<PAGE> 1
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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 March 31, 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 April 30, 1998, the Registrant has outstanding 22,275,128 shares of
Common Stock, par value $.01.
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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>
MARCH 31, DECEMBER 31,
1998 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,812 $ 5,548
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,161 73,134
Accounts receivable, trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,936 10,237
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,775 5,375
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,533 1,263
------------- ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,217 95,557
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,566 10,255
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,304 22,941
Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,872 34,883
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,293 6,484
------------- ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 165,252 $ 170,120
============= ============
LIABILITIES, REDEEMABLE PREFERENCE SHARES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,241 $ 1,042
Current portion of notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 2,113 2,605
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,143 9,047
Accrued liabilities and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,930 4,305
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757 622
------------- ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,184 17,621
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,110 90,055
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,059 1,131
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 921 532
------------- -----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,274 109,339
------------- -----------
Commitments and contingencies
Redeemable preference shares of subsidiary . . . . . . . . . . . . . . . . . . . . . . . 948 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 and outstanding 22,256,462 and 22,189,462 shares, respectively . . . . . . . 222 222
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,721 109,332
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (55,571) (49,055)
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . (2,342) (891)
------------- ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,030 59,608
------------- ------------
Total liabilities, redeemable preference shares and stockholders' equity $ 165,252 $ 170,120
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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FUISZ TECHNOLOGIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1998 1997
---------- -----------
<S> <C> <C>
Operating revenues:
Product sales . . . . . . . . . . . . . . . . . . . . . . . . $ 11,847 $ -
Research and development . . . . . . . . . . . . . . . . . . . 1,682 1,571
Licensing fees . . . . . . . . . . . . . . . . . . . . . . . . - 30
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . - 250
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474 -
---------- -----------
Total operating revenues . . . . . . . . . . . . . . . . 14,003 1,851
---------- -----------
Operating expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . 7,332 -
Research and development . . . . . . . . . . . . . . . . . . . 5,407 3,175
General and administrative . . . . . . . . . . . . . . . . . . 7,089 1,860
---------- -----------
Total operating expenses . . . . . . . . . . . . . . . . 19,828 5,035
---------- -----------
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . (5,825) (3,184)
---------- -----------
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . . . 1,074 780
Interest expense . . . . . . . . . . . . . . . . . . . . . . . (1,753) -
---------- -----------
Total other income (expense) . . . . . . . . . . . . . . (679) 780
---------- -----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6,504) $ (2,404)
========== ===========
Net loss per share (basic and diluted) . . . . . . . . . . . . . . $ (0.29) $ (0.12)
========== ===========
Weighted average shares outstanding
(basic and diluted) . . . . . . . . . . . . . . . . . . . . . . . 22,220 20,694
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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FUISZ TECHNOLOGIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
---------- ------------
<S> <C> <C>
Operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6,504) $ (2,404)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 2,061 248
Amortization of deferred financing costs . . . . . . . . . . . . . 106 -
Amortization of discount on notes payable . . . . . . . . . . . . . 330 -
Increase (decrease) in cash resulting
from changes in working capital items:
Accounts receivable and other current assets . . . . . . . . (1,384) (347)
Accounts payable and other current liabilities . . . . . . . 1,730 (1,551)
----------- ----------
Net cash used by operating activities . . . . . . . . . . . . . . . (3,661) (4,054)
----------- ----------
Investing activities:
Decrease (increase) in marketable securities . . . . . . . . . . . . . . 28,973 2,240
Capital expenditures (2,568) (1,948)
Acquisitions of businesses, net of acquired cash . . . . . . . . . . . . (19,340) -
Additions to intangibles . . . . . . . . . . . . . . . . . . . . . . . . (13) -
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . 94 (203)
----------- ----------
Net cash provided by investing activities . . . . . . . . . . . . . 7,146 89
----------- ----------
Financing activities:
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . 389 21
Redemption of preference shares of subsidiary . . . . . . . . . . . . . (206) -
Net borrowings under line-of-credit facilities . . . . . . . . . . . . . 241 -
Payments of debt obligations . . . . . . . . . . . . . . . . . . . . . . (495) (2)
Increase (decrease) in long term liabilities . . . . . . . . . . . . . . (107) -
----------- ----------
Net cash (used by) provided by financing activities . . . . . . . . (178) 19
----------- ----------
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . (43) -
----------- ----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . 3,264 (3,946)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . 5,548 5,282
----------- ----------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . 8,812 1,336
Marketable securities and restricted cash, end of period . . . . . . . . . 53,727 52,978
----------- ----------
Cash, cash equivalents and marketable securities, end of period . . . . . . . $ 62,539 $ 54,314
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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FUISZ TECHNOLOGIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
----------- ----------
<S> <C> <C>
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . $ (6,504) $ (2,404)
Foreign currency translation adjustments . . . . . . . . . . . . . (1,451) -
----------- ----------
Comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . $ (7,955) $ (2,404)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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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 microsphere technology and its Shearform
technology, including controlled release and rapid dissolve over-the-counter
("OTC") and prescription (or "ethical") pharmaceuticals.
Prior to the quarter ended September 30, 1997, the Company did not
have significant commercial revenues and its efforts had been principally
devoted to research and development; therefore, the Company was considered to
be in the development stage. However, as a result of the Company's 1997
business acquisitions and the 1997 launch of its Soft Chew calcium supplement
product, the Company is no longer considered to be in the development stage.
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 March 31, 1998 and for the three months ended March 31, 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. COMPREHENSIVE INCOME
As of March 31, 1998, the Company has adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which
requires additional disclosures with respect to certain changes in assets and
liabilities that previously were not required to be reported as results of
operations for the period.
3. ACQUISITION
In March 1998, the Company completed the acquisition (effective
February 1, 1998) of all of the issued and outstanding equity interests of Dr.
Rentschler GmbH & Co. Medizin KG ("Medizin 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 will be allocated between product licenses and
goodwill and will be amortized over five to fifteen years.
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<PAGE> 7
This acquisition was accounted for under the purchase method of
accounting. The results of operations of Medizin 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.
4. INVENTORY
Inventory consists of the following at March 31, 1998.
<TABLE>
<CAPTION>
(in thousands)
-----------------
<S> <C>
Raw materials $ 2,219
Work in process 881
Finished goods 2,675
-----------------
$ 5,775
=================
</TABLE>
5. 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 approximate fair value due to the relatively short maturity
of these instruments. As of March 31, 1998, the fair value of the $75.0
million aggregate principal amount of 7% Convertible Subordinated Debentures
due October 15, 2004, was approximately $82,500,000.
6. 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.
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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.
Prior to the quarter ended September 30, 1997, the Company did not
have significant commercial revenues and its efforts had been principally
devoted to research and development; therefore, the Company was considered to
be in the development stage. However, as a result of the Company's 1997
business acquisitions (see below) and the 1997 launch of its Soft Chew calcium
supplement product, the Company is no longer considered to be in the
development stage.
Since January 1, 1997, the Company significantly expanded its
operations with the i) opening of offices in Dublin, Ireland for its
international administrative and business development activities, ii)
establishment of a research and development facility outside of Dublin, iii)
completion of five business acquisitions, iv) purchase of two product licenses
and v) expansion of its research and development and production facilities in
Virginia. The five business acquisitions were of Laboratoires Murat ("Murat"),
Pangea Ltd. ("Pangea"), Clonmel Healthcare Limited ("Clonmel"), Istoria
Farmaceutici ("Istoria"), and Dr. Rentschler GmbH & Co. Medizin KG ("Medizin
KG"), which 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 the 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.
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The Company has not been profitable to date, on a full fiscal year
basis, and expects to incur additional losses in the near term, primarily due
to the continuation of its research and development activities and the
expansion of its manufacturing operations.
RESULTS OF OPERATIONS
Operating revenues were $14,003,000 for the quarter ended March 31,
1998, compared to $1,851,000 for the quarter ended March 31, 1997, an increase
of $12,152,000. The increase is primarily due to the inclusion of $11,847,000
of product sales from the Acquired Companies, all of which were acquired
subsequent to March 31, 1997.
Cost of sales was $7,332,000 for the quarter ended March 31, 1998,
with no corresponding amount for the quarter ended March 31, 1997. The
increase was due to the inclusion of the cost of product sales by the Acquired
Companies.
Research and development expenses were $5,407,000 for the quarter
ended March 31, 1998, compared to $3,175,000 for the quarter ended March 31,
1997, an increase of $2,232,000. The increase was primarily due to increases
in research personnel, pharmaceutical bioavailability studies and materials and
supplies necessary to support the Company's additional development and license
agreements and the Company's continued emphasis on developing its own product
applications.
General and administrative expenses were $7,089,000 for the quarter
ended March 31, 1998, compared to $1,860,000 for the quarter ended March 31,
1997, an increase of $5,229,000. The increase was primarily due to increases
in personnel (primarily sales personnel) and expanded administrative activities
associated with the operations of the Acquired Companies and the start-up of
the international facilities in Ireland.
Net interest expense was $679,000 for the quarter ended March 31,
1998, compared to net interest income of $780,000 for the quarter ended March
31, 1997, a net increase in interest expense of $1,459,000. 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 additional interest income resulting from an increase in
the average balance of funds available for investment.
As a result of the foregoing, the net loss was $6,504,000 for the
quarter ended March 31, 1998, compared to a net loss of $2,404,000 for the
quarter ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company's portfolio of cash and marketable
securities totaled $62.5 million (including $9.6 million which is pledged as
collateral for the installment notes issued in connection with the purchase of
Clonmel), compared to $88.9 million as of December 31, 1997. Major uses of
cash during the first quarter of 1998 included $19.4 million for the
acquisition of Medizin KG (see below), $500,000 for installment note and term
loan obligations, $2.6 million in capital expenditures and $5.4 million of
research and development expenses.
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<PAGE> 10
In March 1998, the Company completed the acquisition of all the issued
and outstanding equity interests of Dr. Rentschler GmbH & Co. Medizin KG
("Medizin 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. 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 1998, the Company anticipates capital expenditures ranging from
$17.0 to $19.0 million. 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 a $15.0 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 $1.1 million of
equipment was financed during the first quarter of 1998). Through March 31,
1998, the Company has financed a total of approximately $4.4 million of
equipment under the Equipment LOC.
The Company's long-term debt consists of notes payable of $92.2
million as of March 31, 1998. Notes payable 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 $10.8 million (using March 31, 1998
exchange rates) related to installment notes issued in connection with the
acquisition of Clonmel, net of discount, and $6.4 million (using March 31, 1998
exchange rates) related to term loans and other long-term obligations, net of
discount. Maturities of notes payable during the next twelve months, excluding
maturities which are being financed, will be approximately $2.1 million. The
Company has available international banking lines of credit totaling
approximately $2.4 million for short-term financing.
In connection with the September 1997 acquisition of Clonmel, the
Company assumed the obligation of the 750,000 cumulative redeemable preference
shares of Clonmel. Cumulative dividends of 3% on 300,000 shares and 6.5% on
450,000 shares are payable annually. Clonmel redeemed 150,000 shares in
February 1998 for approximately $206,000 and is required to redeem 600,000
shares in June 1998 at a redemption rate of IR(Irish Pound)1 per share plus
accrued dividends.
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 expects to incur additional losses in the near term. The Company
expects that, at least for the near term, its revenues 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 realize income from the investment of the funds generated in its October
1997 Debenture offering. The Company
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<PAGE> 11
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 with others 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.
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.
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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 March 12, 1998,
regarding Acquisition of Dr. Rentschler GmbH & Co.
Medizin KG.
Current report on Form 8-K dated March 24, 1998,
regarding the Company's new focus on the development
and manufacture of products incorporating Fuisz's
patented technology and that Fuisz and McNeil
Consumer Products Company have agreed not to proceed
together.
12
<PAGE> 13
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: May 15, 1998 By: /S/ Patrick D. Scrivens
----------------------- -------------------------------
Patrick D. Scrivens
Executive Vice President and
Chief Financial Officer
Date: May 15, 1998 By: /S/ Lars G. Okeson
----------------------- -------------------------------
Lars G. Okeson
Controller
(Principal Accounting Officer)
13
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