-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MREODzL6PEz7IUXOdN7ykGU9NYopruBR3K7fUoc1sH3DSk39NZKlyWaqWW3Zqguy tETx1XKeo2E3IwKVut+CxQ== 0000897101-96-000268.txt : 19960710 0000897101-96-000268.hdr.sgml : 19960710 ACCESSION NUMBER: 0000897101-96-000268 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATS MEDICAL INC CENTRAL INDEX KEY: 0000824068 STANDARD INDUSTRIAL CLASSIFICATION: 8731 IRS NUMBER: 411595629 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18602 FILM NUMBER: 96566253 BUSINESS ADDRESS: STREET 1: 3905 ANNAPOLIS LA STREET 2: SUITE 105 CITY: MINNEAPOLIS STATE: MN ZIP: 55447 BUSINESS PHONE: 6125537736 MAIL ADDRESS: STREET 1: 3905 ANNAPOLIS LANE STREET 2: SUITE 105 CITY: MINNEAPOLIS STATE: MN ZIP: 55447 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 COMMISSION FILE NO. 0-18602 ATS MEDICAL, INC. (Exact name of registrant as specified in its charter) MINNESOTA 41-1595629 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3905 ANNAPOLIS LANE, SUITE 105 55447 MINNEAPOLIS, MINNESOTA (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (612) 553-7736 Former name, if changed since last report: N/A Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ___ The number of shares outstanding of each of the registrant's classes of common stock as of May 1, 1996 was: Common Stock, $.01 par value 15,102,039 shares ATS MEDICAL, INC. INDEX PAGE PART I. FINANCIAL INFORMATION Item 1. Statements of Financial Position - 3 March 31, 1996 (unaudited) and December 31, 1995 Statements of Operations - 4 Three Months Ended March 31, 1996 and 1995 (unaudited) Statements of Cash Flows - 5 Three Months Ended March 31, 1996 and 1995 (unaudited) Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of 7 Financial Condition and Results of Operations PART II. OTHER INFORMATION 10 Signatures 11 ATS MEDICAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION (Unaudited)
MARCH 31, DECEMBER 31, 1996 1995 ASSETS ------------ ------------ CURRENT ASSETS Cash & cash equivalents $ 2,901,507 $ 2,213,632 Marketable securities 8,853,680 10,770,979 ------------ ------------ 11,755,187 12,984,611 Accounts receivable, less allowance of $12,500 in 1996 and $150,000 in 1995 3,327,146 3,014,957 Other receivables 108,500 210,150 Prepaid expenses 357,023 440,682 Inventory 14,316,339 13,421,745 ------------ ------------ TOTAL CURRENT ASSETS 29,864,195 30,072,145 FURNITURE, MACHINERY & EQUIPMENT 1,902,291 1,849,120 Less accumulated depreciation 1,018,846 961,571 ------------ ------------ 883,445 887,549 OTHER ASSETS 370,885 369,434 ------------ ------------ TOTAL ASSETS $ 31,118,525 $ 31,329,128 ============ ============ LIABILITIES & SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 889,951 $ 1,988,189 Accrued payroll and expenses 168,115 281,518 ------------ ------------ TOTAL CURRENT LIABILITIES 1,058,066 2,269,707 LONG-TERM DEBT 0 0 SHAREHOLDERS' EQUITY Common Stock, $.01 par value: Authorized 40,000,000 shares; Issued and outstanding 15,101,539 & 14,963,604 at March 31, 1996 and Dec 31, 1995, respectively 151,015 149,636 Additional paid-in capital 51,600,750 50,777,154 Other equity 32,046 48,154 Retained earnings (deficit) (21,723,352) (21,915,523) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 30,060,459 29,059,421 ------------ ------------ TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 31,118,525 $ 31,329,128 ============ ============
ATS MEDICAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three months ended March 31, --------------------------- 1996 1995 ------------ ------------ REVENUES Net sales $ 2,596,880 $ 2,318,305 Less cost of goods sold 1,674,285 1,495,327 ------------ ------------ GROSS PROFIT 922,595 822,978 OPERATING EXPENSES Research, development and engineering 162,386 155,039 Selling, general and administrative 751,647 605,351 ------------ ------------ TOTAL EXPENSES 914,033 760,390 Interest income 183,609 73,837 Interest expense 0 (29,761) ------------ ------------ 183,609 44,076 NET INCOME $ 192,171 $ 106,664 ============ ============ Net income per share $ 0.01 $ 0.01 ============ ============ Weighted average number of shares outstanding during the period 16,685,411 12,673,470 ============ ============ ATS MEDICAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31 1996 1995 ------------ ------------ OPERATING ACTIVITIES Net income $ 192,171 $ 106,664 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 57,275 57,447 Loss on disposal of equipment 0 712 Compensation expense on stock options 0 9,266 Changes in operating assets and liabilities: Accounts receivable (312,189) 47,585 Prepaid expenses and other assets 185,308 97,066 Other assets (1,451) (21,613) Inventory (894,594) 986,405 Accounts payable and accrued expenses (1,211,641) 122,435 ------------ ------------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,985,121) 1,405,967 INVESTING ACTIVITIES Purchase of marketable securities (928,650) (8,639,860) Sale of marketable securities 2,833,097 0 Purchases of property, plant and equipment (53,171) 0 ------------ ------------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,851,276 (8,639,860) FINANCING ACTIVITIES Notes payable 0 (1,250,000) Net proceeds from sale of common stock 824,975 14,814,027 ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 824,975 13,564,027 Effect of exchange rate changes on cash (3,255) 18,038 INCREASE IN CASH AND CASH EQUIVALENTS 687,875 6,348,172 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,213,632 628,368 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,901,507 $ 6,976,540 ============ ============
ATS MEDICAL, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) March 31, 1996 Note A - BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month periods ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ATS Medical, Inc. (the "Company") is engaged in the manufacturing and marketing of a pyrolytic carbon bileaflet mechanical heart valve. The Company sells the ATS Open Pivot TM valve (the "ATS Valve" or the "Valve") in international markets and is in the process of pursuing regulatory approval for sales in the United States. RESULTS OF OPERATIONS Net sales for the quarter ended March 31, 1996 totalled $2,596,880 compared to $2,318,305 for the quarter ended March 31, 1995. Revenue increased 12 % in the first quarter 1996 compared to 1995, but unit sales declined 4 %. More valves were sold into price sensitive markets during the quarter ended March 31, 1995 than in 1996. The average selling price per valve increased 11 % for the quarter ended March 31, 1996 compared to 1995. International pricing of heart valves is very competitive. The Company sells to independent specialty medical products distributors, who are responsible for specific geographic territories. These distributors sell the Valve to doctors, hospitals and health systems. Effective January 1, 1996 the Company raised the price of the Valve an average of 5%. Cost of sales for the first quarter of 1996 totaled $1,674,285 or 65 % of sales compared to $1,495,327 or 65 % of sales for the first quarter of 1995. Although the mix of sales shifted to fewer units in low priced markets, the price of the carbon components increased 11% for the quarter ended March 31, 1996 as compared to the cost of carbon components contained in the Valves sold in the quarter ended March 31, 1995. Gross profit totaled $922,595 for the quarter ended March 31, 1996 or 35 % of sales, compared to gross profit of $822,978 or 35 % for the quarter ended March 31, 1995. The increase in the average selling price in the first quarter of 1996 over 1995 was offset by the increase in the cost of carbon components. Research, development and engineering expenses totalled $162,386 for the quarter ended March 31, 1996 versus $155,039 for the quarter ended March 31, 1995. Approximately 47 % and 40 % of research and development expenses for the quarters ended March 31, 1996 and 1995, resectively, were for testing and outside consulting services related to the valve. The primary focus of the Company's development efforts in the first quarter of 1996 was for new packaging for the Valve. Selling, general and administrative expenses totaled $751,647 for the quarter ended March 31, 1996, an increase over the $605,351 reported for the quarter ended March 31, 1995. During the second half of 1995 the Company added personnel in sales and marketing which combined with other salary increases accounted for most of the year to year increase. The Company is planning the Second Symposium on the ATS Valve for the fourth quarter of 1996. Anticipated expenses associated with this meeting are being accrued at a rate of $50,000 per quarter starting with the first quarter of 1996. Interest expense totaled $29,761 for the quarter ended March 31, 1995. There was no interest expense incurred in the quarter ended March 31, 1996. At the beginning of 1995, the Company had borrowed the entire limit of its $1,250,000 line of credit. The Company repaid its entire line of credit on March 13, 1995. Interest income totaled $183,609 for the first quarter of 1996 compared to $73,837 for the first quarter of 1995. The increase in interest income was the result of having more cash on hand to invest in 1996 than in 1995. The Company recorded net income of $192,171 for the quarter ended March 31, 1996 versus net income of $106,664 for the quarter ended March 31, 1995. The increased amount of interest income, the absence of interest expense and the increase in gross profit were greater than the increase in operating expenses, which resulted in increased net income. Earnings per share for both quarters totaled $.01. The weighted average number of shares outstanding increased 32% in the 1996 first quarter over the 1995 first quarter primarily due to the issuance of 3,600,000 shares in the March, 1995 common stock offering. LIQUIDITY AND CAPITAL RESOURCES Cash, cash equivalents and marketable securities decreased by $1,229,424 from $12,984,611 at December 31, 1995 to $11,755,187 at March 31, 1996. Inventory purchases, accounts receivable growth and a $1,098,238 reduction in accounts payable caused the company to have negative cashflow. During 1996 the Company is required to buy $9.6 million of heart valve components in accordance with terms of a long term supply agreement with Carbomedics, Inc. (the "Supply Agreement"). There are four contract years after 1996 during which the Company is obligated to purchase an aggregate total of approximately $60 million of components. The minimum purchases under the contract are not tied to sales of the Company's valve and the Company does not expect sales of the Valve to exceed the minimum purchase requirements until the Valve is approved for sale in the United States by the Food and Drug Administration. Accounts receivable increased from $3,014,957 at December 31, 1995 to $3,327,146 at March 31, 1996. All of the Company's sales have been to customers in international markets and while the Company attempts to set standard 60 day terms for receivables, competitive pressures and geographical economic situations have caused the Company to selectively extend the terms for payment. Accounts payable decreased by $1,098,238 from $1,988,189 at December 31, 1995 to $889,951 at March 31, 1996. The Company scheduled and received a large quantity of components from its carbon supplier in the fourth quarter of 1995 and a lesser quantity in the first quarter of 1996. The majority of the decrease is related to the amount owing CMI. Based upon the Company's current rate of sales, its expected obligations under the supply agreement with CMI and its expected expenses, the Company anticipates that existing cash, cash equivalents and short-term investments will be sufficient to satisfy its capital requirements through 1997. Beyond 1997, given the substantial minimum purchase requirements under the Supply Agreement and the costs associated with obtaining FDA approval in the United States, the Company must continue to substantially increase revenues to meet its capital requirements. Should revenues not increase sufficiently, the Company may be required to raise additional equity capital. There can be no assurance that equity would be available to the Company at favorable terms, if at all. PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders At the Company's Annual Meeting of Shareholders held on May 2, 1996, the share-holders re-elected each of the Company's four directors by the following votes: Director Votes For Withheld Not Voting Manuel A. Villafana 11,914,692 71,525 3,113,572 Richard W. Kramp 11,914,692 71,525 3,113,572 Charles F. Cuddihy, Jr. 11,912,072 74,145 3,113,572 James F. Lyons 11,905,242 80,975 3,113,572 A. Jay Graf 11,912,117 74,100 3,113,572 In addition, the shareholders ratified the selection of Ernst & Young as the Company's independent auditors for 1996 by the following vote: Votes For Votes Against Abstentions Not Voted 11,967,475 10,232 8,510 3,113,572 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K Exhibit 27 - Financial Data Schedule SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 14, 1996 ATS MEDICAL, INC. By: /s/ John H. Jungbauer John H. Jungbauer, Vice President/CFO (Principal Financial Officer and Authorized Signatory) EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 MAR-31-1996 2,901,507 8,853,680 3,489,646 162,500 14,316,339 29,864,195 1,902,291 1,018,846 31,118,525 1,058,066 0 0 0 151,015 29,909,444 31,118,525 2,596,880 2,596,880 1,674,285 1,674,285 730,424 0 0 192,171 0 192,171 0 0 0 192,171 .01 .01
-----END PRIVACY-ENHANCED MESSAGE-----