AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 9, 2000
REGISTRATION NO. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ATS MEDICAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 3842 41-1595629
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE) IDENTIFICATION NO.)
3905 ANNAPOLIS LANE, SUITE 105
MINNEAPOLIS, MINNESOTA 55447
(763) 553-7736
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MANUEL A. VILLAFANA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ATS MEDICAL, INC.
3905 ANNAPOLIS LANE, SUITE 105
MINNEAPOLIS, MINNESOTA 55447
(763) 553-7736
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
------------------------------------------- ------------------------------------
MANUEL A. VILLAFANA TIMOTHY S. HEARN, ESQ.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER DORSEY & WHITNEY LLP
ATS MEDICAL, INC. PILLSBURY CENTER SOUTH
3905 ANNAPOLIS LANE, SUITE 105 220 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55447 MINNEAPOLIS, MINNESOTA 55402
(763) 553-7736 (612) 340-2600
FACSIMILE: (763) 553-1492 FACSIMILE: (612) 340-8827
------------------------------------------- ------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
------------------------------- ------------------- -------------------- ---------------------- --------------
PROPOSED PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE(2) PRICE (2) FEE
------------------------------- ------------------- -------------------- ---------------------- --------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 2,727,273 $14.44 $39,381,822 $10,400
------------------------------- ------------------- -------------------- ---------------------- --------------
</TABLE>
(1) This amount represents shares to be offered by the selling shareholders
from time to time after the effective date of this Registration Statement
at prevailing market prices at time of sale.
(2) Estimated solely for the purpose of calculating the registration fee based
upon the average of the high and low sales prices for our common stock on
August 4, 2000, as reported on the Nasdaq National Market.
-----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is declared effective. This prospectus is not
an offer to sell these securities, and it is not soliciting an offer to buy
these securities, in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 8, 2000
PROSPECTUS
------------------------------------------------------------------------------
2,727,273 SHARES
ATS MEDICAL, INC.
[LOGO]
COMMON STOCK
------------------------------------------------------------------------------
2,727,273 shares of the common stock, $.01 par value, of ATS Medical,
Inc. are being offered by this prospectus. The shares will be sold from time to
time by the selling shareholders named in this prospectus. We will not receive
any of the proceeds from the sale of the shares.
Our common stock is traded on the Nasdaq National Market under the
symbol "ATSI." On August 7, 2000, the last sale price of our common stock as
reported on the Nasdaq National Market was $14.5625 per share.
--------------------
INVESTMENT IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 3 TO READ ABOUT CERTAIN RISKS YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
ATS MEDICAL, INC.
3905 Annapolis Lane, Suite 105
Minneapolis, Minnesota 55447
(763) 553-7736
The date of this prospectus is _________, 2000.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission (the "SEC"). The prospectus relates to
2,727,273 shares of our common stock which the selling shareholders named in
this prospectus may sell from time to time. We will not receive any of the
proceeds from these sales. We have agreed to pay the expenses incurred in
registering these shares, including legal and accounting fees.
These shares have not been registered under the securities laws of any
state or other jurisdiction as of the date of this prospectus. The selling
shareholders should not make an offer of these shares in any state where the
offer is not permitted. Brokers or dealers should confirm the existence of an
exemption from registration or effect a registration in connection with any
offer and sale of these shares.
You should read this prospectus together with the additional
information described under the heading "Where You Can Find More Information."
---------------------
TABLE OF CONTENTS
Page
----
About this Prospectus............................... 2
Forward-Looking Statements.......................... 2
Risk Factors........................................ 3
About ATS Medical, Inc. ............................ 9
Selling Shareholders................................ 11
Plan of Distribution................................ 12
Experts............................................. 12
Legal Matters....................................... 12
Where You Can Find More Information................. 13
---------------------
FORWARD-LOOKING STATEMENTS
This prospectus (including the documents incorporated by reference)
contains forward-looking statements regarding our plans, expectations, estimates
and beliefs. These statements involve risks and uncertainties, and actual
results could differ materially from those reflected in the forward-looking
statements. Forward-looking statements in the prospectus are typically
identified by words such as "believes," "anticipates," "expects," "intends,"
"will" and "may" and other similar expressions. In addition, any statements that
refer to expectations, projections or other characterizations of future events
or circumstances are forward-looking statements. We will not necessarily update
the information in this prospectus if and when any forward-looking statement
later turns out to be inaccurate. Some of the important risks and uncertainties
that may affect our future results and performance are described in "Risk
Factors," below. Additional information about factors that could affect our
future results and events is included in our reports and filed with the SEC and
incorporated by reference in this prospectus.
---------------------
2
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE YOU DECIDE TO
BUY OUR COMMON STOCK. YOU SHOULD ALSO CONSIDER THE INFORMATION IN THIS
PROSPECTUS AS WELL AS THE OTHER DOCUMENTS INCORPORATED BY REFERENCE.
WE WILL NOT BE SUCCESSFUL UNLESS WE RECEIVE APPROVAL FROM THE FDA TO SELL OUR
HEART VALVE IN THE UNITED STATES.
We will not be able to sell the ATS heart valve in the United States
unless we obtain FDA approval. Our premarket approval, or PMA, application was
accepted for filing by the FDA on August 3, 1999. On February 4, 2000, we
received a letter from the FDA relating to our PMA application. In this letter,
the FDA requested additional information regarding the ATS heart valve. We are
in the process of providing this information to the FDA. Upon completion of this
review, the FDA could, among other things, request additional information or
schedule a meeting for presentation of clinical data to a FDA advisory panel.
The PMA approval process can be expensive, uncertain and lengthy. We are unable
to estimate when, if ever, we will receive approval and be able to start selling
the ATS heart valve in the United States. Some mechanical heart valves for which
premarket approval has been sought have never been approved for sale in the
United States. Negative publicity concerning prosthetic heart valves could
result in greater regulatory scrutiny of our ATS heart valve. If we experience
delays, or we are unable to receive FDA approval, our business and results of
operations will be seriously harmed.
EVEN IF APPROVED BY THE FDA, OUR HEART VALVE MAY NEVER ACHIEVE MARKET
ACCEPTANCE.
Our success will depend, in large part, on the medical community's
acceptance of the ATS heart valve. The medical community's acceptance of the ATS
heart valve will depend upon our ability to demonstrate the safety and efficacy,
advantages, long-term clinical performance and cost-effectiveness of the ATS
heart valve as compared to other prosthetic heart valves. We cannot predict
whether the medical community will accept the ATS heart valve or, if accepted,
the extent of its use. Negative publicity resulting from isolated incidents
involving the ATS heart valve or other prosthetic heart valves could have a
significant adverse effect on the overall acceptance of our heart valve. If we
encounter difficulties introducing the ATS heart valve in the United States, our
business and results of operations will be seriously harmed.
WE CURRENTLY RELY ON THE ATS HEART VALVE AS OUR SOLE SOURCE OF REVENUE.
We have developed only one product, which is being sold only outside
the United States. Even if we were to develop additional products, regulatory
approval would likely be required to sell them. Clinical testing and the
approval process itself are very expensive and can take many years. Therefore,
we do not expect to be in a position to sell additional products in the
foreseeable future. As a result, if we fail to achieve FDA approval or
widespread market acceptance for the ATS heart valve, our business and results
of operations will be seriously harmed.
WE CURRENTLY DEPEND SOLELY ON THE MARKETING AND SALES EFFORTS OF INDEPENDENT
DISTRIBUTORS, AND OUR SALES HAVE BEEN CONCENTRATED IN THREE COUNTRIES.
The ATS heart valve is sold internationally through independent
distributors. The loss of an international distributor could seriously harm our
business and results of operations if a new distributor could not be found on a
timely basis in the relevant geographic market. Sales to our Japanese, German
and French distributors have accounted for approximately 50% of our net sales in
fiscal years 1999 and 1998. We do not control the amount and timing of marketing
resources that these third parties devote to our product. Further, to the extent
we rely on sales through independent distributors, any revenues we receive will
depend primarily on the efforts of these parties. In addition, as part of our
agreement with our distributors, we allow for the return of unopened valves for
credit. If a distributor(s) were to terminate their distributorship agreement
with us, we could be obligated to buy back their inventory of valves as well as
valves on consignment at hospitals. Such a buyback could have an adverse impact
on our results of operations for the quarter and/or year in which it occurs.
WE ARE DEPENDENT UPON SALES OUTSIDE THE UNITED STATES, WHICH ARE SUBJECT TO A
NUMBER OF RISKS THAT COULD HARM OUR BUSINESS.
3
<PAGE>
All of our commercial sales to date have been outside the United
States, and we expect that international sales will account for substantially
all of our revenue in the future until the ATS heart valve is approved, if ever,
for sale in the United States.
There are risks inherent in doing business in international markets,
including:
* unforeseen changes in regulatory requirements and government health
programs;
* weaker intellectual property rights protection in some countries;
* potentially adverse tax consequences;
* political and economic instability; and
* greater difficulty in collecting payments from product sales.
These factors could harm our ability to successfully commercialize our
product internationally and could harm our business.
The value of the U.S. dollar in relation to other currencies may also
harm our sales to customers outside the United States because we sell in U.S.
dollars to all of our customers abroad. For the three months ended June 30,
2000, sales decreased by about 43% compared to the same period for 1999, and for
the six months ended June 30, 2000, sales decreased by about 23% compared to the
same period for 1999. The decrease in sales was due primarily to the increase in
value of the U.S. dollar against the Euro. Our dependence in sales outside of
the United States will continue to expose us to U.S. dollar currency
fluctuations for the foreseeable future.
INCURRENCE OF COSTS IN ANTICIPATION OF POSSIBLE FDA APPROVAL OF OUR VALVE IS
EXPECTED TO ADVERSELY AFFECT EARNINGS.
In preparation for possible FDA approval of the ATS heart valve, we
have recently taken, and will be taking in the near term, a number of important
steps that we believe will facilitate commercialization of our valve in the
United States market and enhance our profitability in international markets.
These steps include:
* the establishment of a licensing arrangement with CarboMedics to
permit us to manufacture pyrolytic carbon components;
* the planned leasing, construction, equipping, staffing and
commercialization of a facility to manufacture pyrolytic carbon
components; and
* the hiring and training of a direct sales force to market our valve
in the United States.
These actions involve incurring significant costs. The timing of these
expenditures is expected to adversely affect quarter-to-quarter comparisons of
our earnings. As there is no assurance of FDA approval of our valve, or
commercial success of our valve in the United States if so approved, the
commitment of our resources to these matters at this time entails, in addition
to the adverse effects on earnings for at least the next three years,
substantial uncertainty and business risk.
THE MARKET FOR PROSTHETIC HEART VALVES IS HIGHLY COMPETITIVE.
The market for prosthetic heart valves is highly competitive. We expect
that competition will intensify as additional companies enter the market or
modify their existing products to compete directly with us. Our primary
competitor, St. Jude Medical, Inc., currently controls approximately 50% of the
worldwide mechanical heart valve market. Many of our competitors have FDA
approval for their valves and extensive clinical data demonstrating the
performance of their valves. In addition, they have greater financial,
manufacturing, marketing and research and development capabilities than we have.
For example, many of our competitors have the ability, due to their internal
carbon manufacturing facilities and economics of scale, to manufacture their
heart valves at a lower cost than we can
4
<PAGE>
manufacture our ATS heart valve. Our primary competitor has recently used price
as a method to compete in several markets. We might not be able to compete
successfully.
NEW PRODUCTS OR TECHNOLOGIES DEVELOPED BY OTHERS COULD HARM OUR BUSINESS AND
RESULTS OF OPERATIONS.
The medical device industry is characterized by significant
technological advances. Several companies are developing new prosthetic heart
valves based on new or potentially improved technologies. Significant advances
also are being made in surgical procedures, which may delay the need for
replacement heart valves. A new product or technology may emerge that renders
our ATS heart valve noncompetitive or obsolete.
OUR FUTURE RESULTS WILL BE HARMED IF THE USE OF MECHANICAL HEART VALVES
DECLINES.
Our business could suffer if the use of mechanical heart valves
declines. Historically, mechanical heart valves have accounted for over
two-thirds of all heart valve replacements. Recently, there has been an increase
in the use of tissue valves. We estimate that mechanical heart valves are
currently being used in 50 to 70% of all heart valve replacements, depending on
the geographic market, down from 65 to 75% about ten years ago. We believe
improvements in tissue valve longevity and an increase in the average age of
valve patients have contributed to the recent increase in the use of tissue
valves.
WE CURRENTLY MAINTAIN A LARGE VOLUME OF INVENTORY, WHICH EXCEEDS THE CURRENT
DEMAND FOR THE ATS HEART VALVE.
We currently purchase pyrolytic carbon components under a long-term
supply agreement with CarboMedics. To date, our purchases of pyrolytic carbon
components have exceeded our sales of the ATS heart valve. We currently have in
inventory enough pyrolytic carbon components to satisfy our projected
requirements for over two years. In addition, we expect that our minimum
purchase requirements in 2000 under the supply agreement will exceed our product
sales in 2000. If we do not receive FDA approval or are unable to achieve
widespread acceptance for the ATS heart valve or if competitive pressures result
in price reductions, the value of the excess inventory would likely decrease,
which could seriously harm our results of operations and financial condition.
Because the pyrolytic carbon components are made to meet the unique
specifications of the ATS heart valve, our inventory may have little, if any,
value in the open market.
WE LICENSE PATENTED TECHNOLOGY AND OTHER PROPRIETARY RIGHTS FROM CARBOMEDICS. IF
THESE AGREEMENTS ARE TERMINATED, OUR BUSINESS AND RESULTS OF OPERATIONS COULD BE
SERIOUSLY HARMED.
If our agreements with CarboMedics are breached or terminated, our
business and results of operations could be seriously harmed. We have licensed
from CarboMedics an exclusive right to the basic design of an open pivot,
bileaflet mechanical valve from which our ATS heart valve has been developed. If
we fail to satisfy the minimum purchase requirements under the supply agreement
with CarboMedics in any year before 2001, CarboMedics may terminate the license
agreement and supply agreement or make the license non-exclusive. Termination of
these agreements would prevent or delay us from manufacturing and selling the
ATS heart valve.
In addition, under the new carbon technology agreement with
CarboMedics, we have obtained a license to use CarboMedics' pyrolytic carbon
technology to manufacture components for the ATS heart valve. CarboMedics also
has agreed to assist us in establishing our pyrolytic carbon manufacturing
facility. If this agreement is terminated, our business and results of
operations could be seriously harmed.
A DELAY OR INTERRUPTION IN THE SUPPLY OF PYROLYTIC CARBON COMPONENTS COULD
SERIOUSLY HARM OUR BUSINESS.
We cannot be certain that, after our current inventory is exhausted,
sufficient quantities of pyrolytic carbon components will be available to
assemble the ATS heart valve. We currently purchase pyrolytic carbon components
from a single source, CarboMedics, on an exclusive basis. We are prohibited from
using an alternative supplier through 2000. There is currently no other
FDA-approved alternate supplier of our pyrolytic carbon components.
While CarboMedics has recently granted to us the right to manufacture
pyrolytic carbon components, we agreed to continue to purchase a minimum annual
number of pyrolytic carbon components from CarboMedics through 2007.
5
<PAGE>
Failure to purchase these minimum annual amounts would cause us to lose our
right to manufacture the pyrolytic carbon components. We anticipate that our
carbon manufacturing facilities will not be operational until at least 2003.
Consequently, any interruption in our supply from CarboMedics could seriously
harm our business.
OUR DIRECT SALES EFFORTS MAY NOT BE SUCCESSFUL.
If we receive FDA approval, we intend to market the ATS heart valve
directly in the United States. We will need to expend significant funds and
management resources to develop an internal sales force. We believe there is
significant competition for direct sales personnel with the advanced sales
skills and technical knowledge we need. We may not be able to hire, retain and
motivate qualified personnel. Our business and results of operations may suffer
if we do not establish or maintain an effective direct sales force.
BECAUSE WE LACK MANUFACTURING EXPERIENCE, WE MAY ENCOUNTER DIFFICULTIES IN
MANUFACTURING PYROLYTIC CARBON COMPONENTS FOR OUR HEART VALVE.
Under a new agreement with CarboMedics, we have been granted an
exclusive worldwide license to manufacture pyrolytic carbon components for the
ATS heart valve. We cannot be certain that our strategy to establish internal
manufacturing capabilities will result in a cost-effective means for
manufacturing the ATS heart valve. We have no experience in manufacturing
pyrolytic carbon. We may encounter difficulties in establishing and maintaining
our manufacturing operations, including problems involving:
* leasing, renovating and equipping the facility;
* production yields;
* quality control;
* per unit manufacturing costs;
* shortages of qualified personnel; and
* compliance with FDA and international regulations and requirements
regarding good manufacturing practices.
Difficulties encountered by us in establishing or maintaining a
commercial-scale manufacturing facility may limit our ability to manufacture our
heart valve and therefore could seriously harm our business and results of
operations.
OUR BUSINESS COULD BE SERIOUSLY HARMED IF THIRD-PARTY PAYORS DO NOT REIMBURSE
THE COSTS FOR OUR HEART VALVE.
Our ability to successfully commercialize the ATS heart valve depends
on the extent to which reimbursement for the cost of our product and the related
surgical procedure is available from third-party payors, such as governmental
programs, private insurance plans and managed care organizations. Third-party
payors are increasingly challenging the pricing of medical products and
procedures that they consider are not cost-effective or are used for a
non-approved indication. The failure by physicians, hospitals and other users of
our product to obtain sufficient reimbursement from third-party payors would
seriously harm our business and results of operations.
In recent years, there have been numerous proposals to change the
health care system in the United States. Some of these proposals have included
measures that would limit or eliminate payment for medical procedures or
treatments. In addition, government and private third-party payors are
increasingly attempting to contain health care costs by limiting both the
coverage and the level of reimbursement. In international markets, reimbursement
and health care payment systems vary significantly by country. In addition, we
have encountered price resistance from government-administered health programs.
Significant changes in the health care system in the United States or elsewhere,
including changes resulting from adverse trends in third-party reimbursement
programs, could have a material adverse effect on our business and results of
operations.
6
<PAGE>
WE MAY FACE PRODUCT LIABILITY CLAIMS.
The manufacture and sale of mechanical heart valves entail significant
risk of product liability claims and product recalls. A mechanical heart valve
is a life-sustaining device and the failure of any mechanical heart valve
usually results in the patient's death. A product liability claim or product
recall, regardless of the ultimate outcome, could require us to spend
significant time and money in litigation or to pay significant damages and could
seriously harm our business. We currently maintain product liability insurance
coverage in an aggregate amount of $25 million. However, we cannot assure you
that our current insurance coverage is adequate to cover the costs of any
product liability claims made against us. Product liability insurance is
expensive and does not cover the costs of a product recall. In the future,
product liability insurance may not be available at satisfactory rates or in
adequate amounts.
WE DEPEND ON THE CONTINUED SERVICE OF OUR KEY PERSONNEL.
Our future success depends on the continued services of Manuel A.
Villafana, our founder and Chief Executive Officer, and Richard W. Kramp, our
President and Chief Operating Officer. We are also dependent on our ability to
attract and retain technically qualified personnel in the future. The loss of
the technical knowledge and industry expertise of these officers and other
personnel could seriously impede our success.
OUR BUSINESS WOULD BE ADVERSELY AFFECTED IF WE ARE NOT ABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS.
Our success depends in part on our ability to maintain and enforce our
patents and other proprietary rights. We rely on a combination of patents, trade
secrets, know-how and confidentiality agreements to protect the proprietary
aspects of out technology. These measures afford only limited protection and
competitors may gain access to our intellectual property and proprietary
information. The patent positions of medical device companies are generally
uncertain and involve complex legal and technical issues. Litigation may be
necessary to enforce our intellectual property rights, to protect our trade
secrets and to determine the validity and scope of our proprietary rights. Any
litigation could be costly and divert our attention from the growth of the
business. We cannot assure you that our patents and other proprietary rights
will not be successfully challenged, or that others will not independently
develop substantially equivalent information and technology or otherwise gain
access to our proprietary technology.
We may be sued by third parties which claim that our product infringes on their
intellectual property rights.
We may be exposed to future litigation by third parties based on
intellectual property infringement claims. Any claims or litigation against us,
regardless of the merits, could result in substantial costs and could harm our
business. In addition, intellectual property litigation or claims could force us
to:
* cease manufacturing and selling our product, which would seriously
harm us;
* obtain a license from the holder of the infringed intellectual
property right, which license may not be available on reasonable
terms, if at all; or
* redesign our product, which could be costly and time-consuming.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION, WHICH IS COSTLY, TIME
CONSUMING AND CAN SUBJECT US TO UNANTICIPATED DELAYS.
The ATS heart valve and our manufacturing activities are subject to
extensive regulation by a number of governmental agencies, including the FDA and
comparable international agencies. We are required to:
* obtain the approval of the FDA and international regulatory agencies
before we can market and sell the ATS heart valve;
* satisfy content requirements for all of our labeling, sales and
promotional materials;
* comply with manufacturing and reporting requirements; and
7
<PAGE>
* undergo rigorous inspections by these agencies.
Compliance with the regulations of these agencies may delay or prevent
us from introducing the ATS heart valve in the United States or introducing any
new or improved products. Violations of regulatory requirements may result in
fines, marketing restrictions, product recall, withdrawal of approvals and civil
and criminal penalties.
WE MAY NEED TO RAISE CAPITAL AND WE CANNOT BE CERTAIN THAT ADDITIONAL FINANCING
WILL BE AVAILABLE.
We have cash in hand and credit facilities to support our operations
and capital requirements through 2002. After that we may need to raise
additional capital. Our future liquidity and capital requirements will depend
upon several factors, including actions related to regulatory matters, our
progress in establishing our pyrolytic carbon manufacturing operations and the
extent to which the ATS heart valve gains market acceptance.
THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE.
Historically, the market price of our common stock has fluctuated over
a wide range and it is likely that the price of our common stock will fluctuate
in the future. The market price of our common stock could be impacted by the
following:
* delays in obtaining FDA approval of the PMA application for the ATS
heart valve;
* announcements of technical innovations or new products by our
competitors;
* the status of component supply arrangements;
* changes in reimbursement policies;
* government regulation;
* developments in patent or other proprietary rights;
* public concern as to the safety and efficacy of products developed
by us or others; and
* general market conditions.
In addition, due to one or more of the foregoing factors, in one or more future
quarters, our results of operations may fall below the expectations of
securities analysts and investors. In that event, the market price of our common
stock could be materially and adversely affected.
OUR CHARTER DOCUMENTS AND MINNESOTA LAW MAY DISCOURAGE A TAKEOVER OF OUR
COMPANY.
Provisions of our certificate of incorporation, bylaws and Minnesota
law could make it more difficult for a third party to acquire us, even if doing
so would be beneficial to our stockholders.
8
<PAGE>
ABOUT ATS MEDICAL, INC.
We manufacture and market a mechanical bileaflet heart valve with a
unique open pivot design. Our valve is used to treat heart valve failure caused
by the natural aging process, rheumatic heart disease, prosthetic valve failure
and congenital defects. Our Chairman, Chief Executive Officer and founder,
Manuel Villafana, has led ATS Medical in the development of a valve designed to
achieve a significant advancement in mechanical heart valve technology.
Mechanical heart valves have been in use since the early 1960s. In 1976, Mr.
Villafana founded St. Jude Medical, Inc. to develop a bileaflet mechanical heart
valve that has become the world's most frequently implanted prosthetic heart
valve and is currently the industry standard. The U.S. market for replacement
heart valves in 1998 was estimated to be over $325 million.
The ATS heart valve is designed to advance the standard among
mechanical heart valves by incorporating a pivot consisting of protruding
spheres upon which the leaflets of the valve pivot to open and close. This
unique open pivot has been designed to eliminate the cavity associated with the
pivot of other bileaflet valves and to improve the ability of the blood to flow
through the valve without forming clots. The formation of clots, or thrombosis,
can lead to impairment of leaflet movement. In addition, if the clots detach and
enter the bloodstream, an event called thromboembolism, they may cause a patient
to suffer a stroke.
The design characteristics of the ATS heart valve are intended to:
* reduce the rate of thrombosis and thromboembolic complications;
* improve blood flow efficiencies;
* facilitate the implant procedure;
* improve follow-up diagnostic capability; and
* improve patient quality of life through lower noise levels.
In August 1999, after five years of clinical studies and over 950
implants at 17 U.S. and three international clinical centers, the FDA accepted
for filing our premarket approval, or PMA, application. On February 4, 2000, we
received a letter from the FDA relating to our PMA application. In this letter,
the FDA requested additional information regarding the ATS heart valve. We are
in the process of providing this information to the FDA. Upon completion of this
review, the FDA could, among other things, request additional information or
schedule a meeting for presentation of clinical data to a FDA advisory panel.
Premarket approval to sell the ATS heart valve will be subject to the advisory
panel's recommendation. If approved, the ATS heart valve would be the only open
pivot bileaflet mechanical valve available in the United States.
We have been selling the ATS heart valve since 1992 through independent
distributors in most of the major international markets, including Europe, Japan
and Australia. At December 31, 1999 we had contracts with 24 independent
distributors covering 32 countries. We estimate that over 35,000 ATS heart
valves have been implanted in patients since 1992. If the ATS heart valve is
approved for sale by the FDA, we intend to market it in the United States
through a direct sales force.
The primary components of the ATS heart valve are made of pyrolytic
carbon, which offers biocompatibility and durability. The pyrolytic carbon
components are the largest single factor in the cost of the valve. Since 1990,
we have purchased our pyrolytic carbon components pursuant to a long-term supply
agreement and have assembled, marketed and sold the valves under a long-term
license agreement with Sulzer CarboMedics, Inc. In December 1999, we
renegotiated our supply agreement with CarboMedics. The supply agreement, as
amended, provides for significant reductions in our minimum purchase
requirements and unit costs beginning in 2001. In addition, under a separate
agreement, CarboMedics granted us an exclusive worldwide right and license to
use its carbon coating technology to manufacture pyrolytic carbon components for
the ATS heart valve. Under this agreement, CarboMedics has also agreed to assist
us in designing, building and commencing operations in our own pyrolytic carbon
production facility in Minneapolis, Minnesota. We believe that this internal
carbon manufacturing capability will result in substantial cost
9
<PAGE>
savings in the production of our valve and allow us to compete more effectively
in price sensitive markets. In July 2000, we took a substantial step toward
establishing our own pyrolytic carbon production facility by raising $30,000,000
in a private placement of ATS common stock. Much of this new capital will be
used to fund the leasehold, equipment and staffing of the new facility in
Minnesota.
Our objective is to establish the ATS heart valve as the leading
product in the prosthetic heart valve market. The key elements of our strategy
to accomplish this objective are to:
* obtain FDA approval for the sale of the ATS heart valve in the
United States;
* promote the clinical benefits of the ATS heart valve;
* develop a direct sales force in the United States;
* expand our relationships with distributors in international markets;
* improve cost efficiencies by establishing internal manufacturing
capabilities; and
* increase market penetration in price-sensitive markets where
potential unit growth is highest.
Our principal executive offices are located at 3905 Annapolis Lane,
Suite 105, Minneapolis, Minnesota 55447 and our telephone number is (763)
553-7736.
10
<PAGE>
SELLING SHAREHOLDERS
We have agreed to register 2,727,273 shares of our common stock owned
by the selling shareholders. These shares were acquired by the selling
shareholders pursuant to Stock Purchase Agreements, dated July 26 and July 28,
2000, between each selling shareholder and us. The shares of our common stock
held by the selling shareholders are being registered to permit public secondary
trading of these shares, and the selling shareholders may offer these shares for
resale from time to time. See "Plan of Distribution."
The following table lists the selling shareholders and presents certain
information regarding their beneficial ownership of our common stock as well as
the number of shares of our common stock they may sell pursuant to this
prospectus.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES OF MAXIMUM NUMBER OF OF COMMON STOCK
COMMON STOCK SHARES TO BE SOLD BENEFICIALLY OWNED
BENEFICIALLY OWNED PURSUANT TO THIS AFTER THE
NAME PRIOR TO THE OFFERING PROSPECTUS OFFERING(1)
------------------------------- --------------------- ----------------- ------------------
<S> <C> <C> <C>
Deerfield International Ltd. 98,162 98,162 -0-
Deerfield Partners, L.P. 265,454 265,454 -0-
Essex Global Life Sciences
Fund, LP 31,537 31,537 -0-
Essex Global Life Sciences Fund
II, LP 9,246 9,246 -0-
Framlington Health 181,818 181,818 -0-
H&Q Healthcare Investors 381,818 381,818 -0-
H&Q Life Sciences Investors 254,546 254,546 -0-
Munder Framlington Healthcare
Fund 181,818 181,818 -0-
Permal Essex Global Life
Sciences Ltd. 4,672 4,672 -0-
Putnam Capital Appreciation Fund 275,118 275,118 -0-
Putnam Investment Funds -
Putnam Capital Opportunities
Fund 156,700 156,700 -0-
Robert Fleming Inc. 620,000 620,000 -0-
Tokai Bank Europe, plc 30,000 30,000 -0-
UBS O'Connor LLC f/b/o UBS
Global Equity Arbitrage Masters
Limited 159,091 159,091 -0-
United Capital Management, Inc. 31,818 31,818 -0-
Westcore Small Cap Growth
Fund 45,455 45,455 -0-
TOTAL 2,727,273 2,727,273 -0-
</TABLE>
(1) Assumes the sale of all of the shares offered by this prospectus.
11
<PAGE>
PLAN OF DISTRIBUTION
We are registering these shares on behalf of the selling shareholders.
As used in this prospectus, the term "selling shareholders" includes donees and
pledgees selling shares received from a named selling shareholder after the date
of this prospectus. The selling shareholders will offer and sell the shares to
which this prospectus relates for their own accounts. We will not receive any
proceeds from the sale of the shares. We will bear all fees and expenses in
connection with the registration of the shares. Fees and expenses of any
attorneys or other advisors retained by the selling shareholders in connection
with the registration shall be borne by the selling shareholders.
The selling shareholders may offer and sell the shares from time to
time in one or more types of transactions (which may include block transactions)
on the Nasdaq National Market, in transactions directly with market makers or in
privately negotiated transactions, through put or call option transactions,
through short sales, or a combination of these methods of sale, at prices
relating to prevailing market prices or at negotiated prices. Sales may be made
to or through brokers or dealers who may receive compensation in the form of
discounts, concessions or commissions from the selling shareholders or the
purchasers of the shares. As of the date of this prospectus, we are not aware of
any agreement, arrangement or understanding between any broker or dealer and the
selling shareholders regarding the sale of their shares, nor are we aware of any
underwriter or coordinating broker acting in connection with the proposed sale
of shares by the selling shareholders. There is no assurance that the selling
shareholders will sell any or all of the shares that they offer.
The selling shareholders and any brokers or dealers who participate in
the sale of the shares may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, as amended, and any commissions received by them and
any profits realized by them on the resale of shares may be deemed to be
underwriting discounts or commissions under the Securities Act. Because the
selling shareholders may be deemed to be an "underwriter" within the meaning of
the Securities Act, the selling shareholders will be subject to the prospectus
delivery requirements of the Securities Act. We have informed the selling
shareholders that their sales in the market must comply with the requirements of
the rules and regulations of the Exchange Act.
The selling shareholders may also resell all or a portion of these
shares in open market transactions in reliance upon Rule 144 under the
Securities Act, provided it meets the criteria and conform to the requirements
of that Rule.
Upon notification to us by a selling shareholders that any material
arrangement has been entered into with a broker or dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such selling shareholder and of
the participating brokers or dealers, (ii) the number of shares involved, (iii)
the price at which such shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such brokers or dealers, where applicable, (v) that
such brokers or dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus and (vi)
other facts material to the transaction. In addition, upon notification to us by
a selling shareholders that a donee or pledgee intends to sell more than 500
shares, a supplement to this prospectus will be filed if required.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual report on Form 10-K for
the year ended December 31, 1999, as set forth in their report, which is
incorporated by reference in this prospectus. Our consolidated financial
statements and schedule are incorporated by reference in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the issuance of shares of common stock offered by us in
this offering will be passed upon for us by Dorsey & Whitney LLP, Minneapolis,
Minnesota.
12
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy these documents at the
SEC's public reference room at 450 Fifth Street, NW, Washington, DC 20549, or at
the SEC's public reference rooms in New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The SEC also maintains an Internet site that contains reports,
proxy and information statements, and other information regarding issuers like
us that file electronically with the SEC. The address of the SEC's web site is
http://www.sec.gov.
We have filed with the SEC a registration statement on Form S-3 to
register the common stock offered by this prospectus. This prospectus is part of
the registration statement. As allowed by SEC rules, this prospectus does not
contain all of the information that is in the registration statement and the
exhibits and schedules to the registration statement. For further information
regarding the Company, investors should refer to the registration statement and
its exhibits and schedules. A copy of the registration statement may be
inspected, without charge, at the offices of the SEC at 450 Fifth Street, NW,
Washington, DC 20549, and copies of all or any part of the registration
statement may be obtained from the SEC's public reference room at 450 Fifth
Street, NW, Washington, DC 20549, upon the payment of any fees required by the
SEC. The registration statement is also available on the SEC's web site at
http://www.sec.gov
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information that we incorporate by
reference is considered to be part of this prospectus, and later information
that we file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), until the
selling shareholders sell all of the shares or the earlier termination of this
offering:
* our annual report on Form 10-K for the fiscal year ended December
31, 1999;
* our quarterly report on Form 10-Q for the fiscal quarter ended March
31, 2000;
* our current report on Form 8-K filed on January 13, 2000; and
* the description of our common stock contained in the registration
statement on Form 8-A filed on May 8, 1990, including any amendments
or reports filed for the purpose of updating that description.
You may request a free copy of any of the above filings by writing or
calling: John H. Jungbauer, ATS Medical, Inc., 3405 Annapolis Lane, Minneapolis,
MN 55447, (763) 553-7736.
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement to this prospectus. We have not
authorized anyone else to provide you with different information. You should not
assume that the information in this prospectus or any supplement to this
prospectus is accurate as of any date other than the date on the cover page of
this prospectus or any supplement.
13
<PAGE>
2,727,273 SHARES
ATS MEDICAL, INC.
COMMON STOCK
[ATS LOGO]
------------------
PROSPECTUS
------------------
________, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee................................. $ 10,400
Nasdaq Listing Application Fee....................... 17,500
Accounting Fees and Expenses......................... 3,000
Legal Fees and Expenses.............................. 5,000
Miscellaneous ....................................... 4,100
----------
Total....................................... $ 40,000
All fees and expenses other than the SEC registration fee are
estimated. The Company will pay all the expenses listed above.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Minnesota Statutes Section 302A.521 provides that a corporation shall
indemnify any person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of such person against
judgments, penalties, fines (including, without limitation excise taxes assessed
against such person with respect to any employee benefit plan), settlements and
reasonable expenses, including attorneys' fees and disbursements, incurred by
such person in connection with the proceeding, if, with respect to the acts or
omissions of such person complained of in the proceeding, such person (1) has
not been indemnified therefor by another organization or employee benefit plan;
(2) acted in good faith; (3) received no improper person benefit and Section
302A.255 (with respect to director conflicts of interest), if applicable, has
been satisfied; (4) in the case of a criminal proceeding, had no reasonable
cause to believe the conduct was unlawful; and (5) reasonably believed that the
conduct was in the best interests of the corporation in the case of acts or
omissions in such person's official capacity for the corporation or reasonably
believed that the conduct was not opposed to the best interests of the
corporation in the case of acts or omissions in such person's official capacity
for other affiliated organizations. The Bylaws of the Company provide that the
Company shall indemnify its officers and directors under such circumstances and
to the extent permitted by Section 302A.521 as now enacted or hereafter amended.
The Company has established a Self-Insurance Trust Agreement to assist
in funding indemnification of its directors and officers to the extent
permissible under Minnesota Law. The Company has contributed $300,000 plus
interest to an irrevocable trust (the "Trust") to be invested by an independent
trustee in governmental issued or insured obligations. The Trust funds may be
used only for indemnification of the Company's officers or directors or, at the
direction of the Company and with the consent of the beneficiaries under the
Trust, to pay directors' and officers' liability insurance premiums. The rights
of the beneficiaries under the Trust are contract rights enforceable against the
Company and the trustee. In addition to the Trust, since November 1995 the
Company has maintained a liability insurance policy for its directors and
officers.
II-1
<PAGE>
ITEM 16. EXHIBITS
Exhibit
Number Description of Exhibit
5.1 Opinion of Dorsey & Whitney LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of our counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it was declared
effective; and (2) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis, State of Minnesota, on August 8, 2000.
ATS MEDICAL, INC.
By: /s/ John H. Jungbauer
-------------------------------------
John H. Jungbauer
Vice President, Treasurer and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Manuel A. Villafana, Richard W. Kramp and
John H. Jungbauer, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all (i)
amendments (including post-effective amendments) to this Registration Statement
and (ii) registration statements and any and all amendments thereto (including
post-effective amendments) for the same offering that is effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933 and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents, or
his or her substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the indicated capacities
on August 8, 2000.
SIGNATURE TITLE
--------- -----
By: /s/ Manuel A. Villafana Chairman of the Board and Chief Executive
-------------------------- Officer (Principal Executive Officer)
Manuel A. Villafana
By: /s/ John H. Jungbauer Vice President, Treasurer and Chief Financial
-------------------------- Officer (Principal Financial and Accounting
John H. Jungbauer Officer)
By: /s/ Richard W. Kramp President, Chief Operating Officer and Director
--------------------------
Richard W. Kramp
By: /s/ David L. Boehnen Director
--------------------------
David L. Boehnen
By: /s/ Charles F. Cuddihy Director
--------------------------
Charles F. Cuddihy
By: /s/ A. Jay Graf Director
--------------------------
A. Jay Graf
II-3
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
5.1 Opinion of Dorsey & Whitney LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
II-4
