<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 June 30, 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 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
(address of principal executive offices) (Zip Code)
Registrant's telephone number 847-229-2020
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 July 25,
1997 was 13,781,027.
<PAGE>
AKSYS, LTD.
FORM 10-Q
For the Quarterly Period Ended June 30, 1997
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PART 1 - FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1997 (Unaudited)
and December 31, 1996........................................... 3
Consolidated Statements of Operations for the Three- and
Six-Month Periods Ended June 30, 1997 and 1996 (Unaudited)...... 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and 1996 (Unaudited)........................ 5
Notes to Consolidated Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 7-9
PART II - OTHER INFORMATION
Item 2. Changes in Securities........................................... 10
Item 6. Exhibits and Reports on Form 8-K................................ 10
SIGNATURES............................................................... 10
INDEX TO EXHIBITS........................................................ 11
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Balance Sheets
================================================================================
June 30, December 31,
Assets 1997 1996
- --------------------------------------------------------------------------------
(Unaudited)
Current assets:
Cash and cash equivalents $10,098,356 $10,900,059
Short-term investments 27,374,117 34,749,875
Interest receivable 424,072 698,124
Prepaid expenses 108,228 81,075
Other current assets 151,730 56,613
- --------------------------------------------------------------------------------
Total current assets 38,156,503 46,485,746
- --------------------------------------------------------------------------------
Long-term investments 780,000 780,000
Property and equipment, net 3,829,357 2,737,620
Other non-current assets 229,282 144,144
- --------------------------------------------------------------------------------
$42,995,142 $50,147,510
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 1,147,612 $ 1,141,829
Accrued liabilities 309,083 269,918
Current maturities of lease obligation 11,968 32,039
- --------------------------------------------------------------------------------
Total current liabilities 1,468,663 1,443,786
- --------------------------------------------------------------------------------
Other long-term liabilities 49,074 19,630
- --------------------------------------------------------------------------------
Total liabilities 1,517,737 1,463,416
- --------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, par value $.01 per share, 1,000,000
shares authorized, 0 shares issued and outstanding -- --
Common stock, par value $.01 per share 50,000,000
shares authorized, 13,780,027 and 13,708,555 shares
issued and outstanding in 1997 and 1996, respectively 137,800 137,086
Additional paid-in capital 64,608,982 64,573,686
Foreign currency translation adjustment 12,550 2,921
Deficit accumulated during development stage (23,281,927) (16,029,599)
- --------------------------------------------------------------------------------
Total stockholders' equity 41,477,405 48,684,094
- --------------------------------------------------------------------------------
$ 42,995,142 $ 50,147,510
================================================================================
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 Six-Month Periods Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
Cumulative
from
Jan. 18, 1991
Three months ended June 30, Six months ended June 30, (inception)
--------------------------- ------------------------ through
1997 1996 1997 1996 June 30, 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Research and development $ 3,131,253 $ 1,278,733 $ 5,905,320 $ 2,691,239 $ 19,089,421
Business development 244,645 94,623 493,229 198,391 1,400,526
General and administrative 997,920 476,609 2,087,335 862,031 6,119,798
- ---------------------------------------------------------------------------------------------------------------------------
Operating loss (4,373,818) (1,849,965) (8,485,884) (3,751,661) (26,609,745)
- ---------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income 592,984 325,733 1,233,556 361,559 3,286,558
Interest expense -- (951) -- (2,404) (23,591)
Other income -- -- -- -- 67,884
- --------------------------------------------------------------------------------------------------------------------------
592,984 324,782 1,233,556 359,155 3,330,851
- --------------------------------------------------------------------------------------------------------------------------
Net loss $(3,780,834) $(1,525,183) $(7,252,328) $(3,392,506) $(23,278,894)
===========================================================================================================================
Net loss per share (pro forma in 1996) $ (0.27) $ (0.14) $ (0.53) $ (0.30)
- ----------------------------------------------------------------------------------------------------------
Weighted average shares oustanding 13,767,396 11,215,754 13,756,750 11,215,754
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
====================================================================================================================================
Cumulative
from
Jan. 18, 1991
(inception)
through
1997 1996 June 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (7,252,328) $ (3,392,506) $(23,278,894)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 298,969 118,920 881,334
Stock option expense - - 3,240
Issuance of stock in exchange for services rendered - 66,003 66,003
Changes in assets and liabilities:
Interest receivable 274,052 (410,291) (424,072)
Prepaid expenses (27,153) (167,608) (108,228)
Other current assets (95,117) 15,920 (151,730)
Accounts payable 5,783 604,992 1,147,612
Accrued liabilities 39,165 2,402 331,634
Other assets (80,679) (96,927) (269,299)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (6,837,308) (3,259,095) (21,802,400)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of investments 18,788,298 3,386,484 43,158,337
Purchases of investments (11,412,540) (39,013,934) (71,326,128)
Purchases of property and equipment (1,356,092) (173,030) (4,494,811)
Organizational costs incurred - - (19,595)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 6,019,666 (35,800,480) (32,682,197)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of issuance costs 36,010 52,225,313 52,338,410
Proceeds from issuance of preferred stock - - 12,336,096
Proceeds from issuance of note payable - - 41,792
Repayment of notes payable - (11,500) (41,792)
Repayment of lease obligation (20,071) (11,231) (91,553)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 15,939 52,202,582 64,582,953
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (801,703) 13,143,007 10,098,356
Cash and cash equivalents at beginning of period 10,900,059 570,621 -
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 10,098,356 $ 13,713,628 $ 10,098,356
==================================================================================================================================
See accompanying notes to consolidated financial statements.
</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, 1996, 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 six-month periods ended June 30, 1997 are not
necessarily indicative of results that ultimately may be achieved for the
entire year ending December 31, 1997. These financial statements should be
read in conjunction with the financial statements and notes thereto for the
year ended December 31, 1996, included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 3,
1997.
(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. The net loss per share for the three
and six month periods ended June 30, 1996 has been presented on a pro forma
basis in lieu of historical net loss per share as such historical
information is not meaningful due to the mandatory conversion of redeemable
preferred stock in connection with the Company's initial public offering.
6
<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 a fully-
automated Personal Hemodialysis System ("PHD") dedicated to a single patient and
designed to remove the barriers to performing more frequent hemodialysis safely
and effectively outside of the current dialysis clinic setting, such as the
patient's home or a self-care clinic. By greatly reducing complexity and
inconvenience, the PHD/TM/ system allows users to gain the significant,
clinically demonstrated benefits of dialyzing on a more frequent basis than the
traditional standard of three times per week. 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.
During the quarter ended June 30, 1997, the Company took delivery of its first
lot of GMP manufactured production prototype PHD/TM/ systems, which represents
an important milestone in preparing the device for clinical trials during 1998.
As Aksys pursues regulatory approval in the U.S., the Company is simultaneously
pursuing a number of initiatives outside the U.S. to commercialize the PHD/TM/
system. These initiatives include obtaining the CE mark in Europe and
negotiating with potential partners to open markets around the world.
Comparison of Results of Operations
Net losses for the quarter and six months ended June 30, 1997 were $3.8 million
($0.27 per share) and $7.3 million ($0.53 per share), respectively, compared to
$1.5 million ($0.14 per share) and $3.4 million ($0.30 per share), respectively,
for the same periods in 1996. The increase in net loss during the quarter and
six months ended June 30, 1997 compared to the year earlier period is due to
increases in spending in research and development, hiring of additional
personnel, and the support of the Company's development efforts. Interest income
earned from the investment of the net proceeds raised by the Company in the
initial public offering completed during May 1996 accounts for the increases in
other income compared to the quarter and six months ended June 30, 1996.
Operating loss. Operating loss for the quarter ended June 30, 1997 was $4.4
million, compared to $1.9 million for the comparable period in 1996, an increase
of $2.5 million or 136%. For the six months ended June 30, 1997, operating loss
was $8.5 million, compared to $3.8 million for the same period last year, an
increase of $4.7 million, or 126%. The increases in the operating loss during
the quarter and six months ended June 30, 1997 compared to the year earlier
periods is due to increased research
7
<PAGE>
and development spending, additional hires, and related support for the
Company's product development efforts.
Other income (expense). Interest income for the quarter and six months ended
June 30, 1997 was $0.6 million and $1.2 million, respectively, compared to $0.3
million and $0.4 million for the year earlier periods. The increases in interest
income during the quarter and six months ended June 30, 1997, compared to the
prior year 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
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 June
30, 1997, the Company had cash, cash equivalents and short-term investments of
$37.5 million and working capital of $36.7 million. The Company also had long-
term investments of $0.8 million with maturity dates ranging between 12 and 18
months.
The Company expects to incur additional losses in the foreseeable future and
estimates that during 1997 it will spend approximately $14 to $16 million of
cash and investments ($8.2 million of which has been spent through June 30,
1997), including capital expenditures and working capital, for pre-production
costs of the PHD/TM/ 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 PHD/TM/ system), that the net proceeds of the initial
public offering will be sufficient to satisfy the Company's contemplated
operating, capital expenditure and working capital requirements through late
1999, assuming it is able to obtain equipment financing to finance the
commercial scale production and market launch of the PHD/TM/ system.
Generally, the Company expects customers to purchase PHD/TM/ systems and enter
into a contract whereby the Company will provide all products and services
related to the PHD/TM/ system for a single monthly price, which would include
all consumables, service and product support. As an alternative, customers may
enter into lease agreements for the PHD/TM/ systems, under which the single
monthly price would also include a lease payment. Financing production of the
PHD/TM/ system in quantities necessary for commercialization will require a
significant investment in working capital. This need for working capital is
likely to increase to the extent that demand for the PHD/TM/ system increases.
The Company would, therefore, have to rely on sources of capital beyond cash
generated from operations to finance production of the PHD/TM/ 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 and receivable 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.
8
<PAGE>
Note on Forward-Looking Information
Certain statements in this Form 10-Q and in 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) pre-market notification, and equivalent regulatory
clearances for Europe and Japan; (ii) 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; (iii) the
uncertainty regarding the effectiveness and ultimate market acceptance of the
PHD/TM/ system, the Company's primary product in development; and (iv) the need
to further establish the clinical benefits of daily hemodialysis. 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.
9
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities
none
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement Regarding Computation of Net Loss Per Share
(27) Financial Data Schedule
(99.1) Press Release of the Company, Issued June 6, 1997
(99.2) Press Release of the Company, Issued July 23, 1997
(b) Reports on Form 8-K
none
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: August 1, 1997 By: /s/ Lawrence H. N. Kinet
-------------- ----------------------------------------
Lawrence H.N. Kinet
Chairman and Chief Executive Officer
and Director
Date: August 1, 1997 By: /s/ Steven A. Bourne
-------------- ---------------------------------------
Steven A. Bourne
Controller (Principal Accounting Officer)
10
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- --------------------------------------------------------------------------------
11 Statement Regarding Computation of Net Loss Per Share
27 Financial Data Schedule
99.1 Press Release of the Company, Issued June 6, 1997
99.2 Press Release of the Company, Issued July 23, 1997
11
<PAGE>
AKSYS, LTD. AND SUBSIDIARY Exhibit 11
(a development stage enterprise) ----------
Statement Regarding Computation of Net Loss Per Share
<TABLE>
<CAPTION>
================================================================================================
Three months ended Six months ended
----------------------------- -----------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss $(3,780,834) $(1,525,183) $(7,252,328) $(3,392,506)
================================================================================================
Weighted average shares used
to compute net loss per share:
Weighted average common
shares outstanding* 13,767,396 10,994,637 13,756,750 10,994,637
Additional shares pursuant
to SAB83 computation - 221,117 - 221,117
- ------------------------------------------------------------------------------------------------
13,767,396 11,215,754 13,756,750 11,215,754
================================================================================================
Net loss per share $ (0.27) $ (0.14) $ (0.53) $ (0.30)
================================================================================================
</TABLE>
* Includes conversion of preferred shares.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the consolidated balance sheet as of June 30, 1997 and the consolidated
statement of operations for the six months ended June 30, 1997, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,098
<SECURITIES> 28,154
<RECEIVABLES> 424
<ALLOWANCES> 0
<INVENTORY> 45
<CURRENT-ASSETS> 38,157
<PP&E> 4,570
<DEPRECIATION> 740
<TOTAL-ASSETS> 42,995
<CURRENT-LIABILITIES> 1,469
<BONDS> 0
0
0
<COMMON> 138
<OTHER-SE> 41,339
<TOTAL-LIABILITY-AND-EQUITY> 42,995
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,486
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,252)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,252)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,252)
<EPS-PRIMARY> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
<PAGE>
Exhibit 99.1
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. ANNOUNCES PRODUCT DEVELOPMENT UPDATE
Lincolnshire, IL, June 6, 1997 - Aksys, Ltd. (Nasdaq/NNM: AKSY), today
announced that as a result of additional development work required on its
PHD(TM) system, it has revised the timetable for submitting the PHD(TM) system
for FDA review. The Company currently expects to make an IDE submission in the
summer of 1998, followed by clinical trials in the second half of the year.
This timeline represents approximately a 9 month delay to the schedule
previously announced.
The Company believes that a truly effective personal hemodialysis system will
succeed only if it meets the highest standards of quality and reliability.
The Company, therefore, intends to take the additional time necessary to
complete all performance specifications, validation and documentation
requirements. This additional effort has led to an organization restructuring
intended to improve the product development process and management structure
in order to complete the development of the PHD(TM) system. Effective
immediately, senior product development management responsibilities have been
reassigned with a direct reporting relationship to Lawrence H.N. Kinet,
Chairman and CEO.
"The Company has received its initial PHD(TM) systems, manufactured under GMP
conditions. This is an important milestone in completing the software
validation and testing to prepare the device for IDE approval. The schedule
delay is not a result of any technology or regulatory development. There has
been no change in the feasibility of the product, the size of the opportunity,
or the market demand. The delay is due to a greater than expected workload
required to integrate the various system components followed by the validation
and documentation of this work," stated Lawrence H.N. Kinet, Chairman and CEO
of Aksys, Ltd. "We are committed to producing a highly reliable product that
can be used safely and effectively by dialysis patients and we now believe
that additional time is needed to achieve this goal. Over the last several
months, we have brought in experienced management in the healthcare field and
are in a stronger position now to bring the PHD(TM) system to the clinic. We
remain confident that we have sufficient financial resources to evaluate the
product in the clinical setting and secure regulatory approval."
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 PHD(TM) System which is designed to
improve clinical outcomes of patients and reduce mortality, morbidity and the
associated high cost of patient care.
- more -
14
<PAGE>
AKSYS, LTD. ANNOUNCES PRODUCT DEVELOPMENT UPDATE
Page 2
This press release contains forward-looking statements that involve a number
of risks and uncertainties. The Company's actual results could differ
materially from the results identified or implied in any forward-looking
statement and these statements are based on the Company's views as of the date
they are made with respect to future events. Factors that could cause such a
difference include, but are not limited to, risks related to the development
and manufacturing milestones, changes in GMP requirements, risks related to
the regulatory approval process, whether and when the Company will obtain
clearance from the FDA of a 510(K) premarket notification and what additional
clinical and other data the Company might have to obtain in connection with
seeking such clearance, and risks associated with the commencement of clinical
trials based on an approved Investigational Device Exemption (IDE), a
prerequisite for the commencement of such trials.
# # #
15
<PAGE>
Exhibit 99.2
Contact:
Lawrence H. N. Kinet
Chairman and CEO
Aksys, Ltd.
(847) 229-2222
For Immediate Release
---------------------
AKSYS, LTD. REPORTS FINANCIAL RESULTS FOR THE SECOND QUARTER
ENDED JUNE 30, 1997
Lincolnshire, IL, July 23, 1997 - Aksys, Ltd. (Nasdaq/NNM: AKSY), a leader in
the development of personal hemodialysis products and services, today reported
financial results for the second quarter ended June 30, 1997.
For the quarter ended June 30, 1997, the Company reported a net loss of
$3,781,000, or $0.27 per share, compared to a net loss of $1,525,000, or $0.14
per share, for the same quarter last year. Operating expenses increased to
$4,374,000 during the second quarter of 1997, compared to $1,850,000 during
the second quarter of 1996. The increase in operating expenses is due to
research and development spending, new hires, and support for the Company's
product development efforts. Net interest income increased to $593,000 during
the quarter ended June 30, 1997, compared to $325,000 for the same quarter
last year, as a result of the net proceeds invested from the Company's sale of
shares of Common Stock in May 1996.
"We recently took delivery of our first lot of GMP manufactured production
prototype PHD(TM) systems which is an important milestone in preparing the
device for clinical trials next year," stated Lawrence H.N. Kinet, Chairman
and CEO of Aksys, Ltd. "Although we believe our financial resources are
sufficient to evaluate the product in the clinic and secure regulatory
approval, we have recently taken a number of steps to conserve resources."
For the six months ended June 30, 1997, the Company reported a net loss of
$7,252,000, or $0.53 per share, compared to a net loss of $3,393,000, or
$0.30 per share, for the six month period ended June 30, 1996. Operating
expenses increased to $8,486,000 for the six month period of 1997, compared to
$3,752,000 for the year earlier period. Net interest income for the six
months ended June 30, 1997 was $1,234,000 compared to $359,000 for the same
period in 1996.
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 Personal Hemodialysis
System(TM) which is designed to improve clinical outcomes of patients and
reduce mortality, morbidity and the associated high cost of patient care.
Further information is available on Aksys' website: www.aksys.com.
- more -
16
<PAGE>
AKSYS, LTD. REPORTS FINANCIAL RESULTS FOR THE SECOND QUARTER ENDED JUNE 30,
1997
Page 2
This press release contains forward-looking statements that involve a number
of risks and uncertainties. The Company's actual results could differ
materially from the results identified or implied in any forward-looking
statement and these statements are based on the Company's views as of the date
they are made with respect to future events. Factors that could cause such a
difference include, but are not limited to, risks related to the development
and manufacturing milestones, changes in GMP requirements, risks related to
the regulatory approval process, whether and when the Company will obtain
clearance from the FDA of a 510(K) pre-market notification and what additional
clinical and other data the Company might have to obtain in connection with
seeking such clearance, and risks associated with the commencement of clinical
trials based on an approved Investigational Device Exemption (IDE), a
prerequisite for the commencement of such trials.
- financial table to follow -
17
<PAGE>
<TABLE>
<CAPTION>
AKSYS, LTD. AND SUBSIDIARY
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter ended June 30, Six months ended June 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
---------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Revenues: $ - $ - $ - $ -
Expenses:
Research and development 3,131,000 1,279,000 5,905,000 2,691,000
Business development 245,000 95,000 493,000 199,000
General and administrative 998,000 476,000 2,088,000 862,000
---------------- ---------------- ---------------- ----------------
Operating loss (4,374,000) (1,850,000) (8,486,000) (3,752,000)
Net interest income 593,000 325,000 1,234,000 359,000
---------------- ---------------- ---------------- -----------------
Net loss $ (3,781,000) $ (1,525,000) $ (7,252,000) $ (3,393,000)
================ ================ ================ =================
Net loss per share $ (0.27) $ (0.14) $ (0.53) $ (0.30)
================ ================ ================ ================
Weighted average shares outstanding 13,767,000 11,216,000 13,757,000 11,216,000
================ ================ ================ ================
</TABLE>
<TABLE>
SELECTED BALANCE SHEET DATA
June 30, December 31,
----------------- -----------------
1997 1996
----------------- -----------------
<S> <C> <C>
Cash and short-term investments $ 37,472,000 $ 45,650,000
Working capital 36,688,000 45,042,000
Long-term investments 780,000 780,000
Total assets 42,995,000 50,148,000
Total liabilities 1,518,000 1,464,000
Stockholders' equity 41,477,000 48,684,000
18
</TABLE>
