UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1998.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from_______to_________
Commission file number 0-26208
KERAVISION, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0328942
(State of Incorporation) (I.R.S. Employer
Identification No.)
48630 MILMONT DRIVE
FREMONT, CA 94538
(Address of principal executive offices)
(510) 353-3000
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
As of November 6, 1998 there were 12,748,179 shares of Common Stock
outstanding.
<PAGE>
INDEX
-----
PART I. FINANCIAL INFORMATION (unaudited)
Item 1. Condensed Consolidated Balance Sheets as of
September 30, 1998 and December 31, 1997
Condensed Consolidated Statements of Operations
for the three-month and nine-month periods
September 30, 1998 and 1997
Condensed Consolidated Statements of Cash Flows
for the nine-month periods ended
September 30, 1998 and 1997
Notes to Condensed Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Items
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
KERAVISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30,December 31,
1998 1997
----------- -----------
<S> <C> <C>
(Unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents.......................... $3,250 $2,574
Available-for-sale investments..................... 10,580 11,539
Prepaid expenses and other current assets.......... 1,049 1,265
----------- -----------
Total current assets................................. 14,879 15,378
----------- -----------
Property and equipment, at cost:
Manufacturing and laboratory equipment............. 3,664 3,298
Office furniture and fixtures...................... 597 586
Leasehold improvements............................. 622 383
----------- -----------
4,883 4,267
Accumulated depreciation and amortization............ (2,918) (2,398)
----------- -----------
Net property and equipment......................... 1,965 1,869
Other assets......................................... 122 98
----------- -----------
Total assets......................................... $16,966 $17,345
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable................................... $1,213 $1,089
Accrued payroll and related expenses............... 696 489
Accrued clinical trial costs....................... 1,352 1,211
Other accrued liabilities.......................... 267 414
Current portion of capital lease obligations....... 394 355
----------- -----------
Total current liabilities............................ 3,922 3,558
Capital lease obligations............................ 667 850
Redeemable convertible series B preferred stock 17,106
Commitments and contingencies
Stockholders' equity:
Common stock....................................... 13 13
Additional paid-in capital......................... 79,383 76,540
Deferred compensation.............................. (67) (179)
Accumulated deficit................................ (82,525) (62,634)
Notes receivable from stockholders................. (1,533) (803)
----------- -----------
Total stockholders' equity (Net capital deficiency).. (4,729) 12,937
----------- -----------
Total liabilities and stockholders'
equity (Net capital deficiency)................... $16,966 $17,345
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
KERAVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data; unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales........................... $239 $91 $503 $261
Costs and expenses:
Cost of sales and manufacturing
expenses........................ 1,155 843 3,104 2,588
Research and development......... 2,839 2,596 8,855 8,002
Selling, general and
administrative................ 2,129 1,485 5,781 4,563
--------- --------- --------- ---------
Total costs and expenses............ 6,123 4,924 17,740 15,153
--------- --------- --------- ---------
Operating loss...................... (5,884) (4,833) (17,237) (14,892)
Interest income, net................ 221 264 400 932
--------- --------- --------- ---------
Net Loss........................... ($5,663) ($4,569) ($16,837) ($13,960)
Quarterly dividend on preferred stock (383) 0 (383) 0
Deemed dividend on preferred stock 0 0 (2,611) 0
--------- ------------------------------
Net loss applicable to Common Shareholders ($6,046) ($4,569) ($19,831) ($13,960)
========= ========= ========= =========
Basic and diluted net loss per share
applicable to Common Shareholders.. ($0.48) ($0.36) ($1.57) ($1.12)
========= ========= ========= =========
Shares used in calculation of
net loss per share................. 12,686 12,555 12,655 12,515
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
KERAVISION, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(In thousands, unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net Loss................................................ ($16,837) ($13,960)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization......................... 520 492
Expenses related to forgiveness of
stockholders' notes................................. 45 --
Amortization of deferred compensation................. 112 112
Other current assets................................ 216 (317)
Accounts payable.................................... 124 18
Accrued liabilities................................. 201 614
--------- ---------
Total adjustments.................................... 1,218 919
--------- ---------
Net cash used in operating activities................ (15,619) (13,041)
--------- ---------
Cash flows from investing activities:
Purchases of available-for-sale investments............. (20,335) (19,428)
Sales of available-for-sale investments................. 19,033 9,139
Maturities of available-for-sale investments............ 2,201 18,608
Issuance of stockholders' notes....................... (775) --
Capital expenditures.................................... (616) (490)
Other assets............................................ (24) (11)
--------- ---------
Net cash provided by (used in) investing activities.. (516) 7,818
--------- ---------
Cash flows from financing activities:
Principal payments under capital lease obligations...... (324) (293)
Proceeds from sales-leaseback of capital equipment...... 180 495
Proceeds from issuance of equity securities, net
of repurchases........................................ 312 312
Proceeds from issuance of redeemable convertible
Series B.............................................. 18,000 --
Fees incurred to obtain additional financing............ (1,357) --
--------- ---------
Net cash provided by financing activities.. 16,811 514
--------- ---------
Net increase (decrease) in cash and cash equivalents..... 676 (4,709)
Cash and cash equivalents at the beginning of the period. 2,574 8,291
--------- ---------
Cash and cash equivalents at the end of the period....... $3,250 $3,582
========= =========
Supplemental disclosure of non-cash financing activities:
Accrued dividends to preferred stock..................... $2,912 --
========= =========
Accretion related to preferred stock..................... $82 --
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
KERAVISION, INC.
Notes to Condensed Consolidated Financial Statements, (unaudited)
1. Basis of Presentation
The accompanying unaudited condensed financial statements of
KeraVision, Inc. (the "Company" or "KeraVision"), have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and
Article 10 of Regulation S-X. The balance sheet as of September 30,
1998, the statements of cash flows for the nine-month periods ended
September 30, 1998 and 1997 and the statements of operations for the
three and nine-month periods ended September 30, 1998 and 1997 are
unaudited but include all adjustments (consisting only of normal
recurring adjustments) which the Company considers necessary for a fair
presentation of the financial position at such date and the operating
results and cash flows for those periods. Although the Company believes
that the disclosures in these financial statements are adequate to make
the information presented not misleading, certain information normally
included in financial statements and related footnotes prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. The accompanying financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report and Form 10-K
for the year ended December 31, 1997. The accompanying condensed
consolidated balance sheet at December 31, 1997 is derived from audited
financial statements at that date.
Results for any interim period are not necessarily indicative of
results for any other interim period or for the entire year.
2. Financing
On June 12, 1998, the Company issued 562,500 shares of the
Company's Series B Redeemable Convertible Preferred Stock (the "Series B
Shares") at $32.00 per share. The Series B Shares are entitled to
receive quarterly dividends at the rate of seven percent (7%) per annum,
payable, at the election of the Company, in either cash or additional
Series B Shares, as described in the Certificate of Designation of
Rights, Preferences and Privileges of Series B Redeemable Convertible
Preferred Stock (the "Certificate of Designation"). Each Series B Share
is convertible into four shares of Common Stock at $8.00 per share. The
Series B Shares are convertible at the Company's option after two years
if the price of the Company's Common Stock exceeds $16.00 per share.
The conversion rate is subject to adjustment in the event of certain
circumstances described in the Certificate of Designation, including if
the then-current value of the Common Stock is below $8.00 per share on
June 12, 2000. The Series B Shares are redeemable at the option of the
holders after five (5) years. The cumulative quarterly dividends as of
September 30, 1998 were approximately $381,000.
3. Net Loss Per Common Share
Net loss per common share is computed based on the weighted
average number of common shares outstanding and excludes common stock
equivalents as their effect would be antidilutive. For the period ended
September 30, 1998, preferred dividends, including the difference, at
the date of issuance, between the market value of the Company's common
stock and conversion price of the Company's Series B Redeemable
Convertible Preferred Stock of $2.5 million (See Note 2), are added to
the net loss to arrive at net loss applicable to common stockholders.
4. Comprehensive Income
As of January 1, 1998, the Company adopted Statement No. 130,
"Reporting Comprehensive Income". Statement No. 130 establishes new
rules for the reporting and display of comprehensive income and its
components; however, the adoption of this Statement had no impact on the
Company's net income or stockholders' equity. Statement No. 130
requires unrealized gains or losses on the Company's available-for-sale
securities and foreign currency translation adjustments, which prior to
adoption were reported separately in stockholders' equity to be included
in other comprehensive income. Total comprehensive income was not
significant during the periods ended September 30, 1998 and 1997.
5. AVAILABLE-FOR-SALE INVESTMENTS
The Company's available-for-sale investments at September 30, 1998
were composed of the following (in thousands):
Gross Estimated
Unrealized Fair
Cost Gain Value
----------- ----------- -----------
Certificate of deposit......... $159 $ -- $159
Reverse repurchase agreement... 2,460 2,460
Corporate debt securities...... 7,950 11 7,961
----------- ----------- -----------
Available-for-sale
investments................... $10,569 $11 $10,580
=========== =========== ===========
All available-for-sale investments mature within one year. Gross
realized and unrealized gains/losses were not significant during the
periods ended September 30, 1998 and 1997.
6. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions. These assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Management believes that all of the assumptions used in the preparation
of financial statements contained in this Quarterly Report are
reasonable and have a reasonable basis. Actual results could differ
from these estimates.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
The following discussion should be read in conjunction with the
unaudited financial statements and notes thereto included in Part I -
Item 1 of this Quarterly Report and the audited financial statements and
notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Annual
Report and Form 10-K for the year ended December 31, 1997.
Overview
Since its founding in November 1986, the Company has been engaged
in the research and development of the KeraVision Ring and related
technology. Although the Company recorded its first revenue in the
quarter ended December 31, 1996, the Company expects to continue to
incur substantial losses at least through the year ending December 31,
1999 and until sufficient revenue and margin can be generated to offset
expenses. Given the uncertainties in developing a new market, revenues
may not significantly accelerate in the foreseeable future.
Furthermore, the Company expects its expenses to increase as its
marketing and sales and certain other areas increase.
The Company is currently conducting Phase III trials for the
KeraVision Ring in the United States and has had an application accepted
for filing by the FDA for myopia in the range of -1.0 to -3.5 diopters.
The Company has enrolled patients in the range of -0.5 and -1.0 diopters
and -3.5 to -5.0 diopters in a Phase III trial. In a late 1996 the Company
was granted the right to affix the CE mark on the KeraVision Ring for
myopia which allows the Company to sell product in the range of -1.0 to
- -5.0 diopters in European Union countries. In May 1998, the Company
received regulatory approval in Canada to sell the KeraVision Ring in
the range of -1.0 to -5.0 diopters; the Company has subsequently
begun limited commercial sales in Canada.
The research, manufacture, sale and distribution of medical
devices such as the KeraVision Ring are subject to numerous regulations
imposed by governmental authorities, principally the FDA and
corresponding state and foreign agencies. The regulatory process is
lengthy, expensive and uncertain. Prior to commercial sale in the United
States, most medical devices, including the Company's KeraVision Ring,
must be cleared or approved by the FDA. Securing FDA approvals and
clearances will require the submission to the FDA of extensive clinical
data and supporting information. Current FDA enforcement policy strictly
prohibits the marketing of medical devices for uses other than those for
which the product has been approved or cleared. After approvals have
been given, product approvals and clearances can be withdrawn for
failure to comply with regulatory standards or for the occurrence of
unforeseen problems following initial marketing. Foreign governments or
agencies also have review processes for medical devices which present
many of the same risks. The right to affix the CE mark can be
withdrawn, resulting in an inability to sell products in European
countries.
There can be no assurance that the Company's research and
development efforts will be successfully completed, and until the
development and testing processes for the KeraVision Ring are complete,
there can be no assurance that the KeraVision Ring will perform in the
manner anticipated. Although the Company does have approval to sell
product in the European Union and Canada, there can be no assurance that
the KeraVision Ring will prove to be safe or effective over the long
term in correcting vision, that the product will be approved for
marketing by the FDA or other government agencies or that the approvals
that the Company has obtained will not be withdrawn. There can also be
no assurance that the KeraVision Ring or any other product developed by
the Company, if any, will be commercially successful, will be
successfully marketed or achieve market acceptance. There can be no
assurance that the Company will ever achieve either significant revenues
from sales of the KeraVision Ring or any other products, if developed,
or ever achieve profitable operations.
Results of Operations
Three Months Ended September 30, 1998 and 1997
Revenue increased by $148,000 to $239,000 for the three-month
period ended September 30, 1998 compared to $91,000 for the three-
month period ended September 30, 1997. The increase was due to an
increase in shipments to Germany and Canada.
Cost of sales and manufacturing expenses totaled $1.2 million
as compared to $0.8 million in the comparable prior year period.
These costs reflect currently low production volumes and certain fixed
costs associated with the Company's manufacturing capabilities and
investment in its quality system.
Research and development expenses, which include clinical and
regulatory expenses, for the three-month period ended September 30, 1998
were $2.8 million, an increase of $0.2 million from the three-month
period ended September 30, 1997. The increase is primarily due to
legal expenses related to patent coverage for KeraVision technology.
Selling, general and administrative expenses of $2.1 million were
incurred in the three-month period ended September 30, 1998, an increase
of $0.6 million from the $1.5 million incurred in the comparable prior
year period. The increase was primarily due to market-development
expenses in Canada.
The Company recorded $0.2 million of net interest income for the
three-month period ended September 30, 1998, as compared to $0.3 million
for the previous year. Interest income decreased due to lower average
cash and investment balances from period to period. The net loss for
the quarter was $5.7 million versus $4.6 million for the same quarter in
1997. The net loss per share applicable to common stockholders was 48
cents. This per share calculation includes the effect of a dividend of
$0.4 million to preferred stockholders as part of the recently completed
Series B Preferred Stock financing. (See Note 2 to "Notes to
Consolidated Financial Statements"). The Company believes that its net
loss may significantly increase in future periods.
Nine Months Ended September 30, 1998 and 1997
Revenue increased by $242,000 to $503,000 for the nine-month
period ended September 30, 1998 compared to $261,000 for the nine-month
period ended September 30, 1997. Sales for the nine-month period were
primarily concentrated in Germany and France. The Company initiated its
first product shipments to Canada following regulatory approval in May
1998.
Research and development expenses for the nine-month period ended
September 30, 1998 were $8.9 million, an increase of $0.9 million over
the comparable nine-month period in the prior year. This increase was
due to higher expenses related to continued investments in patent
coverage.
Selling, general and administrative expenses for the nine-month
periods ended September 30, 1998 and 1997 were $5.8 million and $4.6
million, respectively. The increase in selling, general and
administrative expenses is primarily the result of increased marketing
efforts relating to European commercialization and to market-development
investments in Canada.
The Company recorded $0.4 million of net interest income for the
nine-month period ended September 30, 1998, as compared to $0.9 million
for the same period in 1997. Interest income decreased during the
period due to lower average cash and investment balances. The net loss
for the nine-month period ended September 30, 1998 was $16.8 million, an
increase of $2.9 million over the loss of $14.0 million in the same
period of the prior year. The net loss per share applicable to common
stockholders was $1.57. This per share calculation includes the effect
of a dividend of $0.4 million and a deemed dividend of $2.6 million to
preferred stockholders as part of a recently completed Series B Preferred
Stock financing. (See Note 2 to "Notes to Consolidated Financial
Statements"). The Company believes that its net loss may significantly
increase in future periods.
Liquidity and Capital Resources
The Company has financed its operations since incorporation
primarily through its initial public offering, private sales of
preferred stock, interest income and equipment financing arrangements.
On June 12, 1998, the Company completed the sale of Series B Convertible
Preferred Stock with net proceeds to the Company of $16.6 million. Cash
used in operating activities for the first nine months of 1998 has
increased to $16.4 million from $13.0 million in the same period of the
prior year, reflecting increased selling, general and administrative and
research and development expenditures. Cash, cash equivalents and
available-for-sale investments were $13.8 million at September 30, 1998.
Capital expenditures for the first nine months of 1998 and 1997 were
$0.6 million and $0.5 million, respectively.
The Company expects to continue to incur substantial expenses in
support of additional research and development and sales and marketing
activities, including cost of clinical studies, manufacturing costs, the
expansion of its sales and marketing organization and the support for
ongoing administrative activities. The Company anticipates that the
existing cash, cash equivalents and available-for-sale investments will
enable it to maintain its current operations through at least December
1998.
The Company's cash requirements may vary materially from those now
planned because of results of research, development and clinical
testing, establishment of relationships with strategic partners, changes
in focus and direction of the Company's research and development
programs, changes in the scale, timing, or cost of the Company's
commercial manufacturing facility, competitive and technological
advances, the FDA or other regulatory processes, changes in the
Company's marketing and distribution strategy, and other factors. The
Company will need to raise additional funds in the form of equity or
debt financing to funds its future operations. The Company may also
enter into collaborative arrangements with corporate partners that could
provide the Company with additional funding in the form of equity, debt
or license fees in exchange for the Company's rights with respect to
certain markets or technology. There can be no assurance that the
Company will able to raise any additional funds or enter into any such
collaborative arrangements on terms favorable to the Company, or at all.
If the Company is unable to obtain the necessary capital, significant
reductions in spending or the delay or cancellation of planned
activities or more substantial restructuring options may be necessary.
Year 2000
The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable year.
Any of the Company's computer programs or hardware that have date-
sensitive software or embedded chips may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
Based on recent assessments, the Company determined that it would
be required to replace a small portion of its software so that those
systems will properly utilize dates beyond December 31, 1999. The
Company has determined that all of its critical business systems already
are year 2000 compliant. Assessment, testing and remediation are
proceeding in tandem, and the Company currently plans to have all
modifications to systems completed and tested by mid-1999. These
activities are intended to encompass all major categories of systems in
use by the Company, including manufacturing, sales, finance and human
resources. KeraVision is also actively working with critical suppliers
of products and services to determine that the suppliers' operations and
the products and services they provide are year 2000 compliant or to
monitor their progress toward year 2000 compliance. The Company
reviewed its product line and determined that all of the products it has
sold and will continue to sell do not require remediation to be year
2000 compliant. There can be no guarantee that any system of other
companies, on which the Company's systems rely and which are not year
2000 compliant, will be year 2000 compliant in a timely fashion and
would not have an adverse effect on the Company's systems.
The costs incurred to date related to these programs are less than
$5,000. The Company currently expects that the total cost of these
programs, including both incremental spending and redeployed resources,
will not exceed $60,000. The total cost estimated does not include
potential costs related to any customer or other claims or the cost of
internal software and hardware replaced in the normal course of
business. The total cost estimate is based on the current assessment of
the projects and is subject to change as the projects progress.
Due to the Company's reliance on widely used software packages
that have been certified as year 2000 compliant, the Company has not
developed a formal contingency plan for software. Should unforeseen
problems surface during its testing of those packages, the Company will
evaluate its alternatives, such as utilizing different software
packages. The Company is currently working on developing contingency
plans to increase inventories and raw materials in preparation for the
year 2000. This plan is currently in the development stages and should
be finalized by mid -1999.
Based on currently available information, management does not
believe that the year 2000 matters discussed above related to internal
systems, will have a material adverse impact on the Company's financial
condition or overall trends in results of operations; however, it is
uncertain to what extent the Company may be affected by such matters.
In addition, there can be no assurance that the failure to ensure year
2000 compliance by a supplier or another third party would not have a
material adverse effect on the Company.
Euro
The Company does not presently expect that the introduction and
use of the Euro will materially affect the Company's foreign exchange or
will result in any material increase in costs to the Company. While
KeraVision will continue to evaluate the impact of the Euro introduction
over time, based on currently available information, management does not
believe that the introduction of the Euro currency will have a material
adverse impact on the Company's financial condition or overall trends in
results of operations.
Forward Looking Statements
The Company notes that certain of the foregoing statements in this
report are forward looking and that actual results may differ materially
due to a variety of factors including, but not limited to (i) slower
than anticipated market acceptance of the KeraVision Ring and challenges
associated with creating a market for a new products in Canada, the
European Union and the United States, (ii) significant unforeseen delays
in the FDA or foreign regulatory approval processes, (iii)
determinations by the FDA or foreign regulatory bodies that the clinical
data collected are insufficient to support safety and efficacy of the
KeraVision Ring, (iv) the FDA's failure to schedule advisory review
panels, (v) changes in FDA or foreign regulatory review guidelines,
procedures, regulations or administrative interpretations, (vi)
complications relating to the KeraVision Ring, the surgical procedure to
insert the KeraVision Ring or use of the KeraVision Ring, (vii)
inability to raise additional working capital funding, (viii)
competitive products and technology and (ix) other risk factors
described under the heading "Risk Factors Affecting the Company, its
Business and its Stock Price" set forth in Item 1 of the Company's Form
10-K for the year ended December 31, 1997, in the Company's Registration
Statement on Form S-3 filed on July 13, 1998 and in other filings made
with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In July 1997, an interference action was brought in the
United States Patent Trademark Office before the Board of
Patent Appeals and Interferences in the matter of Loomas et.
al. vs. Simon et. al., Interference No. 103,973. The
interference involves the issue of the priority of
inventions relating to technology for forming corneal
channels in which an implant or implants may be placed. A
settlement has been reached under which KeraVision owns both
the patent and the application for which priority is in
issue. Final determinations by the Board of Patents Appeals
and Interferences are still pending.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Items
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.14 Promissory Notes, dated July 15, 1998 executed
by Thomas Silvestrini in favor of Registrant and
all amendments thereto
10.28 Promissory Notes, dated September 1, 1998
executed by Thomas Loarie in favor Registrant
10.29 Promissory Notes, dated September 1, 1998
executed by Darlene Crockett-Billig in favor of Registrant
10.30 Promissory Notes, dated September 1, 1998
executed by Thomas Silvestrini in favor of Registrant
10.31 Promissory Notes, dated September 1, 1998
executed by Mark Fischer-Colbrie in favor of Registrant
27.1 Financial Data Schedule (filed via the EDGAR system)
(b) The Company filed the following reports on Form 8-K
during the quarter ended September 30, 1998:
Report Date: August 26, 1998
Item 5. Other Events
Pioneering Ring Technology For Nearsighted People To
Receive Full PMA Review By FDA.
-------------
Report Date: August 3, 1998
Item 5. Other Events
KeraVision Appoints to Board Peter L. Wilson, Former
President of Richardson Vicks USA.
--------------
Report Date: July 23, 1998
Item 5. Other Events
KeraVison Appoints 23-Year J&J Veteran as VP-Europe.
--------------
Report Date: July 23, 1998
Item 5. Other Events
KeraVision Reports Second Quarter Results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
KERAVISION, INC.
/s/Mark Fischer-Colbrie
Mark Fischer-Colbrie
Vice President, Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: November 12, 1998
AMENDMENT OF PROMISSORY NOTE
This Amendment of Promissory Note is made as of July 15, 1998,
between KeraVision, Inc. (the "Company") and Thomas A. Silvestrini (the
"Purchaser").
The Promissory Note ("Note") executed by the Purchaser on
July 15, 1996, under which the Purchaser promised to pay to the Company
$19,909.44, plus interest, on or before July 15, 1998, is hereby amended
as follows:
(1) The Company and the Purchaser hereby agree that the interest
due with respect to the Note as of the date hereof is $2,477.06, which
amount is hereby added to the original principal amount of the Note, so
that the principal as of the date hereof is $22,386.50.
(2) The due date of all principal and interest under the Note is
hereby extended to July 15, 2000.
(3) The interest rate of the Note changes as of this Amendment
Date from the original 5.95% per annum, compounded semi-annually, to
5.48% per annum, compounded semi-annually.
KERAVISION, INC. THOMAS A. SILVESTRINI
/s/Thomas M. Loarie /s/Thomas A. Silvestrini
Thomas M. Loarie
President & CEO
FULL RECOURSE
PROMISSORY NOTE
$293,090.13 Fremont, California
September 1, 1998
FOR VALUE RECEIVED, Thomas M. Loarie ("Borrower") promises to pay
to KeraVision, Inc., a Delaware corporation (the "Company"), the
principal sum of Two Hundred Ninety Three Thousand Ninety and 13/100
Dollars ($293,090.13), together with interest on the unpaid principal
hereof from the date hereof at the rate of 5.35% per annum, compounded
semiannually.
All principal and accrued interest shall be due and payable in
full on the earliest of (a) December 1, 1998 or (b) the termination of
Borrower's employment or consulting relationship with the Company for
any reason (or for no reason). Payments of principal and interest shall
be made in lawful money of the United States of America and shall be
credited first to the accrued interest, with the remainder applied to
principal.
Borrower may at any time prepay all or any portion of the
principal or interest owing hereunder.
The holder of this Note shall have full recourse against Borrower.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorney's fees therein of the holder shall be paid
by Borrower.
/s/ Thomas M. Loarie
Thomas M. Loarie
FULL RECOURSE
PROMISSORY NOTE
$83,086.36 Fremont, California
September 1, 1998
FOR VALUE RECEIVED, Darlene Crockett-Billig ("Borrower") promises
to pay to KeraVision, Inc., a Delaware corporation (the "Company"), the
principal sum of Eighty Three Thousand Eighty Six and 36/100 Dollars
($83,086.36), together with interest on the unpaid principal hereof from
the date hereof at the rate of 5.35% per annum, compounded semiannually.
All principal and accrued interest shall be due and payable in
full on the earliest of (a) September 1, 2001 or (b) the termination of
Borrower's employment or consulting relationship with the Company for
any reason (or for no reason). Payments of principal and interest shall
be made in lawful money of the United States of America and shall be
credited first to the accrued interest, with the remainder applied to
principal.
Borrower may at any time prepay all or any portion of the
principal or interest owing hereunder.
The holder of this Note shall have full recourse against Borrower.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorney's fees therein of the holder shall be paid
by Borrower.
/s/ Darlene Crockett-Billig
Darlene Crockett-Billig
FULL RECOURSE
PROMISSORY NOTE
$76,327.92 Fremont, California
September 1, 1998
FOR VALUE RECEIVED, Thomas A. Silvestrini ("Borrower") promises to
pay to KeraVision, Inc., a Delaware corporation (the "Company"), the
principal sum of Seventy Six Thousand Three Hundred Twenty Seven and
92/100 Dollars ($76,327.92), together with interest on the unpaid
principal hereof from the date hereof at the rate of 5.35% per annum,
compounded semiannually.
All principal and accrued interest shall be due and payable in
full on the earliest of (a) September 1, 2001 or (b) the termination of
Borrower's employment or consulting relationship with the Company for
any reason (or for no reason). Payments of principal and interest shall
be made in lawful money of the United States of America and shall be
credited first to the accrued interest, with the remainder applied to
principal.
Borrower may at any time prepay all or any portion of the
principal or interest owing hereunder.
The holder of this Note shall have full recourse against Borrower.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorney's fees therein of the holder shall be paid
by Borrower.
/s/Thomas A. Silvestrini
Thomas A. Silvestrini
FULL RECOURSE
PROMISSORY NOTE
$71,307.27 Fremont, California
September 1, 1998
FOR VALUE RECEIVED, Mark Fischer-Colbrie ("Borrower") promises to
pay to KeraVision, Inc., a Delaware corporation (the "Company"), the
principal sum of Seventy One Thousand Three Hundred Seven and 27/100
Dollars ($71,307.27), together with interest on the unpaid principal
hereof from the date hereof at the rate of 5.35% per annum, compounded
semiannually.
All principal and accrued interest shall be due and payable in
full on the earliest of (a) September 1, 2001 or (b) the termination of
Borrower's employment or consulting relationship with the Company for
any reason (or for no reason). Payments of principal and interest shall
be made in lawful money of the United States of America and shall be
credited first to the accrued interest, with the remainder applied to
principal.
Borrower may at any time prepay all or any portion of the
principal or interest owing hereunder.
The holder of this Note shall have full recourse against Borrower.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorney's fees therein of the holder shall be paid
by Borrower.
/s/ Mark Fischer-Colbrie
Mark Fischer-Colbrie
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
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STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY
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