3,400,000 SHARES
ANGEION LOGO
COMMON STOCK
Angeion Corporation (the "Company") is offering hereby 3,400,000 shares of
its Common Stock, par value $.01 per share (the "Shares"). The Common Stock
of the Company is traded over-the-counter on the Nasdaq SmallCap Market
System under the symbol "ANGN" and is also listed on the Boston Stock
Exchange under the symbol "ANI." On July 26, 1995, the closing bid price of
the Common Stock, as reported on the Nasdaq SmallCap Market System, was
$6.625.
SEE "RISK FACTORS" ON PAGE 6 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION INVESTORS SHOULD CONSIDER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO COMMISSION PROCEEDS TO
PUBLIC AND FEES(1) COMPANY(2)(3)
<S> <C> <C> <C>
Per Share $6.50 $.4225 $6.0775
Total $22,100,000 $1,436,500 $20,663,500
</TABLE>
(1) The Shares are being offered by the Company principally to selected
investors purchasing for investment. Raymond James & Associates, Inc. (the
"Placement Agent") has been retained to act, on a best efforts basis, as
agent for the Company in connection with the arrangement of this transaction.
The Company has agreed, among other things, (i) to pay the Placement Agent a
fee equal to 6.5% of the Price to Public in connection with the arrangement
of this financing, and (ii) to indemnify the Placement Agent against certain
liabilities including liabilities under the Securities Act of 1933, as
amended. See "Plan of Distribution."
(2) Prior to the closing date of this best efforts, all or nothing offering,
all investor funds will promptly be placed in escrow with Citibank, N.A., as
escrow agent ("Citibank"), in an escrow account established for the benefit
of the investors. Upon receipt of notice from Citibank that investors have
affirmed purchase of the Shares and deposited the requisite funds in the
escrow account, the Company will deposit with the Depository Trust Company
the Shares to be credited to the accounts of the investors and will collect
the investor funds from Citibank. In the event that investor funds are not
received in the full amount necessary to satisfy the requirements of the
offering, all funds deposited in the Citibank escrow account will promptly be
returned to the investors. See "Plan of Distribution."
(3) Before deducting expenses payable by the Company estimated at $221,500.
RAYMOND JAMES & ASSOCIATES, INC.
The date of this Prospectus is July 27, 1995.
[ICD Photo]
The Company's Sentinel Implantable Cardioverter
Defibrillator ("ICD") and dual transvenous
leads are implanted in a patient to monitor the
heart for irregular heartbeats, and, when
necessary, provide an appropriate amount of
electrical energy to convert the irregular
heartbeat back to a normal rhythm.
[System Photo]
The Sentinel ICD System includes the ICD, a
computer programmer, an external defibrillation
test system, a smart wand and transvenous
leads.
[Photo]
Programmer/Interrogator
for patient follow-up in
physician's clinic.
[Photo]
Defibrillation Test System
and Programmer during
implant procedure.
[Photo]
Sentinel ICD and Dual Transvenous
Lead System is implanted pectorally.
IN JANUARY 1995, THE COMPANY INITIATED LIMITED HUMAN CLINICAL TRIALS OF ITS
SENTINEL(TM) ICD SYSTEM IN GERMANY. THERE CAN BE NO ASSURANCE, HOWEVER, THAT
THE COMPANY WILL RECEIVE APPROVAL FROM THE FDA OR FOREIGN REGULATORY
AUTHORITIES TO COMMENCE HUMAN CLINICAL TRIALS IN THE U.S. OR EXPAND FOREIGN
CLINICAL TRIALS OR, IF SUCH APPROVAL IS RECEIVED, TO COMMENCE COMMERCIAL
MARKETING. THE ABOVE DIAGRAMS DEPICT AN IMPLANTED SENTINEL ICD AND RELATED
ACCESSORIES.
SUMMARY
This summary is intended only for convenience and is not a complete
presentation of all relevant facts. It is qualified in its entirety by the
detailed information and financial statements contained elsewhere herein. The
entire Prospectus should be read and understood by prospective investors.
THE COMPANY
Angeion Corporation is engaged in designing, developing and manufacturing two
types of products to treat and potentially cure irregular heartbeats
(arrhythmias). The Company's Implantable Technology Division is developing
the Sentinel series of implantable cardioverter defibrillators ("ICDs"),
which are designed to treat rapid heartbeats in the ventricular (or lower)
chambers of the heart, a condition known as ventricular tachycardia ("VT"),
and a severe form of VT known as ventricular fibrillation ("VF") which if not
terminated will lead to a sudden cardiac death ("SCD") episode. The Company
believes, based upon industry analyses and attendance by management at
industry meetings, that its first product, the Sentinel 2000, is the smallest
and one of the most technologically advanced ICDs under development today.
The Company's Interventional Technology Division is developing a radio
frequency ("RF") catheter ablation system that it believes will provide a
potential cure for certain forms of atrial fibrillation (rapid heartbeats
originating in the upper chambers of the heart), and a laser catheter
ablation system that it believes will provide a potential cure for certain
forms of VT. The Company is actively pursuing a strategic alliance to
accelerate the continued development and commercialization of the products
and technologies in the Company's Interventional Technology Division.
Current treatments for VT consist primarily of medication, ICDs and open
heart surgery. The Company believes that the most effective treatment for
individuals at risk of experiencing a SCD episode, in light of currently
available technology, is an ICD. The ICD and lead market has grown from
approximately $160 million in 1990 to approximately $530 million in 1994,
representing a compounded annual growth rate of approximately 35%. The ICD
market is expected to continue to grow by at least 20% to 25% per year to
reach in excess of $1 billion per year by the end of the decade.
An ICD is implanted within the body to monitor the patient's heartbeat and,
in the event of VT or VF, to deliver an electrical shock to the heart
sufficient to terminate the arrhythmia. The most advanced ICDs currently in
human clinical trials or market approved are devices characterized by (i)
tiered therapy (electrical shocks of varying intensity depending on the type
and severity of the arrhythmia), (ii) programmability (allows the physician
to customize therapy to the patient's condition both before and, more
importantly, after implant), (iii) improved transvenous lead systems (allows
implantation of the lead through a vein so that open chest surgery is not
required), (iv) electrogram storage capability (storage of intracardiac
EKGs), (v) a biphasic waveform (an electrical shock of alternating polarity),
and (vi) limited pectoral implant capability.
The Company is developing the Sentinel series of ICDs, which offers certain
advantages over ICDs currently in human clinical trials or market approved,
including the following: (i) reduced size and weight specifications that will
allow for universal pectoral implant capability; (ii) Small Cap(tm) biphasic
waveform, a more efficient output waveform that delivers energy at a higher
average current and in a shorter time and thereby lowers defibrillation
energy thresholds; (iii) Hot Can(tm) electrode system that uses the Sentinel
housing as an efficient electrode that can be programmed on and off; (iv) a
dual battery system that increases the potential lifetime of the ICD from
five years to up to seven years; (v) Energy Steering(tm) delivery system that
permits the device to increase shock effectiveness by directing the current
more uniformly throughout the heart; and (vi) special algorithms for more
effective discrimination between VT, VF and supraventricular tachycardia
("SVT") (a feature greatly enhanced in the Sentinel 2001). Electrogram
storage capability will first be introduced in the Company's Sentinel 2001.
See "Business -- Products."
The Company's products are subject to a lengthy and expensive premarket
approval process with the U.S. Food and Drug Administration ("FDA"). With
respect to the Sentinel 2000 and the Company's RF catheter ablation system,
the Company is currently scheduled to submit applications to the FDA for
investigational device exemptions ("IDEs") in the second half of calendar
1995. The Company has received an IDE for its laser catheter ablation system
that permits the Company to conduct up to 15 procedures at two medical
centers. See "Business -- Products" and " -- Government Regulation."
The Company's products are also subject to regulation by agencies comparable
to the FDA in foreign countries. The Company has initiated limited human
clinical trials of the Sentinel 2000 in Germany. Initial regulatory documents
and requests to conduct human clinical trials in Italy were filed in the
second half of calendar 1994 and in the United Kingdom in the first half of
calendar 1995. The Company is currently scheduled to complete these
international documents and file for expanded clinical trials in Germany
during the second half of calendar 1995. Upon completion of clinical trial
requirements for the Sentinel 2000 in the European Community ("EC"), the
Company will file for a CE mark in one of the countries in which clinical
trials have been conducted, approval of which will allow the Company to
commence commercial marketing throughout the EC. The Company currently
expects to file for a CE mark in the first calendar quarter of 1996. The
Company has contracted with a manufacturer in Scotland to perform final
assembly of its products for use in clinical trials in the EC, which facility
has received ISO 9002 certification. See "Business -- Governmental
Regulation."
The Company has a strategic alliance with Pacesetter, Inc. ("Pacesetter"), a
subsidiary of St. Jude Medical, Inc. This arrangement, among other things,
provides Pacesetter with worldwide OEM marketing rights, on a co-exclusive
basis with the Company, to certain of the Company's products for a period
that may not be less than seven years. The Company retains the right to
market and sell defibrillator and laser catheter products worldwide under its
own label and, subject to certain specified limitations and qualifications,
to manufacture the products it sells to Pacesetter. See "Business -- Sales
and Distribution" and " -- Manufacturing."
RISK FACTORS
An investment in the Shares offered hereby involves a high degree of risk due
to a number of factors, including, but not limited to: (i) the Company's
operating losses and need to obtain substantial additional financing,
technical, manufacturing and marketing resources than the Company, (ii) the
Company's ability to complete development and obtain regulatory approval to
commence commercial marketing of the Sentinel series and its two catheter
ablation systems, (iii) competition with other ICD manufacturers that have
greater financial, technical, manufacturing and marketing resources than the
Company, (iv) uncertainty of third party reimbursement, (v) the Company's
ability to prosecute its patent portfolio, obtain new patents and avoid
infringement of the proprietary rights of others, (vi) the Company's ability
to fulfill the manufacturing requirements of the Pacesetter arrangement,
(vii) the Company's ability to establish an effective system for
manufacturing, selling and distributing its products, and (viii) the
uncertainty of market acceptance of the Company's products. See "Risk
Factors."
THE OFFERING
SHARES OFFERED 3,400,000 Shares. See "Plan of Distribution."
PRICE PER SHARE $6.50
COMMON STOCK TO BE 20,702,526 Shares (excludes 6,428,587 shares
OUTSTANDING AFTER issuable upon exercise of outstanding options and
THE OFFERING warrants)
NASDAQ TRADING SYMBOL ANGN (Common Stock)
BOSTON STOCK EXCHANGE SYMBOL ANI (Common Stock)
USE OF PROCEEDS The Company intends to apply the net proceeds of
the sale of the Shares for research and
development (including clinical trials),
investment in capital equipment and leasehold
improvements, and general corporate purposes,
including working capital.
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL 30, YEAR ENDED JULY 31,
1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales $ 0 $ 0 $ 0 $ 137,982 $ 77,615
Research and development
expenses 5,268,028 3,629,800 5,158,738 4,485,818 2,996,845
Merger expense for in-process
research and development 0 1,435,124 1,450,499 0 0
General and administrative
expenses 1,508,635 1,032,172 1,493,424 1,353,502 1,021,078
Loss from continuing
operations (6,673,157) (5,768,779) (7,675,743) (5,915,558) (4,054,919)
Net loss (6,673,157) (5,768,779) (7,675,743) (2,708,438) (4,161,455)
Net loss per share $ (0.41) $ (0.55) $ (0.72) $ (0.26) $ (0.42)
Weighted average number of
shares outstanding (1) 16,291,900 10,519,777 10,657,311 10,296,812 9,901,592
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1995
JULY 31, 1994 ACTUAL AS ADJUSTED(2)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 2,127,358 $4,700,977 $25,142,977
Working capital (1,175,384) 4,030,294 24,472,294
Total assets 4,752,630 7,756,628 28,198,628
Long-term debt, less current
installments 1,504,187 1,501,917 1,501,917
Shareholders' equity (deficit) (596,320) 5,262,766 25,704,766
</TABLE>
(1) Computed on the basis described for net loss per share in Note 2 of Notes
to Financial Statements.
(2) Adjusted to give effect to application of the net proceeds of this
offering at an offering price per share of $6.50. See "Use of
Proceeds."
RISK FACTORS
In analyzing this offering, prospective investors should consider carefully,
among others, the following risk factors relating to the Company and this
offering:
CONTINUING OPERATING LOSSES; PROFITABILITY UNCERTAIN
The Company has incurred net operating losses from continuing operations in
each year since its inception in 1986. At April 30, 1995, the Company's
accumulated deficit was approximately $24,215,537. Such losses have resulted
principally from costs incurred in the research and development of the
Company's products. The Company has had no significant revenue since the sale
of its medical accessory products division in September 1992. The Company
expects to incur additional operating losses over the next several years as
the Company continues to fund research and development (including clinical
trials) relating to its ICDs and catheter ablation systems. The Company's
ability to achieve profitability is dependent in part on obtaining regulatory
approvals for its products and developing the capacity to manufacture and
sell its products successfully. There can be no assurance that the Company
will obtain the required regulatory approvals on a timely basis or at all,
successfully develop, commercialize, manufacture and market its products, or
ever achieve profitability. See "Business -- Government Regulation."
NEED FOR ADDITIONAL FINANCING
The proceeds from this offering will be used for research and development
(including clinical trials), investment in capital equipment and leasehold
improvements, and general corporate purposes, including working capital. See
"Use of Proceeds." If the Company's operations progress as anticipated, of
which there can be no assurance, the Company expects that the net proceeds
from this offering will allow the Company to meet its cash requirements for a
period of approximately 17 months after the closing of this offering. The
timing of the Company's future capital requirements, however, will depend on
a number of factors, including progress with preclinical and clinical trials;
time and costs involved in obtaining regulatory approvals; costs involved in
filing, prosecuting and enforcing patents or defending against patent
infringement claims; competing technological and market developments; and
costs of manufacturing and marketing scale-up. In any event, the Company will
require substantial additional capital beyond the net proceeds of this
offering to complete development and commence commercial manufacturing and
marketing of its products. There can be no assurance, however, that such
additional financing will be available on acceptable terms, or at all. If
additional funds are raised by issuing equity securities, further dilution to
then existing shareholders may result. If the Company is unable to obtain
additional funds as needed, the Company may be required to significantly
curtail one or more of its research and development programs or cease
operations entirely, in which case investors in this offering could lose
their entire investment.
LACK OF PMA APPROVAL; INITIAL U.S. REVENUES MAY BE LIMITED
The Company will not be able to commence marketing and commercial sales of
its products in the U.S. until it receives FDA approval, which will only be
granted following filing of a Pre-Market Approval ("PMA") application. An IDE
submission, a necessary first step prior to filing a PMA, is expected to be
filed for the Sentinel 2000 system in the second half of calendar 1995. At
such time as an IDE is approved in connection with the Sentinel 2000 system,
and until the Company receives PMA approval, the Company will be subject to
FDA-imposed limitations on the number of patients who may receive Sentinel
2000 implants and the number and location of clinical sites at which implants
may be performed. The Company would be unable to sell additional Sentinel
2000 systems in the U.S. should the number of implants reach the limits
authorized by the FDA and such limitation could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company obtained an IDE with respect to its laser catheter
ablation system that permits up to 15 clinical trials at two medical centers.
The Company intends to file an IDE with respect to its RF catheter ablation
system in the second half of calendar 1995 and to pursue this technology more
aggressively as funding becomes available. The timing of both the IDE and PMA
review processes is unpredictable and uncertain. There can be no assurance as
to when or whether the Company will receive IDE or PMA approvals. Failure to
obtain IDE or PMA approval or to obtain such approval on a timely basis would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business Products" and " -- Government
Regulation."
COMPETITION
Competition in the ICD market is intense. Although the Company's ICDs will
also compete with alternative treatments for VT, such as drug therapy, open
heart surgery and cardiac ablation, the Company believes that ICD
manufacturers constitute its primary competition. Although no assurance can
be given that PMA approval will ever be obtained for the Sentinel series
products, or that competitors will not introduce new products with similar
features or that the market will accept the Sentinel series, the Company
believes the Sentinel series will be able to compete effectively with other
ICD devices currently in the market due to its smaller size and certain other
proprietary features that will ease implantation, improve patient therapy and
improve monitoring capability. Most of the Company's competitors in the ICD
market have greater financial, manufacturing, marketing, distribution and
technical resources and greater name recognition than the Company. Although
there can be no assurance that the Company's strategic alliance with
Pacesetter will be successful, the Company believes that this strategic
alliance will assist the Company in addressing the greater resources and name
recognition of its competitors. See "Business -- Competition."
A number of companies are believed to be developing ablation devices to treat
SVT, certain of which are larger companies with significant resources. To
date, however, few companies have focused on ablation devices to treat VT.
There can be no assurance, however, that competitors of the Company will not
be able to develop and introduce cardiac ablation systems that may be more
effective in treating VT. In addition, catheter ablation technologies also
compete with drug therapy. While historically drug therapy has had limited
effectiveness and caused adverse side effects, new drugs under development
may offer improved treatment outcomes. See "Business -- Competition."
UNCERTAINTY OF THIRD PARTY REIMBURSEMENT AND HEALTH CARE REFORM
The Company's ability to market its products successfully in the U.S. will
depend in part on the extent to which reimbursement for the cost of such
products and related treatment will be available from government health
administration authorities (such as the Health Care Financing Administration
("HCFA"), which determines Medicare reimbursement levels), private health
insurers, health maintenance organizations and other third-party payors.
Payors are increasingly challenging the need for and prices of medical
products and services. Payors may deny reimbursement for procedures that they
deem experimental or for devices that are used other than for FDA-approved
indications. Currently, HCFA is not allowing Medicare reimbursement for
products and related procedures that have not received FDA approval, and
certain private third-party payors have also begun denying such
reimbursement. With respect to the laser catheter ablation system, even if
the Company obtains a PMA, some payors may deny coverage until the procedure
becomes generally accepted by the medical profession. The inability of
hospitals and other providers to obtain reimbursement from third-party payors
for the Company's products and related procedures would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Third Party Reimbursement."
The Company expects that there will be continued pressure on cost-containment
throughout the U.S. health care system. Reforms may include mandated basic
health care benefits, controls on health care spending through limitations on
the growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups and fundamental
changes to the health care delivery system. The Company anticipates that
Congress and state legislatures will continue to review and assess
alternative health care delivery systems and payment methodologies and public
debate of these issues will likely continue in the future. Due to
uncertainties regarding the ultimate features of reform initiatives and their
enactment and implementation, the Company cannot predict which, if any, of
such reform proposals will be adopted, when they may be adopted or what
impact they may have on the Company. See "Business -- Third Party
Reimbursement."
INTELLECTUAL PROPERTY PROTECTION
As of June 30, 1995, the Company had 43 U.S. issued patents and 16 U.S.
patents which have been allowed but have not yet issued, relating to its
research and development products. As of this date, the Company also had 34
U.S. patent applications pending, 17 foreign patent applications pending and
13 U.S. patent applications in preparation with respect to its research and
development products. The Company also owns certain registered trademarks and
has applied for several other trademarks in the U.S. and certain foreign
countries. There can be no assurance that patents and trademarks will be
granted in the future, or that any patents and trademarks that the Company
now holds or may be granted or under which it has been granted licenses will
be valid or otherwise be of value to the Company. Even if the Company's
patents and trademarks are valid, others may be able to introduce
non-infringing products that are competitive with those of the Company.
The Company is conducting an ongoing evaluation of potential infringement of
any proprietary rights of third parties by the products the Company intends
to market. Regardless of the Company's efforts to evaluate the potential
infringement of any proprietary rights of third parties, there can be no
assurance that such infringements do not exist or may not arise in the
future. There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry, particularly in
the ICD market. Litigation, which could result in substantial cost to and
diversion of effort by the Company, may be necessary to enforce patents
issued to or licensed by the Company, to protect trade secrets or know-how
owned by the Company or to defend the Company against claimed infringement of
the rights of others and to determine the scope and validity of the
proprietary rights of others. Adverse determinations in litigation could
subject the Company to significant liabilities to third parties or could
require the Company to seek licenses from third parties. Although patent and
intellectual property disputes in the medical device area have often been
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial and there can be no assurance that necessary
licenses would be available to the Company on satisfactory terms or at all.
Accordingly, an adverse determination in a judicial or administrative
proceeding or failure to obtain necessary licenses could prevent the Company
from manufacturing and selling its products, which would have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company is not currently a party to any patent or other
litigation. In the event that litigation or licensing of the Company's
patents were to occur, the license agreement currently in existence between
the Company and Pacesetter may affect the ability of the Company to settle
any intellectual property disputes related to the Company's products on
reasonable terms or at all, which could have a material adverse effect on the
Company's business. See "Business -- Intellectual Property."
The Company also relies on trade secrets and proprietary know-how, which it
seeks to protect, in part, through confidentiality agreements with employees,
consultants and other parties. There can be no assurance, however, that these
agreements will not be breached, that the Company would have adequate
remedies for any breach, or that the Company's trade secrets will not
otherwise become known to or independently developed by competitors.
REQUIREMENTS OF PACESETTER RELATIONSHIP
The Company and Pacesetter are parties to a Preferred Stock, Preferred Stock
Option and Subordinated Debenture Purchase Agreement (the "Purchase
Agreement"), an OEM Marketing and Manufacturing Agreement (the "OEM
Agreement") and a License Agreement (the "License Agreement"). Pursuant to
the OEM Agreement, if the Company fails to fulfill all product quantity,
quality and specification requirements, Pacesetter may elect to manufacture
these products and pay the Company a royalty that is less than the transfer
price payment the Company would have received had it manufactured the
products and sold them to Pacesetter. No assurance can be given that the
Company will be able to fulfill these requirements, and the failure to do so
could have a material adverse effect on the Company's operations. See
"Business -- Manufacturing." In addition, the License Agreement, on its face,
contains certain conditional rights and obligations for both Pacesetter and
the Company with respect to sublicensing of the Company's defibrillator
patents and patent applications in existence at the time of the License
Agreement. In the event that litigation or licensing of the Company's patents
were to occur, the License Agreement may affect the ability of the Company to
settle any intellectual property disputes related to the Company's products
on reasonable terms or at all, which could have a material adverse effect on
the Company's business. See "Business -- Intellectual Property."
The Purchase Agreement provides that, until one year after PMA approval of
the Company's first ICD (other than the Sentinel 2000), Pacesetter will have
a right of first refusal any time the Company receives an offer for the
purchase, license, lease or transfer of all or a substantial portion of the
Company's assets or business or for the purchase of a majority interest in
the capital stock of the Company. In connection with this right of first
refusal, Pacesetter will have 21 days after notice to determine whether it
will exercise its right by proceeding with the transaction on the same terms
and conditions as are set forth in the offer. This right of first refusal
could have the effect of delaying, deferring or preventing a change in
control of the Company, which could operate to deny shareholders the receipt
of a premium on their Common Stock and could have a depressive effect on the
market price for the Common Stock.
GOVERNMENT REGULATION
The medical products the Company intends to market are subject to regulation
in the U.S. by the FDA. The process of complying with such regulations with
respect to new products can be costly and time-consuming. The Company's ICD
products and its catheter ablation systems are subject to a lengthy and
expensive pre-market approval process with the FDA. The Company expects to
file for an IDE in the U.S. in the second half of calendar 1995 with respect
to its Sentinel 2000. Upon approval of the IDE, the Company will initiate
clinical trials of the Sentinel 2000 system in the U.S. During the second
half of calendar 1995, the Company is also planning to file for an IDE on its
RF catheter ablation system. The Company has received an IDE with respect to
its laser catheter ablation system permitting it to perform up to 15
procedures at two medical centers. The data collected in clinical trials
(both in and outside the U.S.) of the Company's Sentinel 2000 and its
catheter ablation systems will be used to prepare the PMA applications for
such products. If such PMA applications are accepted for filing by the FDA,
they will be reviewed further by the FDA and subsequently by the FDA
Circulatory System Devices Panel. After considering the panel's
recommendation, the FDA will determine whether to approve such PMA
applications. Approval of the Company's applications for PMAs for the
Sentinel series and its catheter ablation systems will depend on a wide
variety of factors, many of which are outside the Company's control. Approval
will also require an inspection by the FDA to determine whether the Company's
operations conform with the FDA's current Good Manufacturing Practices. There
can be no assurance that the Company will be successful in obtaining an IDE
for its Sentinel series or its RF catheter ablation system, or that the
Company will be successful in obtaining a PMA for its products, in a timely
manner, or at all. Delays in obtaining marketing approvals and clearances in
the U.S. could have significant adverse consequences on the Company and its
operations. The Company is also subject to certain FDA regulations governing
manufacturing practices, packaging and labelling. Further, the FDA regulates
the export of medical devices that have not been approved or cleared for
marketing in the United States. Prior to commencement of sales outside the
U.S., the Company will be required either to obtain export approval from the
FDA or to establish a manufacturing capacity abroad. See "Business --
Government Regulation."
The Company's products are also subject to regulation by agencies comparable
to the FDA in foreign countries. The Company has initiated limited human
clinical trials of the Sentinel 2000 in Germany. Initial regulatory documents
and requests to conduct human clinical trials in Italy were filed in the
second half of calendar 1994 and in the United Kingdom in the first half of
calendar 1995. The Company is currently scheduled to complete these
international documents and file for expanded clinical trials in Germany
during the second half of calendar 1995. Under the Active Implantable Medical
Device Directive, which was fully implemented in the EC in January 1995,
regulatory documents and test information must be submitted to the
governmental agency of each country in which the Company intends to conduct
human clinical trials, and the Company is in the process of complying with
these regulatory requirements. Upon completion of the clinical trial
requirements, the Company will file for a CE mark in one of the countries in
which clinical trials have been conducted, approval of which will allow the
Company to commence commercial marketing of its products throughout the EC.
There can be no assurance, however, that the Company will be allowed to
conduct the necessary human clinical studies of the Sentinel 2000 in Europe
or that the Company will obtain CE mark approval, on a timely basis or at
all. The Company has contracted with a manufacturer in Scotland to perform
final assembly of its products for use in clinical trials in Europe, and this
facility has received ISO 9002 certification.
MARKET ACCEPTANCE
Market acceptance of the Company's products will depend, in part, on the
therapeutic capabilities and operating features of its products as compared
to competing products and will also depend on the Company's ability to
convince the medical community of the clinical efficacy of its products.
Failure of the Company's products to gain market acceptance would have a
material adverse effect on the Company's business, financial condition and
results of operations.
POSSIBLE OBSOLESCENCE DUE TO TECHNOLOGICAL CHANGE
The medical device industry is subject to rapid technological innovation and,
consequently, the life cycle of a particular product tends to be relatively
short. The Company is engaged in a field characterized by extensive research
and development efforts. There can be no assurance that alternative
treatments or other discoveries and developments with respect to ICDs or
catheter ablation systems will not render the Company's products obsolete.
The greater financial and other resources of many of the Company's
competitors may permit such competitors to respond more rapidly than the
Company to technological advances. See "Business -- Competition."
LIMITED MANUFACTURING OR MARKETING EXPERIENCE
Although management of the Company has limited manufacturing and marketing
experience with respect to the Sentinel series and the catheter ablation
systems, key members of management do have experience in manufacturing and
marketing ICDs and other medical products. While there can be no assurance
that the Company will be able to develop an effective manufacturing and
marketing function, the Company believes that the OEM Agreement entered into
with Pacesetter will support and enhance these efforts. Failure to develop an
effective manufacturing function could also result in the failure of the
Company to meet Pacesetter's product requirements, resulting in a royalty
from Pacesetter that is lower than the transfer price payment the Company
would have otherwise received. See "Business -- Manufacturing" and " -- Sales
and Marketing."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends largely on its senior management and other key
personnel. Accordingly, the loss of the services of key individuals could
have a material adverse effect on the Company's operations and on its current
and future product development efforts. See "Management."
APPLICABILITY OF "PENNY STOCK RULES"
If, during the time in which the Common Stock is quoted on Nasdaq SmallCap
Market, the Common Stock is priced below $5.00 per share, trading of the
Common Stock will be subject to federal regulations governing "penny stocks"
(the "Penny Stock Rules"). Common Stock will be deemed a penny stock for the
limited purpose of enabling the Commission to prohibit previously sanctioned
persons from participating in penny stock activities. This provision requires
brokers to take reasonable steps to avoid distributing the Common Stock to
such previously sanctioned persons. If the Penny Stock Rules are not followed
by the broker, the investor has no obligation to purchase the security.
Accordingly, application of the Penny Stock Rules may make it more difficult
for brokers to sell the Common Stock, and purchasers of the Common Stock
offered hereby may have difficulty in selling their shares in the future in
the secondary trading market.
DILUTION
Purchasers of the shares of Common Stock offered hereby will experience an
immediate dilution in net tangible book value. See "Dilution."
CONTROL BY DIRECTORS AND OFFICERS
Upon completion of this offering, the directors and officers of the Company
will own or control approximately 8.7% of the Company's outstanding Common
Stock. If outstanding options and warrants are exercised in full, and
assuming no other change in ownership of the Common Stock, the total number
of shares of Common Stock owned or controlled by directors and officers of
the Company after this offering will represent approximately 12.3% of the
outstanding Common Stock. As a result, directors and officers, if they act
together, would have the ability to exercise substantial control over the
Company's affairs. See "Principal Shareholders and Beneficial Ownership of
Management."
LACK OF PROSPECTIVE DIVIDENDS
The Company has not paid dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company
intends to retain any earnings to finance the development of its business.
There can be no assurance that the Company will ever pay cash dividends. See
"Dividend Policy."
SUFFICIENCY OF PRODUCT LIABILITY INSURANCE
The Company currently carries product liability insurance covering its
products with policy limits of $5.0 million per occurrence and $5.0 million
in the aggregate. It cannot be predicted, however, whether such insurance is
sufficient, or if not, whether the Company will be able to obtain such
insurance as is sufficient, to cover the risks associated with the Company's
business or whether such insurance will be available at premiums that are
economically feasible. Lack of sufficient insurance could expose the Company
to suits for substantial damages.
USE OF PROCEEDS
The Company estimates that the net proceeds to be received by the Company in
this offering, after deducting estimated offering expenses and selling
commissions, will be approximately $20,442,000, at an offering price of
$6.50.
The Company estimates that it will use the proceeds of this offering in the
following manner:
<TABLE>
<CAPTION>
<S> <C>
Research and development (including clinical trials) $15,292,000
Capital equipment and leasehold improvements in connection
with start-up of manufacturing operations 1,800,000
General corporate purposes, including working capital 3,350,000
Total $20,442,000
</TABLE>
The table above represents the Company's best estimate of its allocation of
the net proceeds of this offering, based upon its current plans and current
economic, industry and regulatory conditions. These estimates are subject to
change based upon factors such as progress of preclinical and clinical
trials, the time and costs involved in obtaining regulatory approvals, the
costs involved in filing, prosecuting and enforcing patents and defending
against patent infringement claims, competing technologies and market
developments and the cost of manufacturing and marketing scale-up.
If the Shares offered hereby are sold and the Company's operations progress
at expected levels, the Company expects that net proceeds of this offering
will allow the Company to meet its cash requirements for approximately 17
months from the date of the closing of this offering. If the Company's
operations exceed or fall short of expected levels, the Company may require
additional capital earlier than expected. In any event, and particularly if
the Company's operations do not achieve expected levels, the Company will
require substantial amounts of additional capital.
Prior to the use of the proceeds of this offering, the Company will invest
such proceeds in short-term interest-bearing instruments, such as
certificates of deposit and short-term governmental obligations.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of April
30, 1995, and as adjusted to reflect the issuance and sale of the Shares
offered hereby at an offering price of $6.50 per share.
<TABLE>
<CAPTION>
APRIL 30, 1995(1)
ACTUAL AS ADJUSTED
<S> <C> <C>
Long-Term Debt $ 1,500,000 $ 1,500,000
Shareholders' Equity:
Preferred Stock, Series A, $.01 par value; authorized 1,475,000
shares; issued and outstanding 875,000 shares 3,166,425 3,166,425
Common Stock, $.01 par value; authorized 35,000,000 shares;
issued and outstanding 17,145,819 shares, 20,545,819 shares as
adjusted 171,458 205,458
Additional Paid-in Capital 26,140,420 46,548,420
Accumulated Deficit (24,215,537) (24,215,537)
Total Shareholders' Equity 5,262,766 25,704,766
Total Capitalization $ 6,762,766 $ 27,204,766
</TABLE>
(1) Excludes 6,580,576 shares of Common Stock issuable upon exercise of
options and warrants outstanding at April 30, 1995.
MARKET PRICE FOR COMMON STOCK
The Common Stock is traded over-the-counter on the National Association of
Securities Dealers Automated Quotation ("Nasdaq") SmallCap Market System
under the symbol "ANGN" and is listed on the Boston Stock Exchange under the
symbol "ANI." The following table sets forth the high and low bid prices of
the Common Stock from the first calendar quarter of 1992 through July 5,
1995, as reported by Nasdaq. Such information represents prices between
dealers, without markup, markdown or commission, and does not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
COMMON STOCK
HIGH LOW
<S> <C> <C>
1995
Third calendar quarter (through July 26, 1995) $6.750 $4.875
Second calendar quarter 5.000 3.375
First calendar quarter 4.125 2.500
1994
Fourth calendar quarter $3.250 $2.375
Third calendar quarter 3.125 2.000
Second calendar quarter 3.125 1.750
First calendar quarter 3.625 2.375
1993
Fourth calendar quarter $2.875 $2.000
Third calendar quarter 3.125 2.250
Second calendar quarter 4.500 3.250
First calendar quarter 5.250 3.750
1992
Fourth calendar quarter $4.250 $2.500
Third calendar quarter 3.375 1.875
Second calendar quarter 3.750 2.250
First calendar quarter 5.875 3.125
</TABLE>
For a recent bid price for the Common Stock, see the cover page to this
Prospectus. As of June 30, 1995, the Common Stock was held of record by 495
persons. The Company's Common Stock is held beneficially by more than 3,200
persons.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company
intends to retain any earnings to finance the development of its business.
There can be no assurance that the Company will ever pay cash dividends.
DILUTION
The net tangible book value of the Common Stock of the Company as of April 30,
1995 (based on the unaudited financial statements included herein), was $889,747
or $0.05 per share. "Net tangible book value" per share of Common Stock
represents the total tangible assets of the Company reduced by the total
liabilities and convertible preferred stock of the Company and divided by the
number of shares of Common Stock outstanding. Upon completion of this offering,
after deducting estimated offering expenses and selling commissions and at an
offering price of $6.50 per share, the adjusted net tangible book value of the
Common Stock of the Company as of April 30, 1995 would have been $21,331,747 or
$1.04 per share. The increase in net tangible book value of $0.99 per share
would be due solely to the purchase of the Shares in this offering. Purchasers
in this offering will immediately incur a dilution of $5.46 per share from the
$6.50 offering price of the Shares sold hereby. "Dilution" is determined by
subtracting net tangible book value per share after the offering from the
offering price.
SELECTED FINANCIAL DATA
The selected financial data presented below under the captions "Statements of
Operations Data" and "Balance Sheet Data" for, and as of the end of, each of
the years in the five-year period ended July 31, 1994, are derived from the
financial statements of the Company, which financial statements have been
audited by KPMG Peat Marwick LLP, independent certified public accountants.
The selected financial data presented below for the nine-month periods ended
April 30, 1995 and 1994, are derived from the unaudited financial statements
of the Company included elsewhere in this Prospectus. In the opinion of
management, the unaudited financial statements reflect all normal recurring
adjustments necessary to present fairly the financial data for the unaudited
periods described above. The financial statements as of July 31, 1994 and
1993, and for each of the years in the three-year period ended July 31, 1994,
and the report thereon, are included elsewhere in this Prospectus. The
results of operations of the Company for the nine-month period ended April
30, 1995 should not necessarily be taken as indicative of the results of
operations that may be expected for the entire fiscal year ending July 31,
1995. Unless otherwise noted, the following discussion of financial condition
and results of operations relates only to the continuing operations of the
Company.
The selected financial data should be read in conjunction with the financial
statements as of July 31, 1994 and 1993, and for each of the years in the
three-year period ended July 31, 1994, the related notes and the independent
auditors' report, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTHS ENDED APRIL 30, JULY 31,
STATEMENTS OF OPERATIONS DATA: 1995 1994 1994
<S> <C> <C> <C>
Net sales $ 0 $ 0 $ 0
Research and development expenses 5,268,028 3,629,800 5,158,738
Merger expense for in-process research
and development 0 1,435,124 1,450,499
General and administrative expenses 1,508,635 1,032,172 1,493,424
Loss from continuing operations (6,673,157) (5,768,779) (7,675,743)
Gain on sale of discontinued
operations 0 0 0
Income (loss) discontinued operations 0 0 0
Net income (loss) (6,673,157) (5,768,779) (7,675,743)
Net loss per share from continuing
operations (0.41) (0.58) (0.72)
Net income (loss) per share from
discontinued operations 0 0.03 0
Net loss per share $ (0.41) $ (0.55) $ (0.72)
Weighted average number of shares
outstanding (1) 16,291,900 10,519,777 10,657,311
</TABLE>
<TABLE>
<CAPTION>
(TABLE CONTINUED)
STATEMENTS OF OPERATIONS DATA: 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Net sales $ 137,982 $ 77,615 $ 3,030 $ 0
Research and development expenses 4,485,818 2,996,845 1,175,986 300,000
Merger expense for in-process research
and development 0 0 0 0
General and administrative expenses 1,353,502 1,021,078 824,516 149,206
Loss from continuing operations (5,915,558) (4,054,919) (1,892,420) (297,881)
Gain on sale of discontinued
operations 3,207,120 0 0 0
Income (loss) discontinued operations 0 (106,536) 125,817 325,369
Net income (loss) (2,708,438) (4,161,455) (1,766,603) 27,488
Net loss per share from continuing
operations (0.57) (0.41) (0.22) (0.04)
Net income (loss) per share from
discontinued operations 0.31 (0.01) 0.01 0.04
Net loss per share $ (0.26) $ (0.42) $ (0.21) $ 0
Weighted average number of shares
outstanding (1) 10,296,812 9,901,592 8,536,984 8,270,634
</TABLE>
<TABLE>
<CAPTION>
AS OF APRIL 30, AS OF JULY 31,
BALANCE SHEET DATA: 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $4,700,977 $ 468,849 $ 2,127,358 $4,842,033 $ 927,620 $1,185,759 $1,138,666
Working capital 4,030,294 438,132 (1,175,384) 4,692,607 2,989,426 4,097,908 4,244,354
Total assets 7,756,628 3,245,190 4,752,630 7,329,146 5,905,146 4,903,150 4,704,407
Long-term debt, less current
installments 1,501,917 1,504,880 1,504,187 1,513,516 76,045 117,604 448,457
Shareholders' equity
(deficit) 5,262,766 1,071,639 (596,320) 5,207,346 4,404,409 4,544,481 4,125,014
</TABLE>
(1) Computed on the basis described for net loss per share in Note 2 of Notes
to Financial Statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
In September 1992, the Company completed the sale of its Angeion Medical
Products ("AMP") division, an accessory products business, to the B. Braun
Cardiovascular Division of Burron Medical Inc. The sale price consisted of
$6.2 million cash at closing, plus a royalty of 10% and 5% of AMP product
sales in fiscal 1993 and 1994, respectively. The Company's continuing
operations consist of the research and development efforts of its two
divisions, the Implantable Technology Division and the Interventional
Technology Division. These divisions are developing medical devices to treat
various types of arrhythmias (irregular heartbeats). The operations conducted
by these divisions were previously conducted by the Company's two
greater-than-90% owned subsidiaries, which were merged into the Company
effective December 20, 1993. See Note 3 of Notes to Financial Statements.
Unless otherwise noted, the following discussion of financial condition and
results of operations relates only to the continuing operations of the
Company.
RESULTS OF OPERATIONS
NINE MONTHS ENDED APRIL 30, 1995 COMPARED TO THE NINE MONTHS ENDED APRIL 30,
1994. Research and development expenses increased from $3,629,800 in the
nine months ended April 30, 1994 to $5,268,028 in the nine months ended April
30, 1995. This increase of $1,638,228 was due to an acceleration of research
and development activity on the Company's ICDs. Research and development
activity focused on the development of its Sentinel series which accounted
for $4,530,065 of the expense for the nine months ended April 30, 1995, while
the catheter ablation development activities accounted for $737,963 of the
expense. Research and development expenses will continue to increase,
reflecting the Company's intent to move these products through their
development stages as rapidly as possible and initiate human clinical trials.
The nine months ended April 30, 1994, included a charge of $1,435,124,
representing the purchase of in-process research and development in
connection with the merger of the AngeLase, Inc. and AngeMed, Inc.
subsidiaries into the Company. See Note 3 of Notes to Financial Statements.
General and administrative expenses increased from $1,032,172 in the nine
months ended April 30, 1994 to $1,508,635 in the nine months ended April 30,
1995. The increase is due mainly to $132,708 of expense associated with
bridge notes that were repaid or converted in the first quarter of fiscal
1995. The remaining increase is due to other financing costs and increased
legal, payroll and consulting expenses.
The net loss for the nine months ended April 30, 1995 was $6,673,157 or $0.41
per share, compared to net loss of $5,768,779 or $0.55 per share for the nine
months ended April 30, 1994. The Company's aggressive research and
development program and related expenses will continue to adversely impact
results of operations in fiscal 1995 and 1996.
YEAR ENDED JULY 31, 1994 COMPARED TO 1993. Net sales decreased from $137,982
in fiscal 1993 to zero in fiscal 1994. This decrease was due to the
termination of a contract with the Company's only OEM customer.
Research and development expenses increased from $4,485,818 in fiscal 1993 to
$5,158,738 in fiscal 1994. This increase of $672,920 was due to an acceleration
of research and development activity on its Sentinel series. Research and
development activity relating to the development of the Sentinel series
accounted for $3,981,905 of the expense for fiscal 1994, while the catheter
ablation development activities accounted for $1,176,833 of the expense.
Research and development expenses will continue to increase, reflecting the
Company's intent to move these products through their development stages as
rapidly as possible and initiate human clinical trials.
During fiscal 1994, there was a charge of $1,450,499 representing the purchase
of in process research and development in connection with the mergers of
AngeLase, Inc. and AngeMed, Inc. into the Company. See Note 3 of Notes to
Financial Statements.
General and administrative expenses increased from $1,353,502 in fiscal 1993 to
$1,493,424 in fiscal 1994. This increase was due to an increase in payroll
expenses and financing expenses.
The gain on sale of discontinued operations of $3,207,120 in fiscal 1993
resulted from the sale of the AMP division. See Note 4 of Notes to Financial
Statements.
The net loss for fiscal 1994 was $7,675,743 or $0.72 per share, compared to a
net loss of $2,708,438 or $0.26 per share, for fiscal 1993, which included the
gain on sale of discontinued operations.
YEAR ENDED JULY 31, 1993 COMPARED TO 1992. Net sales increased from $77,615
in fiscal 1992 to $137,982 in fiscal 1993. This increase was due to the sale
of fiberoptic catheters manufactured for an OEM customer. The contract with
that OEM customer was terminated in the quarter ended January 31, 1993.
Research and development expenses increased from $2,996,845 in fiscal 1992 to
$4,485,818 in fiscal 1993. This increase of $1,488,973 was due to an
acceleration of research and development activity on the Sentinel series,
external temporary pacemaker and the laser catheter ablation system. In
fiscal 1993, the Sentinel series and external temporary pacemaker accounted
for $2,996,319 of the expense, while the laser catheter ablation system
development activities accounted for $1,489,499 of the expense.
General and administrative expenses increased from $1,021,078 in fiscal 1992
to $1,353,502 in fiscal 1993. The increase was due to non-cash compensation
expense and increases in insurance expense.
The gain on sale of discontinued operations of $3,207,120 in fiscal 1993 is
described in Note 4 of Notes to Financial Statements.
The net loss including the gain on the sale of discontinued operations for
fiscal 1993 was $2,708,438, or $0.26 per share, compared to a net loss of
$4,161,455, or $0.42 per share, for fiscal 1992.
FINANCIAL POSITION
OPERATING ACTIVITIES. Net cash used in operating activities was $5,813,173
and $4,217,590 in the nine months ended April 30, 1995 and 1994,
respectively. The cash used was primarily related to research and development
activities of the Company's operating divisions.
INVESTING ACTIVITIES. Net cash used in investing activities was $1,084,523
and $491,929 in the nine months ended April 30, 1995 and 1994, respectively.
The Company invested $281,234 in patents during the nine months ended April
30, 1995, primarily for its Sentinel series. The Company also purchased fixed
assets of $803,289 consisting primarily of computer and production equipment.
FINANCING ACTIVITIES. Net cash provided by financing activities was
$9,471,315 and $336,335 in the nine months ended April 30, 1995 and 1994,
respectively. Cash was provided from proceeds of a public offering of 4.9
million shares of Common Stock and 4.9 million warrants in the nine months
ended April 30, 1995. See Note 5 of Notes to Financial Statements. The public
offering proceeds were offset by repayments of notes payable. See Note 4 of
Notes to Financial Statements. Cash of $344,221 was provided from royalty
proceeds related to the sale of the AMP division in the nine months ended
April 30, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at April 30, 1995 were $4,700,977. The proceeds
from this offering will be used for research and development, investment in
capital equipment and leasehold improvements, and general corporate purposes,
including working capital. See "Use of Proceeds." If the Company progresses
as anticipated, of which there can be no assurance, the Company expects that
the net proceeds from this offering will allow the Company to meet its cash
requirements for a period of approximately 17 months after completion of this
offering. To the extent that the Company's operations do not proceed as
anticipated, additional funds will be needed earlier. In any event,
substantial additional funds will be needed by the Company.
In September 1994, the Company completed a public offering of 4.9 million
shares of Common Stock and 4.9 million warrants (the "Warrants"). Each
Warrant entitles the holder to purchase at any time up to 3:30 pm. Eastern
time on March 12, 1996, the expiration date of the Warrants, one-half of a
share of Common Stock at an exercise price per whole share of $4.75, subject
to certain adjustments for changes in capitalization. There can be no
assurance, however, that the Warrants will be exercised or that additional
funds will be available from other sources on acceptable terms or at all. If
the Company is unable to obtain additional funds as needed, the Company may
be required to curtail significantly one or more of its research and
development programs, or cease operations entirely, in which case investors
in this offering could lose their entire investment.
The Company has net operating loss carryforwards for financial reporting and
federal income tax purposes of approximately $20,000,000, which can be used
to offset taxable income and income taxes in future years. Sales of the
Company's equity during the three fiscal years preceding this offering, along
with sales of equity securities earlier in fiscal 1995 and the completion of
this offering, may cause changes in ownership under Section 382 of the
Internal Revenue Code of 1986, which would limit the use of the Company's net
operating loss carryforwards existing as of the date of the ownership change
to approximately $4,000,000 per year. Given that the Company anticipates
continued losses during the next few years, it is not anticipated that this
limitation will have a material adverse effect.
BUSINESS
GENERAL
Angeion Corporation is engaged in designing, developing and manufacturing two
types of products to treat and potentially cure irregular heartbeats
(arrhythmias). The Company's Implantable Technology Division is developing
the Sentinel series of implantable cardioverter defibrillators ("ICDs"),
which are designed to treat rapid heartbeats in the ventricular (or lower)
chambers of the heart, a condition known as ventricular tachycardia ("VT"),
and a severe form of VT known as ventricular fibrillation ("VF"). The Company
believes, based upon industry analyses and attendance by management at
industry meetings, that its first product, the Sentinel 2000, is the smallest
and one of the most technologically advanced ICDs under development today.
The Company's Interventional Technology Division is developing a radio
frequency ("RF") catheter ablation system, that it believes will provide a
potential cure for certain forms of atrial fibrillation (rapid heartbeats
originating in the upper chambers of the heart), and a laser catheter
ablation system, that it believes will provide a potential cure for certain
forms of VT.
BACKGROUND AND MARKETS
Arrhythmias, abnormal rhythms of the heart muscle, arise from numerous
causes, including congenital defects, tissue damage due to previous heart
attacks or atherosclerosis and certain other diseases. Arrhythmias originate
in either the atria (upper two chambers of the heart) where they are
generally not life-threatening, or the ventricles (the lower two chambers of
the heart), where they can significantly interfere with the pumping of
oxygenated blood and can therefore be life-threatening. VT occurs when the
ventricles beat at an abnormally rapid rate, depriving the ventricles of
sufficient time to fill with blood prior to each contraction and therefore
reducing the amount of blood pumped out of the heart. As a result, tissues
and organs are deprived of the oxygen carried by the blood, causing
dizziness, unconsciousness, cardiac arrest and possibly death.
Episodes of VT occur unpredictably and tend to become more serious over time.
VT can progress to the most serious type of cardiac arrhythmia, ventricular
fibrillation ("VF"). In VF, the heart's normal electrical impulses become
disorganized and erratic. Unlike VT, where the heart continues to contract in
an organized fashion though at an abnormally high rate, in VF the heart
ceases to pump blood through the body. If VF is not terminated quickly, the
individual will experience a sudden cardiac death ("SCD") episode resulting
in unconsciousness due to the heart's failure to pump oxygenated blood to the
body's tissues and organs. Without prompt medical intervention, the
individual typically will die.
Industry analysts estimate that in excess of 1.4 million people in the U.S.
have some form of VT and that more than 450,000 people die from SCD episodes
each year. It is estimated that approximately 100,000 people survive SCD
episodes each year and that approximately 150,000 people are diagnosed each
year with sustained chronic VT. These individuals are considered to have a
very high risk of experiencing a SCD episode. Current treatments for VT
consist primarily of medication, ICDs and open heart surgery.
IMPLANTABLE CARDIOVERTER DEFIBRILLATORS. The Company believes that the most
effective treatment for individuals at risk of experiencing an SCD episode,
in light of currently available technology, is an ICD. The ICD and lead
market has grown from approximately $160 million in 1990 to approximately
$530 million in 1994, representing a compounded annual growth rate of
approximately 35%. By 1996, the worldwide ICD market is expected to reach
$830 million per year. The ICD and lead market is further expected to grow by
at least 20% to 25% per year to reach in excess of $1 billion per year by the
end of the decade. The Company believes this growth rate is attributable to a
number of factors, including (i) the expansion of the indications for use of
an ICD, (ii) less invasive surgical procedures for implanting the device as a
result of transvenous leads and pectoral implant capability, (iii) the poor
performance of drug therapy and (iv) the increasing survival rate for SCD
episodes.
An ICD is an electronic device that is permanently implanted in the patient,
typically in the patient's abdomen, and is connected to the heart with
defibrillation leads and sensing/pacing leads. The ICD is designed to monitor
the patient's heartbeat and, in the event of VT or VF, to deliver electric
pulses or shocks to the heart to terminate the VT or VF. Early ICD devices
delivered primarily high-energy shocks that were both painful to the patient,
provided more energy than needed to treat the VT or VF and had short life
spans, requiring replacement every two or three years. The limitations of
these early devices led to the development of more sophisticated devices
which are currently on the market today and which are characterized by (i)
tiered therapy (electrical shocks of varying intensity depending on the type
and severity of the arrhythmia), (ii) programmability (allows the physician
to customize therapy to the patient's condition both before and, more
importantly, after implant), (iii) improved transvenous lead systems (allows
implantation of the lead through a vein so that open chest surgery is not
required), (iv) electrogram storage capability (storage of intracardiac
EKGs), (v) a biphasic waveform (an electrical shock of alternating polarity),
and (vi) limited pectoral implant capability.
CATHETER ABLATION. Catheter ablation is an emerging therapeutic procedure
that, in many cases, offers the curative benefit of surgery but has the
advantages of being a minimally invasive procedure that exposes the patient
to a lower risk of complications or death, generally involves hospitalization
of only one or two days and is much less expensive than open chest surgery.
In catheter ablation procedures, a special electrophysiological mapping
catheter is guided through an artery or vein into the patient's heart and to
the site of the arrhythmogenic tissue (oxygen deprived heart tissue and areas
of scar tissue resulting from sustained VT which conduct electrical impulses
more slowly than normal tissue and increase the risk of occurrence of an
arrhythmia). The mapping catheter identifies the specific site(s) of
electrical malfunction. A catheter attached to an energy source is then used
to transmit energy from an external source into the arrhythmogenic tissue in
an amount sufficient to thermally damage tissue. The ablated tissue is
replaced with scar tissue, the pathway generating the conflicting electrical
impulse is thereby eliminated and the normal conduction of electrical
activity is restored.
The market for catheter ablation devices in the treatment of tachyarrhythmias
is much less defined, and in a much earlier stage of development, than the
ICD market. As a result of certain deficiencies in available
electrophysiologic mapping technology, the potential growth of the catheter
ablation market depends upon the condition to be treated. The use of
catheters utilizing RF energy, for the treatment of supraventricular
tachycardia ("SVT"), is growing quickly because atrial ablation sites are
easily accessible using current catheter technology and the RF energy is able
to penetrate the thinner tissue of the atria. The Company believes a more
significant market potential for laser catheter ablation devices, however, is
in the treatment of VT. The market for VT is supported by the same patient
population for whom drug therapy is not an acceptable treatment regimen.
While not well defined, the Company believes that the potential market for VT
catheter ablation could equal the market for ICD devices since (i) catheter
ablation offers a potential cure for certain forms of VT rather than simply
managing the symptoms of VT, and (ii) catheter ablation offers a minimally
invasive procedure similar to angioplasty.
PRODUCTS
IMPLANTABLE CARDIOVERTER DEFIBRILLATOR SYSTEM. The Company's Sentinel series
system consists of an ICD, a specialized computer programmer connected to a
programming wand (smart wand) via the serial port, an external defibrillation
test system and transvenous leads which connect the ICD to the patient's
heart.
The Sentinel series offers certain advantages over ICDs currently in human
clinical trials or market approved, including the following:
* REDUCED SIZE AND WEIGHT. The Company believes that its Sentinel ICD
products are the smallest ICDs under development (approximately 60 cubic
centimeters and weighing approximately 110 grams), thereby increasing
patient comfort and simplifying implantation procedures. The reduced size
allows for universal pectoral implant capability. Pectoral implantation, in
combination with transvenous leads, eliminates the need for abdominal
surgery and/or a thoracotomy (a complex and difficult surgical procedure
involving the opening of the chest wall), thereby reducing patient recovery
time and hospitalization costs.
* SMALL CAP BIPHASIC WAVEFORM. The Company believes that its proprietary
waveform is more efficient than competitive waveforms. The Sentinel series
delivers electrical shocks to the patient in a monophasic or biphasic
waveform. A monophasic waveform has only positive or negative polarity in
each pulse of electrical current. In contrast, a biphasic waveform reverses
the polarity of the electrical current during each pulse. The Company's
Small Cap(tm) biphasic waveform lowers defibrillation energy thresholds by
delivering energy at a higher average current and in a shorter time than
competing biphasic waveforms for ICDs currently market approved.
* HOT CAN ELECTRODE SYSTEM. The Company's Hot Can electrode system utilizes
the Sentinel housing as an efficient electrode which the physician can
program on and off. The ability to program the electrode on or off allows
for either an abdominal or pectoral implant, unlike certain other ICDs
currently in human clinical trials or market approved.
* DUAL BATTERY. The Sentinel series dual battery system increases the life of
the device by as much as 40% compared to current devices in the market. The
ICDs currently in the market are powered by a single battery, which
provides the energy for both continuously monitoring the heart's activity
and delivering the shock to cardiovert or defibrillate the heart. The
Company's proprietary dual battery system in the Sentinel series allows a
higher energy density battery to monitor continuously the heart's activity
while a second high power battery is available solely to deliver the shock
necessary to cardiovert or defibrillate the heart. The dual battery system
increases the potential lifetime of the device from five years, as is the
case with current generation devices, to up to seven years depending on the
number of shocks delivered.
* ENERGY STEERING DELIVERY SYSTEM. Energy Steering delivery system, a new
feature developed by the Company which is not offered by competitors,
allows the Sentinel series to increase energy efficiency by directing the
electrical current emitted by the ICD more uniformly throughout the heart,
thereby requiring less energy to defibrillate the heart. In conjunction
with the dual battery system, this feature will add to the longevity of the
device.
* SPECIAL ALGORITHMS. The Company's Sentinel 2000 uses a sophisticated
sensing system and a complex set of special algorithms to monitor
continuously the patient's heart rate and to discriminate more effectively
between VT, VF and SVT.
In addition to the features found in the Sentinel 2000, the Sentinel 2001
will have electrogram storage capabilities and is expected to have enhanced
VT, VF and SVT discrimination capabilities. The Company is also developing a
patient follow-up interrogator and fax transmitter for the Sentinel 2001. The
patient interrogator is a small handheld device that will be used by the
patient to check the ICD memory on demand. The interrogator will evaluate the
data from the ICD and give the patient a brief message as to recent device
activity. This information can then be relayed to the physician via telephone
or, with an optional fax transmitter, the data can be sent to the physician
in a more detailed form. See "Business -- Research and Development."
The Sentinel series system is designed for simplicity, efficiency, ease of
use and mobility. The programmer is capable of both transmitting to and
receiving data from the device through a smart wand. The defibrillation test
system is used in conjunction with the specialized computer/programmer at the
time of implant to emulate the ICD in order to test and appropriately program
the patient's defibrillation thresholds before actual implant.
The Company is also developing several models of transvenous leads for the
Sentinel series. One model, the AngeFlex dual transvenous lead system, is
currently undergoing preclinical testing and is expected to enter human
clinical trials in the second half of calendar 1995. The Company also expects
to begin testing the AngeFlex single pass transvenous lead system in the
second half of calendar 1995. Certain leads manufactured by competitors are
also under preclinical evaluation to demonstrate compatibility with the
Sentinel series.
In January 1995, the first fully functional model of the Sentinel 2000 was
successfully implanted in two human patients as part of a limited clinical
trial in Bonn, Germany. Follow-up evaluations of the two patients has
confirmed that the Sentinel 2000 is performing as anticipated. Additional
clinical testing of the device outside of the U.S. is currently expected to
allow the Company to generate limited clinical sales of the Sentinel 2000
system in calendar 1995.
The Company intends to file its IDE with the FDA in the second half of
calendar 1995. There can be no assurance, however, that the Company will be
able to meet this filing schedule. See "Risk Factors -- Governmental
Regulations." The Company will conduct human clinical trials of the Sentinel
2000 in the U.S. at such time as approval of its IDE is obtained, although
there is no assurance that the Company's IDE will be approved on a timely
basis or at all. See "Business -- Government Regulation."
The Company expects that the first human implant of the Sentinel 2001 outside
of the U.S. will be performed during mid-calendar 1996, as an expansion of
the Sentinel 2000 clinical testing. There can be no assurance, however, that
the Company will be able to meet this development schedule. See "Risk Factors
- -- Governmental Regulation" and " -- Need for Additional Financing."
CATHETER ABLATION SYSTEMS. The Company is developing two catheter-based
systems for nonsurgical, percutaneous elimination of various forms of cardiac
arrhythmias: an RF catheter ablation system and a laser catheter ablation
system. The Company is also developing a steerable guide/mapping catheter
that can be used in conjunction with both its RF and laser catheter ablation
systems.
RF Catheter Ablation System. The Company's RF catheter ablation system
consists of the Company's proprietary single use, disposable catheter coupled
to a standard RF generator. Additional support devices are supplied by the
hospital. The Company believes that its RF catheter is a major improvement
over the RF catheters currently in use. The effectiveness of these existing
catheters is hindered by blood coagulation on overheated catheter electrodes.
To address this problem, the Company's RF catheter uses a porous metal tip
electrode. During RF energy delivery, irrigation fluid flows through the
catheter and is forced through the pores in the tip. The flushing fluid
cools, purges and insulates the electrode from blood contact and thereby
minimizes blood coagulation on the catheter tip while maximizing lesion size.
A patent covering the Company's porous tip RF catheter ablation system has
recently been allowed.
The Company has completed preclinical studies with respect to its RF catheter
ablation system at the Enders Pediatric Research Center in Boston. These
studies demonstrated the viability of the cool tip RF catheter for the
treatment of SVT. The Company currently expects to file for an IDE in the
second half of calendar 1995.
Laser Catheter Ablation System. The Company's laser catheter ablation system
is targeted at the VT market. Laser energy appears to produce, with minimal
trauma, lesions of a size and depth most likely to achieve consistently
favorable results in the ventricle.
The Company has completed IDE feasibility studies that have demonstrated the
laser catheter's ability to desiccate heart tissue thermally, thereby
relieving symptoms of obstructive hypertrophic cardiomyopathy, and to
eliminate successfully a patient's VT in an open chest procedure. Currently,
the Company is conducting a feasibility study to demonstrate the ability of
the Company's laser catheter to eliminate VT through a percutaneous
procedure, and the Company has received an IDE permitting the Company to
conduct up to 15 human clinical procedures at two medical centers.
To date, the Company has treated 11 patients in the U.S. and Germany with its
laser catheter ablation system. Of the 11 patients treated, 7 were treated
with the Company's steerable guide/mapping catheter (see below) with 5
patients successfully treated.
Steerable Guide/Mapping Catheter. The Company has also developed a steerable
guide/mapping catheter that allows local mapping and accurate, flexible
positioning of the ablation catheter at the proper site. This steerable
guide/mapping catheter can be used with both the Company's RF and laser
catheter ablation systems.
The steerable guide/mapping catheter has been studied in preclinical trials
and has been approved by the FDA for use in connection with the Company's
laser catheter human clinical trials. Early indications are that this
steerable catheter will allow a physician to position the ablation catheter
more accurately within the ventricle.
Since December 1993, the Company has allocated the majority of its resources
to its Implantable Technology Division, which the Company views as a rapidly
growing existing market with significant near-term potential. Although the
catheter ablation market shows substantial promise with significant business
potential as an emerging alternative treatment for arrhythmias, the Company's
resources, even after completion of this offering, preclude it from
aggressively pursuing both the ICD and catheter ablation markets
simultaneously. As a result, the Company is actively pursuing a strategic
alliance to accelerate the continued development and commercialization of the
Company's catheter ablation products and technologies.
Late in calendar 1994, the Company also made the decision to focus its
interventional technology resources on the development of its RF catheter
ablation system. The market for atrial RF catheter ablation already exists
and therefore provides greater near-term potential, while the market for VT
ablation is still developing.
COMPETITION
IMPLANTABLE CARDIOVERTER DEFIBRILLATORS. Competition in the ICD market is
intense and most of the Company's primary competitors have substantially
greater financial, manufacturing, marketing, distribution and technical
resources than those of the Company. While antiarrhythmic drugs and cardiac
ablation therapies (like the Company's laser catheter ablation system)
compete in this same market, other manufacturers of ICD devices have claimed
a significant share of the market and are believed to be the Company's
primary competitors. Three companies (Medtronic, Inc. ("Medtronic"), Cardiac
Pacemakers, Inc. ("CPI"), a division of Guidant Corporation and Ventritex,
Inc. ("Ventritex")) currently have PMA-approved products in the ICD market
and control virtually all of that market today.
CPI was the first company to capitalize on the market potential of
implantable defibrillators. In August 1985, the FDA approved CPI's first
commercial defibrillator to be marketed in the U.S. CPI received PMA approval
for its Ventak PRxIII ICD in May 1995 and filed a PMA application in June
1995 to begin marketing a smaller version of the Ventak PRxIII called the
Mini. Medtronic received PMA approval for its PCD in February 1993 and for
its Jewel PCD 7219D, widely believed to be the most advanced FDA
market-approved ICD, in March 1995. Ventritex received PMA approval for its
Cadence ICD in April 1993 and filed a PMA application in June 1995 to begin
marketing a smaller version of the Cadence called the Cadet. Intermedics,
Inc. and Telectronics, Inc. also have ICD products of their own in clinical
trials.
The Company believes, based upon industry analyses and attendance by
management at industry meetings, that its first product, the Sentinel 2000 is
the smallest and one of the most technologically advanced ICDs currently
under development. Competitors of the Company, however, many of whom have
greater financial and technical resources than the Company, are developing
and conducting human clinical trials of ICDs with certain similar features.
See "Risk Factors -- Governmental Regulation."
Any product developed by the Company that gains regulatory approval will have
to compete for market acceptance and market share. See "Risk Factors --
Market Acceptance." The timing of market introduction of competitive products
could adversely affect the competitiveness of the Company's products.
Accordingly, the relative speed with which the Company can develop products,
complete clinical testing and the regulatory approval process and supply
commercial quantities of the product to the market are expected to be
important competitive factors. See "Risk Factors -- Limited Manufacturing or
Marketing Experience." The Company expects that competition will also be
based on the availability of defibrillation leads that can be implanted
through less invasive surgical procedures, ease of programmability, ability
to provide diagnostic capability, size and weight of the device, product
reliability, physician familiarity with the device, patent protection, sales
and marketing capability, third-party reimbursement policies, reputation and
price.
CATHETER ABLATION. Although catheter ablation offers a potential cure, rather
than a treatment, of VT, catheter ablation technologies must nonetheless
compete with drug therapy, open heart surgery and ICDs. While drug therapy
has in the past experienced limited effectiveness and adverse side effects,
new drugs currently under development may offer the potential of improved
treatment outcomes. Catheter ablation does not currently compete, to a
significant extent, with ICDs since catheter ablation is currently used as a
treatment for SVT rather than for VT. As ablation products evolve and
demonstrate efficacy in the treatment of VT, the Company believes that
ablation will increasingly compete with the ICD market.
Competition in the current catheter ablation market includes C.R. Bard, Inc.,
Cordis Corp. (which purchased Webster Laboratories, Inc.), Boston Scientific
Corporation, Medtronic, EP Technologies, Inc., and Electro Catheter
Corporation. These companies are primarily involved in the treatment of SVT
with RF energy-based catheters. RF catheters are not currently considered
effective treatments relating to the ventricle, however, certain of such
companies are experimenting with the use of RF energy, as well as other forms
of energy, in the ventricle.
MANUFACTURING
Pursuant to the OEM Agreement, the Company has the right to manufacture the
products it sells to Pacesetter so long as the Company fulfills all product
quantity, quality and specification requirements. If the Company fails to
fulfill these requirements, Pacesetter may elect to manufacture the Company's
first commercially available defibrillator and laser catheter products and
pay the Company an agreed upon royalty. Even if the Company has fulfilled all
product quantity, quality and specification requirements, Pacesetter may
elect to manufacture up to 50% of Pacesetter's aggregate product requirements
but will be required to pay to the Company a payment that approximates the
net margin on the products had the Company manufactured the products and sold
them to Pacesetter.
In light of the OEM Agreement and in recognition of the late stage of
development of the Company's Sentinel 2000 ICD, the Company has recently
devoted substantial time and resources to its manufacturing capability. In
the first half of calendar 1995, the Company developed a dedicated
manufacturing organization with the capability to satisfy its product
requirements for the next 18 to 24 months. In October 1994, the Company hired
a Vice President of Operations to lead the development of the Company's
manufacturing capability. This individual has extensive medical device
manufacturing experience, including direct experience in implantable
defibrillator manufacturing. During the spring of 1995, the Vice President of
Operations sought, among other things, to define the Company's manufacturing
strategy and organizational and facility needs.
The Company's manufacturing strategy is to use outside component suppliers
and process vendors whenever possible. Use of outside sources minimizes
facility and equipment investment at a time when the Company is producing
product at low volumes. Key high quality component suppliers have been
identified for all components in the Sentinel 2000. The Company has verified
that the component suppliers have high volume capabilities which can meet an
increasing product demand. The key process vendors identified and utilized by
the Company provide laser welding, electronic assembly, sterilization, and
other process requirements. In addition, the Company has contracted with a
manufacturer in Scotland that will be responsible for final assembly,
testing, packaging, sterilization and labeling of its ICDs and associated
external products for use in the Company's international clinical trials.
The Company has defined its organizational needs for all manufacturing
functions and has hired experienced personnel to perform these functions. As
of June 30, 1995, the manufacturing organization employed 22 people with the
required specialized skills in engineering, production, testing, materials
management and quality assurance. The Company is currently in the process of
hiring and training production operators to meet expected monthly production
demand through the next 18 to 24 months.
The Company has defined its manufacturing facility needs and capital
equipment requirements. In the spring of 1995, the Company completed the
renovation of its production facility, resulting in expansion and definition
of specific locations for material receiving, electronic board assembly, test
and inspection, and final assembly operations. The current facility and
organization is estimated to be adequate to satisfy the Company's implantable
defibrillator product needs for the next 18 to 24 months.
The Company is currently producing implantable defibrillator products to meet
preclinical and clinical requirements. Engineering, prototype, and pilot
builds have been completed and the Company has documented and validated its
key ICD manufacturing processes. In addition, the Company intends to receive
ISO 9002 certification by the end of calendar year 1995. This certification,
which relates to manufacturing quality standards, in conjunction with the
Company's clinical trials and testing data, will be used in the Company's
application for CE mark approval.
The Company's efforts to define and establish its manufacturing strategy and
capability have been predominantly focused on its ICD products. The Company
currently has limited manufacturing capability to produce the products needed
to support its catheter ablation clinical studies. Currently, these needs are
being defined, and a plan is under development regarding how the Company will
provide production capability to the Company's Interventional Technology
Division. It is anticipated that the Company can generate this capability
within the constraints of the current facility and organization, but failure
to provide manufacturing capability for the catheter ablation products could
cause a delay in the catheter ablation program.
Manufacturing ability is a key element that the Company must have in place to
ensure success in its ICD and catheter ablation clinical trials and the
expanded laser catheter clinical trials. Failure to produce products in a
timely manner could cause a delay in the market release of such products, and
could result in the failure of the Company to meet Pacesetter's product
requirements, resulting in a royalty from Pacesetter that is lower than the
transfer price the Company would have received. See "Risk Factors -- Limited
Manufacturing or Marketing Experience."
SALES AND MARKETING
The Company intends to utilize a dual approach to marketing and distribution
of its ICD and catheter ablation products on a worldwide basis.
Under the first approach, the Company will directly market and sell its
products under its own label through its own sales force or through
independent sales representatives or distributors, provided that under the
OEM Agreement with Pacesetter such independent sales representatives or
distributors may not also sell ICDs or laser catheter products that are
manufactured by other companies. In addition, the Company may not market and
sell products under its own label until it has satisfied all of Pacesetter's
quantity requirements for such products. On May 26, 1995, the Company entered
into a distribution agreement with C. Nicolai GmbH & Co. KG to market and
distribute the Company's Sentinel products in Germany. The Company is
currently negotiating with distributors in Italy and the United Kingdom for
such markets, and anticipates initiating discussions with other independent
sales representatives or distributors for other countries.
To coordinate and effectuate the Company's sales and marketing efforts, the
Company intends to hire a Vice President of Sales and Marketing in the second
half of calendar 1995. This person will have extensive experience in
marketing medical devices as well as direct defibrillator product experience.
The Vice President of Sales and Marketing will be responsible for developing
and implementing a strategic plan for worldwide sales and marketing of the
Company's products.
Under the second approach, the Company will sell its products through
Pacesetter under the terms and conditions of the OEM Agreement. Pursuant to
this agreement, Pacesetter was granted worldwide marketing and distribution
rights, on a co-exclusive basis with the Company, to all defibrillator and
laser catheter products that are first commercially marketed within two years
of the first commercial sales of defibrillator and laser catheter products,
as the case may be, incorporating certain features. With respect to
defibrillator products, it is anticipated that commercial marketing of the
Sentinel 2001 will begin this two-year period. This co-exclusive marketing
period will continue for at least seven years, and thereafter will be
contingent upon certain defined minimum product purchases by Pacesetter and
its affiliates. Pacesetter's marketing rights will continue on a
non-exclusive basis in the event that the exclusive period terminates. The
Company believes that the worldwide OEM marketing capability of Pacesetter
will be of significant value in establishing market presence for the
Company's products.
RESEARCH AND DEVELOPMENT
Research and development expenditures for continuing operations were
$5,158,738, $4,485,818 and $2,996,845 in fiscal 1994, 1993 and 1992,
respectively. Research and development expenditures for the nine months ended
April 30, 1995 were $5,268,028. The Company's research and development is
primarily directed at the development of its existing products and the
clinical trials relating to such products. Approximately 75%, 89% and 70% of
the Company research and development expenditures in fiscal 1994, 1993 and
1992, respectively, were directly attributable to the Implantable Technology
Division, most of which was spent on the Sentinel series. Approximately 86%
of the Company's research and development expenditures in the nine months
ended April 30, 1995 was directly attributable to the Sentinel series.
In addition to the Sentinel 2000, the Company's ICD research and development
expenditures relate to the development of the Sentinel 2001 and the Sentinel
2010. In addition to the features found in the Sentinel 2000, the Sentinel
2001 will have electrogram storage capabilities, enhanced VT, VF and SVT
discrimination capability, a patient interrogator, a patient data fax
transmitter and telephonic interrogation capabilities. The Sentinel 2010 is
expected to possess the following additional features: (i) smaller size and
weight; (ii) lower defibrillation energy threshold waveform; (iii) pulse
pretreatment threshold lowering therapy; (iv) new anti-tachyarrhythmia pacing
therapy; (v) dual chamber pacing; and (vi) atrial defibrillation capability.
Patent applications have been filed or are in process for a number of the
features of the Company's Sentinel 2001 and 2010.
THIRD PARTY REIMBURSEMENT
The Company's ability to commercialize its products successfully in the
United States will depend in part on the extent to which reimbursement for
the cost of such products and related treatment will be available from
government health administration authorities (such as HCFA which determines
Medicare reimbursement levels), private health insurers, health maintenance
organizations and other third-party payors. Payors are increasingly
challenging the prices of medical products and services. Payors may deny
reimbursement for procedures which they deem experimental or for devices that
are used for other than FDA-approved indications. Currently, HCFA is not
allowing Medicare reimbursement for products and related procedures that have
not received FDA approval and certain private third-party payors have also
begun denying such reimbursement. Although there is legislation currently
pending in Congress that would address certain of these HCFA reimbursement
issues, there can be no assurance that such legislation will be passed. Even
if the Company obtains a PMA for the laser catheter ablation system, some
payors may deny coverage until the device and related procedures become
generally accepted by the medical profession. The inability of hospitals and
other providers to obtain reimbursement from third-party payors for the
Company's products would have a material adverse effect on the Company's
business, financial condition and results of operations. The Company expects
that there will be continued pressure on cost-containment throughout the
United States health care system. This pressure could adversely affect the
amount the Company is able to charge for its products. See "Risk Factors --
Dependence on Third Party Reimbursement; Uncertainty of Health Care Reform."
Fees for physicians' and surgeons' services are paid by Medicare and certain
other payors on the basis of what they have historically charged for their
services. Beginning in 1992, Medicare payments to physicians and surgeons
began shifting, over the course of a five-year period, to a fee scale based
on the relative value of the services rendered. This fee scale may reduce the
amount of fees paid to physicians who perform defibrillator implants. Other
payors may adopt similar payment methods for surgical services. At this time,
the Company is unable to determine whether any such limitations on
physicians' fees could adversely affect the Company's business.
GOVERNMENT REGULATION
The Company's products are all classified as medical devices by the Food,
Drug and Cosmetic Act (the "FDC Act"), and as such, are subject to regulation
and supervision by the FDA, and to regulation by foreign governmental
authorities. As such, these medical devices are subject to ongoing controls
and regulations, including registration by the manufacturer, compliance with
established manufacturing practices, device tracking, record-keeping,
advertising, packaging and compliance to standards. Comparable agencies in
certain states and foreign countries also regulate the Company's activities.
The Company's products are subject to recall at any time by the FDA or the
Company if it appears that use of the products could result in unwarranted
health risks.
All medical devices intended for human use that are to be marketed in the
United States are placed into one of three regulatory classifications,
depending on the degree of regulatory control to which the device will be
subject. Class III devices, which include life support and life sustaining
devices or implants, are subject to the most stringent controls and require
FDA approval prior to marketing. The Company's ICD products and its catheter
ablation systems are classified as Class III devices.
FDA requirements for both the Company's ICD and catheter ablation products
involve obtaining formal FDA premarket approval. The first stage of obtaining
formal FDA premarket approval is submission of an application for an
investigational device exemption ("IDE"). The IDE permits clinical
evaluations of products on human subjects under controlled experimental
conditions by designated qualified medical institutions. To obtain an IDE,
approval of the investigational plan for the applicable system is required
from the institutional review board within each participating medical
institution as well as from the FDA.
The second stage of formal FDA premarket approval is the Pre-Market Approval
("PMA") application. The PMA, which is submitted after clinical evaluations
are completed under the IDE, is a comprehensive report of all data and
information obtained by the applicant throughout the product's development
and testing. The FDA will grant a PMA if it finds that the safety and
effectiveness of the product have been sufficiently demonstrated and that the
product complies with all applicable regulations and standards. The FDA may
require further clinical evaluation of the product, terminate the clinical
trials, grant premarket approval but restrict the number of devices
distributed, or require additional patient follow-up for an indefinite period
of time. There can be no assurance that the Company will be successful in
obtaining IDEs or expanded IDEs for its products or that the company will be
successful in obtaining a PMA for such products, which is necessary to market
Company's products commercially in the U.S., in a timely manner, or at all.
Delays in obtaining marketing approvals and clearances in the U.S. could have
significant adverse consequences on the Company and its operations.
The Company is required to and does keep detailed records relating both to
its maintenance of good manufacturing practices and to defective products and
complaints about its products. The FDA has authority to inspect the Company's
facilities to assure compliance with the FDC Act and regulations thereunder.
Many foreign countries have similar regulatory requirements concerning the
marketing of new medical devices. In January 1995, the Active Implantable
Medical Device Directive ("AIMD") was fully implemented in the EC. Prior to
the enactment of the AIMD, the foreign regulatory requirements varied widely
from country to country. Under the AIMD, the EC regulatory requirements are
expected to be more consistent. The time required to obtain approvals
required by foreign countries may be longer or shorter than that required for
FDA approval and requirements for licensing may differ from FDA requirements.
The Company is also subject to certain FDA regulations governing
manufacturing practices, packaging and labelling. Further, the FDA regulates
the export of medical devices that have not been approved or cleared for
marketing in the United States. Prior to commencement of sales outside the
U.S., the Company will be required either to obtain export approval from the
FDA or to establish a manufacturing capacity or expand its contract
manufacturing capabilities abroad. See "Business -- Manufacturing."
The Company has initiated limited human clinical trials of the Sentinel 2000
in Germany. Initial regulatory documents and requests to conduct human
clinical trials in Italy were filed in the second half of calendar 1994 and
in the United Kingdom in the first half of calendar 1995. The Company is
currently scheduled to complete these international documents and file for
expanded clinical trials in Germany during the second half of calendar 1995.
Under the AIMD, the Company is subject to "prior notice" of intent to conduct
clinical trials in the EC. This process, similar to the FDA IDE process,
requires regulatory documents and test information to be submitted to the
governmental agency, known as the Competent Authority, of each country in
which the Company intends to conduct clinical trials. The Company is in the
process of complying with these regulatory requirements with the necessary
Competent Authorities. Upon completion of these clinical trial requirements,
the Company will file for a CE mark, approval of which is required before the
Company can commence commercial marketing of its products in the EC. There
can be no assurance, however, that the Company will be allowed to conduct
additional human clinical trials of the Sentinel 2000 in Europe or that the
Company will obtain CE mark approval, on a timely basis or at all. The
Company has contracted with a manufacturer in Scotland to perform final
assembly of its products for use in clinical trials in Europe, and this
facility has received ISO 9002 certification.
INTELLECTUAL PROPERTY
The Company believes strongly in protecting its intellectual property and
intends to undertake efforts to obtain patents, when available, in connection
with its research and product development programs. As of June 30, 1995, the
Company has 43 U.S. issued patents and 16 U.S. patents which have been
allowed but have not yet issued, relating to its research and development
products. These patents cover various features and technologies. With payment
of maintenance fees, the Company's patents will begin to expire in the year
2008. As of June 30, 1995, the Company also had 34 U.S. patent applications
pending, 17 foreign patent applications pending, and 13 U.S. patent
applications in preparation with respect to its research and development
products. There can be no assurance, however, that any patents held by the
Company will be valid or otherwise of value to the Company or that any patent
applied for will be granted.
There has been substantial litigation regarding patent and other intellectual
property rights in the medical device industry, particularly in the ICD
market. To date, many patent and intellectual property disputes in the
medical device area have been settled through licensing or similar
arrangements. In contemplation of such an environment, the Company has
developed a strategy of expanding its patent portfolio in those areas where
the Company believes litigation is most likely to develop in the ICD market,
and where the Company has proven expertise, including defibrillation
waveforms, electrode systems, additional therapies, reduced size and
increased device lifetime. While no assurance can be given that the Company's
strategy will be effective or that the Company's patents in these areas are
valid or will be of value in potential negotiations with third parties, the
Company continues to pursue patents in those areas which it has identified as
critical to ICD development. See "Risk Factors -- Intellectual Property
Protection" and " -- Pacesetter Relationship."
The Company also relies on trade secrets and proprietary know-how. The
Company typically requires its key technical employees and consultants to
agree in writing to keep its proprietary information confidential and, within
certain limitations, to assign all inventions relating to the Company's
business to the Company.
The Company acquired the technology for its continuous-wave laser catheter
system from Dr. Jeffrey Isner and Dr. Richard Clark in 1989. Pursuant to the
assignment agreement, the Company agreed to pay Dr. Isner and Dr. Clark a
royalty of 5% on sales of patented products incorporating this technology for
the life of any patent on this technology. Additionally, in exchange for Dr.
Svenson's efforts in connection with the laser catheter ablation system, the
Company has agreed to pay Dr. Svenson and Carolinas Medical Center a royalty,
when certain conditions are met, of 2% and 3%, respectively, on all paid
sales of the Company's laser catheter ablation products.
Pursuant to the License Agreement, the Company and Pacesetter have agreed to
cross license certain of their patents and patent applications. Under this
agreement, Pacesetter grants the Company certain non-exclusive rights to
certain patents and patent applications relating to Pacesetter's
defibrillator products as well as to manufacturing improvements made by
Pacesetter with respect to the Company's defibrillator products. With respect
to the Company's defibrillator products, the License Agreement divides the
Company's patents and patent applications into two categories: a first
category for which the License Agreement, on its face, grants certain
exclusive rights, and a second category for which the License Agreement
grants certain non-exclusive rights. The License Agreement also grants
certain non-exclusive rights to the Company's laser catheter patents and
patent applications. Since the time of the License Agreement, the Company has
prepared and filed new patent applications relating to future defibrillator
products of the Company which are not within the scope of the License
Agreement, and the Company intends to continue to prepare and file such
additional patent applications in the future.
The License Agreement, on its face, also grants Pacesetter a conditional
right to sublicense the first category of patents to as many as three
separate parties, provided that the Company receives the same patent rights
from the sublicensee as Pacesetter receives (or that Pacesetter uses its best
efforts to secure such similar rights for the Company if, in the particular
sublicensing transaction, Pacesetter also licenses 20 or more of its own
patents or patent applications). The License Agreement provides that the
Company always has the right to sublicense its patents and patent
applications to third parties to avoid or settle a pending patent
infringement lawsuit, provided that during the purported exclusive period the
Company obtains for Pacesetter as part of any such settlement the same rights
and benefits received by the Company with respect to any patents that are
required or useful to Pacesetter in manufacturing and marketing the Company's
products.
EMPLOYEES
As of June 30, 1995, the Company had 87 full-time employees, including 8
engaged in administration, 22 in manufacturing and 57 in research and
development. There are no unions representing the Company's employees. The
Company believes that its relations with its employees are good. There are no
pending or threatened labor or material employment disputes or work
interruptions.
FACILITIES
The Company leases approximately 25,000 square feet of office and
manufacturing space in the Plymouth Business Center I Complex, located in
Plymouth, Minnesota. This space serves as the Company's corporate
headquarters, as well as the research and development and manufacturing
facilities for the ICD and catheter ablation systems programs. Rent payments
under the lease are approximately $229,000 per year, including shared real
estate taxes and operating expenses. The current lease agreement extends
through December 31, 1997. The Company's current space may not be adequate to
satisfy the needs of the Company through the end of the lease. The Company
believes, however, it will be able to secure additional or alternative space
at a reasonable price when needed.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages as of June
30, 1995 are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
<S> <C> <C>
Whitney A. McFarlin 54 Chairman, Chief Executive Officer and President
David L. Christofferson 58 Vice President, Chief Financial Officer and Secretary
Robert S. Garin 52 Vice President, Human Resources
Mark W. Kroll, Ph.D. 42 Vice President, Research and Product Planning
Jennifer M. Marrone 39 Vice President, Regulatory and Clinical Affairs
Gary Payment 52 Vice President, Operations
William J. Rissmann 45 Vice President, Engineering
Arnold A. Angeloni 53 Director
Dennis E. Evans 56 Director
Sally E. Howard 59 Director
Lyle D. Joyce, M.D., Ph.D. 47 Director
Joseph C. Kiser, M.D. 62 Director
Glen Taylor 54 Director
</TABLE>
WHITNEY A. MCFARLIN has been President, Chief Executive Officer and Chairman
of the Board of the Company since September 15, 1993. From June 1990 to
September 1993, Mr. McFarlin was President, Chief Executive Officer, Chairman
of the Board and a founder of Clarus Medical Systems, Inc., a private medical
device company manufacturing products for the orthopedic surgical market
("Clarus"). Prior to founding Clarus, Mr. McFarlin was President and Chief
Executive Officer of Everest & Jennings International, Ltd., a manufacturer
of durable medical equipment from June 1985 to May 1990. From December 1977
to May 1985, Mr. McFarlin was an officer of Medtronic, a leading pacemaker
manufacturer, most recently as Executive Vice President where he was
responsible for the U.S. pacing business. He serves on the Board of Directors
of several corporations, including Clarus, Zero Corp. and PSICOR, Inc.
DAVID L. CHRISTOFFERSON joined the Company as Vice President and Chief
Financial Officer in January 1991. From April 1988 to December 1990, he was a
Division Manager for Excel Office Products ("Excel"). From 1987 through 1989,
he was Chief Financial Officer and Chairman of Medical Wellness Technologies,
Inc., a distributor of pain control devices. In 1986, Mr. Christofferson
founded Excel, which was acquired in 1988 by General Office Products Company.
Prior to that, Mr. Christofferson was employed by Medtronic for over 13 years
in various management positions, most recently as Director of Finance and
Administration for the Drug Administration Devices and Systems Division.
ROBERT S. GARIN joined the Company as Vice President of Human Resources in
January 1995. Prior to joining the Company, Mr. Garin served as a management
consultant to the Company. From 1985 through 1993, Mr. Garin was a partner in
Garin and Associates, a management and human resources consulting firm. From
1971 to 1985, Mr. Garin was employed by Medtronic in various positions
including Director of Lead Operations and Director of Human Resources for
Latin American Manufacturing and Sales Operations. From 1973 to 1981, Mr.
Garin served as Director of Human Resources for Micro-Rel, Inc., a medical
semi-conductor subsidiary of Medtronic.
MARK W. KROLL, PH.D. joined the Company in 1991 as Director of Research and
Development and is now Vice President of Research and Product Planning. Prior
to joining the Company, Dr. Kroll was Vice President of Research and
Development of Vital Heart Systems, formerly called Cherne Medical, Inc., a
cardiovascular instrumentation company. He has served as Director of Research
at several medical device companies in the Twin Cities during his 21-year
career. He has numerous patents to his credit and has authored a number of
medical papers, several of which have been published in peer-reviewed
journals. He has also made a significant number of presentations at medical
conferences and has authored chapters in or has served as editor of several
medical textbooks.
JENNIFER M. MARRONE joined the Company in April 1995, as Vice President of
Regulatory and Clinical Affairs. She has more than 16 years of experience in
the medical device industry. Most recently, Ms. Marrone was Director of
Regulatory, Clinical and Quality Assurance/Compliance at Empi, Inc., a
rehabilitative and urologic products company. From 1979 to 1993, Ms. Marrone
served in a number of capacities of increasing responsibility at Medtronic
including Manager of Regulatory Affairs for the bradyarrhythmia and
tachyarrhythmia products where she prepared and managed Medtronic's PMA
applications for its tachyarrhythmia management devices and transvenous
leads. She joined Medtronic in 1979 as Study Director in Preclinical
Research.
GARY PAYMENT joined the Company in 1994 as Vice President of Operations.
During his 23 years of experience in the medical device industry, Mr. Payment
has held various positions at CPI, most recently as Director of
Manufacturing. Prior to joining CPI in 1985, Mr. Payment held several
positions at Medtronic, including Director of Operations, Manufacturing
Program Manager and Director of Quality Assurance.
WILLIAM J. RISSMANN joined the Company in 1994 as Vice President of
Engineering. He has more than 18 years of experience in the medical device
industry. Most recently, Rissmann was Director of Research and Development in
the Advanced Tachy Products division at CPI. While at CPI, he held several
positions including Director of Quality Control and Test Engineering and
Manager of Product Planning and Administration. From 1983 to 1985, Mr.
Rissmann was an engineering project manager at St. Jude Medical, Inc., where
he was responsible for microprocessor-based medical devices, and from 1980 to
1983 Mr. Rissmann held several engineering management positions at Medtronic.
ARNOLD A. ANGELONI is President of the Business Systems Division of Deluxe
Corporation, a provider of check products and services to the financial
payments industry. Mr. Angeloni is responsible for the check printing and
Business Systems operations. Mr. Angeloni has been employed by Deluxe
Corporation in various administrative, marketing, and operations positions
since 1961.
DENNIS E. EVANS has been President and Chief Executive Officer of Hanrow
Financial, a merchant banking partnership since February 1989. He serves on
the Board of Directors of Minnesota Power and Astrocom Corporation.
SALLY E. HOWARD has been Director of Health Sciences Public Relations at the
University of Minnesota for more than five years. In addition, Ms. Howard
serves on the board of directors of several private corporations and is an
active civic leader, having served on the Minneapolis City Council.
LYLE D. JOYCE, M.D., PH.D. has been a cardiothoracic surgeon with the
Minneapolis Heart Institute for more than five years, and is currently the
President of Minnesota Thoracic Group, P.A.
JOSEPH C. KISER, M.D. is a cardiothoracic surgeon and a founder of the
Minneapolis Heart Institute and the Minneapolis Heart Institute Foundation.
Dr. Kiser is also a founder of the Minnesota Thoracic Group, P.A. He has
practiced cardiothoracic surgery at Abbott Northwestern Hospital as well as
other Twin Cities hospitals for more than 20 years.
GLEN TAYLOR has been the Chief Executive Officer and Chairman of the Board of
Taylor Corporation for more than five years. Taylor Corporation employs more
than 6,800 individuals throughout 41 operating divisions in 11 states and
three Canadian provinces. Mr. Taylor also is the owner of Taylor Bancshares,
which includes five banks in Minnesota, and the Minnesota Timberwolves, a
National Basketball Association franchise. From 1980 to 1990, Mr. Taylor
served as a Minnesota State Senator.
MEDICAL ADVISORS
In addition to the Company's Board of Directors and full-time employees, the
Company maintains a number of Medical Advisors who possess knowledge and
experience in technical and medical areas related to the Company's products.
The Medical Advisors consult with management of the Company concerning the
products being developed and their use by health professionals. The following
is a brief summary of the accomplishments of the Medical Advisors.
DAVID G. BENDITT, M.D. has served as a Medical Advisor to the Company since
1992. Dr. Benditt is a Professor of Medicine and Director of the Cardiac
Electrophysiology Laboratory and Arrhythmia Service at the University of
Minnesota Medical School in Minneapolis, Minnesota.
JEFFREY M. ISNER, M.D. has served as a Medical Advisor to the Company since
1989. Dr. Isner is the Chief of Cardiovascular Research at St. Elizabeth's
Hospital in Boston, Massachusetts and Professor of Medicine and Pathology at
Tufts University School of Medicine. In the Company's first IDE study, Dr.
Isner successfully demonstrated the laser catheter's ability to thermally
destroy heart tissue and relieve symptoms of obstructive hypertrophic
cardiomyopathy ("OHCM"), a disease which causes thickening on the inside of
the heart wall and therefore reduces blood flow from the heart to the rest of
the body. He is one of the inventors of the first generation laser catheter
to treat OHCM.
ROBERT H. SVENSON, M.D. has served as a Medical Advisor to the Company since
1991. Dr. Svenson is currently the Director of Laser and Applied Technologies
Laboratory at the Carolinas Medical Center in Charlotte, North Carolina and
is Adjunct Professor of Medicine at the University of North Carolina. He is
considered a pioneer in the use of laser energy for JVT elimination in open
heart procedures. Dr. Svenson has performed percutaneous laser catheter
procedures in the Company's IDE studies.
LYLE D. JOYCE, M.D., PH.D. has served as a Medical Advisor to the Company
since 1988. Dr. Joyce, a director of the Company, is a cardiothoracic surgeon
with the Minneapolis Heart Institute in Minneapolis, Minnesota and is
currently the President of the Minnesota Thoracic Group, P.A. Dr. Joyce was
an assistant surgeon on the team which implanted the artificial heart in
Barney Clark. Subsequently, he was the first surgeon to implant the Jarvik
VII artificial heart in the Twin Cities area. Among his many awards, he has
received the Arnold Award for Excellence in Research from the Baylor College
of Medicine.
JOSEPH C. KISER, M.D. has served as a Medical Advisor to the Company since
1988. Dr. Kiser, a director of the Company, is a cardiothoracic surgeon and a
founder of the Minneapolis Heart Institute and the Minneapolis Heart
Institute Foundation. Dr. Kiser has been active in the medical community
having co-founded an international children's charity dedicated to treating
children with heart disease around the world.
PATRICK J. TCHOU, M.D. has served as a Medical Advisor to the Company since
1991. Dr. Tchou is the Director of the Cardiac Electrophysiology Laboratory
at the Cleveland Clinic in Cleveland, Ohio. He is a prolific author and
researcher in many topics of electrophysiology.
FABIO LEONELLI, M.D. has served as a Medical Advisor to the Company since
1992. Dr. Leonelli is Assistant Professor of Medicine at the University of
Kentucky, Lexington, Kentucky. Dr. Leonelli is a clinical electrophysiologist
and an active researcher in the impact of waveforms and electrodes on
defibrillation.
MARK A. WOOD, M.D. has served as a Medical Advisor to the Company since 1993.
Dr. Wood is Assistant Professor of Internal Medicine at the Medical College
of Virginia in Richmond, Virginia and the Co-Director of Cardiac
Electrophysiology Laboratories at the Medical College of Virginia and the
McGuire Veterans Administration Medical Center in Richmond, Virginia. He is a
well known author on the topic of clinical use of implantable defibrillators.
ROBERT G. HAUSER, M.D. has served as a Medical Advisor to the Company since
July of 1994. In addition, Dr. Hauser serves as a special advisor to the
Chairman and Chief Executive Officer of the Company. Dr. Hauser is the
President of, and a cardiologist with, the Minneapolis Heart Institute. He
was a founding member of the North American Society of Pacing and
Electrophysiology and served as president in 1983. He was Editor-in-Chief of
Clinical Progress in Electrophysiology and Pacing for five years and has
served on the editorial board of Pacing and Clinical Electrophysiology
publication. Dr. Hauser was Chief Executive Officer of CPI from 1988 to 1992.
The number of Medical Advisors may be expanded in the future. The duties of
the Medical Advisors are based upon the specific requests of the Company and
at the convenience of the individuals. The Medical Advisors may limit time
spent on such Company matters as they desire and receive fees determined on
an hourly, monthly or other basis as may be agreed in writing for specific
tasks undertaken at the request of the Company.
PRINCIPAL SHAREHOLDERS AND BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial ownership
of the Common Stock of the Company as of June 28, 1995, unless otherwise
noted, (a) by each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) by each
director and current executive officer, and (c) by all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)(2)
PERCENT
NAME AMOUNT OF CLASS
<S> <C> <C>
Pacesetter, Inc. 1,125,000 (3) 6.1%
15900 Valley View Court
P.O. Box 9221
Sylmar, California 91392
Whitney A. McFarlin 208,110 (4) 1.2%
David L. Christofferson 147,547 (5) *
Robert S. Garin 2,000 *
Mark W. Kroll, Ph.D. 67,156 (6) *
Jennifer M. Marrone 0 *
Gary Payment 2,800 *
William J. Rissman 0 *
Arnold A. Angeloni 67,096 (7) *
Dennis E. Evans 735,129 (8)(9) 4.2%
Sally E. Howard 48,796 (7) *
Lyle D. Joyce, M.D., Ph.D. 275,179 (10) 1.6%
Joseph C. Kiser, M.D. 390,030 (11) 2.2%
Glen Taylor 710,785 (12) 4.1%
All current directors and executive officers as a group (13
persons) 2,654,628 (13) 14.6%
</TABLE>
* Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person or member of a group to acquire them within 60 days are
treated as outstanding only when determining the amount and percent owned by
such person or group.
(2) Unless otherwise noted, all of the shares shown are held by individuals
or entities possessing sole voting and investment power with respect to such
shares.
(3) As set forth in a Schedule 13D filed with the Securities and Exchange
Commission on October 11, 1994, this amount includes (i) 875,000 shares of
Common Stock which may be acquired within 60 days upon the conversion of
Preferred Stock, and (ii) 250,000 shares of Common Stock which may be
acquired within 60 days upon the conversion of a $1,500,000 convertible
subordinated debenture.
(4) Includes 205,156 shares which may be acquired within 60 days upon the
exercise of stock options.
(5) Includes 147,247 shares which may be acquired within 60 days upon the
exercise of stock options.
(6) Includes 15,578 shares which may be acquired within 60 days upon the
exercise of stock options.
(7) Includes 18,500 shares which may be acquired within 60 days upon the
exercise of stock options.
(8) Includes 30,000 shares owned by Hanrow Capital Fund and 580,000 shares
owned by Hanrow Capital Fund III. Hanrow Financial is the General Partner of
Hanrow Capital Fund and Hanrow Capital Fund III, and Mr. Evans, a Director of
the Company, is the President and Chief Executive Officer of Hanrow
Financial.
(9) Includes 18,500 shares which may be acquired within 60 days upon the
exercise of stock options granted to Dennis E. Evans, a Director of the
Company and the President and Chief Executive Officer of Hanrow Financial.
Also includes 83,333 shares which may be acquired within 60 days by Hanrow
Finance, Inc., an affiliate of Mr. Evans, upon the exercise of warrants.
(10) Includes 57,333 shares which may be acquired within 60 days upon the
exercise of warrants and stock options.
(11) Includes 78,333 shares which may be acquired within 60 days upon the
exercise of warrants and stock options.
(12) Includes 202,500 shares which may be acquired within 60 days upon the
exercise of warrants and stock options.
(13) Includes 844,980 shares which may be acquired within 60 days upon the
exercise of warrants and stock options.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 35,000,000 shares of
Common Stock, par value $.01 per share, 1,475,000 shares of Preferred Stock,
Series A, par value $.01 per share (the "Series A Preferred"), and 1,525,000
shares of Preferred Stock, par value $.01 per share, the designation, rights
and preferences of which have not been determined (the "Undesignated
Preferred").
COMMON STOCK
As of June 28, 1995, there were 17,302,526 shares of Common Stock issued and
outstanding and options and warrants outstanding to purchase a total of
6,428,587 shares of Common Stock. All outstanding shares of Common Stock are
fully paid and nonassessable.
The holders of the Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of stockholders. Subject to the
preferential rights of the holders of the Undesignated Stock with respect to
dividends, holders of the Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. Holders of the Common Stock have no preemptive rights and
no right to convert their Common Stock into any other securities.
Promptly upon completion of this offering, the Company intends to file an
application with the National Association of Securities Dealers for the
quotation of the Company's Common Stock on the Nasdaq National Market System
(the "NMS"). If the Company's Common Stock is not accepted for quotation on
the NMS, it will continue to be quoted on the Nasdaq SmallCap Market System.
SERIES A PREFERRED
As of June 28, 1995, there were 875,000 shares of Series A Preferred issued
and outstanding. Series A Preferred, at the option of the holder, may be
converted into Common Stock at the rate of one share of Common Stock for each
share of Series A Preferred, subject to certain antidilution adjustments. The
holders of the Series A Preferred are entitled to vote on any matter
submitted to a vote of the holders of the Common Stock of the Company as if
the Series A Preferred had been converted into Common Stock. All shares of
Series A Preferred are entitled to a liquidation preference in cash equal to
$4.00 per share before the payment, distribution or setting apart for payment
or distribution of any amount for the holders of the Common Stock. In
addition, as long as shares of Series A Preferred are outstanding, dividends
may not be declared on the Common Stock of the Company, and, in the event
that dividends are declared on the Common Stock of the Company, holders of
the Series A Preferred shall be entitled to receive a comparable dividend on
the basis of the number of shares of Common Stock into which such holder's
shares of Series A Preferred are then convertible.
UNDESIGNATED PREFERRED
Under Minnesota law, no action by the Company's shareholders is necessary,
and only action by the Board of Directors is required, to authorize the
issuance of any of the undesignated shares of Undesignated Preferred. Subject
to certain limitations, the Board of Directors is empowered to establish, and
to designate the name of each class or series of the shares of Undesignated
Preferred and to set the terms of such shares (including terms with respect
to redemption, sinking fund, dividend, liquidation, preemptive, conversion
and voting rights and preferences). The Board of Directors can issue shares
of such class or series to, among other individuals, the holders of another
class or series of Undesignated Preferred or to the holders of the Common
Stock. Accordingly, the Board of Directors without shareholder approval can
issue Undesignated Preferred with voting or conversion rights which could
adversely affect the voting power of the holders of the Common Stock. The
Undesignated Preferred may have the effect of discouraging an attempt,
through acquisition of a substantial number of shares of the Common Stock, to
acquire control of the Company with a view to effecting a merger, sale or
exchange of assets or a similar transaction.
WARRANTS
The Company has outstanding warrants to purchase an aggregate of 3,890,000
shares of its Common Stock. The average exercise price per share is $3.85.
Such warrants are exercisable at present and for periods of up to four and
one-half years. The Company is not able to determine whether or when any such
warrants will be exercised or what impact, if any, any such exercise might
have on the price of the Common Stock.
LIMITATION OF LIABILITY OF DIRECTORS AND INDEMNIFICATION
The Company's Restated Articles of Incorporation limit the liability of its
directors to the fullest extent permitted by the Minnesota Business
Corporation Act. Specifically, directors of the Company will not be
personally liable for monetary damages for breach of fiduciary duty as
directors, except liability for (i) any breach of the duty of loyalty to the
Company or its shareholders, (ii) acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) dividends
or other distributions of corporate assets that are in contravention of
certain statutory or contractual restrictions, (iv) violations of certain
Minnesota securities laws, or (v) any transaction from which the director
derives an improper personal benefit. Liability under federal securities law
is not limited by the Restated Articles.
The Minnesota Business Corporation Act requires that the Company indemnify
any director, officer or employee made or threatened to be made a party to a
proceeding, by reason of the former or present official capacity of the
person, against judgments, penalties, fines, settlements and reasonable
expenses incurred in connection with the proceeding if certain statutory
standards are met. "Proceeding" means a threatened, pending or completed
civil, criminal, administrative, arbitration or investigative proceeding,
including a derivative action in the name of the Company. Reference is made
to the detailed terms of the Minnesota indemnification statute (Minn. Stat.
S. 302A.521) for a complete statement of such indemnification rights. The
Company's Restated Articles of Incorporation also require the Company to
provide indemnification to the fullest extent of the Minnesota
indemnification statute.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company is aware that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
SECTIONS 302A.671 AND 302A.673 OF MINNESOTA BUSINESS CORPORATION ACT
The Company is governed by the provisions of Sections 302A.671 and 302A.673
of the Minnesota Business Corporation Act. These anti-takeover provisions may
eventually operate to deny shareholders the receipt of a premium on their
Common Stock and may also have a depressive effect on the market price of the
Company's Common Stock. Section 302A.671 basically provides that the shares
of a corporation acquired in a "control share acquisition" have no voting
rights unless voting rights are approved by the shareholders in a prescribed
manner. A "control share acquisition" is generally defined as an acquisition
of beneficial ownership of shares that would, when added to all other shares
beneficially owned by the acquiring person, entitle the acquiring person to
have voting power of 20% or more in the election of directors. Section
302A.673 prohibits a public corporation from engaging in a "business
combination" with an "interested shareholder" for a period of four years
after the date of the transaction in which the person became an interested
shareholder, unless the business combination is approved in a prescribed
manner. A "business combination" includes mergers, asset sales and other
transactions. An "interested shareholder" is a person who is the beneficial
owner, of 10% or more of the corporation's voting stock. Reference is made to
the detailed terms of Sections 302A.671 and 302A.673 of the Minnesota
Business Corporation Act.
Furthermore, Section 3.5 of Article III of the Company's Restated Articles of
Incorporation provides that the affirmative vote of the holders of two-thirds
of the voting power of the shares entitled to vote is required for
shareholder approval of a plan of merger, exchange of securities, or transfer
of assets, as described in Section 302A.601 of the Minnesota Business
Corporation Act.
REGISTRATION RIGHTS
Under the terms of various warrant agreements, the Company has granted
certain demand and "piggyback" registration rights covering the possible
disposition of up to 1,440,000 shares issuable upon the exercise of such
warrants. The warrants containing such registration rights are exercisable at
present. In addition, pursuant to the Purchase Agreement, Pacesetter has
certain demand and "piggyback" registration rights covering the possible
disposition of up to 1,125,000 shares of Common Stock issuable upon
conversion of preferred stock and convertible debenture. The Company is not
able to determine whether or when any such registration rights will be
exercised or what impact, if any, the exercise of such rights might have on
the price of the Common Stock.
PLAN OF DISTRIBUTION
The Shares are being offered for sale by the Company on a best efforts, all
or nothing basis, principally to selected investors purchasing for
investment. Raymond James & Associates, Inc. (the "Placement Agent") has been
retained to act as the exclusive agent for the Company in connection with the
arrangement of such offers and sales on a best efforts basis. The Placement
Agent is not obligated to and does not intend to itself take (or purchase)
any of the Shares. It is anticipated that the Placement Agent will obtain
indications of interest from potential investors for the amount of the
offering and that effectiveness of the Registration Statement will not be
requested and no investor funds will be accepted until indications of
interest have been received for the amount of the offering. Confirmation and
definitive prospectuses will be distributed to all investors at the time of
pricing, informing investors of the closing date, which will be scheduled for
three business days after pricing. No investor funds will be accepted prior
to effectiveness of the Registration Statement. Prior to the closing date,
all investor funds will promptly be placed in escrow with Citibank, N.A., as
escrow agent ("Citibank"), in an escrow account established for the benefit
of the investors. The escrow agent will invest such funds in accordance with
Rule 15c2-4 promulgated under the Securities Exchange Act of 1934, as
amended. Prior to the closing date, Citibank will advise the Company that
payment for the purchase of the Shares has been affirmed by the investors and
that the investors have deposited the requisite funds in the escrow account
at Citibank. Upon receipt of such notice, the Company will deposit with the
Depository Trust Company the Shares to be credited to the respective accounts
of the investors. Investor funds, together with interest thereon, if any,
will be collected by the Company through the facilities of Citibank on the
scheduled closing date. The offering will not continue after the closing
date. In the event that investor funds are not received in the full amount
necessary to satisfy the requirements of the offering, all funds deposited in
the Citibank escrow account will promptly be returned. The Company has agreed
(i) to pay the Placement Agent 6.5% of the proceeds of this offering as the
selling commission, (ii) to indemnify the Placement Agent against certain
liabilities, including liabilities under the Securities Act and (iii) to
reimburse the Placement Agent for up to $100,000 for certain of its
out-of-pocket expenses in connection with the offering. Certain officers and
directors of the Company have agreed that they will not, directly or
indirectly, offer, sell or otherwise dispose of any shares of Common Stock or
any securities convertible into or exercisable for, or any rights to purchase
or acquire, Common Stock for a period of ninety (90) days after the date of
this Prospectus, without the prior written consent of the Placement Agent.
The Company has agreed that, during the period ending three years after the
closing of this offering, Raymond James shall have a right of first refusal
to act as lead manager or agent in connection with any proposed offering of
securities by the Company or by any affiliates thereof, to act as the
investment banker to the Company in connection with any merger, acquisition
or consolidation involving the Company or any affiliate, and to serve as the
investment banker to the Company in connection with any other transaction
with respect to which the Company proposes to engage an investment banker. If
Raymond James agrees to render its assistance for any such transaction, it
shall be for fees and expenses competitive with those which would likely be
charged by comparable investment banking firms. Pursuant to an agreement,
dated November 3, 1994, the Company engaged Raymond James to assist the
Company in locating a partner for the Company's Interventional Technology
Division for purposes of forming a strategic alliance to accelerate the
continued development and commercialization of the products and technology of
the Interventional Technology Division.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Oppenheimer Wolff
& Donnelly, Minneapolis, Minnesota. Certain legal matters will be passed upon
for the Placement Agent by Stroock & Stroock & Lavan, New York, New York.
EXPERTS
The financial statements and financial statement schedules of Angeion
Corporation as of July 31, 1994 and 1993, and for each of the years in the
three-year period ended July 31, 1994, included and incorporated herein and
in the registration statement by reference, have been so included and
incorporated herein by reference in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, included or
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the Public Reference Section
of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following Regional Office of the Commission: New York
Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048;
and Chicago Regional Office, Northwestern Atrium Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material can also be
obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, such reports, proxy statements and other information concerning the
Company may be inspected at the offices of the Boston Stock Exchange, Inc.,
One Boston Place, Boston, Massachusetts 02108.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission by the Company (File No.
0-17019) are incorporated into this Prospectus by reference:
(a) Annual Report on Form 10-K for the year ended July 31, 1994; and
(b) Quarterly Reports on Form 10-Q for the quarters ended October 31,
1994 and January 31 and April 30, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering hereunder shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon written or oral request of such person, a copy
of any or all of the documents referred to above which are incorporated by
reference in this Prospectus, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents).
Written requests for such copies should be directed to Angeion Corporation,
3650 Annapolis Lane, Suite 170, Minneapolis, Minnesota 55447-5434, Attention:
David L. Christofferson, Chief Financial Officer; telephone number (612)
550-9388.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Page
Independent Auditors' Report F-2
Balance Sheets as of July 31, 1994 and 1993 F-3
Statements of Operations for the years ended July 31, 1994, 1993 and 1992 F-4
Statements of Shareholders' Equity for the years ended
July 31, 1994, 1993 and 1992 F-5
Statements of Cash Flows for the years ended July 31, 1994, 1993 and 1992 F-6
Notes to Financial Statements F-7 - F-11
Unaudited Balance Sheets as of April 30, 1995 and July 31, 1994 F-12
Unaudited Statements of Operations for the nine months ended
April 30, 1995 and 1994 F-13
Unaudited Statements of Cash Flows for the nine months ended
April 30, 1995 and 1994 F-14
Notes to Unaudited Financial Statements F-15
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of Angeion Corporation:
We have audited the accompanying balance sheets of Angeion Corporation as of
July 31, 1994 and 1993, and the related statements of operations,
shareholders' equity (deficit), and cash flows for each of the years in the
three-year period ended July 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Angeion Corporation as of
July 31, 1994 and 1993, and the results of its operations and its cash flows
for each of the years in the three-year period ended July 31, 1994, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 19, 1994
ANGEION CORPORATION
BALANCE SHEETS
JULY 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,127,358 $ 4,842,033
Other receivable 38,697 36,094
Royalty receivable 144,978 217,756
Inventories 230,211 139,759
Prepaid expenses and other current assets 128,135 65,249
Total current assets 2,669,379 5,300,891
Property and equipment, net 998,876 1,077,495
Patents and trademarks, net 905,875 737,028
Other assets 178,500 213,732
Total assets $ 4,752,630 $ 7,329,146
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net of discount of $167,000 $ 2,833,000 $ 0
Current installments of capital lease obligations 9,328 12,910
Accounts payable 415,825 367,622
Accrued payroll, vacation and related costs 337,758 138,145
Other accrued expenses 248,852 89,607
Total current liabilities 3,844,763 608,284
Long-term debt 1,500,000 1,500,000
Capital lease obligations, less current installments 4,187 13,516
Total liabilities 5,348,950 2,121,800
Shareholders' Equity (Deficit):
Class A Convertible Preferred Stock, $.01 par value.
Authorized 1,475,000 shares; issued and
outstanding 875,000 shares 3,166,425 3,166,425
Common stock, $.01 par value, authorized 25,000,000
shares; issued and outstanding 11,152,935 shares in
1994 and 10,322,225 shares in 1993 111,529 103,222
Additional paid-in capital 13,668,107 11,804,337
Accumulated deficit (17,542,381) (9,866,638)
Total shareholders' equity (deficit) (596,320) 5,207,346
Commitments
Total liabilities and shareholders' equity $ 4,752,630 $ 7,329,146
</TABLE>
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED July 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net sales $ 0 $ 137,982 $ 77,615
Cost of goods sold 0 147,755 169,587
Gross margin 0 (9,773) (91,972)
Operating expenses:
Research and development 5,158,738 4,485,818 2,996,845
Merger expense for in-process research
and development 1,450,499 0 0
General and administrative 1,493,424 1,353,502 1,021,078
Total operating expenses 8,102,661 5,839,320 4,017,923
Operating loss from continuing operations (8,102,661) (5,849,093) (4,109,895)
Other income (expense):
Royalty income 482,853 0 0
Other expense 0 (106,298) 0
Interest income 72,250 115,852 75,741
Interest expense (128,185) (76,019) (20,765)
Other income (expense) 426,918 (66,465) 54,976
Loss from continuing operations (7,675,743) (5,915,558) (4,054,919)
Gain on sale of discontinued operations 0 3,207,120 0
Loss from discontinued operations,
net of income tax benefit 0 0 (106,536)
Net loss $(7,675,743) $(2,708,438) $(4,161,455)
Net loss per share from continuing
operations (0.72) (0.57) (0.41)
Net income (loss) per share from
discontinued operations 0 0.31 (0.01)
Net loss per share $ (0.72) $ (0.26) $ (0.42)
Weighted average number of shares
outstanding 10,657,311 10,296,812 9,901,592
</TABLE>
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED July 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
NUMBER NUMBER
OF SHARES PAR VALUE OF SHARES PAR VALUE
<S> <C> <C> <C> <C>
Balance at July 31, 1991 0 $ 0 8,701,159 $ 87,012
Stock options exercised 0 0 6,000 60
Exercise of stock warrants 0 0 80,000 800
Shares issued at $3.00 per
share, net of issuance costs 0 0 1,443,275 14,432
Net loss 0 0 0 0
Balance at July 31, 1992 0 0 10,230,434 102,304
Shares issued at $4.00 per
share, net of issuance costs 875,000 3,166,425 0 0
Stock options exercised 0 0 8,093 81
Director stock issued 0 0 68,698 687
Stock issued in settlement
of litigation 0 0 15,000 150
Compensation expense on grant of
options 0 0 0 0
Net loss 0 0 0 0
Balance at July 31, 1993 875,000 3,166,425 10,322,225 103,222
Stock issued in connection with
merger of subsidiaries 0 0 663,610 6,636
Stock options exercised 0 0 115,530 1,155
Director stock issued 0 0 36,570 366
Stock issued for consulting
services 0 0 15,000 150
Compensation expense on grant of
options 0 0 0 0
Issuance of common
stock warrants 0 0 0 0
Net loss 0 0 0 0
Balance at July 31, 1994 875,000 $3,166,425 11,152,935 $111,529
</TABLE>
(TABLE CONTINUED FROM ABOVE)
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED
PAID-IN CAPITAL DEFICIT TOTAL
<S> <C> <C> <C>
Balance at July 31, 1991 $ 7,454,214 $ (2,996,745) $ 4,544,481
Stock options exercised 8,580 0 8,640
Exercise of stock warrants 190,400 0 191,200
Shares issued at $3.00 per
share, net of issuance costs 3,807,111 0 3,821,543
Net loss 0 (4,161,455) (4,161,455)
Balance at July 31, 1992 11,460,305 (7,158,200) 4,404,409
Shares issued at $4.00 per
share, net of issuance costs 0 0 3,166,425
Stock options exercised 28,675 0 28,756
Director stock issued 215,288 0 215,975
Stock issued in settlement
of litigation 59,850 0 60,000
Compensation expense on grant of
options 40,219 0 40,219
Net loss 0 (2,708,438) (2,708,438)
Balance at July 31, 1993 11,804,337 (9,866,638) 5,207,346
Stock issued in connection with
merger of subsidiaries 1,443,863 0 1,450,499
Stock options exercised 4,222 0 5,377
Director stock issued 95,634 0 96,000
Stock issued for consulting
services 52,350 0 52,500
Compensation expense on grant of
options 67,301 0 67,301
Issuance of common
stock warrants 200,400 0 200,400
Net loss 0 (7,675,743) (7,675,743)
Balance at July 31, 1994 $13,668,107 $(17,542,381) $ (596,320)
</TABLE>
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED July 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Operating activities:
Net loss $(7,675,743) $(2,708,438) $(4,161,455)
Adjustments to reconcile net loss to net cash used in
operating activities:
Gain on sale of discontinued operations 0 (3,207,120) 0
Depreciation and amortization 534,025 416,193 125,817
Expense on grant of stock options and issuance of
stock 215,801 316,194 0
Merger expense for in-process research and
development 1,450,499 0 0
Changes in operating assets and liabilities:
Other receivable (2,603) (6,094) (30,000)
Trade accounts receivable 0 77,615 (77,615)
Royalty receivable 72,778 (217,756) 0
Inventories (90,452) (81,954) (48,561)
Prepaid expenses and other current assets (62,886) 53,633 (34,539)
Net assets of discontinued operations 0 0 (142,569)
Accounts payable 101,903 (105,845) 349,433
Accrued expenses 305,158 117,614 62,419
Net cash used in operating activities (5,151,520) (5,345,958) (3,957,070)
Investing activities:
Payments for purchases of property and equipment (244,254) (430,234) (770,649)
Increase in other assets (311,767) (523,185) (220,132)
Net cash used in investing activities (556,021) (953,419) (990,781)
Financing activities:
Proceeds from issuance of preferred stock, net 0 3,166,425 0
Proceeds from issuance of convertible
subordinated debentures 0 1,500,000 0
Proceeds from sale of discontinued operations, net 0 6,409,315 0
Proceeds from exercise of stock options 5,377 28,756 8,640
Proceeds from sale and exercise of stock warrants 200,400 0 191,200
Proceeds from issuance of common stock, net 0 0 3,821,543
Proceeds from issuance of notes payable 2,800,000 0 750,000
Repayments of debt (12,911) (890,706) (81,671)
Net cash provided by financing activities 2,992,866 10,213,790 4,689,712
Net increase (decrease) in cash and cash equivalents (2,714,675) 3,914,413 (258,139)
Cash and cash equivalents:
Beginning of year 4,842,033 927,620 1,185,759
End of year $ 2,127,358 $ 4,842,033 $ 927,620
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 59,115 $ 22,310 $ 19,000
</TABLE>
Supplemental schedule of noncash investing and financing activities:
During 1992, $61,887 of capital lease assets were acquired under capital
lease obligations.
During 1993, 15,000 shares of common stock valued at $60,000 were issued in
settlement of litigation.
During 1994, 15,000 shares of common stock valued at $52,500 were issued as
compensation for consulting services.
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
1. DESCRIPTION OF BUSINESS
Angeion Corporation (the "Company") is developing arrhythmia and
electrophysiology products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
INVENTORIES: Inventories are stated at the lower of cost (determined on a
first in, first out basis) or market. Inventories consist primarily of
material costs.
PROPERTY AND EQUIPMENT: Property and equipment are carried at cost. Equipment
and furniture and fixtures are depreciated using the straight-line method
over five to seven years. Leasehold improvements are depreciated using the
straight-line method over the lease term. Expenditures for repairs and
maintenance are charged to expense as incurred.
PATENTS AND TRADEMARKS: The costs incurred to register patents and trademarks
are capitalized as incurred. Amortization of these costs commences when the
related patent or trademark is filed. The costs are amortized over the
estimated useful life of the patent or trademark, generally seven years.
INCOME TAXES: The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes.
NET LOSS PER SHARE: Net loss per share is computed by dividing net loss for
the period by the weighted average number of shares of common stock and
common equivalent shares outstanding during the period. Common equivalent
shares representing stock warrants and options were excluded because of their
antidilutive effect.
STATEMENTS OF CASH FLOWS: For purposes of the statements of cash flows, the
Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
3. MERGER OF SUBSIDIARIES
Effective December 20, 1993, AngeMed, Inc. ("AngeMed") and AngeLase, Inc.
("AngeLase"), greater-than-90% owned subsidiaries of the Company, were merged
with and into the Company (the "Mergers"), with the Company being the
surviving entity after the Mergers. Pursuant to the Mergers, each share of
common stock of AngeMed and each share of common stock of AngeLase was
converted into shares of Angeion common stock. In addition, each option to
purchase AngeMed or AngeLase common stock was converted into an option to
purchase Angeion common stock based upon the respective exchange ratios.
Certain of the former AngeMed and AngeLase shareholders dissented from the
Mergers (the "Dissenters") and sought a higher value for the shares of
AngeMed and AngeLase common stock held by such shareholders in accordance
with the applicable provisions of Minnesota corporate law (the "Dissenters'
Claims"). Effective May 31, 1994, a Settlement and Release Agreement was
entered into by and among the Company and the AngeMed Dissenters (the
"Settlement Agreement"). Pursuant to the terms of the Settlement Agreement,
the AngeMed Dissenters agreed to terminate their claims against the Company
and the directors and the Company agreed to issue an aggregate of 630,004
shares of the Company's common stock to the AngeMed Dissenters in exchange
for their AngeMed common stock and to issue options to the AngeMed Dissenters
to purchase an aggregate of 348,596 shares of the Company's common stock in
exchange for their options to purchase AngeMed common stock. Effective June
21, 1994, a settlement was reached with the sole AngeLase Dissenter pursuant
to which the AngeLase Dissenter terminated his Dissenters' Claim and agreed
to exchange his AngeLase common stock for an aggregate of 6,000 shares of
Angeion common stock.
The fair market value of Angeion common stock issued in connection with the
Mergers was accounted for as a purchase of in-process research and
development and, accordingly, a charge of $1,450,499 is included in the
statement of operations with an offsetting credit to additional paid-in
capital.
4. DISCONTINUED OPERATIONS
On September 22, 1992, the Company sold its Angeion Medical Products ("AMP")
division effective as of July 31, 1992. The 1992 financial statements of the
Company have been reclassified to report separately the operating results of
the discontinued operation in 1992. Net sales of AMP were $6,777,346 in
fiscal 1992. The sale price consisted of $6.2 million cash at closing, plus a
royalty of 5% and 10% of AMP product sales in fiscal 1994 and 1993,
respectively. A gain of $3,207,120 (including $770,366 of royalties) was
recognized in 1993 and royalty income of $482,853 was recognized in fiscal
1994. There are no further royalties to be recognized.
5. PROPERTY AND EQUIPMENT:
At July 31 property and equipment consists of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Production equipment $ 296,495 $ 214,956
Furniture and fixtures 117,465 102,611
Computer equipment 538,793 470,144
Research and development equipment 616,772 540,042
Leasehold improvements 187,071 184,589
1,756,596 1,512,342
Less accumulated depreciation and
amortization 757,720 434,847
$ 998,876 $1,077,495
</TABLE>
6. ALLIANCE AND LONG TERM DEBT
On February 4, 1993, Angeion and Pacesetter entered into an agreement which
provided for an investment by Pacesetter in Angeion and the grant by Angeion
of certain licensing, manufacturing and marketing rights with respect to
certain of the products being developed by the Company. The investment by
Pacesetter consisted of the purchase of 875,000 shares of Angeion preferred
stock, Class A, at $4.00 per share. The preferred stock is convertible at any
time on a one-for-one basis into Angeion common stock. Pacesetter's
investment also includes the purchase of a $1,500,000 convertible
subordinated debenture with an interest rate of 7.16%, interest payable
semi-annually, which is convertible at any time into Angeion common stock at
$6.00 per share. The debenture is due in semi-annual installments of
$150,000, beginning July 1, 1998 through July 1, 2003.
7. NOTES PAYABLE
During June and July of 1994, the Company raised a total of $3,000,000 in the
form of short-term bridge loans (the "Bridge Financing") to fund its
operations until it could complete an equity financing. All loans under the
Bridge Financing are evidenced by promissory notes accruing interest at a
rate of 12% per year. The promissory notes are due on December 8, 1994, or
such earlier time as the Company completes a permanent equity financing
raising at least $6,000,000 in gross proceeds. The promissory notes are
secured by certain assets of the Company and may be converted into Angeion
common stock at a conversion price of $2.00 per share. In connection with
such loans, each lender received a warrant to purchase, at an exercise price
of $2.00 per share, that number of shares of common stock equal to 50% of the
principal amount of the loan divided by the exercise price of the warrant.
The warrants expire on December 8, 1997. The warrants issued were valued at
$200,400 which is reflected as a discount and is being amortized as interest
expense over the term of the Bridge Financing. Certain directors of the
Company participated in the Bridge Financing and invested $1,000,000 in
exchange for promissory notes and warrants to purchase 250,000 shares at
$2.00 per share.
8. SHAREHOLDERS' EQUITY
STOCK OPTIONS. The Company's shareholders have approved the 1993, 1991, 1989
and 1988 Stock Incentive Plans (the "Plans"). The Plans provide that
incentive stock options and nonqualified stock options to purchase shares of
common stock may be granted at prices determined by the Compensation
Committee, except that the purchase price of incentive stock options may not
be less than 100% of the fair market value of the stock at date of grant. All
options expire not later than ten years from date of grant.
In connection with the Mergers (note 3), options under the AngeLase and
AngeMed Plans were converted into options to purchase Angeion stock under the
Plans. Changes in options outstanding under the Plans are as follows:
<TABLE>
<CAPTION>
SHARES RANGE OF OPTION
UNDER OPTION PRICE PER SHARE
<S> <C> <C>
Balance at July 31, 1991 1,019,371 $0.100-9.375
Granted in fiscal 1992 371,000 2.500-5.000
Exercised in fiscal 1992 (6,000) 1.440
Forfeited in fiscal 1992 (114,250) 1.560-4.280
Balance at July 31, 1992 1,270,121 0.100-9.375
Granted in fiscal 1993 104,465 2.062-3.875
Exercised in fiscal 1993 0 --
Forfeited in fiscal 1993 (556,000) 1.560-9.375
Balance at July 31, 1993 818,586 0.100-9.062
Granted in fiscal 1994 818,296 1.970-3.500
Conversion of subsidiary options 541,738 0.032-2.160
Exercised in fiscal 1994 (115,530) 0.032-0.100
Forfeited in fiscal 1994 (54,000) 2.062-4.062
Balance at July 31, 1994 2,009,090 $0.032-9.062
</TABLE>
Options for the purchase of 1,244,571 shares were exercisable at July 31,
1994. Options to purchase 530,984 shares were available for grant under the
Plans at July 31, 1994.
The Company has granted options, outside the Plans, to purchase 353,787
shares at prices ranging from $2.50 to $3.63 per share. At July 31, 1994,
these options were exercisable.
Options have also been granted under the Non-Employee Director Plan to
purchase 24,000 shares at $2.94 and 24,000 shares at $3.19 per share. In
addition under this plan, annual stock grants valued at $16,000 of common
stock are awarded to each non-employee director.
WARRANTS. In connection with issuing a note payable to a shareholder in
fiscal 1992, the Company issued a warrant to such shareholder to purchase
75,000 shares of common stock at $2.50 per share. This warrant expires on
July 27, 1999.
In connection with the Bridge Financing (note 7), warrants to purchase
835,000 shares of common stock were issued at an exercise price of $2.00 per
share. These warrants expire on December 8, 1997.
In connection with a consulting agreement, warrants to purchase 40,000 shares
of common stock were issued at an exercise price of $2.50 per share. These
warrants expire on December 15, 1998.
9. LEASES
The Company leases office and production space under an operating lease. The
lease provides for executory costs which are subject to escalation based on
increases in the lessor's underlying costs. In addition, the Company leases
certain equipment under cancelable operating leases. Rent expense was
approximately $116,000, $113,000 and $197,000, for the years ended July 31,
1994, 1993 and 1992, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) are approximately
$167,000 and $42,000 in 1995 and 1996.
10. INCOME TAXES
The Company has a tax net operating loss carryforward at July 31, 1994 of
approximately $16,200,000 which is available to reduce income taxes payable
in future years. If not used, this carryforward will begin to expire in 2004.
Under the Tax Reform Act of 1986, the utilization of these carryforwards may
be limited as a result of significant changes in ownership.
The actual tax expense differs from the expected tax expense (benefit)
computed by applying the U.S. federal corporate income tax rate of 34% to the
net loss as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Federal statutory rate (34.0)% (34.0)% (34.0)%
State income taxes, net (6.0) (6.0) (6.0)
Expense on mergers of subsidiaries 6.4 0 0
Miscellaneous 1.0 (1.7) (1.7)
Change in valuation allowance 32.6 41.7 41.7
Effective income tax rate 0% 0% 0%
</TABLE>
Deferred taxes, calculated using an effective tax rate of 39% as of July 31
consist of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Net operating loss carryforwards $ 6,511,000 $ 3,880,000
AMP sale 0 176,000
Other 25,000 (22,000)
Total net deferred tax assets 6,536,000 4,034,000
Less valuation allowance (6,536,000) (4,034,000)
Deferred income taxes $ 0 $ 0
</TABLE>
The net deferred assets at July 31, 1994 and 1993, are fully offset by a
valuation allowance. The amount of the valuation allowance will be reviewed
annually.
11. RETIREMENT SAVINGS PLAN
The Angeion Corporation Tax Deferred Savings and Employees Stock Ownership
Plan (the "Plan") provides for contributions in the form of a salary
reduction cash or deferred arrangement, discretionary matching employer
contributions, discretionary supplemental employer contributions and
voluntary, after-tax contributions by participating employees. Generally, all
employees of the Company who have completed six months of service with the
Company are eligible to participate in the Plan. Contribution expense was
insignificant in all years presented.
12. ROYALTY COMMITMENTS
The Company acquired the technology for its continuous-wave laser catheter
system. As part of this acquisition, the Company agreed to pay a royalty of
5% on sales of patented products incorporating this technology for the life
of any related patent. Additionally, in exchange for a doctor's efforts in
connection with the laser catheter ablation system, the Company has agreed to
pay the doctor and Carolinas Medical Center a royalty, when certain
conditions are met, of 2% and 3%, respectively, on all collected sales of
tachycardia devices. The Company has incurred no royalties through July 31,
1994 related to the above commitments.
13. SUBSEQUENT EVENT
On September 19, 1994, the Company completed a public offering of 4.9 million
shares of newly issued common stock and 4.9 million warrants to purchase
one-half of a share of common stock, which raised proceeds of approximately
$10,730,000, net of expenses. The exercise price of the warrants per whole
share is $4.75 per share and these warrants expire in March 1996. The Company
intends to apply the net proceeds of the sale of the securities for research
and development, investment in capital equipment and leasehold improvements,
general corporate purposes, including working capital, and for the repayment
of unconverted short-term bridge loans. In September 1994, $1,500,000 of the
bridge notes were converted and $1,500,000 were repaid (see note 7). If the
Company's operations progress as anticipated, management believes the net
proceeds of this offering along with cash on hand will fund operations
through September 1995, at which time the Company will need to raise
additional capital. There can be no assurance that efforts to raise
additional capital will be successful.
ANGEION CORPORATION
BALANCE SHEETS
APRIL 30, 1995 AND JULY 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,700,977 $ 2,127,358
Other receivable 0 38,697
Royalty receivable 0 144,978
Inventories 229,781 230,211
Prepaid expenses and other current assets 91,481 128,135
Total current assets 5,022,239 2,669,379
Property and equipment, net 1,527,795 998,876
Patents and trademarks, net 1,046,705 905,875
Other assets 159,889 178,500
Total assets $ 7,756,628 $ 4,752,630
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net of discount of $167,000 $ 0 $ 2,833,000
Current installments of capital lease obligations 2,599 9,328
Accounts payable 550,826 415,825
Accrued payroll, vacation and related costs 285,791 337,758
Other accrued expenses 152,729 248,852
Total current liabilities 991,945 3,844,763
Long-term debt 1,500,000 1,500,000
Capital lease obligations, less current installments 1,917 4,187
Total liabilities 2,493,862 5,348,950
Shareholders' Equity (Deficit):
Convertible Preferred Stock, Series A, $.01 par value.
Authorized 1,475,000 shares; issued and outstanding
875,000 shares at April 30, 1995, and July 31, 1994 3,166,425 3,166,425
Common Stock, $.01 par value, authorized 35,000,000 shares;
issued and outstanding 17,145,819 shares at April 30, 1995, and
11,152,935 at July 31, 1994 171,458 111,529
Additional paid-in capital 26,140,420 13,668,107
Accumulated deficit (24,215,537) (17,542,381)
Total shareholders' equity (deficit) 5,262,766 (596,320)
Total Liabilities and Shareholders' Equity $ 7,756,628 $ 4,752,630
</TABLE>
See accompanying notes to financial statements.
ANGEION CORPORATION
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED APRIL 30, 1995 and 1994
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
APRIL 30
1995 1994
<S> <C> <C>
Net sales $ 0 $ 0
Cost of goods sold 0 0
Gross margin 0 0
Operating expenses:
Research and development 5,268,028 3,629,800
Merger expense for in-process research and
development 0 1,435,124
General and administrative 1,508,635 1,032,172
Total operating expenses 6,776,663 6,097,096
Operating loss from continuing operations (6,776,663) (6,097,096)
Other income (expense):
Royalty income 0 344,221
Interest income 245,354 68,890
Interest expense (141,848) (84,794)
Other income 103,506 328,317
Net loss $(6,673,157) $(5,768,779)
Net loss per share $ (.41) $ (.55)
Weighted average number of shares outstanding 16,291,900 10,519,777
</TABLE>
See accompanying notes to financial statements.
ANGEION CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30, 1995 and 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(6,673,157) $(5,768,779)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 433,385 381,797
Compensation expense on grant of stock and
stock options 117,182 196,334
Notes payable discount amortization 83,500 0
Expense on merger of subsidiaries (note 3) 0 1,435,124
Changes in operating assets and liabilities:
Employee receivable 38,697 (1,952)
Other receivable 144,978 83,656
Materials inventories 430 (173,135)
Prepaid expenses and other current assets 36,654 (87,665)
Accounts payable 135,001 (32,136)
Accrued expenses (129,843) 93,387
Net cash used in operating activities (5,813,173) (3,873,369)
INVESTING ACTIVITIES:
Payments for purchases of property and
equipment (803,289) (170,340)
Increase in other assets (281,234) (321,589)
Net cash used in investing activities (1,084,523) (491,929)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock and
warrants, net 10,599,122 0
Proceeds from exercise of stock options and
warrants 381,192 1,614
Repayments of notes payable (1,508,999) (9,500)
Net cash provided by financing activities 9,471,315 (7,886)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,573,619 (4,373,184)
Cash and cash equivalents:
Beginning of period 2,127,358 4,842,033
End of period $ 4,700,977 $ 468,849
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest $ 160,533 $ 57,944
</TABLE>
During the nine month period ended April 30, 1995, Notes Payable of
$1,500,000 were converted into common stock.
See accompanying notes to financial statements.
ANGEION CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
APRIL 30, 1995
1. BASIS OF PRESENTATION
The unaudited interim financial statements have been prepared by the Company
in accordance with generally accepted accounting principles, pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in financial
statements have been omitted or condensed pursuant to such rules and
regulations. The accompanying unaudited interim financial statements should
be read in conjunction with the financial statements and related notes
included in the Company's July 31, 1994 Annual Report to Shareholders.
The information furnished reflects, in the opinion of the management of
Angeion Corporation, all adjustments (of only a normally recurring nature),
necessary to present a fair statement of the results for the interim periods
presented.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing the net income (loss) for
the period by the weighted average number of shares of common stock
outstanding during the period. Common equivalent shares representing stock
warrants and options were excluded in the fiscal 1994 and 1995 periods
presented due to their antidilutive effect.
3. MERGER OF SUBSIDIARIES
Effective December 20, 1993, AngeMed, Inc. ("AngeMed") and AngeLase, Inc.
("AngeLase"), greater than 90%-owned subsidiaries of the Company, were merged
with and into the Company (the "Mergers"), with the Company being the
surviving entity after the Mergers. Pursuant to the Mergers, each share of
common stock of AngeMed and each share of common stock of AngeLase was
converted into shares of Angeion common stock. In addition, each option to
purchase AngeMed or AngeLase common stock was converted into an option to
purchase Angeion common stock based upon the respective exchange ratios.
The fair market value of Angeion common stock issued in connection with the
Mergers was accounted for as a purchase of in-process research and
development and, accordingly, a charge of $1,450,499 is included in the
fiscal 1994 statement of operations with an offsetting credit to additional
paid-in capital.
4. NOTES PAYABLE
During June and July of 1994, the Company raised a total of $3,000,000 in the
form of short-term bridge loans (the "Bridge Financing") to fund its
operations until it could complete an equity financing. All loans under the
Bridge Financing were evidenced by promissory notes accruing interest at a
rate of 12% per year. In connection with such loans, each lender received a
warrant to purchase, at an exercise price of $2.00 per share, that number of
shares of common stock equal to 50% of the principal amount of the loan
divided by the exercise price of the warrant. The warrants expire on December
8, 1997. The warrants issued were valued at $200,400 which was reflected as a
discount and was amortized over the term of the Bridge Financing. Certain
directors of the Company participated in the Bridge Financing and invested
$1,000,000 in exchange for promissory notes and warrants to purchase 250,000
shares. In September 1994, $1,500,000 of the bridge notes were converted into
common stock and $1,500,000 were repaid.
5. PUBLIC OFFERING
On September 19, 1994, the Company completed a public offering of 4.9 million
shares of newly issued common stock and 4.9 million warrants to purchase
one-half of a share of common stock, which raised proceeds of approximately
$10,600,000 net of expenses. The exercise price of the warrants per whole
share is $4.75 per share and they expire in March 1996. The Company is using
the net proceeds of the sale of the securities for research and development,
investment in capital equipment and leasehold improvements, general corporate
purposes, including working capital, and for the repayment of uncovered
short-term bridge loans.
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[Tip Photo]
The Company's radio frequency catheter ablation
system has a patented cooled, porous tip which
minimizes blood coagulation while maximizing
lesion size. This device is being developed for
the nonsurgical treatment of irregular heartbeats
in the atrial chambers of the heart.
[Catheter Photo]
The Company's laser catheter ablation system is
being evaluated in human clinical trials for the
nonsurgical treatment of irregular heartbeats in
the ventricular chambers of the heart.
ANGEION CORPORATION'S CATHETER ABLATION SYSTEM
[Photo]
An open lumen mapping catheter is inserted into the femoral artery in the leg
and threaded up and into the heart. The mapping catheter identifies the
location of cells causing the irregular heartbeat. An ablation catheter is
threaded through the opening of the mapping catheter. Radio frequency or
laser energy (depending on the location of the arrhythmia) is delivered to
the site in the heart tissue to eliminate the abnormal electrical pathways.
THE COMPANY HAS BEGUN LIMITED U.S. HUMAN CLINICAL TRIALS OF THE LASER
CATHETER ABLATION SYSTEM, DEPICTED ABOVE, UNDER AN IDE APPROVED BY THE FDA.
THE COMPANY PLANS TO FILE FOR AN IDE DURING THE SECOND HALF OF CALENDAR 1995
FOR ITS RF CATHETER ABLATION SYSTEM. THERE CAN BE NO ASSURANCE THAT THE
COMPANY WILL RECEIVE AN IDE FROM THE FDA TO CONDUCT HUMAN CLINICAL TRIALS OF
THE RF CATHETER ABLATION SYSTEM OR RECEIVE FDA APPROVAL TO COMMENCE
COMMERCIAL MARKETING OF ANY OF THE COMPANY'S PRODUCTS.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE PLACEMENT AGENT. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE COMMON STOCK TO WHICH IT RELATES, OR AN OFFER IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME AFTER THE DATE
HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
Summary 3
Risk Factors 6
Use of Proceeds 12
Capitalization 12
Market Price for Common Stock 13
Dividend Policy 13
Dilution 13
Selected Financial Data 14
Management's Discussion and Analysis of
Results of Operations and Financial
Condition 15
Business 18
Management 29
Principal Shareholders and Beneficial
Ownership of Management 32
Description of Securities 33
Plan of Distribution 35
Legal Matters 36
Experts 36
Available Information 36
Documents Incorporated by Reference 36
Index to Financial Statements F-1
</TABLE>
3,400,000 SHARES
ANGEION LOGO
COMMON STOCK
P R O S P E C T U S
RAYMOND JAMES &
ASSOCIATES, INC.
JULY 27, 1995
