<PAGE>
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 June 30, 1996
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25544
PDT, Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 7-0222872
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7408 Hollister Avenue, Santa Barbara, California 93117
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
(805) 685-9880
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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.
Class Outstanding at July 31, 1996
----- ----------------------------
Common Stock, $.01 par value 12,434,395
<PAGE>
PDT, INC.
Form 10-Q
TABLE OF CONTENTS
PAGE NO.
--------
TABLE OF CONTENTS ...................................................... 2
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated balance sheets as of June 30, 1996 and
December 31, 1995 ....................................... 3
Consolidated statements of operations for the three months
ended June 30, 1996 and 1995, and for the six months
ended June 30, 1996 and 1995 ............................ 4
Consolidated statements of cash flows for the six months
ended June 30, 1996 and 1995 ............................ 5
Notes to consolidated financial statements .................... 6
ITEM 2. Management's discussion and analysis of financial
condition and results of operations .................. 7
PART II OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8-K ..................... 12
SIGNATURES ............................................................. 13
<PAGE>
Part 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PDT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 46,702,000 $ 8,886,000
Investments in short term marketable securities ........ 19,999,000 -
Accounts receivable .................................... 1,124,000 11,000
Inventory-finished goods ............................... 15,000 10,000
Prepaid expenses and other current assets .............. 546,000 385,000
---------------- -----------------
Total current assets 68,386,000 9,292,000
Property, plant & equipment:
Furniture and fixtures ................................. 376,000 336,000
Equipment .............................................. 2,017,000 1,630,000
Leasehold improvements ................................. 904,000 666,000
Capital lease equipment ................................ 184,000 184,000
---------------- -----------------
3,481,000 2,816,000
Accumulated depreciation and amortization .............. (1,453,000) (1,210,000)
---------------- -----------------
2,028,000 1,606,000
Patents and other assets .................................. 304,000 361,000
---------------- -----------------
Total assets .............................................. $ 70,718,000 $ 11,259,000
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................... $ 2,815,000 $ 2,468,000
Accrued payroll and expenses ........................... 347,000 331,000
Current portion of long term obligations ............... 54,000 51,000
Current portion of capital lease obligations ........... 42,000 39,000
---------------- -----------------
Total current liabilities ................................. 3,258,000 2,889,000
Long term obligations, less current portion ............... 19,000 47,000
Capital lease obligations, less current portion ........... 41,000 63,000
Convertible notes payable ................................. 85,000 93,000
Shareholders' equity:
Common stock, 50,000,000 shares authorized; 12,404,307
and 10,401,358 shares issued and outstanding at
June 30, 1996 and December 31, 1995, respectively ..... 112,579,000 50,188,000
Deferred compensation .................................. (2,277,000) (7,518,000)
Accumulated deficit .................................... (42,987,000) (34,503,000)
--------------- -----------------
Total shareholders' equity ................................ 67,315,000 8,167,000
--------------- -----------------
Total liabilities and shareholders' equity ............... $ 70,718,000 $ 11,259,000
=============== =================
</TABLE>
See accompanying notes.
<PAGE>
PDT, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Product sales ............................... $ 3,000 $ 4,000 $ 4,000 $ 12,000
Grants, licensing, and royalty income ....... 753,000 43,000 1,381,000 180,000
--------------- ---------------- --------------- ---------------
756,000 47,000 1,385,000 192,000
Costs and expenses:
Cost of goods sold .......................... 2,000 11,000 4,000 33,000
Research and development .................... 3,384,000 1,612,000 8,050,000 2,788,000
Selling, general and administrative ......... (331,000) 954,000 2,507,000 1,458,000
--------------- ---------------- --------------- ---------------
Total costs and expenses ....................... 3,055,000 2,577,000 10,561,000 4,279,000
Loss from operations ........................... (2,299,000) (2,530,000) (9,176,000) (4,087,000)
Other income (expense):
Interest income ............................. 627,000 22,000 710,000 28,000
Interest expense ............................ (10,000) (28,000) (18,000) (99,000)
--------------- ---------------- --------------- ---------------
Total other income (expense) ................... 617,000 (6,000) 692,000 (71,000)
Net loss ....................................... $ (1,682,000) $ (2,536,000) $ (8,484,000) $ (4,158,000)
=============== ================ =============== ===============
Net loss per share ............................. $ (0.14) $ (0.26) $ (0.76) $ (0.44)
=============== ================ =============== ===============
Shares used in computing net loss per share .... 11,872,255 9,610,803 11,148,338 9,372,197
=============== ================ =============== ===============
</TABLE>
See accompanying notes.
<PAGE>
PDT, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (8,484,000) $ (4,158,000)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization .................................. 252,000 276,000
Amortization of deferred compensation .......................... 1,608,000 565,000
Changes in operating assets and liabilities:
Accounts receivable ......................................... (1,113,000) (43,000)
Inventories ................................................. (5,000) (3,000)
Prepaid expenses and other assets ........................... (113,000) 153,000
Accounts payable and accrued payroll and expenses ........... 363,000 151,000
---------------- ----------------
Net cash used in operating activities .......................... (7,492,000) (3,059,000)
INVESTING ACTIVITIES:
Purchases and maturities of short term marketable
securities, net .................................................. (19,999,000) -
Purchases of property, plant, and equipment ....................... (665,000) (315,000)
---------------- ----------------
Net cash used in investing activities ............................ (20,664,000) (315,000)
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock, less issuance costs ...... 66,017,000 4,642,000
Proceeds from notes payable ...................................... - 1,230,000
Payments of notes payable ........................................ - (1,230,000)
Payments of long term obligations ................................ (25,000) (23,000)
Payments of capital lease obligations ............................ (20,000) (22,000)
Proceeds from line of credit ..................................... - 3,600,000
Payments of line of credit ....................................... - (3,600,000)
---------------- ----------------
Net cash provided by financing activities ........................ 65,972,000 4,597,000
Net increase (decrease) in cash and cash equivalents ............. 37,816,000 1,223,000
Cash and cash equivalents at beginning of period ................. 8,886,000 1,483,000
---------------- ----------------
Cash and cash equivalents at end of period ....................... $ 46,702,000 $ 2,706,000
================ ================
SUPPLEMENTAL DISCLOSURES:
State taxes paid ................................................. $ 10,000 $ 8,000
================ ================
Interest paid .................................................... $ 18,000 $ 152,000
================ ================
</TABLE>
<PAGE>
PDT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTs
June 30, 1996
(Unaudited)
1. BASIS OF PRESENTATION
The information contained herein has been prepared in accordance with Rule
10-01 of Regulation S-X. The information at June 30, 1996, and for the
three month and six month periods ended June 30, 1996 and 1995, is
unaudited. In the opinion of management, the information reflects all
adjustments necessary to make the results of operations for the interim
periods a fair statement of such operations. All such adjustments are of a
normal recurring nature. Interim results are not necessarily indicative of
results for a full year. For a presentation including all disclosures
required by generally accepted accounting principles, these financial
statements should be read in conjunction with the audited consolidated
financial statements for the year ended December 31, 1995 included in the
PDT, Inc. Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
2. PER SHARE DATA
Net loss per share is computed using the weighted average number of shares
outstanding, during the periods, as adjusted pursuant to the rules of the
Securities and Exchange Commission for certain matters for which
adjustments would not be required to be presented under APB Opinion 15,
for the periods prior to the Company's public offerings. All stock,
warrant, and option data included in the consolidated financial statements
and footnotes reflect the effect of the three-for-two stock split for all
periods presented.
3. PUBLIC OFFERING
On April 30, 1996, the Company completed a secondary public offering in
which it sold 1,500,000 shares of Common Stock with net proceeds to the
Company of approximately $65.4 million.
4. MARKETABLE SECURITIES
Marketable securities are classified as available-for-sale and are carried
at market value. Unrealized gains and losses are reported in shareholders'
equity. Realized gains and losses on investment transactions are recognized
when realized based on settlement dates and recorded as interest income.
Interest and dividends on securities are recognized when earned. There was
no unrealized gain or loss recorded as of June 30, 1996.
5. COMMITMENTS
In June 1996, the Company leased an additional facility with monthly rental
of $47,000 which will commence in September 1996. The lease expires in
August 1999 and can be extended for three years thereafter. The lease
provides for annual rental increases based on the Consumer Price Index.
1
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. This Quarterly Report on
Form 10-Q may be deemed to include forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that involve risk and uncertainty, including financial,
clinical, business environment and trend projections. Although the Company
believes that its expectations are based on reasonable assumptions, it can give
no assurance that its goals will be achieved. The important factors that could
cause actual results to differ materially from those in the forward looking
statements herein include, without limitation, the early stage of development of
both the Company and its products, the timing and uncertainty of results of both
research and regulatory processes, the extensive government regulation
applicable to the Company's business, the unproven safety and efficacy of the
Company's drug and device products, the Company's significant additional
financing requirements, the uncertainty of future capital funding, the highly
competitive environment of the international pharmaceuticals and medical device
industries and the presence of a number of competitors with significantly
greater financial, technical and other resources and extensive operating
histories, the Company's potential exposure to product liability or recall,
uncertainties relating to patents and other intellectual property, including
whether the Company will obtain sufficient protection or competitive advantage
therefrom and the Company's dependence upon a limited number of key personnel
and consultants and its significant reliance upon its collaborative partners for
achieving its goals.
GENERAL
Since its inception, PDT, Inc. ("the Company") has been principally
engaged in the research and development of drugs and medical device products for
use in photodynamic therapy. The Company has been unprofitable since its
founding and has incurred a cumulative net loss of approximately $43.0 million
as of June 30, 1996. The Company expects to continue to incur substantial and
increasing operating losses for the next several years due to continued and
increased spending on research and development programs, the funding of
preclinical and clinical testing and regulatory activities and the costs of
manufacturing and administrative activities.
The Company's revenues primarily reflect income earned from device
product sales, grants, contracts and licensing agreements. Product sales
represent limited sales of photodynamic therapy devices (e.g., light producing
devices and light delivery and measurement devices), sold both domestically and
internationally, to researchers and an OEM distributor. To date, the Company has
received no revenue from the sale of drug products, and the Company is not
permitted to engage in commercial sales of drugs or devices until such time, if
ever, as the Company receives requisite regulatory approvals. As a result, the
Company does not expect to record significant product sales until such approvals
are received.
Until the Company commercializes its product(s), the Company expects
revenues to continue to be attributed to grants, contracts, licensing agreements
and device product sales for research use. The Company anticipates that future
revenues and results of operations will continue to fluctuate significantly
depending on, among other factors, the timing and outcome of applications for
regulatory approvals, the Company's ability to successfully manufacture, market
and distribute its drug products and device products and/or the establishment of
collaborative arrangements for the manufacturing, marketing and distribution of
some of its products.
The Company has completed Phase I/II clinical trials in the United
States using its drug candidate SnET2 for the local treatment of certain
nonmelanoma skin cancers and AIDS-related Kaposi's Sarcoma ("KS"). The Company
has initiated Phase III clinical trials for KS and metastatic breast cancer
involving the skin and, based on clinical results and after review with the FDA,
plans to begin enrolling patients in Phase III clinical trials for basal cell
carcinoma in 1996. In May, the Company began Phase I/II clinical studies in
ophthalmology, using SnET2 to treat complications of advanced age-related
macular degeneration (AMD), a leading cause of blindness. The Company is also in
various stages of preclinical testing of SnET2 and other photoreactive drugs for
the treatment of other cancers, certain cardiovascular conditions, urologic,
gynecologic and dermatologic conditions and eye disorders.
The Company has awarded stock options that vest upon the achievement of
certain milestones. Under Accounting Principles Board Opinion No. 25, such
options are accounted for as variable stock options. As such, until the
milestone is achieved (but only after it is determined to be probable), deferred
compensation is recorded in an amount equal to the difference between the fair
market value of the Common Stock on the date of determination less the option
exercise price and is adjusted from period to period to reflect changes in the
market value of the Common Stock. Deferred compensation, as it relates to a
particular milestone, is amortized over the period between when achievement of
the milestone becomes probable and when the milestone is estimated to be
achieved. Amortization of deferred compensation could result in significant
additional compensation expense being recorded in future periods based on the
market value of the Common Stock from period to period.
Effective June 21, 1996, the Compensation Committee of the Board of
Directors adjusted the future vesting periods of the variable stock options
covering 400,000 shares of Common Stock. These variable stock options were
adjusted to change the vesting periods to specific dates as opposed to the
original vesting periods which were based upon the achievement of milestones; no
change was made to the exercise prices of these variable stock options. This
change in the vesting periods provides for the options to be accounted for as
non-variable options and therefore alleviates the impact of deferred
compensation expense fluctuating in future periods based on the changes in the
per share market value period to period. At June 30, 1996, options covering
160,000 shares with an exercise price of $34.75 per share have vested and 67,500
shares are expected to vest during the remainder of 1996. The remaining unvested
shares will vest in the years 1997 through 2000. Based on the decrease in the
per share market value of the Common Stock from $59.00 as of March 31, 1996 to
$35.50 per share as of June 21, 1996 (the effective date of the change in the
vesting periods), the Company recorded a deferred compensation adjustment,
associated with these variable stock options, of $3.2 million for the three
months ended June 30, 1996.
RESULTS OF OPERATIONS
The following table provides a summary of the Company's revenues
for the three and six months ended June 30, 1996 and 1995.
Three months ended June 30, Six months ended June 30,
Consolidated Revenues 1996 1995 1996 1995
------------ ------------ ------------ ------------
Product sales $ 3,000 $ 4,000 $ 4,000 $ 12,000
Grants and contracts -- 29,000 256,000 141,000
Royalties 4,000 14,000 4,000 39,000
License 749,000 -- 1,121,000 --
------------ ------------ ------------ ------------
Total revenue $ 756,000 $ 47,000 $ 1,385,000 $ 192,000
============= ============ ============ ============
REVENUES. For the three months ended June 30, 1996, revenues increased
to $756,000 from $47,000 in the three months ended June 30, 1995. Total revenues
for the six months ended June 30, 1996 increased to $1.4 million from $192,000
in the first six months of 1995. The increase for the three months ended June
30, 1996 relates to the increase in license income which was $749,000 in 1996
compared to no license income for the same period of the prior year.
Additionally, license income for the six months ended June 30, 1996 was $1.1
million compared to no license income for the same period in 1995. The increases
in license income are due to the commencement in 1996 of the billing for the
reimbursement of clinical costs related to the Pharmacia & Upjohn, Inc.
("Pharmacia & Upjohn") license agreement. Grant income for the six months ended
June 30, 1996 increased to $256,000 from $141,000 for the comparable period of
the prior year. The Company expects grant income to be a continuing source of
revenue during the remainder of 1996.
COST OF GOODS SOLD. Cost of goods sold for the three months ended June
30, 1996 decreased to $2,000 from $11,000 for the three months ended June 30,
1995. For the six months ended June 30, 1996, cost of goods sold decreased to
$4,000 from $33,000 in the first six months of 1995. The decrease was due to the
decrease in product sales during 1996 based on the Company's decision to
allocate its manufacturing resources to supporting its preclinical and clinical
testing.
RESEARCH AND DEVELOPMENT. The Company's research and development
expenses for the three months ended June 30, 1996 increased to $3.38 million
from $1.6 million in the three months ended June 30, 1995. Research and
development expenses for the six months ended June 30, 1996 increased to $8.0
million from $2.79 million for the six months ended June 30, 1995. The increase
in expense for the three and six month periods ended June 30, 1996 compared to
the same periods in 1995 relate primarily to the significant increase in costs
associated with the development of drug formulation, an increase in the purchase
of raw materials and supplies used in the production of clinical devices and
drug product in connection with clinical trials and an increase in payroll costs
due to the growth of research and development personnel. The increases in costs
for the three month period ended June 30, 1996 were offset by a decrease of $1.0
million in deferred compensation expense associated with the decline in the per
share market value of the variable stock options, as well as the changing of the
vesting periods of the variable stock options, as discussed previously. The
Company anticipates that future research and development expenses, as well as
other expenses, will increase significantly during the remainder of 1996 and
beyond as the Company expands its research and development programs, which
include the hiring of personnel and the continued expansion of preclinical and
clinical testing.
SELLING, GENERAL AND ADMINISTRATIVE. The Company's selling, general and
administrative expenses for the three months ended June 30, 1996 decreased by
$1.3 million from the comparable period of the prior year. The decrease relates
primarily to the decrease of $2.1 million in compensation expense associated
with the decline in the per share market value of the variable stock options, as
well as the changing of the vesting periods of the variable stock options, as
discussed previously. This decrease in compensation expense was offset by
increased costs received from professional services consisting of financial
consultants, attorneys and public relations and the increase in payroll costs
due to the addition of personnel. Total selling, general and administrative
expenses for the six months ended June 30, 1996 increased to $2.51 million from
$1.46 million for the six months ended June 30, 1995. The increase relates to
the increase in professional services received and personnel costs. The Company
expects future selling, general and administrative expenses to increase in the
remainder of 1996 and beyond due to the increased support required for research
and development activities, continuing corporate development and professional
services, and general corporate activities.
INTEREST INCOME. For the three months ended June 30, 1996, interest
income increased to $627,000 compared to interest income of $22,000 for the
three months ended June 30, 1995. Interest income for the six months ended June
30, 1996 increased to $710,000 from $28,000 in the same period of the prior
year. The increases in interest income result from the investment of proceeds
received from the Company's secondary public offering in April 1996, as well as
the continued interest income from the proceeds from the Company's initial
public offering and the Pharmacia & Upjohn investment in the Company's Common
Stock.
INTEREST EXPENSE. Interest expense for the three months ended June 30,
1996 decreased to $10,000 compared to interest expense of $28,000 for the three
months ended June 30, 1995. For the six months ended June 30, 1996, interest
expense decreased to $18,000 from $99,000 in the comparable period of the prior
year. The decreases result primarily from the conversion of the Company's
convertible notes to Common Stock (approximately 79% were converted in December
1994, 18% were converted during 1995 and 2% have been converted during 1996).
The Company does not believe that inflation has had a material impact
on its results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Since inception through June 30, 1996, the Company has accumulated a
deficit of approximately $43.0 million and expects to continue to incur
substantial and increasing operating losses for the next several years. The
Company has financed its operations primarily through a secondary public
offering in April 1996, Pharmacia & Upjohn's purchase of Common Stock, its
initial public offering and private placements of common and preferred stock,
and private placements of convertible notes and short term notes,. As of June
30, 1996, the Company had received net proceeds from the sale of equity
securities and convertible notes of approximately $110.7 million. In addition,
the Company has financed a substantial portion of its leasehold improvements and
certain equipment through capital lease obligations, a leasehold improvement
loan and a bank line of credit. The Company has available a $1.0 million bank
line of credit which has a variable rate of interest based on the bank's lending
rate (7.8% as of June 30, 1996), which expires on January 31, 1997, and is
collateralized by the Company's cash balances. The credit agreement subjects the
Company to certain customary restrictions, including a prohibition on the
payment of dividends. The Company presently has no outstanding borrowings under
the bank line of credit.
In April 1996, the Company completed a secondary public offering of
1,500,000 shares of Common Stock which provided net proceeds to the Company of
approximately $65.4 million. These proceeds are anticipated to be used to fund
preclinical and clinical testing, research and development and the balance for
general corporate activities. Pending such uses, the Company has invested the
net proceeds in short-term, interest-bearing obligations and which may primarily
consist of those issued by the U.S. Government, its agencies and
instrumentalities.
In connection with the licensing agreement with Pharmacia & Upjohn, the
Company has recorded as license income for the reimbursement of clinical costs
of $722,000 in the second quarter of 1996, and $1.1 million for the six months
ended June 30, 1996. The Company anticipates recording license income for the
reimbursement of clinical costs throughout the remainder of 1996 and beyond.
For the first six months of 1996, the Company required cash for
operations of approximately $7.5 million compared to $3.06 million for the same
period in 1995. The increase in cash used in operations was primarily due to an
increase in operating activities associated with the continued expansion of
preclinical and clinical testing, the increase in research and development
activities, the growth of research and development and support personnel and the
increase in general corporate activities. For the first six months of 1996, the
Company received net cash from its financing activities of approximately $66.0
million as compared to $4.6 million for the same period in 1995. The increase
results from the sale of Common Stock in the Company's secondary public offering
which closed in April 1996.
The Company invested a total of $665,000 in property, plant and
equipment during the first six months of 1996 as compared to $315,000 during the
same period in 1995. The Company expects to purchase property, plant and
equipment during the remainder of 1996 as the Company expands its preclinical,
clinical and research and development activities. In June 1996, the Company
entered into an agreement for the leasing of an additional facility which will
commence in September 1996. (See Note 5 of the Notes to Consolidated Financial
Statements.) The move to this facility will require additional expenditures for
the construction of the laboratories and office space and purchases of
equipment. Since inception, the Company has entered into capital lease
agreements for approximately $184,000 of equipment, consisting primarily of
laboratory equipment. The Company expects to continue to lease equipment from
time to time as needed.
The Company's capital requirements will depend on numerous factors,
including the progress and magnitude of the Company's research and development
programs and preclinical and clinical testing, the time involved in obtaining
regulatory approvals, the cost involved in filing and maintaining patent claims,
technological advances, competitor and market conditions, the ability of the
Company to establish and maintain collaborative arrangements, the cost of
manufacturing scale-up and the cost and effectiveness of commercialization
activities and arrangements.
The Company has raised funds in the past through public and private
placement offerings. In April 1996, the Company completed a secondary public
offering of Common Stock which provided net proceeds to the Company of
approximately $65.4 million. The Company believes that these funds should
satisfy its capital requirements for the next few years. The Company may
contemplate raising funds in the future through public or private financings,
collaborative arrangements or from other sources. The success of such efforts in
the future will depend in large part upon continuing developments in the
Company's preclinical and clinical testing and the success of photodynamic
therapy in general. The Company is also in discussion with other companies
regarding the potential for license agreements, equity investments,
collaborative arrangements, or development or other funding programs in exchange
for marketing, distribution or other rights to products developed by the
Company. However, there can be no assurance that discussions with other
companies will result in any investments, collaborative arrangements, agreements
or funding.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See Exhibit Index on page 14.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
PDT, INC.
Date: August 8, 1996 By: /s/ John M. Philpott
--------------------
John M. Philpott
Chief Financial Officer and Controller
(on behalf of the Company and as
Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Incorporating
Exhibit Reference
Number Description (if applicable)
- ------ ----------- ---------------
<S> <C> <C>
3.1 Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant [C][3.11]
filed with the Delaware Secretary of State on July 24, 1995.
3.2 Restated Certificate of Incorporation of the Registrant filed with the Delaware Secretary [B][3.1]
of State on December 14, 1994.
3.3 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.2]
the Delaware Secretary of State on March 17, 1994.
3.4 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.3]
the Delaware Secretary of State on October 7, 1992.
3.5 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.4]
the Delaware Secretary of State on November 21, 1991.
3.6 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.5]
the Delaware Secretary of State on September 27, 1991.
3.7 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.6]
the Delaware Secretary of State on December 20, 1989.
3.8 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.7]
the Delaware Secretary of State on August 11, 1989.
3.9 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.8]
the Delaware Secretary of State on July 13, 1989.
3.10 Certificate of Incorporation of the Registrant filed with the Delaware Secretary of State [A][3.9]
on June 16, 1989.
3.11 Bylaws of the Registrant. [A][3.10]
4.1 Specimen Certificate of Common Stock. [B][4.1]
4.2 Form of Convertible Promissory Note. [A][4.3]
4.3 Form of Indenture. [A][4.4]
4.4 Special Registration Rights Undertaking. [A][4.5]
4.5 Undertaking Agreement dated August 31, 1994. [A][4.6]
4.6 Letter Agreement dated March 10, 1994. [A][4.7]
4.7 Form of $10,000,000 Common Stock and Warrants Offering Investment Agreement.
[A][4.8]
10.1(+) Development and Distribution Agreement between Registrant and IRIDEX Corporation.
10.2(++) Commercial Lease Agreement between Registrant and Santa Barbara Business Park, a
California Limited Partnership.
11.1 Statement regarding computation of net loss per share.
27.1 Financial Data Schedule.
- -------------------
[A] Incorporated by reference from the exhibit referred to in brackets contained in the Registrant's Registration
Statement on Form S-1 (File No. 33-87138).
[B] Incorporated by reference from the exhibit referred to in brackets contained in Amendment No. 2 to the
Registrant's Registration Statement on Form S-1 (File No. 33-87138).
[C] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 10-Q for the quarter ended June
30, 1995, as amended on Form 10-Q/A dated December 6, 1995 (File No.
0-25544).
[D] Incorporated by reference from the exhibit referred to in brackets contained in the Registrant's Form 10-Q
for the quarter ended March 31, 1996 (File No. 0-25544).
(+) Filed subject to confidential treatment. Confidential portions of this Exhibit have been omitted (by
redacting-out such material).
(++) The material has been filed separately on paper pursuant to a request granted by the Commission for a continuing
hardship exemption from filing electronically.
</TABLE>
<PAGE>
Exhibit 10.1
PDTI / IRIDEX OPHTHALMIC DEVICE
DEVELOPMENT AND DISTRIBUTION AGREEMENT
THIS OPHTHALMIC DEVICE DEVELOPMENT AND DISTRIBUTION AGREEMENT
("Agreement") entered into this 28th day of May, 1996, between PDT, Inc., with
corporate offices at 7408 Hollister Avenue, Santa Barbara, California 93117
(hereinafter referred to as "PDTI") and, IRIDEX Corporation, with corporate
offices at 340 Pioneer Way, Mountain View, California 94041 (hereinafter
referred to as "IRIDEX").
WHEREAS, PDTI is a pharmaceutical and medical device company which,
using its proprietary technology and know-how, has developed and will continue
to develop, on its own or in collaboration with third party vendors,
photoreactive drugs and related light devices for use in photodynamic therapy;
WHEREAS, IRIDEX is a medical device company which, using its
proprietary technology and know-how, has developed and will continue to develop,
on its own or in collaboration with third party vendors, medical devices;
WHEREAS, PDTI and IRIDEX wish to enter into this Agreement which will
provide for the co-development of technology and devices for use in photodynamic
therapy in ophthalmology.
NOW, THEREFORE, in consideration of the mutual covenants exchanged
herein, the parties agree as follows:
ARTICLE I - DEFINITIONS
1.01 Act. The term "Act" shall mean the Food, Drug & Cosmetic Act
(21 U.S. ss.301, et seq.) as such shall be amended from time to time and
regulations promulgated thereunder.
1.02 Affiliate. The term "Affiliate" shall mean, with respect to any
specified party, any company that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the party specified. For purposes of this definition, "Control" including with
correlative meanings, the terms "controlled by" and "under common control with"
means ownership directly or indirectly of more than fifty percent (50%) of the
equity capital having the right to vote for election of directors (or in the
case of an entity other than a corporation, the equivalent management
authority).
1.03 Clinical Tests. The term "Clinical Tests" shall mean any
tests performed on humans in preparation and support of regulatory submissions.
1.04 Co-Developed Device. The term "Co-Developed Device" shall mean any
instrument, device or product, or functionally separable component thereof, that
embodies, incorporates, is comprised of, functions or is produced by means of,
or derives its utility from any Co-Developed Technology.
1.05 Co-Developed Technology. The term "Co-Developed Technology" shall
mean all Know-How conceived, made, created, developed, produced, designed or
reduced to practice, jointly by PDTI and IRIDEX, or their respective Affiliates,
during the course and as a result of the performance of work or services after
June 7, 1995.
1.06 Effective Date. The "Effective Date" of this Agreement
shall be the date first written hereinabove upon the execution of this Agreement
by the last of the parties to sign.
1.07 FDA. The term "FDA" shall mean the United States Food and Drug
Administration or any successor agency having the administrative authority to
regulate the approval for testing or marketing of human pharmaceutical,
biological medical or medical device products in the United States (or, where
appropriate, the equivalent governmental authority in any foreign country).
1.08 Field. The term "Field" shall mean any application of
Photodynamic Therapy in ophthalmology.
1.09 GCP. The term "GCP" shall mean the applicable current good
clinical practices promulgated from time to time by the FDA in accordance with
the Act, and which may be amended from time to time (or the equivalent in any
foreign country).
1.10 GLP. The term "GLP" shall mean the applicable current good
laboratory practices promulgated from time to time by the FDA in accordance with
the Act, and which may be amended from time to time (or the equivalent in any
foreign country).
1.11 GMP. The term "GMP" shall mean the applicable current good
manufacturing practices promulgated from time to time by the FDA in accordance
with the Act, and which may be amended from time to time (or the equivalent in
any foreign country).
1.12 Gross Sales. The term "Gross Sales" shall mean the final gross
invoiced price from the sale of Co-Developed Devices by the seller (and its
Affiliates, sublicensees or marketing partners). In the event of a sale of a
Co-Developed Device to an Affiliate or sublicensee, and the subsequent resale by
such Affiliate or sublicensee, Gross Sales shall be computed on the basis of
such subsequent resale.
1.13 ICG. The term "ICG" shall mean indocyanine green.
1.14 IDE. The term "IDE" shall mean an "investigational device
exemption" application or any other application submitted to the FDA for the
purpose of conducting clinical investigations of a device, and any supplement or
abbreviated application thereof (or the equivalent in any foreign country).
1.15 IND. The term "IND" shall mean an "investigational new drug"
application or any other application submitted to the FDA in accordance with the
Act for the purpose of conducting clinical investigations of a drug and any
supplement or abbreviated application thereof (or the equivalent in any foreign
country).
1.16 IRIDEX Technology. The term "IRIDEX Technology" shall mean all
Know-How owned by or licensed to IRIDEX or any of its Affiliates other than
Co-Developed Technology.
1.17 Know-How. The term "Know-How" shall mean all ideas, concepts,
inventions (whether or not patentable), discoveries, improvements, unpublished
research and development information, information disclosed (whether or not
claimed) in Patent applications or in issued Patents, trade secrets, technical
and other information and data, including, without limitation: apparatus;
compositions; methods; processes; techniques; controls; routines; systems
(including quality assurance systems); procedures; reports; operating, test and
performance data; and process, mechanical, material and product specifications.
1.18 NDA. The term "NDA" shall mean a New Drug Application or other
premarket approval application for a Photodynamic Therapy drug, and any
supplement or abbreviated application relating thereto, submitted to the FDA (or
the equivalent in any foreign country).
1.19 Net Sales. The term "Net Sales" shall mean Gross Sales less the
following: tariffs, import or export duties, excise, value-added, use and sales
taxes, where such tariffs, duties or taxes are separately stated as part of the
sales price; customary trade, distributor, quantity and cash discounts actually
given; rebates and adjustments required by governmental entities and made
pursuant to governmental or private third-party health or medical insurance
programs; allowances or credits for returns or rejections. In the event of a
sale to an Affiliate or sublicensee, and the subsequent resale by such Affiliate
or sublicensee, Net Sales shall be computed on the basis of such subsequent
resale. In the event that any Co-Developed Device is sold as a component of
another product, "Net Sales" shall mean the portion of such other product's
invoice price that is allocable to the Co-Developed Device based on the
customary price of the Co-Developed Device when sold separately or, in the
absence of such customary price, on the ratio of the cost of the Co-Developed
Device to the total cost of such other product.
1.20 Patents. The term "Patents" shall mean all United States and
foreign patents, including improvement patents, patents of addition, patents of
importation, certificates of invention, utility model and design patents, method
patents, and all reissues, renewals and extensions thereof; and all United
States and foreign patent applications, including original, divisional,
continuation and continuation-in-part applications pending before any patent
office.
1.21 PDTI Drug. The term "PDTI Drug" shall mean any Photodynamic
Therapy compound owned by or licensed to PDTI or any of its Affiliates, to the
extent that PDTI has the right to use, make, sell or license such compound.
1.22 PDTI Technology. The term "PDTI Technology" shall mean all
Know-How owned by or licensed to PDTI or any of its Affiliates other than
Co-Developed Technology.
1.23 Photodynamic Therapy. The term "Photodynamic Therapy" shall mean
the technique of diagnosis and/or treatment of abnormal or normal biological or
medical conditions, either in-vivo or ex-vivo, through the use of drugs
activated by any type of electromagnetic radiation or magnetic field.
1.24 PMA. The term "PMA" shall mean a Pre-Market Approval Application,
510(k) Application or any other application for regulatory approval of
Co-Developed Devices, and any supplement or abbreviated application relating
thereto, submitted to the FDA (or the equivalent in any foreign country).
1.25 Preclinical Tests. The term "Preclinical Tests" shall
mean any nonhuman tests performed in preparation and support of a regulatory
submission.
ARTICLE II - OWNERSHIP AND LICENSE
2.01 Ownership of Technology.
PDTI and IRIDEX shall jointly own the entire right, title and interest
in and to all Co-Developed Devices and Co-Developed Technology. PDTI retains all
right, title and interest in and to PDTI Technology, and IRIDEX retains all
right, title and interest in and to IRIDEX Technology. PDTI shall retain the
entire right, title and interest in and to all PDTI Drugs, and nothing in this
Agreement shall give IRIDEX any rights in or to any PDTI Drugs.
2.02 License to IRIDEX.
Subject to the terms of this Agreement, PDTI hereby grants to IRIDEX an
exclusive, worldwide license under the Co-Developed Technology to make, have
made, use, offer for sale, import, export, distribute, and sell Co-Developed
Devices in the Field. IRIDEX may sublicense, totally or in part, the rights
granted to it under this Section 2.02, or may appoint one or more third parties
to subdistribute Co-Developed Devices in the Field; provided, however, (i)
IRIDEX must notify PDTI, in writing, of each such sublicense or subdistributor
at least fifteen (15) days in advance; (ii) IRIDEX remains responsible to PDTI
for all contractual obligations of the sublicensee or subdistributor including,
but not limited to, keeping of records, reporting of sales and payment of
invoices, as if the sublicensee's or subdistributor's sales were IRIDEX's sales
and (iii) the sublicensee or subdistributor agrees to be bound by the terms of
this Agreement to the same extent as IRIDEX.
2.03 License to PDTI.
In the event that IRIDEX fails within a reasonable period of time to
begin making a particular Co-Developed Device or after receipt of all applicable
regulatory approvals for such Co-Developed Device to begin using or distributing
a particular Co-Developed Device in the Field, or decides to discontinue so
making, using and distributing such Co-Developed Device, then the license
granted to IRIDEX in Section 2.02 hereof shall no longer apply to such
Co-Developed Device and IRIDEX shall thereupon be deemed to have granted to PDTI
an exclusive, worldwide, paid-up license under the Co-Developed Technology and
such IRIDEX Technology, as may be required, to make, use, distribute, and sell
such Co-Developed Device in the Field. PDTI may thereafter sublicense, totally
or in part, the rights granted to it under this Section 2.03, or may appoint one
or more third parties to subdistribute such Co-Developed Device in the Field;
provided, however, (i) PDTI must notify IRIDEX, in writing, of each such
sublicense or subdistributor at least thirty (30) days in advance; (ii) PDTI
remains responsible to IRIDEX for all contractual obligations of the sublicensee
or subdistributor including, but not limited to, keeping of records, reporting
of sales and payment of invoices, as if the sublicensee's or subdistributor's
sales were PDTI's sales and (iii) the sublicensee or subdistributor agrees to be
bound by the terms of this Agreement to the same extent as PDTI. If IRIDEX
decides to discontinue so making, using or does not use reasonable commercial
efforts to continue distributing such Co-Developed Device, it shall give PDTI
written notice of such decision and agrees to continue making such Co-Developed
Device for PDTI for a period of nine (9) months after the date of delivery of
such written notice or until PDTI determines that it is able to make such
Co-Developed Device, whichever is sooner, whereupon IRIDEX shall transfer to
PDTI, as no cost to PDTI, such information under the IRIDEX Technology as may be
required for PDTI to make such Co-Developed Device.
2.04 Exclusivity.
During the term of this Agreement, except as permitted under Sections
2.02, 2.03 and 2.05 hereof or as otherwise agreed to in writing by the parties:
(i) neither PDTI nor IRIDEX shall, directly or indirectly, grant any rights in,
to or under the Co-Developed Technology to any third party; (ii) neither PDTI
nor IRIDEX shall, directly or indirectly, make, use, sell, distribute or license
Co-Developed Devices outside the Field; (iii) IRIDEX shall not, directly or
indirectly, make, use, sell, distribute or license any Co-Developed Device with
any Photodynamic Therapy drug other than PDTI Drugs; and (iv) IRIDEX shall not,
directly or indirectly, make, use, sell, distribute or license any IRIDEX
Technology or any products developed thereunder, in the Field, other than as
required for the manufacture, use, sale, distribution or license of Co-Developed
Devices in the Field. Notwithstanding any provision in this Agreement, the
parties acknowledge and agree that nothing contained in this Agreement shall be
deemed to restrict or prevent IRIDEX from engaging in any business or
developing, making, using, selling, offering for sale, importing and exporting
any products that are used in conjunction with ICG in IRIDEX's sole and absolute
discretion.
2.05 Conditions to Consents.
In accordance with Section 2.04, prior to agreeing in writing to allow
the other party (the "Granting Party") to grant any rights in, to or under the
Co-Developed Technology to any third party with respect to any instrument,
device or other product (hereinafter referred to as a "Third Party Co-Developed
Device"), PDTI or IRIDEX, as the case may be, shall have the right to review and
approve the terms of the arrangement between the Granting Party and such third
party. The terms of such arrangements shall provide at a minimum that: (i) the
Granting Party may sell Third Party Co-Developed Devices to such third party
only for resale by such third party and the Granting Party shall not directly
sell or provide products or services to the end user, and (ii) a royalty on the
Net Sales of Third Party Co-Developed Devices shall be due to the other party at
a rate pursuant to the royalty provisions set forth in Section 5.02. In the
event that either PDTI or IRIDEX agrees to allow the other party to make, use,
sell, distribute or license Co-Developed Devices outside the Field, the other
party shall pay to the first party a mutually agreed to royalty on the Net Sales
of such devices.
ARTICLE III - RESEARCH, DEVELOPMENT AND FUNDING
3.01 Research, Development and Preclinical Tests of Co-Developed
Devices.
PDTI and IRIDEX agree to use reasonable efforts to cooperate in the
joint development of Co-Developed Technology and Co-Developed Devices. Unless
otherwise agreed to in writing by the parties, PDTI shall conduct all reasonably
necessary Preclinical Tests of Co-Developed Devices, and IRIDEX shall
manufacture Co-Developed Devices for use in such tests in quantities agreed to
in writing by the parties. The actual costs of conducting such tests, including
the actual costs of Co-Developed Devices manufactured by IRIDEX for such tests,
shall be shared equally by PDTI and IRIDEX; provided, however, that such costs
shall not include costs allocable to Preclinical Tests of PDTI Drugs.
3.02 Clinical Tests of Co-Developed Devices.
Unless otherwise agreed to in writing by the parties, PDTI shall
conduct, or arrange for a third party to conduct, all reasonably necessary
Clinical Tests of Co-Developed Devices. IRIDEX shall manufacture Co-Developed
Devices for use in such tests in quantities agreed to in writing by the parties;
the actual costs of such Co-Developed Devices shall be shared equally by PDTI
and IRIDEX. All other costs of conducting Clinical Tests shall be paid by PDTI.
3.03 Regulatory Submissions.
Unless otherwise agreed to in writing by the parties, PDTI shall, with
counsel of its choice, prepare, file and prosecute, in the name of PDTI and at
PDTI's expense, any applicable regulatory submissions covering Co-Developed
Devices, including any IDE, IND, PMA or NDA applications, with the exception of
CDRH laser safety submissions, which shall be prepared by IRIDEX at IRIDEX's
expense. The parties agree to cooperate to secure government or private price
approvals and reimbursement qualifications in preparation for product launch of
Co-Developed Devices in the Field. PDTI and IRIDEX agree to provide each other
with access to information or data relating to Co-Developed Devices which the
other may need for regulatory submissions or compliance. The actual costs of any
regulatory submission shall be paid by PDTI.
ARTICLE IV - MARKETING AND TRADEMARKS.
4.01 Collaboration in Marketing.
IRIDEX and PDTI shall collaborate in promotion and marketing activities
with each other and with any third party permitted under the terms hereof to
make, use, sell or distribute Co-Developed Devices, as applicable. IRIDEX or
such third party, as applicable, shall be responsible for providing all
necessary customer or other service, shipping and receiving, and invoicing
services in support of the sales of Co-Developed Devices.
4.02 Protection and Use of Trademarks
The registration, maintenance and protection of all trademarks, logos
and/or trade dress owned by IRIDEX for use in connection with Co-Developed
Devices shall be the responsibility of IRIDEX. The registration, maintenance and
protection of all trademarks, logos and/or trade dress owned by PDTI for use in
connection with Co-Developed Devices shall be the responsibility of PDTI. Each
party shall have the right to use the trademarks, logos and/or trade dress of
the other party in connection with Co-Developed Devices, provided that each
party shall have the right to review and approve the inclusion or omission of
its trademarks, logos and/or trade dress from the packaging and labeling of each
Co-Developed Device.
ARTICLE V - PAYMENTS AND ACCOUNTING
5.01 Payment of Preclinical and Clinical Costs.
PDTI and IRIDEX shall review, on a quarterly basis, the costs of
Preclinical Tests and Clinical Tests described in Sections 3.01 and 3.02 hereof,
and shall determine the method by which to reconcile and reimburse each party.
Invoices, including all applicable taxes or freight and other transportation
charges stated thereon, shall be paid within thirty (30) days after date of
invoice.
5.02 Payment of Royalties
In consideration of the license granted in Section 2.02 hereof, IRIDEX
shall pay to PDTI royalties of ***** on total Net Sales of Co-Developed Devices.
The royalties due under this Agreement shall be
***** Confidential Treatment Requested
<PAGE>
paid quarterly within thirty (30) days after March 31, June 30, September 30 and
December 31, accompanied by a report containing sufficient information to enable
the other party to verify the accuracy of the calculation of Net Sales on which
such payment was based during the royalty period, including a statement of Net
Sales. A reconciliation of the credits, allowances and rebates used to calculate
Net Sales from Gross Sales shall be provided on an annual basis.
5.03 Payment.
All payments made pursuant to this Agreement shall be made in U.S.
dollars.
5.04 Late Payments.
In the event any payment due pursuant to this Agreement is not paid
within the time specified, in addition to remitting the amount of the payment as
required by this Agreement, the late paying party shall pay the other party
interest on such amount at the Prime Rate of Bank of America N.T. & S.A., San
Francisco Branch, in effect on the date such payment was due; such interest
being payable on demand together with all costs incurred by the collecting party
to collect the amounts due hereunder, including, but not limited to, reasonable
attorney fees and disbursements.
5.05 Books and Records.
PDTI and IRIDEX shall keep, and shall each cause its Affiliates and
sublicensees to keep, full, true and accurate books of accounts and other
records, for a period of five (5) years, containing sufficient detail as may be
necessary for the other party to properly ascertain and verify the costs and
royalties payable to it hereunder in accordance with generally accepted
accounting principles. Upon either PDTI's or IRIDEX's request, the other party
shall permit an independent certified accountant selected by the requesting
party (except one to whom the other has reasonable objection) to have access
once each year during ordinary business hours to such records as may be
necessary to determine the correctness of any report and payment made under this
Agreement. If an audit shows that either party has overstated costs or underpaid
royalties by ten percent (10%) or more, for the period covered by the audit,
that party shall, in addition to immediately remitting the amount of cost
overstatement or royalty underpayment, pay for the cost of such audit. In the
event the audit shows that any party has understated costs or overpaid
royalties, the party shall be allowed to remit an invoice for the cost
understatement or royalty overpayment which the other party shall promptly pay,
and the remitting party shall pay for the cost of the audit.
ARTICLE VI - REGULATORY RESPONSIBILITIES
6.01 Compliance With Applicable Law.
In exercising the rights, and in carrying out the duties and
obligations set forth in this Agreement, each party agrees that it shall comply
with all applicable state, federal and country laws or rules. Each party further
agrees that it shall comply to the extent of its duties hereunder with all
applicable state, federal or other rules and regulations governing the
manufacture, records, distribution, promotion, marketing and sale of
Co-Developed Devices and that it shall specifically comply with applicable GCPs,
GLPs, GMPs or other equivalent regulatory requirements of any country.
6.02 FDA Action.
PDTI and IRIDEX shall promptly notify each other of, and shall provide
copies of, any correspondence and other documentation received or prepared in
connection with any FDA action or notification regarding Co-Developed Devices.
PDTI and IRIDEX shall jointly determine whether a recall, field action, or other
regulatory action is warranted. In the event of a total or partial recall of
Co-Developed Devices, whether voluntary or mandated by law, PDTI and IRIDEX
agree to cooperate fully with each other to effect such recall. In the event a
recall results from the gross negligence or willful misconduct of either party,
then that party, whether PDTI or IRIDEX, shall bear the expenses associated with
such recall and, if the recall is due to PDTI's gross negligence or willful
misconduct, PDTI shall refund to IRIDEX all royalties paid pursuant to Section
5.02 hereof in connection with the Co-Developed Devices so recalled. In the
event a recall results from the gross negligence or willful misconduct of both
PDTI and IRIDEX, then the parties shall equitably share the expenses associated
with such recall, to the extent that each party is responsible.
ARTICLE VII - PATENTS
7.01 Patents.
If a patentable invention embodying Co-Developed Technology, or related
to Co-Developed Devices or to the Field, is (a) conceived in the course of this
Agreement and (b) reduced to practice either during the term of this Agreement
or during the six (6) month period after its termination, PDTI and IRIDEX shall
together determine whether to file patent applications covering the invention.
Both parties agree to begin application and prosecution in a timely manner once
patentable inventions are identified and disclosed. Any such patent applications
shall be prepared by PDTI and filed jointly in the name of PDTI and IRIDEX. PDTI
shall prepare, prosecute and maintain any and all Patents embodying Co-Developed
Technology or related to Co-Developed Devices or the Field. The reasonable costs
thereof shall be shared equally by the parties. If PDTI elects not to prepare,
prosecute or maintain any such Patent, IRIDEX shall have the right, but not the
obligation, to do so in its own name and for its own benefit and PDTI agrees to
execute an assignment of its rights in such Patent to IRIDEX. If PDTI and IRIDEX
mutually agree in writing to allow either party to utilize any Patent outside
the Field, such agreement shall include, at a minimum, terms as to the
development, manufacture and royalty obligations of the parties. In the event of
a disagreement between the parties, both parties agree to allow resolve the
disagreement pursuant to Article 16.01.
7.02 Patent Infringement by Third Parties.
If, during the term of this Agreement, either PDTI or IRIDEX shall
acquire knowledge or have reasonable cause to believe that any patent rights
covering Co-Developed Devices or Co-Developed Technology are being infringed or
used without authorization by any third party, either PDTI or IRIDEX shall
promptly notify the other of such knowledge. PDTI and IRIDEX agree to cooperate
in making prompt investigation of such possible infringement and to promptly
meet to discuss the commercial impact of such third party infringement.
7.03 Initiation of Action by PDTI or IRIDEX.
If PDTI and IRIDEX determine to jointly institute any action in
connection with the infringement described in Section 7.02, then PDTI and IRIDEX
shall share equally in the costs of such action and in the full recovery of any
money or other property collected by way of judgment, settlement (whether prior
to or after the institution of any action or proceeding) or otherwise on any
action initiated jointly by the parties. If either PDTI or IRIDEX determines not
to be involved in any such action, then it will execute an assignment of its
rights to the other party, and the other party may take all steps in the name of
both parties which are necessary or advisable including, without limitation, the
institution of any action or proceeding for the obtaining of damages or the
enjoinment of any such infringement and to prosecute, settle, compromise or
otherwise dispose of the same. That party, whether PDTI or IRIDEX, shall pay all
costs incurred pursuant to this Section 7.03 and shall be entitled to the full
recovery of any money or other property collected by way of judgment, settlement
(whether prior to or after the institution of any action or proceeding) or
otherwise on any action initiated by the party.
7.04 Claims Against PDTI or IRIDEX.
If any claim is made or action brought against PDTI or IRIDEX based on
the claim that PDTI or IRIDEX is infringing any third party patent rights by
virtue of the manufacture, use or sale of Co-Developed Devices or Co-Developed
Technology hereunder, PDTI or IRIDEX shall promptly so notify the other. The
parties shall then consult with each other as to the course of action to take
relative to such third party claim and shall cooperate in defending or taking
such other action as they shall reasonably agree with respect to such
Co-Developed Devices or Co-Developed Technology. Each party hereto shall pay its
own expenses in defending any such third party claim. Each shall solely be
responsible for any infringement claims on that party's trademarks, Patents or
other intellectual property and for all related damages incurred.
7.05 Damages to Third Party.
If, in any such action described in Section 7.04, a court of competent
jurisdiction determines that either PDTI or IRIDEX is obligated to pay damages
to any third person (excluding trademark claims) because PDTI's or IRIDEX's
manufacture, use, sale, distribution or licensing of Co-Developed Technology or
Co-Developed Devices was held to be an infringement of a third party right, then
the infringing party shall pay such damages; provided, however, that if PDTI and
IRIDEX are determined to be jointly responsible, the parties shall share such
damages to the extent that each party is determined to be responsible.
ARTICLE VIII - PUBLICATIONS AND CONFIDENTIALITY
8.01 Publication.
At least thirty (30) days prior to the time IRIDEX or PDTI submits any
data or articles related to Co-Developed Technology or Co-Developed Devices for
publication or presentation, the proposed publication or presentation must be
sent to the other party for review and approval, provided that with respect to
disclosures described in Section 8.03(i) below; such obligations shall be
limited to consulting with the other party regarding appropriate requests for
confidential treatment. If the other party so decides, such publication or
presentation can be delayed as long as reasonably necessary to preserve U.S. or
foreign patent or other property rights. Such approval shall not be unreasonably
withheld.
8.02 Confidential Information.
Unless otherwise agreed to by the parties, the parties agree to
maintain in confidence information relating to PDTI Technology, IRIDEX
Technology, Co-Developed Technology or Co-Developed Devices (including without
limitation, information developed in Preclinical Tests and Clinical Tests) and
licenses, Patents, patent applications, technology or processes and business
plans, in each case, of the other party, including information designated as
confidential in writing from one party to another (all of the foregoing
hereinafter referred to as "Confidential Information"), disclosed to the other
and shall not, during the term of this Agreement and for a period of five (5)
years thereafter, use such Confidential Information, except as permitted by this
Agreement or disclose the same to anyone other than those of its officers,
directors, employees, Affiliates and sublicensees as are necessary in connection
with either parties' activities as contemplated in this Agreement.
8.03 Limitations on Confidentiality.
The obligation of confidentiality in Section 8.02 shall not apply to
the extent that (i) a party is required to disclose information by applicable
law, such as pursuant to Securities and Exchange Commission rules and
regulations, or by order of a governmental agency or a court of competent
jurisdiction; (ii) a party can demonstrate that the disclosed information was,
at the time of disclosure, already in the public domain other than as a result
of actions or failure to act of a party, its officers, directors, employees,
Affiliates and sublicensees in violation hereof; (iii) the disclosed information
was rightfully known by a party or its Affiliates or sublicensees (as shown by
its written records) prior to the date of disclosure to the other party in
connection with this Agreement; or (iv) the disclosed information was received
by a party or its Affiliates or sublicensees on an unrestricted basis from a
third party which is not the other party or an Affiliate of the other party and
not under a duty of confidentiality, and which was rightfully known to said
source.
ARTICLE IX - WARRANTIES OF PDTI
PDTI makes no representations or warranties of any nature whatsoever
with respect to the Co-Developed Technology, Co-Developed Devices or PDTI
Technology, and ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY
DISCLAIMED BY PDTI AND ITS AFFILIATES.
ARTICLE X - WARRANTIES OF IRIDEX
10.01 Warranty.
IRIDEX represents and warrants that Co-Developed Devices shall not have
been misbranded or adulterated within the meaning of the Act, or of any
applicable state or local law. IRIDEX represents and warrants that Co-Developed
Devices shall have been manufactured, packaged, labeled, stored and shipped in
conformity with all applicable GMP requirements. IRIDEX further represents and
warrants that it shall promote, market and sell Co-Developed Devices in
accordance with all applicable FDA, state and local regulations and in
accordance with the NDA or PMA.
10.02 Reasonable Commercial Efforts.
IRIDEX agrees that it shall use commercially reasonable efforts to
promote, market and sell Co-Developed Devices manufactured hereunder.
10.03 No Other Product Warranties.
Except as expressly provided for in this Article X, IRIDEX makes no
representations or warranties of any nature whatsoever with respect to the
Co-Developed Technology, Co-Developed Devices or IRIDEX Technology, and ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED BY
IRIDEX AND ITS AFFILIATES.
ARTICLE XI - MUTUAL WARRANTIES
11.01 Right, Power and Authority to Execute.
Each party hereby represents and warrants to the other party that it
has full right, power and authority to enter into this Agreement and that the
Agreement has been duly authorized by all necessary actions of its directors and
shareholders and constitutes a valid and binding obligation enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and other laws of general
application affecting enforcement of creditors' rights generally, rules of law
governing specific performance, injunction relief or other equitable remedies.
11.02 Corporate Good Standing.
Each party represents and warrants to the other party that it is a
corporation duly organized and validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and that no consent of any
third party is or shall be required in order for the representing party to
comply with the terms of this Agreement. Execution, delivery and performance of
this Agreement will not violate the terms of any contract, instrument,
agreement, judgment, decree, order, rule or regulation to which the representing
party is a party or by which it is bound.
11.03 Duration of Representations and Warranties.
Each party represents and warrants to the other party that the
representations and warranties set forth in this Article XI shall be true as of
the Effective Date of this Agreement.
ARTICLE XII - TERM & TERMINATION
12.01 Term of Agreement.
This Agreement shall be effective as of the date first set forth
hereinabove ( "Effective Date"), and shall continue in full force and effect for
ten (10) years from the date of first NDA or PMA approval for commercial sale of
Co-Developed Devices. Provided that both parties agree in writing, at least one
hundred eighty (180) days prior to the expiration of the then existing term,
PDTI and IRIDEX shall have the option to extend the term of this Agreement by
successive two (2) year periods.
12.02 Termination for Material Breach.
Either party may terminate this Agreement in the event of a material
breach by the other, provided that the party asserting such breach first serves
written notice of the alleged material breach on the offending party and such
alleged breach is not cured within sixty (60) days of said notice unless such
material breach cannot be cured within said period in which case the cure period
will be extended an additional ninety (90) days if the offending party has taken
reasonable steps to cure the material breach within the sixty (60) day period.
12.03 Termination for Insolvency.
In the event that either party becomes insolvent or shall suspend its
business, or shall file a voluntary petition or any answer admitting the
jurisdiction of the court and the material allegations of, or shall consent to,
an involuntary petition pursuant to or purporting to be pursuant to any
reorganization or insolvency law of any jurisdiction, or shall make an
assignment for the benefit of creditors, or shall apply for or consent to the
appointment of a receiver or trustee of all or a substantial part of its
property (such party, upon the occurrence of any such event, a "Bankrupt
Party"), then to the extent permitted by the law the other party hereto may
thereafter immediately terminate this Agreement by giving written notice of
termination to the Bankrupt Party, unless the proceeding is dismissed within
ninety (90) days of its filing.
12.04 Effect of Expiration or Termination.
Expiration or earlier termination of this Agreement shall not
extinguish rights or obligations previously accrued or vested. Upon such
expiration or earlier termination IRIDEX may, at its option, liquidate such
inventory of Co-Developed Devices as IRIDEX may have at the time of such
expiration or termination, subject to the obligation of IRIDEX to pay royalties
on such inventory in accordance with Article V. Articles VIII, XIII and XIV
shall survive such expiration or termination of this Agreement.
ARTICLE XIII - INDEMNIFICATION
13.01 PDTI Indemnity.
PDTI agrees to indemnify, protect and defend IRIDEX and hold IRIDEX
harmless from and against any claims, damages, liability, harm, loss, costs,
penalties, lawsuits, threats of lawsuit, judgments, recalls or other
governmental action, including reasonable attorneys' fees, brought or claimed by
any third party which (i) arise as the result of PDTI's breach of this Agreement
or of any warranty or representation made by PDTI under this Agreement or (ii)
result from the grossly negligent acts or willful malfeasance on the part of
PDTI or its employees or agents in connection with PDTI's manufacture, use,
sale, marketing or distribution of Co-Developed Devices or other activities or
actions in connection with the Co-Developed Devices; or (iii) result from any
claim made against IRIDEX in connection with PDTI Technology. Upon the filing of
any such legal claim or lawsuit against IRIDEX, IRIDEX shall promptly notify
PDTI, in writing, of any such claim and PDTI shall, at its expense, with
attorneys reasonably acceptable to IRIDEX, handle, defend and control such claim
or lawsuit.
13.02 IRIDEX Indemnity.
IRIDEX agrees to indemnify, protect, and defend PDTI and hold PDTI
harmless from and against any claims, damages, liabilities, harm, loss, costs,
penalties, lawsuits, threats of lawsuit, judgments, recalls or other
governmental action, including reasonable attorneys' fees, brought or claimed by
any third party, which (i) arise as a result of IRIDEX's breach of this
Agreement or of any warranty or representation made by IRIDEX under this
Agreement; or, (ii) result from the grossly negligent acts or willful
malfeasance on the part of IRIDEX or its employees or agents, in connection with
IRIDEX's manufacture, use, sale, marketing or distribution of Co-Developed
Devices or other activities or actions in connection with the Co-Developed
Devices; or (iii) result from any claim made against PDTI in connection with
IRIDEX Technology. Upon the filing of any such legal claim or lawsuit against
PDTI, PDTI shall promptly notify IRIDEX, in writing, of any such claim IRIDEX
shall, at its expense, with attorneys reasonably acceptable to PDTI, handle,
defend, and control such claim or lawsuit.
13.03 Notice of Defense of Actions.
Each party shall give the other prompt notice of any potential
liability, and promptly after receipt by a party claiming indemnification under
this Article XIII, of notice of the commencement of any action, such indemnified
party shall notify the indemnifying party of the commencement of the action and
generally summarize such action. The indemnifying party shall have the right to
participate in and to assume the defense of such action with counsel of its
choosing. An indemnifying party shall not have the right to direct the defense
in such an action of an indemnified party if counsel to such indemnified party
has reasonably concluded that there may be defenses available to it that are
different from or additional to those available to the indemnifying party;
provided, however, that in such event, the indemnified party shall bear the fees
and expenses of separate counsel reasonably satisfactory to the indemnifying
party. The failure to notify an indemnifying party promptly of the commencement
of any such action, if materially prejudicial to the ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Article XIII. No settlement of any claim or action
may be made without the consent of the indemnifying party (which consent shall
not be unreasonably withheld or delayed).
ARTICLE XIV - MISCELLANEOUS
14.01 Force Majeure.
No party to this Agreement shall be liable to another party for any
loss, injury, delay, damage or other casualty suffered or incurred by such other
party due to strikes, lockouts, accidents, fire, delays in manufacture,
transportation or delivery of material, embargoes, inability to ship,
explosions, floods, war, governmental action or any other cause similar thereto
which is beyond the reasonable control of such other party and any failure or
delay by a party in the performance of any of its obligations under this
Agreement, other than the payment of money, shall not be considered as a breach
of this Agreement due to, but only so long as there exists, one or more of the
foregoing causes.
14.02 Relationship.
This Agreement shall not be construed to create between the parties
hereto or their respective successors or permitted assignees the relationship of
principal and agent, joint ventures, co-partners or any other similar
relationship, the existence of which is hereby expressly denied by each party.
The parties shall not be liable to any third party in any way for engagement,
obligation, contract, representation or transaction or for any negligent act or
omission to act of the other except as expressly provided.
14.03 Governing Law.
The provisions of this Agreement shall be governed in all respects by
the laws of the State of California.
14.04 Notice.
All notices, proposals, submissions, offers, approvals, agreements,
elections, consents, acceptances, waivers, reports, plans, requests,
instructions and other communications required or permitted to be made or given
hereunder (all of the foregoing hereinafter collectively referred to as
"Communications") shall be in writing, and shall be deemed to have been duly
made or given when: a) delivered personally with receipt acknowledged; b) sent
by registered or certified mail or equivalent, return receipt requested, or c)
sent by facsimile or telex (which shall promptly be confirmed by a writing sent
by registered or certified mail or equivalent, return receipt requested), or d)
sent by recognized overnight courier for delivery within twenty-four (24) hours,
in each case addressed or sent to the parties at the following addresses and
facsimile numbers or to such other or additional address or facsimile as any
party shall hereafter specify by Communication to the other parties:
PDTI: PDT, Inc.
7408 Hollister Avenue
Santa Barbara, CA 93117
U.S.A.
Attn: President
Fax # 805-685-2959
With a copy to: Bryan Cave LLP
One Metropolitan Square
211 No. Broadway, Suite 3600
St. Louis, MO 63102-2750
U.S.A.
Attn: James A. Kearns III or James L. Nouss, Jr.
Fax # 314-259-2020
IRIDEX: IRIDEX Corporation
340 Pioneer Way
Mountain View, CA 94041
U.S.A.
Attn: President
Fax # 415-962-0486
With a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
U.S.A.
Attn: Judith M. O'Brien
Fax # 415-493-6811
Notice of change of address shall be deemed given when actually
received, all other Communications shall be deemed to have been given, received
and dated on the earlier of: (i) when actually received, or on the date when
delivered personally; (ii) one (1) day after being sent by facsimile, cable,
telex (each promptly confirmed by a writing as aforesaid) or overnight courier;
or four (4) business days after mailing.
14.05 Legal Construction.
In case any one or more of the provisions contained in this Agreement
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby and the parties will attempt to agree upon a
valid and enforceable provision which shall be a reasonable substitute for such
invalid and unenforceable provision in light of the tenor of this Agreement,
and, upon so agreeing, shall incorporate such substitute provision in this
Agreement.
14.06 Entire Agreement, Modifications, Consents, Waivers.
This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Each
party hereto may, by an instrument in writing, waive compliance by another party
hereto with any term or provision of this Agreement on the part of such other
party to be performed or complied with. The waiver by either party hereto of a
breach of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach.
14.07 Section Headings; Construction.
The section headings and titles contained herein are each for reference
only and shall not be deemed to affect the meaning or interpretation of this
Agreement. The words "hereby", "herein", "hereinabove", "hereinafter", "hereof"
and "hereunder", when used anywhere in this Agreement, refer to this Agreement
as a whole and not merely to a subdivision in which such words appear, unless
the context otherwise requires. The singular shall include the plural, the
conjunctive shall include the disjunctive and the masculine gender shall include
the feminine and neuter, and vice versa, unless the context otherwise requires.
14.08 Execution Counterparts.
This Agreement may be executed in any number of counterparts and each
such duplicate counterpart shall constitute an original, any one of which may be
introduced in evidence or used for any other purpose without the production of
its duplicate counterpart. Moreover, notwithstanding that any of the parties did
not execute the same counterpart, each counterpart shall be deemed for all
purposes to be an original, and all such counterparts shall constitute one and
the same instrument, binding on all of the parties hereto.
ARTICLE XV - BINDING EFFECT: ASSIGNMENT
In entering into this Agreement, each party hereto has relied upon the
expertise and capabilities of the other. Accordingly, the parties may not
directly or indirectly assign, delegate, encumber or in any other manner
transfer any of its rights, remedies, obligations, liabilities or interests in
or arising under this Agreement, without the prior consent of the other, which
consent shall not be unreasonably withheld or delayed, except that either party
(an "Assigning Party") may directly or indirectly assign, delegate, encumber or
in any other manner transfer any of its rights, remedies, obligations,
liabilities or interests in or arising under this Agreement, upon prior notice
to (but without obtaining the prior consent of the other party) to: a) any
affiliate of the Assigning Party, or b) any entity which succeeds, by purchasing
stock or assets, by merger or otherwise, to all or substantially all of the
assets of the Assigning Party or right, title and interest of the Assigning
Party to Co-Developed Devices. Any attempted assignment, delegation, encumbrance
or other transfer in violation of this Agreement shall be void and of no effect,
and shall be a material breach hereof.
ARTICLE XVI - RESOLUTION OF DISPUTES
16.01 Mediation.
Except for any claims relating to the validity, construction, scope,
enforceability or infringement of any Patent rights, which claims shall be
resolved by a court of competent jurisdiction, and except for the right of
either party to apply to a court of competent jurisdiction for a temporary
restraining order or preliminary injunction to preserve the status quo or
prevent irreparable harm pending the selection and confirmation of a panel of
arbitrators, any dispute arising under this Agreement shall be resolved through
a mediation-arbitration approach. The parties agree to first try to resolve the
dispute informally with the help of a mutually agreed-upon mediator. If it
proves impossible to arrive at a mutually satisfactory solution through
mediation, the parties agree, upon the written demand of either party, to submit
their dispute to binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association.
16.02 Arbitration.
The arbitration may be conducted by one impartial arbitrator by mutual
agreement or by three arbitrators if the parties are unable to agree on a single
arbitrator within 30 days of first demand for arbitration. All arbitrators are
to be selected from a panel of candidates having a background or training in
photodynamic therapy, photoreactive drugs or related light devices. The
arbitrator or arbitrators shall determine the place or places of arbitration
having due regard for the convenience of the parties and witnesses and the
location of records. Upon request of a party, the arbitrators shall have the
authority to permit discovery to the extent they deem appropriate. A court
reporter shall record the arbitration hearing and the reporter's transcript
shall be the official transcript of the proceeding. The arbitrators shall have
no power to add or detract from the agreements of the parties and may not make
any ruling or award that does not conform to the terms and conditions of this
Agreement. The arbitrators shall have the authority to grant injunctive relief
in a form substantially similar to that which would otherwise be granted by a
court of law. The arbitrators shall have no authority to award punitive damages
or any other damages not measured by the prevailing party's actual damages. The
arbitrators shall specify the basis for any damage award and the types of
damages awarded. The decision of the arbitrators shall be final and binding on
the parties and may be entered and enforced in any court of competent
jurisdiction by either party. The prevailing party in the arbitration
proceedings shall be awarded reasonable attorney fees, expert witness costs and
expenses, and all other costs and expenses incurred directly or indirectly in
connection with the proceedings, unless the arbitrators shall for good cause
determine otherwise.
IN WITNESS WHEREOF, the parties have cause this Agreement to be
executed as of the day and year first written above.
PDT, INC.
By: /s/ John M. Philpott
--------------------
Title: Chief Financial Officer
Date: May 28, 1996
IRIDEX CORPORATION
By: /s/ Theodore A. Boutacoff
-------------------------
Title: President and CEO
Date: May 28, 1996
<PAGE>
Exhibit 11.1
Computation of Net Loss Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ----------------------------------
1996 1995 1996 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Primary
Net loss $ (1,682,000) $ (2,536,000) $ (8,484,000) $ (4,158,000)
================ ================ ================ ================
Weighted average common shares outstanding 11,872,255 9,610,803 11,148,338 9,372,197
---------------- ---------------- ---------------- ----------------
Net loss per share $ (0.14) $ (0.26) $ (0.76) $ (0.44)
================ ================ ================ ================
Fully diluted
Net loss $ (1,682,000) $ (2,536,000) $ (8,484,000) $ (4,158,000)
================ ================ ================ ================
Weighted average common shares outstanding 11,872,255 9,610,803 11,148,338 9,372,197
---------------- ---------------- ---------------- ----------------
Net loss per share $ (0.14) $ (0.26) $ (0.76) $ (0.44)
================ ================ ================ ================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDING
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 46,702
<SECURITIES> 19,999
<RECEIVABLES> 1,124
<ALLOWANCES> 0
<INVENTORY> 15,000
<CURRENT-ASSETS> 68,386
<PP&E> 3,481
<DEPRECIATION> (1,453)
<TOTAL-ASSETS> 70,718
<CURRENT-LIABILITIES> 3,258
<BONDS> 145
0
0
<COMMON> 112,579
<OTHER-SE> (45,264)
<TOTAL-LIABILITY-AND-EQUITY> 70,718
<SALES> 4
<TOTAL-REVENUES> 1,385
<CGS> 4
<TOTAL-COSTS> 10,561
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> (8,484)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,484)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,484)
<EPS-PRIMARY> (0.76)
<EPS-DILUTED> (0.76)
</TABLE>
