<PAGE>
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 Quarter Ended March 31, 1998
or
[ ] Transition report pursuant to Section 13 or 15(d) of Securities
Exchange Act of 1934
Commission file number 1-14430
-------
MAXIM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0279983
--------------------------------------------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
8899 University Center Lane, Suite 200, San Diego, CA 92122
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(Address of principal executive offices) (Zip Code)
(619) 453-4040
----------------------------------------------------
(Registrant's telephone number, including area code)
10835 Altman Row, Suite 150, San Diego, CA 92121
------------------------------------------------
(former address, 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
----- ----
As of May 8, 1998, the registrant had 9,278,986 shares of Common Stock, $.001
par value, outstanding.
<PAGE>
MAXIM PHARMACEUTICALS, INC.
(A Development Stage Company)
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page
- ------------------------------ ----
<S> <C>
Item 1. Financial Statements
Balance Sheets -
March 31, 1998 (unaudited) and September 30, 1997........ 1
Statements of Operations (unaudited) -
Three Months and Six Months Ended March 31, 1998
and 1997, and from Inception (October 23, 1989)
through March 31, 1998.................................. 2
Statements of Cash Flows (unaudited) -
Six Months Ended March 31, 1998 and 1997
and from Inception (October 23, 1989) through
March 31, 1998.......................................... 3
Notes to Financial Statements........................... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 6
Part II - Other Information
- ---------------------------
Item 1. Legal Proceedings....................................... 8
Item 2. Changes in Securities and Use of Proceeds............... 8
Item 4. Submission of Matters to a Vote of Security Holders..... 8
Item 6. Exhibits and Reports on Form 8-K........................ 9
SIGNATURE......................................................... 9
</TABLE>
<PAGE>
BALANCE SHEETS
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1997
-------------- ------------------
ASSETS (UNAUDITED)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 13,125,879 $ 447,523
Short-term investments in marketable securities 19,626,042 9,389,690
Inventory 645,000 -
Accrued interest and other current assets 1,498,440 576,836
------------- ------------
Total current assets 34,895,361 10,414,049
Investments in marketable securities 7,953,755 2,322,398
Patents and licenses, net 1,823,700 1,815,428
Property and equipment, net 935,922 718,988
Other assets 257,693 586,893
------------- ------------
Total assets $ 45,866,431 $ 15,857,756
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,850,181 $ 1,082,038
Accrued expenses 759,939 597,388
Note payable 14,933 102,161
Current portion of long-term debt 185,844 127,712
------------- ------------
Total current liabilities 3,810,897 1,909,299
Long-term debt, less current portion 537,165 555,229
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value,
5,000,000 shares authorized - -
Common stock, $.001 par value,
20,000,000 shares authorized;
9,272,221 and 6,671,237 shares
issued and outstanding at
March 31, 1998 and September 30,
1997, respectively 9,272 6,672
Additional paid-in capital 69,289,156 34,269,521
Deficit accumulated during the development stage (27,750,804) (20,832,052)
Deferred compensation (29,255) (50,913)
------------- ------------
Total stockholders' equity 41,518,369 13,393,228
------------- ------------
Total liabilities and stockholders' equity $ 45,866,431 $ 15,857,756
------------- ------------
------------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
1
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended October 23, 1989
March 31 March 31 (inception) to
1998 1997 1998 1997 March 31, 1998
----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Research and development $ 3,493,278 $ 1,215,456 $ 6,402,861 $ 1,755,048 $ 21,757,284
Business development 192,775 99,425 314,620 163,179 927,710
General and administrative 720,608 493,119 1,349,239 901,385 10,700,252
----------- ----------- ----------- ----------- ------------
Total operating expenses 4,406,661 1,808,000 8,066,720 2,819,612 33,385,246
Other income (expense):
Investment income 656,585 239,918 1,185,001 505,160 2,399,781
Interest expense (18,371) (14,972) (37,033) (32,305) (2,018,404)
Other expense - (13,564) - (14,421) (116,964)
Gain on sale of subsidiary - - - - 2,288,474
Research grant revenue - - - - 2,946,001
----------- ----------- ----------- ----------- ------------
Total other income (expense) 638,214 211,382 1,147,968 458,434 5,498,888
----------- ----------- ----------- ----------- ------------
Discontinued operations:
Loss from operation of discontinued
diagnostic division - - - - (347,608)
Gain on sale of diagnostic division - - - - 483,162
----------- ----------- ----------- ----------- ------------
Net loss $(3,768,447) $(1,596,618) $(6,918,752) $(2,361,178) $(27,750,804)
----------- ----------- ----------- ----------- ------------
Net loss per share of common stock $ (0.41) $ (0.24) $ (0.78) $ (0.35)
----------- ----------- ----------- -----------
Weighted average shares outstanding 9,248,908 6,671,237 8,912,557 6,671,238
----------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
2
<PAGE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
Six Months Ended
March 31 October 23, 1989
--------------------------- (inception) to
1998 1997 March 31, 1998
------------ ----------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (6,918,752) $(2,361,178) $(27,750,804)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 168,497 103,347 1,212,425
Amortization of net premium on investments 61,367 84,308 217,709
Stock options issued as compensation 21,658 33,913 462,647
Loss on write-off of patents - - 242,212
Gain on sale of subsidiary - - (2,288,474)
Loss on disposal of property and equipment 481 - 133,164
Loss on write-off of receivable from related party - - 147,803
Other - - 51,701
Gain on sale of diagnostic division - - (483,162)
Loss on write-off of purchased research
and development - - 2,646,166
Cumulative effect of reorganization - - 1,152,667
Changes in operating assets and liabilities:
Accrued interest and other current assets (1,566,604) 46,946 (2,143,440)
Other assets 329,200 (200,000) (405,496)
Accounts payable 1,768,143 349,010 2,850,181
Accrued expenses 162,551 101,745 781,149
------------ ----------- ------------
Net cash used in operating activities (5,973,459) (1,841,909) (23,173,552)
INVESTING ACTIVITIES:
Purchases of marketable securities (25,662,576) (8,151,437) (51,572,006)
Maturities of marketable securities 9,733,500 7,996,000 23,774,500
Additions to patents and licenses (89,418) (513,201) (2,584,258)
Purchases of property and equipment (304,766) (612,348) (1,917,461)
Cash acquired in acquisition of business - - 985,356
Proceeds from sale of diagnostic division - - 496,555
------------ ----------- ------------
Net cash used in investing activities (16,323,260) (1,280,986) (30,817,314)
FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and
long-term debt 72,180 408,195 5,462,983
Payments on notes payable and long-term debt (119,340) - (3,166,123)
Proceeds from issuance of notes payable to
related parties - - 4,982,169
Payments on notes payable to related parties - - (1,329,885)
Net proceeds from issuance of common stock
and warrants 35,022,235 68 60,680,101
Net proceeds from issuance of preferred stock - - 487,500
------------ ----------- ------------
Net cash provided by financing activities 34,975,075 408,263 67,116,745
------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents 12,678,356 (2,714,632) 13,125,879
Cash and cash equivalents at beginning of period 447,523 4,070,089 -
------------ ----------- ------------
Cash and cash equivalents at end of period $ 13,125,879 $ 1,355,457 $ 13,125,879
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
1. PRINCIPLES OF INTERIM PERIOD REPORTING
Maxim Pharmaceuticals, Inc. (the "Company") has not earned significant
revenues from planned principal operations. Accordingly, the Company's
activities have been accounted for as those of a "Development Stage
Enterprise" as set forth in Financial Accounting Standards Board Statement
No. 7 ("SFAS 7").
In the opinion of the Company, the unaudited financial statements contain all
of the adjustments, consisting only of normal recurring adjustments and
accruals, necessary to present fairly the financial position of the Company
as of March 31, 1998 and September 30, 1997, and the results of operations
for the three months and six months ended March 31, 1998 and 1997 and from
inception (October 23, 1989) to March 31, 1998. The results of operations
for the three months and six months ended March 31, 1998 are not necessarily
indicative of the results to be expected in subsequent periods or for the
year as a whole. For further information, refer to the financial statements
and footnotes thereto for the year ended September 30, 1997.
2. LOSS PER SHARE OF COMMON STOCK
Effective October 1, 1997, the Company adopted Financial Accounting Standards
Board Statement No. 128, "Earnings per Share" ("SFAS 128"). Loss per share of
common stock is computed by dividing the net loss by the weighted average
number of shares of common stock outstanding during the period. Loss per
share calculated by including the additional common shares issuable upon
exercise of outstanding options and warrants is not presented as these
securities are antidilutive.
3. LINE OF CREDIT AGREEMENT
In March 1997 the Company entered into a line of credit agreement with a
bank. Under the agreement the Company was permitted to borrow up to $900,000
during 1997 to fund qualified equipment purchases. At January 1, 1998,
$718,620 in outstanding advances under the line of credit converted to a term
loan payable in equal installments over 48 months, including interest at
prime plus 0.5%. In March 1998 the line of credit agreement was amended to
permit the Company to borrow up to an additional $700,000 during 1998. The
existing term loan and the line of credit are both secured by all assets of
the Company. At January 1, 1999, any outstanding advances under the line of
credit will convert to a term loan payable in 48 equal installments ,
including interest at prime plus 0.25%. No advances under the line of credit,
as amended, have been made at March 31, 1998.
4. STOCKHOLDERS' EQUITY
SECONDARY PUBLIC OFFERING - During October 1997 the Company completed a
secondary public offering in which it sold 2,500,000 shares of common stock
at a price of $15.25 per share. The Company received net proceeds of
approximately $34,700,000 after underwriting discounts and other issuance
costs.
4
<PAGE>
4. STOCKHOLDERS' EQUITY (CONTINUED)
SHARES ISSUED UPON EXERCISE OF COMMON STOCK OPTIONS AND WARRANTS - During
the six months ended March 31, 1998 the Company issued 50,773 and 49,732
shares of common stock upon the exercise of warrants and options,
respectively.
5. LEASE COMMITMENT
In January 1998 the Company entered into a two-year operating lease
commencing February 1998 for approximately 12,500 square feet of additional
office facilities located in San Diego, California. The lease requires
monthly base rent in the amount of approximately $29,000. The base rent is
subject to adjustment for the second year.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAXIM PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY)
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY
CAUSE SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER
"RISK FACTORS" AND ELSEWHERE IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED SEPTEMBER 30, 1997 AND THE COMPANY'S REGISTRATION STATEMENT ON
FORM S-3 (FILE NO. 333-4854-LA), AS AMENDED THROUGH THE DATE HEREOF, EACH AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
UNCERTAINTIES ASSOCIATED WITH RESEARCH AND DEVELOPMENT, THE RISK THAT
PRODUCTS THAT APPEARED PROMISING IN EARLY CLINICAL TRIALS DO NOT DEMONSTRATE
EFFICACY IN LARGER-SCALE CLINICAL TRIALS, THE RISK THAT CLINICAL TRIALS WILL
NOT COMMENCE WHEN PLANNED, AND THE RISK THAT THE COMPANY WILL NOT OBTAIN
APPROVAL TO MARKET ITS PRODUCTS.
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31,
1998 AND 1997
RESEARCH AND DEVELOPMENT EXPENSES - For the quarter ended March 31, 1998,
research and development expenses were $3,493,000, an increase of $2,278,000,
or 187%, over the same period in the prior year. This increase was primarily
attributable to increased activity related to late-stage clinical trials of
the Company's MAXAMINE-Registered Trademark- therapy, including hiring
additional clinical and development personnel, clinical trial site and
contract research organization costs and other costs associated with the
commencement in June 1997 of a Phase III cancer clinical trial in the United
States, the commencement in November 1997 of an international Phase III
cancer clinical trial, and the commencement of a third international Phase
III cancer clinical trial in February 1998.
For the six months ended March 31, 1998, research and development costs were
$6,403,000, an increase of $4,648,000, or 265%, over the same period of the
prior year. The increase resulted from the Phase III clinical trial efforts
described above.
BUSINESS DEVELOPMENT AND GENERAL AND ADMINISTRATIVE EXPENSES - For the
quarter ended March 31, 1998, business development expenses totaled $193,000,
approximately double the $99,000 in expense recorded in the same quarter in
the prior year. This increase was due to additional personnel and other
resources devoted to corporate partnering efforts and market evaluations.
General and administrative expenses for the quarter ended March 31, 1998 were
$721,000, an increase of $227,000, or 46%, over the prior year quarter. This
increase was in a large part due to the increased personnel costs and general
expenses associated with the Company's expanded operations.
Business development costs for the six month period ended March 31, 1998
totaled $315,000, an increase of $151,000, or 93%, over the same period of
the prior year. General and administrative expense for the six month period
ended March 31, 1998 were $1,349,000, an increase of $448,000, or 50%, over
the same period of the prior year. Both of these increases resulted from the
expanded activities described above.
OTHER INCOME (EXPENSE) - Investment income was $657,000 for the quarter ended
March 31, 1998, compared to $240,000 for the same period in the prior year.
This increase was due to income on the proceeds of the Company's secondary
public offering completed in October 1997. Interest expense for the quarter
ended March 31, 1998 approximated that of the prior year quarter and totaled
$18,000.
Investment income was $1,185,000 for the six month period ended March 31,
1998, compared to $505,000 for the same period of the prior year, due to the
income on the offering proceeds described above. Interest
6
<PAGE>
expense for the six month period ended March 31, 1998 was $37,000, consistent
with the same period of the prior year.
NET LOSS - Net loss for the quarter ended March 31, 1998 totaled $3,768,000,
an increase of $2,172,000, or 136%, over the same period of the prior year.
The increase was due to the expansion of research and development and general
corporate activities described above, partially offset by the current quarter
increase in investment income. Net loss per share of common stock for the
three month period was $.41, a 71% increase over the loss of $.24 per share
for the same period of the prior year resulting from the increase in net loss
for the quarter partially offset by the increase in the number of shares of
common stock outstanding.
Net loss for the six months ended March 31, 1998 totaled $6,919,000, an
increase of $4,558,000, or 193%, over the same period of the prior year. Net
loss per share of common stock for the six month period was $.78, a 123%
increase over the loss of $.35 per share for the same period of the prior
year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through the sale of its
equity securities, including an initial public offering in July 1996 and an
international secondary public offering in October 1997 which provided net
proceeds to the Company of approximately $18.2 million and $34.7 million,
respectively.
As of March 31, 1998, the Company had cash, cash equivalents and investments
totaling approximately $40.7 million. For the six months ended March 31,
1998, net cash used in the Company's operating activities was approximately
$6.0 million. The Company expects its cash requirements to increase
significantly in future periods as it conducts additional product development
efforts including clinical trials, other research and development activities,
and efforts associated with the commercial launch of any products that are
developed. Among the activities which are expected to result in an increase
in cash requirements are two Phase III cancer clinical trials of the MAXAMINE
THERAPY commenced in 1997, and the commencement of a third international
Phase III cancer clinical trial in February 1998.
The Company's cash requirements may vary materially from those now planned
because of the results of clinical trials and other research and development,
the time and costs involved in obtaining regulatory approvals, the cost of
filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, competing technological and market
developments, changes in the Company's existing research relationships, the
ability of the Company to establish collaborative arrangements and the
development of the Company's product commercialization activities. As a
result of these factors, it is difficult to predict accurately the timing and
amount of the Company's cash requirements. In order to successfully
commercialize any of its products, the Company expects that it will
ultimately be required to seek additional funds through public or private
financings or collaborative arrangements with corporate partners. The
issuance of additional equity securities could result in substantial dilution
to the Company's stockholders. There can be no assurance that additional
funding will be available on terms acceptable to the Company, if at all. The
failure to fund its capital requirements would have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company has never paid a cash dividend and does not contemplate the
payment of cash dividends in the foreseeable future.
7
<PAGE>
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1997 the former President and Chief Operating Officer and Chief
Financial Officer of the Company (the "Former Employees") filed a complaint
in the Superior Court in the State of California, County of San Diego (the
"Complaint") seeking claims for certain purported damages in contract and in
tort arising from their respective terminations of employment with the
Company. In May 1998 the Company entered into an agreement with the Former
Employees resulting in a full and final release of claims against the Company
and a dismissal with prejudice of the Complaint.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) In March 1998, the Company issued 18,441 shares of common stock upon
exercise of warrants previously issued to the underwriter of the Company's
initial public offering. In April 1998, the Company issued 6,140 shares of
common stock upon exercise of warrants previously issued to an affiliate of
the above mentioned underwriter. The Company issued such shares in reliance
on the exemption provided by Section 4(2) of the Securities Act of 1933, as
amended.
(d) Of the net offering proceeds to the Company of $18.2 million that
resulted from the sale of shares of common stock and warrants pursuant to the
Company's Registration Statement on Form SB-2 (File No. 333-4854-LA), through
March 31, 1998, the following payments have been made:
<TABLE>
(A) (B)
<S> <C> <C>
Purchase and installation of
machinery and equipment 715,000
Repayment of indebtedness 289,000 667,000
Interest earning bonds and securities 5,611,000
Research and development expenses 7,857,000
Business development expenses 446,000
General and administrative 2,117,000
Intellectual property 518,000
</TABLE>
(A) Direct or indirect payments to directors, officers, general partners of
the issuer or their associates; to persons owning ten percent or more of
any class of equity securities of the issuer; and to affiliates of the
issuer.
(B) Direct or indirect payments to others.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of the Company held on February 20,
1998, the following matters were voted on and approved:
1. Two Directors were elected to the Board of Directors to hold office for a
three-year term or until their successors are elected and qualified. The
following persons were elected: Per-Olof Martensson and Larry G.
Stambaugh. 7,685,472 shares of Common Stock, or 99.95% of the shares
voting, voted in favor of each of the foregoing individuals. There were
no votes against either of the foregoing individuals and 3,556, or 0.05%
of the shares voting, abstained. The term of office of the remaining
three Directors, Colin B. Bier, Ph.D., G. Steven Burrill and F. Duwaine
Townsen continued after the meeting.
8
<PAGE>
2. The 1993 Long-Term Incentive Plan (the "Incentive Plan"), as amended to
increase the aggregate number of shares authorized for issuance under the
Incentive Plan from a total of 1,000,000 shares to 1,300,000 shares, was
approved. 7,083,863 shares of Common Stock, or 92.13% of the shares
voting, voted in favor of the proposal. 604,315 shares, or 7.86% of the
voting shares, voted against the proposal, 850 shares, or 0.01% of the
voting shares, abstained.
3. The Boards selection of KPMG Peat Marwick LLP as the Company's
independent public accountants for the fiscal year ended September 30,
1998 was ratified. 7,687,168 shares of Common Stock, or 99.98% of the
shares voting, voted in favor of the proposal. 850 shares, or 0.01% of
the voting shares, voted against the proposal, and 1,010 shares, or 0.01%
of the voting shares, abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
10.20 (1) Form of lease dated January 13, 1998 between British
Pacific Properties Corporation, a California Corporation,
As Landlord and the Registrant
10.21 Amendment to Loan and Security Agreement dated
March 16, 1998 between the Registrant and Silicon
Valley Bank.
27.1 Financial Data Schedule
</TABLE>
(1) Previously filed as an exhibit to Registrant's Quarterly Report on
Form 10-Q (File No. 1-14430) for the quarter ended December 31, 1997.
b.) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1998.
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.
Maxim Pharmaceuticals, Inc.
Date: May 8, 1998 /s/ Dale A. Sander
--------------------------------------
Dale A. Sander
Chief Financial Officer
(Principal Accounting Officer and Officer
duly authorized to sign this report on
behalf of the registrant)
9
<PAGE>
[LOGO] SILICON VALLEY BANK
AMENDMENT TO LOAN AND SECURITY
AGREEMENT
BORROWER: MAXIM PHARMACEUTICALS, INC.
DATE: MARCH 16, 1998
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Bank") and the borrower named above (the "BORROWER"). The Parties
agree to amend the Loan and Security Agreement between them, dated March 15,
1997, as amended from time to time (the "Loan Agreement"), as follows,
effective as of the date hereof. (Capitalized terms used but not defined in
this Amendment, shall have the meanings set forth in the Loan Agreement.)
1. NEW DEFINITIONS. Section 1.1 of the Loan Agreement is hereby
amended by adding the following new defined terms thereto:
"'Committed Second Term Line' means a credit extension of up to
Seven-Hundred Thousand Dollars ($700,000) made pursuant to Section 2.1.3
hereof, and as further limited pursuant to the terms and conditions of
Section 2.1.3 hereof.
'Second Term Loan' and 'Second Term Loans' shall have the meanings set
forth in Section 2.1.3 hereof.
'Second Term Loan Evidence' has the meaning set forth in Section 2.1.3.
'Second Term Loan Amendment Date' means the date of the making of the
initial Second Term Loan."
2. REVISED DEFINITION. Section 1.1 of the Loan Agreement is hereby
amended by replacing the definition of "Maturity Date" with the following:
"'Maturity Date' means December 31, 2001 with regard to the Term Loan
and related Obligations and means December 31, 2002 with regard to the
Second Term Loan and related Obligations."
3. NEW SECTION 2.1.3. Section 2.1.3 of the Loan Agreement, as set
forth below, is hereby added to the Loan Agreement to follow immediately
after Section 2.1.2.
"2.1.3 SECOND TERM LOANS; ETC.
(a) Subject to and upon the terms and conditions of this Agreement, at
any time from the date hereof through December 31, 1998 (the "Second Term
Availability End Date"), Bank agrees to make advances (each a "Second
Term Loan" and collectively the "Second Term Loans") to Borrower in an
aggregate, initial outstanding amount
-1-
<PAGE>
thereof not to exceed the Committed Second Term Line, PROVIDED in no
event shall the amount of each Second Term Loan exceed 100% of the net
purchase price of new equipment being purchased by Borrower or equipment
purchased by the Borrower on and after 90 days prior to the Second Term
Loan Amendment Date, comprised of general purpose, scientific,
laboratory, manufacturing and test equipment, associated software,
computer equipment, office equipment, furnishing and leasehold
improvements and which is otherwise acceptable to Bank in its sole
discretion (the "Second Equipment Borrowing Base"), PROVIDED that the
aggregate, original principal amount of Second Term Loans relating to
leasehold improvements shall not exceed $125,000. The "net purchase
price" of equipment means the purchase price thereof, as shown on the
applicable invoice, net of all charges for taxes, freight, delivery,
insurance, set-up, training, manuals, fees, service charges and other
similar items, provided that only up to 15% of the total purchase price
of equipment included in the Second Equipment Borrowing Base may consist
of software. To evidence each Second Term Loan, Borrower shall deliver
to Bank, at the time of each Second Term Loan request, evidence, in form
and substance satisfactory to Bank (the "Second Term Loan Evidence"), of
the equipment purchases that are the subject of the Second Equipment
Borrowing Base.
(b) Interest shall accrue from the date of each Second Term Loan at the
per annum rate equal to one-quarter of one percent (0.25%) above the
Prime Rate (the "Second Term Loan Prime Option Rate") and shall be
payable monthly for each month through the Second Term Availability End
Date. On and after the Second Term Availability End Date, interest shall
accrue at either the Second Term Loan Prime Option Rate or the Second
Term Loan Fixed Option Rate (as defined below), at the Borrower's
election made by the Borrower on the Second Term Availability End Date
by notifying Bank in writing of the Borrower's election; if Borrower
fails to notify the Bank on or before the Second Term Availability End
Date of such interest rate election, then the interest rate shall be
deemed to be the Second Term Loan Prime Option Rate. Such interest shall
be payable monthly for each month while the Second Term Loans are
outstanding. As used herein the term "Second Term Loan Fixed Option
Rate" shall mean the Treasury Bill Rate in effect as of the Second Term
Availability End Date on a per annum basis plus three and one quarter
percent (3.25%).
(c) In the event the Prime Rate is changed from time to time hereafter,
the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the
basis of a three hundred sixty (360) day year for the actual number of
days elapsed.
(d) Any Second Term Loans that are outstanding on the Second Term
Availability End Date will be payable in forty-eight (48) equal monthly
installments of principal, plus all accrued interest, with the first of
such payments due on February 1, 1999, and continuing on the first day
of each month thereafter for the following forty-six (46) consecutive
months, with all Second Term Loans and all Obligations relating thereto
to be fully due and payable in a final payment no later than December
31, 2002. Second Term Loans, once repaid, may not be reborrowed.
(e) When Borrower desires to obtain a Second Term Loan, Borrower shall
notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Second Term Loan is to be made.
Such notice shall be substantially in the form of Exhibit B. The notice
shall be signed by a Responsible Officer or its designee and include the
Second Term Loan Evidence.
-2-
<PAGE>
(f) In the event any principal of the Second Term is prepaid prior to
the dates due under the schedule of principal payments set forth above
and Borrower has elected the Second Term Loan Fixed Option Rate only,
Borrower shall also pay Bank a prepayment fee in an amount equal to the
following percentage of the amount prepaid or required to be prepaid,
based on the date the prepayment occurs or the date prepayment is due as
a result of an Event of Default or termination of this Agreement:
Prior to or during the 1999 calendar
year: 3%
During the 2000 calendar year: 2%
During the 2001 calendar year: 1%"
4. REVISED SECTION 2.3(a). Section 2.3(a) of the Loan Agreement is
hereby amended to read as follows:
"(a) INTEREST RATE. The Term Loans and Second Term Loans shall have
the interest rate as set forth in Sections 2.1.2 and 2.1.3 hereof,
respectively."
5. REVISED SECTION 6.12. Section 6.12 of the Loan Agreement is
hereby amended to read as follows:
"6.12 LIQUIDITY COVENANT; CASH PLEDGE; ETC. Borrower shall maintain, as
of the last calendar day of each month, the greater of at least Twelve
(12) months Remaining Months Liquidity or two multiplied times the
principal amount of the Term Loans and Second Term Loans outstanding.
"Remaining Months Liquidity" is defined as cash on hand (and cash
equivalents and marketable securities), divided by Cash Burn. "Cash
Burn" is defined as cash (prior period) minus cash (current period) plus
increases in short and long term borrowings plus increases in equity (or
subordinated debt). If the Borrower fails to maintain the above
covenant, then Borrower agrees to deposit cash with the Bank in an
amount equal to the amount of the Term Loans and Second Term Loans
outstanding, as collateral security for the repayment of the
Obligations, and to execute and deliver to the Bank the Bank's standard
cash collateral security agreement in connection therewith. Upon the
Borrower's subsequent satisfaction of the covenant set forth in the
first sentence of this section, Bank agrees to terminate such cash
pledge as long as Borrower remains in compliance therewith."
6. REPRESENTATIONS TRUE. Borrower represents and warrants to Bank
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
7. FEE. Borrower shall pay to Bank a fee of $1,500 in connection
herewith, which shall be in addition to interest and to all other amounts
payable under the Loan Agreement.
8. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any
prior written amendments to the Loan Agreement signed by Bank and the
Borrower, and the other written documents and agreements between Bank and the
Borrower set forth in full all of the representations and agreements of the
parties with respect to the subject matter hereof and supersede all prior
discussions, representations, agreements and understandings between the
parties with respect to the subject hereof. Except as herein expressly
amended, all of the terms and provisions of the Loan Agreement, and all other
documents and agreements between Bank and the Borrower shall continue in full
force and effect and the same are hereby ratified and
-3-
<PAGE>
confirmed. This Agreement and Consent may be executed in any number of
counterparts, which when taken together shall constitute one and the same
agreement.
BORROWER: SILICON:
MAXIM PHARMACEUTICALS, INC. SILICON VALLEY BANK
BY /s/ Dale A. Sander BY /s/ Linda S. LeBeau
------------------------------ -----------------------------
TITLE: CHIEF FINANCIAL OFFICER TITLE SVP
-----------------------
BY /s/ Larry G. Stambaugh
------------------------------
TITLE: CHIEF EXECUTIVE OFFICER
-4-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 13,125,879
<SECURITIES> 19,626,042
<RECEIVABLES> 51,358
<ALLOWANCES> 45,876
<INVENTORY> 645,000
<CURRENT-ASSETS> 34,895,361
<PP&E> 1,137,559
<DEPRECIATION> 201,637
<TOTAL-ASSETS> 45,866,431
<CURRENT-LIABILITIES> 3,810,897
<BONDS> 537,165
0
0
<COMMON> 9,272
<OTHER-SE> 41,509,097
<TOTAL-LIABILITY-AND-EQUITY> 45,866,431
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,402,861
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,033
<INCOME-PRETAX> (6,918,752)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,918,752)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,918,752)
<EPS-PRIMARY> $(0.78)
<EPS-DILUTED> $(0.78)
</TABLE>
