<PAGE> 1
FORM 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1996 Commission File Number 0-19373
BIOMATRIX, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3058261
- - ------------------------------- ---------------------------------
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
65 Railroad Avenue, Ridgefield, N.J. 07657
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(201)945-9550
---------------------------------------------------
(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.
(1) Yes X No
--- ---
The number of shares outstanding of the issuer's common stock as of the latest
practicable date:
Class March 31, 1996
----- --------------
Common stock, $ 0.0001 par value 10,182,872
1
<PAGE> 2
BIOMATRIX, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1 - Unaudited Financial Statements
Consolidated Balance Sheets as of
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations for the
Three Months Ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
2
<PAGE> 3
BIOMATRIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 3,966,784 $ 8,888,869
Held-to-maturity investments ............................... 5,889,712 1,598,397
Accounts receivable, less allowance for doubtful accounts
of $25,500 in 1996 and 1995 .............................. 1,037,871 1,035,699
Inventory, at lower of cost (average) or market ............ 531,203 660,607
Prepaid expenses and other current assets .................. 500,434 431,802
----------- -----------
Total current assets ................................ 11,926,004 12,615,374
Property, plant and equipment, net ............................ 4,553,166 4,635,656
Other assets .................................................. 61,725 130,546
----------- -----------
Total assets ........................................ $16,540,895 $17,381,576
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable ........................... $ 693,484 $ 792,615
Accounts payable ........................................... 566,723 435,329
Accrued expenses and deferred income ....................... 1,101,878 1,309,298
----------- -----------
Total current liabilities .......................... 2,362,085 2,537,242
Notes payable less current maturities ......................... 705,510 728,525
Deferred income ............................................... 450,000 -
----------- -----------
Total liabilities .................................. 3,517,595 3,265,767
----------- -----------
Commitments and contingent liabilities
Shareholders' equity:
Common stock, $.0001 par value: 20,000,000
shares authorized; 10,185,686 and 10,125,949
issued and 10,182,872 and 10,123,135 outstanding
in 1996 and 1995, respectively ......................... 1,019 1,013
Preferred stock, 3,000 shares authorized; none issued ...... - -
Additional paid-in capital ................................. 53,445,842 53,286,223
Accumulated deficit ........................................ (39,583,288) (38,334,485)
Equity adjustment from foreign currency translation ........ (828,313) (824,982)
Treasury stock, 2,814 shares of common stock at cost ....... (11,960) (11,960)
----------- -----------
Total shareholders' equity ......................... 13,023,300 14,115,809
----------- -----------
Total liabilities and shareholders' equity .......... $16,540,895 $17,381,576
=========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements
3
<PAGE> 4
BIOMATRIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
Revenues:
Net sales ...................................... $ 1,096,900 $ 666,029
Income from licenses, royalties, research
contracts and grants ......................... 641,947 430,767
----------- -----------
Total revenues ......................... 1,738,847 1,096,796
----------- -----------
Costs and expenses:
Cost of sales .................................. 713,848 519,208
Research and development expenses .............. 1,366,844 1,347,465
Selling, general and administrative expenses ... 1,005,874 1,307,278
----------- -----------
Total costs and expenses ............... 3,086,566 3,173,951
----------- -----------
Loss from operations .............................. (1,347,719) (2,077,155)
Interest expense .................................. (28,455) (14,991)
Interest and miscellaneous income ................. 127,371 127,700
----------- -----------
Net loss .......................................... $(1,248,803) $(1,964,446)
=========== ===========
Net loss per share:
Net loss per common share ................. $ (0.12) $ (0.21)
=========== ===========
Weighted average common shares outstanding 10,161,437 9,512,469
=========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements
4
<PAGE> 5
BIOMATRIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................. $(1,248,803) $(1,964,446)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ...................... 134,776 129,415
Amortization of deferred income .................... - (229,289)
Stock option compensation .......................... - 12,375
Change in assets and liabilities:
Accounts receivable ................................ (1,611) 19,222
Inventory .......................................... 130,646 40,845
Prepaid expenses and other current assets .......... (66,366) (64,196)
Other assets ....................................... 14,830 921
Accounts payable, accrued expenses and
deferred income ............................. 358,186 (471,456)
----------- -----------
Total adjustments ........................... 570,461 (562,163)
----------- -----------
Net cash used in operating activities ....... (678,342) (2,526,609)
----------- -----------
Cash flows from investing activities:
Redemption of held-to-maturity securities .......... 1,591,105 3,660,582
Purchases of held-to-maturity securities ........... (5,882,420) (1,953,743)
Capital expenditures ............................... (40,192) (52,173)
----------- -----------
Net cash provided by (used for)
investing activities .................... (4,331,507) 1,654,666
----------- -----------
Cash flows from financing activities:
Payments of note payable ........................... (126,928) (5,598)
Stock options exercised ............................ 159,624 -
Sale of common stock ............................... - 2,000,000
----------- -----------
Net cash provided by financing activities ... 32,696 1,994,402
----------- -----------
Effect of exchange rate changes on cash ............ 55,068 579
----------- -----------
Net increase (decrease) in cash and cash equivalents ..... (4,922,085) 1,123,038
Cash and cash equivalents at beginning of period ......... 8,888,869 481,328
----------- -----------
Cash and cash equivalents at end of period ............... $ 3,966,784 $ 1,604,366
=========== ===========
Supplemental cash flow data:
Interest paid ...................................... $ 28,455 $ 14,991
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements
5
<PAGE> 6
BIOMATRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The financial statements at March 31, 1996 and for the three months ended
March 31, 1996 and 1995 are unaudited but include all adjustments which the
Company considers necessary for a fair presentation of the financial position at
such date and the operating results and cash flows for those periods. These
condensed financial statements should be read in conjunction with the Company's
audited financial statements for the year ended December 31, 1995, which were
included as part of the Company's Form 10-K, filed with the Securities and
Exchange Commission. Results for the interim periods are not necessarily
indicative of results for the entire year.
NOTE 2 - CONTINGENCY
In August 1990, the Company received a notice from the Pennsylvania
Department of Environmental Resources ("DER") that it is one of approximately
1,000 potentially responsible parties ("PRPs") that may have clean-up
responsibility at the Industrial Solvents and Chemical Company site in York
Haven, Pennsylvania (the "Site"). During the late 1980's, the Company, through a
licensed waste disposal transport company, shipped industrial solvents to the
Site, which was operating as a recycling facility. The DER is in the process of
reviewing hazardous waste found at the Site as well as the DER's own records in
order to identify additional PRPs and to quantify PRPs' volumetric
contributions. The Company has joined a steering committee that consists of many
PRPs. Although neither the total clean-up cost nor the portion of the total
clean-up cost assigned to each PRP has been determined, the Company estimated
based upon the advice of an environmental consultant, that its liability at
December 31, 1992 was approximately $417,000, which amount was provided for in
the financial statements at that date. On February 2, 1994, the same consultant
provided the Company with an updated report on the site. Based upon this
analysis, the Company revised its expected liability to $780,000. Further, the
same consultant has reported to the Company that there is less than a 10% chance
that its liability might exceed $1,070,033. During the second quarter of 1995
the Company paid its first assessment for clean-up costs of $79,390. Therefore
the reserve at December 31, 1995, represents $700,610. There have been no
significant changes in the projected total clean-up costs nor the PRPs assigned
portion of the total costs in the first quarter of 1996, therefore, the
Company's reserve of $700,610 has remained unchanged at March 31, 1996.
NOTE 3 - INVENTORIES
Inventories at March 31, 1996 and December 31, 1995 consisted of :
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Finished Goods...................................... $120,684 $120,057
Work-in-Process..................................... 294,543 427,193
Raw Materials....................................... 115,976 113,357
------- --------
531,203 $660,607
======= ========
</TABLE>
6
<PAGE> 7
BIOMATRIX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Biomatrix, Inc., which includes Biomatrix Svenska AB, a wholly owned
subsidiary, and Biomatrix Medical Canada, Inc., a majority owned subsidiary,
(the "Company"), has been principally engaged in the research and development
and commercial application of proprietary viscoelastic biological polymers
called hylans, for use in therapeutic medical applications and skin care. For
the past two years, a significant source of revenue for the Company has been
from corporate license and distribution agreements which have included certain
one-time payments. Until the Company commences sales of its products in major
markets, payments from corporate agreements are expected to continue to be a
major source of revenues.
The Company's business is subject to significant risks. Forward-looking
comments included herein are subject to and should be read in conjunction with
the "Risk Factors" section of the Company's 1995 Annual Report on Form 10-K,
including the risks and uncertainties associated with the regulatory approval
process and with obtaining and enforcing patents important to the Company's
business. As a significant amount of Biomatrix' future revenues may be based on
payments from corporate license and distribution agreements, the Company's total
revenues and profit and losses are expected to fluctuate from quarter to
quarter. Some of these fluctuations may be significant and, as a result, quarter
to quarter comparisons may not be meaningful. As of March 31, 1996, the
Company's accumulated deficit was $39,583,288.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
REVENUES. Total revenues for the three months ended March 31, 1996
were $1,738,847, an increase of $642,051, or 58.5%, from the same period in
1995. Product sales were $1,096,900 in the first quarter of 1996, an increase of
$430,871, or 64.7%, from the same period in 1995, and represented 63.1% of total
first quarter 1996 revenues. New product sales of Synvisc(R), the Company's
product for the treatment of osteoarthritis, in Sweden and an increase in the
sales of skin care intermediate products were the major factors which
contributed to the product sales increase. Revenues from licenses, royalties,
research contracts and grants were $641,947 in the first quarter of 1996, an
increase of $211,180, or 49.0%, from the comparable period in 1995. This
favorable change was primarily attributed to a non-refundable payment associated
with negotiations for a strategic corporate distribution agreement.
COSTS AND EXPENSES. Total costs and expenses for the first quarter of
1996 were $3,086,566, a decrease of $87,385, or 2.8%, from the same period in
1995. Selling, general and administrative expenses in the first quarter were
$1,005,874, a decrease of $301,404, or 23.1%, from the same period in 1995. Such
decrease was principally due to changes made in the Canadian subsidiary whereby
the Company, in accordance with its distribution agreement in Canada, was
reimbursed for certain selling and administrative expenses by its corporate
partner. Additionally, as a result of such agreement, a major portion of the
Company's marketing expenses and customer service personnel have become the
responsibility of its corporate partner. This decrease was partially offset by
an increase in cost of sales of $194,640 to $713,848 due to the higher sales
volumes. Cost of sales as a percentage of sales was 65.1% in the first quarter
of 1996 versus 78.0% in the same quarter of 1995. This favorable change was
primarily due to an increase in production volumes at the Company's
manufacturing facility in Canada to support the demand for medical products in
Sweden and Canada. Such change was offset partially as a result of the Company's
corporate partner distribution arrangement in Canada, under which the Company
now receives a percentage of its corporate partner's sales of Synvisc. However,
the Company expects that cost of sales will decline further as a percentage of
sales as production volumes increase and as the Company expands the sales of its
medical products globally.
INTEREST AND MISCELLANEOUS INCOME. Interest expense was $28,455 for the
first quarter of 1995, an increase of $13,464 from the prior year due to a
construction and equipment loan from the Quebec government. Interest and
miscellaneous income was $127,371 for the first three months of 1996, which was
consistent with the same period in 1995.
7
<PAGE> 8
BIOMATRIX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital needs have been financed in the past from several
sources, including private and public placements of its equity securities, loans
from shareholders and the Canadian government, license fees, product revenues,
royalties, research contracts and grants. Through March 31, 1996, the Company
had raised an aggregate of approximately $50 million from the sale of equity
securities and an aggregate of approximately $10.6 million from corporate
license and distribution agreements.
The Company had cash and cash equivalents of $3,966,784 and
investments, invested in U.S. government securities, of $5,889,712 at March 31,
1996. Overall, the Company's cash and investment position decreased by $630,770
for the first quarter of 1996.
As of March 31, 1996, the Company had provided a reserve of $700,610
for a contingent liability related to an environmental matter. This reserve is
included in accrued expenses. See Note 2 of Notes to the Consolidated Financial
Statements.
In connection with the Company's acquisition in 1991 of the
manufacturing facility in Canada, the Company's majority-owned Canadian
subsidiary obtained a five-year loan of approximately $600,000. The anticipated
outstanding balance of $525,053 will be due in June 1996. The Company plans to
renew this loan for an additional five-year term.
The Company's present cash and investments together with revenues
generated from ongoing business operations are expected to be sufficient to
enable the Company to conduct its present business activities into 1997. The
Company is pursuing arrangements with potential corporate partners, which could
add additional capital in the form of equity, up-front license payments and
anticipated future revenue payments, in addition to the potential milestone
payments it could receive from existing corporate partners to support ongoing
operations. There can be no assurance that any such arrangements will be
consummated on terms satisfactory to the Company, or at all.
8
<PAGE> 9
BIOMATRIX, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
27.1 Financial Data Schedule
B. REPORT ON FORM 8-K
None
9
<PAGE> 10
BIOMATRIX, INC.
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.
DATE: May 13, 1996 BIOMATRIX, INC.
By: /s/Endre A. Balazs
---------------------------------------
Endre A. Balazs
Chief Executive Officer
By: /s/Brian J. Hayden
---------------------------------------
Brian J. Hayden
Chief Financial & Accounting Officer
10
<PAGE> 11
BIOMATRIX, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<S> <C>
27.1 Financial Data Schedule
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1996
<CASH> 3,966,784
<SECURITIES> 5,889,712
<RECEIVABLES> 1,063,371
<ALLOWANCES> 25,500
<INVENTORY> 531,203
<CURRENT-ASSETS> 11,926,004
<PP&E> 7,719,200
<DEPRECIATION> 3,166,034
<TOTAL-ASSETS> 16,540,895
<CURRENT-LIABILITIES> 2,362,085
<BONDS> 1,398,994
0
0
<COMMON> 1,019
<OTHER-SE> 13,022,281
<TOTAL-LIABILITY-AND-EQUITY> 16,540,895
<SALES> 1,096,900
<TOTAL-REVENUES> 1,738,847
<CGS> 713,848
<TOTAL-COSTS> 3,086,566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,455
<INCOME-PRETAX> (1,248,803)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,248,803)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,248,803)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
