================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
_X_ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
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 August 1, 1999 was:
Common Stock $.01 par value 17,868,610 shares
<PAGE>
ATS MEDICAL, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Statements of Financial Position - 3
June 30, 1999 (unaudited) and
December 31, 1998
Statements of Operations - 4
Three Months and Six Months Ended
June 30, 1999 and 1998 (unaudited)
Statements of Cash Flows - 5
Six Months Ended June 30, 1999 and
1998 (unaudited)
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 14
Market Risk
PART II. OTHER INFORMATION 15
Signatures 16
<PAGE>
Item 1 Financial Statements
ATS MEDICAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
---------------------------------
ASSETS (Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 5,920,096 $ 7,754,077
Short-term investments 11,976,736 12,852,885
---------------------------------
17,896,832 20,606,962
Accounts receivable, less allowance of $195,000
in 1999 and $185,000 in 1998 6,099,982 5,820,699
Inventories 34,101,209 29,954,718
Prepaid expenses 381,970 458,663
---------------------------------
Total current assets 58,479,993 56,841,042
Furniture, machinery and equipment 2,485,067 2,596,311
Less accumulated depreciation 1,531,596 1,393,527
---------------------------------
953,471 1,202,784
Other assets 393,259 387,550
---------------------------------
Total assets $ 59,826,723 $ 58,431,376
=================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,135,669 $ 2,355,443
Accrued payroll and expenses 271,096 256,358
---------------------------------
Total current liabilities 2,406,765 2,611,801
Long-term debt 0 0
Shareholders' equity:
Common Stock, $.01 par value:
Authorized 40,000,000 shares; Issued and
outstanding 17,855,907 & 17,824,137 at
June 30, 1999 and Dec 31, 1998, respectively 178,559 178,241
Additional paid-in capital 71,382,687 71,249,846
Stock subscriptions receivable 0 0
Accumulated other comprehensive income 43,494 43,799
Accumulated deficit (14,184,782) (15,652,311)
---------------------------------
Total shareholders' equity 57,419,958 55,819,575
---------------------------------
Total liabilities and shareholders' equity $ 59,826,723 $ 58,431,376
=================================
</TABLE>
Note: The balance sheet at December 31, 1998 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 June 30, Six months ended June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 4,721,854 $ 4,565,601 $ 8,912,150 $ 8,814,321
Less cost of goods sold 2,937,967 2,814,975 5,484,879 5,454,949
----------- ----------- ----------- -----------
Gross profit 1,783,887 1,750,626 3,427,271 3,359,372
Expenses:
Research, development and engineering 335,707 383,478 616,717 740,756
Selling, general and administrative 898,312 898,157 1,825,617 1,822,202
----------- ----------- ----------- -----------
Total expenses 1,234,019 1,281,635 2,442,334 2,562,958
----------- ----------- ----------- -----------
Operating income 549,868 468,991 984,937 796,414
Interest income 229,650 330,567 482,593 697,761
----------- ----------- ----------- -----------
Net income $ 779,518 $ 799,558 $ 1,467,530 $ 1,494,175
=========== =========== =========== ===========
Net income per share:
Basic $ 0.04 $ 0.04 $ 0.08 $ 0.08
Diluted $ 0.04 $ 0.04 $ 0.08 $ 0.08
Weighted average number of shares outstanding:
Basic 17,848,642 17,769,818 17,841,011 17,694,873
Diluted 18,256,947 18,177,065 18,246,925 18,175,602
</TABLE>
<PAGE>
ATS MEDICAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,467,530 $ 1,494,175
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 142,810 125,560
Loss on disposal of equipment 186,037 1,420
Changes in operating assets and liabilities:
Accounts receivable (279,283) (1,233,939)
Prepaid expenses 76,693 87,675
Other assets (5,709) (6,749)
Inventories (4,146,491) (2,071,259)
Accounts payable and accrued expenses (205,036) 1,047,660
------------ ------------
Net cash used in operating activities (2,763,449) (555,457)
INVESTING ACTIVITIES
Purchase of marketable securities (7,431,973) (47,812,126)
Sale of marketable securities 8,308,122 49,685,808
Purchases of property, plant and equipment (79,534) (341,357)
------------ ------------
Net cash provided by investing activities 796,615 1,532,325
FINANCING ACTIVITIES
Net proceeds from sale of common stock 133,158 (635,702)
------------ ------------
Net cash provided by financing activities 133,158 (635,702)
Effect of exchange rate changes on cash (305) 896
------------ ------------
Increase (decrease) in cash and cash equivalents (1,833,981) 342,062
Cash and cash equivalents at beginning of period 7,754,077 4,568,332
------------ ------------
Cash and cash equivalents at end of period $ 5,920,096 $ 4,910,394
============ ============
</TABLE>
<PAGE>
ATS MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1999
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 six-month periods ended June 30, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999.
<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 and Canada for
the purpose of obtaining regulatory approval.
RESULTS OF OPERATIONS
Net sales for the quarter ended June 30, 1999 increased 3.4% to $4,721,854
compared to $4,565,601 for the quarter ended June 30, 1998. Unit sales increased
1.3% in 1999 compared to 1998. The continued volatility in foreign exchange
rates, the pressure from hospital administrators for lower prices and the
willingness of competitors to reduce prices put pressure on revenue growth and
margins. This pressure is expected to continue in the second half of 1999. The
average selling price of the Valve increased for the quarter ended June 30, 1999
compared to the quarter ended June 30, 1998 due mostly to an increase in the
number of Aortic Valved Grafts, "AVGs", sold in the 1999 quarter compared to the
1998 quarter.
Net sales for the six months ended June 30, 1999 totaled $8,912,150 which
represented a 1.1% increase over the net sales of $8,814,321 reported for the
six months ended June 30, 1998. Unit sales for the first six months of 1999
increased 2.0 % compared to the first six months of 1998.
The Company sells to independent distributors with assigned territories
(generally a specific country or region) who in turn sell the Valve to hospitals
or clinics. The Company sells in U.S. dollars so currency risk is borne by the
distributor. 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. For the six months ended June 30, 1999 the
Company's sales efforts were challenged by significant price competition from
other valve manufacturers and the increased strength of the U.S. dollar relative
to almost all foreign currencies. During 1999 and 1998 the Company was selling
Valves in most developed countries and several lesser-developed countries
("LDC's").
Since January 1997, the Company has been conducting a clinical study of the
Valve at fifteen hospitals in the United States. During the study, Valves are
provided to the hospitals at prices designed to recover some of the costs of the
clinical study.
Cost of sales for the three months ended June 30,1999 totaled $2,937,967 or
62.2% of sales compared to $2,814,975 or 61.7% of sales for the three months
ended June 30,1998. Cost of goods sold totaled $5,484,879 or 61.5% of sales for
the first six months of 1999 compared to $5,454,949 for the first six months of
1998.
Beginning in January, 1999 the Company increased production/assembly levels of
the Valve. During the first six months of 1999 the Company assembled 242% more
Valves than in the first six months of 1998. The increased levels are in excess
of the Company's current sales levels and
<PAGE>
are in anticipation of eventual U.S. Food and Drug Administration Pre Market
approval of the Valve. The benefit is increased absorption of overhead costs
leading to slightly lower cost of goods sold. However, unless the Company is
able to increase sales following FDA approval it would not be practical to
continue to assemble valves at these levels. While the price of the carbon
components contained in the Valves sold in the first quarter of 1999 were 6%
lower as compared to the cost of carbon components contained in the Valves sold
in the first quarter of 1998, the price of components sold for most of the
second quarter 1999 were 3% higher than the cost of components contained in the
Valves sold in the second quarter 1998. Based upon the Company's internal sales
projections, the price of the carbon contained in Valves sold in the remainder
of 1999 is expected to be 3% higher than in 1998. The Company purchases
pyrolytic carbon components for the Valve from CarboMedics, Inc. ("CMI").
Approximately 80% of the total cost of a valve is contained in the cost of the
carbon components. The price of the components is set under a multi-year supply
agreement between the Company and CMI. The price was established in 1990, and
varies according to annual volume and is adjusted annually according to
increases in the U.S. Department of Labor Employment Cost Index. The Company
uses the first-in first-out ("FIFO") method of accounting for inventory. All of
the Valves sold in the first quarter of 1999 were made with carbon purchased in
1996 (under FIFO). The cost of carbon components, after giving effect to volume
discounts and inflationary adjustments decreased 7% in 1996, rose 3% in 1997 and
decreased 4.5% in 1998 compared to each previous year, respectively. For 1999
(the seventh contract year) the Company expects to pay 3.8% more for carbon
components than in 1998.
Gross profit totaled $1,783,887 for the quarter ended June 30, 1999 or 37.8% of
sales, compared to gross profit of $1,750,626 or 38.3% of sales for quarter
ended June 30, 1998. Gross profit totaled $3,427,271 for the first six months of
1999 or 38.5% of sales compared to $3,359,372 for the six months ended June 30,
1998 or 38.1% of sales. Although the average selling price per unit decreased in
the first six months of 1999 compared to 1998, the average cost per unit sold
decreased more improving gross margin.
Research, development and engineering expenses totaled $335,707 for the quarter
ended June 30, 1999 versus $383,478 for the quarter ended June 30, 1998. The
major portion of the decrease is related to the costs associated with the
Company's U.S. clinical study. Approximately 28% and 23% of research and
development expenses for the quarters ended June 30, 1999 and 1998,
respectively, were for testing and outside consulting services related to the
Valve.
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 the cost of the Valve 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. The estimated total cost of
follow-up is accrued at the time of the sale as research and development
expense.
Selling, general and administrative expenses totaled $898,312 for the three
months ended June 30, 1999, a negligible increase from the $898,157 reported for
the three months ended June 30, 1998. Selling, general and administrative
expenses totaled $1,825,617 for the first six months of
<PAGE>
1999 compared to $1,822,202 for the first six months of 1998. The Company had 88
employees at June 30, 1999 compared to 65 employees at June 30, 1998. The
absorption of labor into inventory offset the increased payroll expenses.
Interest income totaled $229,650 for the quarter ended June 30, 1999 compared to
$330,567 for the quarter ended June 30, 1998. The decrease in interest income in
1999 was the result of lower average investable cash balances during 1999 and
lower interest rates. Cash on hand at June 30, 1999 is less than the amount on
hand at December 31, 1998. Interest income in 1999 is expected to be
approximately 50% less than in 1998. The Company is investing cash in carbon and
the completion of a large quantity of valves in anticipation of the market
release of the Valve in the United States.
Net income totaled $779,518 for the quarter ended June 30,1999 compared to
$799,558 for the quarter ended June 30, 1998. Net income for the first six
months of 1999 totaled $1,467,530 compared to $1,494,175 for the first six
months of 1998. The increases in operating income for the second quarter and
first six months of 1999 as compared to 1998 were offset by the decreases in
interest income.
The Company has accumulated approximately $15 million of net operating loss
carryforwards for U.S. tax purposes. The Company believes that its ability to
fully utilize the existing net operating loss carryforwards will be restricted
to approximately $3 million per year. Although the Company can offset a
significant portion of pretax income with the net operating losses from prior
years the Company is subject to alternative minimum taxes and accrued $32,534 to
cover state and federal income taxes for the six months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities decreased by $2,710,130 from
$20,606,962 at December 31, 1998 to $17,896,832 at June 30, 1999. Inventory
purchases and the pay-down in accounts payable, caused the Company to have
negative cash flow from operations.
During 1999 the Company is obligated to purchase $14.4 million of components in
accordance with the terms of its long-term supply agreement with CarboMedics,
Inc. (the "Supply Agreement"). The Company is obligated to purchase $18.6
million of components in the year 2000. These 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.
After the Company purchases the minimum required Valves under the CMI Supply
Agreement for the Year 2000, the Company will be obligated under the Supply
Agreement only to buy what it sells.
Accounts receivable increased from $5,820,699 at December 31, 1998 to $6,099,982
at June 30, 1999. 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 accounts receivable, competitive pressures and geographical economic
situations have caused the Company to selectively extend the terms for payment.
At December 31, 1998 and June 30, 1999, the account balance for one
<PAGE>
customer was 26% and 22%, respectively, 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 decreased from $2,611,801 at December 31, 1998 to $2,406,765
at June 30, 1999. The majority of the decrease 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 through 2000. Beyond 2000 the Company should be
cash flow positive or at worst cash flow neutral barring a significant change in
the Company's business plan.
The Company does not use derivatives and therefore does not face market risk
from currency or interest rate changes on these types of instruments. There
would be no impact on the Company's operations from interest rate changes on
debt instruments since the Company has not used debt to finance its operations.
Assuming that interest rates on investment grade securities were to decrease by
10%, the Company's annual interest income would decrease by approximately
$100,000 based on the level of investable funds available to the Company at
December 31, 1998.
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 (systems which contain embedded technology and are used
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. During
1998 the Company spent approximately $59,000 on hardware and software some of
which was necessary to eliminate potential Year 2000 problems. During the first
half of 1999 the Company purchased $49,650 of computer equipment and software.
The Company's 1999 budget for
<PAGE>
hardware and software is $164,528 including the replacement or upgrade of
personal computers, workstations and software which are not currently Year 2000
compliant.
Shortly after the close of the quarter ended March 31, 1999 the Company took
delivery on custom measuring equipment. The primary purpose of this equipment
was to improve processing of the Company's products but it also contained Year
2000 compliant software. Vendor personnel installed and attempted to debug the
equipment and software. The equipment was not able to perform up to
specification. During the quarter ended June 30, 1999, the Company expensed the
$186,000 prepaid in 1998.
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 were obtained or completed by the end of the second
quarter 1999.
In addition, during the first quarter of 1999 the Company has requested
assurances 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 have been 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.
The total estimated cost for resolving the Company's Year 2000 issues is
approximately $223,500, of which approximately $108,650 has been spent through
June 30, 1999. 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 to
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
developed contingency plans to help provide continuity of normal business
operations in the event that problem scenarios arise. 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
<PAGE>
unexpected difficulties will not arise and, if so, that the Company will be able
to timely develop and implement an effective contingency plan.
THE SINGLE EUROPEAN CURRENCY
A significant portion of the Company's sales occur in Europe. Effective January
1, 1999 various European countries began utilizing a single currency, the
"Euro". From January 1999 through 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. Europe is a very important market for the Company's
Valve. Disruption or loss of a portion of the Company's European business could
have a material and adverse impact on the Company's financial position. The Euro
has declined in value relative to the dollar by 13% from its introduction
January 1, 1999 to June 30, 1999. The Company sells in U.S. Dollars so the price
of the Valve to Distributors in countries covered by the Euro has in effect
increased by 13%. Transactionally the introduction of the Euro has not been a
problem for the Company and its European distributors, but economically the
weakness in the Euro has put pressure on the Company's pricing.
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 of pyrolytic
<PAGE>
carbon components for the Valve and the effect of the Year 2000 problem on the
Company, its suppliers and its customers. 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.
<PAGE>
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not use derivatives and therefore does not face market risk
from currency or interest rate changes on these types of instruments. There
would be no impact on the Company's operations from interest rate changes on
debt instruments since the Company has not used debt to finance its operations.
Assuming that interest rates on investment grade securities were to decrease by
10%; the Company's annual interest income would decrease by approximately
$100,000 based on the level of investable funds available to the Company at
December 31, 1998.
<PAGE>
PART II. OTHER INFORMATION
Item1. 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
The annual meeting of Shareholders of the Company was held on May 6,
1999 at which time (i) five nominees were elected to the Board of
Directors for one-year terms, (ii) the appointment of Ernst & Young LLP
as the independent auditors of the Company was approved. Proxies for
the Company were solicited pursuant to Section 14(a) of the Securities
Exchange act of 1934, as amended, and there was no solicitation in
opposition to management's solicitations. All nominees for directors as
listed in the proxy statement were elected. The voting results were as
follows:
Broker
For Against Withheld Non-Votes
--- ------- -------- ---------
Election of Directors:
Manuel A. Villafana 15,186,202 0 35,573 0
Richard W. Kramp 15,186,202 0 35,573 0
Charles F. Cuddihy, Jr. 15,184,602 0 37,173 0
David L. Boehnen 15,185,202 0 36,573 0
A. Jay Graf 15,185,102 0 36,673 0
Approval of Independent
Auditors 15,174,382 25,585 21,808 0
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: August 10, 1999 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 5,920,096
<SECURITIES> 11,976,736
<RECEIVABLES> 6,099,982
<ALLOWANCES> 0
<INVENTORY> 34,101,209
<CURRENT-ASSETS> 58,479,993
<PP&E> 2,485,067
<DEPRECIATION> 1,531,596
<TOTAL-ASSETS> 59,826,723
<CURRENT-LIABILITIES> 2,406,765
<BONDS> 0
0
0
<COMMON> 178,559
<OTHER-SE> 57,241,399
<TOTAL-LIABILITY-AND-EQUITY> 59,826,723
<SALES> 8,912,150
<TOTAL-REVENUES> 8,912,150
<CGS> 5,484,879
<TOTAL-COSTS> 5,484,879
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<NET-INCOME> 1,467,530
<EPS-BASIC> .08
<EPS-DILUTED> .08
</TABLE>
