-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JTGevMrWTszNGmO9CyHUxWpgulVnWaxSWZ7nUf3p50ODwjCh1HHcGwuFK/yDusBd Kj+A0GLA/+hf31JE6JYEKw== 0000912057-01-525193.txt : 20010726 0000912057-01-525193.hdr.sgml : 20010726 ACCESSION NUMBER: 0000912057-01-525193 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010725 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABIOMED INC CENTRAL INDEX KEY: 0000815094 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 042743260 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09585 FILM NUMBER: 1689057 BUSINESS ADDRESS: STREET 1: 33 CHERRY HILL DR CITY: DANVERS STATE: MA ZIP: 01923 BUSINESS PHONE: 5087775410 MAIL ADDRESS: STREET 1: 33 CHERRY HILL DRIVE CITY: DANVERS STATE: MA ZIP: 01923 10-Q 1 a2055059z10-q.txt 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 2001 -------------- 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 0-20584 ------- ABIOMED, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-2743260 -------- ---------- (State of incorporation) (IRS Employer No.) 22 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 July 20, 2001, there were 20,825,354 shares outstanding of the registrant's Common Stock, $.01 par value. ABIOMED, INC. AND SUBSIDIARIES TABLE OF CONTENTS
Page No. Part I - Financial Information: Item 1. Condensed Consolidated Financial Statements Consolidated Balance Sheets June 30, 2001 and March 31, 2001 3-4 Consolidated Statements of Operations Three Months Ended June 30, 2001 and June 30, 2000 5 Consolidated Statements of Cash Flows Three Months Ended June 30, 2001 and June 30, 2000 6 Notes to Consolidated Financial Statements 7-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-16 Item 3. Quantitative and Qualitative Disclosure About Market Risk 17 Part II - Other Information 18 Signatures 19
2 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS --------------------------- (in thousands) ASSETS
June 30, 2001 March 31, 2001 (unaudited) (audited) Current Assets: Cash and cash equivalents (Note 7) $ 60,287 $ 90,462 Short-term marketable securities (Note 8) 27,805 2,036 Accounts receivable, net of allowance for doubtful accounts of $184 at June 30, 2001 and March 31, 2001 (Note 3) 8,001 10,028 Inventories (Note 4) 3,602 3,674 Prepaid expenses and other current assets 1,435 766 ------------ ----------- Total current assets 101,130 106,966 ------------ ----------- Property and Equipment, at cost: Machinery and equipment 7,917 7,546 Furniture and fixtures 858 807 Leasehold improvements 1,883 3,528 ------------ ----------- 10,658 11,881 Less: Accumulated depreciation and amortization 5,858 7,129 ------------ ----------- 4,800 4,752 ------------ ----------- Intellectual Property and Other Assets, net (Note 9) 5,641 6,295 ------------ ----------- $111,571 $118,013 ============ ===========
The accompanying notes are an integral part of these consolidated financial statements. 3 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS (continued) CONSOLIDATED BALANCE SHEETS (CONTINUED) --------------------------------------- (in thousands, except share data) LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, 2001 March 31, 2001 (unaudited) (audited) Current Liabilities: Accounts payable $ 2,236 $ 2,129 Accrued expenses 5,700 5,600 Current portion of long-term liabilities 77 242 Deferred revenues 862 996 ----------- ---------- Total current liabilities 8,875 8,967 ----------- ---------- Long-Term Liabilities 91 368 Stockholders' Equity (Note 5 and 9): Class B Preferred Stock, $.01 par value- Authorized 1,000,000 shares Issued and outstanding-none - - Common Stock, $.01 par value- Authorized 100,000,000 shares Issued and outstanding- 20,816,872 shares at June 30, 2001 and 20,770,714 shares at March 31, 2001 208 208 Additional paid-in capital 158,643 158,415 Paid-in capital - warrants 3,145 3,145 Accumulated deficit (59,391) (53,090) ----------- ---------- Total stockholders' equity 102,605 108,678 ----------- ---------- $111,571 $118,013 =========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 4 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS (continued) CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (in thousands, except per share and share data) (unaudited)
THREE MONTHS ENDED June 30, 2001 June 30, 2000 Revenues: Products $ 5,747 $ 5,504 Funded research and development 245 355 --------- --------- 5,992 5,859 --------- --------- Costs and expenses: Cost of product revenues 1,991 1,935 Research and development (Note 10) 7,144 4,491 Selling, general and administrative 4,144 2,977 --------- --------- 13,279 9,403 --------- --------- Loss from operations (7,287) (3,544) Interest and other income 986 1,559 --------- --------- Net loss $(6,301) $(1,985) ========= ========= Basic and diluted net loss per share (Note 6): $ (0.30) $ (0.10) Weighted average shares outstanding (Note 6): 20,791,903 20,463,894
The accompanying notes are an integral part of these consolidated financial statements. 5 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS (continued) CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (in thousands) (unaudited)
THREE MONTHS ENDED June 30, 2001 June 30, 2000 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (6,301) $ (1,985) Adjustments to reconcile net loss to net cash used in operating activities- Depreciation and amortization 999 504 Changes in assets and liabilities- Accounts receivable, net 2,027 197 Inventories 72 (203) Prepaid expenses and other assets (582) (311) Accounts payable 107 (157) Accrued expenses (34) (845) Long-term liabilities (7) - ----------- ---------- Net cash used in operating activities (3,719) (2,800) ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of short-term marketable securities - 2,350 Purchases of short-term marketable securities (25,769) (8,949) Purchases of property and equipment (480) (676) ----------- ---------- Net cash used by investing activities (26,249) (7,275) ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 228 127 Repayment of long-term debt and capital lease obligation (435) (59) ----------- ---------- Net cash (used) provided by financing activities (207) 68 ----------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS (30,175) (10,007) CASH AND CASH EQUIVALENTS, EXCLUDING MARKETABLE SECURITIES, AT BEGINNING OF PERIOD 90,462 101,917 ----------- ---------- CASH AND CASH EQUIVALENTS, EXCLUDING MARKETABLE SECURITIES, AT END OF PERIOD $ 60,287 $ 91,910 =========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 6 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 our latest audited financial statements. These audited statements are contained in our Form 10-K for the year ended March 31, 2001 and have been filed with the Securities and Exchange Commission. In our opinion, the accompanying consolidated financial statements include all adjustments (consisting only of normal, recurring adjustments) necessary to summarize fairly the financial position and results of operations as of June 30, 2001 and for the three months then ended. The results of operations for the three months ended June 30, 2001 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. ACCOUNTS RECEIVABLE Accounts receivable include amounts due from customers, net of allowance for doubtful accounts. Accounts receivable also include amounts due from government and other third party sources related to the Company's research and development contracts and grants. These research and development contracts and grants generally provide for payment on a cost-plus-fixed-fee basis. The Company recognizes revenues under its government contracts and grants as work is performed, provided that the government has appropriated sufficient funds for the work. The Company retains rights to all technological discoveries and products resulting from these efforts. 4. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following (in thousands): 7 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 1: FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited, continued) 4. INVENTORIES (CONTINUED)
June 30, March 31, 2001 2001 ------------------- ------------------ Raw materials $ 1,406 $ 1,418 Work-in-process 845 737 Finished goods 1,351 1,519 --------- --------- $ 3,602 $ 3,674 ========= =========
Finished goods and work-in-process inventories consist of direct material, labor and overhead. Inventories do not currently include any costs associated with AbioCor(TM) or other products under development. 5. STOCKHOLDERS' EQUITY During the three months ended June 30, 2001, options to purchase 385,500 shares of Common Stock were granted at prices ranging from $11.563 to $23.480. During that same period options to purchase 58,875 shares were canceled and options to purchase 55,650 shares of Common Stock were exercised at prices ranging from $3.500 to $8.000 per share. 6. NET LOSS PER COMMON SHARE Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of dilutive common shares outstanding during the period. Diluted weighted average shares reflect the dilutive effect, if any, of potential common stock such as options and warrants based on the treasury stock method. No potential common stock is considered dilutive in periods in which a loss is reported, such as the three month periods ended June 30, 2001 and 2000, because all such common equivalent shares would be antidilutive. The calculation of diluted weighted average shares outstanding for the three months ended June 30, 2001 and June 30, 2000 excludes 1,664,178 and 1,686,142 options to purchase common stock, respectively. The calculation of diluted weighted average shares outstanding for the three months ended June 30, 2001 also excludes warrants to purchase 400,000 shares of common stock issued in connection with the purchase of intellectual property (see Note 9). 8 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 1: FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited, continued) 7. CASH AND CASH EQUIVALENTS The Company classifies any marketable security with a maturity date of 90 days or less at the time of purchase as a cash equivalent. 8. MARKETABLE SECURITIES The Company classifies any security with a maturity date of greater than 90 days at the time of purchase as marketable securities and classifies marketable securities with a maturity of greater than one year from the balance sheet date as long-term investments. Under Statement of Financial Accounting Standards (SFAS) No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, securities that the Company has the positive intent and ability to hold to maturity are reported at amortized cost and classified as held-to-maturity securities. At June 30, 2001, the amortized cost of these securities approximated market value. 9. INTELLECTUAL PROPERTY AND OTHER ASSETS In September 2000, the Company acquired the exclusive rights to The Pennsylvania State University implantable replacement heart (referred to as the Penn State Heart). The terms of these transactions consisted of payment of 110,000 shares of the Company's common stock, plus the issuance of warrants to purchase up to 400,000 additional shares of the Company's common stock at an exercise price of $0.01 per share. Exercise of the warrants is contingent on the achievement of certain clinical and regulatory milestones with the Penn State Heart by specified dates. In connection with this acquisition, the Company capitalized the purchase cost totaling $6,361,000, which consists of acquisition costs of approximately $70,000, the fair market value of the 110,000 shares of common stock issued and the fair market value of the first traunch of warrants to purchase 110,000 shares of common stock. This amount is classified as intellectual property, a long-term asset in the accompanying consolidated balance sheet. The Company is amortizing this asset ratably over a period of three years, its estimated useful life. The unamortized cost of this asset as of June 30, 2001 and March 31, 2001 was approximately $4,771,000 and $5,300,000, respectively. Beyond the initial 110,000 warrants to purchase common stock, to the extent that the designated milestones are achieved, the Company intends to expense the value of the remaining 290,000 warrants in the period that the milestone is achieved and such warrants become exercisable. None of these remaining warrants had become exercisable as of June 30, 2001. 9 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 1: FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited, continued) 9. INTELLECTUAL PROPERTY AND OTHER ASSETS (CONTINUED) 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 June 30, 2001, the long-term amount due from these sales-type leases approximated $143,000. As of March 31, 2001, the long-term amount due from these sales-type leases approximated $215,000. Other assets also include the unamortized cost of a number of awarded and pending patents. As of June 30, 2001, the unamortized cost of these patents approximated $723,000. As of March 31, 2001, the unamortized cost of these patents approximated $773,000. 10. RESEARCH AND DEVELOPMENT Research and development costs are expensed when incurred and include direct materials and labor, depreciation, contracted services and other costs associated with developing and testing new products and improving existing products, including amortized costs of purchased technology. Research and development costs consist of the following amounts (in thousands).
Three Months Ended June 30, June 30, 2001 2000 --------------- ---------------- Internally funded $ 6,408 $ 4,211 Incurred under government contracts and grants 206 280 Amortization of purchased technology 530 - -------- -------- Total research and development $ 7,144 $ 4,491 ======== ========
11. COMPREHENSIVE INCOME SFAS No. 130, REPORTING COMPREHENSIVE INCOME, requires disclosure of all components of comprehensive income and loss on an annual and interim basis. Comprehensive income and loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Other than the reported net loss, there were no components of comprehensive income or loss that require disclosure for the three months ending June 30, 2001 or June 30, 2000. 10 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 1: FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited, continued) 12. SEGMENT AND ENTERPRISE WIDE DISCLOSURES SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, requires certain financial and supplementary information to be disclosed on an annual and interim basis for each reportable segment of an enterprise. The Company believes that it operates in one business segment-- the research, development and sale of medical devices to assist or replace the pumping function of the failing heart. 13. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, as amended by SFAS No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--DEFERRAL OF THE EFFECTIVE DATE OF FASB STATEMENT NO. 133, and SFAS No. 138, ACCOUNTING FOR CERTAIN DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES, AN AMENDMENT OF SFAS NO. 133 require companies to reflect the fair value of all derivative instruments, including those embedded in other contracts, as assets or liabilities in an entity's balance sheet. Changes in fair value may be accounted for as a component of other comprehensive income, provided that certain criteria are met as specified in these pronouncements. The Company had no such derivative or hedging instruments for the three months ended June 30, 2001 and June 30, 2000. 11 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 JUNE 30, 2001 PRODUCT REVENUES Product revenues increased by $0.2 million, or 4%, to $5.7 million in the three months ended June 30, 2001 from $5.5 million in the three months ended June 30, 2000. The increase in product revenues is primarily attributable to increased international sales of BVS(R) blood pumps. Domestic sales accounted for 88% and 98% of total product revenue during the three months ended June 30, 2001 and 2000, respectively. FUNDED RESEARCH AND DEVELOPMENT REVENUES Funded research and development revenues were $0.2 million in the three months ended June 30, 2001, a decrease of 31% from revenues of $0.4 million in the three months ended June 30, 2000. Revenues from government contracts and grants continue to decline as we focus our resources more on product development activities and less on the types of early-stage research activities that are often supported by the government. We account for funded research and development revenues under our government contracts and grants as work is performed, provided that the government has appropriated sufficient funds for the work. As of June 30, 2001, our total backlog of research and development contracts and grants was $0.9 million. All of these contracts and grants contain provisions that make them terminable at the convenience of the government. ABIOMED retains rights to commercialize all technological discoveries and products resulting from these efforts. COST OF PRODUCT REVENUES Cost of product revenues as a percentage of product revenues was 35% for both the three months ended June 30, 2001 and 2000. Costs reductions during the current period approximating 2.1% of BVS product revenues resulting from the discontinuation after August 3, 2000 of royalty obligations due to the Abiomed Limited Partnership were offset by production inefficiencies resulting from starting up our new BVS blood pump manufacturing facility and to a higher proportion of relatively lower margin BVS console sales, including sales of our 12 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) COST OF PRODUCT REVENUES (CONTINUED) new backup/transport console, in the June 30, 2001 quarter compared to the prior year. RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses increased by $2.6 million, or 59% to $7.1 million in the three months ended June 30, 2001, from $4.5 million in the three months ended June 30, 2000. Research and development expenses were 119% of total revenues for the quarter ended June 30, 2001 and 77% of total revenues for the quarter ended June 30, 2000. The increase in expenditures during the quarter just ended was primarily due to increased spending for the AbioCor and Penn State Heart implantable replacement hearts. Research and development expenses during the three months ended June 30, 2001 included $4.8 million of expenses incurred in connection with development activities for the AbioCor, compared to $3.7 million for the same period of the prior year. The increase in AbioCor spending was primarily attributable to increased manufacturing, testing, and documentation activities associated with preparation for our initial clinical trials that began in early July 2001. The Company is currently expensing as research and development expense all inventory costs associated with the AbioCor. Quarterly costs related to AbioCor inventory is highly variable depending upon the timing of receipts of materials from vendors. These costs have been increasing in preparation for the clinical trials. Included in research and development expenses during the three months ended June 30, 2001 were $1.4 million in costs related to development of the Penn State Heart of which $0.5 million represented amortization of technology capitalized in connection with its acquisition. There were no research and development expenses incurred by the Company in connection with the Penn State Heart in the three months ended June 30, 2000. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased by $1.1 million, or 39%, to $4.1 million in the three months ended June 30, 2001, from $3.0 million in the three months ended June 30, 2000. Expenditures increased to 69% of total revenues from 51% of total revenues in the same period a year earlier. The increase was primarily attributable to increased staffing, public relations activities and sales commissions. 13 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) INTEREST AND OTHER INCOME Interest and other income consist primarily of interest earned on our investment balances, net of interest and other expenses. Interest and other income decreased by $0.6 million to $1.0 million for the three months ended June 30, 2001 from $1.6 million for the three months ended June 30, 2000. The decrease was due to lower average funds available for investment during the quarter just ended and reduced yields on investments resulting from lower interest rates. NET LOSS Net loss for the three months ended June 30, 2001 was approximately $6.3 million, or $0.30 per share. This compares to a net loss of approximately $2.0 million, or $0.10 per share, in the same period of the previous year. The losses for both periods are primarily attributable to the Company's development and pre-clinical testing costs associated with the AbioCor. LIQUIDITY AND CAPITAL RESOURCES We have supported our operations primarily with net revenues from sales of our BVS product line, government contracts and proceeds from our equity financings. As of June 30, 2001, our cash, cash equivalents and marketable securities totaled $88.1 million. During the three months ended June 30, 2001, operating activities used $3.7 million of cash. Net cash used by operating activities during this period reflected a net loss of $6.3 million, including non-cash depreciation and amortization expense of $1.0 million, and an increase in prepaid expenses and other assets of $0.6 million. These uses of cash were partially offset by a decrease in accounts receivable and inventory of $2.0 million and $0.1 million, respectively, and an increase in accounts payable of $0.1 million. During the three months ended June 30, 2001, investing activities used $26.3 million of cash. Approximately $25.8 million in cash was used for the acquisition of short-term marketable securities. We also expended cash for capital equipment and leasehold improvements of $0.5 million during the three months ended June 30, 2001. Financing activities used $0.2 million of cash during the quarter ended June 30, 2001. Cash used to pay off equipment term loans of $0.4 million was partially offset by $0.2 million of cash received as a result of stock options exercised during the period. 14 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 (CONTINUED) Income taxes incurred during the three months ended June 30, 2001 were not material, and we continue to have significant net tax operating loss and tax credit carryforwards. We believe that our revenue from product sales and government contracts, together with existing resources will be sufficient to fund our planned operations, including the planned increases in our internally funded AbioCor, Penn State Heart and new BVS development and product extension efforts, for more than the next twelve months. However, we may require significant additional funds in order to complete the development, conduct clinical trials, and achieve regulatory approvals of the AbioCor, Penn State Heart and other products under development over the next several years. We may also need additional funds for possible future strategic acquisitions of businesses, products or technologies complementary to our business. If additional funds are required, we may raise such funds from time to time through public or private sales of equity or from borrowings. RISK FACTORS WHICH MAY AFFECT FUTURE RESULTS This document contains forward-looking statements, including statements regarding new products under development and adequacy of existing resources. The Company's actual results, including our AbioCor and Penn State Heart development, BVS enhancements and adequacy of resources may differ materially based on a number of factors, both known and unknown, including: uncertainty of product development, clinical trials and commercial acceptance; complex manufacturing; high quality requirements; the need to demonstrate required reliability of products under development; dependence on key personnel; risks associated with a growing number of employees; difficulties in recruiting required human resources on schedule; competition and technological change, government regulations including the FDA and other regulatory agencies; risks associated with international expansion; dependence on limited sources of supply; future capital needs and uncertainty of additional funding; dependence on third-party reimbursement; potential inadequacy of product liability insurance; dependence on patents and proprietary rights; and other risks detailed in our Form 10-K for the year ended March 31, 2001 which was filed with the Securities and Exchange Commission. Investors are cautioned that all such statements involve risks and uncertainties. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements 15 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) RISK FACTORS WHICH MAY AFFECT FUTURE RESULTS (CONTINUED) that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 16 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company does not use derivative financial instruments for speculative or trading purposes. However, it is exposed to market risk related to changes in interest rates. The Company maintains an investment portfolio consisting mainly of federal agency obligations, state and municipal bonds, and U.S. Treasury notes with maturities of one year or less. These held-to-maturity securities are subject to interest rate risk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 10 percent from levels at June 30, 2001, the fair market value of the portfolio would decline by an immaterial amount. The Company has the ability to hold the majority of its fixed income investments until maturity, and therefore the Company would not expect its operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on its securities portfolio. 17 ABIOMED, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS No material change. 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 18 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: July 25, 2001 /s/ David M. Lederman -------------------------------- David M. Lederman CEO and President Date: July 25, 2001 /s/ John F. Thero -------------------------------- John F. Thero Senior Vice President Finance and Treasurer Chief Financial Officer Principal Accounting Officer 19 -----END PRIVACY-ENHANCED MESSAGE-----