UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From ________to________
Commission file number 0-17019
ANGEION CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1579150
(State of Incorporation) (IRS Employer Identification No.)
3650 Annapolis Lane, Plymouth, MN 55447-5434
(Address of principal (Zip Code)
executive offices)
(612) 550-9388
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES _X_ NO ___
Common stock, par value $.01 per share: 24,222,207 shares
outstanding as of May 21, 1996
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<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM DESCRIPTION Page(s)
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
Consolidated Balance Sheets (unaudited) - April 30, 1996 and 1
July 31, 1995.
Consolidated Statements of Operations (unaudited) 2
- For the Three and Nine Months Ended
April 30, 1996 and 1995.
Consolidated Statements of Cash Flows (unaudited) - For the 3
Nine Months Ended April 30, 1996 and 1995.
Notes to Consolidated Financial Statements (unaudited) 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 5 - 7
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 8
Signature. 9
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<TABLE>
<CAPTION>
ANGEION CORPORATION
Consolidated Balance Sheets
April 30, 1996 and July 31, 1995
(Unaudited)
April 30, July 31,
ASSETS 1996 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 14,789,510 $ 2,367,764
Short Term Investments 7,328,201 --
Receivables 401,913 --
Inventories 2,909,277 398,788
Prepaid Expenses and Other Current Assets 151,272 172,955
------------ ------------
TOTAL CURRENT ASSETS 25,580,173 2,939,507
Property and Equipment, Net 3,667,445 1,602,774
Patents and Trademarks, Net 1,190,277 1,055,229
Other Assets 135,073 153,684
------------ ------------
TOTAL ASSETS $ 30,572,968 $ 5,751,194
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 1,778,547 836,301
Accrued Payroll, Vacation and Related Costs 611,327 238,599
Current Installments of Capital Lease Obligations 984 2,599
Other Accrued Expenses 236,306 192,454
------------ ------------
TOTAL CURRENT LIABILITIES 2,627,164 1,269,953
Long-Term Debt 1,500,000 1,500,000
Capital Lease Obligations, Less Current Installments -- 1,091
------------ ------------
TOTAL LIABILITIES 4,127,164 2,771,044
------------ ------------
Shareholders' Equity:
Class A Convertible Preferred Stock, $.01 par value
Authorized 1,475,000 shares; issued and outstanding
875,000 shares at April 30, 1996, and July 31, 1995 3,166,425 3,166,425
Common Stock, $.01 par value. Authorized
35,000,000 shares; issued and outstanding
24,212,207 shares at April 30, 1996, and 17,500,529
at July 31, 1995 242,122 175,005
Additional Paid-In Capital 60,384,733 26,824,452
Accumulated Deficit (37,347,476) (27,185,732)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 26,445,804 2,980,150
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 30,572,968 $ 5,751,194
============ ============
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See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
ANGEION CORPORATION
Consolidated Statements of Operations
Three and Nine Months Ended April 30, 1996 and 1995
(Unaudited)
Three Months Ended Nine Months Ended
April 30, April 30,
---------------------------- ----------------------------
1996 1996 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 452,600 $ -- $ 874,959 $ --
Operating Expenses:
Manufacturing Expenses 1,053,444 -- 2,278,242 --
Research & Development 2,808,202 1,894,959 6,717,469 5,268,028
Sales & Marketing 199,187 7,208 387,634 12,767
General & Administrative 922,127 484,039 2,444,543 1,495,868
------------ ------------ ------------ ------------
Total Operating Expenses 4,982,960 2,386,206 11,827,888 6,776,663
------------ ------------ ------------ ------------
OPERATING LOSS (4,530,360) (2,386,206) (10,952,929) (6,776,663)
------------ ------------ ------------ ------------
Other Income (Expense):
Interest Income 279,905 79,825 878,879 245,354
Interest Expense (29,088) (28,706) (87,694) (141,848)
------------ ------------ ------------ ------------
Other Income (Expense) 250,817 51,119 791,185 103,506
------------ ------------ ------------ ------------
NET LOSS $ (4,279,543) $ (2,335,087) $(10,161,744) $ (6,673,157)
============ ============ ============ ============
NET LOSS PER SHARE $ (.18) $ (.14) $ (.46) $ (.41)
============ ============ ============ ============
Weighted Average Number of
Shares Outstanding 23,301,937 17,059,537 21,953,593 16,291,900
============ ============ ============ ============
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See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
ANGEION CORPORATION
Consolidated Statements of Cash Flows
For the Nine Months Ended April 30, 1996 and 1995
(Unaudited)
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss $(10,161,744) $ (6,673,157)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Depreciation and Amortization 684,412 433,385
Compensation Expense on Grant of Stock and Stock Options 485,237 117,182
Notes Payable Discount Amortization -- 83,500
Changes in Operating Assets and Liabilities:
Receivables (401,913) 183,675
Inventories (2,510,489) 430
Prepaid Expenses and Other Current Assets 21,683 36,654
Accounts Payable 942,246 135,001
Accrued Expenses 416,580 (129,843)
------------ ------------
Net Cash Used in Operating Activities (10,523,988) (5,813,173)
------------ ------------
INVESTING ACTIVITIES:
Purchase of Short Term Investments (7,328,201) --
Purchases of Property and Equipment (2,543,497) (803,289)
Increase in Other Assets (322,023) (281,234)
------------ ------------
Net Cash Used in Investing Activities (10,193,721) (1,084,523)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock, Net 20,327,045 10,599,122
Proceeds from Exercise of Stock Options 1,184,779 381,192
Proceeds from Exercise of Warrants 11,630,337 --
Repayments of Debt (2,706) (1,508,999)
------------ ------------
Net Cash Provided by Financing Activities 33,139,455 9,471,315
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS: 12,421,746 2,573,619
Cash and Cash Equivalents:
Beginning of Period 2,367,764 2,127,358
------------ ------------
End of Period $ 14,789,510 $ 4,700,977
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 60,843 $ 160,533
============ ============
Supplemental disclosure of non-cash investing and financing activities: During
the nine months ended April 30, 1995, notes payable of $1,434,746 were
converted into common stock.
</TABLE>
See accompanying notes to consolidated financial statements.
ANGEION CORPORATION
Form 10-Q
April 30, 1996
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The unaudited interim consolidated financial statements have been prepared
by the Company in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements have been omitted or
condensed pursuant to such rules and regulations. The accompanying
unaudited interim consolidated financial statements should be read in
conjunction with the financial statements and related notes included in
the Company's July 31, 1995 Annual Report to Shareholders.
Effective November 1, 1995, the Company established a European subsidiary,
Angeion Europe Limited, to facilitate clinical trials of its Implantable
Cardioverter Defibrillator and expand its European business activities.
The information furnished reflects, in the opinion of the management of
Angeion Corporation, all adjustments consisting primarily of recurring
accruals, considered necessary for a fair presentation of the financial
position and the results of operations.
2. NET LOSS PER SHARE
Net loss per share is computed by dividing the net loss for the period by
the weighted average number of shares of common stock outstanding during
the period. Common equivalent shares representing stock warrants and
options were excluded in the Fiscal 1995 and 1996 periods presented due to
their anti-dilutive effect.
3. PUBLIC OFFERING
On September 19, 1994, the Company completed a public offering of 4.9
million shares of newly issued common stock and 4.9 million warrants to
purchase one-half of a share of common stock, which raised proceeds of
$10,599,122 net of expenses. The exercise price of the warrants per whole
share is $4.75 per share and they expire in March 1996. Net proceeds of
the sale of the securities are being used for research and development,
investment in capital equipment and leasehold improvements, general
corporate purposes, including working capital, and for the repayment of
unconverted short-term bridge loans.
On August 2, 1995, the Company completed a public offering of 3.4 million
shares of newly issued common stock for proceeds of approximately
$20,300,000, net of expenses. During the nine months ended April 30, 1996,
warrants that would have expired in March 1996 were exercised, along with
certain stock options, which provided to the Company net proceeds of
approximately $12,800,000. The Company intends to apply the net proceeds
of the sale of securities for research and development and leasehold
improvements, and general corporate purposes, including working capital.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company's operations consist of the research and development efforts of its
two divisions, the implantable cardioverter defibrillator group and the catheter
ablation group. These divisions are developing medical devices to treat various
types of arrhythmias (irregular heartbeats). These devices are currently
undergoing human clinical trials. Effective November 1, 1995, the Company also
established a European subsidiary, Angeion Europe Limited, to facilitate its
clinical trials of the implantable cardioverter defibrillator and expand its
European business activities.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs have related to, and are expected to relate to,
the research and development activities of its ICD and catheter ablation
divisions, working capital and expenditure requirements of its manufacturing
operations, the acquisition of businesses, products and technologies, and
expanded marketing expenditures. The Company has financed its liquidity needs
over the last three fiscal years through the sale of Common Stock and other
equity securities, issuance of long-term debt and notes payable and the proceeds
from the sale of the Angeion Medical Products division.
Net cash used in operating activities was $10,523,988 in the nine months ended
April 30, 1996 compared to $5,813,173 in the nine months ended April 30, 1995
and 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 ICD and catheter ablation
divisions (including clinical trials) and, during the nine months ended April
30, 1996, was also related to the build-up of inventory and the increase in
sales and marketing expenses as the Company began manufacturing and marketing
activities.
The Company continues to expand its patent and trademark portfolio through
internal proprietary development, and the acquisition of developed technologies.
The Company's investment in patents and trademarks for the nine months ending
April 30, 1996 totaled $322,023. The Company invested $337,158 and $311,767 in
patents and trademarks in fiscal 1995 and 1994, respectively. The Company will
continue to invest in proprietary technologies and procedures as warranted.
The Company's expenditures for fixed assets were $2,543,497 for the nine months
ended April 30, 1996, $989,351 in fiscal 1995 and $244,254 in fiscal 1994. Fixed
asset expenditures related primarily to computer equipment, office furniture,
production equipment for the ICD division and research and development
equipment. As the Company expands its ICD production and catheter ablation
research capabilities, fixed asset expenditures are expected to increase.
At April 30, 1996, cash and cash equivalents was $14,789,510 and short term
investments were $7,328,201. In August 1995, the Company completed a public
offering of $3.4 million shares of Common Stock that resulted in net proceeds to
the Company of $20,327,045. In September 1994, the Company completed a public
offering of 4.9 million shares of Common Stock and 4.9 million warrants that
resulted in net proceeds of $10,599,122. An additional $11,630,338 in net
proceeds was received from the exercise of the warrants, which would have
expired on March 12, 1996. In fiscal 1993, the Company completed the sale of AMP
and in 1993 consummated the strategic alliance with Pacesetter Inc.
("Pacesetter").
The Company will need additional financing. The timing of that financing depends
on a number of factors, including progress with clinical trials; time and costs
involved in obtaining regulatory approvals, costs involved in filing,
prosecuting and enforcing patents or defending against patent infringement
claims; competing technological and market developments; and costs of
manufacturing and marketing scale-up potential acquisitions of products,
businesses and technologies. However, there can be no assurance that such
additional financing will be available on acceptable terms or at all, and the
failure to obtain any such additional financing would have a material adverse
effect on the Company.
The Company has net operating loss carryforwards for financial reporting and
federal income tax purposes of approximately $35,000,000, 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 limitations
would have a material adverse effect.
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1996 COMPARED TO THE THREE MONTHS ENDED APRIL 30,
1995
Net sales increased from $0 in the quarter ended April 30, 1995 to $452,600 in
the quarter ended April 30, 1996. The increase was due to the initiation of
sales of defibrillator products to Pacesetter and sales in connection with U.S.
and European clinical trials.
Manufacturing expenses increased from $0 in the quarter ended April 30, 1995 to
$1,053,444 in the quarter ended April 30, 1996. The increase was due to the cost
of products sold during the quarter, as well as start up costs associated with
the establishment of the Company's manufacturing capabilities. Manufacturing
costs were higher than net sales due to the low volume of net sales relative to
the significant costs incurred as the Company establishes its manufacturing
capabilities.
Research and development expenses increased from $1,894,959 in the quarter ended
April 30, 1995 to $2,808,202 in the quarter ended April 30, 1996. This increase
of $913,243 was primarily due to an acceleration of research and development
activity (including clinical trials) in connection with the implantable
cardioverter defibrillator (ICD) products. Research and development activity is
currently focused on the Company's ICD products, which accounted for $2,543,557
of the expense for the quarter ended April 30, 1996, while the laser catheter
ablation development activities accounted for $264,645 of the expense. The
Company expects that research and development expenses will continue to increase
as the Company expands human clinical trials and enhances current products and
accelerates the development of its new products
Sales and marketing expenses increased from $7,208 in the quarter ended April
30, 1995 to $199,187 in the quarter ended April 30, 1996 reflecting the hiring
of a sales and marketing Vice President and the initiation of marketing
activity.
General and administrative expenses increased from $484,039 in the quarter ended
April 30, 1995 to $922,127 in the quarter ended April 30, 1996. The increase is
due to increased legal expenses, payroll costs and consulting expenses.
The net loss for the quarter ended April 30, 1996 was $4,279,543 or $.18 per
share, compared to a net loss of $2,335,087 or $.14 per share for the quarter
ended April 30, 1995.
NINE MONTHS ENDED APRIL 30, 1996 COMPARED TO THE NINE MONTHS ENDED APRIL 30,
1995
Net sales increased from $0 in the nine months ended April 30, 1995 to $874,959
in the nine months ended April 30, 1996. The increase was due to the initiation
of sales of defibrillator products to Pacesetter and sales in connection with
U.S. and European clinical trials.
Manufacturing expenses increased from $0 in the nine months ended April 30, 1995
to $2,278,242 in the nine months ended April 30, 1996. The increase was due to
the cost of products sold during the period, as well as start up costs
associated with the establishment of the Company's manufacturing capabilities.
Manufacturing costs were higher than net sales due to low volume of net sales
relative to the significant costs incurred as the Company establishes its
manufacturing capabilities.
Research and development expenses increased from $5,268,028 in the nine months
ended April 30, 1995 to $6,717,469 in the nine months ended April 30, 1996. This
increase of $1,449,441 was primarily due to an acceleration of research and
development activity (including clinical trials) in connection with the
implantable cardioverter defibrillator products. Research and development
activity is currently focused on the implantable cardioverter defibrillator
products, which accounted for $5,898,322 of the expense for the nine months
ended April 30, 1996, while the catheter ablation research and development
activities accounted for $819,147 of the expense. The Company expects that
research and development expenses will continue to increase as the Company
expands human clinical trials and enhances current products while accelerating
the development of its new products.
Sales and marketing expense increased from $12,767 in the nine months ended
April 30, 1995 to $387,634 in the nine months ended April 30, 1996 reflecting
the hiring of a sales and marketing Vice President and the initiation of
marketing activity.
General and administrative expenses increased from $1,495,868 in the nine months
ended April 30, 1995 to $2,444,543 in the nine months ended April 30, 1996. The
increase was primarily due to an increase in non-cash compensation expenses
resulting from the grant of stock and options and the start up costs associated
with the establishment of the European subsidiary.
The net loss for the nine months ended April 30, 1996 was $10,161,744 or $.46
per share, compared to net loss of $6,673,157 or $.41 per share for the nine
months ended April 30, 1995.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27-Financial Data Schedule (for SEC use only).
(b) A current report on Form 8-K, dated April 8, 1996, was
filed during the three months ended April 30, 1996,
pursuant to Item 5. This filing was made in reference to
an announcement of the Company's adopting a
shareholder's rights plan. No financial statements or
Proforma Financial information was filed with this Form
8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANGEION CORPORATION
Dated: May 31, 1996 By________________________________
David L. Christofferson
Vice President of Finance
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> APR-30-1996
<CASH> 14,789,510
<SECURITIES> 7,328,201
<RECEIVABLES> 401,913
<ALLOWANCES> 0
<INVENTORY> 2,909,277
<CURRENT-ASSETS> 25,580,173
<PP&E> 5,289,444
<DEPRECIATION> 1,621,999
<TOTAL-ASSETS> 30,572,968
<CURRENT-LIABILITIES> 2,627,164
<BONDS> 0
0
3,166,425
<COMMON> 242,122
<OTHER-SE> 23,037,257
<TOTAL-LIABILITY-AND-EQUITY> 30,572,968
<SALES> 874,959
<TOTAL-REVENUES> 874,959
<CGS> 2,278,242
<TOTAL-COSTS> 2,278,242
<OTHER-EXPENSES> 9,549,646
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,694
<INCOME-PRETAX> (10,161,744)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,161,744)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,161,744)
<EPS-PRIMARY> (.46)
<EPS-DILUTED> 0
</TABLE>
