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Biopsys Medical Inc – ‘10-Q’ for 9/30/96

As of:  Tuesday, 11/12/96   ·   For:  9/30/96   ·   Accession #:  912057-96-25361   ·   File #:  0-28016

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/12/96  Biopsys Medical Inc               10-Q        9/30/96    3:25K                                    Merrill Corp/FA

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      12     47K 
 2: EX-11.1     Statement re: Computation of Earnings Per Share        1      5K 
 3: EX-27       Exhibit 27 FDS                                         2      8K 


10-Q   —   Quarterly Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
3Item 1. Financial Statements
7Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
10Item 1. Legal Proceedings
"Item 2. Changes in Securities
"Item 3. Defaults in Senior Securities
"Item 4. Submission of Matters to A Vote of Security Holders
"Item 5. Other Information
"Item 6. Exhibits and Reports on Form 8-K
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UNITED STATES 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, 1996 ----------------------------- 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 0-28016 Number Biopsys Medical, Inc. -------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 33-0578012 ----------------------------------- -------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3 Morgan, Irvine CA 92618 ---------------------------------------------------------------------------- (address of principal executive offices) (Zip Code) 714-460-7800 ---------------------------------------------------------------------------- (Registrant's telephone number, including area code) ---------------------------------------------------------------------------- (Former name, former address and 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 ---- ---- As of October 25, 1996, 9,716,880 shares of Common Stock were issued and outstanding.
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BIOPSYS MEDICAL, INC. FORM 10-Q For the Quarter Ended September 30, 1996 INDEX [Download Table] Page ---- Facing Sheet 1 Index 2 Part I. Financial Information Item 1. a) Balance sheets at September 30, 1996 and June 30, 1996 3 b) Statements of operations for the three-month periods ended September 30, 1996 and September 30, 1995 4 c) Statements of cash flows for the three-month periods ended September 30, 1996 and September 30, 1995 5 d) Notes to financial statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other Information 10 Signature 11 Index to Exhibits 12 2
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PART 1: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BIOPSYS MEDICAL, INC. BALANCE SHEETS ASSETS September 30, June 30, -------------------------------- 1996 1996 ------------- ------------ (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 8,906,000 $ 12,122,000 Short-term investments 6,419,000 9,405,000 Accounts receivable, net 1,473,000 985,000 Inventories 2,160,000 1,581,000 Prepaid expenses and other current assets 256,000 141,000 ----------- ------------ Total current assets 19,214,000 24,234,000 LONG-TERM INVESTMENTS 20,427,000 15,860,000 PROPERTY AND EQUIPMENT, net 850,000 776,000 OTHER ASSETS 38,000 44,000 ----------- ------------ $40,529,000 $ 40,914,000 ----------- ------------ ----------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABLITIES: Accounts payable $ 778,000 $ 1,270,000 Accrued expenses 694,000 561,000 ----------- ------------ Total current liabilities 1,472,000 1,831,000 COMMITMENTS - - STOCKHOLDERS' EQUITY Common Stock, $.001 par value; 50,000,000 shares authorized; 9,716,880 shares issued and outstanding 10,000 10,000 Additional paid-in capital 45,083,000 45,092,000 Accumulated deficit (6,753,000) (6,615,000) Deferred stock option compensation 717,000 596,000 ----------- ------------ Net stockholders' equity 39,057,000 39,083,000 ----------- ------------ $40,529,000 $ 40,914,000 ----------- ------------ ----------- ------------ See accompanying notes to financial statements. 3
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BIOPSYS MEDICAL, INC. STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended September 30, -------------------------------- 1996 1995 ------------- ------------ Net Sales $ 2,401,000 $ 224,000 Cost of Sales 1,106,000 153,000 ------------- ----------- Gross Profit 1,295,000 71,000 Operating Expenses: Research and development 485,000 236,000 Sales and marketing 854,000 272,000 General and administrative 563,000 230,000 ------------- ----------- Total operating expenses 1,902,000 738,000 ------------- ----------- Interest income 469,000 64,000 Interest expense - (13,000) ------------- ----------- Net loss $ (138,000) $ (616,000) ------------- ----------- ------------- ----------- Net loss per share $ (0.01) $ (0.08) ------------- ----------- ------------- ----------- Weighted average shares outstanding 10,274,000 7,593,000 See accompanying notes to financial statements. 4
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BIOPSYS MEDICAL, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended September 30, -------------------------------- 1996 1995 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (138,000) $ (616,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 53,000 24,000 Deferred Compensation 121,000 - Changes in assets and liabilities: Accounts receivable (488,000) (84,000) Prepaid expenses and other current assets (115,000) 10,000 Inventories (579,000) (279,000) Accounts payable and accrued expenses (359,000) 154,000 ------------- ----------- Net cash used in operating activities (1,505,000) (791,000) CASH FLOWS FROM INVESTING ACTIVITIES: Acquistion of property and equipment (121,000) (126,000) Short-term investment maturities 2,986,000 - Long-term investment purchases (4,567,000) (999,000) ------------- ----------- Net cash used in investing activities (1,702,000) (1,125,000) CASH FLOWS FROM FINANCING ACTIVITIES: Stock issuance expenses (9,000) - Net proceeds from issuance of Series C preferred stock - 6,495,000 ------------- ----------- Net cash provided (used) by financing activities (9,000) 6,495,000 ------------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,216,000) 4,579,000 CASH AND CASH EQUIVALENTS, beginning of period 12,122,000 13,000 ------------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 8,906,000 $ 4,592,000 ------------- ----------- ------------- ----------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes $ - $ - ------------- ----------- ------------- ----------- Cash paid for interest $ - $ - ------------- ----------- ------------- ----------- See accompanying notes to financial statements. 5
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BIOPSYS MEDICAL, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying balance sheet as of September 30, 1996 and the statements of operations and cash flows for the three months ended September 30, 1996 and 1995 have been prepared by Biopsys Medical, Inc.( the "Company"), without audit. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations, and cash flows at September 30, 1996, and for all periods presented, have been made. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures required by Generally Accepted Accounting Principles for complete financial statements have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). This financial data should be reviewed in conjunction with the audited financial statements and notes thereto included in the Company's Form 10-K for the year ended June 30, 1996. The results of operations for the three months ended September 30, 1996 may not necessarily be indicative of the operating results for the full 1997 fiscal year. 2. COMPUTATION OF NET LOSS PER SHARE Net loss per share has been computed by dividing the net loss by the weighted average number of common and common equivalent shares outstanding during the period. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin Topic 4D, stock options granted during the twelve months prior to the date of the initial filing of the Company's Form S-1 Registration Statement have been included in the calculation of common equivalent shares using the treasury stock method, as if they were outstanding as of the beginning of each period presented. 6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the unaudited Financial Statements and related Notes thereto included in Part I - Item 1 of this Form 10-Q and with the Financial Statements and related Notes thereto included in its June 30, 1996 Annual Report on Form 10-K. This Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual events or results may differ materially from those projected in the forward-looking statements as a result of the factors described herein and in the documents incorporated herein by reference. Such forward-looking statements include, but are not limited to, statements concerning the risk of breast cancer; breast cancer screening; improvements in ultrasound; business strategy; development and introduction of new products; research and development; marketing, sales and distribution; manufacturing; competition; third-party reimbursement; government regulation; and operating and capital requirements. OVERVIEW Since its inception in July 1993, the Company has been engaged in the design, development, clinical testing and, more recently, the manufacture and sale of the Mammotome Biopsy System. The Company received clearance of its 510(k) premarket notification for the Mammotome Biopsy System from the FDA in April 1995, began limited sales to selected customers in May 1995 and commercially introduced the Mammotome Biopsy System in August 1995. For the quarter ended September 30, 1996, net sales of the Mammotome Biopsy System totaled $2,401,000. As of September 30, 1996, the Mammotome Biopsy System had been used in over 23,000 breast biopsy procedures at approximately 317 sites in the United States. The Company has a limited history of operations and has experienced significant operating losses since inception. As of September 30, 1996 the Company had an accumulated deficit of approximately $6.8 million. Results of operations may fluctuate significantly from quarter to quarter and will depend upon numerous factors, including the extent to which the Company's products continue to gain market acceptance, actions relating to regulatory and reimbursement matters, progress of clinical trials, introduction of alternative means for less-invasive breast biopsy by competitors of the Company, pricing of competitive products and the cost and effect of promotional discounts and marketing programs. There can be no assurance that the Company will successfully commercialize the Mammotome Biopsy System or achieve significant revenues or profitability. Furthermore, there can be no assurance that revenues and profitability, if achieved, will be sustained on a quarterly or annual basis, or at all. The Mammotome procedure requires the use of an imaging modality during the procedure. Currently, the only imaging modality with which the Mammotome Biopsy System is compatible is a prone stereotactic x-ray imaging table. Two companies, Fischer and Lorad, have sold substantially all of the approximately 1,000 prone stereotactic imaging tables installed in the United States. The Company has established non-exclusive marketing arrangements with Fischer and Lorad under which Fischer and Lorad can purchase Mammotome drive units from the Company at a discount from list price and can then bundle Mammotome drive units with stereotactic imaging tables for sale to customers. However, Mammotome probes and other disposable products related to the Mammotome Biopsy System are purchased by the customer directly from the Company, not from Fischer or Lorad. There can be no assurance that Fischer and Lorad will purchase or promote the Mammotome drive unit or that they will continue their marketing arrangements with the Company. Lorad also has an arrangement with United States Surgical Corporation ("USSC"), a competitor of the Company, under which Lorad manufactures stereotactic tables for USSC on a private label basis. In addition, Fischer and Lorad may have additional arrangements to market other competing breast biopsy systems. There can be no assurance that these or other imaging equipment manufacturers will not redesign the stereotactic tables so that they would not be compatible with the Mammotome Biopsy System. The failure or loss of such marketing arrangements could have a material adverse affect on the Company's business, financial condition and results of operations. 7
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The Company has limited experience in manufacturing the Mammotome Biopsy System. If the Company is unable to manufacture an adequate number of drive units or probes on a cost-effective and timely basis, it would have a material adverse effect on the Company's ability to realize significant product revenues for at least the next several quarters. The Company currently contracts with third parties to manufacture certain components of the Mammotome Biopsy System. Final assembly, sterilization and packaging of the Mammotome Biopsy System is currently performed by the Company in-house and by contract manufacturers. The Company has limited capacity to manufacture the Mammotome Biopsy System and will be required to increase its in-house capability to manufacture more of the system's components. There can be no assurance that the Company will be able to attract, train and retain the required personnel or will be able to increase its manufacturing capability in a timely manner, or at all. There can be no assurance that reliable, high-volume manufacturing can be established or maintained at commercially reasonable costs on a timely basis, or at all. If the Company is unable to increase its in-house manufacturing capability, the Company may need to obtain alternative manufacturing facilities or establish additional contract manufacturing for its products. Delays associated with, or the inability to establish, such additional capacity could have a material adverse affect on the Company's business, financial condition and results of operations. The Company purchases components used in the Mammotome Biopsy System from various suppliers. A limited number of parts and components are currently available only from single sources. The Company is in the process of qualifying additional sources for these components. There can be no assurance that the Company will be successful in qualifying any additional sources on a timely basis, or at all. Medical device companies frequently experience difficulties in obtaining required quantities of components necessary to manufacture their products. For example, the industry has experienced shortages of the type of stainless steel used in the Mammotome probes, and there can be no assurance that such shortages will not occur in the future. If the Company or any of its contract manufacturers encounter future manufacturing difficulties, including problems involving production yields, quality control and assurance, shortages of components or shortages of qualified personnel, it could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, prior to international commercialization, the Company will be required to attain and maintain compliance with GMP requirements and ISO 9001 standards. Failure to either attain or maintain compliance with the applicable regulatory requirements of various regulatory agencies would have a material adverse effect on the Company's business, financial condition and results of operations. RESULTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 1996 AND 1995 Net sales for the quarter ended September 30, 1996 were $2,401,000 compared to $224,000 during the quarter ended September 30, 1995. The Company commenced commercial shipments of its Mammotome Biopsy System in August 1995. Net sales for the quarter ended September 30, 1996 reflect sales of 97 Mammotome drive units and approximately 11,000 disposable probes. During the quarter ended September 30, 1996, cost of sales totaled $1,106,000, or 46% of net sales compared to $153,000 or 68% of net sales in the prior year. In addition to direct material and subassembly costs associated with products sold, cost of sales also reflect increases in manufacturing personnel and other overhead costs associated with the commencement of manufacturing and assembly operations, engineering and support functions, and materials procurement and handling functions. Research and development expenses increased 106% to $485,000 during the quarter September 30, 1996 from $236,000 during the quarter ended September 30, 1995. This increase was primarily due to research and development expenses associated with the continued development of the 11-gauge probe and the MicroMark Clip during the quarter ended September 30, 1996. Selling general and administrative expenses increased to $1,417,000 during the quarter ended September 30, 1996 from $503,000 during the quarter ended September 30, 1995. This increase was primarily due to the hiring of sales personnel, increased marketing activities and increases in administrative personnel and related costs to support commercial sales of the Mammotome Biopsy System. 8
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Interest income increased to $469,000 during the quarter ended September 30, 1996 from $51,000, net during the quarter ended September 30, 1995. The increase was due to higher cash balances and short-term and long-term investments associated with completion of Company's initial public offering in May 1996. LIQUIDITY AND CAPITAL RESOURCES In May 1996, the Company completed an initial public offering of 2,587,500 shares of common stock (including the underwriters overallotment of 337,500 shares) at $15.00 per share. Net proceeds to the Company were approximately $35.3 million. From inception through April 1996, the Company financed its operations primarily through the private placement of equity securities totaling $9.7 million. These equity securities were converted to common stock in conjunction with the initial public offering. As of September 30, 1996, cash, cash equivalents, short-term and long-term investments totaled $35.7 million. The Company's cash used in operating activities increased to $1.5 million for the quarter ended September 30, 1996 from $.8 million for the quarter ended September 30, 1995, primarily resulting from increases in accounts receivable and inventories related to the commercial introduction of the Mammotome Biopsy System. The Company's principal source of liquidity at September 30, 1996 consisted of cash, cash equivalents, short term and long term investments of $35.7 million. The Company has adopted investment guidelines which restrict the types and quality of investments the Company is authorized to enter into. At September 30, 1996, the Company had invested approximately $.4 million in money market funds, approximately $16.1 million in commercial paper and corporate bonds rated a minimum of A1/P1, and approximately $19.2 million in U.S. government treasury notes or federal agencies. At September 30, 1996, the Company had no long term debt. The Company has never had and currently does not have commitments for credit facilities, such as revolving credit agreements or lines of credit, that could provide additional working capital. The Company believes that the current cash balances and short-term and long-term investments will be sufficient to meet the Company's operating and capital requirements through fiscal 1997. The Company's future liquidity and capital requirements will depend on numerous factors, including the extent to which the Company's Mammotome Biopsy System gains market acceptance, the timing of regulatory actions regarding the Company's potential future products, the costs and timing of expansion of sales, marketing and manufacturing activities, obtaining and enforcing patents important to the Company's business, results of clinical trials and competition. There can be no assurance that the Company will not be required to raise additional capital, or that such capital will be available on acceptable terms, or at all. 9
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PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3 DEFAULTS IN SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Page 11.1 Computation of net loss per share (see note 2 to Financial Information in Part I of this Form 10-Q) 13 27 Financial Data Schedule 14 (b) Reports on Form 8-K None 10
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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. BIOPSYS MEDICAL, INC. By: /s/ ---------------------------------- Steven J. Naber Vice President of Finance and Chief Financial Officer (Duly Authorized and Principal Financial and Accounting Officer) Date: November 11, 1996 11
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BIOPSYS MEDICAL, INC. INDEX TO EXHIBITS EXHIBIT SEQUENTIALLY NUMBER DESCRIPTION NUMBERED PAGE ------- ----------- ------------- 11.1 Statement Re: Computation of Net loss Per Share 13 27 Financial data schedule 14 12

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘10-Q’ Filing    Date First  Last      Other Filings
11/14/96
Filed on:11/12/96
11/11/9611
10/25/961
For Period End:9/30/9619
6/30/966710-K
9/30/9569
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