<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 JUNE 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)
Connecticut 06-1211921
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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.
Shares Outstanding
Class of Common Stock as of August 4, 2000
--------------------- --------------------
Common Stock, no par value 14,882,320
<PAGE> 2
BIO-PLEXUS, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Condensed Balance Sheets at June 30, 2000 (unaudited) and
December 31, 1999 1
Condensed Statements of Operations for the three months
ended June 30, 2000 (unaudited) and 1999 2
Condensed Statements of Operations for the six months
ended June 30, 2000 (unaudited) and 1999 3
Condensed Statements of Cash Flows for the six months
ended June 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 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 16
</TABLE>
<PAGE> 3
BIO-PLEXUS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
(UNAUDITED)
-----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,672,000 $ 867,000
Accounts receivable 559,000 908,000
Inventories:
Raw materials 1,083,000 621,000
Work-in-process 1,502,000 474,000
Finished goods 1,053,000 1,167,000
---------- ---------
3,638,000 2,262,000
---------- ---------
Other current assets 110,000 173,000
---------- ---------
Total current assets 13,979,000 4,210,000
---------- ---------
Fixed assets, net 4,989,000 4,384,000
Deferred debt financing expenses 1,147,000 465,000
Patents, net of amortization 376,000 335,000
Other assets 253,000 253,000
---------- ---------
$20,744,000 $ 9,647,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 526,000 $ 899,000
Note payable -- 1,340,000
Accounts payable and accrued expenses 953,000 786,000
Accrued interest payable 9,000 55,000
Accrued vacation 271,000 202,000
Other accrued employee costs 292,000 226,000
---------- ---------
Total current liabilities 2,051,000 3,508,000
---------- ---------
Long-term debt, net 16,382,000 2,262,000
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, 40,000,000 authorized,
14,851,168 and 14,083,807 shares issued and outstanding 76,045,000 71,833,000
Accumulated deficit (73,883,000) (68,105,000)
----------- -----------
Total shareholders' equity 2,162,000 3,728,000
----------- -----------
$20,744,000 $ 9,647,000
============ ============
</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 JUNE 30,
2000 1999
------------ ------------
<S> <C> <C>
Revenue:
Product $ 776,000 $ 1,401,000
Services -- 32,000
------------ ------------
Total revenue 776,000 1,433,000
------------ ------------
Operating costs and expenses:
Product 342,000 705,000
Services -- 11,000
Research and development 235,000 294,000
Selling, general and administrative 2,015,000 1,157,000
------------ ------------
Total operating costs and expenses 2,592,000 2,167,000
------------ ------------
Operating loss (1,816,000) (734,000)
Financing expenses:
Amortization of deferred debt financing 129,000 24,000
Interest expense 1,099,000 297,000
Other income (103,000) (16,000)
------------ ------------
Total financing expenses 1,125,000 305,000
------------ ------------
Net loss $(2,941,000) $(1,039,000)
============ ============
Net loss per share of common stock:
Basic and diluted $ (0.20) $ (0.08)
============ ============
Weighted average common shares outstanding (Note 2) 14,711,509 13,505,302
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
2
<PAGE> 5
BIO-PLEXUS, INC
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
2000 1999
---- ----
<S> <C> <C>
Revenue:
Product $ 2,184,000 $ 2,570,000
Services 34,000 1,177,000
Licensing fees (Note 6) 100,000 --
---------- ----------
Total revenue 2,318,000 3,747,000
============ ============
Operating costs and expenses:
Product 1,090,000 1,535,000
Services 29,000 28,000
Research and development 557,000 598,000
Selling, general and administrative 3,590,000 2,261,000
---------- ----------
Total operating costs and expenses 5,266,000 4,422,000
============ ============
Operating loss (2,948,000) (675,000)
Financing expenses:
Amortization of deferred debt financing 189,000 26,000
Interest expense 2,782,000 385,000
Other income (139,000) (50,000)
---------- ----------
Total financing expenses 2,832,000 361,000
============ ============
Net loss $(5,780,000) $(1,036,000)
============ ============
Net loss per share of common stock:
Basic and diluted $ (0.40) $ (0.08)
============ ============
Weighted average common shares outstanding (Note 2) 14,463,595 13,397,928
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
3
<PAGE> 6
BIO-PLEXUS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(5,780,000) $(1,036,000)
Adjustments to reconcile net loss to cash used
by operating activities:
Depreciation and amortization 261,000 282,000
Amortization of deferred debt financing expenses 189,000 26,000
Amortization of debt discount 2,095,000 193,000
Decrease (increase) in assets:
Accounts receivable 349,000 (159,000)
Inventories (1,376,000) (134,000)
Other current assets 63,000 --
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 157,000 (67,000)
Accrued interest payable (46,000) 11,000
Accrued vacation and other accrued employee costs 135,000 (31,000)
Accrued product replacement costs -- (222,000)
Decrease in deferred revenue -- (875,000)
Other 28,000 90,000
------------ ------------
Net cash used in operating activities (3,925,000) (1,922,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets (853,000) (104,000)
Long-term investments (Note 3) -- 627,000
Cost of patents (54,000) (44,000)
------------ ------------
Net cash (used in) provided by investing activities (907,000) 479,000
------------ ------------
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 87,000
Accretion of interest payable 336,000
Payments of deferred financing costs (871,000) --
Increase (Decrease) in notes payable (Note 3) 3,850,000 (250,000)
Proceeds from issuance of long-term debt 9,900,000 2,154,000
Repayments of long-term debt (Note 3) (411,000) (1,350,000)
------------ ------------
Net cash provided by financing activities 13,637,000 1,741,000
------------ ------------
Net increase (decrease) in cash and cash equivalents 8,805,000 298,000
Cash and cash equivalents, beginning of
period 867,000 535,000
------------ ------------
Cash and cash equivalents, end of period $ 9,672,000 $ 833,000
------------ ------------
Supplemental cash flow disclosures:
Cash payments of interest $ 397,000 $ 181,000
Cash payments of income taxes $ -- $ 4,000
Surrender of debt upon conversion to equity $ 1,169,000 $ --
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE> 7
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 June 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
<PAGE> 8
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 are 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 may 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
June 30, 2000, the Debenture Holders had converted a total of $2,336,000 of the
outstanding principal balance of the 6% Debentures into 794,515 shares of Common
Stock. The Company and the Debenture Holders have 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. As of August 4, 2000, such warrant has not
been exercised.
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
6
<PAGE> 9
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 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
7
<PAGE> 10
for general working capital purposes, subject to the terms and conditions of the
Permanent Financing transaction agreements.
NOTE 4 - COMMITMENTS
As of June 30, 2000, the Company had capital expenditure purchase
commitments outstanding of approximately $1,670,000 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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 1998 2000 1999 1998
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Safety Medical Products and $ 776,000 $1,401,000 $ 790,000 $2,121,000 $2,546,000 $1,681,000
Accessories
Joint Venture Design & Development -- 32,000 1,549,000 197,000 1,201,000 2,200,000
------------------------------------------------------------------------
Total Consolidated Revenue $ 776,000 $1,433,000 $2,339,000 $2,318,000 $3,747,000 $3,881,000
========================================================================
</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 June 30 Six,Months Ended June 30,
-------------------------- -------------------------
2000 1999 1998 2000 1999 1998
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL REVENUE MAJOR CUSTOMERS:
Safety Medical Products and
Accessories $ 579,000 $1,111,000 $ 679,000 $1,745,000 $1,819,000 $1,501,000
Joint Venture Design & Development -- 15,000 1,549,000 197,000 1,110,000 2,200,000
OTHER DOMESTIC SALES 197,000 88,000 61,000 376,000 310,000 130,000
EXPORT SALES:
Safety Medical Products and -- 219,000 50,000 -- 508,000 50,000
Accessories
Joint Venture Design & Development -- -- -- -- -- --
--------------------------------------------------------------------------------------
TOTAL CONSOLIDATED REVENUE $ 776,000 $1,433,000 $2,339,000 $2,318,000 $3,747,000 $3,881,000
=======================================================================================
</TABLE>
During the periods presented, there were no material intersegment revenues.
Segment Operating Profit
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 1998 2000 1999 1998
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Safety Medical Products and Accessories $ 434,000 $ 697,000 $ 132,000 $ 1,037,000 $ 1,034,000 $ 193,000
Joint Venture Design & Development -- 21,000 1,056,000 162,000 846,000 1,307,000
---------------------------------------------------------------------------------------
Total Consolidated Operating Profit 434,000 718,000 1,188,000 1,199,000 1,880,000 1,500,000
---------------------------------------------------------------------------------------
Selling, General and Administrative (2,015,000) (1,157,000) (1,188,000) (3,590,000) (2,261,000) (2,431,000)
Expenses
Other (235,000) (295,000) -- (557,000) (294,000) (114,000)
Financing Expenses (1,125,000) (305,000) (143,000) (2,832,000) (361,000) (303,000)
---------------------------------------------------------------------------------------
Net Loss ($2,941,000) ($1,039,000) ($ 143,000) ($5,780,000) ($1,036,000) ($1,348,000)
=======================================================================================
</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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 1998 2000 1999 1998
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Safety Medical Products and
Accessories $598,000 $104,000 $386,000 $853,000 $104,000 $479,000
Joint Venture Design & Development - - - - - -
--------------------------------------------------------------------------
Total Consolidated Capital
Expenditures $598,000 $104,000 $386,000 $853,000 $104,000 $479,000
==========================================================================
</TABLE>
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There has been no material change in identifiable assets related to
reportable segments since the 1999 Annual Report.
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.
NOTE 7 - SUBSEQUENT EVENTS
From July 1, 2000 through August 2, 2000, the Debenture Holders converted
$49,000 of outstanding principal balance of 6% Debentures into 22,542 shares of
Common Stock.
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, risk of
dependence on third party suppliers, ability to obtain financing, 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
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<PAGE> 13
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 June 30, 2000, the Company has incurred cumulative losses totaling
approximately $73,883,000. For the Company to achieve profitability, 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. The Company'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.
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 JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
The Company had product sales of $776,000 for the three months ended
June 30, 2000 compared to $1,401,000 for the same period in 1999. The decrease
was primarily attributable to decreased sales of safety medical devices in
Europe and reduced shipments domestically as distributors utilized excess
inventories ordered in 1999 due to Year 2000 concerns and a sales promotion in
the first quarter of 2000. Lower sales volume also reduced product costs to
$342,000 for the three months ended June 30, 2000, compared to $705,000 for the
same period in 1999.
Total revenues also decreased due to the absence of service revenue for
the three months ended June 30, 2000 compared to $32,000 for the same period in
1999. The decrease was primarily attributable to completion of the I.V. catheter
development project for JJM in the first quarter of 1999 and completion of the
PICC Introducer development project for TFX during the first quarter of 2000.
There was also an $11,000 decrease in service costs due to the completion of
these projects.
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<PAGE> 14
Research and development expenses were $235,000 for the three months ended
June 30, 2000 compared to $294,000 for the same period in 1999. The decrease in
these costs resulted primarily from the capitalization of research and
development labor expense for the winged intravenous set production line during
the machine construction phase of the development project.
Selling, general and administrative expenses were $2,015,000 for the three
months ended June 30, 2000 compared to $1,157,000 for the same period in 1999.
The increase in these costs resulted from increases of approximately $508,000 in
sales and marketing expenses and the hiring of additional personnel, and
approximately $350,000 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 $1,125,000 for the three months ended June 30,
2000 compared to $305,000 for the same period in 1999. The increase in these
costs resulted primarily from $486,000 of debt discount amortization in the
second quarter of 2000 and interest expense of $391,000 from the Bridge Notes
and Permanent Financing debt obligations.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
The Company had product sales of $2,184,000 for the six months ended June
30, 2000 compared to $2,570,000 for the same period in 1999. The decrease was
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 $1,090,000 for the six
months ended June 30, 2000 compared to $1,535,000 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 $34,000 for the six months
ended June 30, 2000 compared to $1,177,000 for the same period in 1999. The
decrease was primarily attributable to the completion of the I.V. catheter
development project for JJM in the first quarter of 1999 and completion of the
PICC Introducer development project for TFX in the first quarter of 2000.
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 $557,000 for the six months ended
June 30, 2000 compared to $598,000 for the same period in 1999. The decrease in
these costs resulted primarily from the capitalization of labor for the winged
intravenous set production line during the machine construction phase of the
development project.
Selling, general and administrative expenses were $3,590,000 for the six
months ended June 30, 2000 compared to $2,261,000 for the same period in 1999.
The increase in these costs resulted from increases of approximately $878,000 in
sales and marketing expenses, and approximately $370,000 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 $2,832,000 for the six months ended June 30, 2000,
compared to $361,000 for the same period in 1999. The increase in these costs
resulted primarily from $1,729,000
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of debt discount amortization and interest expense of $554,000 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 and the sale of equity securities.
Through June 30, 2000, the Company has received net proceeds of approximately
$48,456,000 through borrowings and the sale of debt securities and $51,297,000
through the sale of equity securities.
Net cash used in operating activities for the six months ended June 30,
2000 totaled $3,925,000 and was primarily due to a net loss for the period of
$5,780,000 and an increase in inventory balances of $1,376,000 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 $2,095,000
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 $907,000 for the six
month period ended June 30, 2000 primarily due to additions to fixed assets
totaling $853,000 consisting substantially of capitalized costs associated with
the construction of its winged intravenous set production line.
Net cash provided by financing activities amounted to $13,637,000 for the
six months ended June 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 $411,000 and the payment of deferred financing costs associated with
the Permanent Financing.
The Company's primary cash requirement for the remainder of 2000 will be
for working capital to expand its operations for its current product lines as
well as 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.
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<PAGE> 16
The Company is continuing 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
During the three months ended June 30, 2000, the Debenture Holders
converted a total of $528,000 of the outstanding principal balance of 6%
Debentures into 193,768 shares of Common Stock.
On January 5, 2000, the Company issued to the Purchasers the Second Bridge
Note and in connection with such issuance, the Company agreed to issue and sell
on the earlier of (i) April 30, 2000 and (ii) the closing of the Permanent
Financing, the Second Bridge Warrants. The Second Bridge Warrants contain a
net-exercise provision and were issued at the closing of the Permanent Financing
on April 28, 2000 at $3.00 per share.
In connection with the closing of the Permanent Financing, the Company
issued (i) the Permanent Financing Shares at a price of $3.00 per share and (ii)
the $7 Warrants.
ITEM 5. OTHER INFORMATION
On June 28, 2000, at a meeting of the Board of Directors, Mr. Scott
Tepper was appointed to the Company's Board of Directors. Mr. Tepper was
appointed to the Board of Directors as the appointee of Appaloosa (as
contemplated by terms of the Permanent Financing). Mr. Tepper has been a
consultant to the Company since September 1999 and will continue to provide
consulting services while serving on the Board of Directors. In September 1999,
Mr. Tepper and the Company executed a formal consulting agreement. This
agreement has been orally amended and Mr. Tepper is currently being paid a
monthly fee of $4,166 for consulting services. The agreement, as amended, has a
term of one year and contains standard confidentiality provisions and provides
that Mr. Tepper is an independent contractor of the Company. The Company and
Mr. Tepper are in the process of preparing a formal written agreement with
respect to the consulting services to be provided by Mr. Tepper.
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)
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
-+
<S> <C> <C>
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)
10.44 Employment Agreement dated April 26, 2000 Incorporated by reference to Exhibit 3.3 to the
between the Company and John S. Metz Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000 filed on May 15, 2000
(File No. 0-24128)
10.45 Security Agreement dated April 28, 2000 Incorporated by reference to Exhibit 3.3 to the
between the Company and Appaloosa Registrant's Quarterly Report on Form 10-Q for the
Investment Limited Partnership I, L.P quater ended March 31, 2000 filed on May 15, 2000
(File No. 0-24128)
10.46 Form of Convertible Note Incorporated by reference to Exhibit 3.3 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000 filed on May 15, 2000
(File No. 0-24128)
27 Financial Data Schedule Filed with this Report.
</TABLE>
(b) Reports on Form 8-K
A report on Form 8-K was filed on April 27, 2000 reporting that the
Company named John S. Metz as its President and Chief Executive Officer
effective April 28, 2000.
Reports on Form 8-K were filed on May 11, 2000 and May 12, 2000
reporting that the Company, at a special meeting of stockholders held on Friday,
April 28, 2000, obtained stockholder approval for the Permanent Financing, an
amendment to the Company's Certificate of Incorporation increasing the number of
authorized shares of Common Stock, an amendment to the Company's 1991 Long-Term
Incentive Plan, and reporting that following the stockholders meeting, the
Company and Appaloosa consummated the Permanent Financing.
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<PAGE> 18
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)
/s/ John S. Metz
August 10, 2000 ------------------------------------
(Date) John S. Metz
President and Chief Executive Officer
/s/ Kimberley A. Cady
August 10, 2000 ------------------------------------
(Date) Kimberley A. Cady
Vice President of Finance and Chief
Financial Officer
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