-----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, CM9ckW5eSUWxL1Dg8Vb/m4DwdYaOny9UWXlFeFM2O181blzkdUsFB2ylWfjdrlzV co1xE5rWD24a6L6pHN8F4w== 0001047469-99-000621.txt : 19990111 0001047469-99-000621.hdr.sgml : 19990111 ACCESSION NUMBER: 0001047469-99-000621 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19990108 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/A SEC ACT: SEC FILE NUMBER: 000-20584 FILM NUMBER: 99503533 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/A 1 FORM 10-Q/A FORM 10-Q/A Amendment No. 1 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 SEPTEMBER 30, 1998 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.) 33 CHERRY HILL DRIVE DANVERS, MASSACHUSETTS 01923 (Address of principal executive offices, including zip code) (978) 777-5410 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) or the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of September 30, 1998, there were 8,637,482 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 September 30, 1998 and March 31, 1998 3-4 Consolidated Statements of Operations Three and Six Months Ended September 30, 1998 and September 30, 1997 5 Consolidated Statements of Cash Flows Six Months Ended September 30, 1998 and September 30, 1997 6 Notes to Consolidated Financial Statements 7-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-16 Part II - Other Information 17 Signatures 18
2 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS ASSETS
September March 31, 30, 1998 1998 (unaudited) (audited) ------------ ------------- Current Assets: Cash and cash equivalents (Note 7) $ 1,716,839 $ 2,683,151 Short-term marketable securities (Note 8) 20,438,541 23,714,641 Accounts receivable, net of allowance for doubtful accounts of $204,000 at September 30, 1998 and March 31, 1998, respectively 4,954,687 5,356,348 Inventories (Note 4) 3,209,573 2,327,442 Prepaid expenses and other current assets 413,131 208,387 ------------ ------------- Total current assets 30,732,771 34,289,969 ------------ ------------- Property and Equipment, at cost: Machinery and equipment 5,357,049 4,316,852 Furniture and fixtures 563,172 533,460 Leasehold improvements 1,689,671 1,561,189 ------------ ------------- 7,609,892 6,411,501 Less: Accumulated depreciation and amortization 3,417,238 2,724,442 ------------ ------------- 4,192,654 3,687,059 ------------ ------------- Other Assets, net (Notes 2 and 9) 522,151 638,176 ------------ ------------- $35,447,576 $38,615,204 ------------ ------------- ------------ -------------
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) LIABILITIES AND STOCKHOLDERS' INVESTMENT
September 30, March 31, 1998 1998 (unaudited) (audited) ------------- ----------- Current Liabilities: Accounts payable $ 1,244,410 $ 2,057,473 Accrued expenses 2,948,064 2,872,288 ------------- ----------- Total current liabilities 4,192,474 4,929,761 ------------- ----------- Liabilities of Discontinued Operations, net (Note 3) 610,688 667,466 Stockholders' Investment (Note 5): Class B Preferred Stock, $.01 par value- Authorized 1,000,000 shares Issued and outstanding-none - - Common Stock, $.01 par value- Authorized 25,000,000 shares Issued and Outstanding- 8,637,482 shares at September 30, 1998 and 8,567,015 shares at March 31, 1998 86,375 85,670 Additional paid-in capital 58,105,784 57,454,983 Accumulated deficit (27,547,745) (24,522,676) ------------- ----------- Total stockholders' investment 30,644,414 33,017,977 ------------- ----------- $35,447,576 $38,615,204 ------------- ----------- ------------- -----------
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 (unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED ----------------------------------- ---------------------------------- September 30, September 30, September 30, September 30, 1998 1997 1998 1997 -------------- --------------- --------------- -------------- Revenues: Products $4,352,983 $4,967,490 $7,877,493 $8,803,913 Contracts 614,443 1,851,207 2,893,176 3,680,252 -------------- --------------- --------------- -------------- 4,967,426 6,818,697 10,770,669 12,484,165 -------------- --------------- --------------- -------------- Costs and expenses: Cost of product revenues 1,563,346 1,806,043 3,000,211 3,114,145 Research and development 3,950,444 2,010,657 6,984,224 3,654,132 Selling, general and administrative 2,306,439 2,668,715 4,538,306 4,553,708 -------------- --------------- --------------- -------------- 7,820,229 6,485,415 14,522,741 11,321,985 -------------- --------------- --------------- -------------- (Loss) income from operations (2,852,803) 333,282 (3,752,072) 1,162,180 Interest and other income 369,791 292,147 727,003 416,642 -------------- --------------- --------------- -------------- (Loss) income from continuing operations (2,483,012) 625,429 (3,025,069) 1,578,822 Loss from discontinued operations (Note 3) - (137,425) - (219,857) -------------- --------------- --------------- -------------- Net (loss) income $(2,483,012) $488,004 $(3,025,069) $1,358,965 -------------- --------------- --------------- -------------- -------------- --------------- --------------- -------------- (Loss) income from continuing operations per share (Note 6): Basic $(0.29) $0.08 $(0.35) $0.21 Diluted $(0.29) $0.07 $(0.35) $0.20 Loss from discontinued operations per share (Note 6): Basic - $(0.02) - $(0.03) Diluted - $(0.01) - $(0.03) Net (loss) income per share (Note 6): Basic $(0.29) $0.06 $(0.35) $0.18 Diluted $(0.29) $0.06 $(0.35) $0.17 -------------- --------------- --------------- -------------- -------------- --------------- --------------- -------------- Weighted average shares outstanding (Note 6): Basic 8,620,861 8,263,092 8,598,869 7,637,928 Diluted 8,620,861 8,605,689 8,598,869 7,868,675 -------------- --------------- --------------- -------------- -------------- --------------- --------------- --------------
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 STATEMENT OF CASH FLOWS (unaudited)
SIX MONTHS ENDED ------------------------------------------- September 30, September 30, 1998 1997 ----------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $(3,025,069) $1,358,965 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities- Depreciation and amortization 763,873 439,744 Changes in assets and liabilities- Accounts receivable 401,661 (1,595,337) Inventories (882,131) (52,096) Prepaid expenses and other assets (159,796) (708,574) Accounts payable (813,063) (156,294) Accrued expenses 75,776 498,905 Liabilities of discontinued operations, net (56,778) 226,642 ------------------ ------------------ Net cash (used in) provided by operating activities (3,695,527) 11,955 ----------------- ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Maturities (purchases) of short-term marketable securities, net 3,276,100 (15,855,425) Purchases of property and equipment (1,198,391) (1,109,684) ------------------ ----------------- Net cash provided by (used in) investing activities 2,077,709 (16,965,109) ------------------ ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the sale of common stock, net - 15,965,069 Proceeds from exercise of stock options and stock issued under employee stock purchase plan 651,506 99,349 ----------------- ----------------- Net cash provided by financing activities 651,506 16,064,418 ----------------- ----------------- NET DECREASE IN CASH AND CASH EQUIVALENTS, EXCLUDING INVESTMENTS (966,312) (888,736) CASH AND CASH EQUIVALENTS, EXCLUDING INVEST- MENTS, AT BEGINNING OF PERIOD 2,683,151 1,579,972 ----------------- ------------------ CASH AND CASH EQUIVALENTS , EXCLUDING INVEST- MENTS, AT END OF PERIOD $1,716,839 $691,236 ----------------- ----------------- ----------------- -----------------
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 the Company's latest audited financial statements, which are contained in the Company's Form 10-K for the year ended March 31, 1998, which was filed with the Securities and Exchange Commission. In the opinion of management, the accompanying consolidated financial statements include all adjustments (consisting only of normal, recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations. The results of operations for the six months ended September 30, 1998 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. DISCONTINUED OPERATIONS In its fiscal year ended March 31, 1998, the Company made the decision to shift all of its focus to the Company's core cardiovascular business and to sell, license or otherwise dispose of its dental business. The accompanying consolidated financial statements contain certain accounts that have been reclassified in each of the periods presented to reflect this decision by the Company. Reported revenue, cost and expenses from continuing operations exclude the operating results of the Company's dental business. The amount accrued by the Company at March 31, 1998 for discontinuing the dental business included estimated operating losses of $370,000 to be incurred during fiscal 1999. During the six months ended September 30, 1998, the operating loss from the Company's dental business applied against the accrual was $190,000. 7 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 1: FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited, continued) 4. INVENTORIES Inventories include raw materials, work-in-process, and finished goods and are priced at the lower of cost (first-in, first-out) or market and consist of the following:
September 30, March 31, 1998 1998 ---------------- ------------ Raw materials $1,435,900 $1,320,600 Work-in-process 516,212 483,723 Finished goods 1,257,461 523,119 ---------- ---------- $3,209,573 $2,327,442 ---------- ---------- ---------- ----------
Finished goods and work-in-process inventories consist of direct material, labor and overhead. 5. STOCKHOLDERS' INVESTMENT During the six months ended September 30, 1998, options to purchase 306,550 shares of Common Stock were granted at exercise prices ranging from $11.25 to $13.625 per share. Options to purchase 31,800 shares were canceled during the quarter and options to purchase 64,150 shares of Common Stock were exercised at prices ranging from $5.625 to $13.50 per share. During the six months ended September 30, 1998, 6,286 shares of Common Stock were issued under the Employee Stock Purchase Plan. 6. NET INCOME (LOSS) PER COMMON SHARE The Company has calculated net income (loss) per common share in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which requires the Company to present both basic and diluted net income (loss) per share for all periods presented. Basic net income (loss) per share ("Basic EPS") is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share ("Diluted EPS") is computed by dividing net income (loss) by the weighted average number of common and common equivalent shares outstanding during the period using the treasury stock method. In computing Diluted EPS, common equivalent shares are not considered dilutive in periods in which a net loss is reported because such common equivalent shares are antidilutive. The number of shares that otherwise would have been dilutive for the three and six months ended September 30, 1998 are 125,406 and 214,195, respectively. In accordance with SFAS No. 128, the Company has recomputed net income per share for the three and six month periods ended September 30, 1997 which did not result in a change to reported net income per share. 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 marketable securities with a maturity date of 90 days or less at the time of acquisition to be a cash equivalent. Securities, including marketable securities, with original maturities of greater than 90 days are classified as investments. 8. INVESTMENTS The Company classifies any security, including marketable securities, with a maturity of greater than 90 days as short-term marketable securities. At September 30, 1998 the Company's short-term marketable securities consisted primarily of government agency securities and high-grade corporate bonds and the amortized cost of these securities approximated market value. 9. OTHER ASSETS Other assets include approximately $272,000 in unamortized purchase cost of the Company's majority interest of the Abiomed Limited Partnership. The interest in the Abiomed Limited Partnership is being amortized over five years, its estimated useful life. Abiomed Limited Partnership (the Partnership) was formed in March 1985 and provided initial funding for the design and development of certain of the Company's products. Through August 3, 2000, the Company owes a royalty to the Partnership of 5.5% of certain revenues from these products. Because the Company owns 61.7% of the Partnership, the net royalty expense to the Company is approximately 2.1% of these product revenues. This royalty formula is subject to certain maximum amounts and to certain additional adjustments in the event that the Company sells the technology. The Partnership is inactive except with respect to receiving and distributing proceeds from these royalty rights. Also included in other assets are long-term accounts receivable related to sales-type leases. The terms of these non-cancelable leases are one to three years. As of September 30, 1998, approximately $250,000 is included in other assets for these sales-type leases. 10. RECENT ACCOUNTING PRONOUNCEMENT In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. The Company does not believe the adoption of this accounting standard will have any impact on the Company's financial position or results of operations. 9 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 SEPTEMBER 30, 1998 NET INCOME Net loss and net loss per share for the three months ended September 30, 1998, were approximately $2,483,000 and $0.29 per share, respectively. This compares to net income and net income per share of approximately $488,000 and $0.06 per share, respectively, in the same period of the previous year. The net loss for the three months ended September 30, 1998 is primarily attributable to the Company's undertaking to accelerate the development of its battery-powered heart replacement device ("HRD") and to decreases in contract and product revenues. REVENUES Product revenues decreased by 12% to $4.4 million in the three months ended September 30, 1998 from $5.0 million in the three months ended September 30, 1997. This was primarily attributable to a decrease of $400,000 in international orders and $260,000 in orders from new U.S. customers, which was partially offset by increased sales of BVS blood pumps to existing customers. International revenues in the three months ended September 30, 1997 included $250,000 in revenue from a single international distributor. The distributor is using the product to gain regulatory approval for that distributor's territory. Efforts by that distributor to gain regulatory approval for its territory are ongoing and, as such, the Company sold no product to that distributor in the three months ended September 30, 1998. The $260,000 decrease in orders from new U.S. customers primarily reflected decreased unit sales of BVS consoles which was partially offset by increased average selling prices. The increase in U.S. sales of BVS blood pumps to existing customers in the three months ended September 30, 1998 compared to September 30, 1997 reflects increases in both the number of units sold and the average selling price. Sales of BVS blood pumps in the three months ended September 30, 1997 included $230,000 in product revenues shipped in the period from backlog. The Company generally operates with only limited backlog. Without the effect of backlog on the September 30, 1997 quarter, the Company's sales of BVS blood pumps increased approximately $270,000 in the three months ended September 30, 1998 compared to the three months ended September 30, 1997. More than 90% of total product revenues in the three months ended September 30, 1998 were derived from domestic sources. During the three months ended September 30, 1998, the Company added 24 medical centers in the U.S. as new customers of the BVS, increasing the Company's U.S. customer base for the BVS to more than 375. 10 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) REVENUES (continued) Contract revenues decreased by 67% to approximately $600,000 in the three months ended September 30, 1998 from $1.9 million in the three months ended September 30, 1997. The decrease in contract revenue was primarily attributable to the Company's HRD government contract. None of the contract revenue recognized in the three months ended September 30, 1998 was derived from the Company's HRD government contract compared to $1.4 million of contract revenue recognized under this contract for the three months ended September 30, 1997. The $600,000 in contract revenues generated in the three months ended September 30, 1998 were primarily derived from the Company's Heart Booster-TM- contract and other grants. Revenues from these sources totaled $500,000 in the three months ended September 30, 1997. The Company accounts for revenue under its government contracts and grants as work is performed, provided that the government has appropriated sufficient funds for the work. Through September 30, 1998, the government had appropriated and the Company has recognized as revenue, $6.7 million of the $8.5 million HRD contract amount. To date, the Company's expenditures under the HRD contract have exceeded the appropriated amount. The government appropriation schedule calls for no further appropriation for the HRD contract until October 1999. This schedule is subject to change at the discretion of the government. While the Company currently plans to continue its expenditures in connection with the development of the HRD, the Company will not recognize any further contract revenues under the HRD contract until such time as additional funds are appropriated under the HRD contract, if ever. The Company believes that certain of its costs incurred prior to further appropriation may be reimbursable under the HRD contract, if and when additional appropriation under the HRD contract is made. Due to the Company's accelerated HRD development activity and the timing of government appropriations, the Company believes that it will experience significant quarterly fluctuations in contract revenues. The Company also believes that the Company's total expenses to complete the development of the HRD will significantly exceed the remaining $1.8 million HRD contract amount. As of September 30, 1998, the Company's total backlog of research and development contracts and grants was $6.2 million, including $1.8 million for HRD research and development, $2.0 million for Heart Booster research and development and $2.4 million for various other research and development. Funding for the Company's government research and development contracts is subject to government appropriation, and all of these contracts contain provisions that make them terminable at the convenience of the government. The Company retains rights to all technological discoveries and products resulting from these efforts. COSTS AND EXPENSES Total costs and expenses increased to $7.8 million, 157% of total revenues, for the three months ended September 30, 1998, from $6.5 million, 95% of total revenues, for the three months ended September 30, 1997. The majority of this increase was incurred to support increased development activities related to the HRD. 11 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) COSTS AND EXPENSES (continued) Cost of product revenues as a percentage of product revenues was 36% for the three months ended September 30, 1998 and the three months ended September 30, 1997. The impact of increased engineering costs incurred to support expanded manufacturing capabilities and changes in the relative mix of products sold were offset by higher average selling prices. Research and development expenses increased by 96% to $4.0 million, 80% of total revenues, for the three months ended September 30, 1998, from $2.0 million, 29% of total revenues for the three months ended September 30, 1997. The increase primarily reflected higher levels of spending by the Company to advance the development of the HRD and to enhance the BVS and higher level of activity under the Company's non-HRD cost-plus-fixed-fee research and development contracts and grants. Research and development expenses during the three months ended September 30, 1998 included $3.0 million of expenses incurred in connection with the Company's development activities for the HRD. The Company anticipates that its research and development expenses will continue to increase as a result of its plans to further increase its research and development efforts to further develop and test the HRD and enhance the BVS. Selling, general and administrative expenses decreased by 14% to $2.3 million, 46% of total revenues, for the three months ended September 30, 1998, from $2.7 million, 39% of total revenues, for the three months ended September 30, 1997. This decrease was primarily due to reduced legal costs, reduced headcount and related costs, and timing of spending for marketing programs. INTEREST AND OTHER INCOME Interest and other income consists primarily of interest on the Company's investment balances, net of interest and other expenses. Interest and other income increased to $370,000 for the three months ended September 30, 1998 from $292,000 for the three months ended September 30, 1997. This increase primarily reflected interest earned on the Company's higher average investment balances. Income taxes incurred during these periods were not material and the Company continues to have significant net tax operating loss carryforwards and tax credit carryforwards. 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) SIX MONTHS ENDED SEPTEMBER 30, 1998 NET INCOME Net loss and net loss per share for the six months ended September 30, 1998, were approximately $3.0 million and $0.35 per share, respectively. This compares to net income and net income per share of approximately $1.4 million and $0.17 per share, respectively, in the same period of the previous year. The net loss for the six months ended September 30, 1998 is primarily attributable to the Company's undertaking to accelerate the development of its HRD and to the decrease in contract and product revenues. REVENUES Product revenues decreased by 11% to $7.9 million in the six months ended September 30, 1998 from $8.8 million in the six months ended September 30, 1997. This decrease was comprised of decreases in sales of $400,000 in BVS blood pumps to existing customers, of $270,000 in international orders and of $260,000 in orders from new customers. Sales of BVS blood pumps in the six months ended September 30, 1997 included $640,000 in product revenues shipped in the period from backlog. The Company generally operates with only limited backlog. Without the effect of backlog, the Company's sales of BVS blood pumps increased approximately $240,000 in the six months ended September 30, 1998 compared to the six months ended September 30, 1997 reflecting increases in both the number of units sold and average selling prices of the BVS blood pumps. International revenues in the six months ended September 30, 1997 included $250,000 in revenue from a single international distributor. The distributor is using the product to gain regulatory approval for that distributor's territory. Efforts by that distributor to gain regulatory approval for its territory are ongoing and, as such, the Company sold no product to that distributor in the six months ended September 30, 1998. The decrease in orders from new U.S. customers reflects decreased unit sales of BVS consoles partially offset by increased average selling prices. More than 90% of total product revenues in the six months ended September 30, 1998 were derived from domestic sources. Contract revenues decreased by 21% to approximately $2.9 million in the six months ended September 30, 1998 from $3.7 million in the six months ended September 30, 1997. Approximately $1.8 million of the contract revenue recognized in the six months ended September 30, 1998 was derived from the Company's HRD government contract compared to $3.0 million of contract revenue recognized under this contract for the six months ended September 30, 1997. Excluding revenue generated from the HRD government contract, the Company generated $1.1 million in contract revenue in the six months ended September 30, 1998 primarily from the Company's Heart Booster-TM- contract and other government grants compared to $700,000 from these sources in the six months ended September 30, 1997. 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) COSTS AND EXPENSES Total costs and expenses increased to $14.5 million, 135% of total revenues, for the six months ended September 30, 1998, from $11.3 million, 91% of total revenues, for the six months ended September 30, 1997. The majority of this increase in costs and expenses was incurred to support increased development activities related to the HRD. Cost of product revenues as a percentage of product revenues was 38% for the six months ended September 30, 1998 as compared to 35% in the six months ended September 30, 1997. The majority of this increase in cost of products sold as a percentage of product revenues was attributable to higher product costs for both the console and blood pumps due to increased engineering costs incurred to support expanded manufacturing capabilities and to changes in the relative mix of products sold partially offset by higher average product selling prices. Research and development expenses increased by 91% to $7.0 million, 65% of total revenues, for the six months ended September 30, 1998, from $3.7 million, 29% of total revenues for the six months ended September 30, 1997. The increase primarily reflected higher levels of spending by the Company to advance the development of the HRD and to enhance the BVS and higher level of activity under the Company's non-HRD cost-plus-fixed-fee research and development contracts and grants. Research and development expenses during the six months ended September 30, 1998 included $5.2 million of expenses incurred in connection with the Company's development activities for the HRD. Selling, general and administrative expenses were $4.5 million, 42% of total revenues, for the six months ended September 30, 1998, compared to $4.5 million, 36% of total revenues, for the six months ended September 30, 1997. INTEREST AND OTHER INCOME Interest and other income consists primarily of interest on the Company's investment balances, net of interest and other expenses. Interest and other income increased to $727,000 for the six months ended September 30, 1998 from $417,000 for the six months ended September 30, 1997. This increase primarily reflected interest earned on the Company's higher average investment balances. Income taxes incurred during these periods were not material and the Company continues to have significant net tax operating loss carryforwards and tax credit carryforwards. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1998, the Company had $22.2 million in cash and short-term marketable securities. The Company also has a $3 million line of credit from a bank that expires on November 30, 1998, and which was entirely available at September 30, 1998. 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) In the six months ended September 30, 1998, operating activities used cash of $3,696,000. Net cash used by operating activities during the six months ended September 30, 1998 reflected a net loss of $3,025,000, increases in inventory and prepaid expenses of $882,000 and $160,000, respectively, and decreases in accounts payable and net assets of discontinued operations of $813,000 and $57,000, respectively. These uses of cash were partially offset by a decrease in accounts receivable of $402,000, an increase in accrued expenses of $76,000 and depreciation and amortization expense of $764,000 included in the net loss. The increase in inventory is primarily attributable to a decision by the company to increase levels of finished goods and lower than expected sales for the quarter resulting in higher inventories. During the six months ended September 30, 1998, investing activities provided $2,078,000 of cash. Net cash provided by investing activities included $3,276,000 of maturities of short-term investments partially offset by $1,198,000 of purchases of equipment and improvements of property primarily to support the advanced development of the HRD. During the six months ended September 30, 1998, financing activities provided $652,000 of cash. Net cash provided by financing activities included $595,000 from the exercise of stock options and $57,000 from employee purchases of Common Stock under the Employee Stock Purchase Plan. Although the Company does not currently have significant capital commitments, the Company believes that it will continue to make significant investments over the next several years to support the development and commercialization of its products and the expansion of its manufacturing and product development facilities. The Company is currently negotiating to enter into a new or amended facility lease that would allow the Company to consolidate its operations into one building. There is no guarantee that the Company will be able to negotiate acceptable terms. The Company estimates that it may incur costs of approximately two million dollars for improvements. The Company believes that its revenues and existing resources, including its $22.2 million in cash and short-term marketable securities, will be sufficient to fund its planned operations, including planned increases in its internally funded HRD development and BVS enhancement efforts, for at least the next twelve months. RISK FACTORS WHICH MAY AFFECT FUTURE RESULTS As the year 2000 approaches, it is generally anticipated that computers, software and other equipment utilizing microprocessors may be unable to function properly. The Company has evaluated this potential issue with respect to its products, its financial and management information systems and its suppliers. With respect to the Company's products, the software controlling the BVS drive console includes internal counters, but the BVS operation is not related in any way to a specific calendar date. Accordingly, the Company believes that the BVS will not need any repair of modification with regard to the Year 2000 issue. 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) With respect to the Company's financial and management information systems, the Company must upgrade the application software to be Year 2000 compliant. The supplier of the software has developed a Year 2000 compliant version of the software and the Company anticipates upgrading its systems to this version prior to the end of fiscal 1999. Because on April 1, 1999 the Company begins its fiscal year 2000, the Company anticipates that if it does not upgrade its financial and management information systems in Fiscal 1999, it may encounter Year 2000 compliance issues as early as April 1999. With respect to its suppliers, the Company is beginning to communicate with key suppliers to assess their vulnerability to the Year 2000 issue and intends to increase inventory levels of certain key components to help mitigate the risk of certain suppliers not being able to supply materials on a timely basis due to systems issues. Although management does not expect Year 2000 issues to have a material impact on its business or future results of operations, there can be no assurance that there will not be interruptions of operations or other limitations of system functionality or that the Company will not incur significant costs to avoid such interruptions or limitations. To the extent that the Company does not eliminate all Year 2000 issues, the most reasonably likely worst case year 2000 scenario is systemic failures beyond the control of the Company, such as a prolonged telecommunications or electrical failure, or a general disruption in supplies and services provided to the Company which could have a material adverse effect on the Company's business, results of operations and financial condition. This document contains forward looking statements, including statements regarding the anticipated timing and cost of the Company's HRD development activities, enhancements to be made to the BVS, planned expansion of the Company's manufacturing and product development facilities, adequacy of existing resources and overcoming Year 2000 related issues. The Company's actual results, including its HRD development, BVS enhancements, facility expansion, adequacy of resources and overcoming Year 2000 issues may differ materially based on a number of factors, both known and unknown, including: uncertainty of product development and clinical trials, complex manufacturing, high quality requirements, unproven demonstration of required reliability of products under development, dependence on key personnel, risks associated with growing number of employees, inability to recruit required human resources on schedule, competition and technological change, government regulations including the FDA and other regulatory agencies, reliance on government contracts, 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 the Company's Form 10-K for the year ended March 31, 1998 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. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements 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 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 At the Company's Annual Meeting of Shareholders held on August 13, 1998, the stockholders approved the following: a) Elected two persons to serve as Class II directors as follows:
Votes Votes Director for Withheld ---------------- --------- -------- W. Gerald Austen 7,898,220 34,315 Paul B. Fireman 7,895,720 36,815
b) A proposal to adopt the Company's 1998 Equity Incentive Plan. The proposal received 4,966,658 votes for and 307,921 votes against. There were 33,313 abstentions and 2,624,643 non-voting. Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) EXHIBITS Exhibit 10 - ABIOMED, Inc. 1998 Equity Incentive Plan b) REPORTS ON FORM 8-K None 17 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: October 21, 1998 /s/ David M. Lederman ------------------------------------- David M. Lederman CEO and President Date: October 21, 1998 /s/ John F. Thero ------------------------------------ John F. Thero Vice President Finance and Treasurer Chief Financial Officer Principal Accounting Officer 18 EX-10 2 EXHIBIT 10 Exhibit 10 ABIOMED, INC. 1998 EQUITY INCENTIVE PLAN Section 1. Purpose The purpose of the ABIOMED, Inc. 1998 Equity Incentive Plan (the "Plan") is to attract and retain key employees, directors, advisors and consultants, to provide an incentive for them to assist ABIOMED, Inc. (the "Corporation") to achieve long-range performance goals, and to enable them to participate in the long-term growth of the Corporation. Section 2. Definitions (a) "Affiliate" means any business entity in which the Corporation owns directly or indirectly 50% or more of the total combined voting power or has a significant financial interest as determined by the Committee. (b) "Annual Meeting" means the annual meeting of shareholders or special meeting in lieu of annual meeting of shareholders at which one or more directors are elected. (c) "Award" means any Option, Stock Appreciation Right, Performance or Award Share, or Restricted Stock awarded under the Plan. (d) "Award Share" means a share of Common Stock awarded to an employee, director, advisor or consultant without payment therefor. (e) "Board" means the Board of Directors of the Corporation. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (g) "Committee" means the Compensation Committee of the Board, or such other committee of not less than two members of the Board appointed by the Board to administer the Plan, provided that the members of such Committee must be Non-Employee Directors as defined in Rule 16b-3(b) promulgated under the Securities Exchange Act of 1934, as amended. (h) "Common Stock" or "Stock" means the Common Stock, par value $.01 per share, of the Corporation. (i) "Corporation" means ABIOMED, Inc. (j) "Designated Beneficiary" means the beneficiary designated by a Participant, in a manner determined by the Board, to receive amounts due or exercise rights of the Participant in the event of the Participant's death. In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant's estate. (k) "Fair Market Value" means, with respect to Common Stock or any other property, the fair market value of such property as determined by the Board in good faith or in the manner established by the Board from time to time. (l) "Incentive Stock Option" means an option to purchase shares of Common Stock, awarded to a Participant under Section 6, which is intended to meet the requirements of Section 422 of the Code or any successor provision. (m) "Nonqualified Stock Option" means an option to purchase shares of Common Stock, awarded to a Participant under Section 6, which is not intended to be an Incentive Stock Option. (n) "Option" means an Incentive Stock Option or a Nonqualified Stock Option. (o) "Participant" means a person selected by the Board to receive an Award under the Plan. (p) "Performance Cycle" or "Cycle" means the period of time selected by the Board during which performance is measured for the purpose of determining the extent to which an award of Performance Shares has been earned. (q) "Performance Shares" mean shares of Common Stock which may be earned by the achievement of performance goals, awarded to a Participant under Section 8. (r) "Restricted Period" means the period of time selected by the Board during which an award of Restricted Stock may be forfeited to the Corporation. (s) "Restricted Stock" means shares of Common Stock subject to forfeiture, awarded to a Participant under Section 9. (t) "Stock Appreciation Right" or "SAR" means a right to receive any excess in value of shares of Common Stock over the reference price, awarded to a Participant under Section 7. (u) "Stock Unit" means an award of Common Stock and/or other rights granted as units that are valued in whole or in part by reference to, or otherwise based on, the value of Common Stock, awarded to a Participant under Section 10. Section 3. Administration The Plan shall be administered by the Committee, which shall initially be the Stock Option Committee. The Board, including any duly authorized committee of the Board, shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, and to interpret the provisions of the Plan. The Board's decisions shall be final and binding. To the extent permitted by applicable law, the Board may delegate to the Committee the power to make Awards to Participants and all determinations under the Plan with respect thereto. Section 4. Eligibility All employees and, in the case of Awards other than Incentive Stock Options, directors, advisors and consultants of the Corporation or any Affiliate capable of contributing significantly to the successful performance of the Corporation, other than a person who has irrevocably elected not to be eligible, are eligible to be Participants in the Plan. Section 5. Stock Available for Awards (a) Subject to adjustment under subsection (b), Awards may be made under the Plan, as the Board may determine, provided that a maximum of 500,000 shares of Common Stock may be issued under this Plan. If any Award in respect of shares of Common Stock expires or is terminated unexercised or is forfeited for any reason or settled in a manner that results in fewer shares outstanding than were initially awarded, including without limitation the surrender of shares in payment for the Award or any tax obligation thereon, the shares subject to such Award or so surrendered, as the case may be, to the extent of such expiration, termination, forfeiture or decrease, shall again be available for award under the Plan, subject, however, in the case of Incentive Stock Options, to any limitation required under the Code. Common Stock issued through the assumption or substitution of outstanding grants from an acquired corporation shall not reduce the shares available for Awards under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) In the event that the Board determines that any stock dividend, extraordinary cash dividend, creation of a class of equity securities, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Common Stock at a price substantially below fair market value, or other similar transaction affects the Common Stock such that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under the Plan, then the Board, subject, in the case of Incentive Stock Options, to any limitation required under the Code, shall equitably adjust any or all of (i) the number and kind of shares in respect of which Awards may be made under the Plan, (ii) the number and kind of shares subject to outstanding Awards, and (iii) the award, exercise or conversion price with respect to any of the foregoing, and if considered appropriate, the Board may make provision for a cash payment with respect to an outstanding Award, provided that the number of shares subject to any Award shall always be a whole number. Section 6. Stock Options (a) Subject to the provisions of the Plan, the Board may award Incentive Stock Options and Nonqualified Stock Options and determine the number of shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. The terms and conditions of Incentive Stock Options shall be subject to and comply with Section 422 of the Code, or any successor provision, and any regulations thereunder. (b) The Board shall establish the option price at the time each Option is awarded, which price shall not be less than 100% of the Fair Market Value of the Common Stock on the date of award with respect to Incentive Stock Options. (c) Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable Award or thereafter. The Board may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. (d) No shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Corporation. Such payment may be made in whole or in part in cash or, to the extent permitted by the Board at or after the award of the Option, by delivery of a note or shares of Common Stock owned by the optionholder, including Restricted Stock, valued at their Fair Market Value on the date of delivery, by the reduction of the shares of Common Stock that the optionholder would be entitled to receive upon exercise of the Option, such shares to be valued at their Fair Market Value on the date of exercise, less their option price (a so-called "cashless exercise"), or such other lawful consideration as the Board may determine. (e) The Board may provide for the automatic award of an Option upon the delivery of shares to the Corporation in payment of an Option for up to the number of shares so delivered. (f) In the case of Incentive Stock Options the following additional conditions shall apply to the extent required under Section 422 of the Code for the options to qualify as Incentive Stock Options: (i) Such options shall be granted only to employees of the Corporation, and shall not be granted to any person who owns stock that possesses more than ten percent of the total combined voting power of all classes of stock of the Corporation or of its parent or subsidiary corporation (as those terms are defined in Section 422(b) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder), unless, at the time of such grant, the exercise price of such option is at least 110% of the fair market value of the stock that is subject to such option and the option shall not be exercisable more than five years after the date of grant; (ii) Such options shall, by their terms, be transferable by the optionholder only by the laws of descent and distribution, and shall be exercisable only by such optionholder during his lifetime. (iii) Such options shall not be granted more than ten years from the effective date of this Plan or any subsequent amendment to the Plan approved by the stockholders of the Corporation which extends this Incentive Stock Option expiration date, and shall not be exercisable more than ten years from the date of grant. Section 7. Stock Appreciation Rights Subject to the provisions of the Plan, the Board may award SARs in tandem with an Option (at or after the award of the Option), or alone and unrelated to an Option. SARs in tandem with an Option shall terminate to the extent that the related Option is exercised, and the related Option shall terminate to the extent that the tandem SARs are exercised. Section 8. Performance Shares (a) Subject to the provisions of the Plan, the Board may award Performance Shares and determine the number of such shares for each Performance Cycle and the duration of each Performance Cycle. There may be more than one Performance Cycle in existence at any one time, and the duration of Performance Cycles may differ from each other. The payment value of Performance Shares shall be equal to the Fair Market Value of the Common Stock on the date the Performance Shares are earned or, in the discretion of the Board, on the date the Board determines that the Performance Shares have been earned. (b) The Board shall establish performance goals for each Cycle, for the purpose of determining the extent to which Performance Shares awarded for such Cycle are earned, on the basis of such criteria and to accomplish such objectives as the Board may from time to time select. During any Cycle, the Board may adjust the performance goals for such Cycle as it deems equitable in recognition of unusual or non-recurring events affecting the Corporation, changes in applicable tax laws or accounting principles, or such other factors as the Board may determine. (c) As soon as practicable after the end of a Performance Cycle, the Board shall determine the number of Performance Shares which have been earned on the basis of performance in relation to the established performance goals. The payment values of earned Performance Shares shall be distributed to the Participant or, if the Participant has died, to the Participant's Designated Beneficiary, as soon as practicable thereafter. The Board shall determine, at or after the time of award, whether payment values will be settled in whole or in part in cash or other property, including Common Stock or Awards. Section 9. Restricted Stock (a) Subject to the provisions of the Plan, the Board may award shares of Restricted Stock and determine the duration of the Restricted Period during which, and the conditions under which, the shares may be forfeited to the Corporation and the other terms and conditions of such Awards. Shares of Restricted Stock may be issued for no cash consideration or such minimum consideration as may be required by applicable law. (b) Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by the Board, during the Restricted Period. Shares of Restricted Stock shall be evidenced in such manner as the Board may determine. Any certificates issued in respect of shares of Restricted Stock shall be registered in the name of the Participant and unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Corporation. At the expiration of the Restricted Period, the Corporation shall deliver such certificates to the Participant or if the Participant has died, to the Participant's Designated Beneficiary. Section 10. Stock Units (a) Subject to the provisions of the Plan, the Board may award Stock Units subject to such terms, restrictions, conditions, performance criteria, vesting requirements and payment rules as the Board shall determine. (b) Shares of Common Stock awarded in connection with a Stock Unit Award shall be issued for no cash consideration or such minimum consideration as may be required by applicable law. Such shares of Common Stock may be designated as Award Shares by the Board. Section 11. General Provisions Applicable to Awards (a) Documentation. Each Award under the Plan shall be evidenced by a written document delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Board considers necessary or advisable to achieve the purposes of the Plan or comply with applicable tax and regulatory laws and accounting principles. (b) Board Discretion. Each type of Award may be made alone, in addition to or in relation to any other type of Award. The terms of each type of Award need not be identical, and the Board need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Award, any determination with respect to an Award may be made by the Board at the time of award or at any time thereafter. Without limiting the foregoing, an Award may be made by the Board, in its discretion, to any 401(k), savings, pension, profit sharing or other similar plan of the Corporation in lieu of or in addition to any cash or other property contributed or to be contributed to such plan. (c) Settlement. The Board shall determine whether Awards are settled in whole or in part in cash, Common Stock, other securities of the Corporation, Awards, other property or such other methods as the Board may deem appropriate. The Board may permit a Participant to defer all or any portion of a payment under the Plan, including the crediting of interest on deferred amounts denominated in cash and dividend equivalents on amounts denominated in Common Stock. If shares of Common Stock are to be used in payment pursuant to an Award and such shares were acquired upon the exercise of a stock option (whether or not granted under this Plan), such shares must have been held by the Participant for at least six months. (d) Dividends and Cash Awards. In the discretion of the Board, any Award under the Plan may provide the Participant with (i) dividends or dividend equivalents payable currently or deferred with or without interest, and (ii) cash payments in lieu of or in addition to an Award. (e) Termination of Employment. The Board shall determine the effect on an Award of the disability, death, retirement or other termination of employment of a Participant and the extent to which, and the period during which, the Participant's legal representative, guardian or Designated Beneficiary may receive payment of an Award or exercise rights thereunder. (f) Change in Control. In order to preserve a Participant's rights under an Award in the event of a change in control of the Corporation, the Board in its discretion may, at the time an Award is made or at any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise or realization of the Award, (ii) provide for the purchase of the Award upon the Participant's request for an amount of cash or other property that could have been received upon the exercise or realization of the Award had the Award been currently exercisable or payable, (iii) adjust the terms of the Award in a manner determined by the Board to reflect the change in control, (iv) cause the Award to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provision as the Board may consider equitable and in the best interests of the Corporation. (g) Withholding. The Corporation shall have the power and the right to deduct or withhold, or require a Participant to remit to the Corporation an amount sufficient to satisfy federal, state and local taxes (including the Participant's FICA obligation) required to be withhold with respect to an Award or any dividends or other distributions payable with respect thereto. In the Board's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of delivery. The Corporation and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant. (h) Amendment of Award. The Board may amend, modify or terminate any outstanding Award, including substituting therefor another Award of the same or a different type, changing the date of exercise or realization and converting an Incentive Stock Option to a Nonqualified Stock Option, provided that the Participant's consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. (i) Except as otherwise provided by the Board, Awards under the Plan are not transferable other than as designated by the participant by will or by the laws of descent and distribution. Section 12. Miscellaneous (a) No Right To Employment. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment. The Corporation expressly reserves the right at any time to dismiss a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. (b) No Rights As Shareholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a shareholder with respect to any shares of Common Stock to be distributed under the Plan until he or she becomes the holder thereof. A Participant to whom Common Stock is awarded shall be considered the holder of the Stock at the time of the Award except as otherwise provided in the applicable Award. (c) Effective Date. Subject to the approval of the shareholders of the Corporation, the Plan shall be effective on September 1, 1998. Prior to such approval, Awards may be made under the Plan expressly subject to such approval. (d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without shareholder approval if such approval is necessary to comply with any applicable requirement of the laws of the jurisdiction of incorporation of the Corporation, any applicable tax requirement, any applicable rules or regulation of the Securities and Exchange Commission, including Rule 16(b)-3 (or any successor rule thereunder), or the rules and regulations of the Nasdaq Stock Market National Market or any other exchange or stock market over which the Corporation's securities are listed. (e) Governing Law. The provisions of the Plan shall be governed by and interpreted in accordance with the laws of the jurisdiction of incorporation of the Corporation. (f) Indemnity. Neither the Board nor the Committee, nor any members of either, nor any employees of the Corporation or any parent, subsidiary, or other affiliate, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with their responsibilities with respect to this Plan, and the Corporation hereby agrees to indemnify the members of the Board, the members of the Committee, and the employees of the Corporation and its parent or subsidiaries in respect of any claim, loss, damage, or expense (including reasonable counsel fees) arising from any such act, omission, interpretation, construction or determination to the full extent permitted by law. EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONATAINS FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED INCOME STATEMENT, CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO FORM 10-Q/A FOR THE PERIOD ENDING SEPTEMBER 30, 1998. 6-MOS MAR-31-1999 SEP-30-1998 1716839 20438541 4954687 204000 3209573 30732771 7609892 3417238 35447576 4792474 0 0 0 86375 30558039 35447576 7877493 10770669 3000211 14522741 0 0 (727003) (3025069) (3025069) (3025069) 0 0 0 (3025069) (0.35) (0.35)
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