<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996
-------------
OR
| | Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________
to ________________________
Commission file number 0-20871
-------
SELFCARE, INC.
(Exact name of Small Business Issuer as specified in its charter)
DELAWARE 04-3161276
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 PROSPECT STREET
WALTHAM, MASSACHUSETTS 02154
(Address of principal executive offices)
(617) 647-3900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the registrant's Common Stock as of
September 17, 1996 was 5,672,745.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
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SELFCARE, INC.
FORM 10-QSB
For the Quarterly Period Ended June 30, 1996
This Form 10-QSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Factors that might cause such
a difference are discussed in the section entitled "Certain Factors Affecting
Future Operating Results" on page 13 of this Form 10-QSB.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements:
a) Consolidated Statement of Operations for the three months ended June
30, 1996 and 1995 and the six months ended June 30, 1996 and 1995 .........
b) Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 .....
c) Consolidated Statements of Cash Flows for the six months ended June
30, 1996 and 1995 .........................................................
d) Notes to Consolidated Financial Statements ................................
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations ...............................................................
PART 2. OTHER INFORMATION
ITEM 1. Legal Proceedings ...........................................................
ITEM 4. Submission of Matters to a Vote of Securityholders ..........................
ITEM 6. Exhibits and Reports on Form 8-K ............................................
SIGNATURES ..........................................................................
(i)
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL INFORMATION
<TABLE>
SELFCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
1996 1995 1996 1995
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues $2,828,127 $ 1,694,457 $ 5,297,528 $ 3,030,433
Cost of sales 1,769,140 1,302,820 3,604,637 2,326,376
---------- ----------- ------------ -----------
Gross profit 1,058,987 391,637 1,692,891 704,057
Operating Expenses:
Research and development 1,275,903 220,308 2,530,729 502,407
Selling, general and administrative 1,920,523 1,361,599 3,795,245 2,242,061
Noncash compensation charge (2,297,258) - 3,365,483 -
---------- ----------- ------------ -----------
Total operating expenses 899,168 1,581,907 9,691,457 2,744,468
Operating income (loss) 159,819 (1,190,270) (7,998,566) (2,040,411)
---------- ----------- ------------ -----------
Interest expense, including noncash
interest (expense) and reversal thereof
relating to issuance of warrants (Note 5) 2,465,182 (85,968) (5,688,549) (142,586)
Interest Income 104,697 11,801 123,466 11,801
---------- ----------- ------------ -----------
Loss before dividends and accretion on
preferred stock of a subsidiary 2,729,698 (1,264,437) (13,563,649) (2,171,196)
Dividends and accretion on mandatorily
redeemable preferred stock of
a subsidiary (23,124) - (46,101) -
---------- ----------- ------------ -----------
Net income (loss) $2,706,574 $(1,264,437) $(13,609,750) $(2,171,196)
========== =========== ============ ===========
Net income (loss) per common and
common equivalent share $ 0.44 $ (0.22) $ (2.22) $ (0.38)
========== =========== ============ ===========
Weighted average number of common
and common equivalent shares
outstanding 6,170,258 5,793,725 6,142,727 5,780,706
========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
1
<PAGE> 4
SELFCARE, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1996 1995
------------ -------------
(unaudited)
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 7,789,142 $ 7,394,750
Accounts receivable, net of allowance for doubtful accounts
of $79,000 and $94,000 in 1996 and 1995, respectively 1,718,180 1,414,232
Inventory 1,575,135 1,193,114
Prepaid expenses and other current assets 1,027,101 305,043
------------ ------------
Total current assets 12,109,558 10,307,139
PROPERTY AND EQUIPMENT (NET) 2,871,577 2,219,607
INVESTMENT IN ORGENICS 1,000,000 1,000,000
DEFERRED STOCK OFFERING COSTS 936,007 -
OTHER ASSETS 328,054 165,602
------------ ------------
Total assets $ 17,245,196 $ 13,692,348
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 2,233,669 $ 1,764,095
Accrued expenses and other current liabilities 2,756,151 1,665,368
Current portion of convertible advance 4,564,516 2,333,333
Current portion of deferred revenue 226,667 226,667
------------ ------------
Total current liabilities 9,781,003 5,989,463
DEFERRED REVENUE, LESS CURRENT PORTION 3,074,944 3,123,035
NOTES PAYABLE 2,325,000 2,325,000
NOTES PAYABLE TO RELATED PARTIES 675,000 675,000
CONVERTIBLE ADVANCE, NET OF CURRENT PORTION 9,129,032 4,666,667
CONVERTIBLE PAYABLE - 500,000
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 11,712 -
COMMITMENTS AND CONTINGENCIES (NOTES 6 and 7)
MANDATORILY REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 1,666,557 1,643,580
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock
Authorized - 5,000,000 shares
Issued and outstanding - none - -
Common stock, $.001 par value -
Authorized - 40,000,000 shares
Issued and outstanding - 4,193,345 and 4,057,924 shares in
1996 and 1995 respectively 4,193 4,058
Additional paid-in capital 18,818,906 9,553,220
Deferred compensation (73,482) (198,965)
Less-Treasury stock, at cost, 15,600 shares in 1996 and 1995 (15,200) (15,200)
Accumulated deficit (28,285,784) (14,676,034)
Cumulative translation adjustment 133,315 102,524
------------ ------------
Total stockholders' (deficit) (9,418,052) (5,230,397)
------------ ------------
Total liabilities and stockholders' (deficit) $ 17,245,196 $ 13,692,348
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
2
<PAGE> 5
SELFCARE INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Six months ended June 30,
-----------------------------
1996 1995
------------- ------------
(unaudited) (unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(13,609,750) $(2,171,196)
Adjustments to reconcile net loss to net cash used in operating activities:
Dividends and accretion of mandatorily redeemable preferred stock of a
subsidiary 45,825 -
Noncash interest expense related to issuance of warrants 5,525,821 -
Compensation expense related to issuance of common stock options 125,483 -
Compensation expense related to common stock options issued to the
Company's Chief Executive Officer 3,240,000 -
Amortization of deferred revenue (335,556) (149,813)
Depreciation and amortization 402,329 284,958
Changes in assets and liabilities:
Accounts receivable (318,568) (190,143)
Inventory (390,142) (128,836)
Prepaid and other current assets (744,508) 610
Accounts payable 587,040 (77,496)
Accrued expenses and other current liabilities 287,351 552,172
------------ -----------
Net cash used in operating activities (5,184,675) (1,879,744)
------------ -----------
Cash Flows From Investing Activities:
Purchases of property and equipment (1,022,886) (70,547)
(Increase) decrease in deferred costs in connection with stock offering (125,007) -
(Increase) decrease in other assets (200,000) -
------------ -----------
Net cash used in investing activities (1,347,893) (70,547)
------------ -----------
Cash Flows From Financing Activities:
Decrease in restricted cash - 39,346
Proceeds from the receipt of capital grant 286,525 -
Proceeds from the sales of property and equipment - 36,019
Net proceeds from issuance of common stock - 102,883
Net repayment of line of credit (31,638) (977,728)
Proceeds from issuance of notes payable 6,693,548 2,802,500
Capital lease 11,712 -
Proceeds from sales of preferred stock - 1,588,000
------------ -----------
Net cash provided by financing activities 6,960,147 3,591,020
------------ -----------
Effect of exchange rate changes on cash and cash equivalents (33,187) 31,264
------------ -----------
Net increase in cash and cash equivalents 394,392 1,671,993
Cash and Cash Equivalents, beginning of period 7,394,750 1,762,108
------------ -----------
Cash and Cash Equivalents, end of period $ 7,789,142 $ 3,434,101
============ ===========
Supplemental disclosures of cash flow information:
Interest paid 158,975 52,835
Income taxes paid 10,111 -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE> 6
SELFCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) Basis of Presentation of Financial Information
The accompanying condensed financial statements of Selfcare, Inc. and its
subsidiaries (the "Company") are condensed and unaudited. In the opinion of
management, the unaudited, condensed, consolidated financial statements contain
all adjustments considered normal and recurring, with the exception of the
non-cash expenses (see Note 5), necessary for their fair presentation. These
interim financial statements have been prepared in accordance with the
instructions for Form 10-QSB and therefore do not include all information and
footnotes necessary for a complete presentation of operations, financial
position, and cash flows of the Company, in conformity with generally accepted
accounting principles. The Company filed audited consolidated financial
statements which included information and footnotes necessary for such
presentation for the year ended December 31, 1995 on Form SB-2. These condensed,
unaudited financial statements should be read in conjunction with the audited
consolidated financial statements and related notes for the period ended
December 31, 1995 included on Form SB-2 filed with the Securities and Exchange
Commission on July 23, 1996, as amended.
2) Cash and Cash Equivalents
The Company considers all highly liquid cash investments with maturities of
three months or less at the date of acquisition to be cash equivalents. At June
30, 1996, the Company's cash equivalents consisted of United States treasury
notes and money market funds. The Company follows the provisions of Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities.
3) Inventories
<TABLE>
Inventories are comprised of the following:
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Raw materials $ 798,593 $ 776,770
Work in-process 311,876 237,954
Finished goods 464,666 178,390
---------- ----------
$1,575,135 $1,193,114
========== ==========
</TABLE>
4) Property and Equipment
<TABLE>
Property and equipment, net consists of the following:
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Machinery and equipment $1,567,556 $ 990,455
Leasehold improvements 695,200 691,946
Laboratory equipment 938,732 715,347
Furniture and fixtures 502,434 295,775
Computer equipment 147,329 151,092
---------- ----------
$3,851,251 $2,844,615
Less accumulated depreciation
and amortization 979,674 625,008
---------- ----------
$2,871,577 $2,219,607
========== ==========
</TABLE>
5) Non recurring, non-cash expenses
On August 15, 1995, the Company entered into a stock option agreement (the
"Agreement") with the Chief Executive Officer ("CEO") of the Company. Under the
Agreement, the CEO received an option to
<PAGE> 7
acquire 520,000 shares of the Company's Common Stock. The option vested and
became exercisable upon the completion of the Company's initial public offering
on August 9, 1996. The exercise price of the option is $2.27 per share of Common
Stock. Non-cash compensation expense for the three and six month periods ended
June 30, 1996 were related to this option. In the quarter ended June 30, 1996,
the Company reversed charges in the amount of $2,360,000 related to the
aforementioned stock option due to a reduction in the fair market value of the
related equity as compared to the estimated fair market value at March 31, 1996.
For the six months ended June 30, 1996 the net non-cash compensation expense
related to this stock option was $3,240,000.
In 1995, the Company issued notes payable ("Cambridge Diagnostics Notes")
and common stock warrants ("Cambridge Diagnostics Warrants") to individual
investors for gross proceeds of $3,030,000. Of this amount, $3,000,000
represented the original principal amount of the Cambridge Diagnostics Notes,
which bear interest at 10% and are due on March 31, 1998. The remaining $30,000
relates to Cambridge Diagnostics Warrants. The number of Cambridge Diagnostics
Warrants is calculated as 69% of the net sales of Cambridge Diagnostics for the
fiscal year preceding the repayment of the Cambridge Diagnostics Notes divided
by $2.53. The Cambridge Diagnostics Warrants are fully exercisable, for no
additional consideration, beginning on the date that the notes payable are
repaid and expire 30 days after that date. The Company anticipates repaying
these Cambridge Diagnostics Notes on or about December 31, 1996. Based on the
formula described above, the warrants will be exercisable for 1,142,635 shares
of the Company's Common Stock. In the three months ended June 30, 1996, the
Company reversed $2.6 million of non-cash interest expense relating to the
Cambridge Diagnostics Warrants. The reversal relates to the reduction in the
fair market value of the related equity as compared to the estimated fair market
value at March 31, 1996. For the six months ended June 30, 1996, the net
non-cash interest expense relating to the aforementioned warrants was $5.5
million.
6) Subsequent Event
On August 6, 1996, the Company's Common Stock began trading on the American
Stock Exchange after an initial public offering of 1,300,000 shares at a price
of $8.50 per share. The proceeds from the offering were $10,276,500 after
deducting the underwriters' commission. In September 1996, the underwriters
exercised their option to purchase an additional 195,000 shares of Common Stock
at the same price. The proceeds from their purchase of the 195,000 shares, after
deducting commissions, was $1,541,475. The Company estimates that the expenses
relating to the offering will total approximately $1.3 million. Thus, the net
proceeds from the offering will be approximately $10.5 million.
7) LifeScan Alliance
The Company is currently engaged in an alliance with LifeScan, Inc.,
("LifeScan") a subsidiary of Johnson and Johnson. The terms of the alliance
with LifeScan ("LifeScan Alliance") contemplate that the Company will
manufacture and LifeScan will distribute a proprietary electrochemical blood
glucose monitoring system for the management of diabetes. On September 17,
1996, the Company announced that it received notification of FDA clearance for
its proprietary electrochemical blood glucose monitoring system. This clearance
satisfies a key requirement in the LifeScan Alliance. The September 17, 1996
announcement also stated that Selfcare and LifeScan are currently finalizing
certain amendments to the previously agreed form of distribution agreement and
anticipate entering into a revised form of distribution agreement soon for an
advanced version of the system. The announcement also stated that, subject to
conclusion of such distribution agreement and satisfaction of certain
conditions relating to patent matters, an affiliate of Johnson & Johnson will
convert its existing loans into Common Stock of the Company and LifeScan will
pay the Company a $7 million success fee, and that Selfcare currently believes
that it can receive FDA clearance for the advanced version of the system and
commence shipments as early as the first half of 1997. However, no assurance
can be given that these events will occur or will not be delayed.
8) Investment in Orgenics
The Company plans to expand its research, manufacturing, and marketing
capabilities for infectious disease diagnostic products by acquiring the capital
stock of Orgenics, Ltd ("Orgenics"), an Israeli company, on or prior to August
7, 1997. The Company is currently offering to purchase for cash up to $3.0
million of the common stock of Orgenics and Orgenics International Holding, B.V.
("OIH") from their stockholders. OIH's primary asset is stock of Orgenics. If
more than $3.0 million of Orgenics and OIH stock is tendered, Selfcare may, but
is not obligated to, purchase additional shares. Selfcare has agreed that if it
purchases at least $3.0 million of stock pursuant to its current offer, it will
also convert into Orgenics stock the existing non-interest bearing convertible
debenture which Selfcare holds. If Selfcare were to purchase $3.0 million of
stock and convert the debenture, Selfcare would then own, either directly or
indirectly through a minority interest in OIH, approximately 35% of Orgenics'
outstanding stock. In addition, Selfcare and the stockholders of Orgenics and
OIH have existing agreements which under certain circumstances give Selfcare
the right to purchase, or the stockholders the right to sell, all of their
remaining shares to Selfcare at formula prices dependent on Orgenics revenues
and a multiplier which increases over time. Selfcare believes that it is likely
that it will acquire at least some of such shares, if they are not acquired in
the Company's current offer, pursuant to such agreements by August 7, 1997.
2
<PAGE> 8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Selfcare, Inc. (the "Company") is engaged in the development, manufacture,
and marketing of self-test diagnostic products for the diabetes, women's health
and infectious disease markets. The Company's existing and planned products are
targeted at the two largest existing markets for self-care diagnostics, diabetes
management and women's health, as well as the emerging market for self tests for
infectious diseases and agents, including human immunodeficiency viruses
("HIV"). An important part of the Company's business strategy is to enter into
strategic alliances, joint ventures and licensing arrangements with third
parties, primarily medical products companies, for the development, manufacture,
and distribution of certain products. The Company is also pursuing a strategy of
selective acquisitions of companies, assets and technologies which it believes
will enhance its ability to deliver innovative diagnostic products to the
marketplace at a low cost. The Company has completed two such transactions, the
acquisition of Cambridge Diagnostics Ltd. ("Cambridge Diagnostics") and the
Company's investment in Inverness Medical Ltd.
In addition, the Company is currently engaged in an alliance with
LifeScan, Inc., ("LifeScan") a subsidiary of Johnson and Johnson. The terms of
the alliance with LifeScan ("LifeScan Alliance") contemplate that the Company
will manufacture and LifeScan will distribute a proprietary electrochemical
blood glucose monitoring system for the management of diabetes. On September
17, 1996, the Company announced that it received notification of FDA clearance
for its proprietary electrochemical blood glucose monitoring system. This
clearance satisfies a key requirement in the LifeScan Alliance. The September
17, 1996 announcement also stated that Selfcare and LifeScan are currently
finalizing certain amendments to the previously agreed form of distribution
agreement and anticipate entering into a revised form of distribution agreement
soon for an advanced version of the system. The announcement also stated that,
subject to conclusion of such distribution agreement and satisfaction of
certain conditions relating to patent matters, an affiliate of Johnson &
Johnson will convert its existing loans into Common Stock of the Company and
LifeScan will pay the Company a $7 million success fee, and that Selfcare
currently believes that it can receive FDA clearance for the advanced version
of the system and commence shipments as early as the first half of 1997.
However, no assurance can be given that these events will occur or will not be
delayed.
The Company also plans to expand its research, manufacturing, and
marketing capabilities for infectious disease diagnostic products by acquiring
the capital stock of Orgenics, Ltd ("Orgenics"), an Israeli company, on or
prior to August 7, 1997. The Company is currently offering to purchase for cash
up to $3.0 million of the common stock of Orgenics and Orgenics International
Holding, B.V. ("OIH") from their stockholders. OIH's primary asset is stock of
Orgenics. If more than $3.0 million of Orgenics and OIH stock is tendered,
Selfcare may, but is not obligated to, purchase additional shares. Selfcare has
agreed that if it purchases at least $3.0 million of stock pursuant to its
current offer, it will also convert into Orgenics stock the existing
non-interest bearing convertible debenture which Selfcare holds. If Selfcare
were to purchase $3.0 million of stock and convert the debenture, Selfcare
would then own, either directly or indirectly through a minority interest in
OIH, approximately 35% of Orgenics' outstanding stock. In addition, Selfcare
and the stockholders of Orgenics and OIH have existing agreements which under
certain circumstances give Selfcare the right to purchase, or the stockholders
the right to sell, all of their remaining shares to Selfcare at formula prices
dependent on Orgenics revenues and a multiplier which increases over time.
Selfcare believes that it is likely that it will acquire at least some of such
shares, if they are not acquired in the Company's current offer, pursuant to
such agreements by August 7, 1997.
The Company's results of operations for the three months and six months
ended June 30, 1996 include certain significant non-cash charges which became
final upon the consummation of Company's public stock offering. In the quarter
ended June 30, 1996, the Company reversed non-cash compensation expense of
$2,360,000 relating to options granted to the Company's Chief Executive Officer.
For the six months ended June 30, 1996, the total non-cash charge for
compensation relating to such options was $3,240,000. The Company has reversed
$2,592,903 of non-cash interest expense relating to warrants granted to
noteholders in
3
<PAGE> 9
connection with the acquisition of Cambridge Diagnostics. The total non-cash
interest expense, relating to warrants granted to noteholders in connection with
the acquisition of Cambridge Diagnostics, recorded in the six months ended June
30, 1996 was $5,525,821.
RESULTS OF OPERATIONS
<TABLE>
As an aid to understanding Selfcare Inc.'s operating results, the following
table shows the results of operations as a percentage of revenues.
<CAPTION>
Percentage of net revenues for the
----------------------------------------------------------
three months ended June 30, six months ended June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100% 100% 100% 100%
Gross profit 37 23 32 23
Research and development expenses 45 13 48 17
Selling, general, and administrative expenses 68 80 72 74
Compensation charge (81) - 63 -
Total operating expenses 32 93 183 91
Interest and other income (expense) 91 (5) (106) (4)
Net income 96 (75) (257) (72)
</TABLE>
Net Revenues. Net revenues increased $1.1 million, or 67%, to $2.8 million
in the quarter ended June 30, 1996 from $1.7 million in the same quarter last
year. Net revenues for the six months ended June 30, 1996 increased $2.3 million
or 75% to $5.3 million from $3.0 million in the corresponding period in 1995.
The increase was primarily due to increased demand in the United States for the
Company's pregnancy and ovulation prediction products. Revenues for the
Company's U.S. operations in the quarter ended June 30, 1996 increased $825,000
or 158% to $1.3 million in the quarter ended June 30, 1996 from $523,000 in the
quarter ended June 30, 1995. For the six months ended June 30, 1996 revenues
from U.S. operations were $2.7 million, an increase of $1.7 million or 187% from
net revenues of $935,000 in the six months ended June 30, 1995.
International revenues (sales by the Company's foreign subsidiaries)
increased by $309,000 or 26% in the quarter ended June 30, 1996 to $1.5 million
in the three months ended June 30, 1996 from $1.2 million in the three months
ended June 30, 1995. International revenues for the six months ended June 30,
1996 was $2.6 million, an increase of approximately $525,000 or 25% from net
revenues of $2.1 million for the six months ended June 30, 1995. Approximately
$349,000 of the 1996 international revenue was attributable to the amortization
of deferred revenue relating to certain development and capital grants relating
to the Company's facility in Inverness, Scotland.
Gross profit. Gross profit increased $667,000 or 170% in the quarter ended
June 30, 1996 to $1.1 million from $392,000 in the same quarter in 1995. Gross
profit as a percentage of net revenues increased to 37% of net revenues in the
three months ended June 30, 1996 from 23% of net revenues in the same quarter
last year. Gross profit for the six months ended June 30, 1996 increased $1.0
million or 140% to $1.7 million from $704,000 in the six months ended June 30,
1995. Gross profit as a percentage of net revenues increased to 32% for the six
months ended June 30, 1996 from 23% in the same period a year ago.
The increase in gross profits was primarily due to increased net revenues,
in particular from higher margin products, and reduced cost of sales resulting
from volume purchase discounts provided to the Company by certain suppliers. The
increase in gross margins was derived primarily from sales of pregnancy and
ovulation prediction products.
Research and Development Expense. Research and development expenses
increased by $1.1 million or 479% to $1.3 million for the three months ended
June 30, 1996 from $220,000 in the three months ended June 30, 1995. Research
and development expenses for the 6 months ended June 30, 1996 increased $2.0
million or 404% to $2.5 million from $502,000 in the corresponding period in
1995. The increase was primarily due to the development of the Company's New
System and generic electrochemical blood glucose test strips for the
4
<PAGE> 10
management of diabetes. These development activities accounted for $861,000 and
$1.6 million of the increases in the three and six month periods ended June 30,
1996. In addition, the Company continues to allocate research and development
resources in the areas of women's health products and infectious diseases,
principally those related to the detection of HIV. The Company expects to
continue to spend significant amounts on research and development throughout
1996 and 1997.
Selling, General, and Administrative Expense. Selling, general, and
administrative expense increased $559,000 or 41% to $1.9 million for the three
months ended June 30, 1996 from $1.4 million for the three months ended June 30,
1995. Selling, general, and administrative expense for the six months ended June
30, 1996 increased $1.6 million or 69% to $3.8 million from $2.2 million in the
corresponding period in 1995. The increase was primarily attributable to
expansion of the Company's marketing efforts in the United States and Europe,
and the hiring of additional staff to support the Company's operations. Selling,
general, and administrative expense, as a percentage of net revenues, decreased
during 1996 as compared the same periods in 1995. Selling, general, and
administrative expense were 68% and 72% of net revenues for the three and six
month periods ended June 30, 1996 compared to 80% and 74% for the three and six
month periods ended June 30, 1995.
Non-Cash Compensation Expense. Substantially all of the non-cash
compensation expense for the three and six months ended June 30, 1996 related to
an option granted to the Company's Chief Executive Officer. In the quarter
ended June 30, 1996, the Company reversed charges in the amount of $2,360,000
related to the aforementioned stock option due to a reduction in the fair
market value of the related equity as compared to the estimated fair market
value at March 31, 1996. For the six months ended June 30, 1996 the non-cash
compensation expense related to this stock option was $3,240,000. The
remaining $62,742 and $125,483 of non-cash compensation expense for the three
and six months ended June 30, 1996 respectively, relates to the amortization of
deferred compensation pertaining to the grant of certain stock options to
employees.
Interest and Other Income (Expense). The Company reversed $2.6 million of
non-cash interest expense relating to warrants granted in November, 1994. The
reversal relates to the reduction in the fair market value of the related equity
as compared to the estimated fair market value at March 31, 1996. For the six
months ended June 30, 1996, the non-cash interest expense relating to the
aforementioned warrants was $5.5 million. Excluding the non-cash interest
expense relating to the warrants, the interest expense was $128,000 and $163,000
for the three and six month periods ended June 30, 1996 as compared to $86,000
and $143,000 for three and six month periods ended June 30, 1995. Interest
income increased by $93,000 and $112,000 for the three and six months ended June
30, 1996 as compared to the same period last year, primarily due to larger cash
balances. The Company's subsidiary in Inverness, Scotland accrued $23,000 and
$46,000 for the three and six months ended June 30, 1996, representing a 6%
dividend on cumulative redeemable preference shares held by Inverness & Nairn
Local Enterprise Company.
Foreign Currency Transactions. Fluctuations in foreign currency did not
significantly impact revenue performance measured in U.S. dollars for the three
and six months June 30, 1996. Substantially all sales are paid in the functional
currency of the selling entity.
Net Profit (Loss). Net profit for the three months ended June 30, 1996 was
approximately $2.7 million or $0.44 per common and common equivalent share.
Excluding the net effect of the previously described reversal of non-cash
interest expense of $2.6 million and non-cash compensation expense of $2.3
million, results in a net loss of $2.2 million or ($0.36) per common and common
equivalant share as compared to $1.3 million or ($0.22) per common and common
equivalent share for the three months ended June 30, 1995. The net loss for the
six months ended June 30, 1996 was approximately $13.6 million or ($2.22) per
common and common equivalent share. Excluding the previously described non-cash
interest expense of $5.5 million and non-cash compensation expense of $3.4
million, results in a net loss of $4.8 million or ($0.79) per common and common
equivelent share as compared to $2.2 million or ($0.38) per common and common
equivalent share for the six months ended June 30, 1995. These losses reflect
increased spending on research and development as well as expansion of the
Company's sales and marketing efforts and the hiring of additional staff to
support the Company's operations.
5
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through the funds it has
received in connection with the private placements of debt and equity
securities, a bank line of credit, capital lease obligations, cash from product
sales and grants from government development agencies. The Company received $7.0
million from Johnson & Johnson Development Corporation ("JJDC"), an affiliate of
LifeScan, in November 1995 and another $6.7 million in May 1996 in connection
with the Company's filing of the Section 510(k) Notification with respect to the
proprietary electrochemical blood glucose monitoring system it is developing for
LifeScan, and the acceptance for the filing by the U.S. Food and Drug
Administration ("FDA") on May 21, 1996 of such notification.
As disclosed in the Company's September 17, 1996 announcement referred to
above, subject to conclusion of a revised distribution agreement with LifeScan
with respect to an advanced version of the Company's electrochemical blood
glucose monitoring system and satisfaction of certain conditions relating to
patent matters, JJDC will convert its existing loans into Common Stock of the
Company, and LifeScan will pay the Company a $7.0 million success fee. The
Company currently believes that it can receive FDA clearance for the advanced
version of the system and commence shipments as early as the first half of 1997.
However, no assurance can be given that these events will occur or will not be
delayed. Commencing on September 20, 1996, and at any time prior to such time
as (i) Selfcare has satisfied certain conditions relating to patent matters
under the exiting terms of the LifeScan alliance or (ii) Selfcare has entered
into the revised form of distribution agreement with LifeScan, JJDC may require
the Company to repay the amounts advanced over a three-year period.
The Company financed a portion of the acquisition of Cambridge Diagnostics
in 1994 by utilizing a bank line of credit. In 1995, the Company paid the
outstanding balance on the line of credit in full with a portion of the proceeds
of the issuance of promissory notes and warrants to purchase Common Stock
totaling approximately $3.0 million. In order for the Company to obtain approval
for listing of the Common Stock on the American Stock Exchange, the Company has
entered into agreements with holders of approximately $2.75 million in principal
amount of such notes. Pursuant to such agreements, the principal amount of the
notes will be automatically converted into shares of Common Stock if the
Company's stockholders' equity as of November 30, 1996 is determined to be less
than $4.0 million. If such notes are not converted, the Company will repay such
notes on or about December 31, 1996.
The Company received $1.6 million in June 1995 from an investment by
Highlands and Islands Enterprise ("HIE"), a development agency funded by the
government of the United Kingdom, in redeemable preferred stock of Inverness
Medical Ltd. to finance a portion of the start-up costs relating to the facility
in Inverness, Scotland. In addition, the Company received $2.5 million in
deferred grants from the HIE.
In March 1996, the Company entered into an agreement with Princeton
BioMeditech Corporation ("Princeton"), pursuant to which the Company will
provide a $500,000 investment to finance Princeton's production of certain
products and will purchase certain minimum amounts of those products over the
course of three years. The Company paid $250,000 of the above mentioned $500,000
investment in August 1995 and the Company plans to pay the remaining $250,000 in
the fourth quarter of 1996. The aggregate minimum amount of such purchases over
the course of the three-year period will be $6.9 million
At June 30, 1996, the Company had cash and cash equivalents of $7.8
million, a $394,000 increase from December 31, 1995. This was primarily due to
the aforementioned advance from JJDC. Cash used for operations in the six months
ended June 30, 1996 was $5.2 million due largely to net losses of $13.6 million
in the six months ended June 30, 1996. However, the net loss for the six months
ended June 30, 1996 consisted of $9.0 million of non-cash items. The largest
non-cash expenses were the interest charge of $5.5 million related to warrants
issued to the noteholders in connection with the acquisition of Cambridge
Diagnostics and the compensation expense of $3.2 million related to an option
granted to the Company's Chief Executive Officer. In addition, in the six months
ended June 30, 1996, the Company recognized $125,000 of non-cash compensation
expense relating to the amortization of deferred compensation pertaining to the
grant of certain stock options to employees and dividends and dividends and
accretion on mandatorily redeemable preferred stock of a subsidiary of the
Company in the amount of $46,000. None of the above mentioned non-cash items
6
<PAGE> 12
were applicable to the six months ended June 30, 1995. The Company also
recognized depreciation and amortization of property and equipment and other
assets amounting to $402,000 for the six months ended June 30, 1996 compared to
$285,000 for the same six month period in 1995. The Company recognized $336,000
of deferred revenue in the six months ended June 30, 1996 and $150,000 for the
six months ended June 30, 1995. Of these amounts, $113,000 related to the
amortization of revenue relating to the 1993 sale of the Company's core
immunoassay technology to USB '93 Technology Associates Limited Partnership. The
remaining $223,000 and $37,000 in the periods ended June 30, 1996 and June 30,
1995 respectively related to deferred revenue of certain grants. Other uses of
cash in operating activities included an increased funding of accounts
receivable of $319,000 reflecting the Company's increase in sales. The Company
also used $390,000 of cash to increase inventories to support increased demand
for the Company's products. Prepaid and other current assets increased $745,000
due primarily to deposits on equipment in the amount of $642,000 at the
Company's facility in Inverness, Scotland. Cash was provided for operations in
part by an increase in accounts payable, accrued expenses, and other current
liabilities of $874,000.
During the six months ended June 30, 1996, the Company used $1.3 million
for investment activities. The Company purchased property and equipment for $1.0
million. Approximately $687,000 of the purchased property and equipment was for
the facility in Inverness, Scotland. Also, during the six months ended June 30,
1996, the Company paid $125,000 in expenses relating to the Company's offering
of Common Stock which was consummated in August 1996. In addition, the Company
provided guarantees of $200,000 in the form of letters of credit on the debt of
Orgenics' French subsidiary to two French banks.
Financing activities provided approximately $7.0 million in the six months
ended June 30, 1996. The most significant financing activity was the $6.7
million advance from JJDC. The Company also received a capital grant of
approximately $286,000 from Inverness & Nairn Local Enterprise Company, a party
related to Highlands and Islands Enterprise ("HIE"), for equipment in the
facility in Inverness, Scotland for the future manufacture of glucose strips.
Subsequent to the period ended June 30, 1996 which is being reported, the
Company offered $1,300,000 shares of its Common Stock to the public at a price
of $8.50 per share. On August 6, 1996, the Company began trading on the American
Stock Exchange. In September 1996, the underwriters exercised their option to
purchase an additional 195,000 shares of Common Stock at the same price. The
total net proceeds from the offering were $10.5 million after deducting the
underwriters' commission and estimated expenses of $1.3 million.
The Company intends to invest substantially in development, property and
equipment at its facility in Inverness, Scotland so that it can manufacture
glucose strips for the diabetes market in connection with the LifeScan Alliance.
The Company believes that funds received to date in connection with the LifeScan
Alliance and the net proceeds from the offering of the Company's Common Stock
will be sufficient to provide adequate working capital and funds necessary for
anticipated capital expenditures for at least the next 12 months. The Company
currently plans to continue its research and development of new technologies and
pursue the acquisition of new products and technologies, whether through
licensing arrangements, business acquisitions, or otherwise. The Company
anticipates that it will be required to raise substantial additional funds for
such projects or strategies. There can be no assurance that any such additional
capital will be available on terms acceptable to the Company, or at all.
The Company anticipates that it will consummate the acquisition of Orgenics
("Orgenics Acquisition") on or prior to August 7, 1997 by acquiring direct or
indirect control of substantially all of the share capital of Orgenics. The
Company is currently offering to purchase for cash up to $3.0 million of
Orgenics and OIH stock. Thereafter, the Company expects to acquire the remaining
shares in Orgenics and OIH pursuant to the option agreements entered into with
the shareholders of Orgenics and OIH. The purchase price for such shares
pursuant to the option agreements is based on a formula contained in the option
agreements which provides for potential increases in the total consideration
which may be payable in connection with the Orgenics Acquisition, depending upon
when the Orgenics Acquisition is consummated, and provides the Orgenics
shareholders the ability to elect to receive their consideration in cash and/or
Common Stock. No assurance can be given as to when the Orgenics Acquisition will
be consummated, if at all, or that the consideration which is required to be
paid in connection with such acquisition will not have materially
7
<PAGE> 13
increased at the time of such consummation. In addition, the Company expects
that it may be required to obtain additional financing in order to pay the cash
portion of the consideration payable pursuant to the option agreements. The
inability to fund such payment of such cash portion would have a material
adverse affect on the Company.
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
This Form 10-QSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Factors that might cause such
a difference include those discussed below, as well as those factors set forth
under "Risk Factors" beginning on page 8 of the Company's registration statement
on Form SB-2 filed with the Securities and Exchange Commission on July 23, 1996,
as amended.
The Company's future results of operations depend to a substantial degree
on the successful consummation of the LifeScan Alliance and on LifeScan's
ability to market and sell the Company's proprietary electrochemical blood
glucose monitoring system. There can be no assurance that the LifeScan Alliance
will be consummated or, if consummated, that it will be profitable for the
Company. If the LifeScan Alliance is not consummated, the Company will be
required to find alternative means for marketing and selling such system, either
by entering into a similar arrangement with another strategic partner, by
marketing and selling such system itself, or otherwise. In any such case, the
Company may experience substantial delays and costs. No assurance can be given
that the Company would be able to find an acceptable alternative means of
marketing and selling its electrochemical blood glucose monitoring system, or if
such an alternative means was found, that it would be successful.
The Company is at an early stage in its development. With the exception of
certain professional diagnostic products for infectious diseases and its women's
health products produced by third-party manufacturers, all of the Company's
products are in various stages of research and development, and the Company has
generated no revenue from the commercialization of these products under
development. Many of the Company's products will require substantial additional
development, pre-clinical and clinical testing and investment prior to their
commercialization. There can be no assurance that the Company's research and
development efforts will be successful, that any of the Company's products under
development will prove to be safe or effective in clinical trials, that the
Company will be able to obtain regulatory approval to market any of its
products, that any of its products can be manufactured at acceptable cost and
with appropriate quality, or that any of its products, if and when approved, can
be successfully marketed.
The Company's research, development and clinical programs, as well as its
manufacturing and marketing operations, are subject to extensive regulation by
numerous governmental authorities in the United States and other countries. Most
of the Company's products require governmental approvals for commercialization
that have not yet been obtained and are not expected to be obtained for several
years. Pre-clinical and clinical trials and manufacturing and marketing of many
of the Company's products will be subject to the rigorous testing and approval
process of the FDA and corresponding foreign regulatory authorities. The
regulatory process, which includes pre-clinical and clinical testing of many of
the Company's products to establish their safety and efficacy, can take many
years and require the expenditure of substantial financial and other resources.
Data obtained from pre-clinical and clinical activities are susceptible to
varying interpretations that could delay, limit or prevent regulatory approval.
In addition, delays or rejection may be encountered based upon changes in, or
additions to, regulatory policies for device and test approval during the period
of product development and regulatory review. Delays in obtaining such approvals
could adversely affect the marketing of products developed by the Company and
the Company's ability to generate commercial product revenues.
The medical products industry, including the diagnostic testing industry,
places considerable importance on obtaining patent and trade secret protection
for new technologies, products and processes, and the Company's success will
depend, in part, on its ability to obtain patent protection for its products and
manufacturing processes, to preserve its trade secrets and to operate without
infringing the proprietary rights of third parties.
8
<PAGE> 14
The Company holds certain patent rights, has certain patent applications
pending, and expects to seek additional patents in the future, but there can be
no assurance as to its success or timeliness in obtaining any such patents or as
to the breadth or degree of protection that any such patents will afford the
Company. The Company could incur substantial costs in defending itself against
patent infringement claims or in asserting such claims against others. If the
outcome of any such litigation is adverse to the Company, the Company's business
could be materially adversely affected. To determine the priority of inventions,
the Company may also have to participate in interference proceedings declared by
the U.S. Patent and Trademark Office, which could also result in substantial
costs to the Company.
In addition, the Company may be required to obtain licenses to patents or
other proprietary rights of third parties to market its products. No assurance
can be given that licenses required under any such patents or proprietary rights
would be made available on terms acceptable to the Company, if at all. If the
Company does not obtain such licenses, it could encounter delays in product
market introductions while it attempts to design around such patents or other
rights, or be unable to develop, manufacture or sell such products in certain
countries or at all.
The medical products industry, including the diagnostic testing industry,
is rapidly evolving and developments are expected to continue at a rapid pace.
Competition in this industry is intense and expected to increase as new products
and technologies become available and new competitors enter the market. The
Company's competitors in the United States and abroad are numerous and include,
among others, diagnostic testing and medical products companies, universities
and other research institutions. The Company's success depends upon developing
and maintaining a competitive position in the development of products and
technologies in its area of focus. The Company's competitors may also succeed in
developing technologies and products that are more effective than any that have
been or are being developed by the Company or that render the Company's
technologies or products obsolete or noncompetitive. The Company's competitors
may also succeed in obtaining patent protection or other intellectual property
rights that would prevent the Company from developing its potential products, or
in obtaining regulatory approval for the commercialization of their products
more rapidly or effectively than the Company. Finally, many of the Company's
existing or potential competitors have or may have substantially greater
research and development capabilities, clinical, manufacturing, regulatory and
marketing experience and financial and managerial resources than the Company.
The Company is also aware of several of its competitors who are attempting
to develop a non-invasive blood glucose monitoring technology. The development
and successful introduction of any such products could have a material adverse
effect on the Company's business, financial condition and results of operations.
9
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company may be exposed to litigation arising out of
its products and operations. The Company is not engaged in any legal proceedings
which are expected individually or in the aggregate to have a material adverse
effect on the Company's financial condition or results of operations.
Pasteur Sanofi Diagnostics licensed the Pasteur HIV Technology to Cambridge
Biotech and its affiliates, including Cambridge Affiliate, relating to patents
and proprietary rights underlying the Company's HIV-related products. The
licenses of the Pasteur HIV Technologies to Cambridge Biotech are non-exclusive
and cover diagnostic test kits in finished form embodying the Pasteur HIV
Technologies. The territorial scope of the licenses is worldwide, with the
exception of exclusive rights which Pasteur Sanofi Diagnostics asserted to have
granted in the Pasteur HIV Technologies to Genetic Systems Corporation ("Genetic
Systems") in the United States, Canada, Mexico, Australia, New Zealand and India
(the "Excluded Countries"). However, the licenses provide that, to the extent
that Pasteur Sanofi Diagnostics recovers the right to practice, the patents
underlying the Pasteur HIV Technologies in the Excluded Countries, Cambridge
Biotech is entitled to non-exclusive rights in such technology in such
countries. In 1990, Pasteur Sanofi Diagnostics acquired ownership of Genetic
Systems, whereupon Cambridge Biotech commenced selling products incorporating
the Pasteur HIV Technologies in the United States. These activities were
challenged in a patent infringement lawsuit filed in bankruptcy court in March
1995 by Institut Pasteur, the minority stockholder of Pasteur. Sanofi
Diagnostics, and Genetic Systems. In September 1995, the bankruptcy court ruled
in favor of Cambridge Biotech on this issue, and Institut Pasteur and Genetic
Systems subsequently filed an appeal in district court. The date for the appeal
hearing is unknown. If the bankruptcy court decision were reversed on appeal,
the territories to which Cambridge Affiliate could sell HIV-related products
would be limited and this could have a material adverse effect on the Company.
Pasteur Sanofi Diagnostics has notified Orgenics that as a result of
Orgenics' use of certain peptides, Orgenics may be liable for infringement of
certain patents held by Institut Pasteur, and under which Pasteur Sanofi
Diagnostics holds an exclusive license. Orgenics has informed the Company that
it is not aware of any other threatened litigation that would have a material
adverse effect on Orgenics or its business.
The Company has been involved in a dispute with Enviromed plc., an English
public company ("Enviromed"), with respect to a joint venture agreement entered
into between the Company and Enviromed in March 1994 and the issuance of shares
of Common Stock to Enviromed in connection therewith. See "Certain
Transactions." In connection with this dispute, the Company has informed
Enviromed that, due to the failure of Enviromed to perform its obligations under
the joint venture agreement, it disputes Enviromed's ownership of the Common
Stock held of record by Enviromed. On July 5, 1996, Enviromed filed suit against
the Company and the representatives of the underwriters of the Company's
initial public offering in United States District Court for the Southern
District of New York alleging breach of a registration rights agreement
relating to the Common Stock held of record by Enviromed. Enviromed claimed that
such shares were required to be included in such offering pursuant to the terms
of the registration rights agreement and requested damages, injunctive relief
and a declaratory judgment that Enviromed is the lawful owner of the shares.
The Company has filed counterclaims against Enviromed arising out of Enviromed's
failure to perform its obligations under the joint venture agreement and intends
to contest Enviromed's claims vigorously. The Company is not able to estimate
the amount of damages, if any, which might result from Enviromed's claims
against the Company, but believes that in no event would any such damages be an
amount which would have a material adverse effect on the Company. The Company
has agreed to indemnify the Representatives of the Underwriters for any losses
they might incur, including reasonable attorney's fees and expenses, as a result
of the Enviromed lawsuit.
According to Schedule 13Ds filed with the Securities and Exchange
Commission by Trinity Biotech plc ("Trinity") and Eastcourt Limited
("Eastcourt"), Enviromed sold the Common Stock held by it of record to Flambelle
Limited ("Flambelle"), a wholly-owned subsidiary of Trinity, and Eastcourt, an
entity owned 50% each by Enviromed and Flambelle, on August 28, 1996.
10
<PAGE> 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On June 14, 1996, the Company distributed to its stockholders for
consideration and approval a Written Consent of Stockholders in Lieu of Annual
Meeting. The items to be considered by written consent were (i) approval of the
Company's Amended and Restated Certificate of Incorporation and its Amended and
Restated Bylaws, (ii) approval of an amendment of the Amended and Restated
Certificate of Incorporation, (iii) approval of amendments of the Company's 1994
Incentive and Nonqualified Stock Option Plan, (iv) approval of the Company's
1996 Stock Option and Grant Plan, (v) approval of the Company's Employee Stock
Purchase Plan, and (vi) election of the directors set forth in the Company's
Amended and Restated Certificate of Incorporation. The directors set forth in
the Company's Amended and Restated Certificate of Incorporation were as follows:
Ron Zwanziger and Willard Lee Umphrey (Class I); Edward B. Roberts and Carol R.
Goldberg (Class II); and Jonathan J. Fleming (Class III).
As of June 26, 1996, the Company had received executed consents
representing approximately 56% of its outstanding Common Stock, $.001 par value
per share, a sufficient percentage to approve the items considered. In
accordance with the Delaware General Corporation Law, on August 5, 1996, the
Company distributed to all stockholders whose consents the Company had not
received at that time notice of the taking of the corporate actions set forth in
the consent.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
The following exhibit is filed as a part of this report:
Exhibit Number Title
-------------- -----
27 Financial Data Schedule
99 Press Release regarding the Lifescan Alliance
b. Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 30,
1996.
11
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SELFCARE, INC.
Date: September 18, 1996 /s/ Ron Zwanziger
-----------------
Ron Zwanziger,
Chairman and Chief Executive Officer
Date: September 18, 1996 /s/ Anthony H. Hall
-------------------
Anthony H. Hall,
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,789,142
<SECURITIES> 0
<RECEIVABLES> 1,797,180
<ALLOWANCES> 79,000
<INVENTORY> 1,575,135
<CURRENT-ASSETS> 12,109,559
<PP&E> 3,851,251
<DEPRECIATION> 979,674
<TOTAL-ASSETS> 17,245,196
<CURRENT-LIABILITIES> 9,781,003
<BONDS> 13,129,032
<COMMON> 4,193
1,666,557
0
<OTHER-SE> (9,422,245)
<TOTAL-LIABILITY-AND-EQUITY> 17,245,196
<SALES> 5,297,528
<TOTAL-REVENUES> 5,297,528
<CGS> 3,604,637
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,691,457
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,465,182)
<INCOME-PRETAX> 2,706,574
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,706,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,706,574
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
<PAGE> 1
EXHIBIT 99
----------
FOR IMMEDIATE RELEASE
SELFCARE ANNOUNCES UPDATE ON LIFESCAN ALLIANCE.
SEPTEMBER 17, 1996
WALTHAM, MA - Selfcare, Inc. announced that it has received notification of
FDA clearance for its proprietary electrochemical blood glucose monitoring
system.
This clearance satisfies a key requirement in the existing arrangements
between Selfcare and LifeScan, Inc., a subsidiary of Johnson & Johnson.
Selfcare and LifeScan are currently finalizing certain amendments to
the previously agreed form of distribution agreement and anticipate entering
into a revised form of distribution agreement soon for an advanced version of
the system. Subject to conclusion of such distribution agreement and
satisfaction of certain conditions relating to patent matters, an affiliate of
Johnson & Johnson will convert its existing loans into Selfcare Common Stock,
and LifeScan will pay Selfcare $7 million success fee. Selfcare currently
believes that it can receive FDA clearance for the advanced version of the
system and commence shipments as early as the first half of 1997. However, no
assurance can be given that these events will occur or will not be delayed.
Selfcare, with facilities in Waltham, Massachusetts, Inverness, Scotland,
Galway, Ireland and Munich, Germany, is engaged in the development, manufacture
and marketing of self-test diagnostic products for the diabetes, women's health
and infectious disease markets.
CONTACT - Doug Guarino
Director of Public Relations
Selfcare, Inc.
(617) 647-3900 ext. 75
