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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-24128
BIO-PLEXUS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
CONNECTICUT 06-1211921
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
384 Q MERROW ROAD
TOLLAND, CONNECTICUT 06084
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(860) 871-8601
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS:
Common stock, no par value
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant at March 31, 1997, was $30,484,406.
On March 31, 1997, there were 7,517,869 outstanding shares of the
Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the 1997 Annual Meeting of Stockholders
are incorporated by reference into Part III of this Report.
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BIO-PLEXUS, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
YEAR ENDED DECEMBER 31, 1996
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<S> <C> <C>
PART I
Item 1. Business...................................................................... 1
Item 2. Properties.................................................................... 5
Item 3. Legal Proceedings............................................................. 5
Item 4. Submission of Matters to a Vote of Security Holders........................... 5
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters..... 5
Item 6. Selected Financial Data....................................................... 6
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 7
Item 8. Financial Statements and Supplementary Data................................... 10
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................... 10
PART III
Item 10. Directors and Executive Officers of the Registrant............................ 11
Item 11. Executive Compensation........................................................ 11
Item 12. Security Ownership of Certain Beneficial Owners and Management................ 11
Item 13. Certain Relationships and Related Transactions................................ 11
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............. 11
</TABLE>
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PART I
ITEM 1. BUSINESS
General Development of Business
Bio-Plexus, Inc. (the Company or Bio-Plexus), was incorporated in
Connecticut in 1987 for the purpose of designing, developing, manufacturing and
selling safety medical products. Since inception, the Company's primary focus
has been the design, development, testing and evaluation of its first product, a
self-blunting blood collection needle which reduces the risk of accidental
needlesticks, and the design and development of the molds, machinery and systems
used to manufacture the blood collection needle. The Company markets the blood
collection needle under the Punctur-Guard(R) name. In addition, the company
markets a standard needle holder, and a new holder with a push-button release
mechanism which allows the used needle to be disposed of more conveniently and
quickly than a standard holder.
In June 1993, the Company completed its clinical tests of the
Punctur-Guard(R) blood collection needle and began selling the needle to
hospitals, medical centers and other large volume users on a limited basis. In
June 1994, the Company completed an initial public offering of 1,638,750 shares
of common stock at $10 per share. Net proceeds to the Company were $14,191,000.
Since June 1994, the Company has concentrated on improving and expanding its
overall manufacturing, sales and marketing operations. This includes the
acquisition of a production facility, improvements to and the expansion of its
production tooling and assembly equipment, and the improvement and expansion of
its production processes and capacity. In addition, the Company has
significantly expanded its marketing staff to establish direct sales coverage in
all major U.S. markets, and has established a marketing and distribution
agreement with one of the leading national distributors of medical products.
In September 1995, the Company completed a secondary public offering of
securities involving the sale of 1,725,000 shares of common stock at $11.25 per
share. The net proceeds totaled $17,575,000, of which the Company utilized
$4,000,000 to repay outstanding debt obligations. The balance was used for
working capital to sustain ongoing operations, to purchase additional machinery
and equipment, and to continue to improve and expand the Company's manufacturing
and marketing operations, as well as to support research and development.
During 1996, the Company continued its efforts to increase sales and
improve and expand its manufacturing operations. In June, the Company installed
a new needle assembly and packaging system at its Vernon facility, and began to
market its products in Europe under separate distribution agreements with an
Italian company and a European distributor.
The Company also has continued its research and development of new
products. In June 1996, it received 510(k) approval from the Food and Drug
Administration for its winged intravenous set, and in August received approval
for its needle disposal container. In addition, the Company has developed a
prototype for an I.V. catheter which utilizes a self-blunting technology similar
to its blood collection needle.
Revenues increased by $1,829,000 to $2,743,000 in 1996 compared to $914,000
the prior year, and the Company anticipates continued sales growth in 1997.
However, continued losses from operations are expected until significant
additional increases in monthly sales and further reductions in manufacturing
costs are achieved.
During 1997, the Company will need to raise additional capital, and has
begun to explore options including additional sources of debt and equity
financing, as well as the possibility of establishing other strategic
partnerships or other joint development arrangements with major health care
companies. One such arrangement was established in January 1997, with Johnson &
Johnson Medical, Inc. ("JJMI") See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview." Failure to raise the
needed capital would have an adverse impact on the Company, and its ability to
sustain operations beyond the first half of 1997. See "Management's Discussion
and Analysis of Financial Condition and Results -- Liquidity and Capital
Resources."
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Financial Information About Industry Segments
Bio-Plexus operates in one industry segment which is the design,
development, manufacture and sale of safety medical products and related
accessories.
Description of Business
Bio-Plexus designs, develops, manufactures and sells safety medical
products marketed under the Punctur-Guard(R) trademark. The Company's
Punctur-Guard(R) needle is a patented safety needle which reduces the risk of
accidental needlesticks through a self-blunting mechanism. The Punctur-Guard(R)
needle is the only safety needle on the market which reduces the risk of
accidental needlesticks prior to its removal from the patient.
The Company's first Punctur-Guard(R) product is a blood collection needle.
The Company manufactures and sells three varieties of blood collection needles,
as well as two types of needle holders. The blood collection needle is similar
in appearance, size, performance and general operation to standard blood
collection needles, and works with substantially all standard blood collection
accessories. Hospitals, doctors and other health care professionals use blood
collection needles to obtain sufficient volume of blood for a variety of
diagnostic procedures.
The blood collection needle assembly consists of a mechanically activated,
hollow, internal cannula with a blunt end, called a blunting member, placed
within a blood collection needle. The blunting member advances through the
needle by applied mechanical pressure. When the needle is inserted into the
patient, the blunting member is in its retracted position. Prior to removing the
needle from the patient, the operator applies slight additional downward force
to the blood collection tube, allowing the blunting member to advance forward
and lock into place beyond the needle's tip. The blunting member does not cause
any additional patient discomfort, and because it is hollow, fluids flow through
the needle in the same manner as through standard blood collection needles.
The Company assembles the purchased components of its Punctur-Guard(R)
blood collection needles on automated assembly machines. During 1996, the
Company purchased additional assembly and packaging equipment, which was placed
in service on a limited basis in June. The Company continues to refine and
improve the new equipment which, when fully operational, is expected to result
in sufficient capacity to meet its production needs at least through the balance
of 1997.
The Company also continued its focus on the development of new products
during 1996, including the development of an I.V. catheter, a winged intravenous
set, and a needle disposal container. On June 27, 1996 the Company received its
510(k) approval from the Food and Drug Administration for its winged intravenous
set, and on August 28, 1996 received approval for its needle disposal container.
(See Products Under Development).
Marketing
Commercial sales of the Company's Punctur-Guard(R) blood collection needle
commenced in June 1993 on a limited basis. The Company employs a sales staff
which markets directly to customers. Initially, due to limited production
capacity, marketing efforts were directed at the hospitals, medical centers and
clinics where the needle was tested. As production capacity and capabilities
have expanded, the Company has expanded its marketing efforts to other large
volume users in specific geographic areas through direct sales presentations,
demonstrations and product trials. The Company's experience has demonstrated
that it can take up to seven or eight months to complete the sales cycle at
large institutions.
On March 16, 1995, the Company entered into a domestic distribution and
marketing agreement with Allegiance Healthcare Corporation ("Allegiance",
formerly "Baxter Healthcare Corporation") a worldwide leader in sales,
distribution and manufacturing of medical products. Pursuant to the agreement,
the Company retains primary responsibility for marketing its products.
Allegiance supports the Company's marketing efforts with marketing promotions
for the Company's products and stocks the Company's products in Allegiance's
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warehouse locations. Allegiance is compensated based on a percentage of sales.
To date, the Allegiance agreement has not had a significant effect on sales
growth.
During 1996, the Company initiated an effort to market its products
overseas through the use of distributors to assist in marketing the Company's
products internationally. On June 3, 1996 the Company entered into an agreement
with an Italian company to market and sell the Company's products throughout
Italy. Pursuant to the agreement, the distributor purchased initial inventory,
agreed to make minimum purchases in the future, and agreed to maintain ample
supplies of inventory. The Company agreed to fund certain initial marketing
expenses to assist the distributor in promoting the Companies products in Italy.
On September 26, 1996, the Company entered into an agreement with a European
distributor to market and sell the Company's products in France, Switzerland,
Germany and the United Kingdom. Pursuant to the agreement, the distributor has
agreed to purchase initial inventory, to make minimum purchases in the future,
and to maintain ample supplies of inventory. To date, the selling price to
foreign distributors has been lower than the average selling price to domestic
customers.
The Company has expanded its account base in 1996, and increased the rate
of shipments, resulting in a growth in revenues to $2,743,000 in 1996, compared
to $914,000 the prior year.
Products under Development
The Company has designed and constructed a prototype intravenous (I.V.)
catheter using its self-blunting needle technology. An I.V. catheter is a
flexible tube that is used to inject or continuously flow fluids into a patient.
I.V. catheters are inserted into a patient by a needle within the flexible
catheter tube.
The Company has also designed and constructed a prototype winged
intravenous set using its self-blunting needle technology. A winged intravenous
set is a small needle with a pair of plastic wings which gives the health care
worker the ability to control the needle for very precise vein insertion. Its
primary purpose is to draw blood from patients whose veins are more difficult to
access, such as geriatric and pediatric patients. The Company expects to begin
marketing winged sets in limited quantities during 1997.
During 1996, the Company had limited sales of its new Drop-It(TM) holder
and continued development of a prototype for a new container which would be used
by health care workers to safely dispose of the Company's used blood collection
needles. The Company hopes the combination of additional accessory products will
have a positive impact on its sales of the blood collection needle, but there
can be no assurance that such positive impact will occur.
Raw Materials
The Company's Punctur-Guard(R) blood collection needle has seven
components. The component parts are purchased from outside suppliers which
manufacture the components according to drawings and specifications provided by
the Company. The materials used in the components are plastics, rubber and
stainless steel and are available from a number of sources.
The Company owns or otherwise controls all production molds and tooling
used by its suppliers to manufacture critical plastic and rubber parts. Rubber
parts are currently manufactured by a single major supplier. Subgroups of
plastic parts are manufactured by separate single major suppliers. The Company
currently has one supplier of cannula which is located in a foreign country and
has multiple manufacturing sources. Lead times on cannula orders are several
months. While alternative manufacturers are available, changes in the Company's
suppliers could disrupt production schedules and adversely affect the Company.
Patents, Proprietary Rights and Trademark
The Company holds a United States utility patent for a self-blunting needle
using an internal cannula design which expires in 2006. The patent is broad
enough to include a number of applications, including the blood collection
needle, the winged intravenous set, and the I.V. catheter. The Company has
obtained patents for its self-blunting needle design, and has corresponding
patent applications pending, in a number of foreign countries. There can be no
assurance, however, that patents will be issued from any pending patent
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application. The Company also has applied for patent protection on its new
Drop-It(TM) holder and intends to file in the near future a patent application
on its needle disposal container.
The Company considers the design of its needle assembly machines and
certain other features of its manufacturing systems to be proprietary
information. The Company protects such information through employee
confidentiality agreements and limited access to its facilities.
"Punctur-Guard(R)" is a trademark registered with the United States Patent
and Trademark Office. The Company considers this mark and the associated name
recognition to be valuable to its business. Applications have also been filed
for trademark registration on the name "Bio-Plexus" and for the new
"Drop-It(TM)" holder. The Company considers its patents, other proprietary
information and trademarks to be valuable assets of its business.
Seasonality of Business
Sales of the Company's products are not subject to material seasonal
variations.
Backlog
As a result of purchasing practices typical to the medical supply industry
in which the Company operates, there is no material backlog of unfilled orders.
Competition
The leading manufacturers of standard blood collection needles are
Becton-Dickinson and Company, Sherwood Medical Company, Inc., and Terumo Medical
Corporation of Japan. Becton-Dickinson and Sherwood also market safety needle
products. There are also a number of smaller manufacturers of safety needle
devices. The Punctur-Guard(R) needle competes with the standard and safety
needles manufactured by these companies. The major competitors of the Company
have longer operating histories and are substantially larger, better financed
and better positioned in the market than the Company. Some of these larger
competitors have multiple products which are sold to the Company's current
and/or targeted customers, giving them a potential marketing advantage. The
Company currently has three varieties of the Punctur-Guard(R) needle and two
needle holders for sale.
Standard blood collection needles compete on the basis of price, with
little product differentiation. Safety needle devices compete on the basis of
price, operating features, convenience and safety. The Company's safety needle
sells for approximately the same price as other blood collection safety needles,
which is approximately three to four times the price of standard blood
collection needles. The Company competes with standard needles on the basis that
its safety needle is cost effective when the direct costs to the average
hospital for an accidental needlestick are factored in. The Company competes
with other safety needle devices on the market on the basis of its similarity in
convenience and use to standard needles. All other current safety needle devices
on the market use an external sheath design which requires the operator to alter
his blood drawing procedure from that used on standard needles.
Research and Development
The Company has devoted substantially all of its efforts since its
formation to research and development of the Punctur-Guard(R) blood collection
needle and the production processes needed to manufacture the blood collection
needle. More recently, the Company has increased its efforts related to new
products. Research and development expenses were $1,466,000 for the year ended
December 31, 1994, $1,668,000 for the year ended December 31, 1995, and
$1,511,000 for the year ended December 31, 1996.
During 1997, the Company plans to maintain its current focus on
improvements to and the expansion of the production process for its blood
collection needle and to continue its research and development efforts on the
new products described above. However, there can be no assurance that such
effort will be successful.
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Environmental Matters
Compliance with federal, state and local laws and regulations enacted to
regulate the discharge of materials into the environment has not had, and is not
expected to have, a material effect upon the Company's business.
Employees
As of March 31, 1997, Bio-Plexus employed 119 people including 22 research
and development employees, 39 production employees and 58 sales, marketing and
administrative employees. The Company's employees are not represented by a labor
union, and the Company believes its employee relations are good.
ITEM 2. PROPERTIES
The Company owns and leases property in the state of Connecticut. The
Company leases approximately 8,000 square feet of administrative office space
and 9,500 square feet of warehouse space in a modern office park in Tolland,
Connecticut. Such leases expire in November 1999 and do not contain an option to
extend the term of the leases. The Company leases approximately 16,100 square
feet of industrial and office space in Willington, Connecticut, where the
Company has built its needle assembly machines and performs certain engineering
functions. The Willington lease expires at the end of 1997.
On October 28, 1994, the Company acquired a 37,500 square foot facility on
5.6 acres in Vernon, Connecticut. The facility comprises manufacturing,
warehouse and office space. The Company relocated substantially all of its
manufacturing and warehouse operations to the Vernon facility during the first
quarter of 1995.
ITEM 3. LEGAL PROCEEDINGS AND OTHER MATTERS
The Company is not party to any litigation or legal proceedings material to
its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Company's Common Stock is traded on Nasdaq under the symbol BPLX. The
following table shows the quarterly high and low closing price on Nasdaq for a
share of the Company's common stock for each quarter in the years ended December
31, 1995 and 1996:
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<CAPTION>
1995 1996
----------------- ----------------
YEAR ENDED DECEMBER 31 HIGH LOW HIGH LOW
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First Quarter................................ $16.00 $12.25 $11.25 $9.50
Second Quarter............................... $15.50 $10.25 $12.25 $9.75
Third Quarter................................ $13.25 $10.75 $10.50 $6.88
Fourth Quarter............................... $12.75 $ 8.00 $11.13 $4.13
</TABLE>
As of March 13, 1997 there were 549 holders of record of the Company's
common stock.
The Company has not paid any dividends on its common stock since its
inception and does not intend to pay any dividends for the foreseeable future.
On June 28, 1996 the Company issued warrants to purchase 16,851 shares of
common stock to an equipment lessor at an exercise price of $11.28 per share
with an exercise period of five years. The warrants were issued as an inducement
to secure additional equipment lease financing in the amount of $2,000,000. The
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warrants were issued pursuant to an exemption from registration under Section
4(2) of the Securities Act of 1933, as amended (the "Securities Act").
During 1996, the Company issued 123,278 shares of common stock to certain
holders of notes and related warrants who exercised the warrants for common
stock by the surrender of the notes. The notes and warrants were issued in a
1993 private placement. The shares of common stock were issued pursuant to an
exemption from registration under Section 3(a)(9) of the Securities Act.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Financial Statements and related Notes appearing elsewhere in this Form
10-K.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA: 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- -------
(DOLLARS IN THOUSANDS)
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Revenues............................... $ 2,743 $ 914 $ 267 $ 27 $ --
------- ---------- ---------- -------- -- -------
Costs and expenses:
Research and development............. 1,511 1,668 1,466 1,110 1,099
Other operating and engineering
costs............................. 5,656 4,864 3,829 1,634 523
Selling, general and
administrative.................... 6,949 5,964 3,442 1,623 1,039
------- ---------- ---------- -------- -- -------
Total operating costs and expenses..... 14,116 12,496 8,737 4,367 2,661
Financing expenses, net................ 1,497 1,455 1,174 839 400
------- ---------- ---------- -------- -- -------
Net loss before extraordinary items.... $ (12,870) $ (13,037) $ (9,644) $ (5,179) $(3,061)
========== ========== =======
------- ----------
Extraordinary item (1)
Loss on early extinguishment of debt,
net of income taxes of nil........ -- 979
------- ----------
Net loss after extraordinary item...... $ (12,870) $ (14,016)
======= ==========
Net loss per common share before
extraordinary item................... $ (1.89) $ (2.48)
======= ==========
Net loss per common share after
extraordinary item................... $ (1.89) $ (2.67)
======= ==========
Weighted average common shares
outstanding.......................... 6,815,936 5,256,997
========== ==========
Unaudited pro forma net loss per common
share (2)............................ $ (2.64) $ (1.68)
========== ==========
Unaudited pro forma weighted average
common shares outstanding (2)........ 3,536,774 2,698,525
========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
BALANCE SHEET DATA: 1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
Working capital (deficiency)............... $ (1,413) $ 12,017 $ 6,152 $ 1,516 $ (66)
Total assets............................... 12,820 23,389 14,739 6,159 2,554
Long-term debt............................. 7,407 9,099 6,715 5,729 1,097
Total shareholders' equity (deficit)....... (713) 10,751 4,690 (1,972) 155
</TABLE>
- ---------------
(1) Extraordinary items are described in Note 2 to the Financial Statements.
(2) Unaudited pro forma net loss per common share and unaudited pro forma
weighted average common shares outstanding are described in Note 2 to the
Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Since its inception in September 1987 through December 31, 1996, Bio-Plexus
has incurred cumulative ongoing losses totaling $47,600,000. During the same
period, the Company's principal focus has been the design, development, testing
and evaluation of its blood collection safety needle and the design and
development of the molds, needle assembly machines and production processes
needed for manufacturing the blood collection safety needle.
Revenues increased by $1,829,000 in 1996 to $2,743,000, while operating
costs and expenses increased by $1,620,000 to $14,116,000. During 1996, the
Company added a new needle assembly and packaging system and continued its
efforts to improve and expand its production processes. In addition, the Company
accelerated its research and development efforts on new products.
The Company is currently constructing production equipment and tooling for
winged intravenous sets which it expects to begin marketing on a limited basis
in 1997. With the addition of the new blood collection needle assembly and
packaging system, the Company believes it will have sufficient capacity to meet
its production needs for blood collection needles for the balance of 1997 when
the new system is fully operational. The Company also continues to review its
cost of operations. In order to achieve profitability, further significant
reductions in per-unit manufacturing costs and increases in sales and
manufacturing capacity and capabilities are necessary. The Company expects
substantial progress in sales growth during 1997, but expects that ongoing
losses from operations will continue at least for the balance of the year.
During 1996, the Company continued its discussions with a number of major
health care companies with a view toward establishing joint development,
manufacturing and marketing agreements on one or more of its major product
lines. In January 1997, the Company entered into a development and licensing
agreement and a supply agreement with JJMI. Pursuant to the agreements,
Bio-Plexus will develop and manufacture safety needle assemblies for JJMI, to
become part of a new safety I.V. catheter to be manufactured and sold by JJMI,
utilizing the Company's patented self-blunting needle design. JJMI will receive
world-wide exclusive rights to the new catheter, and will purchase certain
minimum quantities annually of safety needle assemblies, and pay Bio-Plexus
certain minimum royalties annually, in accordance with separate supply and
licensing agreements. In addition, JJMI has paid the Company $2,900,000 in
licensing fees and funding for the research and development necessary to
complete the design of the safety needle assemblies, and for development of
production equipment and molds. JJMI will also provide up to $1,800,000 to
acquire initial production equipment and molds.
The Company believes that similar arrangements may be possible with one or
more of the major health care companies for its blood collection needle line,
the winged intravenous set and other future products, and intends to pursue this
strategy during 1997. Such arrangements could assist the Company in raising
additional capital and help fund research and development of new products, as
well as accelerate the rate of sales growth. However, such arrangements could
also decrease revenue per unit for the Company, as a result of sharing revenue
with a strategic partner. The Company believes the overall benefits and
potential for greater market share outweigh the disadvantages of a possible
decline in per unit revenue, or other disadvantages that may result from such
agreements.
YEARS ENDED DECEMBER 31, 1996 AND 1995
The Company had revenues of $2,743,000 for the year ended December 31,
1996, compared with revenues of $914,000 for the prior year. The increase in
sales is attributable to the addition of a major new account in 1996, the
expansion of its account base, and the initiation of sales overseas through
certain European distributors, which generated 21% of the Company's total sales
in 1996.
Research and development expenses were $1,511,000 for the year ended
December 31, 1996, compared to $1,668,000 for the prior year. The Company's
efforts in each of these periods reflects the continuing focus on improving the
design and continuing development of needle assembly systems for the blood
collection needle, and the production molds used to produce its plastic
components, as well as its efforts to develop new
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products. The decrease in these costs in 1996 resulted in part from a reduction
in engineering resources devoted to the development of new machinery and
equipment for the blood collection program, which was made possible as a result
of the purchase of new machinery from outside vendors.
Other operating and engineering costs were $5,656,000 for the year ended
December 31, 1996, compared with $4,864,000 for the prior year. The increase in
these costs resulted primarily from charges associated with the removal of three
machines from the production of blood collection needles, when the Company
acquired a new assembly and packaging system. The existing machines will, in
part, be reallocated to the production machines for other products.
Selling, general and administrative expenses were $6,949,000 for the year
ended December 31, 1996, compared with $5,964,000 for the prior year. This
increase resulted primarily from the full-year effect of the 1995 increases in
marketing staff and related activities, as well as the initiation in 1996 of
efforts to market the Company's products overseas. In addition, general and
administrative expenses increased primarily due to additional administrative
staff at the Vernon facility, as well as increased expenditures by the Company
for public relations and consulting services.
Financing expenses for the year ended December 31, 1996 were $1,497,000,
compared to $1,455,000 for the prior year. Financing expenses include interest
expense, accretion of the repurchase premium on the CII Note and amortization of
deferred debt financing expenses, less interest income.
Other interest expense increased from $1,594,000 in 1995, to $1,745,000 in
1996, as a result of higher average outstanding balances under the Company's
equipment lease financing.
YEARS ENDED DECEMBER 31, 1995 AND 1994
The Company had revenues of $914,000 for the year ended December 31, 1995
compared with revenues of $267,000 for the prior year. The increase in sales is
attributable primarily to the expansion of the sales staff in 1995, and the
introduction of its 22 gauge needle in January 1995.
Research and development expenses were $1,668,000 for the year ended
December 31, 1995 compared with $1,466,000 for the prior year. The Company's
efforts in each of these periods reflects the continuing focus on improving the
design of the Punctur-Guard(R) blood collection needle as well as the production
molds used to produce its plastic components, and on improving the design and
continuing development of needle assembly systems for the blood collection
needle. The increase in these costs in 1995 resulted primarily from the
full-year effect of staffing increases that had occurred in 1994.
Other operating and engineering costs were $4,864,000 for the year ended
December 31, 1995 compared with $3,829,000 for the prior year. The increase in
these costs resulted primarily from an overall increase in production activities
in 1995, from additional payroll expenses related to staff expansion in late
1994 and early 1995 and from increased depreciation charges on capital
investments including a full year on the new Vernon facility and increased
investment in new equipment and molds.
Selling, general and administrative expenses were $5,964,000 for the year
ended December 31, 1995 compared to $3,442,000 for the prior year. This increase
resulted primarily from the hiring of additional marketing staff in late 1994
and early 1995 as the Company increased its effort to establish broader national
sales coverage. Administrative and supervisory staff also increased as the
Company expanded its manufacturing operations and moved to the Vernon facility.
Certain other administrative expenses increased over the prior year as a result
of the Company's second public offering of securities and other financing.
Financing expenses were $1,455,000 for the year ended December 31, 1995
compared with $1,174,000 for the year ended December 31, 1994. In addition, the
Company incurred an extraordinary charge of $979,000 in the third quarter of
1995, related to the extinguishment of debt. Financing expenses include interest
expense, accretion of repurchase premium on the CII Note (see below), and
amortization of deferred debt financing expenses, less interest income.
In January 1992, the Company received a loan from Connecticut Innovations,
Inc. ("CII") and issued a note to CII in the amount of $1,050,000. Under the
terms of the note, CII could have required the Company
8
<PAGE> 11
to repurchase the note at a 25% premium compounded annually if the Company did
not complete a public offering prior to January, 1997. CII converted this note
to common stock on June 29, 1994, when the Company completed its initial public
offering on June 21, 1994, and therefore there were no charges related to the
repurchase premium in 1995, as compared to $205,000 in 1994.
Other interest expense increased from $1,068,000 in 1994, to $1,594,000 in
1995, as a result of higher average outstanding balances under the Company's
equipment lease financing, a full year of interest on the $1,350,000 mortgage
loan for the Vernon facility acquired in late 1994, a new loan from the
Connecticut Development Authority (CDA) in the amount of $2,500,000 in March of
1995, a new sale-leaseback financing of $1,000,000 in July 1995, and $4,000,000
in Private Placement Notes in August 1995. Interest expense on the
aforementioned financing, includes the amortization of debt discount which arose
from the issuance of detachable warrants with such debt. In addition, deferred
financing expenses increased by $68,000 in 1995, as a result of the above
financing. Interest income increased due to higher average balances on the
Company's short-term investment of the proceeds of the 1995 public offering
compared to cash balances the prior year.
The extraordinary charge of $979,000 in 1995, resulted from unamortized
debt discount of $226,000 related to the early extinguishment of a 1993 CDA loan
which was retired in July 1995, and from the unamortized debt discount of
$584,000, and deferred financing costs of $121,000 both of which were associated
with the Private Placement Note offering in August 1995, which was retired from
the proceeds of the 1995 public offering. The extraordinary charge also includes
unamortized deferred financing costs of $48,000 related to a $1,000,000
financing commitment secured in August 1995, which expired upon the completion
of the public offering.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for additional funds has continued from period to
period, as a result of its ongoing research and development activities
surrounding the Punctur-Guard(R) blood collection needle and production
processes, its need for additional capital expenditures on molds and production
equipment, its efforts to develop new products, and the expansion of its sales
staff. To date, the Company has financed its operations primarily through
borrowings and the sale of equity securities. Through December 31, 1996, the
Company has received net proceeds of approximately $24,140,000 through
borrowings and the sale of debt securities and $40,169,000 through the sale of
equity securities. Of the net equity proceeds, $17,575,000 was received from its
1995 public offering, $14,191,000 was received from the Company's initial public
offering and the balance of $8,403,000 was received through the private
placement of equity securities.
In July 1996, the Company drew down approximately $1,200,000 as part of a
new $2,000,000 lease financing commitment for the Company's new needle assembly
and packaging system. At December 31, 1996, the Company had paid approximately
$1,550,000 of the expected total cost of the machine of approximately
$2,129,000.
As of December 31, 1996, the Company's principal source of liquidity was
cash and short-term investments totaling $1,322,000. The Company invests its
excess cash with a local bank in a short-term investment account backed by
Treasury obligations and other federal agency obligations.
On February 18, 1997, the Nasdaq Stock Market informed the Company that it
would move the Company's securities to the Nasdaq SmallCap Market effective
February 20, 1997, based on the Company's failure to meet the National Market
listing requirements. To maintain its listing on the SmallCap Market, the
Company will need to meet its ongoing listing requirements, including its net
tangible asset requirement. At the time of the move to the SmallCap Market,
Nasdaq informed the Company it met the SmallCap Market initial listing
requirements.
The Company's primary cash requirement for 1997 will be for working capital
to sustain ongoing operations including debt service, and to continue its
research and development efforts to improve and increase manufacturing capacity
and capabilities and reduce manufacturing costs. The Company also anticipates
additional capital expenditures both for its blood collection needle program as
well as new products, including further research and development on its winged
intravenous set and I.V. catheter. The Company is considering
9
<PAGE> 12
the development of a strategic partnership with one or more major companies to
assist with the development and expansion of its product line, in addition to
the agreement it already has in place with JJMI on the I.V. catheter. Its
overall strategy is to minimize expenditures on new product research and
development, as well as production capacity for new products until such time as
either additional financing is secured or until it determines that additional
strategic partnerships are feasible. In addition to the $2,900,000 in proceeds
received from JJMI in January 1997, the Company completed a $5,000,000
convertible debenture financing on January 30, 1997 with net proceeds of $4.7
million. Based on the above, the Company believes these proceeds, together with
funds generated from sales of its products, will be sufficient to fund its cash
requirements for the first half of 1997. These estimated cash requirements do
not include significant expenditures in new product areas and amounts needed
could vary based on the actual growth of sales and the level of additional
investment and time required to further increase manufacturing capacity and
capabilities, and reduce manufacturing costs. In addition to considering
strategic partnerships, the company is reviewing alternative financing
strategies to raise the funds it will need in the second half of 1997, and is
also reviewing opportunities to reduce overhead costs. Failure to raise needed
capital would have an adverse effect on the Company and its ability to sustain
operations beyond the first half of 1997.
To date the Company has not been adversely impacted by inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See index to financial statements and financial statement schedules as Item
14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
10
<PAGE> 13
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
Incorporated by reference to the Company's definitive proxy statement which
the Company intends to file with the Securities and Exchange Commission within
120 days after the close of its fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's definitive proxy statement which
the Company intends to file with the Securities and Exchange Commission within
120 days after the close of its fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Company's definitive proxy statement which
the Company intends to file with the Securities and Exchange Commission within
120 days after the close of its fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Company's definitive proxy statement which
the Company intends to file with the Securities and Exchange Commission within
120 days after the close of its fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) FINANCIAL STATEMENTS
Listed on page F-1 of the Financial Statements.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the fourth
quarter ended December 31, 1996.
11
<PAGE> 14
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ---------------------------------------- ----------------------------------------
<C> <S> <C>
1.1 Form of Underwriting Agreement between Incorporated by reference to Exhibit 1.1
Advest, Inc. and the Company. to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
1.2 Form of Advest, Inc. Warrant. Incorporated by reference to Exhibit 1.2
to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
1.3 Form of Advest, Inc. Registration Rights Incorporated by reference to Exhibit 1.3
Agreement. to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
1.4 Form of Underwriting Agreement among Incorporated by reference to Exhibit 1.1
Advest, Inc. as representative of the to the Registrant's Amendment No. 2 to
several underwriters named therein and the registration statement on Form S-1
the Company. filed on September 15, 1995 (File No.
33-95554).
3.1 Certificate of Incorporation of the Incorporated by reference to Exhibit 3.1
Company, as amended. to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended
September 30, 1996 (File No. 30-24128).
3.2 Bylaws of the Company. Incorporated by reference to Exhibit 3.2
to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
4.1 Loan Agreement, dated January 7, 1992, Incorporated by reference to Exhibit 4.1
between the Company and CII. to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
4.2 Loan Agreement dated July 27, 1993, Incorporated by reference to Exhibit 4.2
between the Company and CDA. to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
4.3 Form of Unsecured Term Notes with Incorporated by reference to Exhibit
Detachable Warrants to Purchase Common 10.4 to the Registrant's registration
Stock. statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
4.4 Loan Agreement, dated March 7, 1995, Incorporated by reference to Exhibit 4.4
between the Company and the CDA. to the Registrant's Annual Report on
Form 10-K filed on March 30, 1995 (File
No. 0-24128).
4.5 Promissory Note, dated October 28, 1994, Incorporated by reference to Exhibit 4.5
between the Company and Victor and to the Registrant's Annual Report on
Margaret DeMattia. Form 10-K filed on March 30, 1995 (File
No. 0-24128).
10.1 Lease, dated March 7, 1989, between the Incorporated by reference to Exhibit
Company and T&S Limited Partnership, as 10.1 to the Registrant's registration
amended. statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ---------------------------------------- ----------------------------------------
<C> <S> <C>
10.2 Royalty Agreement, dated November 6, Incorporated by reference to Exhibit
1989, between the Company and CII, as 10.2 to the Registrant's registration
amended. statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
10.3 Master Lease Agreement, dated April 30, Incorporated by reference to Exhibit
1993, between the Company and Aberlyn 10.3 to the Registrant's registration
Capital Management and its Affiliate, statement on Form S-1 filed on April 1,
Aberlyn. 1994 (File No. 33-77202).
10.4 Purchase and Sale Agreement, as amended, Incorporated by reference to Exhibit
for 129 Reservoir Road, Vernon, 10.4 the Registrant's Annual Report on
Connecticut, dated October 28, 1994, Form 10-K filed on March 30, 1995 (File
between the Company and Victor and No. 0-24128).
Margaret DeMattia.
10.5 Lease, dated March 11, 1994, between the Incorporated by reference to Exhibit
Company and Thomas D. Buccino d/b/a The 10.5 to the Registrant's registration
Mill Works. statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
10.6 Marketing and Distribution Agreement Incorporated by reference to Exhibit
dated March 16, 1995, between the 10.6 to the Registrant's Amendment No. 2
Company and Allegiance. to Annual Report on Form 10-K filed on
June 30, 1995 (File No. 0-24128).
10.7* 1991 Long-Term Incentive Plan. Incorporated by reference to Exhibit
10.7 to the Registrant's Amendment No. 2
to Annual Report on Form 10-K filed on
June 30, 1995 (File No. 0-24128).
10.8* Stock Warrant granted by the Company to Incorporated by reference to Exhibit
Ronald A. Haverl. 10.8 to the Registrant's Amendment No. 2
to Annual Report on Form 10-K filed on
June 30, 1995 (File No. 0-24128).
10.9* Stock Warrant granted by the Company to Incorporated by reference to Exhibit
Carl R. Sahi. 10.9 to the Registrant's Amendment No. 2
to Annual Report on Form 10-K filed on
June 30, 1995 (File No. 0-24128).
10.10* Stock Warrant granted by the Company to Incorporated by reference to Exhibit
Ronald A. Haverl. 10.10 to the Registrant's Amendment No.
2 to Annual Report on Form 10-K filed on
June 30, 1995 (File No. 0-24128).
10.11* Stock Warrant granted by the Company to Incorporated by reference to Exhibit
Carl R. Sahi. 10.11 to the Registrant's Amendment No.
2 to Annual Report on Form 10-K filed on
June 30, 1995 (File No. 0-24128).
10.12 Master Equipment Lease Agreement dated Incorporated by reference to Exhibit
as of March 8, 1995, between the Company 10.12 to the Registrant's Quarterly
and Financing for Science International, Report on Form 10-Q for the quarter
Inc. ended on June 30, 1995 (File No.
0-24128).
10.13* 1995 Non-Employee Directors' Stock Incorporated by reference to Exhibit
Option Plan. 10.13 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on June 30, 1995 (File No.
0-24118).
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ---------------------------------------- ----------------------------------------
<C> <S> <C>
10.14 Note and Warrant Purchase Agreement, Incorporated by reference to Exhibit
Form of Private Placement Note, Security 10.14 to the Registrant's Quarterly
Agreement, and Form of Warrant. Report on Form 10-Q for the quarter
ended on June 30, 1995 (File No.
0-24128).
10.15 Letter Agreement with Aberlyn Capital Incorporated by reference to Exhibit
Management Limited Partnership. 10.15 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on June 30, 1995 (File No.
0-24128).
</TABLE>
- ---------------
* Management contract or compensatory plan required to be filed pursuant to Item
14(c) of Form 10-K.
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BIO-PLEXUS, INC.
(REGISTRANT)
By: /s/ RONALD A. HAVERL
------------------------------------
Ronald A. Haverl
Chairman, Chief Executive Officer,
Treasurer and Director
Dated: April 15, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------- ---------------
<C> <S> <C>
By: /s/ RONALD A. HAVERL Chairman, Chief Executive Officer, April 15, 1997
Treasurer and Director (Principal
- ------------------------------------------ Executive, Financial and
Ronald A. Haverl Accounting Officer)
By: /s/ CARL R. SAHI Director and President April 15, 1997
- ------------------------------------------
Carl R. Sahi
By: /s/ MILTON STOLLER Director April 15, 1997
- ------------------------------------------
Milton Stoller
By: /s/ RICHARD D. RIBAKOVE Director April 15, 1997
- ------------------------------------------
Richard D. Ribakove
</TABLE>
15
<PAGE> 18
BIO-PLEXUS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Accountants..................................................... F-2
Balance Sheet at December 31, 1996 and 1995........................................... F-3
Statement of Operations for the years ended December 31, 1996, 1995 and 1994.......... F-4
Statement of Cash Flows for the years ended December 31, 1996, 1995, and 1994......... F-5
Statement of Changes in Shareholders' Equity (Deficit) for the years ended December
31, 1996, 1995 and 1994............................................................. F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
All schedules are omitted because they are not applicable or the required
information is shown in the Financial Statements or Notes thereto.
F-1
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Bio-Plexus, Inc.
In our opinion, the accompanying balance sheet and the related statement of
operations, of cash flows and of changes in shareholders' equity (deficit)
present fairly, in all material respects, the financial position of Bio-Plexus,
Inc. at December 31, 1996 and 1995, and the results of its operations, its cash
flows and changes in shareholders' equity (deficit) for each of the three years
in the period ended December 31, 1996, and for the period from December 31, 1993
through December 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has a net working capital deficit and
shareholders' deficit due to recurring net losses from operations raising
substantial doubt about the Company's ability to continue as a going concern
through December 31, 1997. Management's plans in regards to these matters are
also described in Note 1, and include raising additional capital (through
strategic partnerships or otherwise), increasing sales volume and reducing costs
in 1997. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
PRICE WATERHOUSE LLP
Hartford, CT
April 11, 1997
F-2
<PAGE> 20
BIO-PLEXUS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 1,322,000 $ 11,842,000
Accounts receivable............................................ 386,000 138,000
Inventories:
Raw materials............................................... 1,314,000 1,408,000
Work-in-process............................................. 271,000 150,000
Finished goods.............................................. 271,000 1,071,000
------------ ------------
1,856,000 2,629,000
------------ ------------
Other current assets........................................... 430,000 228,000
------------ ------------
Total current assets........................................ 3,994,000 14,837,000
------------ ------------
Fixed assets, net (Note 3)..................................... 8,305,000 8,262,000
Deferred debt financing expenses............................... 164,000 260,000
Patents, net of amortization................................... 55,000 30,000
Other assets................................................... 302,000 --
------------ ------------
$12,820,000 $ 23,389,000
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt (Note 4)..................... $ 3,225,000 $ 1,663,000
Accounts payable and accrued expenses.......................... 1,693,000 685,000
Accrued interest payable....................................... 27,000 29,000
Accrued employee costs......................................... 462,000 443,000
------------ ------------
Total current liabilities................................... 5,407,000 2,820,000
------------ ------------
CII debt, net (Note 4)........................................... 131,000 116,000
Other long-term debt, net (Note 4)............................... 7,276,000 8,983,000
Accrued financing expense -- CII debt (Note 4)................... 550,000 550,000
Redeemable Class A common stock (Note 6)......................... 20,000 20,000
Redeemable common stock warrants (Note 6)........................ 149,000 149,000
Commitments (Note 10)
Shareholders' equity (deficit) (Note 6)
Common stock, no par value, 12,000,000 authorized, 7,046,552
and 6,568,938 shares issued and outstanding................. 46,887,000 45,481,000
Accumulated Deficit............................................ (47,600,000) (34,730,000)
------------ ------------
Total shareholders' equity (deficit)........................ (713,000) 10,751,000
------------ ------------
$12,820,000 $ 23,389,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 21
BIO-PLEXUS, INC
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
Revenue........................................... $ 2,743,000 $ 914,000 $ 267,000
------------ ------------ -----------
Costs and expenses:
Research and development........................ 1,511,000 1,668,000 1,466,000
Other operating and engineering costs........... 5,656,000 4,864,000 3,829,000
Selling, general and administrative............. 6,949,000 5,964,000 3,442,000
------------ ------------ -----------
Total operating costs and expenses...... 14,116,000 12,496,000 8,737,000
------------ ------------ -----------
Financing expenses:
CII debt:
Interest expense............................. 28,000 60,000 89,000
Amortization of deferred debt financing...... 96,000 136,000 68,000
Accretion of repurchase premium.............. 205,000
Other interest expense.......................... 1,745,000 1,594,000 1,068,000
Less: interest income........................... (372,000) (335,000) (256,000)
------------ ------------ -----------
Total financing expenses................ 1,497,000 1,455,000 1,174,000
------------ ------------ -----------
Net loss before extraordinary items............... $(12,870,000) (13,037,000) $(9,644,000)
------------ ------------ -----------
Extraordinary item (Note 2):
Loss on extinguishment of debt, net of income
taxes of nil................................. -- 979,000
------------ ------------
Net loss after extraordinary item................. $(12,870,000) $(14,016,000)
============ ============
Net loss per common share before extraordinary
item............................................ $ (1.89) $ (2.48)
============ ============
Net loss per common share after extraordinary
item............................................ $ (1.89) $ (2.67)
============ ============
Weighted average common shares outstanding........ 6,815,936 5,256,997
============ ============
Unaudited pro forma net loss per common share
(Note 2)........................................ $ (2.64)
===========
Unaudited pro forma weighted average common shares
outstanding (Note 2)............................ 3,536,774
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 22
BIO-PLEXUS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(12,870,000) $(14,016,000) $(9,644,000)
Adjustments to reconcile net loss to cash used by operating
activities:
Depreciation and amortization........................... 1,317,000 1,003,000 480,000
Writedown of equipment to net realizable value.......... 550,000 54,000
Loss on early extinguishment of debt.................... 979,000
Warrants granted........................................ 118,000
Accretion of repurchase premium......................... 205,000
Amortization of deferred debt financing expenses........ 96,000 136,000 147,000
Amortization of debt discount........................... 454,000 519,000 330,000
Increase in accounts receivable......................... (248,000) (60,000) (59,000)
Decrease (increase) in inventories...................... 773,000 (1,613,000) (617,000)
Increase (decrease) in accounts payable and accrued
liabilities........................................... 1,008,000 (33,000) 66,000
Increase (decrease) in accrued interest payable......... (2,000) 19,000 (153,000)
Increase in accrued employee costs...................... 19,000 34,000 216,000
Other................................................... (345,000) 259,000 (32,000)
------------ ------------ -----------
Net cash used in operating activities.............. (9,248,000) (12,719,000) (8,943,000)
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases and construction of fixed assets including
acquisition of land....................................... (2,066,000) (3,511,000) (4,196,000)
Purchases of short-term investments......................... (8,295,000)
Proceeds from sales of short-term investments............... 2,795,000 5,500,000
Cost of patents............................................. (29,000)
------------ ------------ -----------
Net cash used in investing activities.............. (2,095,000) (716,000) (6,991,000)
------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of common stock...................... 17,575,000 14,191,000
Proceeds from exercise of common stock warrants............. 345,000 584,000
Proceeds from exercise of common stock options.............. 142,000 68,000 18,000
Proceeds from long-term debt................................ 6,364,000 1,978,000
Net (decrease) increase in notes payable.................... (450,000) 450,000
Proceeds from sale and leaseback............................ 2,228,000 2,109,000 1,321,000
Purchase of common stock.................................... (17,000) (10,000)
Repayments of long-term debt................................ (1,892,000) (5,143,000) (483,000)
Decrease in deferred offering costs......................... 273,000
------------ ------------ -----------
Net cash provided by financing activities.......... 823,000 21,090,000 17,738,000
------------ ------------ -----------
Net (decrease) increase in cash and cash
equivalents...................................... (10,520,000) 7,655,000 1,804,000
Cash and cash equivalents, beginning of period..... 11,842,000 4,187,000 2,383,000
------------ ------------ -----------
Cash and cash equivalents, end of period........... $ 1,322,000 $ 11,842,000 $ 4,187,000
============ ============ ===========
Supplemental cash flow disclosures:
Cash payments of interest................................. $ 1,276,000 $ 1,202,000 $ 937,000
Cash payments of income taxes............................. 15,000 24,000 6,000
Surrender of debt upon warrant exercise................... 1,110,000 698,000 238,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 23
BIO-PLEXUS, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
--------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance -- December 31, 1993.................... 2,364,895 $ 9,098,000 $(11,070,000) $ (1,972,000)
Exercise of stock options....................... 3,000 18,000 18,000
Warrants issued................................. 664,000 664,000
Exercise of warrants............................ 25,511 173,000 173,000
Cash proceeds from sale......................... 1,638,750 14,191,000 14,191,000
Conversion of CII Note.......................... 262,500 1,270,000 1,270,000
Purchase of common stock........................ (1,675) (10,000) (10,000)
Net loss........................................ (9,644,000) (9,644,000)
--------- ----------- ------------ ------------
Balance -- December 31, 1994.................... 4,292,981 25,404,000 (20,714,000) 4,690,000
Exercise of stock options....................... 39,500 68,000 68,000
Warrants issued with debt....................... 968,000 968,000
Exercise of warrants............................ 379,000 523,000 523,000
Repurchase of shares............................ (38,742) (523,000) (523,000)
Cash proceeds from sale......................... 1,725,000 17,575,000 17,575,000
Exercise of CII warrants........................ 93,667 584,000 584,000
Conversion of warrants.......................... 77,532 899,000 899,000
Purchase of options............................. (17,000) (17,000)
Net loss........................................ (14,016,000) (14,016,000)
--------- ----------- ------------ ------------
Balance -- December 31, 1995.................... 6,568,938 45,481,000 (34,730,000) 10,751,000
Exercise of stock options....................... 103,000 142,000 142,000
Exercise of warrants............................ 250,000 345,000 345,000
Conversion of warrants.......................... 124,614 850,000 850,000
Warrants issued with debt....................... 69,000 69,000
Net loss........................................ (12,870,000) (12,870,000)
--------- ----------- ------------ ------------
Balance -- December 31, 1996.................... 7,046,552 $46,887,000 $(47,600,000) $ (713,000)
========= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 24
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS
1. FORMATION AND OPERATIONS OF THE COMPANY
Bio-Plexus, Inc. (the "Company") was incorporated in Connecticut on
September 2, 1987. The Company was formed for the purpose of the design,
development, manufacture and sale of medical products, the only business segment
in which the Company operates. Since inception, the Company has devoted
substantially all of its efforts to the development and marketing of a series of
safety blood collection needles marketed under the Punctur-Guard(R) trademark
and the development and construction of needle assembly systems used to
manufacture the Punctur-Guard(R) needles. The Company has funded its operating
losses since inception through loans and the sale of debt and equity securities.
The Company increased sales in 1996 to $2,743,000 from $914,000 the prior
year, and added increased production capacity through the purchase of a new
needle assembly and packaging system. The Company expects to further increase
blood collection needle sales in 1997, and to begin selling on a limited basis a
commercial version of its winged intravenous set. It also expects to continue
development of a commercial version of an I.V. catheter.
However, in order to generate a positive gross margin and adequate cash
flows to fund operations, the Company needs to achieve significant additional
sales growth and reduced manufacturing costs. For this reason, it will need to
raise additional capital in 1997 to fund operations. In the first quarter of
1997, the Company raised $2.9 million by completing a development, licensing and
supply agreement for the I.V. catheter with a major health care company, and
raised approximately $5.0 million through the issuance of convertible debentures
and warrant exercises. These funds are not expected to be sufficient to fund
operations for the entire year, and therefore the Company is exploring
additional sources of debt and equity financing, as well as the possibility of
entering into additional strategic partnerships. The Company is also reviewing
opportunities to reduce operating costs and expenses.
There are risks and uncertainties surrounding management's plans, including
maintaining its status as a Nasdaq listed company (Note 12). The Company's
failure to successfully implement its Plan, including raising sufficient
capital, through a strategic partnership or otherwise, would have an unfavorable
impact on the Company's ability to continue as a going concern. The accompanying
financial statements have been prepared assuming the Company will continue as a
going concern through December 31, 1997. The financial statements do not include
any adjustment that might result from the outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 and
disclosure of contingent 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.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents.
Short-Term Investments
The Company may invest its excess cash with a local bank in a short-term
investment account backed by either U.S. Treasury bonds or federal agency
obligations.
F-7
<PAGE> 25
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories are stated at market value, which is below cost. The Company
expects to use a weighted average cost basis in the future, when market value
exceeds its cost of inventory.
Revenue Recognition
Sales and related costs are recorded by the Company upon shipment of
product to the customer.
Fixed Assets
Fixed assets are stated at cost and are depreciated using the straight-line
method over the estimated useful lives of the assets, which range from 3-30
years. Interest expense incurred during construction is capitalized as part of
the cost of the asset. Maintenance and repair expenditures are charged to
expense as incurred.
Deferred Debt Financing Expenses and Debt Discount
Financing expenses and debt discount incurred in connection with the
issuance of long-term debt are amortized using the interest method over the term
of the debt.
Income Taxes
The Company uses the liability method of accounting for income taxes, as
set forth in Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities.
Patents
Patent costs are capitalized as incurred and amortized on a straight-line
basis over the shorter of the legal term or estimated economic life of the
patent.
Earnings per share
Primary earnings (loss) per common and common equivalent share are based on
the weighted average number of common shares outstanding during the period.
Unaudited Pro Forma Loss Per Share
Conversion of the Connecticut Innovations, Inc. ("CII") Convertible Note
(see Note 4) to common stock occurred on June 29, 1994, as a result of the
Company completing an initial public offering of common stock on June 21, 1994.
Conversion of the convertible preferred stock to common stock occurred in
September 1993 when the Board of Directors decided to proceed with an initial
public offering of common stock. The unaudited pro forma net loss per common
share data included in the statement of operations for the years ended December
31, 1994 and 1993 give effect to these conversions as if the shares were
outstanding at the beginning of the respective periods, and with respect to the
CII Convertible Note, as if the interest, the accretion of the repurchase
premium, and the amortization of other financing expenses were not incurred.
In determining pro forma weighted average common shares outstanding, common
share equivalents are excluded from the computation as their effect is
anti-dilutive, except that, pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 83, common stock options and warrants issued and common
stock and convertible preferred stock sold in the twelve months preceding the
initial filing date of the
F-8
<PAGE> 26
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
public offering and through the effective date have been included in the
calculation as if outstanding for the period January 1, 1994 through March 31,
1994, using the treasury stock method and at the initial public offering price
of $10.00 per share.
Extraordinary Item
During the third quarter of 1995, the Company incurred a $979,000 charge
relating to the extinguishment of various debt. The extraordinary charge is
comprised of the unamortized debt discount of $226,000 associated with the
partial extinguishment of the 1993 CDA outstanding debt referred to in Note 4,
the unamortized debt discount and deferred financing costs of $705,000
associated with the extinguishment of the Private Placement Notes referred to in
Note 4, the unamortized $48,000 associated with the extinguishment of the
$1,000,000 Aberlyn Capital Management Line of Credit in September, 1995 referred
to in Note 6.
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Fixed assets under capital lease:
Machinery and equipment................................. $ 4,127,000 $ 3,564,000
Production molds........................................ 1,892,000 909,000
Office furniture and equipment.......................... 519,000 472,000
----------- -----------
Total under capital lease....................... 6,538,000 4,945,000
Land and building......................................... 2,396,000 2,299,000
Machinery and equipment................................... 967,000 51,000
Construction-in-progress.................................. 364,000 1,191,000
Production molds.......................................... 820,000 1,316,000
Office furniture and equipment............................ 113,000 40,000
Leasehold improvements.................................... 288,000 288,000
----------- -----------
11,486,000 10,130,000
Less: accumulated depreciation............................ (3,181,000) (1,868,000)
----------- -----------
$ 8,305,000 $ 8,262,000
=========== ===========
</TABLE>
At December 31, 1996 and 1995, the Company had approximately $6,538,000 and
$4,945,000, respectively, of fixed assets subject to a sale-leaseback
arrangement with third party lessors (see Note 4). Such assets are accounted for
as a capital lease.
Internally constructed machinery and equipment include $0 and $104,000 of
capitalized employee costs incurred during 1996 and 1995, respectively. The
development costs of the machine technology are expensed as incurred. There was
$0 and $85,000 of interest capitalized on construction in progress during 1996
and 1995, respectively.
Depreciation expense was $1,313,000 in 1996, $1,000,000 in 1995, $477,000
in 1994.
4. DEBT
CII Convertible Note
On January 7, 1992, the Company entered into a $1,050,000, six-year
Convertible Term Loan Agreement with CII, an instrumentality of the State of
Connecticut and a related party through beneficial ownership, for
F-9
<PAGE> 27
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
working capital purposes and the acquisition of manufacturing equipment.
Principal is payable upon maturity on January 7, 1998, with interest at 10%
payable annually.
Prior to the Notes conversion on June 29, 1994, CII could have required the
Company to repurchase its aggregate investment at cost plus 25% compounded
annually. A 25% accretion to the estimated value of the repurchase premium was
recorded as an expense and corresponding increase in the carrying value of the
CII Convertible Note prior to their conversion.
As an inducement for CII to purchase the CII Convertible Note, the Company
agreed to pay CII an aggregate of $550,000 under specified conditions. Payments
will not commence until the Company has sales and operating profits, as defined,
and payments will not exceed the lesser of 2% of sales or $100,000 in the first
three years. The Company may elect to make payments in the first three years
after payments commence in shares of its common stock at a fixed price of $4 per
share. On February 11, 1997, the Company entered into a Royalty Modification
agreement with CII to satisfy the $550,000 royalty obligation via the issuance
of 78,572 shares of common stock.
As part of the Loan Agreement, the Company issued CII a warrant to purchase
175,000 shares of common stock. This detachable warrant was valued at its
repurchase price of $280,000 and recorded as a discount on the CII Convertible
Note. The Company repurchased the warrant from CII on June 12, 1992 for
$280,000. As discussed in Note 6, the Company also issued CII a contingent
warrant to purchase 500,000 shares of common stock and extended an outstanding
warrant to purchase 35,000 shares of common stock in connection with the CII
transaction.
In consideration for CII's release of the lien on the Company's machinery
and equipment to permit the sale-leaseback financing referred to below, the
Company issued CII a warrant to purchase 42,000 shares of common stock at $9 per
share. The warrant is exercisable until April 30, 1998. The fair value of the
warrant at the date of issuance was recorded as a deferred debt financing
expense.
On June 29, 1994, CII converted the $1,050,000 principal amount of the CII
Convertible Note into 262,500 shares of common stock, as a result of the Company
completing its initial public offering of common stock on June 21, 1994. On this
date, the net book value of the CII Convertible Note of $1,652,000, consisting
of the principal amount less unamortized discount plus accretion of the
repurchase premium, was credited to common stock, and the unamortized portion of
deferred debt financing expenses related to the Note of $381,000 was charged to
common stock.
Unsecured Term Notes
During 1993, the Company sold $4,230,000 of unsecured term notes with
detachable warrants to purchase 469,996 shares of common stock at $9 per share.
Subsequent to December 31, 1993 and through February 15, 1994, the Company sold
an additional $628,000 of unsecured term notes with warrants to purchase 69,814
shares of common stock at $9 per share. The term notes bear interest at 8%.
One-third of the principal amount of the notes mature on December 31, 1997 and
the remainder matures on December 31, 1998. The warrants are exercisable until
December 31, 1998. Upon exercise, warrant holders may surrender an equal
principal amount of the term notes in lieu of paying cash. The fair value of the
warrants at the date of issuance is recorded as a discount on the debt.
During 1996, certain warrant holders exercised warrants for shares of
common stock, simultaneously surrendering $1,109,500 of unsecured term notes,
with a net book value of $849,500 in lieu of paying cash.
On January 16, 1997, the Company advised certain holders of warrants that
it was reducing the exercise price from $9.00 to $7.00 on warrants issued with
the unsecured term notes. At the same time, the Company advised the warrant
holders that if the warrants were exercised into shares of common stock by
simultaneously surrendering the related unsecured term notes, the Company would
make payments in lieu of interest through
F-10
<PAGE> 28
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1997 at a rate of 8%. As a result, warrant holders surrendered approximately
$2,334,000 of the term notes, with a net book value of $2,039,000 and exercised
warrants for 333,395 shares of common stock. The transaction will result in a
one time 1997 charge of $731,000, as a result of the reduction in the warrant
exercise price.
Private Placement Notes
On August 4, 1995 the Company sold to certain investors in a private
placement $4.0 million of notes (the "Private Placement Notes") with detachable
warrants (the "Private Placement Warrants") for common stock. The Private
Placement Notes had an interest rate of 8% per annum before amortization of debt
discount and were due and payable on the earlier of (i) the date of closing of a
private placement or strategic alliance in which the Company receives net
proceeds of at least $7.5 million (ii) the closing of a public offering of
securities of the Company; or (iii) July 24, 1996.
The proceeds of the Private Placement Notes were used for working capital
purposes. The Company repaid the Private Placement Notes with a portion of the
1995 Public Offering referred to below, resulting in an extraordinary charge as
described in Note 1. The Private Placement Notes could be prepaid at any time
without penalty, and were secured by a second lien against the patents and
trademarks of the Company. As an inducement to purchase the Private Placement
Notes, the Company issued investors 161,551 warrants to purchase common stock
which are exercisable at $12.38 per share. The warrants are not exercisable
until August 5, 1996 and expire on August 4, 2000. The Private Placement
Warrants may be exercised by cash, or by effecting a net exercise based on the
difference between the exercise price and the market value of the common stock
at the time of the exercise.
In January 1997, a holder of the Private Placement warrant exercised the
warrant into 35,714 shares of common stock at an exercise price of $7 per common
share or $250,000.
Lease Financing -- Machinery and Equipment and Molds
On April 30, 1993, the Company entered into a $2,000,000 sale-leaseback
agreement with a lessor primarily to finance the purchase and construction of
needle assembly machines and production molds. The lease term is 42 months with
interest at a rate of 15%. The Company has an option to purchase all but not
less than all of the leased equipment at the end of the lease term for 5% of the
amount financed. As an inducement, the Company issued the lessor and its
affiliate warrants to purchase up to 47,500 shares of common stock at $9 per
share. The warrants are exercisable through April 30, 2000. The fair value of
the warrants at the date of issuance was recorded as a discount on the equipment
lease obligation.
On October 28, 1993, the Company and the lessor agreed to a $575,000
increase in the sale-leaseback agreement for certain machinery and molds. The
lease term is 48 months with interest at a rate of 15%. As an inducement, the
Company issued the lessor and its affiliate warrants to purchase 11,876 shares
of common stock at $9 per share. The warrants are exercisable through December
1, 2000. The fair value of the warrants at the date of issuance is recorded as a
discount on the lease obligation.
In March 1994, the Company granted warrants to purchase 16,667 shares of
common stock at $9 per share to a financing company. The warrants were granted
in consideration for a commitment by the financing company to purchase any
shares which may have been returned by investors if the Company had been
required to make a rescission offer to certain investors of its common stock and
convertible preferred stock. The warrants are exercisable at any time until
April 30, 2001. The estimated fair value of the warrants of $118,000 was charged
to general and administrative expense in 1994.
On April 1, 1994, the Company and the lessor agreed to a $2,000,000
expansion of the sale-leaseback agreement for certain machinery and molds. The
lease term is 42 months from the date specific equipment is leased with interest
at a rate of 15%. As an inducement, the Company issued the lessor and its
affiliate
F-11
<PAGE> 29
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
warrants to purchase 47,500 shares of common stock at $9 per share. The warrants
are exercisable through April 30, 2001. The fair value of the warrants on the
date of issuance is recorded as a deferred financing expense. In January 1995,
the lessor agreed to extend the date through which equipment and molds could be
purchased and leased by the Company under this commitment from March 31, 1995 to
June 30, 1995 in exchange for a $12,000 fee, representing approximately 1% of
the unused portion of the commitment at December 31, 1994.
On March 8, 1995, the Company entered a five-year sale-leaseback financing
agreement in amounts up to $2,000,000 with an equipment lessor on certain
machinery and molds. Monthly rent expense will equal 2.14% of the equipment
leased and is payable monthly in advance. The Company has the option to purchase
all but not less than all of the leased equipment at the end of the lease term
for the then current market value of the equipment, which shall not be less than
10% or more than 15% of the equipment cost. In June 1995, the Company utilized
approximately $1,000,000 of the commitment, and as an inducement, the Company
issued the lessor warrants to purchase 6,355 shares of Common Stock at an
exercise price of $13.63 per share with an exercise period of five years. The
fair value of the warrants at the date of issuance is recorded as a discount on
the lease obligation.
On August 7, 1995, the Company received a commitment to provide $1.0
million of additional financing from one of its equipment lenders. As an
inducement to obtain the commitment, the Company granted warrants to purchase
12,255 shares of common stock at an exercise price of $12.24 per share. The
warrants are exercisable from August 7, 1996 through August 6, 2003. The
estimated fair value of the warrants of $53,000 which was recorded as a deferred
financing charge and amortized over the life of the line or twelve months. Upon
successful completion of the public offering of securities on September 20,
1995, the unamortized book value of $48,000 was recorded as a portion of the
1995 extraordinary item.
On June 28, 1996, the Company and the lessor agreed to a $2,000,000
expansion of the sale-leaseback financing agreement to finance the purchase of a
new needle production machine. The lease term is four years and monthly rent
payments will equal 2.50% of the equipment leased and is payable monthly in
advance. The Company has the option to purchase all but not less than all of the
leased equipment at the end of the lease term for the then current market value
of the equipment, which shall not be less than 15% or more than 20% of the
equipment cost. At December 31, 1996, the Company had approximately $1,200,000
outstanding under the expanded $2,000,000 financing agreement. The Company
issued the lessor warrants to purchase 16,851 shares of common stock at an
exercise price of $11.28 per share with an exercise period of five years. The
fair value of the warrants at the date of issuance is recorded as a discount on
the lease obligation.
In addition, the Company entered into a Reserve Pledge and Security
Agreement with the lessor requiring the Company to establish a Security Reserve
of $250,000, as additional collateral for the lessor which is recorded as a Long
Term other asset in the Company's financial statements.
On September 19, 1996, the Company entered a three-year sale-leaseback
financing agreement in amounts up to $150,000 with an equipment lessor for
certain machinery and equipment. Monthly rent expense will equal 3.32% of the
equipment leased and is payable monthly in advance. The Company has the option
to purchase all but not less than all of the leased equipment at the end of the
lease term for the then current market value of the equipment, which shall not
be less than 10% of the original equipment cost. In September 1996, the Company
had utilized approximately $48,000 of the commitment.
CDA Loans
On July 27, 1993, the Company and the Connecticut Development Authority
("CDA"), an instrumentality of the State of Connecticut, entered into a
$1,000,000 loan agreement, of which $600,000 was advanced in 1993. The loan had
a maturity of August 1, 2000 and required aggregate annual payments of $85,000,
F-12
<PAGE> 30
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
including interest at 7.4%. The loan was secured by the tangible and intangible
assets of the Company, which included all of its intellectual property.
As an inducement, the Company issued the CDA a warrant to purchase 100,200
shares of common stock at $9 per share. The warrant is exercisable through
August 1, 2000. The CDA may require the Company to purchase the warrant at any
time between July 27, 1998 and August 1, 2000 at a price of $3.40 per share. The
fair value of the warrant at the date of issuance was recorded as a discount on
the notes and a corresponding credit to redeemable common stock warrants. The
balance of the July 1993 loan in the amount of $518,000 was effectively repaid
July 1, 1995 when CDA exercised its rights under the Warrant Modification
Agreement referred to in Note 6.
In March 1995, the Company and the CDA entered into a three-year,
$2,500,000 term loan agreement. The loan bears interest at 9% per annum, with
interest only payable in the first year. Principal payments beginning in year
two are based on a four-year amortization schedule with a balloon payment due at
the end of year three. In connection with this loan agreement, the Company paid
a commitment fee of $12,500, and the CDA withdrew the $400,000 of remaining
funds available on the $1,000,000 loan agreement described above.
As an inducement, the Company issued CDA warrants to purchase 40,000 shares
of common stock at an exercise price equal to 110% of the market price of the
common stock on the date of issuance or $14.66. The warrants are exercisable
through March 6, 2002. The Company has the option to avoid the balloon principal
payment at the end of year three by issuing the CDA warrants for 50,000 shares
of common stock at an exercise price equal to that of the warrants for 40,000
shares issued at inception of the loan.
On March 31, 1997, the Company entered into an agreement to retire the CDA
Loan by prepaying $1,050,000 of the principal amount of the outstanding note and
converting the balance of the principal amount of the note, including interest
accrued through March 31, 1997, into 241,627 shares of common stock based on a
conversion price of $4.50 per share. In addition, the Company agreed to redeem
any shares held by CDA and not yet sold on March 31, 1998, for an aggregate
redemption price of $1,125,000 less the sum of all net proceeds received by CDA
from the sale of any shares prior to that date.
Facility Mortgage
On October 28, 1994, the Company acquired a manufacturing and warehouse
facility for $1,500,000. Financing of $1,350,000 of the purchase price was
provided by the seller in the form of a note which bears interest at 9% per
annum. Interest only is payable for the first two years of the note. Principal
payments began in October, 1996, and are based on a twenty year amortization
schedule with a balloon payment due on November 1, 2009. The note is secured by
a first mortgage on the facility.
Convertible Debenture Financing
Pursuant to Regulation S of the Securities Act of 1933, the Company issued
on January 30, 1997, $5,000,000, 5% Convertible Debentures due February 4, 1999.
Interest is payable quarterly in arrears beginning April 30, 1997 until
repayment or conversion of the debt occurs. The Debentures are convertible into
Common Shares in one-third step progression, 45, 75 and 105 days from the
closing at the lessor of $9.00 per Common Share or 80% of the average closing
bid price over the ten-day trading period ending on the day prior to the date of
notice of conversion is filed with the number of shares not to exceed 1,350,000.
In the event that the above calculation results in shares to be issued greater
than 1,350,000, the Company would redeem the outstanding debenture at the price
paid plus any accrued interest thereon. In the event the closing bid price of
the Company's stock exceeds $14.70 per share for twenty consecutive trading days
during any period of time 45 days after the closing, all outstanding debentures
will automatically convert into common stock within 10 business days.
F-13
<PAGE> 31
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The balance of long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Unsecured Term Notes, net of unamortized discount of
$402,000 and $1,006,000................................. $ 2,778,000 $ 3,284,000
CII Unsecured Term Note, net of unamortized discount of
$19,000 and $34,000..................................... 131,000 116,000
CDA loan, net of unamortized discount of $85,000 and
$153,000................................................ 2,143,000 2,347,000
Capital lease obligations, net of unamortized discount of
$79,000 and $37,000..................................... 4,232,000 3,644,000
Facility mortgage payable................................. 1,348,000 1,350,000
Other capital lease obligation............................ -- 21,000
----------- -----------
10,632,000 10,762,000
Less: current portion..................................... 3,225,000 1,663,000
----------- -----------
$ 7,407,000 $ 9,099,000
=========== ===========
</TABLE>
The aggregate maturities of long-term debt, including CII debt and capital
lease obligations, over the next five years are as follows: 1997 -- $3,225,000;
1998 -- $4,262,000; 1999 -- $1,641,000; 2000 -- $1,661,000; 2001 -- $36,000.
5. INCOME TAXES
Deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Costs capitalized for tax purposes...................... $ 295,000 $ 194,000
Research tax credits.................................... 532,000 473,000
Net operating losses.................................... 18,388,000 13,295,000
---------- ----------
Gross deferred tax assets................................. 19,215,000 13,962,000
Less: valuation allowance................................. 19,215,000 13,962,000
---------- ----------
Net deferred tax assets................................... $ -- $ --
========== ==========
</TABLE>
The Company has provided a valuation allowance for the full amount of
deferred tax assets since the realization of these future benefits cannot be
reasonably assured as of the end of each related year. If the Company achieves
profitability, the deferred tax assets would be available to offset future
income taxes.
At December 31, 1996, the Company has available net operating loss
carryforwards of $45,293,000 and research and development tax credit
carryforwards of $532,000. The Federal carryforwards expire in years 2002
through 2011. The State of Connecticut net operating loss carryforwards of
$43,122,000, expire in years 1997 through 2001.
As defined in the Internal Revenue Code, certain substantial ownership
changes limit the utilization of the available net operating loss and tax credit
carryforwards. The Company has experienced a number of
F-14
<PAGE> 32
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
substantial ownership changes, which limit the amount of pre-change loss
carryforwards that can be utilized in any one taxable year as follows:
<TABLE>
<CAPTION>
DATE NOL FEDERAL LOSS
WAS GENERATED CARRYFORWARD ANNUAL LIMITATION
- ------------- ------------ -----------------
<S> <C> <C>
9/87 - 12/89 $ 333,000 $ 32,000
1/90 - 12/91 1,807,000 386,000
1/92 - 06/94 11,749,000 1,437,000
</TABLE>
The remaining $32,498,000 of Federal net operating loss carryforwards is not
limited unless a substantial ownership change occurs in the future.
6. SHAREHOLDERS' EQUITY
Capital Stock Transactions
On July 17, 1996, at the Annual Meeting of Shareholders, the Company
increased the authorized number of common shares from 10,000,000 to 12,000,000.
Class A Common Stock
During 1992, 10,000 shares each of Class A common stock was awarded to the
two principal officers of the Company and entitles them to 500 votes for each
share of Class A common stock held on any matter submitted to the shareholders
of the Company for action. The Class A common stock does not pay dividends. The
two shareholders have agreed not to sell, give or otherwise transfer their
shares, except to each other or to the Company. As part of the September 1993
Capital Stock Amendment, the Class A Common Stock was made manditorily
redeemable by the Company on January 1, 1998 for $20,000. Prior to such
amendment, the Company had the option to redeem all of the outstanding shares of
Class A Common Stock at any time after January 1, 2003 for the aggregate of
$20,000.
Warrants
The Company granted CII a contingent warrant to purchase 500,000 shares of
common stock at $1.38 per share in connection with the CII Convertible Notes
(see Note 4). As of December 31, 1996 the contingent warrant had expired.
In January 1990, the Company granted warrants at a $1.38 per share to
purchase 323,000 shares of common stock to one of its principal officers and
56,000 shares of common stock to a member of the company's medical advisory
board. Effective January 1, 1995, the Company's Board of Directors amended the
terms of the warrants to allow the holders to exercise their warrants without
cash payments based upon the difference in the warrant exercise price and the
market value of the common stock at the time of exercise. The warrants were
exercised on January 1, 1995 and the principal officer received 289,992 shares,
and the medical advisor received 50,276 shares.
During April 1991, the Company granted warrants to purchase 125,000 shares
of common stock at $1.38 per share to each of its two principal officers. These
warrants are exercisable for a period of five years from the date of grant. On
April 29, 1996, the two principal officers exercised these warrants. Proceeds to
the company upon exercise were $345,000.
In September 1992, the Company granted warrants to purchase 125,000 shares
of common stock at $6 per share to each of its two principal officers. These
warrants are exercisable for a period of five years from the date of grant.
F-15
<PAGE> 33
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the sale of $4,858,000 of unsecured term notes in 1993
through February 15, 1994 (see Note 4), the Company issued warrants to purchase
539,810 shares of common stock at $9 per share. The warrants are exercisable
until December 31, 1998. Upon exercise, warrant holders may surrender an equal
value of the term notes in lieu of paying cash. The fair value of the warrants
at the date of issuance is recorded as a discount on the debt. As of December
31, 1996, warrants for 353,410 shares of common stock remain unexercised.
In March 1994, the Company granted warrants to purchase 16,667 shares of
common stock at $9 per share to a financing company. The warrants were granted
in consideration for a commitment by the financing company to purchase any
shares which may have been returned by investors if the Company had been
required to make a rescission offer to certain investors of its common stock and
convertible preferred stock. The warrants are exercisable at any time until
April 30, 2001. The estimated fair value of the warrants of $118,000 was charged
to general and administrative expense in 1994.
In June 1994, the Company granted warrants to purchase 75,000 shares of
common stock at $12 per share to the underwriter of its initial public offering.
The warrants are exercisable at any time through June 20, 1999, which is five
years from the date of the initial public offering.
On January 3, 1995, CII exercised its total warrant holdings in the Company
for 93,667 shares of common stock. Proceeds to the Company upon exercise were
$584,000.
On March 7, 1995, the Company issued the Connecticut Development (CDA)
warrants to purchase 40,000 shares of common stock at $14.66 per share in
connection with a $2.5 million loan from the CDA (See Note 4). The fair value of
the warrants on the date of issuance of $204,000 was recorded as a discount on
the debt and a corresponding increase to common stock. The warrants are
exercisable through March 6, 2002.
In June 1995, as an inducement for a sale-leaseback commitment with an
equipment leasing company (see Note 4), the Company issued warrants to purchase
6,355 shares of common stock at an exercise price of $13.63 per share with an
exercise period of five years.
On June 15, 1995 the Company and the CDA entered into a certain Warrant
Modification Agreement pursuant to which: (i) each of the CDA Warrants may be
exercised by surrender of the instruments evidencing the Company's indebtedness
incurred in connection with the issuance of such warrant; (ii) the Company
agreed to permit the CDA's net exercise of the CDA Warrants based upon the
difference between the fair market value (as defined) of the Company's common
stock on the date of such exercise and the respective exercise price; provided,
however, that the CDA shall exercise its warrants first by surrender of debt, as
described above; (iii) the CDA waived the right to redeem the 1995 CDA Warrant;
and (iv) the CDA agreed to partially exercise the 1993 CDA Warrant by
surrendering the CDA Notes in exchange for shares of common stock and agreed to
receive a replacement redeemable warrant exercisable at $9.00 per share for the
balance of the shares subject to the 1993 CDA Warrant. The warrants are
exercisable at any time between July 27, 1998 and August 1, 2000. Effective July
1, 1995, the CDA partially exercised the 1993 CDA Warrant for 57,531 shares of
common stock and received a replacement warrant for the unexercised portion of
the 1993 CDA Warrant or 42,669 shares of common stock.
On August 4, 1995 the Company sold to certain investors in a private
placement $4.0 million of notes with detachable warrants for common stock (see
Note 4). The 161,551 Private Placement Warrants are exercisable at $12.38 per
share. They are not exercisable until the first anniversary of issuance and
expire on the fifth anniversary of issuance. The holder has the right to have
the shares underlying the Private Placement Warrant included in any registration
of the Company's securities, subject to underwriters limiting participation. The
Private Placement Warrants may be exercised by cash, or by effecting a net
exercise based on the difference between the exercise price of the Private
Placement Warrant and the market value of the common stock at the time of
exercise.
F-16
<PAGE> 34
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On August 7, 1995, the Company received a commitment to provide $1.0
million of additional financing from one of its equipment lenders. As an
inducement to obtain the commitment, the Company granted warrants to purchase
12,255 shares of Common Stock at an exercise price of $12.24 per share. The
warrants are exercisable from August 7, 1996 through August 6, 2003. The
estimated fair value of the warrants was $53,000 which was recorded as a
deferred financing charge and amortized over the life of the line or twelve
months. Upon successful completion of the public offering of securities on
September 20, 1995, the unamortized book value of $48,000 was recorded as a
portion of the 1995 extraordinary item.
In June 1996, as an inducement for a sale-leaseback commitment with an
equipment leasing company (see Note 4), the Company issues warrants to purchase
16,851 shares of common stock at an exercise price of $11.28 per share with an
exercise period of five years.
The Board of Directors and management believe that the exercise price of
the above warrants was at or exceeded the fair value of the equivalent shares of
common stock at the time of issuance.
In addition to the warrants referred to above, other warrants were issued
as described in Note 4. The Company has reserved shares of common stock as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
------------ ------------
1996 1995
------------ ------------
<S> <C> <C>
Warrants........................................... 1,081,634 1,438,063
Stock options...................................... 899,000 752,000
--------- ---------
1,980,634 2,190,063
========= =========
</TABLE>
Dividend and Stock Restrictions
Under the terms of the loan agreement between the Company and the CDA, the
Company is prohibited from declaring or paying cash or stock dividends, or
purchasing, redeeming or otherwise acquiring any common stock, warrants, rights
or options except for any securities held by CII or CDA.
7. STOCK PLAN
The Company established the 1991 Long Term Incentive Plan (the "Plan")
under which the Board of Directors may grant awards to employees and directors
of the Company. Awards will be granted at the fair value of the common stock at
the time of grant, as determined by the Board of Directors. Awards under the
Plan may be made in a variety of forms, including stock options, incentive stock
options (within the meaning of Section 422A of the Internal Revenue Code of
1986) and restricted stock. Stock options may be accompanied by stock
appreciation rights, and restricted stock may be accompanied by grants of
performance shares. All awards under the Plan have been stock options. Such
options generally vest over a period of three to five years and are exercisable
over a period of ten years from the date of grant.
On July 6, 1995 at the Annual Meeting of Shareholders, an amendment to the
1991 Long-Term Incentive Plan was adopted which increased the number of shares
of common stock subject to the Incentive Plan from 500,000 to 750,000.
Additionally, on July 17, 1996 at the Annual Meeting of Shareholders, an
amendment to the 1991 Long-Term Incentive Plan was adopted which increased the
number of shares of common stock subject to the Incentive Plan from 750,000 to
1,000,000. A committee of outside directors administers the Incentive Plan;
imposes limits on awards to executives; eliminates sequential exercise of
outstanding options; imposes restrictions on the cash exercise of stock
appreciation rights in certain circumstances; and effects certain other
technical and conforming changes.
F-17
<PAGE> 35
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of stock option activity under the Plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE
--------- -----------
<S> <C> <C>
Outstanding at December 31, 1993............................ 314,700
Granted -- 1994............................................. 27,500 11.00
Canceled -- 1994............................................ (4,600) 6.00
Exercised -- 1994........................................... (3,000) 6.00
--------
Outstanding at December 31, 1994............................ 334,600
Granted -- 1995............................................. 273,750 9.25-12.00
Canceled -- 1995............................................ (72,500) 6.00-12.00
Exercised -- 1995........................................... (41,000) 1.38-6.00
--------
Outstanding at December 31, 1995............................ 494,850
Canceled -- 1996............................................ (65,750) 1.38-9.25
Exercised -- 1996........................................... (103,000) 1.38-6.00
--------
Outstanding at December 31, 1996............................ 326,100
========
</TABLE>
There are 194,137 stock options exercisable under the Plan at December 31,
1996.
The following summarizes additional information about stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------ ---------------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AT AVERAGE WEIGHTED EXERCISABLE AT WEIGHTED
EXERCISE DECEMBER 31, REMAINING AVERAGE DECEMBER 31, AVERAGE
PRICE 1996 CONTRACTUAL LIFE EXERCISE PRICE 1996 EXERCISE PRICE
- -------- -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
1.38 80,000 4.42 1.38 80,000 1.38
6.00 28,100 5.75 6.00 28,100 6.00
9.00 20,000 6.92 9.00 20,000 9.00
9.25 198,000 8.83 9.25 66,037 9.25
------- -------
326,100 194,137
======= =======
</TABLE>
Had compensation expense been recognized based on the fair value of the
options at their grant dates, as prescribed in Financial Accounting Standard No.
123, the Company's net loss and net loss per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net loss:
As reported........................................ $ (12,870,000) $ (14,016,000)
Pro forma under FAS 123............................ $ (13,352,000) $ (14,115,000)
Net loss per share:
As reported........................................ $(1.89) $(2.67)
Pro forma under FAS 123............................ $(1.96) $(2.68)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
options granted during 1995: dividend yield of 0%, risk-free interest rate of
6.12%, expected volatility factor of 66.30% and an expected option term of ten
years.
At the Annual Meeting of Shareholders in July, the shareholders also
approved the adoption of the 1995 Non-Employee Director's Stock Option Plan (the
"Directors" Plan). The Directors' Plan includes
F-18
<PAGE> 36
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
50,000 shares of common stock reserved for issuance to non-employee directors.
Eligible directors will receive options for 1,000 shares of common stock upon
their election and subsequent re-election. Current non-employee directors
received an option for 1,000 shares for each calendar year they served as a
director prior to the adoption of the Directors' Plan. All options granted vest
one year after the grant and have an exercise price equal to the fair market
value of the shares at the time of the grant.
A summary of stock option activity under the Plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE
--------- -----------
<S> <C> <C>
Granted -- 1995.............................................. 16,000 8.50-11.75
------
Outstanding at December 31, 1995............................. 16,000
Granted -- 1996.............................................. 4,000 6.50-9.75
Canceled -- 1996............................................. (2,000) 9.75-11.75
------
Outstanding at December 31, 1996............................. 18,000
======
</TABLE>
8. LEASES
At December 31, 1996, the Company was committed under operating leases
which expire at various dates through November 1999. Minimum lease payments
under these non-cancelable leases in the next five years are: 1997 -- $347,000;
1998 -- $263,000; 1999 -- $238,000; 2000 -- $5,000. Rent expense was $166,000 in
1992, $182,000 in 1993, $340,000 in 1994, $384,000 in 1995, and $394,000 in
1996.
9. MAJOR CUSTOMER INFORMATION
There were no customers exceeding 10% of the Company's domestic sales in
1996 and 1995, respectively. Three customers accounted for 14%, 12% and 10%,
respectively of the Company's sales in 1994. The Company had export sales of
approximately $566,000 in 1996. Such sales were to an Italian company and a
European distributor and were not material in the prior years.
10. COMMITMENTS
As of December 31, 1996 the Company had capital expenditure purchase
commitments outstanding of approximately $573,000, expected to be financed
through an existing financing arrangement.
11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount for cash and cash equivalents approximates fair value
because of the short maturity of these instruments. The carrying amount for
accounts receivable, accounts payable, accrued interest payable and accrued
employee costs is a reasonable estimate of fair value because of the short
nature of the transactions. The fair value of the note payable and long-term
debt is estimated based upon the current rates that would be offered to the
Company on similar debt.
The estimated fair value of the Company's debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
CARRYING FAIR
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Note payable and long-term debt................................. $6,400,450 $6,283,111
</TABLE>
F-19
<PAGE> 37
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. SUBSEQUENT EVENTS
On January 28, 1997, the Company entered into a Development and License
Agreement and a Supply Agreement with Johnson & Johnson Medical, Inc. ("JJMI")
of Arlington, Texas. Under the terms of the agreements, Bio-Plexus, Inc. will
develop and manufacture safety needle assemblies for JJMI utilizing its self-
blunting technology, which will be used by JJMI, under an exclusive world-wide
license granted by the Company, to manufacture and sell a new safety I.V.
catheter. The Company received $2,900,000 in licensing fees and funding to
complete the development of the safety needle assemblies and for the development
of manufacturing equipment and tooling. JJMI has agreed to acquire initial
production equipment in amounts up to $1,800,000, to purchase certain minimum
quantities of safety needle assemblies annually, and to pay certain minimum
annual royalties.
On February 18, 1997, the Nasdaq Stock Market informed the Company that it
would move the Company's securities to The Nasdaq SmallCap Market effective
February 20, 1997, based on the Company's failure to meet the National Market
listing requirements. To maintain its listing on the SmallCap Market, the
Company will need to meet its ongoing listing requirements, including its net
tangible asset requirement.
F-20
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION METHOD OF FILING PAGE NO.
- ------- ----------------------------------- ----------------------------------- ----------
<C> <S> <C> <C>
1.1 Form of Underwriting Agreement Incorporated by reference to
between Advest, Inc. and the Exhibit 1.1 to the Registrant's
Company. registration statement on Form S-1
filed on April 1, 1994 (File No.
33-77202).
1.2 Form of Advest, Inc. Warrant. Incorporated by reference to
Exhibit 1.2 to the Registrant's
registration statement on Form S-1
filed on April 1, 1994 (File No.
33-77202).
1.3 Form of Advest, Inc. Registration Incorporated by reference to
Rights Agreement. Exhibit 1.3 to the Registrant's
registration statement on Form S-1
filed on April 1, 1994 (File No.
33-77202).
1.4 Form of Underwriting Agreement Incorporated by reference to
among Advest, Inc. as Exhibit 1.1 to the Registrant's
representative of the several Amendment No. 2 to the registration
underwriters named therein and the statement on Form S-1 filed on
Company. September 15, 1995 (File No.
33-95554).
3.1 Certificate of Incorporation of the Incorporated by reference to
Company, as amended. Exhibit 3.1 to the Registrant's
Quarterly Report on Form 10-Q for
the quarter ended September 30,
1996 (File No. 30-24128).
3.2 Bylaws of the Company. Incorporated by reference to
Exhibit 3.2 to the Registrant's
registration statement on Form S-1
filed on April 1, 1994 (File No.
33-77202).
4.1 Loan Agreement, dated January 7, Incorporated by reference to
1992, between the Company and CII. Exhibit 4.1 to the Registrant's
registration statement on Form S-1
filed on April 1, 1994 (File No.
33-77202).
4.2 Loan Agreement dated July 27, 1993, Incorporated by reference to
between the Company and CDA. Exhibit 4.2 to the Registrant's
registration statement on Form S-1
filed on April 1, 1994 (File No.
33-77202).
4.3 Form of Unsecured Term Notes with Incorporated by reference to
Detachable Warrants to Purchase Exhibit 10.4 to the Registrant's
Common Stock. registration statement on Form S-1
filed on April 1, 1994 (File No.
33-77202).
4.4 Loan Agreement, dated March 7, Incorporated by reference to
1995, between the Company and the Exhibit 4.4 to the Registrant's
CDA. Annual Report on Form 10-K filed on
March 30, 1995 (File No. 0-24128).
4.5 Promissory Note, dated October 28, Incorporated by reference to
1994, between the Company and Exhibit 4.5 to the Registrant's
Victor and Margaret DeMattia. Annual Report on Form 10-K filed on
March 30, 1995 (File No. 0-24128).
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION METHOD OF FILING PAGE NO.
- ------- ----------------------------------- ----------------------------------- ----------
<C> <S> <C> <C>
10.1 Lease, dated March 7, 1989, between Incorporated by reference to
the Company and T&S Limited Exhibit 10.1 to the Registrant's
Partnership, as amended. registration statement on Form S-1
filed on April 1, 1994 (File No.
33-77202).
10.2 Royalty Agreement, dated November Incorporated by reference to
6, 1989, between the Company and Exhibit 10.2 to the Registrant's
CII, as amended. registration statement on Form S-1
filed on April 1, 1994 (File No.
33-77202).
10.3 Master Lease Agreement, dated April Incorporated by reference to
30, 1993, between the Company and Exhibit 10.3 to the Registrant's
Aberlyn Capital Management and its registration statement on Form S-1
Affiliate, Aberlyn. filed on April 1, 1994 (File No.
33-77202).
10.4 Purchase and Sale Agreement, as Incorporated by reference to
amended, for 129 Reservoir Road, Exhibit 10.4 the Registrant's
Vernon, Connecticut, dated October Annual Report on Form 10-K filed on
28, 1994, between the Company and March 30, 1995 (File No. 0-24128).
Victor and Margaret DeMattia.
10.5 Lease, dated March 11, 1994, Incorporated by reference to
between the Company and Thomas D. Exhibit 10.5 to the Registrant's
Buccino d/b/a The Mill Works. registration statement on Form S-1
filed on April 1, 1994 (File No.
33-77202).
10.6 Marketing and Distribution Incorporated by reference to
Agreement dated March 16, 1995, Exhibit 10.6 to the Registrant's
between the Company and Allegiance. Amendment No. 2 to Annual Report on
Form 10-K filed on June 30, 1995
(File No. 0-24128).
10.7 1991 Long-Term Incentive Plan. Incorporated by reference to
Exhibit 10.7 to the Registrant's
Amendment No. 2 to Annual Report on
Form 10-K filed on June 30, 1995
(File No. 0-24128).
10.8 Stock Warrant granted by the Incorporated by reference to
Company to Ronald A. Haverl. Exhibit 10.8 to the Registrant's
Amendment No. 2 to Annual Report on
Form 10-K filed on June 30, 1995
(File No. 0-24128).
10.9 Stock Warrant granted by the Incorporated by reference to
Company to Carl R. Sahi. Exhibit 10.9 to the Registrant's
Amendment No. 2 to Annual Report on
Form 10-K filed on June 30, 1995
(File No. 0-24128).
10.10 Stock Warrant granted by the Incorporated by reference to
Company to Ronald A. Haverl. Exhibit 10.10 to the Registrant's
Amendment No. 2 to Annual Report on
Form 10-K filed on June 30, 1995
(File No. 0-24128).
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION METHOD OF FILING PAGE NO.
- ------- ----------------------------------- ----------------------------------- ----------
<C> <S> <C> <C>
10.11 Stock Warrant granted by the Incorporated by reference to
Company to Carl R. Sahi. Exhibit 10.11 to the Registrant's
Amendment No. 2 to Annual Report on
Form 10-K filed on June 30, 1995
(File No. 0-24128).
10.12 Master Equipment Lease Agreement Incorporated by reference to
dated as of March 8, 1995, between Exhibit 10.12 to the Registrant's
the Company and Financing for Quarterly Report on Form 10-Q for
Science International, Inc. the quarter ended on June 30, 1995
(File No. 0-24128).
10.13 1995 Non-Employee Directors' Stock Incorporated by reference to
Option Plan. Exhibit 10.13 to the Registrant's
Quarterly Report on Form 10-Q for
the quarter ended on June 30, 1995
(File No. 0-24118).
10.14 Note and Warrant Purchase Incorporated by reference to
Agreement, Form of Private Exhibit 10.14 to the Registrant's
Placement Note, Security Agreement, Quarterly Report on Form 10-Q for
and Form of Warrant. the quarter ended on June 30, 1995
(File No. 0-24128).
10.15 Letter Agreement with Aberlyn Incorporated by reference to
Capital Management Limited Exhibit 10.15 to the Registrant's
Partnership. Quarterly Report on Form 10-Q for
the quarter ended on June 30, 1995
(File No. 0-24128).
27 Financial Data Schedule Filed with this document
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,322,000
<SECURITIES> 0
<RECEIVABLES> 386,000
<ALLOWANCES> 0
<INVENTORY> 1,856,000
<CURRENT-ASSETS> 3,994,000
<PP&E> 11,486,000
<DEPRECIATION> 3,181,000
<TOTAL-ASSETS> 12,820,000
<CURRENT-LIABILITIES> 5,407,000
<BONDS> 7,407,000
0
0
<COMMON> 46,887,000
<OTHER-SE> (47,600,000)
<TOTAL-LIABILITY-AND-EQUITY> 12,820,000
<SALES> 2,743,000
<TOTAL-REVENUES> 2,743,000
<CGS> 0
<TOTAL-COSTS> 14,116,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,497,000
<INCOME-PRETAX> (12,870,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,870,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,870,000)
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.89
</TABLE>
