<PAGE>
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 quarter ended March 31, 1999 Commission File Number 0-19373
-------------------------------
BIOMATRIX, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3058261
(State or 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.
Yes _X_ No ____
The number of shares outstanding of the issuer's common stock as of the latest
practicable date: (adjusted by 100% stock dividend paid April 23, 1999)
Class April 23, 1999
----- --------------
Common stock, $ 0.0001 par value 22,914,522
<PAGE>
BIOMATRIX, INC.
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1 - Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1999 and December 31, 1998 (Unaudited).................. 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998 (Unaudited)............ 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998 (Unaudited)............ 5
Notes to Condensed Consolidated Financial Statements.............. 6
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................10
PART II. OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8-K..................................15
Signatures........................................................16
2
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except share and per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................. $20.1 $16.5
Accounts receivable, less allowance for doubtful accounts............. 10.8 8.9
Inventory, at lower of cost or market................................. 8.8 6.8
License fees receivable............................................... 1.6 7.6
Prepaid expenses and other current assets............................. 2.4 1.5
----- -----
Total current assets.......................................... 43.7 41.3
Property, plant and equipment, net....................................... 39.9 37.7
Other assets............................................................. 4.4 4.3
----- -----
Total assets.................................................. $88.0 $83.3
===== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................... $ 2.1 $ 3.5
Accrued expenses...................................................... 8.0 5.6
Notes payable and capital lease obligations - current................. 5.2 5.2
----- -----
Total current liabilities..................................... 15.3 14.3
Notes payable and capital lease obligations - long term.................. 17.4 17.6
----- -----
Total liabilities............................................. 32.7 31.9
----- -----
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock, 3,000 shares authorized; none issued................. - -
Common stock, $.0001 par value: 60,000,000 authorized;
23,004,416 and 22,848,358 issued and 22,912,122 and
22,756,064 outstanding in 1999 and 1998, respectively .............. 0.0 0.0
Additional paid in capital ........................................... 75.8 72.8
Notes receivable - related parties.................................... (13.2) (10.6)
Accumulated deficit................................................... (4.4) (7.7)
Accumulated other comprehensive loss ................................. (2.0) (2.2)
Treasury stock, 92,294 shares of common stock at cost................. (0.9) (0.9)
----- -----
Total shareholders' equity ................................... 55.3 51.4
----- -----
Total liabilities and shareholders' equity.................... $88.0 $83.3
===== =====
</TABLE>
The accompanying notes are an integral
part of the condensed consolidated financial statements.
3
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1999 1998
---- ----
<S> <C> <C>
Revenues:
Net product sales.................................................... $16.5 $ 4.6
Income from licenses, royalties and research contracts............... 0.1 2.9
----- -----
Total revenues................................................. 16.6 7.5
----- -----
Costs and expenses:
Cost of goods sold................................................... 4.9 1.5
Research and development expenses.................................... 2.2 2.2
Selling, general and administrative expenses......................... 3.9 2.9
----- -----
Total costs and expenses....................................... 11.0 6.6
----- -----
Income from operations................................................... 5.6 0.9
Interest expense......................................................... (0.4) (0.0)
Interest and miscellaneous income........................................ 0.3 0.3
----- -----
Income before taxes...................................................... 5.5 1.2
Provision for income taxes............................................... 2.2 0.4
----- -----
Net income............................................................... $ 3.3 $ 0.8
===== =====
Net income per share:
Basic ............................................................... $0.14 $0.04
Weighted average shares outstanding.................................. 22,794,084 22,092,114
Diluted.............................................................. $0.13 $0.03
Weighted average diluted shares outstanding.......................... 24,461,854 23,195,112
</TABLE>
The accompanying notes are an integral
part of the condensed consolidated financial statements.
4
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1999 1998
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................... $ 3.3 $ 0.8
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization......................................... 0.8 0.2
Stock option compensation............................................. 0.1 -
Change in assets and liabilities:
Accounts receivable................................................... (1.7) (0.5)
Inventory ............................................................ (2.0) (0.2)
Prepaid expenses and other current assets............................. 5.2 0.0
Other assets.......................................................... (0.0) (1.3)
Accounts payable and accrued expenses................................. 2.5 1.3
----- -----
Net cash provided by operating activities................... 8.2 0.3
----- -----
Cash flows from investing activities:
Capital expenditures..................................................... (4.6) (5.4)
----- -----
Net cash used for investing activities...................... (4.6) (5.4)
----- -----
Cash flows from financing activities:
Payments of notes payable and capital lease obligations.................. (0.2) (0.0)
Stock options exercised.................................................. 0.2 0.1
----- -----
Net cash provided by financing activities................... 0.0 0.1
----- -----
Effect of exchange rate changes on cash...................................... 0.0 0.0
----- -----
Net increase (decrease) in cash and cash equivalents......................... 3.6 (5.0)
Cash and cash equivalents at beginning of period............................. 16.5 17.4
----- -----
Cash and cash equivalents at end of period................................... $20.1 $12.4
===== =====
Non-cash financing activities:
Sale of common stock financed with notes receivable...................... $ 2.4 $ 1.5
</TABLE>
The accompanying notes are an integral
part of the condensed consolidated financial statements.
5
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation
The condensed consolidated financial statements at March 31, 1999 and
December 31, 1998 and for the three months ended March 31, 1999 and 1998 are
unaudited, but include all adjustments which the Company considers necessary for
a fair presentation of the financial position at such dates and the operating
results and cash flows for those periods. These condensed consolidated financial
statements should be read in conjunction with the Company's audited consolidated
financial statements for the year ended December 31, 1998, which were included
as part of the Company's Form 10-K, filed with the Securities and Exchange
Commission. Results for interim periods are not necessarily indicative of
results for the entire year.
NOTE 2 - Inventories
Inventories at March 31, 1999 and December 31, 1998 consisted of (in
millions):
March 31, December 31,
1999 1998
--------- ------------
Raw materials.......................... $1.7 $1.5
Work-in-process........................ 6.2 4.8
Finished goods......................... 0.9 0.5
---- ----
$8.8 $6.8
==== ====
NOTE 3 - Stock Split
On April 6, 1999 the Company announced a two-for-one common stock split
to be distributed in the form of a 100% stock dividend (the "Stock Split"). As a
result of this action, on April 23, 1999 22,914,522 shares were distributed to
the shareholders of record on April 16, 1999, of which 92,294 shares represented
treasury stock of the Company. The shares issued, outstanding and in treasury of
11,424,179, 11,378,032 and 46,147 at December 31, 1998 have been restated to
22,848,358, 22,756,064, and 92,294 to reflect the Stock Split. In addition, the
shares issued, outstanding and in treasury of 11,502,208, 11,456,061 and 46,147
at March 31, 1999 have been restated to 23,004,416, 22,912,122 and 92,294 to
reflect the Stock Split. Par value will remain at $0.0001 per share. The par
value of the additional shares resulting from the Stock Split, from additional
paid in capital to common stock. All shares outstanding and per share amounts in
the accompanying statements have been restated to reflect the Stock Split.
6
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - Net Income Per Common Share
Basic net income per share is computed by dividing net income by the
weighted-average common shares outstanding for the period. Diluted net income
per share is reflective of all common share equivalents. The Company has
convertible debt which converts into 750,000 shares of common stock (see Note
9), however this instrument has not been included in diluted earnings per share
for the first quarter of 1999 because its effect would be anti-dilutive. A
reconciliation of weighted average shares outstanding from basic to diluted for
the three months ended March 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Weighted average shares outstanding - Basic................... 22,794,084 22,092,114
Dilutive effect of stock options.............................. 1,667,770 1,102,998
---------- ----------
Weighted average shares outstanding - Diluted................. 24,461,854 23,195,112
========== ==========
</TABLE>
NOTE 5 - Comprehensive Income
Components of comprehensive income are net income and all other
non-owner changes in equity, such as the change in the cumulative translation
adjustment. The following table shows comprehensive income for the three months
ended March 31, 1999 and 1998 (in millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net income ................................................... $ 3.3 $0.8
Change in cumulative translation adjustment................... 0.2 0.3
---- ----
Comprehensive income.......................................... $3.5 $1.1
==== ====
</TABLE>
NOTE 6 - Notes Receivable - Related Parties
Notes receivable - related parties relate to the acquisition of common
stock of the Company at fair market value by certain officers and directors of
the Company pursuant to the Company's 1997 Restricted Stock Plan. The notes are
with full recourse and are payable with simple interest upon maturity. The
balance of the notes including accrued interest at March 31, 1999 and December
31, 1998 was $13.2 million and $10.6 million, respectively. The notes mature
over a range of dates from May 2007 to March 2009.
7
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - Segment Data
The Company adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 requires a new basis of
determining the reportable business segments using the management reporting
approach. The following data is utilized by the Company's Executive Committee
(the chief operating decision makers) when analyzing the performance of the
Company. The following table presents the segment data for the three months
ended March 31, 1999 and 1998 (in millions):
1999 1998
------ ------
Product sales:
Synvisc:
United States........................... $12.6 $ 3.0
Rest of the world....................... 3.2 0.8
All other products........................ 0.7 0.8
----- ----
Total product sales....................... $16.5 $4.6
===== ====
March 31, December 31,
1999 1998
--------- ------------
Identifiable assets (in millions):
United States............................. $77.6 $73.9
Rest of the world......................... 10.4 9.4
----- -----
Total assets.............................. $88.0 $83.3
===== =====
NOTE 8 - Contingencies
In October 1996, Michael Jarcho ("Jarcho") filed suit in the United
States District Court for the Southern District of California seeking to recover
damages and declaratory judgment for the alleged breach by the Company of
Jarcho's consulting agreement. A consulting agreement had been entered into
between the Company and Jarcho on December 2, 1988. The agreement contains
certain royalty provisions for products that result from Jarcho's consultancy.
Jarcho contends, inaccurately in the Company's view, that Hylaform(R) resulted
from his consultancy. Jarcho seeks compensatory damages of $0.3 million plus a
royalty on the Company's past and future net sales of Hylaform as well as
punitive damages and recovery of attorney fees. The Company believes that no
royalties are owed Jarcho as a result of Hylaform sales. Jarcho's case was
dismissed on January 10, 1997, on the grounds that the agreement requires such
disputes to be brought exclusively in New Jersey state court. Jarcho moved for a
partial reconsideration of the decision, the Company opposed that request, and
the request was denied. On June 16, 1997 Jarcho filed suit in New Jersey state
court. The Company intends to defend this matter vigorously. In accordance with
the Company's policy on contingencies, a liability has been recorded in the
accompanying consolidated financial statements for estimated legal fees expected
to be incurred in defending the matter vigorously. The Company has not made any
provisions for any liability that might result from the claims made by Jarcho.
8
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 9 - Convertible Debt
In May 1998, the Company issued $15.0 million of subordinated
convertible debt to a third party. The debt has a five year term and a coupon
rate of 6.9% with interest payable on a semi-annual basis. The debt contains a
conversion feature that allows the third party to convert the debt into common
shares at $20 per share after one year. In addition, the Company can call the
debt at par after three years or after two years if certain conditions are
satisfied. Debt fees are included in other assets and are being amortized on a
straight-line basis over the five year term of the debt.
NOTE 10 - Subsequent Events
On April 6, 1999, the Company announced a two-for-one stock split in
the form of a 100% stock dividend (See Note 4).
9
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Biomatrix, Inc., together with its subsidiaries Biomatrix Medical
Canada Inc. ("BMC"), Biomatrix Svenska AB ("Biomatrix Svenska"), Biomatrix
(U.K.) Limited ("Biomatrix UK"), Biomatrix Limited ("Biomatrix Hong Kong"),
Biomatrix France SARL ("Biomatrix France"), Biomatrix Switzerland GmbH
("Biomatrix Switzerland"), and Biomatrix Germany GmbH ("Biomatrix Germany")
(together, "Biomatrix" or the "Company") develops, manufactures, markets and
sells a series of proprietary viscoelastic products made of biological polymers
called hylans for use in therapeutic medical applications and skin care. Hylans
are chemically modified forms of the naturally occurring hyaluronan (also known
as hyaluronic acid or sodium hyaluronate). Hylans are the second generation of
viscoelastics used in medicine, and are characterized by significantly enhanced
physical (rheological) properties (elasticity, viscosity and pseudoplasticity)
as compared to naturally occurring hyaluronan, from which the first generation
viscoelastics are made. The discovery of hylans has allowed the Company to
develop a range of patented products with superior viscoelastic properties in
the forms of fluids, gels and solids.
The Company's business is subject to significant risks. Certain
statements contained in this Form 10-Q are forward-looking within the meaning of
Section 27A of the Securities Act of 1933 and involve risks and uncertainties,
including, but not limited to, governmental regulation, reimbursement,
dependence on distribution relationships, patents, competition, manufacturing,
rapid growth, dependence upon key personnel, fluctuation in operating results,
product liability, stock price volatility, Year 2000 matters, and other risks
detailed in the Company's reports filed under the Securities and Exchange Act,
including the Company's Form 10-K for the year ended December 31, 1998. As a
portion of the Company's future revenues may be based on payments from corporate
license and distribution agreements, the Company's total revenues and net income
will fluctuate from quarter to quarter. Some of these fluctuations may be
significant and, as a result, quarter to quarter comparisons may not be
meaningful.
Results of Operations for the three months ended March 31, 1999 and 1998
Revenues. Total revenues for the three months ended March 31, 1999
were $16.6 million, representing an increase of $9.1 million over the same
period of the prior year. Net product sales for the three months ended March 31,
1999 were $16.5 million, representing an increase of $11.9 million or 259% over
the same period of 1998. This increase was primarily due to increased sales of
Synvisc(R) to the Company's marketing partners in the United States and Europe
and launches into Latin America, South Africa and Australia. Income from
licenses, royalties and research contracts was $0.1 million for the three months
ended March 31, 1999. This represented a decrease of $2.8 million from the three
months ended March 31, 1998 which included up-front license fees of $2.8 million
from Novartis Pharma AG related to the distribution of Synvisc in Central and
South America.
10
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Results of Operations for the three months ended March 31, 1999 and 1998
(Continued)
Costs and Expenses. Total costs and expenses were $11.0 million for
the three months ended March 31, 1999, representing an increase of $4.4 million
or 67% over the same period of the prior year. Cost of goods sold for the first
quarter of 1999 and 1998 were $4.9 million and $1.5 million, respectively, which
produced gross margins of 70% and 67%, respectively. The increase in the gross
margin percentage is due to the Company's greater utilization of its overall
manufacturing capacity. Research and development expenses were $2.2 million for
each of the first quarters of 1999 and 1998; increased clinical costs were
offset by the decrease in costs related to the development costs of the new
facility. Selling, general and administrative expenses for the first quarter of
1999 were $3.9 million, representing an increase of $1.0 million or 34%, over
the first quarter of 1998. This increase is primarily due to increased staffing
needed to support the scope of the Company's growing global activities. The
Company expects to incur higher expenses for the remainder of 1999 as it
continues to develop its infrastructure to support its global operations.
Income Taxes
The Company recorded federal and state tax provisions totaling $2.2
million and $0.4 million for the three months ended March 31, 1999 and 1998,
respectively. The effective rate for the first quarter of 1999 was 40% as
compared to 33% for the first quarter of 1998. The Company expects its effective
tax rate to continue to approximate the combined statutory federal and state
rate in 1999. The effective rate could potentially exceed the combined statutory
federal and state rate in the future depending on the impact of certain foreign
operations and non-deductible items.
As of March 31, 1999 the Company had $2.8 million of net deferred U.S.
tax assets included in other long term assets on its balance sheet, as it is
more likely than not that the Company will realize the benefit of these assets.
However, the Company has provided a full valuation allowance on certain foreign-
related deferred tax assets due to the uncertainty of realization.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $20.1 million at March 31,
1999. Overall, the Company's cash position increased by $3.6 million in the
three months ended March 31, 1999.
The Company's operations and capital growth over the past several years
have been financed by up-front non-refundable license fee payments from
corporate partners, the utilization of the Company's cash and investments and
the private placement of debt and equity securities. Since January 1, 1996, the
Company has received funding of $39.4 million from non-refundable license fee
payments and $21.0 million from the private placement of equity and debt
securities.
11
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources (continued)
For the three months ended March 31, 1999 the Company had positive cash
flows from operations of $8.2 million, of which $6.0 million resulted from an
up-front, non-refundable license fee payment received during the quarter. During
the quarter, the Company also invested $4.6 million in property, plant, and
equipment, primarily associated with the construction of certain research and
development laboratories. The Company continues to lease a 93,000 square foot
building in New Jersey in which the U.S. manufacturing operations resides. The
Company exercised its option to acquire this building at a price of
approximately $4.6 million. The Company expects to expend cash to complete the
purchase of the building during the second quarter 1999.
During the remainder of 1999, the Company also expects to utilize cash
for increased working capital requirements needed to support higher anticipated
sales levels. The Company also expects to incur higher expenses during the
remainder of 1999 associated with developing its internal infrastructure to
support the administration of its various distribution agreements and expanded
global operations. The Company believes that its capital needs and higher
operating expenses will be supported by its operations, its existing cash
position, up-front license fee payments from the potential completion of
additional distribution agreements, milestone payments from existing corporate
partners and potential financing arrangements.
Year 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year. Some
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including a
temporary inability to process transactions, send invoices, or engage in normal
business and operating activities.
Some of the Company's systems are Year 2000 compliant. The Company has
a program in place to assess the remaining software and systems and bring them
into Year 2000 compliance in time to minimize any significant detrimental
effects on operations. The program focuses on three main functional areas:
i) Information technology which addresses data, phone and
administrative systems, including personal computers,
telecommunications, local area networks, wide area networks and
business applications. These systems are computer devices and software
that the company wrote or purchased which are not supported by external
vendors. The software systems include applications developed or
purchased by corporate departments and operated by departmental
personnel. The computer devices are desktop personal computers and
server computer equipment including system hardware, firmware, and
installed commercial application software.
12
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Year 2000 (continued)
ii) Embedded chip technology which addresses manufacturing systems,
laboratory instruments and plant maintenance systems with programmable
logic controllers with date functions. The Process Control and
Environmental Monitoring and Control Systems are used in the Company's
manufacturing and research and development processes, among other
operations. These generally are systems, devices and instruments which
utilize date functionality and generate, send, receive or manipulate
date-stamped data and signals. These systems may be found in data
acquisition/processing software, laboratory instrumentation, and other
equipment with embedded code.
iii) Material suppliers and marketing partners which address third
parties that are critical to the Company's manufacturing process and
distribution of product. The company has identified critical providers
of information, goods and services in order to assess their Year 2000
compliance/readiness. The Company has sent letters to all critical and
regular suppliers and marketing partners. Although the Company cannot
control the response time to its letters, the Company hopes to have
assessed all letters by May 31, 1999 and confirmed Year 2000 readiness
of selected suppliers and marketing partners by June 30, 1999. The
Company recognizes that to a certain degree it is relying on
information provided by such third parties regarding their Year 2000
compliance readiness. While the Company is attempting to evaluate
information provided by these third parties, there can be no assurance
that in all instances accurate information is being provided. Failure
of these third parties' systems to be Year 2000 compliant could have a
material adverse effect on the Company's financial position, results of
operations and cash flows.
In order to address the three noted areas, the Company has divided the
project into four phases including awareness, assessment, validation, and
implementation along the functional departments of the Company. The Company has
completed the awareness and assessment phases for all functional areas. The
Company expects to complete the validation phase by April 30, 1999. Full
implementation and compliance for all functional areas is expected by September
30, 1999.
The Company is using both internal and external resources to identify,
correct/reprogram, and test its computer systems, equipment and software for
Year 2000 compliance.
13
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Year 2000 (continued)
The Company estimates that the costs associated with the Year 2000
issue will not be material, and as such will not have a significant impact on
the Company's financial position or operating results. However, the failure to
correct a material Year 2000 problem could result in an interruption in certain
normal business activities or operations. Such failures could materially and
adversely affect the Company's results of operations, liquidity and financial
condition. The Company believes that, with the implementation of the Year 2000
program, the possibility of significant interruptions of normal operations will
be reduced. To date the Company estimates that it has spent approximately $0.1
million replacing, upgrading, or repairing systems or equipment. The aggregate
additional costs of the Company's Year 2000 program cannot be known at this
time. However, given the current status of the validation phase the additional
costs are expected to be approximately $0.5 million. The actual additional costs
will depend on numerous factors, including without limitation, the costs of
replacing, upgrading or repairing systems, software and equipment, and
consulting fees and expenses. All costs are expected to be funded through
operations.
The Company is also developing a contingency plan to address a
situation in which Year 2000 problems do cause an interruption in normal
business activities. Once developed, contingency plans and related cost
estimates will be continually refined, as additional information becomes
available. The Company expects to have the contingency plan in place for
critical operations by June 30, 1999.
There can be no assurance that the Company will be able to complete all
of the modifications in the required time frame, that unanticipated events will
not occur or that the Company will be able to identify all Year 2000 issues
before problems arise. Therefore there can be no assurance that the Year 2000
issue will not a have a material adverse effect on the Company's financial
position, results of operations and cash flows.
The statements set forth herein concerning the Year 2000 problem which
are not historical facts are forward-looking statements that involve risk and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. There can be no guarantee that any estimates or
other forward-looking statements will be achieved and actual results could
differ significantly from those planned or contemplated. The Company plans to
update the status of its Year 2000 program as necessary in its periodic filings
and in accordance with applicable securities laws.
14
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27.1 Financial Data Schedule
B. Reports on Form 8-K
None
15
<PAGE>
BIOMATRIX, INC. AND SUBSIDIARIES
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: April 27, 1999 BIOMATRIX, INC.
By: /s/ Endre A. Balazs
---------------------------
Endre A. Balazs
Chief Executive Officer and
Chief Scientific Officer
By: /s/ Maxine Seifert
---------------------------
Maxine Seifert
Vice President, Finance and
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000747952
<NAME> BIOMATRIX, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 20,100,000
<SECURITIES> 0
<RECEIVABLES> 10,800,000
<ALLOWANCES> 0
<INVENTORY> 8,800,000
<CURRENT-ASSETS> 43,700,000
<PP&E> 46,500,000
<DEPRECIATION> (6,600,000)
<TOTAL-ASSETS> 88,000,000
<CURRENT-LIABILITIES> 15,300,000
<BONDS> 22,600,000
0
0
<COMMON> 75,800,000
<OTHER-SE> (20,500,000)
<TOTAL-LIABILITY-AND-EQUITY> 88,000,000
<SALES> 16,500,000
<TOTAL-REVENUES> 16,600,000
<CGS> 4,900,000
<TOTAL-COSTS> 2,200,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (100,000)
<INCOME-PRETAX> 5,500,000
<INCOME-TAX> 2,200,000
<INCOME-CONTINUING> 3,300,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,300,000
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.13
</TABLE>
