<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: 0-22401
BIONX IMPLANTS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 22-3198032
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1777 Sentry Parkway West
Gwynedd Hall, Suite 400
Blue Bell, Pennsylvania 19422
(Address of principal executive office, including zip code)
215-643-5000
(Registrant's telephone number, including area code)
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.
At October 31, 2000, there were 10,779,713 shares of Common Stock, par value
$.0019 per share, outstanding.
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BIONX IMPLANTS, INC. AND SUBSIDIARIES
INDEX
Page
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 1999
and September 30, 2000 (Unaudited) 3
Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 1999 and 2000 (Unaudited) 4
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1999 and 2000 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
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BIONX IMPLANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
(In thousands, except share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,186 $ 6,481
Inventory, net (note 2) 7,774 7,492
Trade accounts receivable, net of allowance
of $441 and $387 as of December 31, 1999,
and September 30, 2000, respectively 3,540 2,394
Grants receivable 137 69
Related party receivable 321 387
Prepaid expenses and other current assets,
net of allowance of $223 914 349
Deferred tax asset 798 798
-------- --------
Total current assets 16,670 17,970
Investments 87 87
Plant and equipment, net 2,723 2,206
Goodwill and intangibles, net 3,941 3,844
-------- --------
Total assets 23,421 24,107
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable 2,940 1,828
Accrued and other current liabilities 2,173 1,663
-------- --------
Total current liabilities 5,113 3,491
Long-term debt 33 159
Subordinated debt -- 145
Deferred tax liability 281 281
-------- --------
Total Liabilities 5,427 4,076
Stockholders' equity
Preferred stock, par value $0.001 per share,
8,000,000 shares authorized, -- --
None issued and outstanding
Common stock, par value $0.0019 per share,
31,600,000 shares authorized, 9,199,085 and
10,785,942 shares issued and outstanding as of
December 31, 1999 and September 30, 2000, respectively 17 21
Treasury stock, 26,500 and 6,229 shares at December 31, 1999
and September 30, 2000, respectively (161) (38)
Additional paid-in capital 35,892 39,829
Accumulated deficit (16,729) (18,756)
Accumulated other comprehensive income (1,025) (1,025)
-------- --------
Total stockholders' equity 17,994 20,031
Total liabilities and stockholders' equity $ 23,421 $ 24,107
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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BIONX IMPLANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 2000 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 4,802 $ 4,111 $ 14,917 $ 13,213
License and grant revenues 90 143 256 583
-------- -------- -------- --------
Total revenues 4,892 4,254 15,173 13,796
Cost of goods sold 1,032 1,370 3,834 4,781
Special charge related to Instrument Inventory -- -- 929 --
-------- -------- -------- --------
Gross profit 3,860 2,884 10,410 9,015
Selling, general and administrative 3,781 2,758 12,779 8,575
Research and development 778 538 2,050 1,893
Patent & litigation expense 633 184 1,726 412
Severance Charges -- -- 275 --
-------- -------- -------- --------
Total operating expenses 5,192 3,480 16,830 10,880
Operating loss (1,332) (596) (6,420) (1,865)
Other income and (expenses):
Interest income 46 99 219 248
Foreign exchange gain (loss) (1) (370) 490 (410)
-------- -------- -------- --------
Total other income and (expenses) 45 (271) 709 (162)
Loss before provision for income taxes (1,287) (867) (5,711) (2,027)
Provision for income taxes 50 -- 50 --
-------- -------- -------- --------
Net Loss $ (1,337) $ (867) $ (5,761) $ (2,027)
======== ======== ======== ========
Loss per share:
Basic $ (0.15) $ (0.08) $ (0.65) $ (0.19)
Diluted (0.15) (0.08) (0.65) (0.19)
Shares used in computing Loss per share:
Basic 8,895 10,780 8,895 10,408
Diluted 8,895 10,780 8,895 10,408
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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BIONX IMPLANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1999 2000
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (5,761) $ (2,027)
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Depreciation and amortization 648 935
Consignment amortization 1,309 1,048
(Increase) in inventory, net (4,954) (766)
Decrease in accounts receivable, net 849 1,146
Decrease in grant receivable 44 68
(Increase) in related parties (58) (66)
Decrease in prepaid expenses and other current assets 244 565
(Increase) in deferred tax asset (355) --
(Decrease) in trade accounts payable (1,362) (1,112)
(Decrease) in current income tax liability (183) --
(Decrease) in accrued and other current liabilities (157) (510)
-------- --------
(3,975) 1,308
Net cash (used in) operating activities (9,736) (719)
Cash flow from investing activities:
Purchases of plant and equipment, intangibles (1,348) (29)
Purchases of computer software and intangibles (114) (292)
-------- --------
Net cash (used in) investing activities (1,462) (321)
Cash flow from financing activities:
(Repayment) / increase of long-term debt (56) 271
Rights Offering, net -- 3,954
Proceeds from exercise of employee stock options -- 81
Proceeds from treasury stock to employee benefit plan -- 29
Purchase of treasury shares (33) --
-------- --------
Net cash (used in) provided by financing activities (89) 4,335
Net (decrease) increase in cash and cash equivalents (11,287) 3,295
Cash and cash equivalents at beginning of period 14,213 3,186
Cash and cash equivalents at end of period $ 2,926 $ 6,481
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1 $ 8
Cash paid for taxes $ 383 $ --
</TABLE>
See accompanying notes to unaudited consolidated financial statements
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BIONX IMPLANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying financial statements have been prepared by Bionx Implants, Inc.
(the "Company") and are unaudited. Certain amounts in 1999 have been
reclassified to conform with current presentation. In the opinion of the
Company's management, all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the Company's consolidated financial
position as of September 30, 2000 and the Company's consolidated results of
operations and cash flows for the nine months ended September 30, 1999 and 2000,
have been made. Certain information and footnote disclosures required under
generally accepted accounting principles have been condensed or omitted from the
consolidated financial statements and notes thereto presented herein pursuant to
the rules and regulations of the SEC. The consolidated financial statements and
notes thereto presented herein should be read in conjunction with the Company's
audited consolidated financial statements for the year ended December 31, 1999
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999 filed with the SEC. The results of operations and
the cash flows for the nine months ended September 30, 2000 are not necessarily
indicative of the results to be expected for any other interim period or the
entire fiscal year.
2. Inventory
Inventory consists of the following components as of December 31, 1999 and
September 30, 2000 (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 September 30, 2000
<S> <C> <C>
Raw materials $ 1,121 $ 952
Finished goods - Implants 2,844 2,577
Instruments 4,505 4,180
Instruments on consignment 3,100 3,362
-------- --------
11,570 11,071
Less:
Inventory reserve for obsolete and excess
instruments and implants (2,701) (1,786)
Accumulated amortization
- consigned instruments (1,095) (1,793)
-------- --------
$ 7,774 $ 7,492
======== ========
</TABLE>
The Company amortizes the cost of instrumentation inventory consigned to dealers
and distributors.
3. Net Loss Per Share
Basic losses per share are computed using the weighted average number of shares
of common stock outstanding during the period. Diluted losses per share are
computed using the weighted average number of common and dilutive potential
common shares outstanding during the period. Potential common shares consist of
stock options and warrants using the treasury stock method. These options and
warrants have been excluded from the diluted losses per share calculation as
their effect would be antidilutive at September 30, 1999 and 2000.
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The following table sets forth the calculation of the total number of shares
used in the computation of net loss per common share for the three and nine
months ended September 30, 1999 and 2000 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 2000
------ ------
<S> <C> <C>
Shares used in computing basic 8,895 10,780
Loss per share
Incremental shares from assumed -- --
Exercise of dilutive options and
Warrants ______ ______
Shares used in computing diluted 8,895 10,780
Loss per share
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 2000
------ ------
<S> <C> <C>
Shares used in computing basic 8,895 10,408
Loss per share
Incremental shares from assumed -- --
Exercise of dilutive options and
Warrants ______ ______
Shares used in computing diluted 8,895 10,408
Loss per share
</TABLE>
4. Capital Stock
In the first quarter of 2000 the Company completed a rights offering under
which the Company received proceeds of $4 million.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Statements regarding future performance in this Quarterly Report on Form 10-Q
constitute forward-looking statements under the Private Securities Litigation
Reform Act of 1995 ("Forward looking Statements"). The Company does not assume
the obligation to update any Forward-Looking Statement. The Company's actual
results could differ materially from those anticipated by such Forward-Looking
Statements as a result of certain factors, including those set forth in Exhibit
99.1 to the Company's Annual Report on Form 10-K for the year ended December 31,
1999.
The Company was founded in 1984 to develop certain resorbable polymers for
orthopaedic uses. The Company has incurred substantial operating losses since
its inception and, as of September 30, 2000, had an accumulated deficit of
approximately $18.8 million. Such losses have resulted to a large extent from
expenses associated with the write off and reserve of impaired inventory, the
development and patenting of the Company's Self-Reinforcing technologies and
resorbable implant designs, preclinical and clinical studies, preparation of
submissions to the FDA and foreign regulatory agencies, the development of
sales, marketing and distribution channels, the write-off of acquired in-process
research and development or foreign currency translation adjustments, patent
litigation expenses and the development of the Company's manufacturing
capabilities. After recording profitable results for a number of quarters, the
Company has again recorded losses in recent periods, including a loss of
approximately $12.5 million in 1999 and $2.0 million for the nine months ended
September 30, 2000. Although the Company's revenues grew significantly in the
second half of 1996 and during 1997 and 1998, there was no revenue growth during
1999 or during the first nine months of 2000; indeed, revenues for the nine
months ended September 30, 2000 were $1.4 million less than the comparable
period in 1999. No assurance can be given that revenues will grow in the future
or that revenues will exceed expenses in the future.
During the third quarter of 1999, the Company began to implement initiatives and
refocus its business in an attempt to improve its profitability and operations
performance. Four new products were introduced. The loss from operations was
reduced from $2,028,000 in the second quarter of 1999 to $699,000 in the third
quarter and $335,000 in the fourth quarter ended December 31, 1999. The
Company's cash and cash equivalents improved from $2.9 million at September 30,
1999 to $3.2 million at December 31, 1999, representing the improvements made in
cash flow management and our continued efforts to achieve a positive cash flow.
During 2000 cash and cash equivalents increased to $6.5 million. See the section
on " Liquidity and Capital Resources".
During the nine months ended September 30, 2000, the Company incurred a loss of
$2.0 million. Excluding special charges related to inventory of $0.9 million
during the nine months ended September 30, 1999, this loss was $2.8 million less
than the loss incurred in the nine months ended September 30, 1999 as a result
of improvements in operations that the Company made.
No assurances can be given that the Company's initiatives will result in
profitable operations in the future.
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The Company typically sells, consigns or provides free of charge to hospitals
implant grade, stainless steel surgical instruments for use with each of its
Self-Reinforced, resorbable products. For financial statement purposes, revenues
from the sale of instrumentation systems are included within product sales and
costs associated with such systems are included within cost of goods sold. The
Company began expensing instruments during the fourth quarter of 1999 as they
are placed in domestic hospitals for use by the surgeon. In the case of product
consigned to distributors and dealers, the Company amortizes the cost of the
instrumentation over a three-year period as cost of goods sold.
The Company sells its products through managed networks of independent sales
agents, distributors and dealers. In the U.S., the Company handles all invoicing
functions directly and pays commissions to its sales agents or representatives.
Outside the U.S., the Company sells its products directly to distributors and
dealers at discounts that vary by product and by market. Accordingly, the
Company's U.S. sales result in higher gross margins than international sales.
Outside of the orthopedic market, the Company may seek to establish licensing or
distribution agreements with strategic partners to develop certain products and
to market and distribute products that the Company elects not to distribute
through its managed networks of independent sales agents, distributors and
dealers. No assurance can be given that the Company will be able to enter into
license arrangements on satisfactory terms.
The Company has entered into agreements pursuant to which the Company is
obligated to pay royalties based on net sales of certain of the Company's
products, including the Meniscus Arrow. To the extent that sales of the Meniscus
Arrow products and other licensed products increase in future periods, the
Company's license obligations are expected to increase.
The Company invoices more than 85% of its consolidated revenues in US Dollars.
Approximately 70% of the expenses incurred by the Company are typically
denominated in US Dollars. The remaining portion of revenues and expenses are
denominated in European currencies, predominantly Finnish Markka. Foreign
exchange transaction gains and losses can vary significantly from period to
period.
The Company's operating losses have resulted in net operating loss carryforwards
of approximately $10 million for Federal, foreign and state income tax reporting
purposes as of September 30, 2000. Because tax laws limit the time during which
these carryforwards may be applied against future taxes, the Company may not be
able to take full advantage of these carryforwards for income tax purposes.
Furthermore, income earned by a foreign subsidiary may not be offset against
operating losses of U.S. entities. The statutory tax rates applicable to the
Company and its foreign subsidiaries vary substantially. Tax rates have
fluctuated in the past and may do so in the future.
The Company's results of operations have fluctuated in the past on an annual and
quarterly basis and may fluctuate significantly from period to period in the
future, depending on many factors, many of which are outside of the Company's
control. Such factors include the timing of government approvals, the medical
community's acceptance of the Company's products, the success of competitive
products, the ability of the Company to enter into strategic alliances with
corporate partners, expenses associated with patent matters, the results of
regulatory inspections and the timing of expenses related to product launches.
Results of Operations
Product sales. The Company's product sales decreased by 14.4% from $4.8 million
during the quarter ended September 30, 1999 to $4.1 million during the quarter
ended September 30, 2000 and by 11.4% from $14.9 million during the nine months
ended September 30, 1999 to $13.2 million during the nine months ended September
30, 2000. Consolidated revenues for the Company are comprised of three specific
product categories: Sports Medicine (which includes the Meniscus Arrow),
Orthopedic Trauma and Craniofacial. In order to stimulate sales and introduce
innovative new products to physicians, the Company has added resources,
including physician training programs and field sales business development
managers, to the Sports Medicine sales effort, and formed an Orthopedic Trauma
sales and marketing team.
Consolidated sales of Sport Medicine products during the three months ended
September 30, 1999 and 2000 were $2.8 million for each quarter, and were $9.3
million and $8.8 million, respectively, during the nine months ended September
30, 1999 and 2000. Sports Medicine products represented 68% and 67% of sales
during the three and nine months ended September 30, 2000, respectively, and 58%
and 62% of sales during the three and nine months ended September 30, 1999,
respectively. Due in part to increased non-meniscus arrow new product sales by
the Company and an emphasis on sales and marketing initiatives for these new
products, during the nine months ended September 30, 2000, Meniscus Arrow sales
declined to 82% of the Company's Sports Medicine revenues, as compared with 90%
during the nine months ended September 30, 1999. The overall decline in Sports
Medicine revenues during the nine month period ended September 30, 2000 is
attributable to competitive pressures on distributors and a slight reduction in
the number of arrows used per procedure, offset by the aforementioned new
product sales.
Consolidated sales of Orthopedic Trauma products during the three months ended
September 30, 1999 and 2000 were $1.1 million and $0.8 million, respectively,
and were $3.1 million and $2.8 million, respectively, during the nine months
ended September 30, 1999 and 2000. The Company attributes these declines to the
reduced sales and marketing focus on these products during the early portion of
2000. The Company has, more recently, shifted resources to include additional
sales and marketing personnel in this area by forming a dedicated Orthopedic
Trauma team in the US focused on sales, marketing and also directing product
development activities to develop further new products that satisfy surgeon
needs.
Consolidated sales of Craniofacial products during the three months ended
September 30, 1999 and 2000, were $0.4 million and $0.3 million, respectively,
and were $1.5 million and $0.9 million, respectively, during the nine months
ended September 30, 1999 and 2000. These decreases were largely due to the
Company's decision to discontinue a direct selling effort and shift selling
efforts to a distributor network. The Company is engaged in evaluating and
securing partnerships with major distributors and firms involved with
Craniofacial selling worldwide.
Grant and License revenues. Grant and license revenues during the three months
ended September 30, 1999 and 2000 were $90,000 and $143,000, respectively, and
were $256,000 and $583,000, respectively, during the nine months ended September
30, 1999 and 2000. This revenue is generated primarily from grants obtained from
a Finnish government research organization which funds certain research and
development projects.
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Gross profit. The Company's gross profit declined from $3.9 million during the
three months ended September 30, 1999 to $2.9 million during the three months
ended September 30, 2000. The Company's gross profit declined from $10.4 million
during the nine months ended September 30, 1999 to $9.0 million during the nine
months ended September 30, 2000. The gross profit margin declined from 79% to
68% from the third quarter of 1999 to the third quarter of 2000 and declined
from 69% to 65% from the nine months ended September 30, 1999 to the nine months
ended September 30, 2000. The Company attributes a significant portion of the
gross profit declines to a dedication of certain management and support
personnel to manufacturing functions. The impact of this item was $.3 million
and $1.0 million in the three and nine months ended September 30, 2000,
respectively.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased by 26% from $3.8 million in the third quarter
of 1999 to $2.8 million in the third quarter of 2000 and by 33% from $12.8
million during the first nine months of 1999 to $8.6 million during the nine
months ended September 30, 2000. These declines primarily reflect the charges
incurred by the Company during the third quarter of 1999 as part of management's
initiatives to refocus its business and reallocate critical resources. In
addition, as noted above, the Company rededicated certain personnel from
marketing to manufacturing functions during 2000.
Patent and legal / litigation expense. Patent and legal / litigation expense
decreased substantially during 2000; the Company incurred $633,000 of such
expenses during the third quarter of 1999, as compared to only $184,000 during
the third quarter of 2000, and $412,000 for the nine months ended September 30,
2000, as compared to $1,700,000 for the nine months ended September 30, 1999.
The Company believes that the current status of the proceedings and negotiations
does not require the level of legal assistance that was previously required when
these matters were first initiated.
Research and development. Research and development expenses totaled $778,000 or
16% of sales for the third quarter of 1999, but decreased to $538,000 or 13% of
sales for the same period of 2000. For the first nine months of 1999, research
and development expenses totaled $2.1 million or 13.7% of sales, as compared
with $1.9 million or 14.3% of sales during the nine months ended September 30,
2000. The reduction of research spending primarily reflects lower development
costs at third parties conducting collaborative studies in new products and
technologies offset by increased internal development programs.
Income taxes. The Company recorded no tax provision for the periods reported
herein, due to operating losses for all such periods.
Other income and expense. Included in this line item is $330,000 of expense for
the three and nine months ended September 30, 2000 related to foreign exchange
translation adjustments associated with the Company's adjustments under FAS 52,
Foreign Currency Translation. There were no similar entries included in the
results for the same periods of 1999. The U.S. dollar is the functional currency
for the Company's foreign subsidiaries.
Net loss. The Company reported a net loss of $1.3 million and $0.9 million for
the three months ended September 30, 1999 and 2000, respectively, and net losses
of $5.8 million and $2.0 million, respectively, for the nine months ended
September 30, 1999 and 2000. Excluding the special charges related to instrument
inventory during the second quarter of 1999, net loss decreased by $.5 million
for the three months ended September 30, 2000, and $2.8 million for the nine
months ended September 30, 2000, as compared to the same periods of 1999.
Liquidity and Capital Resources
The Company has relied primarily upon external (private and public) sources of
equity to fund operations and development.
At December 31, 1999 and September 30, 2000, cash and cash equivalents totaled
$3.2 million and $6.5 million, respectively. The increase in cash and cash
equivalents of approximately $3.3 million is primarily attributable to the
Company's Rights Offering of approximately $4.0 million during the first quarter
of 2000. Absent said increase, cash and cash equivalents declined by $0.7
million, primarily as a result of investments in intellectual property.
At December 31, 1999 and September 30, 2000, the Company had net working capital
totaling $11.6 million and $14.5 million, respectively.
The Company's liquidity is dependent primarily upon its ability to improve
operating results and thereby generate adequate cash flow from operations.
Management has taken several steps designed to improve future financial results
and reduce the amount of cash used by operations, including (i) developing a
management restructuring plan to add critical resources to areas having the
greatest impact in sales growth, (ii) consolidating sales efforts to improve
sales efficiencies, increase market coverage and reduce selling costs, (iii)
refocusing research and development investments on new product introductions,
(iv) consolidating and reducing inventory levels, (v) increasing sales and
marketing efforts outside the U.S., and (vi) where possible, reducing other
operating expenses. However, there can be no assurance that these steps will be
successful. The Company's operations may not provide sufficient internally
generated cash flows to meet the Company's projected requirements. The Company's
ability to continue to finance its operations will depend on its ability to
achieve profitability by improving sales and margins, its ability to reduce cash
outflows and, if necessary, its ability to obtain other sources of funding
sufficient to support the Company's operations. No assurances can be given that
such funding will be available on satisfactory terms or at all.
To the extent that funds generated from the Company's operations, together with
its existing capital resources, and the net interest earned thereon, are
insufficient to meet current or planned operating requirements, the Company will
be required to obtain additional funds through equity or debt financing,
strategic alliances with corporate partners and others, or through other
sources. The terms of any further equity financing may be dilutive to
stockholders and the terms of any debt financing may contain restrictive
covenants, which limit the Company's ability to pursue certain courses of
action. The Company does not have any committed sources of additional financing
beyond that described above, and there can be no assurance that additional
funding, if necessary, will be available on acceptable terms, if at all.
Principal stockholders of the Company who previously provided funding to the
Company and provided guarantees to sources of credit have indicated that they do
not intend to continue furnishing such assistance. If adequate funds are not
available, the Company may be required to delay, scale-back or eliminate certain
aspects of its operations or attempt to
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obtain funds through arrangements with strategic partners or others that may
require the Company to relinquish rights to certain of its technologies, product
candidates, products or potential markets. If adequate funds are not available,
the Company's business, financial condition and results of operations could be
materially and adversely affected. The Company's future capital requirements and
the adequacy of available capital resources will depend on numerous factors,
including the Company's ability to successfully perform management initiatives
initiated in 1999, market acceptance of its existing and future products, the
successful commercialization of products in development, progress in its product
development efforts, the magnitude and scope of such efforts, acquisition
opportunities, progress with preclinical studies, clinical trials and product
clearances by the FDA and other agencies, the cost and timing of the Company's
efforts to expand its manufacturing capabilities, the cost of filing,
prosecuting, defending and enforcing patent claims and other intellectual
property rights, competing technological and market developments, and the
development of strategic alliances for the marketing of certain of the Company's
products. The sufficiency of the Company's capital reserves with respect to
operations beyond 2000 will depend primarily upon the Company's operating
results and the extent to which such results are capable of funding anticipated
growth.
The Company believes that existing capital resources from its $4.0 million
discretionary credit line and its $4.0 million rights offering completed in the
first quarter of 2000, together with cash flow from operations (if, and to the
extent, generated), will be sufficient to fund its operations for the near term.
This statement constitutes a Forward-Looking Statement. Actual results could
differ materially from the Company's expectations regarding its capital
requirements and its sources of capital. The Company's operations did not
produce positive cash flows during 1994, 1995, 1996, 1998 or the nine months
ended September 30, 2000. To the extent that funds generated from the Company's
operations, together with its existing capital resources (including its credit
facility), and the net interest earned thereon, are insufficient to meet current
or planned operating requirements, the Company will be required to obtain
additional funds through equity or debt financing, strategic alliances with
corporate partners and others, or through other sources. No assurances can be
given that such funds will be made available to the Company on acceptable terms
or at all.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
No change since filing of the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on July 12, 2000.
Anthony J. Dimun and David H. MacCallum were re-elected as directors for three
year terms. A total of 5,260,975 shares were voted for Mr. Dimun, and 709,227
shares were voted authority withheld. A total of 5,260,555 shares were voted for
Mr. MacCallum, and 709,647 shares were voted authority withheld. Mr. MacCallum
subsequently resigned as a director of the Company in September 2000. Terry D.
Wall, Gerard S. Carlozzi, David J. Bershad and Pertti Tormala continued their
respective terms as directors after the Annual Meeting.
Also at the Annual Meeting, the shareholders approved an amendment to the
Company's Stock Option Plan to increase the number of shares that may be issued
under such Plan. The vote was 3,124,281 shares "For", 763,220 shares "Against",
6,708 "Abstentions" and 2,075,993 "Broker Non-Votes."
The shareholders also approved a proposal to authorize the use of payroll
deductions and associated loans to enable participants in the Company's
Investment Plan to purchase shares under that Plan. The vote was 5,903,907
shares "For", 61,331 shares "Against", and 4,964 "Abstentions".
Item 6. Exhibits and Reports on form 8-K
(a) The following exhibits are filed as part of this Quarterly Report
on Form 10-Q:
No. 27.1 Financial Data Schedule
(b) The Registrant did not file any Current Reports on Form 8-K during
the quarter ended September 30, 2000.
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.
BIONX IMPLANTS, INC.
By: /s/ Gerard Carlozzi
--------------------------------------
Gerard Carlozzi, President
and Chief Executive Officer
By: /s/ Drew Karazin
--------------------------------------
Drew Karazin, Chief Financial Officer
Dated: November 14, 2000
EXHIBIT INDEX
Exhibit
27.1 Financial Data Schedule
11
