<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, 1997
     -------------

[ ]  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
                              ------------------
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

        Minnesota                                       41-1670176
--------------------------                --------------------------------------
 (State of Incorporation)                  (I.R.S. Employer Identification No.)

2800 Patton Road, St. Paul, MN                            55113
----------------------------------------               ------------
(Address of principal executive offices)                (Zip Code)

                       Telephone Number:  (612) 639-8816
                   -----------------------------------------
             (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 ___
                                                  ---             

As of August 5, 1997, the registrant had 9,314,869 shares of $.01 par value
common stock issued and outstanding.

________________________________________________________________________________
 
<PAGE>
 
                              INTEG INCORPORATED
                              
                                     INDEX
                                     -----

<TABLE> 
<CAPTION> 
PART I.     FINANCIAL INFORMATION                                            Page
                                                                             ----
<S>                                                                          <C> 
 Item 1.    Financial Statements


            Balance Sheets as of June 30, 1997 and December 31, 1996           3
 
            Statements of Operations for the three and six months
            ended June 30, 1997 and 1996 and for the period from
            April 3, 1990 (inception) through June 30, 1997                    4
 
            Statements of Cash Flows for the three and six months
            ended June 30, 1997 and 1996 and for the period from
            April 3, 1990 (inception) through June 30, 1997                    5

            Notes to Financial Statements                                      6

 Item 2.    Management's Discussion and Analysis of
            Financial Condition and Results of Operations                      7

PART II.    OTHER INFORMATION                                                 10

 Item 1-3.  None

 Item 4.    Submission of Matters to a Vote of Security Holders

 Item 5.    None

 Item 6.    Exhibits and Reports on Form 8-K


SIGNATURES                                                                    11
</TABLE> 

                                       2
<PAGE>
 
                              INTEG INCORPORATED

                         (A Development Stage Company)
                                BALANCE SHEETS

<TABLE>
<CAPTION>
                                               JUNE 30       December 31  
                                                1997            1996     
                                            -------------   ------------- 
<S>                                         <C>             <C>         
                                             (UNAUDITED)                 
ASSETS                                                                    
------                                                                    
Current assets:                                                           
   Cash and cash equivalents                 $ 27,767,449    $ 33,879,608 
   Receivables                                     30,957         113,254 
   Prepaid expenses                               128,468         157,933 
                                            -------------   -------------
      Total current assets                     27,926,874      34,150,795 
                                            -------------   ------------- 
                                                                          
Furniture and equipment                         6,719,000       3,701,648 
Less accumulated depreciation                  (1,162,235)       (821,476)
                                            -------------   -------------
                                                5,556,765       2,880,172 
                                                                          
Other assets                                      550,620         684,933 
                                            -------------   -------------
                                                                          
TOTAL ASSETS                                 $ 34,034,259    $ 37,715,900 
                                            =============   ============= 
                                                                          
                                                                          
                                                                          
LIABILITIES AND SHAREHOLDERS' EQUITY                                      
----------------------------------------                                  
Current liabilities:                                                      
   Accounts payable and accrued expenses     $    884,473    $  1,236,348 
   Current portion of long-term debt and                                  
      capital lease obligations                   657,343         337,277 
                                            -------------   -------------
         Total current liabilities              1,541,816       1,573,625 
                                            -------------   ------------- 
                                                                          
Long-term debt and capital lease                                          
 obligations, less current portion              2,464,717       1,298,484 
   
                                                                          
Shareholders' equity:                                                     
   Common stock                                    93,016          92,757 
   Additional paid-in capital                  54,290,386      54,269,333 
   Deficit accumulated during the             
    development stage                         (23,859,187)    (18,873,957)
                                            -------------   ------------- 
                                               30,524,215      35,488,133 
   Deferred compensation                         (496,489)       (644,342)
                                            -------------   ------------- 
Total shareholders' equity                     30,027,726      34,843,791 
                                            -------------   ------------- 
                                                                          
TOTAL LIABILITIES AND SHAREHOLDERS'          
 EQUITY                                      $ 34,034,259    $ 37,715,900 
                                            =============   =============  
</TABLE>

                                       3
<PAGE>
                              INTEG INCORPORATED
                         (A Development Stage Company)
                            STATEMENT OF OPERATIONS
                                 (UNAUDITED) 

<TABLE> 
<CAPTION> 
                                                                                                         Period from  
                                                                                                        April 3, 1990 
                                             Three Months Ended             Six Months Ended            (Inception) to  
                                                 June 30                        June 30                    June 30     
                                        ------------------------------   ------------------------------
                                              1997            1996          1997           1996             1997
                                        ---------------  -------------  -------------   --------------  -------------

OPERATING EXPENSES:
<S>                                       <C>            <C>            <C>             <C>             <C>
   Research and development                $ 1,154,369    $ 1,212,760    $ 2,296,072    $ 2,114,091      $12,895,001
   Manufacturing development                   585,703        349,324      1,138,941        700,806        3,622,906
   Clinical and regulatory                     304,944        163,017        575,770        309,005        1,757,926
   General and administrative                  520,306        363,380      1,052,094        657,617        5,370,664
   Sales and marketing                         225,001        217,950        448,519        415,425        1,855,987
                                        ---------------  -------------  -------------   --------------  ------------- 
                        
OPERATING LOSS                              (2,790,323)    (2,306,431)    (5,511,396)    (4,196,944)     (25,502,484)
                                        ---------------  -------------  -------------   --------------  ------------- 
 
OTHER INCOME (EXPENSE):
   Interest income                             416,099        165,903        839,093        347,752        2,813,781
   Interest expense                           (149,469)       (58,135)      (312,927)       (80,341)      (1,170,484)
                                        ---------------  -------------  -------------   --------------  ------------- 
                                               266,630        107,768        526,166        267,411        1,643,297
                                        ---------------  -------------  -------------   --------------  ------------- 
 
NET LOSS FOR THE PERIOD AND DEFICIT        
 ACCUMULATED DURING THE DEVELOPMENT
 STAGE                                     $(2,523,693)   $(2,198,663)   $(4,985,230)   $(3,929,533)    $(23,859,187) 
                                        ===============  =============  =============   ==============  ============= 
  
NET LOSS PER SHARE:
   Primary                                      ($0.27)        ($5.07)        ($0.54)        ($3.12)          ($8.20)
   Fully-diluted*                               ($0.27)        ($0.35)        ($0.54)        ($0.55)          ($5.09)
 
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
   Primary                                   9,293,020        433,333      9,287,725      1,258,387        2,908,063
   Fully-diluted*                            9,293,020      6,269,038      9,287,725      7,094,092        4,687,148
</TABLE> 
 
Assumes conversion of all previously outstanding convertible preferred stock
into common stock during each reporting period prior to July 1, 1996, the
closing date of the company's initial public offering, at which time all
convertible preferred stock was automatically converted into common stock.

                                       4
<PAGE>
                              INTEG INCORPORATED
                         (A Development Stage Company)
                            STATEMENT OF CASH FLOWS
                                  (unaudited)


<TABLE>
<CAPTION>

                                                                                                                     
                                                                                                                        Period from
                                                                Three Months Ended           Six Months Ended          April 3, 1990
                                                                    June 30                      June 30              (Inception) to
                                                            --------------------------  ---------------------------       June 30 
                                                               1997           1996           1997           1996           1997 
                                                            --------------------------  --------------------------- ----------------
<S>                                                         <C>           <C>           <C>           <C>             <C> 
Operating activities:                                       
  Net loss                                                  $ (2,523,693) $ (2,285,868) $ (4,985,230) $ (3,842,327)   $ (23,859,187)
  Adjustments to reconcile net loss to cash used in         
  operating activities:                                     
    Depreciation                                                 185,813       102,039       340,759       190,334        1,196,627
    Deferred compensation amortization                            73,926       224,791       147,853       145,113          850,898
    Amortization of loan committment fee                             -             -          77,463           -            250,074
    Amortization of options and warrants related to debt
      financing, lease guarantee, extension of options
      and consulting services                                      5,751         8,886        11,501        15,735          266,303
    Loss on sale of equipment and deposit write-off                  -             -             -             -             68,209
    Changes in operating assets and liabilities:
      Receivables                                                 46,085       (13,960)       82,297       (14,747)         (30,957)
      Prepaid expenses and other assets                          (54,970)     (166,096)        2,290      (194,466)        (220,504)
      Accounts payable and accrued expenses                       11,602       152,998      (351,875)       19,890          884,473
                                                            --------------------------  --------------------------- ----------------
        Net cash used in operating activities                 (2,255,486)   (1,977,210)   (4,674,942)   (3,680,468)     (20,594,064)

Investing activities:
  Purchase of furniture and equipment                         (1,770,109)     (147,967)   (3,006,170)     (537,014)      (6,044,642)
  Proceeds from sale of furniture and equipment                        -             -             -             -           43,079
                                                            --------------------------  --------------------------- ----------------
        Net cash used in investing activities                 (1,770,109)     (147,967)   (3,006,170)     (537,014)      (6,001,563)

Financing activities:
  Proceeds from sale of Convertible Preferred Stock                  -             -             -             -         22,789,732
  Proceeds from bridge loan debt                                     -             -             -             -          2,900,000
  Payments on long-term debt and capital lease obligations       (64,283)      (34,419)     (201,953)      (71,638)        (585,003)
  Proceeds from sale of Common Stock                              13,062           -          21,312           -         26,156,479
  Proceeds from borrowings under equipment loan                      -             -       1,749,594       926,418        3,101,868
                                                            --------------------------  --------------------------- ----------------
        Net cash provided by financing activities                (51,221)      (34,419)    1,568,953       854,780       54,363,076
                                                            --------------------------  --------------------------- ----------------

Increase (decrease) in cash and cash equivalents              (4,076,816)   (2,159,596)   (6,112,159)   (3,362,702)      27,767,449

Cash and cash equivalents - beginning of period               31,844,265    14,561,032    33,879,608    15,764,138              -
                                                            --------------------------  --------------------------- ----------------
Cash and cash equivalents - end of period                    $27,767,449   $12,401,436   $27,767,449   $12,401,436      $27,767,449
                                                            ==========================  =========================== ================


Supplemental disclosure of cash flow information
  Fixed assets capitalized under capital lease and loan
    agreements                                               $       -   $         -     $    11,182   $       -        $   763,052

  The company converted $2,900,000 of debt into
    Series E Convertible Preferred Stock                     $       -   $         -     $       -     $       -        $ 2,900,000
</TABLE> 


                                       5
<PAGE>
 
                              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, 1996, 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 the Company's Annual Report on
Form 10-K/A for the year ended December 31, 1996 filed with the Securities and
Exchange Commission.

(2) NET LOSS PER SHARE

Net loss per share is computed using the weighted average number of common
shares outstanding during the periods presented.  Pursuant to Securities and
Exchange Staff Accounting Bulletin No. 83 (SAB No. 83), shares convertible into
common stock issued by the Company at prices less than the initial public
offering price ($9.50 per share) during the 12 months immediately preceding the
initial public offering, plus stock options and warrants granted at exercise
prices less than the initial public offering price during the same period, have
been included in the determination of shares used in calculating the net loss
per share, using the treasury stock method, as if they were outstanding for all
periods presented prior to the initial public offering.

Fully-diluted net loss per share computed in accordance with Accounting
Principles Board Opinion No. 15 and SAB No. 83 gives effect to the conversion of
all series of convertible preferred stock into common stock during the entirety
of each respective reporting period.  The primary net loss per share assumes
conversion of all previously outstanding convertible preferred stock as of July
1, 1996, when such automatic conversion actually took place.

(3) EQUIPMENT LOAN AGREEMENT

During 1996, the Company 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 expires December 31, 1998.  This agreement was amended in
August 1997 to adjust the required collateral for all future borrowings that
occur prior to a public announcement that the in-house testing of the Company's
LifeGuide System has resulted in performance which should allow the Company to
initiate clinical trials within 90 days.  The Company has borrowed a total of
$3.1 million under this agreement as of June 30, 1997.

                                       6
<PAGE>
 
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 within
the meaning of  Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  When used in
this Form 10-Q and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer of the Company, the word 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 the Company'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 LifeGuide
System; history of operating losses and expectation of future losses; limited
clinical testing experience; uncertainty of obtaining Food and Drug
Administration clearances; heightened competition; risks associated with the
lack of manufacturing capability and dependence on contract manufacturers and
suppliers; and risks associated with the company's dependence on proprietary
technology, including those related to adequacy of patent and trade secret
protection.  The Company wishes to caution readers not to place undue reliance
on any such forward-looking statements, which speak only as of the date made.
The Company 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 the Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and factors that may affect the Company's business.  Such forward-
looking statements are qualified in their entirety by the cautions and risk
factors set forth under "Cautionary Statement" filed as Exhibit 99.1 to this
Form 10-Q.

GENERAL

Integ, a development stage company, was incorporated on April 3, 1990 to develop
the LifeGuide System, a next generation, hand-held glucose monitoring product
for use by people with diabetes that avoids the pain and blood associated with
conventional "finger-stick" technologies.  Utilizing the Company's proprietary
interstitial fluid sampling technology, the LifeGuide System will allow people
with diabetes to frequently self-monitor their glucose levels without repeatedly
enduring the pain of lancing their fingers to obtain a blood sample.

From inception through June 30, 1997, the Company has incurred losses totaling
$23.9 million, consisting of $12.9 million of research and development expenses,
$5.4 million of general and administrative expenses and $5.6 million of other
expenses net of interest income.  The Company's activities have consisted
primarily of research and product development, product design, and development
of the manufacturing processes and marketing strategies needed for the
introduction of the LifeGuide System.  The Company has generated no revenue and
has sustained significant operating losses each year since inception.  The
Company expects such losses to continue for the next several years.

                                       7
<PAGE>
 
The Company's future success is entirely dependent upon the successful
development, commercialization and market acceptance of the LifeGuide System,
the development of which is ongoing and the complete efficacy of which has not
yet been demonstrated.  The Company is currently focused on the research and
development activities necessary to modify the current design in order for the
LifeGuide System to meet the Company's product specifications.  Until such time
as the commercial prototypes of the LifeGuide System meet the Company's
performance specifications, the Company expects that further increases in non-
research and development expenses will be minimized.


RESULTS OF OPERATIONS

Comparison of Three and Six Months Ended June 30, 1997 and 1996

General:  The Company's net loss totaled $2,523,693 and $4,985,230 during the
three and six months ended June 30, 1997, up from $2,198,663 and $3,929,533
during the same periods in 1996.  The Company expects net losses to continue for
the next several years.

Research and development expenses:  Research and development expenses decreased
5% to $1,154,369 during the three months ended June 30, 1997 from $1,212,760
during the same period in 1996.  This decrease in research and development
expenses was due primarily to decreases in the usage of prototype materials and
legal costs associated with patent filings.  The impact of these expense
decreases was partially offset by higher staffing costs, depreciation and
consulting fees.  For the first half of 1997, research and development expenses
increased 9% to $2,296,072, up from $2,114,091 during the first half of 1996.
The year-to-date increase in research and development expenses is primarily
related to higher staffing costs and consulting fees, which were partially
offset by lower prototype expenses.

Manufacturing development expenses:  Manufacturing development expenses totaled
$585,703 and $1,138,941 during the three and six month periods ended June 30,
1997, up from $349,324 and $700,806 during the same periods in 1996.  These
increases in manufacturing development expenses were due primarily to increases
in pre-manufacturing expenses, consisting of facility costs, prototype expenses,
and compensation and benefit costs of additional staff that were hired to plan
and design the Company's automated manufacturing processes.  Once production of
the LifeGuide System commences, manufacturing related costs will be allocated to
inventory and costs of goods sold.

Clinical and regulatory expenses:  Clinical and regulatory expenses totaled
$304,944 and $575,770 during the three and six month periods ended June 30,
1997, up from $163,017 and $309,005 during the same periods in 1996.  These
increases in clinical and regulatory expenses were due primarily to increases in
compensation and benefit costs of additional staff that were hired to plan the
clinical trials necessary to obtain the required regulatory approvals for the
LifeGuide System.

General and administrative expenses:  General and administrative expenses
totaled $520,306 and $1,052,094 during the three and six month periods ended
June 30, 1997, up from $363,380 and $657,617 during the same periods in 1996.
These increases in general and administrative expenses were due to increases in
compensation and various legal, insurance and filing costs of being a publicly
traded company.

                                       8
<PAGE>
 
Sales and marketing expenses:  Sales and marketing expenses increased slightly
to $225,001 and $448,519 for the three and six month periods ended June 30,
1997, compared to $217,950 and $415,425 for the comparable periods in 1996.

Interest Income:  Interest income increased to $416,099 and $839,093 for the
three and six month periods ended June 30, 1997, compared to $165,903 and
$347,752 during the comparable 1996 periods.  The increase was due primarily to
higher average balances of cash and cash equivalents in 1997 as a result of the
investment of net proceeds totaling approximately $26 million received in July
1996  from the Company's initial public offering.


LIQUIDITY AND CAPITAL RESOURCES

The Company's operations since inception have been funded by net proceeds from
the sale of Common and Preferred Stock totaling approximately $52 million
through June 30, 1997.  The Company had cash and cash equivalents of
approximately $28 million as of June 30, 1997.

The Company believes that its current cash balances, when combined with the $9.4
million unused portion of its line of credit facility, will be sufficient to
fund its operations until sometime during the second half of 1998.  The
Company'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, the extent to which the Company's LifeGuide
System gains market acceptance, the timing of regulatory actions regarding the
LifeGuide System, the costs and timing of expansion of sales, marketing and
manufacturing activities, the results of clinical trials and competition.  See
Exhibit 99.1 to this Form 10-Q for a more detailed description of the factors
that may affect the Company's future liquidity and capital requirements.

                                       9
<PAGE>
 
                            II.  OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders

On June 4, 1997, the Company held a regular meeting of its shareholders, at
which the shareholders voted on the following matters:

1.   To elect Mark B. Knudson, Ph.D. and Terrance G. McGuire to the Board of
     Directors of the Company to serve for three year terms that will expire at
     the Company's annual shareholder meeting in 2000. The vote on this
     resolution was as follows:

     Mark B. Knudson, Ph.D.:  8,105,876 For;  0 Against;  5,051 Abstain
     Terrance G. McGuire: 8,105,876 For;  0 Against;  5,051 Abstain

2.   To approve the Integ Incorporated 1997 Employee Stock Purchase Plan. The
     vote on this resolution was as follows:

     8,047,929 For;  31,515 Against;  14,139 Abstain;  17,344 Broker non-vote

3.   To ratify the appointment of Ernst & Young LLP as the Company's independent
     auditors for the year ending December 31, 1997. The vote on this resolution
     was as follows:

     8,091,428 For;  11,475 Against;  8,024 Abstain;  0 Broker non-vote



Item 6.  Exhibits and Reports on Form 8-K


         (a)   Exhibits filed herewith.

               10.1  Amendment dated August 7, 1997 to the loan agreement
                     between Venture Lending & Leasing, Inc. and the Company.

               11.   Statement Re: Computation of Net Loss per Common and Common
                     Equivalent Share.

               27.   Financial Data Schedule.
 
               99.1  Cautionary Statement
 
         (b)   No reports on Form 8-K were filed during the quarter ended 
               June 30, 1997.

                                       10
<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:  August 13, 1997           By:  /s/  John R. Brintnall
                                      ----------------------
                                John R. Brintnall
                                Vice President of Finance
                                (Principal financial and accounting officer and
                                duly authorized signatory on behalf of the
                                Registrant)

                                       11
<PAGE>
 
                                 EXHIBIT INDEX


Exhibit     Description
-------     -----------

10.1        Amendment dated August 7, 1997 to the loan agreement between Venture
            Lending & Leasing, Inc. and the Company.

11.         Statement Re:  Computation of Net Loss per Common and Common
            Equivalent Share.

27.         Financial Data Schedule (Electronically Filed)

99.1        Cautionary Statement