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 January 31, 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, Suite 170 55447-5434
Plymouth, MN (Zip Code)
(Address of principal
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: 22,461,833 shares
outstanding as of March 6, 1996
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM DESCRIPTION Page(s)
- ---- ----------- -------
1. FINANCIAL STATEMENTS.
<S> <C> <C>
Consolidated Balance Sheets (unaudited) 1
- January 31, 1996 and July 31, 1995.
Consolidated Statements of Operations (unaudited) 2
- For the Three and Six Months Ended
January 31, 1996 and 1995.
Consolidated Statements of Cash Flows (unaudited) 3
- For the Six Months Ended January 31, 1996 and 1995.
Notes to Consolidated Financial Statements. 4-5
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 6-8
PART II. OTHER INFORMATION
1. LEGAL PROCEEDINGS. 9
4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS. 9
6. EXHIBITS AND REPORTS ON FORM 8-K. 10
Signature. 11
</TABLE>
<TABLE>
<CAPTION>
ANGEION CORPORATION
Consolidated Balance Sheets
January 31, 1996 and July 31, 1995 (Unaudited)
January 31, July 31,
ASSETS 1996 1995
- ------ ------------- -----------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 6,364,802 $ 2,367,764
Investments 11,398,188 --
Receivables 180,140 --
Inventories 1,693,277 398,788
Prepaid Expenses and Other Current Assets 164,709 172,955
------------ ------------
TOTAL CURRENT ASSETS 19,801,116 2,939,507
Property and Equipment, Net 2,533,910 1,602,774
Patents and Trademarks, Net 1,166,201 1,055,229
Other Assets 141,277 153,684
------------ ------------
TOTAL ASSETS $ 23,642,504 $ 5,751,194
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 1,726,673 836,301
Accrued Payroll, Vacation and Related Costs 375,670 238,599
Current Installments of Capital Lease Obligations 1,926 2,599
Other Accrued Expenses 156,511 192,454
------------ ------------
TOTAL CURRENT LIABILITIES 2,260,780 1,269,953
Long-Term Debt 1,500,000 1,500,000
Capital Lease Obligations, Less Current Installments -- 1,091
------------ ------------
TOTAL LIABILITIES 3,760,780 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 January 31, 1996, and July 31, 1995 3,166,425 3,166,425
Common Stock, $.01 par value. Authorized
35,000,000 shares; issued and outstanding
21,521,651 shares at January 31, 1996, and 17,500,529
at July 31, 1995 215,217 175,005
Additional Paid-In Capital 49,568,013 26,824,452
Accumulated Deficit (33,067,931) (27,185,732)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 19,881,724 2,980,150
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 23,642,504 $ 5,751,194
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
ANGEION CORPORATION
Consolidated Statements of Operations
For the Three and Six Months Ended January 31, 1996 and 1995
(Unaudited)
Three Months Ended Six Months Ended
January 31 January 31
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 267,029 $ -- $ 422,359 $ --
Operating Expenses:
Manufacturing Expenses 599,926 -- 1,224,798 --
Research & Development 1,872,405 1,944,292 3,909,176 3,373,068
Sales & Marketing 102,737 2,349 188,447 5,559
General & Administrative 814,511 380,453 1,522,506 1,011,829
------------ ------------ ------------ ------------
Total Operating Expenses 3,389,579 2,327,094 6,844,927 4,390,456
------------ ------------ ------------ ------------
OPERATING LOSS (3,122,550) (2,327,094) (6,422,568) (4,390,456)
------------ ------------ ------------ ------------
Other Income (Expense):
Interest Income 278,199 109,325 598,975 165,529
Interest Expense (29,283) (28,100) (58,606) (113,142)
------------ ------------ ------------ ------------
Other Income (Expense) 248,916 81,225 540,369 52,387
------------ ------------ ------------ ------------
NET LOSS $ (2,873,634) $ (2,245,869) $ (5,882,199) $ (4,338,069)
============ ============ ============ ============
NET LOSS PER SHARE $ (.13) $ (.13) $ (.28) $ (.27)
============ ============ ============ ============
Weighted Average Number of Shares
Outstanding 21,375,280 16,882,314 21,279,421 15,908,082
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
ANGEION CORPORATION
Consolidated Statements of Cash Flows
For the Six Months Ended January 31, 1996 and 1995
(Unaudited)
1996 1995
------------ ------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $ (5,882,199) $ (4,338,069)
Adjustments to Reconcile Net Loss
to Net Cash Used in Operating Activities:
Depreciation and Amortization 393,680 272,470
Compensation Expense on Grant of Stock and Stock Options 349,223 90,587
Notes Payable Discount Amortization -- 83,500
Changes in Operating Assets and Liabilities:
Receivables (180,140) 183,675
Inventories (1,294,489) (6,980)
Prepaid Expenses and Other Current Assets 8,246 63,584
Accounts Payable 890,372 157,303
Accrued Expenses 101,128 (111,621)
------------ ------------
Net Cash Used in Operating Activities (5,614,179) (3,605,551)
------------ ------------
INVESTING ACTIVITIES:
Purchase of Investments (11,398,188) --
Purchases of Property and Equipment (1,191,649) (473,332)
Increase in Other Assets (231,733) (193,478)
------------ ------------
Net Cash Used in Investing Activities (12,821,570) (666,810)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock and Warrants, Net 20,327,045 10,603,355
Proceeds from Exercise of Stock Options and Warrants 2,107,506 38,180
Repayments of Capital Lease Obligation and Note Payable (1,764) (1,507,213)
------------ ------------
Net Cash Provided by Financing Activities 22,432,787 9,134,322
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,997,038 4,861,961
Cash and Cash Equivalents:
Beginning of Period 2,367,764 2,127,358
------------ ------------
End of Period $ 6,364,802 $ 6,989,319
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 4,906 $ 158,943
============ ============
</TABLE>
During the six month period ended January 31, 1995, Notes Payable of $1,500,000
were converted into common stock.
See accompanying notes to financial statements.
ANGEION CORPORATION
Form 10-Q
January 31, 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 wholly-owned European
subsidiary, Angeion Europe Limited, to facilitate its clinical trials of
the Implantable Cardioverter Defibrillator and expand its European business
activities. All intercompany transactions and accounts have been eliminated
in consolidation.
The information furnished reflects, in the opinion of the management of
Angeion Corporation, all adjustments (of only a normally recurring nature),
necessary to present a fair statement of the results for the interim
periods presented.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing the net income (loss)
for the period by the weighted average number of shares of common stock
outstanding during the period. Common equivalent shares representing stock
warrants and options were excluded in the Fiscal 1995 and 1996 periods
presented due to their anti-dilutive effect.
3. NOTES PAYABLE
During June and July of 1994, the Company raised a total of $3,000,000 in
the form of short-term bridge loans (the "Bridge Financing") to fund its
operations until it could complete an equity financing. All loans under the
Bridge Financing were evidenced by promissory notes accruing interest at a
rate of 12% per year. The promissory notes were due on December 8, 1994, or
such earlier time as the Company completed a permanent equity financing
raising at least $6,000,000 in gross proceeds. The promissory notes were
secured by certain assets of the Company, and were convertible into Angeion
common stock at a conversion price of $2.00 per share. In connection with
such loans, each lender received a warrant to purchase, at an exercise
price of $2.00 per share, that number of shares of common stock equal to
50% of the principal amount of the loan divided by the exercise price of
the warrant. The warrants expire on December 8, 1997. The warrants issued
were valued at $200,400 which was reflected as a discount and was being
amortized over the term of the Bridge Financing. Certain directors of the
Company participated in the Bridge Financing and invested $1,000,000 in
exchange for promissory notes and warrants to purchase 250,000 shares. In
September 1994, $1,500,000 of the bridge notes were converted into common
stock and $1,500,000 were repaid.
4. 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
$10,603,355 net of expenses. The exercise price of the warrants per whole
share is $4.75 per share and they expire in March 1996. Net proceeds of the
sale of the securities are being used for research and development,
investment in capital equipment and leasehold improvements, general
corporate purposes, including working capital, and for the repayment of
unconverted short-term bridge loans.
On August 2, 1995, the Company completed a public offering of 3.4 million
shares of newly issued common stock for proceeds of approximately
$20,300,000, net of expenses. The Company intends to apply the net proceeds
of the sale of 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. The 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
Cash, cash equivalents and investments at January 31, 1996 were $17,762,990.
Management believes this cash and investments will fund operations through
December 1996. Additional funds may be available from Warrants issued in
connection with an offering in September 1994. The Company completed a public
offering of 4.9 million shares of Common Stock and 4.9 million warrants (the
Warrants). Each Warrant entitles the holder to purchase at any time up to 3:30
p.m. Eastern time on March 12, 1996, the expiration date of the Warrants,
one-half of a share of Common Stock at an exercise price per whole share of
$4.75, subject to certain adjustments for changes in capitalization.
Approximately 11% of these warrants had been exercised at January 31, 1996.
There can be no assurance, however, that the remaining Warrants will be
exercised or that additional funds will be available from other sources on
acceptable terms or at all.
OPERATING ACTIVITIES: Net cash used in operating activities was
$5,614,179 and $3,605,551 in the six months ended January 31, 1996 and 1995,
respectively. The cash used was primarily related to research and development
activities of Angeion's continuing operations, the implantable cardioverter
defibrillator and the catheter ablation divisions, including the buildup of
inventory.
INVESTING ACTIVITIES: Net cash used in investing activities was
$12,821,570 and $666,810 in the six months ended January 31, 1996 and 1995,
respectively. Of this amount $11,398,188 represented investment of proceeds from
the Company's public offering of common stock in August 1995. The Company
invested $231,733 in patents during the six months ended January 31, 1996,
primarily for the implantable cardioverter defibrillator. The Company also
purchased fixed assets of $1,191,649, consisting primarily of computer
equipment, office furniture and production equipment for the implantable
cardioverter defibrillator division.
FINANCING ACTIVITIES: Net cash provided by financing activities was
$22,432,787 and $9,134,322 in the six months ended January 31, 1996 and 1995,
respectively. In September 1994 the Company completed a public offering of 4.9
million shares of Common Stock and 4.9 million warrants to purchase one-half of
a share of common stock, which raised net proceeds of $10,603,355. Of this
amount $1,500,000 was used to repay notes payable; the remaining $1,500,000 of
notes payable was converted into common stock. On August 2, 1995, the Company
completed a public offering of 3.4 million shares of newly issued common stock
for proceeds of the offering approximately $20,300,000, net of expenses. The
Company intends to apply the net proceeds of the offering for research and
development, leasehold improvements, and general corporate purposes,
including working capital.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 1996 COMPARED TO THE THREE MONTHS ENDED
JANUARY 31, 1995
Net sales increased from zero in the quarter ended January 31, 1995 to $267,029
in the quarter ended January 31, 1996. The increase was due to the initiation of
sales of defibrillator products to Pacesetter Inc. ("Pacesetter") and European
clinical trials.
Manufacturing expense increased from zero in the quarter ended January 31, 1995
to $599,926 in the quarter ended January 31, 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.
Research and development expenses decreased from $1,944,292 in the quarter ended
January 31, 1995 to $1,872,405 in the quarter ended January 31, 1996. Research
and development activity is focused on the Company's fourth-generation automatic
implantable cardioverter defibrillator, which accounted for $1,603,850 of the
expense for the quarter ended January 31, 1996, while the catheter ablation
development activities accounted for $268,555 of the expense. In spite of this
temporary decrease, research and development expenses will continue to increase,
reflecting the Company's intent to move current products through their
development and human clinical stages as rapidly as possible and to enhance
current products while accelerating the development of a fifth generation ICD.
Sales and marketing expense increased from $2,349 in the quarter ended January
31, 1995 to $102,737 in the quarter ended January 31, 1996 reflecting the hiring
of a sales and marketing Vice President and the initiation of marketing
activity.
General and administrative expenses increased from $380,453 in the quarter ended
January 31, 1995 to $814,511 in the quarter ended January 31, 1996. The increase
is due to an increase in corporate legal expense and start up costs associated
with the establishment of the European subsidiary.
Interest income increased from $109,325 in the quarter ended January 31, 1995 to
$278,199 in the quarter ended January 31, 1996. The increase was due to higher
average invested cash balances in the quarter ended January 31, 1996 compared to
the quarter ended January 31, 1995.
Interest expense increased from $28,100 in the quarter ended January 31, 1995 to
$29,283 in the quarter ended January 31, 1996.
The net loss for the quarter ended January 31, 1996 was $2,873,634 or $.13 per
share, compared to net loss of $2,245,869 or $.13 per share for the quarter
ended January 31, 1995.
SIX MONTHS ENDED JANUARY 31, 1996 COMPARED TO THE SIX MONTHS ENDED
JANUARY 31, 1995
Net sales increased from zero in the six months ended January 31, 1995 to
$422,359 in the six months ended January 31, 1996. The increase was due to the
initiation of sales of defibrillator products to Pacesetter and European
clinical trails.
Manufacturing expense increased from zero in the six months ended January 31,
1995 to $1,224,798 in the six months ended January 31, 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.
Research and development expenses increased from $3,373,068 in the six months
ended January 31, 1995 to $3,909,176 in the six months ended January 31, 1996.
This increase of $536,108 was primarily due to an acceleration of research and
development activity (including clinical trails) on the implantable cardioverter
defibrillator (ICD). Research and development activity is focused on the
Company's fourth-generation automatic implantable cardioverter defibrillator,
which accounted for $3,354,547 of the expense for the six months ended January
31, 1996, while the catheter ablation development activities accounted for
$554,629 of the expense. Research and development expenses will continue to
increase, reflecting the Company's intent to move current products through their
development and human clinical stages as rapidly as possible and to enhance
current products while accelerating the development of a fifth generation ICD.
Sales and marketing expense increased from $5,559 in the six months ended
January 31, 1995 to $188,447 in the six months ended January 31, 1996 reflecting
the hiring of a sales and marketing Vice President and the initiation of
marketing activity.
General and administrative expenses increased from $1,011,829 in the six months
ended January 31, 1995 to $1,522,506 in the six months ended January 31, 1996.
The increase is due to an increase in non-cash compensation expense, the start
up costs associated with the establishment of the European Subsidiary, and
corporate legal expense.
Interest income increased from $165,529 in the six months ended January 31, 1995
to $598,975 in the six months ended January 31, 1996. The increase was due to
higher average invested cash balances in the six months ended January 31, 1996
compared to the six months ended January 31, 1995.
Interest expense decreased from $113,142 in the six months ended January 31,
1995 to $58,606 in the six months ended January 31, 1996. The decrease was due
to interest expense on the bridge notes which were repaid and converted in the
first quarter of fiscal 1995.
The net loss for the six months ended January 31, 1996 was $5,882,199 or $.28
per share, compared to net loss of $4,338,069 or $ .27 per share for the six
months ended January 31, 1995.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As a result of the hiring of Angeion's Vice President of Research and
Development, Medtronic, Inc. alleged that such hiring violated the non-compete
provisions of his employment agreement with Medtronic. In response to this
allegation, Angeion commenced a declaratory judgment against Medtronic in
Minnesota District Court seeking to have the court confirm that such hiring does
not violate these non-compete provisions. Angeion believes that the allegations
by Medtronic are without merit and intends to pursue this matter vigorously.
There can be no assurance, however, that Angeion will prevail, and the failure
of Angeion to prevail could delay retaining his services.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of the Shareholders of the Company was held on December 20,
1995. The following matters were voted on and approved by the Company's
shareholders at the Annual Meeting. The tabulation of votes with respect to each
of the following matters voted on at the Annual Meeting is set forth as follows:
<TABLE>
<CAPTION>
For Withhold Abstain Broker Non-Vote
--- -------- ------- ---------------
1. ELECTION OF DIRECTORS
<S> <C> <C> <C> <C>
Whitney McFarlin 19,270,397 245,913
Dennis Evans 19,169,096 347,214
Lyle Joyce, M.D.,Ph.D. 19,107,422 408,888
Glen Taylor 19,272,197 244,113
Arnold Angeloni 19,271,922 244,388
Joseph Kiser, M.D. 19,110,422 405,888
2. AMEND THE COMPANY'S 1993 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF
SHARES RESERVED FOR ISSUANCE BY 1,000,000.
18,184,526 1,027,112 153,972 150,700
3. RATIFICATION OF KPMG PEAT MARWICK LLP AS AUDITORS FOR THE YEAR ENDING JULY
31, 1996
19,415,022 36,853 64,435 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27.1 Financial Data Schedule.
(b) No reports were filed on Form 8-K during the
quarter for which this report was filed.
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: March 13, 1996 By________________________________
David L. Christofferson
Vice President of Finance
(Principal Financial Officer and
Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JAN-31-1996
<CASH> 6,364,802
<SECURITIES> 11,398,188
<RECEIVABLES> 180,140
<ALLOWANCES> 0
<INVENTORY> 1,693,277
<CURRENT-ASSETS> 19,801,116
<PP&E> 3,937,596
<DEPRECIATION> 1,403,686
<TOTAL-ASSETS> 23,642,504
<CURRENT-LIABILITIES> 2,260,780
<BONDS> 0
0
3,166,425
<COMMON> 215,217
<OTHER-SE> 16,500,082
<TOTAL-LIABILITY-AND-EQUITY> 19,881,724
<SALES> 422,359
<TOTAL-REVENUES> 422,359
<CGS> 1,224,798
<TOTAL-COSTS> 1,224,798
<OTHER-EXPENSES> 5,620,129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,606
<INCOME-PRETAX> (5,882,199)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,882,199)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,882,199)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> 0
</TABLE>
