ANGEION CORP/MN, 10-K, 1999-03-31

ANGEION CORP/MN
10-K, 1999-03-31
SURGICAL & MEDICAL INSTRUMENTS & APPARATUS

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UNITED STATES
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 DECEMBER 31, 1998 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.)

7601 NORTHLAND DRIVE, MN 55428-1088
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (612) 315-2000

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
PREFERRED STOCK PURCHASE RIGHTS

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 the 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 March 24, 1999, 40,051,569 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),
excluding outstanding shares beneficially owned by directors and executive
officers and 10% shareholders, was approximately $23,954,224.

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PART I

THIS FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. FOR THIS
PURPOSE, ANY STATEMENTS CONTAINED IN THIS FORM 10-K 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 IDENTIFY
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL
RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A
VARIETY OF FACTORS, INCLUDING THOSE SET FORTH IN THE SECTION BELOW ENTITLED
"CERTAIN RISK FACTORS."

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 customers'
specifications while it devoted its research and development capabilities to
designing proprietary products.

In July 1988, Angeion merged with Verde Ventures Incorporated, a public
company organized in March 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 to
assume responsibility for the intensified research efforts on the development of
a laser catheter ablation system, and in October 1990, the Company acquired a
company engaged in the development of an automatic implantable cardioverter
defibrillator ("ICD") system. In September 1992, the Company sold all of the
assets of the Company's medical accessory products division to Burron Medical
Inc., a wholly-owned subsidiary of B. Braun of America, Inc., and focused its
resources on development of its laser catheter ablation system and ICD system.

In February 1993, the Company and Siemens Pacesetter, Inc.
("Pacesetter"), at the time a subsidiary of Siemens Corporation and subsequently
acquired by St. Jude Medical, Inc. ("St. Jude"), entered into a strategic
relationship pursuant to which Angeion sold to Pacesetter shares of Series A
Convertible Preferred Stock and a convertible subordinated debenture, and
entered into certain OEM and license agreements. In May 1997, St. Jude acquired
Ventritex, Inc. and, in connection with such acquisition, the Company, St. Jude
and Pacesetter entered into a Cross-License Agreement and terminated their
previous OEM and license agreements. See "Narrative Description of
Business--Manufacturing" and "--Intellectual Property." In May 1997, Pacesetter
converted the shares of Series A Convertible Preferred Stock and the convertible
subordinated debenture into shares of Common Stock.

In October 1997, the Company entered into a strategic relationship with
Synthelabo, a French pharmaceutical company, pursuant to which Synthelabo
purchased Common Stock and warrants from the Company under an Investment and
Master Strategic Relationship Agreement (the "Investment Agreement"). In
addition, ELA Medical, S.A., a subsidiary of Synthelabo, is marketing the
Company's products in European and Japanese markets and ELA Medical, Inc.,
another subsidiary of Synthelabo, formed a U.S. joint venture with the Company
that combined the two companies' sales and marketing functions and serves

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as the U.S. selling organization for both companies. Pursuant to the Investment
Agreement, Synthelabo has made equity investments totaling $20 million prior to
December 31, 1998 and an additional $10 million equity investment subsequent to
December 31, 1998. See Notes to Financial Statements 17 - Subsequent Events.

(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.

The Company operates in a single industry segment: the research,
development, manufacture and marketing of medical devices.

GENERAL

Angeion Corporation designs, develops, manufactures and markets
products that treat irregular heartbeats (arrhythmias). The Company has
developed several ICDs. ICDs are designed to treat abnormally 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"), which if not terminated will lead to sudden cardiac death
("SCD"). ICDs are electronic devices that are implanted within the body and are
connected to the heart with defibrillator leads. These devices monitor the
patient's heartbeat and, in the event of VT or VF, deliver an electrical shock
to return the heartbeat to normal rhythm.

Following receipt of an Investigational Device Exemption ("IDE") from
the U.S. Food and Drug Administration ("FDA"), the Company commenced U.S.
clinical studies of its first Sentinel model, the Sentinel 2000, in March 1996.
In April 1996, the Company received CE Mark approval to market the Sentinel 2000
in the European Union ("EU"). From September 1996 to March 1997, the Company
received FDA approval to expand its U.S. clinical studies of the Sentinel 2000
and AngeFlex (TM) lead system to 25 centers across the U.S. and to conduct
additional patient evaluations; received an IDE for and initiated U.S. clinical
studies of the Sentinel 2010; received CE Mark approval to market its Sentinel
2011 and 2012 ICD systems in the EU; and received permission to add the Sentinel
models 2011 and 2012 to its U.S. clinical studies and to expand the number of
centers across the U.S. to 35. In June 1997, the Company submitted its
application for Pre-Market Approval ("PMA") for the Sentinel 2000 and the
Sentinel 2010 series to the FDA. In October 1997, Angeion initiated U.S.
clinical studies of its series of AngePass (TM) single-pass lead systems as part
of FDA approved supplement to the Company's previous approved IDE for the two
Sentinel ICDs and AngeFlex leads. Through this supplement, the Company has
approval to perform clinical trials of two AngePass series of leads. On August
19, 1998, the Company received the PMA approval for the Sentinel 2000 and 2010
series for market release in the U.S. In November 1998, the Company submitted
its application for Supplemental PMA for the Lyra 2020 Series of ICD Systems and
the Angepass 4040 and 4080 Lead Systems. On March 5, 1999, the Company received
PMA for these ICD and Lead Systems for market release in the U.S.

Since 1990, Angeion has also been developing cardiac ablation catheter
technologies and products for the treatment of atrial and ventricular
tachyarrhythmias. The first product developed was the AngeCool cooled tip
radiofrequency ablation catheter that is targeted at the treatment of sustained
ventricular tachycardias. In August of 1997, Angeion completed a 20 patient
feasibility study for the treatment of sustained ventricular tachycardias.
Angeion's product successfully treated 100% of the patients with no arrhythmia
reoccurrence after six months.

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Due to the significant investment required in order to develop a
broad-based ablation catheter product line, Angeion decided to seek a strategic
partner that could incorporate Angeion's proprietary catheter ablation
technologies into its own product line. In September 1998, Angeion announced an
agreement with Cordis-Webster, a division of Johnson & Johnson, which allowed
Cordis-Webster to acquire the rights to Angeion's angecool RF ablation product
and technologies. In return, cordis-Webster agreed to fund certain development
work by Angeion on a linear radiofrequency ablation product targeted at the
treatment of atrial fibrillation.

As a result of the continually increasing financial requirements
necessary for the Company to develop and market high-tech medical devices, the
Company expects to focus future efforts mainly on the ICD product lines. The
research and development activities that relate to the ablation catheter product
lines are anticipated to decrease as the Company's resources are reallocated.
The development activities agreed upon with Cordis-Webster will continue during
1999, however, development of additional ablation catheter technologies will be
limited due to the availability of resources.

RECENT DEVELOPMENTS

As noted by the independent public accountants in their report and as
disclosed in the accompanying financial statements, the Company has suffered
recurring losses from operations and has a net shareholders' deficiency that
raises substantial doubt about its ability to continue as a going concern. The
Company has begun a comprehensive review of its short and long term options to
help improve its financial condition and increase shareholder value. In November
1998, the Company announced that it had retained Raymond James and Associates,
Inc. ("Raymond Jones") as a financial advisor to assist in this process. The
Company, together with Raymond Jones, is currently evaluating all of its
alternatives in this process, including: potential sources of financing; further
reorganization of the Company's operations (in addition to the reorganization
discussed below); sale or license of some or all of the Company's technology,
product lines, and assets; settlement of its lawsuit with CPI, and transactions
by which the Company would be acquired by another entity.

In January 1999, the Company also announced a reorganization to reduce
cash requirements, improve operational efficiencies and enhance sales and
marketing efforts. As a result of this restructuring, the Company reduced
approximately 20% of the total employee base, including 40% of the Company's
senior management team. A charge of approximately $750,000, or $.02 per share,
will be taken in the first quarter 1999 related to the reorganization.

In January 1999, the Company announced that it had secured $6 million
in short-term debt financing to bridge the Company through receipt of an equity
investment due upon achievement of the U.S. Food and Drug Administration's
market approval of the Lyra(TM) 2020 ICD series and AngeFix(TM) lead systems.
The debt is to be repaid on October 19, 1999. FDA approval was received on March
5, 1999 and the $10 million investment was received on March 16, 1999. The
Company issued warrants to purchase 9,090,171 and 5,405,405 shares of the
Company's common stock at prices of $0.01 and $1.11 per share, respectively, in
exchange for the $10 million. These warrants expire on March 12, 2009 and March
12, 2002, respectively.

BACKGROUND AND MARKETS

IMPLANTABLE CARDIOVERTER DEFIBRILLATORS

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ICDs were first implanted in humans in 1980 by Dr. Michel Mirowski, a
research cardiologist at Johns Hopkins University. Dr. Mirowski's ICD was first
approved by the FDA in October of 1985. Today, the worldwide market size for
ICDs is approximately $1 billion.

Since the first ICD was commercialized in 1985, there have been
significant technological improvements in these devices, which have greatly
benefited both the patients and the physicians implanting them. These
improvements, combined with a considerable number of published medical studies
that have demonstrated the clinical efficacy of ICDs, have been responsible for
the widespread acceptance of this technology and the resultant growth in the
marketplace.

ARRHYTHMIAS

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 heart 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. Tacharrythmias of the heart are
characterized by a heart rate and rhythm that is abnormally high.

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 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, among other things, dizziness, unconsciousness, cardiac arrest and
possibly death. Episodes of VT occur unpredictably and tend to become more
serious over time. VT can progress to the most serious type of cardiac
arrhythmia, VF.

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 an 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 will die.

CLINICAL INDICATIONS FOR ICDS

The market for ICDs is driven by the number of patients who have, or
are at risk to have, tachyarrhythmias. Tachyarrhythmias are a major public
health problem due to the incidence and prevalence of cardiovascular disease. In
the U.S. alone, it is estimated that approximately 350,000 people each year
succumb to SCD as a result of VF. When VF occurs, the body's tissues and organs
become starved for oxygen and within three to five minutes, the body's organs,
particularly the brain, begin to fail. If the patient's heart is not restarted
within five minutes, almost always by the administration of an electrical shock
from an external defibrillator, there is a relatively low chance that the
patient can be revived. In fact, the probability of surviving an episode of SCD
is approximately 6%.

According to CARDIOLOGY TRENDS, there are more than 3 million people in
the U.S. who suffer from some form of tachyarrhythmia. About 1.7 million of
these patients have supraventricular arrhythmias while the other half, about 1.3
million, suffer from VT.

The patient population with VT can be broadly divided into the
following two groups: (i) unsustained ventricular tachyarrhythmias, which affect
about one million people in the U.S. and

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(ii) sustained VT, which affects the remaining population with VT. In addition
to these two patient populations, there are two additional groups of patients
who either have, or are at risk to have, tachyarrhythmias: (i) survivors of SCD
and (ii) patients who are at risk for ventricular tachyarrhythmias.

The market for ICDs is driven by the indications for the device. Due to
the results of a variety of clinical trials involving the ICD, there are
currently three categories of patients for whom the implantation of an ICD is
indicated:

o Survivors of SCD (approximately 20,000)
o Patients with sustained ventricular tachyarrhythmias (approximately
250,000)
o Patients who are at risk for ventricular arrhythmias (approximately
80,000)

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MARKET OVERVIEW

THE SIZE AND THE GROWTH OF THE POTENTIAL MARKET FOR ICDS

From its first commercial marketing in October of 1985, the market for
ICDs has grown to more than $1 billion today, with the U.S. comprising
approximately 80% of the world market. During its first ten years, the market
grew at a compound annual growth rate of nearly 56% per year from $7 million in
1985 to nearly $610 million in 1995. Over the past several years, it is
estimated that the market has grown at a compound annual growth rate of 25% to
approximately $1.2 billion in 1998. Because of the technological sophistication
of ICDs today, and the growing body of clinical data demonstrating the efficacy
of these devices, Industry Analysts project that this market can grow at a
compound annual growth rate of approximately 20-25% per year for the foreseeable
future. At that rate, it is expected that the market will grow to nearly $3
billion by the year 2003. The growth in the market for ICDs will likely be
driven by several factors, including: (1) the expansion of the clinical
indications for these devices; (2) technological improvements which will allow
these devices to satisfy unmet clinical needs; and (3) a continuing stream of
published medical studies demonstrating the clinical efficacy and
cost-effectiveness of ICDs.

FEATURES DESIRED BY PHYSICIANS IN ICDS AND UNMET CLINICAL NEEDS

Physicians that diagnose and treat abnormalities of the heart's rhythm
and electrical conduction system are known as electrophysiologists.
Electrophysiology is the study of the electrical conduction system of the heart.
There are an estimated 1,600 electrophysiologists in the U.S. today practicing
at approximately 600 medical institutions throughout the country.
Electrophysiologists are most often the physicians who implant ICDs and, as
such, comprise the first-line consumer in the ICD market. As
electrophysiologists have gained experience with ICDs over the past 13 years,
they have developed a set of needs which they would like to see reflected in the
design of ICDs, including the following:

o Small Size. ICDs have decreased in size from 150 cc's or more in the
mid-1980s to less than 40 cc's for some models today, thereby enabling
the electrophysiologist to dramatically reduce the complications
associated with the implantation of ICDs. When ICDs were greater than
90 cc's in size, they had to be implanted in a patient's abdomen.
Angeion's 2020 Series is 46 cc's. Physicians can implant smaller
devices in the upper chest (pectoral region) of the patient either just
underneath the skin or beneath the chest muscle. The leads available in
the earliest models of ICDs required open heart surgery to implant them
on the surface of the heart. Subsequently, transvenous leads were
developed which could be implanted in the heart through veins next to
the collarbone. These changes dramatically reduced the complications
associated with the implantation of these devices. As the size of
devices continue to get smaller, they should continue to become easier
to implant and will become more comfortable for the patient, thereby
causing fewer post-surgical complications.

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o Long Life. The earliest ICDs had an effective life of only two to three
years. Incremental improvements in detection algorithms (to reduce
inappropriate shocks), improvements in the electrical waveform of the
ICD, and incorporation of state-of-the-art electronic circuitry have
combined to reduce the drain on the batteries which has improved the
longevity of these devices. Today, the average ICD is expected to last
up to five years, assuming several shocks are delivered to the patient
per year. Angeion believes that its 2020 Series ICD best meets the
customers' needs by having an average expected useful life of
approximately nine years.

o Electrogram Storage. Almost all ICDs today store a record of the
patient's electrocardiogram before, during, and after arrhythmic
episodes. This record of the patient's electrogram is downloaded into
the external programmer transcutaneously from the ICD by the
electrophysiologist during checkups with the patient. This information
is valuable in evaluating the patient's condition and adjusting the
settings on the ICD to provide optimal therapy to the patient. The
earliest models of ICDs had no electrogram storage. They simply
recorded the number of detected arrhythmic events. Today, most devices
have between 15 and 20 minutes of EGM storage. As ICDs become more
technologically sophisticated, particularly in terms of sensing, the
amount of electrogram storage required will rise dramatically. As such,
ICDs with 60 minutes or more of EGM storage or more may be required to
provide the physician with the information they desire to more
effectively manage the patient's condition. Angeion's 2020 Series ICD
has 60 minutes of EGM storage.

While the Company believes that its ICDs offer certain features
attractive to customers, including competitive size and weight, increased
longevity and greater flexibility in treatment options, competition, with
greater resources than the Company, particularly Medtronic and Guidant (CPI),
have continued to make significant progress in this area and the Company's
ability to continue to develop, manufacture and sell a competitive ICD can not
be assured.

INTERVENTIONAL TECHNOLOGIES

Catheter ablation is an emerging therapeutic procedure that has the
advantage of being a minimally invasive procedure that exposes the patient to a
lower risk of complications or death, reduces hospitalization and is much less
expensive than open chest surgery. In catheter ablation procedures, an
electrophysiological mapping 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 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 the tissue. When the ablated tissue is
replaced with scar tissue, the pathway generating the conflicting electrical
impulse is eliminated and the normal conduction of electrical activity is
restored.

The market for catheter ablation devices in the treatment of
arrhythmias is much less defined and in an earlier stage of development than the
ICD market. The worldwide ablation market grew to approximately $100 million in
1998.

PRODUCTS

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IMPLANTABLE CARDIOVERTER DEFIBRILLATOR SYSTEM

The Company's ICD products and lead systems currently under
development, in clinical studies or market-approved are described below.

ICD PRODUCTS

o Sentinel 2000 Model ICD. This system consists of the Sentinel 2000
Model ICD, the AngeFlex transvenous defibrillation lead system that
connects the ICD to the patient's heart, a specialized lap top computer
programmer connected to a programming wand ("Smart Wand") and an
external defibrillation test system. The Sentinel 2000 Model ICD is
also characterized by its size (60 cc's) and weight (110 gm), which
allows for universal pectoral implantation. Pectoral implantation in
combination with transvenous leads eliminates the need for abdominal
surgery and thoracotomy (open chest surgery). Pectoral implantation
reduces patient trauma, recovery time, hospitalization costs, and
increases physician and patient acceptance. Additionally, this product
offers extended longevity through the use of a dual battery system and
other product design features. The Sentinel 2000 Model also utilizes
the Company's proprietary Small Cap Tuned biphasic waveform. The
Sentinel 2000 Model features a programmable Hot Can electrode system,
which uses the Sentinel 2000 Model's housing as an electrode that can
be programmed on and off, and programmable shock configuration to add
implant flexibility and further reduce defibrillation thresholds. In
January 1995, the first fully functional model of the Sentinel 2000
Model was implanted in human patients as part of a limited clinical
study in Bonn, Germany.

o Sentinel 2010 Series. This series of ICDs consists of the 2010, 2011
and 2012 models which contain all of the features of the Sentinel 2000
Model plus 5.5 minutes of EGM storage capability and enhanced
programming flexibility for the electrophysiologist. These models also
have a coupled shock fibrillation feature, which provides testing
convenience for the electrophysiologist. The differences among the
three models in the 2010 series relate to lead connector
configurations. The Sentinel 2010 Model, like the Sentinel 2000 Model,
provides a universal four-port connector for an additional subcutaneous
electrode. The Sentinel 2011 Model is two cc's smaller than the
Sentinel 2010 Model because of its two-port low profile connector. The
Sentinel 2012 Model four-port connector is compatible with competitors'
lead systems for replacement applications without the use of adapters.
In May 1996, the Sentinel 2010 Model ICD was introduced into human
clinical evaluation in Europe. An approval was received on August 18,
1998.

o 2020 Series. This series is a single chamber ICD, with a volume
displacement of 46 cc's. Angeion received FDA approval to begin
clinical trials of the 2020 Series ICDs in the first quarter of 1998;
clinical implants began in March 1998. The 2020 series offers 60
minutes of cardiac EGM storage capability which is used by clinicians
as an aid to better diagnose and treat their patients. The 2020 Series
also offers EGM Snapshot which is a feature that permits long term
storage of EGMs in the device and provides the ability to compare EGM
morphology over an extended period of time without the possibility of
having the EGM erased. Other devices store new EGMs over existing EGMs
as memory space becomes depleted. The EGM Snapshot reserves space in
memory so that it can never be overwritten. The 2020 Series continues
the use of the Tuned Biphasic waveform which provides for lower DFTs
and the dual battery architecture which provides for extended device
longevity. European market approval (CE Mark) was received June 1998
and U.S. FDA PMA approval was received in March 1999.

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o 2030 Series. This ICD series, currently under development will use the
same feature set as the 2020 Series, but will incorporate technology to
reduce the size of the device to less than 40 cc's.

o 2100 Series. The Company's 2100 Series ICDs will be a new generation of
ICDs designed to offer significant therapeutic enhancements and
flexibility. The Company expects that this series will have the
following features: (i) dual chamber pacing and sensing; (ii) smaller
size and weight; (iii) advanced tachyarrhythmia therapies; and (iv)
rate-responsive pacing. It is currently in early stages of development.

Following receipt of an IDE from the FDA, the Company commenced U.S.
clinical studies of its first Sentinel model, the Sentinel 2000, in March 1996.
In April 1996, the Company received CE Mark approval to market the Sentinel 2000
Model in the EU. From September 1996 to March 1997, the Company received FDA
approval to expand its U.S. clinical studies of the Sentinel 2000 Model and
AngeFlex lead system up to 25 clinical centers across the U.S. and to conduct
additional patient evaluations; received an IDE for and initiated U.S. clinical
studies of the Sentinel Series 2010; received CE Mark approval to market its
Sentinel 2010 Series in the EU; and later received permission to expand further
the number of clinical centers across the U.S. to 35. In June 1997, the Company
submitted its application for PMA Approval for the Sentinel 2000 Model and the
Sentinel 2010 Series ICDs to the FDA. In October 1997, Angeion initiated U.S.
clinical studies of its series of AngePass single-pass lead systems as part of
an FDA approved supplement to the Company's previously approved IDE for its ICDs
and AngeFlex lead systems. Through this supplement, the Company received
approval to conduct clinical trials of two AngePass lead systems. On August 19,
1998, the Company received the PMA approval for the Sentinel 2000 and 2010
series. On March 5, 1999, the Company received PMA approval for the Lyra 2020
ICD series and the AngePass lead system.

LEAD SYSTEMS

o AngePass System. The Company has developed a passive fixation
transvenous lead system, the AngePass, that combines a pacing electrode
and a shocking electrode in a single catheter. Shocks are delivered
between this lead's electrode and the Hot Can electrode. An additional
electrode may be used in the high right atrium if so desired. The
AngePass lead system is in clinical trials in the U.S. and has received
CE Mark approval in Europe and FDA approval in the U.S.

o AngeFix System. The Company has developed an active fixation,
transvenous, lead system, the AngeFix, that uses a stylet-driven
screw-in mechanism to secure the tip of the wall of the heart. This
lead began clinical trials in the U.S. in the fourth quarter of 1998.
European approval was obtained in August, 1998.

o AngeFlex Systems. The Company has developed a transvenous
defibrillation lead system without pacing or sensing capability, the
AngeFlex, which is available in four lengths. This system has been
approved for commercial sale in Europe and the U.S.

CATHETER ABLATION PRODUCTS

Since 1990, Angeion has been developing cardiac ablation catheter
technologies and products for the treatment of atrial and ventricular
tacharrhythmias.

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Due to the significant investment required in order to develop a
broad-based ablation catheter product line, Angeion decided to seek a strategic
partner that could incorporate Angeion's proprietary catheter ablation
technologies into its own product line. In September 1998, Angeion announced an
agreement with Cordis-Webster, a division of Johnson & Johnson, which will allow
Cordis-Webster to acquire the rights to Angeion's angecool RF ablation product
and technologies. In return, cordis-Webster agreed to fund certain development
work by Angeion on a linear radiofrequency ablation product targeted at the
treatment of atrial fibrillation. Angeion's future activity here will be
directly related to the funding and requirements of Cordis Webster.

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 the Company. Although the
Company's ICDs will also compete with alternative treatments for VT such as drug
therapy, open heart surgery and catheter ablation, the Company believes that ICD
manufacturers constitute its primary competition. Four other companies,
Medtronic, Guidant (CPI), Biotronik and St. Jude (Ventritex), currently have
PMA-approved products in the ICD market with Medtronic and Guidant controlling
approximately 85-90% of that market today. These two companies also have
distribution resources and customer relationships significantly greater than the
Company's.

Dual chamber defibrillators have gained acceptance in the market and
analysts predict they will increase to over 50% of the market in the near
future. Currently the Company has no dual chamber product available. Its 2100
system is a dual chamber device but will not be ready for implanting until the
latter half of the year 2000. There can be no assurance the Company will be able
to introduce this device and be competitive since it's still in early stages of
development.

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 important competitive factors. The Company expects that
competition will also be based on many factors, including device size and
weight, longevity, ease of programmability, ability to provide diagnostic
capability, product reliability, physician familiarity with the device, patent
protection, sales and marketing capability, third-party reimbursement policies,
reputation and price. Given the significantly greater resources of its primary
competitors, the Company has to date been unable to develop products containing
features which permit the Company to compete effectively with such competitors.
In addition, because such competitors have broader product offerings than the
Company, they are able to leverage their research and development efforts over
a number of different products.

MANUFACTURING

The Company's manufacturing strategy is focused on the extensive use of
proven process vendors and the utilization of key component suppliers, with
final product assembly, testing, inspection and packaging taking place at the
Company's facilities. Key process vendors provide laser welding, electronic
assembly, sterilization and other process requirements. Component suppliers
provide the Company with high quality materials and the ability to increase
production levels. The Company's largest competitors have integrated most of the
key manufacturing processes into their own products to gain greater control and
cost advantages. The Company has not yet been able to follow that strategy due
to capital and focus constraints.

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The Company began manufacturing its products at its new U.S. facility
in Minneapolis, Minnesota in March 1998. The previous Minneapolis facility
received ISO 9002 certification in February 1996 and in August 1996, the Company
successfully completed an ISO 9002 surveillance audit of the new Minneapolis
facility. ISO 9002 registration certifies the quality management systems for the
facility, with a primary emphasis on manufacturing. The Company received ISO
9001 certification in March 1998. ISO 9001 registration certifies the quality
management systems for the Company and its facility, with a primary emphasis on
manufacturing and design. An update of the ISO 9002 and ISO 9001 certifications
has been completed for the Company's new facilities. The Company's manufacturing
facilities are required to meet and adhere to all applicable standards of U.S.
and international regulatory agencies, including current FDA Quality System
Requirements and Active Implantable Medical Device Directive ("AIMDD") standards
mandated by the FDA.

SALES AND MARKETING

The Company intends to market and sell its ICD products in Europe and
Japan, through its strategic relationship with ELA Medical, and in the United
States through ELA*Angeion. In addition, Angeion has retained the rights to
market its ICD products in the rest of the world (other than certain countries
in Eastern Europe which are covered by the Manufacturing and Supply Agreement
with ELA Medical) and has received the right to market ELA Medical's products in
Canada and Mexico. See "General Development of Business."

In October 1997, the Company entered into a strategic relationship with
Synthelabo and ELA Medical. Pursuant to this relationship, the Company has
granted ELA Medical exclusive sales and marketing rights to Angeion's ICD
products in Europe and Japan. ELA Medical has marketed the Company's ICD
products using ELA Medical's trademarks and its established global direct sales
and marketing network, which currently services Japan and over 20 countries in
Europe. The initial term of the Manufacturing and Supply Agreement is seven
years, and ELA Medical may, at its sole option, renew the Manufacturing and
Supply Agreement for an additional three-year term if the minimum aggregate
purchase requirement has been met or waived in all territories during all years
prior to the end of the initial seven-year term.

In addition, the Company and ELA Medical, Inc. have formed a joint
venture, ELA*Angeion, to combine the two companies' sales and marketing
functions and to serve as the U.S. selling organization for both parties.
ELA*Angeion plans to offer a complete line of cardiac rhythm management
products, including single and dual chamber ICD systems for the rapidly growing
tachyarrhythmia management market as well as pacemaker and lead systems for the
established bradyarrhythmia market. During 1998, the Company recorded $1,800,000
in marketing expenses related to marketing activities by ELA*Angeion for Angeion
products. To date sales of the Company's products by ELA*Angeion have been
nominal.

RESEARCH AND DEVELOPMENT

Research and development expenditures for continuing operations were
$21,636,666, $7,213,832, 16,953,294, and $11,049,462 in the year ended December
31, 1998, the five-month transition period ended December 31, 1997, and the
fiscal years ended July 31, 1997 and 1996, respectively. The Company's research
and development is primarily directed at the development of its existing
products and the clinical studies relating to such products. Approximately
89.5%, 87.9%, 89.2% and 89.2% of the Company's research and development
expenditures in the year ended December 31, 1998, the five-month transition
period ended December 31, 1997, and the fiscal years ended July 31, 1997 and
1996, respectively, were directly attributable to the ICD products. As a result
of the Cordis-Webster agreement and the Company's

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restructuring efforts in January 1999, the Company anticipates future research
and development spending to be focused primarily on the ICD products and
technology.

INTELLECTUAL PROPERTY

Patents and trademarks are critical in the medical device industry. The
Company believes strongly in protecting its intellectual property and has a long
history of obtaining patents, when available, in connection with its research
and product development programs. Through its internal patent development and
cross-licensing, the Company has access to more than 1,000 patents. As of
January 15, 1999, the Company had a portfolio of approximately 150 patents and
patent applications which the Company owns, consisting of 99 U.S. issued
patents, 8 U.S. patents which have been allowed but have not yet been issued, 17
U.S. patent applications pending, 8 foreign patent issued, 11 foreign patent
applications pending, and additional U.S. patent applications in preparation
relating to its research and development products. The Company also owns certain
registered trademarks, and has applied for other trademarks in the U.S. and
certain foreign countries, there can be no assurance, that patents and
trademarks will be granted in the future, or that any patents and trademarks
that the Company now holds or may be granted, or under which it has held license
rights, will be valid or otherwise be of value to the Company. Even if the
Company's patents and trademarks are valid, others may be able to introduce
non-infringing products that are competitive with those of the Company.
Competitors of the Company may also hold or be granted patents that are not
licensed to the Company.

The Company conducts ongoing evaluations of potential infringement of
any proprietary rights of third parties by the products the Company intends to
market. Regardless of the Company's efforts to evaluate the potential
infringement of any proprietary rights of third parties, however, there can be
no assurance that such infringements do not exist or may not arise in the
future. There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry, particularly in the
ICD market, and the Company is currently engaged in patent litigation with CPI.
Litigation, which will result in substantial cost to and diversion of effort by
the Company, may be necessary to enforce patents issued to or licensed by the
Company, to protect trade secrets or know-how owned by the Company, to defend
the Company against claimed infringement of the rights of others, and to
determine the scope and validity of the proprietary rights of others. Adverse
determinations in litigation could subject the Company to significant
liabilities to third parties or could require the Company to seek licenses from
third parties.

To date, many patent and intellectual property disputes in the medical
device area have been settled through licensing agreements 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 may develop in the ICD market, and where the Company has
proven expertise, including defibrillation waveforms, electrode systems,
additional therapies, reduced size and increased device longevity. No assurance
can be given that the Company's strategy will be effective or that the Company's
patents in these areas will be adjudicated to be valid if challenged, or
otherwise will be of value in potential negotiations with third parties.

Pursuant to the Cross-License Agreement with St. Jude Medical, as of
May, 1997, the Company and St. Jude Medical have agreed to a royalty-free,
worldwide, nonexclusive, nontransferable, nonsublicensable cross-license
covering a total of more than 1,000 patents. The Cross-License Agreement
provides Angeion with access to more than 840 arrhythmia management patents in
St. Jude Medical's portfolio, as well as any

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<PAGE>

patent applications filed as of the effective date of the agreement, including
all of the related intellectual property of St. Jude Medical and its Pacesetter,
Ventritex and Telectronics subsidiaries. In turn, St. Jude Medical has access to
Angeion's portfolio of approximately 150 patents and patent applications as of
the effective date of the agreement.

In November, 1996, the Company was advised of the results of an
arbitration between Pacesetter and Medtronic concerning a purported sublicense
of certain of the Company's patents by Pacesetter to Medtronic. This arbitration
arose under a 1992 cross-license between Medtronic and Pacesetter and under a
provision of the 1993 license agreement between Pacesetter and the Company which
purported to give Pacesetter certain rights to sublicense certain of the
Company's patents. Because the Company was not a party to the arbitration, the
Company did not have an opportunity to present its arguments in this matter and
therefore does not consider itself to be bound by the results of the
arbitration. The Company has notified both Pacesetter and Medtronic that it
disputes the entire matter. The inability of the Company to be successful in
maintaining its position in this matter could have a material adverse effect on
the Company in its ability to obtain a satisfactory resolution of this matter
with both Pacesetter and Medtronic.

The Company has an ongoing patent lawsuit against CPI which was begun
in 1996 and is expected to begin trial in May of 1999. The Company's lawsuit
involves four U.S. patents of the Company which have been asserted against
certain ICD devices manufactured by CPI. These four patents relate to inventions
by the Company with respect to reduced capacitance of the high voltage
capacitors in an ICD, decreased size of the ICD and the ability to use the
housing of the ICD as an electrode in combination with a subcutaneous electrode,
It is not known whether the Company's lawsuit against CPI will be successful
and, if so, what damages or other outcomes may result. The inability of the
Company to prevail in the lawsuit could result in one or more of the patents of
the Company to be declared invalid, unenforceable or not infringed, which could
have a material adverse effect on the ability of the Company to obtain a
satisfactory resolution of this matter, if at all, with CPI, as well as to
obtain satisfactory resolutions with other competitors in the industry.

On September 15, 1998, CPI sued the Company for infringement of three
patents assigned to Michelle Mirowski. The Company firmly believes it does not
infringe any of the patents asserted in the lawsuit and as a precaution had
obtained a patent clearance opinion for its 2010 product prior to PMA approval.
The Company has answered the complaint by asserting that its' products do not
infringe the Mirowski patents, that the Mirowski patents are not valid or
enforceable, that CPI is not the proper party to be asserting the Mirowksi
patents, and that CPI is estopped by virtue of latches and estoppel to claim
infringement by the Company. Moreover, the Company filed a Request for
Reexamination of each of the three Mirowski patents with the U.S. Patent Office
alleging that each patent is invalid. The Patent Office has agreed to consider
all three of these Requests.

On September 22, 1998, the Company entered into an agreement with
Cordis Webster under which certain patents and patent applications related to
spot catheter radio frequency ablation and linear radio frequency ablation were
transferred to Cordis Webster as part of this agreement in exchange for certain
upfront payments and future royalties, as well as funding of certain continuing
development related to catheter ablation. As a result of this transaction,
ownership of three U.S. issued patents, two pending U.S. patent applications and
three foreign patent applications was transferred to Cordis Webster, were
certain rights to certain applications to be filed in connection with spot
catheter radio frequency ablation and linear radio frequency ablation.

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<PAGE>

Although patent and intellectual property disputes in the medical
device area have often been settled through licensing agreements or similar
arrangements, costs associated with such arrangements may be substantial, and
there can be no assurance that necessary licenses would be available to the
Company on satisfactory terms, if at all. Accordingly, an adverse determination
in a judicial or administrative proceeding or failure to obtain necessary
licenses could prevent the Company from manufacturing and selling its products,
which would have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company also relies on trade secrets and proprietary know-how,
which it seeks to protect, in part, through confidentiality agreements with
employees, consultants and other parties, as well as through contractual
exclusivity with certain suppliers. There can be no assurance, however, that
these agreements will not be breached, that the Company would have adequate
remedies for any breach, or that the Company's trade secrets will not otherwise
become known to or independently developed by competitors. See "Legal
Proceedings."

THIRD-PARTY REIMBURSEMENT

The Company's ability to commercialize its products successfully
depends in part on the extent to which reimbursement for the cost of such
products and related treatments available from government health administration
authorities, such as Health Care Financing Administration ("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.

In November 1995, the FDA and HCFA entered into an interagency
agreement establishing a process pursuant to which the FDA will place all IDEs
that it approves into one of two categories, Category A or Category B. Category
A devices are considered experimental and for which the "absolute risk" of the
device type has not been established (i.e., initial questions of safety and
effectiveness have not been resolved for the device type) and will not be
eligible for Medicare reimbursement. Category B devices are considered
non-experimental or investigative devices where the incremental risk is the
primary risk in question (i.e., underlying questions of safety and effectiveness
of that device type have been resolved), or it is known that the device type can
be safe and effective because, for example, other manufacturers have obtained
FDA approval for that device type. A Category B device will be eligible for
Medicare reimbursement if it meets all other Medicare coverage requirements. The
Sentinel and Lyra series of ICDs are Category B devices and are eligible for
reimbursement by HCFA and third-party payors.

Even if the Company obtains PMAs for its products, some payors may deny
coverage until the procedures become generally accepted by the medical
profession. There can be no assurance that HCFA and third-party payors will
continue to reimburse for any of the Company's products. 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.
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 prices of the Company's products.

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

15
<PAGE>

foreign governmental authorities. Medical devices are also subject to ongoing
controls and regulations under the FDC Act, including registration by the
manufacturer, compliance with established manufacturing practices, device
tracking, record-keeping, advertising, labeling, 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 and life-sustaining
devices or implants, are subject to the most stringent controls and require FDA
approval prior to marketing. The Company's ICD products are classified as Class
III devices.

FDA requirements for the Company's ICD products require obtaining
formal FDA PMA approval. The first stage of obtaining formal FDA PMA 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 Company has received IDE approval with respect to its
Sentinel 2010 and Lyra 2020 Series systems, AngeFlex, AngeFix, and AngePass lead
systems. In addition, on March 5, 1999, the Company received FDA PMA approval
for release of its Lyra(TM) 2020 Series of ICDs and its AngePass(TM) 4040 and
4080 Lead Systems.

The second stage of formal FDA PMA approval is the PMA approval
application. The PMA approval application, which is submitted after extensive
clinical evaluations are completed under an 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 PMA approval 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
studies, grant PMA 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 PMA approval
for any products, which is necessary to market the Company's products
commercially in the U.S. Delays in obtaining marketing approvals and clearances
in the U.S. could have a material adverse effect on the Company and its
operations. The Company has received PMA approval for the Sentinel and Lyra ICD
series and AngeFlex and Angepass lead systems.

The Company is subject to certain FDA regulations governing
manufacturing practices, labels, packaging, defective products and complaints
about its products. The FDA has authority to inspect the Company's facilities to
ensure compliance with the FDC Act and regulations thereunder. Failure to comply
with these regulations could have a material adverse effect on the Company's
business, financial condition and results of operations. Further, the FDA
regulates the export of medical devices that have not been approved or cleared
for marketing in the United States.

Many foreign countries have similar regulatory requirements concerning
the marketing of new medical devices. In January 1995, the AIMDD was fully
implemented in the EU, which is intended to make

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<PAGE>

EU regulatory requirements 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.

Under AIMDD, the Company is subject to "prior notice" of intent to
conduct clinical studies in the EU. This process, similar to the FDA IDE
process, requires regulatory documents and test information to be submitted to
the governmental agency of each country in which the Company intends to conduct
clinical studies. In order to commence commercial marketing of its products in
the EU, the Company is required to file for a CE Mark approval. In April 1996
and August 1996, the Company received CE Mark approval for the Sentinel 2000
Model and Sentinel 2010 Model ICD, respectively, from TUV Product Service, an
organization that certifies the safety of medical device products and the
quality assurance systems put in place by the manufacturer of the medical
device. In April 1997, the Company received CE Mark approval of the Sentinel
2011 Model and Sentinel 2012 Model. In June 1998, the Company received CE Mark
approval of the 2020 Series ICD and the 4040 and 4090 lead systems. There can be
no assurance, however, that the Company will be successful in obtaining CE Mark
approval for any other products in a timely manner, if at all, and any failure
to receive or delay in receiving such approval could have a material adverse
effect on the Company's business, financial condition or results of operations.
See "Competition."

EMPLOYEES

As of March 15, 1999, the Company had 161 full-time employees,
including 20 engaged in administration, 46 in manufacturing, 88 in research and
development and 7 in regulatory and clinical. There are no unions representing
the Company's employees. The Company believes that its relations with its
employees are good.

<PAGE>

CERTAIN RISK FACTORS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements made in this Annual Report on Form 10-K are
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 that involve certain risks and uncertainties. The Company's
actual results could differ materially from those anticipated in such
forward-looking statements as a result of certain factors, including those set
forth in the following risk factors and elsewhere in this Annual Report on Form
10-K. These forward-looking statements are made as of the date of this Annual
Report on Form 10-K and the Company assumes no obligation to update such
forward-looking statements, or to update the reasons why actual results could
differ materially from those anticipated in such forward-looking statements.

STATUS AS A GOING CONCERN. The Company's independent certified public
accountants have included an explanatory paragraph in their audit report with
respect to the Company's consolidated financial statements, included herein,
related to a substantial doubt with about the Company's ability to continue as a
going concern. The Company has incurred substantial losses from operations since
its inception, which have been recurring and amounted to $123,055,618 on a
cumulative basis through December 31, 1998. As of December 31, 1998, the
Company's liabilities exceeded its assets by $6,279,697.

In the event that the Company cannot generate or otherwise obtain
funding, the Company would have to substantially cut back its level of
operations. These reductions could have a material adverse effect on the
Company's relations with its strategic partners and customers. Uncertainty
exists with respect to the adequacy of current funds to support the Company's
activities until positive cash flow from operations can be achieved, and with
respect to the availability of financing from other sources to fund any cash
deficiencies.

The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern, which contemplates continuity of
operations, realization of assets and satisfaction of liabilities in the
ordinary course of business. The propriety of using the going concern basis is
dependent upon, among other things, the achievement of future profitable
operations and the ability to generate sufficient cash from operations, public
and private financing and other funding sources to meet its obligations. The
uncertainties described in the preceding paragraphs raise substantial doubt at
December 31, 1998 about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments relating to
the recoverability of the carrying amount of recorded assets or the amount

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<PAGE>

of liabilities that might result from the outcome of these uncertainties. If the
Company is unable to continue as a going concern, the values realized from the
Company's assets may be less than the carrying amounts reported in its financial
statements. See "Need for Additional Financing; Future Dilution to
Shareholders," "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" and "Consolidated
Financial Statements."

RISK OF BANKRUPTCY. The Company may need to be reorganized under
Chapter 11 of Title 11 of the United States Code or liquidated under Chapter 7
of Title 11 of the United States Code. There can be no assurance that if the
Company decides to reorganize under the applicable laws of the United States
that such reorganization efforts would be successful or that shareholders would
receive any distribution on account of their ownership of shares of the
Company's stock. Similarly, there can be no assurances that if the Company
decides to liquidate under the applicable laws of the United States that such
liquidation would result in the shareholders receiving any distribution on
account of their ownership of shares of the Company's stock. In fact, if the
Company was to be reorganized or liquidated under the applicable laws of the
United States, the bankruptcy laws would require (with limited exceptions) that
the creditors of the Company be paid before any distribution is made to the
shareholders.

SUBSTANTIAL INDEBTEDNESS; EFFECT OF FINANCIAL LEVERAGE. On April 14,
1998 the Company issued $22,150,000 principal amount of 7 1/2 percent Senior
Convertible Notes due 2003 (the "Notes'). Due to the issuance of the Notes, the
Company has indebtedness that is substantial in relation to its stockholders'
equity and cash flow. As a result of the substantial indebtedness of the
Company, fixed charges of the Company are expected to exceed its earnings for
the foreseeable future, and there can be no assurance that the Company's
operating cash flow will be sufficient to pay interest on the Notes. In
addition, the indenture for the Notes does not limit the Company's ability to
incur additional indebtedness, other than secured indebtedness, such secured
indebtedness not to include secured indebtedness pursuant to one or more bank
credit agreements. The leveraged nature of the Company could limit the ability
of the Company to effect future financing or may otherwise restrict the
Company's activities. Substantial leverage poses the risk that the Company may
not be able to generate sufficient cash flow to service its indebtedness,
including the Notes, and to adequately fund its operations.

The Company's leverage could have important consequences to holders of
Company Common Stock, including the following: (i) the Company's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes may be impaired in
the future; (ii) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of principal of and interest on its
indebtedness, thereby reducing the funds available to the Company for other
purposes; (iii) the Company's leverage may hinder its ability to adjust rapidly
to changing market conditions; and (iv) the leverage could make the Company more
vulnerable in the event of a downturn in its business or in general economic
conditions.

NEED FOR ADDITIONAL FINANCING; FUTURE DILUTION TO SHAREHOLDERS. The
Company may seek to raise additional capital through future additional financing
that if raised through the issuance of equity securities, will reduce the
percentage ownership of the stockholders of the

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<PAGE>

Company. Existing stockholders may experience additional dilution, and
securities issued in conjunction with new financing may have rights, preferences
and privileges senior to those of holders of the Company's Common Stock. There
can be no assurance, however, that additional financing will be available when
needed, if at all, or on favorable terms. The Company and Raymond James &
Associates have been actively seeking funding since late November of 1998 and as
yet have not been able to conclude any equity funding arrangement. The failure
to obtain additional financing would have a material adverse affect on the
Company and may force the Company to seek bankruptcy protection. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and "Financial Statements."

IMPACT OF RESTRUCTURING OF OPERATIONS; TRANSITIONS IN SENIOR
MANAGEMENT. In July 1998, the Company announced that it had hired a new
President and Chief Executive Officer and that its incumbent President and Chief
Executive Officer was retiring from those positions, but would remain Chairman
of the Board of Directors. In November 1998, the Company announced that it had
hired a new Chief Financial Officer. In January 1999, the Company announced a
restructuring plan whereby the Company reduced approximately 20% of its total
employee base, including 40% of the its senior management team. In March 1999,
the Company announced the resignation of its recently-hired Chief Financial
Officer, who has not yet been replaced. The effect of these transitions in
senior management have placed, and could continue to place a significant strain
on the Company's, management, personnel, and other resources. These changes or
other future steps to restructure operations and reduce expenses could impair
the Company's ability to administer its operations or result in delays in the
Company's ability to obtain financing, develop and introduce new products or
support the production and sale of existing products, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

IMPACT OF COMPETITION. Competition in the ICD market is intense.
Although the Company's ICDs also compete with alternative treatments such as
drug therapy, open heart surgery and catheter ablation, the Company believes
that ICD manufacturers currently constitute its primary competition. Four
companies (Medtronic, Inc. ("Medtronic"), Cardiac Pacemakers, Inc. ("CPI"), a
division of Guidant Corporation ("Guidant") Ventritex, Inc.("Ventritex"), a
wholly-owned subsidiary of St. Jude Medical, Inc. ("St. Jude Medical")) and
Biotronik have obtained PMA Approval for products in the ICD market and
currently control virtually all of the U.S. market. Furthermore, each of these
companies has greater financial, manufacturing, marketing, distribution and
technical resources and greater name recognition than the Company. Their product
development pipelines and ability to conduct research far exceed what that
Company has the resources to accomplish.

Currently Medtronic and Guidant have introduced products seen as more
competitive than the Company's products. They also have ongoing clinical trials
and research activities in excess of the Company's initiatives in these areas.
There can be no assurance that competitors will not introduce new products with
better or more timely features or that the market will accept the Company's
products when introduced.

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Although catheter ablation offers a potential cure, rather than a
treatment, of ventricular tachycardia ("VT"), catheter ablation technologies
must nonetheless compete with drug therapy, open heart surgery and ICDs. A
number of companies, certain of which have significantly greater resources than
the Company, have developed RF catheter ablation devices to treat
supraventricular tachycardia ("SVT"). There can be no assurance that competitors
of the Company will not be able to develop and introduce cardiac ablation
systems more quickly than the Company or systems that may be more effective in
treating SVT and VT than the Company's catheter ablation systems. In addition,
there can be no assurance that the Company's catheter ablation systems will
receive FDA approval or, if approved, that the market will accept such systems.
In addition, catheter ablation technologies also compete with drug therapy.
While historically drug therapy has had limited effectiveness and caused adverse
side effects, new drugs under development may offer improved treatment outcomes
which could have a material adverse effect on the ICD market generally and on
the Company's business, financial condition and results of operations. Even with
the Company's new relationship with Cordis-Webster, there can be assurance of
success, or royalties from that venture.

IMPORTANCE OF INTELLECTUAL PROPERTY PROTECTION. Patents and trademarks
are critical in the medical device industry, and the Company believes strongly
in protecting its intellectual property and has a long history of obtaining
patents, when available, in connection with its research and product development
programs. As of March 1, 1998, the Company had a portfolio of approximately 150
patents and patent applications consisting of 90 U.S. issued patents, 17 U.S.
patents which have been allowed but have not yet been issued, 13 U.S. patent
applications pending, two foreign patents issued, 24 foreign patent applications
pending, and additional U.S. patent applications in preparation relating to its
research and development products. The Company also owns certain registered
trademarks, and has applied for other trademarks in the U.S. and certain foreign
countries, there can be no assurance, that patents and trademarks will be
granted in the future, or that any patents and trademarks that the Company now
holds or may be granted, or under which it has held license rights, will be
valid or otherwise be of value to the Company. Even if the Company's patents and
trademarks are valid, others may be able to introduce non-infringing products
that are competitive with those of the Company. Competitors of the Company may
also hold or be granted patents that are not licensed to the Company.

Although patent and intellectual property disputes in the medical
device area have often been settled through licensing agreements or similar
arrangements, costs associated with such arrangements may be substantial, and
there can be no assurance that necessary licenses would be available to the
Company on satisfactory terms if at all. Accordingly, an adverse determination
in a judicial or administrative proceeding or failure to obtain necessary
licenses could prevent the Company from manufacturing and selling its products,
which would have a material adverse effect on the Company's business, financial
condition and results of operations.

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<PAGE>

remedies for any breach, or that the Company's trade secrets will not otherwise
become known to or independently developed by competitors.

NEED FOR MARKET ACCEPTANCE. Market acceptance of the Company's products
will depend, in part, on the therapeutic capabilities and operating features of
its products as compared to competing products, the Company's ability to
convince the medical community of the clinical efficacy of its products, the
timeliness of its product introductions compared to competing products and its
ability to manufacture quality products profitably in sufficient quantities.
Failure of the Company's products to gain market acceptance would have a
material adverse effect on the Company's business, financial condition and
results of operations. Although the markets for the Company's products are
expected to grow, there can be no assurance that the Company will participate in
such growth.

RELATIONSHIP WITH SYNTHELABO. Pursuant to the Investment and Master
Strategic Relationship Agreement ("Investment Agreement") with ELA Medical,
S.A., a subsidiary of Synthelabo ("ELA Medical") and ELA*Angeion Medical
Systems, LLC ("ELA*Angeion"), a U.S.-based joint venture company formed by the
Company and ELA Medical, Inc., another subsidiary of Synthelabo, which were
entered into in connection with the Investment Agreement with Synthelabo, the
Company has committed to certain obligations with respect to the exclusivity of
marketing of its ICD products in certain territories and a pricing structure. In
the event that such arrangements are not successful, the Company would be
restricted in its ability to enter into alternative marketing arrangements in
these territories during the term of these agreements. Although these agreements
obligate ELA Medical and ELA*Angeion to use their best efforts to market and
promote the ICD products of the Company, there can be no assurance that such
efforts will be successful. These agreements also provide for transfer prices to
be established for future ICD and related products based upon initially agreed
upon formulas and good faith negotiations between the parties. There can be no
assurance that such transfer prices would be sufficient to allow the Company to
operate profitably. While there are certain minimum purchase obligations to
maintain exclusivity in the case of the Manufacturing and Supply Agreement with
ELA Medical, there can be no assurance that these minimum obligations will be
adequate or will be achieved. With respect to the ELA*Angeion joint venture,
while there are obligations for both the Company and ELA Medical to fund this
joint venture and to cooperate in the control of this joint venture, there can
be no assurance that such funding will occur or will be adequate, or that the
joint venture will able to operate successfully in the event of unresolved
disputes between its owners. Any significant problems pursuant to the agreements
with Synthelabo or ELA Medical could have a material adverse effect upon the
Company's business, financial condition and results of operations.

The Company expects that virtually all of its sales will be made
pursuant to manufacturing and supply agreements that the Company has entered
into with (i) ELA*Angeion, the joint venture which has been granted exclusive
rights to have ICDs and certain other products manufactured by the Company for
sale in the U.S., and (ii) ELA Medical which has been granted exclusive rights
to have ICDs and certain other products manufactured by the Company for sale in
certain territories. The Company's ability to sell its products successfully
will depend substantially on the marketing capabilities of ELA Medical and
ELA*Angeion. In recent years there has been significant consolidation among
medical device suppliers as the major suppliers have attempted to broaden their
product lines in order to respond to cost pressures from health care providers.
This consolidation has made it increasingly difficult for smaller suppliers,
such as

22
<PAGE>

the Company, to effectively distribute their products without a relationship
with one or more of the major suppliers. The sales and marketing organizations
of ELA Medical and those of ELA*Angeion are substantially smaller than the sales
and marketing organizations of certain of the Company's competitors and there
can be no assurance that these organizations will be able to compete effectively
with the Company's larger competitors.

It is the objective of the strategic relationship with ELA Medical to
allow both ELA Medical and ELA*Angeion to market an array of products in the
field of cardiac rhythm management in order to compete effectively with these
larger competitors. There can be no assurance that this objective will be met,
or that ELA Medical will have competitive and timely bradycardia pacemakers and
other related products to meet this objective. In addition, as ELA*Angeion is a
joint venture, there can be no assurance that ELA*Angeion will be in a position
to accomplish the marketing and sales objectives intended by the Company.
Currently, the Company and ELA Medical are having ongoing discussions to
evaluate their relationship and determine what, if any, changes should occur.

DEPENDENCE ON SENIOR MANAGEMENT AND OTHER KEY PERSONNEL. The Company's
success depends largely on its senior management and other key personnel.
Competition for qualified personnel with sufficient and relevant experience in
the medical device industry is intense. Accordingly, the loss of the services of
such individuals, or the inability to hire additional key individuals as
required, could have a material adverse effect on the Company, including its
current and future product development efforts.

DEPENDENCE ON THIRD PARTY VENDORS. The Company relies on third party
vendors for certain of the components used in the Company's products and for
certain contract manufacturing services. A number of significant components,
such as capacitors, batteries, integrated circuits and lead systems, are
purchased from sole source suppliers. For certain components and manufacturing
services, there are relatively few sources of supply, and establishing
additional or replacement suppliers for such components or services cannot be
accomplished quickly. In addition, each supplier and each component must be
qualified with the FDA, and the time required for such qualification may be
lengthy. Although the Company tries to maintain sufficient quantities of
inventory of such components to minimize production delays or interruptions,
there can be no assurance that the Company will find suitable alternatives at
reasonable prices, if at all, or that any such alternatives will remain
available to the Company. The Company's inability to obtain acceptable
components in a timely manner or find and maintain suitable replacement
suppliers of components or manufacturing services would have a material adverse
effect on the Company, including its ability to manufacture its products.

LIMITED MANUFACTURING EXPERIENCE. To date, the Company's products have
been manufactured in limited quantities and have not been manufactured on a
significant commercial scale. As a result, there can be no assurance that the
Company will not encounter difficulties in scaling up its manufacturing
capabilities, including problems involving production yields, quality control,
component supply and shortages of qualified manufacturing personnel. Any
significant manufacturing difficulties could have a material adverse effect on
the Company.

POSSIBLE OBSOLESCENCE DUE TO TECHNOLOGICAL CHANGE. The medical device
industry is subject to rapid technological innovation and, consequently, the
life cycles of medical devices

23
<PAGE>

tend to be relatively short, typically eighteen months to three years. The
Company is engaged in a field characterized by extensive research and
development efforts or rapid new product introductions. There can be no
assurance that alternative treatments or other discoveries and developments with
respect to ICDs or catheter ablation systems will not render the Company's
products obsolete. The greater financial and other resources of many of the
Company's competitors may permit such competitors to respond more rapidly than
the Company to technological advances.

PRODUCT LIABILITY AND POTENTIAL INSUFFICIENCY OF PRODUCT LIABILITY
INSURANCE. The testing, manufacturing, marketing and sale of medical devices
involves risk of liability claims and product recalls. The Company has in the
past experienced difficulties related to the development, testing and government
approval of its products. For example, in November 1997, the Company announced a
revision to the clinical trial protocol of its Sentinel 2000 Model and 2010
Model ICDs and a temporary suspension of clinical implants due to a component
issue. The Company has since incorporated a new ceramic capacitor to replace the
component at issue and received FDA approval in January 1998 to resume clinical
implants of its Sentinel 2000 Model and 2010 Model ICDs. The Company's products
are highly complex and some are, or will be, used in medical procedures and in
situations where there is a potential risk of serious injury, adverse side
effects or death. As a result, the Company currently carries product liability
insurance covering its products with policy limits per occurrence and in the
aggregate which the Company has deemed to be sufficient. It cannot be predicted,
however, whether such insurance is sufficient, or if not, whether the Company
will be able to obtain such insurance as is sufficient, to cover the risks
associated with the Company's business or whether such insurance will be
available at premiums that are commercially reasonable. A successful claim
against or settlement by the Company in excess of its insurance coverage or the
Company's inability to maintain insurance in the future could have a material
adverse effect on the Company's business, results of operations and financial
condition.

POSSIBLE VOLATILITY OF COMMON STOCK PRICES. The market price of the
Common Stock has experienced substantial fluctuations in the past and may
continue to be volatile depending on news announcements or changes in general
market conditions. In particular, news announcements regarding quarterly results
of operations, competitive developments, product developments, litigation or
governmental regulatory actions impacting the Company may adversely affect the
Common Stock price.

EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS. The Company is governed by
the provisions of Sections 302A.671 and 302A.673 of the Minnesota Business
Corporation Act. These anti-takeover provisions could potentially operate to
deny shareholders the receipt of a premium on their Common Stock and may also
have a depressive effect on the market price of the Company's Common Stock.
Section 302A.671 generally provides that the shares of a corporation acquired in
a "control share acquisition" have no voting rights unless voting rights are
approved by the shareholders in a prescribed manner. A "control share
acquisition" is generally defined as an acquisition of beneficial ownership of
shares that would, when added to all other shares beneficially owned by the
acquiring person, entitle the acquiring person to have voting power of 20% or
more in the election of directors. Section 302A.673 prohibits a public
corporation from engaging in a "business combination" with an "interested
shareholder" for a period of four years after the date of the transaction in
which the person became an interested shareholder, unless the business
combination is approved in a prescribed manner. A "business

24
<PAGE>

combination" includes mergers, asset sales and other transactions. An
"interested shareholder" is a person who is the beneficial owner of 10% or more
of the corporation's voting stock. Reference is made to the detailed terms of
Sections 302A.671 and 302A.673 of the Minnesota Business Corporation Act.

Furthermore, Section 3.5 of Article III of the Company's Restated
Articles of Incorporation provides that the affirmative vote of the holders of
two-thirds of the voting power of the shares entitled to vote is required for
shareholder approval of a plan of merger, exchange of securities, or transfer of
assets, as described in Section 302A.601 of the Minnesota Business Corporation
Act. In addition, the Company has adopted a Shareholder Rights Plan that may
have an anti-takeover effect in that any person or group acquiring control of
the Company without the consent of the Company's Board of Directors could suffer
substantial dilution through operation of the Shareholder Rights Plan. The
Company has also entered into agreements with certain executive officers that
provide for certain benefits upon a change of control.

YEAR 2000 COSTS. Currently, many computer systems and software products
are coded to accept only two digit entries in the date code field. These date
code fields will need to accept four digit entries to distinguish 21st century
dates from 20th century dates. As a result, many companies' software and
computer systems may need to be upgraded or replaced in order to comply with
such "Year 2000" requirements. The Company and third parties with which the
Company does business rely on numerous computer programs in their day to day
operations. The Company has completed a preliminary evaluation of the Year 2000
issue as it relates to the Company's internal computer systems and third party
computer systems with which the Company interacts. Based on this evaluation, the
Company does not expect to incur significant costs related to these issues.
However, there can be no assurance that the Year 2000 issues will be resolved in
1998 or 1999. If not resolved, this issue could have a material adverse impact
on the Company's operations.

25
<PAGE>

ITEM 2. PROPERTIES.

The Company occupies approximately 80,000 square feet of office and
manufacturing space in Minneapolis, Minnesota. The lease agreement for this
facility expires on February 28, 2008, and the Company has the option to extend
the term of this lease for one to two additional five-year terms. The monthly
base rent for the first five years under the terms of the lease agreement is
approximately $48,040, plus the Company's pro rata share of operating expenses
and real estate taxes.

ITEM 3. LEGAL PROCEEDINGS.

In June 1996, the Company joined with Pacesetter in a patent lawsuit
against CPI. In July of 1997, the Company's portion of the lawsuit was severed
from Pacesetter's lawsuit. The Company's lawsuit involves four U.S. patents of
the Company which have been asserted against certain ICD devices manufactured by
CPI. These four patents relate to inventions by the Company with respect to
reduced capacitance of the high voltage capacitors in an ICD, decreased size of
the ICD and the ability to use the housing of the ICD as an electrode in
combination with a subcutaneous electrode. Discovery is now completed in the
lawsuit. The Company has moved for partial summary judgment on the issue of
non-infringement of all four patents, but that motion has not yet been decided
by the court. A trial date has been set for May 17, 1999. It is not known
whether the Company's lawsuit against CPI will be successful and, if so, what
damages or other outcomes may result.

In November 1996, the Company was advised of the results of an
arbitration between Pacesetter and Medtronic concerning a purported sublicense
of certain of the Company's patents by Pacesetter to Medtronic. This arbitration
arises under a 1992 cross-license between Medtronic and Pacesetter and under a
provision of the 1993 license agreement between Pacesetter and Angeion which
purported to give Pacesetter certain rights to sublicense certain of the
Company's patents. Because the Company was not a party to the arbitration, the
Company did not have an opportunity to present its arguments in this matter and
therefore does not consider itself to be bound by the results of the
arbitration. The Company has notified both Pacesetter and Medtronic that it
disputes the entire matter. The inability of the Company to be successful in
maintaining its position in this matter could have a material adverse effect on
the Company in its ability to obtain a satisfactory resolution of this matter
with both Pacesetter and Medtronic.

26
<PAGE>

The Company is also subject to certain claims and lawsuits that have
been filed in the ordinary course of business. It is management's opinion that
the settlement of all litigation would not have a material effect on the
financial position of the Company.

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.

27
<PAGE>

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS.

The Company's common stock is traded on the NASDAQ National Market
under the symbol "ANGN". The prices below are the high and low transaction
prices as reported in each quarter of the last two calendar years.

Angeion Common Stock Prices
Calendar Years 1998 and 1997 High Low
- --------------------------------------------------------

1998
Fourth calendar quarter $ 2.25 $ 0.88
Third calendar quarter $ 3.13 $ 2.00
Second calendar quarter $ 3.75 $ 2.00
First calendar quarter $ 3.88 $ 2.38

1997
Fourth calendar quarter $ 6.69 $ 2.13
Third calendar quarter $ 5.88 $ 4.19
Second calendar quarter $ 5.87 $ 3.93
First calendar quarter $ 5.56 $ 3.37

As of March 24, 1999, the Company's Common Stock was held of record by
757 persons. Such record ownership reflects individual and nominee holdings. The
Company's securities are held beneficially by more than persons.

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.

ITEM 6. SELECTED FINANCIAL DATA.

The selected financial data as of and for the five-month transition
period ended December 31, 1996 and for the year ended December 31, 1997 are
derived from unaudited financial statements of the Company. In the opinion of
management, the unaudited financial statements reflect all normal recurring
adjustments necessary to present fairly the financial data for the unaudited
periods described above. This unaudited financial data is presented for
comparative purposes as a result of the Company's change in year end from July
31 to December 31 in 1997.

<TABLE>
<CAPTION>
Years Ended Five Month Periods Ended Years Ended
December 31, December 31, July 31,
1998 1997 1997 1996 1997 1996 1995
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Sales $ 4,566,768 3,094,159 $ 864,775 2,275,901 $ 4,505,285 2,948,729 0
</TABLE>

28
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Equity in net loss of
joint venture (2,778,996) 0 0 0 0 0 0
Revenue from sale of patents
and technology 2,050,000 0 0 0 0 0 0
Net loss (38,838,110) (34,114,929) (14,940,896) (7,734,829) (26,908,861) (15,182,019) (9,643,351)
Net loss per common share $ (1.12) (1.14) $ (0.48) (0.27) $ (0.93) (0.66) (0.58)
Weighted average number of 34,595,068 30,026,211 30,997,656 28,678,276 29,064,994 22,898,538 16,550,915
common shares outstanding

Balance Sheet Data:
Working capital $ 3,495,560 18,508,714 $ 18,508,714 37,017,967 $ 18,490,175 44,935,198 1,669,554
Total Assets 22,893,407 28,883,551 28,883,551 46,797,456 30,896,363 55,183,896 5,751,194
Long-term debt 22,150,000 0 0 0 0 1,500,000 1,501,091
Shareholders' equity (deficit) $ (6,279,697) 25,750,945 $ 25,750,945 42,117,137 $ 26,047,520 49,463,672 2,980,150
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

The Company's operations consist primarily of the research, development,
manufacturing and marketing efforts of implantable cardioverter defibrillator
business and the catheter ablation activity pursuant to the Cordis Webster
agreement. activity pursuant to the Cordis Webster agreement. The Company
established two European subsidiaries, Angeion GmbH, effective October 31, 1996,
and Angeion Europe, Ltd. ("Angeion Europe"), effective November 1, 1995, to
facilitate clinical studies of its ICDs and expand its European business
activities. 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) from the joint
venture are accounted for under the Equity method and 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. In September 1998, the Company entered into an agreement with Cordis
Webster, Inc. pursuant to which the Company assigned the rights to patents,
technology, manufacturing and distribution of the catheter ablation products.

The Company has incurred net operating losses from continuing
operations in each year since its inception in 1986. At December 31, 1998, the
Company's accumulated deficit was $123,055,618. Losses have resulted principally
from costs incurred in the research and development of the Company's products
and initial startup of manufacturing operations. The Company has had limited
revenue since the sale of its accessory products business, AMP, in September
1992. The Company expects to incur additional operating losses during the next
fiscal year. The Company's ability to achieve profitability is ultimately
dependent on obtaining regulatory approvals for its products, attaining revenue
levels which generate operating profits, and developing the manufacturing
capacity to achieve these revenue levels. There can be no assurance that the
Company will obtain the required regulatory approvals on a timely basis, if at
all; successfully develop, commercialize, manufacture and market its products or
achieve profitability. In addition, the Company's results of operations may
fluctuate significantly from quarter to quarter depending upon a number of
factors including; the availability of third party reimbursement, the timing of
regulatory approvals, operating costs, competition, progress of product
development and clinical studies and the extent to which the Company's products
gain market acceptance.

RESULTS OF OPERATIONS

29
<PAGE>

Year Ended December 31, 1998 Compared to 1997
Net sales increased to $4,566,768 in 1998 from $3,094,159 in 1997. The
increase was due to growth in sales of defibrillator products associated with
U.S. clinical studies the Sentinel approval in August 1998, international
activities and clinical sales of its 2020 series of ICDs.

Manufacturing expenses increased to $12,394,194 in 1998 from
$10,812,042 in 1997. The increase was substantially due to direct costs
associated with product sales and the ongoing costs associated with the
establishment of the Company's manufacturing operations. The Company's product
sales do not currently generate gross profit because the Company has not
achieved a scale of production that allows it to cover manufacturing costs.

Research and development expenses increased to $21,636,666 in 1998 from
$19,790,050 in 1997. The increase of $1,846,616 was due to an acceleration of
research and development activity on the Models 2020, 2030 and 2100 ICD series.
Research and development activity related to the development of ICDs accounted
for $19,370,081 of the expense for 1998, while the catheter ablation development
activities accounted for $2,266,585 of the expense.

Selling, general and administrative expenses decreased to $7,185,581 in
1998 from $7,465,643 in 1997. This decrease of $280,062 was primarily due to
moving the U.S. selling and marketing efforts to ELA*Angeion.

Equity in net loss of joint venture resulted from the Company's portion
of the net loss incurred by the 50 percent owned joint venture, ELA*Angeion
Medical Systems, LLC.

Revenue from sale of patents and technology resulted from the agreement
between the Company and Cordis Webster that related to rights to certain
ablation catheter products.

Interest income decreased to $668,750 in 1998 from $918,502 in 1997.
The decrease was due to lower average cash balances and lower average interest
rates during 1998.

Interest expense increased to $2,128,191 in 1998 from $59,855 in 1997.
The increase was due to the issuance of $22,150,000 of 7 1/2% senior convertible
debentures in April 1998.

Five-month Transition Period Ended December 31, 1997 Compared to 1996
Net sales decreased to $864,775 from $2,275,901 for the five-month
period ended December 31, 1997 compared to the five-month period ended December
31, 1996. This decrease was primarily due to the dissolution of the OEM
Agreement with Pacesetter, Inc., a wholly-owned subsidiary of St. Jude Medical,
Inc. (St. Jude), in May 1997 and a reduction in clinical implants in the latter
part of 1997 due to the temporary suspension of implants described below. In the
five-month period ended December 31, 1997, net sales were generated primarily
from U.S. clinical implants and from the recognition of deferred revenue from
the sale of programmers to St. Jude. In the five-month period ended December 31,
1996, 55% of the net sales were generated from the sale of ICDs and related
products to Pacesetter.

Manufacturing expense increased to $4,180,198 from $2,677,881 for the
five-month period ended December 31, 1997 compared to the five-month period
ended December 31,1996. The increase of 56% was primarily due to increased
unabsorbed manufacturing expense as a result of lower production volumes as the
Company transitioned between current models of ICDs, and the elimination of
production for the OEM Agreement with St. Jude in the 1996 period. On November
12, 1997, the Company announced a revision to its clinical trial protocol of its
Sentinel ICD and a temporary suspension of implants due to a capacitor issue.
The Company incorporated a new ceramic capacitor and received FDA approval in
January 1998 to resume implants. The Company recognized an $800,000 expense for
the manufacturing cost associated with this change as well as additional
obsolescence caused by a change in the estimate on salvage value.

30
<PAGE>

Research and development expenses increased to $7,213,832 from
$5,905,774 for the five-month period ended December 31, 1997 compared to the
five-month period ended December 31, 1996. This increase of 22% was due to the
cost associated with the development of prototypes for the new models of ICDs as
well as increased expenditures related to the catheter ablation division.
Research and development activity related to the development of the ICDs
accounted for $6,342,024 of the expense for the five-month period ended December
31, 1997, while the catheter ablation development activities accounted for
$871,808 of the expense.

Selling, general and administrative expense increased to $4,609,807
from $2,232,852 for the five-month period ended December 31, 1997 compared to
the five-month period ended December 31, 1996. This increase of 106% was
partially due to an increase in selling and marketing costs as the Company
continued to build its U.S. sales force. In addition, the increase is
attributable to an increase in legal costs and approximately $350,000 of expense
incurred to dissolve an international distributor agreement.

Interest income decreased to $203,059 from $854,451 for the five-month
period ended December 31, 1997 compared to the five-month period ended December
31, 1996. The decrease of 76% was due to the lower average invested cash
balances partially off-set by higher interest rates in the five-month period
ended December 31, 1997, compared to the five-month period ended December 31,
1996.

Year Ended July 31, 1997 Compared to 1996
Net sales increased to $4,505,285 in Fiscal 1997 from $2,948,729 in
Fiscal 1996. The increase was due to growth in sales of defibrillator products
associated with U.S. clinical studies and international activities offset by a
decline in sales to Siemens Pacesetter, Inc.

Manufacturing expenses increased to $9,309,726 in Fiscal 1997 from
$4,456,152 in Fiscal 1996. The increase was substantially due to direct costs
associated with product sales, the ongoing costs associated with the
establishment of the Company's manufacturing operations and the write off of
excess inventory associated with termination of the Pacesetter OEM Marketing and
Manufacturing Agreement

Research and development expenses increased to $16,953,294 in Fiscal
1997 from $11,049,462 in Fiscal 1996. The increase of $5,903,832 was due to an
acceleration of research and development activity on the Sentinel ICD series and
additional implantable cardioverter defibrillators. Research and development
activity related to the development of the Sentinel ICD series accounted for
$15,097,165 of the expense for Fiscal 1997, while the catheter ablation
development activities accounted for $1,856,129 of the expense.

Selling, general and administrative expenses increased to $6,617,386 in
Fiscal 1997 from $3,665,156 in Fiscal 1996. This increase of $2,952,230 was
primarily due to an increase in costs associated with establishing the selling
and marketing activities in Europe, legal expenses, and the establishment of
administrative services to support a growing employee base related to the
Company's transition from a development stage company to an operating company.

Interest income increased to $1,569,895 in Fiscal 1997 from $1,156,885
in Fiscal 1996. The increase was due to higher average cash balances during
Fiscal 1997 as a result of net proceeds from the equity offering which closed in
July 1996 and warrants exercised during Fiscal 1997.

Interest expense decreased to $103,635 in Fiscal 1997 from $116,863 in
Fiscal 1996. The decrease was due to the conversion of Pacesetter convertible
debenture into common stock in June 1997.

31
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs have related to expansion of clinical
studies, research and development activities of its ICD product lines and
scale-up and expansion of the Company's manufacturing activities and general
corporate purposes including working capital. The Company has financed its
liquidity needs over the last several fiscal years through the sale of common
stock, other equity securities, and debt.

Net cash used in operating activities was $29,267,910 in 1998 compared
to $30,152,209 in 1997. 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 studies), the establishment of
manufacturing operations and the corresponding build-up of inventory and the
increase in selling and marketing expenses.

The Company's expenditures for fixed assets were $2,523,805 in 1998 and
were $2,741,644 in 1997. Fixed asset expenditures related primarily to computer
equipment, office furniture, production equipment for the ICD; and research and
development equipment. As the Company expands its ICD production, fixed asset
expenditures are expected to continue at the 1998 level.

On September 2, 1997 the Company entered into an equity line of credit
agreement with an investment group that allows the Company to access up to
$25,000,000, under certain conditions, through sales of its common stock. The
equity line terminates on September 2, 1999. As of December 31, 1998, the
Company did not meet the conditions required to access the equity line of
credit.

During 1998, the Company invested cash amounting to $5,561,595 as its
share of the capitalization of ELA*Angeion, a U.S. selling organization.

In April 1998, the Company issued a $22,150,000 Convertible Debenture.
In December 1997, the Company received proceeds from a strategic investment by
Synthelabo in the amount of $15,000,000.

As of December 31, 1998, the Company's principal source of liquidity
consisted of cash and cash equivalents of $1,827,637. Also as of that date, the
Company's liabilities exceeded its assets by $6,279,697. Management believes
that currently available funds not be sufficient to sustain the Company for the
next 12 months. Such funds consist of available cash and cash equivalents, any
funds received from the Company's catheter ablation technology licensing
agreement, product sales and any funds received with respect to the Company's
litigation against CPI. Reducing operating expenses and capital expenditure
alone may not be sufficient to address the Company's liquidity needs, and
continuation as a going concern is dependent upon product sales the Company's
litigation against CPI and the Company's ability to raise funds through equity
investment, asset sales or the licensing or sales of all or part of its
intellectual property. The Company is currently exploring many avenues of
funding as reported earlier in this document, all of which are presently
uncertain. There is no assurance any such financing is or would become
available.

In the event that the Company cannot generate or otherwise obtain
funding, the Company would have to substantially cut back its level of
operations. These reductions could

32
<PAGE>

have a material adverse effect on the Company's relations with its strategic
partners and customers. Uncertainty exists with respect to the adequacy of
current funds to support the Company's activities until positive cash flow from
operations can be achieved, and with respect to the availability of financing
from other sources to fund any cash deficiencies.

During January 1999, the Company obtained $6 million in secured debt
financing provided under a bank loan and secured by a portion of the Company's
intellectual property. Guarantees for this debt were provided to the bank by
private investors, including a director of the Company. The debt is required to
be repaid in October 1999.

In March 1999, the Company received a $10 million equity investment
from Synthelabo for meeting certain milestones as described in the Investment
and Master Strategic Relationship Agreement between the Company and Synthelabo.
The Company issued Synthelabo warrants to purchase 9,090,171 and 5,405,405
shares of the Company's Common Stock at prices of $0.01 and $1.11 per share,
respectively in exchange for the $10 million. These warrants expire on March 12,
2009 and March 12, 2002, respectively.

YEAR 2000 COMPLIANCE

All companies that use computers must address problems that could occur
when the year changes from 1999 to 2000. In the past, many computers and
software used two digits instead of four to identify the year when storing and
processing dates. This practice could cause a computer to use or calculate an
incorrect date as the year 2000 approaches.

The Company has a Year 2000 Oversight team in place, and has commenced
efforts to address all potential Year 2000 issues. The team has divided the
project into several areas: products the Company manufactures; equipment used to
produce and test those products; business systems; facilities; and third
parties. Each area will be evaluated and brought into compliance in five phases:

1. Inventory - A complete list of all possible systems that may be
affected by the turn of the century.

2. Assessment - Review and document the impact and severity of the Year
2000 issues for each system on the list.

3. Solutions - Identify the various methods for resolving each issue,
select the best solutions and establish an implementation plan.

4. Implementation - Carry out the plan to resolve the issues.

5. Verification - Test solutions prior to the year 2000 as required by the
implementation plan.

All of the Company's current and future products are designed,
manufactured and tested to perform correctly in the next century. All equipment
used to manufacture and test these products is inventoried and will be assessed
by the end of the second quarter of 1999. All critical business systems,
including the Company's financial systems, have completed all five phases and
are compliant. Remaining non-critical business systems will be assessed by the
end of the second quarter of 1999. The facilities have been assessed and only
one system requires a minor update to comply. Significant third party vendors
have been identified, and the Company expects to complete the assessment of
their compliance by the end of the second quarter 1999. The Company will require
written documentation from third party vendors indicating that they are Year
2000 compliant. The Company's objective is to complete all phases of the project
in all areas by the end of the second quarter of 1999. Due to the January
reorganization this initiative may extend beyond expected dates but the Company
will continue to focus to solve any potential Y2K issues.

Many of the Company's systems were purchased or implemented within the
last few years, which will keep compliance costs relatively low. As of December
31, 1998, the Company has incurred Year 2000 related expenses of less than
$100,000. The total expenditures to comply to the Year 2000 issues are estimated
to be no more than $200,000, however, there can be no guarantee that the actual
results will not differ from those estimated.

33
<PAGE>

If the Company is not successful in its efforts to bring its systems in
compliance, the Company's ability to procure merchandise in a timely and
cost-effective manner may be impaired, daily business processes may be delayed
by manual procedures, or business processes may be interrupted if no alternative
methodology is available, which could have a material effect on the Company's
operations.

Although, the Company believes that its Year 2000 compliance plan is
adequate to achieve full system operation on a timely basis, the Company is in
the process of developing a contingency plan to address the possibility of the
Company's and third parties' non-compliance. The Company anticipates completing
its contingency plan by the end of the second quarter of 1999.

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISKS.

The Company's primary market risk exposure is foreign exchange rate
fluctuations of the British pound sterling and the German deutschemark to the
U.S. dollar as the financial results of the Company's two subsidiaries, Angeion
Europe and Angeion GmbH, are translated into U.S. dollars in consolidation. The
Company's exposure to foreign exchange rate fluctuations also arise from certain
inter-company payable or receivable balances. Additionally, the Company has a
small exposure to currency risk arising from German deutschemark denominated
sales from Angeion GmbH to its customers. Since sales through Angeion GmbH have
historically been, and are expected to be, minimal, the exposure due to the
translation of German deutschemarks into U.S. dollars is not expected to be
material. All sales from the Company's U.S. and Angeion Europe operations are
denominated in U.S. dollars. As a result of the Investment and Master Strategic
Relationship Agreement (the "Agreement") the Company entered into with
Synthelabo in October 1997, all of the Company's European and Japanese sales,
with the exception of clinical studies, will be through ELA Medical. All sales
made to ELA Medical are denominated in the U.S. dollar and have no foreign
currency exchange rate risk to the Company. Any future operations at Angeion
Europe and Angeion GmbH are not expected to have any material impact on the
Company's foreign exchange rate exposure.

The effect of foreign exchange rate fluctuations on the Company's
financial results for the year ended December 31, 1998, the five month
transition period ended December 31, 1997 and the years ended July 31, 1997 and
1996 was not material. The Company does not currently use derivative financial
instruments to hedge against exchange rate risk. Because foreign exchange
exposure to these rate fluctuations increases as sales and inter-company
balances grow, the Company will continue to evaluate the need to initiate
hedging programs to mitigate the impact on inter-company balances due to changes
in the exchange rate of the British pound sterling and the German deutschemark
to the U.S dollar.

EURO CONVERSION

Effective January 1, 1999, 11 of the 15 member countries of the
European Union (EU) adopted the euro as the common legal currency. On that date,
the participating countries fixed euro conversion rates between their existing
local currencies and the euro. During the three-and-a-half year transition
period following its introduction, participating countries will be allowed to
transact business both in the euro and in their local currencies. On July 1,
2002, the euro will be the sole official currency in the participating EU
countries.

The Company sells and distributes its products globally, including
sales in Europe. Additionally, as noted under "Market Risks", the Company's two
subsidiaries, Angeion Europe and Angeion GmbH, conduct their business from
within the U.K. and Germany, respectively. All sales from the Company's U.S. and
Angeion Europe operations are denominated in U.S. dollars and all sales from
Angeion GmbH operations are denominated in German deutschemarks. The U.K. is one
of the four countries of the EU that did not adopt the euro as its legal
currency effective January 1, 1999, however, the U.K. may convert to the euro at
a later

34
<PAGE>

date. The conversion of the deutschemark into the euro is not expected to result
in any significant pricing changes. As a result of the Investment and Master
Strategic Relationship Agreement (the "Agreement") the Company entered into with
Synthelabo in October 1997, all of the Company's European and Japanese sales,
with the exception of clinical studies, will be through ELA Medical. All sales
made to ELA Medical are denominated in the U.S. dollar and have no foreign
currency exchange rate risk to the Company. Any future operations at Angeion
Europe and Angeion GmbH are not expected to have any material impact on the
Company's euro foreign exchange rate exposure.

The Company is in the process of addressing any issues raised by the
conversion to the euro. The Company does not presently expect that the
conversion to the euro will result in any material increase in costs to the
Company. While the Company will continue to evaluate the impact of the euro
conversion over time, based upon currently available information, management
does not believe that the conversion to the euro currency will have a material
impact on the Company's financial condition or over-all trends in result of
operations.

NEW ACCOUNTING PRONOUNCEMENTS

In 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), ACCOUNTING
FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
The statement requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. The Company plans to adopt the new standard in 1999.
The Company is currently evaluating SFAS No. 133, but does not expect that it
will have a material effect on its financial statements.

In 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1 ("SOP 98-1"), ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1 provides guidance on accounting
for the costs of computer software developed or obtained for internal use and
does not require additional disclosures. The Company intends to adopt SOP 98-1
in 1999. Costs incurred prior to the initial application of the SOP will not be
adjusted to conform to SOP 98-1. The adoption is not expected to have a material
impact on the Company's financial position or results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Angeion Corporation:

We have audited the accompanying consolidated balance sheets of Angeion
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity (deficit), and cash
flows for the year ended December 31, 1998, the five-month transition period
ended December 31, 1997 and the years ended July 31, 1997 and 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

35
<PAGE>

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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Angeion
Corporation and subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for the year ended December 31, 1998,
the five-month transition period ended December 31, 1997, and the years ended
July 31, 1997 and 1996, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has a shareholders' deficit that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/KPMG Peat Marwick LLP

Minneapolis, Minnesota
February 23, 1999, except as
to Note 17(c) which
is as of March 16, 1999

36
<PAGE>

ANGEION CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>

ASSETS 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,827,637 $ 14,052,115
Accounts Receivable:
Trade, less allowance for doubtful accounts of
$294,775 for 1998 and $0 for 1997 1,587,669 241,136
Other 102,426 167,450
Inventories 6,377,359 6,889,144
Prepaid expenses and other current assets 623,573 291,475
- -------------------------------------------------------------------------------------------------------------------
Total current assets 10,518,664 21,641,320

Property and equipment, net 6,880,822 6,523,820
Investment in joint venture, net 3,221,003 --
Other assets, net 2,272,918 718,411
- -------------------------------------------------------------------------------------------------------------------

Total assets $ 22,893,407 $ 28,883,551
===================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
- -------------------------------------------------------------------------------------------------------------------

Current liabilities:
Accounts payable 2,459,294 893,996
Current portion long-term debt 500,461 --
Accrued payroll, vacation, and related costs 983,060 1,015,119
Other accrued expenses 1,882,268 1,186,941
Deferred income 1,198,021 36,550
-------------------------------------------------------------------------------------------------------------------
Total current liabilities 7,023,104 3,132,606

Long-term debt 22,150,000 --
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 29,173,104 3,132,606
- -------------------------------------------------------------------------------------------------------------------

Shareholders' equity
(deficit):
Common stock, $.01 par value. Authorized 75,000,000
shares; issued and outstanding 38,796,555 shares
in 1998 and 32,998,443 shares in 1997 387,966 329,984
Additional paid-in capital 116,530,671 109,682,282
Unamortized value of restricted stock (118,066) (50,716)
Cumulative translation adjustment (24,650) 6,903
Accumulated deficit (123,055,618) (84,217,508)
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity (deficit) (6,279,697) 25,750,945

Commitments and contingencies (notes 11, 12 and 17)
- -------------------------------------------------------------------------------------------------------------------

Total liabilities and shareholders' equity (deficit) $ 22,893,407 $ 28,883,551
===================================================================================================================

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

37
<PAGE>

ANGEION CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

<TABLE>
<CAPTION>
Five Month Periods
Years Ended December 31, Ended December 31, Years Ended July 31,
--------------------------- --------------------------- ---------------------------
1998 1997 1997 1996 1997 1996
(Unaudited) (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 4,566,768 3,094,159 864,775 2,275,901 4,505,285 2,948,729

Operating expenses:
Manufacturing 12,394,194 10,812,042 4,180,198 2,677,881 9,309,726 4,456,152
Research and development 21,636,666 19,790,050 7,213,832 5,905,774 16,953,294 11,049,462
Selling, general and
administrative 7,185,581 7,465,643 4,609,807 2,232,852 6,617,386 3,665,156
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 41,216,441 38,067,735 16,003,837 10,816,507 32,880,406 19,170,770
- ---------------------------------------------------------------------------------------------------------------------------------
Operating loss (36,649,673) (34,973,576) (15,139,062) (8,540,606) (28,375,121) (16,222,041)
- ---------------------------------------------------------------------------------------------------------------------------------

Other income (expense):
Equity in net loss of joint
venture (2,778,996) 0 0 0 0 0
Revenue from sale of patents and
technology 2,050,000 0 0 0 0 0
Interest income 668,750 918,502 203,059 854,451 1,569,895 1,156,885
Interest expense (2,128,191) (59,855) (4,893) (48,674) (103,635) (116,863)
- ---------------------------------------------------------------------------------------------------------------------------------
Other income (expense) (2,188,437) 858,647 198,166 805,777 1,466,260 1,040,022
- ---------------------------------------------------------------------------------------------------------------------------------

Net loss $(38,838,110) (34,114,929) (14,940,896) (7,734,829) (26,908,861) (15,182,019)
=================================================================================================================================

Net loss per common $ (1.12) (1.14) (0.48) (0.27) (0.93) (0.66)
share
=================================================================================================================================

Weighted average number of common shares
outstanding 34,595,068 30,026,211 30,997,656 28,678,276 29,064,994 22,898,538
=================================================================================================================================
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

38
<PAGE>

ANGEION CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity (Deficit)

<TABLE>
<CAPTION>
Convertible
preferred stock Common stock
-------------------------------------------------
Number Par Number
of shares value of shares Par value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Balance at July 31, 1995 875,000 8,750 17,500,529 175,005

Shares issued at $6.50 per share,
net of issuance costs 0 0 3,400,000 34,000
Shares issued at $7.00 per share,
net of issuance costs 0 0 4,200,000 42,000
Stock options exercised 0 0 525,828 5,259
Warrants exercised 0 0 2,991,500 29,915
Director stock issued 0 0 11,530 115
Compensation expense on grant
of stock and stock options 0 0 12,320 123
Net loss 0 0 0 0
- --------------------------------------------------------------------------------------

Balance at July 31, 1996 875,000 8,750 28,641,707 286,417

Preferred stock
converted
into common stock (875,000) (8,750) 875,000 8,750
Notes payable converted
into common stock 0 0 250,000 2,500
Restricted Stock Grant 0 0 33,333 333
Stock options exercised 0 0 59,567 596
Warrants exercised 0 0 662,499 6,625
Director stock issued 0 0 36,027 360
Compensation expense on grant
of stock and stock options 0 0 0 0
Cumulative translation adjustment 0 0 0 0
Net loss 0 0 0 0
- --------------------------------------------------------------------------------------

Balance at July 31, 1997 0 0 30,558,133 305,581

Restricted Stock Grant 0 0 15,000 150
Stock options exercised 0 0 33,834 338
Warrants exercised
Director stock issued 0 0 40,068 401
Compensation expense on grant
of stock and stock options 0 0 0 0
Amortization of
restricted stock 0 0 0 0
Promethian Stock Grant 0 0 100,000 1,000
Synthelabo Investment 0 0 2,251,408 22,514
Cumulative translation adjustment 0 0 0 0
Net loss 0 0 0 0
- --------------------------------------------------------------------------------------

Balance at December 31, 1997 0 0 32,998,443 329,984

Restricted Stock Grant 0 0 210,000 2,100
Stock options exercised 0 0 94,500 945
Director stock issued 0 0 5,607 56
Compensation expense on grant
of stock and stock options 0 0 0 0
Amortization of
restricted stock 0 0 0 0
Rose Glen 0 0 25,000 250
Warrants on convertible debenture
Synthelabo Investment 0 0 5,208,551 52,086
Short swing profit
Employee stock purchase plan 0 0 254,454 2,545
Cumulative translation adjustment 0 0 0 0
Net loss 0 0 0 0
- --------------------------------------------------------------------------------------

Balance at December 31, 1998 0 0 38,796,555 387,966
======================================================================================
</TABLE>

[WIDE TABLE CONTINUED FROM ABOVE]

<TABLE>
<CAPTION>
Unamortized Cumulative
Additional value of translation Accumulated
paid-in capital restricted stock adjustment deficit Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

Balance at July 31, 1995 29,982,127 0 0 (27,185,732) 2,980,150

Shares issued at $6.50 per share,
net of issuance costs 20,293,045 0 0 0 20,327,045
Shares issued at $7.00 per share,
net of issuance costs 27,359,887 0 0 0 27,401,887
Stock options exercised 1,324,853 0 0 0 1,330,112
Warrants exercised 11,911,421 0 0 0 11,941,336
Director stock issued 87,885 0 0 0 88,000
Compensation expense on grant
of stock and stock options 577,038 0 0 0 577,161
Net loss 0 0 0 (15,182,019) (15,182,019)
- -----------------------------------------------------------------------------------------------------------------------

Balance at July 31, 1996 91,536,256 0 0 (42,367,751) 49,463,672

Preferred stock
converted into common stock 0 0 0 0 0
Notes payable converted
into common stock 1,415,500 0 0 0 1,418,000
Restricted Stock Grant 124,667 (72,917) 0 0 52,083
Stock options exercised 156,317 0 0 0 156,913
Warrants exercised 1,318,373 0 0 0 1,324,998
Director stock issued 111,640 0 0 0 112,000
Compensation expense on grant
of stock and stock options 426,938 0 0 0 426,938
Cumulative translation adjustment 0 0 1,777 0 1,777
Net loss 0 0 0 (26,908,861) (26,908,861)
- -----------------------------------------------------------------------------------------------------------------------

Balance at July 31, 1997 95,089,691 (72,917) 1,777 (69,276,612) 26,047,520

Restricted Stock Grant 79,538 (29,883) 0 0 49,805
Stock options exercised 87,011 0 0 0 87,349
Warrants exercised 0 0 0 0 0
Director stock issued 48,933 0 0 0 49,333
Compensation expense on grant
of stock and stock options 88,098 0 0 0 88,098
Amortization of
restricted stock 0 52,084 0 0 52,084
Promethian Stock Grant (20,810) 0 0 0 (19,810)
Synthelabo Investment 14,309,822 0 0 0 14,332,336
Cumulative translation adjustment 0 0 5,126 0 5,126
Net loss 0 0 0 (14,940,896) (14,940,896)
- -----------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1997 109,682,282 (50,716) 6,903 (84,217,508) 25,750,945

Restricted Stock Grant 508,846 (112,509) 0 0 398,437
Stock options exercised 149,366 0 0 0 150,311
Director stock issued 157,944 0 0 0 158,000
Compensation expense on grant
of stock and stock options 207,598 0 0 0 207,598
Amortization of
restricted stock 0 45,159 0 0 45,159
Rose Glen Warrants 311,089 0 0 0 311,339
Warrants on convertible debenture 286,202 0 0 0 286,202
Synthelabo Investment 4,899,241 0 0 0 4,951,327
Short swing profit 12,445 0 0 0 12,445
Employee stock purchase plan 315,658 0 0 0 318,203
Cumulative translation adjustment 0 0 (31,553) 0 (31,553)
Net loss 0 0 0 (38,838,110) (38,838,110)
- -----------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1998 116,530,671 (118,066) (24,650) (123,055,618) (6,279,697)
=======================================================================================================================

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

39
<PAGE>

ANGEION CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Five Month Periods
Ended Ended
December 31, December 31,
-------------------------- -------------------------
1998 1997 1997 1996
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating activities:
Net loss $(38,838,110) (34,114,929) (14,940,896) (7,734,829)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation expense 2,027,156 1,730,928 809,319 563,983
Amortization expense 1,168,008 367,428 116,858 116,858
Compensation expense on grant of stock and
stock options 809,194 528,188 239,320 220,670
Loss on disposal of fixed assets 498,630 0 0
Equity in net loss of joint venture 2,778,996 0 0
Changes in operating assets and liabilities:
Accounts receivable (1,281,509) 534,538 1,109,617 1,534,307
Inventories 511,785 921,903 272,833 (3,861,697)
Prepaid expenses and other current assets (332,098) (77,734) (53,888) (54,803)
Accounts payable 1,565,299 (141,863) (1,355,452) (1,934,248)
Accrued expenses 663,268 794,032 332,071 894,344
Deferred Income 1,161,471 (694,700) (694,700) 0
- ------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (29,267,910) (30,152,209) (14,164,918) (10,255,415)
- ------------------------------------------------------------------------------------------------------------------

Investing activities:
Purchase of marketable securities 0 (325,074) 0 (31,206,636)
Proceeds from maturities of marketable securities 0 29,500,000 8,050,181 9,400,000
Investments in joint venture (5,561,595) 0 0 0
Payments for purchases of property and equipment (2,523,805) (2,741,644) (611,219) (1,251,539)
Purchase of other assets 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities (8,085,400) 26,433,282 7,438,962 (23,058,175)
- ------------------------------------------------------------------------------------------------------------------

Financing activities:
Net proceeds from issuance of debt and warrants 25,025,027 0 0 0
Proceeds from issuance of common stock and warrants 4,951,327 15,713,643 14,334,292 0
Proceeds from exercise of stock options and warrants 480,959 65,583 167,625
Payments under capital lease obligations (296,928) 0 0 0
Repayments of debt (5,000,000) 0 0 0
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by financing
activities 25,160,385 15,713,643 14,399,875 167,625
- ------------------------------------------------------------------------------------------------------------------

Effect of Exchange Rate on Cash and Cash Equivalents (31,553) 19,445 6,077 0

Net increase (decrease) in cash and cash equivalents (12,224,478) 12,014,161 7,679,996 (33,145,965)

Cash and cash equivalents:
Beginning of year 14,052,115 2,037,954 6,372,119 35,183,919
- ------------------------------------------------------------------------------------------------------------------

End of year $ 1,827,637 14,052,115 14,052,115 2,037,954
==================================================================================================================

Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 945,218 59,855 4,893 3,924
==================================================================================================================

Supplemental disclosure of non-cash investing and
financing activities:
Property and equipment acquired under capital lease
obligations $ 797,389 0 0 0
Transfer of property and equipment to joint venture 438,405 0 0 0
Notes payable converted to common stock 0 0 0 0
Issuance of 3,846,153 shares of common stock to
Synthelabo 38,462 0 0 0
- ------------------------------------------------------------------------------------------------------------------

</TABLE>

[WIDE TABLE CONTINUED FROM ABOVE]

<TABLE>
<CAPTION>
Years
Ended
July 31,
--------------------------
1997 1996

- ---------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net loss (26,908,861) (15,182,019)

Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation expense 1,520,181 726,416
Amortization expense 280,460 279,429
Compensation expense on grant of stock and
stock options 591,022 665,161
Loss on disposal of fixed assets 0 0
Equity in net loss of joint venture 0 0
Changes in operating assets and liabilities:
Accounts receivable 1,050,194 (2,494,751)
Inventories (3,202,462) (3,550,562)
Prepaid expenses and other current assets 14,770 13,843
Accounts payable (721,614) 2,133,936
Accrued expenses 618,983 818,934
Deferred Income 731,250 0
- ---------------------------------------------------------------------------------------
Net cash used in operating activities (26,026,077) (16,589,613)
- ---------------------------------------------------------------------------------------

Investing activities:
Purchase of marketable securities (31,581,891) (20,368,290)
Proceeds from maturities of marketable securities 30,900,000 13,000,000
Investments in joint venture 0 0
Payments for purchases of property and equipment (3,432,601) (3,943,462)
Purchase of other assets 0 (279,170)
- ---------------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities (4,114,492) (11,590,922)
- ---------------------------------------------------------------------------------------

Financing activities:
Net proceeds from issuance of debt and warrants 0 0
Proceeds from issuance of common stock and warrants 0 47,728,932
Proceeds from exercise of stock options and warrants 1,326,993 13,271,448
Payments under capital lease obligations 0 0
Repayments of debt 0 (3,690)
- ---------------------------------------------------------------------------------------
Net cash provided by financing
activities 1,326,993 60,996,690
- ---------------------------------------------------------------------------------------

Effect of Exchange Rate on Cash and Cash Equivalents 1,776 0

Net increase (decrease) in cash and cash equivalents (28,811,800) 32,816,155

Cash and cash equivalents:
Beginning of year 35,183,919 2,367,764
- ---------------------------------------------------------------------------------------

End of year 6,372,119 35,183,919
=======================================================================================

Supplemental disclosures of cash flow information:
Cash paid during the year for interest 103,635 116,813
=======================================================================================

Supplemental disclosure of non-cash investing and
financing activities:
Property and equipment acquired under capital lease
obligations 0 0
Transfer of property and equipment to joint venture 0 0
Notes payable converted to common stock 1,500,000 0
Issuance of 3,846,153 shares of common stock to
Synthelabo 0 0
- ---------------------------------------------------------------------------------------

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

40
<PAGE>

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS

Angeion (the "Company") develops, manufactures and distributes products
for the treatment of cardiac arrhythmia patients.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND INVESTMENT IN JOINT VENTURE

The consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries and its 50 percent-owned joint venture,
ELA*Angeion, LLC ("ELA*Angeion"). Angeion Europe Ltd. ("Angeion Europe"),
established November 1, 1995 and Angeion GmbH, established October 31, 1996 were
founded to facilitate clinical studies of the Company's ICDs and expand its
European business operations. All inter-company transactions and balances are
eliminated in consolidation. On January 1, 1998, ELA*Angeion began operations. A
proportional amount of the income (loss) from the joint venture are accounted
for under the Equity Method and 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.

CASH EQUIVALENTS

Cash equivalents consist of temporary cash investments with maturities
of three months or less from the date of purchase. At December 31, 1998, cash
equivalents consisted of checking accounts and money market funds.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is
determined on a first in, first out basis.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Equipment and furniture and
fixtures are depreciated using the straight-line method over the estimated
useful lives of the assets that range from three to seven years. Leasehold
improvements are depreciated using the straight-line method over the shorter of
the lease term, or the estimated useful life of the asset. Expenditures for
repairs and maintenance are charged to expense as incurred.

OTHER ASSETS

Other assets consist primarily of intangible assets representing
completed technology and other assets resulting from the sales of convertible
debentures. The intangible assets are amortized using straightline method over 4
years and the debt issuance costs are ratably amortized over the term of the
note.

INCOME TAXES

Under the asset and liability method of accounting for income taxes,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.

41
<PAGE>

REVENUE RECOGNITION

Revenues from direct sales of products are recognized at the date of
patient implant when delivered directly to hospitals and at date of shipment for
sales to distributors. Revenues generated through ELA*Angeion are recognized
upon shipment to the joint-venture and Angeion's proportional share of sales and
cost of sales 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.

NET LOSS PER SHARE

In accordance with SFAS No. 128, Earnings per Share, basic EPS is
calculated by dividing net earnings (loss) by the weighted average common shares
outstanding during the period. Diluted EPS reflects the potential dilution to
basic EPS that could occur upon conversion or exercise of securities, options,
or other such items, to common shares using the treasury stock method based upon
the weighted average fair value of the Company's common shares during the
period. For each period presented, basic and diluted loss per share amounts are
identical, as the effect of potential common shares is anitdilutive.

FOREIGN CURRENCY TRANSLATION

The functional currency and denomination of all sales transactions of
Angeion Europe are the U.S. dollar. Accordingly, the financial statements of
Angeion Europe, which are maintained in the local currency, are remeasured into
U.S. dollars in accordance with Statement of Financial Accounting Standards
(SFAS) No. 52, FOREIGN CURRENCY TRANSLATION. All exchange gains or losses from
remeasurement of monetary assets and liabilities that are not denominated in
U.S. dollars are recognized currently in income.

The assets and liabilities for Angeion GmbH are translated into U.S.
dollars at year-end exchange rates while elements of the statement of operations
are translated at average exchange rates in effect during the year. The
resulting translation adjustments are recorded as a component of shareholders'
equity.

SHORT-TERM MARKETABLE SECURITIES

As of December 31, 1998, the Company's marketable debt securities are
classified as available-for-sale. However, because the maturities of the
Company's debt securities are less than one year, they are reported at amortized
cost that approximates fair value.

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments that subject the Company to concentration of
credit risk consist principally of cash investments and trade accounts
receivable. Cash in excess of current operating needs is invested in accordance
with the Company's investment policy that emphasizes principal preservation. At
year end, the majority of investments consisted of checking and money market
account balances.

The Company grants credit primarily to ELA Medical and the Company's
50% owned joint venture, ELA*Angeion, for product sales in the normal course of
business. During the year ended December 31, 1998,

42
<PAGE>

$2,445,090, or 54%, of the Company's sales were from sales to ELA*Angeion. ELA
Medical represented $774,550, or 17% of sales for the year ended December 31,
1998. At December 31, 1998, ELA*Angeion and ELA Medical represented 29% and 40%
of the Company's accounts receivable, respectively.

STOCK-BASED COMPENSATION

The Company applies the intrinsic value method as prescribed under
Accounting Principles Board Opinion (APB) No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES and related interpretations to account for the issuance of stock
incentives to employees and directors and, accordingly, no compensation expense
related to employees' and directors' stock incentives has been recognized in the
financial statements. Effective fiscal 1997, in accordance with the provisions
of SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company has
presented pro forma information reflecting compensation cost for such issuances.
See Note 7 "Shareholder's Equity".

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cast flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

In 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1 ("SOP 98-1"), ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1

43
<PAGE>

provides guidance on accounting for the costs of computer software developed or
obtained for internal use and does not require additional disclosures. The
Company intends to adopt SOP 98-1 in 1999. Costs incurred prior to the initial
application of the SOP will not be adjusted to conform to SOP 98-1. The adoption
is not expected to have a material impact on the Company's financial position or
results of operations.

(3) LIQUIDITY

The Company has incurred substantial losses from operations since its
inception, which have been recurring and amounted to $123,055,618 on a
cumulative basis through December 31, 1998. These losses, which include the
costs for research and development, have been funded primarily from the sale of
equity securities, including preferred stock and warrants, and debt (see Notes
6, 7 and 8 with respect to financing transactions of the Company).

The Company had cash and cash equivalents of $1,827,637 at December 31,
1998. Management believes that currently available funds not be sufficient to
sustain the Company for the next 12 months. Such funds consist of available cash
and cash equivalents, any funds received from the Company's catheter ablation
technology licensing agreement, product sales and any funds received with
respect to the Company's litigation against CPI. Reducing operating expenses and
capital expenditure alone may not be sufficient to address the Company's
liquidity needs, and continuation as a going concern is dependent upon product
sales, the Company's litigation against CPI and the Company's ability to raise
funds through equity investment, asset sales or the licensing or sales of all or
part of its intellectual property. The Company is currently exploring many
avenues of funding as reported earlier in this document, all of which are
presently uncertain. There is no assurance any such financing is or would become
available.

The Company has begun a comprehensive review of its short and long term
options to help improve its financial condition and increase shareholder value.
In December 1998, the Company announced that it had retained Raymond James and
Associates, Inc. as a financial advisor to assist in this process. The Company,
together with its financial advisor, is currently evaluating all of its
alternatives in this process, including: potential sources of financing; further
reorganization of the Company's operations (in addition to the reorganization
discussed below); sale or license of some or all of the Company's technology,
product lines, and assets; settlements of its lawsuit with CPI, the possibility
of entering into new businesses and/or exiting its current business, and
transactions by which the Company would be acquired of another entity.

44
<PAGE>

(4) INVENTORIES

Inventories consisted of the following at December 31:

1998 1997
- ------------------------------------------------------------------------------
Raw Materials $3,243,555 $3,647,071
Work-in-Process 1,573,124 1,373,697
Finished Goods 1,560,680 1,868,376
- ------------------------------------------------------------------------------
$6,377,359 $6,889,144

(5) PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31:

1998 1997
- ------------------------------------------------------------------------------

Furniture and fixtures 1,120,518 831,491
Equipment 9,517,664 8,930,522
Leasehold improvements 1,020,911 595,827
- ------------------------------------------------------------------------------
11,659,093 10,357,840

Less accumulated depreciation and (4,778,271) (3,834,020)
amortization
- ------------------------------------------------------------------------------

$ 6,880,822 $ 6,523,820
- ------------------------------------------------------------------------------

(6) OTHER ASSETS

Other assets consist of the following at December 31:

1998 1997
---------- --------
Debt issuance costs, net $1,923,635 $ -
Patents, net 349,283 697,371
Other - 21,040
---------- --------
$2,272,918 $718,411
========== ========

(7) ALLIANCE AND LONG-TERM DEBT

On February 4, 1993, Angeion and Siemens Pacesetter Inc. (Pacesetter),
which was subsequently acquired by St. Jude Medical (St. Jude), 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 was converted
on a one-for-one basis into Angeion common stock on May 30, 1997. Pacesetter's
investment also included the purchase of a $1,500,000 convertible subordinated
debenture with an interest rate of 7.16%, interest payable semi-annually, which
was convertible at any time into Angeion common stock at $6.00 per share. On
June 19, 1997, this Debenture net of unamortized debt issuance costs, was
converted into 250,000 shares of common stock.

On November 20, 1996, the Company delivered to St. Jude a formal notice
of recission and termination of the OEM Marketing Agreements and the License
Agreement between the Company and Pacesetter, Inc. In April 1997, the Company
signed a royalty-free cross license agreement with St. Jude and its
subsidiaries, Pacesetter, Ventritex and Telectronics. This agreement terminates
the OEM Marketing Agreement and supersedes the earlier License Agreement. St.
Jude's suit against the Company in U.S. District Court, concerning the 1993
License and OEM Marketing Agreement and Pacesetter's claim for overpayment was
dismissed in July 1997.

(8) NOTES PAYABLE

On March 11, 1998, the Company borrowed $5,000,000 from RGC
International Investors, IDC ("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

45
<PAGE>

Company's Common Stock at an exercise price of $2.92. 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.
These Notes had an initial conversion price ("Conversion Price") of $3.0516 per
share subject to adjustment upon the occurrence of certain events ("Events").
These events stipulated that the 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 December 18, 1998
the Conversion Price was adjusted to $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.

(9) SHAREHOLDERS' EQUITY

COMMON STOCK

In October 1997, the Company entered into an Investment and Master
Strategic Relationship Agreement (the "Agreement") with Synthelabo which, in
addition to creating the ELA*Angeion joint venture, resulted in net equity
investments of $14,332,336 in 1997 and $4,951,327 in 1998. Total shares of
common stock and warrants issued in 1997 were 2,251,408 and 1,350,845,
respectively, and in 1998 were 1,362,398 and 817,439, respectively. The
Agreement included a repricing provision which automatically repriced the
original shares of common stock and warrants as if this investment had been made
at a price based on the average Company stock price for the fifteen day trading
period prior to the one year anniversary of the initial investment. Pursuant to
the Agreement, on October 9, 1998, the initial 2,251,408 shares of common stock
and 1,350,845 warrants were repriced to reflect the repricing provision of the
Agreement resulting in an additional 3,846,153 shares of common stock and an
additional 2,307,692 warrants being issued to Synthelabo. The new totals for the
initial investment are: 6,097,561 shares of common stock issued at $2.46 per
share and warrants which allow Synthelabo to purchase an additional 3,658,537
shares of the Company's common stock at a price of $2.46 per share with an
expiration date of October 9, 2001. The 1,362,398 shares of common stock issued
in 1998 were

46
<PAGE>

issued at $3.67 per share and the warrants allow Synthelabo to purchase an
additional 817,439 shares of the Company's common stock at a price of $3.67 per
share with an expiration date of September 1, 2001.

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 no later than ten
years from date of grant.

Shares Weighted average
under option price per share
- ---------------------------------------------------------------

Balance at July 31, 1995 2,062,303 $ 2.95
Granted 750,251 8.00
Exercised (347,933) 2.38
Forfeited (265,873) 5.60
- ---------------------------------------------------------------

Balance at July 31, 1996 2,198,748 $ 4.45
Granted 1,862,775 3.50
Exercised (35,567) 2.26
Forfeited (1,105,125) 6.79
- ---------------------------------------------------------------

Balance at July 31, 1997 2,920,831 $ 2.94
Granted 129,800 5.00
Exercised (17,834) 2.26
Forfeited (56,600) 3.76
- ---------------------------------------------------------------

Balance at December 31, 1997 2,976,197 $ 3.02
Granted 911,584 2.13
Exercised (94,500) 1.59
Forfeited (332,575) 3.48
- ---------------------------------------------------------------
Balance at December 31, 1998 3,460,706 $ 2.78
===============================================================

As of December 31, 1998, the outstanding options in the 1993, 1991,
1989 and 1988 Stock Incentive Plans had exercise prices ranging from $1.44 to
$10.00 with a weighted average contractual life of 3.7 years. At December 31,
1998 1,949,720 options were exercisable, with a weighted-average exercise price
of $2.84. The following table summarizes information concerning options
outstanding and exercisable at December 31, 1998:

47
<PAGE>

Options Outstanding Options Exercisable
----------------------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Range of Number Remaining Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisble Price
--------------------------------------------------------------
$1.44 - $2.17 244,800 1.79 $1.78 77,400 $2.08
$2.19 - $2.20 1,182,584 2.39 2.20 500,000 2.19
$2.31 - $3.09 455,923 3.43 2.56 383,823 2.54
$3.13 - $3.16 321,302 5.01 3.15 193,527 3.15
$3.18 - $3.19 967,697 4.91 3.19 670,458 3.19
$3.22 - $4.31 140,350 5.02 3.88 82,125 3.89
$4.38 - $10.00 148,050 6.23 5.18 42,387 5.59
--------------------------------------------------------------
Totals 3,460,706 3.70 $2.78 1,949,720 $2.84

During the year ended December 31, 1998, the five month transition
period ended December 31, 1997, the years ended July 31, 1997 1996, the Company
granted options, outside the Plans, to purchase 818,416, 0, 225,000 and 300,000
shares, respectively, of common stock at a weighted average price of $2.20,
$0.00, $3.19 and $8.14 per share, respectively. During 1998, none of these
options were exercised. At December 31, 1998, 282,498 of these options were
exercisable at a weighted average exercise price of $3.33.

Under the Non-Employee Director Option Plan, options for 1,500, 18,000,
18,767 and 12,500 shares were granted at a weighted average price of $2.14,
$3.59, $3.58 and $6.94 during the year ended December 31, 1998, the five month
transition period ended December 31, 1997, the years ended July 31, 1997 and
1996, respectively. Options for 0, 16,000, 24,000 and 2,500 shares at a weighted
average price of $0.00, $2.94, $3.19 and $2.44 were exercised during the same
respective periods. At December 31, 1998, 60,767 shares at a weighted average
price of $4.02 were outstanding and exercisable under this plan.

On November 25, 1996, the Board of Directors reviewed the exercise
price of the options then outstanding, current market conditions, as well as
other factors, and offered to re-price all of the outstanding options that had
exercise prices above market value. The new option price reflected the market
value on December 18, 1996. The total number of re-priced options was 1,231,375.
These re-priced options cannot be exercised for twelve months from the election
date and then vest pursuant to the original terms.

WARRANTS

In connection with the Investment and Master Strategic Relationship
Agreement (the "Investment Agreement") with Synthelabo in October 1997, the
Company issued 1,350,845 warrants. As allowed for in the Investment Agreement
and as discussed above, these 1,350,845 warrants were subject to repricing
provisions, which resulted in the issuance of additional warrants totaling
2,307,692 in October 1998. These warrants will allow Synthelabo to purchase
3,658,537 shares of common stock at $2.46 per share and expire on October 9,
2001. In addition, in connection with the additional $5,000,000 investment
received from Synthelabo in August 1998, additional 817,439 warrants were
issued. These warrants allow Synthelabo to purchase 817,439 shares of common
stock at $3.67 per and expire on September 1, 2001.

In connection with the private placement of $22,150,000 principle of 7
1/2 percent Senior Convertible Notes due 2003 (the "Notes"), the Company issued
181,462 warrants each to HSBC Securities, Inc. ("HSBC") and Prudential
Securities, Inc. ("Prudential"), respectively. These warrants allow both HSBC
and Prudential to purchase 181,462 shares of common stock at a price of $1.5258
per share. These warrants expire on April 15, 2003. The fair value of the
warrants at the time of issuance was determined to be $286,202. This value is
being ratably amortized over the term of the debt. The warrants' unamortized
value at December 31, 1998, of $245,657, is included in other assets.

48
<PAGE>

In connection with $5,000,000 Convertible Senior Note agreement the
Company entered into with RGC International Investors, IDC ("Rose Glen"), 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 $2.92. 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 warrants for 727,500 shares of Common
Stock (the "Rose Glen Warrant") are exercisable until March 11, 2003. The fair
value of the warrants at the time of issuance was determined to be $244,949. The
remaining value was expensed upon the repayment of the note.

In connection with the issuance of a note payable to a 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 Bridge Financing, warrants to purchase 834,999
shares of common stock were issued at an exercise price of $2.00 per share.
During 1997 and 1996, warrants for 662,499 and 155,500 shares of common stock,
respectively, were exercised. At December 31, 1998, 17,000 shares were
outstanding and scheduled to expire on July 29, 1999.

PRO FORMA OPTION INFORMATION

In 1997, the company adopted SFAS No. 123 ACCOUNTING FOR STOCK-BASED
COMPENSATION which encourages, but does not require companies to recognize
compensation cost for stock-based compensation plans over the term of option
based upon the fair value of awards on the date of grant. However, the statement
allows the alternative of the continued use of the intrinsic value method as
prescribed in APB No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. Therefore,
as permitted, no compensation expense has been recognized by the Company for its
stock options to employees.

<TABLE>
<CAPTION>
Five Month
Year Ended Period Ended
December 31, December 31, Year Ended Year Ended
1998 1997 July 31, 1997 July 31, 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss):
As reported $(38,838,110) (14,940,896) (26,908,861) (15,182,019)
Pro forma (40,983,370) (15,489,736) (27,963,861) (15,872,019)
- --------------------------------------------------------------------------------------------------------------
Net income (loss) per common share:
As reported $ (1.12) (0.48) (0.93) (0.66)
Pro forma (1.18) (0.50) (0.96) (0.69)
- --------------------------------------------------------------------------------------------------------------
</TABLE>

The estimated per share weighted-average fair value of all stock
options granted during the fiscal year ending December 31, 1998, the five month
transition period ending December 31, 1997 and the fiscal years ending July
31,1997 and 1996 was $1.43, $3.24, $1.51 and $2.71, respectively, as of the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions for the same periods:

<TABLE>
<CAPTION>
Five Month
Year Ended Period Ended
December 31, December 31, Year Ended Year Ended
1998 1997 July 31, 1997 July 31, 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Risk-free interest rate 5.50% 5.80% 6.20% 6.00%
Annualized volatility factor .77 .74 .60 .60
Expected option term 5 years 5 years 5 years 5 years
- --------------------------------------------------------------------------------------------------------------
</TABLE>

49
<PAGE>

Pro-forma net income excludes options granted in fiscal 1995 and prior.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented because compensation cost is reflected over the term of the option and
compensation cost for options granted prior to August 1, 1995 is not considered.

NON-CASH COMPENSATION

During the year ended December 31, 1998, the five month transition
period ended December 31, 1997, and the years ended July 31, 1997 and 1996, the
Company granted in-the-money stock options and stock grants to employees,
directors and consultants in lieu of cash compensation, which amounted to
$809,194, $239,319, $591,022 and $665,161, respectively. For securities issued
to employees, expense was recognized for the stock and stock option grants based
on the intrinsic value method in accordance with APB Opinion 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES. For stock issued to non-employees, expense was
recognized based on fair value of securities granted.

RESTRICTED STOCK GRANTS

The Company's 1993 Stock Option Plan allows for issuance of restricted
stock grants. During the year ended December 31, 1998, the five month transition
period ended December 31, 1997 and the years ended July 31, 1997 and 1996, the
Company issued 210,000, 15,000, 33,333 and 0 shares of restricted stock,
respectively, in lieu of cash compensation totaling $510,946, $79,688, $125,000
and $0. The value of such stock was established by the market price on the date
of the grant. Unearned compensation is shown as a reduction of shareholders'
equity in the accompanying consolidated financial statements and is being
amortized ratably over the restricted period.

SHAREHOLDER RIGHTS PLAN

On April 8, 1996, the Board of Directors declared a dividend
distribution on one common stock purchase right (a "Right") for each share of
the Company's common stock outstanding on April 30, 1996, and one Right for each
common stock into which Series A preferred stock are convertible. Each Right
would entitle shareowners to buy one-thousandth share of a new series of
preferred stock at an exercise price of $70.00 per share, subject to adjustment.
The Rights will not be exercisable or separable from the common stock until a
party, other than Synthelabo, acquires beneficial ownership of 15 percent or
more (or as low as 10 percent as the Board of Directors may determine) of the
Company's common stock or after a person or group announces an offer, the
consummation of which would result in such party owning 15 percent or more of
the common stock. The Rights expire on April 7, 2006, unless redeemed or
exchanged by the Company earlier.

(10) INVESTMENT IN JOINT VENTURE

Investments in joint venture consist of 50 percent of the common stock
of ELA*Angeion, a sales and marketing company formed to be the U.S. distributors
for Angeion and ELA Medical, Inc. products. The joint venture commenced
operations on January 1, 1998. Angeion's investments in and advances to the
joint venture have totaled $6,000,000 at December 31, 1998. Net sales to the
joint venture and net accounts receivable due from the joint venture were
$2,445,090 and $457,630, respectively, at December 31, 1998, net of elimination
of proportional share of sales, cost of sales and any resultant gain or loss
related to assets sold to the joint venture

50
<PAGE>

still remaining on the books of the joint venture at year end. A summary of the
financial information for the joint venture as of, and for, the year ended
December 31, 1998 follows:

1998
------------
Current assets $ 9,278,504
Current liabilities 5,515,951
============
Working capital 3,762,553

Plant, property & equipment, net 2,486,509
Other assets 0
Long-term debt 0
============

Stockholders' equity $ 6,249,062
============

Sales 16,282,810
============

Net income (loss) $ (5,750,938)
============

(11) LEASES

The Company leases office and production space under an operating
lease. The lease provides for executory costs that 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 for
office and production space was approximately $572,000, $176,000, $404,000 and
$246,000, for the year ended December 31, 1998, the five month transition period
ended December 31, 1997, the years ended July 31, 1997 and 1996, respectively.

Future minimum lease payments under the operating leases are
approximately $722,328, $714,987, $671,605, $592,881, $634,443 and $2,691,819
for the years ended December 31, 1999, 2000, 2001, 2002, 2003 and thereafter,
respectively.

The Company also rents office furniture and equipment under capital
leases with the last lease expiring in February 2000. The total outstanding
balance at December 31, 1998 is $500,461.

(12) INCOME TAXES

The Company has a net operating loss carry-forward at December 31,
1998, of approximately $116,000,000 which is available to reduce income taxes
payable in future years. If not used, this carry-forward will begin to expire in
2004. Under the Tax Reform Act of 1986, the utilization of these carry-forwards
may be limited as a result of significant changes in ownership.

The actual tax expense 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:

</TABLE>

51
<PAGE>

<TABLE>

<S> <C> <C> <C> <C>
State income taxes, net (7.3) (6.0) (6.0) (6.0)
Miscellaneous (0.2) (0.2) 0.0 (0.0)
Change in valuation allowance 41.5 40.2 40.0 40.0
- ----------------------------------------------------------------------------------------------------

Effective income tax rate 0.0% 0.0% 0.0% 0.0%
- ----------------------------------------------------------------------------------------------------
</TABLE>

Deferred taxes, calculated using an effective tax rate of 40% as of
December 31 consist of the following:

<TABLE>
<CAPTION>
Five Month
Year Ended Period Ended
December 31, December 31, Year Ended Year Ended
1998 1997 July 31, 1997 July 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net operating loss carry-forwards $ 46,651,000 $ 32,167,000 $ 27,693,000 $ 17,200,000
Other 3,425,000 2,118,000 (240,000) (32,000)
- ----------------------------------------------------------------------------------------------------
Total net deferred tax assets 50,076,000 34,285,000 27,453,000 17,168,000

- ----------------------------------------------------------------------------------------------------
Less valuation allowance (50,076,000) (34,285,000) (27,453,000) (17,168,000)

- ----------------------------------------------------------------------------------------------------
Deferred Income Taxes $ 0 $ 0 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------
</TABLE>

The net deferred assets at December 31, 1998 and 1997 and July 31, 1997
and 1996 are fully offset by a valuation allowance. The amount of the valuation
allowance will be reviewed annually.

(13) RETIREMENT SAVINGS PLAN

The Angeion Corporation Tax Deferred Savings and Employee 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 immaterial in all
years presented.

(14) ROYALTY COMMITMENTS

On August 13, 1998, the Company agreed to pay royalties to Children's
Medical Center Corporation for sales related to specified identified patents.
Royalty rates related to this agreement are as follows: 2 1/2 percent of the
first $2,000,000 of net product sales after market release; 5 percent of all net
product sales over and above the first $2,000,000; and 10 percent on all
third-party income. The Company has incurred $34,000 in royalties as of December
31, 1998 related to the above commitment.

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 tachycardia devices. The Company has incurred no royalty expense through
December 31, 1998 related to this commitment.

52
<PAGE>

(15) 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
earning and paid-in-capital in the equity section of the statement of financial
position. The Company adopted SFAS 130 on January 1, 1998, however, because
components of comprehensive income consist only of immaterial foreign currency
translation adjustments, the Company's net loss and comprehensive loss are
substantially equivalent and are not presented separately.

(16) SEGMENT REPORTING

In the current year, the Company adopted SFAS No. 131, DISCLOSURES
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which establishes
standards for disclosure about operating segments, products, geography and major
customers.

The Company operates in a single industry segment: cardiovascular
medical products. For management purposes, the Company is segmented into two
geographic areas. Information regarding operations in these two geographies for
the year ended December 31, 1998, the five-month transition period ending
December 31, 1997 and the years ended July 31, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
Five Month
Year Ended Period Ended
December 31, December 31, Year Ended Year Ended
1998 1997 July 31, 1997 July 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers
United States $2,976,366 758,525 3,063,766 2,610,729
Europe 1,345,318 33,350 1,441,519 338,000
All other foreign countries 245,084 72,900 0 0
-----------------------------------------------------------
$4,566,768 864,775 4,505,285 2,948,729
- ----------------------------------------------------------------------------------------------------

Net long-lived assets
United States $6,878,438 6,436,925 6,623,990 4,819,820
Europe 2,384 86,895 98,086 0
-----------------------------------------------------------
$6,880,822 6,523,820 6,722,076 4,819,820
- ----------------------------------------------------------------------------------------------------
</TABLE>

Sales attributed to geographic area are based upon customer location.
Long-lived assets consist of property and equipment located at the Company's
facilities in the United States, United Kingdom and Germany.

53
<PAGE>

(17) CONTINGENCIES

54
<PAGE>

(18) SUBSEQUENT EVENTS

(a) In January 1999, the Company announced a restructuring plan to
improve the Company's ability to market the ICD product line while helping to
reduce the cash flow burn rate. As a result of this restructuring, the Company
reduced approximately 20% of the total employee base, including 40% of the
Company's senior management team. Although the restructuring included employees
from throughout the entire organization, it is the Company's opinion that this
action will not have a material impact on the Company's ability to meet any
research and development schedules nor will it prevent compliance with any
regulatory agencies. In addition, a small sales and marketing organization was
established within the Company that will help educate and coordinate the sales
efforts with the Company's joint venture, ELA*Angeion, LLC. Approximately
$750,000 in expenses were incurred related to the reorganization, severance and
other employee benefits associated with the reduction in force. No material
future expenses related to this restructuring are expected.

(b) In January 1999, the Company entered into financing agreements
between the Company and Norwest Business Credit (the "Bank") in which the Bank
made two term loans (the "Loans") to the Company in the amount of $4,000,000 and
$2,000,000. The loans have a term of nine months from the date of advance and
bear an initial interest rate of 5.75% per annum, adjusted based upon changes in
the prime rate, and paid on a monthly basis to the Bank. The loans are
guaranteed by individual investors (the "Investors"), including a director of
the Company, who, upon maturity of the Loans, will be paid guarantee fees of
approximately 5.05% per annum. In addition, the Investors received a one time
commitment fee from the Company equal to 2% of the loan amount. The Loans are
secured by a security interest in all of the Company's intellectual property
that the Company is free to pledge for such purpose.

(c) On March 16, 1999, the Company received an equity investment of
$10,000,000 from the Company's strategic partner, Synthelabo, as a result of the
Company receiving PMA approval for its 2020 ICD and lead systems. This payment
was in accordance with the Investment and Master Strategic Relationship
Agreement (the "Investment Agreement") between Synthelabo and the Company
entered into in October 1997. As a result of the equity investment, Synthelabo
received warrants to purchase 9,090,171 and 5,405,405 shares of the Company's
common stock at prices of $0.01 and $1.11 per share, respectively. These
warrants expire on March 12, 2009 and March 12, 2002, respectively.

(19) QUARTERLY FINANCIAL DATA
(unaudited)

Following is a summary of quarterly financial results in the years
ended December 31:

(in thousands except
per share amounts) First Second Third Fourth
- ------------------------------------------------------------------------------

1998
Total revenue $ 355 $ 1,113 $ 1,614 $ 1,485
Net income (loss) (9,675) (8,723) (7,133) (13,307)
Loss per common share (0.29) (0.26) (0.21) (0.35)
Weighted average shares 33,091 33,178 33,815 38,247

1997
Total revenue $ 716 $ 985 $ 1,214 $ 179
Net income (loss) (6,880) (7,935) (10,109) (9,191)
Loss per common share (0.24) (0.27) (0.33) (0.29)
Weighted average shares 28,802 29,433 30,599 31,246

Loss per common share is computed based upon the weighted average
number of shares outstanding during each period.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.

55
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

(a) DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

DIRECTORS.

The directors of the Company, their ages, as of March 15, 1999, and the
year they became a director are as follows:

<TABLE>
<CAPTION>
DIRECTOR AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- -------- --- -------------------- --------------
<S> <C> <C> <C>
Whitney A. McFarlin 58 Chairman of the Board 1993

Arnold A. Angeloni 56 President of Gateway Alliance LLC 1990

Dennis E. Evans 60 President and Chief Executive Officer of Hanrow 1990
Financial Group, Ltd.

James B. Hickey, Jr. 45 President and Chief Executive Officer 1998
of the Company

Lyle D. Joyce, M.D., Ph.D. 51 Cardiothoracic Surgeon and President of 1988
Minnesota Thoracic Group, P.A.

Joseph C. Kiser, M.D. 66 Retired Cardiothoracic Surgeon at Minnesota 1988
Thoracic Group, P.A. and Co-founder of The
Minneapolis Heart Institute

Donald D. Maurer 62 Consultant with ABI, Inc. 1996

Glen Taylor 57 Chief Executive Officer and Chairman of Taylor 1992
Corporation

Stephen L. Wilson 46 Executive Vice President and Chief Financial 1998
Officer of Computer Motion, Inc.
</TABLE>

OTHER INFORMATION ABOUT THE DIRECTORS

WHITNEY A. MCFARLIN has been Chairman of the Board of the Company since
September 1993. From September 1993 to July 1998 Mr. McFarlin was also President
and Chief Executive Officer of the Company. 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. ("Clarus"), a private medical device
company that manufactures neuroendoscopy products. 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, Inc., a medical device manufacturer, most recently as Executive Vice
President, where he was

56
<PAGE>

responsible for the U.S. pacing business. He serves on the Board of Directors of
Autonomous Technologies, Inc., Possis Medical Inc. and a private corporation.

ARNOLD A. ANGELONI has been President of Gateway Alliance LLC, a
financial consulting firm for start-up ventures and business consolidations,
since January 1996. From 1961 to 1995, Mr. Angeloni was employed by Deluxe
Corporation, a provider of check products and services to the financial payments
industry, in various administrative, marketing, and operations positions, most
recently as Senior Vice President and President of the Business Systems
Division.

DENNIS E. EVANS has been President and Chief Executive Officer of
Hanrow Financial Group Ltd., a merchant banking partnership, since February
1989. He also serves on the Board of Directors of Minnesota Power & Light Co.

JAMES B. HICKEY, JR. see information under Executive Officers, below.

LYLE E. JOYCE, M.D., PH.D. has been a cardiothoracic surgeon with The
Minneapolis Heart Institute for more than five years, and is currently the
President of the Minnesota Thoracic Group, P.A.

JOSEPH C. KISER, M.D. is a cardiothoracic surgeon (retired) and a
founder of The Minneapolis Heart Institute and The Minneapolis Heart Institute
Foundation. Dr. Kiser is also a founder of the Minnesota Thoracic Group, P.A. He
practiced cardiothoracic surgery at Abbott Northwestern Hospital as well as
other Minneapolis/St. Paul hospitals for more than 20 years prior to his
retirement in January 1995.

DONALD D. MAURER is currently a consultant with ABI, Inc. He served as
Chairman of the Board of Empi, Inc., a public company that manufactures
noninvasive biomedical devices from 1977 to 1997 and is currently a member of
the Board of Directors of Empi. Mr. Maurer founded Empi in 1977, became Chairman
of the Board in 1978, and was named President and Chief Executive Officer in
1979. Mr. Maurer is also the Past Chairman of the Board of Medical Alley, a Twin
Cities professional organization representing the interests of the medical
industry.

GLEN TAYLOR is the Chief Executive Officer and Chairman of the Board of
Taylor Corporation, which he founded in 1975. Taylor Corporation's businesses
include printing, direct mail marketing and electrical manufacturing. Mr. Taylor
also is the owner of the Minnesota Timberwolves, a National Basketball
Association franchise. From 1980 to 1990, Mr. Taylor served as a Minnesota State
Senator.

STEPHEN L. WILSON has, since June 1997, been Executive Vice President
and Chief Financial Officer of California-based Computer Motion, Inc. (Nasdaq:
RBOT), the world leader in medical robotics. From 1990 to 1997, Mr. Wilson was
Vice President Finance and Chief Financial Officer of St. Jude Medical, Inc., a
leading medical device company.

EXECUTIVE OFFICERS.

57
<PAGE>

The executive officers of the Company, their ages and the offices held,
as of March 15, 1999, are as follows:

NAME AGE TITLE
---- --- -----

James B. Hickey, Jr. 45 President and Chief Executive Officer

Terrence W. Bunge 45 Vice President Worldwide Sales and Marketing

William J. Rissmann 49 Vice President, Product Development

Edson R. Weeks, III 46 Vice President, Operations

JAMES B. HICKEY, JR. is President and CEO of Angeion responsible for
strategy, operations and commercialization of its products.

From 1993 to 1997, Mr. Hickey was President and CEO of Aequitron
Medical, Inc., a publicly-traded medical device company, whose principle
products were portable ventilators, infant apnea monitors and sleep diagnostic
equipment. While at Aequitron, Mr. Hickey and his team reversed a negative
earnings trend in 1993 to achieve record profitable earnings in each of the next
three years. In 1996, he negotiated the sale of Aequitron to Nellcor Puritan
Bennett for approximately $60 million.

From 1989 to 1993, Mr. Hickey was President of the $190 million
Respiratory/Anesthesia Systems Division for Baxter International. Mr. Hickey
reversed a negative growth trend in 1989 to grow sales at double the market rate
by 1992. In 1990 and 1992, Mr. Hickey's division was awarded the American
Association of Respiratory Care's Zenith Award for outstanding quality and
service.

As President of Baxter International's Hospitex Division from 1986 to
1989, Mr. Hickey implemented a strategy which not only reversed negative sales
trends but helped ensure long-term stability and market growth. Mr. Hickey
redirected an $85 million product portfolio, which had trended down 12 percent
per year, to more than $180 million in three years, while nearly doubling the
company's market share from 18 percent to 29 percent.

From 1977 to 1986, Mr. Hickey held various positions with Baxter and
American Hospital Supply Corporation's Distribution Divisions, ranging from
Sales Representative to Vice President of Sales, Vice President/General Manager
and Vice President of Planning and Business Development.

Mr. Hickey is a graduate of the University of Illinois, Urbana, with a
Bachelor of Science degree in marketing.

TERRENCE W. BUNGE became Vice President Worldwide Sales and Marketing
in January 1999. He joined the Company in February 1997 and serviced as Vice
President and General Manager of Interventional Technologies until January 1999.
Prior to joining the Company, Mr. Bunge served in a number of positions with
Medtronic over a period of 16 years. From August 1994 to April 1996, Mr. Bunge
served as Vice President - Far East Business Development for

58
<PAGE>

Medtronic. From 1990 to 1996, Mr. Bunge served as Vice President and General
Manager - Software and Instruments Division. From 1980 to 1990, Mr. Bunge served
in a variety of other positions with Medtronic, including Business Director
(Global Marketing Director) - Dual Chamber Products, Director of Product
Development, Project Manager and Design Engineer.

WILLIAM J. RISSMANN joined the Company in November 1994 as Vice
President of Engineering. Most recently, Mr. Rissmann was Director of Research
and Development in the Advanced Tachy Products Division at CPI. From 1990 to
1994, he held several positions at CPI, including Director of Quality Control
and Test Engineering and Manager of Product Planning and Administration. Mr.
Rissmann also has prior experience at St. Jude Medical and Medtronic.

EDSON R. WEEKS, III is Vice President of Operations. He joined Angeion
in January of 1999 and has more than 25 years of experience in the medical
device industry. Mr. Weeks is responsible for manufacturing, quality assurance,
documentation, materials, manufacturing engineering, and facilities. Prior to
joining Angeion, Mr. Weeks was Senior Director of Integration for Nellcor
Puritan Bennett from 1996 to 1998, where he was responsible for the
consolidation and integration of NPB's Alternate Care Division. From 1984 to
1996 Mr. Weeks held various positions at Aequitron Medical, Inc., including the
last six years as Vice President of Operations. From 1973 to 1984 he held
various positions of increasing responsibility at Cardiac Pacemakers, Inc.,
including purchasing and project management roles. He attended the University of
Minnesota and is APICS certified.

STRATEGIC TACHYARRHYTHMIA ADVISORY RESOURCE TEAM.

In addition to the Company's Board of Directors and full-time
employees, the Company established in May 1996 its Strategic Tachyarrhythmia
Advisory Resource Team (the "STAR Team"). The STAR Team is made up of leading
electrophysiologists, who are recognized as experts in the use of biomedical
devices for the management and treatment of cardiac arrhythmias.

As a supplement to its STAR team, 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 and Board of Directors
concerning the products being developed and their use by health professionals.

The number of Medical Advisors changes from time to time. 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.

59
<PAGE>

(b) SECTION 16(a) OF THE EXCHANGE ACT BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE

To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except Dr. Kiser
failed to timely file one report with respect to the exercise of an option to
purchase 24,000 shares of Common Stock.

ITEM 11. EXECUTIVE COMPENSATION.

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table sets forth the cash and non-cash compensation for
the fiscal years ended December 31, 1998, July 31, 1997 and July 31, 1996 and
for the five month Transition Period ended December 31, 1997 ("TP97") earned by,
or awarded to, each of the persons who served as the Chief Executive Officer of
the Company in the fiscal year ended December 31, 1998 and the four other most
highly compensated executive officers of the Company who were serving as
executive officers on December 31, 1998. All of the options and the restricted
stock award listed below, unless otherwise noted, were granted under the
Company's 1993 Stock Incentive Plan (the "1993 Plan").

60
<PAGE>

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ----------------------------
------------------------ RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD (#) OPTIONS (#) COMPENSATION (1)
- ---------------------------- ---- --------- --------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James B. Hickey, Jr. (2) 1998 $ 105,000 $ -- $ -- 1,000,000 $ 3,000
CHIEF EXECUTIVE OFFICER AND
PRESIDENT

Whitney A. McFarlin (4) 1998 258,000 100,000 -- 500,000 21,495(5)
CHAIRMAN OF THE BOARD, CHIEF TP97 109,154 -- -- -- 18,868(5)
EXECUTIVE OFFICER AND PRESIDENT 1997 255,692 35,000 -- 30,000(6) 1,800(5)
1996 240,300 -- -- -- 1,595(5)

William J. Rissmann 1998 137,052 8,750 -- -- 6,000
VICE PRESIDENT OF PRODUCT TP97 46,162 -- -- -- 2,500
DEVELOPMENT 1997 107,056 -- -- -- --
1996 100,837 -- -- -- --

Michael J. Kallok, Ph.D 1998 135,462 7,000 -- -- 6,000
VICE PRESIDENT OF RESEARCH AND TP97 48,902 -- -- -- 2,500
CLINICAL OPERATIONS 1997 125,000 -- -- 85,000(7) --
1996 79,327 -- -- 75,000(8) --

Gary L. Payment 1998 125,575 7,000 -- -- 6,000
VICE PRESIDENT OF OPERATIONS TP97 48,902 -- -- -- 2,500
1997 114,000 -- -- 22,000(7) --
1996 105,785 -- -- 12,000(8) --

Terrence W. Bunge (9) 1998 113,327 65,250 -- -- 6,000
VICE PRESIDENT WORLDWIDE SALES TP97 98,666 -- -- -- 2,500
AND MARKETING 1997 -- -- 33,333 -- --

</TABLE>

- ---------------
(1) Except as otherwise noted, the amounts represent an automobile allowance
paid by the Company.

(2) Mr. Hickey joined the Company in July 1998.

(3) The amount listed includes an option to purchase 818,416 shares of the
Company's Common Stock granted outside of the 1993 Plan and subject to
shareholder approval.

(4) Mr. McFarlin served as Chairman of the Board, Chief Executive Officer and
President until July 1998, and continues to serve as Chairman of the Board.

(5) The amount listed includes life insurance premiums and certain other
reimbursed expenses paid by the Company on Mr. McFarlin's behalf.

(6) Mr. McFarlin was granted options to purchase an aggregate of 30,000 shares
of Common Stock during Fiscal 1997. Of this amount, 15,000 shares represented an
option originally granted in September 1996 that was canceled and reissued in
December 1996 during the employee repricing program.

61
<PAGE>

(7) The amount listed includes options that were originally granted during
Fiscal 1996 and were cancelled and reissued in Fiscal 1997.

(8) All of the options listed were canceled and reissued in December 1996 during
the employee repricing program and are included in the amounts listed as Fiscal
1997 grants as well.

(9) Mr. Bunge joined the Company in February 1997.

OPTION GRANTS AND EXERCISES

The following tables summarize option grants and exercises,
respectively, during the fiscal year ended December 31, 1998 to or by the
executive officers named in the Summary Compensation Table and the potential
realizable value of the options held by such persons at December 31, 1998. There
were no option grants or exercises to or by the executive officers named in the
Summary Compensation Table during the five month Transition Period ending
December 31, 1997.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT
NUMBER OF PERCENT OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ----------- ------------- ----------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
James B. Hickey, Jr. 1,000,000(2) 57.8% $2.2028 07/14/08 $1,385,000 $3,511,000

Whitney A. McFarlin 500,000(3) 28.9 $2.2028 01/31/00 88,000 183,000

William J. Rissman --- --- --- --- --- ---

Michael J. Kallok, Ph.D. --- --- --- --- --- ---

Gary L. Payment --- --- --- --- --- ---

Terrence W. Bunge --- --- --- --- --- ---
</TABLE>

- ------------------------------

(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent upon the future
performance of the Company's Common Stock, overall market conditions and the
executive's continued involvement with the Company. The amounts represented in
this table will not necessarily be achieved.

(2) The amount listed includes an option to purchase 181,584 shares of the
Company's Common Stock granted under the Company's 1993 Stock Incentive Plan
(the "1993 Plan') and an option to purchase 818,416 shares of the Company's
Common Stock granted out of a plan, subject to shareholder approval. The options
become exercisable at the rate of 25% of the number of shares covered by such
option on each of the first four anniversary dates of the grant of such option,
so long as Mr. Hickey remains employed by the Company or one of its
subsidiaries. The 1993 Plan provides that in the event of a "change in control"
of the Company (as

62
<PAGE>

defined in the 1993 Plan) the Compensation Committee may, among other things,
accelerate the vesting of all options granted under the 1993 Plan.

(3) The option was granted under the Company's 1993 Plan. The option becomes
exercisable with respect to 181,584 shares of the Company's Common Stock on
January 14, 1999 and 318,416 on January 31, 1999, so long as Mr. McFarlin
remains employed by the Company or one of its subsidiaries. The 1993 Plan
provides that in the event of a "change in control" of the Company (as defined
in the 1993 Plan) the Compensation Committee may, among other things, accelerate
the vesting of all options granted under the 1993 Plan.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
EXERCISE REALIZED OPTIONS AT JULY 31, 1997 (#) AT JULY 31, 1997 ($)(1)
-------- -------- ---------------------------- -----------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISAEBLE
---- -------- --- ------------- ------------- ----------- --------------

<S> <C> <C> <C> <C> <C> <C>
James B. Hickey, Jr. --- --- --- 1,000,000 --- ---
Whitney A. McFarlin --- --- 515,000 500,000 --- ---
William J. Rissman --- --- 77,750 19,250 --- ---
Michael J. Kallok, Ph.D. --- --- 61,250 23,750 --- ---
Gary L. Payment --- --- 114,000 8,000 --- ---
Terrence W. Bunge --- --- 62,500 62,500 --- ---
</TABLE>

- ------------------------------

(1) Value based on the difference between the fair market value of the Common
Stock on December 31, 1998 ($1.094) and the exercise price of the options.

63
<PAGE>

CHANGE IN CONTROL AGREEMENTS

As of December 1998, the Company had a change in control agreement
(collectively, the "Change in Control Agreements") in effect with each of the
following executive officers: James B. Hickey, Jr., Whitney A. McFarlin, Michael
J. Kallok, Ph.D., Gary Payment, William J. Rissmann and Terrence W. Bunge. The
Change in Control Agreements provide for the payment of certain benefits to such
executive officers of the Company upon the occurrence of a "change in control"
of the Company. A "change in control" is defined by the Change in Control
Agreements to include, among other actions: (i) the sale, lease or other
transfer of substantially all of the assets of the Company; (ii) the approval by
the shareholders of the Company of any plan or proposal for the liquidation or
dissolution of the Company; (iii) any person becomes the beneficial owner of (A)
20% or more, but not 50% or more, of the combined voting power of the Company's
outstanding voting securities, unless the transaction resulting in such
ownership has been approved in advance by the "continuity Directors" or (B) 50%
or more of the combined voting power of the Company's outstanding voting
securities regardless of any approval by the continuity Directors; (iv) a merger
or consolidation to which the Company is a party if the shareholders of the
Company immediately prior to the effective date of such merger or consolidation
have beneficial ownership immediately following the effective date of such
merger or consolidation of securities of the surviving company representing (A)
more than 50%, but less than 80%, of the combined voting power of the surviving
corporation's then outstanding voting securities, unless such merger or
consolidation has been approved in advance by the continuity Directors, or (B)
50% or less of the combined voting power of the surviving corporation's then
outstanding voting securities regardless of any approval by the continuity
Directors; or (v) the continuity Directors cease for any reason to constitute at
least a majority of the Board. A "continuity Director" is any individual who is
a member of the Board on December 18, 1996, and any individual who subsequently
becomes a member of the Board whose election or nomination for election was
approved by a majority of the continuity Directors.

Under the Change in Control Agreements, an executive officer who is
terminated by the Company for any reason other than death or "cause" or
terminates his or her employment with the Company for "good reason" (as such
terms are defined in the Change in Control Agreements) within 24 months
following a change in control or prior to a change in control if termination was
either a condition of the change in control or was at the request or insistence
of a person related to the change in control will be entitled to the following
benefits: (i) a lump-sum cash payment in an amount equal to two times the
executive's annual base salary; (ii) continued coverage under the Company's
group health plan(s) for a period not exceeding the last day of the 24th month
that begins after the executive's date of termination; (iii) additional cash
payments to compensate the executive for all taxes, including any excise taxes,
interest or penalties, imposed upon all payments received by the executive under
his or her Change in Control Agreement; and (iv) reimbursement of any out
placement assistance up to 5% of the executive's base pay. The Change in Control
Agreements will continue in effect until January 1, 1999; at which time such
agreements will be extended automatically for additional 12-months periods
thereafter, unless at least 90 days prior to any such January 1 the Company or
the executive has given notice that such agreement will not be extended.

64
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

PRINCIPAL SHAREHOLDERS AND BENEFICIAL
OWNERSHIP OF MANAGEMENT

The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of March 19, 1999, unless
otherwise noted, (a) by each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) by each Director
and nominee for Director of the Company, (c) by each executive officer named in
the Summary Compensation Table, and (d) by all executive officers and Directors
of the Company as a group.

Shares of Common Stock
Beneficially Owned(1)(2)
------------------------
Percent of
Name Amount Class(3)
- ---------------------------------------------------- ------ ---------

Synthelabo, societe anonyme
22 Avenue Galilee
92350 Le Plessis Robinson, France................... 26,431,511 (4) 44.8

Awad Asset Management, Inc.
250 Park Avenue, 2nd Floor
New York, New York 10177............................ 3,333,588 (5) 8.3

Chancellor LGT Asset Management Inc.
50 Califonia Street, 27th Floor
San Francisco, California 94111..................... 2,209,200 (6) 5.5

Whitney A. McFarlin................................. 1,032,000 (7) 2.5
Arnold A. Angeloni.................................. 85,099 (8) *
Dennis E. Evans..................................... 762,132 (9) 1.9
James B. Hickey..................................... --- *
Lyle D. Joyce, M.D., Ph.D........................... 293,682 (10) *
Joseph C. Kiser, M.D. .............................. 380,033 (11) *
Donald D. Maurer.................................... 20,358 (12) *
Glen Taylor......................................... 490,288 (13) 1.2
Stephen L. Wilson................................... 7,107 (14) *
William J. Rissman.................................. 87,000 (15) *
Michael J. Kallok, Ph.D. ........................... 61,250 (16) *
Gary L. Payment..................................... 130,300 (17) *
Terrence W. Bunge................................... 185,233 (18) *
All current Directors and executive officers as a
group (12 persons)................................ 3,342,932 (19) 8.1%

- --------------------------------
* Less than 1%.

(1) Shares not outstanding but deemed beneficially owned by virtue of the right
of a person or member of a group to acquire them within 60 days are treated as
outstanding only when determining the amount and percent owned by such person or
group.

65
<PAGE>

(2) Unless otherwise noted, all of the shares shown are held by individuals or
entities possessing sole voting and investment power with respect to such
shares.

(3) Based on 40,051,569 shares of Common Stock outstanding as of March 29, 1999.

(4) Based on a Schedule 13G dated October 27, 1998 and the Company's transaction
with Synthelabo on March 16, 1999. Includes 18,971,552 shares which may be
acquired within 60 days upon the exercise of warrants.

(5) Based on a Schedule 13G dated February 12, 1999.

(6) Based on a Schedule 13G dated February 6, 1998, filed on behalf of
Chancellor LGT Asset Management, Inc., its wholly owned subsidiary, Chancellor
LGT Trust Company and LGT Asset Management, Inc. the holding company for
Chancellor LGT Asset Management, Inc.

(7) Includes 1,015,000 shares which may be acquired within 60 days upon the
exercise of stock options.

(8) Includes 34,500 shares which may be acquired within 60 days upon the
exercise of stock options.

(9) Includes 693,333 shares of Common Stock beneficially owned by Hanrow
Financial. Hanrow Financial is the general partner of Hanrow Capital Fund and
Hanrow Capital Fund III, which own 30,000 and 580,000 shares of Common Stock,
respectively. Hanrow Financial is also an affiliate of Hanrow Business Finance,
Inc., which owns 41,667 shares of Common Stock. Also includes 10,500 shares of
Common Stock which may be acquired within 60 days upon the exercise of stock
options owned by Mr. Evans. Mr. Evans, a Director of the Company, is the
President and Chief Executive Officer of Hanrow Financial.

(10) Includes 91,550 shares held by the MTA Retirement Plan and Trust FBO Lyle
D. Joyce, and 10,500 shares which may be acquired within 60 days upon the
exercise of stock options.

(11) Includes 43,567 shares held by the MTA Retirement Plan and Trust FBO Joseph
C. Kiser and 25,500 shares which may be acquired within 60 days upon the
exercise of stock options.

(12) Includes 6,767 shares which may be acquired within 60 days upon the
exercise of stock options.

(13) Includes 75,000 shares which may be acquired within 60 days upon the
exercise of warrants and 10,500 shares which may be acquired within 60 days upon
the exercise of stock options.

(14) Includes 1,500 shares which may be acquired within 60 days upon the
exercise of stock options.

(15) Includes 87,000 shares which may be acquired within 60 days upon the
exercise of stock options.

(16) Includes 61,250 shares which may be acquired within 60 days upon the
exercise of stock options.

(17) Includes 10,300 shares held by an individual retirement account for the
benefit of Mr. Payment and 116,000 shares which may be acquired within 60 days
upon the exercise of stock options.

(18) Includes 25,000 shares held by an individual retirement account for the
benefit of Mr. Bunge shares 125,000 shares which may be acquired within 60 days
upon the exercise of stock options.

(19) Includes 1,401,767 shares which may be acquired within 60 days upon the
exercise of warrants and stock options. Also includes all shares beneficially
owned by affiliates of Officers and Directors.

66
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In January 1999, the Company entered into financing agreements between
the Company and Norwest Business Credit (the "Bank") in which the Bank made two
term loans to the Company in the amount of $4,000,000 and $2,000,000. The loan
in the amount of $4,000,000 is guaranteed by Glen Taylor, a director of the
Company. Upon maturity of the loan in October 1999, Mr. Taylor will be paid a
guarantee fee of approximately 5.05% per annum. In addition, Mr. Taylor received
a one time commitment fee from the Company equal to 2% of the loan amount.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) 1. FINANCIAL STATEMENTS OF REGISTRANT

The following financial statements of the Company, accompanied by an
Independent Auditors' Report, are contained in Part II, Item 8:

Consolidated Balance Sheets as of December 31, 1998 and 1997

Consolidated Statements of Operations for the years ended December 31,
1998 and 1997, the five month period ended December 31, 1997 and 1996 and the
fiscal years ended July 31, 1997 and 1996.

Consolidated Statements of Shareholders' Equity for the year ended
December 31, 1998, the five month period ended December 31, 1997 and the fiscal
years ended July 31, 1997 and 1996.

Consolidated Statements of Cash Flows for the years ended December 31,
1998 and 1997, the five month periods ended December 31, 1997 and 1996 and the
fiscal years ended July 31, 1997 and 1996.

Notes to Consolidated Financial Statements

(a) 2. FINANCIAL STATEMENT SCHEDULES OF REGISTRANT

(a) 3. EXHIBITS

(a) 3. Exhibits

3.1 Articles of Merger, including Amended and Restated Articles of
Incorporation (incorporated by reference to Exhibit 3A contained
in the Company's Registration Statement on Form 8-A (File No.
0-17019)).

67
<PAGE>

3.2 Amendment to the Company's Amended and Restated Articles of
Incorporation (incorporated by reference to Exhibit 4.3
contained in the Company's Registration Statement on Form S-3
(File No. 333-36005)).

3.3 Amendment to the Company's Amended and Restated Articles of
Incorporation (incorporated by reference to Exhibit 4.4 to the
Company's Registration Statement on Form S-3 (File No.
333-50557)).

3.4 Amended Bylaws (incorporated by reference to Exhibit 4.2
contained in the Company's Registration Statement on Form S-3
(File No. 333-04993)).

4.1 Amended Form of the Company's Common Stock Certificate
(incorporated by reference to Exhibit 4.3 contained in the
Company's Registration Statement on Form S-3 (File No.
333-04993)).

4.2 Certificate of Designation of Preferred Stock, Series A
(incorporated by reference to Exhibit 4.1 contained in the
Company's Current Report on Form 8-K filed February 9, 1993).

4.3 Warrant dated July 27, 1992 in the name of Glen Taylor
(incorporated by reference to Exhibit 10.10 contained in the
Company's Annual Report on Form 10-K for the year ended July 31,
1991).

4.4 Form of Rights Agreement dated as of April 8, 1996 between
Angeion Corporation and Norwest Bank Minnesota, N.A.
(incorporated by reference to Exhibit 4.1 contained in the
Company's Current Report on Form 8-K dated April 8, 1996).

4.5 Indenture, dated as of April 14, 1998, between the Company and
U.S. Bank National Association, as Trustee (incorporated by
reference to Exhibit 4.6 to the Company's Registration Statement
on Form S-3 (File No. 333-50557)).

4.6 Form of 7 1/2% Senior Convertible Notes due 2003 (incorporated
by reference to Exhibit 4.7 to the Company's Registration
Statement on Form S-3 (File No. 333-50557)).

4.7 Registration Rights Agreement, dated as of April 14, 1998,
between the Company and the subscribers named on the signature
pages thereof (incorporated by reference to Exhibit 4.8 to the
Company's Registration Statement on Form S-3 (File No.
333-50557)).

4.8 Form of Warrant Agreement between the Company and HSBC
Securities, Inc., dated as of April 14, 1998 (incorporated by
reference to Exhibit 4.10 to the Company's Registration
Statement on Form S-3 (File No. 333-50557)).

4.9 Form of Warrant Agreement between the Company and Prudential
Securities Incorporated, dated as of April 14, 1998
(incorporated by reference to Exhibit 4.11 to the Company's
Registration Statement on Form S-3 (File No. 333-50557)).

68
<PAGE>

4.10 Warrant dated as of March 11, 1998 to purchase 727,500 shares of
Common Stock of the Company held by RGC International Investors,
LDC (incorporated by reference to Exhibit 4.12 to the Company's
Registration Statement on Form S-3 (File No. 333-50557)).

4.11 Securities Purchase Agreement dated as of March 11, 1998 between
the Company and RGC International Investors, LDC (incorporated
by reference to Exhibit 4.13 to the Company's Registration
Statement on Form S-3 (File No. 333-50557)).

4.12 First Amendment to Rights Agreement dated as of October 9, 1997
between the Company and Norwest Bank Minnesota, N.A.
(incorporated by reference to Exhibit 10.5 contained in the
Company's Quarterly Report on 10-Q for the quarter ended October
31, 1997).

4.13 Second Amendment to Rights Agreement dated as of October 9, 1997
between the Company and Norwest Bank Minnesota, N.A.
(incorporated by reference to Exhibit 10.6 contained in the
Company's Quarterly Report on 10-Q for the quarter ended October
31, 1997).

4.14 Form of Common Stock Purchase Warrant to purchase 1,350,845
shares of Common Stock issued to Synthelabo (incorporated by
reference to Exhibit 10.7 contained in the Company's Quarterly
Report on 10-Q for the quarter ended October 31, 1997).

4.15 Form of Supplemental Common Stock Purchase Warrant (incorporated
by reference to Exhibit 10.8 contained in the Company's
Quarterly Report on 10-Q for the quarter ended October 31,
1997).

4.16 Form of Second Investment Common Stock Purchase Warrant
(incorporated by reference to Exhibit 10.9 contained in the
Company's Quarterly Report on 10-Q for the quarter ended October
31, 1997).

4.17 Form of Third Investment Common Stock Purchase Warrant
(incorporated by reference to Exhibit 10.10 contained in the
Company's Quarterly Report on 10-Q for the quarter ended October
31, 1997).

4.18 Form of Fourth Investment Common Stock Purchase Warrant
(incorporated by reference to Exhibit 10.11 contained in the
Company's Quarterly Report on 10-Q for the quarter ended October
31, 1997).

#10.1 1998 Stock Option Plan (incorporated by reference to Exhibit 10
contained in the Company's Annual Report on Form 10-K for the
year ended April 30, 1998).

69
<PAGE>

#10.2 1989 Omnibus Stock Option Plan, as amended effective May 16,
1989 (incorporated by reference to Exhibit 10.2 contained in the
Company's 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 Company's Annual Report on Form 10-K for
the year ended July 31, 1992).

10.4 Development Agreement between AngeLase, Inc. and Dr. Robert H.
Svenson dated January 15, 1991. (incorporated by reference to
Exhibit 10.7 contained in the Company's Annual Report on Form
10-K for the year ended July 31, 1991).

#10.5 Stock Purchase Agreement dated September 21, 1990 relating to
the acquisition of XMED, Inc. (incorporated by reference to
Exhibit 10.9 contained in the Company's Annual Report on Form
10-K for the year ended July 31, 1991).

10.6 CryoLife Joint Venture Agreement for Development of Biological
Pacemaker (incorporated by reference to Exhibit 10A contained in
the Company's Annual Report on Form 10-K for the year ended July
31, 1989).

10.7 Agreement with Jeffrey Isner, M.D. for Laser Catheter Technology
(incorporated by reference to Exhibit 10B contained in the
Company's Annual Report on Form 10-K for the year ended July 31,
1989).

10.8 Stock Purchase Agreement dated September 13, 1990 between Hanrow
Financial Group, Ltd. and the Company (incorporated by reference
to Exhibit 10.10 contained in the Company's Annual Report on
Form 10-K for the year ended July 31, 1990).

10.9 Cross-License Agreement dated April 2, 1997 among the Company,
St. Jude Medical, Inc. and Pacesetter, Inc. (incorporated by
reference to Exhibit 10.1 contained in the Company's Quarterly
Report on Form 10-Q for the quarter ended April 30, 1997).

#10.10 Employment Agreement with Whitney A. McFarlin, effective as of
September 15, 1996. (incorporated by reference to Exhibit 10.15
contained in the Company's Annual Report on Form 10-K for the
year ended July 31, 1996).

#10.11 1991 Stock Incentive Plan (incorporated by reference to Exhibit
99.1 contained in the Company's Registration Statement of Form
S-8 (File No. 33-81594)).

#10.12 1993 Stock Incentive Plan (incorporated by reference to Exhibit
99.1 contained in the Company's Registration Statement of Form
S-8 (File No. 333-04189)).

10.13 Lease Agreement dated January 21, 1991 with Gopher XI, a Texas
limited partnership (incorporated by reference to Exhibit 10.26
contained in the Company's Annual Report on Form 10-K for the
year ended July 31, 1994).

70
<PAGE>

10.14 Addendum No. 1 to Lease Agreement dated June 26, 1991
(incorporated by reference to Exhibit 10.27 contained in the
Company's Annual Report on Form 10-K for the year ended July 31,
1994).

10.15 Addendum No. 2 to Lease Agreement dated February 24, 1992
(incorporated by reference to Exhibit 10.28 contained in the
Company's Annual Report on Form 10-K for the year ended July 31,
1994).

10.16 Lease Agreement dated September 23, 1992 (incorporated by
reference to Exhibit 10.29 contained in the Company's Annual
Report on Form 10-K for the year ended July 31, 1994).

10.17 Addendum No. 3 to Lease Agreement dated September 24, 1992
(incorporated by reference to Exhibit 10.30 contained in the
Company's Annual Report on Form 10-K for the year ended July 31,
1994).

10.18 Sublease Agreement effective as of October 26, 1994 with Sharpe
Endosurgical Corporation (incorporated by reference to Exhibit
10.31 contained in the Company's Annual Report on Form 10-K for
the year ended July 31, 1994).

10.19 Lease Agreement dated as of June 27, 1997 between Ryan
Companies, US, Inc. and the Company (incorporated by reference
to Exhibit 10.22 contained in the Company's Annual Report on
Form 10-K for the year ended July 31, 1997).

#10.20 Change in Control Agreement dated December 18, 1996 between the
Company and Whitney A. McFarlin (incorporated by reference to
Exhibit 10.23 contained in the Company's Annual Report on Form
10-K for the year ended July 31, 1997).

#10.21 Form of Change in Control Agreement (incorporated by reference
to Exhibit 10.25 contained in the Company's Annual Report on
Form 10-K for the year ended July 31, 1997).

10.22 Consulting Agreement dated as of August 1, 1997 among the
Company, ELA Medical, S.A. and Dennis L. Sellke (incorporated by
reference to Exhibit 10.26 contained in the Company's Annual
Report on Form 10-K for the year ended July 31, 1997).

10.23 Common Stock Investment Agreement dated as of September 2, 1997
between the Company and Promethean Investment Group, L.L.C.
(incorporated by reference to Exhibit 10.27 contained in the
Company's Annual Report on Form 10-K for the year ended July 31,
1997).

*10.24 Amended and Restated Investment and Master Strategic
Relationship Agreement dated as of October 9, 1997 between the
Company and Synthelabo (incorporated by reference to Exhibit
10.1 contained in the Company's Quarterly Report on 10-Q for the
quarter ended October 31, 1997).

71
<PAGE>

*10.25 Limited Liability Company Operating Agreement of Angellan
Medical Systems, LLC dated December 9, 1997 between the Company
and ELA Medical, Inc. (incorporated by reference to Exhibit 10.2
contained in the Company's Quarterly Report on 10-Q for the
quarter ended October 31, 1997).

*10.26 Implantable Cardioverter Defibrillator Product Manufacturing and
Supply Agreement dated December 9, 1997 between the Company and
ELA Medical, Inc. (incorporated by reference to Exhibit 10.3
contained in the Company's Quarterly Report on 10-Q for the
quarter ended October 31, 1997).

*10.27 Implantable Cardioverter Defibrillator Product Manufacturing and
Supply Agreement dated December 9, 1997 between the Company and
Angellan Medical Systems, LLC (incorporated by reference to
Exhibit 10.4 contained in the Company's Quarterly Report on 10-Q
for the quarter ended October 31, 1997).

#10.28 1994 Non-Employee Director Plan (as amended through September
30, 1997) (incorporated by reference to Exhibit 10.12 contained
in the Company's Quarterly Report on 10-Q for the quarter ended
October 31, 1997).

#10.29 1997 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.13 contained in the Company's Quarterly Report on
10-Q for the quarter ended October 31, 1997).

*10.30 Agreement between the Company and Cordis Webster, Inc. regarding
Angeion's cooled porous electrode and cooled linear electrode
patents (incorporated by reference to Exhibit 10.1 contained in
the Company's Quarterly Report on 10-Q for the quarter ended
September 30, 1998).

22.1 List of Subsidiaries.

23.1 Independent Auditors' Consent.

27.1 Financial Data Schedule.

* Confidential treatment has been granted by the Securities and Exchange
Commission for certain portions contained within this exhibit.

# Management contract, compensatory plan or arrangement required to be filed
as an exhibit to this Form 10-K.

72
<PAGE>

(b) REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the fourth quarter of the fiscal year
ended December 31, 1998.

73
<PAGE>

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: March 31, 1999 By /s/ James B. Hickey, Jr.
------------------------------------------
James B. Hickey, Jr.
Chief Executive Officer and
President (principal executive
officer and acting principal
financial officer)

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 March 31, 1999 in the capacities indicated.

/s/ Whitney A. McFarlin Chairman
- ------------------------------
Whitney A. McFarlin

/s/ James B. Hickey, Jr. Director, Chairman, Chief Executive Officer
- ------------------------------ and President (principal executive officer
James B. Hickey, Jr. and acting principle financial officer)

/s/ Joseph C. Kiser, M.D. Director
- ------------------------------
Joseph C. Kiser, M.D.

/s/ Lyle D. Joyce, M.D., Ph.D. Director
- ------------------------------
Lyle D. Joyce, M.D., Ph.D.

/s/ Arnold A. Angeloni Director
- ------------------------------
Arnold A. Angeloni

/s/ Dennis E. Evans Director
- ------------------------------
Dennis E. Evans

/s/ Donald D. Maurer Director
- ------------------------------
Donald D. Maurer

/s/ Steven Wilson Director
- ------------------------------
Steven Wilson

/s/ Glen Taylor Director
- ------------------------------
Glen Taylor

74
<PAGE>

ANGEION CORPORATION
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
Item Item Method of Filing
No. ---- ----------------
- ----
<S> <C> <C>
3.1 Articles of Merger, including Amended and Restated Incorporated by reference to Exhibit 3A contained in
Articles of Incorporation the Company's Registration Statement on Form 8-A (File
No. 0-17019).

3.2 Amendment to the Company's Amended and Restated Incorporated by reference to Exhibit 4.3 contained in
Articles of Incorporation the Company's Registration Statement on Form S-3 (File
No. 333-36005).

3.3 Amendment to the Company's Amended and Restated Incorporated by reference to Exhibit 4.4 to the
Articles of Incorporation Company's Registration Statement on Form S-3 (File
No. 333-50557).

3.4 Amended Bylaws Incorporated by reference to Exhibit 4.2 contained in
the Company's Registration Statement on Form S-3 (File
No. 333-04993).

4.1 Amended Form of the Company's Common Stock Certificate Incorporated by reference to Exhibit 4.3 contained in
the Company's Registration Statement on Form S-3 (File
No. 333-04993).

4.2 Certificate of Designation of Preferred Stock, Series A Incorporated by reference to Exhibit 4.1 contained in
the Company's Current Report on Form 8-K filed
February 9, 1993.

4.3 Warrant dated July 27, 1992 in the name of Glen Taylor Incorporated by reference to Exhibit 10.10 contained
in the Company's Annual Report on Form 10-K for the
year ended July 31, 1991.

4.4 Form of Rights Agreement dated as of April 8, 1996 Incorporated by reference to Exhibit 4.1 contained in
between Angeion Corporation and Norwest Bank Minnesota, the Company's Current Report on Form 8-K dated April 8,
N.A. 1996.

4.5 Indenture, dated as of April 14, 1998, between the Incorporated by reference to Exhibit 4.6 to the
Company and U.S. Bank National Association, as Trustee Company's Registration Statement on Form S-3 (File
No. 333-50557).

4.6 Form of 7 1/2% Senior Convertible Notes due 2003 Incorporated by reference to Exhibit 4.7 to the
Company's Registration Statement on Form S-3 (File
No. 333-50557).
</TABLE>

75
<PAGE>

<TABLE>
<S> <C> <C>
4.7 Registration Rights Agreement, dated as of April 14, Incorporated by reference to Exhibit 4.8 to the
1998, between the Company and the subscribers named on Company's Registration Statement on Form S-3 (File
the signature pages thereof No. 333-50557).

4.8 Form of Warrant Agreement between the Company and HSBC Incorporated by reference to Exhibit 4.10 to the
Securities, Inc., dated as of April 14, 1998 Company's Registration Statement on Form S-3 (File
No. 333-50557).

4.9 Form of Warrant Agreement between the Company and Incorporated by reference to Exhibit 4.11 to the
Prudential Securities Incorporated, dated as of Company's Registration Statement on Form S-3 (File
April 14, 1998 No. 333-50557).

4.10 Warrant dated as of March 11, 1998 to purchase 727,500 Incorporated by reference to Exhibit 4.12 to the
shares of Common Stock of the Company held by RGC Company's Registration Statement on Form S-3 (File
International Investors, LDC No. 333-50557).

4.11 Securities Purchase Agreement dated as of March 11, Incorporated by reference to Exhibit 4.13 to the
1998 between the Company and RGC International Company's Registration Statement on Form S-3 (File
Investors, LDC No. 333-50557).

4.12 First Amendment to Rights Agreement dated as of Incorporated by reference to Exhibit 10.5 contained in
October 9, 1997 between the Company and Norwest Bank the Company's Quarterly Report on 10-Q for the quarter
Minnesota, N.A. ended October 31, 1997.

4.13 Second Amendment to Rights Agreement dated as of Incorporated by reference to Exhibit 10.6 contained in
October 9, 1997 between the Company and Norwest Bank the Company's Quarterly Report on 10-Q for the quarter
Minnesota, N.A. ended October 31, 1997.

4.14 Form of Common Stock Purchase Warrant to purchase Incorporated by reference to Exhibit 10.7 contained
1,350,845 shares of Common Stock issued to Synthelabo in the Company's Quarterly Report on 10-Q for the
quarter ended October 31, 1997.

4.15 Form of Supplemental Common Stock Purchase Warrant Incorporated by reference to Exhibit 10.8 contained in
the Company's Quarterly Report on 10-Q for the quarter
ended October 31, 1997.

4.16 Form of Second Investment Common Stock Purchase Warrant Incorporated by reference to Exhibit 10.9 contained
in the Company's Quarterly Report on 10-Q for the
quarter ended October 31, 1997.

4.17 Form of Third Investment Common Stock Purchase Warrant Incorporated by reference to Exhibit 10.10 contained in
the Company's Quarterly Report on 10-Q for the quarter
ended October 31, 1997.

4.18 Form of Fourth Investment Common Stock Incorporated by reference to Exhibit 10.11
</TABLE>

76
<PAGE>

<TABLE>
<S> <C> <C>
Purchase Warrant contained in the Company's Quarterly Report on 10-Q
for the quarter ended October 31, 1997.

10.1 1998 Stock Option Plan Incorporated by reference to Exhibit 10 contained in
the Company's Annual Report on Form 10-K for the year
ended April 30, 1998.

10.2 1989 Omnibus Stock Option Plan, as amended effective Incorporated by reference to Exhibit 10.2 contained in
May 16, 1989 the Company's 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 Company's Annual Report on Form 10-K for the year
ended July 31, 1992.

10.4 Development Agreement between AngeLase, Inc. and Incorporated by reference to Exhibit 10.7 contained in
Dr. Robert H. Svenson dated January 15, 1991. the Company's Annual Report on Form 10-K for the year
ended July 31, 1991.

10.5 Stock Purchase Agreement dated September 21, 1990 Incorporated by reference to Exhibit 10.9 contained in
relating to the acquisition of XMED, Inc. the Company's Annual Report on Form 10-K for the year
ended July 31, 1991.

10.6 CryoLife Joint Venture Agreement for Development of Incorporated by reference to Exhibit 10A contained in
Biological Pacemaker the Company's Annual Report on Form 10-K for the year
ended July 31, 1989.

10.7 Agreement with Jeffrey Isner, M.D. for Laser Catheter Incorporated by reference to Exhibit 10B contained in
Technology the Company's Annual Report on Form 10-K for the year
ended July 31, 1989.

10.8 Stock Purchase Agreement dated September 13, 1990 Incorporated by reference to Exhibit 10.10 contained in
between Hanrow Financial Group, Ltd. and the Company the Company's Annual Report on Form 10-K for the year
ended July 31, 1990.

10.9 Cross-License Agreement dated April 2, 1997 among the Incorporated by reference to Exhibit 10.1 contained in
Company, St. Jude Medical, Inc. and Pacesetter, Inc. the Company's Quarterly Report on Form 10-Q for the
quarter ended April 30, 1997.

10.10 Employment Agreement with Whitney A. McFarlin, Incorporated by reference to Exhibit 10.15 contained in
effective as of September 15, 1996. the Company's Annual Report on Form 10-K for the year
ended July 31, 1996.

10.11 1991 Stock Incentive Plan Incorporated by reference to Exhibit 99.1 contained in
the Company's Registration Statement of Form S-8 (File
No. 33-81594).
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77
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<S> <C> <C>
10.12 1993 Stock Incentive Plan Incorporated by reference to Exhibit 99.1 contained in
the Company's Registration Statement of Form S-8 (File
No. 333-04189).

10.13 Lease Agreement dated January 21, 1991 with Gopher XI, Incorporated by reference to Exhibit 10.26 contained in
a Texas limited partnership the Company's Annual Report on Form 10-K for the year
ended July 31, 1994.

10.14 Addendum No. 1 to Lease Agreement dated June 26, 1991 Incorporated by reference to Exhibit 10.27 contained
in the Company's Annual Report on Form 10-K for the
year ended July 31, 1994.

10.15 Addendum No. 2 to Lease Agreement dated February 24, Incorporated by reference to Exhibit 10.28 contained in
1992 the Company's Annual Report on Form 10-K for the year
ended July 31, 1994.

10.16 Lease Agreement dated September 23, 1992 Incorporated by reference to Exhibit 10.29 contained in
the Company's Annual Report on Form 10-K for the year
ended July 31, 1994.

10.17 Addendum No. 3 to Lease Agreement dated September 24, Incorporated by reference to Exhibit 10.30 contained in
1992 the Company's Annual Report on Form 10-K for the year
ended July 31, 1994.

10.18 Sublease Agreement effective as of October 26, 1994 Incorporated by reference to Exhibit 10.31 contained in
with Sharpe Endosurgical Corporation the Company's Annual Report on Form 10-K for the year
ended July 31, 1994.

10.19 Lease Agreement dated as of June 27, 1997 between Ryan Incorporated by reference to Exhibit 10.22 contained in
Companies, US, Inc. and the Company the Company's Annual Report on Form 10-K for the year
ended July 31, 1997.

10.20 Change in Control Agreement dated December 18, 1996 Incorporated by reference to Exhibit 10.23 contained in
between the Company and Whitney A. McFarlin the Company's Annual Report on Form 10-K for the year
ended July 31, 1997.

10.21 Form of Change in Control Agreement Incorporated by reference to Exhibit 10.25 contained in
the Company's Annual Report on Form 10-K for the year
ended July 31, 1997.

10.22 Consulting Agreement dated as of August 1, 1997 among Incorporated by reference to Exhibit 10.26 contained in
the Company, ELA Medical, S.A. and Dennis L. Sellke the Company's Annual Report on Form 10-K for the year
ended July 31, 1997.
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78
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<S> <C> <C>
10.23 Common Stock Investment Agreement dated as of Incorporated by reference to Exhibit 10.27 contained
September 2, 1997 between the Company and in the Company's Annual Report on Form 10-K for the
Promethean Investment Group, L.L.C. year ended July 31, 1997.

10.24 Amended and Restated Investment and Master Strategic Incorporated by reference to Exhibit 10.1 contained in
Relationship Agreement dated as of October 9, 1997 the Company's Quarterly Report on 10-Q for the quarter
between the Company and Synthelabo ended October 31, 1997.

10.25 Limited Liability Company Operating Agreement of Incorporated by reference to Exhibit 10.2 contained in
Angellan Medical Systems, LLC dated December 9, 1997 the Company's Quarterly Report on 10-Q for the quarter
between the Company and ELA Medical, Inc. ended October 31, 1997.

10.26 Implantable Cardioverter Defibrillator Product Incorporated by reference to Exhibit 10.3 contained in
Manufacturing and Supply Agreement dated December 9, the Company's Quarterly Report on 10-Q for the quarter
1997 between the Company and ELA Medical, Inc. ended October 31, 1997.

10.27 Implantable Cardioverter Defibrillator Product Incorporated by reference to Exhibit 10.4 contained in
Manufacturing and Supply Agreement dated December 9, the Company's Quarterly Report on 10-Q for the quarter
1997 between the Company and Angellan Medical ended October 31, 1997.
Systems, LLC

10.28 1994 Non-Employee Director Plan (as amended through Incorporated by reference to Exhibit 10.12 contained in
September 30, 1997) the Company's Quarterly Report on 10-Q for the quarter
ended October 31, 1997.

10.29 1997 Employee Stock Purchase Plan Incorporated by reference to Exhibit 10.13 contained in
the Company's Quarterly Report on 10-Q for the quarter
ended October 31, 1997.

10.30 Agreement between the Company and Cordis Webster, Inc. Incorporated by reference to Exhibit 10.1 contained in
regarding Angeion's cooled porous electrode and cooled the Company's Quarterly Report on 10-Q for the quarter
linear electrode patents ended September 30, 1998.

21.1 List of Subsidiaries Filed herewith electronically.

23.1 Independent Auditors' Consent Filed herewith electronically.

27.1 Financial Data Schedule Filed herewith electronically.
</TABLE>

EXHIBIT 21.1

LIST OF SUBSIDIARIES

Angeion Europe Ltd., a company organized under the laws of England and Wales.
Angeion GmbH, a company organized under the laws of Germany.

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Angeion Corporation:

We consent to incorporation by reference in the Registration Statements (Nos.
333-04189, 33-88882, 33-56784, 33-81594 and 333-42931) on Form S-8, Registration
Statements (Nos. 333-36005, 333-03007, 333-04993, 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 February 23, 1999, except as to note
17(c) which is as of March 16, 1999, relating to the consolidated balance sheets
of Angeion Corporation and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of operations, shareholders' equity
(deficit), and cash flows for the year ended December 31, 1998, the five-month
transition period ended December 31, 1997, and for each of the years ended July
31, 1997 and 1996, which report is incorporated by reference in the December 31,
1998, annual report on Form 10-K of Angeion Corporation.

Our report dated February 23, 1999, except as to note 17(c) which is as of March
16, 1999, contains an explanatory paragraph that states that the Company has
suffered recurring losses from operations and has a shareholders' deficit, which
raise substantial doubt about its ability to continue as a going concern. The
Consolidated Financial Statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ KPMG Peat Marwick LLP

Minneapolis, Minnesota
March 31, 1999

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