SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission File No. 0-15360
BIOJECT MEDICAL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Oregon 93-1099680
(Jurisdiction of incorporation) (I.R.S. identification no.)
7620 SW Bridgeport Road
Portland, Oregon 97224
(Address of principal executive offices) (Zip code)
(503) 639-7221
(Registrant's telephone number, including areas code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At June 30, 1998 there were 27,808,493 outstanding shares of common stock
of the registrant.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited consolidated financial statements of Bioject Medical
Technologies Inc. (BMT), an Oregon Corporation, and its subsidiaries, (together,
unless the context otherwise requires, the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
The Company's needle-free injection operations are conducted by Bioject Inc.
(BI), an Oregon corporation formed in February 1985, which is a wholly owned
subsidiary of BMT, and its blood glucose monitoring technology development
operations are conducted by Bioject JV Subsidiary Inc. ("JV"), an Oregon
corporation formed in October 1997, which is owned 80.1% by BMT.
The following 10-Q report reflects the consolidated results of operations, cash
flows and financial position for the first quarter of the year ending March 31,
1999. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the year.
- Consolidated Statements of Operations for the quarters ended
June 30, 1998 and June 30, 1997
- Consolidated Balance Sheets dated June 30, 1998 and March 31, 1998
- Consolidated Statements of Cash Flows for the quarters ended
June 30, 1998 and June 30, 1997
<PAGE>
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
June 30,
1998 1997
(Unaudited)
-------------------------
REVENUES:
Net sales of products $ 142,411 $ 342,614
Licensing/technology fees 138,001 125,000
----------- ---------
280,412 467,614
----------- -----------
EXPENSES:
Manufacturing 271,014 458,994
Research and development 1,057,717 253,982
Selling, general and administrative 781,148 753,842
----------- -----------
Total operating expenses 2,109,879 1,466,818
----------- -----------
Operating loss (1,829,467) (999,204)
Other income 22,712 6,630
---------- ----------
Loss before taxes (1,806,755) ( 992,574)
Provision for income taxes - -
----------- -----------
Net Loss (1,806,755) ( 992,574)
Preferred stock dividend 346,350 -
------------ ----------
Net loss allocable to
common shareholders ($2,153,105) ($992,574)
============ ===========
Basic and diluted net loss per
common share ($0.08) ($0.05)
=========== ===========
Shares used in per share calculation 26,912,231 19,789,582
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, March 31,
1998 1998
(Unaudited)
--------------------------
ASSETS
- ------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 2,578,789 $ 1,900,839
Accounts receivable, net 93,906 153,721
Inventories 2,069,834 1,891,970
Other current assets 83,039 75,292
--------- -----------
Total current assets 4,825,568 4,021,822
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment 2,367,671 2,241,904
Production molds 1,945,267 1,945,267
Furniture and fixtures 179,654 158,477
Leasehold improvements 94,115 94,115
----------- -----------
4,586,707 4,439,763
Less - Accumulated depreciation (2,108,502) (1,947,006)
----------- -----------
2,478,205 2,492,757
OTHER ASSETS 475,466 463,031
----------- -----------
$ 7,779,239 $ 6,977,610
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 424,008 $ 497,180
Accrued payroll 201,763 218,424
Other accrued liabilities 996,657 277,122
Deferred revenue 124,999 10,000
----------- -----------
Total current liabilities 1,747,427 1,002,726
SHAREHOLDERS' EQUITY:
Preferred stock, no par, 10,000,000 shares
authorized; issued and outstanding
Series A Convertible-692,694 shares,
$15 stated value 8,153,639 7,826,157
Series B Convertible -134,333 shares,
$15 stated value 1,510,157 1,491,289
Common stock, no par, 100,000,000
shares authorized; issued and
outstanding 27,808,493 shares at
June 30, 1998 and 25,503,038 at
March 31, 1998 49,420,980 47,557,297
Accumulated deficit (53,052,964) (50,899,859)
----------- -----------
Total shareholders' equity 6,031,812 5,974,884
----------- -----------
$ 7,779,239 $ 6,977,610
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
June 30,
1998 1997
(Unaudited)
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss applicable to common
shareholders ($2,153,105) ($992,574)
Adjustments to net loss:
Depreciation and amortization 171,237 107,505
Contributed capital for services 13,818 -
Preferred stock dividends 346,350
Net changes in assets and liabilities:
Accounts receivable 59,815 95,986
Inventories (177,864) 67,351
Other current assets (7,747) (36,018)
Accounts payable (73,173) (138,125)
Accrued payroll (16,661) (61,465)
Other accrued liabilities 719,535 31,006
Deferred revenue 114,999 (125,000)
----------- -----------
Net cash used in operating activities (1,002,796) (1,051,334)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment (146,944) ( 10,228)
Other assets ( 22,175) ( 11,070)
----------- -----------
Net cash used in investing activities (169,119) ( 21,298)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from common stock 1,849,865 750,000
---------- ----------
Net cash provided by financing activities: 1,849,865 750,000
---------- ----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and
cash equivalents 677,950 (322,632)
Cash and cash equivalents at beginning
of period 1,900,839 2,116,478
----------- -----------
Cash and cash equivalents at end
of period $ 2,578,789 $ 1,793,846
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
The consolidated financial statements of Bioject Medical Technologies Inc. (the
"Company"), include the accounts of Bioject Medical Technologies Inc. ("BMT"),
an Oregon Corporation, and its wholly owned subsidiary, Bioject Inc., an Oregon
Corporation ("BI"), and its 80.1% owned subsidiary, Bioject JV Subsidiary Inc.
("JV"), an Oregon corporation. All significant intercompany transactions have
been eliminated. Although Bioject Inc. commenced operations in 1985, the Company
was formed in December 1992 for the purpose of acquiring all of the capital
stock of Bioject Medical Systems Ltd., a Company organized under the laws of
British Columbia, Canada, in a stock-for-stock exchange in order to establish a
U.S. domestic corporation as the publicly traded parent company for Bioject Inc.
and Bioject Medical Systems Ltd. Bioject Medical Systems Ltd. was terminated in
fiscal 1997. Bioject JV Subsidiary Inc. was formed in October 1997 in connection
with a joint venture arrangement with Elan Corporation, plc ("Elan"). All
references to the Company include Bioject Medical Technologies Inc. and its
subsidiaries, unless the context requires otherwise.
The Company commenced operations in 1985 for the purpose of developing,
manufacturing and distributing a new drug delivery system. Since its formation,
the Company has been engaged principally in organizational, financing, research
and development, and marketing activities. In the last quarter of fiscal 1993,
the Company launched U.S. distribution of its Biojector 2000 system primarily to
the hospital and large clinic market. The Company's products and manufacturing
operations are subject to extensive government regulation, both in the U.S. and
abroad. In the U.S., the development, manufacture, marketing and promotion of
medical devices is regulated by the Food and Drug Administration ("FDA") under
the Federal Food, Drug, and Cosmetic Act ("FFDCA"). In 1987, the Company
received clearance from the FDA under Section 510(k) of the FFDCA to market a
hand-held CO2-powered needle-free injection system. In June 1994, the Company
received clearance from the FDA under Section 510(k) to market a version of its
Biojector 2000 system in a configuration targeted at high volume injection
applications. In October 1996, the Company received 510(k) clearance for a
needle-free disposable vial access device. In March 1997, the Company received
additional 510(k) clearance for certain enhancements to its Biojector 2000
system. On March 23,1998 the Company entered into a transaction with Vitajet
Corporation ("Vitajet") whereby the Company acquired, along with certain other
assets, the rights to the Vitajet(R), a spring-powered, needle-free
self-injection device which currently has regulatory clearance for administering
injections of insulin. On September 30, 1997, the Company entered into a joint
venture agreement with Elan Corporation, plc ("Elan") for the development and
commercialization of certain blood glucose monitoring technology which the
Company licensed from Elan. The blood glucose monitoring technology is also
subject to government regulation in the U.S. by the FDA and abroad by various
agencies.
The Company's revenues to date have been derived primarily from licensing and
technology fees for the needle-free injection technology and more recently from
sales of the Biojector 2000 system and Biojector syringes to public health and
flu immunization clinics. Future revenues will depend upon acceptance and use by
healthcare providers of the Company's needle-free injection technology and
successful development, regulatory approval and market acceptance of its blood
glucose monitoring technology. Uncertainties over government regulation and
competition in the healthcare industry may impact healthcare provider
expenditures and third party payer reimbursements. Accordingly, the Company
cannot predict what impact, if any, subsequent healthcare reforms and industry
trends might have on its business. In the future the Company is likely to
require substantial additional financing. Failure to obtain such financing on
favorable terms could adversely affect the Company's business.
<PAGE>
2. ACCOUNTING POLICIES
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined in a
manner which approximates the first-in, first out (FIFO) method. Costs utilized
for inventory valuation purposes include labor, materials and manufacturing
overhead. Net inventories consist of the following:
June 30, March 31,
1998 1998
---------- ----------
Raw Materials $ 703,778 $ 754,715
Work in Process 9,763 9,763
Finished Goods 1,356,293 1,127,492
---------- ----------
$2,069,834 $1,891,970
========== ==========
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's expenses to conform
to the current year's presentation.
NET LOSS PER SHARE
The following common stock equivalents are excluded from earnings per share
calculations as their effect would have been antidilutive:
Three Months Ended June 30, 1998 1997
---------- ---------
Warrants and stock options 9,594,642 6,927,681
Convertible preferred stock 8,270,270 -
---------- ---------
17,864,912 6,927,681
========== ==========
3. RELATED PARTY TRANSACTION
A significant portion of the expenses of the blood glucose monitoring business
segment are incurred by Elan and billed to the Company under a contractual
arrangement between the two companies. Included in other accrued liabilities at
June 30, 1998 is approximately $754,000 owed to Elan under this arrangement.
<PAGE>
4. SEGMENT INFORMATION
The Company has adopted the segment reporting requirements of SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. At present,
the Company has two reportable segments which offer different products and are
managed separately. Each business requires different technology and marketing
strategies. The following sets forth the unaudited results of operations of the
Company for its two segments of operations - needle-free injection technology
and blood glucose monitoring technology (in thousands):
Needle-free Injection Blood glucose Monitoring
Three Months Ended Three Months Ended
June 30, June 30,
------------------ -------------------
1998 1997 1998 1997
------- ------- -------- -------
REVENUES:
Net sales of products $ 142,411 $342,614 $ 0 $ 0
Licensing/technology fees 138,001 125,000 0 0
------- ------- -------- --------
280,412 467,614 0 0
------- ------- -------- --------
EXPENSES:
Manufacturing 271,014 458,994 0 0
Research & development 244,586 253,982 813,131 0
Selling, general
& administrative 608,630 753,842 172,518 0
--------- --------- -------- ------
Total operating expenses 1,124,230 1,466,818 985,649 0
--------- --------- --------- ------
Operating loss (843,818) (999,204) (985,649) 0
Other income 22,712 6,630 0 0
--------- --------- -------- ------
Loss before taxes (821,106) (992,574) (985,649) 0
Provision for income taxes 0 0 0 0
------- ------ -------- -------
Net loss $(821,106) $(992,574) $(985,649) $ 0
========== =========== ========== =======
At June 30, 1998, the blood glucose monitoring business segment had net property
and equipment, at cost, of $98,683 and accounts payable and accrued expenses of
approximately $754,000. The blood glucose monitoring business segment had no
other significant assets or liabilities at June 30, 1998. Accordingly, after
separating the blood glucose monitoring business segment assets and liabilities,
the accompanying consolidated balance sheets effectively represent the assets
and liabilities of the needle-free injection business segment. In the future,
certain proceeds from the sale of equity or issuance of debt by JV may be
restricted to JV operations. To the extent that they meet certain reporting
requirements, the separate assets, liabilities and equity of the parent and its
subsidiary will be appropriately disclosed.
5. NEW ACCOUNTING PRONOUNCEMENT
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
standards for reporting and displaying comprehensive income and its components
in a full set of general purpose financial statements. The objective of SFAS 130
is to report a measure of all changes in the equity of an enterprise that result
from transactions and other economic events of the period other than
transactions with owners. The Company adopted SFAS 130 during the first quarter
of fiscal 1999. Comprehensive loss did not differ from currently reported net
loss in the periods presented.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for all
derivative instruments. SFAS 133 is effective for fiscal years beginning after
June 15, 1999. The Company does not have any derivative instruments and,
accordingly, the adoption of SFAS 133 will have no impact on the Company's
financial position or results of operations.
<PAGE>
6. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying, unaudited consolidated financial statements do not include all
information and footnote disclosures normally included in an audited financial
statement. However, in the opinion of management, all adjustments (which include
only normal, recurring adjustments) necessary to present fairly the financial
position, cash flows, and results of operations have been made. It is suggested
that these statements be read in conjunction with the financial statements
included in the Company's Annual Report on Form 10-K/A for the year ended March
31, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company continues to focus on maintaining its penetration into the public
health and flu immunization markets with its Biojector 2000 needle-free
injection system. The Company is also directing its sales efforts at creating
sales of the Biojector 2000 system to the U.S. military. At the same time, the
Company is actively seeking relationships with major pharmaceutical and
biotechnology companies in key niche markets to market its needle-free products
for specific applications and to develop other application-specific devices and
companion syringes.
Subsequent to quarter end, in July 1998, the Company entered into an agreement
with Merck & Co, Inc. ("Merck"), a worldwide leader in the development,
manufacture and sale of a broad range of human and animal health products and
services. The agreement provides Merck the rights to use the Biojector 2000 jet
injection system with selected Merck vaccines. The Company believes that this
agreement is the first step in establishing a long-term relationship between the
two companies whereby Merck will use the Company's needle-free technology in
connection with certain of its vaccines. There can be no assurance that such
long-term relationship will be established. (See "Forward Looking Statements").
Also subsequent to quarter end, in July 1998, the Company entered into a
collaborative research agreement with GeneMedicine, Inc. ("GeneMedicine") a
developer of gene medicines and genetic vaccine technologies for treatment or
prevention of a wide range of diseases. This collaboration involves the
continued refinement of the Biojector 2000 jet injection system coupled with
GeneMedicine's unique gene-based delivery platforms to create a combined product
that will enhance the delivery and activity of plasmid-based genetic vaccines.
The agreement contemplates that combined products developed as a result of the
research collaboration will be marketed to third party corporate partners for
commercialization and sale rather than being commercialized or sold by either
Bioject or GeneMedicine. There can be no assurance that the collaborative
<PAGE>
alliance will result in marketable products. Further, should marketable products
be developed as a result of the collaborative alliance, there can be no
assurance that the companies will be successful either at locating appropriate
third party corporate partners or at entering into the necessary agreements with
those partners to commercialize and sell the products so developed. (See
"Forward Looking Statements"). Additionally, should such products be developed,
there can be no assurance that they will receive the required governmental
clearance.
Through its joint venture with Elan the Company is actively engaged in the
development of its continuous blood glucose monitoring technology. To date, the
Company has continued testing and development of a clinical prototype. In April
1998, a small, human clinical study with a prototype of the device was
conducted. The prototype device was used to monitor the blood glucose levels of
six diabetes patients for fifteen continuous hours. The system tracked the
patients' actual blood glucose levels against whole blood reference samples with
significant levels of accuracy. The Company is planning further preliminary
clinical studies as development of the product continues. Based on the results
of these studies, the Company will then plan and conduct comprehensive clinical
trials of the monitoring system which are intended to support its applications
to the FDA to market the product in the United States. (See "Forward Looking
Statements")
The Company's revenues to date have not been sufficient to cover operating
expenses. The Company believes that sales volumes will increase as its
needle-free injection products achieve greater market penetration, both through
continued direct sales efforts and through corporate marketing relationships. If
sales volume increases and can be coupled with further reduction of the
Company's product costs, its cost of goods with respect to the needle-free
injection products as a percentage of sales will decrease and the Company will
realize positive margins. However, in addition to funding the operations of its
needle-free injection business, the Company is required to fund substantial
research and development costs associated with developing the blood glucose
monitoring technology. Since no revenue from blood glucose monitoring products
is expected for a number of years, the Company expects larger losses unless
sales of the Biojector 2000 increase substantially. (See "Forward Looking
Statements") The level of sales required to generate net income will be affected
by a number of factors including the pricing of the Company's products, its
ability to attain volume purchasing and manufacturing efficiencies, and the
impact of inflation on the Company's manufacturing and other operating costs.
There can be no assurance that the Company will be able to successfully
implement additional manufacturing cost reductions or sell its needle-free
injection products at prices or in volumes sufficient to achieve profitability
or to offset increases in the Company's research and development expenses or
other costs should they occur.
Revenues and results of operations have fluctuated and can be expected to
continue to fluctuate significantly from quarter to quarter and from year to
year. Various factors may affect quarterly and yearly operating results
including (i) timing of new product introductions by the Company and its
competition, (ii) the cost and length of time required to complete development
and commercialization of, and gain regulatory clearance for the blood glucose
monitoring technology, (iii) length of time to close product sales, (iv)
customer budget cycles, (v) success in implementing manufacturing cost
reductions, (vi) uncertainties and changes in customer purchases due to changes
third party reimbursement policies and overall market pressure to contain
increases in healthcare spending, and (vii) the timing and amount of payments
under technology development and licensing agreements.
<PAGE>
During fiscal 1999, the Company will continue to focus its efforts on expanding
sales of existing products, commencing manufacture and sale of the Vitajet,
commencing manufacture and sale of the B4000 Self-Injector if regulatory
clearance is obtained, reducing the cost of its products, continuing development
and cooperation in pursuing regulatory clearance of a 1.5 ml. injector for
Hoffmann-La Roche, developing the blood glucose monitoring technology, pursuing
product licensing and development opportunities under the Merck and GeneMedicine
agreements, pursuing additional alliances with pharmaceutical companies and
conserving its financial resources. The Company does not expect to report net
income from operations in fiscal 1999. (See "Forward Looking Statements")
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1998 COMPARED TO QUARTER ENDED JUNE 30, 1997 Product
sales decreased from $343,000 in the first quarter of fiscal 1998 to $142,000 in
the first quarter of fiscal 1999. The sales decrease was due to smaller than
expected flu season reorders, principally from one major municipal customer
which had sufficient supplies of the Company's products carrying over from the
prior year to satisfy its requirements through the current immunization season.
License and technology revenues increased to $138,000 in the current quarter
compared to $125,000 in the same quarter a year ago due to the timing of
recognizing revenue relating to strategic partner development payments.
Manufacturing expense decreased from the first quarter of fiscal 1998 to the
first quarter of fiscal 1999 by $188,000 due to lower unit sales volumes,
resulting in a lower cost of goods sold, coupled with higher levels of
production which resulted in higher absorption of manufacturing overhead into
inventory. Research and development expense increased from $254,000 in the first
quarter of fiscal 1998 to $1.06 million in the first quarter of fiscal 1999. The
increase was due primarily to the Company assuming responsibility, beginning in
the current quarter, for funding the research and development cost of the blood
glucose monitoring technology. The Company incurred $813,000 of research and
development costs in the current quarter to develop the blood glucose monitoring
technology as compared to no spending in the same quarter a year ago. Selling,
general and administrative expense increased from $754,000 in the first quarter
of fiscal 1998 to $781,000 in the first quarter of fiscal 1999. Selling expense
for the current quarter decreased by $167,000 when compared with the same period
a year ago, a result of reductions in the Company's direct sales force. The
savings in selling expenses were offset by a $194,000 increase in administrative
spending, primarily relating to administrative costs of the Company's blood
glucose monitoring development operations. The overall result was a $27,000
increase in selling general and administrative expense for the quarter ended
June 30, 1998 as compared to the quarter ended June 30, 1997.
Other income consists of earnings on available cash balances and fluctuates
based on available cash balances.
On a segment basis, the needle-free injection operations reported a net loss of
$821,000 for the quarter-ended June 30, 1998 as compared to a net loss of
$993,000 for the quarter ended June 30, 1997. The improved performance is
primarily the result of reduced spending the area of sales and marketing and
higher interest earned on comparatively higher cash balances.
<PAGE>
The blood glucose monitoring business segment reported a net loss of $986,000
for the quarter ended June 30, 1998. Due to the recent formation of this
business segment, there was no corresponding operating result for the first
quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in 1985, the Company has financed its operations, working
capital needs and capital expenditures primarily from private placements of
securities, exercises of stock options and warrants, proceeds received from its
initial public offering in 1986, proceeds received from a public offering of
common stock in November 1993, licensing and technology revenues and revenues
from sales of products. Net proceeds received from issuance of securities from
inception through June 30, 1998 totaled approximately $46.5 million.
During the first quarter of fiscal 1999 the Company raised approximately $1.85
million from issuance of capital stock. $1.56 million of that amount was
proceeds from the exercise of warrants issued in connection with previous
private placements of the Company's common stock and $290,000 was proceeds from
the exercise of stock options. Subsequent to the end of the quarter, during July
1998, the Company received additional proceeds from the exercise of warrants and
stock options totaling approximately $645,000. A portion of the warrants
exercised in the current quarter were issued in a private placement and would
have expired in June 2002. These were exercised in exchange for the Company's
commitment to issue 147,850 new warrants with an expiration date of March 2003
and at an exercise price of $1.348 per share.
Cash, cash equivalents and marketable securities totaled $2.6 million at June
30, 1998 compared to $1.9 million at March 31, 1998. The increase
resulted primarily from cash proceeds received from issuance of the Company's
common stock pursuant to warrant and stock option exercises offset by operating
cash requirements, capital asset purchases, increases in product inventories and
reduction in certain short term liabilities.
Inventories increased from $1.9 million at March 31, 1998 to $2.1 million
at June 30, 1998 due to the volume of units sold being less than the volume of
units produced.
The Company believes that its current cash position, combined with revenues,
other cash receipts, proceeds from the exercise of stock warrants and options,
proceeds from the issuance of the Company's Series C preferred stock to Elan
pursuant to agreements entered into in connection with the joint venture and
proceeds from the purchase by Elan of additional stock in JV, will be sufficient
to fund the Company's operations through the end of fiscal 1999. In addition,
the Company is considering a number of other potential financing alternatives.
Even if the Company is successful in raising additional financing, unforeseen
costs and expenses or lower than anticipated cash receipts from product sales or
research and development activities could accelerate or increase the financing
requirements. The Company has been successful in raising additional financing in
the past and believes that sufficient funds will be available to fund future
operations. However, there can be no assurance that the Company's efforts will
be successful, and there can be no assurance that such financing will be
available on terms which are not significantly dilutive to existing
shareholders. Failure to obtain needed additional capital on terms acceptable to
the Company, or at all, would significantly restrict the Company's operations
and ability to continue product development and growth and materially adversely
affect the Company's business. The Company has no banking line of credit or
other established source of borrowing. (See "Forward Looking Statements")
<PAGE>
GOVERNMENTAL REGULATION
No clearances from the FDA have been obtained for marketing of the blood glucose
monitoring technology presently being developed by the Company. The Company is
researching and has not finally determined which FDA device clearances will be
required with respect to any products developed based on this technology. Based
upon FDA clearance of a prior product, the Company believed that the FDA would
allow the blood glucose monitor to be cleared for marketing under a 510(k)
premarket notification. If a medical device does not qualify for the 510(k)
procedure, the manufacturer must file a premarket approval ("PMA") application.
A PMA must show that the device is safe and effective and is generally a more
complex submission than a 510(k) notification. A PMA typically requires more
extensive testing before regulatory filing and a longer FDA review process.
MiniMed, Inc., developer of a continuous glucose sensor system which had been
submitted to the FDA for clearance under a 510(k) notification was advised in
July 1998 that the FDA would require regulatory submission under the PMA
regulatory pathway. Because the Company has allowed a significant amount of time
in its product development schedule for submitting to the FDA for regulatory
clearance, it believes that if the FDA requires a PMA rather than a 510(k)
submission, the overall product development schedule may not be adversely
affected. (See "Forward Looking Statements") Whatever level of regulatory
submission is required, the Company anticipates that extensive testing and
regulatory review will be required of the Company's blood glucose monitoring
product. There can be no assurance that the regulatory review process will not
cause significant delays in the product development schedule or that regulatory
clearance will be obtained at all.
FORWARD LOOKING STATEMENTS
This report contains "forward looking statements" concerning, among other
things, the Company's strategic relationships with Merck and GeneMedicine,
future product development plans in the blood glucose monitoring business
segment, anticipated unit sales volumes and cost reduction prospects in the
needle-free business segment, expected sufficiency of capital resources and
future sources of working capital, that are made within the meaning of the
Private Securities Litigation Reform Act of 1995. Certain forward looking
statements are identified with a cross-reference to this section. Such forward
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such forward
looking statements. Such risks, uncertainties and factors include, without
limitation and inclusive of risks, uncertainties and other factors contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview" and "-Liquidity and Capital Resources" as well as: i) the
risk that current strategic partnerships will not develop into long-term,
revenue-producing relationships; ii) the risk that research and product
development efforts will not produce the desired results; iii) uncertainties
relating to the time and cost required to complete research and development; iv)
uncertainties related to obtaining necessary clinical data and regulatory
clearances; v) dependence on the continued performance of strategic partners;
and vi) the availability of additional financing at times and in such amounts as
are necessary to continue to fund the Company's operations. For a more detailed
description and discussion of such risks, uncertainties and other factors,
readers of this report are referred to the Company's filings with the Securities
and Exchange Commission, including the Company's Annual Report on Form 10-K/A
for the year ended March 31, 1998.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None during the quarter ended June 30, 1998.
Item 2. Changes in Securities
In December 1996, the Company completed two private placements of units,
each unit consisting of one share of Common Stock and one warrant to purchase
one share of Common Stock at an exercise price of $1.00. In June 1998, warrants
to purchase 500,000 shares of Common Stock were exercised.
In June and July 1997, the Company completed a private placement of units,
each unit consisting of one share of Common Stock and one warrant to purchase
one-half share of Common Stock at an exercise price of $0.71 per share. In April
1998, 1,478,490 shares were issued upon exercise of the warrants in exchange for
the Company's commitment to issue 147,850 new warrants with an expiration date
of March 2003 and at an exercise price of $1.348 per share.
In September 1997, the Company issued to Raphael L.L.C. a warrant to
purchase a total of 100,000 shares of Common Stock of the Company at a price of
$0.85. In June 1998, warrants to purchase 20,000 shares of common stock were
exercised.
The warrants and the shares issued upon exercise of the warrants have been
issued pursuant to an exemption from registration under Rule 506 of Regulation D
and Section 4(2) of the Securities Act. In relying upon such exemption (1) the
Company did not engage in any "general solicitation," (ii) the purchaser
represented and the Company reasonably believed that the purchaser was an
accredited investor and had such knowledge and experience in financial and
business matters such that it was capable of evaluating the merits and risks of
the prospective investment and was able to bear the economic risk of such
investment, (iii) the purchaser was provided access to all necessary and
adequate information to enable the purchaser to evaluate the financial risk
inherent in making an investments, and (iv) the purchaser represented that it
was acquiring the shares for itself and not for distribution.
Aggregate proceeds to the Company from the warrant exercises totaled
approximately $1.56 million.
Item 3. Defaults Upon Senior Securities
None during the quarter ended June 30, 1998.
Item 4. Submission of Matters to a Vote of Security Holders
None during the quarter ended June 30, 1998.
<PAGE>
Item 5. Other Information
TIMELY SUBMISSION OF SHAREHOLDER PROPOSALS
The Securities and Exchange Commission ("SEC") requires a registrant to
give shareholders notice of deadlines for timely submission of certain types of
shareholder proposals that shareholders wish to present for a vote on certain
SEC rules as they relate to the registrant's annual meeting date and relevant
provisions of its articles and by-laws. Set forth below are the deadlines
applicable to the Company's shareholders. The Company's Board has not yet acted
to set the annual meeting date; the following dates are based on an assumed
meeting date of September 10, 1999 for the Company's 1999 Annual Meeting.
In the event a shareholder does not notify the Company by June 22, 1999 of
an intent to be present at the 1999 Annual Meeting in order to present a
proposal for a vote (other than a proposal for the nomination of a director),
the Company will have the right to exercise its discretionary authority to vote
against the proposal, if presented, without including any information about the
proposal in its proxy materials.
Item 6. Exhibits and Reports on Form 8-K
None during the quarter ended June 30, 1998.
EXHIBITS:
27.1 Financial Data Schedule
REPORTS ON FORM 8-K:
None during the quarter ended June 30, 1998.
SIGNATURE
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.
BIOJECT MEDICAL TECHNOLOGIES INC.
(Registrant)
Date: August 14, 1998 /S/ James O'Shea
---------------------------------
James O'Shea
Chairman, Chief Executive Officer
and President
/S/ Michael A. Temple
---------------------------------
Michael A. Temple
Vice President and Chief Financial Officer
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