SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                                   (Mark One)

[X] Quarterly report  pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the quarterly period ended March 31, 1999 or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the transition period from _____ to _____.

                         Commission File Number: 0-22401

                              BIONX IMPLANTS, INC.
             (Exact name of registrant as specified in its charter)

           Delaware                                            22-3458598
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                            Identification No.)

                            1777 Sentry Parkway West
                             Gwynedd Hall, Suite 400
                          Blue Bell, Pennsylvania 19422
           (Address of principal executive office, including zip code)

                                  215-643-5000
              (Registrant's telephone number, including area code)

      _____________________________________________________________________
        (Former name, former address and former fiscal year, if changed
         since last report)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days.

                                  Yes X  No___

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.

     At May 10, 1999,  there were  8,895,576  shares of Common Stock,  par value
$.0019 per share, outstanding.

<PAGE>


BIONX IMPLANTS, INC. AND SUBSIDIARIES


INDEX




                                                                      Page

Part I. Financial Information

Item 1. Consolidated Financial Statements

         Consolidated Balance Sheets at December 31, 1998
         and March 31, 1999 (Unaudited)                                   3

         Consolidated Statements of Operations for the Three
         Months Ended March 31, 1998 and 1999 (Unaudited)                 4

         Consolidated Statements of Cash Flows for the Three Months
         Ended March 31, 1998 and 1999 (Unaudited)                        5

         Notes to Consolidated Financial Statements (Unaudited)           6

Item 2. Management's Discussion and Analysis of Financial
         Condition and Results of Operations                              8


Part II. Other Information

Item 2.  Changes in Securities and Use of Proceeds                       13

Item 6. Exhibits and Reports on Form 8-K                                 13

Signatures                                                               14

Exhibits                                                                 15

<PAGE>


Item 1. Financial Statements

<TABLE>
<CAPTION>

                      BIONX IMPLANTS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      December 31, 1998 and March 31, 1999
                      (in thousands, except share amounts)

                                                                         December 31,          March 31,
                                                                            1998                  1999
                                                                                     (Unaudited)
Assets:
Current assets:

<S>                                                                        <C>                <C>    
   Cash and cash equivalents                                               $ 14,213           $ 9,300
   Inventory, net                                                             9,778            11,106
   Trade accounts receivable, net of
      allowance of $142 and $238 as of December 31,
      1998 and March 31, 1999                                                 4,643             4,273
   Grants receivable                                                            189               490
   Related party receivables                                                    239               252
   Prepaid expenses and other current assets                                    726               403
   Deferred tax assets                                                          829               829
                                                                             ------            ------

Total current assets                                                         30,617            26,653
Investments                                                                      87                87
Plant and equipment, net                                                      2,561             3,195
Goodwill and intangibles, net                                                 3,684             4,024

          Total assets                                                     $ 36,949            33,959
                                                                             ======            =======

Liabilities and Stockholders" Equity
Current Liabilities:
    Trade accounts payable                                                  $ 4,176             2,192
     Long-term debt, current portion                                             41                 2
     Current income tax liability                                               578               471
     Accrued and other current liabilities                                    1,839             1,878
                                                                              -----             -----
Total current liabilities                                                     6,634             4,543

Long-term debt                                                                   75                75

Stockholders' equity:
   Preferred stock, par value $0.001 per share
      8,000,000 authorized and none issued                                       -                 -
  Common stock, par value, $0.0019 per share,
    31,600,000 shares authorized,  8,922,076
    and 8,922,076 shares issued and outstanding
    as of December 31, 1998 and March 31, 1999,
    respectively                                                                 17                17
Treasury  stock,  20,500 and 26,500  shares as of December  31,
1998 and  March 31, 1999                                                       (128)             (162)
Additional paid-in capital                                                   35,642            35,642
Accumulated deficit                                                          (4,266)           (5,131)
Foreign currency translation adjustment                                      (1,025)           (1,025)
                                                                             ------            -------
Total stockholders' equity                                                   30,240            29,341
                                                                             ------            ------
          Total liabilities and stockholders' equity                       $ 36,949          $ 33,959
                                                                            =======           =======
   See accompanying notes to the unaudited Consolidated Financial Statements.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                      BIONX IMPLANTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (Unaudited)

                                                                             Three Months Ended
                                                                                    March 31,
                                                                             1998              1999


Revenues:
<S>                                                                        <C>                <C>  
Product Sales                                                              $4,459             5,107
Grant and license revenues                                                     54               177
                                                                            -----             -----
Total revenues                                                              4,513             5,284
                                                                            -----             -----
Cost of goods sold                                                            969             1,348
                                                                            -----             -----
Gross profit                                                                3,544             3,936
                                                                            -----             -----
Selling, general and administrative                                         3,018             4,336
Research and development                                                      301               750
                                                                            -----             -----
Total operating expenses                                                    3,319             5,086
                                                                            -----             -----
Operating income (loss)                                                       225            (1,150)


Other income and expense                                                      281               285
                                                                            -----            ------
Income (Loss) before provision for
   income taxes                                                               506              (865)

Provision for income taxes                                                    177                 -
                                                                             ----               ----
Net income (loss)                                                          $  329              (865)
                                                                             ====              =====

Earnings (Loss) per share:
     Basic                                                                 $ 0.04             (0.10)
     Diluted                                                               $ 0.04             (0.10)


Shares used in computing earnings (loss) per share:
     Basic                                                                  8,922             8,899
     Diluted                                                                9,278             8,899

   See accompanying notes to the unaudited Consolidated Financial Statements.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                       BIONX IMPLANTS, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (Unaudited)
                                                  (in thousands)
                                                                                 Three Months Ended
                                                                                     March 31,
                                                                           -------------------------------
                                                                                1998                1999

Cash flows from operating activities:

<S>                                                                            <C>                  <C>  
Net income (loss)                                                             $  329                (865)
Adjustments to reconcile net income
     to net cash (used in) provided by (loss) operating activities:
Depreciation and amortization                                                    109                 152
Change in assets and liabilities:
(Increase) in inventory, net                                                    (390)             (1,328)
(Increase) decrease in trade accounts receivable, net                           (128)                370
(Increase) decrease in grants receivable                                          68                (301)
(Increase) in related party receivables                                           -                  (13)
Increase (decrease) in prepaid expense and other current assets                 (162)                323
Increase (decrease) in trade accounts payable                                    125              (1,984)
(Decrease) in current income tax liability                                      (407)               (107)
Increase in accrued and other current liabilities                                 68                  39
                                                                               -----              -------
                                                                                (717)             (2,849)
                                                                               -----              -------

Net cash (used in) operating activities                                         (388)             (3,714)
                                                                               ------              ------
Cash flows from investing activities
            Purchase of plant and equipment                                     (490)               (748)
            Purchase of intangible assets                                        -                  (378)
                                                                               ------               -----

Net cash used in investing activities                                          (490)              (1,126)
                                                                               ------              ------
Cash flows from financing activities:
             Repayment of long-term debt                                         -                   (39)
             Proceeds from exercise of employee stock options                    26                    -
             Purchase of treasury shares                                         -                   (34)

Net cash provided by (used in) financing activities                              26                  (73)


Net decrease in cash and cash equivalents                                      (852)              (4,913)
Cash and cash equivalents at beginning of period                             22,632               14,213
Cash and cash equivalents at end of period                                 $ 21,780              $ 9,300
                                                                            =======               ======
Supplementary cashflow information:

Cash paid for taxes                                                             584                  155
</TABLE>

   See accompanying notes to the unaudited Consolidated Financial Statements.

<PAGE>

                     BIONX IMPLANTS, INC., AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                    (Unaudited)

1.   Basis of Presentation

     The accompanying financial statements have been prepared by Bionx Implants,
Inc.  (the  "Company")  and  are  unaudited.  In the  opinion  of the  Company's
management,  all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly the Company's  consolidated financial position as of
December 31, 1998 and March 31, 1999, and the Company's  consolidated results of
operations  and cash flows for the three  months  ended March 31, 1998 and 1999,
have been made.  Certain  information  and footnote  disclosures  required under
generally accepted accounting principles have been condensed or omitted from the
consolidated financial statements and notes thereto presented herein pursuant to
the rules and regulations of the SEC. The consolidated  financial statements and
notes thereto  presented herein should be read in conjunction with the Company's
audited  consolidated  financial statements for the year ended December 31, 1998
and notes thereto included in the Company's Annual Report on Form 10-K (SEC file
no.  0-22401)  filed with the SEC. The results of operations  and the cash flows
for the three months ended March 31, 1999 are not necessarily  indicative of the
results to be expected for any other interim period or the entire fiscal year.

2.   Inventory

     Inventory consists of the following components (000's):


                                                     December 31,     March 31,
                                                        1998            1999

   Raw materials                                       $1,782          $1,883
   Finished goods - Implants                            2,570           2,288
   Instruments                                          2,457           4,066
   Instruments on consignment                           3,944           4,147
                                                       ------          ------
                                                       10,753          12,384

   Inventory Reserve                                     (175)           (175)
   Accumulated amortization
    - consigned instruments                              (800)         (1,103)
                                                       -------         ------
                                                      $ 9,778         $11,106
                                                       ======          ======

3.   Net Income (loss) Per Share

     Basic earnings per share is computed  using the weighted  average number of
shares of common stock outstanding during the period. Diluted earnings per share
is computed using the weighted  average number of common and dilutive  potential
common shares outstanding during the period.  Potential common shares consist of
stock options and warrants  using the treasury  stock method and are excluded if
their effect is antidilutive.


     The  following  table sets  forth the  calculation  of the total  number of
shares used in the  computation of net earnings  (loss) per common share for the
three months ended March 31, 1998 and 1999 (in thousands):

                                                     1998                  1999

Shares used in computing basic
         earnings per share                         8,920                  8,899

Incremental shares from assumed exercise of
         dilutive options and warrants                358                     -
                                                    -----                  -----
Shares used in computing diluted
         earnings per share                         9,278                  8,899
                                                    =====                  =====

4.   Reporting Comprehensive Income

     As  of  January  1,  1998,  the  Company  adopted  Statement  of  Financial
Accounting Standards No. 130 Reporting Comprehensive Income (SFAS 130). SFAS 130
establishes new rules for the reporting and display of comprehensive  income and
its  components.  The  adoption of SFAS 130 had no impact on the  Company's  net
income or stockholders' equity. SFAS 130 requires the Company's foreign currency
translation  adjustments,  which prior to adoption were  reported  separately in
stockholders' equity, to be included in other comprehensive income.

Comprehensive  income  (loss)  was the same as net  income  (loss) for the three
months ended March 31, 1998 and 1999.


<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business

     Statements  regarding  future  performance in this Quarterly Report on Form
10-Q  constitute   forward-looking   statements  under  the  Private  Securities
Litigation  Reform  Act of 1995.  The  Company's  actual  results  could  differ
materially from those anticipated by such forward-looking statements as a result
of certain  factors,  including those set forth in Exhibit 99.1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.

     The  Company  was  founded in 1984 to develop  certain  resorbable  polymer
implants for orthopaedic  uses. The Company had incurred  substantial  operating
losses from its inception through December 31, 1996, with an accumulated deficit
of  approximately  $5.1  million  as of March 31,  1999.  Such  losses  resulted
principally  from  expenses  associated  with  the  development,  patenting  and
clinical testing of the Company's  Self-Reinforcing  technologies and resorbable
implant  designs,   preparation  of  submissions  to  the  U.S.  Food  and  Drug
Administration (the "FDA") and foreign regulatory  agencies,  the development of
sales, marketing and distribution channels, the write-off of acquired in-process
research and development, and the development of its manufacturing capabilities.
Although the  Company's  revenues  have grown  significantly  in certain  recent
periods,  no  assurance  can be given  that this  trend  will  continue  or that
revenues of any  magnitude  will exceed  expenses  incurred in  anticipation  of
future growth.  Accordingly,  the Company may incur significant operating losses
in the future as it  continues  its  product  development  efforts,  expands its
marketing,  sales and  distribution  activities and scales up its  manufacturing
capabilities.  There  can be no  assurance  that  the  Company  will  be able to
continue  to   successfully   commercialize   its  products  or  that  continued
profitability will be achieved.

     The Company first introduced its polyglycolic  acid ("PGA") polymer pins in
1984 and its PGA  screws in 1986.  In 1987,  the  Company  introduced  its first
poly-l-lactic  acid  ("PLLA")  polymer  products,  PLLA pins.  PLLA  screws were
introduced in 1989.  Since the  introduction of these products,  the Company has
expanded  its PGA and PLLA pin and screw  product  lines to  address  additional
clinical indications. The Company's PGA membrane product was introduced in 1992,
and, in 1995, the Company  launched its Meniscus Arrow,  PLLA tacks, and PGA and
PLLA urology stents. Prior to 1996, the Company derived substantially all of its
revenue from sales of its PLLA and PGA screws and pins. A substantial portion of
the Company's  revenues in more recent  periods has resulted from U.S.  sales of
the Meniscus  Arrow,  which  received FDA clearance in March 1996. To date,  all
products sold by the Company have been launched first in international  markets.
During the three  months  ended  March 31, 1998 and 1999  international  product
sales represented 17% of the Company's total product sales.

     The Company  typically  sells or consigns  implant grade,  stainless  steel
surgical  instruments  for  use  with  each of its  Self-Reinforced,  resorbable
products.  The sale of these  instruments  result in margins which are typically
lower than the margins  applicable to the Company's implant  products.  However,
since  orthopedic  companies  operating in the U.S.  have  traditionally  loaned
rather than sold instruments to their customers, the Company anticipates that in
the  future,  it will be  necessary  for the  Company to  provide an  increasing
proportion of its  instrumentation  in the U.S. on a loan basis.  In most cases,
instrumentation is provided on a consignment basis to customers that commit to a
certain  purchase level of implant  products.  The instruments are loaned on the
basis of a one year  consignment  policy.  Similar  practices  are not common in
international markets. For financial statement purposes,  revenues from the sale
of  instrumentation   systems  are  included  within  product  sales  and  costs
associated with such systems are included within cost of goods sold. In the case
of consigned product, the Company amortizes the cost of the instrumentation over
a three to four year period as cost of goods sold. The Company's instrumentation
systems are reusable. Accordingly, sales and loans of such systems are likely to
be most  pronounced in periods  shortly after product  launches and likely to be
less prevalent as penetration of the market increases over the long term.

     The Company  sells its products  through  managed  networks of  independent
sales agents,  distributors  and dealers.  In the U.S., the Company  handles all
shipping and  invoicing  functions  directly and pays  commissions  to its sales
agents.   Outside  the  U.S.,  the  Company  sells  its  products   directly  to
distributors  and  dealers  at  discounts  that vary by  product  and by market.
Accordingly,  the  Company's  U.S.  sales  result in higher  gross  margins than
international sales. The Company anticipates that during the next few years, the
relative  percentage of its U.S.  product sales to total product sales is likely
to  continue  to  increase.  Since the Company  pays  commissions  on sales made
through its U.S.  network,  an increased  percentage of U.S. sales in the future
will  likely  result in an increase in the  percentage  of selling,  general and
administrative  expenses to total sales.  This increase will be partially offset
by the higher gross margins received on products sold in the U.S.

     The Company has entered  into  agreements  pursuant to which the Company is
obligated  to pay  royalties  based on net  sales of  certain  of the  Company's
products, including the Meniscus Arrow. To the extent that sales of the Meniscus
Arrow  products and other  licensed  products  increase in future  periods,  the
Company's royalty obligations are expected to increase.

     The  Company  currently  manufactures  its implant  products  solely at its
Tampere,  Finland  plant.  The  Company  intends to  establish  a  manufacturing
capability in the U.S. The Company plans to establish this capability  either by
equipping and operating a leased  facility or contracting  with a third party to
provide a manufacturing  capability to the Company. The Company believes that on
an interim basis, contract  manufacturing may enable the Company to save certain
staffing  costs and enable  senior  management  to focus on other aspects of its
business. However, if the Company arranges for a third party to provide contract
manufacturing  in the U.S.,  fees  payable to such  manufacturer  may exceed any
savings in  staffing  costs and  result in higher  costs of goods sold and lower
gross profit.  Ultimately,  in operating a U.S. facility, the Company will incur
certain  duplicative  manufacturing  costs which could result in higher costs of
goods sold and lower gross profit margins.

     The Company  invoices  more than 85% of its  consolidated  revenues in U.S.
Dollars.  Approximately  80%  of  the  expenses  incurred  by  the  Company  are
denominated in U.S. Dollars.  The remaining portion of revenues and expenses are
denominated in European  currencies,  predominantly  Finnish Markka. The Company
seeks to manage its foreign currency risk for these other currencies through the
purchase of foreign currency options and forward contracts. No assurances can be
given that such  hedging  techniques  will  protect  the Company  from  exposure
resulting  from  relative  changes  in the  economic  strength  of  the  foreign
currencies  applicable to the Company.  Foreign exchange  transaction  gains and
losses can vary significantly from period to period.

     While the Company's  operating  losses have resulted in net operating  loss
carryforwards of approximately  $2.0 million for income tax reporting  purposes,
the extent to which such  carryforwards  are  available  to offset  future  U.S.
taxable income is significantly limited as a result of various ownership changes
that have  occurred in recent years.  Additionally,  because U.S. tax laws limit
the time during which these  carryforwards  may be applied against future taxes,
the Company may not be able to take full advantage of the U.S. carryforwards for
federal income tax purposes.  Furthermore, income earned by a foreign subsidiary
may not be offset against  operating losses of Bionx Implants,  Inc. or its U.S.
subsidiaries.  As a result, the Company may incur tax obligations during periods
when it reflects a  consolidated  net  operating  loss.  The statutory tax rates
applicable  to the  Company  and its foreign  subsidiaries  vary  substantially,
presently  ranging  from  approximately  40% in the U.S. to 28% in Finland.  Tax
rates have fluctuated in the past and may do so in the future.

     The  Company's  results of  operations  have  fluctuated  in the past on an
annual and quarterly basis and may fluctuate significantly from period to period
in the future,  depending on several  factors,  many of which are outside of the
Company's control. Such factors include the timing of government approvals,  the
medical  community's  acceptance  of the  Company's  products,  the  success  of
competitive  products,  the  ability  of the  Company  to enter  into  strategic
alliances with corporate partners,  expenses associated with patent matters, the
results of regulatory  inspections and the timing of expenses related to product
launches.

     Effective January 1, 1998, the functional currency of the Company's foreign
subsidiaries was changed from the Finnish Marrka to the U.S. dollar. This change
was made because of the  development of the Compan's  business and the changes,
which that  development  created,  in the economic  conditions  surrounding  the
Finnish  subsidiaries.  The Company based its decision to change the  functional
currency  primarily  on  trends in sales and cash  inflows  noted in  historical
financial  data through  December  1997. In  particular,  the amount of revenues
denominated in U.S. dollars increased from below 50% of total sales in the years
prior to 1997 to in excess of 90% of total sales during 1997.  In addition,  the
Company's  initial  public  offering in April 1997 and the  introduction  of its
Meniscus  Arrow  dramatically  altered the dollar cash  inflows into the Finnish
subsidiaries from  approximately 50% throughout 1997 to 93% by the first quarter
of  1998.  Other  gradual  changes  in  the  economic  factors  of  the  Finnish
subsidiaries  include  changes  in  the  sales  prices  of  the  products  being
manufactured,  the sales markets for the products being  manufactured,  expenses
being incurred, sources of financing and intercompany  transactions.  All of the
changes in these economic factors are primarily due to the increased reliance of
the foreign  subsidiaries  on the U.S.  marketplace  for sales of products being
manufactured.  It was not until  late 1997 when  these  trends in sales and cash
inflows became clearer and  stabilized.  Based upon these facts and trends,  the
Company believed that the functional  currency of the Finnish  operations should
be U.S. dollars not Finnish Markka.

Results of Operations

     Product  sales.  The  Company's  product  sales  increased by 15% from $4.5
million  during the  quarter  ended March 31,  1998 to $5.1  million  during the
quarter  ended March 31, 1999.  Product  sales are  comprised of three  specific
product  categories,  Meniscus Arrows,  Other Implants  (screws,  pins,  plates,
tacks, and stents) and Instruments and other product-related revenue.

     Meniscus Arrow revenues worldwide were unchanged at $3.1 million during the
first  quarters  of 1998  and  1999.  Meniscus  Arrow  performance  in the  U.S.
continues to be impacted by competitive pressures in the marketplace.

     Other implant revenues  increased by 81% worldwide from $893,000 during the
first quarter of 1998 to $1.6 million during the first quarter of 1999. The 1999
product sales increases reflect  increased  utilization of the Company's managed
network of  independent  sales  agents in the U.S.  and  increased  sales of the
Company's existing products in international markets.

     Instruments  and other  product-related  revenues  declined  from  $433,000
during the first quarter of 1998 to $390,000, during the first quarter of 1999.

     Grant and License revenues. Grant and license revenues totaled $177,000 for
the three months ended March 31, 1999, compared with revenue of $54,000 recorded
during the three month period ended March 31, 1998.  This increase in revenue is
results from two license fees of $105,000 recorded in the first quarter of 1999,
which relate to one domestic and one international distribution agreement.

     Gross profit;  gross margin. The Company's gross profit increased from $3.5
million  during  the first  quarter  of 1998 to $3.9  million  during  the first
quarter of 1999. The increases in the Company's gross profit primarily  resulted
from the general increase in product sales volume.  Overall, the Company's gross
margin (including the effects of grant revenue)  decreased from 78.5% during the
first quarter of 1998 to 74.5% during the first quarter of 1999. The decrease in
gross  margin in 1999 is  attributable  to the  increasing  amortization  of the
Company's consigned instrumentation.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  increased  by 44% from $3.0  million  during the first
quarter of 1998 to $4.3 million during the first quarter of 1999.  Such expenses
were 68% of product sales during the first  quarter of 1998,  and 85% of product
sales  during the first  quarter of 1999.  Selling,  general and  administrative
expenses consist  primarily of distributor  commissions paid on product sales in
the U.S., patent and license related expenses, costs incurred in connection with
the  regulatory  process,  expenses  associated  with  supporting  the Company's
managed  networks of  independent  sales  agents,  distributors  and dealers and
amortization  of goodwill and patents  associated  with the Company's  September
1996   reorganization   (such   amortization  and   depreciation   amounting  to
approximately $65,000 per quarter and expected to be approximately  $255,000 per
year through 2017).  The increases in the dollar amount of selling,  general and
administrative  expenses were  primarily  attributable  to increased  commission
payment obligations reflecting the Company's increased product sales in the U.S.
and increased  expenses  associated with  establishing  and supporting a managed
network of independent sales agents, and direct  representatives in the U.S. The
increase in the  percentage  relationship  of such expenses to product sales for
the  three  month  periods   described   herein  reflects  certain  general  and
administrative  expenses  incurred  in  anticipation  of new  product  launches.
Additionally,  the Company incurred in the first quarter of 1999,  approximately
$385,000 in legal fees to initiate three separate patent  infringement suits and
start  up  costs   associated   with  the  addition  of  certain   direct  sales
representatives.

     Research and development.  Research and development  expenses  increased by
149% from $301,000 during the first quarter of 1998 to $750,000 during the first
quarter  of 1999.  These  increases  reflected  an  increased  volume of product
development work being performed by the Company and increased staffing levels in
this area.

     Other  income  and  expense.  In the first  quarter  of 1999,  the  Company
generated  interest income of $132,000,  compared to interest income of $281,000
in the  comparable  period of 1998.  Funds obtained from the proceeds of the IPO
generated  the  interest  income in both the 1998 and 1999  periods.  During the
first quarter of 1999, the Company incurred foreign exchange gains of $153,000.

     Income taxes. The Company recorded no tax provision in the first quarter of
1999 compared to a tax provision of $177,000 in the  comparable  period of 1998.
The consolidated operating loss in the first quarter of 1999 was incurred by the
U.S. entity. As a result, no corresponding tax benefit was recognized due to the
net operating loss position in the U.S.

     Net (loss) income.  The Company reported a net loss of ($865,000) or ($.10)
per share  (diluted)  for the first quarter of 1999, as compared with net income
of $329,000 or $.04 per share for the comparable period in 1998.

Liquidity and Capital Resources

     In  September  1996,  the  Company  completed a private  placement  of $5.0
million in preferred  stock (all of which was  converted  into Common Stock upon
consummation of the Company's Initial Public Offering in April 1997 ("IPO")) and
warrants (all of which were exercised  during April 1997). The net proceeds were
used to repay  bank debt,  to pay down trade  debt,  to fund  manufacturing  and
product development efforts and for other working capital purposes. During April
1997, the Company  consummated its IPO. In May 1997, the Underwriters  exercised
in full their  over-allotment  option  granted in  connection  with the IPO. Net
proceeds from the IPO (including the exercise of the over-allotment  option) and
the exercise of warrants during April 1997 were $21.7 million. In addition,  the
Company made arrangements for a $2 million credit line,  secured by the personal
property  of the  Company.  and its  Biostent,  Inc.  subsidiary.  Amounts to be
advanced  thereunder  are subject to the lender's  discretion and are limited to
specific percentages of certain domestic receivables and inventory.  To date, no
amounts have been borrowed pursuant to this credit facility.

     At December 31, 1998 and March 31, 1999, cash and cash equivalents  totaled
$14.2  million and $9.3  million,  respectively.  The  decrease in cash and cash
equivalents of approximately $4.9 million from December 31, 1998 is attributable
to  investments  of  approximately  $1.1 million in machinery  and equipment and
intangibles,  as  well  as a $ 1.3  million  increase  in  inventory  levels  in
anticipation of new product launches and consignment of  instrumentation,  and a
pay down of trade accounts payable of $2.0 million.

     As of March 31,  1999,  the Company had working  capital of $22.1  million,
compared with $24.0 million as of December 31, 1998.  Long-term debt  (including
the current portion) was reduced by $39,000,  from the level at the beginning of
the year to $77,000 as of March 31, 1999.  This debt  represents  loans obtained
from the Finnish government,  and carries interest rates ranging from 1 - 3% per
annum.

     The Company  believes that  existing  capital  resources  from its IPO, its
September 1996 private placement and its $2.0 million credit line, together with
cash flow from operations (if, and to the extent, generated), will be sufficient
to fund its  operations  through 2000.  However,  the Company's  future  capital
requirements  and the  adequacy  of  available  funds  will  depend on  numerous
factors,  including market  acceptance of its existing and future products,  the
successful commercialization of products in development, progress in its product
development  efforts,  the magnitude  and scope of such  efforts,  progress with
preclinical studies, clinical trials and product clearances by the FDA and other
agencies,  the cost and  timing  of its  efforts  to  expand  its  manufacturing
capabilities,  the cost of filing,  prosecuting,  defending and enforcing patent
claims and other  intellectual  property  rights,  competing  technological  and
market  developments,  and  the  development  of  strategic  alliances  for  the
marketing of certain of its products.  The Company's  operations did not produce
positive  cash flows  during  1994,  1995 and 1996 and 1998.  To the extent that
funds  generated  from the  Company's  operations,  together  with its  existing
capital resources  (including its credit facility),  and the net interest earned
thereon, are insufficient to meet current or planned operating requirements, the
Company  will be  required to obtain  additional  funds  through  equity or debt
financings,  strategic  alliances with corporate partners and others, or through
other  sources.   The  terms  of  any  equity  financings  may  be  dilutive  to
stockholders  and the  terms  of any debt  financings  may  contain  restrictive
covenants,  which  limit the  Company's  ability  to pursue  certain  courses of
action. The Company does not have any committed sources of additional  financing
beyond that  described  above,  and there can be no  assurance  that  additional
funding,  if  necessary,  will be available on acceptable  terms,  if at all. If
adequate  funds  are not  available,  the  Company  may be  required  to  delay,
scale-back or eliminate  certain  aspects of its operations or attempt to obtain
funds through  arrangements  with strategic  partners or others that may require
the  Company  to  relinquish  rights to  certain  of its  technologies,  product
candidates,  products or potential markets. If adequate funds are not available,
the Company's  business,  financial condition and results of operations could be
materially and adversely affected.

Year 2000 Compliance

Readiness

     The Company's  centralized  corporate  business and  technical  information
systems have been fully assessed as to year 2000  compliance and  functionality.
Presently,  these systems are nearly complete with respect to required  software
changes,  tests  and  migration  to  the  production  environment.  The  Company
anticipates that internal  business and technical  information  system year 2000
compliance  issues  will be  substantially  remedied  by the  end of the  second
quarter 1999. This  expectation  constitutes a  Forward-Looking  Statement.  The
Company's non- technical  information systems are currently being assessed as to
their year 2000  compliance  and  functionality  and this  assessment  should be
completed in the second quarter of 1999.

     The Company has  satisfactorily  completed the identification and review of
computer  hardware and software  suppliers  and is in the process of  verifying,
reviewing  and logging  year 2000  preparedness  of general  business  partners,
suppliers,  vendors, and/or service providers that the Company has identified as
critical.

Costs

     The  Company  incurred  costs of  approximately  $250,000  in  fiscal  1998
associated  with the purchase of and  modifications  to the  Company's  existing
systems to make them year 2000 ready. The Company expects to incur costs between
$100,000 and $200,000 in fiscal year 1999 for a total  project cost of less than
$500,000  for  year  2000  compliance.   Most  of  these  costs  relate  to  the
implementation of a new internal business system, which will be depreciated over
its estimated life. Any other cost relating to this undertaking will be expensed
as incurred.  Based on the estimates and information  currently  available,  the
Company does not anticipate  that the cost  associated with year 2000 compliance
issues will be  material to the  Company's  consolidated  financial  position or
results of operations.

Risks and Contingency Plans

     Considering  the  substantial  progress made to date,  the Company does not
anticipate  delays in  finalizing  internal  year 2000  remediation  within  the
remaining  time  schedules.  There  can  be no  assurances,  however,  that  the
Company's internal systems or those of a third party on which the Company relies
will be year 2000 compliant by the year 2000. An  interruption  of the Company's
ability to conduct its business due to a year 2000 readiness  problem could have
a material adverse effect on the Company.

     Anticipated  completion of this review is estimated to be  accomplished  by
the end of the second  quarter of 1999.  Pending  the  results of the  Company's
review of the year 2000 preparedness of its critical third parties,  the Company
will then  determine  what  course of action and  contingencies  will need to be
made, if any.

<PAGE>


Part II. Other Information

Item 2.  Changes in Securities and Use of Proceeds

     The  Company's   initial  public  offering  was  effected   pursuant  to  a
registration  statement on Form S-1 (No.  333-22359)  declared  effective by the
Securities and Exchange  Commission  (the "SEC") on April 24, 1997. The offering
commenced on April 25, 1997 and terminated after all securities were sold.

     From April 25,  1997  through  March 31,  1999,  the  Company  has used the
following  amounts of the net proceeds from the initial public  offering for the
following categories enumerated by the SEC:

                                                    Reasonable Estimated Amount
                                                          (in thousands)
     Category

     Construction of plant, building and facilities             $1,933

     Purchase and installation of machinery and equipment        1,652

     Repayment of indebtedness                                     734

     Working capital                                             8,100

     Short term investments (Cash Equivalents)                   9,300

     Other purposes for which at least $100,000 has been used      -
 
None of the  above-mentioned  uses of  proceeds  represented  direct or indirect
payments to directors or officers of the Company or their associates, to persons
owning ten percent or more of any class of equity  security of the Company or to
affiliates of the Company.  Such uses do not represent a material  change in the
use of proceeds described in the above-mentioned registration statement.


Item 6. Exhibits and Reports on Form 8-K

     (a) The following  exhibits are filed as part of this  Quarterly  Report on
Form 10-Q:

     No. 27.1 Financial Data Schedule

     (b) The Registrant did not file any Current  Reports on Form 8-K during the
quarter ended March 31, 1999.

<PAGE>

SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                       BIONX IMPLANTS, INC.





                                       By: /s/Gerard S. Carlozzi
                                           Gerard S. Carlozzi,
                                           Acting President and Chief 
                                           Operating Officer



                                       By: /s/ Michael J.  O'Brien
                                           Michael J. O'Brien
                                           Vice President, Chief Financial 
                                           Officer and Chief Accounting Officer


Dated: May 15, 1999

<PAGE>

                                 EXHIBIT INDEX


Exhibit No.

Exhibit No. 27.1 Financial Data Schedule