SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25544
Miravant Medical Technologies
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(Exact name of Registrant as specified in its charter)
Delaware 77-0222872
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
336 Bollay Drive, Santa Barbara, California 93117
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(Address of principal executive offices, including zip code)
(805) 685-9880
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(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 May 10, 2000
----- ---------------------------
Common Stock, $.01 par value 18,287,639
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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Page
Item 1. Consolidated Financial Statements
Consolidated balance sheets as of March 31, 2000 and
December 31, 1999................................................... 3
Consolidated statements of operations for the three months ended
March 31, 2000 and 1999............................................. 4
Consolidated statements of cash flows for the three months ended
March 31, 2000 and 1999............................................. 5
Notes to consolidated financial statements..................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................. 8
Item 3. Qualitative and Quantitative Disclosures About Market Risk..................... 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................... 14
Signatures .................................................................... 14
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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
2000 1999
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Assets (Unaudited)
Current assets:
Cash and cash equivalents............................................... $ 14,401,000 $ 19,168,000
Investments in short-term marketable securities......................... 8,721,000 3,621,000
Accounts receivable..................................................... 1,441,000 5,717,000
Prepaid expenses and other current assets............................... 1,501,000 1,147,000
------------------ -------------------
Total current assets....................................................... 26,064,000 29,653,000
Property, plant and equipment:
Vehicles................................................................ 28,000 28,000
Furniture and fixtures.................................................. 1,639,000 1,639,000
Equipment............................................................... 5,581,000 5,495,000
Leasehold improvements.................................................. 4,502,000 4,488,000
Capital lease equipment................................................. 184,000 184,000
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11,934,000 11,834,000
Accumulated depreciation................................................ (8,550,000) (8,112,000)
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3,384,000 3,722,000
Investments in affiliates.................................................. 1,872,000 752,000
Patents and other assets................................................... 820,000 825,000
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Total assets............................................................... $ 32,140,000 $ 34,952,000
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Liabilities and stockholders' equity
Current liabilities:
Accounts payable........................................................ $ 2,972,000 $ 4,070,000
Accrued payroll and expenses............................................ 541,000 650,000
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Total current liabilities.................................................. 3,513,000 4,720,000
Long-term liabilities:
Long-term debt.......................................................... 15,712,000 15,379,000
Sublease security deposits.............................................. 113,000 127,000
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Total long-term liabilities................................................ 15,825,000 15,506,000
Stockholders' equity:
Common stock, 50,000,000 shares authorized; 18,226,574 and 18,038,270
shares issued and outstanding at March 31, 2000 and
December 31,1999, respectively........................................ 154,619,000 152,731,000
Notes receivable from officers.......................................... (466,000) (460,000)
Deferred compensation and interest...................................... (2,572,000) (2,647,000)
Accumulated other comprehensive loss.................................... (2,604,000) (3,724,000)
Accumulated deficit..................................................... (136,175,000) (131,174,000)
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Total stockholders' equity................................................. 12,802,000 14,726,000
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Total liabilities and stockholders' equity................................. $ 32,140,000 $ 34,952,000
================== ===================
See accompanying notes.
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MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three months ended March 31,
2000 1999
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Revenues:
License - contract research and development....... $ 1,369,000 $ 2,228,000
Royalties......................................... -- 62,000
Grants............................................ 9,000 122,000
-------------------- ---------------------
Total revenues....................................... 1,378,000 2,412,000
Costs and expenses:
Research and development.......................... 4,719,000 6,352,000
Selling, general and administrative............... 1,548,000 1,977,000
Loss in affiliate................................. -- 250,000
-------------------- ---------------------
Total costs and expenses............................. 6,267,000 8,579,000
Loss from operations................................. (4,889,000) (6,167,000)
Interest and other income (expense):
Interest and other income......................... 268,000 128,000
Interest expense.................................. (380,000) --
-------------------- ---------------------
Total net interest and other (expense) income........ (112,000) 128,000
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Net loss............................................. $ (5,001,000) $ (6,039,000)
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Net loss per share - basic and diluted............... $ (0.28) $ (0.35)
==================== =====================
Shares used in computing net loss per share.......... 18,112,326 17,071,169
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See accompanying notes.
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MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three months ended March 31,
Operating activities: 2000 1999
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Net loss........................................................... $ (5,001,000) $ (6,039,000)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization................................... 451,000 767,000
Amortization of deferred compensation and interest.............. 247,000 483,000
Loss on sale of property, plant and equipment................... -- 25,000
Reserve for loan receivable from affiliate...................... -- 250,000
Stock awards.................................................... 40,000 80,000
Non-cash interest on long-term debt............................. 333,000 --
Changes in operating assets and liabilities:
Accounts receivable.......................................... 4,276,000 476,000
Prepaid expenses and other assets............................ (362,000) (1,230,000)
Accounts payable, accrued payroll and expenses............... (1,213,000) (201,000)
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Net cash used in operating activities.............................. (1,229,000) (5,389,000)
Investing activities:
Purchases of marketable securities................................. (5,100,000) (7,250,000)
Purchases of property, plant and equipment......................... (100,000) (278,000)
Payments of loan to affiliate...................................... -- (250,000)
Sublease security deposits......................................... (14,000) --
-------------------- ---------------------
Net cash used in investing activities.............................. (5,214,000) (7,778,000)
Financing activities:
Proceeds from issuance of Common Stock, less issuance costs........ 1,676,000 18,648,000
Repayments of notes to officers.................................... -- 1,083,000
Payments for price protection obligations under the
Amended Securities Agreement.................................. -- (4,204,000)
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Net cash provided by financing activities.......................... 1,676,000 15,527,000
Net (decrease) increase in cash and cash equivalents............... (4,767,000) 2,360,000
Cash and cash equivalents at beginning of period................... 19,168,000 11,284,000
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Cash and cash equivalents at end of period......................... $ 14,401,000 $ 13,644,000
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Supplemental disclosures:
State taxes paid................................................... $ 4,000 $ --
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Interest paid...................................................... $ -- $ --
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See accompanying notes.
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MIRAVANT MEDICAL TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The information contained herein has been prepared in accordance with Rule
10-01 of Regulation S-X. The information at March 31, 2000, and for the
three month periods ended March 31, 2000 and 1999, 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
presentation 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, 1999 included in the
Miravant Medical Technologies Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
2. Comprehensive Income (Loss)
For the three months ended March 31, 2000 and 1999, comprehensive loss
amounted to approximately $3.9 million and $5.5 million, respectively. The
difference between net loss and comprehensive loss relates to the change
in the unrealized loss or gain the Company recorded for its
available-for-sale securities on its investment in Xillix Technologies
Corp.
3. Per Share Data
Basic loss per common share is computed by dividing the net loss by the
weighted average shares outstanding during the period. Diluted earnings
per share reflects the potential dilution that would occur if securities
or other contracts to issue common stock were exercised or converted to
common stock. Since the effect of the assumed exercise of common stock
options and other convertible securities was anti-dilutive, basic and
diluted loss per share as presented on the consolidated statements of
operations are the same.
4. Reclassifications
Certain reclassifications have been made to the 1999 consolidated
financial statements to conform to the periods presented.
5. Commitments and Contingencies
In February 1998, the Company agreed to guaranty a term loan in the amount
of $7.6 million from a bank to a director of the Company at the time. In
June 1998, the director did not stand for re-election on the Board of
Directors. The loan was due and payable on July 31, 1999, and was
subsequently extended to October 31, 2000. In conjunction with the
extension, the Company increased its security interest to include
substantially all of the personal assets of the former director.
Additionally, with the extension of the guaranty of this loan, the former
director paid to the Company a transaction fee of $152,000. In connection
with the extension agreement, as of March 31, 2000, the former director
has reduced the outstanding balance of the loan, and the Company's
guaranty, to $3.1 million. Under the loan agreement and the guaranty, the
individual and Miravant are subject to the maintenance of specified
financial and other covenants.
6. Subsequent Event
In May 2000, in accordance with the Credit Agreement entered into with
Pharmacia Corporation in February 1999, the Company requested the final
$7.5 million available under the Credit Agreement. Under the terms of the
Credit Agreement and in connection with the loan amounts received, the
Company issued the final 120,000 warrants to purchase Miravant Common
Stock at an exercise price of $20.62 per warrant share.
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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 we believe that
our expectations are based on reasonable assumptions, we can give no assurance
that our 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 current stage of development of both Miravant
and our products, the timing and uncertainty of results of both research and
regulatory processes, the extensive government regulation applicable to our
business, the unproven safety and efficacy of our drug and device products, our
significant additional financing requirements, the volatility of our stock
price, the uncertainty of future capital funding, our ability to maintain and
establish collaborative and licensing arrangements, the uncertainties regarding
health care reimbursement and reform, the highly competitive environment of the
international pharmaceutical and medical device industries and the presence of a
number of competitors with significantly greater financial, technical and other
resources and extensive operating histories, our potential exposure to product
liability or recall, uncertainties relating to patents and other intellectual
property, including whether we will obtain sufficient protection or competitive
advantage therefrom and our dependence upon a limited number of key personnel
and consultants and our significant reliance upon our collaborative partners for
achieving our goals, and other factors detailed in our Annual Report on Form
10-K for the year ended December 31, 1999.
General
Since our inception, we have been principally engaged in the research and
development of drugs and medical device products for use in PhotoPoint(TM), our
proprietary technologies for photodynamic therapy. We have been unprofitable
since our founding and have incurred a cumulative net loss of approximately
$136.2 million as of March 31, 2000. We expect to continue to incur substantial,
and possibly increasing, operating losses for the next few years due to
continued and increased spending on research and development programs, the
funding of preclinical studies, clinical trials and regulatory activities and
the costs of manufacturing and administrative activities.
Our revenues primarily reflect income earned from licensing agreements,
grants and royalties from device product sales. To date, we have received no
revenue from the sale of drug products and we are not permitted to engage in
commercial sales of drugs or devices until such time, if ever, as we receive
requisite regulatory approvals. As a result, we do not expect to record
significant product sales until such approvals are received.
Until we commercialize our product(s), we expect revenues to continue to be
attributable to licensing agreements and grants. We anticipate that future
revenues and results of operations may continue to fluctuate significantly
depending on, among other factors, the timing and outcome of applications for
regulatory approvals, our or our collaborative partners ability to successfully
manufacture, market and distribute our drug and device products, the level of
participation of our collaborative partners in our preclinical studies and
clinical trials and/or the restructuring or establishment of collaborative
arrangements for the development, manufacturing, marketing and distribution of
some of our products. We anticipate our operating activities will result in
substantial, and possibly increasing, operating losses for the next few years.
Under the 1998 amendments of the License Agreements with Pharmacia
Corporation, formerly Pharmacia & Upjohn, Inc., we were to conduct all
preclinical studies and U.S. clinical trials in age-related macular degeneration
or AMD and would be reimbursed by Pharmacia Corporation for all out-of-pocket
expenses incurred. Pharmacia Corporation was to conduct all international
clinical trials for AMD. The 1998 amendments also returned to us the rights for
SnET2 in dermatology, and provided for the quarterly funding of $2.5 million for
eight quarters for use in our oncology and urology programs. In January 1999, we
entered into an Equity Investment Agreement, whereby Pharmacia Corporation
purchased 1,136,533 shares of our Common Stock for an aggregate purchase price
of $19.0 million, or $16.71 per share. Also, in February 1999, under a separate
Credit Agreement, Pharmacia Corporation extended to us up to $22.5 million in
credit, which is subject to certain limitations and requirements, including
interest at a variable rate, in the form of up to six quarterly loans or new
loans of $3.75 million each to be used to support our ophthalmology, oncology
and other development programs, as well as for general corporate purposes. As of
March 31, 2000 we have received $15.0 million of the line of credit and in May
2000, we requested the remaining $7.5 million available. Under the terms of the
Credit Agreement and in connection with each draw-down, we are obligated to
issue Pharmacia Corporation a certain number of warrants based on the amount
borrowed. The exercise price of each warrant will be equal to 140% of the
average of the closing bid prices of the Common Stock for the ten trading days
immediately preceding the borrowing request for the related loan. In connection
with the quarterly loans received, we have issued warrants to purchase 240,000
shares of Common Stock at an exercise price of $11.87 per warrant share for
120,000 shares and $14.83 per warrant share for the other 120,000 shares. In May
2000, we will issue the remaining warrants to purchase 120,000 shares of Common
Stock at an exercise price of $20.62 per warrant share. Additionally, in
connection with the Equity Investment Agreement and the Credit Agreement, in
February 1999 we amended the 1998 amendments of the License Agreements with
Pharmacia Corporation to eliminate the remaining future cost reimbursements for
oncology and urology and any future milestone payments in AMD. The amendments
are referred to in this report as the 1999 Amendments.
In February 1999, in connection with the 1999 Amendments, we refined the
use of our resources to correspond with the change in cost reimbursement and
assistance from Pharmacia Corporation while maintaining our core development
programs. We will continue to evaluate the use of our resources in connection
with our funding provisions, external resource assistance and as opportunities
present themselves. In December 1999, we transitioned the majority of the
operations of the Phase III clinical trials in AMD to Pharmacia Corporation in
accordance with the 1999 Amendments. Pharmacia Corporation will now be
responsible for directly funding the majority of the Phase III AMD clinical
trial costs. We will continue to be responsible for the majority of the
preclinical studies and the drug and device development and manufacturing
necessary for the new drug application or NDA submission for AMD and will be
reimbursed for those costs in accordance with the 1999 Amendments.
We are currently conducting clinical trials in oncology and ophthalmology.
In dermatology, we are investigating the development of topical formulations of
our photoselective drugs. Based upon the outcome of these studies and various
economic and development factors, including cost, reimbursement and the
available alternative therapies, we may or may not elect to further develop
PhotoPoint procedures in oncology, ophthalmology, dermatology or in any other
indications.
Results of Operations
Revenues. Our revenues decreased from $2.4 million for the three months
ended March 31, 1999 to $1.4 million for the three months ended March 31, 2000.
For the three months ended March 31, 2000 and March 31, 1999, we recorded
license revenues of $1.4 million and $2.2 million, respectively. The decrease in
license revenues for the three months ended March 31, 2000, is directly
attributed to the December 1999 transition of the majority of the operations of
the Phase III clinical trials in AMD to Pharmacia Corporation in accordance with
the 1999 Amendments. Pharmacia Corporation will now be responsible for directly
funding the majority of the Phase III AMD clinical trial costs. We will continue
to be responsible for the majority of the preclinical studies and the drug and
device development and manufacturing necessary for the NDA submission for AMD
and will be reimbursed for those costs in accordance with the 1999 Amendments.
As a result, we anticipate the 2000 license revenue related to the reimbursement
of out-of-pocket or direct costs, as well as our related expenses, will decrease
compared to 1999.
The level of license and grant income is likely to fluctuate materially
from period to period and in the future depending on the amount of preclinical
and clinical costs incurred and/or reimbursed, the extent of development
activities under the 1999 Amendments and the amount of grant income awarded and
expended. Additionally, we currently have not been awarded any grants for 2000,
however grant applications have been submitted and are currently under review.
The Laserscope license agreement, which provided royalties on the sale of our
previously designed device products, terminated in April 1999 and no further
royalties will be received.
Research and Development. Our research and development expenses decreased
to $4.7 million for the three months ended March 31, 2000 from $6.4 million for
the three months ended March 31, 1999. The decrease in research and development
expenses for the three months ended March 31, 2000 compared to the same period
in 1999 related primarily to the December 1999 transition of the majority of the
operations of the Phase III clinical trials in AMD to Pharmacia Corporation, in
addition to a decrease in salaries and depreciation expense related to research
and development activities. Research and development expenses for the three
months ended March 31, 2000 primarily related to the preclinical studies
required for an NDA submission for AMD and development work associated with the
development of existing and new drug compounds, formulations and preclinical and
clinical programs. Research and development expenses for the three months ended
March 31, 1999 primarily related to the costs associated with the screening,
treatment, monitoring and data collection of qualified individuals participating
in Phase III clinical trials for AMD and Phase I clinical trials for prostate
cancer, and the preclinical studies and development work associated with the
development of existing and new drug compounds, formulations and clinical
programs.
Future research and development expenses may fluctuate depending on
continued expenses incurred in our preclinical studies and clinical trials in
our ophthalmology and other programs, costs associated with the purchase of raw
materials and supplies for the production of devices and drug for use in
preclinical studies and clinical trials, the pharmaceutical manufacturing
scale-up to expanded commercial levels and expansion of our research and
development programs, which includes the increased hiring of personnel, the
continued expansion of preclinical studies and clinical trials and the
development of new drug compounds and formulations.
Selling, General and Administrative. Our selling, general and
administrative expenses decreased to $1.5 million for the three months ended
March 31, 2000 from $2.0 million for the three months ended March 31, 1999. The
overall decrease in selling, general and administrative expenses for the three
months ended March 31, 2000 compared to the same period in 1999 is primarily due
to a decrease in compensation expense associated with options and warrants
issued to consultants and a decrease in net rent expense as a result of
subleasing one of our buildings in December 1999.
Future selling, general and administrative expenses may fluctuate depending
on the support required for research and development activities, continuing
corporate development and professional services, compensation expense associated
with stock options and warrants granted to financial consultants and expenses
for general corporate matters.
Loss in Investment in Affiliate. In connection with the $2.0 million line
of credit we have provided to our affiliate, Ramus Medical Technologies or
Ramus, we have recorded a reserve for the entire $2.0 million outstanding credit
line balance plus accrued interest as of March 31, 2000. The $250,000 expense
recorded in 1999 represents a reserve for the final amount of borrowings under
the credit line.
Interest and Other Income. Interest and other income increased to $268,000
for the three months ended March 31, 2000 from $128,000 for the three months
ended March 31, 1999. The increase for the first three months of 2000 compared
to the same period in 1999 is directly related to the increase in the levels of
cash and marketable securities earning interest and an overall increase in
investment interest rates. The interest income related to the Ramus borrowings,
which has been fully reserved for, was $50,000 and $38,000 for the three months
ended March 31, 2000 and 1999, respectively. The level of future interest and
other income will primarily be subject to the level of cash balances we maintain
from period to period and investment interest rates.
Interest Expense. Interest expense increased to $380,000 for the three
months ended March 31, 2000 from zero for same period in 1999. The increase is
directly related to the amount of borrowings under the Credit Agreement with
Pharmacia Corporation and the value of the warrants issued in connection with
the borrowings. Interest expense will continue to increase in the future based
on the level of borrowings under the Credit Agreement, the interest rate and the
value of the warrants issued in connection with the borrowings.
We do not believe that inflation has had a material impact on our results
of operations.
Liquidity and Capital Resources
Since inception through March 31, 2000, we have accumulated a deficit of
approximately $136.2 million and expect to continue to incur substantial, and
possibly increasing, operating losses for the next few years. We have financed
our operations primarily through private placements of Common Stock and
Preferred Stock, private placements of convertible notes and short-term notes,
our initial public offering, a secondary public offering, Pharmacia
Corporation's purchases of Common Stock and credit arrangements. As of March 31,
2000, we have received proceeds from the sale of equity securities, convertible
notes and credit arrangements of approximately $215.5 million.
In September and October 1997, we entered into a private placement
offering, which was subsequently amended with respect to certain purchasers,
which provided net proceeds to Miravant of approximately $68.2 million. During
1998, under the price protection and repurchase provisions of these agreements,
we issued an additional 2,444,380 shares of Common Stock, repurchased 337,500
shares of Common Stock for $16.9 million and paid $8.6 million. During the first
quarter of 1999, we completed our price protection obligations through the
payment of $4.2 million, the issuance of 688,996 shares Common Stock and the
issuance of 450,000 warrants to purchase Common Stock at an exercise price of
$35.00 per share. As such, we have no further obligation to these purchasers
under the price protection or repurchase provisions of the Securities Purchase
Agreements and the amendments to those agreements.
In January 1999, under the Equity Investment Agreement, Pharmacia
Corporation purchased 1,136,533 shares of our Common Stock for an aggregate
purchase price of $19.0 million. In February 1999, in accordance with the Credit
Agreement, Pharmacia Corporation also extended to us up to $22.5 million in
credit over two years to be used to support our ophthalmology, oncology and
other development programs, as well as for general corporate purposes. We are
able to issue promissory notes for the quarterly interest amounts due on the
amounts borrowed until December 2000 when the issuance of such promissory notes
for the quarterly interest due will be subject to certain restrictions. The
promissory notes for both principal and interest mature in June 2004 and, at our
option, can be repaid in the form of our Common Stock, subject to certain
limitations and restrictions as defined by the Credit Agreement. The promissory
notes accrue interest at the prime rate, which was 9.0% at March 31, 2000. As of
March 31, 2000, in accordance with the Credit Agreement, we have received four
quarterly loans for a total of $15.0 million of the available $22.5 million. In
May 2000, we requested the remaining $7.5 million available under the Credit
Agreement. In accordance with the Credit Agreement, we have issued promissory
notes to Pharmacia Corporation for the loan amounts received and issued
additional promissory notes for a total of $712,000 for the related interest due
on each of the quarterly due dates through March 31, 2000. In connection with
the quarterly loans received, we have issued warrants to purchase 240,000 shares
of Common Stock at an exercise price of $11.87 per warrant share for 120,000
shares and $14.83 per warrant share for the other 120,000 shares. In May 2000,
we will issue the remaining warrants to purchase 120,000 shares of Common Stock
at an exercise price of $20.62 per warrant share.
In June 1998, we purchased a $5.0 million, 9% equity interest in Xillix. We
received 2,691,904 shares of Xillix common stock in exchange for $3.0 million in
cash and 58,909 shares of Miravant Common Stock at the market value on the date
of the agreement of $25.06 per share, or $1.5 million. As of June 1999, the
shares received are no longer restricted and can be sold at anytime by the
Company. In addition, we entered into a strategic alliance agreement with Xillix
to co-develop proprietary systems incorporating the technology of each company
and to share the research and development costs. To date, we have not incurred
any costs under this agreement.
In February 1998, we agreed to guaranty a term loan in the amount of $7.6
million from a bank to a director of ours at the time. In June 1998, the
director did not stand for re-election on the Board of Directors. The loan was
due and payable on July 31, 1999 and was subsequently extended to October 31,
2000. In conjunction with the extension, we increased our security interest to
include substantially all of the personal assets of the former director.
Additionally, with the extension of the guaranty of this loan, the former
director paid to Miravant a transaction fee of $152,000. In connection with the
extension agreement, as of March 31, 2000, the former director has reduced the
outstanding balance of the loan, and our guaranty, to $3.1 million. Under the
loan agreement and the guaranty, the individual and Miravant are subject to the
maintenance of specified financial and other covenants.
In addition to receiving funds through private and public stock offerings,
we have also received funding through the exercise of warrants and stock
options. During the first quarter 2000, we received $1.7 million from the
proceeds of warrant and option exercises. Based on the exercise prices,
expiration dates and call features contained in certain warrants, and depending
on the market value of our Common Stock, we may receive additional funding
through the exercise of these outstanding warrants and stock options in the
future.
For the three months ended March 31, 2000 and March 31, 1999 we required
cash for operations of $1.2 million and $5.4 million, respectively. The decrease
in cash required for operations for the three months ended March 31, 1999
compared to the three months ended March 31, 2000 was due primarily to the
timing of the funds received from Pharmacia Corporation for reimbursable
research and development costs.
For the three months ended March 31, 2000 and March 31, 1999 net cash used
in investing activities was $5.2 million and $7.8 million, respectively. The
funds used for investing activities were used to purchase investments to
maximize the interest earned on our cash balances and the amounts were based on
an analysis of the funds available for investment.
For the three months ended March 31, 2000 and March 31, 1999 net cash
provided by financing activities was $1.7 million and $15.5 million,
respectively. Cash provided by financing activities for the three months ended
March 31, 2000 was primarily related to warrant and option exercises. Cash
provided by financing activities for the three months ended March 31, 1999 was
primarily attributed to Pharmacia Corporation's $19.0 million equity investment
offset by the payment of cash under the price protection provisions of the
Amended Securities Purchase Agreement.
We invested a total of $9.2 million in property and equipment from 1996
through March 31, 2000. During 1998, we entered into a new lease agreement for
an additional facility, which we completely subleased in December 1999. We
expect to continue to purchase property and equipment in the future as we
continue to expand our preclinical, clinical and research and development
activities as well as the buildout and expansion of laboratories and office
space.
Our future capital funding requirements will depend on numerous factors
including:
o The progress and magnitude of our research and development programs,
preclinical studies and clinical trials;
o The time involved in obtaining regulatory approvals;
o The cost involved in filing and maintaining patent claims;
o Competitor and market conditions;
o Investment opportunities;
o Our ability to establish and maintain collaborative arrangements;
o The level of Pharmacia Corporation's involvement in our Phase III AMD
clinical trials;
o The cost of manufacturing scale-up and the cost and effectiveness of
commercialization activities and arrangements; and
o Our ability to obtain grants to finance research and development
projects.
Our ability to generate substantial funding to continue our research and
development activities, preclinical studies and clinical trials and
manufacturing, scale-up, administrative activities and to pursue any additional
investment opportunities is subject to a number of risks and uncertainties and
will depend on numerous factors including:
o Our ability to raise funds in the future through public or private
financings, collaborative arrangements or from other sources;
o Our requirement to allocate 50% of the net proceeds from public or
private financings towards the repayment of the funds received under
the Credit Agreement;
o The potential for equity investments, collaborative arrangements,
license agreements or development or other funding programs with us in
exchange for manufacturing, marketing, distribution or other rights to
products developed by us;
o The amount of funds received from outstanding warrant and stock option
exercises;
o Our ability to maintain our existing collaborative arrangements;
o Our ability to liquidate our equity investments in Ramus, Xillix or
other assets;
o Our requirement to allocate 100% of the net proceeds from the
liquidation of an existing asset towards the repayment of the funds
received under the Credit Agreement; and
o Our ability to collect the loan provided to Ramus under the credit
agreement.
We can not guarantee that additional funding will be available to us when
needed. If it is not, we will be required to scale back our research and
development programs, preclinical studies and clinical trials and administrative
activities and our business and financial results and condition would be
materially adversely affected.
Except for the historical information herein, the matters discussed in this
report are deemed forward-looking statements under federal securities laws that
involve risks and uncertainties. Actual results may differ materially from those
in the forward-looking statements.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements. We are exposed to market risk
related to changes in interest rates. The risks related to foreign currency
exchange rates are immaterial and we do not use derivative financial
instruments.
From time to time, we maintain a portfolio of highly liquid cash
equivalents maturing in three months or less as of the date of purchase. Given
the short-term nature of these investments and that our borrowings outstanding
are under variable interest rates, we are not subject to significant interest
rate risk.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See Exhibit Index on page 15.
(b) Reports on Form 8-K.
None
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.
Miravant Medical Technologies
Date: May 12, 2000 By: /s/ John M. Philpott
---------------------
John M. Philpott
Chief Financial Officer
(on behalf of the Company and as
Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
Incorporating
Exhibit Reference
Number Description (if applicable)
- ------ ----------- ---------------
3.1 Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant
filed with the Delaware Secretary of State on September 12, 1999. [E][3.1]
3.2 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.
3.3 Restated Certificate of Incorporation of the Registrant filed with the Delaware Secretary [B][3.1]
of State on December 14, 1994.
3.4 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.
3.5 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.
3.6 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.
3.7 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.
3.8 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.
3.9 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.
3.10 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.
3.11 Certificate of Incorporation of the Registrant filed with the Delaware Secretary of State [A][3.9]
on June 16, 1989.
3.12 Amended and Restated Bylaws of the Registrant. [E][3.12]
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]
4.8 Form of $55 Common Stock Purchase Warrant. [D][4.1]
4.9 Form of $60 Common Stock Purchase Warrant. [D][4.2]
4.10 Form of $35 Amended and Restated Common Stock Purchase Warrant. [F][4.1]
4.11 Form of Additional $35 Common Stock Purchase Warrant. [F][4.2]
4.12 Warrant to Purchase 10,000 Shares of Common Stock between the Registrant and Charles S. [G][4.12]
Love.*
4.13 Form of $20 Private Placement Warrant Agreement Amendment No. 1. [I][4.13]
10.1 Amendment No. 8 dated as of January 1, 2000 to Employment Agreement between the
Registrant and Gary S. Kledzik.
10.2 Amendment No. 13 dated as of January 1, 2000 to Employment Agreement between the
Registrant and David E. Mai.
10.3 Amendment No. 5 dated as of January 1, 2000 to Employment Agreement between the
Registrant and John M. Philpott.
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 Registration Statement on Form S-3 (File No.
333-39905).
[E] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 10-Q for the quarter ended September 30,
1998 (File No. 0-25544).
[F] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 8-K dated June 30, 1998 (File No.
0-25544).
[G] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 10-Q for the quarter ended June 30, 1998
(File No. 0-25544).
[H] Exhibit A-1 to this exhibit is incorporated by reference from the exhibit
referred to in the Registrant's Registration Statement on Form S-1 (File
No. 33-87138).
[I] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 10-K for the year ended December 31,
1999 (File No. 0-25544).
* Confidential portions of this exhibit have been deleted and filed
separately with the Commission pursuant to a request for confidential
treatment made under Rule 24b-2 under the Securities Exchange Act of 1934.
</TABLE>
<PAGE>
AMENDMENT NO. 8 TO EMPLOYMENT AGREEMENT
- --------------------------------------------------------------------------------
THIS AMENDMENT NO. 8 TO EMPLOYMENT AGREEMENT (the "Amendment") is made and
entered into at Santa Barbara, California, on the date hereinafter set forth by
and between Gary S. Kledzik, Ph.D. (hereinafter referred to as the "Employee")
and MIRAVANT MEDICAL TECHNOLOGIES, a Delaware Corporation (hereinafter referred
to as the "Employer").
WHEREAS:
A. The Employer and the Employee are parties to an Employment Agreement
effective as of December 31, 1989, and Amendments No. 1 through 7 thereto (the
"Employment Agreement").
B. The parties hereto wish to amend the Employment Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises, promises and
representations hereinafter contained, it is agreed as follows:
1. Effective JANUARY 1, 2000, the section entitled EMPLOYEE COMPENSATION on
Exhibit A to the Employment Agreement is hereby amended to read as follows:
EMPLOYEE COMPENSATION
THREE HUNDRED FIFTY SEVEN THOUSAND FIVE HUNDRED DOLLARS
($357,500) per annum.
2. In all other respects, the Employment Agreement is hereby ratified,
confirmed and approved in its entirety.
SIGNATURES ON NEXT PAGE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
this 25th day of January, 2000.
EMPLOYER:
MIRAVANT MEDICAL TECHNOLOGIES
a Delaware Corporation
By: /s/ David E. Mai
----------------------
David E. Mai
President
EMPLOYEE:
/s/ Gary S. Kledzik, Ph.D.
--------------------------
Gary S. Kledzik, Ph.D.
AMENDMENT NO. 13 TO EMPLOYMENT AGREEMENT
- --------------------------------------------------------------------------------
THIS AMENDMENT NO. 13 TO EMPLOYMENT AGREEMENT (the "Amendment") is made and
entered into at Santa Barbara, California, on the date hereinafter set forth by
and between DAVID E. MAI (hereinafter referred to as the "Employee") and
MIRAVANT MEDICAL TECHNOLOGIES, a Delaware Corporation (hereinafter referred to
as the "Employer").
WHEREAS:
A. The Employer and the Employee are parties to an Employment Agreement
effective as of February 1, 1991, and Amendments No. 1 through 12 thereto (the
"Employment Agreement").
B. The parties hereto wish to amend the Employment Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises, promises and
representations hereinafter contained, it is agreed as follows:
1. Effective JANUARY 1, 2000, the section entitled EMPLOYEE COMPENSATION on
Exhibit A to the Employment Agreement is hereby amended to read as follows:
EMPLOYEE COMPENSATION
TWO HUNDRED SEVENTY FIVE THOUSAND DOLLARS ($275,000) per annum.
2. In all other respects, the Employment Agreement is hereby ratified,
confirmed and approved in its entirety.
SIGNATURES ON NEXT PAGE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on this
25th day of January, 2000.
EMPLOYER:
MIRAVANT MEDICAL TECHNOLOGIES
a Delaware Corporation
By: /s/ Gary S. Kledzik, Ph.D.
--------------------------
Gary S. Kledzik, Ph.D.
C.E.O. and Chairman
EMPLOYEE:
/s/ David E. Mai
----------------
David E. Mai
AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT
- --------------------------------------------------------------------------------
THIS AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT (the "Amendment") is made and
entered into at Santa Barbara, California, on the date hereinafter set forth by
and between JOHN M. PHILPOTT (hereinafter referred to as the "Employee") and
MIRAVANT MEDICAL TECHNOLOGIES, a Delaware Corporation (hereinafter referred to
as the "Employer").
WHEREAS:
A. The Employer and the Employee are parties to an Employment Agreement
effective as of March 20, 1995, and Amendments No. 1 through 4 thereto (the
"Employment Agreement").
B. The parties hereto wish to amend the Employment Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises, promises and
representations hereinafter contained, it is agreed as follows:
1. Effective JANUARY 1, 2000, the section entitled EMPLOYEE COMPENSATION on
Exhibit A to the Employment Agreement is hereby amended to read as follows:
EMPLOYEE COMPENSATION
ONE HUNDRED NINETY TWO THOUSAND FIVE HUNDRED DOLLARS ($192,500) per annum.
2. In all other respects, the Employment Agreement is hereby ratified,
confirmed and approved in its entirety.
SIGNATUARES ON NEXT PAGE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on this
25th day of January, 2000.
EMPLOYER:
MIRAVANT MEDICAL TECHNOLOGIES
a Delaware Corporation
By: /s/ Gary S. Kledzik, Ph.D.
--------------------------
Gary S. Kledzik, Ph.D.
C.E.O. and Chairman
EMPLOYEE:
/s/ John M. Philpott
--------------------
John M. Philpott
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND IN
THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2000, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-1-2000
<PERIOD-END> Mar-31-2000
<CASH> 14,401
<SECURITIES> 8,721
<RECEIVABLES> 1,441
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,064
<PP&E> 11,934
<DEPRECIATION> (8,550)
<TOTAL-ASSETS> 32,140
<CURRENT-LIABILITIES> 3,513
<BONDS> 0
0
0
<COMMON> 154,619
<OTHER-SE> (122,479)
<TOTAL-LIABILITY-AND-EQUITY> 32,140
<SALES> 0
<TOTAL-REVENUES> 1,378
<CGS> 0
<TOTAL-COSTS> 6,267
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 380
<INCOME-PRETAX> (5,001)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,001)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,001)
<EPS-BASIC> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
