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 June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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.)
7601 Northland Drive, Brooklyn Park, MN 55428-1088
(Address of principal (Zip Code)
executive offices)
(612) 315-2000
(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: 33,351,446 shares
outstanding as of August 4, 1998
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM DESCRIPTION Page
- ---- ----------- ----
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets (unaudited) 1
- June 30, 1998 and December 31, 1997.
Consolidated Statements of Operations (unaudited) 2
- For the Three and Six Months Ended
June 30, 1998 and 1997.
Consolidated Statements of Cash Flows (unaudited) 3
- For the Six Months Ended June 30, 1998 and 1997.
Notes to Consolidated Financial Statements (unaudited). 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 5
CONDITION AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 9
ITEM 5. OTHER INFORMATION 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 10
Signatures. 11
<PAGE>
ANGEION CORPORATION
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,791,443 $ 14,052,115
Accounts receivable:
Trade, less allowance for doubtful accounts of $17,000 for 593,620 241,136
1998 and $0 for 1997
Other 221,301 167,450
Inventories 7,964,027 6,889,144
Prepaid expenses and other current assets 833,803 291,475
------------- -------------
TOTAL CURRENT ASSETS 23,404,194 21,641,320
Property and equipment, net 7,310,701 6,523,820
Investment in joint venture, net 2,835,634 --
Other assets, net 2,746,554 718,411
------------- -------------
TOTAL ASSETS $ 36,297,083 $ 28,883,551
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,775,356 893,996
Current portion of long-term debt 665,797 --
Accrued payroll, vacation and related costs 851,706 1,015,119
Other accrued expenses 1,525,135 1,186,941
Deferred income 680,123 36,550
------------- -------------
TOTAL CURRENT LIABILITIES 5,498,117 3,132,606
Long-term debt 22,150,000 --
TOTAL LIABILITIES 27,648,117 3,132,606
------------- -------------
Shareholders' equity:
Common stock, $.01 par value. Authorized
75,000,000 shares; issued and outstanding
33,275,946 shares at June 30, 1998,
and 32,998,443 shares at December 31, 1997 332,759 329,984
Additional paid-in capital 111,079,801 109,682,282
Unamortized value of restricted stock (156,266) (50,716)
Cumulative translation adjustment 8,350 6,903
Accumulated deficit (102,615,678) (84,217,508)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 8,648,966 25,750,945
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 36,297,083 $ 28,883,551
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
ANGEION CORPORATION
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 1,113,117 $ 984,966 $ 1,468,115 $ 1,700,651
Operating expenses:
Manufacturing 2,022,438 2,338,232 3,867,059 4,196,544
Research & development 5,204,092 4,908,153 10,551,548 9,515,234
Selling, general & administrative 1,309,702 1,922,683 3,660,142 3,391,748
------------ ------------ ------------ ------------
Total operating expenses 8,536,232 9,169,068 18,078,749 17,103,526
------------ ------------ ------------ ------------
OPERATING LOSS (7,423,115) (8,184,102) (16,610,634) (15,402,875)
------------ ------------ ------------ ------------
Other income (expense), net:
Equity in net loss of joint venture (846,490) -- (1,164,366) --
Interest expense (661,907) (24,677) (945,558) (54,102)
Interest income 208,240 273,741 322,388 642,412
------------ ------------ ------------ ------------
Other income (expense) (1,300,157) 249,064 (1,787,536) 588,310
------------ ------------ ------------ ------------
NET LOSS $ (8,723,272) $ (7,935,038) $(18,398,170) $(14,814,565)
============ ============ ============ ============
NET LOSS PER SHARE $ (.26) $ (.27) $ (.56) $ (.51)
============ ============ ============ ============
Weighted average number of shares
outstanding 33,178,406 29,432,979 33,135,104 28,960,469
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
ANGEION CORPORATION
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(18,398,170) $(14,814,565)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,641,660 925,475
Compensation expense on grant of stock and stock options 1,267,252 676,285
Loss on disposal of fixed assets 299,523 --
Equity in net loss of joint venture 1,164,366 --
Changes in operating assets and liabilities:
Accounts receivable (406,457) (335,444)
Inventory (1,074,883) (1,034,718)
Prepaid expenses and other current assets (542,257) (60,691)
Accounts payable 881,385 691,763
Accrued expenses 175,188 160,742
Deferred income 643,573 --
------------ ------------
Net cash used in operating activities (14,348,820) (13,791,153)
------------ ------------
INVESTING ACTIVITIES:
Purchase of short-term investments -- (360,022)
Proceeds from maturities of short-term investments -- 15,500,000
Investment in joint venture (3,561,595) --
Payments for purchases of property and equipment (2,479,792) (1,784,761)
------------ ------------
Net cash provided by (used in) investing activities (6,041,387) 13,355,217
------------ ------------
FINANCING ACTIVITIES:
Net proceeds from issuance of debt and capitalization of lease 20,102,160 --
Proceeds from exercise of stock options and warrants 27,492 1,023,106
------------ ------------
Net cash provided by financing activities 20,129,652 1,023,106
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS (117) (9,871)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (260,672) 577,299
Cash and cash equivalents:
Beginning of period 14,052,115 2,037,954
------------ ------------
End of period $ 13,791,443 $ 2,615,253
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 33,807 $ 54,102
------------ ------------
Non-cash investment and financing activity
Transfer of property and equipment to joint venture $ 438,405 $ --
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ANGEION CORPORATION
Form 10-Q
June 30, 1998
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements have been prepared by the
Company in accordance with generally accepted accounting principles pursuant to
the published 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 consolidated financial statements should
be read in conjunction with the consolidated financial statements and related
notes included in the Company's 1997 Annual Report to Shareholders. During
October 1997, the Company changed its year end from July 31 to December 31. The
transition period report as of and for the five months ended December 31, 1997,
was filed on Form 10Q.
The information furnished reflects, in the opinion of the management of the
Company, all adjustments, (of a normally recurring nature), necessary to present
a fair statement of the results for the period presented. The consolidated
results of operations for any interim period are not necessarily indicative of
results for the full year.
2. NET LOSS PER SHARE
For each period presented, basic and diluted loss per share amounts are
identical, as the effect of potential common shares is antidilutive.
3. EQUITY IN LOSS OF JOINT VENTURE
On January 1, 1998, the Company's 50 percent-owned joint venture, ELA*Angeion,
LLC ("ELA*Angeion"), began operations. A proportional amount of the income
(loss) from the joint venture will be accounted for under the Equity Method and
will appear as a component of Other Income (Loss) on the Company's Consolidated
Statements of Operations. Angeion's proportional share of sales, cost of sales
and any resultant gain or loss related to assets sold to the joint venture still
remaining on the books of the joint venture at the end of the applicable
reporting period have been eliminated.
4. REPORTING COMPREHENSIVE INCOME
In 1997, the Financial Accounting Standards Board (the "FASB") issued Statement
of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income". SFAS 130 does not change the reporting of net income (loss). However,
it requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a separate
financial statement that is displayed with the same prominence as other
financial statements. SFAS 130 also requires that an enterprise display the
accumulated balance of other comprehensive income separately from retained
earnings and paid-in-capital in the equity section of a statement of financial
position. The Company adopted SFAS 130 on January 1, 1998, but does not have
significant comprehensive income components to report at June 30,1998.
4
<PAGE>
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 ("ICD") group and the
catheter ablation group. These divisions develop and manufacture medical devices
to treat various types of cardiac arrhythmias (irregular heartbeats). In
November 1995, the Company established a European subsidiary, Angeion Europe
Ltd. ("Angeion Europe"), to facilitate clinical studies of its ICDs and expand
its European business activities. For the same reasons, a German subsidiary,
Angeion GmbH, was established by the Company in October 1996. The results of the
subsidiaries' operations are included in the consolidated financial statements
of the Company. On January 1, 1998, the Company's 50 percent-owned joint
venture, ELA*Angeion, LLC ("ELA*Angeion"), began operations. A proportional
amount of the income (loss) of ELA*Angeion appears in the other income (expense)
section of the Company's Consolidated Statements of Operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs have related to, and are expected to continue to
relate to, expansion of clinical studies; research and development activities of
its ICD and catheter ablation divisions; scale-up and expansion of the Company's
manufacturing and marketing activities; funding of ELA*Angeion; and general
corporate purposes including working capital. The Company has financed its
liquidity needs through the sale of Common Stock and other equity securities and
the issuance of long-term debt and notes payable.
Net cash used in operating activities increased to $14,348,820 in the six-month
period ended June 30, 1998 compared to $13,791,153 in the six-month period ended
June 30, 1997. The cash used during these periods related to research and
development activities of the Company's ICD and catheter ablation divisions
(including clinical studies), as well as increases in the manufacturing capacity
in the ICD division.
Investing activities utilized cash of $6,041,387 in the six-month period ended
June 30, 1998 and provided cash of $13,355,217 in the six-month period ended
June 30, 1997. The cash provided from maturity of marketable securities in the
1997 period were generated from U.S. Treasury Bills, which were purchased as
part of a U.S. Treasury Bill ladder established in August 1996, with monthly
maturities timed to meet the Company's liquidity needs. In the six-month period
ended June 30, 1998, the Company invested $4,000,000 in ELA*Angeion, of which
$438,405 was a contribution of physical assets. The Company also utilized cash
of $2,479,792 in the six-month period ended June 30, 1998 and $1,784,761 in the
six-month period ended June 30, 1997, to purchase property and equipment. During
the six-month period ended June 30, 1998, purchases of property and equipment
related primarily to equipping the Company's new offices in Brooklyn Park.
During the six-month period ended June 30, 1997, purchases of property and
equipment related primarily to increasing manufacturing capacity and expanding
the Company's research and development capabilities.
On March 11, 1998, the Company borrowed $5,000,000 from RGC International
Investors, LDC ("Rose Glen") pursuant to a Convertible Senior Note (the "Interim
Financing"). In connection with the Interim Financing, the Company issued Rose
Glen warrants to purchase an aggregate of 970,000 shares of the Company's Common
Stock at an exercise price of $2.922. On April 15, 1998, the Company repaid the
Interim Financing together with accrued interest, in full. In consideration of
early payment, warrants for an aggregate of 242,500 shares of Common Stock were
canceled. The remaining warrant for 727,500 shares of Common Stock (the "Rose
Glen Warrant") is exercisable until March 11, 2003.
On April 14, 1998, the Company completed a private placement of $22,150,000
principal amount of 7 1/2 percent Senior Convertible Notes due 2003 (the
"Notes"), which resulted in net proceeds to the Company of approximately
$20,000,000. The Notes were issued pursuant to an Indenture between the Company
and U.S. Bank National Association, as trustee (the "Indenture"). Interest on
the Notes is payable semi-annually on April 15 and October 15 of each year,
commencing on October 15, 1998. The Notes are convertible into Common Stock at
any time after July 13, 1998, and prior to maturity, unless previously redeemed,
at a conversion price of $3.0516 per share (the "Conversion Price"), subject to
adjustment upon the occurrence of certain events. The
5
<PAGE>
Conversion Price will be adjusted on December 18, 1998 to the lower of: (a) the
previously applicable Conversion Price, or (b) the average of the last reported
sale price of the Common Stock as reported by the Nasdaq National Market for the
five consecutive business days ending on the last full trading day prior to
December 18, 1998; provided, however, that in no event will the Conversion Price
be reduced below $1.5258.
On or after April 14, 2001, the Notes will be redeemable at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days' prior
written notice at a redemption price equal to 100 percent of the principal
amount thereof, together with accrued and unpaid interest and liquidated
damages, if any, up to the redemption date. Upon the occurrence of a "change in
control" or the delisting of the Common Stock from the Nasdaq National Market
System, each holder of the Notes has the right to require the Company to
repurchase all or any part of such holder's Notes at a repurchase price equal to
101 percent of the principal amount thereof, together with accrued and unpaid
interest and liquidated damages, if any. Upon the occurrence of an "Event of
Default" under the Indenture, the Trustee or the holders of at least 25 percent
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately.
At June 30, 1998, the Company had cash and cash equivalents of $13,791,443.
Presuming the Company's operations progress as anticipated (of which there can
be no assurance), the Company believes that its existing balances of cash and
cash equivalents, along with cash generated from operations and additional
milestone investments by Synthelabo, a French pharmaceutical company, under the
previously disclosed Investment and Master Strategic Relationship Agreement
("Synthelabo"), could provide sufficient capital to maintain a minimum level of
operations over the next 12 months; however, management will likely attempt to
raise additional capital during this time to support the planned growth of the
Company. To the extent that the Company's operations do not progress as
anticipated, however, additional capital may be needed sooner. The timing of the
Company's capital needs and the amount of capital needed will depend on a number
of factors, including: progress with clinical studies; 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; costs of manufacturing and marketing
scale-up; funding needs of ELA*Angeion; potential acquisitions of businesses,
products, and technologies; the ability of the Company to maximize its
international sales through the selling and marketing agreement with ELA
Medical, S.A.; and the ability of the Company to increase the number of U.S.
implants through ELA*Angeion, which has exclusive selling and marketing rights
within the U.S.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1997
Net sales increased 13 percent to $1,113,117 for the three-month period ended
June 30, 1998, compared to $984,966 for the three-month period ended June 30,
1997, due primarily to increased sales to ELA*Angeion. In the three-month period
ended June 30, 1998, revenue consisted of sales of ICDs to ELA*Angeion (after
elimination of Angeion's proportional share as discussed in Note 3 above) and
international sales. In the three-month period ended June 30, 1997, sales were
generated from U.S. clinical implants and sales in Europe.
Manufacturing expense decreased 14 percent to $2,022,438 for the three-month
period ended June 30, 1998, compared to $2,338,232 for the three-month period
ended June 30,1997. The decrease was primarily due to a decrease in obsolescence
expense offset by an increase in the cost of products sold due to higher sales.
Research and development expense increased 6 percent to $5,204,092 for the
three-month period ended June 30, 1998, compared to $4,908,153 for the
three-month period ended June 30, 1997. This increase was due to the costs
associated with the development of prototypes for the new models of ICDs
currently in product development. Research and development activity related to
the development of the ICDs accounted for $4,644,101 of the expense for the
three-month period ended June 30, 1998, while the catheter ablation development
activities accounted for $559,991 of the expense. Research and development
expenses will continue to increase, reflecting the Company's intent to move
these and other new products through development and human clinical studies as
rapidly as possible during Calendar 1998.
6
<PAGE>
Selling, general and administrative expense decreased 32 percent to $1,309,702
for the three-month period ended June 30, 1998, compared to $1,922,683 for the
three-month period ended June 30, 1997. This decrease was primarily related to a
decline in legal costs and to a decrease in selling and marketing expense due to
the transition of this function to ELA*Angeion.
Interest expense increased to $661,907 for the three month-period ended June 30,
1998, compared to $24,677 for the three-month period ended June 30, 1997. The
increase was due to the amortization of debt expense and the 7 1/2 percent
interest accrued on the Notes issued in April 1998.
Interest income decreased 24 percent to $208,240 for the three-month period
ended June 30, 1998, compared to $273,741 for the three-month period ended June
30, 1997. The decrease was due to the lower average invested cash balances in
the three-month period ended June 30, 1998, compared to the three-month period
ended June 30, 1997.
The net loss increased to $8,723,272, or $.26 per share, in the three-month
period ended June 30, 1998, compared to $7,935,038, or $.27 per share, the
three-month period ended June 30, 1997.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997
Net sales decreased 14 percent to $1,468,115 for the six-month period ended June
30, 1998, compared to $1,700,651 for the six-month period ended June 30, 1997,
due primarily to a decrease in clinical sales during the first quarter offset
somewhat by the increase in sales to ELA*Angeion. In the six-month period ended
June 30, 1998, revenue consisted of sales of ICDs to ELA*Angeion (after
elimination of Angeion's proportional share as discussed in Note 3 above) and
international sales. In the six-month period ended June 30, 1997, sales were
generated from U.S. clinical implants and sales in Europe.
Manufacturing expense decreased 8 percent to $3,867,059 for the six-month period
ended June 30, 1998, compared to $4,196,544 for the six-month period ended June
30,1997. The decrease was primarily due to a decrease in obsolescence and cost
of goods sold offset by an increase in the expense associated with the
introduction of the new model 2020 ICD, which had its first implant in March
1998.
Research and development expense increased 11 percent to $10,551,548 for the
six-month period ended June 30, 1998, compared to $9,515,234 for the six-month
period ended June 30, 1997. This increase was due to the costs associated with
the development of prototypes for the new models of ICDs currently in product
development. Research and development activity related to the development of the
ICDs accounted for $9,435,703 of the expense for the six-month period ended June
30, 1998, while the catheter ablation development activities accounted for
$1,115,845 of the expense. Research and development expenses will continue to
increase, reflecting the Company's intent to move these and other new products
through development and human clinical studies as rapidly as possible during
Calendar 1998.
Selling, general and administrative expense increased 8 percent to $3,660,142
for the six-month period ended June 30, 1998, compared to $3,391,748 for the
six-month period ended June 30, 1997. This increase was primarily due to an
increase in non-cash compensation associated with restricted stock grants and
expense incurred on disposal of assets relating to the Company's move to its new
facility.
Interest expense increased to $945,558 for the six month-period ended June 30,
1998, compared to $54,102 for the six-month period ended June 30, 1997. The
increase was due to the amortization of debt expense and the 7 1/2 percent
interest accrued on the Notes issued in April 1998.
Interest income decreased 50 percent to $322,388 for the six-month period ended
June 30, 1998 compared to $642,412 for the six-month period ended June 30, 1997.
The decrease was due to the lower average invested cash balances in the
six-month period ended June 30, 1998, compared to the six-month period ended
June 30, 1997.
The net loss increased to $18,398,170, or $.56 per share in the six-month period
ended June 30, 1998, compared to $14,814,565, or $.51 per share the six-month
period ended June 30, 1997.
7
<PAGE>
CERTAIN IMPORTANT FACTORS
This Form 10-Q contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. For this purpose, any
statements contained in this Form 10-Q that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"estimate", or "continue" or comparable terminology are intended to indicate
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties. Actual results may differ materially depending on a
variety of factors, including, but not limited to, the following: progress with
clinical trials; time and costs involved in obtaining regulatory approvals;
costs involved in filing, prosecuting and enforcing patents and defending
against patent infringement claims; competing technological and market
developments; costs of manufacturing and marketing scale-up; funding needs of
ELA*Angeion; ability of the Company to obtain additional capital; and success of
the strategic alliance with Synthelabo. Additional information with respect to
the risks and uncertainties faced by the Company may be found in the Risk
Factors contained in the Company's Current Report of Form 8-K as filed with the
SEC on April 20, 1998, a copy of which is available from the Company upon
request.
8
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS.
In 1996, the Company and Pacesetter, Inc. jointly sued Cardiac Pacemakers, Inc.,
a subsidiary of Guidant Corporation ("CPI"), in the United States District
Court, District of Minnesota, for patent infringement of Pacesetter's
bradycardia patents and the Company's tachycardia patents. In connection with
the Cross-License Agreement with St. Jude Medical, Inc., pursuant to a court
order in July 1997, the Company is now the sole party to the litigation
involving the Company's tachycardia patents. The Company asserted that the Mini
I and Mini II ICDs CPI was making at that time infringed certain of the
Company's patent rights. Discovery was limited to the Mini I and Mini II devices
and has been substantially completed in the lawsuit.
On May 29, 1998, the Company was notified that the Magistrate Judge filed a
Report and Recommendation (the "Report") with the District Judge concerning
motions for summary judgment in the case. The Magistrate Judge heard competing
motions by both the Company and CPI on the issue of whether certain CPI
defibrillators infringed certain claims of four separate Company patents which
are at issue in the lawsuit. The Report recommended to the District Judge that
the Mini I and Mini II implantable defibrillators of CPI should be found to
infringe certain claims of three of the Company patents related to the smaller
capacitance, smaller size and Hot Can(R)-like features of these devices. The
Report of the Magistrate Judge does not constitute an order or judgment of the
District Court. CPI filed objections to the Report to which the Company
responded and the matter is now before the District Judge to make a formal
ruling in which he may accept, reject or modify all or part of the Report. The
Report did not address the issues of validity and enforceability of the patents
or the issues of damages or willful infringement, as these issues were not
before the Magistrate Judge as part of the motions for summary judgment. These
issues will be decided as part of a jury trial of the lawsuit which is to be
trial ready as of December, 1998, with the Company having the burden of proving
damages and willful infringement by a preponderance of the evidence and CPI
having the burden of proving that the patents are invalid or unenforceable by
clear and convincing evidence.
ITEM 5. OTHER INFORMATION.
At June 30, 1998, the total long-term debt of the Company as shown in the
Company's consolidated financial statements, was $22,150,000. For the 1998
year-to-date period, the Company's ratio of earnings to fixed charges was (18.5)
versus (272.8) for the same 1997 period. The ratios were computed by dividing
fixed charges into the sum of earnings (after certain adjustments) and fixed
charges. Earnings include loss from operations plus equity in the net losses of
the Company's 50% owned joint venture. Fixed charges include interest on all
debt including amortization of debt issuance costs.
With the change last year from a Fiscal to a Calendar year, the Company's next
Annual Meeting of Shareholders will take place in spring 1999. Pursuant to
recent amendments to the proxy rules under the Securities Exchange Act of 1934,
as amended, the Company's shareholders are hereby notified that the deadline for
providing the Company timely notice of any shareholder proposal to be submitted
outside the Rule 14a-8 process for consideration at the Company's 1999 Annual
Meeting of Shareholders is February 1, 1999. Proposals of shareholders intended
to be presented in the proxy materials relating to the Company's 1999 Annual
Meeting of Shareholders must be received by the Company at its principal
executive offices on or about December 1, 1998.
9
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Item No. Item
-------- ----
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule.
(b) Reports on form 8-K.
A current report on Form 8-K, dated April 17, 1998, was filed
during the three months ended June 30, 1998, pursuant to Item 5. This
filing was made in reference to the Company's risk factors and
uncertainties. No financial statements were included in this filing.
10
<PAGE>
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: August 13, 1998 By: /s/ James B. Hickey
-----------------------
James B. Hickey
President and Chief Executive Officer
(principal executive and financial officer)
By: /s/ Peg O. Norris
---------------------
Peg O. Norris
Corporate Controller
(principal accounting officer)
11
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Six months ended June 30,
1998 1997
---- ----
Net loss $(18,398,170) $(14,814,565)
Interest expense 379,711 54,102
Amortization of debt costs 565,847 ---
Income tax --- ---
------------ ------------
Loss before fixed charges (17,452,612) (14,760,463)
Fixed Charges (1) 945,558 54,102
Ratio of net loss before fixed charges to
fixed charges (18.5) (272.8)
Deficiency of earnings to cover fixed
charges $(18,398,170) $(14,814,565)
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,791,443
<SECURITIES> 0
<RECEIVABLES> 610,620
<ALLOWANCES> 17,000
<INVENTORY> 7,964,027
<CURRENT-ASSETS> 23,404,194
<PP&E> 11,600,846
<DEPRECIATION> 4,290,145
<TOTAL-ASSETS> 36,297,083
<CURRENT-LIABILITIES> 5,498,117
<BONDS> 0
0
0
<COMMON> 332,759
<OTHER-SE> 8,316,207
<TOTAL-LIABILITY-AND-EQUITY> 36,297,083
<SALES> 1,468,115
<TOTAL-REVENUES> 1,468,115
<CGS> 3,867,059
<TOTAL-COSTS> 3,867,059
<OTHER-EXPENSES> 14,211,690
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 945,558
<INCOME-PRETAX> (18,398,170)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18,398,170)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,398,170)
<EPS-PRIMARY> (.56)
<EPS-DILUTED> (.56)
</TABLE>
