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 September 30, 2009

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 000-15360

BIOJECT MEDICAL TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

Oregon	93-1099680
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
20245 SW 95th Avenue Tualatin, Oregon	97062
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (503) 692-8001

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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨     No  x

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	17,390,399
(Class)	(Outstanding at November 9, 2009)

BIOJECT MEDICAL TECHNOLOGIES INC.

FORM 10-Q

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – September 30, 2009 and December 31, 2008 (unaudited)	2
	Consolidated Statements of Operations – Three and Nine Months Ended September 30, 2009 and 2008 (unaudited)	3
	Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2009 and 2008 (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 4.	Controls and Procedures	17
PART II - OTHER INFORMATION
Item 1A.	Risk Factors	18
Item 6.	Exhibits	25
Signatures		26

1

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2009			December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	877,443		$	1,351,892
Accounts receivable, net of allowance for doubtful accounts of $5,537 and $5,133		545,728			477,329
Inventories		940,642			1,007,423
Other current assets		29,484			74,675
Total current assets		2,393,297			2,911,319
Property and equipment, net of accumulated depreciation of $7,217,794 and $6,787,613		1,196,181			1,608,761
Other assets, net		1,316,651			1,276,521
Total assets	$	4,906,129		$	5,796,601
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term notes payable	$	265,025		$	688,782
Current portion of long-term debt		686,268			650,761
Accounts payable		548,309			673,023
Accrued payroll		33,309			161,622
Derivative liabilities		88,218			22,778
Other accrued liabilities		665,640			518,412
Deferred revenue		440,652			489,993
Total current liabilities		2,727,421			3,205,371
Long-term liabilities:
Deferred revenue		1,276,879			1,348,417
Other long-term liabilities		375,314			309,996
Commitments
Shareholders’ equity:
Preferred stock, no par value, 10,000,000 shares authorized:
Series D Convertible - 2,086,957 shares issued and outstanding at September 30, 2009 and December 31, 2008, liquidation preference of $1.15 per share		1,878,769			1,878,768
Series E Convertible - 3,308,392 shares issued and outstanding at September 30, 2009 and December 31, 2008, liquidation preference of $1.37 per share		5,478,466			5,478,466
Series F Convertible - 8,314 shares issued and outstanding at September 30, 2009 and December 31, 2008, liquidation preference of $75 per share		707,547			670,134
Common stock, no par value, 100,000,000 shares authorized; 17,390,399 shares and 16,436,420 shares issued and outstanding at September 30, 2009 and December 31, 2008		114,255,655			113,962,525
Accumulated deficit		(121,793,922	)		(121,057,076	)
Total shareholders’ equity		526,515			932,817
Total liabilities and shareholders’ equity	$	4,906,129		$	5,796,601

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

2

BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Revenue:
Net sales of products	$	1,430,149		$	1,512,036		$	4,839,350		$	4,569,496
Licensing and technology fees		104,415			138,490			356,063			545,190
		1,534,564			1,650,526			5,195,413			5,114,686
Operating expenses:
Manufacturing		1,000,751			1,082,349			3,122,245			3,372,407
Research and development		309,211			493,293			1,080,929			1,631,449
Selling, general and administrative		434,661			600,292			1,485,698			2,124,745
Total operating expenses		1,744,623			2,175,934			5,688,872			7,128,601
Operating loss		(210,059	)		(525,408	)		(493,459	)		(2,013,915	)
Interest income		2,389			10,192			8,481			33,752
Interest expense		(47,080	)		(125,936	)		(149,015	)		(454,516	)
Loss on extinguishment of debt		—			(597,525	)		—			(597,525	)
Change in fair value of derivative liabilities		80,543			199,126			(65,440	)		423,709
		35,852			(514,143	)		(205,974	)		(594,580	)
Net loss		(174,207	)		(1,039,551	)		(699,433	)		(2,608,495	)
Preferred stock dividend		(12,471	)		(12,481	)		(37,413	)		(196,709	)
Net loss allocable to common shareholders	$	(186,678	)	$	(1,052,032	)	$	(736,846	)	$	(2,805,204	)
Basic and diluted net loss per common share allocable to common shareholders	$	(0.01	)	$	(0.07	)	$	(0.04	)	$	(0.18	)
Shares used in per share calculations		17,157,743			15,955,877			16,922,523			15,700,463

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

3

BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2009			2008
Cash flows from operating activities:
Net loss	$	(699,433	)	$	(2,608,495	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Compensation expense related to fair value of stock-based awards		243,636			645,078
Stock contributed to 401(k) Plan		49,493			46,942
Contributed capital for services		—			30,421
Depreciation and amortization		513,881			654,511
Goodwill impairment		—			94,074
Other non-cash interest expense		113,540			372,876
Change in fair value of derivative instruments		65,440			(423,709	)
Loss on extinguishment of debt		—			597,525
Change in deferred revenue		(120,879	)		1,096,847
Change in deferred rent		76,722			(9,337	)
Changes in operating assets and liabilities:
Accounts receivable, net		(68,399	)		304,257
Inventories		66,781			(179,800	)
Other current assets		38,402			39,396
Accounts payable		(124,713	)		(318,214	)
Accrued payroll		(128,313	)		(14,959	)
Accrued severance and related liabilities and other accrued liabilities		147,228			(238,967	)
Net cash provided by operating activities		173,386			88,446
Cash flows from investing activities:
Purchase of marketable securities		—			(650,000	)
Maturity of marketable securities		—			632,262
Capital expenditures		(17,602	)		(32,758	)
Other assets		(123,830	)		(146,132	)
Net cash used in investing activities		(141,432	)		(196,628	)
Cash flows from financing activities:
Proceeds from (payments on) revolving note payable, net		—			(52,475	)
Payments made on capital lease obligations		(11,405	)		(33,413	)
Payments made on short and long-term debt		(495,000	)		(637,500	)
Net cash used in financing activities		(506,405	)		(723,388	)
Decrease in cash and cash equivalents		(474,451	)		(831,570	)
Cash and cash equivalents:
Beginning of period		1,351,894			1,722,705
End of period	$	877,443		$	891,135
Supplemental disclosure of cash flow information:
Cash paid for interest	$	29,806		$	81,636
Supplemental non-cash information:
Severance costs settled in restricted stock	$	—		$	40,536
Preferred stock dividend to be settled in Series E or Series F preferred stock		37,413			196,709
Issuance of Series F preferred stock in exchange for note payable and accrued interest		—			623,550

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 and Going Concern

The financial information included herein for the three and nine-month periods ended September 30, 2009 and 2008 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 December 31, 2008 is derived from Bioject Medical Technologies Inc.’s (“Bioject”) 2008 Annual Report on Form 10-K for the year ended December 31, 2008. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Bioject’s 2008 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

Due to our limited amount of additional committed capital, recurring losses, negative cash flows and accumulated deficit, the report of our independent registered public accounting firm for the year ended December 31, 2008 expressed substantial doubt about our ability to continue as a going concern.

We have historically suffered recurring operating losses and negative cash flows from operations. As of September 30, 2009, we had an accumulated deficit of $121.8 million with total shareholders’ equity of $0.5 million. Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, assuming that we will continue as a going concern.

At September 30, 2009, cash and cash equivalents were $0.9 million and we had a working capital deficit of $0.3 million.

We continue to monitor our cash and cash equivalents and have previously taken measures to reduce our expenditure rate, delay capital and maintenance expenditures and restructure our debt. However, even if we are able to defer, convert or restructure our debt as discussed below, we expect that we will need to do one or more of the following to provide additional resources in the first quarter of 2010:

• secure additional short-term debt financing;

• secure additional long-term debt financing;

• secure additional equity financing;

• secure a strategic partner; or

• reduce our operating expenditures.

The current economic downturn and uncertainties in the capital markets may result in it being more difficult for us to obtain resources or engage in other strategic alternatives. Failure to secure additional resources may result in our defaulting on our debt, resulting in our lender foreclosing on our assets, or may cause us to cease operations, seek bankruptcy protection, turn our assets over to our lender or liquidate. These actions would have a material adverse effect on us and the value of our common stock.

On September 15, 2009, we entered into a Binding Memorandum of Terms (the “Binding Memorandum of Terms”) with Signet Healthcare Partners, LLC (“Signet”), the fund manager of each of Life Sciences Opportunities Fund II (Institutional), L.P. and Life Sciences Opportunities Fund II, L.P. (collectively, the “LOF Funds”) relating to our outstanding $0.6 million convertible notes (the “Notes”) and the issuance of Series G Convertible Preferred Stock (“Series G Preferred”). The Memorandum is an enforceable agreement between Bioject and Signet, however, it requires Signet investment committee approval before proceeding, which is anticipated to be in the fourth quarter of 2009.

The Binding Memorandum of Terms provides that we will issue shares of Series G Preferred with an issuance price of $0.13 per share for $1.125 million payable as follows:

• conversion of existing Notes of approximately $675,000, including accrued interest; and

• cash of approximately $450,000.

5

Each share of Series G Preferred will be convertible at any time into one share of our common stock at the rate of $0.13 per share, subject to standard anti-dilution adjustments, and has the following rights and preferences:

• the Series G Preferred will rank senior to all other outstanding preferred and common stock;

• in the event of liquidation, the Series G Preferred holders will receive $0.13 per share plus any accrued and unpaid dividends prior to any payments to any other series of preferred or common stock;

• no preferred stock will be issued in the future which is senior to the Series G Preferred, unless consented to by the holders of the Series G Preferred;

• the Series G Preferred will accrue an 8% per annum dividend, paid annually, at the discretion of the Board;

• if the Board does not declare a dividend, dividends will accrue at 10% per annum from the date of issuance, on a cumulative basis;

• dividends may be paid in cash or in additional shares of Series G Preferred at the original issuance price of $0.13 per share;

• Series G Preferred votes on an as-converted basis;

• Series G Preferred holders will have the right to elect two directors to the Board of Directors; and

• the Board composition changes from eight to six.

We expect that we will issue Series G Preferred Stock at a purchase price that is a multiple of $0.13, in order to lower the total number of share issued. This is due to the limited amount of preferred stock available for designation. It will have the same economic effect as the originally proposed transaction.

If we can not close the Series G Preferred Stock financing for any reason, the notes will be due and we will need to address the need for additional capital sooner than would otherwise be the case.

Some of the other actions undertaken in order to improve our chances of continuing operations include the following:

• initiated an across the board 10% temporary salary reduction for all non-executive employees on February 1, 2009;

• executive management voluntarily took a 20% temporary base salary reduction on the same date;

• exploring additional opportunities to increase 2009 sales with current customers, including the military and the recent signing of a three-year extension of our Needle-Free Vial Adapter agreement with Ferring Pharmaceuticals;

• conducted an assessment of manufacturing costs to identify opportunities to improve gross margins;

• engaged in various potential new strategic partnership discussions with sources identified by company contacts and Ferghana Partners; and

• pursued various additional opportunities to lower expenses in the short term, such as the extension of our rent deferral agreement with our landlord through June 2009.

While management continues to work on a number of strategic options and alternatives to keep Bioject operating, there are no assurances that we will be successful.

6

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. Inventories, net of valuation reserves of $643,000 and $612,000 at September 30, 2009 and December 31, 2008, respectively, consisted of the following:

	September 30, 2009		December 31, 2008
Raw materials and components	$	582,512	$	729,850
Work in process		143,239		38,760
Finished goods		214,891		238,813
	$	940,642	$	1,007,423

Note 3. Net Loss Per Common Share

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

	Three and Nine Months Ended September 30,
	2009	2008
Stock options, restricted stock and warrants	3,213,974	4,572,048
Convertible preferred stock	6,226,749	6,226,749
Series E Payment-in-kind dividends	550,516	550,516
Series F Payment-in-kind dividends	111,996	46,113
$1.25 million convertible debt	350,000	1,236,111
$600,000 convertible debt	800,000	800,000
Accrued interest on $600,000 convertible debt	115,024	51,901
Total	11,368,259	13,483,438

Note 4. Product Sales and Concentrations

Product sales to customers accounting for 10% or more of our total product sales were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
Merial	24	%	30	%	30	%	39	%
Serono	15	%	44	%	30	%	36	%
Ferring	22	%	10	%	19	%	*
Middlesex County, New Jersey public health	12	%	*		*		*

* Less than 10%.

At September 30, 2009, accounts receivable from Middlesex County, New Jersey public health, Merial, Ferring and Serono represented 32%, 30%, 19% and 13%, respectively, of the accounts receivable balance. No other customers accounted for 10% or more of our accounts receivable as of September 30, 2009.

Note 5. Fair Value Measurements

We provide information related to the fair value measurements of our assets and liabilities in accordance with the provisions of ASC 820-10, “Fair Value Measurements and Disclosures – Overall,” and ASC 320-10 “Investments – Debt and Equity Securities – Overall.”

Factors used in determining the fair value of our financial assets and liabilities are summarized into three broad categories:

• Level 1 – quoted prices in active markets for identical securities;

• Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.; and

• Level 3 – significant unobservable inputs, including our own assumptions in determining fair value.

7

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Certain of our convertible debt and equity agreements include derivative liabilities as defined under Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity.” These instruments were recorded at fair value and are marked to market each period. The fair value of each of these instruments is determined using the Black-Scholes valuation model.

Following are the disclosures related to our financial assets and (liabilities) as of September 30, 2009 (in thousands):

	September 30, 2009
	Fair Value			Input Level
Warrants issued in connection with $1.5 million bridge loan	$	(70,696	)	Level 3
$1.25 million convertible debt conversion feature	$	(17,522	)	Level 3

Black-Scholes Assumptions	Warrants issued in connection with March 2006 $1.5 million bridge loan			$1.25 million convertible debt conversion feature
Risk-free interest rate		2.31	%		2.31	%
Expected dividend yield		0.00	%		0.00	%
Contractual term (years)		0.94			0.42
Expected volatility		258	%		243	%
Certain Other Information
Fair value at December 31, 2008	$	(8,926	)	$	(13,852	)
Fair value at September 30, 2009	$	(70,696	)	$	(17,522	)
Change in fair value from December 31, 2008 to September 30, 2009	$	(61,770	)	$	(3,670	)

Note 6. Other Accrued Liabilities

Included in other accrued liabilities was $261,000 and $417,000 at September 30, 2009 and December 31, 2008, respectively, related to prepaid inventory for Serono. In addition, the September 30, 2009 balance included $336,000 of credits for consumed inventory for Serono, for which, Serono could begin taking against current invoices or require repayment at any time.

Note 7. Rent Deferral

On March 25, 2009, we entered into a third amendment to our lease agreement with the landlord of our Tualatin, Oregon facility pursuant to which we deferred $12,000 of rent for each of February, March and April 2009. On July 8, 2009, we entered into another amendment to our lease agreement, effective June 30, 2009, pursuant to which we deferred $12,000 of rent for each of May and June 2009. The landlord, in its sole discretion, may, by written notice, extend the deferral period on a month-to-month basis through December 31, 2009. Amounts deferred, plus accrued interest at the rate of 9% per annum, shall be due within sixty (60) days upon the earlier to occur of (i) sale of all or substantially all of our assets or the acquisition or merger of Bioject or the occurrence of any other transaction identified in Section 4.15.4 of the original lease agreement, (ii) capital or equity raise of $3.0 million or more, (iii) the entering of a strategic partnership with up-front payments over $300,000, (iv) default by us under the lease; provided, that if none of the foregoing events have occurred by December 31, 2010, we shall commence paying back amounts deferred plus accrued interest in twelve (12) equal installments at the same time and in the same manner as base rent commencing on January 1, 2011 and on the first of each month thereafter until paid in full.

Unpaid deferred rent and accrued interest totaled $107,000 and $30,000 at September 30, 2009 and December 31, 2008, respectively.

8

Note 8. Convertible Subordinated Promissory Note Extension Agreements

On April 6, 2009, we entered into Convertible Subordinated Promissory Note Extension Agreements (each, an “Extension”) with each of Life Sciences Opportunities Fund II (Institutional), L.P. and Life Sciences Opportunities Fund II, L.P. relating to two Convertible Subordinated Promissory Notes, dated as of December 5, 2007, in the aggregate principal amount of $600,000 (the “Notes”). The Extensions extend the maturity dates of the Notes from May 15, 2009 to July 15, 2009. See also Note 10 for information regarding an additional deferral of the maturity of the Notes to August 15, 2009.

On July 13, 2009, we entered into a Convertible Subordinated Promissory Note Second Extension Agreement (the “Second Extensions”) with each of Life Sciences Opportunities Fund II (Institutional), L.P. and Life Sciences Opportunities Fund II, L.P. relating to the Notes. The Second Extensions extend the maturity date of the Notes from July 15, 2009 to August 15, 2009.

On August 14, 2009, we entered into Convertible Subordinated Promissory Note Third Extension Agreements (the “Third Extensions”) with each of Life Sciences Opportunities Fund II (Institutional), L.P. and Life Sciences Opportunities Fund II, L.P. relating to the Notes. The Third Extensions extend the maturity date of the Notes from August 15, 2009 to August 31, 2009.

On August 31, 2009, we entered into Convertible Subordinated Promissory Note Fourth Extension Agreements (the “Fourth Extensions”) with each of Life Sciences Opportunities Fund II (Institutional), L.P. and Life Sciences Opportunities Fund II, L.P. relating to the Notes. The Fourth Extensions extend the maturity date of the Notes from August 31, 2009 to September 15, 2009.

See Note 1 for a discussion of a Binding Memorandum of Terms entered into on September 15, 2009 to convert the Notes into Series G Preferred. This memorandum of terms provides that the maturity date of the Notes is extended until ten business days following any shareholder meeting that may be required in connection with the Note conversion. We have determined that no such meeting is required.

Note 9. New Accounting Pronouncements

Codification

Effective July 1, 2009, the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) became the single official source of authoritative, nongovernmental generally accepted accounting principles (“GAAP”) in the United States. The historical GAAP hierarchy was eliminated and the ASC became the only level of authoritative GAAP, other than guidance issued by the Securities and Exchange Commission. Our accounting policies were not affected by the conversion to ASC. However, references to specific accounting standards in the footnotes to our consolidated financial statements have been changed to refer to the appropriate section of ASC.

Accounting Guidance Recently Adopted

Amendment to ASC 855

ASC 855, “Subsequent Events,” was amended and defines subsequent events as transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. The amendment defines two types of subsequent events: (i) events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements (that is, recognized subsequent events); and (ii) events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date (that is, nonrecognized subsequent events). In addition, the amendment requires an entity to disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. The amendment was effective for periods ending after June 15, 2009. The adoption of the amendment, effective June 30, 2009, did not have any effect on our financial position, results of operations or cash flows.

9

Amendment to ASC 825

ASC 825, “Financial Instruments,” was amended to require disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. This amendment also requires those disclosures in summarized financial information at interim reporting periods. The adoption of this amendment, effective June 30, 2009, did not have any effect on our financial position, results of operations or cash flows.

Amendment to ASC 820 and ASC 320

ASC 820, “Fair Value Measurements and Disclosures,” and ASC 320, “Investments – Debt and Equity Securities,” were amended to provide additional guidance for estimating fair value and emphasize that, even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation techniques used, the fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. The amendments also require disclosure in interim and annual periods regarding the inputs and valuation techniques used to measure fair value and a discussion of changes in valuation techniques and related inputs, if any, during the period. It also requires that entities define major categories for equity and debt securities. The adoption of these amendments, effective June 30, 2009, did not have any effect on our financial position, results of operations or cash flows.

Recent Accounting Guidance Not Yet Adopted

ASU 2009-05

Accounting Standards Update (“ASU”) 2009-05, “Fair Value Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair Value,” amends ASC Topic 820, “Fair Value Measurements,” to allow companies determining the fair value of a liability to use the perspective of an investor that holds the related obligation as an asset. The new guidance is effective for interim and annual periods beginning after August 27, 2009, and applies to all fair-value measurements of liabilities required by GAAP. No new fair-value measurements are required by the update. We do not believe that the adoption of this ASU will have a material effect on our financial position, results of operations or cash flows.

Amendment to ASC 860

ASC 860, “Transfers and Servicing,” was amended to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets. The amendments to ASC 860 are effective as of the beginning of an entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The amendments must be applied to transfers occurring on or after the effective date. While we are still analyzing the effects of the adoption of the amendments, we do not believe that the adoption will have a material effect on our financial position, results of operations or cash flows.

Note 10. Subsequent Events

We have considered all events that have occurred subsequent to September 30, 2009 and through November 10, 2009, the date the financial statements as of and for the periods ended September 30, 2009 were issued.

Termination of Ferghana Partners Agreement

On October 31, 2009, we terminated the exclusive agreement we had with Ferghana Partners. The relationship had not yielded a signed transaction to date, however, there are on-going discussions with potential strategic partners which remain under the original agreement.

10

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

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning cash requirements. Such forward looking statements (often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,” “anticipates” or “does not anticipate,” “plans,” “estimates” or “intends,” or stating that certain actions, events or results “may,” “could,” “would,” “should,” “might” or “will” be taken, occur or be achieved) involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, 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 we may not enter into anticipated licensing, development or supply agreements, the risk that we may not achieve the milestones necessary for us to receive payments under our development agreements, the risk that our products will not be accepted by the market, the risk that we do not close the Series G Preferred Stock financing with Signet, the risk that we will be unable to obtain needed debt or equity financing on satisfactory terms, or at all, the risk that we may default on our outstanding debt obligations, risks related to the general economic environment and uncertainties in the financial markets, uncertainties related to our dependence on the continued performance of strategic partners and technology and uncertainties related to the time required for us or our strategic partners to complete research and development and obtain necessary clinical data and government clearances. See also Part II, Item 1A, Risk Factors.

Forward-looking statements are based on the estimates and opinions of management on the date the statements are made. We assume 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

We are an innovative developer and manufacturer of needle-free injection therapy systems (“NFITS”).

Our long-term goal is to become the leading supplier of needle-free injection systems to the pharmaceutical and biotechnology industries. We have been focusing our business development efforts on new and existing licensing and supply agreements with leading pharmaceutical and biotechnology companies, as well as numerous research agreements that could lead to long-term agreements. Our pipeline of prospective new partnerships remains active. We are also actively pursuing additional opportunities both domestically and overseas as we expand our current product line. However, historically, finalizing agreements has been a long process and, given the current difficult global economic conditions, we believe that process will take even longer.

Our NFITS work by forcing liquid medication at high speed through a tiny orifice held against the skin. This creates a fine stream of high-pressure medication that penetrates the skin, depositing the medication in the tissue beneath. By bundling customized needle-free delivery systems with partners’ injectable medications and vaccines, we can enhance demand for these products in the healthcare provider and end-user markets.

We began a strategic realignment of our company during 2006 with the singular goal of increasing shareholder value. The realignment has two concurrent phases. Phase One was to focus on our fixed operating expenses, primarily by reducing headcount and related expenses. Along this line, in March 2006 and 2007, we reduced the size of our workforce. In addition, in January 2008, we eliminated an additional 13 positions. Phase Two of our realignment campaign is to increase our revenue by increasing product sales and adding license and development agreements. For example, in October 2007, we entered into a new three-year supply agreement with Serono for the delivery of the cool.click™ and Serojet™ spring-powered needle-free device for use with its recombinant human growth hormone drugs.

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In June 2008, we signed a new long-term exclusive license, development and supply agreement with Merial, a global animal health company, for a next generation companion animal device, which allows for the delivery of injectables. In addition, in January 2009, we extended our supply agreement with Ferring Pharmaceuticals to deliver the vial adapter for Ferring’s proprietary products. We have also initiated new discussions with a number of potential new partners, as well as with past partners.

In 2007, we completed a business assessment for strategic targeting and focusing on the most promising potential partnership opportunities, including opportunities to secure injectable indications allowing us to partner with a pharmaceutical or biotech company or create our own drug+device combinations for the market. Although we have suspended implementation of our drug+device strategy to conserve cash, we are committed to working with our current partners and assessing ways to ensure continued beneficial long-term partner relationships. We continue to initiate discussions with new potential partners within the large pharmaceutical market, the biotechnology market, the specialty pharmaceutical market and other markets.

During the first three quarters of 2009, significant focus was spent on advancing our next generation spring-powered device technology with auto-disable syringes. This focus resulted in our successfully meeting a significant milestone of delivering working prototypes for a new companion animal device and in gaining FDA 510(k) clearance for our new ZetaJet^TM device, which provides unique competitive differentiation for a wide range of human injectables. The ZetaJet^TM provides new features in spring powered needle-free injection technology, including enhanced durability, flexibility for subcutaneous or intramuscular dosing and investigational use for intradermal applications, dosing as low as 0.05 ml and up to 0.5 ml, an auto-disable syringe and an outer molding which can be formed into different shapes and colors for customized branding. The device can be utilized in a wide range of therapeutic, professional (including developing world) and patient segments.

We do not expect to report net income in 2009.

GOING CONCERN AND CASH REQUIREMENTS FOR THE NEXT TWELVE-MONTH PERIOD

See Note 1 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

CONTRACTUAL PAYMENT OBLIGATIONS

A summary of our contractual commitments and obligations as of September 30, 2009 was as follows:

	Payments Due By Period
Contractual Obligation	Total		Remainder of 2009		2010 and 2011		2012 and 2013		2014 and beyond
December 2007 $600,000 LOF convertible note(1)	$	600,000	$	600,000	$	—	$	—	$	—
$1.25 million PFG term loan(2)		315,000		165,000		150,000		—		—
Interest on all debt facilities		16,293		15,503		790		—		—
Operating leases		2,223,210		100,294		935,560		829,364		357,992
Capital leases		20,179		4,345		15,834		—		—
Purchase order commitments(3)		1,035,745		1,035,745		—		—		—
	$	4,210,427	$	1,920,887	$	1,102,184	$	829,364	$	357,992

(1) Pursuant to the Binding Memorandum of Terms entered into on September 15, 2009, we expect the $0.6 million convertible note and related accrued interest of $86,268 will be converted into newly issued shares of Series G Preferred stock. See also Note 1 of Notes to Consolidated Financial Statements.

(2) The entire accreted value of $265,000 of our $1.25 million term loan is classified as current on our consolidated balance sheet as of September 30, 2009 due to the fact that the agreement contains subjective acceleration clauses, which could result in the debt becoming due at any time. However, since none of the subjective acceleration clauses have been triggered to date, it is included in this table according to its contractual maturity. The unpaid principal amount of the $1.25 million term loan was $315,000 at September 30, 2009.

(3) Purchase order commitments generally relate to future raw material inventory purchases, research and development projects and other operating expenses. However, $711,000 of the 2009 purchase order commitments is for capital equipment purchases for the benefit and ownership of a customer. While we are contractually obligated to make the purchases, the funds are generally provided to us by our customer in advance of delivery and prior to our payment for the purchases.

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OUTSTANDING DEBT

$1.25 Million Convertible Loan

We have outstanding a term loan agreement with Partners For Growth, L.P. (“PFG”) for convertible debt financing (the “Debt Financing”). At September 30, 2009, $315,000 was outstanding under this loan. This loan matures in March 2010, with principal payments of $55,000 due per month, payable at PFG’s option. If PFG elects to forgo any of the principal payments, which it has not done to date, the latest this loan will be due is March 2011. However, due to certain subjective acceleration clauses contained in the Debt Financing agreement, the accreted value of the Debt Financing is reflected as current on our balance sheet. The loan bears interest at the Prime Rate plus 3% per annum and is convertible at any time by PFG into our common stock at $0.90 per share. In addition, if our common stock trades at a price of $4.11 per share or higher for 20 consecutive trading days, we can force PFG to convert the debt to common stock, subject to certain limitations on trading volume. If we prepay this loan, we will issue PFG a warrant to purchase a number of shares of common stock equal to what it would have received upon conversion of the remaining outstanding principal balance that was prepaid at a price of $0.90 per share. As a result of the derivative accounting prescribed by ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity,” at September 30, 2009, this debt was recorded on our balance sheet at $265,000 and is being accreted on the effective interest method to its face value over the 18-month contractual term of the debt.

$600,000 Convertible Notes

On December 5, 2007, we entered into Convertible Note Purchase and Warrant Agreements with each of Life Science Opportunities Fund II, L.P. (“LOF II”) and Life Sciences Opportunities Fund II (Institutional) L.P. (“LOF Institutional” and, together with LOF II, the “Purchasers”) pursuant to which we issued Convertible Promissory Notes and warrants to purchase our common stock. Pursuant to the agreements, we sold a note in the principal amount of $91,104 to LOF II and a note in the principal amount of $508,896 to LOF Institutional. The notes bear interest at the rate of 8% per annum and have had the maturity date extended so that all principal and interest was due September 15, 2009. However, pursuant to a Binding Memorandum of Terms entered into on September 15, 2009, we expect the $0.6 million outstanding convertible notes and all accrued interest will be converted into newly issued shares of Series G Preferred stock, if approved by their investment committee. If we can not close the Series G Preferred Stock financing for any reason, the convertible notes will be due and we will need to address the need for additional capital sooner than would otherwise be the case. See also Note 1 of Notes to Consolidated Financial Statements.

The warrants are exercisable for an aggregate of 80,000 shares of our common stock at an exercise price of $0.75 per share. Each warrant is immediately exercisable and expires four years from the date of issuance.

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RESULTS OF OPERATIONS

The consolidated financial data for the three and nine-month periods ended September 30, 2009 and 2008 are presented in the following table:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Revenue:
Net sales of products	$	1,430,149		$	1,512,036		$	4,839,350		$	4,569,496
Licensing and technology fees		104,415			138,490			356,063			545,190
		1,534,564			1,650,526			5,195,413			5,114,686
Operating expenses:
Manufacturing		1,000,751			1,082,349			3,122,245			3,372,407
Research and development		309,211			493,293			1,080,929			1,631,449
Selling, general and administrative		434,661			600,292			1,485,698			2,124,745
Total operating expenses		1,744,623			2,175,934			5,688,872			7,128,601
Operating loss		(210,059	)		(525,408	)		(493,459	)		(2,013,915	)
Interest income		2,389			10,192			8,481			33,752
Interest expense		(47,080	)		(125,936	)		(149,015	)		(454,516	)
Loss on extinguishment of debt		—			(597,525	)		—			(597,525	)
Change in fair value of derivative liabilities		80,543			199,126			(65,440	)		423,709
Net loss		(174,207	)		(1,039,551	)		(699,433	)		(2,608,495	)
Preferred stock dividend		(12,471	)		(12,481	)		(37,413	)		(196,709	)
Net loss allocable to common shareholders	$	(186,678	)	$	(1,052,032	)	$	(736,846	)	$	(2,805,204	)
Basic and diluted net loss per common share allocable to common shareholders	$	(0.01	)	$	(0.07	)	$	(0.04	)	$	(0.18	)
Shares used in per share calculations		17,157,743			15,955,877			16,922,523			15,700,463

Revenue

The $0.1 million, or 5.4%, decrease and the $0.3 million, or 5.9%, increase in product sales in the three and nine-month periods ended September 30, 2009, respectively, compared to the same periods of 2008, were due primarily to the following:

• a decrease in sales to Serono from $670,000 to $213,000, or 68%, and from $1.6 million to $1.4 million, or 12%, in the three and nine-month periods ended September 30, 2009, respectively, compared to the same periods of 2008 due to the timing of orders from Serono;

• a decrease in sales to Merial from $457,000 to $346,000, or 24%, and from $1.8 million to $1.5 million, or 19%, in the three and nine-month periods ended September 30, 2009, respectively, compared to the same periods of 2008.

These factors were partially offset by:

• an increase in sales to Ferring from $144,000 to $313,000, or 117%, and from $372,000 to $903,000, or 143%, in the three and nine-month periods ended September 30, 2009, respectively, compared to the same periods of 2008;

• an increase in sales to the military from $43,000 to $134,000, or 211%, and from $290,000 to $363,000, or 25%, in the three and nine-month periods ended September 30, 2009, respectively, compared to the same periods of 2008; and

• sales of $325,000 of B2000 product to New Jersey counties for use in their emergency preparedness programs in the three and nine-month periods ended September 30, 2009. There were no sales to these counties in 2008.

The changes in sales to the above entities were primarily due to fluctuations in their forecasts.

We currently have supply agreements or commitments with Serono, Merial and Ferring Pharmaceuticals Inc.

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License and technology fees recognized in accordance with our agreements were as follows:

	Three Months Ended Sept. 30,				Nine Months Ended Sept. 30,
	2009		2008		2009		2008
Serono	$	16,963	$	58,419	$	83,968	$	160,179
Merial		40,990		28,139		120,244		138,500
Vical		—		15,624		16,667		46,872
Royalty fees		26,462		26,308		76,526		101,639
Other		20,000		10,000		58,658		98,000
	$	104,415	$	138,490	$	356,063	$	545,190

We currently have active licensing and/or development agreements, which often include commercial product supply provisions, with Merial. Our license agreement with Vical expired pursuant to its terms on August 6, 2009.

Manufacturing Expense

Manufacturing expense is made up of the cost of products sold and manufacturing overhead expense related to excess manufacturing capacity.

The $0.1 million, or 7.5%, decrease and the $0.3 million, or 7.4%, decrease in manufacturing expense in the three and nine-month periods ended September 30, 2009, respectively, compared to the same periods of 2008 were primarily due to product mix and lower indirect overhead. In addition, the nine-month period ended September 30, 2008 included a $94,000 non-cash charge to fully write-off our goodwill balance.

Research and Development Expense

Research and development costs include labor, materials and costs associated with clinical studies incurred in the research and development of new products and modifications to existing products.

The $0.2 million, or 37.3%, decrease and the $0.6 million, or 33.7%, decrease in research and development expense in the three and nine-month periods ended September 30, 2009, respectively, compared to the same periods of 2008 were primarily due the timing of expenses related to on-going projects and the implementation of salary reductions in February 2009. In addition, the nine-month period ended September 30, 2008 included $92,000 of restructuring and severance expense compared to none in the 2009 periods.

Current significant projects include the next generation spring-powered device with an auto disable feature.

Selling, General and Administrative Expense

Selling, general and administrative costs include labor, travel, outside services and overhead incurred in our sales, marketing, management and administrative support functions.

The $0.2 million, or 38.1%, decrease and the $0.6 million, or 30.1%, decrease, in selling, general and administrative expense in the three and nine-month periods ended September 30, 2009 compared to the same periods of 2008 were primarily due to salary reductions implemented in February 2009 and lower legal and corporate communications expenses.

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Interest Expense

Interest expense included the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
Contractual interest expense	$	23,000	$	20,000	$	71,000	$	82,000
Amortization of debt issuance costs		—		44,000		7,000		187,000
Accretion of $1.25 million convertible debt		24,000		62,000		71,000		186,000
	$	47,000	$	126,000	$	149,000	$	455,000

Loss on Extinguishment of Debt

In the third quarter of 2008, we amended our $1.25 million convertible loan (the “Convertible Loan”). The amendment of the Convertible Loan was accounted for as an extinguishment of debt in accordance with ASC 470-50, “Debt – Modifications and Extinguishments.” We determined that the net present value of the cash flows under the terms of the amendment was more than 10% different from the present value of the remaining cash flows under the terms of the original Convertible Loan. Due to the substantial difference, we determined an extinguishment of debt had occurred with the amendment, and, as such, it was necessary to reflect the Convertible Loan at its fair market value and record a loss on extinguishment of debt of approximately $0.6 million in the three and nine-month periods ended September 30, 2008. The amount of the loss was determined based on the following:

• The difference between the Black-Scholes value of the Convertible Loan on September 15, 2008 and the unaccreted value on that date, which totaled $470,175; plus

• The difference between the fair value of the derivative liability for the conversion feature, which totaled $17,212; plus

• $110,138 of unamortized debt issuance costs.

Change in Fair Value of Derivative Liabilities

Our derivative liabilities are recorded at fair value and are marked to market each period. The fair value of each of these instruments is determined using the Black-Scholes valuation model.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception in 1985, we have financed our operations, working capital needs and capital expenditures primarily from private placements of securities, the exercise of warrants, loans, proceeds received from our initial public offering in 1986, proceeds received from a public offering of common stock in 1993, licensing and technology revenues and revenues from sales of products.

Total cash and cash equivalents at September 30, 2009 were $0.9 million compared to $1.4 million at December 31, 2008. We had a working capital deficit of $0.3 million at both September 30, 2009 and December 31, 2008. Going forward, we anticipate debt retirement costs to be approximately $165,000 per quarter in 2009 for our $315,000 convertible loan. Even with the expected conversion of our outstanding $600,000 convertible debt into Series G Preferred shares and the related cash investment, given our current cash and cash equivalents, our debt repayment obligations and our current rate of cash usage, if no new licensing, development or supply agreements with significant up-front payments are entered into or we do not raise debt or equity financing or restructure our existing debt obligations, we anticipate that we will be unable to continue operations beyond the first quarter of 2010.

The overall decrease in cash and cash equivalents during the first nine months of 2009 resulted from $141,000 used for other investing activities, primarily patent applications, and $506,000 used for principal payments on short and long-term debt and capital leases, offset by $173,000 provided by operations, as discussed in more detail below.

Net accounts receivable increased $69,000 to $546,000 at September 30, 2009 compared to $477,000 at December 31, 2008. Receivables from four different customers accounted for a total of 94% of our accounts receivable balance at September 30, 2009, with individual accounts totaling 32%, 30%, 19% and 13%, respectively. Of the accounts receivable due at September 30, 2009, $0.3 million was collected prior to the filing of this Form 10-Q. Historically, we have not had collection problems related to our accounts receivable.

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Inventories decreased $0.1 million to $0.9 million at September 30, 2009 compared to $1.0 million at December 31, 2008 primarily due to the consumption of prepaid raw materials purchased for Serono products.

Capital expenditures in the first nine months of 2009 totaled $18,000. We anticipate spending up to a total of $50,000 in 2009 for production molds for current research and development projects.

Accounts payable decreased $0.2 million to $0.5 million at September 30, 2009 compared to $0.7 million at December 31, 2008 primarily due to lower inventory and other purchases.

Other accrued liabilities increased $0.2 million to $0.7 million at September 30, 2009 compared to $0.5 million at December 31, 2008 primarily due to an increase in tooling deposits and an increase in Serono inventory credits, for which Serono could begin taking against current invoices or require repayment at any time.

Derivative liabilities of $88,000 at September 30, 2009 reflect the fair value of the derivative liabilities associated with certain of our debt and equity transactions. The fair value of the derivative liabilities is adjusted on a quarterly basis using the Black-Scholes valuation model, with changes in fair value being recorded as a non-cash component of earnings.

Deferred revenue totaled $1.7 million and $1.8 million at September 30, 2009 and December 31, 2008, respectively. The balance at September 30, 2009 included $1.6 million received from Merial and $0.1 million received from Serono.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We reaffirm the critical accounting policies and estimates as reported in our Form 10-K for the year ended December 31, 2008, which was filed with the Securities and Exchange Commission on March 31, 2009.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 9 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

ITEM 4T. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our President and Chief Executive Officer and Principal Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our President and Chief Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our President and Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1A. RISK FACTORS

In addition to the other information contained in this Form 10-Q, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, or results of operations could be materially adversely affected by any of these risks. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.

We need to obtain funding in the first quarter of 2010 to continue operations. Sufficient funding may not be available to us and, if available, may be subject to conditions and the unavailability of funding could adversely affect our business and cause us to cease operations. At September 30, 2009, cash and cash equivalents were $0.9 million and we had a working capital deficit of $0.3 million. We continue to monitor our cash and have previously taken measures to reduce our expenditure rate, delay capital and maintenance expenditures and restructure our debt. However, assuming the Series G Preferred Stock transaction described below closes in the fourth quarter of 2009, we expect that we will need to do one or more of the following to provide additional resources during the first quarter of 2010:

• secure additional short-term debt financing;

• secure additional long-term debt financing;

• secure additional equity financing;

• secure a strategic partner; or

• reduce our operating expenditures.

On September 15, 2009, we entered into a Binding Memorandum of Terms with the holders of our $600,000 convertible promissory notes pursuant to which the notes and accrued interest thereon would be converted into Series G Preferred Stock. The holders would also purchase an additional $450,000 of Series G Preferred Stock. If this transaction fails to close, the noteholders could demand payment on or after the maturity date, which could give our secured lender the right to do the same and seek to foreclose on our assets if not paid, which could force us to cease operations. If we can not close the Series G Preferred Stock financing for any reason, the convertible notes will be due and we will need to address the need for additional capital sooner than would otherwise be the case.

While management continues to work on a number of strategic options and alternatives to keep Bioject operating, there are no assurances that we will be successful.

We have previously been out of compliance with the covenants in our loan agreements and, if we default under our loan agreements in the future, our secured lender could foreclose on our assets, which would adversely affect our business. On November 19, 2007 we entered into Forbearance Agreement No. 1 with Partners for Growth, L.P. (“PFG”) in relation to the three loans that were then outstanding with PFG, which are referred to collectively as the “PFG Loans.” On May 30, 2008, we entered into Forbearance Agreement No. 2 with PFG in relation to the PFG Loans. These forbearance agreements related to financial covenants we were out of compliance with.

Only one of the PFG Loans remains outstanding. If we are unable to make the payments under the remaining PFG loan, or fail to comply with the financial covenants in the remaining loan or default under other indebtedness, such as our $600,000 convertible notes, PFG could declare an event of default, accelerate the loan and foreclose on our assets, which would have a material adverse effect on our business.

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We have a history of losses and may never be profitable. Since our formation in 1985, we have incurred significant annual operating losses and negative cash flow. At September 30, 2009, we had an accumulated deficit of $121.8 million and a net working capital deficit of $0.3 million. Due to our lack of additional committed capital, recurring losses, negative cash flows and accumulated deficit, the report of our independent registered public accounting firm dated March 31, 2009 expressed substantial doubt about our ability to continue as a going concern. We may never be profitable, which could have a negative effect on our stock price, our business and our ability to continue operations. Our revenues are derived from licensing and technology fees and from product sales. We sell our products to strategic partners, who market our products under their brand name, and to end-users such as public health clinics for vaccinations and the military for mass immunizations. We have not attained profitability at these sales levels. We may never be able to generate significant revenues or achieve profitability. Now and in the future, we will require substantial additional financing. Such financing may not be available on terms acceptable to us, or at all, which would have a material adverse effect on our business. Any future equity financing could result in significant dilution to shareholders.

Our preferred stock has a liquidation preference and, as a result, if we are sold or liquidated, holders of common stock could receive nothing. We have outstanding shares of Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock. Under the terms of the preferred stock, if we are sold or liquidated, the holders of these shares would be entitled to receive approximately $8.9 million, at September 30, 2009, prior to any payments to the holders of common stock. The Series G Preferred Stock we intend to issue would increase this aggregate preference to approximately $10 million. Accordingly, if we are sold or liquidated, holders of common stock could receive nothing.

If our products are not accepted by the market, our business could fail. Our success will depend on market acceptance of our needle-free injection drug delivery systems and on market acceptance of other products under development. If our products do not achieve market acceptance, our business could fail. Currently, the dominant technology used for intramuscular and subcutaneous injections is the hollow-needle syringe, which has a cost per injection that is significantly lower than that of our products. Our products may be unable to compete successfully with needle-syringes.

We may be unable to enter into additional strategic corporate licensing and distribution agreements or maintain existing agreements, which could cause our business to suffer. A key component of our sales and marketing strategy is to enter into licensing and supply arrangements with leading pharmaceutical and biotechnology companies for whose products our technology provides either increased medical effectiveness or a higher degree of market acceptance. Historically, these agreements have taken a long time to finalize, and the current economic environment may extend that period even further. If we cannot enter into these agreements on terms favorable to us or at all, our business may suffer.

In prior years, several agreements have been canceled by our partners prior to completion. These agreements were canceled for various reasons, including, but not limited to, costs related to obtaining regulatory approval, unsuccessful pre-clinical vaccine studies, changes in vaccine development and changes in business development strategies. These agreements resulted in significant short-term revenue. However, none of these agreements developed into the long-term revenue stream anticipated by our strategic partnering strategy.

We may be unable to enter into future licensing or supply agreements with major pharmaceutical or biotechnology companies. Even if we enter into these agreements, they may not result in sustainable long-term revenues which, when combined with revenues from product sales, could be sufficient for us to operate profitably.

Our new drug+device strategy is currently suspended and is subject to a number of risks and uncertainties and, as a result, we may not be successful in implementing the strategy. In 2007, we announced a new component of our business strategy pursuant to which we plan to attempt to secure rights to injectable medications to sell in combination with our products under our own brand. Successfully implementing this strategy is subject to a number of risks. We may not be successful in securing rights to medications we are interested in combining with our products. Even if successful in securing rights, these products would be subject to FDA approval, and it will be our responsibility to

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obtain such approval. This approval may not be obtained or may take a significant period of time to obtain. In addition, there is a risk that our device will not work for the new drug indication. We may also need to raise additional funds to finance this new strategy, and there is no assurance such funds will be available to us on acceptable terms or at all. We do not have experience manufacturing or marketing to end-users drug+device combinations. In addition, these new products may not be accepted by the market. Further, due to our current liquidity situation, we have temporarily suspended implementation of this strategy. Accordingly, there is no assurance that our new strategy will be successfully implemented, and failure to successfully implement the strategy could negatively affect our business.

We must retain qualified personnel in a competitive marketplace, or we may not be able to grow our business. Our success depends upon the personal efforts and abilities of our senior management. We may be unable to retain our key employees, namely our management team, or to attract, assimilate or retain other highly qualified employees. Although we have implemented workforce and salary reductions, there remains substantial competition for highly skilled employees. Our key employees are not bound by agreements that could prevent them from terminating their employment at any time. If we fail to attract and retain key employees, our business could be harmed.

Our restructuring activities may not result in the expected benefits, which would negatively impact our future results of operations. In March 2006 and 2007, we restructured our operations, which included reducing the size of our workforce. Further headcount reductions were made in January 2008. Despite these efforts, we cannot ensure that we will achieve the operating expense reductions and improvements in operating margins and cash flows currently anticipated from these activities in the periods contemplated, or at all. These reductions in staffing levels could require us to forego certain future opportunities due to resource limitations, which could negatively affect our long-term revenues. We cannot assure you that we will not be required to implement further restructuring activities or reductions in our workforce based on changes in the markets and industries in which we compete or that any future restructuring or workforce reduction efforts will be successful.

We depend on a few significant customers. Our top three customers accounted for 79% of our total product sales in the first nine months of 2009. If any of these customers delays, reduces or ceases ordering our products or services, our business would be negatively affected.

Our common stock is listed on the Over-the-Counter Bulletin Board, which may impair the price at which our common stock trades, the liquidity of the market for our common stock and our ability to obtain additional funding. Our common stock is listed on the Over-the-Counter Bulletin Board, an electronic quotation service maintained by the Financial Industry Regulatory Authority. As a consequence of this listing, the ability of a stockholder to sell our common stock, the price obtainable for our common stock and our ability to obtain additional funding may be materially impaired.

The fair value of accounting for derivative liabilities may materially impact the results of our operations in future periods. We recorded derivative liabilities in connection with our convertible debt and equity financing agreements at inception in 2006. In accordance with ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity,” these derivative liabilities are reported at fair value each reporting period. Changes in the fair value are recorded as a component of earnings. Changes in the value of the derivative liabilities may materially impact results of operations in future periods.

We have limited manufacturing experience, and may be unable to produce our products at the unit costs necessary for the products to be competitive in the market, which could cause our financial condition to suffer. We have limited experience manufacturing our products in commercially viable quantities. We have increased our production capacity for the Biojector^® 2000 system and the Vitajet^® product line through automation of, and changes in, production methods, in order to achieve savings through higher volumes of production. If we are unable to achieve these savings, our results of operations and financial condition could suffer. The current cost per injection of the Biojector^® 2000 system and Vitajet^® product line is substantially higher than that of traditional needle-syringes, our principal competition. In order to reduce costs, a key element of our business strategy has been to reduce the overall manufacturing cost through automating production and packaging. There can be no assurance

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that we will achieve sales and manufacturing volumes necessary to realize cost savings from volume production at levels necessary to result in significant unit manufacturing cost reductions. Failure to do so will continue to make competing with needle-syringes on the basis of cost very difficult and will adversely affect our financial condition and results of operations. We may be unable to successfully manufacture devices at a unit cost that will allow the product to be sold profitably. Failure to do so would adversely affect our financial condition and results of operations.

We are subject to extensive government regulation and must continue to comply with these regulations or our business could suffer. Our products and manufacturing operations are subject to extensive government regulation in both the U.S. and abroad. If we cannot comply with these regulations, we may be unable to distribute our products, which could cause our business to suffer or fail. In the U.S., the development, manufacture, marketing and promotion of medical devices are regulated by the Food and Drug Administration (“FDA”) under the Federal Food, Drug, and Cosmetic Act (“FFDCA”). The FFDCA provides that new pre-market notifications under Section 510(k) of the FFDCA are required to be filed when, among other things, there is a major change or modification in the intended use of a device or a change or modification to a legally marketed device that could significantly affect its safety or effectiveness. A device manufacturer is expected to make the initial determination as to whether the change to its device or its intended use is of a kind that would necessitate the filing of a new 510(k) notification. The FDA may not concur with our determination that our current and future products can be qualified by means of a 510(k) submission or that a new 510(k) notification is not required for such products.

Future changes to manufacturing procedures could require that we file a new 510(k) notification. Also, future products, product enhancements or changes, or changes in product use may require clearance under Section 510(k), or they may require FDA pre-market approval (“PMA”) or other regulatory clearances. PMAs and regulatory clearances other than 510(k) clearance generally involve more extensive prefiling testing than a 510(k) clearance and a longer FDA review process. It is current FDA policy that pre-filled syringes are evaluated by the FDA by submitting a Request for Designation (“RFD”) to the Office of Combination Products (“OCP”). The pharmaceutical or biotechnology company with which we partner is responsible for the submission to the OCP, although we will have this responsibility with respect to drug+device combinations produced by us under our new strategy. A pre-filled syringe meets the FDA’s definition of a combination product, or a product comprised of two or more regulated components, i.e. drug/device. The OCP will assign a center with primary jurisdiction for a combination product (CDER, CDRH) to ensure the timely and effective pre-market review of the product. Depending on the circumstances, drug and combination drug/device regulation can be much more extensive and time consuming than device regulation.

FDA regulatory processes are time consuming and expensive. Product applications submitted by us may not be cleared or approved by the FDA. In addition, our products must be manufactured in compliance with Good Manufacturing Practices, as specified in regulations under the FFDCA. The FDA has broad discretion in enforcing the FFDCA, and noncompliance with the FFDCA could result in a variety of regulatory actions ranging from product detentions, device alerts or field corrections, to mandatory recalls, seizures, injunctive actions and civil or criminal penalties.

Sales of our products, including the Iject^® pre-filled syringe, are dependent on regulatory approval being obtained for the product’s use with a given drug to treat a specific condition. It is the responsibility of the strategic partner producing the drug to obtain this approval. The failure of a partner to obtain regulatory approval or to comply with government regulations after approval has been received could harm our business. In order for a strategic partner to sell our devices for delivery of its drug to treat a specific condition, the partner must first obtain government approval. This process is subject to extensive government regulation both in the U.S. and abroad. As a result, sales of our products, including the Iject^® product, to any strategic partner are dependent on that partner’s ability to obtain regulatory approval. Accordingly, delay or failure of a partner to obtain that approval could cause our financial results to suffer. In addition, if a partner fails to comply with governmental regulations after initial regulatory approval has been obtained, sales to that partner may cease, which could cause our financial results to suffer.

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If we cannot meet international product standards, we will be unable to distribute our products outside of the United States, which could cause our business to suffer. Distribution of our products in countries other than the U.S. may be subject to regulation in those countries. Failure to satisfy these regulations would impact our ability to sell our products in these countries and could cause our business to suffer.

We have received the following certifications from Underwriters Laboratories (“UL”) that our products and quality systems meet the applicable requirements, which allows us to label our products with the CE Mark and sell them in the European Community and non-European Community countries.

Certificate	Issue Date	Date Renewed
ISO 13485:2003 and CMDCAS	February 2006	January 2009
Annex V of the Directive 93/42/EEC on Medical Devices	March 2007	January 2009
Annex II, section 3 of the Directive 93/42/EEC on Medical Devices	March 2007	January 2009

If we are unable to continue to meet the standards of ISO 13485 or CE Mark certification, it could have a material adverse effect on our business and cause our financial results to suffer.

If the healthcare industry limits coverage or reimbursement levels, the acceptance of our products could suffer. The price of our products exceeds the price of needle-syringe combinations and, if coverage or reimbursement levels are reduced, market acceptance of our products could be harmed. The healthcare industry is subject to changing political, economic and regulatory influences that may affect the procurement practices and operations of healthcare facilities. During the past several years, the healthcare industry has been subject to increased government regulation of reimbursement rates and capital expenditures. Among other things, third party payers are increasingly attempting to contain or reduce healthcare costs by limiting both coverage and levels of reimbursement for healthcare products and procedures. Because the price of the Biojector^® 2000 system exceeds the price of a needle-syringe, cost control policies of third party payers, including government agencies, may adversely affect acceptance and use of the Biojector^® 2000 system.

We depend on outside suppliers for manufacturing. Our current manufacturing processes for the Biojector^® 2000 jet injector and disposable syringes as well as manufacturing processes to produce our modified Vitajets^® consist primarily of assembling component parts supplied by outside suppliers. Some of these components are currently obtained from single sources, with some components requiring significant production lead times. In the past, we have experienced delays in the delivery of certain components. To date, such delays have not had a material adverse effect on our operations. We may experience delays or interruptions in the future, including suppliers suspending or ceasing operations, and these delays or interruptions could have a material adverse effect on our financial condition and results of operations.

If we are unable to manage our growth, our results of operations could suffer. If our products achieve market acceptance or if we are successful in entering into significant product supply agreements with major pharmaceutical or biotechnology companies, we expect to experience rapid growth. Such growth would require expanded customer service and support, increased personnel, expanded operational and financial systems, and implementing new and expanded control procedures. We may be unable to attract sufficient qualified personnel or successfully manage expanded operations. As we expand, we may periodically experience constraints that would adversely affect our ability to satisfy customer demand in a timely fashion. Failure to manage growth effectively could adversely affect our financial condition and results of operations.

We may be unable to compete in the medical equipment field, which could cause our business to fail. The medical equipment market is highly competitive and competition is likely to intensify. If we cannot compete, our business will fail. Our products compete primarily with traditional needle-syringes, “safety syringes” and also with other alternative drug delivery systems. In addition, manufacturers of needle-syringes, as well as other companies, may develop new products that compete directly or indirectly with our products. There can be no assurance that we will be able to compete successfully in this market.

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A variety of new technologies (for example, transdermal patches) are being developed as alternatives to injection for drug delivery. While we do not believe such technologies have significantly affected the use of injection for drug delivery to date, there can be no assurance that they will not do so in the future. Many of our competitors have longer operating histories as well as substantially greater financial, technical, marketing and customer support resources.

We are dependent on a single technology, and if it cannot compete or find market acceptance, our business will suffer. Our strategy has been to focus our development and marketing efforts on our needle-free injection technology. Focus on this single technology leaves us vulnerable to competing products and alternative drug delivery systems. If our technology cannot find market acceptance or cannot compete against other technologies, business will suffer. We perceive that healthcare providers’ desire to minimize the use of the traditional needle-syringe has stimulated development of a variety of alternative drug delivery systems such as “safety syringes,” jet injection systems, nasal delivery systems and transdermal diffusion “patches.” In addition, pharmaceutical companies frequently attempt to develop drugs for oral delivery instead of injection. While we believe that for the foreseeable future there will continue to be a significant need for injections, alternative drug delivery methods may be developed which are preferable to injection.

We rely on patents and proprietary rights to protect our technology. We rely on a combination of trade secrets, confidentiality agreements and procedures and patents to protect our proprietary technologies. We have been granted a number of patents in the U.S. and several patents in other countries covering certain technology embodied in our current jet injection system and certain manufacturing processes. Additional patent applications are pending in the U.S. and certain foreign countries. The claims contained in any patent application may not be allowed, or any patent or our patents collectively may not provide adequate protection for our products and technology. In the absence of patent protection, we may be vulnerable to competitors who attempt to copy our products or gain access to our trade secrets and know-how. In addition, the laws of foreign countries may not protect our proprietary rights to this technology to the same extent as the laws of the U.S. We believe we have independently developed our technology and attempt to ensure that our products do not infringe the proprietary rights of others.

If a dispute arises concerning our technology, we could become involved in litigation that might involve substantial cost. Such litigation might also divert substantial management attention away from our operations and into efforts to enforce our patents, protect our trade secrets or know-how or determine the scope of the proprietary rights of others. If a proceeding resulted in adverse findings, we could be subject to significant liabilities to third parties. We might also be required to seek licenses from third parties in order to manufacture or sell our products. Our ability to manufacture and sell our products might also be adversely affected by other unforeseen factors relating to the proceeding or its outcome.

If our products fail or cause harm, we could be subject to substantial product liability, which could cause our business to suffer. Producers of medical devices may face substantial liability for damages in the event of product failure or if it is alleged the product caused harm. We currently maintain product liability insurance and, to date, have experienced one product liability claim. There can be no assurance, however, that we will not be subject to a number of such claims, that our product liability insurance would cover such claims, or that adequate insurance will continue to be available to us on acceptable terms in the future. Our business could be adversely affected by product liability claims or by the cost of insuring against such claims.

There are a large number of shares eligible for sale into the public market, which may reduce the price of our common stock. The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market, or the perception that such sales could occur. We have a large number of shares of common stock outstanding and available for resale. These sales also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. There are also a large number of shares of common stock issuable upon conversion of our outstanding preferred stock, convertible debt and exercise of warrants. In addition, as of September 30, 2009, we had approximately 702,000 shares of common stock available for future

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issuance under our stock incentive plan and our employee share purchase plan combined. As of September 30, 2009, options to purchase approximately 394,000 shares of common stock were outstanding and approximately 285,000 restricted stock units were outstanding and will be eligible for sale in the public market from time to time subject to vesting.

Our stock price may be highly volatile, which increases the risk of securities litigation. The market for our common stock and for the securities of other small market-capitalization companies has been highly volatile in recent years. This increases the risk of securities litigation relating to such volatility. We believe that factors such as quarter-to-quarter fluctuations in financial results, new product introductions by us or our competition, public announcements, changing regulatory environments, sales of common stock by certain existing shareholders, substantial product orders and announcement of licensing or product supply agreements with major pharmaceutical or biotechnology companies could contribute to the volatility of the price of our common stock, causing it to fluctuate dramatically. General economic trends such as recessionary cycles and changing interest rates may also adversely affect the market price of our common stock.

Concentration of ownership could delay or prevent a change in control or otherwise influence or control most matters submitted to our shareholders. Certain funds affiliated with Life Sciences Opportunities Fund II (Institutional), L.P. (collectively, the “LOF Funds”) and its affiliates currently own shares of Series D Preferred Stock, Series E Preferred Stock, convertible debt and warrants to purchase common stock representing in aggregate approximately 26% of our outstanding voting power (assuming conversion of the debt and exercise of the warrants). As a result of the proposed Series G Preferred Stock financing, they will own an aggregate of approximately 44% of our outstanding voting power. As a result, the LOF Funds and their affiliates have the potential to control matters submitted to a vote of shareholders, including a change of control transaction, which could prevent or delay such a transaction.

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ITEM 6. EXHIBITS

The following exhibits are filed herewith and this list is intended to constitute the exhibit index:

Exhibit No.	Description
3.1	2002 Restated Articles of Incorporation of Bioject Medical Technologies Inc., as amended. Incorporated by reference to Form 8-K dated November 15, 2004.
3.1.1	Articles of Amendment to 2002 Restated Articles of Incorporation. Incorporated by reference to Form 8-K dated May 30, 2006 and filed June 5, 2006.
3.1.2	Articles of Amendment to 2002 Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.1 in the Form 8-K filed January 23, 2008.
3.2	Second Amended and Restated Bylaws of Bioject Medical Technologies, Inc. Incorporated by reference to Form 8-K filed July 5, 2007.
4.1	Form of Rights Agreement dated as of July 1, 2002 between the Company and American Stock Transfer & Trust Company, including Exhibit A, Terms of the Preferred Stock, Exhibit B, Form of Rights Certificate, and Exhibit C, Summary of the Right To Purchase Preferred Stock. Incorporated by reference to Form 8-K dated July 2, 2002.
4.1.1	First Amendment, dated October 8, 2002, to Rights Agreement dated July 1, 2002 between Bioject and American Stock Transfer & Trust Company. Incorporated by reference to registration statement on Form 8-A/A filed with the Commission on October 8, 2002.
4.1.2	Second Amendment, dated November 15, 2004, to Rights Agreement dated July 1, 2002 between Bioject and American Stock Transfer & Trust Company. Incorporated by reference to Form 8-K dated November 15, 2004.
4.1.3	Third Amendment to Rights Agreement, dated March 8, 2006, between Bioject Medical Technologies Inc. and American Stock Transfer & Trust Company. Incorporated by reference to Form 8-K dated March 3, 2006 and filed March 9, 2006.
4.1.4	Fourth Amendment to Rights Agreement, dated as of November 20, 2007, between Bioject Medical Technologies Inc. and American Stock Transfer & Trust Company. Incorporated by reference to Form 8-K dated December 19, 2007 and filed December 20, 2007.
10.1	Fourth Amendment to Lease Agreement between MEPT Commerce Park Tualatin II and III LLC and Bioject Medical Technologies Inc. dated June 30, 2009. Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on July 14, 2009.
10.2	Convertible Subordinated Promissory Note Second Extension Agreement, dated July 13, 2009, between Bioject Medical Technologies Inc. and Life Sciences Opportunities Fund II (Institutional), L.P. Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on July 14, 2009.
10.3	Convertible Subordinated Promissory Note Second Extension Agreement, dated July 13, 2009, between Bioject Medical Technologies Inc. and Life Sciences Opportunities Fund II, L.P. Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on July 14, 2009.
10.4	Convertible Subordinated Promissory Note Third Extension Agreements, dated August 14, 2009, between Bioject Medical Technologies Inc. and Life Sciences Opportunities Fund II (Institutional), L.P. and Life Sciences Opportunities Fund II, L.P. Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on August 18, 2009.
10.5	Convertible Subordinated Promissory Note Fourth Extension Agreement, dated August 31, 2009, between Bioject Medical Technologies Inc. and Life Sciences Opportunities Fund II (Institutional), L.P. Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 1, 2009.
10.6	Convertible Subordinated Promissory Note Fourth Extension Agreement, dated August 31, 2009, between Bioject Medical Technologies Inc. and Life Sciences Opportunities Fund II, L.P. Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 1, 2009.
10.7	Binding Memorandum of Terms dates September 14, 2009 between Bioject Medical Technologies Inc. and Signet Healthcare Partners, LLC. Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 17, 2009.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

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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: November 10, 2009	BIOJECT MEDICAL TECHNOLOGIES INC.
	(Registrant)
	/s/    RALPH MAKAR
	Ralph Makar
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/    CHRISTINE M. FARRELL
	Christine M. Farrell
	Vice President of Finance
	(Principal Financial and Accounting Officer)

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