-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F3xSmfBJ9ERHhKuOoGg5k9Xl6RgGiYnUZqbUPbmcerW4N61hJIeVJC2HvWhQ77YZ MrAz7c8ZPnEKvm5ZnCbjCg== 0000810084-97-000023.txt : 19970222 0000810084-97-000023.hdr.sgml : 19970222 ACCESSION NUMBER: 0000810084-97-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOJECT MEDICAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000810084 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 931099680 STATE OF INCORPORATION: OR FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15360 FILM NUMBER: 97533240 BUSINESS ADDRESS: STREET 1: 7620 S W BRIDGEPORT RD CITY: PORTLAND STATE: OR ZIP: 97224 BUSINESS PHONE: 5036397221 FORMER COMPANY: FORMER CONFORMED NAME: BIOJECT MEDICAL SYSTEMS LTD DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED 09-30-96 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR For the quarterly period ended December 31, 1996 Commission File No. 0-15360 BIOJECT MEDICAL TECHNOLOGIES INC. (Exact name of registrant as specified in its charter) Oregon 93-1099680 (State of other jurisdiction of (I.R.S. identification no.) employer incorporation or organization) 7620 SW Bridgeport Road Portland, Oregon 97224 (Address of principal executive offices) (Zip code) (503) 639-7221 (Registrant's telephone number, including areas code) Indicate by check mark whether the registrant (1) has filed all reports required to be 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 [ ] At December 31, 1996 there were 19,051,205 outstanding shares of common stock of the registrant. PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following unaudited consolidated financial statements of Bioject Medical Technologies Inc. (BMT) and its subsidiaries, Bioject Medical Systems Ltd. (BMSL) and Bioject Inc. (BI) (together, unless the context otherwise requires, the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. BMT, BMSL and BI were formed for the purpose of developing, manufacturing and distributing a new drug delivery system, capable of injecting medications through the skin without the traditional needle puncture. The following 10-Q report reflects the consolidated results of operations, cash flows and financial position for the second quarter of the year ending March 31, 1997. The results of operations for interim periods are not necessarily indicative of the results to be expected for the year. - Consolidated Statements of Operations for the quarters ended December 31, 1996 and December 31, 1995 - Consolidated Statements of Operations for the six months ended December 31, 1996 and December 31, 1995 - Consolidated Balance Sheets dated December 31, 1996 and March 31, 1996 - Consolidated Statements of Cash Flows for the quarters ended December 31, 1996 and December 31, 1995 - Consolidated Statements of Cash Flows for the six months ended December 31, 1996 and December 31, 1995 Page 1 BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three-Month Period Ended December 31, 1996 1995 ------------------------- REVENUES: Net sales of products $ 325,791 $ 961,630 Licensing/technology fees 80,000 375,000 ----------- --------- 405,791 1,336,630 ----------- ----------- EXPENSES: Manufacturing 422,344 1,353,714 Research and development 312,922 441,972 Selling, general and administrative 767,992 826,804 Other (income) expense, net (14,717) (38,722) ----------- ----------- 1,488,541 2,583,768 ----------- ----------- INCOME (LOSS) BEFORE TAXES (1,082,750) (1,247,138) PROVISION FOR INCOME TAXES - - ----------- ----------- NET INCOME (LOSS) $(1,082,750) $(1,247,138) =========== =========== EARNINGS (LOSS) PER SHARE $ (.07) $ (.09) =========== =========== SHARES USED IN PER SHARE CALCULATION 16,189,127 14,206,700 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. Page 2 BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Nine-Month Period Ended December 31, 1996 1995 ------------------------- REVENUES: Net sales of products $ 845,422 $ 2,595,649 Licensing/technology fees 665,500 825,000 ----------- ----------- 1,510,922 3,420,649 ----------- ----------- EXPENSES: Manufacturing 1,606,887 4,245,915 Research and development 1,005,402 1,169,956 Selling, general and administrative 2,340,058 2,506,017 Other (income) expense, net (64,829) (147,468) ----------- ----------- 4,887,518 7,774,420 ----------- ----------- INCOME (LOSS) BEFORE TAXES (3,376,596) (4,353,771) PROVISION FOR INCOME TAXES - - ----------- ----------- NET INCOME (LOSS) $(3,376,596) $(4,353,771) =========== =========== EARNINGS (LOSS) PER SHARE $ (.22) $ (.32) =========== =========== SHARES USED IN PER SHARE CALCULATION 15,807,517 13,579,878 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. Page 3 BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, March 31, 1996 1996 -------------------------- ASSETS (unaudited) - ------------------------------------------ CURRENT ASSETS: Cash and cash equivalents $ 2,503,543 $ 3,098,251 Securities available for sale - 993,056 Accounts receivable 259,388 424,859 Inventories 1,723,474 1,255,945 Prepaid and other current assets 44,195 45,714 ----------- ----------- Total current assets 4,530,600 5,817,825 CASH - RESTRICTED 308,558 - PROPERTY AND EQUIPMENT, at cost: Machinery and equipment 1,435,738 1,428,001 Production molds 780,980 777,353 Furniture and fixtures 163,832 163,116 Leasehold improvements 73,854 73,854 Equipment and molds under construction, pledged 1,382,425 - Capitalized interest 67,576 ----------- ----------- 3,904,405 2,442,324 Less - Accumulated depreciation (1,379,338) (1,048,638) ----------- ----------- 2,525,067 1,393,686 OTHER ASSETS 290,594 307,105 ----------- ----------- $ 7,654,819 $ 7,518,616 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY - -------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 645,923 $ 550,174 Accrued payroll 188,362 158,225 Other accrued liabilities 241,487 216,924 Deferred revenue - 566,000 ----------- ----------- Total current liabilities 1,075,772 1,491,323 LONG-TERM DEBT 1,606,000 - COMMITMENTS SHAREHOLDERS' EQUITY: Preferred stock, no par, 10,000,000 shares authorized; no shares issued and outstanding - - Common stock, no par, 100,000,000 shares authorized; issued and outstanding 19,051,205 shares at December 31, 1996 and 15,585,232 at March 31, 1996 38,323,508 36,001,158 Accumulated deficit (33,350,461) (29,973,865) ----------- ----------- Total shareholders' equity 4,973,047 6,027,293 ----------- ----------- $ 7,654,819 $ 7,518,616 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. Page 4 BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Three-Month Period Ended December 31, 1996 1995 -------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(1,082,750) $(1,247,138) Adjustments to net loss: Depreciation and amortization 49,000 132,600 Common stock issued for services - 23,195 Net changes in assets and liabilities: Accounts receivable 10,198 187,625 Inventories (147,490) 158,727 Prepaid and other current assets (345) (28,470) Accounts payable 203,609 (71,416) Accrued payroll 3,430 5,532 Other accrued liabilities (44,664) (145,833) Deferred revenue (30,000) 635,000 ----------- ----------- Net Cash Used in Operating Activities (1,039,012) (350,178) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Transfers to restricted cash (206,000) - Transfers from restricted cash 693,278 - Purchase of securities available for sale - (3,454,102) Sale of securities available for sale - - Capital expenditures (814,929) (153,161) Other assets (167) (18,002) ----------- ----------- Net Cash Used in Investing Activities (327,818) (3,625,265) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt 206,000 - Cash proceeds from common stock 2,163,000 3,454,102 ----------- ----------- Net Cash Provided by Financing Activities 2,369,000 3,454,102 ----------- ----------- CASH AND CASH EQUIVALENTS: Net increase (decrease) in cash and cash equivalents 1,002,170 (521,341) Cash and cash equivalents at beginning of period 1,501,373 2,481,137 ----------- ----------- Cash and cash equivalents at end of period $ 2,503,543 $ 1,959,796 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. Page 5 BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Nine-Month Period Ended December 31, 1996 1995 -------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(3,376,596) $(4,353,771) Adjustments to net loss: Depreciation and amortization 353,200 397,800 Common stock issued for services 159,350 39,961 Net changes in assets and liabilities: Accounts receivable 165,471 239,828 Inventories (467,529) (76,711) Prepaid and other current assets 1,519 (2,536) Accounts payable 95,734 (116,478) Accrued payroll 30,137 63,249 Other accrued liabilities 24,578 (112,933) Deferred revenue (566,000) 535,000 ----------- ----------- Net Cash Used in Operating Activities (3,580,136) (3,386,591) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Transfers to restricted cash (1,606,000) - Transfers from restricted cash 1,297,442 - Purchase of securities available for sale - (3,454,102) Sale of securities available for sale 993,056 3,989,468 Capital expenditures (1,462,081) (644,104) Other assets (5,989) (56,361) ----------- ----------- Net Cash Used in Investing Activities (783,572) (165,099) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt 1,606,000 - Cash proceeds from common stock 2,163,000 3,454,102 ----------- ----------- Net Cash Provided by Financing Activities 3,769,000 3,454,102 ----------- ----------- CASH AND CASH EQUIVALENTS: Net increase (decrease) in cash and cash equivalents (594,708) (97,588) Cash and cash equivalents at beginning of period 3,098,251 2,057,384 ----------- ----------- Cash and cash equivalents at end of period $ 2,503,543 $ 1,959,796 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. Page 6 BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY: The consolidated financial statements of Bioject Medical Technologies Inc. and its subsidiaries (the "Company"), include the accounts of Bioject Medical Technologies Inc. ("BMT") and its wholly owned subsidiaries, Bioject Medical Systems Ltd. ("BMSL") and Bioject Inc. ("BI"). All significant intercompany transactions have been eliminated. BMT was incorporated on December 17, 1992 under the laws of the State of Oregon for the purpose of acquiring all of the outstanding common shares of BMSL in exchange for an equivalent number of common shares of BMT stock under a plan of U.S. reincorporation approved by the Company's shareholders on November 20, 1992. BMSL was incorporated on February 14, 1985, under the laws of British Columbia, and BI was incorporated on February 8, 1985, under the laws of the State of Oregon. The Company commenced operations in 1985 for the purpose of developing, manufacturing and distributing a new drug delivery system. Since its formation, the Company has been engaged principally in organizational, financing, research and development, and marketing activities. In the last quarter of fiscal 1993, the Company launched U.S. distribution of its Biojector 2000 system primarily to the hospital and large clinic market. The Company's products and manufacturing operations are subject to extensive government regulation, both in the U.S. and abroad. In the U.S., the development, manufacture, marketing and promotion of medical devices is regulated by the Food and Drug Administration ("FDA") under the Federal Food, Drug, and Cosmetic Act ("FFDCA"). In 1987, the Company received clearance from the FDA under Section 510(k) of the FFDCA to market a hand-held CO2-powered jet injection system. In June 1994, the Company received clearance from the FDA under 510(k) to market a version of its Biojector 2000 system in a configuration targeted at high volume injection applications. The Company's revenues to date have been derived primarily from licensing and technology fees and more recently from sales of the Biojector 2000 system and Biojector syringes to public health clinics and to Health Management Inc. with whom the Company signed a two-year distribution agreement in fiscal 1995. Subsequent to year end this agreement was cancelled. Although not obligated to do so, the Company agreed to repurchase a portion of the goods sold. Future revenues will depend upon acceptance and use by healthcare providers of the Company's jet injection technology. Uncertainties over government regulation and competition in the healthcare industry may impact healthcare provider expenditures and third party payer reimbursements and, accordingly, the Company cannot predict what impact, if any, subsequent healthcare reforms might have on its business. In the future the Company may require additional financing. Failure to obtain such financing on favorable terms could adversely affect the Company's business. 2. ACCOUNTING POLICIES: INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined in a manner which approximates the first-in, first out (FIFO) method. Costs utilized for inventory valuation purposes include labor, materials and manufacturing overhead. Net inventories consist of the following: December 31, March 31, 1996 1996 ---------- ---------- Raw Materials $ 606,991 $ 697,694 Work in Process 210,000 12,467 Finished Goods 906,483 545,784 ---------- ---------- $1,723,474 $1,255,945 ========== ========== Page 7 During the first nine months of the fiscal year, although not obligated to do so, the Company committed to repurchase certain inventories from one customer. The purchase price totalled $660,000 of which $491,000 has been satisfied and the balance is still outstanding. PROPERTY AND EQUIPMENT AND LONG-TERM DEBT In the first nine months of fiscal 1997, the Company commenced acquiring tooling and molds under a contract with Schering AG. Under the contract, Schering agreed to advance the Company up to $1.6 million on an agreed- upon schedule to acquire this capital equipment which was pledged to Schering subject to repayment of the loans. Unexpended funds advanced to the Company were held in a separate account and were also pledged against repayment of the debt. Subsequent to quarter end, Schering notified the Company that it was canceling its contract. Under the terms of the contract, the loan will be converted into approximately 460,000 shares of common stock of the Company and, therefore, repayment of the debt will not be required. Upon issuance of such shares, the assets will be owned by the Company free of any lien from Schering. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS The accompanying, unaudited consolidated financial statements do not include all information and footnote disclosures normally included in an audited financial statement. However, in the opinion of management, all adjustments (which include only normal, recurring adjustments except as described below) necessary to present fairly the financial position, cash flows, and results of operations have been made. It is suggested that these statements be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K for the year ended March 31, 1996. On June 3, 1996, the British Columbia Securities Commission informed the Company that its Executive Director (formerly the Superintendent of Brokers) consented to the release of all shares originally held in escrow pursuant to an escrow agreement dated May 30, 1986. This means that the 1.5 million shares of common stock which had been held under this escrow arrangement since the Company's initial public offering in July 1986 are now held by the owners of the shares without risk of cancellation and may be sold. As previously disclosed, a non-cash charge to compensation expense was required to be recorded for certain of the shares released from the escrow account and transferred to certain former employees and consultants of the Company. Accordingly, a non-cash charge totalling $120,000 has been recorded in the financial statements in the first quarter of fiscal 1997. Effective with release of these shares, the escrow has been terminated and no further charges will be incurred by the Company as a result of the previously escrowed shares. Page 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company has been developing a self-injection system for Schering AG, Germany, under a multi-year contract signed in March 1994. On June 26, 1996, the Company and Schering entered into a Supply Agreement which specifies the terms under which the Company would manufacture and sell the self-injection systems to Schering. Subject to Schering's satisfaction with certain product test results and receipt of regulatory approval in the United States and certain foreign countries, Bioject would have manufactured the self-injection systems exclusively for Schering AG which would have distributed the systems on a worldwide basis to multiple sclerosis patients using Betaseron. During the quarter, the Company's activities were focused on completing pilot production of the self-injector in preparation for full scale manufacture and shipment which was expected to commence in April 1997. Subsequent to quarter end, the Company was notified by Schering of Schering's intention to cancel its contract with Bioject. Under provisions of the contract, Schering AG had the option of canceling the agreement if the FDA required extensive clinical studies beyond an originally planned safety study. Schering AG recently received a review letter from the FDA which would have required Schering to conduct additional material clinical studies in order to use non-traditional delivery mechanisms with its Betaseron product. The Company understands that the uncertain regulatory clearance schedule was a significant factor in Schering's decision to cancel the contract. The Company retains the rights to the self-injection technology and is actively seeking other strategic partners for whom such a system would provide a competitive advantage. Under terms of the contract, Schering must convert its $1.6 million note due from Bioject into approximately 460,000 shares of Bioject common stock at a conversion price of $3.50 per share. In addition, Schering is obligated to pay Bioject for all product ordered to date. The Company's revenues to date have not been sufficient to cover operating expenses. However, the Company believes that if its products achieve market acceptance and the volume of sales increases, and its product costs are reduced, its costs of goods as a percentage of sales will decrease and eventually the Company will generate net income. (See "Forward Looking Statements") The level of sales required to generate net income will be affected by a number of factors including the pricing of the Company's products, its ability to attain efficiencies that can be attained through volume and automated manufacturing, and the impact of inflation on the Company's manufacturing and other operating costs. There can be no assurance that the Company will be able to successfully implement its manufacturing cost reduction program or sell its products at prices or in volumes sufficient to achieve profitability or offset increases in its costs should they occur. Revenues and results of operations have fluctuated and can be expected to continue to fluctuate significantly from quarter to quarter and from year to year. Various factors may affect quarterly and yearly operating results including (i) length of time to close product sales, (ii) customer budget cycles, (iii) implementation of cost reduction measures, (iv) uncertainties and changes in purchasing due to third party payor policies and proposals relating to national healthcare reform, (v) timing and amount of payments under technology development agreements and (vi) timing of new product introductions by the Company and its competition. Page 9 On June 3, 1996, the British Columbia Securities Commission informed the Company that its Executive Director (formerly the Superintendent of Brokers) consented to the release of all shares originally held in escrow pursuant to an escrow agreement dated May 30, 1986. This means that the 1.5 million shares of common stock which had been held under this escrow arrangement since the Company's initial public offering in July 1986 are now held by the owners of the shares without risk of cancellation and may be sold. As previously disclosed, a non-cash charge to compensation expense is required to be recorded for certain of the shares released from the escrow account and transferred to certain former employees and consultants of the Company. Accordingly, a non-cash charge totalling $120,000 has been recorded in the financial statements during the first quarter of fiscal 1997. During the last quarter of fiscal 1997, the Company will continue to focus its efforts on expanding sales, reducing the cost of its products, developing injectors for Hoffmann-La Roche, pursuing additional alliances with pharmaceutical companies and conserving its fiscal resources. The Company does not expect to report net income from operations in fiscal 1997. (See Forward Looking Statements). RESULTS OF OPERATIONS QUARTER ENDED DECEMBER 31,1996 COMPARED TO QUARTER ENDED DECEMBER 31,1995. -----END PRIVACY-ENHANCED MESSAGE-----