SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1995 COMMISSION FILE NO. 0-17019
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO _______________
ANGEION CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1579150
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3650 ANNAPOLIS LANE, SUITE 170, MINNEAPOLIS, MINNESOTA 55447-5434
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (612) 550-9388
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
WARRANT TO PURCHASE ONE-HALF OF A SHARE OF COMMON STOCK
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
As of October 23, 1995, 21,251,580 shares of Common Stock of the Registrant
were outstanding, and the aggregate market value of the Common Stock of the
Registrant as of that date (based upon the last reported sale price of the
Common Stock at that date as reported by the Nasdaq National Market System),
excluding outstanding shares beneficially owned by directors and executive
officers, was approximately $ 134,827,902.
Portions of the Annual Report to Shareholders for the year ended July 31,
1995 (the "1995 Annual Report") are incorporated by reference into Parts I and
II to the extent specific pages are referred to herein. Portions of the proxy
statement, dated November 6, 1995 for the Annual Meeting of Shareholders to be
held December 20, 1995 (the "1995 Proxy Statement"), are incorporated by
reference into Part III, to the extent specific pages are referred to herein.
PART I
ITEM 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS.
Angeion Corporation ("Angeion" or the "Company") was incorporated in
Minnesota in May 1986 for the purpose of developing, manufacturing, and selling
medical products. The Company initially used its engineering and manufacturing
technologies to custom design and manufacture products to a customer's
specification while it devoted its research and development capabilities to
designing proprietary products.
On July 1, 1988, Angeion merged with Verde Ventures Incorporated, a
public company organized on March 10, 1987, which had no operations at the time
of the merger. Verde Ventures Incorporated, the surviving legal entity, changed
its name to Angeion Corporation and has continued the business of the pre-merger
Angeion Corporation. In August 1990, the Company established a subsidiary,
AngeLase, Inc. ("AngeLase"), to assume responsibility for the intensified
research efforts on the development of a laser catheter ablation system (the
"LCAS")(a through-the-skin catheter for use in the nonsurgical treatment of
tachyarrhythmia). In October 1990, the Company received approximately $1.6
million in cash from the sale of its Common Stock to an investor and transferred
such amount, together with two patents, four patent applications and other
technology to AngeLase. In December 1990, the Company acquired a 94% interest in
XMED, Inc. ("XMED"), a company engaged in limited research and development
activities, in exchange for 27,000 shares of unregistered Angeion Common Stock,
valued by the Company at $5.85 per share, for an aggregate consideration of
$158,000. XMED was renamed AngeMed, Inc. ("AngeMed"), assuming responsibility
for the development of an automatic implantable cardioverter defibrillator
("ICD").
On September 22, 1992, the Company completed the sale of all of the
assets of the Company's medical products division (the "AMP Division") to Burron
Medical Inc., a Pennsylvania corporation which is the wholly owned subsidiary of
B. Braun of America, Inc. ("Burron"). The AMP Division, which was a separate
line of business from the activities of AngeLase and AngeMed, had been involved
in the manufacture of extruded and molded medical products for diagnostic and
therapeutic use. The sale price of the AMP Division's assets was $6,200,000
cash, plus deferred payments equal to 10% of the AMP Division's net sales for
each of the four consecutive three-month periods following the closing date of
the sale and 5% of the AMP Division's net sales for each of the four consecutive
three-month periods thereafter.
On February 4, 1993, the Company and Siemens Pacesetter, Inc.
("Pacesetter"), a subsidiary of Siemens Corporation, entered into (a) a stock
purchase agreement pursuant to which Angeion sold to Pacesetter 875,000 shares
of Series A Convertible Preferred Stock ("Preferred Stock") at $4.00 per share,
and a $1,500,000 convertible subordinated debenture, bearing interest at 7.16%,
with a 10-year term with principal repaid over the last five years and a $6.00
per share conversion price, (b) an OEM Marketing and Manufacturing Agreement
(the "OEM Agreement") relating to the Company's defibrillator and laser catheter
products and (c) a License Agreement (the "License Agreement") relating to the
Company's defibrillator and laser catheter patents. See "Narrative Description
of Business--Manufacturing," "--Sales and Marketing," and "--Intellectual
Property." On September 30, 1994, St. Jude Medical, Inc. acquired the worldwide
cardiac rhythm management business of Siemens AG, including Pacesetter.
Effective December 20, 1993, AngeMed and AngeLase, the two greater than
90% owned subsidiaries of the Company, were merged into the Company. In
connection with the merger of AngeMed, each share of common stock of AngeMed was
converted into 1.299 shares of Company Common Stock, and, in connection with the
merger of AngeLase, each share of common stock of AngeLase was converted into
.58 of a share of Company Common Stock. In addition, in connection with such
mergers, options to purchase the common stock of AngeMed and AngeLase were
converted into options to purchase Company Common Stock based upon the merger
exchange ratio applicable to each such subsidiary. As a result of these mergers,
including the settlement of certain dissenters' claims related to such mergers,
a total of 663,609 shares of Company Common Stock and options to purchase
551,846 shares of Company Common Stock were issued.
In July 1994, the Company completed a private placement of convertible
promissory notes and warrants in a bridge financing, which raised gross proceeds
of $3,000,000. On September 19, 1994, the Company completed a direct placement
of Common Stock and warrants, which raised approximately $11,600,000. Of such
proceeds, $1,549,623 was used to pay off those promissory notes issued in the
bridge financing, including interest accrued thereon, which were not converted
into Common Stock. On August 2, 1995, the Company completed a direct placement
of 3,400,000 shares of Common Stock, which raised approximately $20,300,000.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The Company operates in a single industry segment: the research,
development, manufacture and marketing of medical devices.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
GENERAL
The Company 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, which 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 VF, the most serious type of cardiac arrhythmia. 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 an 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/VF, to deliver electric pulses
or shocks to the heart to terminate the VT/VF. Early generation ICD devices
delivered primarily high-energy shocks that were both painful to the patient,
provided more energy than needed to treat the VT/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 intercardiac 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 ("EP")
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. 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 defibrillator
test system and transvenous leads which connect the ICD to the patient's heart.
The Sentinel series of ICDs 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(TM) 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(TM) Electrode System. The Company's Hot Can(TM)
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 is 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 the condition of the ICD and
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
evaluation 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 initial clinical sales of the Sentinel
2000 system in calendar 1995.
The Company filed its investigational device exemption ("IDE") with the
FDA in September 1995. There can be no assurance, however, that the Company will
be able to meet this filing schedule. 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.
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 filed an IDE in October 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.
As of July 31, 1995, the Company has treated 11 patients in the U.S.
and Germany with its laser catheter ablation system. Of the 11 patients treated,
7 cases 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 the Company's recent 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 Premarket
Approval ("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 and
Telectronics 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 testing of ICDs with certain common features.
Any product developed by the Company that gains regulatory approval
will have to compete for market acceptance and market share. 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. 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
July 31, 1995, the manufacturing organization employed 21 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 rate from Pacesetter that is lower than the transfer
price the Company could have received.
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. On June 27, 1995, the Company entered into a
distribution agreement with N. Gi. C. to market and distribute the Company's
Sentinel products in Italy. The Company is currently negotiating with
distributors in Holland 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 hired a Vice President of Sales and Marketing in the second half of
calendar 1995. This person has extensive experience in marketing medical devices
as well as direct defibrillator product experience. The Vice President of Sales
and Marketing is 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
$7,815,391, $5,158,738 and $4,485,818 in fiscal 1995, 1994 and 1993,
respectively. 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 87%, 75% and 89% of the Company research and
development expenditures in fiscal 1995, 1994 and 1993, respectively, were
directly attributable to the Implantable Technology Division, most of which was
spent on 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 the 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 reviewing its policy that prevents
Medicare reimbursement for products and procedures that have not received FDA
approval. 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.
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/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
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 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 ("AIMDD") was fully implemented in the EC. Prior to the
enactment of the AIMDD, the foreign regulatory requirements varied widely from
country to country. Under the AIMDD, 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, Italy and the United Kingdom. Under the AIMDD, 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. Consequently, in order to commence commercial marketing of its products
in the EC, the Company is required to file for a CE Mark approval. In September
1995, the Company filed for CE Mark approval with TUV, a Notified Body that
certifies the safety of medical device products and the quality assurance
systems put in place by the manufacturer of the medical device. Over the next
several months, the Company will be conducting clinical trials with its Sentinel
ICD while it awaits review of its application by the Notified Body and the
issuance of the CE Mark. There can be no assurance, however, 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.
In September 1995, the Company filed for an IDE with the FDA to allow
it to conduct human clinical trials of its Sentinel ICD system in the United
States.
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 July 31,
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 July 31, 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.
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.
Richard H. 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 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 July 31, 1995, the Company had 81 full-time employees, including
10 engaged in administration and 71 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 employment disputes or work interruptions.
ITEM 2. PROPERTIES.
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 system 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.
ITEM 3. LEGAL PROCEEDINGS.
There are no other material pending or threatened legal, governmental,
administrative or other proceedings to which the Company is a party or of which
any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The executive officers of the Company, their ages and the offices held,
as of October 23, 1995, are as follows:
<TABLE>
<CAPTION>
Name Age Position in the Company
<S> <C> <C>
Whitney A. McFarlin 55 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. (1) 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
</TABLE>
(1) Effective as of October 27, 1995 Mr. Kroll resigned as an officer of the
Company. Mr. Kroll will commence employment with Pacesetter, the Company's
corporate partner.
Information regarding the business experience of the executive officers
of the Company is set forth below.
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.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
The information under the captions "Price Range of the Company's
Securities" and "Dividends" on the inside back cover of the 1995 Annual Report
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information under the caption "Selected Financial Data" on page 12
of the 1995 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information under the caption "Management's Discussion and Analysis
of Results of Operations and Financial Condition" on pages 9 through 11 of the
1995 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The balance sheets of Angeion Corporation as of July 31, 1995 and 1994,
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, 1995,
together with the related notes and the independent auditors' report of KPMG
Peat Marwick LLP, independent certified public accountants, all contained on
pages 11 through 17 of the Company's 1995 Annual Report, are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The information under the caption "Election of Directors -- Nomination"
and "-- Information about Nominees" in the Company's 1995 Proxy Statement, with
respect to directors of the Company, is incorporated herein by reference. The
information concerning executive officers of the Company is included in this
Report under Item 4A, "Executive Officers of the Company".
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"). The Medical Advisors consult with management
of the Company concerning the products being developed and their use by health
professionals and Board of Directors. The following persons are Medical Advisors
to the Company:
David G. Benditt, M.D.
Robert G. Hauser, M.D.
Jeffrey M. Isner, M.D.
Lyle D. Joyce, M.D., Ph.D.
Joseph C. Kiser, M.D.
Fabio Leonelli, M.D.
Robert H. Svenson, M.D.
Patrick J. Tchou, M.D.
Mark A. Wood, M.D.
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. The individuals are
reimbursed for their expenses in meeting with the Company. In addition, on a
case by case basis, the Company grants options to purchase shares of the
Company's Common Stock to certain of the non-employee Medical Advisors at an
exercise price equal to the fair market value of the Common Stock on the date of
grant. Options to purchase an aggregate of 90,000 shares of Common Stock have
been granted to the Medical Advisors.
(b) COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information under the caption "Compliance with Section 16(a) of the
Exchange Act" in the Company's 1995 Proxy Statement is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information under the captions "Executive Compensation and Other
Benefits" and "Election of Directors -- Compensation of Directors" in the
Company's 1995 Proxy Statement, with respect to executive compensation and
transactions, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information under the caption "Principal Shareholders and
Beneficial Ownership of Management" in the Company's 1995 Proxy Statement, with
respect to security ownership of certain beneficial owners and management, is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information under the caption "Certain Transactions" in the
Company's 1995 Proxy Statement, with respect to transactions with entities
affiliated with the Company, is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) 1. FINANCIAL STATEMENTS OF REGISTRANT
The following items are included in this Report by reference to the
Registrants' 1995 Annual Report, excerpts of which are attached hereto as
Exhibit 13.1 (page numbers refer to such pages in the 1995 Annual Report):
<TABLE>
<CAPTION>
Financial Statements: Page:
<S> <C>
Independent Auditors' Report......................................................................... 11
Balance Sheets as of July 31, 1995 and 1994.......................................................... 12
Statements of Operations for the
years ended July 31, 1995, 1994 and 1993............................................................. 13
Statements of Shareholders' Equity (Deficit) for the
years ended July 31, 1995, 1994 and 1993............................................................. 13
Statements of Cash Flows for the
years ended July 31, 1995, 1994 and 1993............................................................. 14
Notes to Financial Statements........................................................................ 15
</TABLE>
(a) 2. FINANCIAL STATEMENT SCHEDULES OF REGISTRANT
Financial statement schedules are omitted because of the absence of
the conditions under which they are required or because the information required
is included in the consolidated financial statements or notes thereto.
(a) 3. EXHIBITS
Reference is made to the Exhibit Index hereinafter contained, at pages
23 through 27 of this Report.
A copy of any exhibits listed or referred to herein will be furnished
at a reasonable cost to any person who was a shareholder of the Company as of
October 23, 1995, upon written request from any such person. Requests should be
sent to: David L. Christofferson, Vice President, Chief Financial Officer and
Secretary, Angeion Corporation, 3650 Annapolis Lane, Suite 170, Minneapolis, MN
55447-5434.
The following is a list of each management contract or compensatory
plan or arrangement required to be filed as an exhibit to this Annual Report on
Form 10-K pursuant to Item 14(a)(3):
A. 1988 Stock Option Plan (incorporated by reference to Exhibit 10
contained in the Annual Report on Form 10-K for the year ended April
30, 1988).
B. 1989 Omnibus Stock Option Plan, as amended effective May 16, 1989
(incorporated by reference to Exhibit 10.2 contained in the Annual
Report on Form 10-K for the year ended July 31, 1990).
C. 1991 Stock Incentive Plan (incorporated by reference to Exhibit 99.1
contained in the Registration Statement on Form S-8 (File No.
33-81594)).
D. Non-Employee Director Plan (incorporated by reference to Exhibit 10.3
contained in the Annual Report on Form 10-K for the year ended July
31, 1992).
E. 1993 Stock Incentive Plan (incorporated by reference to Exhibit 10.22
contained in the Annual Report on Form 10-K for the year ended July
31, 1994).
F. 1994 Non-Employee Director Option Plan (incorporated by reference to
Exhibit 10.23 contained in the Annual Report on Form 10-K for the year
ended July 31, 1994).
G. Employment Agreement between XMED, Inc. and Theodore P. Adams dated
December 21, 1990 (incorporated by reference to Exhibit 10.4 contained
in the Annual Report on Form 10-K for the year ended July 31, 1991).
H. Employment Agreement with Whitney A. McFarlin dated September 15, 1993
(incorporated by reference to Exhibit 10.20 contained in the Annual
Report on Form 10-K for the year ended July 31, 1993).
I. Employment Agreement with David L. Christofferson dated April 20, 1993
(incorporated by reference to Exhibit 10.21 contained in the Annual
Report on Form 10-K for the year ended July 31, 1993).
J. Severance Agreement with Wendell L. King dated September 15, 1993
(incorporated by reference to Exhibit 10.24 contained in the Annual
Report on Form 10-K for the year ended July 31, 1994).
K. Amendment No. 1 to Agreement with Wendell L. King dated September 30,
1994 (incorporated by reference to Exhibit 10.25 contained in the
Annual Report on Form 10-K for the year ended July 31, 1994).
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of the
fiscal year ended July 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 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: October 25, 1995 By /s/ Whitney A. McFarlin
Whitney A. McFarlin
Chairman, Chief Executive Officer
and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant on
October 25, 1995 in the capacities indicated.
<TABLE>
<CAPTION>
Name Title
<S> <C>
/s/ Whitney A. McFarlin Director, Chairman, Chief Executive Officer
Whitney A. McFarlin (principal executive officer) and President
/s/ David L. Christofferson Vice President, Chief Financial Officer and Treasurer
David L. Christofferson (principal financial officer and
principal accounting officer)
Director
Joseph C. Kiser, M.D.
/s/ Lyle D. Joyce, M.D. Ph.D. Director
Lyle D. Joyce, M.D., Ph.D.
Director
Sally E. Howard
/s/ Arnold A. Angeloni Director
Arnold A. Angeloni
/s/ Dennis E. Evans Director
Dennis E. Evans
/s/ Glen Taylor Director
Glen Taylor
</TABLE>
ANGEION CORPORATION
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JULY 31, 1995
<TABLE>
<CAPTION>
Item No. Item Method of Filing
<C> <C> <C>
3.1 Articles of Merger, including Amended and Incorporated by reference to Exhibit 3A
Restated Articles of Incorporation contained in Form 8-A (File No. 0-17019).
3.2 Amended Bylaws Incorporated by reference to Exhibit 3B
contained in the registration statement on Form
S-4 (File No. 33-20761).
4.1 Amended Form of the Company's Common Stock Incorporated by reference to Exhibit 4A
Certificate contained in the registration statement on Form
8-A (File No. 0-17019).
4.2 Certificate of Designation of Preferred Stock, Incorporated by reference to Exhibit 4.1
Series A contained in the current report on Form 8-K
filed February 9, 1993.
10.1 1988 Stock Option Plan Incorporated by reference to Exhibit 10
contained in the Annual Report on Form 10-K for
the year ended April 30, 1988.
10.2 1989 Omnibus Stock Option Plan, as amended Incorporated by reference to Exhibit 10.2
effective May 16, 1989 contained in the Annual Report on Form 10-K for
the year ended July 31, 1990.
10.3 Non-Employee Director Plan Incorporated by reference to Exhibit 10.3
contained in the Annual Report on Form 10-K for
the year ended July 31, 1992.
10.4 Employment Agreement between XMED, Inc. and Incorporated by reference to Exhibit 10.4
Theodore P. Adams dated December 21, 1990. contained in the Annual Report on Form 10-K for
the year ended July 31, 1991.
10.5 Employment Agreement with Wendell L. King Incorporated by reference to Exhibit 10.6
dated October 8, 1990. contained in the Annual Report on Form 10-K for
the year ended July 31, 1991.
10.6 Development Agreement between AngeLase, Inc. Incorporated by reference to Exhibit 10.7
and Dr. Robert H. Svenson dated January 15, contained in the Annual Report on Form 10-K for
1991. the year ended July 31, 1991.
10.7 Stock Purchase Agreement dated September 21, Incorporated by reference to Exhibit 10.9
1990 relating to the acquisition of XMED, Inc. contained in the Annual Report on Form 10-K for
the year ended July 31, 1991.
10.8 Form of Warrant to purchase an aggregate of Incorporated by reference to Exhibit 10.10
250,000 shares dated December 1, 1990. contained in the Annual Report on Form 10-K for
the year ended July 31, 1991.
10.9 Warrant dated July 27, 1992 in the name of Incorporated by reference to Exhibit 10.10
Glen Taylor. contained in the Annual Report on Form 10-K for
the year ended July 31, 1991.
10.10 CryoLife Joint Venture Agreement for Incorporated by reference to Exhibit 10A
Development of Biological Pacemaker contained in the Annual Report on Form 10-K for
the year ended July 31, 1989.
10.11 Agreement with Jeffrey Isner, M.D. for Laser Incorporated by reference to Exhibit 10B
Catheter Technology contained in the Annual Report on Form 10-K for
the year ended July 31, 1989.
10.12 Stock Purchase Agreement dated September 13, Incorporated by reference to Exhibit 10.10
1990 between Hanrow Financial Group, Ltd. and contained in the Annual Report on Form 10-K for
the Company the year ended July 31, 1990.
10.13 Asset Purchase Agreement dated September 22, Incorporated by reference to Exhibit 2.1
1992 between Burron Medical Inc. and the contained in the Current Report on Form 8-K
Company. filed October 7, 1992.
10.14 Preferred Stock, Preferred Stock Option and Incorporated by reference to Exhibit 28.1
Subordinated Debenture Purchase Agreement contained in the Current Report on Form 8-K
dated February 4, 1993 between the Company, filed February 9, 1993.
AngeMed, AngeLase and Siemens Pacesetter, Inc.
10.15 Preferred Stock Option Agreement dated Incorporated by reference to Exhibit 28.2
February 4, 1993 between the Company and contained in the Current Report on Form 8-K
Siemens Pacesetter, Inc. filed February 9, 1993.
10.16 Convertible Subordinated Debenture dated Incorporated by reference to Exhibit 28.3
February 4, 1993. contained in the Current Report on Form 8-K
filed February 9, 1993.
10.17 OEM Marketing and Manufacturing Agreement Incorporated by reference to Exhibit 28.4
dated February 4, 1993 between the Company and contained in the Current Report on Form 8-K
Siemens Pacesetter, Inc. filed February 9, 1993.
10.18 License Agreement dated February 4, 1993 Incorporated by reference to Exhibit 28.5
between the Company and Siemens Pacesetter, contained in the Current Report on Form 8-K
Inc. filed February 9, 1993.
10.19 Employment Agreement with Whitney A. McFarlin Incorporated by reference to Exhibit 10.20
dated September 15, 1993. contained in the Annual Report on Form 10-K for
the year ended July 31, 1993.
10.20 Employment Agreement with David L. Incorporated by reference to Exhibit 10.21
Christofferson dated April 20, 1993. contained in the Annual Report on Form 10-K for
the year ended July 31, 1993.
10.21 1991 Stock Incentive Plan Incorporated by reference to Exhibit 99.1
contained in the Registration Statement on Form
S-8 (File No. 33-81594).
10.22 1993 Stock Incentive Plan Incorporated by reference to Exhibit
10.22 contained in the Annual
Report on Form 10-K for the year
ended July 31, 1994.
10.23 1994 Non-Employee Director Option Plan Incorporated by reference to Exhibit
10.23 contained in the Annual
Report on Form 10-K for the year
ended July 31, 1994.
10.24 Severance Agreement with Wendell L. King dated Incorporated by reference to Exhibit
September 15, 1993 10.24 contained in the Annual Report on
Form 10-K for the year ended July 31, 1994.
10.25 Amendment No. 1 to Agreement with Wendell L. Incorporated by reference to Exhibit
King dated September 30, 1994 10.25 contained in the Annual Report on
Form 10-K for the year ended July 31, 1994
10.26 Lease Agreement dated January 21, 1991 with Incorporated by reference to Exhibit
Gopher XI, a Texas limited partnership 10.26 contained in the Annual Report on
Form 10-K for the year ended July 31, 1994
10.27 Addendum No. 1 to Lease Agreement dated June Incorporated by reference to Exhibit
26, 1991 10.27 contained in the Annual Report on
Form 10-K for the year ended July 31, 1994
10.28 Addendum No. 2 to Lease Agreement dated Incorporated by reference to Exhibit
February 24, 1992 10.28 contained in the Annual Report on
Form 10-K for the year ended July 31, 1994
10.29 Lease Agreement dated September 23, 1992 Incorporated by reference to Exhibit
10.29 contained in the Annual
Report on Form 10-K for the year
ended July 31, 1994.
10.30 Addendum No. 3 to Lease Agreement dated Incorporated by reference to Exhibit
September 24, 1992 10.30 contained in the Annual Report on
Form 10-K for the year ended July 31, 1994
10.31 Sublease Agreement effective as of October 26, Incorporated by reference to Exhibit
1994 with Sharpe Endosurgical Corporation 10.31 contained in the Annual Report on
Form 10-K for the year ended July 31, 1994
11.1 Computation of Net Income (Loss) Per Share Filed herewith.
13.1 Excerpts from the Company's 1995 Annual Report Filed herewith.
to Shareholders incorporated by reference
herein
23.1 Independent Auditors' Consent Filed herewith.
27.1 Financial Data Schedule Filed herewith.
</TABLE>
Exhibit 11.1
<TABLE>
<CAPTION>
ANGEION CORPORATION AND SUBSIDIARIES
Computation of Net Income (Loss) Per Share (1)
Years ended July 31, 1995, 1994 and 1993
Years ended July 31
1995 1994 1993
<S> <C> <C> <C>
Primary earnings per common share:
Average shares outstanding 16,550,915 10,657,311 10,296,812
Dilutive stock options and warrants-
based on the treasury stock method - - -
16,550,915 10,657,311 10,296,812
Loss from continuing operations $(9,643,351) $(7,675,743) $ (5,915,558)
Income (loss) from discontinued
operations 0 0 3,207,120
Income (loss) per share from
continuing operations $(.58) $(0.72) $(0.57)
Income (loss) per share from
discontinued operations 0 0 $ 0.31
</TABLE>
(1) Fully diluted earnings (loss) per share computations are not included as
the per share results do not differ from primary earnings (loss) per
share. Convertible Preferred Stock and Convertible Debentures are not
included in the earnings per share computations because their effects,
if any, would be antidilutive.
ANGEION
CORPORATION
1995 ANNUAL REPORT
FINANCIAL REVIEW
<PAGE> COVER
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION: In September of 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 in 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
cardioverter defibrillator group and the catheter ablation group. These
divisions are developing medical devices to treat various types of arrhythmias
(irregular heartbeats). The operations conducted by these divisions were
previously conducted by AngeLase, Inc. and AngeMed, Inc., 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: YEAR ENDED JULY 31, 1995 COMPARED TO 1994: Research
and development expenses increased from $5,158,738 in Fiscal 1994 to $7,815,391
in Fiscal 1995. This increase of $2,656,653 was due to an acceleration of
research and development activity on the implantable cardioverter defibrillator.
Research and development activity relating to the development of an automatic
implantable cardioverter defibrillator accounted for $6,772,442 of the expense
for Fiscal 1995, while the catheter ablation development activities accounted
for $1,042,949 of the expense. Research and development expenses will continue
to increase, reflecting the Company's intent to move these and other new
products through their development and human clinical stages as rapidly as
possible during Fiscal 1996.
During Fiscal 1994, there was also 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 $1,460,424 in Fiscal
1994 to $1,849,376 in Fiscal 1995. This increase of $388,952 was primarily due
to an increase in payroll expenses and legal expenses.
Interest income increased from $72,250 in Fiscal 1994 to $292,578 in Fiscal
1995. The increase was due to higher cash balances during Fiscal 1995.
Interest expense increased from $161,185 in Fiscal 1994 to $271,162 in
Fiscal 1995. The increase was primarily due to the amortization of the remaining
discount on notes payable and interest incurred on the notes payable. See Note 7
of Notes to Financial Statements.
Royalty income of $482,853 in Fiscal 1994 resulted from proceeds of royalty
payments on the net sales of AMP. There will be no further royalty income
related to the AMP sale. See Note 4 of Notes to Financial Statements.
The net loss for Fiscal 1995 was $9,643,351, or $.58 per share, compared to
a net loss of $7,675,743, or $.72 per share, for Fiscal 1994.
YEAR ENDED JULY 31, 1994 COMPARED TO 1993: Net sales and cost of goods sold
decreased from $137,982 and $147,755, respectively, in Fiscal 1993 to zero in
Fiscal 1994. The 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 the implantable
cardioverter defibrillator. Research and development activity relating to the
development of an automatic implantable cardioverter defibrillator accounted for
$3,981,905 of the expenses for Fiscal 1994, while the laser catheter ablation
development activities accounted for $1,176,833 of the expenses.
During Fiscal 1994, there was also a charge of $1,450,499 representing the
purchase of in-process
<PAGE> 9
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 $1,460,424 in Fiscal 1994. This was due to an increase in payroll
expenses and financing expenses.
Interest income decreased from $115,852 in Fiscal 1993 to $72,250 in Fiscal
1994. The decrease was due to lower cash balances during Fiscal 1994.
Interest expense increased from $76,019 in Fiscal 1993 to $161,185 in
Fiscal 1994. The increase was primarily due to a full year of interest expense
on the convertible subordinated debenture purchased by Siemens compared to half
a year in Fiscal 1993 and the amortization of the note payable discount on
certain bridge loans.
Other expense decreased from $106,298 in Fiscal 1993 to zero in Fiscal
1994. The Fiscal 1993 expense was mainly due to a charge resulting from the
settlement of two separate legal matters.
Royalty income of $482,853 in Fiscal 1994 resulted from proceeds of royalty
payments of the net sales of AMP. The gain on sale of discontinued operations of
$3,207,120 in Fiscal 1993 resulted from the sale of AMP. See Note 4 of Notes to
Financial Statements.
The net loss for Fiscal 1994 was $7,675,743, or $.72 per share, compared to
a net loss of $2,708,438, or $.26 per share for Fiscal 1993, which included the
gain on sale of discontinued operations.
FINANCIAL POSITION
OPERATING ACTIVITIES: Net cash used in operating activities was $8,566,889,
$5,151,520 and $5,345,958 in Fiscal 1995, 1994 and 1993, respectively. The cash
used during these periods was primarily related to research and development
activities of the Company's implantable cardioverter defibrillator and the
catheter ablation divisions.
INVESTING ACTIVITIES: Net cash used in investing activities was $1,326,509
in Fiscal 1995. The Company invested $337,158 in patents during Fiscal 1995,
primarily for the implantable cardioverter defibrillator. The Company also
purchased fixed assets of $989,351, consisting primarily of computer equipment
and production equipment for the implantable cardioverter defibrillator and
research and development equipment for the catheter ablation projects.
Net cash used in investing activities during Fiscal 1994 and 1993 was
$556,021 and $953,419, respectively. During Fiscal 1994, the Company invested
$311,767 in other assets, primarily in patents and trademarks. The Company also
invested $244,254 in property and equipment, primarily related to implantable
defibrillator and catheter product development.
FINANCING ACTIVITIES: Net cash provided by financing activities was
$10,133,804 during Fiscal 1995. Cash was provided from 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. See Note 8 of Notes to Financial Statements.
Net cash provided by financing activities was $2,992,866 and $10,213,790
for 1994 and 1993, respectively. See Notes 4 and 6 of Notes to Financial
Statements for a description of the two significant financing activities which
were completed in Fiscal 1993.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at July 31, 1995 were $2,367,764. On August 2,
1995, the Company completed a public offering of 3.4 million shares of newly
issued common stock for net proceeds of approximately $20,300,000. The Company
intends to apply the net proceeds of the sale of the securities to research and
development, investment in capital equipment and leasehold improvements, and
general corporate purposes, including working capital. Management believes these
proceeds will fund operations through December 1996.
In September 1994, the Company completed a public offering of 4.9 million
shares of Common Stock
<PAGE> 10
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.
The Company has net operating loss carryforwards for financial reporting
and federal income tax purposes of approximately $25,000,000, which can be used
to offset taxable income in future years. Future equity offerings combined with
sales of the Company's equity during the preceding years 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. Given that the Company anticipates continued
losses during the next few years, it is not anticipated that any limitation
would have a material adverse effect.
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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results of its operations and its cash flows for
each of the years in the three-year period ended July 31, 1995, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 14, 1995
<PAGE> 11
SELECTED FINANCIAL DATA
The following is a summary of certain financial information with respect to the
Company for each of the years in the five-year period ended July 31, 1995.
<TABLE>
<CAPTION>
Years ended July 31, 1995 1994 1993 1992 1991
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net sales .............................................. $ 0 $ 0 $ 137,982 $ 77,615 $ 3,030
Loss from continuing operations ........................ (9,643,351) (7,675,743) (5,915,558) (4,054,919) (1,892,420)
Gain on sale of discontinued operations ................ 0 0 3,207,120 0 0
Income (loss) discontinued operations .................. 0 0 0 (106,536) 125,817
Net loss ............................................... (9,643,351) (7,675,743) (2,708,438) (4,161,455) (1,766,603)
Net loss per share from continuing operations ......... (0.58) $ (0.72) $ (0.57) $ (0.41) $ (0.22)
Net (income) loss per share from discontinued operations 0 0 0.31 (0.01) 0.01
Net loss per share ..................................... $ (0.58) $ (0.72) $ (0.26) $ (0.42) $ (0.21)
Weighted average number of shares outstanding .......... 16,550,915 10,657,311 10,296,812 9,901,592 8,536,984
As of July 31, 1995 1994 1993 1992 1991
BALANCE SHEET DATA:
Working capital (deficit) .............................. $ 1,669,554 $ (1,175,384) $ 4,692,607 $ 2,989,426 $ 4,097,908
Total assets ........................................... 5,751,194 4,752,630 7,329,146 5,905,146 4,903,150
Long-term debt, less current installments .............. 1,501,091 1,504,187 1,513,516 76,045 117,604
Shareholders' equity (deficit) ......................... $ 2,980,150 $ (596,320) $ 5,207,346 $ 4,404,409 $ 4,544,481
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEETS JULY 31, 1995 AND 1994
1995 1994
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 2,367,764 $ 2,127,358
Other receivable 0 38,697
Royalty receivable 0 144,978
Inventories 398,788 230,211
Prepaid expenses and other current assets 172,955 128,135
Total current assets 2,939,507 2,669,379
Property and equipment, net 1,602,774 998,876
Patents and trademarks, net 1,055,229 905,875
Other assets 153,684 178,500
Total assets $ 5,751,194 $ 4,752,630
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 836,301 $ 415,825
Accrued payroll, vacation and related costs 238,599 337,758
Notes payable, net of discount of $167,000 0 2,833,000
Current installments of capital lease obligations 2,599 9,328
Other accrued expenses 192,454 248,852
Total current liabilities 1,269,953 3,844,763
Long-term debt 1,500,000 1,500,000
Capital lease obligations, less current installments 1,091 4,187
Total liabilities 2,771,044 5,348,950
Shareholders' equity (deficit):
Class A Convertible Preferred Stock, $.01 par value.
Authorized 1,475,000 shares;
issued and outstanding 875,000 shares in 1995 and 1994 3,166,425 3,166,425
Common stock, $.01 par value.
Authorized 35,000,000 shares; issued and
outstanding 17,500,529 shares in 1995 and
11,152,935 shares in 1994 175,005 111,529
Additional paid-in capital 26,824,452 13,668,107
Accumulated deficit (27,185,732) (17,542,381)
Total shareholders' equity (deficit) 2,980,150 (596,320)
Commitments (notes 10 and 13)
Total liabilities and shareholders'
equity (deficit) $ 5,751,194 $ 4,752,630
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 12
STATEMENTS OF OPERATIONS YEARS ENDED JULY 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net sales $ 0 $ 0 $ 137,982
Cost of goods sold 0 0 147,755
Gross margin 0 0 (9,773)
Operating expenses:
Research and development 7,815,391 5,158,738 4,485,818
General and administrative 1,849,376 1,460,424 1,353,502
Merger expense for in-process research and development 0 1,450,499 0
Total operating expenses 9,664,767 8,069,661 5,839,320
Operating loss from continuing operations (9,664,767) (8,069,661) (5,849,093)
Other income (expense):
Royalty income 0 482,853 0
Interest income 292,578 72,250 115,852
Interest expense (271,162) (161,185) (76,019)
Other expense 0 0 (106,298)
Other income (expense) 21,416 393,918 (66,465)
Loss from continuing operations (9,643,351) (7,675,743) (5,915,558)
Gain on sale of discontinued operations 0 0 3,207,120
Net loss $ (9,643,351) $ (7,675,743) $ (2,708,438)
Net loss per share from continuing operations (0.58) (0.72) (0.57)
Net income per share from discontinued operations 0.00 0.00 0.31
Net loss per share $ (0.58) $ (0.72) $ (0.26)
Weighted average number of shares outstanding 16,550,915 10,657,311 10,296,812
</TABLE>
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) YEARS ENDED JULY 31, 1995, 1994
AND 1993
<TABLE>
<CAPTION>
Convertible
preferred stock Common stock
Number Number Additional Accumulated
of shares Par value of shares Par value paid-in capital deficit Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1992 0 $ 0 10,230,434 $102,304 $11,460,305 $ (7,158,200) $ 4,404,409
Shares issued at $4.00 per
share, net of issuance costs 875,000 3,166,425 0 0 0 0 3,166,425
Stock options exercised 0 0 8,093 81 28,675 0 28,756
Director stock issued 0 0 68,698 687 215,288 0 215,975
Stock issued in settlement
of litigation 0 0 15,000 150 59,850 0 60,000
Compensation expense on
grant of options 0 0 0 0 40,219 0 40,219
Net loss 0 0 0 0 0 (2,708,438) (2,708,438)
Balance at July 31, 1993 875,000 3,166,425 10,322,225 103,222 11,804,337 (9,866,638) 5,207,346
Shares issued in connection
with merger of subsidiaries 0 0 663,610 6,636 1,443,863 0 1,450,499
Stock options exercised 0 0 115,530 1,155 4,222 0 5,377
Director stock issued 0 0 36,570 366 95,634 0 96,000
Stock issued for
consulting services 0 0 15,000 150 52,350 0 52,500
Compensation expense on
grant of options 0 0 0 0 67,301 0 67,301
Issuance of common stock
warrants 0 0 0 0 200,400 0 200,400
Net loss 0 0 0 0 0 (7,675,743) (7,675,743)
Balance at July 31, 1994 875,000 3,166,425 11,152,935 111,529 13,668,107 (17,542,381) (596,320)
Notes payable converted into
common stock 0 0 761,373 7,614 1,427,132 0 1,434,746
Shares and warrants issued
at $2.38 per share,
net of issuance costs 0 0 4,900,000 49,000 10,550,122 0 10,599,122
Stock options exercised 0 0 645,805 6,458 1,038,049 0 1,044,507
Director stock issued 0 0 40,416 404 95,596 0 96,000
Compensation expense on
grant of options 0 0 0 0 45,446 0 45,446
Net loss 0 0 0 0 0 (9,643,351) (9,643,351)
Balance at July 31, 1995 875,000 $3,166,425 17,500,529 $175,005 $26,824,452 $(27,185,732) $ 2,980,150
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 13
STATEMENTS 0F CASH FLOWS YEARS ENDED JULY 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating activities:
Net loss $(9,643,351) $(7,675,743) $(2,708,438)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 598,073 501,025 416,193
Expense on grant of stock and stock options 141,446 215,801 316,194
Notes payable discount amortization 100,200 33,000 0
Merger expense for in-process research and development 0 1,450,499 0
Gain on sale of discontinued operations 0 0 (3,207,120)
Changes in operating assets and liabilities:
Other receivable 38,697 (2,603) (6,094)
Trade accounts receivable 0 0 77,615
Royalty receivable 144,978 72,778 (217,756)
Inventories (168,577) (90,452) (81,954)
Prepaid expenses and other current assets (66,020) (62,886) 53,633
Accounts payable 366,776 101,903 (105,845)
Accrued expenses (79,111) 305,158 117,614
Net cash used in operating activities (8,566,889) (5,151,520) (5,345,958)
Investing activities:
Payments for purchases of property and equipment (989,351) (244,254) (430,234)
Increase in other assets (337,158) (311,767) (523,185)
Net cash used in investing activities (1,326,509) (556,021) (953,419)
Financing activities:
Proceeds from issuance of preferred stock, net 0 0 3,166,425
Proceeds from issuance of convertible subordinated debentures 0 0 1,500,000
Proceeds from sale of discontinued operations 0 0 6,409,315
Proceeds from exercise of stock options 1,044,507 5,377 28,756
Proceeds from sale of stock warrants 0 200,400 0
Proceeds from issuance of common stock and warrants, net 10,599,122 0 0
Proceeds from issuance of notes payable 0 2,800,000 0
Repayments of debt (1,509,825) (12,911) (890,706)
Net cash provided by financing activities 10,133,804 2,992,866 10,213,790
Net increase (decrease) in cash and cash equivalents 240,406 (2,714,675) 3,914,413
Cash and cash equivalents:
Beginning of year 2,127,358 4,842,033 927,620
End of year $ 2,367,764 $ 2,127,358 $ 4,842,033
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 240,031 $ 59,115 $ 22,310
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
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.
During 1995, $1,434,746 of notes payable were converted into common
stock.
The accompanying notes are an integral part of the financial statements.
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1995, 1994 AND 1993
(1) DESCRIPTION OF BUSINESS Angeion Corporation ("Angeion" or 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 for Fiscal years 1995,
1994 and 1993 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 On 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 and June 21, 1994 Settlement and Release Agreements were
entered into by and among the Company and the Dissenters (the Settlement
Agreements). Pursuant to the terms of the Settlement Agreements, the Dissenters
agreed to terminate their claims against the Company and the directors. In
exchange, the Company agreed to issue an aggregate of 636,004 shares of Company
common stock to the Dissenters in exchange for their subsidiary common stock and
to issue options to purchase Company common stock to the Dissenters in exchange
for their subsidiary options.
The fair market value of the Company 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 shareholders' equity.
(4) DISCONTINUED OPERATIONS On September 22, 1992, the Company sold its
Angeion Medical Products division (AMP) effective as of July 31, 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. As of July 31, 1995, there are no further royalties to be
recognized.
(5) PROPERTY AND EQUIPMENT At July 31 property and equipment consists of
the following:
1995 1994
Production equipment $ 630,953 $ 296,495
Furniture and fixtures 177,365 117,465
Computer equipment 848,906 538,793
Research and development
equipment 750,197 616,772
Leasehold improvements 338,526 187,071
2,745,947 1,756,596
Less accumulated depreciation
and amortization (1,143,173) (757,720)
$ 1,602,774 $ 998,876
<PAGE> 15
(6) ALLIANCE AND LONG TERM DEBT On February 4, 1993, Angeion and Siemens
Pacesetter Inc. (Pacesetter), which was subsequently acquired by St. Jude
Medical, 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 (Bridge Financing or Bridge
Notes) 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. In connection with such loans, each lender
received a warrant to purchase, at an exercise price of $2.00 per share, 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 Notes. 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. During September
1994, $1,434,746 in Bridge Notes, net of discount, were converted into common
stock and $1,500,000 in Bridge Notes were repaid.
(8) PUBLIC OFFERING On September 19, 1994, the Company completed a public
offering of 4.9 million shares of newly issued common stock and 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
from 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.
(9) 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:
Shares Range of option
under option price per share
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
Granted in Fiscal 1995 03,968 1.970-7.000
Exercised in Fiscal 1995 (522,174) 0.032-5.000
Forfeited in Fiscal 1995 (128,581) 0.032-3.875
Balance at July 31, 1995 2,062,303 $0.032-9.062
Options for the purchase of 994,649 shares were exercisable at July 31,
1995.
The Company has granted options, outside the Plans, to purchase 272,063
shares at prices ranging from $2.50 to $3.63 per share. At July 31, 1995,
222,063 of these options were exercisable.
Options have also been granted under the Non-Employee Director Plan to
purchase 63,000 shares at prices ranging from $2.44 to $3.19 per share. Under
this plan, annual stock grants valued at $16,000 of common stock also are
awarded to each non-employee director.
WARRANTS In connection with issuing a note payable to a
<PAGE> 16
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.
In connection with a public offering (Note 8), warrants to purchase
2,450,000 shares of common stock were issued at an exercise price of $4.75 per
share. These warrants expire on March 12, 1996. In addition, the placement agent
for the public offering was issued a warrant to purchase 490,000 shares of
common stock at $2.85 per share. This warrant expires on September 12, 1999.
(10) 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 $138,000, $116,000 and $113,000, for the years ended July 31,
1995, 1994 and 1993, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) are approximately
$239,000 and $244,000 and $108,000 in 1996, 1997 and 1998, respectively.
(11) INCOME TAXES The Company has a tax net operating loss carryforward at
July 31, 1995, of approximately $25,000,000, 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 (benefit) 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:
1995 1994 1993
Federal statutory rate (34%) (34%) (34%)
State income taxes, net (6) (6) (6)
Expense on mergers of subsidiaries 0 6.4 0
Miscellaneous 1 1 (1.7)
Change in valuation allowance 39.0 32.6 41.7
Effective income tax rate 0% 0% 0%
Deferred taxes, calculated using an effective tax rate of 39% as of July 31
consist of the following:
1995 1994
Net operating loss carryforwards $ 10,200,000 $ 6,511,000
Other 65,000 25,000
Total net deferred tax assets 10,265,000 6,536,000
Less valuation allowance (10,265,000) (6,536,000)
Deferred income taxes $ 0 $ 0
The net deferred assets at July 31, 1995 and 1994 are fully offset by a
valuation allowance. The valuation allowance is reviewed annually.
(12) 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 contribution, 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.
(13) 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 patent on this technology. 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
paid sales of laser ablation devices. The Company has incurred no royalties
through July 31, 1995, related to the above commitment.
(14) SUBSEQUENT EVENT 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, investment
in capital equipment and leasehold improvements, and general corporate purposes,
including working capital.
<PAGE> 17
INVESTOR INFORMATION
ANNUAL MEETING
The Annual Meeting of Shareholders will be held on Wednesday, December 20, 1995
at 4:00 p.m., Minneapolis Marriott City Center, 30 South Seventh Street,
Minneapolis, Minnesota 55402 612-349-4000.
DIVIDENDS
The Company has not paid any dividends on its common stock. The Company
currently intends to retain any earnings for use in its operations and does not
anticipate paying any cash dividends in the foreseeable future.
MARKET MAKERS
The following firms make a market in the Company's stock as of August 1995:
Allen & Company, Inc.; Bear Stearns & Co.;
Brean Murray Foster Securities; Dain Bosworth
Incorporated; Fahnestock & Co., Inc.;
Hambrecht & Quist; Herzog, Heine, Geduld, Inc.;
John G. Kinnard & Co., Inc.; Knight Securities;
Marche Securities, Inc.; Mayer & Schweitzer, Inc.;
Merrill Lynch, Pierce, Fenner & Smith, Inc.;
Nash Weiss; Oppenheimer & Co., Inc.;
PaineWebber Inc.; Piper Jaffray, Inc.;
Princeton Securities Corp.; Principal Financial
Securities; Prudential Securities, Inc.; Punk,
Ziegel & Knoell, L.P.; Raymond James &
Associates, Inc.; R.J. Steichen; Robb, Peck,
McCooey Clearing; Sherwood Securities Corp.;
Summit Investment Corp.; Troster Singer Corp.;
Wedbush Morgan Securities Inc.; Westonka
Investments, Inc.; Wien Securities Corp.;
Wilson-Davis & Co. Inc.
STOCK EXCHANGE LISTING
Nasdaq: Common stock ANGN; warrants ANGNW
INVESTOR INFORMATION
A copy of the Company's Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission, may be obtained free of charge by calling or writing
to:
Corporate Secretary
Angeion Corporation
3650 Annapolis Lane, Suite 170
Minneapolis, Minnesota 55447-5434
Phone: 612-550-9388
Facsimile: 612-550-9487
Shareholders, securities analysts and investors seeking additional information
about the Company should call Investor Relations at 612-550-9388.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, Minneapolis, Minnesota
TRANSFER AGENT & REGISTRAR
Norwest Bank Minnesota, N.A. Stock Transfer
161 North Concord Exchange
P.O. Box 738
South St. Paul, Minnesota 55075-0738
Telephone: 800-468-9716 or 612-450-4064
Communications concerning change of address, transfer requirements and lost
certificates should be directed to the transfer agent.
LEGAL COUNSEL
Oppenheimer Wolff & Donnelly
Minneapolis, Minnesota
PRICE RANGE OF THE COMPANY'S SECURITIES
The following table sets forth the high and low bid prices of the Company's
common stock from the third calendar quarter of 1993 through July 31, 1995, as
reported by NASDAQ under the symbol ANGN. Such information represents prices
between dealers; without markup, markdown or commission, and does not
necessarily represent actual transactions.
Common Stock
High Low
1995
July, 1995
Second calendar quarter $5 $3 3/8
First calendar quarter 4 1/8 2 1/2
1994
Fourth calendar quarter $3 1/4 $2 3/8
Third calendar quarter 3 1/8 2
Second calendar quarter 3 1/8 1 3/4
First calendar quarter 3 5/8 2 3/8
1993
Fourth calendar quarter $
Third calendar quarter 3 1/8 2 1/4
As of October 23, 1995, the Company's common stock was held of record by 451
persons. Such record ownership reflects individual and nominee holdings. The
Company's securities are held beneficially by more than 5,840 persons. Effective
as of October 19, 1995, the Company's common stock and warrants began trading on
the Nasdaq National Market.
TRADEMARKS
Angeion(R), AngeFlex(TM), AngeLase(R), AngeMed(R), CAT-Pulse(TM), Energy
Steering(TM), Hot Can(TM), Small Cap(TM), Sentinel(TM) are trademarks.
<PAGE> 18
CORPORATE INFORMATION
OFFICERS
Whitney A. McFarlin
Chairman, President & CEO
David L. Christofferson
Vice President, CFO & Secretary
Robert S. Garin
Vice President
Human Resources
Jennifer M. Marrone
Vice President
Clinical & Regulatory Affairs
Gary Payment
Vice President
Operations
T.V. Rao
Vice President
Marketing & Sales
William J. Rissmann
Vice President
Engineering
ANGEION BOARD OF DIRECTORS
Whitney A. McFarlin
Chairman, President & CEO
Angeion Corporation
Arnold A. Angeloni
President, Business Systems Division
Deluxe Corporation
Dennis E. Evans
President & CEO
Hanrow Financial Group, Ltd.
Lyle D. Joyce, M.D., Ph.D.
Minneapolis Heart Institute
Joseph C. Kiser, M.D.
Founder
Minneapolis Heart Institute & Foundation
Glen Taylor
Chairman, CEO & Founder
Taylor Corporation
Angeion Corporation 3650 Annapolis Lane, Suite 170
Minneapolis, Minnesota 55447-5434
<PAGE> INSIDE BACK COVER
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Angeion Corporation:
We consent to incorporation by reference in the Registration Statements (Nos.
33-88882, 33-56784, and 33-81594) on Form S-8, Registration Statements (Nos.
33-45600, 33-85902 and 33-80274) on Form S-3, and Registration Statement (No.
33-82084) on Form S-2 of Angeion Corporation of our report dated September 14,
1995, relating to the balance sheets of Angeion Corporation as of July 31, 1995
and 1994, 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, 1995, which report is incorporated by reference in the July 31, 1995
annual report on Form 10-K of Angeion Corporation.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
October 30, 1995
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<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
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<SECURITIES> 0
<RECEIVABLES> 0
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