10-Q 1 0001.htm FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 2000 FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 2000

UNITED STATES
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 December 31, 2000
  OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
  For the transition period from ___ to ___

Commission file number 0-15360

BIOJECT MEDICAL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)

Oregon 93-1099680
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
   
      7620 SW Bridgeport Road  
            Portland, Oregon 97224
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 503-639-7221

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.

Common Stock without par value 7,889,452
   (Class) (Outstanding at February 12, 2001)
   

BIOJECT MEDICAL TECHNOLOGIES INC.
FORM 10-Q
INDEX

PART I - FINANCIAL INFORMATION    Page
       
Item 1. Financial Statements    
       
  Consolidated Balance Sheets – December 31, 2000 and March 31, 2000   2
       
  Consolidated Statements of Operations -Three and Nine Months Ended
December 31, 2000 and 1999 		  3
       
  Consolidated Statements of Cash Flows - Nine Months Ended
December 31, 2000 and 1999 		  4
       
  Notes to Consolidated Financial Statements   5
       
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 		  6
       
Item 3. Quantitative and Qualitative Disclosures About Market Risk   9
       
PART II - OTHER INFORMATION    
       
Item 1. Legal Proceedings   9
       
Item 6. Exhibits and Reports on Form 8-K   9
       
Signatures   10

 

 

 

 

1

PART 1 - FINANCIAL INFORMATION      
Item 1. Financial Statements
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
           
      December 31,   March 31,
      2000   2000
ASSETS          
Current assets:          

     Cash and cash equivalents

   $ 3,109,652 $ 6,883,524
     Marketable securities     9,558,134   -
     Accounts receivable, net of allowance for doubtful          
      accounts $68,957 of and $19,624     329,606   126,634
     Inventories     825,467   833,416
     Other current assets     168,039   64,806
        Total current assets     13,990,898   7,908,380
           
Long-term marketable securities     2,806,722   -
Noncurrent receivables     13,074   -
           
Property and equipment, at cost:          
     Machinery and equipment     2,364,821   2,320,197
     Production molds     2,113,834   2,060,977
     Furniture and fixtures     179,312   175,210
     Leasehold improvements     95,604   94,115
     Assets-in-process     38,588   -
      4,792,159   4,650,499
     Less - accumulated depreciation     (3,723,261 )   (3,307,367 )
      1,068,898   1,343,132
Other assets     578,648   562,795
        Total assets   $ 18,458,240 $ 9,814,307
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Current liabilities:          
     Accounts payable   $ 488,845 $ 194,605
     Accrued payroll     177,236   309,160
     Other accrued liabilities     335,020   377,166
     Deferred revenue     67,140   96,727
        Total current liabilities     1,068,241   977,658
           
Long Term Liabilites          
     Long Term Lease Payable     18,676   -
     Deferred revenue     386,135   -
           
Shareholders' equity:          
     Preferred stock, no par value, 10,000,000 shares          
      authorized; issued and outstanding:          
     Series A Convertible - 692,694 shares, $15 stated          
      value     13,164,246   12,305,533
     Series C Convertible - 391,830 shares, no stated          
      value     2,400,000   2,400,000
     Common stock, no par, 100,000,000 shares authorized;          
      issued and outstanding 7,889,452 and 6,305,671          
      shares at December 31, 2000 and March 31, 2000     66,512,022   55,188,623
     Accumulated deficit     (65,091,080 )   (61,057,507 )
        Total shareholders' equity     16,985,188   8,836,649
        Total liabilities and shareholders' equity   $ 18,458,240 $ 9,814,307
     
 		  
 
           
The accompanying notes are an integral part of these consolidated financial statements.           

2

BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS 

 

   
  Three Months Ended December 31,  
 
  Nine Months Ended December 31,  
    2000   1999   2000   1999
Revenue:
 
 
 
 
 
 
 
 
     Net sales of products
$
261,098
$
120,033
$
898,417
$
563,417
     Licensing and technology fees
 
210,562
 
150,000
 
587,552
 
500,000
 
 
471,660
 
270,033
 
1,485,969
 
1,063,417
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
     Manufacturing
 
546,643
 
428,199
 
1,703,371
 
1,337,999
     Research and development
 
643,029
 
287,999
 
1,422,547
 
856,240
     Selling, general and administrative
 
724,032
 
604,362
 
2,168,182
 
1,895,219
          Total operating expenses
 
1,913,704
 
1,320,560
 
5,294,100
 
4,089,458
Operating loss
 
(1,442,044
)
 
(1,050,527
)
 
(3,808,131
)
 
(3,026,041
)
 
 
 
 
 
 
 
 
 
Interest income
 
230,174
 
55,154
 
638,218
 
122,971
Other loss
 
-
 
-
 
(4,947
)
 
-
 
 
230,174
 
55,154
 
633,271
 
122,971
Loss before income taxes
 
(1,211,870
)
 
(995,373
)
 
(3,174,860
)
 
(2,903,070
)
Provision for income taxes
 
-
 
-
 
-
 
-
Loss from continuing operations before
 
 
 
 
 
 
 
 
     preferred stock dividend
 
(1,211,870
)
 
(995,373
)
 
(3,174,860
)
 
(2,903,070
)
Preferred stock dividend
 
(295,777
)
 
(274,404
)
 
(858,713
)
 
(913,745
)
   
 
 
   
Loss from continuing operations allocable to
 
 
 
 
 
 
 
 
     common shareholders
 
(1,507,647
)
 
(1,269,777
)
 
(4,033,573
)
 
(3,816,815
)
Loss from discontinued operations allocable to
 
 
 
 
 
 
 
 
     common shareholders
 
-
 
-
 
-
 
(449,786
)
Gain on sale of discontinued operations
 
-
 
-
 
-
 
2,852,666
Gain from discontinued operations
 
 
 
 
 
 
 
 
     allocable to common shareholders
 
-
 
-
 
-
 
2,402,880
Net loss allocable to common shareholders
$
(1,507,647
)
$
(1,269,777
)
$
(4,033,573
)
$
(1,413,935
)
 
 
 
 
 
 
 
 
 
Basic and diluted loss per common share from
 
 
 
 
 
 
 
 
     continuing operations
$
(0.19
)
$
(0.22
)
$
(0.56
)
$
(0.66
)
Basic and diluted loss per common share from
 
 
 
 
 
 
 
 
     discontinued operations
$
-
$
-
$
-
$
(0.08
)
 
 
 
 
 
 
 
 
 
Basic and diluted income per common share
 
 
 
 
 
 
 
 
     from sale of discontinued operations
$
-
$
-
$
-
$
0.49
 
 
 
 
 
 
 
 
 
Basic and diluted net loss per common share
$
(0.19
)
$
(0.22
)
$
(0.56
)
$
(0.24
)
 
 
 
 
 
 
 
 
 
Shares used in per share calculations 
 
7,867,246 
 
5,805,515 
 
7,217,201 
 
5,803,341 

The accompanying notes are an integral part of these consolidated financial statements. 

3

BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS     

   
  Nine Months Ended December 31,  
    2000   1999
Cash flows from operating activities:        
     Net loss allocable to common shareholders $
(4,033,573
)
 $ (1,413,935
)
     Adjustments to reconcile net loss to net cash  
 
    
         used in operating activities from continuing  
 
    
         operations:  
 
    
             Net loss from discontinued operations  
-
  449,786
             Gain on sale of discontinued operations  
-
  (2,852,666
)
             Compensation expense related to stock options  
16,020
  -
             Contributed capital for services  
148,059
  31,677
             Loss on sale of assets  
4,947
  -
             Depreciation and amortization  
476,348
  547,243
             Preferred stock dividends  
858,713
  913,745
     Changes in operating assets and liabilities:  
 
    
             Accounts receivable  
(194,320
)
   139,560
             Inventories  
7,949
  358,747
             Other current assets  
(103,233
)
   1,709
             Accounts payable  
279,641
  3,290
             Accrued payroll  
(131,924
)
   10,017
             Other accrued liabilities  
(42,146
)
   (5,534
)
             Deferred revenue  
356,548
  100,000
             Net cash used in operating activities of  
 
    
                  continuing operations  
(2,356,971
)
   (1,716,361
)
             Net cash provided operating activities of  
 
    
                  discontinued operations  
-
  1,524,752
   
(2,356,971
)
   (191,609
)
Cash flows from investing activities:  
 
    
     Purchase of marketable securities  
(14,453,184
)
   -
     Sale of Marketable Securities  
2,088,328
  -
     Purchase of Marathon Stock  
-
  (331,456
)
     Capital expenditures of continuing operations  
(166,823
)
   (79,924
)
     Proceeds from sale of capital equipment  
6,024
  -
     Other assets and noncurrent receivables  
(50,566
)
   (34,862
)
             Net cash used in investing activities  
(12,576,221
)
   (446,242
)
   
 
    
Cash flows from financing activities:  
 
    
     Cash proceeds from the sale of Series C Preferred  
 
    
         stock  
-
  2,400,000
     Cash proceeds from the sale common stock  
11,159,320
  109,562
             Net cash provided by financing activities  
11,159,320
  2,509,562
   
 
    
Increase (decrease) in cash and cash equivalents  
(3,773,872
)
   1,871,711
   
 
    
Cash and cash equivalents:  
 
    
     Beginning of period  
6,883,524
  1,274,311
     End of period $
3,109,652
$ 3,146,022

The accompanying notes are an integral part of these consolidated financial statements.

4

     BIOJECT MEDICAL TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation

The financial information included herein for the three and nine-month periods ended December 31, 2000 and 1999 is unaudited; however, such information reflects all adjustments consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of March 31, 2000 is derived from Bioject Medical Technologies Inc.’s (“Bioject’s”) 2000 Annual Report on Forms 10-K and 10-K/A. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Bioject’s 2000 Annual Report on 10-K/A. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

Note 2. 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, 2000 March 31, 2000  
 
Raw materials and components $ 381,472 $ 253,120  
Work-in-process 14,946 3,764  
Finished goods 429,049 576,532  
 
$ 825,467 $ 833,416  
 

Note 3. Net Loss Per Share

The following common stock equivalents are excluded from diluted loss per share calculations, as their effect would have been antidilutive:

Three and Nine Months Ended
  
December 31,
  
 
2000
1999
  
 
Stock options and warrants 2,484,636 2,581,305  
Convertible preferred stock 2,561,572 2,377,053  
 
   Total 5,046,208 4,958,358  
 

Note 4. Private Placement

In July and August 2000, the Company issued a total of 1.43 million shares of its common stock at an average price of $7.76 per share for total proceeds to the Company of $10.3 million, net of offering costs. The common stock was issued to a group of private equity investors led by Lone Pine Capital. In connection with this issuance, the Company issued two warrants exercisable for a total of 143,323 shares of its common stock at an average exercise price of $7.85 per share. The warrants are immediately exercisable and expire in July 2005.

5

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
  OPERATIONS

Forward Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning prospects for future strategic corporate relationships, prospects for sales of the company's products into new, high leverage markets and generally heightened prospects for the adoption and use of needle-free technology. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other factors include, without limitation, the risk that research and development efforts of the Company or others will not produce desired results, the risk that the Company will not have sufficient cash to sustain itself to the time, if ever, that it is profitable, the risk that cool.click™ sales will not increase as rapidly as anticipated, the Company's possible need for additional financing and uncertainties related to the time required to complete research and development, obtaining necessary clinical data and government clearances, successfully attracting additional strategic corporate partners and successfully executing revenue-generating agreements with additional strategic partners. Readers of this 10-Q are referred to the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Forms 10-K and 10-K/A for the year ended March 31, 2000 for further discussions of factors that could affect future results. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made. The Company assumes no obligation to update forward-looking statements if conditions or management's estimates or opinions should change.

Forward-looking statements are based on the estimates and opinions of management on the date the statements are made. The Company assumes no obligation to update forward-looking statements if conditions or management's estimates or opinions should change, even if new information becomes available or other events occur in the future.

Overview

In fiscal 2001, the Company is focusing sales and marketing efforts on entering into licensing and supply arrangements with leading pharmaceutical and biotechnology companies for whose products the Biojector technology provides either increased medical effectiveness or a higher degree of market acceptance. The Company is targeting its direct sales efforts toward: i) sales to existing markets, specifically flu immunization providers, public health agencies and public school systems; ii) sales in states such as California, where the Company believes that needle-syringe safety legislation makes the Company's products more price competitive; and iii) sales to the U.S. military. Sales through distributors will target the home self-injection market.

In fiscal 2001, the Company's clinical research efforts are aimed primarily at clinical research collaborations in the area of DNA-based vaccines and medications. Product development efforts focus primarily in three areas: i) developing self-injectors targeted for the home use market, through continuing development of the Iject; ii) developing pre-filled syringes for use with the B-2000 and with other needle-free injectors presently being developed; and iii) furthering development of the intradermal adapter for the B-2000.

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) implementing cost reduction measures; iv) uncertainties and changes in product sales due to third

6

party payer policies and proposals relating to healthcare cost containment; v) timing and amount of payments under licensing and technology development agreements; and vi) timing of new product introductions by the Company and its competition. The Company does not expect to report net income from operations in fiscal 2001.

Results of Operations

Product sales increased to $261,000 and $898,000 for the three and nine month periods ended December 31, 2000, respectively, compared to $120,000 and $563,000, respectively, for the same periods in fiscal 2000. The increase in the three month period is primarily due to increases in unit sales volumes for B-2000 and cool.click™ devices and syringes. The increase in sales volume for the nine month period is primarily due to a shipment of B-2000 product to a public health account in the first quarter of fiscal 2001 and the commercialization of the cool.click™ in the second quarter. License and technology revenues increased to $211,000 and $588,000 for the three and nine month periods ended December 31, 2000, respectively, compared to $150,000 and $500,000, respectively, for the same periods during 1999. These increases are primarily due to the timing of various licensing fees received from existing strategic corporate partnership agreements.

During the third quarter of fiscal 2001, the Company amended its agreement with Serono to provide Serono with exclusive worldwide distribution rights for its recombinant human growth hormone using a customized version of Bioject's Vitajet™ 3 needle-free delivery system. In addition, Serono was given exclusive worldwide rights for AIDS wasting applications. In exchange for the exclusive worldwide licenses, the Company received licensing and technology fees, which are recognizable over the life of the agreement.

Manufacturing expense increased to $547,000 and $1.7 million for the three and nine month periods ended December 31, 2000, respectively, compared to $428,000 and $1.3 million, respectively, for the comparable periods of 1999. The increases are primarily due to increased sales volume of B-2000 and cool.click™ devices and syringes, and production costs related to the commercialization of the cool.click™.

Research and development expense increased to $643,000 and $1.4 million for the three and nine month periods ended December 31, 2000, respectively, compared to $288,000 and $856,000, respectively, for the comparable periods of 1999. The increases are primarily due to increased activity associated with the development of the Iject disposable and multi-use injectors and costs associated with the establishment of a medical advisory board.

Selling, general and administrative expenses increased to $724,000 and $2.2 million for the three and nine month periods ended December 31, 2000, respectively, compared to $604,000 and $1.9 million, respectively, for the comparable periods of 1999. Increased payroll and related expenses and travel accounted for the increases in selling and general and administrative expenses.

Interest income increased to $230,000 and $638,000 for the three and nine month periods ended December 31, 2000, respectively, compared to $55,000 and $123,000, respectively, for the comparable periods of 1999, due to increased cash balances resulting from net proceeds of $10.3 million from the private placement of 1.43 million shares of our common stock in July and August 2000.

Loss from discontinued operations of $450,000 in the nine months ended December 31, 1999 relates to the operating loss from the Company's former operations to develop and commercialize blood glucose monitoring technology, the license to which was sold in June 1999.

7

Gain on sale of discontinued operations of $2.9 million in the nine months ended December 31, 1999 is the gain recognized from the sale of the Company's blood glucose monitoring technology, and certain fixed assets related to developing the technology, to a third party. The sale was completed on June 30, 1999.

Liquidity and Capital Resources

Since its inception in 1985, the Company has financed its operations, working capital needs and capital expenditures primarily from private placements of securities, exercises of stock options and warrants, proceeds received from its initial public offering in 1986, proceeds received from a public offering of common stock in November 1993, licensing and technology revenues and revenues from sales of products. Net proceeds received from issuance of securities from inception through December 31, 2000 total approximately $78.2 million.

Cash and cash equivalents and marketable securities increased to $15.5 million at December 31, 2000 from $6.9 million at March 31, 2000. The increase resulted from net proceeds of approximately $10.3 million from the private placement of 1.43 million shares of our common stock during July and August 2000 and $861,000 from the exercise of common stock options and warrants, offset by operating cash requirements of $2.4 million and capital asset purchases of $167,000.

Accounts receivable increased to $330,000 at December 31, 2000 from $127,000 at March 31, 2000. Included in the balance at December 31, 2000 is $162,000 due from two customers, $75,000 of which was received from one customer in February 2001.

Non-current receivables relate to the sale of used machinery and equipment for approximately $30,000. Approximately $8,650 is related to the current portion, which is included in the accounts receivable balance.

Accounts payable increased to $489,000 at December 31, 2000 from $195,000 at March 31, 2000. The increase is the result of increased production volume and research and development activities.

Deferred revenue relates to licensing fees due from Serono pursuant to their agreement.

Long term leases payable relate to the purchase of new machinery and equipment for approximately $31,000. Approximately $9,911 is related to the current portion, which is included in the accounts payable balance.

In December 2000, the Company authorized a one-time grant of restricted stock to all current non-employee directors. Each of the seven directors received 3,500 shares of common stock, which vests 50% on December 7, 2001 and 50% on December 7, 2002. The Company recorded deferred compensation of $145,000 related to the restricted stock grants, which is being charged against income over the next 24 months.

8

New Accounting Pronouncements

In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities-an amendment of FASB Statement No. 133” (“ SFAS 138”). In June 1999, the FASB issued Statement of Financial Accounting Standards ments and Hedging Activities” (“SFAS 137”). SFAS 137 is an amendment to Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS 137 and 138 establish accounting and reporting standards for all derivative instruments. SFAS 137 and 138 are effective for fiscal years beginning after June 15, 2000. The Company does not have any derivative instruments nor does it participate in hedging activities and therefore, does not expect the adoption of SFAS 137 and 138 to have a material impact on its financial position or results of operations.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (“SAB 101”). SAB 101 summarized certain areas of the Staff’s views in applying generally accepted accounting principles to revenue recognition in financial statements. In June 2000, SAB 101B was issued which deferred the implementation date of SAB 101 until October 1, 2000. The Company does not expect that SAB 101 will have a significant impact on its financial condition or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

PART II

ITEM 1. LEGAL PROCEEDINGS

In April 1998, the Company was named as co-defendant in a product liability suit alleging injury and unspecified damages in excess of $50,000 to the plaintiff in connection with an injection administered using the B-2000. The case, Donovan vs. Bioject Inc. et al, case number 19-C0-99-8265, was brought before the Dakota County District Court in Hastings, MN. In May 2000, the suit was dismissed by the trial court. The plaintiff has appealed the trial court’s decision. The Company intends to defend this matter vigorously but cannot be certain of the outcome.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The exhibits filed as a part of this report are listed below and this list is intended to constitute the exhibit index.

Exhibit Number and Description

     3 Second Amended and Restated Bylaws of Bioject Medical Technologies, Inc.

(b) Reports on Form 8-K

There were no reports on Form 8-K filed during the quarter ended December 31, 2000.

9

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: February 12, 2001 BIOJECT MEDICAL TECHNOLOGIES INC.
  (Registrant)
   
   
   
   
 
/s/ JAMES O’SHEA
 
  James O'Shea
  Chairman, Chief Executive Officer
  And President
  (Principal Executive, Financial and Accounting Officer)
   
   
   
   
   
 
/s/ CHRISTINE M. FARRELL
 
  Christine M. Farrell
  Controller & Secretary

10