1
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 MARCH 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_____________to
Commission file number 0-24128
BIO-PLEXUS, INC.
(Exact name of Registrant as specified in its Charter)
Connecticut 06-1211921
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
129 Reservoir Road, Vernon Connecticut 06066
(Address of principal executive offices including zip code)
(860) 870-6112
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No___.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Class of Common Stock as of May 5, 2000
Common Stock, no par value 14,541,628
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BIO-PLEXUS, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets at March 31, 2000
(unaudited) and December 31, 1999 1
Condensed Statements of Operations (unaudited) for the three months
ended March 31, 2000 and 1999 2
Condensed Statements of Cash Flows (unaudited) for the three months
ended March 31, 2000 and 1999 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 2. Changes in Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 16
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BIO-PLEXUS, INC.
CONDENSED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,219,000 $ 867,000
Accounts receivable 408,000 908,000
Inventories:
Raw materials 469,000 621,000
Work-in-process 1,107,000 474,000
Finished goods 1,129,000 1,167,000
------------ ------------
2,705,000 2,262,000
------------ ------------
Other current assets 194,000 173,000
------------ ------------
Total current assets 4,526,000 4,210,000
------------ ------------
Fixed assets, net 4,514,000 4,384,000
Deferred debt financing expenses 768,000 465,000
Patents, net of amortization 340,000 335,000
Other assets 253,000 253,000
------------ ------------
$ 10,401,000 $ 9,647,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 716,000 $ 899,000
Note payable 4,235,000 1,340,000
Accounts payable and accrued expenses 1,281,000 786,000
Accrued interest payable 233,000 55,000
Accrued vacation 224,000 202,000
Other accrued employee costs 142,000 226,000
------------ ------------
Total current liabilities 6,831,000 3,508,000
------------ ------------
Long-term debt, net 1,800,000 2,262,000
Redeemable common stock warrants 149,000 149,000
Commitments and contingencies (Note 4) -- --
Shareholders' equity:
Convertible preferred stock, no par value, 3,000,000
authorized, no shares issued and outstanding -- --
Common stock, no par value, 25,000,000 authorized,
14,389,979 and 14,083,807 shares issued and outstanding 72,565,000 71,833,000
Accumulated deficit (70,944,000) (68,105,000)
------------ ------------
Total shareholders' equity 1,621,000 3,728,000
------------ ------------
$ 10,401,000 $ 9,647,000
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
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BIO-PLEXUS, INC
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED MARCH 31,
--------------------------------
2000 1999
------------ ------------
Revenue:
Product $ 1,408,000 $ 1,169,000
Services 34,000 1,145,000
Licensing fees (Note 6) 100,000 --
------------ ------------
Total revenue 1,542,000 2,314,000
------------ ------------
Operating costs and expenses:
Product 748,000 830,000
Services 29,000 17,000
Research and development 323,000 304,000
Selling, general and administrative 1,574,000 1,104,000
------------ ------------
Total operating costs and expenses 2,674,000 2,255,000
------------ ------------
Operating (loss) profit (1,132,000) 59,000
Financing expenses:
Amortization of deferred debt financing 61,000 2,000
Interest expense 1,682,000 88,000
Other income (36,000) (34,000)
------------ ------------
Total financing expenses 1,707,000 56,000
------------ ------------
Net (loss) profit $ (2,839,000) $ 3,000
============ ============
Net loss per share of common stock:
Basic and diluted $ (0.20) $ 0.00
============ ============
Weighted average common shares outstanding (Note 2):
Basic 14,213,151 13,289,361
Diluted 14,213,151 13,322,396
The accompanying notes are an integral part of these condensed financial
statements.
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BIO-PLEXUS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
------------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(2,839,000) $ 3,000
Adjustments to reconcile net loss to cash used
by operating activities:
Depreciation and amortization 131,000 143,000
Amortization of deferred debt financing expenses 61,000 2,000
Amortization of debt discount 1,444,000 4,000
Decrease (increase) in assets:
Accounts receivable 500,000 202,000
Inventories (443,000) 227,000
Other current assets (21,000) --
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 495,000 26,000
Accrued interest payable 178,000 (16,000)
Accrued vacation and other accrued employee costs (62,000) (78,000)
Accrued product replacement costs -- (80,000)
Decrease in deferred revenue (Note 6) -- (875,000)
Other 7,000 42,000
----------- -----------
Net cash used in operating activities (549,000) (400,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets (255,000) --
Long-term investments (Note 3) -- 627,000
Cost of patents (11,000) (16,000)
----------- -----------
Net cash (used in) provided by investing activities (266,000) 611,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock (Note 3) -- 1,100,000
Proceeds from exercise of common stock options 83,000 --
Payments of deferred financing costs (364,000) --
Increase (Decrease) in notes payable (Note 3) 1,650,000 (250,000)
Repayments of long-term debt (Note 3) (202,000) (1,071,000)
----------- -----------
Net cash provided by (used in) financing activities 1,167,000 (221,000)
----------- -----------
Net increase (decrease) in cash and cash equivalents 352,000 (10,000)
Cash and cash equivalents, beginning of
period 867,000 535,000
----------- -----------
Cash and cash equivalents, end of period $ 1,219,000 $ 525,000
=========== ===========
Supplemental cash flow disclosures:
Cash payments of interest $ 60,000 $ 100,000
Cash payments of income taxes $ -- $ 3,000
Surrender of debt upon conversion to equity $ 642,000 $ --
The accompanying notes are an integral part of these condensed financial
statements.
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BIO-PLEXUS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion of
the management of the Company, include all adjustments which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However, the
financial statements do not include all information and footnotes required for a
presentation in accordance with generally accepted accounting principles. These
condensed financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's 1999 Annual Report on
Form 10-K. The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the full year.
NOTE 2 - EARNINGS PER SHARE
Basic Earnings Per Share ("EPS") is based on the weighted average number of
common shares outstanding for the period, excluding any dilutive common share
equivalents. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted.
In determining net loss per common share, common stock equivalents are excluded
from the computation as their effect is anti-dilutive.
NOTE 3 - SIGNIFICANT CAPITAL TRANSACTIONS
Stock Options
On February 29, 2000, a director of the Company effected a net exercise of
stock options to purchase 180,000 shares of Common Stock in exchange for 63,625
shares of Common Stock.
On March 9, 2000, an officer of the Company effected a net exercise of
stock options to purchase 32,000 shares of Common Stock in exchange for 14,950
shares of Common Stock.
During the first quarter of 2000, an employee exercised stock options to
purchase 30,000 shares of Common Stock.
Convertible Debentures
On April 27, 1999, the Company sold an aggregate principal amount of
$2,500,000 of its 6% Convertible Debentures due June 30, 2004 (the "6%
Debentures") to several purchasers (the "Debenture Holders"). The 6% Debentures
are convertible at any time at the option of the Debenture Holders into shares
of the Company's common stock at the lesser of a fixed conversion price of $3.06
per share (as may be adjusted from time to time) or a floating conversion price
at the time of the conversion if the floating price is less than $3.06 per share
(as may be adjusted from time to time). The 6% Debentures may be wholly or
partially
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redeemed at the option of the Company for an amount not to exceed 130% of the
face value thereof plus accrued and unpaid interest at any time after the date
of issuance. The Company and the Debenture Holders have limited put and call
options, respectively, for additional 6% Debentures. In connection with a
subsequent financing with Appaloosa Management, L.P., the Company agreed not to
exercise its put right under the 6% Debentures. During the ninety day period
commencing April 27, 2000 the Debenture Holders have the right to cause the
Company to issue to them up to $1,000,000 additional principal amount of the 6%
Debentures. The 6% Debentures also included a warrant to purchase 500,000 shares
of common stock at an exercise price of $3.38. As of March 31, 2000, the
Debenture Holders had converted a total of $1,808,000 of the outstanding
principal balance of the 6% Debentures into 600,747 shares of common stock.
Convertible Note Financing
On September 21, 1999, the Company received a commitment from Appaloosa
Management, L.P., of Chatham, New Jersey ("Appaloosa") for a total financing
package of $17.5 million, comprised of (i) $16.75 million of zero-coupon,
secured convertible notes due 2005 (the "Convertible Notes"), (ii) 250,000
shares of common stock, no par value (the "Common Stock") issued at a purchase
price of $3.00 per share (the "Permanent Financing Shares") and (iii) nine-year
warrants to purchase up to 1.5 million shares of Common Stock at an initial
exercise price of $7.00 per share (the "$7 Warrants" and, collectively with the
Convertible Notes and the Permanent Financing Shares, the "Permanent
Financing"). The Permanent Financing was consummated on April 28, 2000 after
receipt of stockholder approval of the terms of the Permanent Financing and
certain related matters.
Bridge Transactions
Pending consummation of the Permanent Financing, on October 21, 1999, the
Company issued to Appaloosa and entities affiliated therewith (the "Purchasers")
a 7.5% non-convertible secured note in the aggregate principal amount of $3
million (the "First Bridge Note"). In January 2000, the interest rate on the
First Bridge Note was increased to 12% per annum. In connection with the
issuance of the First Bridge Note, the Company also issued to the Purchasers (i)
a five-year warrant to purchase up to 1.0 million shares of Common Stock, at an
initial exercise price of $3.00 per share (the "$3 Warrants") and (ii) a
nine-year warrant to purchase up to 1.5 million shares of Common Stock at an
initial exercise price of $5.00 per share (the "$5 Warrants") (the $3 Warrants
and $5 Warrants are collectively referred to herein as the "First Bridge
Warrants"). At the Purchaser's election and upon the closing of the Permanent
Financing, the exercise price of the $3 Warrants increased to $4.00 per share of
Common Stock. The exercise price of the $5 Warrants increased to $7.00 per share
of Common Stock upon the closing of the Permanent Financing. The $5 Warrants
contain a net-exercise provision.
On January 5, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $1.65 million
(the "Second Bridge Note"). In connection with the issuance of the Second Bridge
Note, the Company also agreed to issue and sell on the earlier of (i) April 30,
2000 and (ii) the closing of the Permanent Financing, five-year warrants to
acquire up to 200,000 shares of Common Stock at an initial exercise price of
$3.00 per share (the "Second Bridge Warrants"). The Second Bridge Warrants
contain a net-exercise provision.
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On April 3, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $2.2 million
(the "Third Bridge Note"). No warrants or convertible securities were issued in
connection with the Third Bridge Note. The First Bridge Note, the Second Bridge
Note and the Third Bridge Note are collectively referred to as the "Bridge
Notes". The issuance of the Bridge Notes, the First Bridge Warrants and the
Second Bridge Warrants are collectively referred to as the "Bridge
Transactions".
The Bridge Notes were not convertible into shares of Common Stock and were
paid-in-full (together with accrued interest in the amount of $265,000) at the
closing of the Permanent Financing on April 28, 2000.
Permanent Financing
In order to consummate the Permanent Financing, the Company was required
by the rules of The NASDAQ Stock Market to obtain the approval of a majority of
the Company's stockholders of the terms and conditions of the Permanent
Financing. In addition, the Connecticut Business Corporation Act required that
the Company obtain stockholder approval of (i) an amendment to the Company's
certificate of incorporation (the "Charter Amendment") and (ii) an amendment to
the Company's 1991 Long-Term Incentive Plan (the "Incentive Plan Amendment").
The Charter Amendment and the Incentive Plan Amendment were required by the
terms of the Permanent Financing. The approval of the Company's stockholders of
the terms of the Permanent Financing, the Charter Amendment and the Incentive
Plan Amendment is collectively referred to as "Stockholder Approval".
Coinciding with Stockholder Approval obtained on April 28, 2000, the
Company issued to the Purchasers the Convertible Notes, the Permanent Financing
Shares and the $7 Warrants. The Convertible Notes are convertible into
shares of Common Stock at an initial conversion price of $3.00. The $7 Warrants
contain a net-exercise provision.
The Permanent Financing generated aggregate proceeds to the Company of
$17.5 million. After repayment of the Bridge Notes and costs and expenses
associated with the financing, the Company realized net proceeds of
approximately $9.6 million which will be available, along with existing
resources, for general working capital purposes, subject to the terms and
conditions of the Permanent Financing transaction agreements.
NOTE 4 - COMMITMENTS
As of March 31, 2000, the Company had capital expenditure purchase
commitments outstanding of approximately $1,280,000 which were primarily
comprised of machinery & equipment and tooling for the construction of its
winged intravenous set production line.
NOTE 5 - SEGMENT FINANCIAL DATA
The Company's operations consist of two worldwide business segments: (i)
Safety Medical Products and Accessories and (ii) Joint Venture Design &
Development. The Safety Medical Products and Accessories segment includes
operations associated with the manufacture of blood collection needles, needle
holders and needle disposal containers. The Joint Venture Design & Development
segment includes operations associated with product design and development,
product licensing, and
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the design, development and construction for machinery and tooling in connection
with joint venture partners.
Distinct reporting by such segments was deemed necessary by management
based on the significance of reported revenues and expenses and the Company's
intention to focus operating resources in both of these areas.
Information with respect to each of the Company's business segments is as
follows:
Segment Revenue
Three Months Ended March 31,
--------------------------------------------
2000 1999 1998
---------- ---------- ----------
Safety Medical Products and Accessories $ 1,345,000 $1,145,000 $ 891,000
Joint Venture Design & Development 197,000 1,169,000 651,000
---------- ---------- ----------
Total Consolidated Revenue $1,542,000 $2,314,000 $1,542,000
========== ========== ==========
Major Customers
There were two customers, domestic distributors of the Company's products,
Allegiance Healthcare and Fisher HealthCare, that exceeded 10% of the Company's
Safety Medical Products and Accessories segment revenue for the periods
presented. The loss of business of any of the foregoing customers could
potentially have a material adverse effect on the business and prospects of the
Company. In the Joint Venture Design & Development segment, Johnson and Johnson
Medical, Inc. ("JJM") of Arlington, Texas and TFX Medical ("TFX"), a division of
Teleflex Incorporated, contributed to more than 10% of the revenues for the
periods presented. The following table represents the revenue associated with
these major customers by segment:
THREE MONTHS ENDED MARCH 31,
--------------------------------------------
2000 1999 1998
---------- ---------- ----------
TOTAL REVENUE MAJOR CUSTOMERS:
Safety Medical Products and
Accessories $1,166,000 $ 708,000 $ 822,000
Joint Venture Design & Development 197,000 1,095,000 651,000
OTHER DOMESTIC SALES 179,000 222,000 69,000
EXPORT SALES:
Safety Medical Products and
Accessories -- 289,000 --
Joint Venture Design & Development -- -- --
---------- ---------- ----------
TOTAL CONSOLIDATED REVENUE $1,542,000 $2,314,000 $1,542,000
========== ========== ==========
During the periods presented, there were no material intersegment revenues.
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Segment Operating Profit (Loss)
THREE MONTHS ENDED MARCH 31,
-------------------------------------------------
2000 1999 1998
----------- ----------- -----------
Safety Medical Products and Accessories $ 603,000 $ 337,000 $ 61,000
Joint Venture Design & Development $ 162,000 826,000 251,000
----------- ----------- -----------
Total Consolidated Operating Profit (Loss) 765,000 1,163,000 312,000
----------- ----------- -----------
Selling, General and Administrative Expenses (1,574,000) (1,104,000) (1,243,000)
Other (323,000) -- (115,000)
Financing Expenses (1,707,000) (56,000) (159,000)
----------- ----------- -----------
Net Profit (Loss) ($2,839,000) $ 3,000 ($1,205,000)
=========== =========== ===========
For the Safety Medical Products and Accessories segment, operating profit (loss)
consists of total revenues less product costs and expenses. In the Joint Venture
Design and Development segment, operating profit consists of total revenues less
certain operating costs and expenses and research and development expenses.
Segment Capital Expenditures
THREE MONTHS ENDED MARCH 31,
-------------------------------------------------
2000 1999 1998
----------- ----------- -----------
Safety Medical Products and Accessories $ 255,000 $ -- $ 93,000
Joint Venture Design & Development -- -- --
----------- ----------- -----------
Total Consolidated Capital Expenditures $ 255,000 $ -- $ 93,000
=========== =========== ===========
There has been no material change in identifiable assets related to
reportable segments since the 1999 Annual Report.
NOTE 6 - LICENSING AND DISTRIBUTION AGREEMENTS
On October 23, 1998, the Company entered into an exclusive License
Agreement and Design, Development and Asset Transfer Agreement for a safety
Peripherally Inserted Central Catheter ("PICC") introducer with TFX Medical. The
License Agreement includes certain minimum annual volume requirements and
ongoing royalties on the sale of PICC introducer catheters featuring the
Company's proprietary Punctur-Guard(R) technology. Under the Design, Development
and Asset Transfer Agreement, the Company would design and develop safety needle
assemblies to be used with the TFX peelable catheter, and would modify existing
manufacturing equipment to be transferred to TFX pursuant to the terms and
conditions of the agreement. On July 26, 1999, an agreement was entered into
with TFX to modify the License Agreement dated October 23, 1998. The amended
agreement included additional licensing fees and changes in royalty revenue in
exchange for TFX's right to exclusively market to one of its customers. In the
first quarter of 2000, the Company completed its obligations under the Design,
Development and Asset Transfer Agreements, and recognized licensing fee revenue
of $100,000.
NOTE 7 - SUBSEQUENT EVENTS
From April 1, 2000 to May 2, 2000, the Debenture Holders converted
$412,000 of outstanding principal balance of 6% Debentures into 148,615 shares
of common stock.
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On April 28, 2000, Mr. John S. Metz was appointed President and Chief
Executive Officer of the Company. Prior to joining the Company, Mr. Metz was
President of Strategic Acquisitions for the Professional Health Care business of
Kimberly-Clark Corporation. Mr. Metz has over twenty-five years of experience in
the medical product industry. The Company and Mr. Metz have entered into a
three-year employment agreement, which may be extended for successive twelve
month periods. In addition to a base salary, the agreement provides for annual
bonuses to be paid to Mr. Metz based upon the achievement of certain Company
performance levels, stock options to be issued under the Company's 1991
Long-Term Incentive Plan, and severance benefits under certain conditions.
On April 28, 2000, the Company obtained Stockholder Approval of the
terms and conditions of the Permanent Financing, the Charter Amendment and the
Incentive Plan Amendment. The Charter Amendment and the Incentive Plan Amendment
were required by the terms of the Permanent Financing.
Coinciding with Stockholder Approval, the Company issued to the
Purchasers (i) the Convertible Notes, (ii) the Permanent Financing Shares, and
(iii) the $7 Warrants. The Convertible Notes are convertible into shares of
Common Stock at an initial conversion price of $3.00. The $7 Warrants contain a
net-exercise provision.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The discussions set forth in this Management's Discussion and Analysis
of the Results of Operations and Financial Condition and elsewhere herein
contain certain statements which are not historical facts and are considered
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. Forward-looking statements can be identified by the use of such
forward-looking terminology as "believes," "expects," "may," "will," "should,"
or "anticipates" or negatives thereof or other derivations thereon or comparable
terminology, or discussions of strategy that involve risks and uncertainties.
The Company's actual results could differ materially from those projected in the
forward-looking statements as a result of, among other factors, the Company's
expectation regarding gross profit and operating income, general economic
conditions and growth in the safety medical products industry, competitive
factors and pricing pressures, changes in product mix, product demand, risk of
dependence on third party suppliers, ability to obtain financing, and other risk
factors and uncertainties detailed in this report, described from time to time
in the Company's other Securities and Exchange Commission filings, or discussed
in the Company's press releases. All forward-looking statements included in this
document are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements.
OVERVIEW
The Company's principal focus is the design, development, testing and
evaluation of its blood collection safety needle and accessory products, and the
design and development of the molds, needle assembly machines and production
processes needed for manufacturing the blood collection safety needle as well as
the design and development of new products. Since its inception in September
1987
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through March 31, 2000, the Company has incurred cumulative losses totaling
approximately $70,944,000. For the Company to achieve profitability, further
reductions in manufacturing costs and increases in sales are necessary, as well
as the addition of new product lines. The Company has also focused its efforts
on developing strategic partnerships with major healthcare companies in order to
bring other products to market featuring its patented internal blunting
technology.
In January 2000, the Company entered into a distribution agreement with
Owens & Minor, a major distributor of medical products to hospitals throughout
the United States. Owens & Minor, a Fortune 500 company headquartered in
Richmond, Virginia, is the nation's largest distributor of national brand
medical and surgical supplies. The company's distribution centers serve
hospitals, integrated healthcare systems and group purchasing organizations
nationwide. The distribution agreement allows Owens & Minor to purchase and
distribute all of the Bio-Plexus blood collection products.
On February 21, 2000, the Company entered into a distribution agreement
with McKessonHBOC Medical Group of Richmond, Virginia. McKessonHBOC's Supply
Management Business is a leading distributor of medical-surgical supplies to
more than 5,000 hospitals nationwide. The agreement allows McKessonHBOC to
purchase and distribute the Company's products on a non-exclusive basis without
territorial limitations or restrictions. The agreement is in effect for a period
of five years and shall continue automatically in effect for successive terms of
five years each until terminated by either party.
The Company believes that similar distribution agreements or strategic
partnerships may be possible with one or more major healthcare companies for its
other products. Such arrangements could assist the Company in raising additional
capital and help fund research and development of new products, as well as
accelerate the rate of sales growth. However, such arrangements could also
decrease the revenue per unit for the Company, as a result of sharing revenue
with its distribution or strategic partners. The Company believes the overall
benefits and potential for greater market share outweigh the disadvantages that
may result from such arrangements.
THE YEAR 2000 UPDATE
The Company has not experienced any major disruptions to its business nor is it
aware of any significant Year 2000-related disruptions affecting its
distributors and customers, strategic partners, and suppliers. Costs incurred by
the Company to achieve Year 2000 readiness were not material and were charged to
expense as incurred.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
The Company had product sales of $1,408,000 for the three months ended
March 31, 2000, compared to $1,169,000 for the comparable period in the prior
year. The increase was primarily attributable to an increase in sales of safety
medical devices over the prior year.
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The Company had revenues from services totaling $34,000 for the three
months ended March 31, 2000, compared to $1,145,000 for the comparable period in
the prior year. The decrease was primarily attributable to completion of the
I.V. catheter development project for JJM in the first quarter of 1999.
The Company had licensing fee revenue of $100,000 in the first quarter
of 2000 which was attributable to the completion of the Design, Development and
Asset Transfer Agreement with TFX Medical.
Product costs were $748,000 for the three months ended March 31, 2000,
compared to $830,000 for the comparable period in the prior year despite greater
revenues from product sales. The decrease in these costs resulted primarily from
lower manufacturing costs associated with the blood collection needle product
line.
Research and development expenses were $323,000 for the three months
ended March 31, 2000, compared to $304,000 for the same period a year ago. The
increase in these costs resulted from an increase in engineering labor and
operating expenses in 2000 as compared to 1999 due to greater research and
development costs related to the winged intravenous set.
Selling, general and administrative expenses were $1,574,000 for the
three months ended March 31, 2000, compared to $1,104,000 for the same period a
year ago. The increase resulted from increases of approximately $370,000 in
sales and marketing expenses due to increased marketing activity and additional
sales and marketing personnel, and $98,000 in administrative expenses due to
increases in administrative personnel.
Financing expenses were $1,707,000 for the three months ended March 31,
2000, compared to $56,000 for the same period in 1999. The increase in these
costs resulted primarily from amortization expense of $1,245,000 from the debt
discount associated with the Bridge Transactions in the fourth quarter of 1999
and first quarter of 2000, from increased interest expense of $163,000
associated with the Bridge Transactions, and amortization of debt discount of
$195,000 relating to the 6% Debentures.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for additional funds has continued from period to
period, as a result of its ongoing losses from operations, and its continued
efforts to develop new products. To date, the Company has financed its
operations primarily through borrowings and the sale of equity securities.
Through March 31, 2000, the Company has received net proceeds of approximately
$36,356,000 through borrowings and the sale of debt securities and $50,547,000
through the sale of equity securities.
Cash used in operating activities for the three months ended March 31,
2000 totaled $549,000 and was primarily due to a net loss for the period of
$2,839,000, an increase in inventory balances due to higher anticipated sales
volumes partially offset by a decrease in accounts receivable due to lower
shipments at the end of the first quarter of 2000 compared to the fourth quarter
of 1999, increases in accounts payable and accrued expenses, increased accrued
interest payable, and depreciation and amortization expenses primarily
reflecting the amortization of deferred debt financing expenses.
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Net cash used in investing activities amounted to $266,000 for the
three month period primarily due to additions to fixed assets totaling $255,000,
consisting substantially of capitalized costs associated with the construction
of its winged intravenous set production line.
Net cash provided by financing activities amounted to $1,167,000 for
the three months ended March 31, 2000 primarily due to proceeds from the
issuance of notes payable of $1,650,000 partially offset by cash paid for
deferred finance costs relating to the Bridge Transactions and repayments of
long-term debt totaling $202,000.
At March 31, 2000, the Company's shareholders' equity decreased to
$1,621,000 from $3,728,000 due to a net loss for the three months ended March
31, 2000. Also, at March 31, 2000, current liabilities exceed current assets due
to the classification of the First Bridge Note and Second Bridge Note as current
liabilities. Both of these notes were repaid on April 28, 2000 upon the closing
of the Permanent Financing transactions.
The Company's primary cash requirement for the remainder of 2000 will
be for working capital to expand its operations for its current product lines as
well as to launch new products, to repay outstanding debt, and continue research
and development on its winged intravenous set and other new products. The
Company is considering the development of a strategic partnership with one or
more healthcare companies to assist in bringing additional products to market
featuring the Company's proprietary internal blunting technology.
In order to satisfy its current and anticipated need for capital, the
Company consummated the Permanent Financing on April 28, 2000 after receiving
Stockholder Approval. Upon the closing of the Permanent Financing, the Company
issued to the Purchasers the Convertible Notes, the Permanent Financing Shares
and the $7 Warrants.
The Permanent Financing generated aggregate proceeds to the Company of
$17.5 million. After repayment of the Bridge Notes and costs and expenses
associated with the Permanent Financing, the Company realized net proceeds of
approximately $9.6 million, which will be available along with existing
resources, for general working capital purposes, subject to the terms and
conditions of the Permanent Financing transaction documents.
The Company is continuing to explore additional financing alternatives
and potential strategic relationships which may provide the Company with
additional sources of working capital. There can be no assurances that the
Company will be able to secure such additional sources of working capital.
Failure to raise needed capital may have a material adverse impact on the
Company's operations, development plans and cash flows.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On February 29, 2000, a director of the Company effected a net exercise
of stock options to purchase 180,000 shares of Common Stock in exchange for
63,625 shares of Common Stock.
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On March 9, 2000, an officer of the Company effected a net exercise of
stock options to purchase 32,000 shares of Common Stock in exchange for 14,950
shares of Common Stock.
During the first quarter of 2000, the holders of the 6% Debentures
converted a total of $641,000 of principal balance into 209,627 shares of Common
Stock.
On January 5, 2000, the Company issued to the Purchasers the Second
Bridge Note and in connection with such issuance, the company agreed to issue
and sell on the earlier of (i) April 30, 2000 and (ii) the closing of the
Permanent Financing, the Second Bridge Warrants. The Second Bridge Warrants
contain a net-exercise provision.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a Special Meeting of Stockholders on April 28, 2000.
The following proposals were voted upon at the Special Meeting:
Proposal No. 1 - Permanent Financing Proposal to approve the issuance and sale
of (i) the Convertible Notes, (ii) the Permanent Financing Shares and (iii) the
$7 Warrants, including the reservation and subsequent issuance of the shares of
Common Stock issuable upon conversion of the Convertible Notes and exercise of
the $7 Warrants (the "Permanent Financing Proposal") to the Purchasers, and to
approve and adopt the Convertible Note Purchase Agreement (the "Purchase
Agreement"), Warrants, (as defined in the Purchase Agreement) Registration
Rights Agreement, (as defined in the Purchase Agreement) and Security Agreement
(as defined in the Purchase Agreement) (collectively, the "Transaction
Documents") and the other transactions contemplated by the Transaction
Documents;
Proposal No. 2 - Charter Amendment Proposal to amend the Company's Certificate
of Incorporation to increase from 25 million (25,000,000) to 40 million
(40,000,000) the number of shares of Common Stock that the Company is authorized
to issue, which proposal was proposed, in part, to ensure that there are
sufficient shares of Common Stock reserved for the subsequent issuance of shares
of Common Stock upon conversion of the Convertible Notes and exercise of the $7
Warrants and as awards in connection with the Company's 1991 Long Term Incentive
Plan (the "Charter Amendment Proposal"); and
Proposal No. 3 - Incentive Plan Amendment Proposal to amend the Company's 1991
Long-Term Incentive Plan (as amended, the "Incentive Plan") to increase from one
million (1,000,000) to 2.5 million (2,500,000) the number of shares of Common
Stock subject to the Incentive Plan, which proposal was made to ensure that
there were sufficient shares of Common Stock reserved for the subsequent
issuance of awards to employees and consultants under the Incentive Plan (the
"Incentive Plan Amendment Proposal").
The stockholders approved the Permanent Financing, the Charter
Amendment and the Incentive Plan Amendment. The proposals required a vote of
holders of a majority of the issued and outstanding shares of common stock
present in person or represented by proxy at the Special Meeting and voting when
a quorum was present. The proposals were approved by the following vote:
Proposal 1: Permanent Financing Proposal
For 9,108,651
Against 138,623
Abstain 13,200
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Proposal 2: Charter Amendment Proposal
For 9,074,819
Against 173,255
Abstain 12,400
Proposal 3: Incentive Plan Amendment Proposal
For 8,922,021
Against 316,336
Abstain 22,117
There were no broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
No. Description Method of Filing
--- ----------- ----------------
3.1 Certificate of Incorporation of the Incorporated by reference to Exhibit 3.1 to the
Company, as amended Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 (File No. 0-24128).
3.2 Bylaws of the Company, as amended Incorporated by reference to Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K filed on
April 13, 1998 (File No. 0-24128)
3.3 Certificate of Amendment of Certificate of Filed with this Report.
Incorporation, dated April 28, 2000.
10.44 Employment Agreement dated April 26, 2000 Filed with this Report.
between the Company and John S. Metz
10.45 Security Agreement dated April 28, 2000 Filed with this Report.
between the Company and Appaloosa Investment
Limited Partnership I, L.P.
10.46 Form of Convertible Note Filed with this Report.
27 Financial Data Schedule Filed with this Report.
(b) Reports on Form 8-K
A report on Form 8-K was filed on February 24, 2000 reporting an
adjournment of a Special Shareholder's Meeting that was to be held on February
28, 2000.
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A report on Form 8-K was filed on March 31, 2000 reporting the
Company's 1999 financial results.
A report on Form 8-K was filed on April 27, 2000 reporting that the
Company named John S. Metz as its President and Chief Executive Officer
effective April 28, 2000.
A report on Form 8-K was filed on May 11, 2000 reporting that the
Company, at a special meeting of stockholders held on Friday, April 28, 2000,
obtained stockholder approval for the $17.5 million financing with Appaloosa
Management, L.P. (the "Permanent Financing"), an amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock, an amendment to the Company's 1991 Long-Term Incentive Plan, and
reporting that following the stockholders meeting, the Company and Appaloosa
consummated the Permanent Financing.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
Bio-Plexus, Inc.
(Registrant)
May 15, 2000 /s/ John S. Metz
---------------- -------------------------------------
(Date) John S. Metz
President and Chief Executive Officer
May 15, 2000 /s/ Kimberley A. Cady
---------------- -------------------------------------
(Date) Kimberley A. Cady
Vice President of Finance and Chief
Financial Officer
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