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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
September 30, 2000.
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[ ] 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: 0-28420
Integ Incorporated
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(Exact name of registrant as specified in its charter)
Minnesota 41-167017
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(State of Incorporation) (I.R.S. Employer Identification No.)
2800 Patton Road, St. Paul, MN 55113
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(Address of principal executive offices) (Zip Code)
Telephone Number: (651) 639-8816
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(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 the filing
requirements for at least the past 90 days. Yes X No
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As of November 2, 2000, the registrant had 9,862,411 shares of $.01 par value
common stock issued and outstanding.
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INTEG INCORPORATED
INDEX
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of September 30, 2000 and
December 31, 1999. 3
Statements of Operations for the three and nine month periods
ended September 30, 2000 and 1999 and for the period April 3,
1990 (inception) through
September 30, 2000. 4
Statements of Cash Flows for the three and nine month periods
ended September 30, 2000 and 1999 and for the period from
April 3, 1990 (inception) through
September 30, 2000. 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 14
</TABLE>
2
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Integ Incorporated
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 1,564,375 $ 2,953,270
Accounts receivable - related party -- 181,669
Prepaid expenses 127,085 82,755
------------ ------------
Total current assets 1,691,460 3,217,694
------------ ------------
Furniture and equipment 8,438,016 8,498,173
Less accumulated depreciation (3,571,626) (3,088,449)
------------ ------------
4,866,390 5,409,724
Other assets 4,640 8,579
------------ ------------
Total assets $ 6,562,490 $ 8,635,997
============ ============
Liabilities and shareholders' equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 270,180 $ 511,873
Notes payable 30,432 --
Current portion of capital lease obligations -- 14,178
Current portion of long-term debt 1,301,399 1,398,098
------------ ------------
Total current liabilities 1,602,011 1,924,149
------------ ------------
Long-term liabilities:
Capital lease obligations, less current portion -- --
Long-term debt, less current portion 333,293 1,273,920
------------ ------------
Total long-term liabilities 333,293 1,273,920
------------ ------------
Shareholders' equity:
Preferred Stock 3,091,908
Common Stock 98,591 97,286
Additional paid-in capital 55,039,048 54,786,327
Deficit accumulated during the development stage (53,522,319) (49,368,631)
------------ ------------
4,707,228 5,514,982
Deferred compensation (80,042) (77,054)
------------ ------------
Total shareholders' equity 4,627,186 5,437,928
------------ ------------
Total liabilities and shareholders' equity $ 6,562,490 $ 8,635,997
============ ============
</TABLE>
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Integ Incorporated
(A Development Stage Company)
Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Period from
Three Months Ended Nine Months Ended April 3, 1990
September 30 September 30 (Inception) to
---------------------------- ---------------------------- September 30
2000 1999 2000 1999 2000
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Research and development $ 439,074 $ 449,491 $ 1,288,679 $ 1,828,079 $ 25,167,588
Manufacturing development 482,388 409,753 1,425,102 1,495,334 10,473,899
General and administrative 356,569 542,776 1,249,784 2,609,684 19,149,041
------------ ------------ ------------ ------------ ------------
Operating loss (1,278,031) (1,402,020) (3,963,565) (5,933,097) (54,790,528)
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income 23,887 68,275 81,523 290,232 4,852,527
Interest expense (85,496) (156,691) (304,992) (532,194) (3,488,925)
Other (net) 4,361 (576) 33,346 (735) (95,393)
------------ ------------ ------------ ------------ ------------
(57,248) (88,992) (190,123) (242,697) 1,268,209
------------ ------------ ------------ ------------ ------------
Net loss for the period and
deficit accumulated during
the development stage $ (1,335,279) $ (1,491,012) $ (4,153,688) $ (6,175,794) $(53,522,319)
============ ============ ============ ============ ============
Net loss per share:
Basic and diluted $(0.14) ($0.15) ($0.42) ($0.64) ($13.27)
============ ============ ============ ============ ============
Weighted average number of
common shares outstanding:
Basic and diluted 9,859,078 9,657,784 9,827,211 9,643,883 4,034,551
============ ============ ============ ============ ============
</TABLE>
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Integ Incorporated
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Period from
Three Months Ended Nine Months Ended April 3, 1990
September 30 September 30 (Inception) to
--------------------------- --------------------------- September 30
2000 1999 2000 1999 2000
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating activities:
Net loss $ (1,335,279) $ (1,491,012) $ (4,153,688) $ (6,175,794) $(53,522,319)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation 160,017 299,108 531,800 847,637 4,341,038
Deferred compensation amortization 13,896 10,587 35,070 31,761 1,175,480
Amortization of loan committment fee -- -- -- -- 250,074
Impairment of fixed assets 6,936 391,096
Loss(gain) on sale of equipment and deposit write-off (1,500) -- (24,533) (901) 70,083
Value of options and warrants related to debt
financing, lease guarantee, extension of
options, compensation and consulting services -- 3,826 105,500 106,370 571,529
Changes in operating assets and liabilities:
Receivables -- -- 181,669 -- (28,831)
Prepaid expenses and other assets (9,065) (62,263) (44,330) (143,542) 252,973
Notes payable (8,193) -- 30,432 30,432
Accounts payable and accrued expenses 23,325 55,029 (241,693) (294,481) 270,180
------------ ------------ ------------ ------------ ------------
Net cash used in operating activities (1,156,799) (1,184,725) (3,572,837) (5,628,950) (46,198,265)
------------ ------------ ------------ ------------ ------------
Investing activities:
Purchase of furniture and equipment (1,431) (32,893) (12,576) (48,240) (8,960,772)
Proceeds from sale of furniture and equipment 1,499 -- 41,707 3,500 141,032
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities 68 (32,893) 29,131 (44,740) (8,819,740)
------------ ------------ ------------ ------------ ------------
Financing activities:
Proceeds from sale of Preferred Stock 1,471,131 -- 3,091,908 -- 25,881,640
Proceeds from bridge loan debt -- -- -- -- 2,900,000
Proceeds from borrowings under loan agreement -- -- -- -- 5,486,446
Payments on long-term debt (305,228) (296,973) (1,037,326) (891,369) (3,704,436)
Payments on capital lease obligations (630) (41,233) (14,178) (124,797) (694,065)
Proceeds from sale of Common Stock -- -- 114,407 962 26,712,795
------------ ------------ ------------ ------------ ------------
Net cash provided by financing activities 1,165,273 (338,206) 2,154,811 (1,015,204) 56,582,379
------------ ------------ ------------ ------------ ------------
(Decrease) increase in cash and cash equivalents 8,542 (1,555,824) (1,388,895) (6,688,894) 1,564,375
Cash and cash equivalents at beginning of period 1,555,833 6,042,625 2,953,270 11,175,695 --
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 1,564,375 $ 4,486,801 1,564,375 $ 4,486,801 $ 1,564,375
============ ============ ============ ============ ============
</TABLE>
5
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INTEG INCORPORATED
(A Development Stage Company)
Notes To Financial Statements
(unaudited)
(1) Basis of Presentation
The accompanying financial statements, which are unaudited except for the
balance sheet as of December 31, 1999, have been prepared in accordance with
instructions to Form 10-Q and do not include all the information and notes
required by Generally Accepted Accounting Principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. These financial statements should be read in conjunction with the
financial statements and accompanying notes from Integ's Annual Report on Form
10-K for the year ended December 31, 1999 filed with the Securities and Exchange
Commission.
(2) Net Loss Per Share
Loss per share is calculated under FASB Statement 128. Basic loss per share is
based on the weighted average shares outstanding and excludes any dilutive
effects of options and warrants. Diluted loss per share for Integ is the same as
basic earnings per share because the effect of options and warrants is
anti-dilutive.
(3) Equipment Loan Agreement
During 1996 Integ entered into an equipment loan agreement, which provides for
borrowings up to $12.5 million to finance the purchase of equipment and fixtures
including automated manufacturing equipment and tooling. Loans are paid back
monthly over a four-year period. The obligation of the lender to make additional
loans expired December 31, 1998. Integ borrowed a total of $5.5 million under
the agreement.
(4) Series B Preferred Stock Purchase Agreement
On February 16, 2000, Integ and Amira Medical entered into a preferred stock
purchase agreement which is intended to provide funding to Integ at its current
operational level for the continued development of the LifeGuide(TM) System
through 2000. Under the agreement, Amira will provide Integ with up to $5.6
million in funding through the purchase of Integ Series B Preferred Stock.
Should Integ exercise it's option to merge with Amira in the future, the Series
B Preferred Stock will not participate in the merger consideration. The Series B
Preferred Stock is redeemable for cash or common stock, at the option of the
Company, in the case of a change in control or if the Company does not exercise
its option to merge with Amira.
As part of the agreement, Integ will hold $1,500,000 of its existing cash in
reserve. As of September 30, 2000, Integ has raised $3.1 million through the
sale of 1,771,236 shares of Series B Preferred Stock.
(5) Subsequent Event
On October 4, 2000, Inverness Medical Technology, Inc. and Integ announced that
they had signed a definitive agreement to merge Integ into a subsidiary of
Inverness. Under the terms of the merger agreement, all of the issued and
outstanding shares of Integ's common stock, options and warrants will be
exchanged for 1.9 million shares of Inverness common stock. Based upon the
closing price for Inverness common stock as of October 3, 2000 and the number of
shares of Integ common stock, options and warrants outstanding on October 3,
2000, each share of Integ common stock would be exchanged for approximately
0.187 of a share of Inverness common stock. Outstanding shares of Integ's
preferred stock will be redeemed for cash at the closing. The
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transaction is structured as a tax-free reorganization and will be accounted for
using the purchase method of accounting. The transaction, which is subject to
approval of Integ's shareholders and other customary closing conditions, is
expected to close near year-end. Inverness anticipates taking a significant
charge for Integ's in-process R&D as well as consolidation costs to be incurred
in connection with the merger.
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Cautionary Statement
This Quarterly Report on Form 10-Q contains forward-looking statements
as defined in the Private Securities Litigation Reform Act of 1995. When used in
this Form 10-Q and in future filings by Integ with the Securities and Exchange
Commission, in Integ's press releases and in oral statements made with the
approval of an authorized executive officer, the words or phrases "believes,"
"anticipates," "expects," "intends," "will likely result," "estimates,"
"projects" or similar expressions are intended to identify such forward-looking
statements, but are not the exclusive means of identifying such statements.
These forward-looking statements involve risks and uncertainties that may cause
Integ's actual results to differ materially from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, the following: risks associated with the development of
a new technology; dependence on the strategic alliance with Amira Medical and
the LifeGuide(TM) System, uncertainty of market acceptance; risks associated
with Integ's history of operating losses, accumulated deficit, expectation of
future losses, risks; dependence on continued funding; risks associated with the
proposed merger with Inverness Medical Technology and the strategic alliance
with Amira Medical; risks associated with limited clinical testing experience;
uncertainty of obtaining Food and Drug Administration clearances or approvals;
heightened competition; risk of technological obsolescence; risks associated
with the lack of manufacturing capability and dependence on suppliers; risks
associated with Integ's dependence on patents and proprietary technology, risks
associated with retaining key personnel and attracting additional qualified
skilled personnel; and the risks associated with product liability and limited
insurance coverage.
Integ wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Integ
undertakes no obligation to revise any forward-looking statements in order to
reflect events or circumstances after the date of such statements. Readers are
urged to carefully review and consider the various disclosures made by Integ in
this report and in Integ's other reports filed with the Securities and Exchange
Commission that attempt to advise interested parties of the risks and factors
that may affect Integ's business.
General
From inception through September 30, 2000, Integ Incorporated has
incurred losses totaling $53.5 million, consisting of $25.2 million of research
and development expenses, $10.5 million of manufacturing development expenses,
$17.8 million of general and administrative and other expenses, net of interest
income. Integ's activities have consisted primarily of research and product
development, product design, development of the manufacturing equipment and
processes and marketing strategies needed for the introduction of the LifeGuide
System. Integ has generated no revenue and has sustained significant operating
losses each year since inception. Integ expects such losses to continue for the
next several years.
On October 4, 2000, Inverness Medical Technology, Inc. and Integ
announced that they had signed a definitive agreement to merge Integ into a
subsidiary of Inverness. Under the terms of the merger agreement,
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all of the issued and outstanding shares of Integ's common stock, options and
warrants will be exchanged for 1.9 million shares of Inverness common stock.
Based upon the closing price for Inverness common stock as of October 3, 2000
and the number of shares of Integ common stock, options and warrants outstanding
on October 3, 2000, each share of Integ common stock would be exchanged for
approximately 0.187 of a share of Inverness common stock. Outstanding shares of
Integ's preferred stock will be redeemed for cash at the closing. The
transaction is structured as a tax-free reorganization and will be accounted for
using the purchase method of accounting. The transaction, which is subject to
approval of Integ's shareholders and other customary closing conditions, is
expected to close near year-end. Inverness anticipates taking a significant
charge for Integ's in-process R&D as well as consolidation costs to be incurred
in connection with the merger. In connection with the merger agreement between
Inverness and Integ, Inverness and Integ entered into a loan agreement pursuant
to which Inverness agreed to provide funding of the operational expenses of
Integ in the event that an event of default under Integ's current funding
arrangement has occurred, and is continuing, and certain other conditions have
been met. The complete terms of the agreement are available as an exhibit to the
Integ Current Report on Form 8-K filed with the Securities and Exchange
Commission on October 18, 2000.
Integ announced in April 1999 that it had formed an alliance with Amira
Medical to jointly develop a new generation of home glucose monitoring tests
utilizing interstitial fluid ("ISF"). If the merger with Inverness is completed,
the strategic alliance with Amira will be terminated. Under the terms of the
strategic alliance, Integ is responsible for the development of a method to
sample ISF using its proprietary sampling technology, designing and
manufacturing development of a means to integrate Integ's sampling technology
with Amira's test strip technology, and manufacture of a packaged and sterile
LifeGuide Key, including Integ's ISF sampling technology incorporating Amira's
test strip. As part of the strategic alliance agreement, Integ has the option at
a future date, to merge with a subsidiary of Amira, subject to certain
conditions. Total consideration payable to Integ`s shareholders, optionholders,
and warrantholders in connection with any merger with Amira is $20,000,000 in
cash and 2,000,000 shares of common stock of Amira, subject to reduction in
certain circumstances. The complete terms of the agreement are available as an
exhibit to the Integ Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 9, 1999.
In January 2000, Integ established a budget for the year 2000 in
support of the joint development plan, which took into account the contributions
that Amira is making toward completion of LifeGuide product development. On
February 15, 2000, Integ entered into a preferred stock agreement with Amira
which is intended to provide up to $5.6 million in funding to Integ for the
continued development of the LifeGuide System through the year 2000. Since April
2000, Integ has been dependent upon sales of Series B Preferred stock to Amira
to meet its operating expenses. Through September 30, 2000, Integ has raised
$3.1 million through the sale of 1,771,236 shares.
On March 29, 2000 Integ announced that, based on discussions with Amira
Medical, it expected to do additional development work on the LifeGuide System
before proceeding to clinical trials. Integ has not established a new target
date for entering clinical trials.
Integ is developing the LifeGuide System, a hand-held glucose
monitoring product for use by people with diabetes. The LifeGuide System will
allow people with diabetes to frequently self-monitor their glucose levels
without repeatedly enduring the pain and mess associated with lancing their
fingers to obtain a blood sample. Frequent monitoring may allow people with
diabetes to manage their disease more effectively and conveniently.
Integ, a Minnesota corporation, was incorporated in April 1990.
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Results of Operations
Comparison of the Three Months and Nine Months Ended September 30, 2000 and 1999
General: Integ's net loss totaled $1.3 million for the three months ended
September 30, 2000 and $4.2 million for the nine months ended September 30,
2000, as compared to $1.5 million for the three months ended September 30, 1999
and $6.2 million for nine months ended September 30, 1999. Integ expects net
losses to continue for the next several years.
In conjunction with the formed alliance with Amira in April 1999, Integ began
cross-charging Amira for certain expenses related to the joint development of
the LifeGuide System. In April 2000, Integ began funding its operations through
sales of Series B preferred stock to Amira and discontinued cross-charging
expenses to Amira. These cross-charges are described in our analysis as
"allocated expenses to Amira" and had the effect of reducing Integ's operating
expenses.
Until her permanent appointment as President and CEO of Integ, Ms. Critzer was
accounted for in Manufacturing Development as she continued in her role as
Vice-President - Operations as well as Interim President and CEO. Since her
permanent appointment as President and CEO in April 1999, Ms. Critzer has been
accounted for in General and Administrative.
Research and development expenses: Research and development expenses decreased
to $439,000 during the three months ended September 30, 2000 from $449,000
during the three months ended September 30, 1999. This decrease was primarily
attributable to decreased prototype expenses of $41,000, consulting fees of
$21,000, contract fees of $11,000 and other expenses of $9,000. These decreases
were partially offset by a reduction in expenses allocated to Amira of $72,000.
For the nine months ended September 30, 2000, expenses decreased to $1,289,000
from $1,828,000 for the nine months ended September 30, 1999. This decrease was
primarily attributable to decreased compensation expense of $147,000,
depreciation expense of $93,000, consulting fees of $216,000, contract fees of
$67,000, prototype expense of $68,000 and the allocation of expenses to Amira of
$17,000. These decreases were offset by increased patent related legal fees of
$20,000 and an increase in other expenses of $49,000.
Manufacturing development expenses: Manufacturing development expenses increased
to $482,000 during the three months September 30, 2000 from $410,000 during the
three months ended September 30, 1999. The increase in manufacturing development
expenses is primarily attributable to a reduction in the expenses allocated to
Amira of $139,000, increased contract fees of $23,000, compensation expenses of
$15,000 and travel expenses of $13,000. These increases were partially offset by
decreased prototype and prototype tooling expenses of $99,000 and other expenses
of $19,000. For the nine months ended September 30, 2000, expenses decreased to
$1,425,000 from $1,495,000 during the nine months ended September 30, 1999. This
decrease was primarily attributable to decreased compensation expense of
$121,000, depreciation expense of $89,000 and prototype and prototype tooling
expenses of $12,000. These decreases were partially offset by increased contract
fees of $93,000, a reduction in the allocation of expenses to Amira of $22,000,
increased travel expenses of $19,000 and other expenses of $18,000.
General and administrative expenses: In accordance with the terms of the
strategic alliance with Amira, Integ no longer incurs expenses categorized
previously as clinical and regulatory and sales and marketing. For presentation
purposes, prior period expenses have been reclassified as general and
administrative.
General and administrative expenses decreased to $357,000 during the three
months ended September 30, 2000, from $543,000 during the three months ended
September 30, 1999. The decrease is primarily attributable to decreased
depreciation expense of $125,000, the allocation of facility expenses to
sub-lease tenant of $77,000 and decreased other expenses of $16,000. The
decrease was partially offset by increased compensation
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expenses of $32,000. For the nine months ended September 30, 2000, expenses
decreased to $1,250,000 from $2,610,000 during the nine months ended September
30, 1999. The decrease was primarily attributable to decreased consulting fees
of $1,075,000, insurance expense of $63,000, the allocation of certain facility
expenses to sub-lease tenant and Amira of $193,000, decreased depreciation
expense of $133,000, increased facility allocations to other departments of
$38,000, decreased Medical Advisory Board (MAB) expenses of $21,000 and a
decrease in other expenses of $59,000. The decrease was partially offset by
increased compensation expenses of $190,000, software expense of $18,000 and
printed supply expense of $14,000.
Interest income: For the three months ended September 30, 2000, interest income
decreased to $24,000 from $68,000 for the three months ended September 30, 1999.
For the nine months ended September 30, 2000, interest income decreased to
$82,000 from $290,000 for the nine months ended September 30, 1999. The
decreases resulted from lower average balances of cash and cash equivalents.
Interest expense: For the three months ended September 30, 2000, interest
expense decreased to $85,000 from $157,000 for the three months ended September
30, 1999. For the nine months ended September 30, 2000, interest expense
decreased to $305,000 from $532,000 during the nine months ended September 30,
1999. The decrease in interest expense is attributable to payments made on
long-term debt and capital leases. On September 30, 2000 Integ's long term
liabilities, including current portions, were $1,635,000 as compared to
$3,067,000 on September 30, 1999.
Other Income: For the three months ended September 30, 2000, other income
increased to $4,000 from an expense of $1,000 for the three months ended
September 30, 1999. For the nine months ended September 30, 2000, other income
increased to $33,000 from an expense of $1,000 for the nine months ended
September 30, 1999. The increases are primarily attributable to gains from the
sale of excess equipment.
Liquidity and Capital Resources
Integ's operations since inception have been funded by net proceeds from
the sale of common and preferred stock totaling approximately $55 million and
proceeds from borrowings under an equipment loan agreement totaling $5.5
million. As of September 30, 2000 Integ had cash and cash equivalents of $1.6
million and working capital of $100,000.
The equipment loan agreement contains covenants that place restrictions on
sales of assets, transactions with affiliates, creation of additional debt, and
other customary covenants. Borrowings under the equipment loan agreement are
collateralized by a large part Integ's assets.
On February 15, 2000, Integ entered into a preferred stock agreement with
Amira which is intended to provide up to $5.6 million in funding to Integ for
the continued development of the LifeGuide System through the year 2000. Sales
of preferred stock to Amira only occur after Integ's cash balance has declined
to $1.5 million and Integ will then only sell preferred stock to Amira from time
to time in amounts sufficient for it to meet its expenses incurred in connection
with Integ's 2000 budget. Since April 2000, Integ has been dependent upon sales
of preferred stock to Amira to meet its operating expenses. As of September 30,
2000, Integ has raised a total of $3.1 million through the sale of 1,771,236
shares of Series B Preferred Stock. Integ believes that its cash and proceeds
from sales of Series B preferred stock will be sufficient to fund operations
through the 1st quarter of 2001. Under the terms of the Series B Preferred Stock
Agreement, upon closing of the merger with Inverness, Integ will be required to
redeem all outstanding shares of Series B preferred stock at a price equal to
the total purchase price paid for the outstanding shares of Series B preferred
stock plus a 10% premium, payable either in cash or shares of common stock of
Integ, at Integ's option. Under the terms of the merger agreement with
Inverness, Integ agreed to redeem the shares of Series B preferred stock for
cash and Inverness agreed to fund the redemption of outstanding shares of Series
B preferred stock.
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In connection with the merger agreement between Inverness and Integ,
Inverness and Integ entered into a loan agreement pursuant to which Inverness
agreed to provide funding of the operational expenses of Integ in the event that
an event of default under Integ's current funding arrangement has occurred, and
is continuing, and certain other conditions have been met.
As part of the strategic alliance with Amira, Integ agreed that it would
not take any actions outside the ordinary course of business which would result
in a liability or an obligation to make payments, and would not issue any debt
or debt securities without Amira's consent, and that the amount of any of these
types of liabilities would be deducted from the consideration payable by Amira
in connection with the merger of Integ with a subsidiary of Amira. Integ also
agreed that it would not incur any liabilities or obligations to make payments
in excess of $1,000,000 in the ordinary course of business without Amira's
consent. Integ cannot predict whether these agreements will adversely affect its
ability to meet its future liquidity and capital requirements.
Integ's future liquidity and capital requirements will depend on numerous
factors, including when or if the performance of the LifeGuide System meets the
required performance specifications, whether the merger with Inverness is
completed, the ability of Integ to successfully maintain its strategic alliance
with Amira, the ability and desire of Inverness or Amira to provide additional
funding, the extent to which Integ's LifeGuide System gains market acceptance,
the timing of regulatory actions regarding the LifeGuide System, and the results
of clinical trials and competition.
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Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Integ has no derivative financial instruments or derivative commodity
instruments in its cash and cash equivalents investments. Integ's cash and cash
equivalents are invested in highly liquid vehicles, including money market
accounts and high-grade commercial paper as guided by Integ's investment policy.
As a result of Integ's investment policy, a decrease in the interest rate earned
would not be material to Integ's results. All of Integ's transactions are
conducted in US dollars. Accordingly, Integ is not exposed to foreign currency
risk.
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On May 5, 2000, Integ issued 260,680 shares of Series B Preferred Stock to
Amira Medical for a total consideration of $610,000. On June 7, 2000, Integ
issued 113,255 shares of Series B Preferred Stock to Amira Medical for a total
consideration of $223,000. On July 10, 2000, Integ issued 457,487 shares of
Series B Preferred Stock to Amira Medical for a total consideration of $787,777.
On August 4, 2000, Integ issued 388,940 shares of Series B Preferred Stock to
Amira Medical for a total consideration of $570,677. On September 7, 2000, Integ
issued 411,855 shares of Series B Preferred Stock to Amira Medical for a total
consideration of $572,677. All of these sales were made in transactions exempt
from registration under Section 4(2) of the Securities Act. Each outstanding
share of Series B Preferred Stock will be automatically convertible into one
share of common stock of Integ, subject to certain exceptions, in the event that
Integ exercises the option (the "Option") to merge with a subsidiary of Amira
Medical granted to Integ pursuant to the terms of the Option Agreement, dated
April 2, 1999, between Integ and Amira Medical. Outstanding shares of Series B
Preferred Stock are subject to mandatory redemption at a redemption price equal
to the total price paid by Amira Medical for the outstanding shares of Series B
Preferred Stock plus a 10% premium in the event Integ is acquired by a third
party or Integ fails to exercise the Option. The redemption price may be paid in
cash or shares of common stock of Integ at Integ's sole option.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed herewith.
3.1 Amended and Restated Articles of Incorporation of
Integ (incorporated by reference to Exhibit 3.2 to
Integ's Registration Statement on Form S-1 (SEC
File No. 333-4352)).
3.2 Amended Bylaws of Integ (incorporated by reference
to Exhibit 3.3 to Integ's Registration Statement
of Form S-1 (SEC File No. 333-4352)).
3.3 Certificate of Designations for Series B Preferred
Stock of Integ, dated February 15, 2000
(Incorporated by reference to exhibit 3.1 of
Integ's Current Report on form 8-K dated February
15, 2000).
3.4 Certificate of Amendment to Certificate of
Designations for Series B Preferred Stock of
Integ.
4.1 Series B Preferred Stock Purchase Agreement, dated
February 15, 2000 between Integ and Amira Medical
(incorporated by reference to exhibit 4.1 of
Integ's Current report on Form 8-K dated February
15, 2000).
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4.2 Amendment No. 1 to Rights Agreement, dated
February 15, 2000 between Integ and Norwest Bank
Minnesota, National Association (incorporated by
Reference to exhibit 4.2 of Integ's Current Report
on Form 8-K dated February 15, 2000).
27 Financial Data Schedule.
13
<PAGE>
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.
INTEG INCORPORATED
(Registrant)
Date: November 10, 2000 By: /s/ Susan L. Critzer
--------------------
Susan L. Critzer
President and Chief
Executive Officer Acting
Chief Financial Officer
(principal executive
officer, principal
financial and accounting
officer)
14
<PAGE>
EXHIBIT INDEX
Exhibit
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3.4 Certificate of Amendment to Certificate of Designations
for Series B Preferred Stock of Integ Incorporated.
27. Financial Data Schedule
