UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ________to________
Commission file number 0-17019
ANGEION CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1579150
(State of Incorporation) (IRS Employer Identification No.)
Suite 170
3650 Annapolis Lane, Plymouth, MN 55447-5434
(Address of principal (Zip Code)
executive offices)
(612) 550-9388
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES _X_ NO ___
Common stock, par value $.01 per share: 21,272,228 shares
outstanding as of December 6, 1995
PART I. FINANCIAL INFORMATION
ITEM DESCRIPTION Page(s)
ITEM 1. FINANCIAL STATEMENTS.
Balance Sheets - October 31, 1995 (unaudited) 1
and July 31, 1995.
Statements of Operations (unaudited) 2
- For the Three Months Ended
October 31, 1995 and 1994.
Statements of Cash Flows (unaudited) 3
- For the Three Months Ended October 31, 1995 and 1994.
Notes to Financial Statements. 4,5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 6,7
CONDITION AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 8
Signature. 9
<TABLE>
<CAPTION>
ANGEION CORPORATION
Balance Sheets
October 31, 1995 (unaudited) and July 31, 1995
October 31, July 31,
------------ ------------
ASSETS 1995 1995
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 6,097,940 $ 2,367,764
Investments 15,126,632 --
Receivables 155,282 --
Inventories 836,052 398,788
Prepaid Expenses and Other Current Assets 120,615 172,955
------------ ------------
TOTAL CURRENT ASSETS 22,336,521 2,939,507
Property and Equipment, Net 1,708,794 1,602,774
Patents and Trademarks, Net 1,091,279 1,055,229
Other Assets 147,481 153,684
------------ ------------
TOTAL ASSETS $ 25,284,075 $ 5,751,194
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 1,276,823 836,301
Accrued Payroll, Vacation and Related Costs 413,822 238,599
Current Installments of Capital Lease Obligations 2,599 2,599
Other Accrued Expenses 143,838 192,454
------------ ------------
TOTAL CURRENT LIABILITIES 1,837,082 1,269,953
Long-Term Debt 1,500,000 1,500,000
Capital Lease Obligations, Less Current Installments 228 1,091
------------ ------------
TOTAL LIABILITIES 3,337,310 2,771,044
------------ ------------
Shareholders' Equity:
Class A Convertible Preferred Stock, $.01 par value
Authorized 1,475,000 shares; issued and outstanding
875,000 shares at October 31, 1995 and July 31, 1995 3,166,425 3,166,425
Common Stock, $.01 par value. Authorized
35,000,000 shares; issued and outstanding
21,266,890 shares at October 31, 1995,
and 17,500,529 shares at July 31, 1995 212,669 175,005
Additional Paid-In Capital 48,761,968 26,824,452
Accumulated Deficit (30,194,297) (27,185,732)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 21,946,765 2,980,150
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 25,284,075 $ 5,751,194
============ ============
</TABLE>
ANGEION CORPORATION
Statements of Operations
For the Three Months Ended October 31, 1995 and 1994
(Unaudited)
Three Months Ended
October 31
1995 1994
------------ ------------
Net Sales $ 155,330 $ --
Operating Expenses:
Manufacturing Expenses 624,873 --
Research & Development 2,036,771 1,425,567
General & Administrative 707,995 634,586
Sales & Marketing 85,709 3,210
------------ ------------
Total Operating Expenses 3,455,348 2,063,363
------------ ------------
OPERATING LOSS (3,300,018) (2,063,363)
------------ ------------
Other Income (Expense):
Interest Expense (29,322) (85,042)
Interest Income 320,775 56,205
------------ ------------
Other Income (Expense) 291,453 (28,837)
------------ ------------
NET LOSS $ (3,008,565) $ (2,092,200)
============ ============
NET LOSS PER SHARE $ (.14) $ (.14)
============ ============
Weighted Average Number of Shares
Outstanding 21,183,561 14,933,850
============ ============
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
ANGEION CORPORATION
Statements of Cash Flows
For the Three Months Ended October 31, 1995 and 1994
(Unaudited)
1995 1994
------------ ------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $ (3,008,565) $ (2,092,200)
Adjustments to Reconcile Net Loss
to Net Cash Used in Operating Activities:
Depreciation and Amortization 191,620 130,087
Compensation Expense on Grant of Stock and Stock Options 275,878 45,294
Note Payable Discount Amortization -- 100,200
Changes in Operating Assets and Liabilities:
Receivables (155,282) 38,697
Royalty Receivable -- 144,978
Inventories (437,264) (18,786)
Prepaid Expenses and Other Current Assets 52,340 10,387
Accounts Payable 440,522 235,556
Accrued Expenses 126,607 (195,925)
------------ ------------
Net Cash Used In Operating Activities (2,514,144) (1,601,712)
------------ ------------
INVESTING ACTIVITIES:
Purchase of Securities (15,126,632) --
Payments for Purchases of Property and Equipment (234,715) (164,172)
Increase in Other Assets (92,771) (84,070)
------------ ------------
Net Cash Used in Investing Activities (15,454,118) (248,242)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock and Warrants, Net 20,327,045 10,608,325
Proceeds from Exercise of Stock Options and Warrants 1,372,256 325
Repayments of Notes Payable (863) (1,503,539)
------------ ------------
Net Cash Provided by (used by) Financing Activities 21,698,438 9,105,111
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,730,176 7,255,157
Cash and Cash Equivalents:
Beginning of Period 2,367,764 2,127,358
------------ ------------
End of Period $ 6,097,940 $ 9,382,515
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 2,472 $ 58,192
</TABLE>
See accompanying notes to financial statements.
ANGEION CORPORATION
Form 10-Q
October 31, 1995
Notes to Financial Statements
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, 1995 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 loss per share is computed by dividing the net 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
anti-dilutive effect.
3. 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. The promissory notes were due on December 8, 1994, or such
earlier time as the Company completed a permanent equity financing raising at
least $6,000,000 in gross proceeds. The promissory notes were secured by certain
assets of the Company, and were convertible 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 was
reflected as a discount and was being 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 and $1,500,000 were repaid.
4. PUBLIC OFFERINGS
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. Net proceeds of the sale of
the securities are being used 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.
On August 2, 1995, the Company completed a public offering of 3.4 million
shares of newly issued common stock for proceeds of approximately $20,300,000,
net of expenses. The Company intends to apply the net proceeds of the sale of
the securities for research and development and leasehold improvements, and
general corporate purposes, including working capital.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company's operations consist primarily of the research and
development efforts of its two divisions, the implantable cardioverter
defibrillator group and the catheter ablation group. These divisions are
developing medical devices to treat various types of arrhythmias (irregular
heartbeats). These devices are currently undergoing human clinical trails. The
Company is expanding manufacturing to meet demand generated by the Company's
human clinical trials and the Company's OEM customer (Pacesetter, Inc.)
FINANCIAL POSITION, LIQUIDITY, AND CAPITAL RESOURCES
OPERATING ACTIVITIES: Net cash used in operating activities was
$2,514,144 and $1,601,712 in the quarter ended October 31, 1995 and 1994,
respectively. The cash used was primarily related to research and development
activities of Angeion's implantable cardioverter defibrillator/pacemaker and the
laser catheter ablation businesses.
INVESTING ACTIVITIES: Net cash used in investing activities was
$15,454,118 and $248,242 in the quarter ended October 31, 1995 and 1994,
respectively. Of this amount $15,126,632 represented investment of proceeds from
the Company's public offering of common stock in August, 1995. The Company
invested $92,771 in patents during the quarter ended October 31, 1995, primarily
for the implantable cardioverter defibrillator/pacemaker. The Company also
purchased fixed assets of $234,715, mainly computer equipment and production
equipment for the implantable cardioverter defibrillator/pacemaker; and research
and development equipment for the catheter ablation projects.
FINANCING ACTIVITIES: Net cash provided by financing activities was
$21,698,438 and $9,105,111 in the quarter ended October 31, 1995 and 1994,
respectively. In 1994 the Company completed a public offering of 4.9 million
shares of Common Stock and 4.9 million warrants to purchase one-half of a share
of common stock, which raised net proceeds of $10,608,325. Of this amount
$1,500,000 was used to repay notes payable; the remaining $1,500,000 of notes
payable was converted into common stock. On August 2, 1995, the Company
completed a public offering of 3.4 million shares of newly issued common stock
for proceeds of approximately $20,300,000, net of expenses. The Company intends
to apply the net proceeds of the offering for research and development and
leasehold improvements, and general corporate purposes, including working
capital.
Cash, cash equivalents and investments at October 31, 1995 were
$21,224,572. Management believes this cash and investments will fund operations
through December 1996. Additional funds may be available from Warrants issued in
connection with an offering 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
p.m. 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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1995 COMPARED TO THE THREE MONTHS ENDED
OCTOBER 31, 1994
Net sales increased from zero in the quarter ended October 31, 1994 to
$155,330 in the quarter ended October 31, 1995. The increase was due to the
initiation of European clinical trials.
Manufacturing expense increased form zero in the quarter ended October
31, 1994 to $624,873 in the quarter ended October 31, 1995. The increase was due
to the cost of products sold during the quarter, as well as start up costs
associated with the establishment of the Company's manufacturing capabilities.
Research and development expenses increased from $1,425,567 in the
quarter ended October 31, 1994 to $2,036,771 in the quarter ended October 31,
1995. This increase of $611,204 was primarily due to an acceleration of research
and development activity (including clinical trials) on the implantable
cardioverter defibrillator/pacemaker (ICD). Research and development activity is
focused on the Company's fourth-generation automatic implantable cardioverter
defibrillator, which accounted for $1,750,697 of the expense for the quarter
ended October 31, 1995, while the catheter ablation development activities
accounted for $286,074 of the expense. Research and development expenses will
continue to increase, reflecting the Company's intent to move current products
through their development and human clinical stages as rapidly as possible and
to enhance current products while accelerating the development of a fifth
generation ICD.
General and administrative expenses increased from $634,586 in the
quarter ended October 31, 1994 to $707,995 in the quarter ended October 31,
1995. The increase is due to an increase in non-cash compensation expense.
Sales and marketing expense increased from $3,210 in the quarter ended
October 31, 1994 to $85,709 in the quarter ended October 31, 1995 reflecting the
hiring of a sales and marketing Vice President and initiation of marketing
activity.
Interest expense decreased from $85,042 in the quarter ended October 31,
1994 to $29,322 in the quarter ended October 31, 1995. The decrease was due to
interest expense on the bridge notes which were repaid and converted in the
first quarter of fiscal 1995.
Interest income increased from $56,205 in the quarter ended October 31,
1994 to $302,775 in the quarter ended October 31, 1995. The increase of $264,570
was due to higher average invested cash balances in the quarter ended October
31, 1995, compared to the quarter ended October 31, 1994.
The net loss for the quarter ended October 31, 1995 was $3,008,565, or
$.14 per share, compared to a net loss of $2,092,200, or $.14 per share for the
quarter ended October 31, 1994.
PART II
ITEM 1. LEGAL PROCEEDINGS
As a result of the hiring of Angeion's Vice President of Research
and Development, Medtronic, Inc. alleged that such hiring
violated the non-compete provisions of his employment agreement
with Medtronic. In response to this allegation, Angeion commenced
a declaratory judgment action against Medtronic in Minnesota
District court seeking to have the court confirm that such hiring
does not violate these non-compete provisions. Angeion believes
that the allegations by Medtronic are without merit and intends
to pursue this matter vigorously. There can be no assurance,
however, that Angeion will prevail, and the failure of Angeion to
prevail could delay retaining his services.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) A current Report on Form 8-K, dated October 31, 1995, was filed
during the quarter ended October 31, 1995 pursuant to Item 5. This
filing was made in reference to an announcement of the Company's
receipt of the IDE approval of its Sentinel(TM) 2000 ICD. No
financial statements or Proforma Financial information were filed
with this Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANGEION CORPORATION
Dated: December 13, 1995 By /s/ David L. Christofferson
David L. Christofferson
Vice President of Finance
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<S> <C>
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<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> OCT-31-1995
<CASH> 6,907,940
<SECURITIES> 15,126,632
<RECEIVABLES> 155,282
<ALLOWANCES> 0
<INVENTORY> 836,052
<CURRENT-ASSETS> 22,336,521
<PP&E> 2,980,662
<DEPRECIATION> 1,271,868
<TOTAL-ASSETS> 25,284,075
<CURRENT-LIABILITIES> 1,837,082
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<COMMON> 212,669
0
3,166,425
<OTHER-SE> 18,567,671
<TOTAL-LIABILITY-AND-EQUITY> 21,946,765
<SALES> 155,330
<TOTAL-REVENUES> 155,330
<CGS> 624,873
<TOTAL-COSTS> 624,873
<OTHER-EXPENSES> 2,830,475
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<INTEREST-EXPENSE> 29,322
<INCOME-PRETAX> (3,008,565)
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