<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 December 31, 1997
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)
(978) 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 December 31, 1997, there were 8,554,556 shares outstanding of the
registrant's Common Stock, $.01 par value.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S>
<C>
Part I - Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1997 and March 31, 1997
3-4
Consolidated Statements of Operations
Three and Nine Months Ended December 31, 1997
and December 31, 1996
5
Consolidated Statements of Cash Flows
Nine Months Ended December 31, 1997 and
December 31, 1996
6
Notes to Consolidated Financial Statements
7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
10-15
Part II - Other Information
16
Signatures
17
</TABLE>
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
1997
March 31,
1997
(unaudited)
(audited)
<S>
<C>
<C>
Current Assets:
Cash and cash equivalents (Note 6)
$37,830
$1,616,696
Short-term marketable securities (Note 6)
28,712,929
7,744,664
Accounts receivable, net of allowance for
doubtful accounts of $229,000 and $242,000
at March 31, 1997 and December 31, 1997,
respectively
4,594,281
4,816,500
Inventories (Note 3)
2,116,125
1,820,783
Prepaid expenses and other current assets
364,972
173,172
Total current assets
35,826,137
16,171,815
Property and equipment, at cost:
Machinery and equipment
4,409,552
3,147,837
Furniture and fixtures
392,052
241,867
Leasehold improvements
1,457,227
1,118,677
6,258,831
4,508,381
Less: Accumulated depreciation
and amortization
3,107,393
2,618,603
3,151,438
1,889,778
Other assets, net (Notes 2 and 7)
711,227
485,000
$39,688,802
$18,546,593
</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>
December 31,
1997
March 31,
1997
(unaudited)
(audited)
<S>
<C>
<C>
Current Liabilities:
Accounts payable
$1,440,512
$1,289,024
Accrued expenses
2,700,018
2,032,506
Total current liabilities
4,140,530
3,321,530
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 December 31, 1997
Issued and Outstanding- 8,554,556 shares at
December 31, 1997 and 7,008,282 shares at
March 31, 1997
85,546
70,082
Additional paid-in capital
57,344,502
37,169,893
Accumulated deficit
(21,881,776)
(22,014,912)
Total stockholders' investment
35,548,272
15,225,063
$39,688,802
$18,546,593
</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>
Nine Months Ended
Three Months Ended
December 31,
1997
December 31,
1996
December 31,
1997
December 31,
1996
<S>
<C>
<C>
<C>
<C>
Revenues:
Products
$13,297,818
$8,095,356
$3,973,613
$2,335,801
Contracts
4,553,652
2,739,015
873,400
985,166
17,851,470
10,834,371
4,847,013
3,320,967
Costs and expenses:
Cost of products
5,194,929
3,623,033
1,757,126
1,500,180
Research and development
6,007,757
2,520,216
2,353,576
739,479
Selling, general and administrative
7,336,650
4,841,567
2,366,500
1,612,332
18,539,336
10,984,816
6,477,202
3,851,991
Net loss from operations
(687,866)
(150,445)
(1,630,189)
(531,024)
Interest and other income
821,002
406,980
404,360
150,443
Net income (loss)
$133,136
$256,535
($1,225,829)
($380,581)
Net income (loss) per common
share (Note 5):
Basic EPS method
$0.02
$0.04
($0.14)
($0.05)
Diluted EPS method
$0.02
$0.04
($0.14)
($0.05)
Weighted average number of common
and dilutive common equivalent shares
outstanding (Note 5):
Basic EPS method
7,911,577
6,972,195
8,457,889
6,976,121
Diluted EPS method
8,205,494
7,191,848
8,457,889
6,976,121
</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)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
1997
December 31,
1996
<S>
<C>
<C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$133,136
$256,535
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities-
Depreciation and amortization
595,405
294,253
Changes in assets and liabilities-
Accounts receivable
222,219
(607,546)
Inventories
(295,342)
(396,387)
Prepaid expenses and other assets
(524,642)
(91,151)
Accounts payable
151,488
56,287
Accrued expenses
667,512
(92,629)
Net cash provided by (used in) operating activities
949,776
(580,638)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchases) maturities of investments, net
(20,968,265)
(422,877)
Purchases of property and equipment and improvements
(1,750,450)
(932,561)
Net cash used in investing activities
(22,718,715)
(1,355,438)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of Common Stock, net
20,087,824
- -
Proceeds from exercise of stock options and stock issued
under employee stock purchase plan
102,249
338,838
Net cash provided by financing activities
20,190,073
338,838
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS,
EXCLUDING INVESTMENTS
(1,578,866)
(1,597,238)
CASH AND CASH EQUIVALENTS, EXCLUDING INVEST-
MENTS, AT BEGINNING OF PERIOD
1,616,696
2,938,332
CASH AND CASH EQUIVALENTS , EXCLUDING INVEST-
MENTS, AT END OF PERIOD
$37,830
$1,341,094
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
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, 1997, 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 nine
months ended December 31, 1997 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, and the accounts of its majority-
owned subsidiary Abiomed Limited Partnership. 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:
<TABLE>
<CAPTION>
December 31,
1997
March 31,
1997
<S>
<C>
<C>
Raw Materials
$1,048,219
$896,433
Work-in-Process
480,764
373,383
Finished Goods
587,142
550,967
TOTAL
$2,116,125
$1,820,783
</TABLE>
Finished goods and work-in-process inventories consist of direct
material, labor and overhead.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 1: FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
4. Stockholders' Investment
In November 1997, the Company completed an offering of 290,000 shares
of its Common Stock. Proceeds to the Company from the stock offering, net of
direct expenses, totaled approximately $4,078,000.
In July 1997, the Company completed a private placement of 1,242,710
shares of its Common Stock to Genzyme Corporation and certain of the
Company's directors. Proceeds to the Company from the private placement, net
of direct expenses, totaled approximately $15,965,000.
During the three months ended December 31, 1997, options to purchase
4,600 shares of Common Stock were granted at exercise prices ranging from
$11.00 to $18.00 per share. Options to purchase 11,125 shares were canceled
during the quarter and there were no options to purchase shares exercised
during the three months ended December 31, 1997.
5. Net Income (Loss) Per Common Share
The Company has calculated net income (loss) per common share in
accordance with Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share, a new accounting standard that requires the Company to
present both basic and diluted net income (loss) for periods presented. Basic
earnings (loss) per share ("Basic EPS") is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during
the period. Diluted earnings (loss) per share ("Diluted EPS") is computed by
dividing net income (loss) by the weighted average number of common and
common equivalent shares outstanding during the period using the treasury
stock method. Under the Diluted EPS method, no common equivalent shares are
considered dilutive in periods, such as the three months December 31, 1997
and 1996, in which a net loss is reported because such common equivalent
shares are antidilutive.
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.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 1: FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
7. Other Assets
Other assets include $378,000 in unamortized purchase cost of the
Company's majority interest of the Abiomed Limited Partnership. The interest
in the Abiomed Limited Partnership is being amortized over five years, its
estimated useful life. 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.
Also included in other assets are long term accounts receivable related
to sales-type leases. The terms of these non-cancelable leases are one to
three years. As of December 31, 1997, approximately $333,000 is included in
other assets for these sales-type leases.
<PAGE>
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
THREE MONTHS ENDED DECEMBER 31, 1997
NET INCOME
Net loss and loss per share, using the Diluted Earnings Per Share
method, for the three months ended December 31, 1997, were approximately
$1,226,000 and $0.14 per share, respectively. These losses compare to net loss
and loss per share of approximately $381,000 and $0.05 per share,
respectively, in the same period of the previous year. The net loss for the
three months ended December 31, 1997 is primarily attributable to the Company's
undertaking to accelerate the development of its battery-powered totally
implantable artificial heart ("TAH"). During the three months ended December
31, 1997, the Company incurred $1,432,000, or $0.16 per share, of
discretionary research and development expenses for this project in excess of
the appropriated amount under its government contract to support this
development (the "TAH contract"). Excluding these expenses, the Company's
net income for the three months ended December 31, 1997 would have been
$206,000, or $0.02 per share.
REVENUES
Total revenues, excluding interest income, increased by 46% to $4.8
million in the three months ended December 31, 1997 from $3.3 million in the
three months ended December 31, 1996. This increase was attributable to an
increase in product revenues.
Product revenues increased by 70% to $4.0 million in the three months
ended December 31, 1997 from $2.3 million in the three months ended
December 31, 1996. This increase was primarily attributable to increased unit
sales of BVS blood pumps, consoles and related accessories. The Company's
product revenues in the three months ended December 31, 1996 were adversely
affected by a product recall. The decrease in product revenues from $5.1
million in the three months ended September 30, 1997 was primarily
attributable to transactions in the September quarter not repeated in the
December quarter, including $250,000 in revenue from a single international
distributor to be used by that distributor to conduct BVS clinical trials for
that distributor's territory, $230,000 in revenue resulting from a reduction in
the Company's BVS blood pump backlog and a large number of new customer
orders in the last week of the quarter. The higher revenue resulting from these
transactions in the September quarter was partially offset in the December
quarter by a higher level of BVS blood pump reorders. More than 90% of total
product revenues in the three months ended December 31, 1997 were derived
from domestic sources.
<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)
Contract revenues decreased by 11% to approximately $873,000 in the
three months ended December 31, 1997 from $985,000 in the three months
ended December 31, 1996. This decrease primarily reflects timing of revenue
recognized under the Company government TAH contract. None of the contract
revenue recognized in the three months ended December 31, 1997 was derived
from the Company's TAH government contract compared to $635,000 of
contract revenue recognized under this contract for the three months ended
December 31, 1996. The Company accounts for revenue under its government
contracts and grants as work is performed, provided that the government has
appropriated sufficient funds for the work. Through December 31, 1997, the
government had appropriated $4.9 million of the $8.5 million of its TAH
contract amount. Prior to the beginning of the three months ended December
31, 1997, the Company's expenditures under the TAH contract had exceeded the
appropriated amount. The original government appropriation schedule calls for
no further appropriation for the TAH contract until October 1998. This
schedule is subject to change at the discretion of the government.
While the Company currently plans to further increase its expenditures
in connection with the development of the TAH, the Company will not
recognize any further contract revenues under the TAH contract until such time
as additional funds are appropriated under the TAH contract, if ever. The
Company believes that certain of its costs incurred prior to further
appropriation may be reimbursable under the TAH contract, if and when
additional appropriation under the TAH contract is made. Due to the
Company's accelerated TAH development activity and the timing of government
appropriations, the Company believes that it will experience significant
quarterly fluctuations in contract revenues. The Company also believes that the
Company's total expenses to complete the development of the TAH will
significantly exceed the remaining $3.6 million TAH contract amount.
As of December 31, 1997, the Company's total backlog of research and
development contracts and grants was $8.0 million, including $3.6 million for
TAH research and development and $2.6 million for Heart Booster*. research
and development. Funding for the Company's government research and
development contracts is subject to government appropriation, and all of these
contracts contain provisions that make them terminable at the convenience of
the government.
COSTS AND EXPENSES
Total costs and expenses increased to $6.5 million, 134% of total
revenues, for the three months ended December 31, 1997, from $3.9 million,
116% of total revenues, for the three months ended December 31, 1996. The
majority of this increase in costs and expenses was incurred to support higher
revenues and increased development activities related to the TAH.
<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)
COSTS AND EXPENSES (continued)
Cost of products sold as a percentage of product revenues was 44% for
the three months ended December 31, 1997 as compared to 64% in the three
months ended December 31, 1996. The majority of this decrease in cost of
products sold as a percentage of product revenues was attributable to higher
unit sales of BVS blood pumps as a percentage of product revenues in the
current fiscal year over the prior year and to higher expenses incurred in the
three months ended December 31, 1996 relating to the product recall.
Research and development expenses increased by 318% to $2.4 million,
49% of total revenues, for the three months ended December 31, 1997, from
$739,000, 22% of total revenues for the three months ended December 31,
1996. The increase primarily reflected higher levels of spending by the
Company to advance the development of the TAH and higher level of activity
under the Company's non-TAH cost-plus-fixed-fee research and development
contracts and grants. Research and development expenses during the three
months ended December 31, 1997 included $1,432,000 of expenses incurred in
connection with the Company's development activities for the TAH in excess
of the appropriated amounts under the TAH contract. The Company anticipates
that its research and development expenses will continue to increase as a
result of its plans to increase its internally funded research and development
efforts for the TAH.
Selling, general and administrative expenses increased by 47% to $2.4
million, 49% of total revenues, for the three months ended December 31, 1997,
from $1.6 million, 49% of total revenues, for the three months ended December
31, 1996. The increase primarily reflects increased sales and marketing
expenses, particularly increased personnel and sales commissions, related to
the increase in product revenues as well as additional administrative
personnel.
INTEREST AND OTHER
Interest and other income consists primarily of interest on the
Company's investment balances, net of interest and other expenses. Interest
income and other income increased to $404,000, 8% of total revenues, for the
three months ended December 31, 1997 from $150,000, 5% of total revenues,
for the three months ended December 31, 1996. This increase primarily reflects
interest earned on the Company's higher average investment balances.
Income taxes incurred during these periods were not material and the
Company continues to have significant net tax operating loss carryforwards
and tax credit carryforwards.
<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)
NINE MONTHS ENDED DECEMBER 31, 1997
NET INCOME
Net income and income per share, using the Diluted Earnings Per Share
method, decreased to $133,000 and $0.02 per share, respectively, for the nine
months ended December 31, 1997 compared to net income and income per share
of $257,000 and $0.04 per share, respectively, for the nine months ended
December 31, 1996. The comparative reduction in net income for the nine
months ended December 31, 1997 is primarily attributable to the Company's
undertaking to accelerate the development of its TAH. During the nine months
ended December 31, 1997, the Company incurred $1,955,000, or $0.23 per
share, of discretionary spending for this project in excess of the amount
appropriated under the TAH contract. Excluding these expenses, the Company's
net income for the nine months ended December 31, 1997 would have been
$2,088,000, or $0.25 per share.
REVENUES
Total revenues, excluding interest income, increased by 65% to $17.9
million in the nine months ended December 31, 1997 from $10.8 million in the
nine months ended December 31, 1996. This increase was attributable to an
increase in both product and contract revenues.
Product revenues increased by 64% to $13.3 million in the nine months
ended December 31, 1997 from $8.1 million in the nine months ended December
31, 1996. This increase was primarily attributable to increased unit sales of
BVS blood pumps, consoles and related accessories. More than 90% of total
product revenues in the nine months ended December 31, 1997 were derived
from domestic sources.
Contract revenues increased by 66% to $4.6 million in the nine months
ended December 31, 1997 from $2.7 million in the nine months ended December
31, 1996. This increase primarily reflected increased activity under the
Company's TAH contract. The Company accounts for revenue under its
government contracts and grants as work is performed, provided that the
government has appropriated sufficient funds for the work. Through December
31, 1997, the government had appropriated $4.9 million of the $8.5 million of
its TAH contract amount. The original government appropriation schedule calls
for no further appropriation for the TAH contract until October 1998. This
schedule is subject to change at the discretion of the government. During the
nine months ended December 31, 1997, the Company's expenditures under the
TAH contract exceeded the appropriated amount, resulting in the Company
recognizing as revenue all of the remaining $3.2 million balance of the $4.9
million appropriated under the TAH contract.
<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)
COSTS AND EXPENSES
Total costs and expenses increased to $18.5 million, 104% of total
revenues, for the nine months ended December 31, 1997 from $11.0 million,
101% of total revenues, for the nine months ended December 31, 1996. The
majority of this increase in costs and expenses was incurred to support higher
revenue levels and increased development activities related to the TAH.
Cost of products sold increased to $5.2 million, 39% of product revenues
for the nine months ended December 31, 1997 from $3.6 million, 45% of
product revenues for the nine months ended December 31, 1996. The majority
of this decrease in cost of products sold as a percentage of product revenues
was attributable to higher unit sales of BVS blood pumps as a percentage of
product revenues in the current fiscal year over the prior year and to higher
expenses incurred in the nine months ended December 31, 1996 relating to the
product recall.
Research and development expenses increased by 138% to $6.0 million,
34% of total revenues, for the nine months ended December 31, 1997, from
$2.5 million, 23% of total revenues, for the nine months ended December 31,
1996. The increase primarily reflected a higher level of activity under the
Company's cost-plus-fixed-fee research and development contracts and grants,
particularly the TAH contract, and $2.0 million of expenses incurred in
connection with the Company's development activities for the TAH in excess
of the appropriated amounts under the TAH contract.
Selling, general and administrative expenses increased by 51% to $7.3
million, 41% of total revenues, for the nine months ended December 31, 1997
from $4.8 million, 45% of total revenues, for the nine months ended December
31, 1996. The increase primarily reflected increased sales and clinical
expenses, particularly increased personnel and sales commissions, related to
the increase in product revenues, as well as additional administrative
personnel. The decrease in selling, general and administrative expenses as a
percentage of total revenues reflected the Company's higher revenue base to
support these increased costs.
INTEREST AND OTHER
Interest and other income consists primarily of interest on the
Company's investment balances, net of interest and other expenses. Interest
income increased to $821,000, 5% of total revenues, for the nine months ended
December 31, 1997, from $407,000, 4% of total revenues, for the nine months
ended December 31, 1996. This increase primarily reflects the interest earned
on the Company's higher average investment balances.
<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)
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Company had $28.8 million in cash and
short-term marketable securities. The Company also has a $3,000,000 line of
credit from a bank that expires in September 1998, and which was entirely
available at December 31, 1997.
In the nine months ended December 31, 1997, operating activities
provided cash of $950,000. Net cash provided by operating activities during
the nine months ended December 31, 1997 reflected net income of $133,000,
including depreciation and amortization expense of $595,000, a decrease in
accounts receivable of $222,000, an increase in accounts payable of $151,000
and an increase in accrued expenses of $668,000. These sources of cash were
partially offset by increases in prepaid expenses and inventory of $524,000 and
$295,000, respectively.
During the nine months ended December 31, 1997, investing activities
used $22.7 million of cash. Net cash used by investing activities included
$21.0 million of purchases of short-term investments and $1.7 million of
purchases and improvements of equipment and property.
During the nine months ended December 31, 1997, financing activities
provided $20.1 million of cash. Net cash provided by financing activities
included $16.0 million in net proceeds from the private placement of Common
Stock to Genzyme Corporation and certain of the Company's directors in July
1997 and $4.1 million in net proceeds from the sale of the Company's Common
Stock in November 1997.
Although the Company does not currently have significant capital
commitments, the Company believes that it will continue to make significant
investments over the next several years to support the development and
commercialization of its products and the expansion of its manufacturing
facility. The Company is regularly evaluating alternative sources of funding to
address this need. The Company believes that its revenues and existing
resources will be sufficient to fund its planned operations, including planned
increases in its internally funded TAH development efforts, for at least the
next twelve months.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On January 20, 1998, World Heart Corporation and the Ottawa
Heart Institute Research Corporation filed a complaint in the United
States District Court for the District of Delaware. The complaint seeks
damages and injunctive relief for alleged breaches of contract,
misappropriation of trade secrets, conversion of trade secrets and patent
infringement by the Company. These allegations relate to certain
technology used by the Company in its transcutaneous energy
transmission system which is a component of the TAH under development
by the Company. The Company does not believe that it is infringing any
patent or other intellectual property rights of the plaintiffs and intends
to vigorously defend this position.
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
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
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: January 27, 1998 /s/ David M. Lederman
David M. Lederman
CEO and President
Date: January 27, 1998 /s/ John F. Thero
John F. Thero
Vice President Finance
and Treasurer
Chief Financial Officer
Principal Accounting Officer
17
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