SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
COMMISSION FILE NO. 0-18602
ATS MEDICAL, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1595629
(state or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3905 ANNAPOLIS LANE, SUITE 105 55447
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 553-7736
Former name, if changed since last report: N/A
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 ___
The number of shares outstanding of each of the registrant's classes of
common stock as of November 4, 1998 was:
Common Stock $.01 par value 17,787,262 shares
<PAGE>
ATS MEDICAL, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Statements of Financial Position - 3
September 30, 1998 (unaudited) and
December 31, 1997
Statements of Operations - 4
Three Months and Nine Months Ended
September 30, 1998 and 1997 (unaudited)
Statements of Cash Flows - 5
Nine Months Ended September 30, 1998 and
1997 (unaudited)
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 13
Market Risk
PART II. OTHER INFORMATION 14
Signatures 15
<PAGE>
ITEM 1 FINANCIAL STATEMENTS
ATS MEDICAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
(Unaudited) (Note)
CURRENT ASSETS
Cash & cash equivalents $ 9,076,310 $ 4,568,332
Marketable securities 14,347,044 20,982,176
------------ ------------
23,423,354 25,550,508
Accounts receivable, less allowance of $180,000
in 1998 and $260,000 in 1997 6,072,260 4,446,834
Inventories 26,436,578 22,686,273
Prepaid expenses 506,774 555,570
------------ ------------
TOTAL CURRENT ASSETS 56,438,966 53,239,185
FURNITURE, MACHINERY & EQUIPMENT 2,305,389 2,023,646
Less accumulated depreciation 1,370,414 1,247,459
------------ ------------
934,975 776,187
OTHER ASSETS 382,208 370,659
------------ ------------
TOTAL ASSETS $ 57,756,149 $ 54,386,031
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,344,552 $ 621,708
Accrued payroll and expenses 258,319 241,584
------------ ------------
TOTAL CURRENT LIABILITIES 2,602,871 863,292
LONG-TERM DEBT 0 0
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value:
Authorized 40,000,000 shares; Issued and
outstanding 17,783,258 & 17,589,058 at
Sept 30, 1998 and Dec 31, 1997, respectively 177,833 175,891
Additional paid-in capital 71,219,750 71,797,797
Other 45,536 40,306
Retained earnings (deficit) (16,289,841) (18,491,255)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 55,153,278 53,522,739
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 57,756,149 $ 54,386,031
============ ============
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed financial statements.
<PAGE>
ATS MEDICAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
---------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Net sales $ 4,138,721 $ 3,469,000 $12,953,042 $10,608,880
Less cost of goods sold 2,593,159 2,252,546 8,048,109 6,722,217
----------- ----------- ----------- -----------
GROSS PROFIT 1,545,562 1,216,454 4,904,933 3,886,663
OPERATING EXPENSES
Research, development and engineering 355,462 284,053 1,096,218 780,812
Selling, general and administrative 827,812 991,389 2,650,014 2,512,717
----------- ----------- ----------- -----------
TOTAL EXPENSES 1,183,274 1,275,442 3,746,232 3,293,529
Interest income 344,951 364,459 1,042,713 949,547
----------- ----------- ----------- -----------
NET INCOME $ 707,239 $ 305,471 $ 2,201,414 $ 1,542,681
=========== =========== =========== ===========
Net income per share:
Basic $ 0.04 $ 0.02 $ 0.12 $ 0.09
=========== =========== =========== ===========
Diluted $ 0.04 $ 0.02 $ 0.12 $ 0.09
=========== =========== =========== ===========
Weighted average number of shares
outstanding during the period:
Basic 17,777,790 17,562,231 17,722,858 17,184,472
=========== =========== =========== ===========
Diluted 18,107,666 18,112,660 18,153,622 17,781,033
=========== =========== =========== ===========
</TABLE>
<PAGE>
ATS MEDICAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,201,414 $ 1,542,681
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 196,090 186,478
Loss on disposal of equipment 1,420 48,225
Changes in operating assets and liabilities:
Accounts receivable (1,625,426) (696,898)
Prepaid expenses 48,796 220,753
Other assets (11,549) (41,835)
Inventories (3,750,305) (2,964,131)
Accounts payable and accrued expenses 1,739,580 717,788
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,199,980) (986,939)
INVESTING ACTIVITIES
Purchase of marketable securities (16,737,404) (27,355,361)
Sale of marketable securities 23,372,536 11,500,553
Purchases of property, plant and equipment (356,298) (157,247)
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 6,278,834 (16,012,055)
FINANCING ACTIVITIES
Net proceeds from sale of common stock (576,106) 19,460,344
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (576,106) 19,460,344
Effect of exchange rate changes on cash 5,230 (12,494)
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 4,507,978 2,448,856
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,568,332 2,320,010
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,076,310 $ 4,768,866
============ ============
</TABLE>
<PAGE>
ATS MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1998
Note A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month and nine month periods ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1998.
Note B - NET INCOME PER SHARE
Net income per share is computed using the weighted average number of common
shares outstanding and dilutive common stock equivalents, if applicable. In
February 1997, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 128, "EARNINGS PER SHARE." This Statement replaces the
presentation of primary earnings per share (EPS) with basic EPS and also
requires dual presentation of basic and diluted EPS for entities with complex
capital structures. This Statement is effective for the fiscal year ended
December 31, 1997. All EPS amounts for all periods have been presented, and
where necessary, restated to conform the the Statement 128 requirements.
<PAGE>
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
September 30 September 30
1998 1997 1998 1997
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Numerator:
Net Income $ 707,239 $ 305,471 $ 2,201,414 $ 1,542,681
Denominator:
Denominator for basic earnings per share-
weighted-average shares 17,777,790 17,562,231 17,722,858 17,184,472
Effect of dilutive securities:
Stock options 329,876 547,825 429,363 593,734
Warrants 0 2,604 1,401 2,827
Diluted potential common shares
Denominator for diluted
earnings per share 18,107,666 18,112,660 18,153,622 17,781,033
Basic earnings per share $ 0.04 $ 0.02 $ 0.12 $ 0.09
Diluted earnings per share $ 0.04 $ 0.02 $ 0.12 $ 0.09
</TABLE>
Note C - SEGMENT REPORTING
In June 1997, the Financial Accounting Standards Board issue Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (Statement 131), which is effective for years
beginning after December 15, 1997. Statement 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. Statement 131 is effective for financial
statements for fiscal years beginning after December 15, 1997, and therefore the
Company will adopt the new requirement retroactively in 1998. Management has not
completed its review of Statement 131, but does not anticipate that the adoption
of this statement will have a significant effect on the Company's reported
segments.
The Company's only product is a prosthetic heart valve. Segments" would involve
tabulation of geographically significant customers which tend to follow
worldwide market distribution for replacement heart valves.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ATS Medical, Inc. (the "Company") is engaged in the manufacturing and marketing
of a pyrolytic carbon bileaflet mechanical heart valve. The Company sells the
ATS Open Pivot TM valve (the "ATS Valve" or the "Valve") in international
markets and is conducting a clinical study in the United States for the
purpose of obtaining regulatory approval.
RESULTS OF OPERATIONS
Net sales for the quarter ended September 30, 1998 increased 19% to $4,138,721
compared to $3,469,000 for the quarter ended September 30, 1997. Unit sales
increased 12% in the third quarter 1998 compared to 1997. Sales in Japan were
very strong during the quarter. The quarter which ends September 30 is usually
the weakest quarter each year, not only for the Company but also for other
implantable medical device companies, as European surgical activity slows during
vacation season.
Net sales for nine months ended September 30, 1998 totaled $12,953,042 compared
to $10,608,880 for nine months ended September 30, 1997. Revenue increased about
22% and unit sales increased about 31% for the nine months ended September 30,
1998 as compared to the nine months ended September 30, 1997.
For both the third quarter and nine months of 1998 this sales growth over the
corresponding period was achieved in spite of significant price competition from
other valve manufacturers and the increased strength of the U.S. dollar relative
to almost all foreign currencies. ATS Medical, Inc. sells the valve to
distributors throughout the world in U.S. dollars. As the dollar increases in
value against the distributor's local currency, the cost of the valve increases
for the distributor even though ATS does not change the selling price.
Cost of sales for the third quarter of 1998 totaled $2,593,159 or 62.7% of sales
compared to $2,252,546 or 64.9% of sales for the second quarter of 1997. Cost of
sales for the nine months ended September 30, 1998 totaled $8,048,109 or 62.1%
of sales compared to $6,722,217 or 63.4% of sales for the nine months ended
September 30, 1997. The price of the carbon components contained in the Valves
sold in the nine months ended September 30, 1998 decreased 4% as compared to the
cost of carbon components contained in the Valves sold in the nine months ended
September 30, 1997. Based upon the Company's internal sales projections, the
price of the carbon contained in Valves sold during the remainder of 1998 is
expected to be 4% lower than in 1997.
Gross profit totaled $ 1,545,562 for the quarter ended September 30, 1998 or
37.3% of sales, compared to gross profit of $1,216,454 or 35.1% of sales for the
quarter ended September 30, 1997. Gross profit totaled $4,904,933 or 37.9% of
sales for the nine months ended September 30, 1998 compared to $3,886,663 or
36.6% of sales for the nine months ended September 30,
<PAGE>
1997. The average selling price ("ASP") increased for the quarter ended
September 30, 1998 compared to the quarter ended September 30, 1997 due to the
previously mentioned significant increase in Japanese sales. This accounted for
most of the gross profit increase. For the nine months ended September 30, 1998
average selling prices are slightly ahead of ASPs for the nine months ended
September 30, 1997. This improvement, along with the 4% decrease in carbon
component prices and operating efficiencies accounts for the gross profit
increase.
Research, development and engineering expenses totaled $355,462 for the quarter
ended September 30, 1998 versus $284,053 for the quarter ended September 30,
1997. For nine months ended September 30, 1998 research, development and
engineering expenses totaled $1,096,218 compared to $780,812 for nine months
ended September 30, 1997. The majority of the increase is related to the
clinical costs associated with the Investigational Device Exemption.
Approximately 25% and 43% of research and development expenses for the quarters
ended September 30, 1998 and 1997, respectively, were for testing and outside
consulting services related to the Valve. During the quarter and nine months
ended September 30, 1997 a large component of the expense was for development
work on an aortic valved graft ("AVG"). The AVG is a standard ATS Medical, Inc.
replacement aortic heart valve sutured at the end of a dacron tube. This product
extension is used in surgeries where the patient's aorta is damaged or
degenerated. Most other valve manufacturers provide a similar product. This
development project was completed in the fourth quarter, 1997 and there is not a
similar development project expense in 1998.
The Company began human implants in the United States under an Investigational
Device Exemption ("IDE") in January 1997. The Company sells the Valves to the
hospitals involved in the study and is eligible for reimbursement by Medicare
and most private pay insurance companies. The Company is responsible for
reimbursing the hospital for certain additional tests and procedures required by
the clinical protocol and accrues the estimated total cost of follow-up at the
time the sale is recorded as research and development expense.
Selling, general and administrative expenses totaled $827,812 for the quarter
ended September 30, 1998, a decrease from the $991,389 reported for the quarter
ended September 30, 1997. The quarter ended September 30, 1997 included $153,921
for separation pay and other expenses related to the shutdown of the Company's
subsidiary in Glasgow, Scotland. The Company had 72 employees at September 30,
1998 compared to 65 employees at September 30, 1997. The decrease in selling,
general and administrative expenses is smaller for the nine months ended
September 30, 1998 compared to 1997 in part because salaries, wages and benefits
increased 12% in 1998.
There was no interest expense incurred in the quarters or nine month periods
ended September 30, 1998 and 1997.
Interest income totaled $344,951 for the quarter ended September 30, 1998
compared to $364,459 for the quarter ended September 30, 1997. For the nine
months of 1998 interest income totaled $1,042,713 compared to $949,547 for the
first nine months of 1997. The increase in interest income for the first nine
months of 1998 was the result of more cash on hand on average to invest than
during the first nine months of 1997. Cash on hand at September 30, 1998 is
<PAGE>
less than the amount on hand September 30, 1997. Interest income for the
remainder of 1998 is expected to be less than the last quarter of 1997.
Net income totaled $707,239 for the quarter ended September 30, 1998 versus net
income of $305,471 for the quarter ended September 30, 1997. Net income totaled
$2,201,414 for the nine months ended September 30, 1998 compared to $1,542,681
for the nine months ended September 30, 1997. The $565,567 increase in operating
income for the first nine months of 1998 as compared to the first nine months of
1997 along with a $ 93,166 increase in interest income are the primary drivers
of the increased net income.
Earnings per share totaled $.04 for the quarter ended September 30, 1998
compared to $.02 for the quarter ended September 30, 1997. Earnings per share
for the first nine months of 1998 totaled $.12 compared to $.09 for the first
nine months of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities decreased by $2,127,154 from
$25,550,508 at December 31, 1997 to $23,423,354 at September 30, 1998. Inventory
purchases and accounts receivable growth less the increase in accounts payable
and net earnings caused the Company to have negative cashflow from operations.
During 1998 the Company is required to purchase $13.9 million of heart valve
components in accordance with the terms of its long term supply agreement with
CarboMedics, Inc. (the "Supply Agreement"). During the two contract years after
1998 the Company is obligated to purchase an aggregate of approximately $33
million of components. The minimum purchases under the Supply Agreement are not
tied to sales of the Company's Valve and the Company does not expect sales of
the Valve to exceed the minimum purchase requirements under the Supply Agreement
until the Valve is approved for sale in the United States by the Food and Drug
Administration.
Accounts receivable increased from $4,446,834 at December 31, 1997 to $6,072,260
at September 30, 1998. Most of the Company's sales have been to customers in
international markets and while the Company attempts to set standard 60 day
terms for receivables, competitive pressures and geographical economic
situations have caused the Company to selectively extend the terms for payment.
At September 30, 1998, the account balance for one customer was 33% of
outstanding receivables. The Company has done business with this customer since
1992 and the size of the receivable while substantial is consistent with the
growth of business in this market and in line with the size of the customer's
overall business.
Current liabilities increased from $863,292 at December 31, 1997 to $2,602,871
at September 30, 1998. The majority of the increase is in accounts payable and
is related to the amount owing to CarboMedics, Inc. under the Supply Agreement.
Based upon the Company's current rate of sales, its expected obligations under
the Supply Agreement and its expected expenses, the Company anticipates that
existing cash, cash equivalents and short-term investments will be sufficient to
satisfy its capital requirements
<PAGE>
through 2000. Beyond 2000 the Company must continue to substantially increase
revenues to meet its capital requirements. Should revenues not increase
sufficiently, the Company may be required to raise additional equity capital.
There can be no assurance that equity would be available to the Company at
favorable terms, if at all.
YEAR 2000 SITUATION
The "Year 2000 Problem" refers to a complex set of problems which may arise when
computer hardware or software is unable to distinguish between 21st century
dates and 20th century dates because the date code fields have been abbreviated
into two digits, i.e. 00. This problem could result in system failures or
miscalculations causing disruptions of business operations (including, among
other things, a temporary inability to process transactions, send invoices or
engage in other similar business activities). As a result, many companies'
computer systems and software will need to be upgraded or replaced in order to
comply with Year 2000 requirements. The potential global impact of the Year 2000
problem is not known, and, if not corrected in a timely manner, could affect the
Company and the U.S. and world economy generally.
The Company's products, including the ATS Medical heart valve, do not contain
any electronics or software and therefore will not be affected by the "Year 2000
Problem".
The Company's internal financial, manufacturing and other computer systems are
being reviewed to assess and remediate Year 2000 problems. The Company's
assessment of internal systems includes its information technology ("IT") as
well as non-IT systems (which systems contain embedded technology in
manufacturing or process control equipment containing microprocessors or other
similar circuitry). As a result of this review the Company determined that some
of its equipment and software needed to be upgraded or replaced. For the first
nine months of 1998 the Company has spent $38,757 on hardware and software some
of which was necessary to eliminate potential Year 2000 problems. In addition,
the Company will take delivery on custom measuring equipment valued at $292,000
during the fourth quarter, 1998 . The primary purpose of this equipment is to
improve processing of the Company's products but it will also contain Year 2000
compliant software. The Company's 1999 budget for hardware and software is
$205,000 including the replacement or upgrade of personal computers,
workstations and software which are not currently Year 2000 compliant.
Since substantially all of this hardware and software is being purchased from
large, industry-leading vendors (i.e. Compaq, Lotus, and Microsoft) the Company
will rely on vendor certification and internal tests to determine Year 2000
compliance as opposed to hiring consultants to perform reviews. Such
certifications and tests are scheduled to be obtained or completed by the end of
the second quarter 1999.
In addition, during the fourth quarter of 1998 and the first quarter of 1999 the
Company will be requesting assurance from its major suppliers that they are
addressing the Year 2000 problem and that products purchased by the Company from
such suppliers will function properly in the Year 2000. The Company has a
significant inventory of product components on hand, however, certain key
components for the Valve are available from a single supplier and a protracted
Year 2000 problem for this vendor could have an adverse impact on the Company.
Contacts are also being made with the Company's major customers. These contacts
with the company's suppliers and customers are intended to help mitigate the
possible external impact of the Year 2000 problem. However, it is impossible to
fully assess the potential consequences in the event service interruption from
suppliers occur or in the event that there are disruptions in such
infrastructure areas as utilities, communications, transportation, banking and
government.
<PAGE>
The total estimated cost for resolving the Company's Year 2000 issues is
approximately $536,000, of which approximately $38,800 has been spent through
September 30, 1998. The total cost estimate includes the cost of replacing
non-compliant systems as a remediation cost in cases where the Company has
accelerated plans to replace such systems. Estimates of Year 2000 costs are
based on numerous assumptions, and there can be no assurance that the estimates
are correct or that actual costs will not be materially greater than
anticipated.
Based upon its assessments to date, the Company believes it will not experience
any material disruption in its operations as a result of Year 2000 problems in
internal financial, manufacturing and other process control systems, or in its
interface with major customers and suppliers. However, if major suppliers,
including those providing component parts, electricity, communications and
transportation services, experience difficulties resulting in disruption of
critical supplies or services to the Company, a shutdown of the Company's
operations could occur for the duration of the disruption. The Company has not
yet developed contingency plans to provide for continuity of normal business
operations in the event that problem scenarios arise, but it will assess the
need to develop such plans based on the outcome of compliance areas currently
under review, and the results of remaining survey feedback from its major
suppliers and customers. Assuming no major disruption in service from critical
third party providers, the Company believes that it will be able to manage the
Year 2000 transition without any material effect on the Company's results of
operations or financial position. There can be no assurance, however, that
unexpected difficulties will not arise and, if so, that the Company will be able
to timely develop and implement a contingency plan.
THE SINGLE EUROPEAN CURRENCY
A significant portion of the Company's sales occur in Europe. Effective January
1, 1999 various European Countries will begin utilizing a single currency, "The
Euro". From January 1999 thru December 2001, merchants will be encouraged to
discontinue using local country currencies and begin using "the Euro" to
transact business. Beginning in 2002, it will be required that business in the
European Community be conducted using "The Euro". The Company sells to all of
its customers in U.S. Dollars and does not expect to have accounting system
issues relative to currency translation. The Company's selling prices are
similar to most of its European Distributors and therefore should not cause
significant disruption whether in dollars or "Euros". The Company and its
distributors have not completed an analysis of what actions competitors might
take as a result of "The Euro". Europe is a very important market for the
Company's Valve and disruption or a loss of a portion of the Company's European
business could have an adverse impact on the Company's financial position.
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about their business, so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. ATS Medical, Inc.
desires to take advantage of the safe harbor provisions with respect to any
forward-looking statements it may make in this filing, other filings with the
Securities and Exchange Commission and any public oral statements or written
releases. The words or phrases "will likely," "is expected," "will continue,"
"is anticipated," "estimate," "projected," "forecast," or similar expressions
are intended to identify forward-looking statements within the meaning of the
Act. Such statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from those projected. The Company
cautions readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made.
In accordance with the Act, the Company identifies the following important
general factors which if altered from the current status could cause the
Company's actual results to differ from those described in any forward-looking
statements: the continued acceptance of the Company's mechanical heart Valve in
international markets, the acceptance by the U.S. FDA of the Company's
regulatory submissions, the continued performance of the Company's mechanical
heart valve without structural failure, the actions of the Company's competitors
including pricing changes and new product introductions, the continued
performance of the Company's independent distributors in selling the Valve, the
actions of the Company's supplier
<PAGE>
of pyrolytic carbon components for the Valve, and the effect of the Year 2000
Problem on the Company, its customers and suppliers. This list is not
exhaustive, and the Company may supplement this list in any future filing or in
connection with the making of any specific forward-looking statement.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
Not Applicable
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
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.
Date: November 13, 1998 ATS MEDICAL, INC.
By: /s/ John H. Jungbauer
-------------------------------------
John H. Jungbauer, Vice President/CFO
(Principal Financial Officer and
Authorized Signatory)
<PAGE>
EXHIBIT INDEX
Number Description
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 9,076,310
<SECURITIES> 14,347,044
<RECEIVABLES> 6,252,117
<ALLOWANCES> 179,857
<INVENTORY> 26,436,578
<CURRENT-ASSETS> 56,438,966
<PP&E> 2,305,389
<DEPRECIATION> 1,370,414
<TOTAL-ASSETS> 57,756,149
<CURRENT-LIABILITIES> 2,602,871
<BONDS> 0
0
0
<COMMON> 177,833
<OTHER-SE> 54,975,445
<TOTAL-LIABILITY-AND-EQUITY> 57,756,149
<SALES> 12,953,042
<TOTAL-REVENUES> 12,953,042
<CGS> 8,048,109
<TOTAL-COSTS> 8,048,109
<OTHER-EXPENSES> 2,703,519
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,201,414
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,201,414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,201,414
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
