UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(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, 1999
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 1, 1999 there were 18,722,112 shares of Common Stock outstanding
<PAGE>
INDEX
-----
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998
Unaudited Condensed Consolidated Statements of Operations
for the three-month and nine-month periods September 30, 1999
and 1998
Unaudited Condensed Consolidated Statements of Cash Flows
for the three-month and nine-month periods ended September 30,
1999 and 1998
Notes to Unaudited Condensed Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Discussions About Market Risk
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 3. Not applicable
Item 4. Not applicable
Item 5. Not applicable
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,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $51,671 $1,449
Available-for-sale investments..................... 6,734 6,279
Accounts receivable, net........................... 663 365
Inventory.......................................... 1,705 427
Prepaid expenses and other current assets.......... 744 716
----------- -----------
Total current assets................................. 61,517 9,236
----------- -----------
Property and equipment, at cost:
Manufacturing and laboratory equipment............. 4,664 3,709
Office furniture and fixtures...................... 641 597
Leasehold improvements............................. 697 636
----------- -----------
6,002 4,942
Accumulated depreciation and amortization............ (3,625) (3,102)
----------- -----------
Net property and equipment......................... 2,377 1,840
Other assets......................................... 100 108
----------- -----------
Total assets......................................... $63,994 $11,184
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable................................... $1,446 $1,742
Accrued payroll and related expenses............... 1,125 581
Accrued clinical trial costs....................... 1,405 1,282
Other accrued liabilities.......................... 959 204
Current portion of capital lease obligations....... 540 512
Short-term debt.................................... 4,460 --
----------- -----------
Total current liabilities............................ 9,935 4,321
Capital lease obligations............................ 568 821
Redeemable convertible series B preferred stock...... 16,534 17,489
Commitments and contingencies
Stockholders' equity (net capital deficiency):
Common stock....................................... 19 13
Additional paid-in capital......................... 147,338 80,162
Deferred compensation.............................. -- (30)
Accumulated other comprehensive income............. 280 109
Accumulated deficit................................ (109,107) (90,092)
Notes receivable from stockholders................. (1,573) (1,609)
----------- -----------
Total stockholders' equity (net capital deficiency).. 36,957 (11,447)
----------- -----------
Total liabilities and stockholders'
equity (net capital deficiency)................... $63,994 $11,184
=========== ===========
</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,
------------------- -------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales.................................... $4,188 $239 $8,569 $503
Costs and expenses:
Cost of sales and manufacturing
expenses................................. 2,915 1,155 7,530 3,104
Research and development.................. 2,293 2,839 6,494 8,855
Selling, general and
administrative......................... 4,258 2,129 12,429 5,781
--------- --------- --------- ---------
Total costs and expenses..................... 9,466 6,123 26,453 17,740
--------- --------- --------- ---------
Operating loss............................... (5,278) (5,884) (17,884) (17,237)
Interest income and other, net............... 555 196 619 387
Interest expense............................. (227) 25 (607) 13
--------- --------- --------- ---------
Net loss..................................... (4,950) (5,663) (17,872) (16,837)
Preferred stock dividend requirements:
Dividend on redeemable convertible
Series B preferred stock............... (369) (383) (1,144) (2,994)
--------- --------- -------------------
Net loss applicable to common stockholders... ($5,319) ($6,046) ($19,016) ($19,831)
Basic and diluted net loss per share
applicable to common stockholders........... ($0.32) ($0.48) ($1.34) ($1.57)
========= ========= ========= =========
Shares used in calculation of
net loss per share.......................... 16,428 12,686 14,201 12,655
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
KERAVISION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................ ($17,872) ($16,837)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation........................................ 523 520
Amortization of debt discount....................... 121 --
Compensation expense relatted to stockholders' notes -- 45
Amortization of deferred compensation............... 30 112
Changes in operating assets and liabilities:
Accounts receivable.............................. (298) (104)
Inventory........................................ (1,278) --
Prepaid expenses and other current assets........ (28) 320
Accounts payable................................. (296) 124
Other accrued liablities......................... 1,421 201
Other assets..................................... 8 (24)
--------- ---------
Net cash used in operating activities................ (17,669) (15,643)
--------- ---------
Cash flows from investing activities:
Purchases of available-for-sale investments............. (6,523) (20,335)
Sales of available-for-sale investments................. 6,242 19,033
Maturities of available-for-sale investments............ -- 2,201
Capital expenditures.................................... (1,060) (616)
--------- ---------
Net cash provided by(used in) investing activities... (1,341) 283
--------- ---------
Cash flows from financing activities:
Principal payments under capital lease obligations...... (357) (324)
Issuance of stockholders' notes......................... -- (775)
Payment on stockholders' notes.......................... 36 --
Proceeds from sales-leaseback of capital equipment...... 132 180
Proceeds from issuance of short-term debt and warrants.. 5,000 --
Proceeds from issuance of common stock.................. 64,421 312
Proceeds from issuance of redeemable convertible
Series B preferred stock.............................. -- 18,000
Fees incurred to obtain additional financing............ -- (1,357)
--------- ---------
Net cash provided by financing activities............ 69,232 16,036
--------- ---------
Net increase (decrease) in cash and cash equivalents..... 50,222 676
Cash and cash equivalents at the beginning of the period. 1,449 2,574
--------- ---------
Cash and cash equivalents at the end of the period....... $51,671 $3,250
========= =========
Supplemental disclosure of non-cash financing activities:
Accrued dividends to preferred stock..................... $1,009 $2,912
========= =========
Accretion related to preferred stock..................... $136 $82
========= =========
Conversion of preferred to common stock.................. 2,099 --
====================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
KERAVISION, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
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,
1999, the statements of operations for the three and nine-month periods
ended September 30, 1999 and 1998 and cash flows for the nine-month
periods ended September 30, 1999 and 1998 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 Company's annual financial statements and notes thereto contained in
the Company's Annual Report on Form 10-K for the year ended December 31,
1998. The accompanying condensed consolidated balance sheet at December
31, 1998 is derived from audited financial statements at that date.
Results for the three and nine-months ended September 30, 1999 and
1998 are not necessarily indicative of results for any other interim
period or for any year.
2. Financing
In March 1999, the Company entered into a senior term loan agreement
providing for borrowings of $5,000,000, which was advanced on March 25,
1999. In May 1999, the Company completed an acquisition of Transcend
Therapeutics, Inc. and its net cash balance of $8.5 million. Transcend
has terminated its activities as a drug development company and now is a
wholly owned subsidiary of the Company. No Transcend employees were
retained. Transcend stockholders received 978,498 shares of the
Company's common stock. This transaction was accounted for as an
acquisition of assets.
In August 1999, the Company issued 4,600,000 shares at $13.00 per
share of common stock, from which it realized net proceeds (after
under-writing discounts and expenses) of approximately $55.8 million.
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 periods ended
September 30, 1999 and 1998 dividends and accretion related to the
redeemable preferred stock are added to the net loss to arrive at net
loss applicable to common stockholders. Options and warrants to purchase
1,650,187 and 55,492 shares of common stock were outstanding at
September 30, 1999 but were not included in the computation of diluted
net income per share as the Company incurred a net loss in the periods
presented and the effect of the securities would have been anti-
dilutive.
4. Inventory
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method. The Company's inventory
was composed of the following (in thousands):
September 30, December 31,
1999 1998
------- --------
Raw materials $867 $182
Finished goods 838 245
------- -------
Total $1,705 $427
======= =======
5. Available-for-sale investments
The Company's available-for-sale investments at September 30, 1999
were composed of the following (in thousands):
Gross Estimated
Unrealized Fair
Cost Gain Value
----------- ----------- -----------
Certificate of deposit......... $165 $ -- $165
Reverse repurchase agreement... 1,000 1,000
Corporate debt securities...... 45,209 168 45,377
----------- ----------- -----------
Available-for-sale
investments................... 46,374 168 46,542
Investment classified as
cash equivalents.............. 39,808 -- 39,808
----------- ----------- -----------
Short term investments $6,566 $168 $6,734
=========== =========== ===========
All available-for-sale investments mature within one year. Gross
realized gains/losses and unrealized losses were not significant during
the nine-month period ended September 30, 1999 and 1998.
6. Issuance of Debt
In March 1999, the Company entered into a senior term loan agreement
providing for borrowings of $5,000,000, which were advanced on March 25,
1999. The loan bears interest at 12.6% per year until the Company repays
the loan on September 30, 2001. Borrowings under the loan are secured by
substantially all of the company's assets except for intellectual
property. In conjunction with the loan, the Company granted to the
lender warrants to purchase 55,492 shares of the common stock at an
exercise price of $10.8125, the closing price as of March 5, 1999, the
date of the loan commitment. The respective warrants are exercisable for
7 years from the date of issuance. The Company allocated a portion of
the proceeds to the fair value of the warrants which was recorded as
additional interest expense to be amortized over the term of the related
debt. The value of the immediately exercisable warrants was determined
using a Black-Scholes valuation model, based on the contractual term of
the warrants.
7. Comprehensive Income (Loss)
The components of comprehensive income (loss) are as follows (in
thousands):
Nine Months Ended
September 30,
1999 1998
--------- -----------
Net loss $(17,872) $(16,837)
Change in unrealized gain on
available-for-sale investments 166 (31)
Foreign currency translation
adjustment 5 (29)
---------- -----------
Total comprehensive income (loss) $(17,701) $(16,897)
========== ===========
Accumulated other comprehensive income presented in the accompanying
consolidated condensed balance sheets consists of the accumulated net
unrealized gain on available-for-sale investments and the net foreign
currency translation adjustment.
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations
Overview
Since its founding in November 1986, KeraVision has been engaged in
the research and development of technologies for surgical correction of
vision disorders. Although KeraVision recorded its first revenues in the
quarter ended December 31, 1996, we expect to continue to incur
substantial losses until sufficient revenues can be generated to offset
expenses. Given the uncertainties in developing a market for a new
product, we may not be able to achieve or sustain significant revenue
growth in the foreseeable future. Furthermore, we expect our overall
expenses to increase as our sales and marketing activities grow.
On April 9, 1999, KeraVision obtained FDA approval to distribute and
sell Intacs in the United States for the treatment of myopia in the
range of -1.0 to -3.0 diopters in patients who are 21 years of age or
older, who have a stable refraction and who have up to +1.0 diopter of
astigmatism. We are currently conducting a Phase III clinical trial to
expand our approved range of indication for myopia to include -0.75 to -
1.0 diopters and -3.1 to -4.5 diopters. In May 1998, we began limited
commercial sales in Canada following regulatory approval to sell Intacs
to treat myopia in the range of -1.0 to -5.0 diopters. In late 1996, we
were granted the right to affix the CE mark on Intacs for myopia which
allows KeraVision to sell products to treat myopia in the range of -1.0
to -5.0 diopters in European Union countries.
The research, manufacture, sale and distribution of medical devices
such as Intacs 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 Intacs, must be cleared or approved by the FDA.
Securing FDA approvals and clearances requires 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. 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.
We cannot be sure that we will achieve significant revenues from
sales of Intacs or any other potential products or become profitable.
Although KeraVision has received approval to sell Intacs in the United
States, the European Union and Canada, we cannot be sure that Intacs
will prove to be safe or effective over the long term in correcting
vision, that Intacs will perform in the manner we anticipate or that
Intacs or any other product developed by us will be commercially
successful.
Results of Operations
Three Months Ended September 30, 1999 and 1998
Net revenue increased by $3.9 million to $4.2 million for the three-
month period ended September 30, 1999 compared to $239,000 for the
three-month period ended September 30, 1998. Revenues in the quarter
were primarily driven by sales of Intacs start-up kits, which include
surgical instruments and a small initial supply of Intacs. The
predominant portion of the revenues received from the sale of the kits
was attributable to the proprietary instruments used in the procedure.
Growth and maintenance of our net sales will be dependent upon our
ability to sell Intacs in increasing volumes.
Cost of sales and manufacturing expenses totaled $2.9 million in the
three-month period ended September 30, 1999 as compared to $1.2 million
in the comparable prior year period. The increase in cost of sales and
manufacturing expenses reflected higher fixed costs associated with the
establishment of our manufacturing operations and higher variable costs
as a result of higher net sales.
Research and development expenses, which include clinical and
regulatory expenses, for the three-month period ended September 30, 1999
were $2.3 million, a decrease of $546,000 from the three-month period
ended September 30, 1998. The decrease is primarily due to reduced
clinical trial costs due to the completion of various studies, in
addition to the reduced legal expenses related to patents.
Selling, general and administrative expenses of $4.3 million were
incurred in the three-month period ended September 30, 1999, an increase
of $2.1 million from the $2.1 million incurred in the comparable prior
year period. The increase was primarily due to increased marketing
efforts related to market development in the U.S. and Canada.
Interest income and other; net was $555,000 for the three-month
period ended September 30, 1999, as compared to $196,000 in the
comparable prior year period. Interest income increased due to the
short-term investment of proceeds from the secondary public offering
completed on August 17, 1999. Interest expense increased $252,000 to
$227,000 for the three-month period ended September 30, 1999. The
increase was primarily due to short-term debt.
The net loss for the three-month period was $5.0 million versus $5.7
million for the same period in 1998. The net loss applicable to common
stockholders for the quarter ended September 30, 1999 was $5.3 million
versus $6.0 million for the comparable prior year period. The net loss
per share applicable to common stockholders for the quarter was 32 cents
as compared to 48 cents for the same period from the previous year.
This per share calculation included the effect of dividends, of $369,000
and $383,000 to preferred stockholders for the three-month periods ended
September 30, 1999 and 1998, respectively.
Nine months ended September 30, 1999 and 1998
Net sales for the nine-month period ended September 30, 1999 totaled
$8.6 million, an increase of $8.1 million from $503,000 for the nine-
month period ended September 30, 1998. The increase in net sales
primarily reflected the initial shipment of instrument kits to surgeons
subsequent to their completion of training in the Intacs procedure.
Each kit includes two sets of proprietary instruments to perform the
Intacs placement procedure and a supply of 18 Intacs. The predominant portion
of the revenues received from the sale of the kits was attributable to the
proprietary instruments. Significant growth of our net sales will be
dependent upon our ability to sell Intacs in increasing volumes.
Cost of sales and manufacturing expenses totaled $7.5 million in the
1999 period as compared to $3.1 million in the 1998 period. The increase
in cost of sales and manufacturing expenses reflected higher fixed costs
associated with the establishment of our manufacturing operations and
higher variable costs as a result of higher net sales.
Research and development expenses, which include clinical and
regulatory expenses, for the 1999 period were $6.5 million, which
represented a decrease of $2.4 million from the 1998 period. The
decrease was primarily due to reduced clinical trial costs as a result
of the completion of various studies, in addition to reduced legal
expenses related to patents.
Selling, general and administrative expenses were $12.4 million in
the 1999 period, which represented an increase of $6.6 million from the
1998 period, primarily due to increased marketing efforts related to
market development in the U.S. and Canada.
Interest income and other; net was $619,000 in the 1999 period, as
compared to $387,000 in the 1998 period. The 1999 amount reflected an
increased due to short terms investments of proceeds from the secondary
public offering completed on August 17, 1999. Interest expense increased
$620,000 to $607,000 for the nine-month period ended September 30, 1999.
The increase was primarily due to short-term debt.
The net loss for the nine-month period was $17.9 million versus
$16.8 million for the same period in 1998. The net loss applicable to
common stockholders for the year was $19.0 million versus $19.8 million
for the comparable prior year period. The net loss per share applicable
to common stockholders for the year was $1.34 as compared to $1.57 for
the same period from the previous year. This per share calculation
included the effect of dividends, of $1.1 million and $3.0 million to
preferred stockholders for the nine-month periods ended September 30,
1999 and 1998, respectively.
Liquidity and Capital Resources
KeraVision has financed its operations since incorporation primarily
through public stock offerings, private sales of preferred stock,
interest income, equipment financing arrangements and the Transcend
acquisition described below. Cash used in operating activities for the
first nine months of 1999 increased to $17.6 million from $16.4 million
in the comparable period of the prior year, reflecting increased
selling, general and administrative and manufacturing expenses. Cash and
investments were $51.7 million at September 30, 1999. Capital
expenditures for the first nine months of 1999 and 1998 were $1.1
million and $616,000, respectively.
In March 1999, KeraVision entered into a loan agreement providing
for borrowings of $5.0 million. The loan bears interest at 12.6% per
annum until KeraVision repays the loan due on September 30, 2001.
KeraVision has the right to prepay the loan subject to a prepayment
penalty of 6.0% of the amount being prepaid on the prepayment date.
In May 1999, KeraVision completed the acquisition of Transcend
Therapeutics, Inc. and its net cash balance of $8.5 million. Transcend
has terminated its activities as a drug development company and now is a
wholly owned subsidiary of KeraVision. No Transcend employees were
retained. Transcend stockholders received 978,498 shares of KeraVision's
common stock. This transaction was accounted for as an acquisition of
assets.
In August 1999, KeraVision completed a secondary public offering of
its Common Stock. The Company issued 4,600,000 shares at $13.00 per
share, from which it realized net proceeds (after under-writing
discounts and expenses) of approximately $55.8 million.
KeraVision'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 KeraVision's research and development
programs, changes in the scale, timing, or cost of KeraVision's
commercial manufacturing facility, competitive and technological
advances, the FDA or other regulatory processes, changes in KeraVision's
marketing and distribution strategy, and other factors.
Year 2000
The Year 2000 Issue is the result of computer programs being unable
to correctly recognize dates beyond December 31, 1999. 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, we have determined that we will not be
required to replace any portion of our software so that our systems to
properly utilize dates beyond December 31, 1999. We have determined that
our critical business systems are Year 2000 ready. Assessment, testing
and remediation for non-critical systems are proceeding in tandem, and
we currently plan to have all modifications to these systems completed
and tested by December 31, 1999. These activities are intended to
encompass all major categories of systems in use by KeraVision,
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 ready or to monitor their
progress toward Year 2000 readiness. We have reviewed our product line
and determined that all of the products we have sold and continue to
sell do not require remediation to be Year 2000 ready. KeraVision cannot
guarantee that any systems of other companies, on which our systems rely
and which are not Year 2000 ready, will be Year 2000 ready in a timely
fashion and would not have an adverse effect on our systems operations
or financial results.
The costs incurred to date related to these programs are less than
$25,000. We currently expect that the total cost of these programs,
including both incremental spending and redeployed resources, will not
exceed $60,000. The total cost estimate 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.
Based on currently available information, we do not believe that
the Year 2000 issue will have a material adverse effect on our financial
condition or overall results of operations; however, we cannot be
certain to what extent we may be affected by such matters. In addition,
we cannot guarantee that the failure to ensure Year 2000 compliance by a
supplier or another third party would not have a material adverse effect
on us.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
KeraVision is exposed to financial market risks, including changes
to interest rates and equity security prices. To mitigate these risks,
KeraVision utilizes derivative financial instruments. KeraVision does
not utilize derivative financial instruments for speculative or trading
purposes.
Interest Rate Risk
The Company's exposure to market risk for changes in interest
rates relates primarily to the Company's investment portfolio and long-
term debt obligations. The Company does not use derivative financial
instruments in its investment portfolio. The Company places its
investments with high credit quality issuers and, by policy, limits the
amount of credit exposure to any one issuer. As stated in its policy,
the Company is averse to principal loss and seeks to ensure the safety
and preservation of its invested funds by limiting default risk, market
risk, and reinvestment risk.
The Company mitigates default risk by investing in only the safest
and highest credit quality securities. The portfolio includes only
marketable securities with active secondary or resale markets to ensure
portfolio liquidity.
The Company has no cash flow exposure due to rate changes for
long-term debt obligations. The Company primarily enters into debt
obligations to support general corporate purposes including capital
expenditures and working capital needs.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
The Company sold no unregistered securities during the period but did
issue 6,671 additional shares of its Series B Convertible Preferred
Stock to holders of Series B Convertible Preferred Stock as a stock
dividend. These dividend shares were not registered under the
Securities Act of 1933, because their issuance did not constitute a sale
under the Securities Act of 1933. The shares issued have the same conversion
and other rights as the originally issued shares of Series B Convertible
Preferred Stock.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Amended and Restated Certificate of Incorporation of the Company
(filed as Exhibit 3.1 to the Company's registration statement on Form
S-1 (File No. 33-92880) and incorporated herein by reference)
3.2 Amended and Restated Bylaws of the Company, as amended (filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K/A for the year
ended December 31, 1998 filed with the Commission on May 3, 1999 ("Form
10-K/A") and incorporated herein by reference)
4.1 Preferred Shares Rights Agreement, dated as of August 18, 1997,
between the Company and Bank Boston, N.A., including the Certificate of
Designation of Rights, Preferences and 13 Privileges of Series A
Participating Preferred Stock attached thereto as Exhibit A (filed as
Exhibit 4.1 to the Company's Form 8-A filed with the Commission on
August 25, 1997 and incorporated herein by reference)
4.2 Investors' Rights Agreement dated as of June 12, 1998, by and
among the Company and the investors listed on Exhibit A thereto (filed
as Exhibit 4.2 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 filed with the Commission on April 1, 1999
("Form 10-K") and incorporated herein by reference)
4.3 Certificate of Designation of Rights, Preferences and Privileges
of Series B Convertible Preferred Stock of the Company (filed as
Exhibit 3.3 to the Company's Form 10-K and incorporated herein by
reference)
27.1 Financial Data Schedule (filed via the EDGAR system)
(b) The Company filed the following Current Reports on Form 8-K or 8- K/A
during the quarterly period ended September 30, 1999:
Date of Report Financial Statements Filed Items Reported
July 1, 1999 5,7 None
July 20, 1999 5,7 None
May 28, 1999 (report filed August 3, 1999) 2,7 yes
August 13, 1999 5,7 None
August 26, 1999 5,7 None
September 3, 1999 5,7 None
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.
By: /s/ MARK FISCHER-COLBRIE
Mark Fischer-Colbrie
Vice President, Finance and Administration
and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
Date: November 16, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND THE
STATEMENT OF INCOME 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-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 51,671
<SECURITIES> 6,734
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,705
<CURRENT-ASSETS> 61,517
<PP&E> 6,002
<DEPRECIATION> 3,625
<TOTAL-ASSETS> 63,994
<CURRENT-LIABILITIES> 9,935
<BONDS> 0
0
0
<COMMON> 19
<OTHER-SE> (36,938)
<TOTAL-LIABILITY-AND-EQUITY> 63,994
<SALES> 4,188
<TOTAL-REVENUES> 4,188
<CGS> 2,915
<TOTAL-COSTS> 2,915
<OTHER-EXPENSES> 6,551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (227)
<INCOME-PRETAX> (4,950)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,950)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (369)
<NET-INCOME> (5,319)
<EPS-BASIC> ($0.32)
<EPS-DILUTED> ($0.32)
</TABLE>
