-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FbloArblFyRrRSepac23TKXk8mTscUnhg46xorHcUf7y2Mu/m7VkguPASftCfS9N v8fM7nR/k68LDLqN7ZwWhQ== 0001045969-98-000388.txt : 19980504 0001045969-98-000388.hdr.sgml : 19980504 ACCESSION NUMBER: 0001045969-98-000388 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980501 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDI JECT CORP /MN/ CENTRAL INDEX KEY: 0001016169 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 411350192 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20945 FILM NUMBER: 98607983 BUSINESS ADDRESS: STREET 1: 161 CHESHIRE LANE STREET 2: SUITE 100 CITY: MINNEAPOLIS STATE: MN ZIP: 55441 BUSINESS PHONE: 6124757700 MAIL ADDRESS: STREET 1: 161 CHESHIRE LANE STREET 2: SUITE 100 CITY: MINNEAPOLIS STATE: MN ZIP: 55441 10-Q 1 FORM 10-Q ====================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 Commission File Number 0-20945 MEDI-JECT CORPORATION 161 Cheshire Lane, Suite 100 Minneapolis, Minnesota 55441 (612) 475-7700 A Minnesota Corporation IRS Employer ID No. 41-1350192 ---------------------------------- 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 [ ] The number of shares outstanding of the Registrant's Common Stock, $.01 par value, as of April 22, 1998 was 7,094,438. ================================== 1 MEDI-JECT CORPORATION INDEX PAGE ---- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited) Balance Sheets, as of December 31, 1997 and March 31, 1998.................................................. 3 Statements of Operations for the three months ended March 31, 1997 and 1998......................................... 4 Statements of Cash Flows for the three months ended March 31, 1997 and 1998......................................... 5 Notes to Financial Statements................................... 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 6 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K................................ 10 SIGNATURES.............................................................. 12 2 MEDI-JECT CORPORATION BALANCE SHEETS (UNAUDITED)
DECEMBER 31, MARCH 31, 1997 1998 ------------ ------------- ASSETS Current Assets: Cash and cash equivalents.............................. $ 3,745,851 $ 3,724,801 Marketable securities.................................. 3,537,483 3,075,216 Accounts receivable, less allowances for doubtful accounts of $22,284..................... 760,948 378,088 Inventories............................................ 397,072 443,760 Prepaid expenses and other assets...................... 71,495 97,304 ----------- ------------- 8,512,849 7,719,169 ----------- ------------- Equipment, furniture and fixtures, net................... 1,165,213 1,344,675 ----------- ------------- Patent rights, net....................................... 369,406 355,495 ----------- ------------- $10,047,468 $ 9,419,339 =========== ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable....................................... $ 321,758 $ 461,182 Accrued expenses and other liabilities................. 379,776 356,457 Deferred revenue....................................... 0 106,847 Capital lease obligations - current maturities......... 7,083 2,113 ----------- ------------- 708,617 926,599 ----------- ------------- Capital leases, less current maturities.................. 1,721 1,166 Shareholders' equity: Common Stock: $0.01 par; authorized 17,000,000 shares: 7,071,589 issued and outstanding at December 31, 1997 and March 31, 1998................. 70,716 70,716 Additional paid-in capital............................. 23,778,648 23,778,648 Accumulated deficit.................................... (14,512,234) (15,357,790) ----------- ------------- 9,337,130 8,491,574 ----------- ------------- $10,047,468 $ 9,419,339 =========== =============
See accompanying notes to financial statements. 3 MEDI-JECT CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED)
QUARTER ENDED ------------------------------ MARCH 31, MARCH 31, 1997 1998 ------------- ------------- Revenues: Sales............................................... $ 406,081 $ 609,195 Licensing & product development..................... 564,944 303,778 ----------- ----------- 971,025 912,973 ----------- ----------- Operating Expenses: Cost of sales....................................... 270,048 467,823 Research and development............................ 645,290 592,486 General and administrative.......................... 407,830 544,812 Sales and marketing................................. 366,362 246,843 ----------- ----------- 1,689,530 1,851,964 ----------- ----------- Net operating loss..................................... (718,505) (938,991) ----------- ----------- Other income (expense): Interest and other income........................... 139,995 94,593 Interest and other expense.......................... (3,780) (1,158) ----------- ----------- 136,215 93,435 ----------- ----------- Net loss............................................... $ (582,290) $ (845,556) =========== =========== Basic and diluted net loss per common share............ $ (.08) $ (.12) Basic and diluted weighted average common shares outstanding......................................... 6,947,245 7,071,589
See accompanying Notes to Financial Statements 4 MEDI-JECT CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED)
QUARTER ENDED ---------------------------- MARCH 31, MARCH 31, 1997 1998 -------------- ---------- Cash flows from operating activities: Net loss............................................ $ (582,290) $ (845,556) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization....................... 56,356 102,677 Interest on marketable debt securities.............. (35,676) (48,288) Changes in operating assets and liabilities: Accounts receivable............................... (318,898) 382,860 Inventories....................................... (34,837) (46,688) Prepaid expenses and other assets................. (117,054) (25,809) Accounts payable.................................. 150,681 139,424 Accrued liabilities............................... 148,733 (23,319) Deferred revenue.................................. 25,000 106,847 ------------ ---------- Net cash used in operating activities................... (707,985) (257,852) ------------ ---------- Cash flows from investing activities: Purchases of marketable securities.................. (2,463,953) (1,519,715) Proceeds from sales of marketable securities........ -- 2,030,271 Purchases of equipment, furniture and fixtures...... (67,021) (268,228) Purchases of patent rights.......................... (31,380) -- ------------ ---------- Net cash provided by (used in) investing activities..... (2,562,354) 242,328 ------------ ---------- Cash flows from financing activities: Principal payments on capital lease obligations..... (11,033) (5,526) Proceeds from issuance of common stock.............. 46,279 -- Principal payments on notes payable................. (31,239) -- Offering costs...................................... (5,691) -- ------------ ---------- Net cash used in financing activities................... (1,684) (5,526) ------------ ---------- Net increase (decrease) in cash and cash equivalents.... (3,272,023) (21,050) Cash and cash equivalents: Beginning of period................................. 9,575,240 3,745,851 ------------- --------- End of period....................................... $6,303,217 $3,724,801 ============= ==========
See accompanying Notes to Financial Statements. 5 MEDI-JECT CORPORATION NOTES TO FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying financial statements and notes should be read in conjunction with the Company's 1997 audited financial statements and notes thereto. 2. INTERIM FINANCIAL STATEMENTS Operating results for the three-month period ended March 31, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. 3. Inventories consist of the following: DECEMBER 31, 1997 MARCH 31, 1998 ----------------- -------------- Raw Material $196,579 $196,127 Work in-process 78,220 107,925 Finished goods 122,273 139,708 ------------- ------------- $397,072 $443,760 ============= ============= ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended March 31, 1997 and 1998 Total revenues for the three months ended March 31, 1997 and 1998 were $971,025 and $912,973, respectively. This represents a decrease of $58,052 or 6%. Sales of injector products and services increased by $203,114 or 50% in the three months ended March 31, 1998, compared to the three months ended March 31, 1997. This increase resulted primarily from an increase in the number of injectors sold (629 and 1,143 in the first quarters of 1997 and 1998, respectively). The increase in sales of injectors in the quarterly periods is primarily attributable to the shipment of significant orders to three distributors in the first quarter of 1998 that did not occur in the 1997 period. 6 Licensing and product development fee income decreased by $261,166 or 46% in the three months ended March 31, 1998 as compared to the prior year period. This decrease is related to the completion in December 1997 of a two-year development funding contract with Becton Dickinson and Company. The Company expects that licensing and product development fee income will fluctuate on a quarter-to-quarter basis, depending on a number of factors, including the timing of the execution of new development and licensing agreements and the timing, nature and size of fee payments to be made under existing and new agreements. In addition, since the Company does not, in general, recognize project-based fee income until related development work has been performed, quarterly results will fluctuate with the timing of the Company's research and development efforts. Cost of sales in the three months ended March 31, 1997 and 1998 were $270,048 and $467,823, respectively. This represents an increase of $197,775, or 73%. The increase in cost of sales is primarily attributable to an increase in the amount of product sold. In addition, manufacturing expenses were higher as a result of additional engineering personnel, higher rent and increased depreciation expense, much of which relates to planning for higher volumes in future periods. Research and development expenses totaled $645,290 and $592,486 in the three months ended March 31, 1997 and 1998, respectively. This represents a decrease of $52,804, or 8%, which is primarily attributable to a transition of the development program to an internally staffed program in 1998 compared to a program conducted largely through contracted engineering services in 1997. General and administrative expenses totaled $407,830 and $544,812 in the three months ended March 31, 1997 and 1998, respectively. These figures reflect an increase of $136,982, or 34%. The largest component of this increase is attributable to the development of a Regulatory and Quality Assurance department. These expenses totaled $66,644 in the first quarter of 1998 compared to $8,891 in the same period of 1997. The balance of the increase relates to moderate increases in facilities, personnel, depreciation, insurance and legal expenses. Sales and marketing expenses totaled $366,362 and $246,843 in the three months ended March 31, 1997 and 1998, respectively. These figures reflect a year-to-year decrease of $119,519, or 33%. This decrease relates primarily to a scaleback of expenses relating to a sales and marketing program in the U.S. insulin market announced by the Company in October 1997. Net other income (expense) decreased by $42,780 relative to the prior year three-month period ending March 31. This decrease is attributable to lower average cash balances as the proceeds from the initial public offering completed in October 1996 are used to fund current operations. LIQUIDITY AND CAPITAL RESOURCES Cash, cash equivalents and marketable securities totaled $7,283,334 on December 31, 1997 compared to $6,800,017 on March 31, 1998. This decrease results primarily from an operating loss of $845,556, offset in part by a $382,860 reduction in accounts receivable. 7 The Company's long term capital requirements will depend on numerous factors, including the status of the Company's collaborative arrangements, the progress of the Company's research and development programs and the receipt of revenues from sales of the Company's products. The Company believes that cash on hand, interest expected to be earned thereon and anticipated revenues, will meet its needs through the next twelve months. In order to meet its capital needs beyond this period, the Company may be required to raise additional capital through public or private offerings, including equity offerings. 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities (Use of proceeds from public offering) The Company's initial Registration Statement on Form S-1, file no. 333-6661, was declared effective by the Securities and Exchange Commission on October 10, 1996. The offering of the Company's Common Stock covered by such Registration Statement commenced on October 2, 1996. Rodman & Renshaw and R.J. Steichen & Company acted as the managing underwriters ("the Representatives") for the offering. A total of 2,750,000 shares of Common Stock, including 330,000 shares subject to the Representatives over-allotment option and 220,000 shares subject to the warrants issued to the Representatives were registered. In addition, warrants to purchase 220,000 shares of Common Stock issued to the Representatives were also registered. The aggregate offering price of the registered Common Stock and warrants was $15,367,220. Of this amount, $12,100,000 representing 2,200,000 shares of Common Stock and warrants to purchase 220,000 shares of Common Stock have been sold. The underwriter's over-allotment option has expired and these shares were not sold. The Representative's warrant has not yet been exercised and consequently the offering has not yet terminated. The amount of expenses incurred for the Company's account in connection with the issuance and distribution of the securities registered are as follows: Underwriting discounts and commissions:.............. $ 907,500 Finder's fees........................................ 0 Expenses paid to or for the underwriters:............ 12,786 Other expenses:...................................... 549,833 ---------- Total expenses............................. $1,470,119 ========== All such expenses were paid directly or indirectly to others. The net offering proceeds to the Company after deducting expenses were $10,629,881. 9 The amount of net offering proceeds to the Company used for the following purposes is as follows: Purchase and installation of machinery and equip....... $ 1,267,913 Repayment of indebtedness.............................. 184,167 Working capital........................................ 108,774 Temporary investments, marketable securities........... 3,075,216 Other : -market development expenses......... 2,066,101 -product development expenses........ 3,927,710 ----------- Total............................... $10,629,881 =========== All such payments were made directly or indirectly to others. The use of proceeds contained herein does not represent a material change in the use of proceeds described in the prospectus Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Securities Holders. None Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 3.1 Second Amended and Restated Articles of Incorporation of the Company.(a) 3.2 Second Amended and Restated Bylaws of the Company.(a) 4.1 Form of Certificate for Common Stock.(a) 4.2 Stock Warrant, dated January 25, 1996, issued to Becton Dickinson and Company.(a) 4.3 Stock Option, dated January 25, 1996, issued to Becton Dickinson and Company.(a) 4.4 Reserved. 10 4.5 Reserved. 4.6 Preferred Stock, Option and Warrant Purchase Agreement, dated January 25, 1996, between the Company and Becton Dickinson and Company (filed herewith as Exhibit 10.7).(a) 10.3 Reserved. 10.4 Reserved. 10.5 Reserved. 10.6 Reserved. 10.7 Preferred Stock, Option and Warrant Purchase Agreement, dated January 25, 1996, between the Company and Becton Dickinson and Company.(a) 10.8* Employment Agreement, dated as of January 1, 1997, between the Company and Franklin Pass, MD. (c) 10.9* Employment Agreement, dated as of January 3, 1995, between the Company and Mark Derus.(a) 10.10* Employment Agreement, dated as of January 3, 1995, between the Company and Todd Leonard.(a) 10.11* Employment Agreement, dated as of January 3, 1995, between the Company and Peter Sadowski.(a) 10.12* 1993 Stock Option Plan.(a) 10.13* Form of incentive stock option agreement for use with 1993 Stock Option Plan.(a) 10.14* Form of non-qualified stock option agreement for use with 1993 Stock Option Plan.(a) 10.15* 1996 Stock Option Plan, with form of stock option agreement.(a) 10.20+ Development and License Agreement between Becton Dickinson and Company and the Company, effective January 1, 1996.(a) 10.21 Office-Warehouse lease with Carlson Real Estate Company, dated February 11, 1997.(b) 10.22* 1998 Stock Option Plan for Non-Employee Directors. (d) 10.23* Letter consulting agreement dated February 20, 1998 between the Company and Geoffrey W. Guy. (d) 11 27 Financial Data Schedule 99 Cautionary Statement (b) * Indicates management contract or compensatory plan or arrangement. + Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential portions of Exhibit 10.20 were deleted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment, which was subsequently granted by the Securities and Exchange Commission. (a) Incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 333-6661), filed with the Securities and Exchange Commission on October 1, 1996. (b) Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1996. (c) Incorporated by reference to the Company's Form 10-Q for the quarter ended March 31, 1997. (d) Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1997. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1998. SIGNATURES Pursuant to the requirements of the securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MEDI-JECT CORPORATION April 30, 1998 /s/ Franklin Pass - ----------------------------- ----------------------------------------- Date Franklin Pass, MD, Chairman/CEO April 30, 1998 /s/ Mark S. Derus - ----------------------------- ----------------------------------------- Date Mark S. Derus, Vice President Finance/CFO (principal financial & accounting officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED AND UNAUDITED INTERNAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS 3-MOS DEC-31-1997 DEC-31-1998 JAN-01-1997 JAN-01-1998 DEC-31-1997 MAR-31-1998 3745851 3724801 3537483 3075216 783232 400372 22284 22284 397072 443760 8512849 7719169 1967113 2235341 801900 890666 10047468 9419339 708617 926599 1721 1166 0 0 0 0 70716 70716 9266414 8420858 10047468 9419339 1686588 609195 4222318 1007566 1221051 467823 5935894 1384141 0 0 0 0 37140 1158 (2971767) (845556) 0 0 (2971767) (845556) 0 0 0 0 0 0 (2971767) (845556) (.42) (.12) (.42) (.12) INCLUDES INTEREST INCOME OF $505,295 FOR PE 12-31-97 AND $94,593 FOR PE 3-31-98.
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