<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 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 0-28290
AKSYS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 36-3890205
(State of incorporation) (I. R. S. Employer
Identification No.)
Two Marriott Drive, Lincolnshire, Illinois 60069
(formerly 1113 S. Milwaukee Ave., Suite 300, Libertyville, Illinois 60048)
(address of principal executive offices)
Registrant's telephone number 847-229-2020
(formerly 847-247-6051)
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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
The number of shares of Common Stock, $.01 Par Value, outstanding as of
October 18, 1996 was 13,685,212.
Page 1 of 15 pages
<PAGE>
AKSYS, LTD
FORM 10-Q
For the quarterly period ended September 30, 1996
<TABLE>
<CAPTION>
TABLE OF CONTENTS
================================================================================================================
PART 1 - FINANCIAL INFORMATION Page
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1996 (Unaudited)
and December 31, 1995............................................................................ 3
Consolidated Statements of Operations for the three and
nine months ended September 30, 1996 and 1995 (Unaudited)........................................ 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 (Unaudited).................................................... 5
Notes to Consolidated Financial Statements....................................................... 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................................. 9-12
PART II - OTHER INFORMATION
Item 2. Changes in Securities............................................................................ 13
Item 6. Exhibits and Reports on Form 8-K................................................................. 13
SIGNATURES................................................................................................ 14
INDEX TO EXHIBITS......................................................................................... 15
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
<TABLE>
<CAPTION>
Consolidated Balance Sheets
- ----------------------------------------------------------------------------------------------
September 30, December 31,
ASSETS 1996 1995
- ----------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,266,728 $ 570,621
Short-term investments 41,836,104 3,386,484
Interest receivable 783,247 8,502
Prepaid expenses 106,469 6,213
Other current assets 76,747 46,319
- ----------------------------------------------------------------------------------------------
Total current assets 45,069,295 4,018,139
- ----------------------------------------------------------------------------------------------
Long-term investments 6,005,971 --
Property and equipment, net 1,894,239 603,382
Other noncurrent assets 143,365 71,929
- ----------------------------------------------------------------------------------------------
$ 53,112,870 $ 4,693,450
==============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 1,889,327 $ 316,400
Accrued liabilities 68,333 89,745
Current maturities of notes payable -- 15,206
Current maturities of lease obligation 37,751 31,525
- ----------------------------------------------------------------------------------------------
Total current liabilities 1,995,411 452,876
- ----------------------------------------------------------------------------------------------
Notes payable, less current maturities -- 909
Lease obligation, less current maturities 3,202 34,852
- ----------------------------------------------------------------------------------------------
Total liabilities 1,998,613 488,637
- ----------------------------------------------------------------------------------------------
Redeemable preferred stock -- 12,406,761
- ----------------------------------------------------------------------------------------------
Stockholders' equity (deficit):
Common stock, par value $.01 per share, 50,000,000
shares authorized, 13,685,212 and 861,457 shares
issued and outstanding in 1996 and 1995, respectively 136,852 8,614
Additional paid-in capital 64,570,096 --
Deficit accumulated during development stage (13,592,691) (8,210,562)
- ----------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) 51,114,257 (8,201,948)
- ----------------------------------------------------------------------------------------------
$ 53,112,870 $ 4,693,450
==============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
AKSYS LTD. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Cumulative
from
Jan. 18, 1991
Three months ended Nine months ended (inception)
------------------------------ ------------------------------ through
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Research and development
expenses $ 1,726,504 $ 990,467 $ 4,417,743 $ 2,940,840 $ 11,086,359
General and administrative
expenses 1,005,456 299,453 2,065,878 912,856 3,898,430
- ----------------------------------------------------------------------------------------------------------
Operating loss (2,731,960) (1,289,920) (6,483,621) (3,853,696) (14,984,789)
- ----------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income 746,740 34,443 1,108,299 101,644 1,349,716
Interest expense (4,403) (2,850) (6,807) (8,466) (22,469)
Other income - - - - 67,884
- ----------------------------------------------------------------------------------------------------------
742,337 31,593 1,101,492 93,178 1,395,131
- ----------------------------------------------------------------------------------------------------------
Net loss $(1,989,623) $(1,258,327) $(5,382,129) $(3,760,518) $(13,589,658)
==========================================================================================================
Net loss per share $ (.15) $ (.12) $ (.45) $ (.36)
==========================================================================================================
Weighted average number
of common shares 13,685,212 10,327,569 12,020,809 10,327,569
==========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
=========================================================================================================
Cumulative
from
Jan. 18, 1991
(inception)
through
1996 1995 Sept. 30, 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (5,382,129) $ (3,760,518) $ (13,589,658)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 199,064 94,152 434,106
Stock option expense -- -- 3,240
Issuance of stock in exchange for services
rendered 66,003 -- 66,003
Changes in assets and liabilities:
Interest receivable (774,745) 1,817 (783,247)
Prepaid expenses (100,256) 10,160 (106,469)
Other current assets (29,883) 10,943 (76,202)
Accounts payable 1,572,927 105,404 1,889,327
Accrued liabilities (21,412) (13,605) 68,333
Other assets (96,889) (71,235) (178,022)
- ---------------------------------------------------------------------------------------------------------
Net cash used in operating activities (4,567,320) (3,622,882) (12,272,589)
- ---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of investments 3,386,484 4,610,379 12,064,014
Purchases of investments (47,849,574) (4,213,019) (59,913,588)
Purchases of property and equipment (1,456,969) (318,070) (2,163,073)
Organizational costs incurred -- -- (19,595)
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (45,920,059) 79,290 (50,032,242)
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of issuance costs 52,225,025 333 52,298,031
Proceeds from issuance of preferred stock -- 8,486,764 12,336,096
Proceeds from issuance of note payable -- -- 41,792
Repayment of notes payable (16,115) (11,507) (41,792)
Repayment of lease obligation (25,424) (18,319) (62,568)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 52,183,486 8,457,271 64,571,559
- ---------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,696,107 4,913,679 2,266,728
Cash and cash equivalents at beginning of period 570,621 609,655 --
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 2,266,728 $ 5,523,334 $ 2,266,728
=========================================================================================================
</TABLE>
5
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements - Unaudited
(1) Basis for Presentation
The consolidated financial statements of Aksys, Ltd. and Subsidiary (the
"Company") presented herein are unaudited, other than the consolidated
balance sheet at December 31, 1995, which is derived from audited financial
statements. The interim financial statements and notes thereto have been
prepared pursuant to the rules of the Securities and Exchange Commission for
quarterly reports on Form 10-Q and do not include all of the information and
note disclosures required by generally accepted accounting principles. In
the opinion of management, the interim financial statements reflect all
adjustments consisting of normal, recurring adjustments necessary for a fair
statement of the results for interim periods. The operations for the three
and nine months ended September 30, 1996 are not necessarily indicative of
results that ultimately may be achieved for the entire year ending December
31, 1996. These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31, 1995,
included in the Company's registration statement on Form S-1 filed with the
Securities and Exchange Commission on May 16, 1996.
(2) Principles of Consolidation
On April 18, 1996 the Company established a subsidiary in Tokyo, Japan. The
consolidated financial statements include the accounts of the Company and
the wholly-owned subsidiary. All material intercompany transactions and
balances have been eliminated in consolidation.
(3) Computation of Net Loss per Share
Net loss per share is based on the weighted average number of shares
outstanding and excludes unexercised stock options using the treasury stock
method because the effect is anti-dilutive. Pursuant to Securities and
Exchange Commission Staff Accounting Bulletin No. 83, options for common
stock granted by the Company during the twelve months immediately preceding
the offering date (using the treasury stock method and the public offering
price) have been included in the calculation of common and common equivalent
shares as if they were outstanding for all periods through the date of the
initial public offering.
6
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements - Unaudited
(4) Cash Equivalents and Investments
Cash equivalents are comprised of certain highly liquid investments with
maturities of less than three months when purchased. In addition to cash
equivalents, the Company has investments in debt securities that are
classified as short-term (mature in more than 91 days but no more than one
year) or long-term (maturities beyond one year but no more than 18 months).
Such investments are classified as held-to-maturity, as the Company has the
ability and intent to hold such until maturity. Investments held-to-maturity
are carried at amortized cost, adjusted for the amortization or accretion of
discounts or premiums without recognition of gains or losses that are deemed
to be temporary. Discounts and premiums are amortized or accreted over the
life of the related instrument as an adjustment to yield using the straight-
line method, which approximates the effective interest method. Interest
income is recognized when earned. Fair value approximates carrying value for
all investments.
(5) Stockholders' Equity (Deficit)
On April 23, 1996, the Company effected a 3-for-2 stock split of its common
stock. Additionally, on April 23, 1996, the Company filed a Restated
Certificate of Incorporation authorizing an increase in the number of
authorized shares of common stock to 50,000,000 shares and authorizing
1,000,000 shares of preferred stock, par value $.01 per share, for future
issuance. All references in the financial statements to share and per share
data have been adjusted to reflect this split.
On May 16, 1996, the Company completed an initial public offering of its
common stock in which 3,565,000 shares were sold by the Company resulting in
net proceeds of approximately $52.2 million. Upon the closing of the
offering, 6,165,424 shares of redeemable preferred stock (representing all
issued and outstanding shares of preferred stock) were automatically
converted into 9,248,136 shares of common stock. All shares of redeemable
preferred stock were canceled upon the conversion to common stock.
7
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements - Unaudited
(6) Stock Options
The following table summarizes the transactions pursuant to the Company's
Stock Option Plan:
===============================================================================
<TABLE>
<CAPTION>
Shares Price Range
- -------------------------------------------------------------------------------
<S> <C> <C>
Outstanding on December 31, 1995 1,447,250 0.1067-0.3935
Granted 236,875 1.00-16.00
Exercised 4,350 0.1067-0.1670
- -------------------------------------------------------------------------------
Outstanding on September 30, 1996 1,679,775 0.1067-16.00
===============================================================================
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
The Company is in the development stage and was formed to provide hemodialysis
products and services for patients suffering from end stage renal disease,
commonly known as chronic kidney failure. The Company has developed an automated
personal hemodialysis system which is designed to enable patients to perform
hemodialysis in an alternate site setting, such as the patient's home or a self-
care clinic, on a daily basis. The Company believes that its products and
services will provide a superior alternative to currently available kidney
dialysis treatment modalities by providing better clinical outcomes, lower
overall costs and improved quality of life for dialysis patients.
The Company submitted a 510(k) premarket notification to the US Food and Drug
Administration (FDA) in March, 1996 to market the Aksys PHD(TM) Personal
Hemodialysis System. After additional data was supplied to the FDA at its
request, the FDA accepted the 510(k) for formal review in July, 1996. In
September, the Company received a written response from the FDA to its 510(k)
premarket notification filing for the Aksys PHD(TM) Personal Hemodialysis
System. The FDA informed the Company that additional clinical and other data
will be required as part of the FDA review process to establish the safety and
effectiveness of the Aksys PHD(TM) System. Included in the letter from the FDA
was a request for the Company to conduct clinical trials and to submit data from
these trials to the FDA. The FDA invited the Company to resubmit its response,
including the clinical data, in the form of a new 510(k) premarket notification
at the time the Company has collected such data. The Company intends to work
very closely with the FDA in the design of the clinical trial protocols in order
to commence these trials in the third quarter of 1997. However, until the
Company is able to meet with the FDA and submit an Investigative Device
Exemption (IDE) that is approved by the agency, the timing of the commencement
of clinical trials in the US is uncertain.
Once the requested clinical trial data has been gathered, the Company will
submit a 510(k) premarket notification for review by the FDA. However, at this
time the Company cannot determine the extent to which the requested clinical
trials will affect the specific timeline for the submission of the clinical data
in a new 510(k) premarket notification, the FDA clearance of the 510(k)
premarket notification, or the commercialization of the Aksys PHD(TM) System.
Although the Company expects to commercialize this product in the United States
during the first half of 1998, there can be no assurance that the Company will
be able to obtain regulatory clearance for the Aksys PHD(TM) System in a timely
manner or at all.
The Company is moving in a parallel path to obtain ISO 9001 certification and CE
Mark approval in Europe on the Aksys PHD(TM) System. The Company expects to
obtain such approvals in late 1997. The market opportunity in Japan is also
significant and the Company continues to work toward the commencement of
clinical trials in 1998. However, there can be no assurance that the Company
will be able to obtain regulatory clearances in Japan or Europe for the Aksys
PHD(TM) System in a timely manner or at all.
9
<PAGE>
The Company has recently relocated its headquarters into a single facility
located in Lincolnshire, Illinois. This move has enabled the Company to
consolidate its research and development, operations and administrative
functions into one building.
Comparison of Results of Operations
Net loss for the three months ended September 30, 1996 was $2.0 million or $0.15
per share, as compared to $1.3 million, or $0.12 per share, for the three months
ended September 30, 1995. Net loss for the nine months ended September 30, 1996
was $5.4 million, or $0.45 per share, as compared to $3.8 million, or $0.36 per
share, for the year earlier period. The increase in net loss in the three and
nine months ended September 30, 1996 compared to the year earlier periods is due
to increases in spending in research and development, hiring of additional
personnel, and the development of necessary infrastructure to support the future
growth of the Company. Interest income earned from the investment of the net
proceeds raised by the Company in the initial public offering in May 1996
accounts for the increases in other income compared to the three and nine month
periods in the previous year.
Operating loss. Operating loss for the three months ended September 30, 1996 was
$2.7 million, as compared to $1.3 million for the comparable period in 1995, an
increase of $1.4 million or 112%. Operating loss for the nine months ended
September 30, 1996 was $6.5 million, as compared to $3.9 million for the
comparable period in 1995, an increase of $2.6 million or 68%. The increase in
the operating loss in the three and nine months ended September 30, 1996
compared to the year earlier periods is due to the scale-up in product
development and overhead to achieve the Company's development plan.
Other income (expense). Interest income for the three months ended September 30,
1996 was $0.7 million, as compared to less than $0.1 million for the comparable
period in 1995. Interest income for the nine months ended September 30, 1996 was
$1.1 million, as compared to $0.1 million for the comparable period in 1995. The
increase in interest income in the three and nine months ended September 30,
1996, compared to the year earlier periods is due to interest earned on the
investment of the net proceeds from the Company's initial public offering in May
1996.
Liquidity and Capital Resources
Net cash used in operating activities. Net cash used in operating activities for
the nine months ended September 30, 1996 and 1995 was $4.6 million and $3.6
million, respectively. The increase in net cash used in operating activities is
related to the scale-up in the Company's product development. Future cash needs
for operating activities are expected to be higher than historical levels
because of the manufacturing scale-up and commercialization of the Aksys PHD(TM)
Personal Hemodialysis System.
10
<PAGE>
Net cash used in investing activities. Net cash used in investing activities was
$45.9 million for the nine months ended September 30, 1996, primarily due to the
purchase of investments using the net proceeds raised by the Company in its
initial public offering. For the prior year period, net cash provided by
investing activities of $0.1 million resulted primarily from net proceeds from
sales of investments.
The Company's primary source of liquidity is from the net proceeds of
approximately $52.2 million from its sale of common stock in May 1996. At
September 30, 1996, the Company had cash, cash equivalents and short-term
investments of $44.1 million and working capital of $43.1 million. The Company
also had long-term investments of $6.0 million with maturity dates ranging
between 12 months and 18 months.
The Company expects to incur additional losses in the foreseeable future and
estimates that during 1996 it will spend approximately $10.5 million, including
capital expenditures and working capital, for manufacturing scale-up and
commercialization of the Aksys PHD(TM) Personal Hemodialysis System. The Company
anticipates, based on its current plans and assumptions relating to its
operations (including assumptions regarding the timing and costs associated with
obtaining FDA approval for, and the production and marketing of, the Aksys
PHD(TM) Personal Hemodialysis System), that the net proceeds of the initial
public offering will be sufficient to satisfy the Company's contemplated capital
expenditure and working capital requirements through 1998, assuming it is able
to obtain equipment financing in 1998 to finance the commercial scale production
and market launch of the Aksys PHD(TM) Personal Hemodialysis System.
Generally, the Company intends to enter into contracts with its customers to
provide all products and services relating to the Aksys PHD(TM) Personal
Hemodialysis System for a single monthly price, which would include a lease
payment for the Aksys PHD(TM) Personal Hemodialysis System. Financing production
of the Aksys PHD(TM) Personal Hemodialysis System in quantities necessary for
commercialization, as well as supplying Aksys PHD(TM) Personal Hemodialysis
Systems on a contracted lease basis, will require a significant investment in
working capital. This need for working capital is likely to increase to the
extent that demand for the Aksys PHD(TM) Personal Hemodialysis System increases
and the Company leases additional units. The Company would, therefore, have to
rely on sources of capital beyond cash generated from operations to finance
production of the Aksys PHD(TM) Personal Hemodialysis System even if the Company
is successful in marketing its products and services. The Company currently
intends to finance the working capital requirements associated with these
arrangements through equipment financing with a commercial lender. If the
Company is unable to obtain such equipment financing, it would need to seek
other forms of financing, through the sale of equity securities or otherwise, to
achieve its business objectives. The Company has not yet obtained a commitment
for such equipment financing, and there can be no assurance that the Company
will be able to obtain equipment financing or alternative financing on
acceptable terms or at all.
11
<PAGE>
NOTE ON FORWARD-LOOKING INFORMATION
Certain statements in this Form 10-Q and in the future filings made by the
Company with the Securities and Exchange Commission and in the Company's written
and oral statements made by or with the approval of an officer of the Company
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
and the Company intends that such forward-looking statements be subject to the
safe harbors created thereby. The words "believes," "expects," "estimates,"
"anticipates," and "will be," and similar words or expressions, identify
forward-looking statements made by or on behalf of the Company. These forward-
looking statements reflect the Company's views as of the date they are made with
respect to future events and financial performance, but are subject to many
uncertainties and factors which may cause the actual results of the Company to
be materially different from any future results expressed or implied by such
forward-looking statements. Examples of such uncertainties and factors include,
but are not limited to, (i) whether and when the Company will obtain clearance
from the FDA of a 510(k) premarket notification, and equivalent regulatory
clearances for Europe and Japan, and what additional clinical and other data the
Company might have to obtain in connection with seeking such clearances; (ii)
the Company's need to achieve manufacturing scale-up in a timely manner with its
primary manufacturing contractor, SeaMED Corporation, and its need to provide
for the efficient manufacturing of sufficient quantities of its products, (iii)
the Company's need to develop the marketing, distribution, customer service and
technical support and other functions critical to the success of the Company's
business plan, (iv) the uncertainty regarding the effectiveness and ultimate
market acceptance of the Aksys PHD(TM) Personal Hemodialysis System, the
Company's primary product in development, (v) the need to further establish the
clinical benefits of daily hemodialysis, and (vi) the capital requirements
necessary to fund the development and commercialization of the Company's
products and services. The Company does not undertake any obligation to update
or revise any forward-looking statement made by it or on its behalf, whether as
a result of new information, future events, or otherwise.
12
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities
The Board of Directors of the Company, at an October 28, 1996 meeting, adopted a
stockholder rights plan and declared a dividend to be made to stockholders of
record on November 8, 1996 of one right on each outstanding share of the
Company's common stock. The stockholder rights plan was adopted to preserve for
the stockholders of the Company the long-term value of the Company in the event
of a takeover of the Company or the purchase of a significant block of common
stock of the Company and to protect the Company and its stockholders against
coercive takeover tactics. The Company is not aware of any takeover attempt at
present. Prior to the time the rights become exercisable, the rights will be
evidenced by the certificates representing shares of common stock of the Company
and will be transferable only in connection with the transfer of shares of
common stock. If a person acquires 15% of the Company's common stock (the rights
will then be exercisable), each right will entitle the holder thereof to
purchase for an exercise price of $85.00 (subject to adjustment), shares of the
Company's common stock having a market value of twice such exercise price,
valued as of the date of occurrence of such triggering event, subject to the
right of the Company to exchange the rights for common stock of the Company on a
one-for-one basis. The Company will be entitled to redeem the rights at $0.01
per right at any time before public disclosure that a 15% position has been
acquired. The rights will expire on October 28, 2006, unless previously redeemed
or exercised. A copy of the stockholder rights plan is available from the
Company upon request.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement Regarding Computation of Per Share Earnings
(27) Financial Data Schedule
(99.1) Press Release of the Company, Issued September 20, 1996
(99.2) Press Release of the Company, Issued October 25, 1996
(99.3) Press Release of the Company, Issued October 30, 1996
(99.4) Aksys, Ltd. Rights Agreement, incorporated by reference to the
Company's Registration Statement on Form 8-A filed with the
Commission on November 5, 1996
(b) Reports on Form 8-K
none
13
<PAGE>
Signatures
Pursuant to 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.
Aksys, Ltd.
Date: November 13, 1996 By: /s/ Lawrence H. N. Kinet
----------------- -------------------------
Lawrence H.N. Kinet
Chairman and Chief Executive Officer
and Director
Date: November 13, 1996 By: /s/ Dennis N. Cavender
----------------- -----------------------
Dennis N. Cavender
Vice President and Chief Financial Officer
14
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- --------------------------------------------------------------------------------
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
99.1 Press Release of the Company, Issued September 20, 1996
99.2 Press Release of the Company, Issued October 25, 1996
99.3 Press Release of the Company, Issued October 30, 1996
99.4 Aksys, Ltd. Rights Agreement, incorporated by reference to the
Company's Registration Statement on Form 8-A filed with the
Commission on November 5, 1996
15
<PAGE>
Exhibit 11
----------
AKSYS LTD. AND SUBSIDIARY
(a development stage enterprise)
Statement Regarding Computation of Net Loss Per Share
<TABLE>
<CAPTION>
=======================================================================================================
Three months ended Nine months ended
------------------------------- -------------------------------
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss $(1,989,623) (1,258,327) (5,382,129) (3,760,518)
=======================================================================================================
Weighted average shares used
to compute net loss per share:
Weighted average common
shares outstanding* 13,685,212 8,363,931 11,911,057 7,596,090
Additional shares pursuant
to SAB83 computation - 1,963,638 109,752 2,731,479
- -------------------------------------------------------------------------------------------------------
13,685,212 10,327,569 12,020,809 10,327,569
=======================================================================================================
Net loss per share $ (0.15) (0.12) (0.45) (0.36)
=======================================================================================================
</TABLE>
* Includes conversion of preferred shares.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the balance sheet as of September 30, 1996 and the statement of operations for
the nine months ended September 30, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> $2,267
<SECURITIES> 41,836
<RECEIVABLES> 783
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,069
<PP&E> 2,266
<DEPRECIATION> 372
<TOTAL-ASSETS> 53,113
<CURRENT-LIABILITIES> 1,995
<BONDS> 0
<COMMON> 137
0
0
<OTHER-SE> 50,977
<TOTAL-LIABILITY-AND-EQUITY> 53,113
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,484)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,382)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,382)
<EPS-PRIMARY> (0.45)
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
Contact:
Lawrence H.N. Kinet Dennis N. Cavender
Chairman and CEO Vice President and CFO
Aksys, Ltd. Aksys, Ltd.
(847) 247-6051 (847) 247-6051
For Immediate Release:
- ---------------------
AKSYS, LTD. ANNOUNCES FDA RESPONSE TO 510(K) FILING
Libertyville, IL, September 20, 1996 -- Aksys, Ltd. (Nasdaq/NNM: AKSY) today
announced that it has received written notification from the U.S. Food and Drug
Administration (FDA) that additional data will be required as part of the FDA
review process to establish the safety and effectiveness of the Aksys PHD(TM)
Personal Hemodialysis System, including data from clinical studies in which end
stage renal disease patients are treated using the Aksys PHD(TM) system. The FDA
also requested that the Company address a number of issues regarding the design
and operation of the system prior to conducting clinical studies.
The FDA has invited the Company to meet to discuss the scope and timing of the
clinical studies. Given that it would not be possible to perform such studies
and respond to the FDA's request within the standard 30-day 510(k) response
period, the Company's current 510(k) premarket notification filing has been
withdrawn by the FDA and the Company intends to make a new filing once the
additional data can be provided. The FDA indicated that if the Company submits
the requested information, the submission will be considered and processed as a
new 510(k) filing.
"Although we continue to believe that clinical data should not be required for
a device such as ours, we knew a request for clinical data was a possibility and
we have always made that very clear. We intend to work diligently to respond to
the FDA's request," stated Lawrence H.N. Kinet, Chairman and CEO of Aksys.
"Until we have an opportunity to work with the FDA to agree upon the parameters
of the clinical studies, we will not be able to accurately assess the impact of
this development on the timing reflected in our current business plan."
The Company is also pursuing regulatory approval for the Aksys PHD(TM) System in
Europe, Japan and other countries.
Aksys, Ltd. is developing hemodialysis products and services for patients
suffering from kidney failure. These products and services include the Company's
lead product in development, the Personal Hemodialysis (PHD) System, designed to
improve clinical outcomes of patients, reducing mortality, morbidity and the
associated high cost of patient care.
###
<PAGE>
EXHIBIT 99.2
CONTACTS:
Lawrence H. N. Kinet Dennis N. Cavender
Chairman and CEO Vice President and CFO
Aksys, Ltd. Aksys, Ltd.
(847) 229-2222 (847) 229-2222
FOR IMMEDIATE RELEASE
- ---------------------
AKSYS, LTD. REPORTS FINANCIAL RESULTS FOR THE THIRD QUARTER ENDED
SEPTEMBER 30, 1996
LINCOLNSHIRE, IL, OCTOBER 25, 1996 - Aksys, Ltd. (Nasdaq/NNM: AKSY), a leader
in the development of personal hemodialysis products and services, today
reported financial results for the third quarter and nine month period ended
September 30, 1996.
For the third quarter ended September 30, 1996, the Company reported a net loss
of $1,989,623, or $0.15 per share, compared to a net loss of $1,258,327, or
$0.12 per share, for the same quarter last year. Operating expenses increased
to $2,731,960 in the third quarter of 1996, compared to $1,289,920 in the third
quarter 1995. The increase in operating expenses is due to research and
development spending, hiring of additional personnel, and the development of
necessary infrastructure to support the future growth of the Company. Interest
income increased to $742,337 in the third quarter ended September 30, 1996,
compared to $31,593 for the same quarter last year, as a result of the net
proceeds invested from the Company's initial public offering in May 1996.
"We have just completed consolidation of our research and development,
operations, and administrative functions into one location in Lincolnshire,
Illinois," stated Lawrence H.N. Kinet, Chairman and CEO of Aksys. "With this
move behind us, we can continue to make progress with the regulatory approval
processes and prepare for commercialization of the Aksys PHD(TM) Personal
Hemodialysis System."
For the nine month period ended September 30, 1996, the Company reported a net
loss of $5,382,129, or $0.45 per share, compared to a net loss of $3,760,518, or
$0.36 per share, for the same nine month period in 1995. Operating expenses
increased to $6,483,621 in the first nine months of 1996, compared to $3,853,696
in the first nine months of 1995. Interest income for the nine months ended
September 30, 1996 was $1,101,492 compared to interest income of $93,178 for the
same period in 1995.
Aksys, Ltd. is developing hemodialysis products and services for patients
suffering from kidney failure. These products and services include the Company's
lead product in development, the Aksys PHD(TM) Personal Hemodialysis System,
designed to improve clinical outcomes of patients, reducing mortality, morbidity
and the associated high cost of patient care. The PHD approach to the treatment
of kidney dialysis patients is simple: more dialysis is better than less; daily
treatment is better than less frequent treatment; and alternate sites, such as
the patient's home or a self-care clinic, are preferable locations to perform
chronic therapy.
- financial table to follow -
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues: $ - $ - $ - $ -
Expenses:
Research and development 1,726,504 990,467 4,417,743 2,940,840
General and administrative 1,005,456 299,453 2,065,878 912,856
----------- ----------- ----------- -----------
Operating loss (2,731,960) (1,289,920) (6,483,621) (3,853,696)
Other income (expense):
Interest income 746,740 34,443 1,108,299 101,644
Interest expense (4,403) (2,850) (6,807) (8,466)
----------- ----------- ----------- -----------
742,337 31,593 1,101,492 93,178
----------- ----------- ----------- -----------
Net loss $(1,989,623) $(1,258,327) $(5,382,129) $(3,760,518)
=========== =========== =========== ===========
Net loss per share $ (0.15) $ (0.12) $ (0.45) $ (0.36)
=========== =========== =========== ===========
Weighted average number
of common shares outstanding 13,685,212 10,327,569 12,020,809 10,327,569
=========== =========== =========== ===========
</TABLE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Cash, cash equivalents and
short-term investments $44,102,832 $ 3,937,105
Working capital 43,073,884 3,565,263
Long-term investments 6,005,971 -
Total assets 53,112,870 4,693,450
Total liabilities 1,998,613 488,637
Redeemable preferred stock - 12,406,761
Stockholders' equity (deficit) 51,114,257 (8,201,948)
</TABLE>
<PAGE>
EXHIBIT 99.3
CONTACTS:
Lawrence H. N. Kinet Dennis N. Cavender
Chairman and CEO Vice President and CFO
Aksys, Ltd. Aksys, Ltd.
(847) 229-2222 (847) 229-2222
FOR IMMEDIATE RELEASE
- ---------------------
AKSYS, LTD. ADOPTS A PREFERRED SHARE PURCHASE RIGHTS PLAN
LINCOLNSHIRE, IL, OCTOBER 30, 1996 - Aksys, Ltd. (Nasdaq/NNM: AKSY), a leader
in the development of personal hemodialysis products and services, today
announced that its Board of Directors, at an October 28, 1996 meeting, adopted a
stockholder rights plan and declared a dividend to be made to stockholders of
record on November 8, 1996 of one preferred share purchase right on each
outstanding share of the Company's common stock. Each such right will entitle a
stockholder to buy one one-thousandth of a share of a new series of junior
participating preferred stock for an exercise price of $85.00.
The stockholder rights plan was adopted to preserve for the stockholders of the
Company the long-term value of the Company in the event of a takeover of the
Company or the purchase of a significant block of common stock of the Company
and to protect the Company and its stockholders against coercive takeover
tactics.
The rights will become exercisable only if a person acquires, or announces a
tender offer for, 15% or more of the Company's common stock (with certain
exceptions). Prior to the time the rights become exercisable, the rights will
be evidenced by the certificates representing shares of common stock of the
Company and will be transferable only in connection with the transfer of shares
of common stock. If a person acquires 15% of the Company's common stock, each
right will entitle the holder thereof to purchase for an exercise price of
$85.00 (subject to adjustment) shares of the Company's common stock having a
market value of twice such exercise price, valued as of the date of occurrence
of such triggering event, subject to the right of the Company to exchange the
rights for common stock of the Company on a one-for-one basis.
The Company will be entitled to redeem the rights at $0.01 per right at any time
before public disclosure that a 15% position has been acquired. The rights will
expire on October 28, 2006, unless previously redeemed or exercised. The
distribution of the rights will not be a taxable event to stockholders.
Aksys, Ltd. is developing hemodialysis products and services for patients
suffering from kidney failure. These products and services include the
Company's lead product in development, the Aksys PHD(TM) Personal Hemodialysis
System, designed to improve clinical outcomes of patients, reducing mortality,
morbidity and the associated high cost of patient care. The PHD approach to the
treatment of kidney dialysis patients is simple: more dialysis is better than
less; daily treatment is better than less frequent treatment; and alternate
sites, such as the patient's home or a self-care clinic, are preferable
locations to perform chronic therapy.
###
