<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 30, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ___________ to
_______________
COMMISSION FILE NUMBER 0-20871
INVERNESS MEDICAL TECHNOLOGY, INC.
(FORMERLY SELFCARE, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3164127
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 PROSPECT STREET
WALTHAM, MASSACHUSETTS 02453
(Address of principal executive offices)
(781) 647-3900
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
The number of shares outstanding of the registrant's Common Stock
as of August 9, 2000 was 24,890,614.
Transitional Small Business Disclosure Format (check one):
YES NO X
--- ---
<PAGE>
INVERNESS MEDICAL TECHNOLOGY, INC.
(FORMERLY SELFCARE, INC.)
FORM 10-Q
For the Quarterly Period Ended June 30, 2000
This Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results of Inverness Medical Technology, Inc. (the
Company or Inverness Medical) could differ materially from those set forth in
the forward-looking statements. Factors that might cause such a difference are
discussed in the section entitled "Certain Factors Affecting Future Results"
beginning on page 14 of this Form 10-Q and in the Company's 1999 Annual Report
to Shareholders, portions of which were filed as an exhibit to the Company's
Form 10-K filed for the year ended December 31, 1999.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited):
a) Consolidated Statements of Operations for the three months
ended June 30, 2000 and 1999 and the six months ended
June 30, 2000 and 1999 3
b) Consolidated Balance Sheets as of June 30, 2000 and
December 31, 1999 4
c) Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 5
d) Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
(FORMERLY SELFCARE, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net product sales $40,513,838 $27,180,725 $78,148,154 $55,957,872
Grants and other revenue 93,138 121,776 156,132 542,591
----------- ------------ ----------- -----------
Net revenues 40,606,976 27,302,501 78,304,286 56,500,463
Cost of sales 23,533,978 19,083,359 45,434,864 39,152,344
----------- ------------ ----------- -----------
Gross profit 17,072,998 8,219,142 32,869,422 17,348,119
----------- ------------ ----------- -----------
Operating Expenses:
Research and development 3,019,619 1,358,429 6,187,845 2,583,138
Selling, general and administrative 9,907,376 8,162,742 19,028,262 17,449,431
----------- ------------ ----------- -----------
Total operating expenses 12,926,995 9,521,171 25,216,107 20,032,569
----------- ------------ ----------- -----------
Operating income (loss) 4,146,003 (1,302,029) 7,653,315 (2,684,450)
Interest, including non-cash interest expense relating to
issuance of warrants and amortization of original issue
discount (2,058,408) (1,900,462) (4,151,847) (3,700,295)
Other income (expense) (Note 5) 2,071,867 (59,455) 2,083,799 (192,362)
----------- ------------ ----------- -----------
Income (loss) before dividends and accretion on mandatorily
redeemable preferred stock of a subsidiary 4,159,462 (3,261,946) 5,585,267 (6,577,107)
Dividends and accretion on mandatorily redeemable preferred
stock of a subsidiary (280,317) (55,878) (335,663) (112,645)
----------- ------------ ----------- -----------
Income (loss) before extraordinary loss and income taxes 3,879,145 (3,317,824) 5,249,604 (6,689,752)
Extraordinary loss on modification of notes payable (799,729) -- (799,729) (306,092)
----------- ------------ ----------- -----------
Income (loss) before income taxes 3,079,416 (3,317,824) 4,449,875 (6,995,844)
Provision for income taxes 152,252 89,318 287,406 333,621
----------- ------------ ----------- -----------
Net income (loss) $ 2,927,164 $ (3,407,142) $ 4,162,469 $(7,329,465)
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Net income (loss) per common share - basic $0.12 $(0.22) $0.18 $(0.53)
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Net income (loss) per common share - diluted $0.11 $(0.22) $0.15 $(0.53)
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Weighted average shares - basic 23,269,265 16,565,659 21,436,221 16,107,346
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Weighted average shares - diluted 27,234,847 16,565,659 26,565,363 16,107,346
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements
3
<PAGE>
INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
(FORMERLY SELFCARE, INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
2000 1999
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,351,437 $ 5,233,594
Accounts receivable, net of reserves of $4,848,000 and
$2,623,000 in 2000 and 1999, respectively 22,397,140 20,557,573
Inventories (Note 3) 14,778,302 12,367,265
Prepaid expenses and other current assets 1,692,392 1,573,509
------------ ------------
Total current assets 44,219,271 39,731,941
PROPERTY, PLANT AND EQUIPMENT, NET 10,998,096 9,779,498
GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET 60,178,389 63,281,897
DEFERRED FINANCING COSTS AND OTHER ASSETS, NET 1,499,209 2,043,218
------------ ------------
$116,894,965 $114,836,554
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable $ 32,126,050 $ 21,483,140
Accounts payable 17,052,795 16,550,984
Accrued expenses and other current liabilities 13,934,346 10,119,326
Current portion of deferred revenue 450,030 251,447
------------ ------------
Total current liabilities 63,563,221 48,404,897
------------ ------------
LONG-TERM LIABILITIES:
Deferred revenue, net of current portion 332,293 204,770
Other long-term liabilities 129,000 161,000
Notes payable, net of current portion 21,807,262 38,892,273
------------ ------------
Total long-term liabilities 22,268,555 39,258,043
------------ ------------
COMMITMENTS AND CONTINGENCIES
MANDATORILY REDEEMABLE PREFERRED STOCK OF A SUBSIDIARY 4,279,910 3,944,247
------------ ------------
SERIES B CONVERTIBLE PREFERRED STOCK, $0.001 par value:
Authorized and issued - 8,000 shares
Outstanding - 3,580 shares in 1999 -- 5,109,841
------------ ------------
STOCKHOLDERS' EQUITY:
Series C, D and E preferred stock, $0.001 par value:
Authorized - 88,500 shares
Issued - 74,041 shares
Outstanding - 74,041 shares in 1999 -- 7,912,447
Common stock, $0.001 par value:
Authorized - 40,000,000 shares
Issued - 25,626,338 and 18,952,960 shares in 2000 and 1999, respectively 25,626 18,953
Additional paid-in capital 128,239,978 113,794,227
Less - Treasury stock, at cost, 743,678 shares (3,724,900) (3,724,900)
Accumulated deficit (96,416,614) (100,205,500)
Accumulated other comprehensive income (1,340,811) 324,299
------------ ------------
Total stockholders' equity 26,783,279 18,119,526
------------ ------------
$116,894,965 $114,836,554
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
(FORMERLY SELFCARE, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,162,469 $(7,329,465)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Accretion on preferred stock of a subsidiary 335,663 112,645
Noncash interest expense related to amortization of original issue discount and
issuance of warrants 152,268 174,856
Noncash portion of extraordinary loss on modification of notes payable 485,485 227,997
Noncash compensation expense related to issuance of and modifications made to
common stock options 323,085 --
Gain on sale of investment in Theratase plc (1,757,229) --
Amortization of deferred revenue (155,272) (516,336)
Depreciation and amortization 3,053,480 3,243,846
Minority interest in subsidiary's income -- 276
Changes in assets and liabilities:
Accounts receivable (2,433,053) 5,272,253
Inventories (2,718,125) (3,838,350)
Prepaid expenses and other current assets 10,753 (277,554)
Accounts payable 1,076,116 2,181,722
Accrued expenses and other current liabilities 4,191,670 (484,642)
----------- -----------
Net cash provided by (used in) operating activities 6,727,310 (1,232,752)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (2,931,439) (1,765,123)
Cash received from affiliated company as repayment of loan -- 244,875
Cash received from sale of investment in Theratase plc 3,328,464 --
Decrease (increase) in other assets 3,300 (5,023)
----------- -----------
Net cash provided by (used in) investing activities 400,325 (1,525,271)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock and preferred stock 433,922 2,750,124
Proceeds from borrowings under notes payable 903,059 10,698,069
Repayments of notes payable (7,097,227) (4,768,152)
Increase in deferred revenue 541,644 --
Cash paid for deferred financing cost (203,867) --
----------- -----------
Net cash (used in) provided by financing activities (5,422,469) 8,680,041
----------- -----------
FOREIGN EXCHANGE EFFECT ON CASH AND CASH EQUIVALENTS (1,587,323) (353,291)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 117,843 5,568,727
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 5,233,594 9,199,630
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,351,437 $14,768,357
----------- -----------
----------- -----------
Supplemental Disclosures of Cash Flow Information:
Cash paid for -
Interest $ 3,385,805 $ 2,234,032
----------- -----------
----------- -----------
Income taxes $ 558,456 $ 226,500
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements
5
<PAGE>
INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
(FORMERLY SELFCARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION OF FINANCIAL INFORMATION
The accompanying consolidated financial statements of Inverness Medical
Technology, Inc. and its subsidiaries (the Company or Inverness Medical) are
unaudited. In the opinion of management, the unaudited consolidated financial
statements contain all adjustments considered normal and recurring necessary for
their fair presentation. Interim results are not necessarily indicative of
results to be expected for the year. These interim financial statements have
been prepared in accordance with the instructions for Form 10-Q and therefore do
not include all information and footnotes necessary for a complete presentation
of operations, financial position, and cash flows of the Company in conformity
with generally accepted accounting principles. The Company filed audited
consolidated financial statements, which included information and footnotes
necessary for such presentation for the year ended December 31, 1999, as an
exhibit to its Form 10-K filed with the Securities and Exchange Commission.
These unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto for the
year ended December 31, 1999 included as an exhibit to the Company's Form 10-K.
2) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid cash investments with maturities of
three months or less at the date of acquisition to be cash equivalents. At June
30, 2000, the Company's cash equivalents consisted of money market funds.
3) INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(unaudited)
<S> <C> <C>
Raw materials $ 3,848,247 $ 3,223,461
Work-in-process 2,038,570 1,675,700
Finished goods 8,891,485 7,468,104
----------- -----------
$14,778,302 $12,367,265
----------- -----------
----------- -----------
</TABLE>
4) NONRECURRING AND NON-CASH EXPENSES
For the six months ended June 30, 2000, the Company recognized a $800,000
extraordinary loss, of which $486,000 was noncash, related to the refinancing
of its subordinated revenue royalty notes (see Note 6). Also, for the six
months ended June 30, 2000, the Company recognized $152,000 of noncash
interest expense which represents the amortization of the original issue
discount and the issuance of warrants related to its subordinated promissory
notes.
For the six months ended June 30, 1999, the Company recognized a $306,000
extraordinary loss, of which $228,000 was noncash, related to the modification
of its senior subordinated convertible notes in January 1999. Also, for the six
months ended June 30, 1999, the Company recognized $175,000 of noncash interest
expense, most of which represents the amortization of the original issue
discount and the issuance of warrants related to its subordinated promissory
notes.
5) SALE OF INVESTMENT IN THERATASE PLC
On June 28, 2000, the Company sold its holding of 8,561,381 shares in
Theratase plc (formerly Enviromed plc), a manufacturer of diagnostic enzymes
based in the United Kingdom, for $3.3 million in cash. As a result, the
Company recorded a gain on sale of investments of $1.8 million, which was
included in other income (expense) in the accompanying Consolidated
Statements of Operations. Prior to the sale of the Theratase shares, the
Company held a 29.9% interest in Theratase plc.
6
<PAGE>
INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
(FORMERLY SELFCARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6) SUBORDINATED NOTES
During June 2000, the Company entered into a securities purchase agreement (the
Securities Purchase Agreement) to sell units (the Units) having an aggregate
purchase price of up to $25 million primarily for the purpose of retiring
certain outstanding two-year subordinated promissory notes (Two-year
Subordinated Notes) and subordinated revenue royalty notes (Revenue Royalty
Notes). Each Unit consists of (i) $25,000 in principal amount of a subordinated
promissory note (the New Subordinated Promissory Note) and (ii) a warrant
(Warrant) to acquire 123 shares of the Company's common stock. The New
Subordinated Promissory Notes will be sold pursuant to the Securities Purchase
Agreement at various closing dates in accordance with the maturity dates and
prepayment dates of the securities being retired. In the aggregate, the Company
will issue Warrants to purchase up to approximately 125,000 shares of its common
stock with exercise prices calculated as the average closing prices of its
common stock for the ten days prior to each closing. The New Subordinated
Promissory Notes are due on the first anniversary of their date of issuance and
the Warrants may be exercised at any time on or prior to the tenth anniversary
of their date of issuance.
The New Subordinated Promissory Notes bear interest at a rate equal to 12.5% per
year, which is payable quarterly on the first day of each quarter beginning on
October 1, 2000. The Company may prepay the New Subordinated Promissory Notes in
whole or in part at any time subject to a prepayment premium.
U.S. Boston Capital Corporation (U.S. Boston), the majority shareholder of which
is a director of the Company, acted as the placement agent for the offering of
the New Subordinated Promissory Notes. As compensation for its services as
placement agent, U.S. Boston will receive cash commissions equal to the sum of
(i) 5% of the aggregate issue price of Units sold for cash and (ii) 1% of the
aggregate issue price of Units issued for the retirement of the outstanding
Two-year Subordinated Notes and Revenue Royalty Notes. Also, the Company shall
reimburse U.S. Boston for out-of-pocket fees and disbursements, plus a $10,000
non-accountable expense allowance. The Company will record such cash commissions
as deferred financing costs and amortize them over the one-year life of the New
Subordinated Promissory Notes. On June 26, 2000, the first closing date (as
described below), U.S. Boston received a Warrant to acquire 10,000 shares of the
Company's common stock on terms identical to those of the Warrants issued to the
subscribers in that closing. The value of this Warrant was $82,500 and was
recorded as deferred financing costs.
Pear Tree Royalty Company, Inc. (Pear Tree), as the authorized representative
of the holders of the New Subordinated Promissory Notes, will receive
Warrants to purchase the number of shares of the Company's common stock equal
to 15% of the number of shares of common stock, issuable pursuant to the
Warrants being issued with the sale of the Units. A director of the Company
is also a director and shareholder of Pear Tree. On June 26, 2000, the first
closing date (as described below), Pear Tree received a Warrant to acquire
3,471 shares of the Company's common stock on terms identical to those of the
Warrants issued to the subscribers in that closing. The value of this Warrant
was $28,600 and was recorded as deferred financing costs.
On June 26, 2000, the Company issued the first series of the New Subordinated
Promissory Notes pursuant to the Securities Purchase Agreement totaling $4.7
million and Warrants to purchase 23,141 shares of its common stock. The proceeds
were used to retire existing Two-year Subordinated Notes which matured on that
date. In addition, the Company repaid $586,000 of the maturing Two-year
Subordinated Notes from its own funds. Upon issuance of the New Subordinated
Promissory Notes and Warrants on June 26, 2000, the Company allocated a total of
$188,000 of the proceeds to the Warrants and is amortizing such original
issuance discount and the related deferred financing costs (as described above)
over the one-year life of the New Subordinated Promissory Notes. Among the
holders of the New Subordinated Promissory Notes issued on June 26, 2000 were
three directors of the Company who purchased Units with an aggregate purchase
price of $578,000. At June 30, 2000, $5.3 million of the Two-year Subordinated
Notes remained outstanding and were due on various dates through August 28,
2000. The Company expects to retire the remaining Two-year Subordinated Notes
with the proceeds from the sale of additional New Subordinated Promissory Notes
and from its own funds.
On July 17, 2000, the Company issued the second series of the New
Subordinated Promissory Notes pursuant to the Securities Purchase Agreement
totaling $2.7 million and Warrants to purchase 13,102 shares of its common
stock for the purpose of retiring the then maturing Two-year Subordinated
Notes.
7
<PAGE>
INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
(FORMERLY SELFCARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6) SUBORDINATED NOTES (CONTINUED)
In connection with the above transactions, the Company notified holders of
the Revenue Royalty Notes on June 29, 2000 of its intention to prepay those
notes on July 31, 2000 according to their applicable terms and conditions. In
so doing, the Company effectively made a binding commitment to prepay such
notes. As a result, the Company followed the provisions of Emerging Issues
Task Force (EITF) Issue No. 96-19, DEBTOR'S ACCOUNTING FOR A MODIFICATION OR
EXCHANGE OF DEBT INSTRUMENTS, and recorded an extraordinary loss of $800,000
in June 2000 since the refinancing will result in a "substantial
modification" to the Company's indebtedness, as this term is defined in EITF
96-19.The extraordinary loss includes $486,000 in write-offs of unamortized
deferred financing costs related to the Revenue Royalty Notes and $314,000 in
additional premium (the Prepayment Premium) to be incurred as a result of
prepaying the Revenue Royalty Notes. On July 31, 2000, the Company retired
all of its outstanding Revenue Royalty Notes, totaling $7.5 million, and made
accrued but unpaid premium payments (including the Prepayment Premium) to the
holders of such notes of $2.2 million. These payments were funded by the
third issuance of New Subordinated Promissory Notes on July 31, 2000 of $8.1
million and Warrants to purchase 39,869 shares of the Company's common stock
pursuant to the Securities Purchase Agreement and from the Company's own
funds of $1.6 million.
7) SERIES B PREFERRED STOCK
On August 26, 1997, the Company sold to investors in a private placement an
aggregate of 8,000 shares of Series B redeemable convertible preferred stock
(the Series B Preferred Stock) and warrants (the Warrants) to purchase an
aggregate of 114,628 shares of its common stock for gross proceeds of
$8,000,000. The terms of the Series B Preferred Stock were amended on January
22, 1999; the amendments provided for the payments by the Company of a one-time
premium of 15% and a change in the conversion ratio. As of March 10, 2000, all
of the remaining Series B Preferred Stock were converted into shares of the
Company's common stock.
8) SERIES C, D AND E PREFERRED STOCK
On January 8, 1999, the Company sold in a private placement 57,842 shares of
Series C convertible preferred stock (Series C Preferred Stock), 3,030 shares of
Series D convertible preferred stock (Series D Preferred Stock) and 13,169
shares of Series E convertible preferred stock (Series E Preferred Stock)
(collectively, the Preferred Shares) to investors at an aggregate purchase price
of $7,404,100. Each Preferred Share accrued a dividend of 7% per annum. The
actual number of shares of common stock issued upon conversion of a Preferred
Share was equal to the aggregate stated value per share (i.e., $100), plus any
accrued and unpaid dividends through the date of such conversion, divided by a
conversion price equal to $1.8125 per share for the Series C Preferred Stock,
$2.00 per share for the Series D Preferred Stock and $3.028 per share for the
Series E Preferred Stock. As of May 9, 2000, all of the Series C, D and E
Preferred Stock were converted into shares of the Company's common stock.
9) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
NUMERATOR:
Net income (loss) $ 2,927,164 $(3,407,142) $ 4,162,469 $(7,329,465)
Premium on Series B convertible preferred stock -- -- (196,827) (808,453)
Dividends on Series C, D and E convertible preferred stock (47,999) (182,354) (176,756) (459,624)
----------- ----------- ----------- -----------
Numerator for basic earnings (loss) per share - income
(loss) available to common shareholders 2,879,165 (3,589,496) 3,788,886 (8,597,542)
Effect of dilutive securities:
Dividends on Series C, D and E convertible preferred
stock 47,999 -- 176,756 --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Numerator for diluted earnings (loss) per share-income
(loss) available to common shareholders after
assuming conversion $ 2,927,164 $(3,589,496) $ 3,965,642 $(8,597,542)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
8
<PAGE>
INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
(FORMERLY SELFCARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9) EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
DENOMINATOR:
Denominator or basic earnings (loss) per share
- weighted average shares 23,269,265 16,565,659 21,436,221 16,107,346
Effect of dilutive securities:
Employee stock options 2,179,316 -- 2,125,224 --
Warrants 233,104 -- 221,832 --
Series C, D and E convertible preferred stock 1,553,162 -- 2,782,086 --
----------- ----------- ----------- -----------
Dilutive potential common shares 3,965,582 -- 5,129,142 --
----------- ----------- ----------- -----------
Denominator or diluted earnings (loss) per share
- adjusted weighted-average shares and assumed
conversions 27,234,847 16,565,659 26,565,363 16,107,346
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
BASIC EARNINGS (LOSS) PER SHARE $ 0.12 $ (0.22) $ 0.18 $ (0.53)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
DILUTED EARNINGS (LOSS) PER SHARE $ 0.11 $ (0.22) $ 0.15 $ (0.53)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Options and warrants to purchase an aggregate of 897,597 and 916,263 shares of
the Company's common stock at exercise prices ranging from $7.330 to $15.375 and
$6.813 to $15.375 per share were outstanding during the three and six months
ended June 30, 2000, respectively, but were not included in the computation of
diluted earnings per share because the exercise prices of the options and
warrants were greater than the average market price of the common stock in the
respective periods, and therefore the effect would have been antidilutive.
During the six months ended June 30, 2000, the Company had Series B convertible
preferred stock (the Series B Preferred Stock) outstanding that could have
resulted in 499,849 shares of the Company's common stock, assuming conversion at
the beginning of the period according to Statement of Financial Accounting
Standard (SFAS) No. 128, EARNINGS PER SHARE. However, the Series B Preferred
Stock was not included in the computation of diluted earnings per share because
the effect of the inclusion of such potential common stock and the related
dividends of $196,827 would have been antidilutive.
During the three and six months ended June 30, 1999, the Company had
outstanding options and warrants, Series B Preferred Stock and senior
subordinated convertible notes (collectively, the Potential Common Stock),
that were exercisable or convertible into shares of the Company's common
stock. The Potential Common Stock was not included in the calculation of
diluted net loss per share since the inclusion thereof would have been
antidilutive.
10) COMPREHENSIVE INCOME
The Company's only item of comprehensive income relates to foreign currency
translation adjustments. Comprehensive income for the three months ended June
30, 2000 and 1999 was approximately $1,391,000 and $262,000 less than reported
net income, respectively, and for the six months ended June 30, 2000 and 1999
was approximately $1,665,000 and $653,000 less than reported net income,
respectively, due to foreign currency translation adjustments.
11) FINANCIAL INFORMATION BY SEGMENT
Under SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, operating segments are defined as components of an enterprise,
about which separate financial information is available, that is evaluated
regularly by the chief operating decision maker or decision making group in
deciding how to allocate resources and in assessing performance. The Company's
chief operating decision making group is composed of the Chief Executive Officer
and members of Senior Management. The Company's reportable operating segments
are Diabetes, Women's Health, Clinical Diagnostics and Other.
The Company evaluates performance based on earnings before interest expense,
taxes, depreciation and amortization (EBITDA). Segment information for the three
and six months ended June 30, 2000 and 1999, respectively, is as follows:
9
<PAGE>
INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
(FORMERLY SELFCARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11) FINANCIAL INFORMATION BY SEGMENT (CONTINUED)
<TABLE>
<CAPTION>
WOMEN'S CLINICAL CORPORATE AND
DIABETES HEALTH DIAGNOSTICS OTHER TOTAL
----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 2000
Net product sales from external customers $26,973,772 $10,875,066 $ 2,665,000 $ -- $ 40,513,838
Grant and other revenue -- -- -- 93,138 93,138
----------- ----------- ----------- ----------- ------------
Total net revenue $26,973,772 $10,875,066 $ 2,665,000 $ 93,138 $ 40,606,976
EBITDA $ 4,317,004 $ 2,867,486 $ 392,000 $(1,386,304) $ 6,190,186
SIX MONTHS ENDED JUNE 30, 2000
Net product sales from external customers $50,555,489 $22,360,665 $ 5,232,000 $ -- $ 78,148,154
Grant and other revenue -- -- -- 156,132 156,132
----------- ----------- ----------- ----------- ------------
Total net revenue $50,555,489 $22,360,665 $ 5,232,000 $ 156,132 $ 78,304,286
EBITDA $ 7,965,247 $ 5,820,419 $ 418,000 $(2,885,792) $ 11,317,874
Assets $58,987,775 $45,672,944 $ 5,687,288 $ 6,546,958 $116,894,965
AT DECEMBER 31, 1999
Assets $55,257,241 $44,397,523 $ 5,698,264 $ 9,483,526 $114,836,554
THREE MONTHS ENDED JUNE 30, 1999
Net product sales from external customers $14,748,850 $ 9,561,159 $ 2,870,716 $ -- $ 27,180,725
Grant and other revenue -- -- -- 121,776 121,776
----------- ----------- ----------- ----------- ------------
Total net revenue $14,748,850 $ 9,561,159 $ 2,870,716 $ 121,776 $ 27,302,501
EBITDA $ (939,961) $ 1,296,987 $ 935,723 $(1,117,597) $ 175,152
SIX MONTHS ENDED JUNE 30, 1999
Net product sales from external customers $29,768,137 $20,333,033 $ 5,856,702 $ -- $ 55,957,872
Grant and other revenue 316,441 -- -- 226,150 542,591
----------- ----------- ----------- ----------- ------------
Total net revenue $30,084,578 $20,333,033 $ 5,856,702 $ 226,150 $ 56,500,463
EBITDA $ (849,842) $ 3,040,693 $ 452,414 $(2,635,498) $ 7,767
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
Reconciliation of EBITDA to Net Income (Loss) 2000 1999 2000 1999
--------------------------- -------------------------
<S> <C> <C> <C> <C>
EBITDA $ 6,190,186 $ 175,152 $11,317,874 $ 7,767
Depreciation and amortization expense (1,439,373) (1,558,601) (3,053,480) (3,243,846)
Amortization of deferred revenue 92,720 98,692 155,272 516,336
Interest expense (2,118,216) (1,975,821) (4,268,544) (3,857,088)
Income taxes (152,252) (89,318) (287,406) (333,621)
Other noncash or non-recurring items 354,099 (57,246) 298,753 (419,013)
---------- ----------- ----------- -----------
Net income (loss) $ 2,927,164 $(3,407,142) $ 4,162,469 $(7,329,465)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Inverness Medical Technology, Inc. and its subsidiaries are engaged in the
development, manufacturing and marketing of self-test diagnostic products for
the diabetes, women's health and, to a lesser extent, infectious disease
markets. We also market nutritional supplement products, several of which are
targeted primarily at the women's health market. Our existing and planned
products are targeted at the two largest existing self-care diagnostics markets,
diabetes management and women's health, in the United States and Europe. An
important part of our business strategy is to enter into strategic alliances,
joint ventures and licensing arrangements with third parties, primarily medical
products companies, for the development, manufacture, and distribution of
certain products. We have from time to time pursued a strategy of selective
acquisitions of companies, assets and technologies, which we believe will
enhance our ability to deliver innovative diagnostic products to the marketplace
at a low cost.
RESULTS OF OPERATIONS
NET REVENUES. Net revenues increased $13.3 million, or 49%, to $40.6 million
for the three months ended June 30, 2000 from $27.3 million for the three months
ended June 30, 1999. Net revenues increased $21.8 million, or 39%, to $78.3
million for the six months ended June 30, 2000 from $56.5 million for the six
months ended June 30, 1999. The primary reason for the increase in revenues was
the increased sale of products for diabetes management, especially the
FastTAKE(R) Blood Glucose Monitoring System, which is distributed by LifeScan,
Inc. (LifeScan), a Johnson & Johnson company. FastTAKE sales were driven by the
strong worldwide market acceptance and our continuous efforts to improve this
and related products. Net product sales from our diabetes management segment
were $27.0 million for the three months ended June 30, 2000, an increase of
$12.2 million or 83% as compared to net diabetes product sales of $14.7 million
for the three months ended June 30, 1999. Likewise, net diabetes product sales
were $50.6 million for the six months ended June 30, 2000, an increase of $20.8
million or 70% as compared to net diabetes product sales of $29.8 million for
the six months ended June 30, 1999. Net diabetes product sales accounted for 66%
and 65% of net revenues for the three and six months ended June 30, 2000,
respectively, compared to 54% and 53% of net revenues for the three and six
months ended June 30, 1999, respectively. Net product sales from our women's
health segment increased $1.3 million or 14% to $10.9 million for the three
months ended June 30, 2000 as compared to the three months ended June 30, 1999
and $2.0 million or 10% to $22.4 million for the six months ended June 30, 2000
as compared to the six months ended June 30, 1999. Although net women's health
product sales increased as compared to the prior periods, they only accounted
for 27% and 29% of total net revenues for the three and six months ended June
30, 2000, respectively, compared to 35% and 36% of total net revenues for the
three and six months ended June 30, 1999, respectively, as a result of the
significant increase in diabetes product sales. The primary factor in the
year-to-date increased sales of the women's health products was an increase in
sales of branded and private label pregnancy and ovulation tests. Net sales of
clinical diagnostic products decreased slightly by $206,000 for the three months
ended June 30, 2000 as compared to the three months ended June 30, 1999 and
$625,000 for the six months ended June 30, 2000 as compared to the six months
ended June 30, 1999. Grant and other revenue were $93,000 and $156,000 for the
three and six months ended June 30, 2000, respectively, compared to $122,000 and
$543,000 for the three and six months ended June 30, 1999, respectively.
GROSS PROFIT. Gross profit increased by $8.9 million or 108% to $17.1
million for the three months ended June 30, 2000 from $8.2 million for the three
months ended June 30, 1999. Similarly, gross profit increased by $15.5 million
or 89% to $32.9 million for the six months ended June 30, 2000 from $17.3
million for the six months ended June 30, 1999. Gross margin of net product
sales increased to 42% for both the three and six months ended June 30, 2000,
compared to 30% for both the three and six months ended June 30, 1999. The
significant improvements in gross profit and gross margin of net product sales
primarily resulted from the increase in sales of FastTAKE systems and reductions
in manufacturing costs attributed to lower material costs, improved yields and
volume related efficiency at our diabetes product manufacturing facility in
Inverness, Scotland.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense increased
by $1.7 million or 122% for the three months ended June 30, 2000 to $3.0 million
from $1.4 million for the three months ended June 30, 1999. For the six months
ended June 30, 2000, research and development expense increased by $3.6 million
or 140% to $6.2 million from $2.6 million for the six months ended June 30,
1999. The increase in research and development expense resulted from research
programs directed towards blood glucose monitoring systems. We expect to
continue to spend significant amounts on research and development in the area of
diabetes management, and specifically blood glucose monitoring, at least
throughout the remainder of 2000.
11
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased by $1.7 million or 21% to $9.9 million for the
three months ended June 30, 2000 from $8.2 million for the three months ended
June 30, 1999. For the six months ended June 30, 2000, selling, general and
administrative expense increased by $1.6 million or 9% to $19.0 million from
$17.4 million for the six months ended June 30, 1999. The increase in selling,
general and administrative expense resulted from higher marketing expenditures
by our subsidiary Can-Am Care Corporation (Can-Am) in the diabetes business
segment, increased legal fees related to the defense of the Abbott lawsuits
against us and a one-time noncash compensation charge of $323,000 related to
stock options granted to consultants. Selling, general and administrative
expense as a percentage of net revenues was 24% for both the three and six
months ended June 30, 2000, respectively, compared to 30% and 31% for the three
and six months ended June 30, 1999.
INTEREST. For the three and six months ended June 30, 2000, we incurred $2.1
million and $4.2 million, respectively, in interest expense, net of interest
income, compared to $1.9 million and $3.7 million for the three and six months
ended June 30, 1999, respectively. The increase resulted from higher interest
expense due to higher average interest rates on outstanding debt partially
offset by a lower total average outstanding debt balance during the six months
ended June 30, 2000 as compared to the six months ended June 30, 1999.
OTHER INCOME (EXPENSE). We incurred other income of $2.1 million for both
the three and six months ended June 30, 2000, respectively, compared to other
expense of $59,000 and $192,000 for the three and six months ended June 30,
1999, respectively. Generally, other income or expense represents foreign
currency exchange transaction gains and losses. During the three and six months
ended June 30, 2000, we recognized $324,000 and $450,000, respectively, in
foreign exchange gain as a result of the strong U.S. Dollar versus the British
Pound Sterling on the Initial LifeScan Loan (as defined below in the "Liquidity
and Capital Resources" section), which is denominated in British Pound Sterling.
Additionally, during the three months ended June 30, 2000, we also recorded a
gain of $1.8 million from the sale of our holding of 8.6 million shares in
Theratase plc (see Note 5 of the accompanying "Notes to Consolidated Financial
Statements").
DIVIDENDS AND ACCRETION ON MANDATORILY REDEEMABLE PREFERRED STOCK OF A
SUBSIDIARY. Inverness Medical Limited (Inverness Scotland), our subsidiary in
Inverness, Scotland, accrued $280,000 and $336,000 for the three and six months
ended June 30, 2000, respectively, representing dividends payable and accretion
on the outstanding cumulative redeemable preference shares, as compared to
$56,000 and $113,000 for the three and six months ended June 30, 1999,
respectively. In June 2000, we recorded a one-time 15% accretion, which amounted
to 150,000 British Pound Sterling ($227,000), because we elected not to redeem
the first issue of such preferred shares within five years of its original issue
date, or June 23, 2000 (see discussion below in the "Liquidity and Capital
Resources" section).
EXTRAORDINARY LOSS. In the second quarter of 2000, we recorded an
extraordinary loss of $800,000 ($486,000 of which was noncash expense) for the
refinancing of our subordinated revenue royalty notes. In the first quarter of
1999, we recorded an extraordinary loss of $306,000 ($228,000 of which was
noncash expense) for the modification of our then outstanding senior
subordinated convertible notes.
INCOME TAXES. For the three and six months ended June 30, 2000, we recorded
provisions of $152,000 and $287,000, respectively, for income taxes compared to
$89,000 and $334,000 for the three and six months ended June 30, 1999,
respectively. Substantially all of the income tax provisions reflect certain
state income taxes relating to Inverness Medical, Inc. (IMI) and Can-Am, our
subsidiaries in the United States.
NET INCOME (LOSS). For the three months ended June 30, 2000, we realized a
net income of $2.9 million compared to a net loss of $3.4 million for the three
months ended June 30, 1999. The basic and diluted earnings per common share for
the three months ended June 30, 2000 were $0.12 and $0.11, respectively,
compared to the basic and diluted loss per common share of $0.22 for the three
months ended June 30, 1999. For the six months ended June 30, 2000, we realized
a net income of $4.2 million compared to a net loss of $7.3 million for the six
months ended June 30, 1999. The basic and diluted earnings per common share for
the six months ended June 30, 2000 were $0.18 and $0.15, respectively, compared
to the basic and diluted loss per common share of $0.53 for the six months ended
June 30, 1999. See Note 9 of the accompanying "Notes to Consolidated Financial
Statements". The results for the three- and six-month periods ending June 30,
2000 and 1999 included significant non-recurring, noncash charges and income as
detailed above. Excluding the nonrecurring and noncash charges and income, net
income for the three and six months ended June 30, 2000 was $2.3 million and
$3.5 million, respectively, compared to net losses of $3.4 million and $7.0
million for the three and six months ended June 30, 1999, respectively.
Excluding the nonrecurring and noncash charges and income, the basic and diluted
earnings per common share were $0.10 and $0.08, respectively, for the three
months ended June 30, 2000 and $0.16 and $0.13, respectively, for the six months
ended June 30, 2000, compared to the basic and diluted net loss per common share
of $0.22 and $0.53 for the three and six months ended June 30, 1999,
respectively.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 2000, our subsidiary, Inverness
Scotland, received approximately $542,000 in capital grants from Inverness &
Nairn Local Enterprise Company (INLEC), a development agency funded by the
government of the United Kingdom. These capital grants were funded to Inverness
Scotland for the purpose of providing training for its work force and outfitting
the facility with required equipment.
Under our product development and distribution agreements (the Amended
Agreements) with LifeScan dated June 7, 1999, we are to develop and supply to
LifeScan additional products for monitoring blood glucose in humans. Upon the
execution of the Amended Agreements, LifeScan provided us with an initial loan
(the Initial LifeScan Loan) of 6,250,000 British Pound Sterling (approximately
$9,900,000) to fund the increased costs related to the anticipated production
levels. LifeScan has also committed to make additional loans (the Additional
LifeScan Loans) of up to 8,125,000 British Pound Sterling (approximately
$13,000,000) to us upon the accomplishment of certain milestones relating to the
new products we are to develop for LifeScan. Interest on both the Initial
LifeScan Loan and Additional LifeScan Loans accrues at 11% per annum and is
payable quarterly. The aggregate principal amount of the Initial LifeScan Loan
and Additional LifeScan Loans will be repaid by deducting 0.0125 British Pound
Sterling (approximately $0.02) from the invoice price of each unit of product we
sell to LifeScan commencing on the date of the Initial LifeScan Loan. On June
30, 2000, the balance of the outstanding Initial LifeScan Loan was approximately
$5.9 million; we have not yet received any of the Additional LifeScan Loans from
LifeScan.
We received $1.6 million in June 1995 as an investment by INLEC in 1,000,000
shares of 6% Cumulative Redeemable Preference Shares (the Inverness Preference
Shares) of Inverness Scotland to finance a portion of the start-up costs
relating to our manufacturing facility in Scotland. The Inverness Preference
Shares held by INLEC (including cumulative dividends) are reflected in the
accompanying consolidated balance sheets as mandatorily redeemable preferred
stock of a subsidiary. We had the option to redeem all 1,000,000 Inverness
Preference Shares at a price of 1.05 British Pound Sterling (approximately
$1.59) per share plus any accrued and unpaid dividends prior to June 23, 2000.
Since we did not redeem the Inverness Preference Shares on such date, INLEC had
the option to demand redemption at any time after June 23, 2000, as long as
legally permissible, at a price of 1.20 British Pound Sterling (approximately
$1.82) per share plus any accrued and unpaid dividends. Therefore, we have
recorded the one-time additional accretion to such shares of 150,000 British
Pound Sterling ($227,000) in June 2000. We intend to redeem the 1,000,000
Inverness Preference Shares using cash generated from Inverness Scotland's
operating activities during 2001. Additionally, in October 1998, we received
$1.7 million from INLEC for another 1,000,000 Inverness Preference Shares. The
additional Inverness Preference Shares may be redeemed at our option prior to
October 27, 2003 and the holders may demand redemption on or after October 27,
2003, and otherwise contain the same terms as the Inverness Preference Shares
that were issued in 1995.
To fund the cash portion of the purchase price for Can-Am in February 1998,
our subsidiary, IMI, entered into a $42 million credit agreement with Chase
Manhattan Bank (Chase Credit Agreement). The Chase Credit Agreement consists of
a $37 million term loan and a $5 million revolving line of credit. IMI is
required to make quarterly principal payments on the term loan ranging from $1.2
million to $1.9 million through December 31, 2003. IMI must also make mandatory
prepayments on the term loan if it meets certain cash flow thresholds, sells
assets outside of the ordinary course of business, issues or sells indebtedness
or issues stock, as defined in the Chase Credit Agreement. During the six months
ended June 30, 2000, IMI made quarterly principal repayments and a mandatory
prepayment totaling $3.8 million. In July 2000, IMI made an additional mandatory
prepayment of $542,000. IMI does not expect to have to make any other mandatory
prepayments during the remainder of 2000. At June 30, 2000, the unused balance
of the revolving line of credit was approximately $1.1 million.
The Chase Credit Agreement requires compliance with various financial and
non-financial covenants for both Inverness Medical Technology, Inc. and IMI. The
primary financial covenants pertain to, among other things, interest coverage,
debt services coverage, leverage, and earnings before interest, taxes,
depreciation and amortization (EBITDA). We were in compliance with such
covenants at June 30, 2000.
During June 2000, we entered into a securities purchase agreement (the
Securities Purchase Agreement) to sell units (the Units) having an aggregate
purchase price of up to $25 million for the purpose of retiring certain
outstanding subordinated promissory notes and subordinated revenue royalty
notes. Each Unit consists of (i) $25,000 in principal amount of a subordinated
promissory note (the New Subordinated Promissory Notes) and (ii) a warrant to
acquire 123 shares of our common stock. The New Subordinated Promissory Notes
will be sold pursuant to the Securities Purchase Agreement at various closing
dates in accordance with the maturity dates and prepayment dates of the
securities being retired. In the aggregate, we will issue warrants to purchase
up to approximately 125,000 shares of our common stock with exercise prices
calculated as the average closing prices of our common stock for the ten days
prior to each closing. The New Subordinated Promissory Notes are due on the
first anniversary of their date of issuance and the warrants may be exercised at
any time on or prior to the tenth anniversary of their date of issuance. See
Note 6 of the accompanying "Notes to Consolidated Financial Statements".
13
<PAGE>
On June 26, 2000, we retired $4.9 million of our then existing 13% two-year
subordinated promissory notes, which matured on that date. The payments, plus
required principal payment premiums of $245,000 and unpaid interest of $151,000,
were funded by the issuance of $4.7 million of the New 12.5% one-year
Subordinated Promissory Notes, as described above, and our own funds of
$586,000.
At June 30, 2000, we had cash and cash equivalents of $5.4 million, a
$118,000 increase from December 31, 1999. During the six months ended June 30,
2000, we generated cash of $6.7 million from our operating activities due
primarily to net income of $6.6 million, adjusted for noncash items. Cash was
also provided for operations in part by the net effect of increases in accounts
payable, accrued expenses and other current liabilities totaling $5.3 million.
Uses of cash in operating activities included increases in accounts receivable
and inventory totaling $5.2 million reflecting our working capital needs related
to the increase in our product sales.
During the six months ended June 30, 2000, we used $2.9 million to purchase
property and equipment, of which $2.6 million was spent at the Inverness
Scotland facility. During the second quarter of 2000, we also received $3.3
million in proceeds from the sale of our holding of 8.6 million shares in
Theratase plc.
During the six months ended June 30, 2000, we used cash of $5.4 million for
financing activities, including our principal repayments on loans from Chase
Manhattan Bank and LifeScan and net proceeds paid for the refinancing of the
subordinated notes (see Note 6 of the "Notes to Consolidated
Financial Statements"), partially offset by the $542,000 capital grants received
from INLEC and $434,000 in proceeds received from issuance of common stock.
We expect to meet all scheduled debt repayments through the use of operating
funds, committed financings from a major customer and financings from other
private investors currently in process as discussed above. However, there can be
no assurance that funds will be available from any or all of these sources or,
if available, will be available on attractive terms. If funds do not become
available from one or more of these sources, we may not be able to meet our debt
obligations when due or continue to pursue desirable research and development
programs. If additional funds are raised by issuing equity securities, further
dilution to then existing stockholders will result.
CERTAIN FACTORS AFFECTING FUTURE RESULTS
There are various risks, including those described below, which may
materially impact your investment in our Company or may in the future, and,
in some cases, already do, materially affect us and our business, financial
condition and results of operations. You should consider carefully these
factors with respect to your investment in our securities. This section
includes or refers to certain forward-looking statements; you should read the
explanation of the qualifications and limitations on such forward-looking
statements beginning on page 16.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO CONTINUE TO EXPAND OUR RESEARCH AND
DEVELOPMENT EFFORTS AND GROW OUR BUSINESS.
We anticipate that during the remainder of year 2000, we may need to raise
additional capital to help fund research and development of new technologies
(beyond the aforementioned activities related to LifeScan) through borrowing, or
the issuance of debt or equity securities, or in connection with agreements
which might be made with one or more collaborative partners. We are not certain
that such additional financing will be available, or, if available, that it will
be available on acceptable terms. For additional information on our liquidity
and capital needs, please see the section entitled "Liquidity and Capital
Resources" in this section "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
WE ONLY RECENTLY INTRODUCED NEW PRODUCTS AND WE CANNOT BE CERTAIN THAT THEY WILL
GAIN MARKET ACCEPTANCE.
On September 17, 1999, we received notification of Federal and Drug
Administration (FDA) clearance for our low cost alternative electrochemical
blood glucose monitoring test strip, Excel(TM) G (formerly, Excel(TM) GE), for
use with Glucometer Elite(R) meters sold by Bayer. We commenced shipments of
Excel G in October 1999. Our future results of operations depend to some extent
on our ability to market and sell Excel G. Additionally, we cannot assure you
that the market will fully accept Excel G.
WE DEPEND ON OUR RELATIONSHIP WITH LIFESCAN TO DISTRIBUTE CERTAIN OF OUR
EXISTING PRODUCTS, AS WELL AS FUTURE PRODUCTS, AND TO FUND CERTAIN NEW
PRODUCT INITIATIVES.
We depend on our relationship with LifeScan (as discussed below) to
distribute certain of our existing products, as well as future products, and for
funding certain new product initiatives.
14
<PAGE>
In 1995, we entered into an exclusive worldwide alliance and distribution
agreement with LifeScan, which was amended in June 1999 (see the section
entitled "Liquidity and Capital Resources" in this section "Management's
Discussion and Analysis of Financial Condition and Results of Operations").
Under the terms of the alliance with LifeScan, we develop and manufacture and
LifeScan distributes FastTAKE, our proprietary electrochemical blood glucose
monitoring system for the management of diabetes, and any new systems consisting
of new meters and disposable strips. We commenced shipments of FastTAKE in
December 1997 and the first upgrade of FastTAKE in July 1999. Early in the
second quarter of 2000, LifeScan also introduced our new advanced biosensor
blood glucose strip, which is compatible with all existing FastTAKE meters.
FastTAKE is currently the most successful product in our diabetes line of
business. Our future results of operations depend to a substantial degree on
LifeScan's ability to market and sell FastTAKE as well as any other new systems.
Although the FastTAKE product appears to be gaining acceptance, we cannot assure
you that the market will fully accept FastTAKE or that any acceptance will
continue. Additionally, under the terms of the alliance with LifeScan, LifeScan
is to make additional funding to us when we reach certain milestones with our
development of future products for LifeScan. As we cannot assure the success of
reaching such milestones in the development of future products, we cannot
guarantee that LifeScan will make such additional funding to us. Any failure by
us to develop and produce or failure of LifeScan to market and distribute
FastTAKE as well as several additional new systems successfully could have a
material adverse effect on our business, financial condition and results of
operations. It would also affect our ability to repay loans received from
LifeScan.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS.
Obtaining patent and trade secret protection for new technologies, products
and processes is important in the medical products and diagnostic testing
industries. Our success depends, in part, on our ability to obtain patent
protection for our products and manufacturing processes, to preserve our trade
secrets and to operate without infringing the proprietary rights of others.
CLAIMS BY OTHER COMPANIES THAT OUR PRODUCTS INFRINGE THEIR PROPRIETARY RIGHTS
COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS AND INCREASE OUR
COSTS.
Substantial litigation over intellectual property rights exists in our
industry. We expect that products in our industry may be increasingly subject to
third-party infringement claims as the number of competitors grows and the
functionality of products and technology in different industry segments
overlaps. Third parties may currently have, or may eventually be issued, patents
that our products or technology may infringe. Any of these third parties might
make a claim of infringement against us. Any litigation could result in the
expenditure of significant financial resources and the diversion of management's
time and resources. In addition, litigation in which we are accused of
infringement may cause negative publicity, have an impact on prospective
customers, cause product shipment delays, require us to develop non-infringing
technology or enter into royalty or license agreements, which may not be
available on acceptable terms, or at all. If a successful claim of infringement
were made against us and we could not develop non-infringing technology or
license the infringed or similar technology on a timely and cost-effective
basis, our business could be significantly harmed and we could be exposed to
legal actions by our customers.
INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE.
SELF-TEST PRODUCTS. The medical products 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. Our competitors in the
United States and abroad are numerous and include, among others, diagnostic
testing and medical products companies, universities and other research
institutions. Our future success depends upon our maintaining a competitive
position in the development of products and technologies in our areas of focus.
Competitors may be more successful in: (i) developing technologies and products
that are more effective than our products or that render our technologies or
products obsolete or noncompetitive; (ii) obtaining patent protection or other
intellectual property rights that would prevent us from developing our potential
products; or (iii) obtaining regulatory approval for the commercialization of
their products more rapidly or effectively than we are able to do so. Also, many
of our 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.
NUTRITIONAL SUPPLEMENTS. The market for the sale of vitamins and nutritional
supplements is highly competitive. This 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, supermarkets and health food stores. As most of these companies are
privately held, we are unable to obtain the information necessary to assess
precisely the size and success of these competitors. However, we believe that a
number of our competitors, particularly manufacturers of nationally advertised
brand name products, are substantially larger than we are and have greater
financial resources.
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VARIOUS FACTORS MAY CAUSE OUR OPERATING RESULTS TO FLUCTUATE.
Factors relating to our business make our future operating results uncertain
and may cause them to fluctuate from period to period. Such factors include: (i)
the timing of new product announcements and introductions by us and our
competitors; (ii) market acceptance of new or enhanced versions of our products;
(iii) changes in manufacturing costs or other expenses; (iv) competitive pricing
pressures; (v) the gain or loss of significant distribution outlets or
customers; (vi) increased research and development expenses; or (vii) general
economic conditions.
OUR SHARE PRICE MAY BE VOLATILE DUE TO OUR OPERATING RESULTS, AS WELL AS FACTORS
BEYOND OUR CONTROL.
Our share price may be volatile due to our operating results, as well as
factors beyond our control. In addition, it is possible that in some future
periods the results of our operations will be below the expectations of the
public market. In any such event, the market price of our common stock could be
materially and adversely affected. Furthermore, the stock market may experience
significant price and volume fluctuations, which may affect the market price of
our common stock for reasons unrelated to our operating performance. The market
price of our common stock may be highly volatile and may be affected by factors
such as: (i) our quarterly operating results; (ii) changes in general conditions
in the economy, the financial markets, or the health care industry; (iii)
government regulation in the health care industry; (iv) changes in other areas
such as tax laws; (v) sales of substantial amounts of common stock or the
perception that such sales could occur, including as a result of the conversion
or potential conversion of convertible securities issued by us; or (vi) other
developments affecting us or our competitors.
YEAR 2000 COMPLIANCE COSTS AND RISKS ARE DIFFICULT TO ASSESS AND COULD IMPACT
OUR BUSINESS.
The year 2000 (Year 2000) problem arose as a result of the fact that many
existing computer programs and embedded chip technology systems were developed
using only the last two digits, rather than four, to define the applicable year.
Thus, any information technology (IT) systems with time-sensitive software might
recognize a date using "00" as the year 1900 rather than the year 2000, which
could result in miscalculations and system failures. In addition, companies were
at risk from Year 2000 failures on the part of third parties with which they
interact.
Our Company uses a significant number of IT systems that are essential to
our operations. For this reason, we developed and implemented a four-phase plan
to address our Year 2000 issues and to ensure that our IT systems would function
properly in the year 2000 and thereafter. We believe that we have successfully
rendered our IT systems Year 2000 compliant. Since January 1, 2000, we have not
experienced disruptions to our business operations as a result of Year 2000
compliance problems or otherwise and have not received reports of any material
Year 2000 compliance problems with any third parties with which we have material
interactions. Although we do not believe that we have continued exposure to the
Year 2000 issue, we cannot give assurances that we will not detect unanticipated
Year 2000 compliance issues in the future. Additionally, we have tested the
software in our product, the FastTAKE Blood Glucose Monitoring System, and
believe that it is Year 2000 compliant.
The primary cost of our Year 2000 compliance to date, which has been
associated with assessment, remediation, and testing, has not been significant.
We believe that if there are additional costs, any such remaining costs will not
have a material adverse effect on our sales, operations or financial
performance. We expect to fund any remaining costs of addressing the Year 2000
issue from cash flows resulting from operations.
The preceding "Year 2000 Disclosure" contains various forward-looking
statements within the meaning of the private Securities Litigation Reform Act of
1995. These forward-looking statements represent our beliefs or expectations
regarding future events. All forward-looking statements involve a number of
risks and uncertainties that could cause the actual results to differ materially
from the projected results. Factors that may cause these differences include,
but are not limited to, the availability of qualified personnel and other
information technology resources; the ability to identify and remediate all date
sensitive lines of computer code or to replace embedded computer chips in
affected systems or equipment; and the actions of governmental agencies or other
third parties with respect to Year 2000 problems.
CAUTIONARY STATEMENT PURSUANT TO PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 - "SAFE HARBOR" FOR FORWARD-LOOKING STATEMENTS
We may from time to time make certain forward-looking statements in publicly
released materials, both written and oral. Forward-looking statements do not
relate strictly to historical or current facts and may be identified by their
use of words like "plans", "expects", "will", "anticipates", "estimates" and
other words of similar meaning. Such statements may address, among other things,
our strategy for growth, product development, regulatory approvals, market
position, expenditures and financial results.
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Forward-looking statements are based on current expectations of future
events. We cannot guarantee that expectations expressed in forward-looking
statements will be realized. Some important factors that could cause our actual
results to differ materially from those projected in any such forward-looking
statements are as follows:
o Economic factors, including inflation and fluctuations in interest
rates and foreign currency exchange rates and the potential effect of
such fluctuations on revenues, expenses and resulting margins;
o Competitive factors, including technological advances achieved and
patents attained by competitors and generic competition;
o Domestic and foreign healthcare changes resulting in pricing
pressures, including the continued consolidation among healthcare
providers, trends toward managed care and healthcare cost containment
and government laws and regulations relating to sales and promotion,
reimbursement and pricing generally;
o Government laws and regulations, affecting domestic and foreign
operations, including those relating to trade, monetary and fiscal
policies, taxes, price controls, regulatory approval of new products
and licensing;
o Difficulties inherent in product development, including the potential
inability to successfully continue technological innovation, complete
clinical trials, obtain regulatory approvals in the United States and
abroad, gain and maintain market approval of products and the
possibility of encountering infringement claims by competitors with
respect to patent or other intellectual property rights which can
preclude or delay commercialization of a product;
o Significant litigation adverse to our Company including product
liability claims, patent infringement claims, and antitrust claims;
o Product efficacy or safety concerns resulting in product recalls or
declining sales;
o The impact of business combinations, including acquisitions and
divestitures, and organizational restructuring consistent with
evolving business strategies; and
o Issuance of new or revised accounting standards by the American
Institute of Certified Public Accountants, the Financial Accounting
Standards Board or the Securities and Exchange Commission;
The foregoing list sets forth many, but not all, of the factors that could
impact our ability to achieve results described in any forward-looking
statements. Investors are cautioned not to place undue reliance on such
statements that speak only as of the date made. Investors also should understand
that it is not possible to predict or identify all such factors and that this
list should not be considered a complete statement of all potential risks and
uncertainties. Investors should also realize that if underlying assumptions
prove inaccurate or unknown risks or uncertainties materialize, actual results
could vary materially from our projections. We do not undertake any obligation
to update any forward-looking statements as a result of future events or
developments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
discussed in the forward-looking statements. We are exposed to market risk
related to changes in interest rates and foreign currency exchange rates. We do
not use derivative financial instruments for speculative or trading purposes.
INTEREST RATE RISK
We are exposed to market risk from changes in interest rates primarily
through our investing and borrowing activities. In addition, our ability to
finance future acquisition transactions may be impacted if we are not able to
obtain appropriate financing at acceptable rates.
Our investing strategy, to manage interest rate exposure, is to invest in
short-term, highly liquid investments. Currently, our short-term investments are
in money market funds with original maturities of 90 days or less. At June 30,
2000, the fair value of our short-term investments approximated market value.
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In February 1998, our subsidiary, IMI, entered into a $42 million credit
agreement with Chase. The Chase Credit Agreement consists of a $37 million term
loan and a $5 million revolving line of credit. The term loan and revolving line
of credit allow IMI to borrow funds at varying rates, including options to
borrow at an alternate base rate plus a spread from 0.50% to 2.00% or the LIBOR
rate plus a spread from 2.00% to 3.50%. The spreads depend on IMI's ratio of
senior funded debt to EBITDA. IMI entered into an interest rate Swap Agreement
with an effective date of March 31, 1998. This agreement protects approximately
50% of IMI's term loan against LIBOR interest rates rising over 7.5%. This
agreement is effective through March 30, 2001. If the LIBOR rate increases one
percentage point, as compared to the rate at June 30, 2000, we estimate an
increase in our interest expense of approximately $202,000 in the next twelve
months. If the LIBOR rate increases two percentage points, as compared to the
rate at June 30, 2000, we estimate an increase in our interest expense of
approximately $335,000 in the next twelve months.
FOREIGN CURRENCY RISK
We face exposure to movements in foreign currency exchange rates. These
exposures may change over time as business practices evolve and could have a
material adverse effect on our business, financial condition and results of
operation. For the three and six months ended June 30, 2000, the net impact of
foreign currency changes was a gain of $323,000 and $343,000, respectively. We
do not use derivative financial instruments or other financial instruments to
hedge economic exposures or for trading. Historically, our primary exposures
have been related to the operations of our European subsidiaries. However, the
sales of FastTAKE, our lead diabetes management product, are denominated in the
currency in which the manufacturing costs are incurred. The loan received from
LifeScan in June 1999 is denominated in British Pounds Sterling and therefore we
are exposed to fluctuations between the British Pound and U.S. Dollar. The Euro
was introduced as a common currency for members of the European Monetary Union
in 1999. We have not determined the impact, if any, that the Euro will have on
foreign exposure. We intend to hedge against fluctuations in the Euro if this
exposure becomes material. At June 30, 2000, our assets related to
non-dollar-denominated currencies amounted to approximately $33.1 million.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ABBOTT LABORATORIES ET ANOTHER V. CORBRIDGE GROUP PTY LTD AND SELFCARE PTY LTD.
In November 1999, Abbott Laboratories (Abbott) commenced a lawsuit against
the Company's Australian subsidiary, Selfcare Pty Ltd. and Corbridge, its
Australian distributor, in the Federal Court of Australia. The complaint alleges
that the Selfcare(R) Excel(R) ET disposable test strips (ET Test Strips)
supplied by the Company to Corbridge infringe Australian Patent No. 572,138 (the
Test Strip Patent) issued to Abbott's predecessor in title on May 5, 1988 (and
assigned to Abbott only a few weeks prior to commencement of the proceedings).
These test strips are marketed in Australia for use with Abbott's ExacTech brand
sensor device. Abbott is seeking damages and an injunction against supply of the
test strips in Australia. Abbott also sought to enjoin the defendants from the
importation and supply of these blood glucose test strips in Australia during
the pendency of the infringement litigation. On November 29, 1999, the court
denied Abbott's motion for a preliminary injunction and on December 17, 1999,
ordered an unusually fast track preparation for a final trial which commenced on
April 26, 2000 in Sydney, Australia and which is continuing at the time of this
filing.
It is unlikely that any ruling against the Australian defendants could have
an adverse impact on the Company's sales, operations or financial performance
elsewhere in the world, and based on a review of the Abbott claims by Australian
counsel, the Company believes that the ET Test Strips do not infringe the Test
Strip Patent and that Abbott's claims will be dismissed. Furthermore, the
Australian defendants have counterclaimed against Abbott seeking revocation of
the Test Strip Patent as well as damages and injunctive relief for breaches of
Australian antitrust law and misleading conduct prohibitions. The Company
believes that its counter claims have good prospects of success and that, under
Australian law, Abbott will be required to pay a large portion of the
defendants' legal costs incurred in the proceedings.
BAYER CORPORATION V. SELFCARE, INC., INVERNESS MEDICAL, INC. AND CAN-AM CARE
CORPORATION
On January 18, 2000, Bayer Corporation (Bayer) filed suit (Case No:
00CV0040) in the United States District Court for the Northern District of
Indiana (District Court) alleging claims in trademark infringement, trade dress
infringement and unfair competition arising out of the Company's marketing in
late 1999 of its new Excel(R) GE (now known as Excel(R) G) blood glucose test
strips intended for use with Bayer's Glucometer Elite(R) meters. This matter has
been settled through a Settlement Agreement dated April 14, 2000, the terms and
conditions of which will not have a material adverse effect on the Company's
sales, operations or financial performance.
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BECTON, DICKINSON AND COMPANY V SELFCARE, INC. ET. AL.
On January 3, 2000, Becton, Dickinson and Company (Becton Dickinson) filed
suit against the Company in the U.S. District Court for the District of Delaware
(Case No: 00-001) alleging that certain pregnancy and ovulation test kits sold
by the Company infringe U.S. Patent Nos. 4,703,017 and 5,591,645. The Company
was served with Becton Dickinson's complaint in April 2000 and filed its answer
on May 30, 2000. The Company intends to defend this litigation vigorously and,
in any event, does not believe that a negative outcome would have a material
adverse impact on the Company's sales, operations or financial performance.
CAMBRIDGE BIOTECH CORPORATION AND CAMBRIDGE AFFILIATE CORPORATION V. RON
ZWANZIGER, SELFCARE, INC., CAMBRIDGE DIAGNOSTICS IRELAND, LTD., TRINITY
BIOTECH, PLC AND PASTEUR SANOFI DIAGNOSTICS
On January 22, 1999, Cambridge Biotech Corporation (CBC) and Cambridge
Affiliate Corporation (CAC) filed suit (Civil Action No. 99-378) in the
Middlesex County Massachusetts Superior Court against the Company, its
President, Ron Zwanziger, Cambridge Diagnostics Ireland, Ltd. (Cambridge
Diagnostics), Trinity Biotech plc (Trinity) and Pasteur Sanofi Diagnostics
(Pasteur). The complaint alleges, among other things, that actions taken by Mr.
Zwanziger as President of CAC in connection with the sale by Cambridge
Diagnostics of its diagnostics business to Trinity were not properly authorized
and that, as a result of the actions, CBC may lose the benefit of valuable
patent licenses from Pasteur. CBC's requested relief is to have the CAC/Trinity
manufacturing and sales agreements declared null and void, the license between
Pasteur and CBC declared to be in full force, to recover damages allegedly
caused by the Company and Mr. Zwanziger, and to recover damages due to Pasteur's
actions. CBC moved for a preliminary injunction, seeking to enjoin the Company,
Cambridge Diagnostics, Mr. Zwanziger, and Trinity from acting pursuant to the
CAC/Trinity agreements and to enjoin Pasteur from terminating its license
agreements with CBC. Following a hearing on January 25, 1999, the Court denied
CBC's motion. Thereafter, Pasteur successfully moved for dismissal on grounds
that the issues between it and CBC should be litigated in France. The
plaintiffs' appeal from that ruling is pending. Trinity has moved for dismissal
on grounds that the issues between it and CBC should be litigated in Ireland or,
instead, should be arbitrated. The Court denied Trinity's motion. The parties
are currently conducting discovery. The Company believes that CBC's complaint
against the Company, Mr. Zwanziger, and Cambridge Diagnostics is without merit
and intends to defend the action vigorously. The Company has filed an Answer
denying the material allegations of the Complaint along with a Counterclaim to
declare its actions lawful and valid and to redress harm that may result if the
court invalidates the sale of Cambridge Diagnostics' diagnostics business to
Trinity despite CBC's representations to the Company that it had the right to
make such a sale. The Company does not believe that an adverse outcome would
have a material impact on the Company's sales, operations or financial
performance.
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD. V. SELFCARE, INC., INVERNESS MEDICAL,
INC. AND CAN-AM CARE CORPORATION
On March 2, 2000, Matsushita Electric Industrial Co., Ltd. (Matsushita)
filed suit (Case Number 00-143) in the United States District Court for the
District of Delaware against the Company and two of its subsidiaries. The
complaint alleges patent infringement of a patent used in connection with the
manufacture and distribution of the Company's Excel(R) G test strips for use
with the Bayer Glucometer Elite(R) meter. The Company intends to defend the
action vigorously. Although a final ruling against the Company could have a
material adverse impact on the Company's sales, operations or financial
performance, based on a review of the Matsushita patent by the Company's outside
patent counsel, the Company believes that its Excel(R) G test strips do not
infringe the Matsushita Patent.
ROCHE DIAGNOSTICS CORPORATION VS. SELFCARE, INC. D/B/A INVERNESS MEDICAL
TECHNOLOGY, INC. ET. ALS.
On July 6, 2000, the Company was served with a complaint filed in the
federal court in Indianapolis, Indiana by Roche Diagnostics Corporation against
it and several of its subsidiaries for patent infringement. The complaint
alleges that the Excel(R) G blood glucose test strips designed for use with test
meters marketed by Bayer Corporation infringe a United States patent owned by
Roche. The Company believes that the Excel(R) G strips do not infringe the
patent at issue but, because the case was only recently filed, has not yet
completed its testing and analysis. A final ruling against the Company could
have a material adverse impact on the Company's sales, operations or financial
performance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Company was held on May 9, 2000.
The following items were submitted to a vote of securities holders at the annual
meeting:
(I) Robert M. Oringer, Willard L. Umphrey and Ron Zwanziger were
re-elected as directors of the Company. The other directors whose
terms of office continued after the meeting were: Carol R.
Goldberg, Edward B. Roberts, John F. Levy and Peter Townsend.
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(II) The amendment to the Amended and Restated Certificate of
Incorporation to change the name of the Company from Selfcare,
Inc. to Inverness Medical Technology, Inc. was approved and
adopted.
(III) The increase of the number of shares available for purchase by
eligible employees of the Company under the Company's Employee
Stock Purchase Plan was authorized and approved.
(IV) The 2000 Stock Option and Grant Plan under which the Board of
Directors or a committee appointed by the Board of Directors
would have the ability to grant stock options, stock appreciation
rights and stock awards with respect to 750,000 shares of the
Company's common stock was approved and adopted.
The following table summarizes the votes for, against or withheld and the
number of abstentions and broker non-votes with regard to each matter voted
upon:
CLASS: COMMON SHARES
<TABLE>
<CAPTION>
Against or
Matter For Withheld Abstentions Broker Non-votes
------ --- -------- ----------- ----------------
<S> <C> <C> <C> <C>
Election of:
Mr. Oringer 15,870,736 0 256,504 0
Mr. Umphrey 15,782,259 0 344,981 0
Mr. Zwanziger 15,868,736 0 258,504 0
Approval of Amendment to Amended and
Restated Certificate of Incorporation 15,986,897 122,107 18,236 0
Approval of Increase in Shares under
Employee Stock Purchase Plan 7,792,775 289,971 116,669 7,927,825
Approval of the 2000 Stock Option and Grant
Plan 7,463,822 598,946 136,647 7,927,825
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS:
EXHIBIT
NUMBER TITLE
3.1 Certificate of Amendment of Amended and Restated Certificate
of Incorporation as filed with the Secretary of State of
Delaware dated May 9, 2000
10.1 Inverness Medical Technology, Inc. 2000 Stock Option and Grant
Plan
27.1 Financial Data Schedule
b. REPORTS ON FORM 8-K:
The Company filed no reports on Form 8-K during the three-month period
ending June 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVERNESS MEDICAL TECHNOLOGY, INC.
Date: August 11, 2000 /s/ JEFFREY A. TEMPLER
-------------------------
Jeffrey A. Templer,
Chief Financial Officer and an authorized
officer
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