<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-----------------------------
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 0-28016
Number Biopsys Medical, Inc.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0578012
- ----------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Morgan, Irvine CA 92618
- ----------------------------------------------------------------------------
(address of principal executive offices)
(Zip Code)
714-460-7800
- ----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ----------------------------------------------------------------------------
(Former name, former address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
---- ----
As of October 25, 1996, 9,716,880 shares of Common Stock were issued and
outstanding.
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BIOPSYS MEDICAL, INC.
FORM 10-Q For the Quarter Ended September 30, 1996
INDEX
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Page
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Facing Sheet 1
Index 2
Part I. Financial Information
Item 1. a) Balance sheets at September 30, 1996 and June 30, 1996 3
b) Statements of operations for the three-month periods
ended September 30, 1996 and September 30, 1995 4
c) Statements of cash flows for the three-month periods ended
September 30, 1996 and September 30, 1995 5
d) Notes to financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Part II. Other Information 10
Signature 11
Index to Exhibits 12
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2
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PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOPSYS MEDICAL, INC.
BALANCE SHEETS
ASSETS
September 30, June 30,
--------------------------------
1996 1996
------------- ------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 8,906,000 $ 12,122,000
Short-term investments 6,419,000 9,405,000
Accounts receivable, net 1,473,000 985,000
Inventories 2,160,000 1,581,000
Prepaid expenses and other current assets 256,000 141,000
----------- ------------
Total current assets 19,214,000 24,234,000
LONG-TERM INVESTMENTS 20,427,000 15,860,000
PROPERTY AND EQUIPMENT, net 850,000 776,000
OTHER ASSETS 38,000 44,000
----------- ------------
$40,529,000 $ 40,914,000
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABLITIES:
Accounts payable $ 778,000 $ 1,270,000
Accrued expenses 694,000 561,000
----------- ------------
Total current liabilities 1,472,000 1,831,000
COMMITMENTS - -
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value; 50,000,000
shares authorized; 9,716,880 shares
issued and outstanding 10,000 10,000
Additional paid-in capital 45,083,000 45,092,000
Accumulated deficit (6,753,000) (6,615,000)
Deferred stock option compensation 717,000 596,000
----------- ------------
Net stockholders' equity 39,057,000 39,083,000
----------- ------------
$40,529,000 $ 40,914,000
----------- ------------
----------- ------------
See accompanying notes to financial statements.
3
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BIOPSYS MEDICAL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30,
--------------------------------
1996 1995
------------- ------------
Net Sales $ 2,401,000 $ 224,000
Cost of Sales 1,106,000 153,000
------------- -----------
Gross Profit 1,295,000 71,000
Operating Expenses:
Research and development 485,000 236,000
Sales and marketing 854,000 272,000
General and administrative 563,000 230,000
------------- -----------
Total operating expenses 1,902,000 738,000
------------- -----------
Interest income 469,000 64,000
Interest expense - (13,000)
------------- -----------
Net loss $ (138,000) $ (616,000)
------------- -----------
------------- -----------
Net loss per share $ (0.01) $ (0.08)
------------- -----------
------------- -----------
Weighted average shares outstanding 10,274,000 7,593,000
See accompanying notes to financial statements.
4
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BIOPSYS MEDICAL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended September 30,
--------------------------------
1996 1995
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (138,000) $ (616,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 53,000 24,000
Deferred Compensation 121,000 -
Changes in assets and liabilities:
Accounts receivable (488,000) (84,000)
Prepaid expenses and other current
assets (115,000) 10,000
Inventories (579,000) (279,000)
Accounts payable and accrued expenses (359,000) 154,000
------------- -----------
Net cash used in operating activities (1,505,000) (791,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquistion of property and equipment (121,000) (126,000)
Short-term investment maturities 2,986,000 -
Long-term investment purchases (4,567,000) (999,000)
------------- -----------
Net cash used in investing activities (1,702,000) (1,125,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock issuance expenses (9,000) -
Net proceeds from issuance of Series C
preferred stock - 6,495,000
------------- -----------
Net cash provided (used) by
financing activities (9,000) 6,495,000
------------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (3,216,000) 4,579,000
CASH AND CASH EQUIVALENTS, beginning of period 12,122,000 13,000
------------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 8,906,000 $ 4,592,000
------------- -----------
------------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes $ - $ -
------------- -----------
------------- -----------
Cash paid for interest $ - $ -
------------- -----------
------------- -----------
See accompanying notes to financial statements.
5
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BIOPSYS MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying balance sheet as of September 30, 1996 and the
statements of operations and cash flows for the three months ended September
30, 1996 and 1995 have been prepared by Biopsys Medical, Inc.( the
"Company"), without audit. In the opinion of management, all adjustments
necessary to present fairly the financial position, results of operations,
and cash flows at September 30, 1996, and for all periods presented, have
been made.
Although the Company believes that the disclosures in these financial
statements are adequate to make the information presented not misleading,
certain information and footnote disclosures required by Generally Accepted
Accounting Principles for complete financial statements have been omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). This financial data should be reviewed in conjunction
with the audited financial statements and notes thereto included in the
Company's Form 10-K for the year ended June 30, 1996. The results of
operations for the three months ended September 30, 1996 may not necessarily
be indicative of the operating results for the full 1997 fiscal year.
2. COMPUTATION OF NET LOSS PER SHARE
Net loss per share has been computed by dividing the net loss by the
weighted average number of common and common equivalent shares outstanding
during the period. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin Topic 4D, stock options granted during the twelve months
prior to the date of the initial filing of the Company's Form S-1
Registration Statement have been included in the calculation of common
equivalent shares using the treasury stock method, as if they were
outstanding as of the beginning of each period presented.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the
unaudited Financial Statements and related Notes thereto included in
Part I - Item 1 of this Form 10-Q and with the Financial Statements and
related Notes thereto included in its June 30, 1996 Annual Report on Form
10-K. This Report on Form 10-Q contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Actual events or results may
differ materially from those projected in the forward-looking statements as a
result of the factors described herein and in the documents incorporated
herein by reference. Such forward-looking statements include, but are not
limited to, statements concerning the risk of breast cancer; breast cancer
screening; improvements in ultrasound; business strategy; development and
introduction of new products; research and development; marketing, sales and
distribution; manufacturing; competition; third-party reimbursement;
government regulation; and operating and capital requirements.
OVERVIEW
Since its inception in July 1993, the Company has been engaged in the
design, development, clinical testing and, more recently, the manufacture and
sale of the Mammotome Biopsy System. The Company received clearance of its
510(k) premarket notification for the Mammotome Biopsy System from the FDA in
April 1995, began limited sales to selected customers in May 1995 and
commercially introduced the Mammotome Biopsy System in August 1995. For the
quarter ended September 30, 1996, net sales of the Mammotome Biopsy System
totaled $2,401,000. As of September 30, 1996, the Mammotome Biopsy System
had been used in over 23,000 breast biopsy procedures at approximately 317
sites in the United States.
The Company has a limited history of operations and has experienced
significant operating losses since inception. As of September 30, 1996 the
Company had an accumulated deficit of approximately $6.8 million. Results of
operations may fluctuate significantly from quarter to quarter and will
depend upon numerous factors, including the extent to which the Company's
products continue to gain market acceptance, actions relating to regulatory
and reimbursement matters, progress of clinical trials, introduction of
alternative means for less-invasive breast biopsy by competitors of the
Company, pricing of competitive products and the cost and effect of
promotional discounts and marketing programs. There can be no assurance that
the Company will successfully commercialize the Mammotome Biopsy System or
achieve significant revenues or profitability. Furthermore, there can be no
assurance that revenues and profitability, if achieved, will be sustained on
a quarterly or annual basis, or at all.
The Mammotome procedure requires the use of an imaging modality
during the procedure. Currently, the only imaging modality with which the
Mammotome Biopsy System is compatible is a prone stereotactic x-ray imaging
table. Two companies, Fischer and Lorad, have sold substantially all of the
approximately 1,000 prone stereotactic imaging tables installed in the United
States. The Company has established non-exclusive marketing arrangements
with Fischer and Lorad under which Fischer and Lorad can purchase Mammotome
drive units from the Company at a discount from list price and can then
bundle Mammotome drive units with stereotactic imaging tables for sale to
customers. However, Mammotome probes and other disposable products related
to the Mammotome Biopsy System are purchased by the customer directly from
the Company, not from Fischer or Lorad. There can be no assurance that
Fischer and Lorad will purchase or promote the Mammotome drive unit or that
they will continue their marketing arrangements with the Company. Lorad also
has an arrangement with United States Surgical Corporation ("USSC"), a
competitor of the Company, under which Lorad manufactures stereotactic tables
for USSC on a private label basis. In addition, Fischer and Lorad may have
additional arrangements to market other competing breast biopsy systems.
There can be no assurance that these or other imaging equipment manufacturers
will not redesign the stereotactic tables so that they would not be
compatible with the Mammotome Biopsy System. The failure or loss of such
marketing arrangements could have a material adverse affect on the Company's
business, financial condition and results of operations.
7
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The Company has limited experience in manufacturing the Mammotome
Biopsy System. If the Company is unable to manufacture an adequate number of
drive units or probes on a cost-effective and timely basis, it would have a
material adverse effect on the Company's ability to realize significant
product revenues for at least the next several quarters. The Company
currently contracts with third parties to manufacture certain components of
the Mammotome Biopsy System. Final assembly, sterilization and packaging of
the Mammotome Biopsy System is currently performed by the Company in-house
and by contract manufacturers. The Company has limited capacity to
manufacture the Mammotome Biopsy System and will be required to increase its
in-house capability to manufacture more of the system's components. There
can be no assurance that the Company will be able to attract, train and
retain the required personnel or will be able to increase its manufacturing
capability in a timely manner, or at all. There can be no assurance that
reliable, high-volume manufacturing can be established or maintained at
commercially reasonable costs on a timely basis, or at all. If the Company
is unable to increase its in-house manufacturing capability, the Company may
need to obtain alternative manufacturing facilities or establish additional
contract manufacturing for its products. Delays associated with, or the
inability to establish, such additional capacity could have a material
adverse affect on the Company's business, financial condition and results of
operations.
The Company purchases components used in the Mammotome Biopsy System
from various suppliers. A limited number of parts and components are
currently available only from single sources. The Company is in the process
of qualifying additional sources for these components. There can be no
assurance that the Company will be successful in qualifying any additional
sources on a timely basis, or at all. Medical device companies frequently
experience difficulties in obtaining required quantities of components
necessary to manufacture their products. For example, the industry has
experienced shortages of the type of stainless steel used in the Mammotome
probes, and there can be no assurance that such shortages will not occur in
the future. If the Company or any of its contract manufacturers encounter
future manufacturing difficulties, including problems involving production
yields, quality control and assurance, shortages of components or shortages
of qualified personnel, it could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, prior to international commercialization, the Company will be
required to attain and maintain compliance with GMP requirements and ISO 9001
standards. Failure to either attain or maintain compliance with the
applicable regulatory requirements of various regulatory agencies would have
a material adverse effect on the Company's business, financial condition and
results of operations.
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1996 AND 1995
Net sales for the quarter ended September 30, 1996 were $2,401,000
compared to $224,000 during the quarter ended September 30, 1995. The
Company commenced commercial shipments of its Mammotome Biopsy System in
August 1995. Net sales for the quarter ended September 30, 1996 reflect
sales of 97 Mammotome drive units and approximately 11,000 disposable probes.
During the quarter ended September 30, 1996, cost of sales totaled
$1,106,000, or 46% of net sales compared to $153,000 or 68% of net sales in
the prior year. In addition to direct material and subassembly costs
associated with products sold, cost of sales also reflect increases in
manufacturing personnel and other overhead costs associated with the
commencement of manufacturing and assembly operations, engineering and
support functions, and materials procurement and handling functions.
Research and development expenses increased 106% to $485,000 during
the quarter September 30, 1996 from $236,000 during the quarter ended
September 30, 1995. This increase was primarily due to research and
development expenses associated with the continued development of the
11-gauge probe and the MicroMark Clip during the quarter ended September 30,
1996.
Selling general and administrative expenses increased to $1,417,000
during the quarter ended September 30, 1996 from $503,000 during the quarter
ended September 30, 1995. This increase was primarily due to the hiring of
sales personnel, increased marketing activities and increases in
administrative personnel and related costs to support commercial sales of the
Mammotome Biopsy System.
8
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Interest income increased to $469,000 during the quarter ended
September 30, 1996 from $51,000, net during the quarter ended September 30,
1995. The increase was due to higher cash balances and short-term and
long-term investments associated with completion of Company's initial public
offering in May 1996.
LIQUIDITY AND CAPITAL RESOURCES
In May 1996, the Company completed an initial public offering of
2,587,500 shares of common stock (including the underwriters overallotment of
337,500 shares) at $15.00 per share. Net proceeds to the Company were
approximately $35.3 million. From inception through April 1996, the Company
financed its operations primarily through the private placement of equity
securities totaling $9.7 million. These equity securities were converted to
common stock in conjunction with the initial public offering. As of September
30, 1996, cash, cash equivalents, short-term and long-term investments
totaled $35.7 million. The Company's cash used in operating activities
increased to $1.5 million for the quarter ended September 30, 1996 from $.8
million for the quarter ended September 30, 1995, primarily resulting from
increases in accounts receivable and inventories related to the commercial
introduction of the Mammotome Biopsy System.
The Company's principal source of liquidity at September 30, 1996
consisted of cash, cash equivalents, short term and long term investments of
$35.7 million. The Company has adopted investment guidelines which restrict
the types and quality of investments the Company is authorized to enter into.
At September 30, 1996, the Company had invested approximately $.4 million in
money market funds, approximately $16.1 million in commercial paper and
corporate bonds rated a minimum of A1/P1, and approximately $19.2 million in
U.S. government treasury notes or federal agencies. At September 30, 1996,
the Company had no long term debt. The Company has never had and currently
does not have commitments for credit facilities, such as revolving credit
agreements or lines of credit, that could provide additional working capital.
The Company believes that the current cash balances and short-term
and long-term investments will be sufficient to meet the Company's operating
and capital requirements through fiscal 1997. The Company's future liquidity
and capital requirements will depend on numerous factors, including the
extent to which the Company's Mammotome Biopsy System gains market
acceptance, the timing of regulatory actions regarding the Company's
potential future products, the costs and timing of expansion of sales,
marketing and manufacturing activities, obtaining and enforcing patents
important to the Company's business, results of clinical trials and
competition. There can be no assurance that the Company will not be required
to raise additional capital, or that such capital will be available on
acceptable terms, or at all.
9
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3 DEFAULTS IN SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Page
11.1 Computation of net loss per share (see
note 2 to Financial Information in Part I
of this Form 10-Q) 13
27 Financial Data Schedule 14
(b) Reports on Form 8-K
None
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIOPSYS MEDICAL, INC.
By: /s/
----------------------------------
Steven J. Naber
Vice President of Finance and
Chief Financial Officer
(Duly Authorized and Principal
Financial and Accounting Officer)
Date: November 11, 1996
11
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BIOPSYS MEDICAL, INC.
INDEX TO EXHIBITS
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
11.1 Statement Re: Computation of Net loss Per Share 13
27 Financial data schedule 14
12
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EXHIBIT 11.1
BIOPSYS MEDICAL, INC.
STATEMENT RE: COMPUTATION OF NET LOSS PER SHARE
Three Months Ended
September 30,
----------------------------------
1996 1995
------------- ------------
Net loss $ (138,000) $ (616,000)
------------ ------------
------------ ------------
Shares used in computing net loss per
share:
Weighted average common shares outstanding
during the period 9,716,880 1,785,000
Equivalent shares representing shares
issuable upon conversion of preferred
stock and preferred warrants:
Series A - 833,333
Series B - 1,333,333
Series C - 3,051,590
Series C warrants - 32,624
Shares related to Staff Accounting Bulletin
Topic 4D 556,902 556,902
------------ ------------
Total shares used in computing historical
net loss per share 10,273,782 7,592,782
------------ ------------
------------ ------------
Net loss per share $ (0.01) $ (0.08)
------------ ------------
------------ ------------
13
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE UNAUDITED BALANCE SHEET AND STATEMENT OF OPERATIONS CONTAINED IN
THE BIOPSYS MEDICAL, INC.'S FORM 10Q FOR THE FIRST QUARTER ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,906,000
<SECURITIES> 6,419,000
<RECEIVABLES> 1,545,000
<ALLOWANCES> (72,000)
<INVENTORY> 2,160,000
<CURRENT-ASSETS> 19,214,000
<PP&E> 1,018,000
<DEPRECIATION> 168,000
<TOTAL-ASSETS> 40,529,000
<CURRENT-LIABILITIES> 1,472,000
<BONDS> 0
0
0
<COMMON> 10,000
<OTHER-SE> 39,047,000
<TOTAL-LIABILITY-AND-EQUITY> 40,529,000
<SALES> 2,401,000
<TOTAL-REVENUES> 2,401,000
<CGS> 1,106,000
<TOTAL-COSTS> 1,106,000
<OTHER-EXPENSES> 1,902,000
<LOSS-PROVISION> 18,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (138,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (138,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (138,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
