<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 quarterly period ended July 4, 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 No. 0-24241
V.I. TECHNOLOGIES, INC.
-----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-3238476
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
155 Duryea Road, Melville, New York 11747
-----------------------------------------
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code: (516) 752-7314
------------------------------------------------------------------------------
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 ( ) No (X)
The number of shares outstanding of each of the Registrant's classes of common
stock as of August 4, 1998:
Title of Class Shares Outstanding
Common Stock, $.01 par value 12,265,493
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V. I. TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
<S> <C> <C>
Item 1. Financial Statements:
Condensed Balance Sheets at July 4, 1998
and December 31, 1997 3
Condensed Statements of Operations for
the thirteen and twenty-six weeks
ended July 4, 1998 and July 5, 1997 4
Condensed Statements of Cash Flows for the
twenty-six weeks ended July 4, 1998
and July 5, 1997 5
Condensed Statements of Stockholders' Equity
for the twenty-six weeks ended
July 4, 1998 and the years ended
December 31, 1997 and 1996 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION
- -------- -----------------
Item 2. Changes in Securities and Use of Proceeds 11
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
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<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
V. I. TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
JULY 4, 1998 AND DECEMBER 31, 1997
(In thousands except for share data)
<TABLE>
<CAPTION>
July 4, December 31,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 39,969 $ 5,250
Trade receivables 3,986 1,355
Other receivables, net 813 895
Due from related parties 124 -
Inventory 2,747 575
Prepaid expenses and other current assets 517 321
----------------- -----------------
Total current assets 48,156 8,396
Property, plant and equipment, net 28,025 29,050
Other assets, net 674 721
----------------- -----------------
Total assets $ 76,855 $ 38,167
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,687 $ 2,687
Current portion of capital lease obligations 1,157 964
Current portion of advance from customer 450 338
Deferred revenue 1,868 -
Accounts payable and accrued expenses 9,571 6,814
Due to related parties - 368
----------------- -----------------
Total current liabilities 15,733 11,171
Long-term debt, less current portion 6,719 8,062
Capital lease obligations, less current portion 3,973 4,593
Advance from customer, less current portion 2,550 2,663
----------------- -----------------
Total liabilities 28,975 26,489
----------------- -----------------
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized
1,000,000 at July 4, 1998 and 500 at December 31,
1997; no shares issued and outstanding - -
Common stock, par value $.01 per share; authorized
30,000,000 shares; issued and outstanding 11,939,152 at
July 4, 1998 and 7,852,723 at December 31, 1997 119 78
Additional paid-in-capital 82,585 38,298
Note receivable from stockholder (250) (35)
Accumulated deficit (34,574) (26,663)
----------------- -----------------
Total stockholders' equity 47,880 11,678
----------------- -----------------
Total liabilities and stockholders' equity $ 76,855 $ 38,167
================= =================
The accompanying notes are an integral part of the condensed financial statements.
</TABLE>
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<PAGE>
V. I. TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED JULY 4, 1998 AND JULY 5, 1997
(In thousands except for share and per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Twenty-six Weeks
Ended Ended
------------------------- -------------------------------
July 4, July 5, July 4, July 5,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 7,946 $ 4,429 $ 12,067 $ 8,162
=================== =================== =================== ===================
Costs and expenses:
Cost of sales 5,363 4,002 10,105 7,471
Research and development, net 1,748 1,196 3,395 2,534
Selling, general and administrative
expenses 2,214 603 3,538 1,355
Charge related to research
collaboration - - 2,202 -
------------------- ------------------- ------------------- -------------------
Total operating costs and expenses 9,325 5,801 19,240 11,360
------------------- ------------------- ------------------- -------------------
Loss from operations (1,379) (1,372) (7,173) (3,198)
Interest income 114 128 167 163
Interest expense (431) (130) (905) (260)
------------------- ------------------- ------------------- -------------------
Interest expense, net (317) (2) (738) (97)
------------------- ------------------- ------------------- -------------------
Net loss $ (1,696) $ (1,374) $ (7,911) $ (3,295)
=================== =================== =================== ===================
Basic and diluted net loss per share $(0.18) $(0.19) $(0.91) $(0.49)
=================== =================== =================== ===================
Weighted average common shares
outstanding used in computing basic and
diluted net loss per share 9,381,000 7,346,000 8,738,000 6,700,000
=================== =================== =================== ===================
The accompanying notes are an integral part of the condensed financial statements.
</TABLE>
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<PAGE>
V. I. TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JULY 4, 1998 AND JULY 5, 1997
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
July 4, July 5,
1998 1997
------------------ ------------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss $(7,911) $(3,295)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,014 1,368
Debt refinancing costs - (856)
Compensation expense in connection with acceleration of
option vesting 281 -
Charge related to research collaboration 2,202 -
Changes in operating accounts:
Trade receivables (2,631) (580)
Other receivables, net 82 555
Due to/from related parties (492) (89)
Inventory (2,172) (221)
Prepaid expenses and other current assets (238) (56)
Deferred revenue 1,868 -
Accounts payable and accrued expenses 2,617 3,545
------------------- -------------------
Net cash provided by (used in) operating activities (4,380) 371
------------------- -------------------
Cash flows used in investing activities:
Additions to property, plant and equipment (900) (3,041)
------------------- -------------------
Net cash used in investing activities (900) (3,041)
------------------- -------------------
Cash flows provided by financing activities:
Proceeds from issuance of common stock, net of
issuance costs 41,634 14,950
Proceeds from issuance of common stock upon exercise
of options 136 -
Advances from customer - 1,000
Principal repayment of long-term debt (1,344) (1,750)
Principal repayment of capital lease obligations (427) (313)
Principal repayment of note payable - (2,827)
------------------- -------------------
Net cash provided by financing activities 39,999 11,060
------------------- -------------------
Net increase in cash and cash equivalents 34,719 8,390
Cash and cash equivalents at beginning of year 5,250 4,752
------------------- -------------------
Cash and cash equivalents at end of period $39,969 $13,142
=================== ===================
The accompanying notes are an integral part of the condensed financial statements.
</TABLE>
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<PAGE>
V. I. TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE TWENTY-SIX WEEKS ENDED JULY 4, 1998 AND THE YEARS ENDED DECEMBER 31,
1997 AND 1996
(In thousands except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Common Common
Stock Stock Additional
----- ----- Paid-In
Shares Amount Capital
---------------- ------------ --------------
<S> <C> <C> <C>
Balance at December 31, 1995 4,472,271 $ 45 $19,426
Issuance of shares of common stock in connection with a loan
agreement 129,964 1 362
Issuance of shares of common stock upon exercise of stock
options and warrants 1,440,072 14 4,011
Issuance of warrant to purchase 3,577 shares of common stock in
connection with a lease agreement - - 10
Net loss - - -
----------------- ------------- --------------
Balance at December 31, 1996 6,042,307 60 23,809
Issuance of shares of common stock in connection with a private
placement, net of issuance costs of $859 1,797,894 18 14,073
Compensation expense in connection with issuance of stock options - - 381
Issuance of shares of common stock upon exercise of stock
options 12,522 - 35
Net loss - - -
----------------- ------------- --------------
Balance at December 31, 1997 7,852,723 78 38,298
Issuance of shares of common stock in connection with initial
public offering, net of costs of $1,286 3,000,000 30 32,164
Issuance of shares of common stock in connection with a private
placement 925,070 9 8,991
Issuance of shares of common stock to New York Blood Center
in satisfaction of obligation 35,778 1 299
Change in connection with research collaboration - - 2,202
Issuance of shares of common stock upon exercise of stock options 125,581 1 350
Compensation expense in connection with acceleration of option
vesting - - 281
Net loss - - -
----------------- ------------- --------------
Balance at July 4, 1998 11,939,152 $ 119 $ 82,585
================= ============= ==============
<CAPTION>
Note
Receivable From Accumulated Stockholders'
Stockholder Deficit Equity
------------------- ------------ -------------
<S> <C> <C> <C>
Balance at December 31, 1995 $ - $(10,839) $ 8,632
Issuance of shares of common stock in connection with a loan
agreement - - 363
Issuance of shares of common stock upon exercise of stock
options and warrants - - 4,025
Issuance of warrant to purchase 3,577 shares of common stock in
connection with a lease agreement - - 10
Net loss - (4,125) (4,125)
--------------- ------------ ----------
Balance at December 31, 1996 - (14,964) 8,905
Issuance of shares of common stock in connection with a private
placement, net of issuance costs of $859 - - 14,091
Compensation expense in connection with issuance of stock options - - 381
Issuance of shares of common stock upon exercise of stock
options (35) - -
Net loss - (11,699) (11,699)
--------------- ------------ ----------
Balance at December 31, 1997 (35) (26,663) 11,678
Issuance of shares of common stock in connection with initial
public offering, net of costs of $1,286 - - 32,194
Issuance of shares of common stock in connection with a private
placement - - 9,000
Issuance of shares of common stock to New York Blood Center
in satisfaction of obligation - - 300
Change in connection with research collaboration - - 2,202
Issuance of shares of common stock upon exercise of stock options (215) - 136
Compensation expense in connection with acceleration of option
vesting - - 281
Net loss - (7,911) (7,911)
--------------- ------------ ----------
Balance at July 4, 1998 $ (250) $(34,574) $ 47,880
=============== ============ ==========
The accompanying notes are an integral part of the condensed financial statements.
</TABLE>
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<PAGE>
ep V. I. TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
The accompanying unaudited condensed financial statements of V.I.
Technologies, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial statement
reporting and in accordance with the instructions to Form 10-Q.
Accordingly, they do not include all the information and footnotes required
by generally accepted accounting principles for complete financial
statements. These condensed financial statements should be read in
conjunction with the Company's prospectus dated June 10, 1998.
In the opinion of management, the accompanying financial statements contain
all material adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position, results of operations,
cash flows and stockholders' equity of V.I. Technologies, Inc. for the
interim periods. Interim results are not necessarily indicative of results
for a full year.
Stock Split
In February 1998, the Board of Directors authorized and the stockholders
approved a 1-for-2.795 reverse split of the Company's common stock which
became effective on February 23, 1998. All share and per share amounts
included in the accompanying condensed financial statements and footnotes
have been restated to reflect the reverse stock split.
Fiscal Year
The Company changed its fiscal year-end to 52 weeks, beginning with the
fiscal year ending January 2, 1999, as reported in the Company's Form 8-K
filed August 11, 1998. Such fiscal period corresponds with the Company's
natural business year.
Inventory
Costs incurred in connection with plasma fractionation processing services
and with the production of VIPLAS/SD are included in inventories and
expensed upon recognition of related revenues. Such costs include direct
labor and processing overheads. The processed plasma is supplied and owned
by the Company's customers and is not included in inventory. Supplies used
are stated at the lower of cost, as determined using the average cost
method, or net realizable value.
Revenue Recognition
Revenue from plasma fractionation processing services and the production of
VIPLAS/SD is recognized in the period in which the related services have
been rendered and upon satisfaction of certain quality control
requirements. Revenue recognized in the accompanying statements of
operations is not subject to repayment or future performance obligations.
Deferred revenue represents billings for the VIPLAS/SD product awaiting
satisfaction of certain quality control requirements.
Research and Development
All research and development costs are charged to operations as incurred.
Revenue from research and development grants and collaborative agreements
is recognized as an offset to research and development costs in the period
in which the eligible costs are incurred by the Company. Such revenue
totaled $0.1 million and $0.5 million for the thirteen weeks ended July 4,
1998 and July 5, 1997, respectively, and $0.5 million and $0.7 million for
the twenty-six weeks ended July 4, 1998 and July 5, 1997, respectively.
-7-
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Reclassification
Certain reclassifications were made to prior year amounts to conform with
the 1998 presentation.
2. Initial Public Offering
-----------------------
On June 15, 1998, the Company completed an initial public offering ("IPO")
of 3,000,000 shares of the Company's common stock, par value $.01 per
share, at $12.00 per share, raising gross proceeds of $36,000,000 before
underwriters' commissions and expenses. The Company intends to use the net
proceeds to fund costs associated with the commercialization of VIPLAS/SD,
clinical trials, research and development and for capital investments and
other general corporate purposes.
3. Inventory
---------
Classification of inventories at July 4, 1998 and December 31, 1997 were as
follows (in thousands):
1998 1997
------------ --------------
Work in process $2,367 $ 211
Supplies 380 364
-------------- ----------------
$2,747 $ 575
============== ================
4. Earnings Per Share
------------------
Earnings per share is computed in accordance with the provisions of SFAS
No. 128 "Earnings per Share", which became effective for the Company as of
December 31, 1997. Basic earnings per share is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock, such as stock options, were exercised, converted into
common stock or otherwise resulted in the issuance of common stock.
Earnings per share for the thirteen and twenty-six weeks ended July 4, 1998
and July 5, 1997 do not include the exercise of stock options and warrants
because the effect of such inclusion would be antidilutive. For the
thirteen weeks ended July 4, 1998 and July 5, 1997, the weighted average
number of common shares outstanding used to compute both basic and diluted
earnings per share was 9,381,000 and 7,346,000, respectively. For the
twenty-six weeks ended July 4, 1998 and July 5, 1997, the weighted average
number of common shares outstanding used to compute both basic and diluted
earnings per share was 8,738,000 and 6,700,000, respectively.
5. Subsequent Events
-----------------
On July 17, 1998, the Company repaid in full its settlement agreement with
Bayer Corporation in the amount of $1,937,000. This agreement, which
originated in January 1996, carried an interest at a rate of prime plus 2%
and increased to prime plus 3% on July 1, 1998.
As part of the Company's initial public offering, an over-allotment option
on up to 450,000 shares of the Company's common stock was exercisable for a
30-day period expiring on July 10, 1998. On July 10, 1998, the
underwriters partially exercised their over-allotment option for an
additional 325,000 shares priced at $12.00 per share, raising additional
gross proceeds of $3,900,000 before underwriters' commissions and expenses.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
- ---------------------
Revenue
- -------
Revenue increased from $4.4 million for the second quarter of 1997 to $7.9
million for the second quarter of 1998, an increase of $3.5 million. Revenue
increased from $8.2 million for the twenty-six weeks ended July 5, 1997 to $12.1
million for the twenty-six weeks ended July 4, 1998, an increase of $3.9
million. The increase for both the quarter and twenty-six weeks was largely due
to sales of VIPLAS/SD, which was approved by the FDA in May 1998. Sales of blood
fractions were also up slightly for the quarter and year-to-date, resulting from
an increase in processing volume partially offset by a decrease in unit pricing
under the Processing Agreement with Bayer Corporation.
Cost of Sales
- -------------
Cost of sales includes costs related to processing fractionated products and
those costs formerly classified as facility costs. In 1998, such facility costs
include manufacturing costs associated with the production ramp-up of VIPLAS/SD
in anticipation of FDA marketing approval, which was obtained in May 1998. In
1997, such costs included employee wages and related benefits, materials and
other supplies associated with product test runs, equipment maintenance,
internal validation and quality control procedures, and the testing of new
machinery associated with VIPLAS/SD production.
Cost of sales increased from $4.0 million for the quarter ended July 5, 1997 to
$5.4 million for the quarter ended July 4, 1998, an increase of $1.4 million.
For the twenty-six weeks, cost of sales increased from $7.5 million for 1997 to
$10.1 million for 1998, an increase of $2.6 million. The increase for the
quarter and year-to-date was primarily due to processing costs related to the
production ramp-up of VIPLAS/SD.
As a percentage of revenue, cost of sales was 67% and 84%, respectively, for the
quarter and twenty-six weeks ended July 4, 1998. This was a significant
improvement from the comparative 1997 periods, which did not contain revenue
from the sale of VIPLAS/SD.
Research and Development
- ------------------------
Research and development costs increased from $1.2 million for the second
quarter of 1997 to $1.7 million for the second quarter of 1998, an increase of
$0.5 million. These costs increased from $2.5 million for the twenty-six weeks
of 1997 to $3.4 million for the twenty-six weeks of 1998, an increase of $0.9
million. The increase in research and development costs for both the thirteen
and twenty-six weeks is due to the expanded activities in the Company's VIGuard
RBCC and VIGuard PC programs, expanded clinical trials for VIGuard Fibrin
Sealant and additional development activities.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses increased from $0.6 million for the
second quarter of 1997 to $2.2 million for the second quarter of 1998, an
increase of $1.6 million, and from $1.4 million for the twenty-six weeks ended
July 5, 1997 to $3.5 million for the twenty-six weeks ended July 4, 1998, an
increase of $2.1 million. The increase for the thirteen and twenty-six weeks is
principally due to administrative costs associated with the hiring of new
personnel as well as legal expenses. The legal expense increase related to
formulating agreements with collaborators and to responding to a Civil
Investigative Demand from the U.S. Department of Justice. The Company
anticipates that selling, general and administrative expenses will decline from
the level of spending incurred in the second quarter of 1998.
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<PAGE>
Charge Related to Research Collaboration
- ----------------------------------------
During the first quarter of 1998, the Company recorded a one-time charge of $2.2
million for research collaboration with Pall Corporation. The charge occurred
in connection with an equity investment in the Company made by Pall under the
collaboration agreement and reflects the difference between the amount paid for
equity and the fair market value of the common stock at that date. The Pall
collaboration covers the development and marketing of systems employing the
Company's LAC and Quencher viral inactivation technologies for red blood cell
and platelet concentrates.
Net Interest Expense
- --------------------
Net interest expense increased by $0.3 million for the second quarter and by
$0.6 million for the twenty-six weeks ended July 4, 1998 versus the comparable
periods in 1997. This increase reflects additional debt outstanding in the
respective periods.
Net Loss
- --------
The Company's net loss increased from $1.4 million for the second quarter of
1997 to $1.7 million for the second quarter of 1998, an increase of $0.3
million, and from $3.3 million for the twenty-six weeks ended July 5, 1997 to
$7.9 million for the twenty-six weeks ended July 4, 1998, an increase of $4.6
million. The principal causes of the increased net loss were operating expenses
associated with VIPLAS/SD in relation to revenues and the charge related to the
research collaboration described above.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company has funded its operations since inception primarily through $32.1
million of private placements of common equity securities, $21.5 million of debt
and lease financings, $31.6 million of revenues derived under its Processing
Agreement with Bayer, $4.2 million of upfront and development fees from United
States Surgical Corporation ("U.S. Surgical") and $32.2 million from the initial
public offering of common equity securities. Over the term of the Processing
Agreement with Bayer, which expires in December 2001, aggregate revenues to the
Company will be approximately $100 million, subject to compliance by the Company
with its performance obligations under the agreement. In addition, the Company
receives research and development funding under a collaboration agreement from
U.S. Surgical, related to the direct costs associated with clinical and
regulatory activities for the development of VIGuard Fibrin Sealant. The
Company also receives funding for research and development from Pall Corporation
as part of a cost sharing agreement in connection with the research
collaboration described above.
As of July 4, 1998, the Company had working capital of $32.4 million, including
cash and cash equivalents of $40.0 million. As of December 31, 1997, there was
working capital of $(2.8) million, including cash and cash equivalents of $5.3
million. During the first half of 1998 working capital increased by $35.2
million including an increase in cash and cash equivalents of $34.7 million.
The increase in working capital and cash is primarily due to the Company's
financing activities, which provided cash of $38.9 million. These proceeds were
mainly generated through the Company's initial public offering, which provided
cash of $32.2 million, as well as through a private placement for $5.0 million.
The increase in working capital and cash from financing activities was partially
offset by a $3.2 million use of cash for operating activities attributable to
net loss and adjustments of $3.4 million as well as a $0.9 million use of cash
for investing activities.
The Company believes that its existing funds and funds expected to be generated
from operations will be sufficient to meet cash requirements in the foreseeable
future.
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Year 2000
- ---------
The Company is aware of the challenges associated with the inability of certain
computer systems to properly format information after December 31, 1999 (the
"Year 2000 Challenge"). The Company is modifying its computer systems to
address the Year 2000 Challenge and does not expect that the cost of modifying
such systems will be material. The Company believes it will fully remediate any
of its Year 2000 Challenges in advance of the year 2000 and does not anticipate
any material disruption in its operations as the result of any failure by the
Company to fully remediate such challenges. The Company does not have any
information concerning the status of Year 2000 Challenges of its suppliers and
customers.
Forward-Looking Statements
- --------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Form 10-Q include "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities and Exchange Act of 1934 (the "Exchange Act").
All statements other than statements of historical information provided herein
are forward-looking statements and may contain information about financial
results, economic conditions, trends and known uncertainties. The forward-
looking statements contained herein are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis, judgment, belief or expectation
only as of the date hereof. The Company undertakes no obligation to publicly
revise these forward-looking statements to reflect events or circumstances that
arise after the date hereof. In addition to the disclosure contained herein,
readers should carefully review any disclosure of risks and uncertainties
contained in other documents the Company has filed with the Securities and
Exchange Commission pursuant to the Exchange Act.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(a) Effective upon the consummation of the Company's initial public offering
(the "Offering") of shares of its common stock, par value $.01 per share (the
"Common Stock") on June 15, 1998, the Company's Certificate of Incorporation and
By-Laws were each amended and restated.
The Amended and Restated Certificate of Incorporation (the "Restated
Certificate") provides the Board of Directors of the Company with the authority
to issue up to 1,000,000 shares of Preferred Stock of the Company in one or more
series and to fix the relative rights, preferences, privileges, qualifications,
limitations and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without further vote
or action by the stockholders of the Company. The issuance of Preferred Stock
could adversely affect the voting power of the holders of Common Stock and
restrict their rights to receive payment upon a liquidation of the Company and
could have the effect of delaying, deferring or preventing a change in control
of the Company.
In addition to providing the Board of Directors of the Company with the ability
to issue shares of Preferred Stock, the Restated Certificate and the Amended and
Restated By-Laws (the "Restated By-Laws") contain several other provisions that
are commonly considered to discourage unsolicited takeover bids and which limit
the power of the Common Stock. The Restated Certificate contains a provision
classifying the Board of Directors into three classes with staggered three-year
terms. The Restated Certificate also includes a provision prohibiting
stockholder action by written consent except as otherwise provided by law.
The Restated Certificate requires the approval of the holders of at least 66
2/3% of the outstanding capital stock of the Company prior to: (i) the merger
of the Company into another entity, (ii) the sale or disposition of all or
substantially all of the Company's assets, (iii) the issuance or transfer by the
Company of its securities having a market value in
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<PAGE>
excess of $500,000 and (iv) engaging in any other business combination
transaction unless, in each case, such transaction has been approved by a
majority of the Board of Directors.
Provisions of the Restated By-Laws and the Restated Certificate provide that the
stockholders may amend the Restated By-Laws or certain provisions of the
Restated Certificate only with the vote of 66 2/3% of the Company's outstanding
capital stock. The Restated By-Laws provide that nominations for directors may
not be made by stockholders at any annual or special meeting unless the
stockholder intending to make a nomination notifies the Company of its intention
a specified period in advance and furnishes certain information. The Restated
By-Laws also provide that special meetings of the Company's stockholders may
only be called by the President or the Board of Directors of the Company and
require advance notice of business to be brought by a stockholder before the
annual meeting.
Article TENTH of the Restated Certificate provides that the Company shall, to
the fullest extent permitted by the Delaware General Corporation Law, as amended
from time to time, indemnify each person who is or was a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding by reason of the fact that he is or was, or has agreed to become a
director or officer of the Company, or is or was serving, or has agreed to
serve, at the request of the Company, as a director, officer or trustee of, or
in a similar capacity with, another corporation, partnership, joint venture,
trust or other enterprise. Article TENTH further permits the Board to authorize
the grant of indemnification rights to other employees and agents of the Company
and such rights may be equivalent to, or greater or less than, those set forth
in Article TENTH.
The Restated By-Laws provide that the Company shall, to the full extent
permitted by the Delaware General Corporation Law, as amended from time to time,
and the Restated Certificate, indemnify each person whom it may indemnify
pursuant thereto.
The Restated By-Laws also provide that the Company shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity or arising out of such person's status as such whether or not the
Company would have the power to indemnify such person against such liability
under the provisions of the General Corporation Law of Delaware.
Article NINTH of the Restated Certificate provides that directors shall not be
personally liable to the Company or its stockholders for monetary damages or for
breach of fiduciary duty as a director, whether or not an individual continues
to be a director at the time such liability is asserted, except for liability
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the Delaware General Corporation Law or (iv) for any transaction from
which the director derives an improper personal benefit.
(c) On June 15, 1998 the Registrant issued 448,028 shares of Common Stock, at a
price of $11.16 per share, to Pall Corporation. No underwriter was engaged in
connection with the foregoing issuance of shares of Common Stock. The shares
were issued in a private placement in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act").
(d) Use of proceeds information is provided herewith in connection with the
Offering. The Company's Registration Statement on Form S-1 (File No. 333-46933)
was declared effective by the Securities and Exchange Commission on June 9,
1998. The first closing for the Offering was held on June 15, 1998 and a second
overallotment closing was held on July 15, 1998. The Offering has terminated.
In the Offering, the Company sold in its two closings an aggregate of 3,325,000
shares (with an aggregate offering price to the public of $39,900,000) out of
the 3,450,000 shares of Common Stock (with an aggregate offering price of
$41,400,000) registered in the Offering. The managing underwriters of the
Offering were Cowen & Company and SBC Warburg Dillon Read, Inc.
In connection with the Offering, the Company incurred the following expenses
through July 4, 1998: underwriting discounts and commissions of $2,520,000 and
other expenses of $850,000. After expenses incurred through July 4, 1998, and
not including the sale of 325,000 shares of Common Stock sold upon the closing
of the overallotment option on July 15, 1998, the Company's net proceeds from
the Offering were $32,194,000 as of July 4, 1998.
-12-
<PAGE>
The Company intends to use the net proceeds to fund costs associated with the
commercialization of VIPLAS/SD (approximately $9,000,000), clinical trials
(approximately $3,000,000), research and development (approximately $8,000,000)
and for capital investments (approximately $12,000,000, including the possible
addition of a new pooling room and filling machine for VIPLAS/SD and the
expansion of the manufacturing facility for VIGuard Fibrin Sealant) and other
general corporate purposes (approximately $1,000,000). As of July 4, 1998, none
of the proceeds of the Offering have been used and all such proceeds are
currently invested in short term investment funds pending final use.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
4.1 Restated Certificate of Incorporation of the
Registrant. Incorporated by reference to Exhibit 3.8
to the Registrant's Registration Statement on Form S-
1, filed with the Commission on February 26, 1998
(File No. 333-46933).
4.2 Amended and Restated By-Laws of the Registrant.
Incorporated by reference to Exhibit 3.10 to the
Registrant's Registration Statement on Form S-1, filed
with the Commission on February 26, 1998 (File No.
333-46933).
4.3 Form of Certificate for Common Stock. Incorporated by
reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-1, filed with the
Commission on February 26, 1998 (File No. 333-46933).
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter covered by
this report.
-13-
<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.
V.I. TECHNOLOGIES, INC.
-----------------------
(Registrant)
Date: August 12, 1998 /s/ John R. Barr
- ---------------------- ----------------
John R. Barr
President, Chief Executive Officer
Date: August 12, 1998 /s/ Thomas T. Higgins
- ---------------------- ---------------------
Thomas T. Higgins
Executive Vice President, Operations
and Chief Financial Officer
-14-
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