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Total Number of Pages: 13
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(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>
The Registrant hereby amends its Quarterly Report on Form 10-Q for the period
ended September 30, 1998 to update disclosures made in Notes 1 and 7 of the
Notes to Condensed Consolidated Financial Statements and the Liquidity and
Capital Resources section of Management's Discussion and Analysis.
2
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INDEX
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Page
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PART I. FINANCIAL INFORMATION (unaudited)
Item 1. Condensed Consolidated Balance Sheets as of September 30,
1998 and December 31, 1997 ................................... 4
Condensed Consolidated Statements of Operations for
the three-month and nine-month periods ended September 30,
1998 and 1997 ................................................ 5
Condensed Consolidated Statements of Cash Flows for
the nine-month periods ended September 30, 1998 and 1997...... 6
Notes to Condensed Consolidated Financial Statements ......... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 9
SIGNATURES................................................................. 13
3
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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
--------------------------------
(Unaudited) (Note 1)
--------------------------------
<S> <C> <C>
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 total stockholders' equity (Net capital deficiency)............. $ 16,966 $ 17,345
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
4
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KERAVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA; UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED 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) -- (383) --
Deemed divedend on preferred stock....................... -- -- (2,611) --
Net loss, applicable to Common Stockholders.............. $ (6,046) $ (4,569) $(19,831) $(13,960)
======== ======== ======== ========
Basic and diluted net loss per share applicable
to Common Stockholders................................... $ (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
5
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KERAVISION, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 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
Changes in operating assets and liabilities:
Prepaid expenses and other current assets............ 216 (317)
Accounts payable..................................... 124 18
Other 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 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
6
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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.
The Company's financial statements are prepared and presented on a basis
assuming it continues as a going concern. At September 30, 1998 the Company had
cash and investments balances of $13.8 million, an accumulated deficit of $82.5
million, and had incurred a net loss of $16.8 million for the nine-months ended
September 30, 1998. The Company will need to obtain additional funds during 1999
to continue its research and development activities, fund operating expenses
including marketing and sales expenses and pursue regulatory approvals for its
products under development. In December 1998, the Company entered into a
definitive merger agreement to acquire Transcend Therapeutics, Inc. (Transcend)
and its anticipated net cash balances of approximately $8 million (unaudited) at
the time of the completion of the merger (See Note 7). The Company also intends
to raise additional funds through the sale of its equity securities and/or debt
financings. 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 be able to complete the acquisition of Transcend and its related
cash balances, 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 and
the delay or cancellation of planned activities or more substantial
restructuring options may be necessary. These actions would have material
adverse effects on the Company's business, results of operations and prospects.
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
7
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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 Gains Value
------------------------------------------
Certificate of deposit $ 159 -- $ 159
Reverse repurchase agreement 2,460 2,460
Corporate debt securities 7,950 $11 7,961
------------------------------------------
Available-for-sale $10,569 $11 $10,580
investments
==========================================
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.
7. SUBSEQUENT EVENTS
On December 22, 1998, KeraVision entered into a definitive merger agreement
to acquire Transcend Therapeutics, Inc. (Nasdaq: TSND) and its anticipated net
cash balance of about $8 million. Under the agreement, Transcend will wind down
its operations as a drug development company and no Transcend employees will be
retained after the closing of the transaction. According to the terms of the
agreement, Transcend will become a wholly owned subsidiary of KeraVision.
Transcend stockholders will receive shares
8
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of KeraVision common stock with a value equal to the amount of net cash of
Transcend as of the closing date plus a premium of between 20 percent and 30
percent, depending on the price of KeraVision stock prior to the closing of the
merger.
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 trail. 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.
9
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RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Revenues 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.
10
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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 March 31, 1999.
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.
11
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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.
12
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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: January 6, 1999
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