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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1997
REGISTRATION STATEMENT NO. 333-37961
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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SELFCARE, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 04-3164127
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
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200 PROSPECT STREET
WALTHAM, MASSACHUSETTS 02154
(781) 647-3900
(Address, including zip code and telephone number, including
area code, of Registrant's principal executive offices)
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RON ZWANZIGER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SELFCARE, INC.
200 PROSPECT STREET
WALTHAM, MASSACHUSETTS 02154
(781) 647-3900
(Name, address, including zip code, and telephone number, including area code of
agent for service)
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COPIES OF ALL COMMUNICATIONS SHOULD BE SENT TO:
MARTIN CARMICHAEL III, P.C.
GOODWIN, PROCTER & HOAR LLP
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
(617) 570-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE TO OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, $0.001 par
value......................... 1,268,401 Shares(2) $12.00 $15,220,812 $4,613(3)
</TABLE>
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(1) Based upon the average of the high and low sale prices reported on American
Stock Exchange on November 10, 1997 and estimated solely for purposes of
calculating the registration fee in accordance with Rule 457(c) under the
Securities Act of 1933.
(2) Pursuant to Rule 416, this Registration Statement also relates to an
indeterminate number of additional Shares issuable (i) to prevent dilution
resulting from stock splits, stock dividends or similar transactions, or
(ii) by reason of changes in the conversion price of shares of the Series B
Convertible Preferred Stock, $.001 par value per share, or the exercise
price of certain warrants in accordance with the terms thereof.
(3) A registration fee of $4,298 was previously paid in connection with the
initial filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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PROSPECTUS
SELFCARE, INC.
1,268,401 SHARES OF COMMON STOCK
This Prospectus relates to 1,268,401 shares (the "Shares") of Common Stock,
$.001 par value per share (the "Common Stock"), of Selfcare, Inc. ("Selfcare" or
the "Company") to be sold by certain stockholders of the Company (the "Selling
Stockholders") from time to time. In addition, pursuant to Rule 416 of the
Securities Act of 1933, as amended (the "Securities Act"), this Prospectus also
relates to such additional number of shares of Common Stock as may become
issuable upon conversion of the Company's Series B Preferred Stock, $.001 par
value per share (the "Series B Preferred Stock"), or exercise of the warrants to
purchase shares of Common Stock (the "Warrants") issued in connection with the
sale of the Series B Preferred Stock as a result of, among others, stock splits,
stock dividends and anti-dilution adjustment provisions (including by reason of
any reduction in the floating rate conversion price mechanism of the Series B
Preferred Stock). The Selling Stockholders may sell the Shares from time to time
in transactions on the American Stock Exchange, in negotiated transactions or by
a combination of these methods, at fixed prices that may be changed, at market
prices at the time of sale, at prices related to market prices or at negotiated
prices. The Selling Stockholders may effect these transactions by selling the
Shares to or through broker-dealers, who may receive compensation in the form of
discounts or commissions from the Selling Stockholders or from the purchasers of
the Shares for whom the broker-dealers may act as an agent or to whom they may
sell as a principal, or both. See "Selling Stockholders" and "Plan of
Distribution." The Common Stock of the Company is traded under the symbol "SLF"
on the American Stock Exchange. On November 10, 1997, the reported closing price
for the Common Stock on the American Stock Exchange was $11.825 per share.
The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed to bear all of the Company's expenses and certain
additional expenses in connection with the registration and sale of the Shares
(but not underwriting discounts and selling commissions). See "Plan of
Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN PURCHASING THE SHARES OF
COMMON STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS NOVEMBER 13, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement (which term
shall include all amendments, exhibits and schedules thereto) on Form S-3 under
the Securities Act, with respect to the shares of Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission, to which Registration Statement reference is hereby made. For
further information with respect to the Company and the securities covered
hereby, reference is made to the Registration Statement and to the exhibits
thereto filed as a part thereof. The Registration Statement and the exhibits
thereto may be inspected and copied at prescribed rates at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549 and at the regional offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies may be
obtained at the prescribed rates from the Public Reference section of the
Commission at its principal office in Washington, DC. The Commission also
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission. Statements made in
this Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files proxy statements, reports and other information with the
Commission. Such proxy statements, reports and other information filed by the
Company may be inspected and copied at prescribed rates at the aforementioned
public reference facilities maintained by the Commission. The Common Stock of
the Company is traded on the American Stock Exchange under the symbol "SLF."
Reports and other information concerning the Company may be inspected at the
offices of the American Stock Exchange, Inc., at 86 Trinity Place, New York, NY
10006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in, and made a part of, this Prospectus by reference as of their
respective dates: (1) the Company's Annual Report on Form 10-KSB/A for the
fiscal year ended December 31, 1996; (2) the Company's Quarterly Reports on Form
10-QSB for the fiscal quarters ended March 31, 1997, June 30, 1997, and
September 30, 1997; (3) the definitive Proxy Statement of the Company for the
Annual Meeting of Stockholders held June 10, 1997; (4) the Company's Current
Report on Form 8-K filed with the Commission on March 5, 1997, as amended; and
(5) the description of the Common Stock of the Company contained in the
Company's Registration Statement on Form SB-2, dated January 16, 1997 (File No.
333-19911), including all amendments and reports updating such description.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this offering shall be deemed to be incorporated by reference in this
Prospectus and shall be a part hereof from the date of filing of such document.
The Company will furnish without charge to each person, including any beneficial
owner, to whom this Prospectus is delivered, upon oral or written request, a
copy of any or all of the documents that have been incorporated by reference to
the Registration Statement of which this Prospectus is a part, other than
exhibits to such documents. Requests should be addressed to: Selfcare, Inc., 200
Prospect Street, Waltham, Massachusetts 02154, Attention: Corporate Secretary
(telephone number (781) 647-3900).
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This Prospectus, including the information incorporated herein by
reference, contains forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. The words "believe,"
"expect," "anticipate," "intend," "estimate," and other expressions which are
predictions of or indicate future events and trends and which do not relate to
historical matters identify forward-looking statements. The Company's actual
results could differ materially from those projected in the forward-looking
statements set forth in this Prospectus including the information incorporated
herein by reference. The Company undertakes no obligation to update publicly or
revise any forward-looking statement, whether as a result of new information,
future events, or otherwise. Investors should carefully consider the discussion
of risk factors below, in addition to the other information contained in this
Prospectus, in connection with an investment in the Shares offered hereby.
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, the following factors should be considered carefully in
evaluating an investment in the shares of Common Stock offered by this
Prospectus.
As used in this Prospectus, the terms "Selfcare" and the "Company" refer to
Selfcare, Inc. and its subsidiaries and predecessors, unless the context
otherwise requires.
RISKS RELATED TO THE LIFESCAN ALLIANCE
The Company has entered into an exclusive worldwide alliance and
distribution agreement (the "LifeScan Alliance") with LifeScan, Inc., a
subsidiary of Johnson & Johnson ("LifeScan"). The terms of the LifeScan Alliance
contemplate that Selfcare will manufacture and LifeScan will distribute
Selfcare's proprietary electrochemical blood glucose monitoring system for the
management of diabetes (the "New System"). The Company previously anticipated
that shipments would commence in the third quarter of this year. Selfcare now
believes that it will commence shipments of the New System in the fourth quarter
of 1997, although there can be no assurance that this will be the case. The
Company's future results of operations depend to a substantial degree on the
successful commencement of shipments of, and LifeScan's ability to market and
sell, the New System. No assurance can be given that these events will occur or
will not be delayed. A material delay in or the nonoccurrence of any of these
events would have a material adverse effect on the Company's business, financial
condition and results of operations. See "-- Comprehensive Government
Regulation" and "-- Dependence on Patents and Proprietary Technology."
RISKS RELATED TO THE NUTRITIONAL SUPPLEMENT LINES ACQUISITION
On February 19, 1997, the Company acquired (the "Nutritional Supplement
Lines Acquisition") for consideration totaling $36.0 million from American Home
Products Corporation ("AHP") the U.S. rights to several nutritional supplement
product lines (the "Nutritional Supplement Lines"), which had domestic sales of
approximately $24.0 million in 1996. The lines include Stresstabs(R),
Ferro-Sequels(R), Posture(R), Protegra(R), Gevrabon(R), Allbee(R), and Z-Bec(R).
As part of its plans for maintaining and expanding sales of these products, the
Company expects to incur substantial marketing and promotional expenses and
allowances in 1997 and thereafter. There can be no assurance that these
expenditures and allowances will allow the Company to increase or maintain the
existing revenue levels from the Nutritional Supplement Lines. The Company's
product focus to date has been on diagnostic tests of various kinds and the
Company has not previously marketed nutritional supplements, nor has the Company
conducted a national advertising campaign of the scope or magnitude of that
which it plans for the Nutritional Supplement Lines. Selfcare is also developing
additional nutritional supplement products, but there can be no assurances that
these can be successfully introduced.
MANAGING AND MAINTAINING GROWTH
The Company is currently experiencing a period of rapid growth and
expansion, including as a result of the consummation of the Nutritional
Supplement Lines Acquisition. This growth and expansion has placed,
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and could continue to place, a significant strain on the Company's management,
customer service and support, operations, sales and administrative personnel and
other resources. In order to serve the needs of its existing and future
customers, the Company has increased and will continue to increase its
workforce, which requires the Company to attract, train, motivate and manage
qualified employees. The Company's ability to manage its planned growth depends
upon the Company's success in continuing to expand its operating, management,
information and financial systems, which may significantly increase its
operating expenses. If the Company fails to achieve its growth as planned or is
unsuccessful in managing its anticipated growth, there could be a material
adverse effect on the Company.
RISKS RELATED TO NEW PRODUCT DEVELOPMENT
The Company is at an early stage in its development. With the exception of
certain professional diagnostic products for infectious diseases, its women's
health products produced by third-party manufacturers, and the Nutritional
Supplement Lines, 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.
COMPREHENSIVE GOVERNMENT REGULATION
Self-Test Products
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 self-test products, including those licensed by the Company
from third parties, 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 Food and Drug Administration (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 marketing authorization 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 Company is developing a human immunodeficiency virus ("HIV") home-test
program and plans to develop other infectious disease self tests in the future.
Although the FDA has authorized a number of home collection and mail-in HIV
testing and telephone counseling services, the program being developed by the
Company differs in significant respects from these services. There can be no
assurance that the FDA will grant clearance for commercialization of the
Company's HIV home test in a timely manner, or at all. There also can be no
assurance that requisite regulatory approvals for the Company's other products
will be obtained within a reasonable period of time, if at all. Moreover, if
regulatory approval of a product is granted, such approval may impose
limitations on the indicated uses, or methods of use, for which such product may
be marketed. Further, even if such regulatory approval is obtained, a marketed
product, its manufacturer and its manufacturing facilities are subject to
continual review and periodic inspections, and later discovery of previously
unknown problems with a product, manufacturer or facility may result in
restrictions on such product or manufacturer, including withdrawal of the
product from the market. Failure to comply with the
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applicable regulatory requirements can result in, among other things, fines,
suspensions of regulatory approvals, product recalls, operating restrictions and
criminal prosecution.
In addition, the Company is required to meet regulatory requirements in
countries outside the United States, which can change rapidly with relatively
short notice, resulting in the Company's products being banned in certain
countries with consequent loss of revenues and income. Foreign regulatory
agencies could also introduce test format changes which, if not quickly
addressed by the Company, could result in restrictions on sales of the Company's
products. Such changes are not uncommon due to advances in basic research and
the nature of certain infectious diseases and agents such as HIV, which is a
mutating virus capable of producing new strains and subtypes. In July 1993, the
French Ministry of Health prohibited the sale in France of certain diagnostic
tests for HIV, due to a concern that the tests did not meet required sensitivity
levels. The Ministry of Health has subsequently imposed a separate ban on a
single HIV test manufactured and sold due to the failure of such test to
identify a newly discovered HIV subtype. There can be no assurance that there
will not be similar actions in the future.
Nutritional Supplements
The manufacturing, processing, formulation, packaging, labeling and
advertising of nutritional supplements such as the Nutritional Supplement Lines
are subject to regulation by one or more federal agencies, including the FDA,
the Federal Trade Commission ("FTC") and the Consumer Product Safety Commission.
These activities are also regulated by various agencies of the states,
localities and foreign countries in which Nutritional Supplement Lines are now
sold or may be sold in the future. In particular, the FDA regulates the safety,
manufacturing, labeling and distribution of dietary supplements, including
vitamins, minerals and herbs, food additives, over-the-counter ("OTC") and
prescription drugs and cosmetics. The regulations that are promulgated by the
FDA relating to the manufacturing process are known as Current Good
Manufacturing Practices ("CGMPs"), and are different for drug and food products.
In addition, the FTC has overlapping jurisdiction with the FDA to regulate the
promotion and advertising of dietary supplements, OTC drugs, cosmetics and
foods.
The Dietary Supplement Health and Education Act of 1994 ("DSHEA") which
amends the FDA Act by defining dietary supplements as a new category of food
separate from conventional food, was enacted on October 25, 1994. The FDA has
finalized certain regulations to implement DSHEA, including those relating to
nutritional labeling requirements, but has not finalized other regulations. The
finalized regulations require different labeling for the Nutritional Supplement
Lines and, with respect to nutritional supplement products under development by
Selfcare, impose new notification procedures and scientific substantiation
requirements regarding ingredients, product claims and safety. The Company
cannot determine what effect these regulations will have on its business in the
future. Failure to comply with applicable FDA requirements could result in
sanctions being imposed on the Company or the manufacturers of its products,
including warning letters, product recalls and seizures, injunctions or criminal
prosecution. With respect to regulations that have not been finalized, the
Company anticipates that the FDA will promulgate specific CGMPs to regulate
dietary supplements which are modeled on the current CGMPs for food. The Company
believes that the manufacture of the Nutritional Supplement Lines is currently
in compliance with applicable CGMPs for food, but changes may be required in
order for the manufacture of the Nutritional Supplement Lines to comply with the
anticipated CGMPs for dietary supplements.
LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT;
UNCERTAIN PROFITABILITY
The Company has incurred operating losses since its inception. As of
September 30, 1997, the Company's accumulated deficit totaled approximately
$63.2 million. For the year ended December 31, 1996, the Company had revenues of
approximately $19.1 million and a net loss of approximately $28.6 million. For
the nine months ended September 30, 1997, the Company had revenues of
approximately $34.4 million and a net loss of approximately $18.6 million. The
continued development of the Company's products will require the commitment of
substantial resources to conduct research and pre-clinical and clinical
development programs, and to establish manufacturing facilities, sales and
marketing capabilities, and additional quality control and regulatory and
administrative capabilities. The Company may incur substantial and increasing
operating losses
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over the next several years as its product programs expand and various clinical
trials commence. The amount of net losses and the time required by the Company
to reach sustained profitability are highly uncertain since achieving
profitability requires the Company to, among other things, successfully complete
development of its products, obtain regulatory approvals and establish
manufacturing and marketing capabilities. There can be no assurance that the
Company will be able to achieve profitability on a sustained basis, or at all.
DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY; TRADEMARKS
Self-Test Products
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.
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 patent position of medical products and diagnostic testing firms is
often highly uncertain and usually involves complex legal and factual questions.
There is a substantial backlog of patents at the U.S. Patent and Trademark
Office. No consistent policy has emerged regarding the breadth of claims covered
in medical products patents. Accordingly, there can be no assurance that patent
applications relating to the Company's products or technology will result in
patents being issued or that, if issued, such patents will afford adequate
protection to the Company's products or, if patents are issued to the Company,
that its competitors will not be able to design around such patents. In
addition, the medical products industry, including the diagnostic testing
industry, has been characterized by extensive litigation regarding patents,
licenses and other intellectual property rights. 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.
See "-- Risks Related to Certain Licensing Arrangements."
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. Under the distribution agreement entered into pursuant to
the LifeScan Alliance, Selfcare has agreed to indemnify LifeScan for any claims
that the New System infringes any patents.
The Company also seeks to protect its proprietary technology, including
technology that may not be patented nor patentable, in part through
confidentiality agreements and, if applicable, inventors' rights agreements with
its collaborators, advisors, employees and consultants. There can be no
assurance that these agreements will not be breached, that the Company will have
adequate remedies for any breach, or that the Company's trade secrets will not
otherwise be disclosed to, or discovered by, competitors. Moreover, the Company
may from time to time conduct research through academic advisors and
collaborators who are prohibited by their academic institutions from entering
into confidentiality or inventors' rights agreements.
Nutritional Supplements
In connection with the Nutritional Supplement Lines Acquisition, the
Company acquired certain trademarks which, the Company believes, are valuable
assets and are very important to the marketing of the Nutritional Supplement
Lines. Substantially all of these trademarks have been registered with the U.S.
Patent and Trademark Office. There can be no assurance, however, that such
registrations will afford adequate
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protection to the Company and not be challenged as unenforceable or invalid, or
not be infringed. In addition, the Company could incur substantial costs in
defending suits brought against it or in prosecuting suits in which the Company
asserted rights under such registrations. If the outcome of such litigation were
adverse to the Company, the Company's business and results of operations could
be materially adversely affected.
COMPETITION; RISK OF TECHNOLOGICAL OBSOLESCENCE
Self-Test Products
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 seeking to develop and market generic test strips which are
compatible with other manufacturers' electrochemical blood glucose monitoring
systems. If the Company succeeds in these efforts, others may attempt to enter
this market with similar products. In addition, the introduction of lower-priced
generic test strips could lead the manufacturers of the systems with which such
test strips are compatible to lower their own test strip prices, thereby
reducing or eliminating the price advantage enjoyed by the generic test strip
producers. On June 28, 1996, the Company obtained FDA Clearance for its first
generic test strip, to be sold under the name "Excel(TM)," which is compatible
with the ExacTech(TM) system sold by MediSense, Inc. ("MediSense"). The Company
initially intended to commence marketing this product in the United States in
1997, but has delayed the commencement of such marketing until 1998. Although
the Company believes that its Excel generic test strip will be priced lower than
the strips produced by MediSense for the ExacTech System and therefore will
compete effectively with the MediSense product, there can be no assurance that
MediSense will not institute price cuts and thereby reduce or eliminate any
price advantage which the Company's product may enjoy.
The Company is also aware of several of its competitors who are attempting
to develop a noninvasive blood glucose monitoring technology. Noninvasive blood
glucose monitoring involves methods for measuring blood glucose levels without
the need to draw blood and, in certain proposed configurations, without the need
to utilize disposable components, such as test strips. The Company believes that
manufacturers are pursuing a number of different technological approaches to
noninvasive blood glucose monitoring. These include near-infrared spectroscopy,
which involves shining a beam of near-infrared light to penetrate the skin and
determine the amount of glucose in the blood, and reverse iontophoresis, which
utilizes a "patch" system to extract glucose through the skin for measurement by
an external meter. In addition, several manufacturers are pursuing minimally
invasive approaches to blood glucose monitoring, such as using a fine needle to
withdraw a small sample of interstitial fluid which is analyzed by use of
mid-infrared spectroscopy. 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.
Nutritional Supplements
The market for the sale of vitamins and nutritional supplements such as the
Nutritional Supplement Lines is highly competitive. Competition is based
principally upon price, quality of products, customer service
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and marketing support. There are numerous companies in the vitamin and
nutritional supplement industry selling products to retailers such as mass
merchandisers, drug store chains, independent drug stores, supermarkets and
health food stores. Most of these companies are privately held and the Company
is unable to precisely assess the size of such competitors. However, a number of
the Company's competitors, particularly manufacturers of nationally advertised
brand name products, are substantially larger than the Company and have greater
financial resources.
DEPENDENCE ON THIRD-PARTY DISTRIBUTION NETWORK
The Company markets and distributes its products primarily through
independent retail brokers and distributors. The Company generally has written
agreements with such brokers and distributors, although it also has a limited
number of oral arrangements. In general, these brokers and distributors are not
subject to minimum purchase requirements and may discontinue marketing the
Company's products with little or no notice. Certain of the Company's retail
brokers and distributors also market products which compete with the Company's
products and which may, from time to time, offer greater sales incentives than
the Company's products. The loss of, or a significant reduction in sales volume
through, one or more of the Company's retail brokers or distributors could have
a material adverse effect on the Company's business, financial condition or
results of operations.
DEPENDENCE ON CERTAIN SUPPLIERS
The Company has no facilities to manufacture the Nutritional Supplement
Lines. The Company currently relies on third-party manufacturers other than AHP
for certain of the products constituting the Nutritional Supplement Lines and
AHP for the supply of the remaining products. The supply agreements with AHP
expire on February 17, 1998. Thereafter, third-party manufacturers other than
AHP will supply all of the products constituting the Nutritional Supplement
Lines. If the Company should encounter delays or other difficulties in the
supply of any of these products from third parties, including AHP, these
interruptions could have a material adverse effect on the Company's result of
operations and result in significant quarter-to-quarter fluctuations. In
addition, contract manufacturers that the Company uses or may use to supply
products for the Nutritional Supplement Lines must adhere to CGMP regulations.
Failure to do so could result in the withdrawal of FDA approval of such
manufacturers and consequent interruptions in the supply of products to the
Company. In addition, the Company has assumed responsibility for all marketing
and sales functions for the Nutritional Supplement Lines as well as certain
administrative functions, including customer service, order receipt, billing and
collection and distribution.
The Company has entered into a manufacturing agreement with Nova Biomedical
Corporation ("Nova") to supply Selfcare with electrochemical blood glucose
meters. The meters manufactured by Nova, together with the Company's test
strips, will form the New System. The Company's ability to ship the New System
on time and in accordance with LifeScan's requirements is highly dependent upon
receipt of an adequate supply of electrochemical blood glucose meters. There can
be no assurance that the Company's supply of electrochemical blood glucose
meters will not be interrupted, or that if such supply were interrupted, that
the Company would be able to contract with another supplier on a timely or
satisfactory basis. If such supply were interrupted, the Company could incur
set-up costs and delays in manufacturing the New System which could have a
material adverse effect on the Company's business, financial condition and
results of operations. If any such delay were to occur, and were to result in
the Company being unable to supply LifeScan with certain required amounts of
meters for the New System under the LifeScan Alliance, LifeScan would
automatically receive a license to manufacture, or to have manufactured on its
behalf, the New System, subject to payment of a royalty to the Company. In such
event, the Company could begin supplying the New System to LifeScan again at any
time, but would be required to reimburse LifeScan for certain expenses incurred
by LifeScan to produce the New System.
RISKS RELATED TO CERTAIN LICENSING ARRANGEMENTS
Through its wholly owned Irish subsidiary, Cambridge Diagnostics Ireland
Ltd. ("Cambridge Diagnostics"), the Company is currently producing diagnostic
test kits primarily for detecting antibodies to HIV,
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which are associated with Acquired Immune Deficiency Syndrome ("AIDS"). Selfcare
acquired Cambridge Diagnostics (formerly known as Cambridge Biotech Limited) in
November 1994 from Cambridge Biotech Corporation ("Cambridge Biotech"), which at
that time was operating in Massachusetts under Chapter 11 of the U.S. Bankruptcy
Code. Prior to the acquisition (the "Cambridge Diagnostics Acquisition"),
Cambridge Biotech licensed from Pasteur Sanofi Diagnostics (formerly known as
Diagnostics Pasteur), certain HIV 1/2 immunoassay technologies relating to
patents and proprietary rights held by Institut Pasteur (the "Pasteur HIV
Technologies"), and required for production of HIV test kits, including the
Selfcare HIV test kits manufactured by Cambridge Diagnostics. Under the terms of
Cambridge Biotech's license agreements with Pasteur Sanofi Diagnostics,
Cambridge Biotech could not assign or sublicense its rights with respect to the
Pasteur HIV Technologies to Selfcare or to Cambridge Diagnostics. In order to
allow Selfcare and Cambridge Diagnostics to have access to such technologies,
Selfcare and Cambridge Biotech formed Cambridge Affiliate Corporation
("Cambridge Affiliate"), 51% owned by Cambridge Biotech, and 49% owned by
Selfcare, but managed by Cambridge Diagnostics. The establishment of Cambridge
Affiliate and the terms of the arrangements relating thereto were considered and
approved by both U.S. and Irish bankruptcy courts in connection with the
approval of the sale of Cambridge Diagnostics by such courts. Cambridge
Affiliate maintains its own accounts and records and makes payments of royalties
due under the Pasteur Sanofi Diagnostics licenses to Cambridge Biotech.
The licenses of the Pasteur HIV Technologies to Cambridge Biotech are
nonexclusive 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 stockholders 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 Corporation subsequently filed an appeal to the United States District
Court for the District of Massachusetts. On July 18, 1997, a hearing was held on
the merits of the appeal. To Selfcare's knowledge, the district court has not
rendered a decision. 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.
DEBT FINANCING
The Company is subject to risks normally associated with debt financing,
including the risk that the Company's cash flow will be insufficient to meet
required payments of principal and interest. At September 30, 1997, the Company
had approximately $52.7 million of outstanding debt, including $29 million of
debt incurred to pay the consideration payable to AHP under the terms of
Nutritional Supplement Lines Acquisition. This amount does not include $10
million of debt incurred subsequent to the end of the third quarter as a result
of the private placement of Senior Subordinated Convertible Notes due October
28, 2002, with an aggregate principal amount of $10 million (the "Senior
Subordinated Notes"). This outstanding indebtedness, together with restrictions
in the Company's financing instruments, may limit the Company's ability to
obtain additional debt financing in the future and to respond to changing
business and economic conditions and could adversely affect its ability to
effect its business strategies. In addition, because certain of the Company's
debt bears interest at floating rates, an increase in interest rates could
adversely affect the Company's ability to meet its debt service obligations.
RISK OF INADEQUATE FUNDING; FUTURE CAPITAL NEEDS
The Company currently anticipates that its existing capital resources,
including funds expected to be generated from operations and other financing
activities, will be adequate to satisfy its capital requirements for
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at least 12 months. No assurance can be given that additional financing,
including currently planned financing, will be available, or, if available, that
it will be available on acceptable terms. If additional funds are raised by
issuing equity securities, further dilution to then existing stockholders will
result. If adequate funds are not available, the Company may be required to
significantly curtail one or more of its research and development programs, or
obtain funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies or
products which the Company would otherwise pursue on its own.
RISKS RELATED TO THE INTEGRATION OF ORGENICS' OPERATIONS
Selfcare has acquired a 97.0% direct and indirect equity interest in
Orgenics Ltd. ("Orgenics"), an Israeli company (the "Orgenics Acquisition"), for
approximately $18.2 million and expects to acquire direct and indirect ownership
of the balance of the outstanding capital stock of Orgenics. Orgenics develops,
manufactures and markets self-contained diagnostic test kits for the
professional market which detect antibodies and/or infectious disease agents,
including those associated with AIDS and chlamydia (a sexually transmitted
disease which may impair fertility). The Company has commenced the integration
of Orgenics' operations with the Company's current organization in order to
avoid redundancy and to make the most efficient use of Orgenics' assets. No
assurance can be given that such integration will be successful or that the
Company will not incur significant costs associated with such integration, such
as costs associated with the diversion of management resources to integration
issues.
DEPENDENCE UPON KEY PERSONNEL
The Company is highly dependent on the services of Ron Zwanziger, its
Chairman, President and Chief Executive Officer, and certain other members of
its management and scientific staff, and the loss of Mr. Zwanziger or one or
more of such employees could have a material adverse effect on the Company. In
addition, the Company believes that its future success will depend in large part
upon its ability to attract and retain highly skilled scientific, managerial and
marketing personnel, particularly as the Company expands its activities,
including product development and regulatory affairs, research and development
and sales and manufacturing. The Company faces significant competition for such
personnel from other companies, research and academic institutions, government
entities and other organizations. There can be no assurance that the Company
will be successful in hiring or retaining the personnel it requires for
continued growth. The failure to hire and retain such personnel could materially
and adversely affect the Company's prospects.
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT
In both the United States and elsewhere, sales of some of the Company's
products will be dependent in part on the availability of reimbursement from
third party payors, such as government and private insurance plans. Third-party
payors are increasingly challenging the prices charged for medical products and
services. If the Company succeeds in bringing one or more of such products to
market, there can be no assurance that these products will be considered
cost-effective, that reimbursement will be available or, if available, that the
level of reimbursement will be sufficient to allow the Company to sell its
products on a profitable basis.
PRODUCT LIABILITY; LIMITED INSURANCE COVERAGE
The testing, manufacturing and marketing of medical diagnostic devices,
such as the Company's blood glucose monitoring systems and HIV self tests
currently under development, including a home collection and mail-in HIV test
under development by a third party which the Company plans to market under a
license arrangement, entail an inherent risk of product liability claims. In
addition, the marketing of the Nutritional Supplement Lines may cause the
Company to be subjected to various product liability claims, including, among
others, that the Nutritional Supplement Lines have inadequate warnings
concerning side effects and interactions with other substances. Potential
product liability claims may exceed the amount of the Company's insurance
coverage or may be excluded from coverage under the terms of the policy. There
can be no assurance that the Company's existing insurance can be renewed at a
cost and level of coverage comparable to that presently in effect, if at all. In
the event that the Company is held liable for a claim against which it is
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not indemnified or for damages exceeding the limits of its insurance coverage,
such claim could have a material adverse effect on the Company's business,
financial condition and results of operations.
EFFECT OF ADVERSE PUBLICITY; SCIENTIFIC RESEARCH
The Nutritional Supplement Lines contain vitamin, minerals, herbs and other
ingredients that the Company generally regards as safe when taken as directed
and that various scientific studies have suggested may offer certain health
benefits. However, because the Company is highly dependent upon consumers'
perception of safety and quality of the Nutritional Supplement Lines as well as
similar products distributed by competitors, the Company could be adversely
affected in the event any of the Nutritional Supplement Lines or similar
products should be asserted or prove to be harmful to consumers. In addition,
the Company believes that the recent growth of the nutritional supplements
market is based on recent scientific research suggesting potential health
benefits from regular consumption of certain vitamins and other nutritional
products and the attention focused on such benefits by the media. The scientific
research to date is preliminary and there can be no assurance of future
favorable scientific results and media attention or of the absence of
unfavorable or inconsistent findings.
RISKS RELATED TO INTERNATIONAL SALES AND OPERATIONS
The Company has manufacturing facilities in Galway, Ireland (the "Galway
Facility") and Inverness, Scotland (the "Inverness Facility") and markets and
sells its products in several international markets. Through the first six
months of 1997, approximately 27% and 2% of the Company's net sales were to
customers in Europe and the Middle East, respectively. If the Company's revenues
generated by foreign activities are not adequate to offset the expense of
establishing and maintaining these foreign activities, the Company's business,
financial condition and results of operations could be materially adversely
affected. In addition, there are certain risks inherent in doing business
internationally, such as changes in applicable laws and regulatory requirements,
export and import restrictions, export controls relating to technology, tariffs
and other trade barriers, less favorable intellectual property laws,
difficulties in staffing and managing foreign operations, longer payment cycles,
difficulties in collecting accounts receivable, political instability,
fluctuations in currency exchange rates, expatriation controls and potential
adverse tax consequences, which could adversely impact the success of the
Company's international activities. There can be no assurance that one or more
of such factors will not have a material adverse effect on the Company's future
international activities and, consequently, on the Company's business, financial
condition and results of operations.
The executive offices and production facilities of Orgenics are located in
the State of Israel, and Orgenics is directly affected by political, economic
and military conditions in that country. On many occasions since December 1987,
Israel has experienced severe civil unrest, primarily in the areas that have
been under its control since 1967. No assurance can be given that hostilities or
other political, economic and military conditions in Israel will not have a
material adverse effect on the business and operations of Orgenics. Any such
effect could have a material adverse effect on the business, operations or
financial condition of the Company.
FLUCTUATIONS IN RESULTS OF OPERATIONS
The Company's annual and quarterly operating results may fluctuate due to
factors such as the timing of new product announcements and introductions by the
Company and its competitors, market acceptance of new or enhanced versions of
the Company's products, changes in manufacturing costs or other expenses,
competitive pricing pressures, the gain or loss of significant distribution
outlets or customers, increased research and development expenses and general
economic conditions. In addition, it is possible that in some future periods the
Company's results of operations will be below the expectations of the public
market. In any such event, the market price of the Common Stock could be
materially and adversely affected.
POSSIBLE VOLATILITY OF SHARE PRICE
The market price of the Common Stock may be highly volatile. Quarterly
operating results of the Company, changes in general conditions in the economy,
the financial markets, or the healthcare industry, or
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other developments affecting the Company or its competitors, could cause the
market price of the Common Stock to fluctuate substantially. In particular, the
stock market may experience significant price and volume fluctuations which may
affect the market price of the Common Stock for reasons unrelated to the
Company's operating performance.
Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect the prevailing market price for the
Common Stock. On October 27, 1997, the Company sold the Senior Subordinated
Notes due October 28, 2002, with an aggregate principal amount of $10 million
and warrants (the "Notes Warrants") to purchase up to 106,700 shares of Common
Stock. Each holder of a Senior Subordinated Note or of a Notes Warrant is
entitled, among other things, to convert such holder's Senior Subordinated Note
and exercise such holder's Notes Warrants, as applicable, pursuant to the lowest
of various prices calculated pursuant to the provisions set forth, respectively,
in the Senior Subordinated Notes and the Notes Warrants. The Senior Subordinated
Notes may be converted, and the Notes Warrants may be exercised, at any time
prior to October 28, 2002. Assuming a market price of $11.50 per share of Common
Stock (based on the lowest market price at which such shares traded during the
period October 21 to October 27, 1997) 730,174 shares of Common Stock are
issuable upon conversion of the Senior Subordinated Notes. The Company is
obligated pursuant to a registration rights agreement to register for public
resale all shares of Common Stock issuable upon conversion of the Senior
Subordinated Notes and exercise of the Notes Warrants.
On August 26, 1997, the Company sold 8,000 shares of Series B Convertible
Preferred Stock and warrants to purchase shares of Common Stock to certain
investors yielding net proceeds to the Company of approximately $7.5 million.
The holders of such shares of Series B Preferred Stock and Warrants (the "Series
B Investors") are entitled, among other things, to convert their shares and
exercise their Warrants pursuant to, respectively, a conversion formula set
forth in the Certificate of Designations, Rights and Preferences of Series B
Convertible Preferred Stock and an exercise price formula set forth in the
Warrants. The Warrants expire at the close of business on August 25, 2000.
Immediately prior to such time, the holders therefore may elect to exercise such
Warrants to purchase up to 114,628 shares of Common Stock. In addition, any
shares of Series B Preferred Stock not previously converted will automatically
convert into shares of Common Stock on August 26, 2000. At such time, assuming,
among other things, (i) that all shares of Series B Preferred Stock remain
outstanding, and (ii) an average of the lowest closing bid prices for Selfcare's
Common Stock of $11.40 per share (based on an average of the five lowest closing
bid prices of the Common Stock on the American Stock Exchange during the period
September 30, 1997, to November 10, 1997), 872,000 shares of Common Stock will
be issued.
Additionally, in October 1996, the Company sold 5,500 shares of Series A
Convertible Preferred Stock, par value $.001 per share, (the "Series A Preferred
Stock") to certain non-U.S. investors yielding net proceeds to the Company of
approximately $5.2 million. Pursuant to a conversion formula contained in their
subscription agreements with the Company, the holders of such shares, among
other things, are entitled to convert their Series A Preferred Stock into shares
of Common Stock in five equal installments over a 120-day period beginning in
December 1996. Any shares of Series A Preferred Stock not previously converted
will automatically convert into shares of Common Stock on October 15, 1998. 400
shares of Series A Preferred Stock remain unconverted. Accordingly, assuming an
average market price of $11.85 per share of Common Stock (based on the closing
price of the Common Stock on the American Stock Exchange on the five trading
days during the period November 4 through November 10, 1997), resulting in a
conversion price of $11.85 per share, 35,961 shares of Common Stock will be
freely tradeable without restriction or registration under the Securities Act as
a result of the conversion of the remaining shares of Series A Preferred Stock.
CONTROL BY CERTAIN STOCKHOLDERS
The executive officers and directors of the Company currently hold a
significant portion, totalling over 20%, of the outstanding shares of Common
Stock (including rights to receive shares of Common Stock but excluding options
and warrants). In addition, such executive officers and directors hold options
and warrants to purchase a significant number of additional shares of Common
Stock. Accordingly, these persons may have the ability to control the Company's
Board of Directors, and, therefore, the business, policies and affairs of the
Company.
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ANTI-TAKEOVER EFFECT OF CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS AND
DELAWARE LAW
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and Amended and Restated By-laws (the "By-laws")
contain certain provisions relating to corporate governance and the rights of
stockholders. These provisions may be deemed to have a potential "anti-takeover"
effect since such provisions may delay, defer or prevent a change in control of
the Company. The Certificate of Incorporation provides for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year. In addition, the Certificate of Incorporation
provides that stockholders may remove a director only for cause and only by the
vote of the holders of two-thirds of the Common Stock of the Company. This
provision, when coupled with the provision of the Certificate of Incorporation
authorizing only the Board of Directors to fill vacant directorships, will
preclude stockholders from removing incumbent directors without cause and
simultaneously gaining control of the Board of Directors by filling the
vacancies created by such removal with their own nominees, and will make more
difficult, and therefore may discourage, a proxy contest to change control of
the Company. These provisions of the Certificate of Incorporation may be changed
only by the affirmative vote of the holders of eighty percent of the Common
Stock of the Company entitled to vote on such matters at a meeting duly called
for such purpose. The Certificate of Incorporation also provides that
stockholder actions may not be taken by written consents.
The By-laws provide that special meetings of stockholders of the Company
may be called only by the Board of Directors. The By-laws also provide that
stockholders seeking to bring business before an annual or special meeting of
stockholders, or to nominate candidates for election as directors at an annual
or special meeting of stockholders, must provide prior written notice thereof,
as set forth in the By-laws. The By-laws may only be amended by the stockholders
by the affirmative vote of at least two-thirds of the votes eligible to be cast,
unless the Board of Directors has approved such amendment, in which case the
affirmative vote of at least a majority of the votes eligible to be cast is
required.
EFFECT OF ISSUANCE OF PREFERRED STOCK
The Company's Board of Directors is currently authorized to issue up to
4,982,000 shares of preferred stock in the future without further stockholder
approval and upon such terms and conditions, and having such rights, privileges
and preferences, as the Board of Directors may determine. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any preferred stock that may be issued in the
future. In addition, the issuance of preferred stock could have the effect of
making it more difficult for a third party to acquire control of, or of
discouraging acquisition bids for, the Company. This could limit the price that
certain investors might be willing to pay in the future for shares of Common
Stock. In October 1996 and August 1997, respectively, the Board of Directors
adopted resolutions authorizing shares of Series A Preferred Stock and shares of
Series B Preferred Stock, and the Company subsequently sold 5,500 shares of
Series A Preferred Stock to certain non-U.S. investors and 8,000 shares of
Series B Preferred Stock to the Selling Stockholders. 400 shares of Series A
Preferred Stock remain outstanding and all 8,000 shares of the Series B
Preferred Stock remain outstanding.
SHARES ELIGIBLE FOR FUTURE SALE
The Company had a total of 8,532,718 shares of Common Stock outstanding as
of November 10, 1997. 68,401 of the 1,268,401 shares of Common Stock offered
hereby and 3,295,000 shares issued in previous public offerings are freely
tradable without restriction or registration under the Securities Act by persons
other than "affiliates" of the Company, as that term is defined in Rule 144
promulgated under the Securities Act ("Affiliates"). The remaining 1,200,000
shares of Common Stock offered hereby will become similarly freely tradeable
upon conversion of the 8,000 shares of Series B Preferred Stock and exercise of
the Warrants. Further, upon conversion of the outstanding 400 shares of Series A
Preferred Stock, assuming an average market price of $11.85 per share of Common
Stock (based on the closing price of the Common Stock on the American Stock
Exchange on the five trading days during the period November 4 through November
10, 1997), resulting in a conversion price of $11.85 per share, an additional
35,961 shares of Common Stock will
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be freely tradeable without restriction or registration under the Securities
Act. During the period November 1996 through October 1997, the Company issued an
aggregate of 174,245 shares of Common Stock in connection with exercises of
employee stock options and purchases under the Company's Employee Stock Purchase
Plan, all of which have been registered and are freely tradeable. The remaining
shares of Common Stock currently outstanding are "restricted securities" as that
term is defined by Rule 144. These restricted securities were issued and sold by
the Company in private transactions in reliance upon exemptions from
registration under the Securities Act.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least one year, including persons who may be deemed Affiliates of the
Company, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the number of shares of Common
Stock then outstanding or the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements, and to the availability of current public
information about the Company. In addition, a person who is not deemed to have
been an Affiliate of the Company at any time during the 90 days preceding a
sale, and who has beneficially owned the shares proposed to be sold for at least
two years, would be entitled to sell such shares under Rule 144(k) without
regard to the requirements described above.
In addition, the Company has granted certain registration rights with
respect to shares of Common Stock which are currently outstanding or which are
issuable in the future, including to the holders of the Senior Subordinated
Notes, pursuant to which the Company may be required to register such shares for
sale under the Securities Act.
DIVIDENDS
The Company has never paid any dividends to holders of shares of Common
Stock. The Company is not currently generating income from operations and
expects that it will retain its earnings, if any, to finance its operations. In
addition, Selfcare is not permitted to pay dividends on the Common Stock prior
to the first anniversary of the date of issuance of the Series B Preferred Stock
(i.e., August 26, 1998). The Company thus does not expect to pay dividends to
holders of shares of Common Stock for the foreseeable future. Holders of shares
of Series A Preferred Stock are generally entitled to receive cumulative
quarterly dividends at a rate of 6% per annum. Holders of shares of Series B
Preferred Stock are not entitled to receive dividends.
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THE COMPANY
Selfcare is engaged in the development, manufacture and marketing of
self-test diagnostic products for the diabetes, women's health and infectious
disease markets, as well as the marketing of nutritional supplement products,
several of which are targeted primarily at the women's health market. The
Company's existing and planned self-test 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 HIV. As part of its strategy for addressing the
diabetes management market, the Company has entered into an exclusive worldwide
alliance and distribution agreement with LifeScan, Inc., a subsidiary of Johnson
& Johnson. The terms of the LifeScan Alliance contemplate that Selfcare will
manufacture and LifeScan will distribute Selfcare's proprietary electrochemical
blood glucose monitoring system for the management of diabetes. In addition the
Company plans to commence commercial production and marketing of disposable
generic test strips which can be used in electrochemical blood glucose
monitoring systems currently sold by certain other leading manufacturers.
In the women's health market, Selfcare is currently marketing home
pregnancy and ovulation prediction tests under the Selfcare brand name and under
various private labels. Pregnancy products packaged and distributed by Selfcare
are currently available on a private label basis or under the Selfcare brand in
approximately 90% of U.S. pharmacy chain outlets, including Wal-Mart, Walgreens,
CVS/pharmacy, Eckerd Drug, Osco Drug, Revco Pharmacy and Target Stores. On
February 19, 1997, pursuant to the Nutritional Supplement Lines Acquisition, the
Company acquired the U.S. rights to several nutritional supplement product
lines, which had domestic sales of approximately $24.0 million in 1996. Included
in these product lines are Stresstabs (a B-complex vitamin with folic acid),
Stresstabs plus iron, Ferro-Sequels (an iron supplement) and Posture (a calcium
supplement), which are targeted primarily at the women's health market. The
Company expects to continue to expand its women's health product line with
products supplied by or co-developed with third-party manufacturers, as well as
products developed by the Company.
Through its wholly owned Irish subsidiary, Cambridge Diagnostics, the
Company is currently producing diagnostic test kits primarily for detecting
antibodies to HIV. The Company also produces other tests for the detection of
hepatitis and Lyme disease infections. In addition, the Company has nearly
completed its acquisition of the capital stock of Orgenics Ltd. Orgenics
develops, manufactures, and markets self-contained test kits for the
professional market which detect antibodies and/or infectious agents, including
those associated with AIDS and chlamydia.
In August 1996, the Company completed an initial public offering in which
it sold 1,495,000 shares of Common Stock. In October 1996, Selfcare completed a
private placement of 5,500 shares of Series A Preferred Stock. In March 1997,
the Company completed a further public offering in which it sold 1,800,000
shares of Common Stock. In August 1997, the Company completed a private
placement of 8,000 shares of Series B Preferred Stock and the Warrants. In
October 1997, the Company completed a private placement of the Senior
Subordinated Notes and Notes Warrants to purchase up to 106,700 shares of Common
Stock.
Selfcare, Inc. was incorporated in Delaware on August 25, 1992, and
acquired its predecessor company, Superior Sensors, Inc. by merger on September
15, 1992. The Company's principal executive offices are located at 200 Prospect
Street, Waltham, Massachusetts 02154, and its telephone number is (781)
647-3900.
RECENT DEVELOPMENTS
AGREEMENT WITH CHEMTRAK
In January 1997, Selfcare entered into an agreement with Chemtrak
Incorporated ("ChemTrak") pursuant to which ChemTrak appointed Selfcare as its
exclusive distributor in Europe, Scandinavia, and certain other countries
formerly comprising the U.S.S.R., including Russia (the "European Territory"),
of ChemTrak's home collection and mail-in HIV testing system for which FDA
approval is currently pending. As part of this agreement, Selfcare agreed to
pursue regulatory approval of the system in each country comprising the European
Territory. In addition, Selfcare agreed to establish and operate one or more
central
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testing facilities and offer services to report results and offer counseling to
users of the system. Under the terms of the distribution agreement, ChemTrak
retained the right to convert the Company's exclusive distribution rights into
non-exclusive rights upon the occurrence of certain events, including the
Company's failure to make certain regulatory filings and the Company's failure
to maintain market share goals. The Company paid ChemTrak $333,000 as a license
fee in January 1997. Under the terms of the distribution agreement, the Company
was obligated to pay quarterly royalty payments when sales commence and
milestone payments of $333,000 each upon (i) obtaining regulatory approval in
the first of the U.K., Germany, or France and (ii) achieving the first $1.0
million in net sales of the mail-in HIV testing system in the European
Territory.
The Company has received notice from ChemTrak that ChemTrak is no longer
seeking regulatory approval in the United States and the Company now believes
that regulatory approval of the test will not be received within the next twelve
month. Accordingly, the Company notified ChemTrak that it is terminating the
distribution agreement on 60 days notice pursuant to the terms of the
distribution agreement. As of September 30, 1997, the Company had expensed
$239,000 related to the license fee. The remaining $94,000 will be written off
in the fourth quarter of 1997.
16
<PAGE> 18
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
REGISTRATION RIGHTS
The registration of the Shares pursuant to the Registration Statement of
which this Prospectus is a part will discharge certain of the Company's
obligations (i) under the terms of a Registration Rights Agreement, dated as of
August 26, 1997 (the "Registration Rights Agreement"), which the Company entered
into in connection with the purchase of the Series B Preferred Stock by, and the
issuance of the Warrants to, the Series B Investors, and (ii) under the terms of
certain option agreements (the "Option Agreements") entered into in connection
with the acquisition of Orgenics Ltd. (the "Orgenics Registration Rights
Agreement").
Pursuant to the Registration Rights Agreement, the Company has agreed to
pay all of the Company's reasonable expenses of registering the Shares (other
than brokerage and underwriting discounts and commissions) issuable upon
conversion of Series B Preferred Stock and exercise of the Warrants. The Company
also has agreed under the Registration Rights Agreement to indemnify each Series
B Investor and its directors, officers, employees and agents and any person who
controls any Series B Investor against losses, claims, damages, expenses and
liabilities arising under the securities laws in connection with the
Registration Statement, except, among other things, to the extent that such
liabilities arise out of or are based upon any information furnished in writing
to the Company by each respective Series B Investor expressly for use in the
Registration Statement or an amendment or supplement thereto. In addition, each
Series B Investor under the Registration Rights Agreement agreed to indemnify
the Company and its directors, officers (who sign the Registration Statement),
employees, agents, and each person who controls the Company, and each other
stockholder selling securities pursuant to the Registration Statement and each
of their respective directors, officers, and any person who controls any of
them, against all losses, claims, damages, expenses and liabilities arising
under the securities laws insofar as such losses, claims, damages or liabilities
relate to information furnished to the Company by such Series B Investor for use
in the Registration Statement or an amendment or supplement thereto.
Pursuant to the Orgenics Registration Rights Agreement, Selfcare will pay
all registration expenses incurred in connection with the registration of the
Shares issued pursuant to the Option Agreements (other than brokerage and
underwriting discounts and commissions).
17
<PAGE> 19
SELLING STOCKHOLDERS
The Shares are to be offered by and for the respective accounts of the
Selling Stockholders. The following table sets forth the names of the Selling
Stockholders, the number of shares of Common Stock beneficially owned by such
Selling Stockholders as of October 10, 1997, and the number of Shares which may
be offered for sale pursuant to this Prospectus by each such Selling
Stockholder. The Shares may be offered from time to time by the Selling
Stockholders named below. However, such Selling Stockholders are under no
obligation to sell all or any portion of such Shares, nor are the Selling
Stockholders obligated to sell any such Shares immediately under this
Prospectus. Because the Selling Stockholders may sell all or part of their
Shares, no estimate can be given as to the number of Shares that will be held by
any Selling Stockholder upon termination of any offering made hereby.
With the exception of the following individuals, none of the Selling
Stockholders has held any position, office or other material relationship with
the Company or any of its affiliates within the past three years other than as a
result of his or its beneficial ownership of Shares. Max Herzberg is the
Chairman of the board of directors and the Chief Executive Officer of Orgenics
Ltd., a subsidiary of Selfcare, Inc. Avraham Reinhartz is the former research
manager of, and David Menacham Ritterband and David Ruben are former research
scientists with, Orgenics Ltd.
Pursuant to Rule 416 of the Securities Act, the Selling Stockholders may
also offer and sell Shares issued with respect to the Series B Preferred Shares
and the Warrants as a result of, among other things, stock splits, stock
dividends, other dilutive events (including by reason of any reduction in the
floating rate conversion price mechanism of the Series B Preferred Stock). In
addition, the Selling Stockholders may also offer and sell Shares issued as
payment of liquidated damages upon certain events of default.
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY
OWNED AFTER
OFFERING(1)
NUMBER OF SHARES SHARES --------------------
NAME OF SELLING BENEFICIALLY OWNED OFFERED PERCENT OF
SHAREHOLDER PRIOR TO OFFERING HEREBY NUMBER OUTSTANDING
- ------------------------------------------ ------------------ ------- ------ -----------
<S> <C> <C> <C> <C>
Capital Ventures International(2)......... 375,000(3) 375,000 0 0
C.C. Investments LDC(2)................... 375,000(3) 375,000 0 0
Proprietary Convertible Investment Group,
Inc.(2)................................. 450,000(3) 450,000 0 0
Max Herzberg(4)........................... 39,936(5) 24,077(6) 15,859 *
TVM Techno Venture International Limited
Partnership(4).......................... 12,684 12,684 0 0
Gadish Kranot Gmulim Ltd.(4).............. 12,092 12,092 0 0
Golan Fine Crafts (1977) Ltd.(4).......... 6,363 6,363 0 0
Tadbik Ltd.(4)............................ 6,363 6,363 0 0
Tagmulin Be Am Keren Metkazit Letagmulim
Upizuim Leyad Bank Hapoalim Ltd.(4)..... 2,545 2,545 0 0
La Salamandre Invitissements France(4).... 1,943 1,943 0 0
Teuza Kupat Gemel Letagmulim Ulepizium
Ltd.(4)................................. 1,273 1,273 0 0
Avraham Reinhartz(4)...................... 528 528 0 0
David Menacham Ritterband(4).............. 431 431 0 0
David Ruben(4)............................ 88 88 0 0
Alain Flamet(4)........................... 7 7 0 0
Genevieve Gerard(4)....................... 7 7 0 0
</TABLE>
- ---------------
* Less than one percent.
(1) Assumes the sale of all Shares.
(2) Pursuant to the Securities Purchase Agreement, dated as of August 26, 1997,
by and among the Company and each of the Series B Investors, the Series B
Investors purchased an aggregate of 8,000
18
<PAGE> 20
shares of Series B Preferred Stock, which are convertible into shares of Common
Stock, and Warrants to acquire up to 114,628 shares of Common Stock.
(3) Represents the pro rata allocation among the Series B Investors of 1,200,000
Shares which the Company is registering hereunder pursuant to the
Registration Rights Agreement attached as Exhibit 99.1 hereto. The actual
number of Shares issuable upon conversion of the Series B Preferred Stock
will equal (i) the aggregate stated value of the shares of Series B
Preferred Stock then being converted (i.e., $1,000 per share), plus a
premium in the amount of 6% per annum accruing beginning on August 27, 1997,
through the date of conversion (unless the Company chooses to pay such
premium in cash) divided by (ii) (x) if the conversion occurs on or before
December 31, 1997, a conversion price (the "Fixed Conversion Price")
initially equal to $13.9581 per share, or (y) in the case of conversions
after December 31, 1997, and before May 24, 1998, a conversion price equal
to the lower of the Fixed Conversion Price and an average based upon the
closing bid prices of shares of Common Stock during a specified trading
period immediately prior to conversion, or (z) in the case of conversions on
or after May 24, 1997, a conversion price equal to the lower of the Fixed
Conversion Price and a percentage of an average based upon the closing bid
prices of shares of Common Stock during a specified trading period
immediately prior to conversion (subject to adjustment in accordance with
the Certificate of Designations, Preferences and Rights of the Series B
Preferred Stock). The 1,200,000 Shares also includes shares of Common Stock
issuable upon any Conversion Default (as defined in the Certificates of
Designations, Preferences and Rights of the Series B Preferred Stock). Each
Warrant entitles the holder thereof to acquire Shares at an exercise price
of $13.9581 per share. For a complete description of the relative rights,
preferences, privileges, powers and restrictions of the Series B Preferred
Stock, see the Certificate of Designations, Preferences and Rights of Series
B Convertible Preferred Stock of Selfcare, Inc. attached as Exhibit 99.2
hereto. For complete descriptions of the terms of the Warrants, see the Form
of Stock Purchase Warrant attached as Exhibit 99.4 hereto.
Except under certain limited circumstances, no holder of shares of Series B
Preferred Stock or the Warrants is entitled to convert or exercise such
securities to the extent that the shares to be received by such holder upon
such conversion or exercise would cause such holder to beneficially own
more than 4.9% of the Common Stock. Therefore, the number of shares set
forth herein and which a Series B Investor may sell pursuant to this
Prospectus may exceed the number of Shares such Series B Investor would
otherwise beneficially own as determined pursuant to Section 13(d) of the
Exchange Act. Moreover, pursuant to the regulations of the American Stock
Exchange, in the absence of shareholder approval, the aggregate number of
shares of Common Stock issuable to the Series B Investors at a discount
from market price upon conversion of the Series B Preferred Stock and
exercise of the Warrants which have been issued to the Series B Investors
pursuant to the Securities Purchase Agreement may not exceed 19.99% of the
outstanding Common Stock on August 26, 1997 (i.e., 1,691,317 shares).
Unless shareholder approval is obtained to issue Common Stock to the Series
B Investors in excess of the maximum amount set forth above, none of the
Series B Investors will be entitled to acquire more than its proportionate
share of such maximum amount. Any Series B Preferred Stock which may not be
converted and any Warrants which may not be exercised because of such
limitation must be redeemed by the Company.
(4) Represents Shares acquired pursuant to an option agreement entered into in
connection with the Orgenics Acquisition.
(5) Includes 11,375 shares of Common Stock issuable upon exercise of options
currently exercisable or exercisable within 60 days after October 10, 1997.
Also includes 20,338 Shares held by Shimon Greenberg as trustee for Max
Herzberg.
(6) Includes 3,739 Shares held by Max Herzberg individually and 20,338 Shares
held by Shimon Greenberg as trustee for Max Herzberg issued in connection
with the Orgenics Acquisition.
19
<PAGE> 21
PLAN OF DISTRIBUTION
The Shares are being offered on behalf of the Selling Stockholders. The
Shares may be sold or distributed from time to time by the Selling Stockholders,
or by pledgees, donees or transferees of, or other successors in interests to,
the Selling Stockholders, directly to one or more purchasers (including
pledgees) or through brokers, dealers or underwriters who may act solely as
agents or may acquire Shares as principals, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices, or at fixed prices, which may be changed. The sale of the Shares may be
effected in one or more of the following methods: (i) ordinary brokers'
transactions, which may include long or short sales; (ii) transactions involving
cross or block trades or otherwise on the American Stock Exchange; (iii)
purchases by brokers, dealers or underwriters as principal and resale by such
purchasers for their own accounts pursuant to this Prospectus; (iv) "at the
market" to or through market makers or into an existing market for the Shares;
(v) in other ways not involving market makers or established trading markets,
including direct sales to purchases or sales effected through agents; (vi)
through transactions in options, swaps or other derivatives (whether exchange-
listed or otherwise); or (vii) any combination of the foregoing, or by any other
legally available means. In addition, the Selling Stockholders or their
successors in interest may enter into hedging transactions with broker-dealers
who may engage in short sales of Shares in the course of hedging the positions
they assume with the Selling Stockholders. The Selling Stockholders or their
successors in interest may also enter into option or other transactions with
broker-dealers that require the delivery by such broker-dealers of the Shares,
which Shares may be resold thereafter pursuant to this Prospectus.
Brokers, dealers, underwriters or agents participating in the distribution
of the Shares as agents may receive compensation in the form of commissions,
discounts or concessions from the Selling Stockholders and/or purchasers of the
Shares for whom such broker-dealers may act as agent, or to whom they may sell
as principal, or both (which compensation as to a particular broker-dealer may
be less than or in excess of customary commissions). The Selling Stockholders
and any broker-dealers who act in connection with the sale of Shares hereunder
may be deemed to be "Underwriters" within the meaning of the Securities Act, and
any commissions they receive and proceeds of any sale of Shares may be deemed to
be underwriting discounts and commissions under the Securities Act. Neither the
Company nor any Selling Stockholder can presently estimate the amount of such
compensation. The Company knows of no existing arrangements between any Selling
Stockholder, any other stockholder, broker, dealer, underwriter or agent
relating to the sale or distribution of the Shares.
The Company will pay substantially all of the expenses incident to the
registration, offering and sale of the Shares to the public other than
commissions or discounts of underwriters, broker-dealers or agents. The Company
has also agreed to indemnify the Series B Investors and certain related persons
against certain liabilities, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby will be passed
upon for the Company by its counsel, Goodwin, Procter & Hoar LLP, Exchange
Place, Boston, Massachusetts 02109-2881.
EXPERTS
The consolidated financial statements of Selfcare, Inc. and its
subsidiaries incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
certified public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
20
<PAGE> 22
================================================================================
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A
SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Risk Factors.......................... 3
The Company........................... 15
Recent Developments................... 15
Use of Proceeds....................... 17
Registration Rights................... 17
Selling Stockholders.................. 18
Plan of Distribution.................. 20
Legal Matters......................... 20
Experts............................... 20
</TABLE>
------------------------
1,268,401 SHARES
SELFCARE, INC.
COMMON STOCK
------------------------------
PROSPECTUS
------------------------------
November 13, 1997
================================================================================
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. (1)
The following are the estimated expenses of issuance and distribution of
the Shares registered hereunder on Form S-3:
<TABLE>
<S> <C>
SEC Registration Fee............................................... $ 4,613
American Stock Exchange Listing Fee................................ 17,500
Legal Fees and Expenses............................................ 30,000
Miscellaneous...................................................... 7,887
-------
Total......................................................... $ 60,000
=======
</TABLE>
- ---------------
(1) The amounts set forth in this Item 14, except for the SEC Registration Fee,
are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with Section 145 of the General Corporation Law of the State
of Delaware, Article VII of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") provides that no director of
the Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or (iv)
for any transaction from which the director derived an improper personal
benefit. In addition, the Certificate of Incorporation provides that if the
Delaware General Corporation Law is amended to authorize the further elimination
or limitation of the liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest extent permitted
by the Delaware General Corporation Law, as so amended.
Article V of the Company's Amended and Restated By-laws (the "By-laws")
provide for indemnification by the Company of its officers and certain
non-officer employees under certain circumstances against expenses (including
attorneys fees, judgments, fines and amounts paid in settlement) reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceeding in which any such person is involved by reason of
the fact that such person is or was an officer or employee of the Company, if
such person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
criminal actions or proceedings, if such person had no reasonable cause to
believe his or her conduct was unlawful.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<S> <C>
5 Opinion of Goodwin, Procter & Hoar LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5)
24* Power of Attorney
99.1* Registration Rights Agreement, dated as August 26, 1997, by and among the Company
and the Selling Stockholders
99.2* Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock of Selfcare, Inc.
99.3* Securities Purchase Agreement, dated as of August 26, 1997, by and among the
Company and each of the Selling Stockholders
99.4* Form of Warrant to Purchase Shares of Common Stock of the Company issued to each of
the Series B Investors
</TABLE>
* Previously filed.
II-1
<PAGE> 24
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes to:
1. File, during any period in which offers and sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement which, individually or
in the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement); and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii)
herein do not apply if the information required in a
post-effective amendment is incorporated by reference from
periodic reports filed by the undersigned Registrant under the
Exchange Act.
2. For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
3. File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Waltham,
The Commonwealth of Massachusetts, on November 12, 1997.
SELFCARE, INC.
By: /s/ RON ZWANZIGER
----------------------------------
RON ZWANZIGER
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Pre-Effective Amendment No. 1 to the Registration Statement has been signed
by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------- ------------------------------------- -----------------
<C> <S> <C>
/s/ RON ZWANZIGER President, Chief Executive Officer November 12, 1997
- --------------------------------- and Director (Principal Executive
RON ZWANZIGER Officer)
* Chief Financial Officer (Principal November 12, 1997
- --------------------------------- Financial Officer and Principal
ANTHONY H. HALL Accounting Officer)
* Director November 12, 1997
- ---------------------------------
JONATHAN J. FLEMING
* Director November 12, 1997
- ---------------------------------
CAROL R. GOLDBERG
* Director November 12, 1997
- ---------------------------------
EDWARD B. ROBERTS
* Director November 12, 1997
- ---------------------------------
WILLARD LEE UMPHREY
* Director November 12, 1997
- ---------------------------------
PETER TOWNSEND
* Director November 12, 1997
- ---------------------------------
JOHN F. LEVY
/s/ RON ZWANZIGER November 12, 1997
- ---------------------------------
*BY RON ZWANZIGER,
AS ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ---------------------------------------------------------------------------- ----
<C> <S> <C>
5 Opinion of Goodwin, Procter & Hoar LLP......................................
23.1 Consent of Arthur Andersen LLP..............................................
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5)..............
24* Power of Attorney (included on signature page)..............................
99.1* Registration Rights Agreement, dated as August26, 1997, by and among the
Company and the Selling Stockholders........................................
99.2* Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock of Selfcare, Inc............................................
99.3* Securities Purchase Agreement, dated as of August 26, 1997, by and among the
Company and each of the Selling Stockholders................................
99.4* Form of Warrant to Purchase Shares of Common Stock of the Company issued to
each of the Series B Investors..............................................
</TABLE>
* Previously filed.
<PAGE> 1
Exhibit 5
GOODWIN, PROCTER & HOAR LLP
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
November 12, 1997
Selfcare, Inc.
200 Prospect Street
Waltham, MA 02154
Ladies and Gentlemen:
This opinion is furnished in our capacity as special counsel to Selfcare,
Inc., a Delaware Corporation (the "Company"), in connection with the
registration, pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), of 1,268,401 shares (the "Shares") of common stock, par value
$0.001 per share (the "Common Stock"), of the Company.
In connection with rendering this opinion, we have examined the Amended and
Restated Certificate of Incorporation and the Amended and Restated Bylaws of the
Company, both as amended to date; such records of the corporate proceedings of
the Company as we have deemed material; a registration statement on Form S-3
under the Securities Act relating to the Shares and the prospectus contained
therein, each as amended; and such other certificates, receipts, records and
documents as we considered necessary for the purposes of this opinion.
We are attorneys admitted to practice in The Commonwealth of Massachusetts.
We express no opinion herein concerning the laws of any jurisdiction other than
the laws of the United States of America, The Commonwealth of Massachusetts, and
the General Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that the
Shares when sold will be duly authorized, legally issued, fully paid and
nonassessable by the Company.
The foregoing assumes that all requisite steps will be taken to comply with
the requirements of the Securities Act and applicable requirements of state laws
regulating the offer and sale of securities. The foregoing also assumes that
all shares of Common Stock to be issued upon conversion of the Series B
Convertible Preferred Stock, par value $.001 per share, of the Company and upon
exercise of the related Stock Purchase Warrants to purchase shares of Common
Stock will be issued in accordance with the terms, respectively, of the
Certificate of Designations, Rights and Preferences of Series B Convertible
Preferred Stock of the Company and of the related Stock Purchase Warrants.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
-------------------------------
GOODWIN, PROCTER & HOAR LLP
<PAGE> 1
EXHIBIT 23.1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated February 19,
1997 (except for the matters discussed in Notes 2(n) and 5, as to which the date
is March 6, 1997) incorporated by reference in Selfcare, Inc.'s Form 10-KSB/A
for the year ended December 31, 1996 and to all references to our Firm included
in this registration statement.
/s/ ARTHUR ANDERSEN LLP
--------------------------------------
Arthur Andersen LLP
Boston, Massachusetts
November 9, 1997
