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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 1998
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 NO.)
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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 OFFICE)
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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.
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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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PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, $.0.001 par value........ 2,038,750 Shares(2) $9.25 $18,858,438 $5,564
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(1) Based upon the average of the high and low sale prices reported on American
Stock Exchange on January 30, 1998, 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 of Common Stock issuable to
prevent dilution resulting from stock splits, stock dividends and other
similar transactions (including by reason of changes in the conversion price
of the Senior Subordinated Convertible Notes due October 28, 2002).
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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.
2,038,750 SHARES OF COMMON STOCK
This Prospectus relates to 2,038,750 shares (the "Shares") of common stock,
$.001 par value per share (the "Common Stock"), of Selfcare, Inc. ("Selfcare" or
the "Company") to be sold from time to time by certain securityholders
identified herein (collectively, the "Selling Stockholders"). 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."
Of the Shares registered hereby: (i) up to 1,600,000 Shares are issuable in
accordance with the terms of the Senior Subordinated Convertible Notes due
October 28, 2002, in the aggregate principal amount of $10,000,000 (the "Senior
Notes") and of warrants to purchase shares of Common Stock (the "Notes
Warrants") issued in connection with the sale of the Senior Notes, representing
shares of Common Stock that may be issued upon conversion of the Senior Notes,
upon exercise of the Notes Warrants and as interest payments on the Senior Notes
in lieu of cash; and (ii) up to 438,750 Shares are issuable upon exercise of
certain warrants (collectively, the "USB '93 Warrants") to purchase shares of
Common Stock originally issued to USB '93 Technology Associates Limited
Partnership ("USB '93") in connection with the Company's acquisition of certain
intellectual property and related assets from USB '93. Pursuant to Rule 416
promulgated under 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 as a result of stock splits, stock dividends and other
anti-dilution adjustment provisions (including by reason of any reduction in the
floating rate conversion price mechanism of the Senior Notes) in accordance with
the terms of the Senior Notes, Notes Warrants and USB '93 Warrants. The Common
Stock of the Company is traded under the symbol "SLF" on the American Stock
Exchange. On February 2, 1998, the reported closing price for the Common Stock
on the American Stock Exchange was $9.00 per share.
The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed to bear all expenses incurred in connection with
the registration 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 FEBRUARY 3, 1998.
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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).
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
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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"). Selfcare commenced shipments of the
New System in December 1997. The Company's future results of operations depend
to a substantial degree on LifeScan's ability to market and sell the New System.
No assurance can be given as to the market acceptance of the New System. The
failure to produce, market and distribute successfully the New System 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 and $22.8 million in 1997. Sales from
February 19, 1997, to December 31, 1997, were approximately $18.4 million. 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 1998 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, 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
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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 applicable regulatory
requirements can result in, among other things, fines, suspensions of regulatory
approvals, product recalls, operating restrictions and criminal prosecution.
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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, as well as 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 Good
Manufacturing Practices ("GMPs"), 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 Food, Drug and Cosmetic 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
Good Manufacturing Practices to regulate dietary supplements which are modeled
on the current GMPs for food. The Company believes that the manufacture of the
Nutritional Supplement Lines is currently in compliance with the proposed GMPs
for dietary supplements. No assurance can be given that the final GMPs for
dietary supplements will not change in ways that require changes in the
manufacture of the Nutritional Supplement Lines.
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 first three quarters of 1997, the Company had revenues of approximately
$18.6 million and a net loss of approximately $34.4 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
over the next several years as its product programs expand and various clinical
trials commence. The amount
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of net losses and the time required by the Company to reach sustained
profitability are highly uncertain since achieving profitability requires the
Company, among other things, to complete successfully 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 protection to the Company and not be
challenged as unenforceable or invalid, or not be infringed. In addition,
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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 mid-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 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,
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supermarkets and health food stores. Most of these companies are privately held
and the Company is unable to assess precisely 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 for 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, 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 GMP
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.
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, 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, 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 Institute Pasteur (the "Pasteur HIV Technologies"),
and required for production of HIV test kits, including the Selfcare HIV test
kits
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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 the United States Bankruptcy Court of the District of
Massachusetts (Western District) in March 1995 by Institute 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 Institute 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 the district
court by Institut Pasteur and Genetic Systems Corporation. The district court
affirmed the rulings of the bankruptcy court, holding that Cambridge Biotech may
sell products incorporating the Pasteur HIV Technologies in the United States.
Institut Pasteur and Genetic Systems Corporation have appealed the decision of
the district court.
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 $10.0
million of debt incurred subsequent to September 30, 1997, as a result of the
private placement of the Senior 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 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 curtail
significantly 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.
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RISKS RELATED TO THE INTEGRATION OF ORGENICS' OPERATIONS
Selfcare has acquired a 99.8% direct and indirect equity interest in
Orgenics Ltd. ("Orgenics"), an Israeli company (the "Orgenics Acquisition"), for
approximately $18.4 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, 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 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
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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, Yavne, Israel
and Inverness, Scotland and markets and sells its products in several
international markets. In 1997, approximately 21% of the Company's net sales
were to customers in Europe and 15% of the Company's net sales were to customers
in regions other than North America and Europe. 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 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. Additionally, 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. See "-- Shares Eligible for Future Sale."
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CONTROL BY CERTAIN STOCKHOLDERS
The executive officers and directors of the Company beneficially owned as
of January 30, 1998, approximately 18% of the outstanding shares of Common Stock
(excluding options, warrants and other derivative securities). On a fully
diluted basis, the executive officers and directors beneficially owned as of
January 30, 1998, approximately 29% of Selfcare's 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.
The amounts set forth in this paragraph relating to the beneficial ownership of
shares of Common Stock by the executive officers and directors of Selfcare are
based on the Principal Stockholders' Table contained in the Company's proxy
statement for its 1997 Annual Meeting of Stockholders, the Forms 3, 4 and 5
filed with the Commission and forwarded to Selfcare, and acquisitions under the
Company's employee benefits plans.
ANTI-TAKEOVER EFFECT OF CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS AND
DELAWARE LAW
The Company's Amended and Restated Certificate of Incorporation, as
amended, (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 the Board of Directors adopted
resolutions authorizing, respectively, shares of Series A Convertible Preferred
Stock, par value $.001 per share (the "Series A Preferred Stock"), and shares of
Series B Convertible Preferred Stock, par value $.001 per share (the "Series B
Preferred Stock"), and the Company subsequently sold 5,500 shares of Series A
Preferred Stock and 8,000 shares of Series B Preferred Stock. No shares of
Series A Preferred Stock remain outstanding and 7,800 shares of the Series B
Preferred Stock remain outstanding.
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SHARES ELIGIBLE FOR FUTURE SALE
The Company had a total of 9,783,616 shares of Common Stock outstanding as
of January 30, 1998. 3,631,109 shares of previously issued Common Stock have
been registered and are freely tradeable without restriction or further
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"). An additional 579,696 shares of Common Stock were issued
upon conversion of Selfcare's Series A Preferred Stock and, assuming compliance
with the applicable provisions of Regulation S, are freely tradeable. The
remaining 5,572,811 shares of Common Stock currently outstanding were issued and
sold by the Company in private transactions in reliance upon exemptions from
registration under the Securities Act and either have or will become freely
tradeable without restriction or further registration under the Securities Act
by persons other than Affiliates under Rule 144. Certain outstanding shares not
currently registered possess registration rights pursuant to which the Company
may be required to register such shares.
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.
As of January 30, 1998, there were outstanding options, warrants,
convertible debt and other derivative securities to purchase or acquire an
aggregate of 7,902,068 shares of Common Stock. This number includes (but is not
limited to): (i) 732,601 shares of Common Stock issuable upon conversion of the
Senior Notes (assuming a conversion price of $13.65 per share of Common Stock,
which is 120% of the lowest market price at which such shares traded during the
period October 20 through October 24, 1997); (ii) 137,950 shares of Common Stock
issuable upon exercise of the Notes Warrants; (iii) 905,380 shares of Common
Stock issuable upon conversion of the Company's 7,800 outstanding shares of
Series B Convertible Preferred Stock (assuming a market price of $8.3875 per
share of Common Stock, which is the average of the five lowest closing bid
prices of Common Stock on the American Stock Exchange during the period December
16, 1997, through January 27, 1998); (iv) 114,628 shares of Common Stock
issuable upon exercise of the related warrants (the "Preferred Warrants") issued
in connection with the sale of the Series B Preferred Stock; (v) 438,750 shares
of Common Stock issuable upon exercise of the USB '93 Warrants; and (vi) 636,691
shares of Common Stock issuable upon conversion of outstanding convertible
promissory notes issued in December 1997 (see "Recent Developments -- EN PLC
Notes Refinancing" and "Recent Developments -- CDIL Notes Refinancing and
Acceleration of CDIL Warrants"). The number of shares of Common Stock issuable
upon conversion or exercise of, or in connection with, currently outstanding
options, warrants, convertible and other derivative securities may vary in the
future as the result of, among others, changes in the market price of shares of
Common Stock, the accrual of interest, the date of any conversion or exercise,
and anti-dilution and liquidated damages provisions of the relevant instrument,
if applicable.
The Company anticipates that all of the shares to be issued upon conversion
of the Senior Notes and the shares of Series B Preferred Stock, and upon
exercise of the Notes Warrants, the Preferred Warrants and the USB '93 Warrants,
will have been registered or will otherwise be freely tradeable without
restriction or further registration by persons other than Affiliates when
issued. The remaining shares of Common Stock issuable pursuant to outstanding
derivative securities of the Company will, to the extent such shares have not
been previously registered, become freely tradeable in accordance with the
respective terms thereof and with the provisions of the Securities Act and the
rules promulgated thereunder.
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. Additionally, the holders of Common Stock could experience
significant dilution in earnings per share as the result of the issuance of
shares of
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Common Stock pursuant to currently existing options, warrants, convertible debt
and other derivative securities, which issuance may occur at rates below the
then prevailing market price for Common Stock.
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 B Preferred Stock are not entitled to receive dividends.
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. Under the terms of the LifeScan Alliance, Selfcare manufactures and
LifeScan distributes 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 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 and $22.8 million in 1997.
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.
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
EN PLC NOTES REFINANCING
In October 1996, the Company purchased 200,000 common shares of Enviromed
plc ("Enviromed") and agreed to purchase EN PLC Limited Partnership's ("EN PLC")
holding of 7,961,386 common shares of
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Enviromed for a promissory note with a principal amount of approximately $3.8
million. In November 1996, the Company purchased an additional 100,000 common
shares of Enviromed. Effective as of January 1, 1997, the Company and EN PLC
entered into an amendment to the agreement (the "EN PLC Agreement") with EN PLC
pursuant to which the Company agreed to issue two promissory notes, in principal
amounts of approximately $2.8 million and $1.0 million respectively, evidencing
the purchase price under the EN PLC Agreement (the "EN PLC Notes").
In December 1997, the Company exchanged notes that are convertible into
shares of Common Stock (the "Convertible EN PLC Notes") in a principal amount
equal to approximately $1.6 million for payments due in January and April 1998
under the EN PLC Notes. The Convertible EN PLC Notes bear interest at the rate
of 10% per year, mature on the six-month anniversary of the date of issuance of
the Convertible EN PLC Notes (the "Convertible EN PLC Notes Maturity Date"), are
convertible by the holders thereof in whole at any time on or prior to the
Convertible EN PLC Notes Maturity Date into that number of shares of Common
Stock determined by dividing the principal balance of such Convertible EN PLC
Notes plus any accrued interest thereon by $7.225 (the "EN PLC Conversion
Price") and will automatically convert, without any action on the part of the
holders thereof, on the Convertible EN PLC Notes Maturity Date, in the event
they are not sooner prepaid or converted, into that number of shares of Common
Stock determined by dividing the principal balance of such Convertible EN PLC
Notes plus the accrued interest thereon by the EN PLC Conversion Price.
The shares of Common Stock into which the Convertible EN PLC Notes are
convertible did not receive rights to register such shares under the Securities
Act. Therefore, such shares of Common Stock will not be freely transferable
absent an available exemption from registration. The EN PLC Conversion Price
represents a 15% discount from the closing price of the Company's Common Stock
on the date immediately preceding the effective date of the exchange of the
amounts due under the EN PLC Notes in January and April 1998 for the Convertible
EN PLC Notes, reflecting in part the fact that shares issuable upon conversion
of the Convertible EN PLC Notes are not freely transferable. The holders of EN
PLC Notes included the following directors and officers, which directors and
officers exchanged an aggregate amount of approximately $0.8 million on
identical terms with all other holders of EN PLC Notes: Carol R. Goldberg, John
F. Levy, Willard L. Umphrey and Ron Zwanziger.
CDIL NOTES REFINANCING AND ACCELERATION OF CDIL WARRANTS
In November 1994, Selfcare acquired Cambridge Diagnostics from Cambridge
Biotech Corporation for an aggregate of $2.1 million and the assumption of
certain liabilities. In addition, the Company furnished Cambridge Diagnostics
with a $900,000 working capital line of credit. Selfcare financed the
acquisition of Cambridge Diagnostics by utilizing a bank line of credit and
subsequently refinanced the amount borrowed through the issuance of an aggregate
of $3.0 million in original principal amount of 10% promissory notes (the "CDIL
Notes"), together with attached warrants exercisable for a number of shares of
Common Stock to be determined based on the net sales of Cambridge Diagnostics in
the fiscal year preceeding the repayment of the CDIL Notes (the "CDIL
Warrants"). The CDIL Notes were due March 31, 1998, and bore interest at the
rate of 10% per year.
In December 1996, the Company fixed the number of shares of Common Stock
issuable upon exercise of the CDIL Warrants at 1,142,635 shares. On December 31,
1996, the holders of $2.6 million in principal amount of the CDIL Notes entered
into agreements (the "Extension Agreements") to terminate and cancel their CDIL
Warrants, in exchange for which the Company agreed to transfer to such holders,
for no additional consideration, an aggregate of 990,050 shares of Common Stock
on the earlier of January 15, 2000, or the occurrence of a change in control (as
defined in the Extension Agreements) of the Company. In December 1997, the
Company accelerated the issuance of the 990,050 shares to December 17, 1997, and
simultaneously issued the 152,585 shares that were issuable upon exercise of the
remaining CDIL Warrants.
In December 1997, the Company entered into exchange agreements with the
holders of approximately $2.95 million of CDIL Notes pursuant to which the
Company exchanged notes convertible into shares of Common Stock (the
"Convertible CDIL Notes") for the CDIL Notes. The Convertible CDIL Notes were
15
<PAGE> 17
issued in a principal amount equal to the principal amount of the CDIL Notes
exchanged by the holders thereof, bear interest at the rate of 10% per year,
mature on the six-month anniversary of the date of issuance of the Convertible
CDIL Notes (the "Convertible CDIL Notes Maturity Date"), are convertible by the
holders of such Convertible CDIL Notes in whole at any time on or prior to the
Maturity Date into that number of shares of Common Stock determined by dividing
the principal balance of such Convertible CDIL Notes plus any accrued interest
thereon by $7.225 (the "CDIL Conversion Price"), and will automatically convert,
without any action on the part of the holders, on the Convertible CDIL Notes
Maturity Date, in the event they are not sooner prepaid or converted, into that
number of shares of Common Stock determined by dividing the principal balance of
such Convertible CDIL Notes plus the accrued interest thereon by the Conversion
Price.
The shares of Common Stock into which the Convertible CDIL Notes are
convertible did not receive rights to register such shares under the Securities
Act. Therefore, such shares of Common Stock will not be freely transferable
absent an available exemption from registration. The CDIL Conversion Price
represents a 15% discount from the closing price of the Company's Common Stock
on the date immediately preceding the effective date of the exchange of the CDIL
Notes for the Convertible CDIL Notes, reflecting in part the fact that shares
issuable upon conversion of the Convertible CDIL Notes are not freely
transferable. The direct and indirect holders of CDIL Notes included the
following directors and officers, which directors and officers exchanged an
aggregate principal amount of $825,000 of CDIL Notes on identical terms with all
other holders of CDIL Notes: John F. Levy, David Scott, Willard L. Umphrey and
Ron Zwanziger.
In addition, U.S. Boston Capital Corporation, a broker-dealer, the
President of which is Willard L. Umphrey, a director and principal stockholder
of the Company, received a fee of three percent (3%) of the principal amount of
the CDIL Notes exchanged.
LITIGATION PERTAINING TO THE USE OF NAME AND THE SERVICE MARK "SELFCARE"
On November 15, 1997, Medical Selfcare, Inc. ("Medical") served process on
the Company in an action filed in the United States District Court for the
Northern District of California ("District Court") asserting service mark and
trade name infringement, unfair competition, dilution, and related claims
arising from the Company's use of the mark "Selfcare" for medical devices,
pharmaceutical products and nutritional supplements. Medical is seeking damages
for lost profits in an amount to be determined at trial, injunctive relief
barring the Company's use of the name and mark "Selfcare" in connection with its
products and services, destruction of products using the said name or mark,
disgorgement of profits gained from the alleged infringement, treble damages,
restitution, punitive damages and attorneys fees. The Company intends to defend
this litigation vigorously. The Company has answered the complaint and asserted
various defenses and a counterclaim seeking cancellation of Medical's federal
service mark registrations. The Company has advised the District Court of its
intention to phase out the use of the mark in connection with its nutritional
supplements. A hearing was held on Medical's motion for a preliminary injunction
before the District Court on December 19, 1997. On January 5, 1998, the District
Court entered an order, in the form proposed by the Company, requiring that,
effective six months thereafter, the Company cease using the mark "Selfcare" on
nutritional supplement products or packaging or distributing nutritional
supplement products or packaging bearing the mark, and that the Company remove
from its packaging the statement that the mark is "registered." The Company does
not believe that the preliminary injunction will have a material adverse impact
on the Company's sales, operations and financial performance. However, there can
be no assurance that a final ruling against the Company on the merits of the
case would not have such an impact.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
16
<PAGE> 18
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
October 27, 1997 (the "Registration Rights Agreement"), which the Company
entered into in connection with the purchase of the Senior Notes by, and the
issuance of the Notes Warrants to, Elliott Associates, L.P. and Westgate
International, L.P. (the "Senior Notes Investors") and (ii) under the terms of a
Registration Rights Agreement, dated as of March 8, 1994, entered into in
connection with the sale of Common Stock to Enviromed (the "USB '93 Registration
Rights Agreement").
Pursuant to the Registration Rights Agreement and the USB '93 Registration
Rights Agreement, the Company has agreed to pay all of the expenses incurred in
connection with registering the Shares, excluding underwriting discounts and
commissions. The Company also has agreed under the Registration Rights Agreement
and the USB '93 Registration Rights Agreement to indemnify each holder of the
Senior Notes, Notes Warrants, USB '93 Warrants and certain persons related to
such parties 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 such holders
expressly for use in the Registration Statement or an amendment or supplement
thereto. In addition, the holders of the Senior Notes and Notes Warrants 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 holder for
use in the Registration Statement or an amendment or supplement thereto. The
other holders of the USB '93 Warrants similarly agreed to indemnify the Company
and certain related persons for certain liabilities.
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 January 30, 1998, 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. USB '93 is a limited
partnership, the general partner which is USB '93 Technology, Inc. ("USB,
Inc."). The President of USB, Inc. is Willard Lee Umphrey, a director and a
principal stockholder of Selfcare, Inc. Additionally, an affiliate of USB '93,
U.S. Boston Capital Corporation ("U.S. Boston"), has acted as a placement agent
for the Company in various financings. Anne M. Umphrey is a registered
representative of U.S. Boston and is the spouse of Mr. Umphrey. Lawrie W.
Okurowski is the spouse of Leon Okurowski, an officer and registered
representative of U.S. Boston.
The Shares offered hereby by the Senior Notes Investors and the holders of
the Notes Warrants and USB '93 Warrants include, pursuant to Rule 416
promulgated under the Securities Act, Shares issued in accordance with the terms
of the Senior Notes, Notes Warrants and USB '93 Warrants as a result of stock
splits, stock dividends and other dilutive events (including, with respect to
the Senior Notes, by reason of changes in the floating rate conversion price
mechanism).
17
<PAGE> 19
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY
OWNED AFTER OFFERING
(1)
NUMBER OF SHARES SHARES ----------------------
BENEFICIALLY OWNED OFFERED PERCENT OF
NAME OF SELLING SHAREHOLDER PRIOR TO OFFERING HEREBY NUMBER OUTSTANDING
- -------------------------------------------- ------------------ ------- ------ -----------
<S> <C> <C> <C> <C>
Elliott Associates, L.P.(2)................. 784,375(3) 784,375 0 *
Westgate International, L.P.(2)............. 784,375(3) 784,375 0 *
USB '93 Technology Associates Limited
Partnership(4)............................ 234,000 234,000 0 *
Anne M. Umphrey (4)......................... 222,298(5) 136,500 85,798 *
Lawrie W. Okurowski (4)..................... 97,860(6) 68,250 29,610 *
Harlan P. Kleiman(2)........................ 20,608(7) 20,608 0 *
Robert K. Schacter(2)....................... 6,662(7) 6,662 0 *
Steven M. Lamar(2).......................... 3,062(7) 3,062 0 *
Thomas J. Griesel(2)........................ 918(7) 918 0 *
</TABLE>
- ---------------
* Less than one percent.
(1) Assumes the sale of all Shares.
(2) Pursuant to the Securities Purchase Agreement, dated as of October 27, 1997,
by and between the Company, Elliott Associates, L.P. and Westgate
International, L.P., the Senior Notes Investors purchased $10 million in
aggregate principal amount of Senior Notes, which are convertible into
shares of Common Stock, and received Notes Warrants to acquire up to 106,700
shares of Common Stock. As partial consideration for the placement of the
Senior Notes, the Company issued Notes Warrants to each of Messrs. Kleiman,
Schacter, Lamar and Griesel.
The principal of the Senior Notes is payable on October 28, 2002. The
unpaid principal of each Note accrues interest at the rate of 16% per year
payable in cash until the later of (i) the date of effectiveness of a
registration statement (the "Notes Registration Date") covering the shares
of Common Stock underlying the Notes and the Notes Warrants (the
"Registrable Securities"), and (ii) a date between 180 and 270 days after
October 27, 1997, selected by the Company (the "Variable Conversion Date").
Thereafter, interest on the unpaid principal accrues at the rate of 8% per
year payable in cash or, at the Company's option subject to certain
conditions, shares of Common Stock calculated at a price per share equal to
95% of the Recent Market Price as of the date interest was due. The "Recent
Market Price" as of any date is the lowest market price at which shares of
Common Stock traded at any time during the five trading days immediately
preceding the given date.
The holder of each Senior Note may convert all or a portion of such Senior
Note into shares of Common Stock prior to October 28, 2002. Prior to the
Variable Conversion Date, each Note converts into shares of Common Stock at
120% of the Recent Market Price as of October 27, 1997 (i.e., 120% of
$11.375 per share). Following the Variable Conversion Date, each Senior
Note converts at a conversion price per share equal to the Applicable
Percentage (as defined below) multiplied by the lesser of: (i) 125% of the
Recent Market Price as of October 27, 1997, as of the Variable Conversion
Date or (if later) as of the Notes Registration Date, which ever is least
(the "Ceiling Price"), and (ii) the Recent Market Price as of the date on
which the conversion notice is sent. The Applicable Percentage is a
percentage ranging from 100% to 92.5% depending upon the date that the
Company chooses as the Variable Conversion Date.
The Notes Warrants may be exercised in whole or in part from time to time
until October 28, 2002. The exercise price per share of each Notes Warrant
equals the Recent Market Price as of October 27, 1997, the Variable
Conversion Date or (if later) the Notes Registration Date, which ever is
lowest. Notwithstanding the foregoing, the holder of a Notes Warrant may
elect a cashless exercise of such Notes Warrant.
For a complete description of the terms of the Senior Notes, see the Form
of Senior Subordinated Convertible Note due October 28, 2002, incorporated
by reference as Exhibit 99.3 to the Registration Statement of which this
Prospectus forms a part. For a complete description of the terms of the
Notes
18
<PAGE> 20
Warrants, see the Form of Common Stock Purchase Warrant Certificate, dated
as of October 27, 1997, incorporated by reference as Exhibit 99.4 to the
Registration Statement of which this Prospectus forms a part.
(3) Represents the pro rata allocation among the Senior Notes Investors of
1,568,750 Shares which the Company is registering hereunder pursuant to the
Registration Rights Agreement incorporated by reference as Exhibit 99.2 to
the Registration Statement of which this Prospectus forms a part. Such
Shares may be issued upon conversion of the Senior Notes, exercise of the
Notes Warrants held by the Senior Notes Investors, and as interest payments
on the Senior Notes in lieu of cash. Currently 732,601 shares of Common
Stock are issuable upon conversion of the Senior Notes (assuming a
conversion price of $13.65, which is 120% of the lowest sale price of shares
of Common Stock during the period October 20 through October 24, 1997).
Currently, no shares of Common Stock are issuable as interest payment in
lieu of cash and up to 106,700 shares are issuable upon exercise of the
Notes Warrants held by the Senior Notes Investors.
The number of shares of Common Stock issuable upon conversion of the Senior
Notes, as interest payments thereon in lieu of cash and upon exercise of
the Notes Warrants is subject to anti-dilution provisions, and may be
adjusted, among others, upon (i) the issuance of stock dividends or the
occurrence of stock splits, reclassifications, recapitalizations or similar
events; and (ii) any consolidation, merger, reorganization or similar
fundamental restructuring. Pursuant to Rule 416 promulgated under the
Securities Act, this Prospectus also relates to such indeterminate number
of shares as may become issuable pursuant to the anti-dilution provisions
of the Senior Notes (including by reason of changes in the floating rate
conversion price mechanism) and Notes Warrants.
Except under certain limited circumstances or by waiver upon 61 days' prior
notice, none of the Senior Notes Investors or the holders of the Notes
Warrants is entitled to convert or exercise such securities to the extent
that the shares to be received by such person upon such conversion or
exercise would cause such person to beneficially own more than 4.9% of the
Common Stock. Therefore, the number of shares set forth herein and which a
Senior Notes Investor or holder of Notes Warrants may sell pursuant to this
Prospectus may exceed the number of Shares such Senior Notes Investor or
holder of Notes Warrants would otherwise beneficially own as determined
pursuant to Section 13(d) of the Exchange Act.
(4) In connection with the execution of the Technology License and Development
Agreement dated as of December 29, 1993, by and between the Company and USB
'93 Technology Associates Limited Partnership, the Company issued warrants
to purchase shares of Common Stock (i.e., the USB '93 Warrants) to USB '93
Technology Associates Limited Partnership, some of which were subsequently
assigned to Anne M. Umphrey and Lawrie W. Okurowski.
(5) Includes 136,500 Shares of Common Stock issuable upon exercise of the USB
'93 Warrants. The 85,798 shares owned by Ms. Umphrey are held jointly with
Willard Lee Umphrey.
(6) Includes 68,250 Shares of Common Stock issuable upon exercise of the USB '93
Warrants.
(7) Represents the Shares of Common Stock issuable upon exercise of the Notes
Warrants. See footnote (3) above.
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
19
<PAGE> 21
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. Elliott Associates, L.P. and Westgate International, L.P. may
offer their Shares through the selling efforts of Manchester Securities Corp., a
registered broker-dealer that is wholly owned by Elliott Associates, L.P.;
however, there is presently no agreement, arrangement or understanding relating
to any such services. 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 all of the expenses incident to the registration of
the Shares (but not commissions or discounts of underwriters or broker-dealers).
The Company has also agreed to indemnify the Senior Notes Investors, the holders
of the Notes Warrants and the holders of the USB '93 Warrants and, in each case,
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. The president of a professional
corporation which is a partner in Goodwin, Procter & Hoar LLP beneficially owns
an aggregate of approximately 40,664 shares of Common Stock and warrants to
purchase up to 5,278 shares of Common Stock. The president of another
professional corporation which is a partner in Goodwin, Procter & Hoar LLP
beneficially owns 1,000 shares of Common Stock.
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......................... 14
Recent Developments................. 15
Use of Proceeds..................... 17
Registration Rights................. 17
Selling Stockholders................ 17
Plan of Distribution................ 19
Legal Matters....................... 20
Experts............................. 20
</TABLE>
======================================================
======================================================
2,038,750 SHARES
SELFCARE, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
February 3, 1998
======================================================
<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............................................... $ 5,564
American Stock Exchange Listing Fee................................ 17,500
Legal Fees and Expenses............................................ 30,000
Miscellaneous...................................................... 6,936
-------
Total.................................................... $60,000
=======
</TABLE>
- ---------------
(1) The amounts set forth in this Item 14, except for the SEC Registration Fee
and the American Stock Exchange Listing 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, as amended (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
- ------- -------------------------------------------------------------------------------------
<C> <S>
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 Securities Purchase Agreement, dated as of October 27, 1997, by and between Selfcare,
Inc., Elliott Associates, L.P. and Westgate International, L.P. (incorporated by
reference to Exhibit 99.5 to Selfcare Inc.'s 10-QSB for the quarter ending September
30, 1997)
</TABLE>
II-1
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
99.2 Registration Rights Agreement, dated as October 27, 1997, by and between Selfcare,
Inc., Elliott Associates, L.P. and Westgate International, L.P. (incorporated by
reference to Exhibit 99.6 to Selfcare, Inc.'s 10-QSB for the quarter ending September
30, 1997)
99.3 Form of Senior Subordinated Convertible Note due October 28, 2002 (incorporated by
reference to Exhibit 99.7 to Selfcare, Inc.'s 10-QSB for the quarter ending September
30, 1997)
99.4 Form of Common Stock Purchase Warrant Certificate, dated as of October 27, 1997
(incorporated by reference to Exhibit 99.8 to Selfcare, Inc.'s 10-QSB for the quarter
ended September 30, 1997)
99.5 Registration Rights Agreement, dated March 8, 1994, between Selfcare, Inc., USB '93
Technology Associates Limited Partnership and Enviromed plc (incorporated by
reference to Exhibit 10.19 to Selfcare, Inc.'s registration statement on Form SB-2,
file no. 333-4830-NY).
</TABLE>
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
II-2
<PAGE> 25
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-3
<PAGE> 26
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Waltham, The Commonwealth of Massachusetts, on
February 3, 1998.
SELFCARE, INC.
By: /s/ RON ZWANZIGER
------------------------------------
Ron Zwanziger
Chairman, President and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS, each of the undersigned officers and
directors of Selfcare, Inc. hereby severally constitutes Ron Zwanziger and
Anthony H. Hall and each of them singly, his true and lawful attorneys with full
power to them, and each of them singly, to sign for the undersigned and in his
name in the capacity indicated below, the Registration Statement filed herewith
and any and all amendments to said Registration Statement, and generally to do
all such things in his name and in his capacity as an officer or director to
enable Selfcare, Inc. to comply with the provisions of the Securities Act of
1933, as amended, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming his signature as it may be signed by
his said attorney, or any of them, to said Registration Statement and any and
all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this 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 February 3, 1998
- ---------------------------------------- and Director (Principal Executive
Ron Zwanziger Officer)
/s/ ANTHONY H. HALL Chief Financial Officer (Principal February 3, 1998
- ---------------------------------------- Financial Officer and Principal
Anthony H. Hall Accounting Officer)
/s/ JONATHAN J. FLEMING Director February 3, 1998
- ----------------------------------------
Jonathan J. Fleming
/s/ CAROL R. GOLDBERG Director February 3, 1998
- ----------------------------------------
Carol R. Goldberg
/s/ EDWARD B. ROBERTS Director February 3, 1998
- ----------------------------------------
Edward B. Roberts
/s/ WILLARD LEE UMPHREY Director February 3, 1998
- ----------------------------------------
Willard Lee Umphrey
/s/ PETER TOWNSEND Director February 3, 1998
- ----------------------------------------
Peter Townsend
/s/ JOHN F. LEVY Director February 3, 1998
- ----------------------------------------
John F. Levy
</TABLE>
II-4
<PAGE> 27
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 Securities Purchase Agreement, dated as of October 27, 1997, by and between
Selfcare, Inc., Elliott Associates, L.P. and Westgate International, L.P.
(incorporated by reference to Exhibit 99.5 to Selfcare, Inc.'s 10-QSB for the
quarter ending September 30, 1997).............................................
99.2 Registration Rights Agreement, dated as October 27, 1997, by and between
Selfcare, Inc., Elliott Associates, L.P. and Westgate International, L.P.
(incorporated by reference to Exhibit 99.5 to Selfcare, Inc.'s 10-QSB for the
quarter ending September 10, 1997).............................................
99.3 Form of Senior Subordinated Convertible Note due October 28, 2002 (incorporated
by reference to Exhibit 99.7 to Selfcare, Inc.'s 10-QSB for the quarter ending
September 30, 1997)............................................................
99.4 Form of Common Stock Purchase Warrant Certificate, dated as of October 27, 1997
(incorporated by reference to Exhibit 99.8 to Selfcare, Inc.'s 10-QSB for the
quarter ended September 30, 1997)
99.5 Registration Rights Agreement, dated March 8, 1994, between Selfcare, Inc., USB
'93 Technology Associates Limited Partnership and Enviromed plc (incorporated
by reference to Exhibit 10.19 to Selfcare Inc.'s registration statement on Form
SB-2, file no. 333-4830-NY)....................................................
</TABLE>
II-5
<PAGE> 1
GOODWIN, PROCTER & HOAR LLP
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
February 2, 1998
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 2,038,750 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; 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 Senior Subordinated
Convertible Notes due October 28, 2002, in the aggregate principal amount of
10,000,000 (the "Senior Notes") of the Company, upon exercise of the related
Common Stock Purchase Warrants and upon exercise of warrants to purchase shares
of Common Stock (the "USB '93 Warrants") originally issued to USB '93 Technology
Associates Limited Partnership ("USB '93") in connection with the execution of
the Technology License and Development Agreement dated as of December 29, 1993,
by and between the Company and USB '93 will be issued in accordance with the
terms, respectively, of the Senior Notes, the related Stock Purchase Warrants
and the USB '93 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
January 30, 1998
