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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
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 JULY 19, 2001
-------------------------- -------------------
Common Stock, no par value 15,002,226
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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 June 30, 2001 (unaudited) and
December 31, 2000 3
Condensed Statements of Operations (unaudited) for the three
months ended June 30, 2001 and 2000 4
Condensed Statements of Operations (unaudited) for the six
months ended June 30, 2001 and 2000 5
Condensed Statements of Cash Flows (unaudited) for the six
months ended June 30, 2001 and 2000 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities 16
Item 3. Default Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 21
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BIO-PLEXUS, INC.
CONDENSED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2001 2000
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,063,000 $ 4,003,000
Accounts receivable 39,000 516,000
Inventories:
Raw materials 1,460,000 1,379,000
Work-in-process 291,000 36,000
Finished goods 448,000 1,634,000
------------ ------------
2,199,000 3,049,000
------------ ------------
Other current assets 173,000 124,000
------------ ------------
Total current assets 3,474,000 7,692,000
------------ ------------
Fixed assets, net 8,651,000 7,845,000
Deferred debt financing expenses 896,000 1,017,000
Patents, net of amortization 445,000 415,000
Other assets 3,000 3,000
------------ ------------
$ 13,469,000 $ 16,972,000
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 18,218,000 $ 52,000
Note payable 300,000 --
Accounts payable and accrued expenses 697,000 1,105,000
Accrued interest payable 13,000 24,000
Accrued vacation 130,000 122,000
Other accrued employee costs 276,000 282,000
Deferred revenue 171,000 --
------------ ------------
Total current liabilities 19,805,000 1,585,000
============ ============
Other long-term debt, net 1,220,000 17,806,000
Commitments and contingencies (Note 4) -- --
Shareholders' deficit:
Convertible preferred stock, no par value, 3,000,000
authorized, no shares issued and outstanding -- --
Common stock, no par value, 40,000,000 authorized,
15,002,162 and 14,887,230 shares issued and outstanding 76,509,000 76,412,000
Accumulated deficit (84,065,000) (78,831,000)
------------ ------------
Total shareholders' deficit (7,556,000) (2,419,000)
------------ ------------
$ 13,469,000 $ 16,972,000
============ ============
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 JUNE 30,
-------------------------------
2001 2000
------------ ------------
Revenue:
Product $ 1,332,000 $ 776,000
Services 85,000 --
Royalties 70,000 --
------------ ------------
Total revenue 1,487,000 776,000
------------ ------------
Costs and expenses:
Product 1,069,000 342,000
Services 103,000 --
Research and development 261,000 235,000
Selling, general and administrative 1,604,000 2,015,000
------------ ------------
Total operating costs and expenses 3,037,000 2,592,000
------------ ------------
Operating loss (1,550,000) (1,816,000)
Financing expenses:
Amortization of deferred debt financing 61,000 129,000
Interest expense 681,000 1,099,000
Other income (11,000) (103,000)
------------ ------------
Total financing expenses 731,000 1,125,000
------------ ------------
Net loss $ (2,281,000) $ (2,941,000)
============ ============
Net loss per share of common stock:
Basic and diluted $ (0.15) $ (0.20)
============ ============
Weighted average common shares outstanding (Note 2) 15,002,162 14,711,509
The accompanying notes are an integral part of these condensed financial
statements.
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BIO-PLEXUS, INC
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
SIX MONTHS ENDED JUNE 30,
-------------------------------
2001 2000
------------ ------------
Revenue:
Product $ 2,586,000 $ 2,184,000
Services 100,000 34,000
Licensing fees (Note 6) 100,000 100,000
Royalties 121,000 --
------------ ------------
Total revenue 2,907,000 2,318,000
------------ ------------
Costs and expenses:
Product 1,908,000 1,090,000
Services 113,000 29,000
Research and development 601,000 557,000
Selling, general and administrative 4,115,000 3,590,000
------------ ------------
Total operating costs and expenses 6,737,000 5,266,000
------------ ------------
Operating loss (3,830,000) (2,948,000)
Financing expenses:
Amortization of deferred debt financing 121,000 189,000
Interest expense 1,329,000 2,782,000
Other income (46,000) (139,000)
------------ ------------
Total financing expenses 1,404,000 2,832,000
------------ ------------
Net loss $ (5,234,000) $ (5,780,000)
============ ============
Per share of common stock:
Basic and diluted $ (0.35) $ (0.40)
============ ============
Weighted average common shares outstanding (Note 2) 14,968,487 14,463,595
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)
FOR SIX MONTHS ENDED JUNE 30,
-------------------------------
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,234,000) $ (5,780,000)
Adjustments to reconcile net loss to cash used by
operating activities:
Depreciation and amortization 308,000 261,000
Amortization of deferred debt
financing expenses 121,000 189,000
Amortization of debt discount 219,000 2,095,000
Decrease (increase) in assets:
Accounts receivable 477,000 349,000
Inventories 850,000 (1,376,000)
Other current assets (49,000) 63,000
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (408,000) 157,000
Accrued interest payable (11,000) (46,000)
Accrued vacation and other accrued
employee cost 2,000 135,000
(Decrease) increase in deferred revenue 171,000 --
Other 18,000 28,000
------------ ------------
Net cash used in+C47 operating
activities (3,536,000) (3,925,000)
------------ ------------
Cash Flows from Investing Activities
Purchases and construction of fixed
assets (1,098,000) (853,000)
Cost of patents (46,000) (54,000)
------------ ------------
Net cash used in investing
activities (1,144,000) (907,000)
------------ ------------
Cash Flows from Financing Activities
Proceeds from sale of common stock 79,000 750,000
Proceeds from exercise of common
stock options -- 83,000
Accretion of accrued interest 1,385,000 336,000
Increase in notes payable 300,000 3,850,000
Proceeds from long-term debt -- 9,900,000
Payments of deferred financing costs -- (871,000)
Repayments of long-term debt (24,000) (411,000)
------------ ------------
Net cash provided by financing
activities 1,740,000 13,637,000
------------ ------------
Net (decrease) increase in cash
and cash equivalents (2,940,000) 8,805,000
Cash and cash equivalents,
beginning of period 4,003,000 867,000
------------ ------------
Cash and cash equivalents, end
of period $ 1,063,000 $ 9,672,000
============ ============
Supplemental cash flow disclosures:
Cash payments of interest $ 71,000 $ 397,000
Cash payments of income taxes 2,000 --
Surrender of debt upon
conversion to equity -- 1,169,000
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 2000 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.
Chapter 11 Filing
On April 4, 2001 (the "Petition Date") the Company filed a voluntary
petition for relief under Chapter 11 of the United States Code the "Bankruptcy
Code") with the United States Bankruptcy Court for the District of Connecticut.
As of the Petition Date, the Company commenced operating its business and
managed its properties as a debtor-in-possession. On April 4, 2001, the Company
filed a Disclosure Statement (the "Disclosure Statement") and a Plan of
Reorganization (the "Plan of Reorganization") with the Bankruptcy Court. The
Disclosure Statement set forth certain information regarding, among other
things, significant events that have occurred during the Company's Chapter 11
case and the anticipated organization, operation and financing of Reorganized
Company ("Reorganized Company"). The Company subsequently filed certain
amendments to the Plan of Reorganization to add and clarify certain terms of the
Plan of Reorganization and to establish conditions to confirmation and
effectiveness of the Plan of Reorganization. Among other things, the Plan of
Reorganization (1) divided the Company's creditors into eight classes; (2)
provides that certain classes of creditors will be paid in full, and will be
otherwise rendered unimpaired; (3) provides that, in exchange for their secured
claim, Appaloosa Management, L.P. ("Appaloosa Management") and certain of its
affiliates would receive shares of common stock of the Reorganized Company
representing 85% of the Reorganized Company outstanding common stock, and (4)
provides that holders of common stock issued prior to the confirmation of the
Plan of Reorganization will receive, in substitution of their existing shares,
new shares of common stock of the Reorganized Company, which will constitute 15%
of Reorganized Company outstanding common stock.
On June 12, 2001 a confirmation order was issued by the United States
Bankruptcy Court that confirmed the Plan of Reorganization pursuant to
Bankruptcy Code section 1129, and the Company emerged from its
debtor-in-possession status as the Reorganized Company. The conditions precedent
to the effectiveness of the Plan of Reorganization included, among other things,
reincorporation of the Reorganized Company in the State of Delaware, there being
no material adverse change in the development and launch of the Company's Winged
Set product, and the consummation of the private placement described below.
The effectiveness of the Plan of Reorganization will have a material effect
on certain facts which existed as of June 30, 2001, including the termination of
certain outstanding options, warrants and other rights (such as conversion
rights) to acquire the Company's common stock. The effectiveness of the Plan of
Reorganization could materially change the amounts and classifications of assets
and liabilities reported in the accompanying financial statements. The financial
statements do not include any adjustments to the carrying value of assets or
amounts of liabilities that might be necessary as a consequence of the
effectiveness of the Plan of Reorganization.
When used herein, the registrant prior to its reorganization pursuant to the
Plan of Reorganization is referred to as the "Debtor Company"; the registrant
after its reorganization under the Plan of Reorganization is referred to as the
"Reorganized Company"; and the registrant after its reincorporation in Delaware
is referred to as the "Delaware Company."
Reverse Split and Reincorporation
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Effective July 19, 2001, the Reorganized Company reincorporated in the
State of Delaware as the Delaware Company. The reincorporation was effected
pursuant to a merger agreement entered into pursuant to the Plan of
Reorganization (the "Merger Agreement"). Immediately prior to the
reincorporation, the Reorganized Company affected a reverse stock split pursuant
to the Plan of Reorganization. As a result of the reverse stock split, each ten
shares of the Reorganized Company's common stock was converted into one share of
Reorganized Company common stock. Thereafter, the reincorporation was effected
in accordance with the Merger Agreement by merging the Reorganized Company with
and into the Delaware Company. As a result of that merger, the separate
corporate existence of the Reorganized Company ceased, the certificate of
incorporation and bylaws of the Delaware Company became and continue in effect
as the registrant's certificate of incorporation and bylaws, and each share of
common stock of the Reorganized Company was immediately converted into one share
of Common Stock of the Delaware Company. Accordingly, as a result of the reverse
stock split and reincorporation, each ten shares of the Reorganized Company's
Common Stock issued and outstanding prior to the reverse stock split and
reincorporation was effectively converted into one share of the Delaware
Company's Common Stock subsequent to the reincorporation. A copy of the
certificate of incorporation and by-laws of the Delaware Company as currently in
effect are filed as Exhibits 3.1 and 3.2 hereto and are incorporated herein by
reference.
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
NASDAQ Delisting
The Nasdaq SmallCap Stock Market notified the Company that its Common Stock
was delisted from The Nasdaq Stock Market effective with the opening of business
on March 6, 2001. The delisting was as a result of the Company's failure to meet
Nasdaq's requirements for continued listing. The Company did not appeal the
delisting on the Nasdaq National Market and is not currently eligible for
listing on The New York Stock Exchange or the American Stock Exchange.
Trading in the Company's Common Stock was conducted on the National
Association of Securities Dealers' Pink Sheets until July 27, 2001. On that
date, after giving effect to the reverse stock split and the reincorporation in
Delaware, the Company's Common Stock began trading on the National Association
of Securities Dealers' OTC Bulletin Board under the symbol BPXS.
Trading in the Company's Common Stock could also be subject to additional
restrictions. As a consequence of such delisting, it is expected that the
Company's stockholders will find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Common Stock. In addition,
such delisting will make the Company's Common Stock substantially less
attractive as collateral for margin and purpose loans, for investment by
financial institutions under their internal policies or state legal investment
laws, or as consideration in future capital raising transactions.
The Company's Common Stock may become subject to regulation as a "penny
stock." The Securities and Exchange Commission has adopted regulations, which
generally define "penny stock" to be any equity security that has a market price
or exercise price less than $5.00 per share, subject to certain exceptions,
including listing on the Nasdaq National Market. If the Company's Common Stock
is not listed on the Nasdaq National Market and no other exception applies, the
Company's Common Stock may be subject to the SEC's Penny Stock Rules, Rules
15g-1 through Rule 15g-9 under the Exchange Act. For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase of such securities and have received the purchaser's written
consent to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a risk disclosure document mandated by
the SEC relating to the penny stock market. The broker-dealer must also disclose
the commission payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. Consequently, the
penny stock rules may restrict the ability of broker-dealers to sell the
Company's securities and may affect the ability of holders to sell the Company's
securities in the secondary market and the price at which such holders can sell
any such securities. Rule 15g-9 under the Exchange Act imposes additional sales
practice requirements on broker-dealers who sell such securities except in
transactions exempted from such
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rule. Such exempt transactions include those meeting the requirements of Rule
505 or 506 of Regulation D promulgated under the Securities Act and transactions
in which the purchaser is an institutional accredited investor or an established
customer of the broker-dealer.
Common Stock and Stock Options
On March 13, 2001, the Company issued to Fresenius Medical Holdings Inc.
101,744 restricted common no par stock as part of a licensing and development
agreement.
On March 9, 2000, an officer of the Company affected 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 Note Financing
On September 21, 1999, the Company received a commitment from Appaloosa
Management 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 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 Management and entities affiliated therewith (the
"Appaloosa Entities") 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 Appaloosa Entities (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. The fair value of the warrants
at the date of issuance was recorded as a discount on the debt and was amortized
over the term of the First Bridge Note.
On January 5, 2000, the Company issued to the Appaloosa Entities 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.
On April 3, 2000, the Company issued to the Appaloosa Entities 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 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
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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 Appaloosa Entities 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 fair value of the warrants at the date of issuance
was recorded as a discount on the debt, which will be amortized over the term of
the debt.
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 is available along with existing resources for general working
capital purposes, subject to the terms and conditions of the Permanent Financing
transaction agreements.
The convertible notes contain certain restrictive covenants including but
not limited to, minimum (maximum) operating profit (loss), minimum product sales
revenues, and maximum permitted capital expenditures, all as defined. At June
30, 2001, the Company was in violation of the operating profit (loss) and
minimum product sales revenues covenants. Under the terms of the agreement, the
Appaloosa Entities may call the convertible notes if the Company is in violation
of any restrictive covenant. The covenant violations have not been waived by the
Appaloosa Entities, as such notes were converted under the provisions of the
Plan of Reorganization (see Note 1). Accordingly, the full amount of the
convertible debt has been classified as a current liability as of June 30, 2001.
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 "Convertible
Debenture Financing"). The 6% Debentures were 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 conversion price is less than $3.06 per share (as may be adjusted
from time to time). The 6% Debentures could be wholly or partially 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.
As of September 30, 2000, the Debenture Holders had converted all of the
$2,500,000 outstanding principal balance of the 6% Debentures into 880,733
shares of Common Stock. The Company and the Debenture Holders had limited put
and call options, respectively, for additional 6% Debentures. In connection with
a subsequent financing with Appaloosa Management, L.P. and certain related
entities, the Company agreed not to exercise its put right under the 6%
Debentures. As of July 26, 2000, the Debenture Holders' call options expired and
were not exercised. In connection with the Convertible Debenture Financing, the
Company issued a warrant to purchase up to 500,000 shares of the Company's
Common Stock at an exercise price of $3.38 per share.
NOTE 4 - COMMITMENTS
As of June 30, 2001 the Company had capital expenditure purchase commitments
outstanding of approximately $750,000 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 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
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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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ----------
Safety Medical Products and
Accessories $1,332,000 $ 776,000 $1,401,000 $2,586,000 $2,121,000 $2,546,000
Joint Venture Design & Development 155,000 -- 32,000 321,000 197,000 1,201,000
---------- ---------- ---------- ---------- ---------- ----------
Total Consolidated Revenue $1,487,000 $ 776,000 $1,433,000 $2,907,000 $2,318,000 $3,747,000
========== ========== ========== ========== ========== ==========
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, TFX Medical ("TFX"), a division of
Teleflex Incorporated and Fresenius Medical Holdings, Inc. 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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ----------
TOTAL REVENUE MAJOR CUSTOMERS:
Safety Medical Products and Accessories $1,022,000 $ 579,000 $1,111,000 $1,891,000 $1,745,000 $1,819,000
Joint Venture Design & Development 155,000 -- 15,000 321,000 197,000 1,110,000
OTHER DOMESTIC SALES 310,000 197,000 88,000 695,000 376,000 310,000
EXPORT SALES:
Safety Medical Products and Accessories -- -- 219,000 -- -- 508,000
Joint Venture Design & Development -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
TOTAL CONSOLIDATED REVENUE $1,487,000 $ 776,000 $1,433,000 $2,907,000 $2,318,000 $3,747,000
========== ========== ========== ========== ========== ==========
During the periods presented, there were no material intersegment revenues.
Segment Operating Profit
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ----------- ----------- ----------- -----------
Safety Medical Products and Accessories $ 263,000 $ 434,000 $ 697,000 $ 678,000 $ 1,037,000 $ 1,034,000
Joint Venture Design & Development 52,000 -- 21,000 208,000 162,000 846,000
----------- ----------- ----------- ----------- ----------- -----------
Total Consolidated Operating Profit 315,000 434,000 718,000 886,000 1,199,000 1,880,000
----------- ----------- ----------- ----------- ----------- -----------
Selling, General and Administrative Expenses (1,604,000) (2,015,000) (1,157,000) (4,115,000) (3,590,000) (2,261,000)
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Other (261,000) (235,000) (295,000) (601,000) (557,000) (294,000)
Financing Expenses (731,000) (1,125,000) (305,000) (1,404,000) (2,832,000) (361,000)
----------- ----------- ----------- ----------- ----------- -----------
Net Loss ($2,281,000) ($2,941,000) ($1,039,000) ($5,234,000) ($5,780,000) ($1,036,000)
=========== =========== =========== =========== =========== ===========
For the Safety Medical Products and Accessories segment, operating profit
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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ----------
Safety Medical Products and Accessories $ 338,000 $ 598,000 $ 104,000 $1,098,000 $ 853,000 $ 104,000
Joint Venture Design & Development -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Consolidated Capital Expenditures $ 338,000 $ 598,000 $ 104,000 $1,098,000 $ 853,000 $ 104,000
========== ========== ========== ========== ========== ==========
There has been no material change in identifiable assets related to
reportable segments since the 2000 Annual Report.
NOTE 6 - LICENSING AND DISTRIBUTION AGREEMENTS
On January 28, 1997 the Company entered into a Development and License
Agreement and a Supply Agreement with Johnson & Johnson Medical, Inc. ("JJM") of
Arlington, Texas. Under the terms of the agreements, the Company would develop
and manufacture safety needle assemblies for JJM utilizing its self-blunting
technology, which would be used by JJM, under an exclusive worldwide license
granted by the Company, to manufacture and sell a new safety I.V. catheter. On
April 9, 1998, the Company amended the Development and License Agreement and
canceled the Supply Agreement with JJM. The amended terms include certain
changes in the licensing and royalty agreements as well as the transfer of
manufacturing of the safety needle assemblies to JJM, in exchange for an initial
milestone payment of $3,500,000, with an additional $500,000 payable upon the
completion of certain milestones. The revised agreement also provided for an
additional $300,000 payable to the Company for initial capital equipment
purchases and the payment of certain minimum annual royalties. During the first
quarter of 2001, the Company received the final licensing payment of $100,000 in
connection with this agreement. In addition, the Company began to receive
royalty payments in connection with this agreement during the first quarter of
2001.
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.
On December 19, 2000, the Company entered into a Development and
Manufacturing and Distribution Agreement with Fresenius Medical Care Holdings,
Inc. ("Fresenius"). Pursuant to this agreement, during the first two phases, the
Company and Fresenius will develop Extracorporeal Therapy Needles and in the
second phase, Fresenius will manufacture, market, and distribute the needles. In
connection with this agreement, the Company also granted to Fresenius an
exclusive worldwide license to manufacture, have manufactured, use, sell, have
sold or after for sale such needles utilized in dialysis applications covered by
the PUNCTUR-GUARD(R) technology. The Fresenius agreement provides for the
payment of royalties to the Company once products developed under the agreement
are sold.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements
THE DISCUSSIONS SET FORTH BELOW 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 ARE IDENTIFIED BY THE USE OF SUCH TERMINOLOGY AS "BELIEVES,"
"EXPECTS," "MAY," "SHOULD," "ANTICIPATES," "PLANS," "ESTIMATES," AND "INTENDS,"
OR DERIVATIONS OR NEGATIVES THEREOF OR COMPARABLE TERMINOLOGY. ACCORDINGLY, SUCH
STATEMENTS INVOLVE RISKS (KNOWN AND UNKNOWN) AND UNCERTAINTIES. ACCORDINGLY,
SUCH STATEMENTS INVOLVE RISKS (KNOWN AND UNKNOWN) AND UNCERTAINTIES. THESE RISKS
AND UNCERTAINTIES INCLUDE THE CONTINUED WILLINGNESS OF THE COMPANY'S CUSTOMERS,
VENDORS AND EMPLOYEES TO MAINTAIN THEIR RELATIONSHIPS WITH THE COMPANY DURING
THIS PERIOD; THE ACCEPTANCE OF THE COMPANY'S PRODUCTS BY HEALTH CARE
PROFESSIONALS; THE COMPANY'S ABILITY TO PROTECT ITS PROPRIETY TECHNOLOGY;
AVAILABILITY OF QUALIFIED PERSONNEL; CHANGES IN, OR FAILURE TO COMPLY WITH
GOVERNMENT REGULATIONS; THE RISKS ASSOCIATED WITH EXPANDING THE COMPANY'S
BUSINESS INTERNATIONALLY; THE ABILITY OF THE COMPANY TO MEET CERTAIN PERFORMANCE
OBJECTIVES AND REQUIREMENTS RELATED TO THE PUBLIC TRADING OF ITS STOCK; THE
ABILITY OF THE COMPANY TO OBTAIN ADDITIONAL FINANCING; GENERAL ECONOMIC AND
BUSINESS CONDITIONS; 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. THE
COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR ADVISE UPON ANY SUCH
FORWARD-LOOKING STATEMENT. 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.
When used herein, the registrant prior to its reorganization pursuant to the
Plan of Reorganization is referred to as the "Debtor Company"; the registrant
after its reorganization under the Plan of Reorganization is referred to as the
"Reorganized Company"; and the registrant after its reincorporation in Delaware
is referred to as the "Delaware Company."
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 through June 30, 2001, the Company has incurred cumulative losses totaling
approximately $84,065,000. 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.
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.
Results of Operations
Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
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The Company had product sales of $1,332,000 for the three months ended
June 30, 2001 compared to $776,000 for the same period in 2000. The increase was
primarily attributable to sales incentives offered to major customers during the
second quarter. Costs relating to product sales increased to $1,069,000 for the
three months ended June 30, 2001, compared to $342,000 for the same period in
2000. Such costs increased due to increased sales volumes and increased
manufacturing costs associated with the new winged intravenous product line.
The Company had revenues from services totaling $85,000 for the three
months ended June 30, 2001, compared to $0 for the comparable period in the
prior year. The increase is attributable to the Fresenius agreement.
The Company had royalty revenue of $70,000 for the three months ended
June 30, 2001, compared to $0 for the comparable period in the prior year. This
increase is attributable to the JJM and TFX agreements.
Research and development expenses were $261,000 for the three months
ended June 30, 2001 compared to $235,000 for the same period in 2000. The
increase in these costs resulted from an increase in engineering labor and
operating expenses in 2001 as compared to 2000 related to the new winged
intravenous set product line.
Selling, general and administrative expenses were $1,604,000 for the
three months ended June 30, 2001 compared to $2,015,000 for the same period in
2000. The decrease in these costs resulted from reduction in approximately
$350,000 in general management and administrative expenses due to costs
associated with the hiring of the Company's chief executive officer incurred in
the second quarter of 2000, and decreases in legal and consulting fees during
the the quarter ended 2001.
Financing expenses were $731,000 for the three months ended June 30,
2001 compared to $1,125,000 for the same period in 2000. The decrease in these
costs resulted primarily from reduction of expenses associated with the
Permanent Financing of approximately $225,000 in 2000 and the capitalization of
$169,000 of interest in 2001.
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
The Company had product sales of $2,586,000 for the six months ended
June 30, 2001 compared to $2,184,000 for the same period in 2000. The increase
was primarily attributable to sales incentives offered to major customers during
the second quarter. Product costs were $1,908,000 for the six months ended June
30, 2001 compared to $1,090,000 for the same period in 2000. Such costs
increased due to increased sales volumes and increased manufacturing costs
associated with the new winged intravenous product line.
The Company had revenues from services totaling $100,000 for the six
months ended June 30, 2001 compared to $34,000 for the same period in 2000. The
increase is attributable to the Fresenius agreement.
The Company had licensing fee revenue of $100,000 in the first quarter
of 2001 and 2000 which was attributable to the completion of the Design,
Development and Asset Transfer Agreement with JJMI Medical and the completion of
the PICC Introducer development project for TFX.
The Company had royalty revenue of $121,000 for the six months ended
June 30, 2001, compared to $0 for the comparable period in the prior year. This
increase is attributable to the JJM and TFX agreements.
Research and development expenses were $601,000 for the six months
ended June 30, 2001 compared to $557,000 for the same period in 2000. The
increase in these costs resulted from an increase in engineering labor and
operating expenses in 2001 as compared to 2000 due to costs related to the new
winged intravenous set product line.
Selling, general and administrative expenses were $4,115,000 for the
six months ended June 30, 2001 compared to $3,590,000 for the same period in
2000. The increase resulted from legal fees incurred during the first quarter
associated with the bankruptcy petition.
Financing expenses were $1,404,000 for the six months ended June 30,
2001 compared to $2,832,000 for the same period in 2000. The decrease in these
costs resulted primarily from reduction of expenses associated with the closing
of the Permanent Financing of approximately $1,092,000 in 2000 and the
capitalization of $336,000 of interest in 2001.
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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 June 30, 2001, the
Company has received net proceeds of approximately $48,756,000 through
borrowings and the sale of debt securities and $51,758,000 through the sale of
equity securities.
Cash used in operating activities for the six months ended June 30, 2001
totaled $3,536,000 and was primarily due to a net loss for the period of
$5,234,000 and decreases in accounts payable and accrued expenses, partially
offset by a decrease in accounts receivable and inventories and depreciation and
amortization expenses primarily reflecting the amortization of deferred debt
financing expenses and an increase in deferred revenue associated with the
Fresenius agreement.
Net cash used in investing activities amounted to $1,144,000 for the six
month period primarily due to additions to fixed assets totaling $1,098,000
consisting substantially of capitalized costs associated with the construction
of its winged intravenous set production line.
Net cash provided by financing activities amounted to $1,740,000 for the six
months ended June 30, 2001 due to accretion of interest, proceeds from notes
payable and the sale of common stock.
At June 30, 2001, the Company's shareholders' deficit increased to
($7,556,000) from ($2,419,000) at December 31, 2000 due to a net loss for the
six months ended June 30, 2001. Also, at June 30, 2001, current liabilities
exceed current assets due to the classification of the convertible notes as
current liabilities.
FINANCING DURING THE CHAPTER 11 CASE
On May 17, 2001, the Bankruptcy Court entered an order authorizing the
Company to borrow from Appaloosa Management. term loans in an amount not to
exceed the aggregate principal amount of $300,000 pursuant to the terms of a
Credit Agreement (the "DIP Credit Agreement") between the Debtor and Appaloosa
Management. The term loans were used for the purposes of funding general working
capital needs in the ordinary course of the Company's business in excess of the
net income generated by the Company's business. As security for the prompt
payment of the term loans and performance of any and all obligations,
liabilities and indebtedness of the Company to Appaloosa Management under the
Credit Agreement or otherwise, Appaloosa Management. was granted valid and
perfected first priority security interests and liens, superior to all other
creditors of the estate of the Company (subject to certain exceptions), in and
upon all now existing and hereafter acquired or arising property of the Company
which constitutes collateral under the Credit Agreement, wherever located, of
any kind or nature, and the proceeds (including insurance proceeds) and products
thereof. The term loans were repaid from the proceeds of the Appaloosa Private
Placement described below.
THE APPALOOSA PRIVATE PLACEMENT
On July 19, 2001 (the "Effective Date"), the Delaware Company completed a
private placement of 1,314,060 shares of its common stock to Appaloosa
Investment Limited Partnership I ("Appaloosa Investment") and Palomino Fund Ltd.
("Palomino") (Appaloosa Investment, and Palomino being collectively referred to
herein as the "Purchasers"). The purchase price paid for the stock was $3
million, which was reduced in an amount equal to the Purchaser's costs and
expenses incurred in connection with the transaction and the amount of the
Delaware Company's outstanding indebtedness for borrowings pursuant to the
financing provided by the Manager during the Chapter 11 case. The private
placement was made pursuant to a Stock Purchase Agreement, which contains
customary provisions, including representations and warranties. A copy of the
Stock Purchase Agreement is filed as Exhibit 10.54 hereto and is incorporated
herein by reference. As part of the private placement, on the Effective Date,
Delaware Company also issued to the Purchasers Warrants to purchase 1,314,060
shares of its common stock (the "Warrants"). The Warrants have an exercise price
of $2.283 per share. The Warrant contains customary provisions, including
anti-dilution protection. Upon the Delaware Company achieving certain
performance targets, (a) the Delaware Company shall have the right to redeem
these Warrants at a price of $.01 per share at any time 45 days after the
Purchasers receive notice of the achievement of the performance target by the
Delaware Company and (b) the Warrants shall be exercisable by the Purchasers for
30 days after the Purchasers receive notice of the achievement of the
performance target by the Delaware Company. The exercise of these Warrants,
assuming they are exercised in full, is expected to yield proceeds of
approximately $3.0 million to the Delaware Company. A copy of the Warrant is
filed as Exhibit 10.55 hereto and is incorporated herein by reference.
Additionally, in consideration for the equity investment made by the Purchasers,
the Delaware Company and the Purchasers have entered into a Registration Rights
Agreement, dated as of the Effective Date (the "Registration
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Rights Agreement"). The Registration Rights Agreement contains customary
provisions, including adjustments for stock splits, stock dividends and reverse
stock splits. Pursuant to the Registration Rights Agreement, the Purchasers have
"demand" registrations which, if exercised, would obligate the Delaware Company,
subject to certain exceptions, to file and have declared effective, a
registration statement relating to resale's of Common Stock owned by the
Purchasers or received from the Delaware Company in respect of the foregoing by
reason of stock dividends or similar matters. These demand registration rights
may be exercised no more than six times. Pursuant to the Registration Rights
Agreement, the Purchasers also have "piggyback" registration rights in
connection with other public offerings by the Delaware Company. A copy of the
Registration Rights Agreement is filed as Exhibit 10.56 hereto and is
incorporated herein by reference. The summary set forth herein of certain
provisions of the Plan of Reorganization, the Delaware Company's Certificate of
Incorporation and Bylaws, the Stock Purchase Agreement, the Warrant Agreement,
and the Registration Rights Agreement does not purport to be a complete
description thereof and is qualified in its entirety by reference to the full
provisions of each document as filed as Exhibits to this Form 10-Q and
incorporated herein by reference.
The Company believes that the net proceeds of the Appaloosa Private
Placement, its existing cash, cash generated from operations, and funds
available through trade credit financing will be sufficient to satisfy its cash
requirements through 2001. Although the Company fully anticipates that it will
be able to continue meetings its obligations as they become due beyond that
date, the Company's ability to do so will depend on its ability to successfully
implement its business plans, general economic and business conditions, and
other factors noted in the section entitled "Forward Looking Statements."
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 4, 2001 (the "Petition Date") the Company filed a voluntary
petition for relief under chapter 11 of the United States Code the "Bankruptcy
Code") with the United States Bankruptcy Court for the District of Connecticut.
As of the Petition Date, the Company commenced operating its business and
manages its properties as a debtor-in-possession. On April 4, 2001, the Company
filed a Disclosure Statement (the "Disclosure Statement") and a Plan of
Reorganization (the "Plan of Reorganization") with the Bankruptcy Court. The
Disclosure Statement set forth certain information regarding, among other
things, significant events that have occurred during the Company's chapter 11
case and the anticipated organization, operation and financing of reorganized
Bio-Plexus ("Reorganized Company"). The Disclosure Statement also described the
Plan of Reorganization, certain effects of Plan confirmation, certain risk
factors associated with securities to be issued under the Plan, and the manner
in which distributions will be made to the Company's creditors under the Plan of
Reorganization for all amounts that were owed to such parties on the Petition
Date. In addition, the Disclosure Statement discussed the confirmation process
and the voting procedures that holders of claims in impaired classes must follow
for their votes to be counted. The Plan of Reorganization divided the Company's
creditors into eight classes: Allowed Secured Claim of Victor and Margaret
DeMattia (Class 1); Allowed Secured Claim of Spafford Leasing (Class 2); Allowed
Priority Claims under Bankruptcy Code section 507(a)(3) (Class 3); Allowed
Priority Claims under Bankruptcy Code section 507(a)(4) (Class 4); Allowed
Secured Claim of the Appaloosa Entities (Class 5); Allowed Unsecured Claims
(Class 6); Allowed Interests of Holders of Old Common Stock (Class 7); Allowed
Interests of Holders of Other Interests (Class 8). In general, the Plan of
Reorganization provided that holders of Administrative Claims, Allowed Tax
Claims, Allowed Priority Claims and Allowed Unsecured Claims would be paid in
full, and would be otherwise rendered unimpaired. Allowed Secured Claims other
than the Allowed Secured Claim of Appaloosa Management and certain of its
affiliates (the "Appaloosa Entities") would be reinstated and paid in accordance
with their terms. In exchange for their Allowed Secured Claim, the Appaloosa
Entities (the Company's largest secured creditor) would receive common stock of
the Reorganized Company, which would constitute 85% of outstanding common stock
of the Reorganized Company. Holders of common stock issued prior to the
confirmation of the Plan of Reorganization would receive, in substitution of
their existing shares, new shares of common stock of the Reorganized Company,
which will constitute 15% of Reorganized Company outstanding common stock. The
Plan of Reorganization also set forth certain information, means for
implementation of the Plan of Reorganization, the effect of rejection of the
Plan of Reorganization by one or more classes of claims or interests, provisions
for how distributions would be made to the Company's creditors, the treatment of
executory contracts and leases and conditions precedent to confirmation of the
Plan of Reorganization and the occurrence of the Effective Date of the Plan of
Reorganization. The Company filed with the United States Bankruptcy Court the
First Amended Plan of Reorganization on April 19, 2001 and the Modified First
Amended Plan of Reorganization on June 12, 2001 to add and clarify certain terms
of the Plan of Reorganization and to establish conditions to confirmation and
effectiveness of the Plan of Reorganization. On April 19, 2001 an order was
approved by the Bankruptcy Court (i) approving the Disclosure Statement (ii)
establishing solicitation, voting, and tabulation procedures and deadlines, and
(iii) scheduling a hearing to consider confirmation of the Plan of
Reorganization, establishing deadlines and procedures for filing objections to
confirmation of the Plan of Reorganization. On June 12, 2001 a confirmation
order was issued by the United States Bankruptcy Court that confirmed the Plan
of Reorganization pursuant to Bankruptcy Code section 1129. Conditions precedent
to the Effective Date of the Plan of Reorganization included, among other
things, reincorporation of Reorganized Company in the State of
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Delaware, the commercial launch of the Company's Winged Set product, and the
Appaloosa private placement described above. On July 19, 2001, the Company
completed its reincorporation in Delaware, it consummated the Appaloosa private
placement and the Plan of Reorganization become effective.
ITEM 2. CHANGES IN SECURITIES
On March 13, 2001, the Company issued to Fresenius Medical Holdings
Inc. 101,744 restricted common no par stock as part of a licensing and
development agreement in reliance on the provisions provided under Section 4(2)
of the Act.
Effective July 19, 2001, the Reorganized Company reincorporated in the
State of Delaware as the Delaware Company. The reincorporation was effected
pursuant to a merger agreement entered into pursuant to the Plan of
Reorganization (the "Merger Agreement"). Immediately prior to the
reincorporation, the Reorganized Company affected a reverse stock split pursuant
to the Plan of Reorganization. As a result of the reverse stock split, each ten
shares of the Reorganized Company's common stock was converted into one share of
Reorganized Company common stock. Thereafter, the reincorporation was effected
in accordance with the Merger Agreement by merging the Reorganized Company with
and into the Delaware Company. As a result of that merger, the separate
corporate existence of the Reorganized Company ceased, the certificate of
incorporation and bylaws of the Delaware Company became and continue in effect
as the registrant's certificate of incorporation and bylaws, and each share of
common stock of the Reorganized Company was immediately converted into one share
of Common Stock of the Delaware Company. Accordingly, as a result of the reverse
stock split and reincorporation, each ten shares of the Reorganized Company's
Common Stock issued and outstanding prior to the reverse stock split and
reincorporation was effectively converted into one share of the Delaware
Company's Common Stock subsequent to the reincorporation. A copy of the
certificate of incorporation and by-laws of the Delaware Company as currently in
effect are filed as Exhibits 3.1 and 3.2 hereto and are incorporated herein by
reference.
Effective June 19, 2001, upon confirmation and effectiveness of the
Company's Plan of Reorganization, Appaloosa Management, and certain of its
affiliates received shares of common stock of the Reorganized Company
representing 85% of the Reorganized Company outstanding common stock, and
holders of common stock issued prior to the confirmation of the Plan of
Reorganization (other than Appaloosa Management and such affiliates) received,
in substitution of their existing shares, new shares of common stock of the
Reorganized Company, which constituted 15% of Reorganized Company outstanding
common. The Company relied on the provisions of Section 1145 of the United
States Bankruptcy Code and Section 3(a)(10) of the Securities Act in connection
with these issuances.
Thereafter, as set forth under the heading "The Appaloosa Private
Placement" the Company issued 1,314,060 shares of its common stock and warrants
to purchase an additional 1,314,060 shares of its common stock to the Purchasers
identified therein. The Company relied on the provisions of Section 1145 of the
United States Bankruptcy Code and Section 3(a)(10) of the Securities Act in
connection with these issuances.
As a result of the foregoing transactions Appaloosa Management and
David A. Tepper, the sole stockholder and President of Appaloosa Partners, Inc.,
the general partner of Appaloosa Management now beneficially own shares of the
Delaware Company's common stock constituting approximately 87% of its
outstanding common stock. As a result, they will be able to control the outcome
of stockholder votes. Examples of stockholder votes include the election of
directors, changes in the registrants Certificate of Incorporation and Bylaws
and approval of certain mergers or other similar transactions, such as a sale of
all or substantially all of the registrant's assets. Moreover, under Delaware
law, these actions can be taken by written consent without an actual meeting of
the registrant's stockholders.
The Company's board of directors now consists of four directors, three
of which have been designated by the Appaloosa Management and certain of its
affiliates: James Bolin who is the non-executive Chairman of the Company's Board
of Directors; Scott M. Tepper, the Vice Chairman of the Company's Board of
Directors and the brother of David A. Tepper; and Ken Maiman. The fourth
director is John S. Metz, who is the president and chief executive officer of
the Company
ITEM 3. DEFAULT UPON SENIOR SECURITIES
The convertible notes payable issued on April 28, 2000 to the Appaloosa
Entities (see Note 3) contain certain restrictive covenants, including but not
limited to, minimum (maximum) operating profit (loss), minimum product sales
revenue and maximum permitted capital expenditures. At June 30, 2001, the
Company was in violation of the operating profit (loss) and the minimum product
sales
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revenues covenants. Under the terms of the agreement, the Appaloosa Entities may
call the convertible notes as a result of this violation. The covenant
violations have not been waived by the Appaloosa Entities as such notes were
converted to common stock upon the effectiveness of the Plan of Reorganization.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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Exhibit No. Description Method of Filing
- ----------- ----------- ----------------
3.1 Certificate of Incorporation of the Incorporated by reference to Exhibit 3.1 of the Company's
Reorganized Delaware Bio-Plexus Form 8-K filed July 31, 2001
3.2 By-Laws of the Reorganized Delaware Bio-Plexus Incorporated by reference to Exhibit 3.1 of the Company's
Form 8-K filed July 31, 2001
10.18 Supply Agreement dated January 28, 1997 by and Incorporated by reference to 10.18 to the Registrant's
between the Company and Johnson & Johnson Quarterly Report on Form 10-Q for the quarter ended on
Medical, Inc. September 30, 1998 (File No. 0-24128).
10.51 Development and Manufacturing and Distribution Incorporated by reference to Exhibit 10.51 of the Company's
Agreement dated December 19, 2000 between the Form 10-K filed July 17, 2001
Company and Fresenius Medical Care Holdings,
Inc. (d/b/a Fresenius Medical Care North
America)
10.53 Debtor's Modified First Amended Plan of Incorporated by reference to Exhibit 10.53 of the Company's
Reorganization dated June 12, 2001 Form 10-K, filed July 17, 2001
10.54 Stock Purchase Agreement, dated as of July 18, Incorporated by reference to Exhibit 3.1 of the Company's
2001, by and among Bio-Plexus, Inc. and each Form 8-K filed July 31, 2001
of the purchasers listed on Exhibit A thereto.
10.55 Warrant, dated July 18, 2001, by and among Incorporated by reference to Exhibit 3.1 of the Company's
Bio-Plexus, Inc. and each of the holders Form 8-K filed July 31, 2001
listed on Exhibit A thereto
10.56 Registration Rights Agreement, dated as of Incorporated by reference to Exhibit 3.1 of the Company's
July 18, 2001, by and among Bio-Plexus, Inc. Form 8-K filed July 31, 2001
and each of the stockholders listed on Exhibit
A thereto.
(b) Reports on Form 8-K
A report on Form 8-K was filed on April 4, 2001 announcing Bio-Plexus, Inc. (the
"Company") reports that it has released its financial results for the year ended
December 31, 2000.
A report on Form 8-K was filed on April 5, 2001 On April 4, 2001,
Bio-Plexus, Inc. (the "Company") filed a voluntary petition under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court for the
District of Connecticut in Hartford, Connecticut.
A report on Form 8-K was filed on June 5, 2001 announcing that quotes
for the Company's common stock could be obtained via the Pink Sheets.
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A report on Form 8-K was filed on July 31, 2001 announcing the
confirmation of the Company's plan of reorganization, the Company's
reincorporation in Delaware, a reverse split with respect to the Company's
common stock, the consummation of a private placement of stock and a change in
control of the Company.
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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)
August 15, 2001 /s/ John S. Metz
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(Date) John S. Metz
President and Chief Executive Officer
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