|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: MERCANTILE CREDIT CARD MASTER TRUST, 8-K, EX-1, 2000-07-21 |
Next: FIDUCIARY TRUST CO INTERNATIONAL, 13F-NT, 2000-07-21 |
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-41424
PROSPECTUS
ENDOCARDIAL SOLUTIONS, INC.
2,030,000 Shares
Common Stock
Shares of common stock of Endocardial Solutions, Inc. are being offered by this Prospectus. The shares will be sold from time to time by the Selling Stockholders 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 "ECSI." On July 17, 2000, the last sale price of our common stock as reported on the Nasdaq National Market was $9.375 per share.
Investment in the common stock involves a high degree of risk. See section titled "Risk Factors" beginning on page 3 to read about certain factors you should consider before buying shares of 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.
Endocardial Solutions, Inc.
1350 Energy Lane, Suite 110
St. Paul, Minnesota 55108
The date of this Prospectus is July 21, 2000.
This Prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the "SEC"). The Prospectus relates to 2,030,000 shares (the "Shares") of our common stock which the selling stockholders named in this Prospectus (the "Selling Stockholders") 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 the Shares, including legal and accounting fees.
The Shares have not been registered under the securities laws of any state or other jurisdiction as of the date of this Prospectus. Brokers or dealers should confirm the existence of an exemption from registration or effectuate such registration in connection with any offer and sale of the Shares.
This Prospectus describes certain risk factors that you should consider before purchasing the Shares. See "Risk Factors" beginning on page 3. You should read this Prospectus together with the additional information described under the heading "Where You Can Find More Information."
| |
Page |
|
|---|---|---|
| About this Prospectus | 2 | |
| Risk Factors |
|
3 |
| Where You Can Find More Information |
|
10 |
| About Endocardial Solutions, Inc. |
|
11 |
| Selling Stockholders |
|
13 |
| Plan of Distribution |
|
13 |
| Legal Matters |
|
14 |
| Experts |
|
14 |
2
An investment in the Shares involves a high degree of risk. You should consider carefully the following risk factors, together with the other information in this Prospectus, before buying any Shares. You should also be aware that certain statements contained in this Prospectus that are not related to historical results are forward-looking statements. These forward-looking statements, such as statements of our strategies, plans, objectives, expectations and intentions, involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements.
Our success depends on developing and commercializing the EnSite System
The EnSite System is currently our only potential product, and our success depends entirely on the successful development, commercialization and market acceptance of the EnSite System. Modifications to the EnSite System may require additional clinical trials and, ultimately, United States and international regulatory approvals before they can be fully marketed in the United States and abroad. Problems in the following areas could materially impact the commercialization of the EnSite System:
We have recently begun to generate revenue from the EnSite System. We cannot assure you that we will ever derive substantial revenues from the sale of the EnSite System.
Clinical testing of our products continues to be required
We have conducted clinical trials on patients for ventricular tachycardia ("VT") and supraventricular tachycardia ("SVT") in the United States and in Europe, and we have at times experienced complications in our clinical trials. During the third and fourth quarters of 1998, we submitted to the United States Food and Drug Administration (the "FDA") two premarket notification applications under Section 510(k) of the Food, Drug and Cosmetic Act (the "FDC Act") containing the results of our left ventricular and right atrium multi-center clinical trials. We believe we will be required to conduct more extensive clinical testing in the United States in order to support a premarket approval ("PMA") application to the FDA for marketing approval for use of the EnSite System in the left ventricle of the heart. Patients selected for clinical trials must meet stringent guidelines to undergo testing, and we cannot assure you that patients can be enrolled in clinical trials on a timely basis. Further, we cannot assure you that any of our products will prove to be safe and effective in clinical trials under United States or international regulatory guidelines. The clinical trials may identify significant technical or other obstacles to be overcome prior to obtaining approvals. If the EnSite System does not prove to be safe and effective in clinical trials, our business, financial condition and results of operations would be materially and adversely affected.
Our products are subject to regulatory approval
The manufacture and sale of medical devices, including the EnSite System, are subject to extensive regulation in the United States, principally by the FDA and corresponding state agencies, and in other countries. In the United States, our products are subject to the FDA's premarket approval
3
requirements, which has only been satisfied for right atrial use. Securing FDA approvals requires us to submit extensive clinical data and supporting information to the FDA. During the third and fourth quarters of 1998, we submitted to the FDA two premarket notification applications under Section 510(k) of the FDC Act containing the results of our left ventricular and right atrium multi-center clinical trials. The FDA has cleared the EnSite System for use in the right atrium of the heart. In March 1999, we announced that our FDA application for left ventricular use of the EnSite System will be submitted as a PMA application. However, we may not be able to file a PMA application with the FDA to market the EnSite System for diagnosing VT in the United States until we complete more extensive clinical trials. The process of obtaining FDA and other required regulatory approvals is lengthy, expensive and uncertain.
Sales of medical devices outside of the United States are subject to international regulatory requirements that vary from country to country, and approval for sale internationally may take more or less time than that required for FDA approval. We have obtained CE certification for the EnSite catheter and for the EnSite 3000 clinical workstation, allowing us to sell our products in member countries of the European Union. We may encounter significant costs and requests for additional information in continuing our efforts to obtain regulatory approvals in other countries, which could substantially delay or preclude us from marketing our products internationally.
Marketing approvals, if granted, may require us to limit the indicated use of our product. FDA enforcement policy strictly prohibits the marketing of approved medical devices for unapproved uses. Product approvals could be withdrawn for failure to comply with regulatory standards or the occurrence of unforeseen problems following the initial marketing. We will be required to follow FDA regulations regarding Good Manufacturing Practices and similar regulations in other countries, which include testing, control, and documentation requirements. Ongoing compliance with Good Manufacturing Practices and other applicable regulatory requirements will be monitored through periodic inspections by federal and state agencies, including the FDA, and by comparable agencies in other countries. If we fail to comply with applicable regulatory requirements, we could be subjected to warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal of the government to grant premarket approval, withdrawal of approvals and criminal prosecution.
We cannot assure you that we will be able to obtain the necessary regulatory approvals on a timely basis or at all. Delays in receipt of or failure to receive the approvals, the loss of previously obtained approvals, or failure to comply with existing or future regulatory requirements would have a material and adverse effect on our business, financial condition and results of operations.
Treatments using the Ensite System may not be available to patients
We have developed the EnSite System to diagnose tachycardia and assist electrophysiologists in determining treatment options. Current treatments for VT include drugs, implantable defibrillators, surgery and catheter ablation. We believe that the EnSite System will enable increased use of catheter ablation for treating complex VT. Because ablation treatment for VT is relatively new and untested, the long-term effects of ablation on patients are unknown. As a result, the long term success of ablation therapy in treating VT will not be known for several years. Catheter ablation devices require PMA approval by the FDA, and we cannot assure you that a catheter ablation market will develop. Moreover, we cannot assure you that the EnSite System will prove useful in diagnosing VT for treatment by catheter ablation products. We are not in the process of developing a catheter for ablation treatment and are entirely dependent upon other medical device companies to develop those devices. If a market for treating VT by catheter ablation does not develop, our business, financial condition and results of operations could be materially and adversely affected.
4
Our products may be unable to diagnose atrial fibrillation
In addition to assisting the diagnosis of VT, we intend to apply the EnSite System to the diagnosis of SVT, including atrial fibrillation. However, we have conducted only limited clinical studies of our technology on patients suffering from atrial fibrillation. We may be unable to successfully extend our technology to the mapping of atrial fibrillation or obtain regulatory approval to test and market any products developed using the technology to map atrial fibrillation. We have made, and expect to continue to make, research and development expenditures to extend the application of the technology to the diagnosis of atrial fibrillation. We cannot assure you that we will realize any benefit from these expenditures.
Atrial fibrillation is a complex disease and the subject of continuing research. The therapies presently available for atrial fibrillation are in the developmental stage with no proven effectiveness. Even if we are successful in extending our technology to provide products that are capable of diagnosing atrial fibrillation, we cannot assure you that treatments for atrial fibrillation will exist that will require the diagnostic capabilities of any of our products. As a result, a commercial market may never develop for any product we develop for the diagnosis of atrial fibrillation. We have no present intention to develop any medical devices on our own for the treatment of atrial fibrillation.
Our products may not succeed in the market
The commercial success of the EnSite System depends upon the number of diagnostic procedures performed by electrophysiologists using the system. Our system may not gain any significant degree of market acceptance among electrophysiologists, patients, health care insurers and managed care providers. Electrophysiologists and other physicians may elect not to recommend diagnostic procedures for any number of reasons, including safety and efficacy, the availability of alternative procedures and treatment options, or inadequate levels of reimbursement. Broad use of the EnSite System will require time-consuming training of electrophysiologists, which could also adversely affect market acceptance. If our products are not accepted by the market, our business, financial condition and results of operations would be materially and adversely affected.
We face significant industry competition
The cardiac medical device market is highly competitive, and the EnSite System is a new technology that must compete with more established devices. Certain of our competitors are developing new approaches and new products for diagnosing VT and SVT, including contact mapping systems using multi-electrode basket contact catheters and single-point mapping technologies. Certain of our competitors have integrated product lines that include products for both diagnosis and ablation treatment, which may afford them opportunities for product bundling and other marketing advantages. Many of our competitors have an established presence in the field of electrophysiology and established relationships with electrophysiology labs. Many of our competitors have substantially greater financial and other resources than we do, including larger research and development staffs and more experience and capabilities in conducting research and development activities, testing products in clinical trials, obtaining regulatory approvals, and manufacturing, marketing and distributing products. Some of our competitors may achieve patent protection, regulatory approval or product commercialization more quickly than us, which may decrease our ability to compete.
Our products may become obsolete if we are unable to anticipate and adapt to rapidly changing technology
The medical device industry is subject to rapid technological innovation and, consequently, the life cycle of any particular product is short. Alternative diagnostic systems or other discoveries and developments with respect to mapping tachycardia may render our products obsolete. Furthermore, the
5
greater financial and other resources of many of our competitors may permit them to respond more rapidly than us to technological advances. If we fail to demonstrate the safety, benefit, efficacy and cost effectiveness of our products as compared to those of our competitors, or if we fail to develop new technologies and products before our competitors, our business, financial condition and results of operations would be materially and adversely affected.
We depend on our patents and proprietary technology, which we may not be able to protect
Our success will depend in part on our ability to obtain patent protection for our products and processes, to preserve our trade secrets and to operate without infringing the intellectual property rights of others. The patent positions of medical device companies are uncertain and involve complex and evolving legal and factual questions. We cannot assure you that any of our pending or future patent applications will result in issued patents, that any current or future patents will not be challenged, invalidated or circumvented, that the scope of any of our patents will exclude competitors or that the patent rights granted to us will provide us any competitive advantage. We may discover that our technology infringes patents or other rights owned by others, and we cannot be certain that we were the first to make the inventions covered by each of our issued patents and our pending patent applications, or that we were the first to file patent applications for such inventions. In addition, we cannot assure you that our competitors will not seek to apply for and obtain patents that will prevent, limit or interfere with our ability to make, use or sell our products either in the United States or in international markets. Further, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States.
In addition to patents, we rely on trade secrets and proprietary knowledge that we seek to protect, in part, through confidentiality agreements with employees, consultants and others. We cannot assure you that our proprietary information or confidentiality agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by competitors.
We may face intellectual property infringement claims which would be costly to resolve
There has been substantial litigation regarding patent and other intellectual property rights in the medical device industry and our competitors may resort to intellectual property litigation as a means of competition. Intellectual property litigation is complex and expensive and the outcome is difficult to predict. We cannot assure you that we will not become subject to patent infringement claims or litigation, or interference proceedings declared by the United States Patent and Trademark Office to determine the priority of inventions. Litigation or regulatory proceedings may also be necessary to enforce our patent or other intellectual property rights. We may not always have the financial resources to assert patent infringement suits or to defend ourselves from claims. An adverse result in any litigation could subject us to liabilities to, or require us to seek licenses from or pay royalties to, others that may be substantial. Furthermore, we cannot assure you that the necessary licenses would be available to us on satisfactory terms, if at all.
We have limited manufacturing experience
We have limited experience manufacturing our products in the volumes that will be necessary for us to achieve significant commercial sales, and we cannot assure you that reliable, high-volume manufacturing capacity can be established or maintained at commercially reasonable costs. We may need to expend significant capital resources and develop the necessary expertise to establish large-scale manufacturing capabilities. We may encounter the following difficulties in scaling up production of our products:
6
Our manufacturing facilities will be periodically inspected by United States and foreign regulatory authorities. In order to manufacture products for sale in the United States, our operations must undergo "Good Manufacturing Practices" compliance inspections conducted by the FDA. We passed inspection of our facility and manufacturing processes by the FDA in the third quarter of 1999. We will also be required to comply with ISO 9001 and CE Mark standards in order to sell our products in Europe. We received ISO 9001 certification for our catheter and quality system in August 1997 and ISO 9001 certification for the clinical workstation in November 1998. We received a CE Mark for each of the EnSite catheter and the clinical workstation in the first quarter of 1998. If we fail to comply with Good Manufacturing Practices or ISO 9001 and CE Mark standards in future audits, we may be required to modify our manufacturing policies and procedures. In addition, we may be required to stop all or part of our operations until we can demonstrate that appropriate steps have been taken to comply with the regulations.
We depend on a few suppliers for key components of our products
We purchase raw materials and certain key components of our products, including the computer workstation and certain components for our catheter, from one or a few suppliers. For certain of these components, there are relatively few alternative sources of supply. We currently have no agreements that would assure delivery of raw materials and components from alternate suppliers. Establishing additional or replacement suppliers for any of the components used in our products, if required, may not be accomplished quickly and could involve significant additional costs. If our suppliers are unable to provide an adequate supply of components in a timely manner, or if we are unable to locate qualified alternate suppliers for materials and components at a reasonable cost, our business, financial condition and results of operations could be materially and adversely affected.
We have limited commercial sales and marketing experience
We have limited experience marketing the EnSite System. We cannot assure you that we will be able to maintain a suitable sales force or enter into or maintain satisfactory marketing arrangements with others. Our sales and marketing efforts may not be successful.
We will need to carefully manage our expanding operations
In order to achieve increased sales levels, complete clinical trials, prepare additional products for clinical trials, and develop future products, we believe that we will be required to expand our operations, particularly in the areas of research and development, manufacturing, quality assurance and sales and marketing. As we expand our operations in these areas, the expansion will likely result in new and increased responsibilities for management. To accommodate any growth and compete effectively, we must implement and improve our information systems, procedures, and controls, and expand, train, motivate and manage our work force. Our future success will depend significantly on the ability of our current and future management to operate effectively. We cannot assure you that our personnel, systems, procedures and controls will be adequate to support our future operations.
7
International operations will expose us to additional risks
We plan to market the EnSite System through distributors in international markets, once we receive the required foreign regulatory approvals. We have entered into a distribution agreement granting Medtronic exclusive distribution rights for our products in Canada, Europe and Japan and certain rights for distribution in other regions outside of the United States. In the first quarter of 1998, we received ISO 9002 certification for our workstation and a CE Mark for each of the EnSite catheter and the clinical workstation, allowing us to begin selling our products in member countries of the European Union. We have distribution arrangements with five distributors in other international markets, and currently retain all distribution rights in the United States. We cannot assure you that international distributors for our products will devote adequate resources to selling our products.
Changes in overseas economic conditions, currency exchange rates, foreign tax laws or tariffs or other trade regulations could materially and adversely affect on our ability to market our products internationally. Our business is also expected to subject us and our representatives, agents and distributors to laws and regulations of the foreign jurisdictions in which we operate or our products are sold. We may depend on foreign distributors and agents for compliance and adherence to foreign laws and regulations.
Our success may depend on achieving adequate levels of third-party reimbursement
Sales of our products will depend largely on the availability of adequate reimbursement for tachycardia diagnostic procedures from third-party payors, such as government and private insurance plans, health maintenance organizations and preferred provider organizations. In the United States, our products, if and when approved for commercial sale, would be purchased primarily by health care providers such as doctors and hospitals who will then seek to be reimbursed for the health care services provided to their patients. Third-party payors are increasingly challenging the pricing of medical products and procedures they consider unnecessary, inappropriate, not cost-effective, experimental or used for a non-approved indication. Even if a procedure is eligible for reimbursement, the level of reimbursement may not be adequate to enable us to achieve or maintain market acceptance of our products or maintain price levels that exceed our costs of developing and manufacturing our products.
The EnSite catheter is being sold at a premium compared to existing single point catheters used in current diagnostic or mapping procedures. In addition, an initial capital outlay will be required for the EnSite clinical workstation. Assuming no increase in the level of reimbursement for cardiovascular procedures utilizing our products, we will be required to justify the relative increased cost of using the EnSite System. This will require us to demonstrate the enhanced benefits of the EnSite System to health care providers and payors in terms of such factors as enhanced patient procedural efficiencies, reduced radiation exposure and improved patient outcomes. This may require us to conduct post-marketing clinical studies, which may be costly, lengthy, and may not provide the cost justification results we are seeking. Without adequate support from third-party payors, the market for our products may be severely limited.
Capital costs for medical equipment purchased by hospitals are currently reimbursed under Medicare separately from medical procedure payments. Recent federal Medicare legislation has called for these capital costs to be reimbursed on a prospective payment system. During a transition period due to end in 2000, each hospital's capital expenditures will be based in part on its own historical capital costs and in part on the prospective payment system. There can be no assurance that the movement to a prospective payment system will not cause hospitals to reduce their expenditure payments for equipment such as the EnSite clinical workstation.
Moreover, we are unable to predict what additional legislation or regulation, if any, relating to the health care industry or third-party coverage and reimbursement may be enacted in the future, or what effect such legislation or regulation would have on us. Reforms may include mandated basic health care
8
benefits, limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, greater reliance on prospective payment systems, the creation of large insurance purchasing groups and fundamental changes to the health care delivery system. We anticipate that Congress and state legislatures will continue to review and assess alternative health care delivery systems and payment methodologies. We cannot predict whether any reform proposals will be adopted or what impact they may have on us.
Reimbursement systems in international markets vary significantly by country and by region within some countries. Many international markets have government managed health care systems that control reimbursement for new devices and procedures. In most international markets, there are private insurance systems as well as government managed systems. We cannot assure you that reimbursement for our products will be available in international markets under either government or private reimbursement systems.
Our products may expose us to costly litigation
We may be exposed to product liability claims if a patient is adversely affected by our products. We currently carry product liability insurance covering our clinical trial operations with an aggregate limit of $5 million. We cannot assure you that our existing insurance coverage limits are adequate to cover any liabilities we might incur in connection with the distribution of our products. Although we obtained product liability insurance coverage in connection with the commercialization of the EnSite System, insurance may not continue to be available on commercially reasonable terms. In addition, insurance might not adequately cover any product liability claim.
We have a history of operating losses and expect future losses
We have generated limited revenue and have sustained significant operating losses each year since our inception. We expect our losses to continue at least through mid-2001. We may never generate substantial operating revenues or achieve profitability. Our ability to generate revenues from operations and make a profit depends upon successful development, regulatory approval, manufacturing and commercialization of the EnSite System and our successful transition from a research and development company to a manufacturing and sales company.
We may be unable to meet our future capital requirements
We may require substantial funds to meet our working capital requirements for sales and marketing, continued research and development, testing, regulatory approval and manufacturing of our EnSite System. In order to meet our funding needs, we may be required to raise additional funds through public or private financings, including the sale of equity or debt. Any additional equity financings may dilute current stockholders, and debt financing, if available, may involve restrictive covenants. Adequate funds for our operations, whether from financial markets or from other sources, may not be available when needed on attractive terms, if at all. Insufficient funds may require us to delay, scale back or eliminate some or all of our plans for growth.
9
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires us to file information with the SEC concerning our business and operations. We file annual, quarterly and special reports, proxy statements and other information with the SEC. You can read and copy these documents at the public reference facility maintained by the SEC at Judiciary Plaza, 450 Fifth Street, NW, Room 1024, Washington, DC 20549. You can also copy and inspect such reports, proxy statements and other information at the following regional offices of the SEC:
| New York Regional Office | Chicago Regional Office | |
| Seven World Trade Center | Citicorp Center | |
| Suite 1300 | 500 West Madison Street, Suite 1400 | |
| New York, NY 10048 | Chicago, Illinois 60661 |
Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public on the SEC's web site at http://www.sec.gov. You can also inspect our reports, proxy statements and other information at the offices of the Nasdaq Stock Market.
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"):
This Prospectus is part of a registration statement we filed with the SEC (Registration No. 333-41424). You may request a free copy of any of the above filings by writing or calling:
Leota
L. Pearson
Chief Financial Officer
1350 Energy Lane, Suite 110
St. Paul, MN 55108
(651) 644-7890
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. The Selling Stockholders should not make an offer of these Shares in any state where the offer is not permitted. 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.
10
ABOUT ENDOCARDIAL SOLUTIONS, INC.
We design, develop, and manufacture a minimally invasive diagnostic system that diagnoses, within the span of a few heartbeats, arrhythmia, a potentially fatal abnormal heart rhythm. Arrhythmias are caused by irregular electrical activity in the heart which disrupts the heart's normal pumping action. Ventricular tachycardia ("VT"), a type of arrhythmia, occur in the lower chambers of the heart and frequently lead to serious complications, including sudden cardiac death. Supraventricular tachycardia ("SVT"), including atrial fibrillation and flutter, originate in the upper chambers of the heart and often result in chest pain, fatigue and dizziness and, while generally not life-threatening, are a leading cause of stroke in the United States. To date, electrophysiologists have generally been unable to adequately diagnose complex arrhythmia due to the limited capabilities of present technology. We believe that our proprietary EnSite® catheter and EnSite 3000® clinical workstation (together, the "EnSite System") is a powerful new diagnostic tool that will enable electrophysiologists to rapidly and comprehensively map arrhythmia and improve the selection of patient treatment options.
Our EnSite System is designed to enable electrophysiologists to rapidly and precisely locate the multiple, unpredictable points of origin of complex arrhythmia. The EnSite System applies proprietary mathematical algorithms to compute more than 3,000 points of electrical activity within a heart chamber, producing a high resolution, real-time, three dimensional color display of the electrical activity in the heart chamber. The "virtual electrogram" function of the EnSite System allows electrophysiologists to instantly view the electrical activity at any of the more than 3,000 points. The EnSite System is also capable of tracking and displaying the location and movements of auxiliary catheters introduced into the chamber.
Our strategy is to establish the EnSite System as the leading diagnostic tool for diagnosing arrhythmia in the more than 1,200 electrophysiology laboratories worldwide. The EnSite System represents a new technology for mapping arrhythmia. In 1998, we received the necessary approval to market our products in the European Community and in 1999, we received FDA approval to market our product for right atrial use in the U.S. In the fourth quarter of 1999, the FDA cleared for release a new version of our software product. The key elements of our strategy are as follows:
• Increase Clinical Awareness With Electrophysiologists. With our multi-center clinical studies and our United States and European product launch, we have established relationships with several leading electrophysiologists, which are expected to continue to enhance market acceptance of the EnSite System. A Center of Excellence program in the United States is in place with several leading institutions to further develop market acceptance of the EnSite System. We will also continue to demonstrate the clinical efficacy of the EnSite System through the publication of the results of our post-market studies and at various scientific shows such as NASPE, AHA and ACC. We have over 100 abstracts and 8 peer-reviewed articles that have been published in various scientific journals.
• Expand Technology. We believe that the EnSite System can be extended from mapping complex atrial tachycardia to mapping complex VT and atrial fibrillation and flutter, all of which share similar complex characteristics, such as multiple sites of origin in unpredictable locations. We believe that the patient population that suffers from complex arrhythmias that are difficult to map using currently available technology presents a significant market opportunity for our EnSite System. We intend to continue to focus on the ability of our technology to provide improved speed, increased accuracy and cost-effectiveness in mapping other arrhythmias. This improved mapping power should benefit electrophysiologists in performing diagnostic procedures and prescribing treatments for an expanded patient population.
In June 1997, we received FDA approval for the use of our EnSite System in the left ventricle of the heart in a multi-center clinical study. In December 1998, we filed a premarket notification application with the FDA under Section 510(k) of the Food, Drug and Cosmetic Act containing
11
the results of our left ventricular multi-center clinical trials. In March 1999, we announced that our FDA application for left ventricular use of the EnSite System will be submitted as a premarket approval ("PMA") application.
In August 1997, we received FDA approval for the use of our EnSite System in the right atrium in a multi-center clinical study. In September 1998, we filed a 510(k) application with the FDA containing the results of our right atrial multi-center clinical trials and in April 1999 received FDA approval to market the EnSite System for use in the right atrium.
We were incorporated in Minnesota in 1992 and reincorporated in Delaware in 1995. Our common stock began trading on The Nasdaq National Market under the symbol "ECSI" on March 19, 1997. We sold 2,250,000 shares of our common stock to the public pursuant to a registered public offering, and sold 750,000 shares of our common stock in a concurrent private placement to Medtronic, Inc. Also at such time, all outstanding shares of our preferred stock were automatically converted into an aggregate of 4,705,602 shares of common stock following the 1 for 2 reverse stock split. Prior to such date, there was no established public trading market for our securities.
In September 1997, we signed a seven-year exclusive distribution agreement with Medtronic, Inc. to market our diagnostic products for the electrophysiology markets in Europe and Japan. The distribution agreement was amended in December 1998 to provide Medtronic with exclusive distribution rights for our products in Canada. In January 1998, we signed a license agreement with Medtronic, Inc. which gives us co-exclusive use of 3D intracardiac location technology for our EnSite System. The technology, when integrated with the EnSite System, will improve intracardiac catheter positioning while significantly reducing the use of harmful radiation.
In the first quarter of 1998, we received ISO 9002 certification for our workstation and a CE Mark for each of the EnSite catheter and EnSite 3000 clinical workstation, allowing us to begin selling our products in the European Community. Distribution by Medtronic in Europe of the EnSite System began in the second quarter of 1998.
In the first quarter of 1999, we announced a financing agreement with Medtronic, Inc. Under the agreement, we received $7 million from Medtronic Asset Management, which is repayable by 2001 or, if earlier, at the close of a significant round of debt or equity financing. In July 1999, we received proceeds of $10,000,000 in a private placement of 1,111,111 shares of our common stock to accredited investors. Proceeds from the financings are being used to facilitate our continued growth in Europe and our U.S. product launch.
Our offices are located at 1350 Energy Lane, Suite 110, St. Paul, Minnesota 55108, and our telephone number is (651) 644-7890. The address of our web site is www.endocardial.com.
Recent Developments
Financing. In June 2000, we received net proceeds of $12,687,500 from a private placement to accredited investors of our common stock at $6.25 per share. Investors purchased a total of 2,030,000 shares in this private placement. Proceeds from the financing will be used for general working capital, including expenses associated with our U.S. market introduction, clinical trials and ongoing research and development. We granted registration rights to the Selling Stockholders covering the resale of common stock issued to investors in the private placement. We are registering the shares on a Form S-3 Registration Statement, of which this Prospectus forms a part, pursuant to which all of the shares may be offered from time to time by the Selling Stockholders.
12
The Selling Stockholders acquired the Shares in connection with a private placement of our common stock. See "About Endocardial Solutions, Inc.—Financing" above. The Shares are being registered to permit public secondary trading of the Shares, and the Selling Stockholders may offer the Shares for resale from time to time. See "Plan of Distribution." The following table lists the Selling Stockholders and sets forth certain information regarding the beneficial ownership of common stock of each Selling Stockholder as well as the number of Shares each Selling Stockholder may sell pursuant to this Prospectus.
| Name |
Number of Shares Beneficially Owned |
Maximum Number of Shares to be Sold Pursuant to this Prospectus(1) |
||
|---|---|---|---|---|
| EGM Medical Technology Offshore Fund | 73,000 | 73,000 | ||
| EGM Medical Technology Fund LP | 118,000 | 118,000 | ||
| Goldman Sachs Strategic Technology Portfolio, L.P. | 45,000 | 45,000 | ||
| Robert Fleming Nominees, Ltd. | 624,000 | 624,000 | ||
| Framlington Health Fund | 143,500 | 143,500 | ||
| Lares & Co. | 143,500 | 143,500 | ||
| William Wells Hutchins | 16,500 | 16,500 | ||
| Narragansett I, LP | 25,030 | 25,030 | ||
| Narragansett Offshore Ltd. | 77,470 | 77,470 | ||
| Ocean Avenue Investors, LLC Anacapa I | 173,100 | 124,000 | ||
| Strategic Advisors Funds, LLC Science & Technology Fund | 8,000 | 8,000 | ||
| Pequot Scout Fund, L.P. | 164,000 | 164,000 | ||
| The Paisley Pacific Fund | 263,000 | 263,000 | ||
| AL-Bank AL-Saudi AL-Alami Limited | 16,500 | 16,500 | ||
| Hare & Co | 164,000 | 164,000 | ||
| Investec Ernst & Co | 24,500 | 24,500 | ||
| Total | 2,030,000 |
We are registering the Shares on behalf of the Selling Stockholders. As used in this Prospectus, the term "Selling Stockholders" includes donees and pledgees selling Shares received from a named Selling Stockholder after the date of this Prospectus. The Selling Stockholders 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 costs, expenses and fees in connection with the registration of the Selling Stockholders' Shares. Brokerage commissions and similar selling expenses, if any, attributable to the sale of the Selling Stockholder' Shares will be borne by the Selling Stockholders.
The Selling Stockholders 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 options transactions, through short sales, or a combination of such methods of sale, at prices relating to
13
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 Stockholders 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 Stockholders 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 Stockholders. There is no assurance that the Selling Stockholders will sell any or all of the Shares that they offer.
The Selling Stockholders 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 (the "Securities Act"), 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 Stockholders may be deemed to be "underwriters" within the meaning of the Securities Act, the Selling Stockholders will be subject to the prospectus delivery requirements of the Securities Act. We have informed the Selling Stockholders that the anti-manipulative provisions of Regulation M promulgated under the Exchange Act may apply to their sales in the market.
The Selling Stockholders may also resell all or a portion of the Shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided such sale meets the criteria and conforms to the requirements of such Rule.
Upon notification to us by a Selling Stockholder 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 Stockholder 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 Stockholder that a donee or pledgee intends to sell more than 500 Shares, a supplement to this Prospectus will be filed.
The validity of the Shares offered by this Prospectus has been passed upon for us by Dorsey & Whitney LLP, Minneapolis, Minnesota.
The financial statements included in our Annual Report on Form 10-K for the year ended December 31, 1999 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
14
|
|