<PAGE> 1
- --------------------------------------------------------------------------------
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x Quarterly report pursuant to Section 13 or 15(d) of the Securities
- -------- Exchange Act of 1934. For the quarterly period ended September 30,
1998.
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 0-27082
FUISZ TECHNOLOGIES LTD.
(Exact name of registrant as specified in charter)
Delaware 52-1579474
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
14555 Avion at Lakeside
Chantilly, Virginia 20151
(Address of Principal Executive Offices)
Registrant's telephone number including area code: (703) 995-2400
Indicate by check mark whether the registrant (1) has filed all reports 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 31, 1998, the Registrant has outstanding 21,767,217 shares of
Common Stock, par value $.01.
- --------------------------------------------------------------------------------
1
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FUISZ TECHNOLOGIES LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
---------------- ----------------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents........................................... $ 10,223 $ 5,548
Marketable securities............................................... 28,288 73,134
Accounts receivable, trade.......................................... 15,731 10,237
Inventory........................................................... 5,806 5,375
Other current assets................................................ 1,395 1,263
---------------- ----------------
Total current assets........................................... 61,443 95,557
Restricted cash.......................................................... 10,500 10,255
Property, plant and equipment, net....................................... 26,507 22,941
Intangibles, net......................................................... 54,858 34,883
Other assets............................................................. 3,432 6,484
---------------- ----------------
Total assets...................................................... $ 156,740 $ 170,120
================ ================
LIABILITIES, REDEEMABLE PREFERENCE SHARES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit...................................................... $ 1,473 $ 1,042
Current portion of long-term debt.................................... 2,122 2,605
Accounts payable..................................................... 7,434 9,047
Accrued liabilities and other........................................ 9,566 4,305
Deferred revenue..................................................... 1,137 622
--------------- ----------------
Total current liabilities......................................... 21,732 17,621
Long-term debt........................................................... 92,132 90,055
Other liabilities........................................................ 1,627 1,663
--------------- ----------------
Total liabilities................................................. 115,491 109,339
--------------- ----------------
Commitments and contingencies
Redeemable preference shares of subsidiary............................... - 1,173
--------------- ----------------
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized 1,000,000 shares;
none issued or outstanding.......................................... --
Common stock, par value $.01 per share; authorized 50,000,000 shares;
issued 22,334,417 and 22,189,462 shares, respectively............... 223 222
Additional paid-in capital............................................. 110,046 109,332
Accumulated deficit.................................................... (65,773) (49,055)
Treasury stock, at cost; 452,500 shares in 1998........................ (4,043) -
Accumulated other comprehensive income (loss).......................... 796 (891)
--------------- ----------------
Total stockholders' equity.......................................... 41,249 59,608
--------------- ----------------
Total liabilities, redeemable preference shares and stockholders'
equity........................................................... $ 156,740 $ 170,120
=============== ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 3
FUISZ TECHNOLOGIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ --------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Operating revenues:
Product sales.......................... $ 11,067 $ 2,567 $ 35,044 $ 3,300
Research and development............... 569 649 3,402 4,221
Licensing fees......................... 4,650 - 6,600 2,980
Royalties.............................. - (250) 1,000 210
Other.................................. 14 - 561 -
------------ ------------ ----------- -----------
Total operating revenues.......... 16,300 2,966 46,607 10,711
------------ ------------ ----------- -----------
Operating expenses:
Cost of sales.......................... 6,147 1,718 20,997 2,060
Research and development............... 6,289 4,517 17,948 11,221
General and administrative............. 7,120 3,685 21,766 8,621
Other operating expenses .............. - 2,294 - 4,694
------------ ------------ ----------- -----------
Total operating expenses.......... 19,556 12,214 60,711 26,596
------------ ------------ ----------- -----------
Net operating loss.......................... (3,256) (9,248) (14,104) (15,885)
------------ ------------ ----------- -----------
Other income (expense):
Interest income........................ 704 554 2,566 1,920
Interest expense....................... (1,743) (76) (5,156) (92)
------------ ------------ ----------- -----------
Total other income (expense)...... (1,039) 478 (2,590) 1,828
------------ ------------ ----------- -----------
Net loss.................................... (4,295) $ (8,770) (16,694) $ (14,057)
============ ============ =========== ===========
Net loss per share (basic and diluted)...... $ (0.19) $ (0.41) $ (0.75) $ (0.67)
============ ============ =========== ===========
Weighted average shares outstanding
(basic and diluted)..................... 22,190 21,308 22,236 20,949
============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
FUISZ TECHNOLOGIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Operating activities:
Net loss................................................. $ (16,694) $ (14,057)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization....................... 6,485 1,290
Amortization of deferred financing costs............ 317 -
Amortization of discount on notes payable........... 796 -
Noncash warrant issuance expense.................... - 2,294
Increase (decrease) in cash resulting from changes ,
in working capital items:
Accounts receivable, inventory and other current
assets......................................... (3,506) (605)
Accounts payable and other current liabilities... 2,391 (1,421)
------------ ------------
Net cash used by operating activities............... (10,211) (12,499)
------------ ------------
Investing activities:
Decrease in marketable securities........................ 44,846 28,543
Capital expenditures .................................... (4,266) (7,589)
Acquisitions of businesses, net of acquired cash......... (19,662) (6,182)
Additions to intangibles................................. (3,338) -
Decrease (increase) in other assets...................... 2,462 (2,100)
------------ ------------
Net cash provided by (used by) investing activities. 20,042 12,672
------------ ------------
Financing activities:
Purchase of treasury stock............................... (4,043) -
Proceeds from exercise of stock options.................. 715 701
Proceeds from exercise of stock warrants................. - 997
Redemption of preference shares of subsidiary............ (1,159) -
Net borrowings under line of credit agreements........... 336 1,131
Payments of debt obligations............................. (828) (1,331)
Decrease in long-term liabilities........................ (392) (35)
------------ ------------
Net cash (used by) provided by financing activities. (5,371) 1,463
------------ ------------
Effect of exchange rate changes on cash....................... 215 (192)
------------ ------------
Net increase (decrease) in cash and cash equivalents.......... 4,675 1,444
Cash and cash equivalents, beginning of period................ 5,548 5,282
------------ ------------
Cash and cash equivalents, end of period...................... 10,223 6,726
Marketable securities and restricted cash, end of period...... 38,788 26,788
------------ ------------
Cash, cash equivalents, marketable securities and
restricted cash, end of period............................ $ 49,011 $ 33,514
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
FUISZ TECHNOLOGIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net loss.................................... $ (4,295) $ (8,770) $ (16,694) $ (14,057)
Foreign currency translation adjustments.... 2,238 (167) 1,687 (192)
----------- ----------- ------------ ------------
Comprehensive loss.......................... $ (2,057) $ (8,937) $ (15,007) $ (14,249)
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
Fuisz Technologies Ltd., a Delaware corporation, was formed on June 9,
1988 (Fuisz Technologies Ltd., together with its wholly owned subsidiaries, is
referred to collectively herein as the "Company"). The Company is engaged in the
development, manufacture and commercialization of its proprietary technologies
for a wide range of pharmaceutical, nutraceutical and food applications. The
Company's primary focus is on the commercialization of products incorporating
its CEFORM(TM) microsphere technology and its Shearform(TM) technology,
including controlled release and rapid dissolve over-the-counter ("OTC") and
prescription (or "ethical") pharmaceuticals.
The accompanying consolidated financial statements include the accounts
of Fuisz Technologies Ltd. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. The information at
September 30, 1998 and for the nine months ended September 30, 1998 and 1997, is
unaudited but includes all adjustments (consisting only of normal recurring
adjustments) which the management of the Company believes necessary for fair
presentation of the results for the periods presented. Interim results are not
necessarily indicative of results for a full year. The consolidated financial
statements should be read in conjunction with the audited financial statements
for the year ended December 31, 1997, included in the Company's 1997 Annual
Report on Form 10-K.
2. ACQUISITION
Effective February 1, 1998, the Company completed the acquisition of
all of the issued and outstanding equity interests of Dr. Rentschler GmbH & Co.
Medizin KG ("Fuisz Pharma KG"), a subsidiary of Dr. Rentschler Arzneimittel GmbH
& Co., a pharmaceutical sales and distribution limited partnership based in
Laupheim, Germany, for an aggregate purchase price of approximately $19.4
million in cash, including expenses. The excess of the aggregate purchase price
over the fair market value of net assets acquired of approximately $19.2 million
has been allocated between goodwill and other intangible assets and is being
amortized over five to fifteen years.
This acquisition was accounted for under the purchase method of
accounting. The results of operations of Fuisz Pharma KG are included in the
Company's consolidated statements of operations since February 1, 1998, the
effective date on which it became owned by the Company. The final allocation of
the purchase price is subject to further review and is therefore subject to
change. However, that allocation is not expected to differ materially from the
initial allocation.
6
<PAGE> 7
3. INVENTORY
Inventory consists of the following at September 30, 1998 and December
31, 1997:
<TABLE>
<CAPTION>
----------------------------------------
(in thousands)
----------------------------------------
September 30, 1998 December 31, 1997
------------------- -------------------
<S> <C> <C>
Raw materials $ 2,685 $ 1,874
Work in process 957 1,130
Finished goods 2,164 2,371
------------------- -------------------
$ 5,806 $ 5,375
=================== ===================
</TABLE>
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the carrying amount of certain of its
financial instruments, which include cash equivalents, marketable securities,
accounts receivable, accounts payable, accrued liabilities, term loans and
installment notes, approximates fair value due to the relatively short maturity
of these instruments. As of September 30, 1998, the fair value of the $75.0
million aggregate principal amount of 7% Convertible Subordinated Debentures due
October 15, 2004, was approximately $54.4 million.
5. RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
became effective for reporting periods beginning after December 15, 1997.
Interim reporting is not required under SFAS No. 131 prior to adoption. SFAS No.
131 requires financial and descriptive information with respect to "operating
segments" of an entity based on the way management makes internal operating
decisions. The Company will begin making the disclosures required by SFAS No.
131 for its operating segments with financial statements for the period ending
December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
Statement requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
The Company will be required to adopt this new accounting standard beginning
with the quarter ended March 31, 2000. The Company believes that the effect of
adoption of SFAS No. 133 will not be significant.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NOTICE CONCERNING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements that involve risks and
uncertainties. The actual future results of Fuisz Technologies Ltd. may differ
materially due to a number of factors, including but not limited to, dependence
on collaborative partners, capital requirements, risk of manufacturing scale-up,
product commercialization including delays of introductions of new products or
enhancements, size and timing of individual orders, rapid technological changes,
acquisitions of marketing and sales distribution organizations, market
acceptance of new products, regulatory approvals, and future competition. These
and other factors are more fully discussed in the Company's Annual Report on
Form 10-K in the section captioned "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
OVERVIEW
Fuisz Technologies Ltd., a Delaware corporation, was formed on June 9, 1988
(Fuisz Technologies Ltd., together with its wholly owned subsidiaries, is
referred to collectively herein as the "Company"). The Company is engaged in the
development, manufacture and commercialization of its proprietary technologies
for a wide range of pharmaceutical, nutraceutical and food applications. The
Company's primary focus is on the commercialization of products incorporating
its CEFORM microsphere technology and its Shearform technology, including
controlled release and rapid dissolve over-the-counter ("OTC") and prescription
(or "ethical") pharmaceuticals.
During the third quarter of 1998, the Company continued to build upon the
steady progress made throughout the year in expanding its drug delivery business
and transforming the Company from primarily a licensor of technology into an
international pharmaceutical and food development and manufacturing company.
During the third quarter, the Company entered into a range of new development
and license agreements with both new and existing partners, for prescription and
OTC drugs, medicated gums and nutraceutical products. The Company also continued
to devote significant resources to the expansion of its research and development
and production capabilities in Virginia and Ireland as part of its ongoing
investment in product research, development and manufacturing for
Company-internal and partner projects.
Following the acquisition of four businesses in 1997, effective February 1,
1998, the Company completed the acquisition of all of the outstanding equity
interests of Dr. Rentschler GmbH & Co. Medizin KG ("Fuisz Pharma KG"), a
pharmaceutical sales and distribution limited partnership based in Laupheim,
Germany, for approximately $19.4 million. The five acquired companies are
collectively referred to herein as the "Acquired Companies." Each of the
acquisitions was accounted for as a purchase and, accordingly, their operating
results have been included in the Company's consolidated financial statements
since their respective dates of acquisition. Four of the Acquired Companies
provide a substantial portion of their products and services in Europe.
Consequently, the Company derives a significant portion of its consolidated
revenues from its European operations.
8
<PAGE> 9
The Company has not been profitable to date, on a full fiscal year basis,
primarily due to the continuation of its research and development activities and
the expansion of its manufacturing operations.
RESULTS OF OPERATIONS
Operating revenues were $16,300,000 for the quarter ended September 30,
1998 and $46,607,000 for the nine months ended September 30, 1998, compared to
$2,966,000 for the quarter ended September 30, 1997 and $10,711,000 for the nine
months ended September 30, 1997. The increases were primarily due to the
inclusion of product sales from each of the five Acquired Companies for a full
nine months in 1998, except Fuisz Pharma KG, which was acquired effective
February 1, 1998. Corresponding amounts for 1997 include product sales for only
three of the Acquired Companies, which were realized after each of their
respective dates of acquisition. The 1998 revenue increases over 1997 were also
due to fees from additional licensing agreements signed during the third
quarter.
Cost of sales were $6,147,000 for the quarter ended September 30, 1998 and
$20,997,000 for the nine months ended September 30, 1998, compared to $1,718,000
for the quarter ended September 30, 1997 and $2,060,000 for the nine months
ended September 30, 1997. Cost of sales increased due to the increase in product
sales by the Acquired Companies as discussed in the preceding paragraph.
Research and development expenses were $6,289,000 for the quarter ended
September 30, 1998 and $17,948,000 for the nine months ended September 30, 1998,
compared to $4,517,000 for the quarter ended September 30, 1997 and $11,221,000
for the nine months ended September 30, 1997. The increase was primarily due to
increases in research personnel, facility expansion, pharmaceutical
bioavailability studies and equipment and materials necessary to support the
Company's continued investment in product research and development for
Company-internal and partner projects.
General and administrative expenses were $7,120,000 for the quarter ended
September 30, 1998 and $21,766,000 for the nine months ended September 30, 1998,
compared to $3,685,000 for the quarter ended September 30, 1997 and $8,621,000
for the nine months ended September 30, 1997. The increase was primarily due to
increases in personnel (primarily sales personnel), selling and marketing costs
and expanded administrative activities and amortization of goodwill associated
with the Acquired Companies.
Net interest expense was $1,039,000 for the quarter ended September 30,
1998 and $2,590,000 for the nine months ended September 30, 1998, compared to
net interest income of $478,000 for the quarter ended September 30, 1997 and
$1,828,000 for the nine months ended September 30, 1997. The increase in net
interest expense was primarily due to the interest expense associated with the
7% Convertible Subordinated Debentures issued in October 1997 which was
partially offset by income earned on the proceeds related thereto.
As a result of the foregoing, the net loss was $4,295,000 for the quarter
ended September 30, 1998 and $16,694,000 for the nine months ended September 30,
1998, compared to a net loss of $8,770,000 for the quarter ended September 30,
1997 and $14,057,000 for the nine months ended September 30, 1997.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company's portfolio of cash and marketable
securities totaled $49.0 million (including $10.5 million which is pledged as
collateral for the installment notes issued in connection with the purchase of
Clonmel Healthcare Limited - "Clonmel"), compared to $88.9 million as of
December 31, 1997. Major uses of cash during the nine months ended September 30,
1998 included approximately $19.4 million for the acquisition of Fuisz Pharma KG
(see below), $4.3 million in capital expenditures financed by the Company, $4.0
million in treasury stock repurchases, $2.6 million in interest associated with
the 7% Convertible Subordinated Debentures, $1.2 million for the redemption of
all 750,000 outstanding preference shares of Clonmel, $830,000 for installment
note and term loan obligations, and $14.5 million on Company-sponsored research
and development.
In March 1998, the Company completed the acquisition of all the issued and
outstanding equity interests of Fuisz Pharma KG, for an aggregate purchase price
of approximately $19.4 million in cash, including expenses. During the next
several years, the Company may periodically evaluate additional acquisitions of
businesses, products and technologies that extend or enhance the Company's
current business and line of products.
During the fourth quarter of 1998, the Company anticipates capital
expenditures ranging from $2.0 to $3.0 million, some of which may be financed
with the equipment leasing line of credit discussed below. Such expenditures
will be used to further expand and improve the Company's laboratory and
production facilities in both Virginia and Ireland.
The Company has an $18.0 million equipment leasing line of credit (the
"Equipment LOC") with an outside group of lenders. The Equipment LOC is
available through June 30, 1999, provides equipment financing under three or
four year operating leases, and may be utilized to finance a portion of the 1998
capital expenditures mentioned above (approximately $6.8 million of equipment
was financed during the nine months ended September 30, 1998). Through September
30, 1998, the Company has financed a total of approximately $10.1 million of
equipment under the Equipment LOC.
The Company's long-term debt totals $94.3 million as of September 30, 1998
and includes $75.0 million related to the Company's 7% Convertible Subordinated
Debentures (the "Debentures") due October 15, 2004. The Debentures were
privately placed on October 22, 1997 and the Company received net proceeds of
approximately $72.8 million related to the sale thereof. The Debentures are
subordinated to the Company's present and future Senior Indebtedness (as
defined) and interest is payable semiannually. In addition, long-term debt
includes $12.2 million (using September 30, 1998 exchange rates) related to
installment notes issued in connection with the acquisition of Clonmel net of
discount, and $7.1 million (using September 30, 1998 exchange rates) related to
term loans, capital leases and other long-term obligations, net of discount.
Maturities of long-term debt during the next twelve months, excluding
maturities, which are being financed, will be approximately $2.1 million. The
Company also has available international banking lines of credit totaling
approximately $2.4 million for short-term financing, of which approximately $1.5
million has been drawn down as of September 30, 1998.
10
<PAGE> 11
In November 1996, the Company's Board of Directors authorized a stock
repurchase program under which the Company is authorized to repurchase up to
1,000,000 shares of the Company's common stock for reissuance upon the exercise
of employee stock options and for other compensation programs utilizing the
Company's common stock. During 1996, the Company repurchased and subsequently
reissued 100,000 shares for $775,000 under this program. During the third
quarter of 1998, the Company repurchased 452,500 shares for $4,043,000.
Subsequent to September 30, 1998, the Company has repurchased an additional
185,700 shares for $1,520,000 (through October 31, 1998).
The Company expects to continue to incur substantial expenses related to
further research and development of its technologies and products, increased
staffing levels, acquisition and support of patent rights, additional capital
equipment for research and development activities and facility expansion. The
Company may incur additional losses in the near term. The Company expects that,
at least for the near term, its cash flow will be derived principally from
product sales, development and license fees and, to a lesser extent, royalties
from collaborative partners. In addition, pending disbursement for capital
expenditures and working capital, the Company expects to generate cash from the
investment of the funds generated in its October 1997 Debenture offering. The
Company believes that the currently available funds and internally generated
cash flow will be adequate to meet the Company's cash needs through 1999.
The Company's capital needs, however, will depend on many factors, including
revenues from product sales, continued progress in the research and development
of the Company's technologies, the ability of the Company to establish and
maintain additional collaborative agreements and the terms thereof, payments
received from collaborative partners under research and development agreements,
the cost involved in filing and enforcing patent claims, and the status of
competitive products and other factors. If the Company's currently available
funds and internally generated cash flow are not sufficient to satisfy its
financing needs, the Company would be required to seek additional funding
through other arrangements with collaborative partners, through bank borrowings
and through public or private sales of its securities, including equity
securities. There can be no assurance that additional funds, if required, will
be available to the Company on favorable terms, if at all.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which became effective for reporting
periods beginning after December 15, 1997. Interim reporting is not required
under SFAS No. 131 prior to adoption. SFAS No. 131 requires financial and
descriptive information with respect to "operating segments" of an entity based
on the way management makes internal operating decisions. The Company will begin
making the disclosures required by SFAS No. 131 for its operating segments with
financial statements for the period ending December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This Statement
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
The Company will be required to adopt this new accounting standard beginning
with the quarter ended March 31, 2000. The Company believes that the effect of
adoption of SFAS No. 133 will not be significant.
11
<PAGE> 12
IMPACT OF YEAR 2000
The Company is developing plans to address the possible exposures related to
the impact on its computer systems for the Year 2000. Key financial information
and operational systems are being assessed and plans are being developed to
address system modifications required by December 31, 1999. The financial impact
of making the required systems changes is not expected to be material to the
Company's consolidated financial position, results of operations or cash flows.
There can be no assurance, however, that the Company will be able to identify
all aspects of its business that are subject to Year 2000 problems, or identify
Year 2000 problems of customers or suppliers that affect the Company's business.
There also can be no assurance that the Company's software vendors are correct
in their assertions that the software is Year 2000 compliant or that the
Company's estimate of the cost of systems preparation for Year 2000 compliance
will prove ultimately to be accurate.
12
<PAGE> 13
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is currently not a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON 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) Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K
Current report on Form 8-K, dated July 20, 1998,
regarding signing of an agreement with the
Whitehall-Robins Healthcare Division of American Home
Products Corporation.
13
<PAGE> 14
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.
FUISZ TECHNOLOGIES LTD.
Date: November 13, 1998 By: /S/ Patrick D. Scrivens
------------------ ---------------------------
Patrick D. Scrivens
Executive Vice President and
Chief Financial Officer
Date: November 13, 1998 By: /S/ Lars G. Okeson
------------------ ---------------------------
Lars G. Okeson
Controller
(Principal Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000873064
<NAME> FUISZ TECHNOLOGIES LTD.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 10,223,000
<SECURITIES> 28,288,000
<RECEIVABLES> 15,731,000
<ALLOWANCES> 0
<INVENTORY> 5,806,000
<CURRENT-ASSETS> 61,443,000
<PP&E> 31,768,000
<DEPRECIATION> (5,261,000)
<TOTAL-ASSETS> 156,740,000
<CURRENT-LIABILITIES> 21,732,000
<BONDS> 92,132,000
0
0
<COMMON> 223,000
<OTHER-SE> 41,026,000
<TOTAL-LIABILITY-AND-EQUITY> 156,740,000
<SALES> 11,067,000
<TOTAL-REVENUES> 16,300,000
<CGS> 6,147,000
<TOTAL-COSTS> 19,556,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,743,000
<INCOME-PRETAX> (4,295,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,295,000)
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<EPS-PRIMARY> (0.19)
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</TABLE>
