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 JUNE 30, 1998
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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 August 11, 1998
--------------------- ---------------------
Common Stock, no par value 12,154,787
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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, 1998 and
December 31, 1997 1
Condensed Statements of Operations for the three months
ended June 30, 1998 and 1997 2
Condensed Statements of Operations for the six months
ended June 30, 1998 and 1997 3
Condensed Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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BIO-PLEXUS, INC.
CONDENSED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1998 1997
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,943,000 $ 1,502,000
Accounts receivable 593,000 395,000
Inventories:
Raw materials 1,010,000 985,000
Work-in-process 244,000 316,000
Finished goods 550,000 297,000
------------ ------------
1,804,000 1,598,000
------------ ------------
Notes receivable 5,000 152,000
------------ ------------
Other current assets 137,000 168,000
------------ ------------
Total current assets 4,482,000 3,815,000
------------ ------------
Fixed assets, net 7,073,000 7,396,000
Deferred debt financing expenses 47,000 73,000
Patents, net of amortization 248,000 152,000
Other assets 252,000 252,000
------------ ------------
$ 12,102,000 $ 11,688,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,017,000 $ 2,219,000
Accounts payable and accrued expenses 1,044,000 619,000
Accrued interest payable 26,000 26,000
Accrued vacation 233,000 248,000
Other accrued employee costs 157,000 204,000
Deferred revenue (Note 3) 3,046,000 841,000
------------ ------------
Total current liabilities 6,523,000 4,157,000
------------ ------------
Other long-term debt, net 2,597,000 3,204,000
Redeemable Class A common stock -- 20,000
Redeemable common stock warrants 149,000 149,000
Commitments and contingencies (Note 5) -- --
Shareholders' equity:
Convertible preferred stock, no par value, 3,000,000
authorized, no shares issued and outstanding -- --
Common stock, no par value, 15,000,000 authorized,
12,154,787 and 12,137,787 shares issued and outstanding 64,093,000 64,070,000
Accumulated deficit (61,260,000) (59,912,000)
------------ ------------
Total shareholders' equity 2,833,000 4,158,000
------------ ------------
$ 12,102,000 $ 11,688,000
============ ============
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,
--------------------------------
1998 1997
------------ ------------
Revenue:
Product $ 1,085,000 $ 954,000
Services 1,254,000 --
------------ ------------
Total revenue 2,339,000 954,000
------------ ------------
Costs and expenses:
Research and development $ 112,000 $ 234,000
Other operating and engineering costs 1,139,000 1,618,000
Selling, general and administrative 1,088,000 1,668,000
------------ ------------
Total operating costs and expenses 2,339,000 3,520,000
------------ ------------
Financing expenses:
Amortization of deferred debt financing 20,000 146,000
Other financing expenses 163,000 984,000
Less: Interest income (40,000) (38,000)
------------ ------------
Total financing expenses 143,000 1,092,000
------------ ------------
Net loss $ (143,000) $ (3,658,000)
------------ ------------
Net loss (basic and diluted) per common share $ (0.01) $ (0.46)
============ ============
Weighted average common shares
outstanding (Note 2) 12,154,787 7,897,390
============ ============
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,
--------------------------------
1998 1997
------------ ------------
Revenue:
Product $ 2,150,000 $ 2,066,000
Services 1,731,000 --
Licensing fees (Note 3) -- 1,500,000
------------ ------------
Total revenue 3,881,000 3,566,000
------------ ------------
Costs and expenses:
Research and development $ 219,000 $ 658,000
Other operating and engineering costs 2,487,000 3,228,000
Selling, general and administrative 2,220,000 3,545,000
------------ ------------
Total operating costs and expenses 4,926,000 7,431,000
------------ ------------
Financing expenses:
Amortization of deferred debt financing 41,000 179,000
Other financing expenses 342,000 3,061,000
Less: Interest income (80,000) (90,000)
------------ ------------
Total financing expenses 303,000 3,150,000
------------ ------------
Net loss $ (1,348,000) $ (7,015,000)
------------ ------------
Net loss (basic and diluted) per common share $ (0.11) $ (0.92)
============ ============
Weighted average common shares
outstanding (Note 2) 12,150,395 7,635,935
============ ============
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)
SIX MONTHS ENDED JUNE 30,
------------------------------
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,348,000) $(7,015,000)
Adjustments to reconcile net loss to cash used
by operating activities:
Depreciation and amortization 565,000 702,000
Inducement expense on conversion -- 640,000
Writedown of equipment to net realizable value 113,000 --
Amortization of deferred debt financing expenses 41,000 179,000
Amortization of debt discount 30,000 1,761,000
Decrease (increase) in assets:
Accounts receivable (198,000) (264,000)
Inventories (206,000) 44,000
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 425,000 (551,000)
Accrued interest payable -- 33,000
Accrued vacation and other employee costs (62,000) (16,000)
(Decrease) increase in deferred revenue (Note 3) 2,205,000 1,243,000
Other 183,000 19,000
----------- -----------
Net cash provided by (used in) operating activities 1,748,000 (3,225,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases and construction of fixed assets (479,000) (466,000)
Cost of patents (102,000) (52,000)
----------- -----------
Net cash used in investing activities (581,000) (518,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of common stock warrants -- 250,000
Proceeds from exercise of common stock options 23,000 50,000
Redemption of common stock (20,000) --
Proceeds from long-term debt -- 4,700,000
Proceeds from sale and leaseback 109,000 302,000
Repayments of long-term debt (838,000) (1,994,000)
----------- -----------
Net cash provided by (used in) financing activities (726,000) 3,308,000
----------- -----------
Net (decrease) increase in cash and cash equivalents 441,000 (435,000)
Cash and cash equivalents, beginning of period 1,502,000 1,322,000
----------- -----------
Cash and cash equivalents, end of period $ 1,943,000 $ 887,000
=========== ===========
Supplemental cash flow disclosures:
Cash payments of interest $ 313,000 $ 539,000
Cash payments of income taxes 3,000 --
Surrender of debt upon warrant exercise -- 4,753,000
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 interim condensed financial statements included herein are
unaudited. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations and cash flows for the periods presented
have been included. The results of operations for the interim period is not
necessarily indicative of the results of operations to be expected for the full
year. These financial statements should be read in conjunction with the
financial statements and the notes included in the 1997 Annual Report to
Shareholders of Bio-Plexus, Inc.
NOTE 2 - LOSS PER SHARE
Net loss per common share is determined based on the weighted average
number of common shares outstanding during the period. In determining weighted
average common shares outstanding, common share equivalents are excluded from
the computation as their effect is anti-dilutive.
In February, 1997, the FASB issued Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings per Share", which establishes new
standards for the computation and disclosure of earnings per share ("EPS"). The
new statement requires dual presentation of "basic" EPS and "diluted" EPS. Basic
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. The Company adopted SFAS 128 for
the periods presented. In determining net loss per common share, common stock
equivalents are excluded from the computation as their effect is anti-dilutive.
NOTE 3 - LICENSING AGREEMENTS
On January 28, 1997 the Company entered into a Development and License
Agreement and a Supply Agreement with Johnson & Johnson Medical, Inc. ("JJMI")
of Arlington, Texas. Under the terms of the agreements, Bio-Plexus, Inc. would
develop and manufacture safety needle assemblies for JJMI utilizing its
self-blunting technology, which would be used by JJMI, under an exclusive
worldwide license granted by the Company, to manufacture and sell a new safety
I.V. catheter. The Company received $2,900,000 in licensing fees and funding to
complete the development of the safety needle assemblies and for the development
of the manufacturing equipment and tooling. JJMI agreed to acquire initial
production equipment and tooling which is expected to be completed in 1998.
During the first quarter of 1997, $1,500,000 in licensing fee revenue was
recognized and at June 30, 1998, $421,000 in development funding was recognized.
The remaining balance of $421,000 has been deferred and will be recognized over
the remaining term of the development project in 1998.
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On April 9, 1998, the Company amended the original development and
license agreement and canceled its supply agreement with JJMI. 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 JJMI, 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
provides for an additional $300,000 payable to the Company for initial capital
equipment purchases during 1998.
NOTE 4 - OTHER SIGNIFICANT CAPITAL TRANSACTIONS
During 1992, 10,000 shares each of Class A common stock was awarded to
two principal officers of the Company, entitling them to 500 votes for each
share of Class A common stock held on any matter submitted to the shareholders
of the Company for action. The Class A common stock was mandatorily redeemable
by the Company on January 1, 1998. Such redemption occurred on January 1, 1998,
and cash payments in the amounts of $10,000 were made to each of the two
individuals during the second quarter of 1998.
NOTE 5 - COMMITMENTS
As of June 30, 1998, the Company had capital expenditure purchase
commitments outstanding of approximately $1,061,000, primarily to be financed
through the JJMI development and license agreement (See Note 3).
NOTE 6 - SUBSEQUENT EVENTS
On July 20, 1998, at the Annual Meeting of Shareholders, the Company
increased the authorized number of common shares from 15,000,000 to 18,000,000.
Additionally, the Company amended its Certification of Incorporation to include
the elimination of the Class A common stock and the elimination of the Series A
preferred stock.
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 negative thereof or other derivations thereon or comparable
terminology, or discussions of strategy that involves 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
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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
Since its inception in September 1987 through June 30, 1998, Bio-Plexus
incurred cumulative ongoing losses totaling $61,260,000. During the same period,
the Company's principal focus has been the design, development, testing and
evaluation of its blood collection safety needle 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.
With the addition of the blood collection needle assembly and
packaging system in 1996, the Company believes it will have sufficient capacity
to meet its production needs for blood collection needles for 1998. The Company
will continue to review its cost of operations during 1998. In order to achieve
profitability, further reductions in manufacturing costs and increases in sales
are necessary.
In January 1997, the Company entered into a Development and License
Agreement and a Supply Agreement with JJMI. Pursuant to the original agreements,
Bio-Plexus would develop and manufacture safety needle assemblies for JJMI, to
become part of a new safety I.V. catheter to be manufactured and sold by JJMI,
utilizing the Company's patented self-blunting needle design.
In April 1998, the Company amended the original development and license
agreement and canceled its supply agreement with JJMI. 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 JJMI, 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 provides
for an additional $300,000 payable to the Company for initial capital equipment
purchases during 1998.
The Company believes that similar arrangements may be possible with one
or more of the major health care companies for its blood collection needle line,
the winged intravenous set and other products, and intends to continue to pursue
this strategy during 1998. 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 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 ISSUE
The "Year 2000 Issue" is the result of computer systems recognizing two
digits rather than four to define the applicable year. Any of the company's
computer applications, computer hardware, or other systems that have
date-sensitive capabilities may recognize a date using "00" as the year 1900
rather than the year 2000. The Company is in the process of addressing the Year
2000 Issue, but has not yet completed its assessment. The Company plans to work
with specialists as needed to reprogram its current software and/or correct any
hardware issues related to any of its systems in order to become fully
compliant. At the present time, no determination has been made as to whether the
Company has material Year 2000 Issues, and no estimate has been made as to the
costs to remediate such issues.
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RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
The Company had revenues from product sales of $1,085,000 for the three
months ended June 30, 1998 compared to $954,000 for the same period a year ago.
The increase was attributable to the expansion of its domestic account base and
better pricing on its products.
The Company had revenues from services of $1,254,000 for the three
months ended June 30, 1998 resulting from progress payments by JJMI on the
capital equipment project for the I.V. catheter.
Research and development expenses were $112,000 for the three months
ended June 30, 1998, compared to $234,000 for the same period a year ago. The
decrease in these costs in 1998 resulted primarily from the recognition of
$210,000 of deferred revenue related to the development of the I.V. catheter for
JJMI and lower research and development costs related to the winged intravenous
set, partially offset by increases in research and development costs related to
the I.V. catheter project.
Other operating and engineering costs were $1,139,000 for the three
months ended June 30, 1998 compared to $1,618,000 for the same period a year
ago. The decrease is primarily attributable to the Company's efficiency in
lowering manufacturing costs associated with the blood collection line and its
other products, and lower depreciation associated with manufacturing machinery
and equipment.
Selling, general and administrative expenses were $1,088,000 for the
three months ended June 30, 1998 compared to $1,668,000 for the same period a
year ago. The decrease is primarily attributable to the Company's further
reductions in its direct sales force during 1998, as well as other
administrative cost reductions recognized during the third quarter of 1997.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
The Company had revenues from product sales of $2,150,000 for the six
months ended June 30, 1998 compared to $2,066,000 for the same period a year
ago. The increase was attributable to equipment sales to JJMI on the I.V.
catheter project, partially offset by a reduction in the use of distributors in
Europe based on a number of factors including pricing considerations and their
ability to meet sales quotas.
The Company had revenues from services of $1,731,000 for the six months
ended June 30, 1998 resulting from progress payments by JJMI on the capital
equipment project and the recognition of deferred revenue for the I.V. catheter.
Research and development expenses were $219,000 for the six months
ended June 30, 1998, compared to $658,000 for the same period a year ago. The
decrease in these costs in 1998 resulted primarily from the recognition of
$421,000 of deferred revenue related to the development of the I.V.
catheter for JJMI.
Other operating and engineering costs were $2,487,000 for the six
months ended June 30, 1998 compared to $3,228,000 for the same period a year
ago. The decrease is primarily attributable
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to the Company's efficiency in lowering manufacturing costs associated with the
blood collection line and its other products.
Selling, general and administrative expenses were $2,220,000 for the
six months ended June 30, 1998 compared to $3,545,000 for the same period a year
ago. The decrease is primarily attributable to the Company's reduction in its
direct sales force during the second quarter of 1997, as well as other
administrative cost reductions recognized during the third quarter of 1997.
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, research and
development activities surrounding the Punctur-Guard(R) blood collection needle
and production processes, its need for additional capital expenditures on molds
and production equipment, and its 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, 1998, the Company has received net proceeds
of approximately $29,209,000 through borrowings and the sale of debt securities
and $47,946,000 through the sale of equity securities. Of the net equity
proceeds, $17,575,000 was received from its 1995 public offering, $14,191,000
was received from the Company's initial public offering and the balance of
$16,180,000 was received through the private placement of equity securities.
The Company's primary cash requirement for the remainder of 1998 will
be for working capital to sustain ongoing operations including debt service,
and, to a lesser extent, further research and development on its winged
intravenous set, I.V. catheter, and other new products. The Company is
considering the development of a strategic partnership with one or more major
companies to assist with the development and expansion of its product line, in
addition to the agreement it already has in place with JJMI on the I.V.
catheter. Its overall strategy is to minimize expenditures on new product
research and development, as well as production capacity for new products until
such time as it determines that additional strategic partnerships are feasible.
On April 9, 1998, the Company amended its existing development and license
agreement and canceled its supply agreement with JJMI. As part of the amendment,
the Company will receive a payment of $3,500,000 with an additional $500,000
payable upon the completion of certain milestones in exchange for the transfer
of manufacturing of the safety needle assemblies to JJMI and certain other
changes in the licensing and royalty agreements. The Company believes that these
proceeds and other anticipated sources of funds, together with funds generated
from sales of its products, will be sufficient to fund its cash requirements for
1998. These estimated cash requirements do not include significant expenditures
in new product areas and amounts needed could vary based on the actual growth of
sales and other factors. In addition to considering strategic partnerships, the
Company is reviewing alternative financing strategies to raise additional funds
in 1998, and is also reviewing opportunities to further reduce operating costs
and other expenses. Failure to raise needed capital would have an adverse effect
on the Company's operations, development plans and cash flows.
To date the Company has not been adversely impacted by inflation.
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PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The Securities and Exchange Commission (the "SEC") recently amended its
proxy rules to provide that a registrant, such as the Company, may specify, in
its proxy statement or form of proxy for its annual meeting of shareholders,
that proxies solicited by the registrant will confer discretionary authority to
vote with regard to matters not identified in the proxy statement that may be
raised at the meeting, including matters to be raised by the shareholders that
were not properly submitted to the registrant as shareholder proposals for
inclusion in the registrant's proxy statement and form of proxy in accordance
with SEC Rule 14a-8, if the registrant did not have notice of such matters at
least 45 days before the date on which the registrant first mailed its proxy
materials for the prior year's annual meeting of shareholders, or by such other
date as may be specified in an advance notice provision adopted by the
registrant. The Company has not adopted an advance notice provision. The Company
first mailed its proxy materials for its 1998 Annual Meeting of Shareholders on
June 19, 1998. Under the SEC's amended proxy rules, the 45 day deadline for
notice to the Company of non-Rule 14a-8 matters to be raised at the Company's
1999 Annual Meeting of Shareholders is thus May 5, 1999.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description Method of Filing
------- ----------- ----------------
27 Financial Data Schedule Filed with this Report.
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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)
--------------------- -------------------------
(Date) Richard L. Higgins
President and Chief Executive Officer
--------------------- -------------------------
(Date) Kimberley A. Cady
Vice President of Finance and Chief
Financial Officer
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