<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9585
ABIOMED, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2743260
(State of incorporation) (I.R.S. Employer No.)
33 CHERRY HILL DRIVE
DANVERS, MASSACHUSETTS 01923
(Address of principal executive offices, including zip code)
(508) 777-5410
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) or 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 [ ]
As of June 30, 1996, there were 5,537,266 shares outstanding of the
registrant's Common Stock, $.01 par value, and 1,428,000 shares outstanding
of the registrant's Class A Common Stock, $.01 par value.
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ABIOMED, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Page No.
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Part I - Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1996 and March 31, 1996
3-4
Consolidated Statements of Operations
Three Months Ended June 30, 1996 and
June 30, 1995
5
Consolidated Statements of Cash Flows
Three Months Ended June 30, 1996 and
June 30, 1995
6
Notes to Consolidated Financial Statements
7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
9-12
Part II - Other Information
13
Signatures
13
</TABLE>
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ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, 1996
March 31, 1996
(unaudited)
(audited)
<S>
<C>
<C>
Current Assets:
Cash and cash equivalents (Note 6)
$1,381,852
$2,938,332
Short-term marketable securities (Note 6)
9,476,961
7,709,110
Accounts receivable, net
2,411,877
2,606,289
Inventories (Note 3)
1,682,179
1,653,512
Prepaid expenses and other current assets
179,357
92,280
Total current assets
15,132,226
14,999,523
Property and equipment, at cost:
Machinery and equipment
2,516,545
2,378,851
Furniture and fixtures
163,445
156,048
Leasehold improvements
377,642
378,998
3,057,632
2,913,897
Less: Accumulated depreciation
and amortization
2,391,690
2,331,145
665,942
582,752
Other assets, net (Note 7)
591,615
627,154
$16,389,783
$16,209,429
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (continued)
CONSOLIDATED BALANCE SHEETS (continued)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
June 30, 1996
March 31, 1996
(unaudited)
(audited)
<S>
<C>
<C>
Current Liabilities:
Accounts payable
$608,306
$777,943
Accrued expenses
1,256,328
1,486,981
Total current liabilities
1,864,634
2,264,924
Stockholders' Investment (Note 4):
Class B Preferred Stock, $.01 par value-
Authorized 1,000,000 shares
Issued and outstanding-none
- -
- -
Common Stock, $.01 par value-
Authorized 25,000,000 shares at June 30, 1996
Issued and Outstanding-5,537,266 shares at
June 30, 1996 and 5,518,054 shares at
March 31, 1996
55,373
55,180
Class A Common Stock $.01 par value
Authorized - 2,346,000 shares
Issued and Outstanding - 1,428,000 shares at
June 30, 1996 and March 31, 1996
14,280
14,280
Additional paid-in capital
36,822,443
36,625,221
Accumulated deficit
(22,366,947)
(22,750,176)
Total stockholders' investment
14,525,149
13,944,505
$16,389,783
$16,209,429
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1996
June 30, 1995
<S>
<C>
<C>
Revenues:
Products
$2,868,349
$2,124,441
Contracts
816,923
619,049
3,685,272
2,743,490
Costs and expenses:
Cost of products
1,048,699
914,893
Research and development
863,975
658,859
Selling, general and administrative
1,519,593
1,216,914
3,432,267
2,790,666
Net income (loss) from operations
253,005
(47,176)
Interest and other income
130,224
131,237
Net income
383,229
84,061
Net income per common share (Note 5):
$0.05
$0.01
Weighted average number of common
and dilutive common equivalent shares
outstanding
7,206,261
6,953,312
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
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<CAPTION>
Three Months Ended
June 30, 1996
June 30, 1995
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<C>
<C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$383,229
$84,061
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities-
Depreciation and amortization
96,084
47,367
Changes in assets and liabilities-
Accounts receivable
194,412
(238,616)
Inventories
(28,667)
139,078
Prepaid expenses and other current assets
(87,077)
(84,896)
Accounts payable
(169,637)
275,610
Accrued expenses
(230,653)
17,205
Net cash provided by (used in) operating activities
157,691
239,809
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments, net
(1,767,851)
(54,809)
Purchases of property and equipment and improvements
(143,735)
(29,214)
Purchases of Abiomed Limited Partnership units from
limited partners (Note 7)
- -
(155,000)
Net cash provided by (used in) investing activities
(1,911,586)
(239,023)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and stock issued
under employee stock purchase plan
197,415
- -
Net cash provided by financing activities
197,415
- -
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS,
EXCLUDING INVESTMENTS
(1,556,480)
786
CASH AND CASH EQUIVALENTS, EXCLUDING INVEST-
MENTS, AT BEGINNING OF PERIOD
2,938,332
614,091
CASH AND CASH EQUIVALENTS , EXCLUDING INVEST-
MENTS, AT END OF PERIOD
$1,381,852
$614,877
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 1: FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Preparation
The unaudited consolidated financial statements of ABIOMED, Inc. (the
Company), presented herein have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and note
disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's latest audited
financial statements, which are contained in the Company's Form 10-K for the
year ended March 31, 1996, which was filed with the Securities and Exchange
Commission. In the opinion of management, the accompanying consolidated
financial statements include all adjustments (consisting only of normal,
recurring adjustments) necessary to summarize fairly the Company's financial
position and results of operations. The results of operations for the three
months ended June 30, 1996 may not be indicative of the results that may be
expected for the full fiscal year.
2. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, ABIOMED Cardiovascular, Inc.,
ABIOMED R&D Inc., ABIODENT, Inc., Abiomed Research and Development,
Inc., ABD Holding Company, Inc., and the accounts of its majority-owned
subsidiary Abiomed Limited Partnership (see Note 7). All significant
intercompany accounts and transactions have been eliminated in
consolidation.
3. Inventories
Inventories include raw materials, work-in-process, and finished goods
and are priced at the lower of cost (first-in, first-out) or market and consist
of the following:
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<CAPTION>
June 30, 1996
March 31, 1996
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<C>
Raw Materials
$851,662
$799,548
Work-in-Process
419,942
428,287
Finished Goods
410,575
425,677
TOTAL
$1,682,179
$1,653,512
</TABLE>
Finished goods and work-in-process inventories consist of direct
material, labor and overhead.
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ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 1: FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(unaudited, continued)
4. Stockholders' Investment
.
During the first quarter of fiscal 1997, options to purchase 30,000
shares of Common Stock were granted at an exercise price of $13.25 per
share. Options to purchase 24,313 shares were canceled during the quarter.
Options to purchase 19,212 shares were exercised in the first quarter at
exercise prices ranging from $5.75 to $11.25 per share.
5. Net Income Per Common Share
Net income per common and common equivalent share is computed by
dividing net income by the weighted average number of common and common
equivalent shares outstanding during the period using the treasury stock
method.
6. Cash and Cash Equivalents
The Company classifies any marketable security with a maturity date of
90 days or less at the time of acquisition to be a cash equivalent. Securities,
including marketable securities, with original maturities of greater than 90
days are classified as investments. Such investments are classified as long-
term investments when their maturities are greater than one year from the
balance sheet date. The Company reports investments at cost plus accrued
interest.
7. Other Assets
Other assets represent the purchase of the majority interest of the
Abiomed Limited Partnership. Abiomed Limited Partnership (the Partnership)
was formed in March 1985 and provided initial funding for the design and
development of certain of the Company's products.
Through August 3, 2000, the Company owes a royalty to the Partnership
of 5.5% of certain revenues from these products. Because the Company owns
61.7% of the Partnership, the net royalty expense to the Company is
approximately 2.1% of these product revenues. This royalty formula is subject
to certain maximum amounts and to certain additional adjustments in the
event that the Company sells the technology. The Partnership is inactive
except with respect to receiving and distributing proceeds from these royalty
rights.
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ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET INCOME
Net income and income per share for the three months ended June 30,
1996 were approximately $383,000 and $0.05 per share, respectively. These
earnings compare to net income and income per share of approximately
$84,000 and $0.01 per share, respectively, in the same period of the previous
year.
REVENUES
In the three months ended June 30, 1996, total revenues were
approximately $3,685,000, 34% higher than total revenues of approximately
$2,743,000 in the same period of the previous year.
Product revenues were approximately $2,868,000, 35% higher than
product revenues of approximately $2,124,000 in the same period of the
previous year. These results primarily reflect increased domestic unit sales
and increased average selling prices of the disposable cardiovascular product
to the expanded installed customer base. More than 90% of total product and
service revenues in the quarter were derived from domestic sources.
Revenues from Research and Development (R&D) contracts and grants
for this quarter were approximately $817,000, 32% higher than total revenues
of approximately $619,000 reported in the same quarter of the previous year.
This increase primarily reflects timing of scheduled activities under existing
contracts and grants.
In aggregate, as of June 30, 1996, the Company's backlog of research
and development contracts and grants totaled approximately $4,844,000
including approximately $269,000 from the National Heart, Lung and Blood
Institute (NHLBI) relating to the current phase of funding for the Company's
total artificial heart (TAH) research and development which expires
September 30, 1996. All such contracts contain provisions making them
terminable at the convenience of the government.
A significant portion of the Company's contract revenues,
approximately 40% for the first quarter of fiscal 1997, was earned in
connection with research for the Company's TAH under the first phase of a
contract awarded in September 1993 and expiring in September 1996, by the
NHLBI. As of June 30, 1996 approximately $269,000 in funding remained
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(continued)
REVENUES (continued)
available to the Company under this phase of the TAH contract. The NHLBI
has indicated that it has approximately $17 million to be awarded in October
1996 for continued phase two development of a total artificial heart. The
NHLBI has indicated that only two of the three scientific teams presently
receiving TAH research funding from the NHLBI will qualify for funding of
the second phase. The second phase is anticipated to be a four year contract.
ABIOMED has asked for $8.6 million to be awarded for its continued TAH
research and development. There can be no assurance that ABIOMED will
receive its requested amount or any amount from the NHLBI for this continued
TAH research and development.
COSTS AND EXPENSES
Total costs and expenses for the three months ended June 30, 1996 were
approximately $3,432,000, 23% higher than total costs and expenses of
approximately $2,791,000 in the same fiscal quarter of the previous year. The
majority of this increase reflects expenses incurred to support higher
revenues.
Cost of products sold as a percentage of product sales (37%) decreased
from the same quarter of the previous year (43%). This decrease primarily
reflects greater proportionate sales of higher margin products and increased
operational efficiencies.
Total research and development costs increased during the first fiscal
quarter of 1997 to approximately $864,000, a 31% increase over research and
development costs of approximately $659,000 incurred during the same fiscal
period of the previous year. The increase primarily reflects the timing of
scheduled expenditures under contracts and grants.
Selling, general and administrative expenses for the three months ended
June 30, 1996 increased to approximately $1,520,000, 25% higher than
selling, general and administrative expenses in the same fiscal quarter of the
previous year. This increase primarily reflects increased sales and marketing
expenses, particularly increased personnel and sales commissions, related to
the increase in product revenues.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(continued)
INTEREST AND OTHER
Interest and other income was approximately $130,000 in the first
quarter of 1997 and approximately even with interest and other income in the
corresponding quarter of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company's balance sheet included $10,859,000
in cash and short-term investments, an increase of approximately $211,000
from March 31, 1996. This increase reflects proceeds from the exercise of
stock options of approximately $197,000 and cash generated from operations
and other activities of approximately $158,000 offset by purchases of
equipment and facility improvements of approximately $144,000. The June 30,
1996 balance includes approximately $1,382,000 in cash, and $9,477,000 in
short-term investments. The Company also has a $3,000,000 line of credit
from a bank which expires on December 1, 1996, and which was entirely
available at June 30, 1996.
Net cash provided by operating activities included net income of
approximately $383,000, including depreciation and amortization expenses of
$96,000, and a decrease in accounts receivable of approximately $194,000.
These sources of cash were partially offset by a decrease in accrued expenses
of approximately $231,000, a decrease in accounts payable of approximately
$170,000 and increases in prepaid expenses and inventory of $87,000 and
$29,000, respectively.
Net cash used in investing activities included approximately $1,768,000
of net purchases of short-term investments and approximately $144,000 of
purchases and improvements of property and equipment. During the first
quarter of fiscal 1997, the Company received proceeds of approximately
$197,000 from the exercise of stock options under the 1992 Combination Stock
Option Plan.
Although the Company does not currently have significant capital
commitments other than described above, the Company believes that it will
continue to make significant investments in the coming years to support the
development and commercialization of its products.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(continued)
HEALTH CARE REFORM
Private and government proposals for significant health care reform are
expected to continue to affect healthcare expenditures in the United States as
well as internationally where the company sells or plans to sell its products.
The Company cannot assess at this time the potential impact that healthcare
trends may have on future results because of uncertainties surrounding any
unforseeable changes.
***
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ABIOMED, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABIOMED, Inc.
Date: July 24, 1996 /s/ David M. Lederman
David M. Lederman
CEO and President
Date: July 24, 1996 /s/ John F. Thero
John F. Thero
Vice President Finance and
Administration; and Treasurer
Chief Financial Officer
Principal Accounting Officer
13
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Income Statement, Consolidated Balance Sheet and Consolidated
Statement of Cash Flows and is qualified in its entirety by reference to
Form 10-Q for the period ended June 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 1381852
<SECURITIES> 9476961
<RECEIVABLES> 2530726
<ALLOWANCES> 118849
<INVENTORY> 1682179
<CURRENT-ASSETS> 15132226
<PP&E> 3057632
<DEPRECIATION> 2391690
<TOTAL-ASSETS> 16389783
<CURRENT-LIABILITIES> 1864634
<BONDS> 0
0
0
<COMMON> 69653
<OTHER-SE> 14455496
<TOTAL-LIABILITY-AND-EQUITY> 16389783
<SALES> 3685272
<TOTAL-REVENUES> 3685272
<CGS> 1912674
<TOTAL-COSTS> 1912674
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (130224)
<INCOME-PRETAX> 383229
<INCOME-TAX> 0
<INCOME-CONTINUING> 383229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 383229
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
