EX-99.3 3 c10652exv99w3.txt UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS EXHIBIT 99.3 UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS As used in these Unaudited Pro Forma Combined Condensed Statements of Operations, references to "we," "us," "our" or "ATS Medical" refer to ATS Medical, Inc., together with its consolidated subsidiaries. The following Unaudited Pro Forma Combined Condensed Statements of Operations are presented for illustrative purposes only and are not necessarily indicative of the combined results of operations for future periods or the results of operations that actually would have been realized had ATS Medical and 3F Therapeutics been a combined company during the specified periods. As the acquisition was completed on September 29, 2006, a Balance Sheet for the combined company has been presented in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2006. Accordingly, no Pro Forma Balance Sheet is presented in this Report The Unaudited Pro Forma Combined Condensed Statements of Operations, including the related notes, are qualified in their entirety by reference to, and should be read in conjunction with: - Our historical financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2005, as amended, and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2006; and - The historical financial statements and related notes of 3F Therapeutics included in ATS Medical's Registration Statement on Form S-4 filed with the Securities and Exchange Commission on August 10, 2006, and its unaudited Balance Sheet and unaudited Statements of Operations as of and for the three and nine months ended September 30, 2006, respectively, filed as Exhibit 99.2 to this Current Report on Form 8-K/A. The aggregate 3F purchase price was allocated to the assets acquired and liabilities assumed based on their preliminarily estimated fair values at the date of acquisition. The preliminary estimate of the excess of purchase price over the fair value of net tangible assets acquired was allocated to identifiable intangible assets and goodwill. The following table summarizes the preliminary estimate of fair value of the identifiable tangible and intangible assets and goodwill, net of liabilities assumed, that were acquired as part of the 3F acquisition (in thousands): Cash $ 2,599 Other current assets 2,846 Intangible assets subject to amortization 7,150 Goodwill 4,662 Other long-term assets 519 Acquired in-process research and development 14,400 Current liabilities (2,922) ------- Total purchase price $29,254 =======
In connection with the acquisition of 3F, we recorded developed and core technology and trade names and trademark intangible assets that have been preliminarily estimated with useful lives of between seven and twenty years and a weighted average life of 18 years. At the time of closing the 3F acquisition, we recorded an in-process research and development (IPR&D) charge preliminarily estimated at $14.4 million, with no related income tax benefit. This non-recurring IPR&D charge has been excluded from the unaudited Pro Forma Combined Condensed Statements of Operations for all periods presented herein. The preliminary valuation of IPR&D was based upon an analysis of technologies that have not yet achieved technological feasibility and have no future alternative use. The preliminary valuation considered expected future cash flows and was discounted for risks and uncertainties related to the completion of products. The tangible assets, net of liabilities of 3F assumed at the time of acquisition, were recorded at their respective fair values, in accordance with purchase accounting requirements. These tangible assets are initially estimated to be $3.04 million. For purposes of the preliminary allocation, we have estimated the fair value of 3F's property, plant and equipment based on an internal appraisal, which included a review of 3F's historical costs and management's 99intended future use, resulting in an adjustment to increase the historical carrying value of the assets by approximately $0.2 million. The fair value of the acquired property and equipment will be depreciated over estimated useful lives of three to five years, depending on the asset. We have also estimated the fair value of 3F's inventories, based on estimated net realizable value less costs to complete and a normal distribution margin, resulting in an adjustment to increase the historical carrying cost of inventories by $0.2 million. This non-recurring inventory increase adjustment has been excluded from the Unaudited Pro Forma Combined Condensed Statements of Operations for all periods presented herein. The goodwill recorded as a result of the 3F acquisition is not deductible for income tax purposes. The goodwill recognized represents operating and market synergies that will be realized as a result of the merger and future product opportunities. The following Unaudited Pro Forma Combined Condensed Statements of Operations are accounted for in accordance with Statement of Financial Accounting Standard No. 141, "Business Combinations." The pro forma adjustments are based upon preliminary estimates and available information. Final purchase accounting adjustments may differ from these pro forma amounts. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS OF ATS MEDICAL, INC. AND 3F THERAPEUTICS, INC. YEAR ENDED DECEMBER 31, 2005 (IN THOUSANDS)
(Restated) ATS Medical 3F Therapeutics Combined Year Ended Year Ended Year Ended December 31, December 31, Merger December 31, 2005 2005 Adjustments Notes 2005 ------------ --------------- ----------- ------ ------------ Net product sales $ 34,636 $ 326 $ -- $ 34,962 License revenue -- 8,618 -- 8,618 -------- ------- -------- -------- Total revenue 34,636 8,944 -- 43,580 Cost of product sales and license revenue 22,828 1,649 -- 24,477 -------- ------- -------- -------- Gross profit 11,808 7,295 -- 19,103 Operating expenses: Sales and marketing 18,948 1,035 -- 19,983 Research and development 1,733 6,614 -- 8,347 General and administrative 7,314 2,347 -- 9,661 Amortization of intangibles and additional depreciation -- -- 499 (1, 2) 499 -------- ------- -------- -------- Total operating expenses 27,995 9,996 499 38,490 -------- ------- -------- -------- Operating loss (16,187) (499) (19,387) Interest expense, net (338) (1,447) -- (1,785) Change in value of convertible senior notes derivative liability 2,131 -- -- 2,131 -------- ------- -------- -------- Net loss $(14,394) $(4,148) $ (499) $(19,041) ======== ======= ======== ======== Basic and diluted net loss per share $ (0.46) $ (0.48) ======== ======== Weighted average common shares outstanding 31,009 9,000 40,009 ======== ======== ========
See Notes to Unaudited Pro Forma Combined Condensed Statements of Operations. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS OF ATS MEDICAL, INC. AND 3F THERAPEUTICS, INC. NINE MONTHS ENDED SEPTEMBER 30, 2006 (IN THOUSANDS)
ATS Medical 3F Therapeutics Combined Nine Months Nine Months Nine Months Ended Ended Ended September 30, September 30, Merger September 30, 2006 2006 Adjustments Notes 2006 ------------- --------------- ----------- ------ ------------- Net product sales $29,709 $ 86 $ -- $29,795 License revenue -- 11,031 -- 11,031 ------- ------- ------- ------- Total revenue 29,709 11,117 -- 40,826 Cost of product sales and license revenue 14,302 940 -- 15,242 ------- ------- ------- ------- Gross profit 15,407 10,177 -- 25,584 Operating expenses: Sales and marketing 15,233 544 (200) (3) 15,577 Research and development 1,370 5,286 -- 6,656 General and administrative 6,288 4,768 (2,200) (3) 8,856 Amortization of intangibles and additional depreciation -- -- 375 (1, 2) 375 ------- ------- ------- ------- Total operating expenses 22,891 10,598 (2,025) 31,464 ------- ------- ------- ------- Operating loss (7,484) (421) 2,025 (5,880) Interest income (expense), net (1,235) 248 -- (987) Income tax expense -- (55) -- (55) Change in value of convertible senior notes derivative liability 1,525 -- -- 1,525 ------- ------- ------- ------- Net loss $(7,194) $ (228) $ 2,025 $(5,397) ======= ======= ======= ======= Basic and diluted net loss per share $ (0.23) $ (0.13) ======= ======= Weighted average common shares outstanding 31,256 8,967 40,223 ======= ======= =======
See Notes to Unaudited Pro Forma Combined Condensed Statements of Operations.