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 March 31, 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 May 3, 1999 there were 13,084,161 shares of Common Stock outstanding
<PAGE>
INDEX
-----
PART I. FINANCIAL INFORMATION (unaudited)
Item 1. Condensed Consolidated Balance Sheets as of
March 31, 1999 and December 31, 1998
Condensed Consolidated Statements of Operations
for the three-month periods March 31, 1999 and 1998
Condensed Consolidated Statements of Cash Flows
for the three-month periods ended March 31, 1999 and 1998
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 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>
March 31, December 31
1999 1998
----------- -----------
<S> <C> <C>
(Unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents.......................... $5,329 $1,449
Available-for-sale investments..................... 874 6,279
Prepaid expenses and other current assets.......... 1,187 1,081
Inventory.......................................... 1,277 427
----------- -----------
Total current assets................................. 8,667 9,236
----------- -----------
Property and equipment, at cost:
Manufacturing and laboratory equipment............. 3,914 3,709
Office furniture and fixtures...................... 586 597
Leasehold improvements............................. 635 636
----------- -----------
5,135 4,942
Accumulated depreciation and amortization............ (3,213) (3,102)
----------- -----------
Net property and equipment......................... 1,922 1,840
Other assets......................................... 107 108
----------- -----------
Total assets......................................... $10,696 $11,184
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable................................... $2,806 $1,742
Accrued payroll and related expenses............... 971 581
Accrued clinical trial costs....................... 1,251 1,282
Other accrued liabilities.......................... 247 204
Current portion of capital lease obligations....... 540 512
Short-term debt.................................... 4,339 --
----------- -----------
Total current liabilities............................ 10,154 4,321
Capital lease obligations............................ 798 821
Redeemable convertible series B preferred stock 17,900 17,489
Commitments and contingencies
Stockholders' equity (net capital deficiency):
Common stock....................................... 13 13
Additional paid-in capital......................... 81,090 80,162
Deferred compensation.............................. -- (30)
Accumulated other comprehensive income............. 108 109
Accumulated deficit................................ (97,758) (90,092)
Notes receivable from stockholders................. (1,609) (1,609)
----------- -----------
Total stockholders' equity (net capital deficiency).. (18,156) (11,447)
----------- -----------
Total liabilities and stockholders'
equity (net capital deficiency)................... $10,696 $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
March 31,
-------------------
1999 1998
--------- ---------
<S> <C> <C>
Net sales.................................... $472 $152
Costs and expenses:
Cost of sales and manufacturing
expenses.................................. 1,588 961
Research and development................... 2,090 2,903
Selling, general and
administrative.......................... 3,979 1,911
--------- ---------
Total costs and expenses...................... 7,657 5,775
--------- ---------
Operating loss................................ (7,185) (5,623)
Interest income............................... 32 115
Interest expense.............................. (103) (22)
--------- ---------
Net Loss...................................... ($7,256) ($5,530)
Preferred stock dividend requirements:
Redeemable convertible series B............ (411) --
--------- ---------
Net loss applicable to common stockholders.... ($7,667) ($5,530)
========= =========
Basic and diluted net loss per share
applicable to common stockholders............ ($0.60) ($0.44)
========= =========
Shares used in calculation of
net loss per share........................... 12,794 12,636
</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>
Three Months Ended
March 31,
-------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net Loss...................................... ($7,256) ($5,530)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization............... 141 200
Changes in operating assets and liabilities:
Prepaid expenses and other current assets. (106) 91
Inventory................................. (850) (9)
Accounts payable.......................... 1,064 454
Other accrued liabilities................. 402 166
-------- ---------
Net cash used in operating activities...... (6,605) (4,628)
-------- ---------
Cash flows from investing activities:
Purchases of available-for-sale investments... (297) (2,404)
Sales of available-for-sale investments....... 5,702 8,111
Capital expenditures.......................... (193) (378)
Other assets.................................. 1 --
--------- --------
Net cash provided by investing activities.. 5,213 5,329
--------- --------
Cash flows from financing activities:
Principal payments under capital
lease obligations........................... (127) (121)
Proceeds from sales-leaseback of
capital equipment........................... 132 180
Proceeds from issuance of short-term
debt and warrants........................... 5,000 --
Proceeds from issuance of equity securities,
net of repurchases.......................... 267 141
--------- --------
Net cash provided by financing activities.. 5,272 200
--------- --------
Net increase in cash and cash equivalents...... 3,880 901
Cash and cash equivalents at the
beginning of the period..................... 1,449 2,574
-------- --------
Cash and cash equivalents at the
end of the period........................... $5,329 $3,475
========= ========
Supplemental disclosure of non-cash
financing activities:
Accrued dividends to preferred stock......... $343 $ --
========= ========
Accretion related to preferred stock......... $68 $ --
========= ========
</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 March 31, 1999,
the statements of operations for the three-month periods ended March 31,
1999 and 1998 and the statements of cash flows for the three-month
periods ended March 31, 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 financial statements and notes thereto included in the Company's
Annual Report on Form 10-K/A for the year ended December 31, 1998 and
filed with the Security and Exchange Commission on May 3, 1999. The
accompanying condensed consolidated balance sheet at December 31, 1998
is derived from audited financial statements at that date.
Results for the quarters ended March 31, 1999 and 1998 are not
necessarily indicative of results for any other interim period or for
any year.
2. Management's Plans and Financing
The Company's financial statements are prepared and presented on a
basis assuming it continues as a going concern. At March 31, 1999, the
Company had an accumulated deficit of $97.8 million and incurred a net
loss of $7.3 million.
On December 23, 1998, the Company announced that it had entered
into a definitive merger agreement to acquire Transcend Therapeutics,
Inc. (Nasdaq: TSND) and its anticipated net cash balance of
approximately $8 million. Transcend stockholders will receive shares 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 approximately 30
percent. The merger of Transcend into KeraVision is currently scheduled
to occur on May 28, 1999. 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.
Management's planned expenditures for 1999 exceed current cash,
cash equivalents and available-for-sale investments and the funds to be
received from the Transcend acquisition and the senior term loan. The
Company will need to obtain additional funds to continue its research
and development activities, fund operating expenses, initiate sales and
marketing activities in the U.S. for its approved products and pursue
regulatory approvals for its products under development. Management
believes that sufficient funds will be available from additional
investors to support planned operations through December 1999. The
Company 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 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 additional
capital, significant reductions in spending and the delay or
cancellation of planned activities or more substantial restructuring
options may be necessary. In such event, the Company intends to
implement expense reduction plans in a timely manner to enable the
Company to meet its operating cash requirements through December 31,
1999. These actions would have material adverse effects on the
Company's business, results of operations and prospects.
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 antidulitive. For the period
ended March 31, 1999 dividends and accretion related to the redeemable
preferred stock are added to the net loss to arrive at a net loss
applicable to common stockholders. Options and warrants to purchase
279,310 and 55,492 shares of common stock were outstanding at
March 31, 1999 and 1998, respectively but were not included in the
computation of diluted net income per share as the Company's 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
at March 31, 1999 was composed of the following (in thousand):
Raw Materials $ 535
Finished Goods 742
---------
Total $1,277
=========
5. 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 the financial statements contained in this Quarterly Report are
reasonable and have a reasonable basis. Actual results could differ
from these estimates.
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 recorded
the fair value of the warrants 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.
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 on Form 10-K/A for the year ended December 31, 1998.
Overview
Since its founding in November 1986, the Company has been engaged
in the research and development of KeraVision Intacs 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 overall expenses to increase as its
sales and marketing activities increase.
On April 9, 1999, KeraVision obtained FDA approval to distribute
and sell KeraVision Intacs in the United States for the treatment of
myopia in the range of -1.0 to -3.0 diopters of correction for patients
over 21 years old. In May 1998, the Company received regulatory
approval in Canada to sell KeraVision Intacs in the range of
- -1.0 to -5.0 diopters; the Company has subsequently begun limited
commercial sales in Canada. In late 1996, the Company was granted the
right to affix the CE mark on KeraVision Intacs for myopia which allows
the Company to sell product in the range of -1.0 to -5.0 diopters in
European Union countries. The Company has enrolled a limited number
of patients in the range of -0.5 and -1.0 diopters and -3.5 to -5.0
diopters in a Phase III trial.
The research, manufacture, sale and distribution of medical
devices such as KeraVision 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 KeraVision Intacs, must be
cleared or approved by the FDA. Securing FDA approvals and clearances
required 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 product 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.
Until the development and testing processes for KeraVision Intacs
are fully complete, we cannot be sure that KeraVision Intacs will
perform in the manner we anticipate. Although the Company does have
approval to sell products in the United States, the European Union and
Canada, we cannot be sure that KeraVision Intacs will prove to be safe
or effective over the long term in correcting vision or that KeraVision
Intacs or any other product developed by the Company 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 KeraVision Intacs or any other
potential products or ever achieve profitable operations.
Results of Operations
Three Months Ended March 31, 1999 and 1998
Net revenues increased by $320,000 to $472,000 for the three-month
period ended March 31, 1999 compared to $152,000 for the three-month
period ended March 31, 1998. The increase was primarily due to
increased unit shipments associated with the Company's limited product
launch into Canadian market. Sales to customers in Canada represented
73% of net sales in the first quarter of 1999.
Cost of sales and manufacturing expenses totaled $1.6 million as
compared to $1.0 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.
Research and development expenses, which include clinical and
regulatory expenses, for the three-month period ended March 31, 1999
were $2.1 million, a decrease of $0.8 million from the three-month
period ended March 31, 1999. The decrease is primarily due to reduced
clinical trial costs and associated expenses due to the completion of
various studies, in addition to the reduced legal expenses associated
with patent filing fees.
Selling, general and administrative expenses of $4.0 million were
incurred in the three-month period ended March 31, 1999, an increase of
$2.1 million from the $1.9 million incurred in the comparable prior year
period. The increase was primarily due to increased marketing efforts
related to our limited launch in Canada and preparation for a U.S.
launch.
The Company recorded $0.1 million of interest expense for the
three-month period ended March 31, 1999, as compared to $0.1 million of
net interest income for the previous year. Interest income decreased
due to lower average cash and investment balances from period to period.
The net loss per common stockholder for the quarter was $7.7 million
versus $5.5 million for the same quarter in 1998. The net loss per share
applicable to common stockholders was 60 cents vs 44 cents in 1998.
This per share calculation includes the effect of a dividend and
accretion of $0.4 million to preferred stockholders. 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.
Cash used in operating activities for the first three months of 1999 has
increased to $6.6 million from $4.6 million in the prior year,
reflecting increased selling, general and administrative, research and
development and increased negative gross margins. Cash, cash equivalents
and available-for-sale investments were $6.2 million at March 31, 1999.
Capital expenditures for the first three months of 1999 and 1998 were
$0.2 million and $0.4 million, respectively.
On December 23, 1998, the Company announced that it had entered
into a definitive merger agreement to acquire Transcend Therapeutics,
Inc. (Nasdaq: TSND) and its anticipated net cash balance of
approximately $8 million. This transaction will be accounted for as an
acquisition of assets. 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 the Company. Transcend stockholders will receive shares 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 approximately 30
percent. Stockholders holding 51% of Transcend outstanding common stock
have agreed to vote in favor of the merger. In addition, KeraVision
will be entitled to a breakup fee of $500,000 if the agreement is
terminated for certain reasons. The merger is currently expected to
occur on May 28, 1999.
In March 1999, the Company entered into a senior term loan
agreement providing for borrowings of $5,000,000. The full amount was
advanced on March 25, 1999. The loan bears interest at 12.6% per year
until the Company repays the loan on September 30, 2001. The Company
has the right to prepay the loan subject to prepayment penalty of 6% of
the outstanding principal balance on the prepayment date. Repayment of
the loan is secured by the Company's assets except for intellectual
property. In connection with the loan, KeraVision 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. These warrants are exercisable for 7 years from
the date of issuance. The Company recorded the fair value of the
warrants as additional interest expense to be amortized over the term of
the related debt. The value of immediately exercisable warrants was
determined using a Black Scholes valuation model, based on the
contratual term of the warrants.
KeraVision 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. Management's planned expenditures for
1999 exceed current cash, cash equivalents and available-for-sale
investments, and the funds to be received from the Transcend acquisition
and the senior term loan. Management believes that sufficient funds will
be available from additional investors to support planned operations
through December 1999. The Company 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 markets or technology. There can be no assurance
that the Company will be 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
additional capital, significant reductions in spending and the delay or
cancellation of planned activities or more substantial restructuring
options may be necessary. In such event, the Company intends to
implement expense reduction plans in a timely manner to enable the
Company to meet its operating cash requirements through December 31,
1999. These actions would have material adverse effects on the
Company's business, results of operations and prospects.
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.
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 are
already 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 results of operations; however, it is uncertain to
what extent the Company may be affected by such matters. In addition,
there can be no guarantee 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.
Market Risk Disclosure
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.
Foreign Currency Risk
The Company transacts business in French Francs, German Deutsch
Marks and Canadian dollars. Transactions in foreign currency are minimal
and do not have a material impact on the Company's financial statements.
Forward Looking Statements
The Company notes that certain of the statements in this report
are forward looking. Actual results may differ materially due to a
variety of factors including, but not limited to (i) unavailability of
capital, (ii) lack of market acceptance of KeraVision Intacs, (iii)
complications relating to KeraVision Intacs or the surgical procedure,
(iv) competitive products and technology, (v) determinations by the FDA
or foreign regulatory bodies that the clinical data collected are
insufficient to support the safety and efficacy of KeraVision Intacs,
(vi) changes in regulatory review guidelines, procedures, regulations or
administrative interpretations, , and (vii) other risk factors described
under the heading "Risk Factors Affecting the Company, its Business and
its Stock Price" as set forth below in this Item 1 of the Company's Form
10-K/A for the year ended December 31, 1998.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
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
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)
10.1 Master Loan and Security Agreement dated as of March 25,
1999 by and between the Company and Transamerica Business
Credit Corporation (filed as Exhibit 10.29 to the Company's
Form 10-K and incorporated herein by reference)
27 Financial Data Schedule
(b) The Company filed the following reports on Form 8-K
during the quarter ended March 31, 1999:
Report Date: January 14, 1999
Item 5. Other Events
FDA Panel Recommends Approval With Conditions for
Keravision Intacs, a Non-Laser Treatment for Myopia.
-------------
Report Date: February 10, 1999
Item 5. Other Events
KeraVision Reports Fourth Quarter Results.
--------------
Report Date: February 10, 1999
Item 5. Other Events
KeraVison Begins European Clinical Study On Non-Laser
Treatment for Hyperopia.
--------------
Report Date: February 18, 1999
Item 5. Other Events
Intacs (Trademark), Keravision's Non-Laser Product for
Nearsightedness, Clears Another FDA Milestone.
<PAGE>
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: May 14, 1999
<PAGE>
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<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
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STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
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0
0
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