**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

# **FORM 10-QSB**

 

**ý****        Quarterly report underSection 13 or 15(d) of the Securities Exchange Act of 1934.**

 

**For the quarterly period ended April 30,2005**

 

**OR**

 

**o****                                ****Transition report under Section 13 or 15(d) of the ExchangeAct.**

 

**For thetransition period from                 to                 .**

 

## **Commissionfile number 001-13543**

##  

## **Angeion Corporation**

(Exact name of small businessissuer as specified in its charter)

 
| **Minnesota**                                                    | ** ** | **41-1579150**                         |
|------------------------------------------------------------------|------------|----------------------------------------|
| (State or  other jurisdiction of  incorporation or organization) |       | (I.R.S.  Employer  Identification No.) |

 

# **350 Oak Grove Parkway, Saint Paul, Minnesota 55127-8599**

(Address of principal executiveoffices)

 

**(651)484-4874**

(Issuer’s telephone number,including area code)

 

Check whether the registrantfiled all documents and reports required to be filed by Section 12, 13 or15(d) of the Exchange Act of 1934 after distribution of securities under aplan confirmed by a court:

 

Yes  ý   No  o

 

Check whether the issuer (1) filed all reports required to befiled by Section 13 or 15(d) of the Exchange Act of 1934 during thepast 12 months (or for such shorter period that the issuer was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

 

Yes  ý   No  o

 

The Company had 3,606,038 shares of common stock, $0.10 par value,outstanding as of June 6, 2005.

 

 

----

 

**PART I- FINANCIAL INFORMATION**

 

**Item 1.****  Financial Statements.**

 

**ANGEIONCORPORATION AND SUBSIDIARIES**

 

**ConsolidatedBalance Sheets**

**April 30,2005 and October 31, 2004**

(unaudited, in thousands except share and per share data)

 
| ** **                                                                                                                                   | ** ** | **April 30,  2005** | ** ** | **October 31,  2004** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|----------------------------|------------|
| **Assets**                                                                                                                                   |       |                     |       |                       |       |
| **Current  assets:**                                                                                                                         |       |                     |       |                       |       |
| Cash and  cash equivalents                                                                                                                   |       | $                        | 2,060      |                       | $          | 2,390 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $308 and $376,  respectively                                                 |       | 3,962                    |       | 4,157                      |       |
| Inventories                                                                                                                                  |       | 3,156                    |       | 2,947                      |       |
| Prepaid  expenses and other current assets                                                                                                   |       | 205                      |       | 294                        |       |
| Current  assets of discontinued operations                                                                                                   |       | 700                      |       | 700                        |       |
| Total  current assets                                                                                                                        |       | 10,083                   |       | 10,488                     |       |
|                                                                                                                                         |       |                     |       |                       |       |
| Property and  equipment, net                                                                                                                 |       | 1,174                    |       | 1,233                      |       |
| Intangible  assets, net                                                                                                                      |       | 5,903                    |       | 6,309                      |       |
| ** **                                                                                                                                   | ** ** | **$**                    | **17,160** | ** **                 | **$**      | **18,030** |   |
|                                                                                                                                         |       |                     |       |                       |       |
| **Liabilities  and Shareholders’ Equity**                                                                                               |       |                     |       |                       |       |
| **Current  liabilities:**                                                                                                                    |       |                     |       |                       |       |
| Accounts  payable                                                                                                                            |       | $                        | 1,592      |                       | $          | 1,526 |   |
| Employee  compensation                                                                                                                       |       | 985                      |       | 932                        |       |
| Deferred  income                                                                                                                             |       | 1,177                    |       | 1,099                      |       |
| Warranty  reserve                                                                                                                            |       | 165                      |       | 155                        |       |
| Other  current liabilities and accrued expenses                                                                                              |       | 362                      |       | 394                        |       |
| Current  liabilities of discontinued operations                                                                                              |       | 989                      |       | 1,092                      |       |
| Total  current liabilities                                                                                                                   |       | 5,270                    |       | 5,198                      |       |
|                                                                                                                                         |       |                     |       |                       |       |
| **Shareholders’  equity:**                                                                                                              |       |                     |       |                       |       |
| Common  stock, $0.10 par value, authorized 25,000,000 shares, issued and outstanding,  3,606,038 shares in 2005 and 3,601,517 shares in 2004 |       | 361                      |       | 360                        |       |
| Additional  paid-in capital                                                                                                                  |       | 17,562                   |       | 17,556                     |       |
| Accumulated  deficit                                                                                                                         |       | (6,033                   | )          | (5,084                     | )          |
| Total  shareholders’ equity                                                                                                             |       | 11,890                   |       | 12,832                     |       |
| ** **                                                                                                                                   | ** ** | **$**                    | **17,160** | ** **                 | **$**      | **18,030** |   |

 

Seeaccompanying notes to consolidated financial statements.

 

2

----

 

**ANGEIONCORPORATION AND SUBSIDIARIES**

 

**ConsolidatedStatements of Operations**

(unaudited,in thousands except per share amounts)

 
| ** **                                                          | ** ** | **Three Months Ended  April 30,** | ** ** | **Six Months Ended  April 30,** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------------|------------|--------------------------------------|------------|
| ** **                                                          | ** ** | **2005**                               | ** ** | **2004**                             | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Revenues**                                                        | ** ** | ** **                             | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Equipment  and supply sales                                         |       | $                                      | 5,367      |                                 | $          | 4,107 |   | $ | 9,652 |   | $ | 7,956 |   |
| Service  revenue                                                    |       | 665                                    |       | 849                                  |       | 1,410 |   | 1,555 |   |
|                                                                |       | 6,032                                  |       | 4,956                                |       | 11,062 |   | 9,511 |   |
| **Cost of  goods sold**                                             |       |                                   |       |                                 |       |   |   |   |   |
| Cost of  equipment and supplies                                     |       | 2,918                                  |       | 2,527                                |       | 5,514 |   | 4,890 |   |
| Cost of  service revenue                                            |       | 126                                    |       | 126                                  |       | 227 |   | 260 |   |
|                                                                |       | 3,044                                  |       | 2,653                                |       | 5,741 |   | 5,150 |   |
|                                                                |       |                                   |       |                                 |       |   |   |   |   |
| **Gross  margin**                                                   |       | 2,988                                  |       | 2,303                                |       | 5,321 |   | 4,361 |   |
|                                                                |       |                                   |       |                                 |       |   |   |   |   |
| **Operating  expenses:**                                            |       |                                   |       |                                 |       |   |   |   |   |
| Selling and  marketing                                              |       | 1,858                                  |       | 1,544                                |       | 3,565 |   | 3,069 |   |
| General and  administrative                                         |       | 614                                    |       | 611                                  |       | 1,278 |   | 1,243 |   |
| Research and  development                                           |       | 559                                    |       | 442                                  |       | 1,037 |   | 840 |   |
| Amortization  of intangibles                                        |       | 203                                    |       | 238                                  |       | 406 |   | 476 |   |
|                                                                |       | 3,234                                  |       | 2,835                                |       | 6,286 |   | 5,628 |   |
|                                                                |       |                                   |       |                                 |       |   |   |   |   |
| **Operating  loss**                                                 |       | (246                                   | )          | (532                                 | )          | (965 | ) | (1,267 | ) |
|                                                                |       |                                   |       |                                 |       |   |   |   |   |
| Interest  income                                                    |       | 8                                      |       | 3                                    |       | 16 |   | 8 |   |
|                                                                |       |                                   |       |                                 |       |   |   |   |   |
| **Loss  before taxes**                                              |       | (238                                   | )          | (529                                 | )          | (949 | ) | (1,259 | ) |
|                                                                |       |                                   |       |                                 |       |   |   |   |   |
| Tax benefit                                                         |       | —                                 |       | —                               |       | — |   | — |   |
|                                                                |       |                                   |       |                                 |       |   |   |   |   |
| **Loss  from continuing operations**                                |       | (238                                   | )          | (529                                 | )          | (949 | ) | (1,259 | ) |
| **Loss  from discontinued operations, net of $0 taxes**             |       | —                                 |       | (350                                 | )          | — |   | (350 | ) |
| **Net loss**                                                        |       | $                                      | (238       | )                                    | $          | (879 | ) | $ | (949 | ) | $ | (1,609 | ) |
|                                                                |       |                                   |       |                                 |       |   |   |   |   |
| **Loss per  share - basic and diluted**                             |       |                                   |       |                                 |       |   |   |   |   |
| Continuing  operations                                              |       | $                                      | (0.07      | )                                    | $          | (0.14 | ) | $ | (0.26 | ) | $ | (0.35 | ) |
| Discontinued  operations                                            |       | —                                 |       | (0.10                                | )          | — |   | (0.10 | ) |
| Net loss                                                            |       | $                                      | (0.07      | )                                    | $          | (0.24 | ) | $ | (0.26 | ) | $ | (0.45 | ) |
|                                                                |       |                                   |       |                                 |       |   |   |   |   |
| **Weighted  average common shares outstanding - basic and diluted** |       | 3,606                                  |       | 3,598                                |       | 3,605 |   | 3,597 |   |

 

See accompanying notes to consolidatedfinancial statements.

 

3

----

 

**ANGEIONCORPORATION AND SUBSIDIARIES**

 

**ConsolidatedStatements of Cash Flows**

(unaudited,in thousands)

 
| ** **                                                                         | ** ** | **Six Months Ended  April 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                         | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| **Cash  Flows From Operating Activities:**                                         |       |                                 |       |   |   |
| Net loss                                                                           |       | $                                    | (949       | ) | $ | (1,609 | ) |
| Loss from discontinued operations                                                  |       | —                               |       | 350 |   |
| Adjustments  to reconcile net loss to net cash flows used in operating activities: |       |                                 |       |   |   |
| Depreciation  and amortization                                                     |       | 628                                  |       | 770 |   |
| Changes in  operating assets and liabilities:                                      |       |                                 |       |   |   |
| Accounts  receivable                                                               |       | 195                                  |       | (176 | ) |
| Inventories                                                                        |       | (209                                 | )          | (483 | ) |
| Prepaid  expenses and other current assets                                         |       | 89                                   |       | (102 | ) |
| Accounts  payable                                                                  |       | 66                                   |       | 195 |   |
| Employee  compensation                                                             |       | 53                                   |       | (252 | ) |
| Deferred  income                                                                   |       | 78                                   |       | 58 |   |
| Warranty  reserve                                                                  |       | 10                                   |       | 1 |   |
| Other  current liabilities and accrued expenses                                    |       | (32                                  | )          | 94 |   |
| Net cash  used in continuing operations                                            |       | (71                                  | )          | (1,154 | ) |
| Net cash  used in discontinued operations                                          |       | (103                                 | )          | — |   |
| Net cash  used in operating activities                                             |       | (174                                 | )          | (1,154 | ) |
|                                                                               |       |                                 |       |   |   |
| **Cash  Flows From Investing Activities:**                                         |       |                                 |       |   |   |
| Purchase of  property and equipment                                                |       | (163                                 | )          | (92 | ) |
| Net cash used  in investing activities                                             |       | (163                                 | )          | (92 | ) |
|                                                                               |       |                                 |       |   |   |
| **Cash  Flows From Financing Activities:**                                         |       |                                 |       |   |   |
| Proceeds  from issuance of common stock                                            |       | 7                                    |       | 4 |   |
| Net cash  provided by financing activities                                         |       | 7                                    |       | 4 |   |
|                                                                               |       |                                 |       |   |   |
| **Net  decrease in cash and cash equivalents**                                     |       | (330                                 | )          | (1,242 | ) |
|                                                                               |       |                                 |       |   |   |
| **Cash and  cash equivalents at beginning of period**                              |       | 2,390                                |       | 3,588 |   |
|                                                                               |       |                                 |       |   |   |
| **Cash and  cash equivalents at end of period**                                    | ** ** | **$**                                | **2,060**  | ** ** | **$** | **2,346** | ** ** |

 

Seeaccompanying notes to consolidated financial statements.

 

4

----

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

April 30, 2005

(Unaudited)

 

**1.****                                      Basisof Presentation**

 

The consolidated balance sheet as of April 30,2005, the consolidated statements of operations for the three and six monthsended April 30, 2005 and 2004, the consolidated statements of cash flowsfor the six months ended April 30, 2005 and 2004, and the relatedinformation presented in these notes have been prepared by management inaccordance with U.S. generally accepted accounting principles for interimfinancial information and with the instructions to Form 10-QSB and Rule 10-01of Regulation S-X, without audit. Accordingly, they do not include all of the information and notesrequired by U.S. generally accepted accounting principles for completefinancial statements.  In the opinion ofmanagement, all adjustments considered necessary for a fair presentation ofresults have been included.  Theconsolidated balance sheet at October 31, 2004 was derived from theaudited consolidated financial statements as of that date.  Operating results for the three and sixmonths ended April 30, 2005 are not necessarily indicative of the resultsthat may be expected for the year ending October 31, 2005.  For further information, refer to theconsolidated financial statements and notes thereto included in AngeionCorporation’s Annual Report on Form 10-KSB for the year ended October 31,2004.

 

Comprehensive income is a measure of allnon-owner changes in shareholders’ equity and includes such items as net income,certain foreign currency translation items, minimum pension liabilityadjustments and changes in the value of available-for-sale securities.  For the three and six months ended April 30,2005 and 2004, comprehensive loss for Angeion Corporation was equivalent to netloss as reported.

 

**2.****                                      RevenueRecognition**

 

In accordance with SAB 104,the Company recognizes revenue when persuasive evidence of an arrangementexists, transfer of title has occurred or services have been rendered, theselling price is fixed or determinable and collectibility is reasonablyassured.  The Company’s products are soldfor cash or on credit terms requiring payment based on the shipment date.  Credit terms can vary between customers dueto many factors, but are generally 30-60 days.  Revenue, net of discounts, is recognized uponshipment or delivery to customers in accordance with written sales terms thatdo not allow for a right of return. Standard sales terms do not include customer acceptance conditions,future credits, rebates, price protection or general rights of return.  The terms of sales to both domestic customersand international distributors are identical. In instances when a customer order specifies final acceptance of thesystem, revenue is deferred until all customer acceptance criteria have beenmet.  Estimated warranty obligations arerecorded upon shipment.

 

Service contract revenue isbased on a stated contractual rate and is deferred and recognized ratably overthe service period, which is typically from one to four years.  In accordance with paragraph 4, of EITF 00-21,the Company applies FASB Technical BulletinNo. 90-1 for service contract revenue.  Revenue from installation and trainingservices provided to domestic customers is deferred until the service has beenperformed.  The amount of deferredinstallation and training revenue was $206,000 at April 30, 2005 and October 31,2004.

 

When a sale involves multiple deliverables,such as equipment, installation services and training, the amount of the considerationfrom an arrangement is allocated to each respective element based on theresidual method and recognized as revenue when revenue recognition criteria foreach element is met.  Considerationallocated to delivered equipment is equal to the total arrangementconsideration less the fair 

 

5

----

 

value ofinstallation and training.  The fairvalue of installation and training services consists of specific objectiveevidence, including third-party invoices, used together with historicalevidence of value.

 

**3.****                                      NewAccounting Pronouncements**

 

In November 2004, the FinancialAccounting Standards Board (“FASB”) issued Statement of Financial AccountingStandards No. 151 (“SFAS No. 151”), “Inventory Costs, an amendment ofARB No. 43, Chapter 4,” which clarifies the types of costs that should beexpensed rather than capitalized as inventory. This statement also clarifies the circumstances under which fixedoverhead costs associated with operating facilities involved in inventoryprocessing should be capitalized.  Theprovisions of SFAS No. 151 are effective for fiscal years beginning after June 15,2005 and the Company will adopt this standard in its fiscal 2006.  The Company believes the adoption of thisstatement will not have a material impact on its consolidated financialposition or results of operations.

 

The FASBissued SFAS No. 123 (Revised 2004) (“SFAS No. 123R”), “Share-BasedPayment,” in December 2004.  SFAS No. 123Ris a revision of FASB Statement 123, “Accounting for Stock-Based Compensation”and supersedes APB Opinion No. 25, “Accounting for Stock Issued toEmployees,” and its related implementation guidance.  The Statement focuses primarily on accountingfor transactions in which an entity obtains employee services throughshare-based payment transactions.  SFAS No. 123Rrequires a public entity to measure the cost of employee services received inexchange for an award of equity instruments based on the grant-date fair valueof the award (with limited exceptions). That cost will be recognized over the period during which an employee isrequired to provide service in exchange for the award.  The Company will adopt the standard forfiscal 2007.  The Company has determinedthat, unless new options are granted, stock-based compensation expense will beapproximately $19,000 for fiscal 2007.

 

**4.****                                      StockBased Compensation**

 

The Company applies the intrinsic-valuemethod as prescribed under Accounting Principles Board Opinion (APB) No. 25,*Accounting for Stock Issued to Employees,*and related interpretations to account for the issuance of stock incentives toemployees and directors.  Accordingly, nocompensation expense related to employees’ and directors’ stock incentives hasbeen recognized in the consolidated financial statements.  In accordance with the provisions of SFAS No. 123,*Accounting for Stock-Based Compensation*,the Company is required to present pro forma information reflectingcompensation cost for such issuances. Had the Company determined compensation costs based on the fair value atthe date of grant for options granted, the Company’s net loss would have beenincreased to the pro forma amounts indicated in the following table:

 

6

----

 
| **(In thousands, except for per**                                                                                 | ** ** | **Three Months Ended April 30,** | ** ** | **Six Months Ended April 30,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|-------------------------------------|------------|
| **share amounts)**                                                                                                | ** ** | **2005**                              | ** ** | **2004**                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net loss:                                                                                                         |       |                                  |       |                                |       |   |   |   |   |
| As reported                                                                                                       |       | $                                     | (238       | )                                   | $          | (879 | ) | $ | (949 | ) | $ | (1,609 | ) |
| Add:  Stock-based employee compensation expense included in reported net loss                                     |       | —                                |       | —                              |       | — |   | — |   |
| Deduct:  Total stock-based employee compensation expense determined under fair value  based method for all awards |       | (21                                   | )          | (57                                 | )          | (42 | ) | (114 | ) |
| Pro forma                                                                                                         |       | $                                     | (259       | )                                   | $          | (936 | ) | $ | (991 | ) | $ | (1,723 | ) |
| Net loss per  share – basic and diluted                                                                      |       |                                  |       |                                |       |   |   |   |   |
| As reported                                                                                                       |       | $                                     | (0.07      | )                                   | $          | (0.24 | ) | $ | (0.26 | ) | $ | (0.45 | ) |
| Pro forma                                                                                                         |       | $                                     | (0.07      | )                                   | $          | (0.26 | ) | $ | (0.27 | ) | $ | (0.48 | ) |

 

**5.****                                      Inventories**

 
| ** **         | ** ** | **April 30,** | ** ** | **October 31,** | ** ** |
|--------------------|------------|--------------------|------------|----------------------|------------|
| **(In thousands)** | ** ** | **2005**           | ** ** | **2004**             | ** ** |
| Raw  materials     |       | $                  | 1,100      |                 | $          | 875 |   |
| Work-in-progress   |       | 233                |       | 164                  |       |
| Finished  goods    |       | 1,823              |       | 1,908                |       |
|               |       | $                  | 3,156      |                 | $          | 2,947 |   |

 

**6.****                                      IntangibleAssets**

 

The Company adopted fresh start reporting asdefined in SOP 90-7 upon its emergence from bankruptcy on October 31,2002.  SOP 90-7 required theCompany’s assets to be recorded at their respective fair values as of October 31,2002.  Accordingly, all intangible assetsare valued at fair value as of the date of fresh-start reporting, October 31,2002, or cost in the case of subsequently acquired assets.  As of April 30, 2005, intangible assetsconsisted of the following:

 
| **(In thousands)**              | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Intangible  Assets, net** | ** ** |
|---------------------------------|------------|-----------------------------|------------|-------------------------------|------------|-----------------------------|------------|
|                            |       |                        |       |                          |       |                        |       |
| Amortized  developed technology |       | $                           | 7,107      |                          | $          | 2,204                       |       | $ | 4,903 |   |
| Unamortized  trade name         |       | 1,000                       |       | -                             |       | 1,000                       |       |
|                            |       | $                           | 8,107      |                          | $          | 2,204                       |       | $ | 5,903 |   |

 

Amortization expense was $406,000 and$476,000 for the six months ended April 30, 2005 and 2004,respectively.  Developed technology isbeing amortized using the straight-line method over the estimated useful livesof the assets that range from three to ten years.  Estimated amortization expense for theremainder of fiscal year 2005 and for each of the succeeding years based on theintangible assets as of April 30, 2005 is as follows:

 

7

----

 
| **(In thousands)**                       | ** ** | **Amortization** | ** ** |
|------------------------------------------|------------|------------------|------------|
| Six months  ending October 31, 2005 |       | $                | 406        |   |
| 2006                                     |       | 812              |       |
| 2007                                     |       | 779              |       |
| 2008                                     |       | 778              |       |
| 2009                                     |       | 778              |       |
| Thereafter                               |       | 1,350            |       |
|                                     |       | $                | 4,903      |   |

 

**7.****                                      WarrantyReserve**

 

Sales of the Company’s equipment are subjectto a warranty.  Equipment warrantiestypically extend for a period of twelve months from the date ofinstallation.  The Company includesstandard warranty terms in customer contracts. Under the terms of these warranties, the Company is obligated to repairor replace any components or assemblies that it deems defective in workmanshipor materials.  The Company reserves theright to reject warranty claims where it determines that failure is due tonormal wear, customer modifications, improper maintenance or misuse.  The Company maintains a warranty reserve thatreflects the estimated expenses that it will incur to honor the warranties onits products.  The Company adjusts thewarranty reserve based on the number and type of equipment that is subject towarranty, adjusted for the remaining months of warranty coverage.  The warranty reserve adjustment reflects theCompany’s historical warranty experience based on type of equipment.  Warranty provisions for the six months ended April 30,2005 and 2004 were as follows:

 
| ** **                    | ** ** | **Six Months Ended April 30,** | ** ** |
|-------------------------------|------------|-------------------------------------|------------|
| **(In thousands)**            | ** ** | **2005**                            | ** ** | **2004** | ** ** |
| Balance,  beginning of period |       | $                                   | 155        |   | $ | 133 |   |
| Warranty  provisions          |       | 141                                 |       | 114 |   |
| Warranty  claims              |       | (131                                | )          | (113 | ) |
| Balance, end  of period       |       | $                                   | 165        |   | $ | 134 |   |

 

**8.****                                      NetLoss per Share**

 

Basic loss per share is computed by dividingnet loss by the weighted average shares outstanding during the reportingperiod.  Diluted loss per share iscomputed similarly to basic loss per share except that the weighted averageshares outstanding are increased to include additional shares from the assumedexercise of stock options and warrants, if dilutive.  The number of additional shares is calculatedby assuming that outstanding stock options or warrants were exercised and thatthe proceeds from the exercise were used to acquire shares of common stock atthe average market price during the reporting period.  As a result of the net losses, there were nodilutive common shares outstanding for the three and six months ended April 30,2005 and 2004.

 

The Company had warrants outstanding at April 30,2005 and 2004 to purchase 179,481 and 179,537 shares, respectively, of itscommon stock that were considered antidilutive and therefore not considered tohave been exercised.  The Company alsohad options outstanding at April 30, 2005 and 2004 to purchase 482,800 and373,800 shares, respectively, of its common stock that were consideredantidilutive and therefore not considered exercised.  Of those options, 120,000 options outstandinghave an exercise price of $2.00 per share and the Company stock closed at $2.22per share on April 30, 2005.

 

8

----

 

**9.****                                      DiscontinuedOperations and Litigation**

 

During the period from October 1990through March 2000, the Company was engaged in the development, design,manufacture and sale of implantable cardioverter defibrillator (“ICD”)systems.  ICDs are electronic devicesthat are implanted within the body and are connected to the heart withdefibrillator leads.  They are designedto treat abnormally rapid heartbeats or tachycardia in the ventricular (orlower) chambers of the heart by monitoring the patient’s heartbeat and, in theevent of tachycardia, delivering an electrical shock to return the heartbeat tonormal rhythm.

 

During March 2000, the Company announcedits decision to discontinue the development, manufacture and distribution ofICDs.  Accordingly, the Company accountsfor the ICD business as a discontinued operation and amounts in the financialstatements and related notes for all periods shown reflect discontinued operationsaccounting.

 

In June 2002,ELA Medical, a former partner of Angeion in a joint venture that manufacturedand distributed ICDs, advised Angeion that some of the ICDs formerlymanufactured by Angeion were experiencing premature battery depletion and that14 had been explanted.  In accordancewith FDA procedures, Angeion instituted a field corrective action and recall oncertain of the ICDs.

 

In June 2003,ELA Medical sought reimbursement from Angeion for the cost of explanting andreplacing the ICDs.  Angeion advised itsinsurance carrier of the ELA Medical claim and sought coverage of the claim.

 

On September 13, 2004, the basicinsurer, Medmarc Casualty Insurance Company, advised Angeion that Medmarc wasdenying insurance coverage to Angeion for the claim by ELA Medical.  In addition, on September 13, 2004,Medmarc commenced a declaratory judgment action against Angeion and ELA Medicalin United States District Court for the District of Minnesota seeking adeclaratory judgment that Medmarc’s interpretation of the policy iscorrect.  In the lawsuit, ELA Medicalfiled a cross-claim against Angeion for the costs and expenses it incurred inconnection with the recall in the equivalent amount of $1,665,068.

 

Angeion has denied liability to ELA Medicaland has counterclaimed against Medmarc and is seeking a declaratory judgmentthat Medmarc is liable (i) to Angeion for any amount that it is requiredto pay to ELA Medical, and (ii) for any fees and expenses that Angeion hasincurred in connection with defense of the cross-claim by ELA Medical and thedeclaratory action by Medmarc.  Angeionvigorously intends to pursue its available defenses against ELA Medical and itasserts that Medmarc is required to provide Angeion insurance coverage withrespect to these matters.

 

The lawsuit is currently in the discoverystage.  A summary judgment argumentmotion has been scheduled for June 24, 2005 on cross motions by theCompany and Medmarc over whether or not Medmarc has a “duty to defend” theCompany in the claim brought by ELA Medical. The Company expects a decision within 90 days after the oralargument.  The Company expects that anytrial in this matter will not occur until the spring of 2006.

 

The Company believes thatalthough it may have some liability to ELA Medical, for several reasons, it isnot liable to ELA Medical for the entire amount alleged.  ELA Medical has provided detailed information in support ofthe claimed amount associated with explantations that have taken place through March 31,2004.  The Company has receivedsufficient information to reasonably estimate a range of expected loss based onthe fact that (i) ELA Medical may not be able to substantiate theentire amount of the claim, (ii) a portion of the claimed amount is forexplantations that appear to have 

 

9

----

 

been outside of the guidelines provided bythe Company and approved by the FDA, (iii) the amounts for theexplantations vary widely and some of the claimed amounts may not ultimately bedetermined as reasonable, and (iv) some ICDs remain implanted inpatients.  As a result of these factors,the Company determined a range of possible losses associated with the claim andrecorded the minimum amount of the range. The current liability of discontinued operations is $989,000 at April 30,2005.  This amount includes the minimumamount of the claim as discussed above together with other related expenses,including legal fees.

 

The Companyevaluated its claim for potential recovery from product liability insuranceseparately from its evaluation of the liability for possible losses associatedwith the claim.  As a result of thatevaluation, the Company has recorded a receivable for an estimated amountrecoverable from product liability insurance, including insurance coverage forrecalls that the Company carried for the ICD products.

 

The Companyconsidered a number of relevant facts in determining that it had a valid claimfor an insurance recovery and that realization of that claim for recovery wasprobable.  The following facts wereanalyzed and considered in this evaluation of the claim for recovery:

 

1.                 In a letter dated September2, 2003, Medmarc Insurance Company initially advised Angeion that there wascoverage, at least in part, and ultimately established a reserve for thatcoverage.

2.               The Companyreceived written claims loss reports from Medmarc stating that the insurer hadestablished a total reserve of $425,000 as of September 30, 2003 and thatMedmarc had increased the reserve to $1,025,000 as of March 31, 2004.

3.               When the insurancepolicy was originally purchased and in response to Angeion’s specific requestfor product recall expense coverage, Medmarc amended its standard insurancepolicy by adding unique endorsements that were drafted by Medmarc to provide “Coveragefor Product Recall-Related Medical Expenses.” This was done primarily through two endorsements that  together greatly expanded the ordinarydefinition of “bodily injury” to include, among other things, “the cost ofreasonable and necessary medical expenses attributable to the withdrawal of theICDs, including any physical examinations and surgical expenses.”

4.               Most of Medmarc’sarguments simply ignore the recall-related expense coverage endorsements thatwere drafted by Medmarc.

 

As stated above, in September 2004, overone year after being served notice with the claim, Medmarc advised the Companythat it was denying coverage and commenced a court action against the Companyseeking a declaratory judgment that Medmarc’s interpretation of the policy wascorrect.  Subsequent to this action, theCompany worked closely with outside legal counsel to determine the probabilityand estimated amount of recoverability of insurance from Medmarc now that therecovery was subject to litigation.  Thisincluded consultation with attorneys that practice in the areas of insurancecontractual matters and related litigation. Based on these consultations and the analysis described above, theCompany and its outside counsel continue to believe that it is probable that arecovery will occur against the insurer.

 

The Companydetermined the amount to recognize as recoverable by analyzing the range ofprobable recoveries that included (i) the claim, (ii) theself-insured retention obligation under the policy, and (iii) legalfees.  The Company considered eachelement separately and based on the information provided by outside counsel,determined 

 

10

----

 

andrecorded the minimum amount of the range for each element.  As of April 30, 2005, the entire$700,000 balance of current assets of discontinued operations representselements related to the claim for recovery from product liability insurance.

 

During thesecond quarter of 2005, the Company determined that there were no changes infacts or circumstances that would require adjustment of the current assets ofdiscontinued operations or current liabilities of discontinued operations as ofApril 30, 2005.

 

The ultimateamount of both the liability due to ELA Medical and the amount recoverable frominsurance carriers are subject to future development and additionalinformation.  The amounts currentlyestimated for the claim and associated expenses as well as the probable insurancerecovery are based on data provided by ELA Medical for explantations thatoccurred through March 31, 2004 and other information related to the causeof the battery depletion.  As of March 29,2005, 35 of the original 122 ICDs remained implanted in patients in the UnitedStates.  As of August 31, 2004, themost recent date for which data is available, 110 of the original 261 ICDsremained implanted in patients outside of the United States.  Since some devices remain implanted inpatients, the Company is not able to estimate the ultimate amount of the claimand has not included the cost of future explantations in its liability forpossible losses associated with the claim. While it is not possible to predictthe ultimate amount of the claim or the associated expenses, the Companybelieves that if the amount of the claim increases, the amount recoverable fromthe insurance company would also increase. In addition, the Company’s liability insurance coverage for claimsassociated with its ICD products expires on July 11, 2005.

 

The Companymay incur additional expenses, which could be substantial, in connection withany purchase of insurance coverage beyond July 11, 2005.

 

If the Companydoes not prevail in its case against Medmarc Insurance Company, it wouldimmediately seek to negotiate a settlement with ELA Medical. The Companybelieves that it could negotiate a settlement and structure a payment scheduleacceptable to both parties. Moreover, the Company also believes that additionalinsurance coverage beyond July 11, 2005 can be purchased and financed withexisting cash.

 

11

----

 

**Item 2.****  Management’s Discussionand Analysis or Plan of Operation.**

 

# **Forward-LookingStatements and Risk Factors**

#  

Statements included in this Quarterly Reporton Form 10-QSB that are not historical or current facts are “forward-lookingstatements” made pursuant to the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. The words “believe,” “expect,” “will,” “can,” “estimate,” “anticipate,”and similar expressions are intended to identify forward-lookingstatements.  Forward-looking statementsare subject to certain risks and uncertainties that could cause actual resultsto differ materially including the following: (i) the Company’s ability tosuccessfully operate its Medical Graphics business including its ability todevelop, improve and update its cardiorespiratory diagnostic products, (ii) theCompany’s ability to successfully introduce its New Leaf products including itsNew Leaf Weight Loss Program, (iii) the Company’s ability to successfullydefend itself from product liability claims related to its Medical Graphics andNew Leaf products or claims associated with its prior cardiac stimulationproducts, (iv) the Company’s ability to protect its intellectual property,and (v) the Company’s dependence on third party vendors and any otherfactors not now anticipated.

 

From time to time, the Company through itsmanagement may make oral forward-looking statements.  The Company undertakes no obligation to updateany forward-looking statement. Additional information with respect to the risks and uncertainties facedby the Company may be found in, and the prior discussion is qualified in itsentirety by, the other risk factors that are described from time to time inAngeion’s Securities and Exchange Commission reports, including but not limitedto the Annual Report on Form 10-KSB for the year ended October 31,2004, and subsequently filed reports.

 

In addition to the risk factors anduncertainties set forth above and in our Annual Report on Form 10-KSB,the Company believes that the following factors are relevant.

 

***Discontinued Operations, Product LiabilityInsurance and Litigation.****** ***The testing, manufacturing, marketing and sale of medicaldevices involve risk of liability claims and product recalls.  ICD products that the Company sold in thepast are highly complex and were used in medical procedures and in situationswhere there is a potential risk of serious injury, adverse side effects ordeath.  As a result, the Companycurrently carries product liability insurance covering its products, includingits former ICD products, with policy limits per occurrence and in the aggregatethat the Company has deemed to be sufficient. The Company cannot predict, however, whether this insurance issufficient, or if not, whether the Company will be able to obtain sufficientinsurance, to cover the risks associated with the Company’s business or whethersuch insurance will be available at premiums that are commercially reasonable.  Although the Company has discontinued its ICDbusiness, a successful claim against or settlement by the Company in excess ofits insurance coverage or the Company’s inability to maintain insurance in thefuture could have a material adverse effect on the Company’s business, resultsof operations, liquidity and financial condition.

 

The Company has received a claim forindemnification from ELA Medical, Inc. for expenses incurred by ELAMedical in connection with ICDs formerly manufactured by the Company.  Although the Company believes its productliability insurance covers the potential liability associated with the ELAMedical claim, subject to applicable self-retention, there can be no assurancethat the Company will not be subject to other claims in the future.

 

On September 13, 2004, the basicinsurer, Medmarc Casualty Insurance Company, advised Angeion that Medmarc wasdenying insurance coverage to Angeion for the claim by ELA Medical, Inc.  In addition, on September 13, 2004,Medmarc commenced a declaratory judgment action against Angeion and ELA Medicalin United States District Court for the District of Minnesota seeking adeclaratory 

 

12

----

 

judgment thatMedmarc’s interpretation of the policy is correct.  In the lawsuit, ELA Medical has entered across-claim against Angeion for the costs and expenses it incurred inconnection with the recall in the equivalent amount of $1,665,068.

 

During the years ended October 31, 2004and 2003, the Company recorded losses in discontinued operations of $901,000and $235,000, respectively, to reflect an impairment of the ICD patents, itsliability for expenses associated with the claim by ELA Medical forreimbursement of costs related to ICD’s formerly manufactured by the Companyand related matters.  See Note 9, “DiscontinuedOperations and Litigation,” in Notes to Consolidated Financial Statements and Part II,Item 1, Legal Proceedings in this Form 10-QSB.

 

***Intangible Assets***.  The Company assesses the impairment ofidentifiable intangible assets at least annually or whenever events or changesin circumstances indicate that the carrying value may not be recoverable.  The Company initially evaluates therecoverability of intangible assets based on fair value techniques, mainlyundiscounted cash flows.  If the Companydetermines that the carrying value of intangible assets may not be recoverable,it measures any impairment based on a projected discounted cash flow methodusing a discount rate determined by management to be commensurate with the riskinherent in the current business model or another valuation technique.  There can be no assurance that businesscircumstances will not change or that projected future cash flows will besufficient to justify the carrying value of intangible assets, in which casethe Company would be required to recognize an impairment charge for a portionor all of the intangible assets.  SeeNote 6, “Intangible Assets,” in Notes to Consolidated Financial Statements inthis Form 10-QSB.

 

# **Overview**

#  

Angeion Corporation is a medical productscompany with reported revenue of $20.7 million for the year ended October 31,2004.  Domestic product sales and servicerevenues accounted for 82.8% of revenue for the year ended October 31,2004 while international product sales accounted for the remaining 17.2%.

 

The Company, through its Medical GraphicsCorporation subsidiary, designs non-invasive diagnostic systems under the “MedGraphics”trade name that assist health care professionals in the prevention, earlydetection and cost-effective treatment of heart and lung disease.  It also markets a version of some of theseproducts under the New Leaf brand to health and fitness clubs and personaltrainers to assist them in developing exercise programs to help their clientsmeet their personal goals.  Revenuesconsist of equipment and supply sales and service revenues.  Equipment and supply sales reflect sales ofMedical Graphics’ non-invasive cardiorespiratory diagnostic equipment, sales ofNew Leaf health and fitness products, and aftermarket sales of peripherals andsupplies.  Service revenues reflectrevenues from extended service contracts, non-warranty service visits andtraining.

 

Total revenue for the quarter ended April 30,2005 of $6.0 million increased by 21.7% over revenue of $5.0 million for2004.  The loss from continuingoperations of $238,000 for the three months ended April 30, 2005 was 55%less than the $529,000 loss from continuing operations for the same period in2004.  Overall operating expenses forboth the three and six months ended April 30, 2005 exceed comparableamounts for 2004 due to planned increases in sales and marketing expenses tosupport the growth in all of the Company’s products and the launch of its newcardiorespiratory diagnostic products.

 

The Company has now posted year over yeartotal revenue growth on a quarterly basis during nine out of the last tenquarters.  Domestic customers arecontinuing their strong pace of replacing older cardiorespiratory systems withnew models that have improved technology. The Company expects this demand for new equipment to continue for thebalance of 2005.  In addition, theCompany is selling its 

 

13

----

 

cardiorespiratorysystems to new customers, including physicians’ offices that are interested inexpanding their services.  The Company’sNew Leaf products continued to gain traction as new sites are added andconsumers become more aware of the of the metabolic testing programs and theircapabilities.  The Company remainsfocused on refining its marketing efforts for expanding the distribution of NewLeaf fitness products.

 

During the second quarter of 2005, theCompany began shipping two more Ultima Series products, the Ultima PF andUltima PFX.  These two new productsupdate two existing products and are designed to expand the target market.  The Ultima Series of products featurenew technology to improve performance and reliability.  Early customer response to these new productshas been very positive.  We also beganshipping the first production units of another new product, the CPFS/D-USBspirometer, during the second quarter of 2005. Customer response to this new spirometer has been excellent, bothdomestically and internationally.

 

The Company is continuing its effort toresolve issues related to the indemnification claim for some of the ICD’sformerly manufactured by the Company that experienced premature batterydepletion.  See Note 9, “DiscontinuedOperations and Litigation,” Notes to Consolidated Financial Statements in this Form 10-QSBfor additional discussion of that matter.

 

# **Results ofOperations**

#  

Angeion Corporation recorded a net loss of$238,000 for the three months ended April 30, 2005 compared to a net lossof $879,000 for the same period in 2004. For the six months ended April 30, the Company recorded net lossesof $949,000 and $1.6 million for 2005 and 2004, respectively.  The losses for the three and six months endedApril 30, 2004 included a loss from discontinued operations of $350,000.

 

**Revenue**

 

Total revenue increased by 21.7% to $6.0million from $5.0 million for the three months ended April 30, 2005 and2004, respectively.  Domestic productrevenue increased by 44.8% to $4.4 million in 2005 compared to $3.0 million in2004.  Internationally, product revenuedecreased 9.0% to $978,000 in 2005 from $1.1 million in 2004.  Service revenue decreased 21.7% to $665,000in 2005 from $849,000 in 2004.

 

For the six months ended April 30, totalrevenue increased 16.3% to $11.1 million in 2005 compared to $9.5 million in2004.  Domestic product revenue increasedby 30.0% to $7.9 million in 2005 compared to $6.1 million in 2004.  Internationally, product revenue decreased7.3% to $1.7 million in 2005 from $1.8 million in 2004.  Service revenue decreased 9.3% to $1.4million in 2005 from $1.6 million in 2004.

 

Demand for both cardiorespiratory productsystems and New Leaf products has remained strong throughout the first andsecond quarters  Customer orders forcardiorespiratory product systems have remained strong as customers replaceolder equipment with newer equipment that has improved technology.  The Company began shipping the first units ofits new Ultima PF and Ultima PFX cardiorespiratory systems during the month ofApril.  Early customer acceptance ofthese new products has been favorable. The Company’s New Leaf health and fitness products have also had twostrong quarters due to broadening consumer acceptance of these newproducts.  In particular, the addition ofsites resulting from new contracts with Life Time Fitness and Equinox FitnessClubs contributed to growth during the second quarter.

 

14

----

 

International product revenue, currentlyrepresenting about 15% of total revenue, has decreased by 7.3% for the sixmonths ended April 30, 2005 compared to 2004.  Regional performance has been mixed.  Latin America continues to suffer from weakeconomies and devaluated currencies with recovery still anticipated to beconsistent but gradual.  Competitivepressures remain strong in Europe and throughout the rest of the world.  Moreover, the Company’s new products aresubject to regulatory approval before they can be sold in certain countries.

 

Service revenue decreased during the secondquarter of 2005 compared to 2004 due to the relatively aggressive pace thatcustomers are replacing older equipment with the Company’s new models, therebyreducing revenue from extended service contracts and non-warranty servicevisits.

 

**Gross Margin**

 

Gross margin percentage for the three monthsended April 30, 2005 increased to 49.5% of revenue compared to 46.5% forthe same period in 2004.  For the sixmonths ended April 30, gross margin percentage increased to 48.1% from45.9% for 2005 and 2004, respectively.  Theoverall improvement in gross margin percentages is due to improvedmanufacturing efficiencies associated with increased revenue together withimproved gross margins on the Company’s new products.

 

**Selling and Marketing**

 

Selling and marketing expenses for the threemonths ended April 30 increased by 20.3% to $1.9 million in 2005 comparedto $1.5 million in 2004.  For the sixmonths ended April 30, selling and marketing expenses increased by 16.2%to $3.6 million in 2005 compared to $3.1 million in 2004.

 

The increase in selling and marketingexpenses was planned as we increased personnel in support of selling all of theCompany’s products.  The 30% increase indomestic sales for the first six months of 2005 is also driving a 27% increasein commission expenses.  In addition, theCompany has increased its marketing expenses associated with the introductionof new cardiorespiratory products by $89,000 and $166,000 for the three and sixmonths ended April 30, 2005, respectively.

 

**General and Administrative**

 

General and administrative expenses for thethree months ended April 30 increased to $614,000 in 2005 compared to$611,000 in 2004.  For the six monthsended April 30, general and administrative expenses for 2005 of $1.3million were comparable to 2004.

 

Overall general and administrative expensesincluded reductions in bad debt expenses of $35,000 and $38,000 for the firstand second quarters, respectively, of 2005. These reductions are partially offset by consulting costs associatedwith Sarbanes-Oxley compliance mandates of $32,000 and $21,000 that wereincurred during the first and second quarters, respectively, of 2005.  In addition, the Company incurred increasedlegal expenses associated with an increased level of business activity duringthe second quarter of 2005.

 

**Research and Development**

 

Research and development expenses for thethree months ended April 30 increased by 26.5% to $559,000 in 2005 from$442,000 in 2004.  For the six monthsended April 30, research and development expenses increased by 23.5% to$1.0 million in 2005 compared to $840,000 in 2004.

 

The increase in research and developmentexpenses is due to increased personnel expenses together with project costsassociated with developing additional cardiorespiratory diagnostic products.  

 

15

----

 

The CPFS/D-USB spirometer wasreleased for sale at the end of the first quarter of 2005.  In addition, the new Ultima PF and Ultima PFXproducts were sold for the first time during the second quarter of 2005.

 

**Amortization of Intangibles**

 

Amortization of intangibles, consistingprimarily of developed technology, for the three months ended April 30decreased to $203,000 in 2005 compared to $238,000 in 2004.  For the six months ended April 30,amortization expense decreased to $406,000 in 2005 compared to $476,000 in2004.  The decrease in amortizationexpense resulted from the fact that the Company incurred a $243,000 impairmentcharge to its ICD patents during the fourth quarter of 2004.

 

**Discontinued Operations**

 

The Company determined that no furtheradjustments are necessary at April 30, 2005 for either the current assetsor current liabilities associated with the ELA Medical claim.  The $350,000 loss from discontinuedoperations, net of income taxes, for the three and six months ended April 30,2004 represented adjustments associated with the ELA Medical claim and thepurchase of liability insurance coverage for claims associated with itsdiscontinued ICD products.  Foradditional details, see Note 9, “Discontinued Operations and Litigation,” Notesto Consolidated Financial Statements in this Form 10-QSB.

 

**Liquidity and Capital Resources**

 

The Company has financed its liquidity needsover the past several years through revenue generated by the operations of itswholly owned subsidiary, Medical Graphics Corporation, through revenue fromlicense agreements for patented ICD technology and through the use of cashbalances.

 

The Company had cash of $2.1 million andworking capital of $4.8 million as of April 30, 2005.  During the six months ended April 30,2005, the Company used $71,000 in cash for continuing operations, partly as aresult of its net loss of $949,000, which was partially offset by $628,000 ofdepreciation and amortization.  Cash wasgenerated by a decrease of $195,000 in accounts receivable and increases of$66,000 and $53,000 in accounts payable and employee compensation,respectively.  Cash was used for anincrease of $209,000 in inventory.  Thisuse of cash was partially offset with cash generated by changes in othercurrent asset and liability balances.  Inaddition, the Company used $103,000 in cash for discontinued operations, whichincluded legal fees and other related expenses.

 

During the three months ended April 30,2005, the Company used $163,000 in cash for investing activities to purchaseproperty and equipment.  The Company hasno material commitments for capital expenditures for the remainder of fiscalyear 2005.

 

With respect to the ELA Medical claimassociated with the discontinued ICD products, the Company vigorously intendsto pursue its available defenses against ELA Medical and believes that Medmarcis required to provide insurance coverage with respect to these matters.  The lawsuit is just beginning and iscurrently only in the discovery stage. The Company expects that any trial in this matter will not occur untilthe spring of 2006.  The ultimate amountof both the liability due to ELA Medical and the amount recoverable from theinsurance carriers are subject to future development and additionalinformation.  It is always possible thatthe Company will not prevail in this effort and the resulting expenses could besubstantial.  Furthermore, the Company’sliability insurance coverage for claims associated with its ICD products expireson July 11, 2005.  The Company mayincur additional expenses, which could be substantial, in connection with anypurchase of insurance coverage beyond July 11, 2005.  

 

16

----

 

For additional details, see Note 9, “Discontinued Operations andLitigation,” Notes to Consolidated Financial Statements in this Form 10-QSB.

 

The Company expects that itscontinuing operating results will be cash flow positive for fiscal 2005.  Subject to the ELA Medical claim discussedabove, the Company believes that its liquidity and capital resource needs forfiscal year 2005 will be met through its current cash and cash equivalents andcash flows from operations.

 

If the Company does notprevail in its case against Medmarc Insurance Company, it would immediatelyseek to negotiate a settlement with ELA Medical.  The Company believes that it could negotiatea settlement and structure a payment schedule acceptable to bothparties.  Moreover, the Company alsobelieves that additional insurance coverage beyond July 11, 2005 can bepurchased and financed with existing cash.

 

If the cash flows fromcontinuing operating results prove insufficient to satisfy payment of bothsettlement costs and additional insurance coverage, the Company would adjustits investment spending in support of new products.

 

### **OtherCommitments**

 

The Company has made various financialcommitments in the ordinary course of conducting its business operations.  The following table summarizes allsignificant commitments as of April 30, 2005:

 
| ** **                                                | ** ** | **Payments due by period (in  thousands)** | ** ** |
|-----------------------------------------------------------|------------|--------------------------------------------|------------|
| **Contractual Obligations**                               | ** ** | **Total**                                  | ** ** | **Six  months  ending  October  31, 2005** | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **More than  5 years** | ** ** |
|                                                      |       |                                       |       |   |   |   |   |   |   |   |   |
| Operating  lease obligations                              |       | $                                          | 1,575      |   | $ | 182 |   | $ | 750 |   | $ | 634 |   | $ | 9 |   |
| Minimum  royalty payments for sales of AeroSport products |       | 167                                        |       | 50 |   | 117 |   | — |   | — |   |
|                                                      |       | $                                          | 1,742      |   | $ | 232 |   | $ | 867 |   | $ | 634 |   | $ | 9 |   |

 

### **Item 3.**  Controlsand Procedures.

 

**(a)****                               Evaluationof Disclosure Controls and Procedures**

 

Management,with the participation of the Company’s chief executive officer, Rodney A.Young, and chief financial officer, Dale H. Johnson, has evaluated theeffectiveness of the design and operation of the disclosure controls andprocedures, as defined in Rules 13a-15(e) under the SecuritiesExchange Act of 1934, as of the end of the period covered by this report.  Management has concluded that the Company’sdisclosure controls and procedures are effective to ensure that informationrequired to be disclosed in the reports that the Company files under theExchange Act is recorded, processed, summarized and reported within the timeperiods specified in the rules and forms of the SEC and that thedisclosure controls are also effective to ensure that information required tobe disclosed in the Company’s Exchange Act reports is accumulated andcommunicated to management, including the chief executive officer and chieffinancial officer, to allow timely decisions regarding required disclosure.

 

17

----

 

**(b)****                                Changesin Internal Controls**

 

There have been no significant changes in internal control overfinancial reporting that occurred during the fiscal quarter covered by thisreport that have materially affected, or are reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting.

 

18

----

 

**PART II- OTHER INFORMATION**

 

**Item 1.****  Legal Proceedings.**

 

The Company is subject to certain claims andlawsuits that have been filed in the ordinary course of business.  From time to time, the Company brings suitagainst others to enforce patent rights or to collect debts in the ordinarycourse of business.  Except as notedbelow, the ultimate settlement of any pending legal matter will not have amaterial impact on the Company or its financial statements.

 

As disclosed in Item 3 of the Form 10-KSBfor the year ended October 31, 2004, the Company is involved in a lawsuitbrought by Medmarc Insurance Company in United States District Court for theDistrict of Minnesota involving a claim for indemnification by ELA Medical andthe Company’s claim for insurance coverage from Medmarc.

 

Although the lawsuit is currently in thediscovery stage, a summary judgment argument motion has been scheduled for June 24,2005 on cross motions by the Company and Medmarc whether or not Medmarc has a “dutyto defend” the Company in the claim brought by ELA Medical.  The Company expects a decision within 90 daysafter the oral argument.  The Companyexpects that any trial in this matter will not occur until the spring of 2006.

 

See Note 9, “DiscontinuedOperations and Litigation,” Notes to Consolidated Financial Statements in this Form 10-QSBfor additional discussion of that matter.

 

**Item 2.****  Unregistered Sales of Equity Securities and Use of Proceeds.**

 

# ***Recent Sales of Unregistered Securities***

#  

The Company had no unregistered sales ofequity securities during the three months ended April 30, 2005.

 

##### ***Small Business Issuer Purchases of EquitySecurities***

#####  

The Company did not purchase any equitysecurities during the three months ended April 30, 2005.

 

### **Item 3.**  Defaults Upon SeniorSecurities.

 

None

 

**Item 4.****  Submission of Matters to a Vote of Security Holders.**

 

None

 

**Item 5.****  Other Information.**

 

# **None**

 

19

----

 

**Item 6.****  Exhibits.**

 
| (a)    |   | The following exhibits are included herein: |
|--------|--------|---------------------------------------------|
|   |   |                                        |
|   |   | 31                                          | Certifications  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14  and 15d-14 of the Exchange Act). |
|   |   | 32                                          | Certifications  pursuant Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.  §1350). |
|   |   | 99.1                                        | Press  release dated June 14, 2005 reporting Angeion Corporation results of  operations for the three and six months ended April 30, 2005. |

 

20

----

 

**SIGNATURES**

 

In accordance with the requirements of the Exchange Act, the registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 
|   | Angeion Corporation                   |
|--------|---------------------------------------|
|   | (Registrant)                          |
|   |                                  |
|   |                                  |
| Date:  | June 14, 2005                    |   | /s/ Rodney A. Young |   |
|   | Rodney A. Young                       |
|   | President and Chief Executive Officer |
|   | (Principal Executive Officer)         |
|   |                                  |
|   |                                  |
| Date:  | June 14, 2005                    |   | /s/ Dale H. Johnson |   |
|   | Dale H. Johnson                       |
|   | Chief Financial Officer               |
|   | (Chief Accounting Officer)            |
|        |                                       |  |  |  |  |

 

21

----