<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 SEPTEMBER 30, 2000
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)
<TABLE>
<S> <C>
Connecticut 06-1211921
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
129 Reservoir Road, Vernon Connecticut 06066
(Address of principal executive offices including zip code)
(860) 870-6112
(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 November 6, 2000
--------------------- ----------------------
<S> <C>
Common Stock, no par value 14,942,157
</TABLE>
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BIO-PLEXUS, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets at September 30, 2000 (unaudited) and
December 31, 1999 1
Condensed Statements of Operations for the three months
ended September 30, 2000 (unaudited) and 1999 2
Condensed Statements of Operations for the nine months
ended September 30, 2000 (unaudited) and 1999 3
Condensed Statements of Cash Flows for the nine
months ended September 30, 2000 (unaudited) and 1999 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
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BIO-PLEXUS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
2000 DECEMBER 31,
(UNAUDITED) 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,627,000 $ 867,000
Accounts receivable 692,000 908,000
Inventories:
Raw materials 1,333,000 621,000
Work-in-process 27,000 474,000
Finished goods 2,177,000 1,167,000
------------ ------------
3,537,000 2,262,000
------------ ------------
Other current assets 106,000 173,000
------------ ------------
Total current assets 9,962,000 4,210,000
------------ ------------
Fixed assets, net 6,623,000 4,384,000
Deferred debt financing expenses 1,076,000 465,000
Patents, net of amortization 415,000 335,000
Other assets 3,000 253,000
------------ ------------
$ 18,079,000 $ 9,647,000
============ ============
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Current portion of long-term debt $ 61,000 $ 899,000
Note payable -- 1,340,000
Accounts payable and accrued expenses 745,000 786,000
Accrued interest payable 9,000 55,000
Accrued vacation 228,000 202,000
Other accrued employee costs 199,000 226,000
------------ ------------
Total current liabilities 1,242,000 3,508,000
------------ ------------
Long-term debt, net 16,874,000 2,262,000
Redeemable common stock warrants 149,000 149,000
Commitments and contingencies (Note 4) -- --
Shareholders' (deficit) equity:
Convertible preferred stock, no par value, 3,000,000
authorized, no shares issued and outstanding -- --
Common stock, no par value, 40,000,000 authorized,
14,942,157 and 14,083,807 shares issued and outstanding 76,218,000 71,833,000
Accumulated deficit (76,404,000) (68,105,000)
------------ ------------
Total shareholders' (deficit) equity (186,000) 3,728,000
------------ ------------
$ 18,079,000 $ 9,647,000
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
1
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BIO-PLEXUS, INC
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenue:
Product $ 1,151,000 $ 1,143,000
Services 12,000 148,000
------------ ------------
Total revenue 1,163,000 1,291,000
------------ ------------
Operating costs and expenses:
Product 578,000 630,000
Services -- 36,000
Research and development 302,000 248,000
Selling, general and administrative 2,089,000 1,211,000
------------ ------------
Total operating costs and expenses 2,969,000 2,125,000
------------ ------------
Operating loss (1,806,000) (834,000)
Financing expenses:
Amortization of deferred debt financing 85,000 10,000
Interest expense 704,000 208,000
Other income (76,000) (6,000)
------------ ------------
Total financing expenses 713,000 212,000
------------ ------------
Net loss $ (2,519,000) $ (1,046,000)
============ ============
Net loss per share of common stock:
Basic and diluted $ (0.17) $ (0.08)
============ ============
Weighted average common shares outstanding (Note 2) 14,904,911 13,552,117
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
2
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BIO-PLEXUS, INC
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenue:
Product $ 3,335,000 $ 3,713,000
Services 46,000 1,325,000
Licensing fees (Note 6) 100,000 --
------------ ------------
Total revenue 3,481,000 5,038,000
------------ ------------
Operating costs and expenses:
Product 1,668,000 2,165,000
Services 29,000 64,000
Research and development 859,000 846,000
Selling, general and administrative 5,679,000 3,472,000
------------ ------------
Total operating costs and expenses 8,235,000 6,547,000
------------ ------------
Operating loss (4,754,000) (1,509,000)
Financing expenses:
Amortization of deferred debt financing 274,000 36,000
Interest expense 3,485,000 593,000
Other income (214,000) (56,000)
------------ ------------
Total financing expenses 3,545,000 573,000
------------ ------------
Net loss $ (8,299,000) $ (2,082,000)
============ ============
Net loss per share of common stock:
Basic and diluted $ (0.57) $ (0.15)
============ ============
Weighted average common shares outstanding (Note 2) 14,611,774 13,449,889
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
3
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BIO-PLEXUS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (8,299,000) $ (2,082,000)
Adjustments to reconcile net loss to cash used
by operating activities:
Depreciation and amortization 402,000 417,000
Amortization of deferred debt financing expenses 274,000 36,000
Amortization of debt discount 2,255,000 292,000
Decrease (increase) in assets:
Accounts receivable 216,000 130,000
Inventories (1,275,000) (495,000)
Other current assets 67,000 --
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (41,000) 414,000
Accrued interest payable (46,000) (16,000)
Accrued vacation and other accrued employee costs (1,000) (14,000)
Accrued product replacement costs -- (222,000)
Decrease in deferred revenue -- (875,000)
Other 278,000 124,000
------------ ------------
Net cash used in operating activities (6,170,000) (2,291,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases and construction of fixed assets (2,620,000) (250,000)
Long-term investments (Note 3) -- 627,000
Cost of patents (100,000) (55,000)
------------ ------------
Net cash (used in) provided by investing activities (2,720,000) 322,000
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock (Note 3) 750,000 1,100,000
Proceeds from exercise of common stock options 83,000 91,000
Accretion of interest payable 845,000 --
Payments of deferred financing costs -- --
Increase (Decrease) in notes payable (Note 3) 3,850,000 (250,000)
Proceeds from issuance of long-term debt 9,900,000 2,092,000
Payments of Deferred Financing Costs (885,000) --
Proceeds from sale and leaseback -- 137,000
Repayments of long-term debt (Note 3) (893,000) (1,541,000)
------------ ------------
Net cash provided by financing activities 13,650,000 1,629,000
------------ ------------
Net increase (decrease) in cash and cash equivalents 4,760,000 (340,000)
Cash and cash equivalents, beginning of
period 867,000 535,000
------------ ------------
Cash and cash equivalents, end of period $ 5,627,000 $ 195,000
============ ============
Supplemental cash flow disclosures:
Cash payments of interest $ 429,000 $ 316,000
Cash payments of income taxes $ -- $ 4,000
Surrender of debt upon conversion to equity $ 1,333,000 $ 83,000
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
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BIO-PLEXUS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion of
the management of the Company, include all adjustments which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However, the
financial statements do not include all information and footnotes required for a
presentation in accordance with generally accepted accounting principles. These
condensed financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's 1999 Annual Report on
Form 10-K. The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the full year.
NOTE 2 - EARNINGS PER SHARE
Basic Earnings Per Share ("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.
In determining net loss per common share for the periods ended September 2000
and 1999, common stock equivalents were excluded from the computation as their
effect was anti-dilutive.
NOTE 3 - SIGNIFICANT CAPITAL TRANSACTIONS
Long-Term Investment
On September 3, 1998, the Company loaned $600,000 to Jordan
Pharmaceuticals, Inc. ("Jordan"), a California corporation, in exchange for a
one-year promissory note. On October 31, 1998, the Company converted the
promissory note into 120,000 shares of Jordan Series A Preferred Stock. Pursuant
to a stock option agreement dated October 31, 1998, Jordan had a right to
repurchase the shares of Series A Preferred Stock plus any paid-in-kind shares
owned by the Company (in lieu of interest paid in cash), at a purchase price of
$5.00 per share. On March 31, 1999, Jordan exercised its option with respect to
all the shares for total consideration of $627,000.
Stock Options
On February 29, 2000, a director of the Company effected a net exercise of
stock options to purchase 180,000 shares of the Company's common stock, no par
value per share (the "Common Stock") in exchange for 63,625 shares of Common
Stock.
5
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On March 9, 2000, an officer of the Company effected a net exercise of
stock options to purchase 32,000 shares of Common Stock in exchange for 14,950
shares of Common Stock.
During the first quarter of 2000, an employee exercised stock options to
purchase 30,000 shares of Common Stock.
Convertible Debentures
On April 27, 1999, the Company sold an aggregate principal amount of
$2,500,000 of its 6% Convertible Debentures due June 30, 2004 (the "6%
Debentures") to several purchasers (the "Debenture Holders") (the "Convertible
Debenture Financing"). The 6% Debentures were convertible at any time at the
option of the Debenture Holders into shares of the Company's Common Stock at the
lesser of a fixed conversion price of $3.06 per share (as may be adjusted from
time to time) or a floating conversion price at the time of the conversion if
the floating conversion price is less than $3.06 per share (as may be adjusted
from time to time). The 6% Debentures could be wholly or partially redeemed at
the option of the Company for an amount not to exceed 130% of the face value
thereof plus accrued and unpaid interest at any time after the date of issuance.
As of September 30, 2000, the Debenture Holders had converted all of the
$2,500,000 outstanding principal balance of the 6% Debentures into 880,733
shares of Common Stock. The Company and the Debenture Holders had limited put
and call options, respectively, for additional 6% Debentures. In connection with
a subsequent financing with Appaloosa Management, L.P. and certain related
entities, the Company agreed not to exercise its put right under the 6%
Debentures. As of July 26, 2000, the Debenture Holders' call options expired and
were not exercised. In connection with the Convertible Debenture Financing, the
Company issued a warrant to purchase up to 500,000 shares of the Company's
Common Stock at an exercise price of $3.38 per share.
Convertible Note Financing
On September 21, 1999, the Company received a commitment from Appaloosa
Management, L.P., of Chatham, New Jersey ("Appaloosa") for a total financing
package of $17.5 million, comprised of (i) $16.75 million of zero-coupon,
secured convertible notes due 2005 (the "Convertible Notes"), (ii) 250,000
shares of Common Stock issued at a purchase price of $3.00 per share (the
"Permanent Financing Shares") and (iii) nine-year warrants to purchase up to 1.5
million shares of Common Stock at an initial exercise price of $7.00 per share
(the "$7 Warrants", and collectively with the Convertible Notes and the
Permanent Financing Shares, the "Permanent Financing"). The Permanent Financing
was consummated on April 28, 2000 after receipt of stockholder approval of the
terms of the Permanent Financing and certain related matters.
Bridge Transactions
Pending consummation of the Permanent Financing, on October 21, 1999, the
Company issued to Appaloosa and entities affiliated therewith (the "Purchasers")
a 7.5% non-convertible secured note in the aggregate principal amount of $3
million (the "First Bridge Note"). In January 2000, the interest rate on the
First Bridge Note was increased to 12% per annum. In connection with the
issuance of the First Bridge Note, the Company also issued to the Purchasers (i)
a five-year warrant to purchase up to 1.0 million shares of Common Stock, at an
initial exercise price of $3.00 per share (the "$3 Warrants") and (ii) a
nine-year warrant to purchase up to 1.5 million shares of Common Stock at an
initial exercise price of $5.00 per share (the "$5 Warrants") (the $3 Warrants
and $5 Warrants are collectively referred to herein as the "First Bridge
Warrants"). At the Purchaser's election and upon the closing of the
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Permanent Financing, the exercise price of the $3 Warrants increased to $4.00
per share of Common Stock. The exercise price of the $5 Warrants increased to
$7.00 per share of Common Stock upon the closing of the Permanent Financing. The
$5 Warrants contain a net-exercise provision. The fair value of the warrants at
the date of issuance was recorded as a discount on the debt and was amortized
over the term of the First Bridge Note.
On January 5, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $1.65 million
(the "Second Bridge Note"). In connection with the issuance of the Second Bridge
Note, the Company also agreed to issue and sell on the earlier of (i) April 30,
2000 and (ii) the closing of the Permanent Financing, five-year warrants to
acquire up to 200,000 shares of Common Stock at an initial exercise price of
$3.00 per share (the "Second Bridge Warrants"). The Second Bridge Warrants
contain a net-exercise provision.
On April 3, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $2.2 million
(the "Third Bridge Note"). No warrants or convertible securities were issued in
connection with the Third Bridge Note. The First Bridge Note, the Second Bridge
Note and the Third Bridge Note are collectively referred to as the "Bridge
Notes". The issuance of the Bridge Notes, the First Bridge Warrants and the
Second Bridge Warrants are collectively referred to as the "Bridge
Transactions".
The Bridge Notes were not convertible into shares of Common Stock and were
paid-in-full (together with accrued interest in the amount of $265,000) at the
closing of the Permanent Financing on April 28, 2000.
Permanent Financing
In order to consummate the Permanent Financing, the Company was required
by the rules of The NASDAQ Stock Market to obtain the approval of a majority of
the Company's stockholders of the terms and conditions of the Permanent
Financing. In addition, the Connecticut Business Corporation Act required that
the Company obtain stockholder approval of (i) an amendment to the Company's
certificate of incorporation (the "Charter Amendment") and (ii) an amendment to
the Company's 1991 Long-Term Incentive Plan (the "Incentive Plan Amendment").
The Charter Amendment and the Incentive Plan Amendment were required by the
terms of the Permanent Financing. The approval of the Company's stockholders of
the terms of the Permanent Financing, the Charter Amendment and the Incentive
Plan Amendment is collectively referred to as "Stockholder Approval".
Coinciding with Stockholder Approval obtained on April 28, 2000, the
Company issued to the Purchasers the Convertible Notes, the Permanent Financing
Shares and the $7 Warrants. The Convertible Notes are convertible into shares of
Common Stock at an initial conversion price of $3.00. The $7 Warrants contain a
net-exercise provision. The fair value of the warrants at the date of issuance
was recorded as a discount on the debt which will be amortized over the term of
the debt.
The Permanent Financing generated aggregate proceeds to the Company of
$17.5 million. After repayment of the Bridge Notes and costs and expenses
associated with the financing, the Company realized net proceeds of
approximately $9.6 million which is available along with existing resources for
general working capital purposes, subject to the terms and conditions of the
Permanent Financing transaction agreements.
7
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NOTE 4 - COMMITMENTS
As of September 30, 2000, the Company had capital expenditure purchase
commitments outstanding of approximately $1,230,000 which primarily represent
purchases for the Company's winged intravenous set production line, computer
equipment and building improvements.
NOTE 5 - SEGMENT FINANCIAL DATA
The Company's operations consist of two worldwide business segments:
Safety Medical Products and Accessories and Joint Venture Design & Development.
The Safety Medical Products and Accessories segment includes revenues and costs
from sales of blood collection needles, needle holders and needle disposal
containers. The Joint Venture Design & Development segment includes revenue and
costs associated with product design and development, product licensing, and the
design, development and construction of machinery and tooling in connection with
joint venture partners.
Distinct reporting by such segments was deemed necessary by management
based on the significance of reported revenues and expenses and the Company's
intention to focus operating resources in both of these areas.
Information with respect to revenue, operating profit or loss and capital
expenditures attributable to each of the Company's business segments are as
follows:
Segment Revenue
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------ ------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Safety Medical Products and Accessories $1,151,000 $1,122,000 $ 921,000 $3,272,000 $3,668,000 $2,602,000
Joint Venture Design & Development 12,000 169,000 2,067,000 209,000 1,370,000 4,267,000
---------- ---------- ---------- ---------- ---------- ----------
Total Consolidated Revenue $1,163,000 $1,291,000 $2,988,000 $3,481,000 $5,038,000 $6,869,000
========== ========== ========== ========== ========== ==========
</TABLE>
Major Customers
There were two domestic distributors of the Company's products, Allegiance
Healthcare and Fisher HealthCare, that exceeded 10% of the Company's Safety
Medical Products and Accessories segment revenue for the periods presented. The
loss of business of any of the foregoing customers could potentially have a
material adverse effect on the business and prospects of the Company. In the
Joint Venture Design & Development segment, Johnson and Johnson Medical, Inc.
("JJM") of Arlington, Texas and TFX Medical ("TFX"), a division of Teleflex
Incorporated, contributed to more than 10% of the revenues for the 1999 and 1998
periods presented. The following table represents the revenue associated with
these major customers by segment:
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<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
TOTAL REVENUE MAJOR CUSTOMERS:
Safety Medical Products and Accessories $ 942,000 $1,029,000 $ 710,000 $2,687,000 $2,847,000 $2,211,000
Joint Venture Design & Development 12,000 68,000 2,067,000 209,000 1,178,000 4,267,000
OTHER DOMESTIC SALES 209,000 173,000 124,000 585,000 484,000 254,000
EXPORT SALES:
Safety Medical Products and Accessories -- 21,000 87,000 -- 529,000 137,000
Joint Venture Design & Development -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- -----------
TOTAL CONSOLIDATED REVENUE $1,163,000 $1,291,000 $2,988,000 $3,481,000 $5,038,000 $6,869,000
========== ========== ========== ========== ========== ==========
</TABLE>
During the periods presented, there were no material intersegment revenues.
Segment Operating Profit
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------ -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Safety Medical Products and Accessories $ 573,000 $ 559,000 $ 280,000 $ 1,610,000 $ 1,593,000 $ 473,000
Joint Venture Design & Development 12,000 116,000 1,128,000 174,000 1,266,000 2,434,000
----------- ----------- ----------- ----------- ----------- -----------
Total Consolidated Operating Profit 585,000 675,000 1,408,000 1,784,000 2,859,000 2,907,000
----------- ----------- ----------- ----------- ----------- -----------
Selling, General and Administrative
Expenses (2,089,000) (1,211,000) (1,049,000) (5,679,000) (3,472,000) (3,480,000)
Other (302,000) (298,000) (147,000) (859,000) (896,000) (260,000)
Financing Expenses (713,000) (212,000) (150,000) (3,545,000) (573,000) (454,000)
----------- ----------- ----------- ----------- ----------- -----------
Net (Loss) Profit ($2,519,000) ($1,046,000) $ 62,000 ($8,299,000) ($2,082,000) ($1,287,000)
=========== =========== =========== =========== =========== ===========
</TABLE>
For the Safety Medical Products and Accessories segment, operating profit
(loss) consists of total revenues less product costs and expenses. In the Joint
Venture Design and Development segment, operating profit consists of total
revenues less certain operating costs and expenses and research and development
expenses.
Segment Capital Expenditures
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ----- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Safety Medical Products and Accessories $1,767,000 $ 146,000 $ -- $2,620,000 $ 250,000 $ 479,000
Joint Venture Design & Development -- -- -- -- -- --
---------- ---------- ----- ---------- ---------- ----------
Total Consolidated Capital Expenditures $1,767,000 $ 146,000 $ -- $2,620,000 $ 250,000 $ 479,000
========== ========== ===== ========== ========== ==========
</TABLE>
There has been no material change in identifiable assets related to
reportable segments since the 1999 Annual Report.
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NOTE 6 - LICENSING AGREEMENTS
On October 23, 1998, the Company entered into an exclusive License
Agreement and Design, Development and Asset Transfer Agreement for a safety
Peripherally Inserted Central Catheter ("PICC") introducer with TFX Medical. The
License Agreement includes certain minimum annual volume requirements and
ongoing royalties on the sale of PICC introducer catheters featuring the
Company's proprietary Punctur-Guard(R) technology. On July 26, 1999, an
agreement was entered into with TFX to modify the License Agreement dated
October 23, 1998. The amended agreement included additional licensing fees and
changes in royalty revenue in exchange for TFX's right to exclusively market to
one of its customers. Under the Design, Development and Asset Transfer
Agreement, the Company would design and develop safety needle assemblies to be
used with the TFX peelable catheter, and would modify existing manufacturing
equipment to be transferred to TFX pursuant to the terms and conditions of the
agreement In the first quarter of 2000, the Company completed its obligations
under the Design, Development and Asset Transfer Agreements, and recognized
licensing fee revenue of $100,000. In the third quarter of 2000, the Company
recognized royalty income from TFX Medical of $12,000 from the sales of the PICC
introducer. This amount was reflected as services revenue in the Statement of
Operations.
NOTE 7 - SUBSEQUENT EVENTS
On November 3, 2000, the Premier group purchasing program awarded the
Company an 18-month purchasing contract for its PUNCTUR-GUARD(R) blood
collection needles, along with the other companies that provide safety devices
used in phlebotomy procedures such as drawing blood from patients for lab
testing. These group purchasing contracts were developed through a special
Premier Breakthroughs Technology process intended to identify new medical
technologies offering the potential for value in clinical efficiency, safety
for patients and workers, and cost-effectiveness across the path of care.
Premier will sponsor a formal member evaluation of the Company's product,
which is set to commence soon after January 1, 2001.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussions set forth in this Management's Discussion and Analysis of
the Results of Operations and Financial Condition and elsewhere herein contain
certain statements which are not historical facts and are considered
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
as amended. Forward-looking statements can be identified by the use of such
forward-looking terminology as "believes," "expects," "may," "will," "should,"
or "anticipates" or negatives thereof or other derivations thereon or comparable
terminology, or discussions of strategy that involves risks and uncertainties.
The Company's actual results could differ materially from those projected in the
forward-looking statements as a result of, among other factors, the Company's
expectation regarding gross profit and operating income, general economic
conditions and growth in the safety medical products industry, competitive
factors and pricing pressures, changes in product mix, product demand,
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risk of dependence on third party suppliers, ability to obtain financing, or to
access capital which may be dependent upon maintaining its NASDAQ listing, of
which there can be no assurances, and other risk factors and uncertainties
detailed in this report, described from time to time in the Company's other
Securities and Exchange Commission filings, or discussed in the Company's press
releases. All forward-looking statements included in this document are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements.
OVERVIEW
The Company's principal focus is the design, development, testing and
evaluation of its blood collection safety needle and accessory products, and the
design and development of the molds, needle assembly machines and production
processes needed for manufacturing the blood collection safety needle as well as
the design and development of new products. Since its inception in September
1987 through September 30, 2000, the Company has incurred cumulative losses
totaling approximately $76,404,000. For the Company to achieve profitability,
continued reductions in manufacturing costs and increases in sales are
necessary, as well as the addition of new product lines. The Company has also
focused its efforts on developing strategic partnerships with major healthcare
companies in order to bring other products to market featuring its patented
internal blunting technology.
In January 2000, the Company entered into a distribution agreement with
Owens & Minor, a major distributor of medical products to hospitals throughout
the United States. Owens & Minor, a Fortune 500 company headquartered in
Richmond, Virginia, is the nation's largest distributor of national brand
medical and surgical supplies. Owens & Minor's distribution centers serve
hospitals, integrated healthcare systems and group purchasing organizations
nationwide. The distribution agreement allows Owens & Minor to purchase and
distribute all of the Bio-Plexus blood collection products.
On February 21, 2000, the Company entered into a distribution agreement
with McKessonHBOC Medical Group of Richmond, Virginia. McKessonHBOC's Supply
Management Business is a leading distributor of medical-surgical supplies to
more than 5,000 hospitals nationwide. The agreement allows McKessonHBOC to
purchase and distribute the Company's products on a non-exclusive basis without
territorial limitations or restrictions. The agreement is in effect for a period
of five years and shall continue automatically in effect for successive terms of
five years each until terminated by either party.
On July 19, 2000, the Company entered into a distribution agreement with
Claflin Company, a distributer of medical and surgical products located in East
Providence, Rhode Island. The agreement permits Claflin to purchase and
distribute all of the Company's blood collection products on a non-exclusive
basis. The agreement has an initial term of two years, and shall be
automatically renewed for successive terms of one year until terminated by
either party.
On September 7, 2000, the Company entered into a distribution agreement
with AmeriSource Medical Supply, a distributer of medical products located in
Knoxville, Tennessee. The agreement permits AmeriSource to purchase and
distribute all of the Company's blood collection products on a non-exclusive
basis. The agreement has an initial term of two years, and shall be
automatically renewed for successive terms of one year until terminated by
either party.
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The Company believes that similar distribution agreements or strategic
partnerships may be possible with one or more major healthcare companies for its
other products. 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 its distribution or strategic partners. The Company believes the overall
benefits and potential for greater market share outweigh the disadvantages that
may result from such arrangements.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
The Company had product sales of $1,151,000 for the three months ended
September 30, 2000 compared to $1,143,000 for the same period in 1999. Product
costs decreased to $578,000 for the three months ended September 30, 2000
compared to $630,000 for the same period in 1999 primarily from lower
manufacturing costs associated with the blood collection needle production line.
Total revenues decreased from $1,291,000 to $1,163,000 due primarily to a
decrease of service revenue for the three months ended September 30, 2000 from
$148,000 in 1999 to $0 for the same period in 2000. The decrease in service
revenue was primarily attributable to the Company's completion of the I.V.
catheter development project for JJM in the first quarter of 1999 and its
completion of the PICC Introducer development project for TFX during the first
quarter of 2000. There was also a corresponding $36,000 decrease in service
costs due to the completion of these projects.
Research and development expenses were $302,000 for the three months ended
September 30, 2000 compared to $248,000 for the same period in 1999. The
increase in these costs resulted primarily from increased research and
development activities associated with the winged intravenous set development
project.
Selling, general and administrative expenses were $2,089,000 for the three
months ended September 30, 2000 compared to $1,211,000 for the same period in
1999. The increase in these costs resulted from increases of approximately
$328,000 in sales and marketing expenses and the hiring of additional personnel,
and approximately $478,000 in general management and administrative expenses due
to costs associated with the hiring of the Company's chief executive officer,
increases in professional fees, insurance expense, and consulting fees.
Financing expenses were $713,000 for the three months ended September 30,
2000 compared to $212,000 for the same period in 1999. The increase in these
costs resulted primarily from an increase of $61,000 of debt discount
amortization in the third quarter of 2000 and an increase of $436,000 in
interest expense, primarily associated with the Permanent Financing debt
obligations.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
The Company had product sales of $3,335,000 for the nine months ended
September 30, 2000 compared to $3,713,000 for the same period in 1999. The
decrease is primarily attributable to decreased sales of safety medical devices
in Europe and reduced shipments domestically as distributors utilized excess
inventories ordered due to Year 2000 concerns. Product costs were $1,668,000 for
the
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nine months ended September 30, 2000 compared to $2,165,000 for the same period
in 1999. The decrease in these costs resulted primarily from lower shipments,
lower manfacturing costs associated with the blood collection needle product
line, and completion of outside development projects.
The Company had revenues from services totaling $46,000 for the nine
months ended September 30, 2000 compared to $1,325,000 for the same period in
1999. The decrease was primarily attributable to the Company's completion of the
I.V. catheter development project for JJM in the first quarter of 1999.
The Company had licensing fee revenue of $100,000 in the first quarter of
2000 which was attributable to the completion of the PICC Introducer development
project for TFX.
Research and development expenses were $859,000 for the nine months ended
September 30, 2000 compared to $846,000 for the same period in 1999. The
increase in these costs resulted primarily from increased research and
development activities associated with the winged intravenous set development
project.
Selling, general and administrative expenses were $5,679,000 for the nine
months ended September 30, 2000 compared to $3,472,000 for the same period in
1999. The increase in these costs was primarily comprised of approximately
$1,206,000 in sales and marketing expenses, and approximately $1,006,000 in
administrative expenses primarily due to costs associated with the hiring of the
Company's chief executive officer, increases in professional fees, insurance
expense and consulting fees.
Financing expenses were $3,545,000 for the nine months ended September 30,
2000, compared to $573,000 for the same period in 1999. The increase in these
costs resulted primarily from $238,000 of debt discount amortization and
interest expense of $2,892,000 from the Bridge Notes and Permanent Financing
debt obligations.
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 and its continued
efforts to develop new products. To date, the Company has financed its
operations primarily through borrowings, the issuance of debt securities, and
the sale of equity securities. Through September 30, 2000, the Company has
received net proceeds of approximately $48,456,000 through borrowings and the
issuance of debt securities and $51,297,000 through the sale of equity
securities.
Net cash used in operating activities for the nine months ended September
30, 2000 totaled $6,170,000 and was primarily due to a net loss for the period
of $8,299,000 and an increase in inventory balances of $1,275,000 due to lower
than expected sales volumes during the period. The cash used in operating
activities was partially offset by the amortization of deferred debt discount of
$2,255,000 included in the net loss due to the recording of the Bridge Notes and
Permanent Financing debt obligations.
Net cash used in investing activities amounted to $2,720,000 for the nine
month period ended September 30, 2000 primarily due to additions to fixed assets
totaling $2,620,000 consisting
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substantially of capitalized costs associated with the construction of its
winged intravenous set production line.
Net cash provided by financing activities amounted to $13,650,000 for the
nine months ended September 30, 2000. Contributing to the provision of net cash
from financing activities were transactions associated with the Permanent
Financing totaling $14,500,000, including proceeds from the sale of stock of
$750,000, and proceeds from the issuance of long-term debt and notes payable of
$13,750,000. The provision of net cash was partially offset by the repayment of
debt totalling $893,000 and the payment of deferred financing costs associated
with the Permanent Financing totalling $885,000.
The Company's primary cash requirement for the remainder of 2000 will be
for working capital to launch new products, to repay outstanding debt, and
continue research and development on its winged intravenous set and other new
products. The Company is considering the development of a strategic partnership
with one or more healthcare companies to assist in bringing additional products
to market featuring the Company's proprietary internal blunting technology.
In order to satisfy its current and anticipated need for capital, the
Company consummated the Permanent Financing on April 28, 2000 after receiving
Stockholder Approval. Upon the closing of the Permanent Financing, the Company
issued to the Purchasers the Convertible Notes, the Permanent Financing Shares
and the $7 Warrants.
The Permanent Financing generated aggregate proceeds to the Company of
$17.5 million. After repayment of the Bridge Notes and costs and expenses
associated with the Permanent Financing, the Company realized net proceeds of
approximately $9.6 million, which will be available along with existing
resources, for general working capital purposes, subject to the terms and
conditions of the Permanent Financing transaction documents.
The Company believes that its existing working capital should be
sufficient to meet its capital and liquidity requirements through the end of
2000. However, the Company's working capital and working capital requirements
are affected by numerous factors and there is no assurance that such factors
will not have a negative impact on the Company's liquidity. Principal among
these factors are the success of its product commercialization and marketing
efforts and the efforts of its strategic partners and distributors in
commercializing and selling the Company's products and products based on the
Company's technology, the competitive advantages and pricing of the Company's
products, and access to favorable financing and capital markets that can provide
the Company with the resources, when necessary, to fund its strategic
priorities.
The Company continues to explore additional financing alternatives and
potential strategic relationships which may provide the Company with additional
sources of working capital. There can be no assurances that the Company will be
able to secure such additional sources of working capital. Failure to raise
needed capital may have a material adverse impact on the Company's operations,
development plans and cash flows.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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During the three months ended September 30, 2000, the Debenture Holders
converted a total of $163,540 of the outstanding principal balance of 6%
Debentures into 86,218 shares of Common Stock. At September 30, 2000 all
outstanding 6% Debentures had been converted into shares of Common Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
---------- ----------- ----------------
<S> <C> <C>
3.1 Certificate of Incorporation of the Incorporated by reference to Exhibit 3.1 to the
Company, as amended Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 (File No. 0-24128).
3.2 Bylaws of the Company, as amended Incorporated by reference to Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K filed on
April 13, 1998 (File No. 0-24128)
3.3 Certificate of Amendment of Certificate of Incorporated by reference to Exhibit 3.3 to the
Incorporation, dated April 28, 2000. Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000 filed on May 15, 2000
(File No. 0-24128)
10.47 Amended 1991 Long-term Incentive Plan Incorporated by reference to Exhibit 99.2 to the
Registrant's Registration Statement on Form S-8
filed on October 27, 2000 (File No. 333-48826)
27 Financial Data Schedule Filed with this Report.
</TABLE>
(b) No reports on Form 8-K were filed during the quarter ended September 30,
2000.
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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)
November 14, 2000 /s/ JOHN S. METZ
------------------ -------------------------------------------
(Date) John S. Metz
President and Chief Executive Officer
November 14, 2000 /s/ KIMBERLEY A. CADY
------------------ -------------------------------------------
(Date) Kimberley A. Cady
Vice President of Finance and Chief
Financial Officer
16
