10-Q

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 June 30, 2011

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  x    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	18,851,312
(Class)	(Outstanding at August 12, 2011)

BIOJECT MEDICAL TECHNOLOGIES INC.

FORM 10-Q

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – June 30, 2011 and December 31, 2010 (unaudited)		2
	Consolidated Statements of Operations – Three and Six Months Ended June 30, 2011 and 2010 (unaudited)		3
	Consolidated Statements of Cash Flows – Six Months Ended June 30, 2011 and 2010 (unaudited)		4
	Notes to Consolidated Financial Statements (unaudited)		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
Item 4.	Controls and Procedures		13
PART II - OTHER INFORMATION
Item 1A.	Risk Factors		14
Item 6.	Exhibits		20
Signatures			21

1

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2011			December 31, 2010
ASSETS
Current assets:
Cash	$	894,318		$	180,154
Accounts receivable, net of allowance for doubtful accounts of $5,149 and $5,149		521,525			837,890
Inventories		1,500,603			626,458
Other current assets		160,162			70,403
Total current assets		3,076,608			1,714,905
Property and equipment, net of accumulated depreciation of $7,939,270 and $7,768,893		476,380			645,346
Other assets, net		1,329,245			1,309,478
Total assets	$	4,882,233		$	3,669,729
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,359,647		$	945,816
Accrued payroll		263,451			225,144
Other accrued liabilities		763,805			481,165
Short-term note payable		225,000			—
Deferred revenue		359,993			176,207
Total current liabilities		2,971,896			1,828,332
Long-term liabilities:
Deferred revenue		1,047,913			1,136,016
Other long-term liabilities		250,548			324,551
Commitments
Shareholders’ equity:
Preferred stock, no par value, 10,000,000 shares authorized:
Series D Convertible — 2,086,957 shares issued and outstanding and liquidation preference of $2,400,000 at June 30, 2011 and December 31, 2010		1,878,768			1,878,768
Series E Convertible — 3,308,392 shares issued and outstanding and liquidation preference of $5,286,704 at June 30, 2011 and December 31, 2010		5,478,466			5,478,466
Series F Convertible — 8,314 shares issued and outstanding at liquidation preference of $723,025 at June 30, 2011 and December 31, 2010		723,025			723,025
Series G Convertible — 92,449 shares issued and outstanding at June 30, 2011 and December 31, 2010 and liquidation preference of $1,351,639 and $1,299,570		1,351,639			1,299,570
Common stock, no par value, 100,000,000 shares authorized; 18,851,312 shares issued and outstanding at June 30, 2011 and 18,455,094 at December 31, 2010		114,875,743			114,762,654
Accumulated deficit		(123,695,765	)		(123,761,653	)
Total shareholders’ equity		611,876			380,830
Total liabilities and shareholders’ equity	$	4,882,233		$	3,669,729

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 June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenue:
Net sales of products	$	2,184,757		$	1,040,222		$	3,806,370		$	2,131,590
License and technology fees		209,155			116,975			330,818			213,329
		2,393,912			1,157,197			4,137,188			2,344,919
Operating expenses:
Manufacturing		1,271,327			808,211			2,323,857			1,617,117
Research and development		399,755			372,931			710,061			745,300
Selling, general and administrative		446,508			569,448			980,248			1,083,295
Total operating expenses		2,117,590			1,750,590			4,014,166			3,445,712
Operating income (loss)		276,322			(593,393	)		123,022			(1,100,793	)
Interest income		27			1,057			574			3,262
Interest expense		(2,781	)		(2,955	)		(5,639	)		(32,891	)
Change in fair value of derivative liabilities		—			39,217			—			31,685
		(2,754	)		37,319			(5,065	)		2,056
Net income (loss)		273,568			(556,074	)		117,957			(1,098,737	)
Preferred stock dividends		(26,034	)		(24,107	)		(52,069	)		(49,331	)
Net income (loss) allocable to common shareholders	$	247,534		$	(580,181	)	$	65,888		$	(1,148,068	)
Basic net income (loss) per common share allocable to common shareholders	$	0.01		$	(0.03	)	$	0.00		$	(0.06	)
Shares used in basic per share calculations		18,689,480			17,823,950			18,584,537			17,776,792
Diluted net income (loss) per common share allocable to common shareholders	$	0.01		$	(0.03	)	$	0.00		$	(0.06	)
Shares used in diluted per share calculations		36,294,172			17,823,950			25,793,148			17,776,792

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)

	For the Six Months Ended June 30,
	2011			2010
Cash flows from operating activities:
Net income (loss)	$	117,957		$	(1,098,737	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Compensation expense related to fair value of stock-based awards		70,822			224,558
Stock contributed to 401(k) Plan		23,336			26,087
Depreciation and amortization		226,177			287,214
Other non-cash interest expense		—			25,242
Change in fair value of derivative instruments		—			(31,685	)
Change in deferred revenue		95,683			(20,334	)
Change in deferred rent		(44,777	)		5,023
Changes in operating assets and liabilities:
Accounts receivable, net		316,365			395,113
Inventories		(874,145	)		(8,737	)
Other current assets		(63,328	)		(42,535	)
Accounts payable		387,649			(282,057	)
Accrued payroll		38,307			27,998
Other accrued liabilities		282,640			15,084
Net cash provided by (used in) operating activities		576,686			(477,766	)
Cash flows from investing activities:
Payments for purchase of property and equipment		(1,411	)		—
Other assets		(75,567	)		(63,012	)
Net cash used in investing activities		(76,978	)		(63,012	)
Cash flows from financing activities:
Proceeds from short-term debt		225,000			—
Debt issuance costs		(7,500	)		—
Principal payments made on short and long-term debt		—			(150,000	)
Payments made on capital lease obligations		(3,044	)		(4,633	)
Net cash provided by (used in) financing activities		214,456			(154,633	)
Increase in cash		714,164			(695,411	)
Cash:
Beginning of period		180,154			1,146,318
End of period	$	894,318		$	450,907
Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,923		$	2,625
Supplemental non-cash information:
Preferred stock dividend to be settled in Series F or Series G preferred stock	$	52,069		$	49,331
Issuance of warrants in connection with convertible debt financing		18,931			—

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 six-month periods ended June 30, 2011 and 2010 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, 2010 is derived from Bioject Medical Technologies Inc.’s 2010 Annual Report on Form 10-K for the year ended December 31, 2010. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Bioject’s 2010 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 availability of additional committed capital, history of recurring losses, negative cash flows, accumulated deficit and lack of sufficient long-term sales commitments, there is 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 June 30, 2011, we had an accumulated deficit of $123.7 million with total shareholders’ equity of $0.6 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 June 30, 2011, we had cash of $0.9 million and working capital of $0.1 million. We continue to monitor our cash and have previously taken measures to reduce our expenditure rate and delay capital and maintenance expenditures. In addition, as discussed in Note 7 below, in the second quarter of 2011, we entered into a debt financing agreement with proceeds of $225,000.

However, if we do not enter into one or more licensing, development or supply agreements with sufficient up-front payments or increase sales to current customers or markets, we may need to do one or more of the following to provide additional resources during 2012:

• secure additional debt financing;

• secure additional equity financing;

• secure a strategic partner; or

• reduce our operating expenditures.

While management continues to pursue a number of strategic options and alternatives to keep Bioject operating, there are no assurances that we will be successful. Additional financing may not be available to us on acceptable terms or at all. If we are unable to obtain additional resources, our business could be adversely affected and we could be forced to cease operations.

In April 2011, we eliminated the 10% pay reductions that were implemented in February 2009 for all non-executive employees. Executive officers continue to maintain a voluntary 20% pay reduction.

Note 2. Inventories

Inventories are stated at the lower of cost or market value. Cost is determined in a manner that approximates the first-in, first out (FIFO) method. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. Any write-down of inventory to the lower of cost or market at the close of a fiscal period creates a new cost basis that subsequently would not be marked up based on changes in underlying facts and circumstances.

5

Inventories consisted of the following:

	June 30, 2011		December 31, 2010
Raw materials and components	$	923,183	$	348,683
Work in process		184,715		74,385
Finished goods		392,705		203,390
	$	1,500,603	$	626,458

Note 3. Net Income (Loss) Per Common Share

Basic earnings per share (“EPS”) and diluted EPS are the same for the three and six-month periods ended June 30, 2010 since we were in a loss position in those periods. Following is a reconciliation of basic EPS and diluted EPS for the three and six-month periods ended June 30, 2011 (in thousands, except per share amounts):

	Three Months Ended June 30, 2011						Six Months Ended June 30, 2011
	Net Income Allocable to Common Share- holders		Shares		Per Share Amount		Net Income Allocable to Common Share- holders		Shares		Per Share Amount
Basic EPS	$	247,534		18,689,480	$	0.01	$	65,888		18,584,537	$	0.00
Dilutive effect of stock options, restricted stock units (“RSUs”) and warrants		—		296,941		—		—		298,083		0.00
Series D, E and F convertible preferred stock		—		6,910,528		—		—		6,910,528		—
Series G convertible preferred stock		26,034		10,397,223		—		—		—		—
Diluted EPS	$	273,568		36,294,172	$	0.01	$	65,888		25,793,148	$	0.00
Schedule of anti-dilutive securities excluded from computation of diluted EPS
Stock options and warrants				3,689,032						3,689,032
Series G convertible preferred stock				—						9,244,877
Series G payment-in-kind dividends				—						1,152,346
				3,689,032						14,086,255

The following common stock equivalents are excluded from the diluted loss per share calculations for the 2010 periods, as their effect would have been antidilutive:

	Three and Six  Months Ended June 30, 2010
Stock options, RSUs and warrants		4,934,731
Series D convertible preferred stock		2,086,957
Series E convertible preferred stock		3,308,392
Series F convertible preferred stock		831,400
Series G convertible preferred stock		9,244,877
Series E payment-in-kind dividends		550,516
Series F payment-in-kind dividends		133,263
Series G payment-in-kind dividends		380,950
Total		21,471,086

6

Note 4. Product Sales and Concentrations

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Merial		45	%		37	%		57	%		32	%
Serono		36	%		18	%		21	%		26	%
Ferring		11	%		30	%		14	%		30	%

At June 30, 2011, accounts receivable from Merial, Serono and Ferring represented 15%, 64% and 14%, respectively, of the accounts receivable balance. No other customers accounted for 10% or more of our accounts receivable as of June 30, 2011.

Note 5. Other Accrued Liabilities

Included in other accrued liabilities was $0.4 million at both June 30, 2011 and December 31, 2010 related to credits for Serono and $0.3 million at June 30, 2011 related to customer deposits for Merial.

Note 6. Facility Lease Amendment

In March 2011, we entered into an agreement with the landlord of our Tualatin, Oregon facility, which provides for the repayment of deferred rent at the rate of $2,000 per month for the period April 1, 2011 through March 31, 2012 and $3,742 per month for the period April 1, 2012 through December 31, 2014.

Note 7. Convertible Debt Financing and Related Warrants

On June 29, 2011, we entered into a $225,000 Convertible Note Purchase and Warrant Agreement (the “Agreement”) with Al Hansen, Mark Logomasini, Ed Flynn, and Ralph Makar (together, the “Purchasers”) pursuant to which we issued Convertible Promissory Notes (the “Notes”) and warrants to purchase common stock (the “Warrants”). Pursuant to the Agreement, we sold Notes in the principal amount of $75,000 to each of Messrs. Hansen and Logomasini, $50,000 to Mr. Flynn and $25,000 to Mr. Makar. Each of Messrs. Flynn, Hansen, Logomasini, and Makar is a director of Bioject; Mr. Makar is also our Chief Executive Officer. In addition, Mr. Hansen is a managing director of Signet Health Partners, an affiliate of one of our principal shareholders, Life Sciences Opportunities Fund II, L.P. and Life Sciences Opportunities Fund II (Institutional), L.P.

The Notes bear interest at the rate of 10% per year with all principal and interest due December 29, 2011, which maturity date may be extended to June 28, 2012 at the option of the holder, and may not be prepaid without the written consent of the holders of a majority in interest of the Notes. The Notes are convertible at any time by the Purchasers into our common stock at the rate of $0.19 per share, or, in the case of a qualified financing, into the equity securities sold in the financing at a price equal to the financing price. A qualified financing is defined as the offering by us of shares of equity securities, including units consisting of stock and warrants, resulting in the receipt of cash proceeds by us of at least $225,000 in the aggregate (the “Minimum Proceeds”) on or prior to the maturity date of the Notes. Minimum Proceeds shall not include the conversion of the principal amount of the outstanding Notes and accrued and unpaid interest thereon.

The number of shares for which each Warrant is exercisable automatically increases if the holder exercises his option to extend the maturity date of his Note. If no holder exercises his option to extend the maturity date of his Note, the Warrants will be exercisable for an aggregate of 118,422 shares of our common stock. If all holders exercise their options to extend the maturity date of their Notes, the Warrants will be exercisable for an aggregate of 236,844 shares of our common stock. The Warrants’ exercise price is $0.19 per share. Each Warrant is immediately exercisable and expires on June 28, 2014.

7

The proceeds have been allocated using the relative fair value of the Notes and the Warrant, with $18,931 being allocated to the Warrant. The estimated fair value of the Warrant was determined utilizing the Black-Scholes valuation model using the following assumptions:

Risk-free interest rate	0.79%
Expected dividend yield	0%
Contractual term	3 years
Expected volatility	251%

The value of the Warrant was recorded as deferred financing fees as a component of other current assets on our Consolidated Balance Sheets and is being amortized over the six-month life of the Notes.

Note 8. Recent Accounting Guidance

ASU 2010-17

In April 2010, the FASB issued ASU 2010-17, “Revenue Recognition – Milestone Method,” which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a drug study or achieving a specific result from the research or development efforts. An entity often recognizes these milestone payments as revenue in their entirety upon achieving the related milestone, commonly referred to as the milestone method. We adopted the amendments in ASU 2010-17 effective January 1, 2011 on a prospective basis. Our previous practices are consistent with the guidance in ASU 2010-17 and, in future research and development transactions, we will analyze the impact and, when the milestones are substantive, we will recognize them according to ASU 2010-17. Accordingly, the adoption of the provisions of ASU 2010-17 did not have any effect on our financial position, results of operations or cash flows.

Note 9. Subsequent Event

In July 2011, we received $0.1 million from the sale of certain packaging equipment to a customer. We will continue to utilize this equipment in our manufacturing process and it will remain at our facility.

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 future development agreements, the risk that our marketing strategies into the military, public health and retail pharmacy sectors may not be successful, the risk that our products will not be accepted by the market, the risk that we will be unable to meet production demands as a result of supply or other factors, the risk that we will be unable to obtain needed debt or equity financing on satisfactory terms, or at all, 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.

8

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. See also Part II, Item 1A, Risk Factors.

OVERVIEW

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

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 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.

In the first quarter of 2011, Serono extended its contract, which expired under its terms in December 2010, with a one-time fixed extension of the agreement until December 31, 2011. We commenced shipment of product in the second quarter of 2011 and anticipate additional sales in the remainder of 2011.

Also, in February 2011, we entered into a collaboration with PATH and the World Health Organization (“WHO”) to support efforts to advance clinical research of intradermal delivery of vaccines in developing-country immunization programs by providing our Intradermal Pen (the “ID Pen”). The ID Pen is a unique disposable-syringe jet injector for intradermal delivery. PATH and WHO will each provide funding for the production of ID Pen devices for further evaluation. A portion of this funding will be recorded as a component of licensing and technology fees and the other portion will be used for direct funding of equipment.

In June 2011, we completed a financing for short-term debt in the amount of $225,000. See Note 7 of Notes to Consolidated Financial Statements.

We continue our efforts to expand into the military, public health and retail pharmacy sectors with both our B2000 and Bioject^® ZetaJet™ products.

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

Our limited amount of additional committed capital, history of recurring losses, negative cash flows, accumulated deficit and lack of sufficient long-term sales commitments are factors that raise substantial doubt about our ability to continue as a going concern. See Note 1 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

9

CONTRACTUAL PAYMENT OBLIGATIONS

A summary of our contractual commitments and obligations as of June 30, 2011 was as follows:

	Payments Due By Period
Contractual Obligation	Total		Remainder of 2011		2012 and 2013		2014 and 2015		2016 and beyond
Short-term debt	$	225,000	$	225,000	$	—	$	—	$	—
Operating leases and deferred rent(1)		1,534,270		217,439		913,939		402,892		—
Purchase order commitments		831,220		831,220		—		—		—
	$	2,590,490	$	1,273,659	$	913,939	$	402,892	$	—

(1) Operating leases and deferred rent includes $119,000 of deferred rent, which we began repaying in April 2011. See also Note 6 of Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

The consolidated financial data for the three and six-month periods ended June 30, 2011 and 2010 are presented in the following table:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenue:
Net sales of products	$	2,184,757		$	1,040,222		$	3,806,370		$	2,131,590
License and technology fees		209,155			116,975			330,818			213,329
		2,393,912			1,157,197			4,137,188			2,344,919
Operating expenses:
Manufacturing		1,271,327			808,211			2,323,857			1,617,117
Research and development		399,755			372,931			710,061			745,300
Selling, general and administrative		446,508			569,448			980,248			1,083,295
Total operating expenses		2,117,590			1,750,590			4,014,166			3,445,712
Operating income (loss)		276,322			(593,393	)		123,022			(1,100,793	)
Interest income		27			1,057			574			3,262
Interest expense		(2,781	)		(2,955	)		(5,639	)		(32,891	)
Change in fair value of derivative liabilities		—			39,217			—			31,685
Net income (loss)		273,568			(556,074	)		117,957			(1,098,737	)
Preferred stock dividend		(26,034	)		(24,107	)		(52,069	)		(49,331	)
Net income (loss) allocable to common shareholders	$	247,534		$	(580,181	)	$	65,888		$	(1,148,068	)
Basic net loss per common share allocable to common shareholders	$	0.01		$	(0.03	)	$	0.00		$	(0.06	)
Shares used in basic per share calculations		18,689,480			17,823,950			18,584,537			17,776,792
Diluted net loss per common share allocable to common shareholders	$	0.01		$	(0.03	)	$	0.00		$	(0.06	)
Shares used in diluted per share calculations		36,294,172			17,823,950			25,793,148			17,776,792

Revenue

The $1.1 million, or 110.0%, increase and the $1.7 million, or 78.6%, increase in product sales in the three and six-month periods ended June 30, 2011, respectively, compared to the same periods of 2010, were due primarily to the following:

• increases in sales to Merial from $382,000 to $978,000, or 156%, and from $674,000 to $2.2 million, or 221%, in the three and six-month periods ended June 30, 2011, respectively, compared to the same periods of 2010 due to increased orders by Merial relating to the launch of its new spring powered device in the second quarter of 2011;

• an increases in sales to Serono from $186,000 to $786,000, or 323%, and from $546,000 to $786,000, or 44%, in the three and six-month periods ended June 30, 2011, respectively, compared to the same periods of 2010 as a result of commencement of last-time buy shipments; and

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• an increase in sales to the military from $82,000 to $109,000, or 33%, and from $109,000 to $218,000, or 100%, increase in the three and six-month periods ended June 30, 2011 compared to the same periods of 2010.

These factors were partially offset by:

• a decrease in sales to Ferring from $316,000 to $247,000, or 22%, and from $631,000 to $529,000, or 16%, in the three and six-month periods ended June 30, 2011, respectively, compared to the same periods of 2010, due to timing of orders.

We currently have supply agreements or commitments with Merial, Ferring Pharmaceuticals Inc., the U.S. federal government and Serono. Although our agreement with Serono expired in December 2010, it was extended with a one-time fixed extension of the agreement until December 31, 2011.

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Serono	$	38,452	$	15,280	$	38,452	$	34,271
Merial		44,052		44,052		88,103		86,063
WHO		104,079		—		147,902		—
Royalty fees		22,572		22,643		46,361		47,995
Other		—		35,000		10,000		45,000
	$	209,155	$	116,975	$	330,818	$	213,329

We currently have an active licensing and development agreement, which includes commercial product supply provisions, with Merial. In addition, we entered into a collaboration agreement with PATH and WHO, which includes development fees and direct funding of equipment.

Manufacturing Expense

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

The $0.5 million, or 57.3%, increase and the $0.7 million, or 43.7%, increase in manufacturing expense in the three and six-month periods ended June 30, 2011, respectively, compared to the same periods of 2010 were primarily due to increased product sales as discussed above. However, manufacturing expense decreased as a percentage of product sales to 58.2% and 61.1%, respectively, in the three and six-month periods ended June 30, 2011 from 77.7% and 75.9%, respectively, in the comparable periods of 2010 due to a larger base over which to absorb overhead costs.

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 $27,000, or 7.2%, increase and the $35,000, or 4.7%, decrease in research and development expense in the three and six-month periods ended June 30, 2011, respectively, compared to the same periods of 2010 were primarily due to the timing of expenses related to on-going projects.

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 $123,000, or 21.6%, decrease and the $103,000, or 9.5%, decrease in selling, general and administrative expense in the three and six-month periods ended June 30, 2011, respectively, compared to the same periods of 2010 were primarily due to a $94,000 decrease in non-cash option and restricted stock expense and an $18,000 decrease in legal and consulting fees.

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Interest Expense

Interest expense included the following:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Contractual interest expense	$	2,781	$	2,955	$	5,639	$	7,649
Accretion of $1.25 million convertible debt		—		—		—		25,242
	$	2,781	$	2,955	$	5,639	$	32,891

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 at June 30, 2011 was $0.9 million compared to $0.2 million at December 31, 2010. We had working capital of $0.1 million at June 30, 2011 compared to a working capital deficit of $0.1 million at December 31, 2010. Given our current cash balance, if no new licensing, development or supply agreements with significant up-front payments are entered into or there is no significant increase in product sales in 2011, we may need to obtain additional debt or equity financing during 2011 in order to continue operations in 2012.

The increase in cash during the first six months of 2011 resulted from $0.6 million of cash provided by operating activities, as discussed in more detail below and $225,000 of proceeds from a convertible debt financing, offset by $77,000 used for capital expenditures and patent activity.

Net accounts receivable decreased $0.3 million to $0.5 million at June 30, 2011 compared to $0.8 million at December 31, 2010. The decrease in accounts receivable, despite the increase in product sales in 2011, was a result of improved payment terms from Merial. Receivables from three different customers accounted for a total of 93% of our accounts receivable balance at June 30, 2011, with individual accounts totaling 64%, 15% and 14%, respectively. Of the accounts receivable due at June 30, 2011, $0.5 million was collected prior to the filing of this Form 10-Q. Historically, we have not had collection problems related to our accounts receivable

Inventories increased $0.9 million to $1.5 million at June 30, 2011 compared to $0.6 million at December 31, 2010, primarily as a result of increased purchases to support the level of anticipated sales orders for the third and fourth quarters of 2011.

Capital expenditures totaled $1,400 in the first six months of 2011. We anticipate spending up to a total of $50,000 or more in 2011 for production equipment for current production and research and development projects.

Accounts payable increased $0.5 million to $1.4 million at June 30, 2011 compared to $0.9 million at December 31, 2010 primarily as a result of increased inventory purchases and the timing of payments.

Other accrued liabilities increased $0.3 million to $0.8 million at June 30, 2011 compared to $0.5 million at December 31, 2010, primarily as a result of increased customer deposits. Customer deposits and credits totaled $0.7 million at June 30, 2011 and are being, or could be, utilized at any time against current invoices or require repayment.

Deferred revenue of $1.4 million at June 30, 2011 represented amounts received from Merial, Serono and WHO.

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At June 30, 2011, we had outstanding $225,000 of short-term convertible debt (the “Notes”). The Notes bear interest at the rate of 10% per year with all principal and interest due December 29, 2011, which maturity date may be extended to June 28, 2012 at the option of the Note holders. The Notes may not be prepaid without the written consent of a majority of the Note holders. In addition, at the Note holders’ option, the Notes are convertible at any time by the Note holders into our common stock at the rate of $0.19 per share, or, in the case of a qualified financing, into the equity securities sold in the financing at a price equal to the financing price. A qualified financing is defined as the offering by us of shares of equity securities, including units consisting of stock and warrants, resulting in the receipt of cash proceeds by us of at least $225,000 in the aggregate (the “Minimum Proceeds”) on or prior to the maturity date of the Notes. Minimum Proceeds shall not include the conversion of the principal amount of the outstanding Notes and accrued and unpaid interest thereon.

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

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, 2010, which was filed with the Securities and Exchange Commission on March 31, 2011.

ITEM 4. 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.

Changes in Internal Control Over Financial Reporting

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

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PART II – OTHER INFORMATION

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 may need to obtain additional funding in 2011 to continue operations. Sufficient funding may not be available to us and, if available, may be subject to conditions. The unavailability of funding could adversely affect our business and cause us to cease operations. At June 30, 2011, we had cash of $0.9 million and working capital of $0.1 million. We continue to monitor our cash and have previously taken measures to reduce our expenditure rate and delay capital and maintenance expenditures. However, if we do not enter into one or more licensing development and supply agreements with sufficient up-front payments or increase sales to current customers or markets, we may need to do one or more of the following to provide additional resources in 2012:

• secure additional debt financing;

• secure additional equity financing;

• secure a strategic partner; or

• reduce our operating expenditures.

Our contract with Serono expired in December 2010 and, in early 2011, Serono provided last-buy purchases, which we will fulfill throughout 2011. 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 entered into convertible debt financing with certain members of our Board of Directors in the second quarter of 2011 that is due in the fourth quarter of 2011, unless extended for an additional six months or converted. Future financing may not be available to us on acceptable terms or at all. If we are unable to obtain additional resources, our business could be adversely affected and we could be forced to cease operations.

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 June 30, 2011, we had an accumulated deficit of $123.7 million and net working capital of $0.1 million. Due to our lack of additional committed capital, recurring losses, negative cash flows and accumulated deficit, there is substantial doubt about our ability to continue as a going concern. While we attained profitability in the second quarter of 2011, we may not be able to maintain profitability in future quarters, which could have a negative effect on our stock price, our business and our ability to continue operations. We may never be able to generate significant revenue. 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. 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, Series F Preferred Stock and Series G 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 $9.8 million, at June 30, 2011, prior to any payments to the holders of common stock. 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.

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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 studies, changes in drug 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 from 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.

We expanded our strategy to focus on military, public health and retail pharmacy sales. This strategy is subject to a number of risks and uncertainties, and, as a result, we may not be successful in implementing this strategy. We recently expanded the number of military and public health targets with whom we are in discussions about utilizing our needle-free injection technology devices. However, this expanded strategy has only resulted in a few new accounts. Successfully implementing this strategic focus is subject to a number of risks, including the risk that our products will not be accepted by these targets. Accordingly, there is no assurance that our expanded strategy will be successful, and the failure of our expanded strategy could negatively affect our business.

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 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 liquidity situation, we suspended implementation of this strategy in the first quarter of 2009 until such time as our cash position improves significantly. 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.

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We have amended our lease agreement for rent deferrals and, if we default under our lease agreement in the future, our landlord could terminate our lease, which would adversely affect our business. In November 2008, we negotiated a $15,000 rent deferral for each of November 2008, December 2008 and January 2009 and, in March 2009, we entered into an agreement 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. In March 2011, we entered into an agreement with the landlord, which provides for the repayment of deferred rent at the rate of $2,000 per month for the period April 1, 2011 through March 31, 2012 and $3,742 per month for the period April 1, 2012 through December 31, 2014. If we are unable to make the payments under the lease when due, including the deferred rent payments, or are unable to negotiate additional rent deferrals, our landlord could declare an event of default and terminate our lease, which would have a material adverse effect on 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 and there remains substantial competition for highly skilled employees. We may be unable to retain our key employees, namely our management team, or to attract, assimilate or retain other highly qualified 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.

We depend on a few significant customers. Our top three customers, Merial, Serono and Ferring, accounted for 92% of our total product sales in the first six months of 2011. We did not have any sales to Serono during the first quarter of 2011, but sales to Serono began in the second quarter of 2011 pursuant to its extended supply agreement, which expires December 31, 2011. Our agreement with Merial contains provisions allowing Merial to remove its production equipment and utilize a different third-party assembler if we fail to meet the production terms of the agreement. In addition, if any of these customers delays, reduces or ceases ordering our products or services, whether as a result of the expiration of a supply agreement or otherwise, 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. The Over-the-Counter Bulletin Board is an electronic quotation service maintained by the Financial Industry Regulatory Authority. Our stock, like most stock listed on this service, has very limited trading volume. As a consequence, 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.

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, the Bioject^® ZetaJet^™ and the Vitajet^® product lines 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, Bioject^® ZetaJet^™ and Vitajet^® product lines 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 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.

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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 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. If we were to have a recall of our product in the field, it could negatively affect our results of operations, financial position and cash flows. Our facility was subject to a routine surveillance audit by the FDA in September 2010. No adverse findings were noted during the audit.

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.

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.

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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
EC Certificate – Needle-free Injection Systems and Accessories (Biojector® 2000, cool.click®, Bioject® ZetaJet™)	March 2007	January 2010
EC Certificate – Vial Adapters and Reconstitution Kits	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. In addition, on March 23, 2010 the Patient Protection and Affordable Care Act was signed into law and, commencing in 2013, the legislation imposes a 2.3% excise tax on sales of medical devices, which may negatively affect our business.

We depend on outside suppliers for manufacturing. Our current manufacturing processes for the Biojector^® 2000 and Bioject^® ZetaJet^™ jet injector and disposable syringes as well as manufacturing processes to produce our modified Vitajet^®

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. We are experiencing delays in the delivery of certain components. These current delays, or any delays or interruptions we may experience in the future, including suppliers suspending or ceasing operations, could have a material adverse effect on our financial condition and results of operations.

Manufacturing difficulties could delay product shipments to customers. Delays in receiving approval for the manufacture of customers’ products or delays related to internal manufacturing difficulties could delay the timing of shipments to customers and negatively affect our results of operations, financial position and cash flows.

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 or vaccine 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.

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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,” other needle-free injectors 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. A variety of new technologies (for example, micro needles on dissolvable patches and 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 and promissory notes and exercise of warrants. In addition, as of June 30, 2011, we had approximately 245,000 shares of common stock available for future issuance under our stock incentive plan. As of June 30, 2011, options to purchase approximately 2.4 million shares of common stock were outstanding and approximately 160,000 restricted stock units were outstanding and will be eligible for sale in the public market from time to time subject to vesting.

19

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, biotechnology companies or vaccine 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 common stock, Series D Preferred Stock, Series E Preferred Stock, Series G Preferred Stock, warrants to purchase common stock and unpaid preferred stock dividends representing, in aggregate, approximately 45.4% of our outstanding voting power (assuming exercise of the warrants and payment of dividends). 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.

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 10-Q for the quarter ended June 30, 2010.
3.2	Second Amended and Restated Bylaws of Bioject Medical Technologies Inc., as amended March 10, 2011. Incorporated by reference to Form 8-K filed March 15, 2011.
10.1	Form of Convertible Note Purchase and Warrant Agreement dated June 29, 2011 between Bioject Medical Technologies Inc. and the Purchasers. Incorporated by reference to Form 8-K filed July 1, 2011.
10.2	Form of Warrant issued by Bioject Medical Technologies Inc. to the Purchasers. Incorporated by reference to Form 8-K filed July 1, 2011.
10.3	Form of Unsecured Subordinated Convertible Promissory Note issued by Bioject Medical Technologies Inc. to the Purchasers. Incorporated by reference to Form 8-K filed July 1, 2011.
10.4	Form of Registration Rights Agreement between Bioject Medical Technologies Inc. and the Purchasers. Incorporated by reference to Form 8-K filed July 1, 2011.
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.
101.INS	XBRL Instance Document *
101.SCH	XBRL Taxonomy Extension Schema Document *
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB	XBRL Taxonomy Extension Label Linkbase Document *
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document *

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

20

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: August 12, 2011	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 Officer)

21

EX-31.1

Exhibit 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

I, Ralph Makar, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bioject Medical Technologies Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2011

/s/ Ralph Makar

Ralph Makar

President and Chief Executive Officer

Bioject Medical Technologies Inc.

EX-31.2

Exhibit 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

I, Christine M. Farrell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bioject Medical Technologies Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2011

/s/ Christine M. Farrell

Christine M. Farrell

Vice President of Finance and

Principal Financial Officer

Bioject Medical Technologies Inc.

EX-32.1

Exhibit 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

In connection with the Quarterly Report of Bioject Medical Technologies Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ralph Makar, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge,:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Ralph Makar

Ralph Makar

President and Chief Executive Officer

Bioject Medical Technologies Inc.

August 12, 2011

This certification is made solely for the purpose of 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to Bioject Medical Technologies Inc. and will be retained by Bioject Medical Technologies Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 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

In connection with the Quarterly Report of Bioject Medical Technologies Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christine M. Farrell, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Christine M. Farrell

Christine M. Farrell

Vice President of Finance and

Principal Financial Officer

Bioject Medical Technologies Inc.

August 12, 2011

This certification is made solely for the purpose of 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to Bioject Medical Technologies Inc. and will be retained by Bioject Medical Technologies Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2011	Dec. 31, 2010
Accounts receivable, allowance for doubtful accounts	$ 5,149	$ 5,149
Property and equipment, accumulated depreciation	7,939,270	7,768,893
Preferred stock, par value	$ 0	$ 0
Preferred stock, shares authorized	10,000,000	10,000,000
Common stock, par value	$ 0	$ 0
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	18,851,312	18,455,094
Common stock, shares outstanding	18,851,312	18,455,094
Series D Preferred Stock [Member]
Preferred stock, shares issued	2,086,957	2,086,957
Preferred stock, shares outstanding	2,086,957	2,086,957
Preferred stock, liquidation preference	2,400,000	2,400,000
Series E Preferred Stock [Member]
Preferred stock, shares issued	3,308,392	3,308,392
Preferred stock, shares outstanding	3,308,392	3,308,392
Preferred stock, liquidation preference	5,286,704	5,286,704
Series F Preferred Stock [Member]
Preferred stock, shares issued	8,314	8,314
Preferred stock, shares outstanding	8,314	8,314
Preferred stock, liquidation preference	723,025	723,025
Series G Preferred Stock [Member]
Preferred stock, shares issued	92,449	92,449
Preferred stock, shares outstanding	92,449	92,449
Preferred stock, liquidation preference	$ 1,351,639	$ 1,299,570

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Consolidated Statements Of Operations (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Revenue:
Net sales of products	$ 2,184,757	$ 1,040,222	$ 3,806,370	$ 2,131,590
License and technology fees	209,155	116,975	330,818	213,329
Total revenue	2,393,912	1,157,197	4,137,188	2,344,919
Operating expenses:
Manufacturing	1,271,327	808,211	2,323,857	1,617,117
Research and development	399,755	372,931	710,061	745,300
Selling, general and administrative	446,508	569,448	980,248	1,083,295
Total operating expenses	2,117,590	1,750,590	4,014,166	3,445,712
Operating income (loss)	276,322	(593,393)	123,022	(1,100,793)
Interest income	27	1,057	574	3,262
Interest expense	(2,781)	(2,955)	(5,639)	(32,891)
Change in fair value of derivative liabilities		39,217		31,685
Total non-operating expenses	(2,754)	37,319	(5,065)	2,056
Net income (loss)	273,568	(556,074)	117,957	(1,098,737)
Preferred stock dividends	(26,034)	(24,107)	(52,069)	(49,331)
Net income (loss) allocable to common shareholders	$ 247,534	$ (580,181)	$ 65,888	$ (1,148,068)
Basic net income (loss) per common share allocable to common shareholders	$ 0.01	$ (0.03)	$ 0.00	$ (0.06)
Shares used in basic per share calculations	18,689,480	17,823,950	18,584,537	17,776,792
Diluted net income (loss) per common share allocable to common shareholders	$ 0.01	$ (0.03)	$ 0.00	$ (0.06)
Shares used in diluted per share calculations	36,294,172	17,823,950	25,793,148	17,776,792

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Document And Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 12, 2011
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2011
Entity Registrant Name	BIOJECT MEDICAL TECHNOLOGIES INC
Entity Central Index Key	0000810084
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		18,851,312

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Convertible Debt Financing And Related Warrants

6 Months Ended

Jun. 30, 2011

Convertible Debt Financing And Related Warrants

Convertible Debt Financing And Related Warrants

Note 7. Convertible Debt Financing and Related Warrants

On June 29, 2011, we entered into a $225,000 Convertible Note Purchase and Warrant Agreement (the "Agreement") with Al Hansen, Mark Logomasini, Ed Flynn, and Ralph Makar (together, the "Purchasers") pursuant to which we issued Convertible Promissory Notes (the "Notes") and warrants to purchase common stock (the "Warrants"). Pursuant to the Agreement, we sold Notes in the principal amount of $75,000 to each of Messrs. Hansen and Logomasini, $50,000 to Mr. Flynn and $25,000 to Mr. Makar. Each of Messrs. Flynn, Hansen, Logomasini, and Makar is a director of Bioject; Mr. Makar is also our Chief Executive Officer. In addition, Mr. Hansen is a managing director of Signet Health Partners, an affiliate of one of our principal shareholders, Life Sciences Opportunities Fund II, L.P. and Life Sciences Opportunities Fund II (Institutional), L.P.

The Notes bear interest at the rate of 10% per year with all principal and interest due December 29, 2011, which maturity date may be extended to June 28, 2012 at the option of the holder, and may not be prepaid without the written consent of the holders of a majority in interest of the Notes. The Notes are convertible at any time by the Purchasers into our common stock at the rate of $0.19 per share, or, in the case of a qualified financing, into the equity securities sold in the financing at a price equal to the financing price. A qualified financing is defined as the offering by us of shares of equity securities, including units consisting of stock and warrants, resulting in the receipt of cash proceeds by us of at least $225,000 in the aggregate (the "Minimum Proceeds") on or prior to the maturity date of the Notes. Minimum Proceeds shall not include the conversion of the principal amount of the outstanding Notes and accrued and unpaid interest thereon.

The number of shares for which each Warrant is exercisable automatically increases if the holder exercises his option to extend the maturity date of his Note. If no holder exercises his option to extend the maturity date of his Note, the Warrants will be exercisable for an aggregate of 118,422 shares of our common stock. If all holders exercise their options to extend the maturity date of their Notes, the Warrants will be exercisable for an aggregate of 236,844 shares of our common stock. The Warrants' exercise price is $0.19 per share. Each Warrant is immediately exercisable and expires on June 28, 2014.

The proceeds have been allocated using the relative fair value of the Notes and the Warrant, with $18,931 being allocated to the Warrant. The estimated fair value of the Warrant was determined utilizing the Black-Scholes valuation model using the following assumptions:

Risk-free interest rate	0.79%
Expected dividend yield	0%
Contractual term	3 years
Expected volatility	251%

The value of the Warrant was recorded as deferred financing fees as a component of other current assets on our Consolidated Balance Sheets and is being amortized over the six-month life of the Notes.

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Net Income (Loss) Per Common Share

6 Months Ended

Jun. 30, 2011

Net Income (Loss) Per Common Share

Net Income (Loss) Per Common Share

Note 3. Net Income (Loss) Per Common Share

Basic earnings per share ("EPS") and diluted EPS are the same for the three and six-month periods ended June 30, 2010 since we were in a loss position in those periods. Following is a reconciliation of basic EPS and diluted EPS for the three and six-month periods ended June 30, 2011 (in thousands, except per share amounts):

	Three Months Ended June 30, 2011						Six Months Ended June 30, 2011
	Net Income Allocable to Common Share- holders		Shares		Per Share Amount		Net Income Allocable to Common Share- holders		Shares		Per Share Amount
Basic EPS	$	247,534		18,689,480	$	0.01	$	65,888		18,584,537	$	0.00
Dilutive effect of stock options, restricted stock units ("RSUs") and warrants		—		296,941		—		—		298,083		0.00
Series D, E and F convertible preferred stock		—		6,910,528		—		—		6,910,528		—
Series G convertible preferred stock		26,034		10,397,223		—		—		—		—
Diluted EPS	$	273,568		36,294,172	$	0.01	$	65,888		25,793,148	$	0.00
Schedule of anti-dilutive securities excluded from computation of diluted EPS
Stock options and warrants				3,689,032						3,689,032
Series G convertible preferred stock				—						9,244,877
Series G payment-in-kind dividends				—						1,152,346
				3,689,032						14,086,255

The following common stock equivalents are excluded from the diluted loss per share calculations for the 2010 periods, as their effect would have been antidilutive:

	Three and Six  Months Ended June 30, 2010
Stock options, RSUs and warrants		4,934,731
Series D convertible preferred stock		2,086,957
Series E convertible preferred stock		3,308,392
Series F convertible preferred stock		831,400
Series G convertible preferred stock		9,244,877
Series E payment-in-kind dividends		550,516
Series F payment-in-kind dividends		133,263
Series G payment-in-kind dividends		380,950
Total		21,471,086

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Subsequent Event

6 Months Ended

Jun. 30, 2011

Subsequent Event

Subsequent Event

Note 9. Subsequent Event

In July 2011, we received $0.1 million from the sale of certain packaging equipment to a customer. We will continue to utilize this equipment in our manufacturing process and it will remain at our facility.

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Recent Accounting Guidance

6 Months Ended

Jun. 30, 2011

Recent Accounting Guidance

Recent Accounting Guidance

Note 8. Recent Accounting Guidance

ASU 2010-17

In April 2010, the FASB issued ASU 2010-17, "Revenue Recognition – Milestone Method," which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a drug study or achieving a specific result from the research or development efforts. An entity often recognizes these milestone payments as revenue in their entirety upon achieving the related milestone, commonly referred to as the milestone method. We adopted the amendments in ASU 2010-17 effective January 1, 2011 on a prospective basis. Our previous practices are consistent with the guidance in ASU 2010-17 and, in future research and development transactions, we will analyze the impact and, when the milestones are substantive, we will recognize them according to ASU 2010-17. Accordingly, the adoption of the provisions of ASU 2010-17 did not have any effect on our financial position, results of operations or cash flows.

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Basis Of Presentation And Going Concern

6 Months Ended

Jun. 30, 2011

Basis Of Presentation And Going Concern

Basis Of Presentation And Going Concern

Note 1. Basis of Presentation and Going Concern

The financial information included herein for the three and six-month periods ended June 30, 2011 and 2010 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, 2010 is derived from Bioject Medical Technologies Inc.'s 2010 Annual Report on Form 10-K for the year ended December 31, 2010. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Bioject's 2010 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 availability of additional committed capital, history of recurring losses, negative cash flows, accumulated deficit and lack of sufficient long-term sales commitments, there is 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 June 30, 2011, we had an accumulated deficit of $123.7 million with total shareholders' equity of $0.6 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 June 30, 2011, we had cash of $0.9 million and working capital of $0.1 million. We continue to monitor our cash and have previously taken measures to reduce our expenditure rate and delay capital and maintenance expenditures. In addition, as discussed in Note 7 below, in the second quarter of 2011, we entered into a debt financing agreement with proceeds of $225,000.

However, if we do not enter into one or more licensing, development or supply agreements with sufficient up-front payments or increase sales to current customers or markets, we may need to do one or more of the following to provide additional resources during 2012:

• secure additional debt financing;

• secure additional equity financing;

• secure a strategic partner; or

• reduce our operating expenditures.

While management continues to pursue a number of strategic options and alternatives to keep Bioject operating, there are no assurances that we will be successful. Additional financing may not be available to us on acceptable terms or at all. If we are unable to obtain additional resources, our business could be adversely affected and we could be forced to cease operations.

In April 2011, we eliminated the 10% pay reductions that were implemented in February 2009 for all non-executive employees. Executive officers continue to maintain a voluntary 20% pay reduction.

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Product Sales And Concentrations

6 Months Ended

Jun. 30, 2011

Product Sales And Concentrations

Product Sales And Concentrations

Note 4. Product Sales and Concentrations

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Merial		45	%		37	%		57	%		32	%
Serono		36	%		18	%		21	%		26	%
Ferring		11	%		30	%		14	%		30	%

At June 30, 2011, accounts receivable from Merial, Serono and Ferring represented 15%, 64% and 14%, respectively, of the accounts receivable balance. No other customers accounted for 10% or more of our accounts receivable as of June 30, 2011.

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Other Accrued Liabilities

6 Months Ended

Jun. 30, 2011

Other Accrued Liabilities

Other Accrued Liabilities

Note 5. Other Accrued Liabilities

Included in other accrued liabilities was $0.4 million at both June 30, 2011 and December 31, 2010 related to credits for Serono and $0.3 million at June 30, 2011 related to customer deposits for Merial.

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Facility Lease Amendment

6 Months Ended

Jun. 30, 2011

Facility Lease Amendment

Facility Lease Amendment

Note 6. Facility Lease Amendment

In March 2011, we entered into an agreement with the landlord of our Tualatin, Oregon facility, which provides for the repayment of deferred rent at the rate of $2,000 per month for the period April 1, 2011 through March 31, 2012 and $3,742 per month for the period April 1, 2012 through December 31, 2014.

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Consolidated Statements Of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities:
Net income (loss)	$ 117,957	$ (1,098,737)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Compensation expense related to fair value of stock-based awards	70,822	224,558
Stock contributed to 401(k) Plan	23,336	26,087
Depreciation and amortization	226,177	287,214
Other non-cash interest expense		25,242
Change in fair value of derivative instruments		(31,685)
Change in deferred revenue	95,683	(20,334)
Change in deferred rent	(44,777)	5,023
Changes in operating assets and liabilities:
Accounts receivable, net	316,365	395,113
Inventories	(874,145)	(8,737)
Other current assets	(63,328)	(42,535)
Accounts payable	387,649	(282,057)
Accrued payroll	38,307	27,998
Other accrued liabilities	282,640	15,084
Net cash provided by (used in) operating activities	576,686	(477,766)
Cash flows from investing activities:
Payments for purchase of property and equipment	(1,411)
Other assets	(75,567)	(63,012)
Net cash used in investing activities	(76,978)	(63,012)
Cash flows from financing activities:
Proceeds from short-term debt	225,000
Debt issuance costs	(7,500)
Principal payments made on short and long-term debt		(150,000)
Payments made on capital lease obligations	(3,044)	(4,633)
Net cash provided by (used in) financing activities	214,456	(154,633)
Increase in cash	714,164	(695,411)
Cash:
Beginning of period	180,154	1,146,318
End of period	894,318	450,907
Supplemental disclosure of cash flow information:
Cash paid for interest	2,923	2,625
Supplemental non-cash information:
Preferred stock dividend to be settled in Series F or Series G preferred stock	52,069	49,331
Issuance of warrants in connection with convertible debt financing	$ 18,931

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Inventories

6 Months Ended

Jun. 30, 2011

Inventories

Inventories

Note 2. Inventories

Inventories are stated at the lower of cost or market value. Cost is determined in a manner that approximates the first-in, first out (FIFO) method. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. Any write-down of inventory to the lower of cost or market at the close of a fiscal period creates a new cost basis that subsequently would not be marked up based on changes in underlying facts and circumstances.

Inventories consisted of the following:

	June 30, 2011		December 31, 2010
Raw materials and components	$	923,183	$	348,683
Work in process		184,715		74,385
Finished goods		392,705		203,390
	$	1,500,603	$	626,458

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Consolidated Balance Sheets (USD $)	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Cash	$ 894,318	$ 180,154
Accounts receivable, net of allowance for doubtful accounts of $5,149 and $5,149	521,525	837,890
Inventories	1,500,603	626,458
Other current assets	160,162	70,403
Total current assets	3,076,608	1,714,905
Property and equipment, net of accumulated depreciation of $7,939,270 and $7,768,893	476,380	645,346
Other assets, net	1,329,245	1,309,478
Total assets	4,882,233	3,669,729
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	1,359,647	945,816
Accrued payroll	263,451	225,144
Other accrued liabilities	763,805	481,165
Short-term note payable	225,000
Deferred revenue	359,993	176,207
Total current liabilities	2,971,896	1,828,332
Long-term liabilities:
Deferred revenue	1,047,913	1,136,016
Other long-term liabilities	250,548	324,551
Commitments
Shareholders' equity:
Common stock, no par value, 100,000,000 shares authorized; 18,851,312 shares issued and outstanding at June 30, 2011 and 18,455,094 at December 31, 2010	114,875,743	114,762,654
Accumulated deficit	(123,695,765)	(123,761,653)
Total shareholders' equity	611,876	380,830
Total liabilities and shareholders' equity	4,882,233	3,669,729
Series D Preferred Stock [Member]
Shareholders' equity:
Preferred stock	1,878,768	1,878,768
Series E Preferred Stock [Member]
Shareholders' equity:
Preferred stock	5,478,466	5,478,466
Series F Preferred Stock [Member]
Shareholders' equity:
Preferred stock	723,025	723,025
Series G Preferred Stock [Member]
Shareholders' equity:
Preferred stock	$ 1,351,639	$ 1,299,570