SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the quarterly period ended December 31, 1997
Commission File No. 0-15360
BIOJECT MEDICAL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Oregon 93-1099680
(State of other jurisdiction of (I.R.S. identification no.)
employer incorporation or organization)
7620 SW Bridgeport Road
Portland, Oregon 97224
(Address of principal executive offices) (Zip code)
(503) 639-7221
(Registrant's telephone number, including areas code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be 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 [ ]
At December 31, 1997 there were 25,368,342 outstanding shares of common
stock of the registrant.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited consolidated financial statements of Bioject
Medical Technologies Inc. (BMT), an Oregon Corporation, and its subsidiaries,
(together, unless the context otherwise requires, the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. The Company's needle-free injector operations are conducted by
Bioject Inc. (BI), an Oregon corporation formed in February 1985, which is a
wholly owned subsidiary of BMT, and its blood glucose monitoring systems
operations are conducted by Bioject JV Subsidiary Inc. ("JV"), an Oregon
corporation formed in October 1997, which is owned 80.1% by BMT.
The following 10-Q report reflects the consolidated results of operations,
cash flows and financial position for the second quarter of the year ending
March 31, 1998. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the year.
- Consolidated Statements of Operations for the quarters ended
December 31, 1997 and December 31, 1996
- Consolidated Statements of Operations for the nine months ended
December 31, 1997 and December 31, 1996
- Consolidated Balance Sheets dated December 31, 1997 and
March 31, 1997
- Consolidated Statements of Cash Flows for the quarters ended
December 31, 1997 and December 31, 1996
- Consolidated Statements of Cash Flows for the nine months ended
December 31, 1997 and December 31, 1996
Page 1
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three-Month Period Ended
December 31,
1997 1996
-------------------------
[S] [C] [C]
REVENUES:
Net sales of products $ 313,153 $ 325,791
Licensing/technology fees 125,000 80,000
----------- ---------
438,153 405,791
----------- -----------
EXPENSES:
Manufacturing 401,050 325,071
Research and development 193,144 410,195
Selling, general and administrative 901,270 767,992
Acquired in-process R&D - -
Interest expense 225,281 -
Other (income) expense, net (32,061) (14,717)
------------ -----------
1,688,684 1,488,541
------------ -----------
(LOSS) BEFORE MINORITY INTERST (1,250,531) (1,082,750)
MINORITY INTEREST ALLOCATION - -
----------- -----------
NET INCOME (LOSS) $ (1,250,531) $(1,082,750)
=========== ===========
EARNINGS (LOSS) PER SHARE $ (.05) $ (.07)
=========== ===========
SHARES USED IN PER SHARE CALCULATION 24,903,892 16,189,127
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
Page 2
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine-Month Period Ended
December 31,
1997 1996
-------------------------
[S] [C] [C]
REVENUES:
Net sales of products $ 1,300,620 $ 845,422
Licensing/technology fees 375,000 665,500
----------- -----------
1,675,620 1,510,922
----------- -----------
EXPENSES:
Manufacturing 1,452,684 1,369,321
Research and development 665,127 1,242,968
Selling, general and administrative 2,633,934 2,340,058
Acquired in-process R&D 15,000,000 -
Interest expense 225,281 -
Other (income) expense, net (64,392) (64,829)
----------- -----------
19,912,634 4,887,518
----------- -----------
LOSS BEFORE MINORITY INTEREST (18,237,014) (3,376,596)
MINORITY INTEREST ALLOCATION 2,985,000 -
----------- -----------
NET INCOME (LOSS) $(15,252,014) $ (3,376,596)
=========== ===========
EARNINGS (LOSS) PER SHARE $ (.68) $ (.22)
=========== ===========
SHARES USED IN PER SHARE CALCULATION 22,356,973 15,807,517
============ ===========
The accompanying notes are an integral part
of these consolidated financial statements.
Page 3
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, March 31,
1997 1997
--------------------------
ASSETS (unaudited)
- ------------------------------------------
[S] [C] [C]
CURRENT ASSETS:
Cash and cash equivalents $ 1,001,990 $ 2,116,478
Securities available for sale 1,967,749 -
Accounts receivable 513,163 311,856
Inventories 1,571,394 1,706,456
Prepaid and other current assets 54,531 45,222
----------- -----------
Total current assets 5,108,827 4,180,012
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment 2,234,433 1,923,174
Production molds 1,939,754 1,878,858
Furniture and fixtures 160,392 176,897
Leasehold improvements 94,115 80,447
----------- -----------
4,428,694 4,059,376
Less - Accumulated depreciation (1,830,090) (1,462,338)
----------- -----------
2,598,604 2,597,038
OTHER ASSETS 332,059 310,981
----------- -----------
$ 8,039,490 $ 7,088,031
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 579,139 $ 659,973
Accrued payroll 199,671 213,130
Other accrued liabilities 256,100 199,384
Accrued interest 225,281 -
Deferred revenue - 250,000
----------- -----------
Total current liabilities 1,260,191 1,322,487
LONG-TERM DEBT 12,015,000 -
COMMITMENTS
SHAREHOLDERS' EQUITY:
Preferred stock, no par, 10,000,000
shares authorized; no shares issued
and outstanding - -
Common stock, no par, 100,000,000 shares
authorized; issued and outstanding
25,368,342 shares at December 31, 1996
and 19,540,413 at March 31, 1997 44,286,505 40,035,736
Accumulated deficit (49,522,206) (34,270,192)
----------- -----------
Total shareholders' equity (5,235,701) 5,765,544
----------- ------------
$ 8,039,490 $ 7,088,031
=========== ============
The accompanying notes are an integral part
of these consolidated financial statements.
Page 4
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three-Month Period Ended
December 31,
1997 1996
--------------------------
[S] [C] [C]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,250,531) $(1,082,750)
Adjustments to net loss:
Depreciation and amortization 128,332 49,000
Common stock and warrants issued
for services 62,236 -
Acquired in-process R&D, net of
minority interest allocation - -
Net changes in assets and liabilities:
Accounts receivable 22,943 10,198
Inventories (212,224) (147,490)
Prepaid and other current assets 8,836 (345)
Accounts payable (74,365) 203,609
Accrued payroll (40,338) 3,430
Other accrued liabilities 19,620 (44,664)
Interest payable 225,281 -
Deferred revenue - (30,000)
------------ -----------
Net Cash Used in Operating Activities (1,110,210) (1,039,012)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfers to restricted cash - (206,000)
Transfers from restricted cash - 693,278
Purchase of securities available for sale (1,967,749) -
Sale of securities available for sale - -
Capital expenditures (71,470) (814,929)
Other assets (9,095) (167)
------------ -----------
Net Cash Used in Investing Activities (2,048,314) (327,818)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt - 206,000
Cash proceeds from common stock 2,942,828 2,163,000
------------ -----------
Net Cash Provided by Financing Activities 2,942,828 2,369,000
------------ -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and
cash equivalents (215,696) 1,002,170
Cash and cash equivalents at beginning
of period 1,217,686 1,501,373
------------ -----------
Cash and cash equivalents at end
of period $ 1,001,990 $ 2,503,543
============ ===========
The accompanying notes are an integral part
of these consolidated financial statements.
Page 5
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine-Month Period Ended
December 31,
1997 1996
--------------------------
[S] [C] [C]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,252,014) $(3,376,596)
Adjustments to net loss:
Depreciation and amortization 390,252 353,200
Common stock and warrants issued
for services 82,941 159,350
Acquired in-process R&D, net of
minority interest allocation 12,015,000 -
Net changes in assets and liabilities:
Accounts receivable (201,307) 165,471
Inventories 135,062 (467,529)
Prepaid and other current assets (9,309) 1,519
Accounts payable (80,834) 95,734
Accrued payroll (13,459) 30,137
Other accrued liabilities 56,716 24,578
Accrued interest 225,281 -
Deferred revenue (250,002) (566,000)
------------ ----------
Net Cash Used in Operating Activities (2,901,671) (3,580,136)
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfers to restricted cash - (1,606,000)
Transfers from restricted cash - 1,297,442
Purchase of securities available for sale (1,967,749) -
Sale of securities available for sale - 993,056
Investment in glucose monitoring technology (15,000,000) -
Capital expenditures (369,318) (1,462,081)
Other assets (43,578) (5,989)
------------- -----------
Net Cash Used in Investing Activities (17,380,645) (783,572)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 12,015,000 1,606,000
Cash proceeds from common stock 4,167,828 2,163,000
Proceeds from minority interest
capital investment in joint venture
subsidiary 2,985,000 -
------------ -----------
Net Cash Provided by Financing Activities 19,167,828 3,769,000
------------ -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and
cash equivalents (1,114,488) (594,708)
Cash and cash equivalents at beginning
of period 2,116,478 3,098,251
------------ -----------
Cash and cash equivalents at end
of period $ 1,001,990 $ 2,503,543
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
Page 6
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY:
The consolidated financial statements of Bioject Medical Technologies Inc.
(the "Company"), include the accounts of Bioject Medical Technologies Inc.
("BMT"), an Oregon Corporation, and its wholly owned subsidiary, Bioject
Inc., an Oregon Corporation ("BI"), and its 80.1% owned subsidiary, Bioject
JV Subsidiary Inc. ("JV"), an Oregon corporation. All significant
intercompany transactions have been eliminated. Although Bioject Inc.
commenced operations in 1985, the Company was formed in December 1992 for the
purpose of acquiring all of the capital stock of Bioject Medical Systems Ltd.,
a Company organized under the laws of British Columbia, Canada, in a
stock-for-stock exchange in order to establish a U.S. domestic corporation as
the publicly traded parent company for Bioject Inc. and Bioject Medical
Systems Ltd. Bioject Medical Systems Ltd. was terminated in fiscal 1997.
Bioject JV Subsidiary Inc. was formed in October 1997 in connection with a
joint venture arrangement with Elan Corporation, plc ("Elan"). All references
to the Company include Bioject Medical Technologies Inc. and its subsidiaries,
unless the context requires otherwise.
The Company commenced operations in 1985 for the purpose of developing,
manufacturing and distributing a new drug delivery system. Since its formation,
the Company has been engaged principally in organizational, financing, research
and development, and marketing activities. In the last quarter of fiscal 1993,
the Company launched U.S. distribution of its Biojector 2000 system primarily
to the hospital and large clinic market. The Company's products and
manufacturing operations are subject to extensive government regulation, both
in the U.S. and abroad. In the U.S., the development, manufacture, marketing
and promotion of medical devices is regulated by the Food and Drug
Administration ("FDA") under the Federal Food, Drug, and Cosmetic Act
("FFDCA"). In 1987, the Company received clearance from the FDA under Section
510(k) of the FFDCA to market a hand-held CO2-powered jet injection system.
In June 1994, the Company received clearance from the FDA under 510(k) to
market a version of its Biojector 2000 system in a configuration targeted at
high volume injection applications. In October 1996, the Company received
510(k) clearance for a non-needle disposable vial access device. In March
1997, the Company received additional 510(k) clearance for certain
enhancements to its Biojector 2000 system. On September 30, 1997, the Company
entered into a joint venture agreement with Elan for the development and
commercialization of certain blood glucose monitoring technology which the
Company licensed from Elan (see Note 2 regarding "Accounting Policies-Long-
term Debt and Development Agreement"). Such technology is also subject to
government regulation in the U.S. by the FDA and abroad by various agencies.
The Company's revenues to date have been derived primarily from licensing
and technology fees for the jet injection technology and more recently from
sales of the Biojector 2000 system and Biojector syringes to public health
clinics, flu immunization clinics and physicians offices. Future revenues
will depend upon acceptance and use by healthcare providers of the Company's
jet injection technology and successful development, regulatory approval and
market acceptance of its blood glucose monitoring technology. Uncertainties
over government regulation and competition in the healthcare industry may
impact healthcare provider expenditures and third party payer reimbursements
and, accordingly, the Company cannot predict what impact, if any, subsequent
healthcare reforms and industry trends might have on its business. In the
future the Company is likely to require substantial additional financing.
Failure to obtain such financing on favorable terms could adversely affect
the Company's business.
2. ACCOUNTING POLICIES:
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined in a
manner which approximates the first-in, first-out (FIFO) method. Costs
utilized for inventory valuation purposes include labor, materials and
manufacturing overhead. Net inventories consist of the following:
December 31, March 31,
1997 1997
---------- ----------
Raw Materials $ 505,531 $ 815,868
Work in Process 9,763 9,763
Finished Goods 1,056,100 880,825
---------- ----------
$1,571,394 $1,706,456
========== ==========
Page 7
LONG-TERM DEBT AND DEVELOPMENT AGREEMENT
On September 30, 1997, the Company signed a binding letter agreement
(the "Agreement") with Elan Corporation, plc ("Elan") the goals of which
included the development and commercialization of Elan's blood glucose
monitoring technology and a collaborative arrangement to further develop the
Company's needle-free technology. Among various terms, all of which were
determined based on arms-length negotiation, the Agreement provides for:
- - Investment by Elan of $3 million in Bioject in exchange for approximately
2.7 million shares of common stock and a five year warrant to purchase 1.75
million shares of common stock at $2.50 per share.
- - Formation of JV which is owned 80.1% by Bioject and 19.9% by Elan to further
develop and commercialize the blood glucose monitoring technology.
- - Payment of a $15 million up front fee and substantial future milestone
payments and royalties on net sales in exchange for North American rights to
Elan's glucose monitoring technology.
- - The loan of $12.015 million to Bioject on a long-term promissory note bearing
interest at 9% per annum through December 31, 1997 and 12% thereafter for the
purpose of Bioject's investment in the new subsidiary's common stock. The
interest is payable quarterly commencing April 1998, and if not exchanged
for preferred stock the Company or otherwise prepaid, the note is due
October 15, 2001.
- - The investment by Elan of $2.985 million in JV's common stock.
- - The commitment by Elan to further develop the blood glucose monitoring
technology until the earlier of human clinical trials, April 1, 1998 or
$2.5 million is expended by Elan.
- - The submission to Bioject's shareholders of a proposal to approve the
exchange of the long-term promissory note for $10 million plus accrued
interest of the Company's Series A Convertible Preferred Stock and $2.105
million of Series B Convertible Preferred Stock, with Series the A
Convertible Preferred Stock accruing dividends at the rate of 9% per annum
(compounded semi-annually) and the Series B Convertible Preferred Stock
accruing no mandatory dividends.
- - The submission to Bioject's shareholders of a proposal to approve the
issuance of up to $4 million of Bioject's Series C Convertible Preferred
Stock to Elan to provide Bioject with funds to contribute toward JV's
additional development funding needs.
- - The agreement by Elan to extend the license on a worldwide basis if the
shareholders approve the exchange of the $12.015 million promissory note
for convertible preferred stock.
- - The agreement by Elan to provide a grant of $500,000 toward development of
Bioject's needle-free technology in a pre-filled application.
Final closing agreements were signed among the Company, Elan and the Company's
new subsidiary on October 15, 1997. On that date the $3 million investment
in the Company was made by Elan and approximately 2.7 million shares of common
stock and a warrant to purchase 1.75 million shares at $2.50 per share were
issued. Elan loaned Bioject $12.015 million which Bioject transferred to the
new subsidiary in exchange for 801,000 shares of the subsidiary's common
stock. Elan invested $2.985 million in the new subsidiary in exchange
for 199,000 shares of the subsidiary's common stock. The new subsidiary
paid $15 million to Elan as its initial payment on the licensing agreement.
The Company believes that the license is likely to run for most of the useful
life of the products that may be commercialized under it. The license itself
is contingent, on a country-by-country basis, on JV's diligently seeking and
obtaining regulatory marketing approval for licensed products and on JV's
timely commercial launch of the licensed products in countries where such
approval has been obtained. In addition, in the event that a significant
percentage of JV's equity is acquired by any one of a number of specified
companies identified by Elan as actual or potential competitors, or any other
entity to which Elan does not consent (which consent shall not be unreasonably
withheld in the case of such other, unspecified companies), the license may be
immediately terminated at the option of Elan.
As of September 30, 1997, the Company recorded an expense of $15 million
related to acquired in-process research and development expenditures. Such
expense relates to the blood glucose monitoring technology that has not yet
established technological feasibility and at present has no alternate future
uses. Accounting rules require that such costs be charged to expense as
incurred. The Company believes that these research and development efforts
will result in commercially viable products within the next three to four
years at an additional cost to the Company of at least $10 million, exclusive
of additional milestone payments due to Elan.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's expenses to
conform to the current year's presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
3. SEGMENT INFORMATION
The Company has adopted the new segment reporting requirements of SFAS No.131,
Disclosures about Segments of an Enterprise and Related Information. At
present, the Company has two reportable segments which offer different products
and are managed separately because each business requires different technology
and marketing strategies. The following sets forth the unaudited results of
operations of the Company for its two segments of operations - needle-free
injection technology and blood glucose monitoring technology (in thousands of
$):
Qtr. Ended Nine Months Ended
December 31, December 31,
------------- ----------------
1997 1996 1997 1996
----- ----- ----- -----
[S] [C] [C] [C] [C]
NEEDLE-FREE INJECTION
RESULTS OF OPERATIONS:
REVENUES $438 $406 $1,676 $1,511
---- ---- ------ ------
EXPENSES:
Manufacturing 401 325 1,453 1,369
R&D 193 410 665 1,243
Selling, general
& administrative 873 768 2,605 2,340
Acquired R&D - - - -
Interest expense 225 - 225 -
Other (income) (32) (14) (64) (64)
---- ----- ------ ------
(1,222) (1,083) (3,208) (3,377)
MINORITY
INTEREST ALLOCATION - - - -
------ ------- ------- ------
NET LOSS $(1,222) $(1,082) $(3,208) $(3,377)
====== ====== ======= =======
Qtr. Ended Nine Months Ended
December 31, December 31,
------------------- -------------------
1997 1996 1997 1996
----- ------ ----- -----
[S] [C] [C] [C] [C]
GLUCOSE MONITORING
RESULTS OF OPERATIONS:
REVENUES $ - $ - $ - $ -
------- ------- ------ ------
EXPENSES:
Manufacturing - - - -
R&D - - - -
Selling, general
& administrative 28 - 28 -
Acquired R&D - - 15,000 -
Interest expense
Other (income) - - - -
------- ------ -------- -------
(28) - (15,028) -
MINORITY
INTEREST ALLOCATION - - 2,985 -
------- ------- -------- --------
NET LOSS $ (28) $ - $(12,043) $ -
======== ======= ======== ========
At December 31, 1997, no significant assets exist related to the blood glucose
monitoring technology other than the acquired in-process research and
development which, as discussed in Note 2 above, was required to be written
off upon acquisition. Accordingly, the accompanying consolidated financial
statements effectively represent the assets of the needle-free injection
business segment. In the future, certain proceeds from the sale of equity or
issuance of debt by JV may be restricted to JV operations only. To the extent
that they meet certain reporting requirements, the separate assets, liabilities
and equity of the parent and its subsidiary will be appropriately disclosed.
4. PRIVATE PLACEMENTS:
In June and July 1997, the Company received net proceeds of $1.225 million in
a private placement of 2.9 million shares of common stock and five year
warrants to purchase 1.45 million shares of common stock at $0.71 per share.
Of the total net proceeds, $750,000 was received and recorded in the financial
statements as of June 30, 1997. The balance of $475,000 was received in July
1997 and was recorded in the financial statements for the quarter ended
September 30, 1997.
During the quarter ended December 31, 1997, the Company received net proceeds
of $2.8 million from Elan in a private placement in exchange for approximately
2.7 million shares of common stock and a five year warrant to purchase 1.75
million shares of common stock at $2.50 per share.
Common Stock activity for the nine months ended December 31, 1997 is
summarized as follows:
Shares Amount
------ ------
[S] [C] [C]
Balances,
March 31, 1997 19,540,413 $40,035,736
Private Placement
of common stock in
June/July 1997 2,906,977 1,225,000
Common stock issued for
services 30,116 20,705
Common stock issued upon
exercise of stock options 120,932 142,828
Common stock issued in private
placement in October 1997 2,727,273 2,800,000
Common stock issued pursuant
to 401(k) matching program 42,631 31,006
Recognition of warrant expense
for services - 31,230
---------- -----------
Balances, December 31, 1997 25,368,342 $44,286,505
========== ===========
Warrant activity for the nine months ended December 31, 1997 is
summarized as follows:
Shares Exercise Amount
Price
--------- ---------- ---------
[S] [C] [C] [C]
Balances,
March 31, 1997,
expiring February 1998
To December 2001 6,030,585 $.82-2.00 $8,438,319
Issued in private
placement in June/July
1997 expiring June 2002 1,453,488 .71 1,031,976
Issued to placement agent,
expiring June 2002 25,000 .50 12,500
Issued for private placement
guarantee, expiring
September 2002 350,000 1.00-1.10 365,000
Issued for fiscal 1998
investor relations
consulting services,
expiring September 2002 50,000 1.10 55,000
Placement agent warrant,
subject to shareholder
approval, expiring October
2002 100,000 .85 85,000
Issued in private placement
in October 1997, expiring
October 2002 1,750,000 2.50 4,375,000
--------- --------- -----------
Balances, December 31, 1997 9,759,073 $.50-2.50 $14,362,795
========= ========= ===========
All of the warrants are currently exercisable except for the placement
agent warrants which are subject to shareholder approval and the investor
relations consulting warrants which are not exercisable until April 1, 1998.
In addition to the above warrants, the Company has committed to issue
certain warrants for services (see Note 5).
5. CONSULTING CONTRACT
During the quarter ended September 30, 1997, the Company engaged the
consulting services of Mr. Robert Gonnelli for the purposes of overseeing the
Company's investor relations functions, providing input to sales and
marketing, advising Bioject's Board of Directors on various matters,
identifying new manufacturing software and providing strategic and financial
advice. For his services, Mr. Gonnelli will receive compensation as follows:
a. Five year warrants to purchase 50,000 shares of Bioject common stock at
$1.10 per share granted at the end of each of two fiscal years for his
investor relations consulting services.
b. At the end of fiscal 1998 and 1999, a five year warrant to purchase 100,000
and 50,000 shares, respectively, of common stock at $1.10 per share
prorated based on product sales achieved to the applicable fiscal year's
sales budget, for his sales and marketing advice.
c. Effective August 1, 1997, the amount of $5,000 per month plus expenses for
all other consulting services. This amount was increased to $8,500
per month plus expenses beginning January 1, 1998.
Commencing October 1997, the Company is recording a non-cash charge to
operating results as the result of the issuance of the warrants to Mr.
Gonnelli. The warrants have been valued using the Black-Scholes model
and resulted in a non-cash charge to selling, general and administrative
expense for the quarter ended December 31, 1997 of $31,000. The consulting
fees are charged to expense as due. The agreement is cancelable at either
party's option upon 30 days written notice. If Bioject terminates the
agreement without cause, all accrued and unpaid fees and
expenses are due and all unearned warrants are immediately issuable.
The Company also granted to Mr. Gonnelli a five year warrant to
purchase 200,000 shares of common stock at $1.00 per share and 150,000 shares
of common stock at $1.10 per share for his guarantee of back-up financing
should Elan not have completed its $3 million equity investment. The effect
of this guarantee has been reflected as an offset of proceeds from the Elan
investment in the Company's common stock.
On October 22, 1997, Mr. Gonnelli was elected Chairman of Bioject's joint
venture subsidiary Board of Directors. Presently, he receives no fees
for such services but will participate in any future subsidiary director
compensation programs including any subsidiary stock incentive plans.
6. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying, unaudited consolidated financial statements do not
include all information and footnote disclosures normally included in an
audited financial statement. However, in the opinion of management, all
adjustments (which include only normal, recurring adjustments) necessary to
present fairly the financial position, cash flows, and results of operations
have been made. It is suggested that these statements be read in conjunction
with the financial statements included in the Company's Annual Report on Form
10-K for the year ended March 31, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company has been focused on expanding sales of its Biojector 2000
needle-free injection management system to the public health and flu
immunization markets. It has also been focusing on raising additional capital
and on expanding its business opportunities with large pharmaceutical company
strategic partners.
On September 30, 1997, the Company signed a binding letter agreement (the
"Agreement") with Elan Corporation, plc ("Elan") the goals of which
included commercialization of Elan's blood glucose monitoring technology and
a collaborative arrangement to further develop the Company's needle-free
technology and the development. Among various terms, the Agreement provides
for:
- - Investment by Elan of $3 million in Bioject in exchange for approximately
2.7 million shares of common stock and a five year warrant to purchase 1.75
million common shares at $2.50 per share.
- - Formation of JV which is owned 80.1% by Bioject and 19.9% by
Elan to further develop and commercialize the blood glucose monitoring
technology.
- - Payment by JV of a $15 million up front fee and substantial future
milestone payments and royalties on net sales in exchange for North American
rights to Elan's glucose monitoring technology.
- - The loan of $12.015 million to Bioject on a long-term promissory note bearing
interest at 9% per annum through December 31, 1997 and 12% thereafter for the
purpose of Bioject's investment in the new subsidiary's common stock. The
interest is payable quarterly commencing April 1998, and if not exchanged
for preferred stock in the Company or otherwise prepaid, the note is due
October 15, 2001.
- - The investment by Elan of $2.985 million in JV's common stock.
- - The commitment by Elan to further develop the blood glucose monitoring
technology until the earlier of human clinical trials, April 1, 1998 or
$2.5 million is expended by Elan.
- - The submission to Bioject's shareholders of a proposal to approve the
exchange of the long-term promissory note for $10 million plus accrued
interest of the Company's Series A Convertible Preferred Stock and $2.105
million of Series B Convertible Preferred Stock, with the Series A
Convertible Preferred Stock accruing dividends at the rate of 9% per
annum (compounded semi-annually) and the Series B Convertible Preferred
Stock accruing no mandatory dividends.
- - The submission to Bioject's shareholders of a proposal to approve the
issuance of up to $4 million of Bioject's Series C Convertible Preferred
Stock or other similar convertible preferred stock to Elan to provide
Bioject with funds to contribute toward JV's additional development funding
needs.
- - The agreement by Elan to extend the license on a worldwide basis if the
shareholders approve the exchange of the $12.015 million promissory note
for convertible preferred stock.
- - The agreement by Elan to provide a grant of $500,000 toward development of
Bioject's needle-free technology in a pre-filled application.
Final closing agreements were signed among the Company, Elan and the Company's
new subsidiary on October 15, 1997. On that date the $3 million investment in
the Company was made by Elan and approximately 2.7 million shares of common
stock and a warrant to purchase 1.75 million shares at $2.50 per share were
issued. Elan loaned Bioject $12.015 million which Bioject transferred to the
new subsidiary in exchange for 801,000 shares of the subsidiary's common
stock. Elan invested $2.985 million in the new subsidiary in exchange for
199,000 shares of the subsidiary's common stock. The new subsidiary paid
$15 million to Elan as its initial payment on the licensing agreement.
In addition, JV is required under the license to pay Elan an
aggregate of $15.5 million in further royalties as the following
milestones are achieved: $1 million within 10 days of the
commencement of pivotal clinical trials; $1.5 within 120 days of
the successful completion of the clinical trials; $3 million
within 10 days of the initial regulatory filing to obtain
marketing approval; and $10 million within 120 days of the grant
of U.S. marketing approval for the first product. If the
Company's shareholders approve the two proposals described above
at an upcoming special meeting of shareholders scheduled February 20, 1998,
the territory of the license would be expanded to be worldwide, and the
royalty payment called for upon the grant of US marketing approval will
be split into two payments of $5 million each, one to be paid
upon the grant of such US marketing approval and the other to be
paid upon the grant of marketing approval in any other of certain
major nations. Additionally, JV will be required under the
license to pay Elan a continuing royalty equal to a percentage of
the net revenues from sublicenses of the licensed technology or
from the sale by JV or its sublicensees of products covered by
the licensed patents or that incorporate or apply the licensed
know-how.
The term of the license is 15 years, or on a country by country basis for
the life of the last patent to expire, whichever is longer. The license itself
is contingent, on a country-by-country basis, on JV's diligently seeking and
obtaining regulatory marketing approval for licensed products and on JV's
timely commercial launch of the licensed products in countries where such
approval has been obtained. In addition, in the event that 15%
of JV's equity is acquired by any one of a number of specified
companies identified by Elan as actual or potential competitors, or any other
entity to which Elan does not consent (which consent shall not be unreasonably
withheld in the case of such other, unspecified companies), the license may
be immediately terminated at the option of Elan.
As of September 30, 1997, the Company recorded an expense of $15 million
related to acquired in-process research and development expenditures. Such
expense relates to the blood glucose monitoring technology that has not yet
established technological feasibility and at present has no alternative
future uses. Accounting rules require that such costs be charged to expense
as incurred. The Company believes that these research and development efforts
will result in commercially viable products within the next three to four
years at an additional cost to the Company of at least $10 million, exclusive
of additional milestone payments due to Elan. See "Forward-looking
Statements". Such technology is also subject to government regulation in the
U.S. by the FDA and abroad by various agencies.
In connection with the Elan investment, the Company engaged the consulting
services of Raphael, LLC, to provide the initial introduction to Elan and
advice regarding the transaction. For its services, Raphael, LLC, will
receive a fee of $150,000 on January 2, 1998 and, if shareholders approve at
a special meeting, a five year warrant to purchase 100,000 shares of the
Company's common stock at $.85 per share. If shareholders do not approve
the issuance of the warrant, Raphael, LLC, will receive an additional cash
payment totaling $75,000, payable immediately following a special
shareholders meeting scheduled February 20, 1998.
During the quarter ended September 30, 1997, the Company engaged the
consulting services of Mr. Robert Gonnelli for the purposes of overseeing the
Company's investor relations functions, providing input to sales and
marketing, advising Bioject's Board of Directors on various matters,
identifying new manufacturing software and providing strategic and financial
advice. For his services, Mr. Gonnelli will receive compensation as follows:
a. Five year warrants to purchase 50,000 shares of Bioject common stock at
$1.10 per share granted at the end of each of two fiscal years for his
investor relations consulting services.
b. At the end of fiscal 1998 and 1999, a five year warrant to purchase 100,000
and 50,000 shares, respectively, of common stock at $1.10 per share
prorated based on product sales achieved to the applicable fiscal year's
sales budget, for his sales and marketing advice.
c. Effective August 1, 1997, the amount of $5,000 per month plus expenses for
all other consulting services. This amount was increased to $8,500
per month plus expenses beginning January 1, 1998.
Commencing October 1997, the Company is recording a non-cash charge to
operating results as the result of the issuance of the warrants to Mr.
Gonnelli. The warrants have been valued using the Black-Scholes model based
on an estimated life of 2.5 years and resulted in a charge to selling,
general and administrative expense for the quarter ended December 31, 1997 of
$31,000. The consulting fees are charged to expense as due. The agreement
is cancelable at either party's option upon 30 days written notice. If
Bioject terminates the agreement without cause, all accrued and unpaid fees
and expenses are due and all unearned warrants are immediately issuable.
The Company also granted to Mr. Gonnelli a five year warrant to
purchase 200,000 shares of common stock at $1.00 per share and 150,000 shares
of common stock at $1.10 per share for his guarantee of back-up financing
should Elan not have completed its $3 million equity investment. The effect
of this guarantee has been reflected as an offset of proceeds from the Elan
investment in the Company's common stock.
On October 22, 1997, Mr. Gonnelli was elected Chairman of Bioject's joint
venture subsidiary Board of Directors. Presently, he receives no fees
for such services but will participate in any future subsidiary director
compensation programs including any subsidiary stock incentive plans.
Commencing September 1, 1997, the Company also engaged the services of Mr.
Jim Weersing for his financial and operating advice. Mr. Weersing was paid
fees of $10,000 per month plus expenses. The agreement was cancelled effective
December 31, 1997.
The Company's revenues to date have not been sufficient to cover
operating expenses. The Company believes that as its jet injection
products achieve market acceptance and the volume of sales increases and if
its product costs are further reduced, its costs of goods with respect to the
jet injection products as a percentage of sales will decrease and the
Company will realize positive margins; however the Company
now faces substantial research and development costs of the glucose monitoring
technology. Since no revenue from glucose monitoring products is expected
for a number of years, the Company expects larger losses unless sales of the
Biojector 2000 increase substantially. (See "Forward Looking Statements")
The level of sales required to generate net income will be affected by a
number of factors including the pricing of the Company's products, its
ability to attain efficiencies that can be attained through volume and
automated manufacturing, and the impact of inflation on the Company's
manufacturing and other operating costs. There can be no assurance that
the Company will be able to successfully implement additional manufacturing
cost reductions or sell its jet injection products at prices or in volumes
sufficient to achieve profitability or offset increases in the Company's
research and development expenses or other costs should they occur.
Revenues and results of operations have fluctuated and can be expected to
continue to fluctuate significantly from quarter to quarter and from year to
year. Various factors may affect quarterly and yearly operating results
including (i) timing of new product introductions by the Company and its
competition, (ii) the costs of blood glucose monitoring development and
commercialization, (iii) length of time to close product sales, (iv) customer
budget cycles, (v) implementation of cost reduction measures,
(vi) uncertainties and changes in purchasing due to third party payor policies
and proposals relating to national healthcare reform, and (vii) the timing and
amount of payments under technology development agreements.
During fiscal 1998, the Company will continue to focus its efforts on
expanding sales, reducing the cost of its products, developing an injector
for Hoffmann-La Roche, pursuing additional alliances with
pharmaceutical companies, developing the blood glucose monitoring technology
and conserving its fiscal resources. The Company does not expect to report
net income from operations in fiscal 1998. (See Forward Looking Statements).
RESULTS OF OPERATIONS
QUARTER ENDED DECEMBER 31,1997 COMPARED TO QUARTER ENDED DECEMBER 31,1996.
Product sales decreased from $326,000 in the third quarter of fiscal 1997 to
$313,000 in the third quarter of fiscal 1998 due to smaller flu season
reorders. License and technology fees increased from $80,000 in the
third quarter of fiscal 1997 to $125,000 in the third quarter of fiscal 1998
due to the fluctuation in timing of strategic partner development payments
and expenses.
Manufacturing expense increased from the third quarter of fiscal 1997 to
the third quarter of fiscal 1998 by $76,000 due to lower production and,
therefore, lower overhead absorption. Research and development expenses
declined from $410,000 in the third quarter of fiscal 1997 to $193,000 in the
third quarter of fiscal 1998 due to completion of the self-injector project.
Selling, general and administrative expense increased from $768,000 in the
third quarter of fiscal 1997 compared to $901,000 in the third quarter of
fiscal 1998 due primarily to increases in consulting fees and new joint
venture administrative expenses.
Interest expense increased to $225,000 in the third quarter of the
current year due to the debt due to Elan of $12.015 million. There was no
corresponding interest expense in the third quarter of the prior year.
Other income consists of earnings on available cash balances and
fluctuates based on available cash balances.
NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1996. Product revenues for the nine months ended December 31, 1997 increased
to $1.3 million from $845,000 in the comparable period in the prior year
due to greater flu season and public health clinic sales. Licensing and
technology fees decreased due to completion of the self-injector project.
Manufacturing costs increased from $1.4 million in the first nine months of
the prior year to $1.5 million in the comparable period in the current year.
This increase was due to greater product sales offset by decreases in
manufacturing overhead and direct labor and materials costs. Research and
product development expenses decreased approximately $578,000 due to completion
of the self-injector project. Selling, general and administrative costs
increased approximately $294,000 due to increases in consulting and travel
expenses and greater total commissions on higher product sales.
Interest expense increased to $225,000 in the first nine months of the
current year due to the debt due to Elan of $12.015 million. There was no
corresponding interest expense in the first nine months of the prior year.
Other income consists of earnings on available cash balances and fluctuates
based on available cash balances.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in 1985, the Company has financed its operations,
working capital needs and capital expenditures primarily from private
placements of securities, exercises of stock options, proceeds received from
its initial public offering in 1986, proceeds received from a public offering
of Common Stock in November 1993, licensing and technology revenues and more
recently from sales of products and private placements of common stock
completed in fiscal 1996, 1997 and 1998. Net proceeds received upon
issuance of securities from inception through December 31, 1997 totaled
approximately $44.0 million.
Cash, cash equivalents and marketable securities totaled, $3.0 million
at December 31, 1997 and $2.1 million at March 31, 1997. The increase
resulted primarily from net of proceeds received in the private placements in
June and July 1997 and October 1997, offset by operating losses and reductions
in certain short term liabilities.
Inventories decreased from $1.7 million at March 31, 1997 to $1.6 million
at December 31, 1997, due to sales of the Company's syringe products exceeding
manufacturing production.
In connection with the Elan transaction, the Company incurred long-term
debt of $12.015 million. This debt bears interest at 9% per annum until
December 31, 1997 and 12% per annum thereafter, with interest payable
quarterly commencing April 1998 and unpaid principal and interest due October
15, 2001. The debt was incurred to permit the Company to fund its share of
the license payment to Elan. Under terms of the agreement with Elan, if the
Company's shareholders approve, the debt plus accrued interest will be
exchanged for Series A and Series B convertible preferred stock of Bioject.
Of the total outstanding principal and accrued interest on the note at the date
of exchange, $10 million plus accrued interest on the note will be exchanged
for Series A Convertible Preferred Stock at $15.00 per share. The Series A
Convertible Preferred Stock will accrue dividends at the rate of 9% per annum
(compounded semi-annually). The remaining $2.015 million outstanding under
the note will be exchanged for Series B Convertible Preferred Stock at $15.00
per share, which will not accrue dividends.
JV will incur significant expenses in connection with the research and
development of the glucose monitoring technology as well as substantial
milestone payments to Elan upon the occurrence of certain events.
In addition, JV is required under the license to pay Elan an
aggregate of $15.5 million in further royalties as the following
milestones are achieved: $1 million within 10 days of the
commencement of pivotal clinical trials; $1.5 within 120 days of
the successful completion of the clinical trials; $3 million
within 10 days of the initial regulatory filing to obtain
marketing approval; and $10 million within 120 days of the grant
of U.S. marketing approval for the first product. If the
Company's shareholders approve the two proposals described above
at an upcoming Special Meeting of Shareholders, the territory of
the license would be expanded to be worldwide, and the royalty
payment called for upon the grant of US marketing approval will
be split into two payments of $5 million each, one to be paid
upon the grant of such US marketing approval and the other to be
paid upon the grant of marketing approval in any other of certain
major nations. Additionally, JV will be required under the
license to pay Elan a continuing royalty equal to a percentage of
the net revenues from sublicenses of the licensed technology or
from the sale by JV or its sublicensees of products covered by
the licensed patents or that incorporate or apply the licensed
know-how. Elan has committed resources of up to $2.5 million of
certain research and development expenses. If the shareholders
approve, the Company may issue to Elan up to $4 million of Series C
convertible preferred stock or other similar convertible preferred
stock to assist Bioject in funding a portion of the development costs
of the glucose monitoring technology. Unless further financing is provided
by Bioject or Elan, additional financing will be the responsibility of JV
which may be required to raise such financing through debt or equity
issuances. There can be no assurance that Elan or Bioject will provide such
financing to JV or that JV will be able to raise additional financing on
favorable terms or at all. A special meeting of the Company's shareholders
has been scheduled for February 20, 1998 to approve the exchange of the
long-term debt for the Series A and Series B Convertible Preferred Stock
and to approve the issuance of the Series C Convertible Preferred Stock or
other similar convertible preferred stock in connection with these
transactions.
The effect of the transactions with Elan has resulted in the Company being
in a deficit equity position at December 31, 1997. Although the Company
believes that it has sufficient cash and other resources for current
operations through fiscal year end and the second quarter of fiscal 1999,
under rules of the National Association of Security Dealers Automatic
Quotation System (NASDAQ), the Company must maintain, in addition to other
requirements, a net tangible assets position of $4.0 million or more in
order to continue to be listed on the exchange. If the Company's
shareholders approve the exchange of the $12 million debt for preferred
stock, the Company will then be in compliance with the NASDAQ's tangible
assets requirement.
The Company believes that its current cash position and expected advances
from Elan for JV operations combined with revenues and other cash receipts
will be adequate to fund the Company's operations through fiscal 1998 and the
second quarter of fiscal 1999. (See "Forward Looking
Statements"). Thereafter, the Company will require additional financing.
However, unforeseen costs and expenses or lower than anticipated cash
receipts from product sales or research and development activities could
accelerate the financing requirement. The Company has been successful in
raising additional financing in the past and believes that sufficient funds
will be available to fund future operations. (See "Forward Looking
Statements"). However, there can be no assurance that such financing will be
available on favorable terms or at all. Failure to obtain additional financing
when required would significantly restrict the Company's operations and
ability to continue product development, and materially adversely affect the
Company's business. The Company has no banking line of credit or other
established source of borrowing.
FORWARD LOOKING STATEMENTS
Certain statements in this report constitute "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company, or industry results, to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such risks, uncertainties and factors
include: the uncertainty market acceptance of the Company's jet injection
products, the Company's ability to develop the glucose monitoring products
presently contemplated, the possibility of delays or unanticipated costs and
expenses in the development of the glucose monitoring technology, the
availability of adequate additional financing, the ownership and protection of
proprietary technology relating to the glucose monitoring technology, the
possibilities that competing monitoring technology could be developed by others
and other risks are described in more detail in the Company's Annual Report
on Form 10-K and other S.E.C. filings. The Company assumes no obligation to
update forward-looking statements if circumstances change.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None during the quarter ended December 31, 1997.
Item 2. Changes in Securities
On October 15, 1997, the Company completed a private placement to
Elan International Services, Ltd. of 2,727,273 shares of the
Company's Common Stock and a warrant to purchase an additional
1,750,000 shares of the Company's Common Stock. The warrant,
which is exercisable in whole or from time to time in part,
expires five years from the date of issuance, and has an exercise
price of $2.50 per share. Aggregate proceeds to the Company before
expenses totaled $3 million. The securities have been issued
pursuant to an exemption from registration under Section 4(2) of
the Securities Act. In relying upon such exemption (i) the Company
did not engage in any "general solicitation", (ii) the purchaser
represented and the Company reasonably believed that the
purchaser had such knowledge and experience in financial and
business matters such that it was capable of evaluating the
merits and risks of the prospective investment and was able to
bear the economic risk of such investment, (iii) the purchaser
was provided access to all necessary and adequate information to
enable the purchaser to evaluate the financial risk inherent in
making an investment, (iv) the offer was part of an agreement to
establish a joint venture with the purchaser and as such was made
only to the purchaser and (v) the purchaser represented that it
was acquiring the shares for itself and not for distribution.
Item 3. Defaults Upon Senior Securities
None during the quarter ended December 31, 1997.
Item 4. Submission of Matters to a Vote of Security Holders
None during the quarter ended December 31, 1997.
Item 5. Other Information
None during the quarter ended December 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS: 27.1 Financial Data Schedule
4.3 Bioject Medical Technologies Inc. 1992 Stock
Incentive Plan, as amended through April 3, 1997
REPORTS ON FORM 8-K:
Form 8-K filed on October 1, 1997 for the purpose of filing as
an exhibit the press release announcing the agreement between
Elan and the Company.
Form 8-K filed on October 3, 1997 regarding a description of the
agreement between Elan and Bioject and filing the agreement as
Exhibit 10.39, for which confidential treatment was granted.
Form 8-K filed on October 21, 1997 regarding the closing of the
transactions contemplated by the agreement between Elan and
Bioject.
Form 8-K filed on October 31, 1997 filing Exhibits 10.41
(Securities Purchase Agreement), 10.42 (Registration Rights
Agreement) and 10.43 (Series K Common Stock Purchase Warrant).
Form 8-K filed on November 3, 1997 regarding the transactions
contemplated by the agreement between Elan and Bioject and
filing Exhibit 10.40 (License Agreement with Elan), Exhibit 10.44
(Promissory Note), Exhibit 10.45 (JV Subscription and Stockholders
Agreement) and Exhibit 10.46 (JV Registration Rights Agreement).
Confidential Treatment was requested with regard to portions of
Exhibits 10.40 and 10.45. This Form 8-K was amended on Form 8-K/A
filed on November 14, 1997 which filed Exhibit 10.47 (Proposed Terms
of Series A, B and C Preferred Stock). This Form 8-K was amended
on Form 8-K/A (Amendment No. 2) filed on January 22, 1998 which
refiled Exhibit 10.40 and Exhibit 10.45. Confidential Treatment
was granted with regard to portions of Exhibit 10.40.
Form 8-K/A (Amendment No. 1) filed on January 22, 1998 amending
Form 8-K originally filed on January 14, 1997 regarding a private
placement in December 1996.
Form 8-K filed on January 22, 1998 regarding amendments to
Exhibit 10.40, Exhibit 10.41 and Exhibit 10.45 and filing such
amendments as Exhibit 10.40.1, Exhibit 10.41.1 and Exhibit
10.45.1.
SIGNATURE
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.
BIOJECT MEDICAL TECHNOLOGIES INC.
(Registrant)
Date: February 13, 1998 /S/ James C. O'Shea
---------------------------------
James C. O'Shea
Chairman, Chief Executive Officer
and President
/S/ Peggy J. Miller
---------------------------------
Peggy J. Miller
Vice President and Chief Financial Officer
[ARTICLE] 5
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF OPERATIONS
FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
[MULTIPLIER] 1
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] MAR-31-1998
[PERIOD-END] DEC-31-1997
[CASH] 1,001,990
[SECURITIES] 1,967,749
[RECEIVABLES] 513,163
[ALLOWANCES] 0
[INVENTORY] 1,571,394
[CURRENT-ASSETS] 5,108,827
[PP&E] 4,428,694
[DEPRECIATION] 1,830,090
[TOTAL-ASSETS] 8,039,490
[CURRENT-LIABILITIES] 1,260,191
[BONDS] 12,015,000
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 44,286,505
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 8,039,490
[SALES] 1,300,620
[TOTAL-REVENUES] 1,675,620
[CGS] 1,452,684
[TOTAL-COSTS] 1,452,684
[OTHER-EXPENSES] 15,474,950
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] (15,252,014)
[INCOME-TAX] 0
[INCOME-CONTINUING] (15,252,014)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (15,252,014)
[EPS-PRIMARY] (.68)
[EPS-DILUTED] (.68)