<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Mark
One
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission file number 0-24128
BIO-PLEXUS, INC.
----------------
(Exact name of Registrant as specified in its Charter)
Connecticut 06-1211921
----------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
129 Reservoir Road, Vernon Connecticut 06066
-----------------------------------------------------------
(Address of principal executive offices including zip code)
(860) 870-6112
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(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months ( or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Shares Outstanding
Class of Common Stock as of May 6, 1998
--------------------- -----------------
<S> <C>
Class A Common Stock, no par value 20,000
Common Stock, no par value 12,154,787
</TABLE>
<PAGE> 2
Index
BIO-PLEXUS, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Balance Sheets at March 31, 1998 and
December 31, 1997 1
Condensed Statements of Operations for the three months
ended March 31, 1998 and 1997 2
Condensed Statements of Cash Flows for the three months
ended March 31, 1998 and 1997 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
</TABLE>
<PAGE> 3
BIO-PLEXUS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 260,000 $ 1,502,000
Accounts receivable 642,000 395,000
Inventories:
Raw materials 1,007,000 985,000
Work-in-process 214,000 316,000
Finished goods 287,000 297,000
------------ ------------
1,508,000 1,598,000
------------ ------------
Notes receivable 20,000 152,000
Other current assets 155,000 168,000
------------ ------------
Total current assets 2,585,000 3,815,000
------------ ------------
Fixed assets, net 6,972,000 7,396,000
Deferred debt financing expenses 52,000 73,000
Patents, net of amortization 203,000 152,000
Other assets 252,000 252,000
------------ ------------
$ 10,064,000 $ 11,688,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,142,000 $ 2,219,000
Accounts payable and accrued expenses 934,000 619,000
Accrued interest payable 40,000 26,000
Accrued vacation 233,000 248,000
Other accrued employee costs 77,000 204,000
Deferred revenue (Note 3) 631,000 841,000
------------ ------------
Total current liabilities 4,057,000 4,157,000
------------ ------------
Other long-term debt, net 2,862,000 3,204,000
Redeemable Class A common stock 20,000 20,000
Redeemable common stock warrants 149,000 149,000
Commitments and contingencies (Note 4) -- --
Shareholders' equity:
Convertible preferred stock, no par value, 3,000,000
authorized, no shares issued and outstanding -- --
Common stock, no par value, 15,000,000 authorized,
12,154,787 and 12,137,787 shares issued and outstanding 64,093,000 64,070,000
Accumulated deficit (61,117,000) (59,912,000)
------------ ------------
Total shareholders' equity 2,976,000 4,158,000
------------ ------------
$ 10,064,000 $ 11,688,000
============ ============
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
1
<PAGE> 4
BIO-PLEXUS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1998 1997
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<S> <C> <C>
Revenue:
Product $ 1,065,000 $ 1,112,000
Services 477,000 --
Licensing fees (Note 3) -- 1,500,000
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Total revenue 1,542,000 2,612,000
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Costs and expenses:
Research and development $ 108,000 $ 425,000
Other operating and engineering costs 1,348,000 1,610,000
Selling, general and administrative 1,132,000 1,876,000
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Total operating costs and expenses 2,588,000 3,911,000
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Financing expenses:
CII debt:
Interest expense $ -- $ 1,000
Amortization of deferred debt financing 20,000 33,000
Other financing expenses 179,000 1,126,000
Less: Interest income (40,000) (52,000)
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Total financing expenses 159,000 1,108,000
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Net loss $(1,205,000) $(2,407,000)
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Net loss (basic and diluted) per common share $ (0.10) $ (0.33)
=========== ===========
Weighted average common shares
outstanding (Note 2) 12,145,954 7,371,577
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
2
<PAGE> 5
BIO-PLEXUS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,205,000) $(2,407,000)
Adjustments to reconcile net loss to cash used
by operating activities:
Depreciation and amortization 298,000 353,000
Inducement expense on conversion -- 640,000
Writedown of equipment to net realizable value 113,000 --
Amortization of deferred debt financing
expenses 20,000 33,000
Amortization of debt discount 15,000 76,000
Decrease (increase) in assets:
Accounts receivable (247,000) (241,000)
Inventories 90,000 (52,000)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 315,000 (418,000)
Accrued interest payable 14,000 132,000
Accrued vacation and other employee costs (142,000) (91,000)
(Decrease) increase in deferred revenue (Note 3) (210,000) 1,400,000
Other 145,000 11,000
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Net cash used in operating activities (794,000) (564,000)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases and construction of fixed assets (93,000) (191,000)
Cost of patents (53,000) (29,000)
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Net cash used in investing activities (146,000) (220,000)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of common stock warrants -- 250,000
Proceeds from exercise of common stock options 23,000 50,000
Proceeds from long-term debt -- 4,700,000
Proceeds from sale and leaseback 109,000 --
Repayments of long-term debt (434,000) (528,000)
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Net cash provided by (used in) financing activities (302,000) 4,472,000
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Net (decrease) increase in cash and cash
equivalents (1,242,000) 3,688,000
Cash and cash equivalents, beginning of
period 1,502,000 1,322,000
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Cash and cash equivalents, end of period $ 260,000 $ 5,010,000
=========== ===========
Supplemental cash flow disclosures:
Cash payments of interest $ 151,000 $ 274,000
Surrender of debt upon warrant exercise -- 3,353,000
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
3
<PAGE> 6
Notes
BIO-PLEXUS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The interim condensed financial statements included herein are unaudited.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of financial position
and the results of operations and cash flows for the periods presented have been
included. The results of operations for the interim period is not necessarily
indicative of the results of operations to be expected for the full year. These
financial statements should be read in conjunction with the financial statements
and the notes included in the 1997 Annual report to Shareholders of Bio-Plexus,
Inc.
NOTE 2 -- LOSS PER SHARE
Net loss per common share is determined based on the weighted average
number of common shares outstanding during the period. In determining weighted
average common shares outstanding, common share equivalents are excluded from
the computation as their effect is anti-dilutive.
In February, 1997, the FASB issued Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings per Share", which establishes new
standards for the computation and disclosure of earnings per share ("EPS"). The
new statement requires dual presentation of "basic" EPS and "diluted" EPS. Basic
EPS is based on the weighted average number of common shares outstanding for the
period, excluding any dilutive common share equivalents. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted. The Company adopted SFAS 128 for
the periods presented. In determining net loss per common share, common stock
equivalents are excluded from the computation as their effect is anti-dilutive.
NOTE 3 -- LICENSING AGREEMENTS
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. would
develop and manufacture safety needle assemblies for JJMI utilizing its
self-blunting technology, which would be used by JJMI, under an exclusive
worldwide 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 the manufacturing equipment and tooling. JJMI agreed to acquire initial
production equipment and tooling which will be completed in 1998. During the
first quarter of 1997, $1,500,000 in licensing fee revenue was recognized and at
March 31, 1998, $210,000 in development funding was recognized. The remaining
balance of $631,000 has been deferred and will be recognized over the remaining
term of the development project in 1998.
4
<PAGE> 7
Notes
On April 9, 1998, the Company amended the original development and license
agreement and canceled its supply agreement with JJMI. The amended terms
include certain changes in the licensing and royalty agreements as well as the
transfer of manufacturing of the safety needle assemblies to JJMI, in exchange
for an initial milestone payment of $3,500,000, with an additional $500,000
payable upon completion of certain milestones. The revised agreement also
provides for an additional $300,000 payable to the Company for initial capital
equipment purchases during 1998.
NOTE 4 -- COMMITMENTS
As of March 31, 1998, the Company had capital expenditure purchase
commitments outstanding of approximately $819,000, primarily to be financed
through the JJMI Development contract (See Note 3).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements included in this Management's Discussion and
Analysis of the Results of Operations and Financial Condition which are not
historical facts may be deemed to contain forward looking statements with
respect to events, the occurrence of which, involve risks and uncertainties,
including, without limitation, the Company's expectation regarding gross profit
and operating income which could differ materially from actual operating
results in future periods.
OVERVIEW
Since its inception in September 1987 through March 31, 1998,
Bio-Plexus incurred cumulative ongoing losses totaling $61,117,000. 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
5
<PAGE> 8
Notes
manufacturing the blood collection safety needle as well as the design and
development of new products.
With the addition of the new blood collection needle assembly and
packaging system in 1996, the Company believes it will have sufficient capacity
to meet its production needs for blood collection needles for 1998. The Company
will continue to review its cost of operations during 1998. In order to achieve
profitability, further reductions in manufacturing costs and increases in sales
are necessary. The Company expects sales growth during 1998, but expects that
ongoing losses from operations will continue through 1998.
In January 1997, the Company entered into a Development and License
Agreement and a Supply Agreement with JJMI. Pursuant to the original
agreements, Bio-Plexus would 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.
In April 1998, the Company amended the original development and license
agreement and canceled its supply agreement with JJMI. The amended terms
include certain changes in the licensing and royalty agreements as well as the
transfer of manufacturing of the safety needle assemblies to JJMI, in exchange
for an initial milestone payment of $3,500,000, with an additional $500,000
payable upon the completion of certain milestones. The revised agreement also
provides for an additional $300,000 payable to the Company for initial capital
equipment purchases during 1998.
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 products, and intends to continue to
pursue this strategy during 1998. 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 the revenue per unit for the Company, as a
result of sharing revenue with strategic partners. The Company believes the
overall benefits and potential for greater market share outweigh the
disadvantages that may result from such arrangements.
Effective January 6, 1998, the Company accepted the retirement of
Lawrence C. Krampert as Chief Executive Officer and President and appointed him
to Chairman of the Board. Richard L. Higgins was appointed to the position of
Chief Executive Officer and President and a member of the Board of Directors
effective January 6, 1998.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
The Company had revenues from product sales of $1,065,000 for the three
months ended March 31, 1998 compared to $1,112,000 for the same period a year
ago. The decrease was attributable to a reduction in the use of distributors in
Europe based on a number of factors, including their ability to meet sales
quotas, pricing considerations and other factors.
The Company had revenues from services of $477,000 resulting from
progress payments by JJMI on the capital equipment project for the I.V.
catheter.
6
<PAGE> 9
Notes
Research and development expenses were $108,000 for the three months ended
March 31, 1998, compared to $425,000 for the same period a year ago. The
decrease in these costs in 1998 resulted primarily from the recognition of
$210,000 of deferred revenue related to the development of the I.V. catheter for
JJMI.
Other operating and engineering costs were $1,348,000 for the three months
ended March 31, 1998 compared to $1,610,000 for the same period a year ago. The
decrease is primarily attributable to the Company's efficiency in lowering
manufacturing costs associated with the blood collection line and its other
products.
Selling, general and administrative expenses were $1,132,000 for the three
months ended March 31, 1998 compared to $1,876,000 for the same period a year
ago. The decrease is primarily attributable to the Company's reduction in its
direct sales force during the second quarter of 1997, as well as other
administrative cost reductions recognized during the third quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for additional funds has continued from period to
period, as a result of its ongoing losses from operations, 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, and its efforts to develop new products. To date, the
Company has financed its operations primarily through borrowings and the sale
of equity securities. Through March 31, 1998, the Company has received net
proceeds of approximately $29,209,000 through borrowings and the sale of debt
securities and $47,946,000 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 $16,180,000 was received through the private placement of equity
securities.
The Company's primary cash requirement for 1998 will be for working
capital to sustain ongoing operations for the blood collection needle program,
debt service, and to a lesser extent further research and development on its
winged intravenous set, I.V. catheter, and other new products. The Company is
considering 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 it determines that additional strategic partnerships are
feasible. On April 9, 1998, the Company amended its existing development and
license agreement and canceled its supply agreement with JJMI. As part of the
amendment, the Company will receive a payment of $3,500,000 with an additional
$500,000 payable upon the completion of certain milestones in exchange for the
transfer of manufacturing of the safety needle assemblies to JJMI and certain
other changes in the licensing and royalty agreements. The Company believes that
these proceeds and other anticipated sources of funds, together with funds
generated from sales of its products, will be sufficient to fund its cash
requirements for 1998. 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 other factors. In addition to
considering strategic partnerships, the company is reviewing alternative
financing strategies to raise additional funds
7
<PAGE> 10
Notes
in 1998, and is also reviewing opportunities to further reduce operation costs
and other expenses. Failure to raise needed capital would have an adverse
effect on the Company's operations, development plans and cash flows.
To date the Company has not been adversely impacted by inflation.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
A report on Form 8-K was filed January 5, 1998, reporting a change
in registrant's certifying accountants.
(b) Exhibits
Exhibit
No. Description Method of Filing
------- ----------- ----------------
27 Financial Data Schedule Filed with this Report.
8
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Notes
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)
May 14, 1998 /s/ Richard L. Higgins
- ------------------------ -----------------------------------
(Date) Richard L. Higgins
President and Chief Executive Officer
May 14, 1998 /s/ Kimberley A. Cady
- ------------------------ -----------------------------------
(Date) Kimberley A. Cady
Vice President of Finance and Chief
Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 260,000
<SECURITIES> 0
<RECEIVABLES> 642,000
<ALLOWANCES> 0
<INVENTORY> 1,508,000
<CURRENT-ASSETS> 155,000
<PP&E> 6,972,000<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,064,000
<CURRENT-LIABILITIES> 4,057,000
<BONDS> 2,862,000
0
0
<COMMON> 64,093,000
<OTHER-SE> 169,000<F2>
<TOTAL-LIABILITY-AND-EQUITY> 10,064,000
<SALES> 1,542,000
<TOTAL-REVENUES> 1,752,000
<CGS> 0
<TOTAL-COSTS> 2,798,000
<OTHER-EXPENSES> 159,000<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 165,000
<INCOME-PRETAX> 1,205,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,205,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,205,000
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
<FN>
<F1>This value is net of depreciation.
<F2>Value represents redeemable common stock and redeemable common stock warrants.
<F3>Amount includes $40,000 of interest income.
</FN>
</TABLE>
