Mail Stop 6010
December 2, 2005
Michael D. Dale
President and Chief Executive Officer
ATS Medical, Inc.
3905 Annapolis Lane, Suite 105
Minneapolis, Minnesota 55447
Re: ATS Medical, Inc.
Registration Statement on Form S-3
Filed November 7, 2005
File No. 333-129521
Dear Mr. Dale:
We have limited our review of your filing to those issues we
have addressed in our comments. Where indicated, we think you
should
revise your filings in response to these comments. If you
disagree,
we will consider your explanation as to why our comment is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. All outstanding comments, including those in our October 31,
2005
letter, must be resolved before we may accelerate the effective
date
of your registration statement.
2. If the notes are callable, please say so in the title of the
securities throughout the document. See Instruction 1.B to Item
202
of Regulation S-K.
Fee Table
3. Please revise footnote 4 to more closely follow the language of
Securities Act Rule 416(a). Other than as permitted by Rule 416,
you
must register a specific number of securities underlying the
convertible notes and the warrants based on a good faith estimate
of
the number of shares that will be issued upon conversion or
exercise,
as applicable.
4. It appears that you have registered the notes and the warrants
for
resale.
* Please tell us what registration or exemption you will be using
for
your primary offering of the underlying securities to subsequent
purchasers of the notes and warrants.
* It does not appear that you have registered the underlying
common
stock for resale. Please reconcile the fee table to your selling
stockholders` table where it appears that the selling stockholders
will offer the underlying common stock.
* If you are intending to register the underlying common shares
for
resale, please provide us your analysis of how those shares are
"outstanding" as required by General Instruction I.B.3 of Form S-
3.
Cite with specificity any authority on which you rely.
* Tell us when you plan to file a registration statement covering
the
public offering of the shares that you may issue as additional
payment upon automatic conversion of the notes. Explain how the
timing of that registration will be consistent with Section 5 of
the
Exchange Act, including an analysis of when a public offering of
those shares will begin.
Interest, page 5
5. Please clarify whether you must pay the interest in cash.
Ranking, page 7
6. Please quantify the amount of obligations that are senior and
subordinated to the notes.
Risk Factors, page 8
7. We note your disclosure on page 21 that a change of control
will
not be deemed to have occurred if at least 90% of the
consideration
in a change-in-control transaction consists of shares traded in
specified markets. Please include appropriate risk factor
disclosure
regarding the risks to the holders of your convertible notes upon
the
occurrence of such an event. For example, we note the risk of an
altered credit risk profile of the acquiror and the change in the
issuer of the common stock issuable upon conversion of the notes.
8. Please add a risk factor regarding the liquidity of the
securities
that will not be listed on any market. Also explain the
implications
of any restrictions on investors` use of the PORTAL market
mentioned
on your prospectus cover.
If we do not receive shareholder approval to increase the number
of
shares..., page 15
9. Disclose the total number of shares issued and reserved for all
outstanding obligations.
10. Please disclose whether you are in violation of any provision
of
any of the agreements you have with your investors with respect to
the reservation of authorized shares. If you are in default under
any such agreement, please describe all of the material risks
associated with such defaults.
11. If true, please describe the risks to your warrant holders if
there is an insufficient number of authorized shares of common
stock.
12. Please note that it is inappropriate to register for resale
shares that you are not authorized to issue. Please revise your
registration statement as appropriate.
The notes were issued with original issue discount, page 15
13. Please disclose the amount of the original issue discount.
Conversion Rate Adjustments, page 19
14. Please disclose whether you have a shareholders` rights plan
in
effect.
15. Please describe the circumstances under which you would elect
to
reduce the conversion price of the convertible notes as described
in
the fifth paragraph of this section. Similarly, please describe
the
circumstances under which you would elect to reduce the exercise
price under the warrants as described in the second to last
paragraph
on page 27.
16. With a view toward disclosure, please analyze for us the
applicability of the tender offer rules to the reduction in the
conversion price of the notes as mentioned here and the reduction
of
the exercise price of the warrants as mentioned on page 27.
17. We note the last full risk factor on page 15 indicates that
the
notes may be convertible into cash. Please disclose the cash
conversion rate.
18. Please describe the purpose and effect of the increase in the
conversion ratio mentioned on page 6 as well as the premiums
mentioned on pages 22 and 23.
General, page 25
19. Please disclose when you may terminate the warrants.
Adjustment, page 26
20. Please clarify how you will adjust the exercise price in the
circumstances cited. Provide similar disclosure regarding the
conversion price adjustments mentioned on page 19.
Material U.S. Federal Income Tax Considerations, page 29
21. Please file an opinion regarding these tax matters. See Item
601(b)(8) of Regulation S-K .
22. If there is uncertainty about a tax consequence, please
explain
why you cannot unequivocally state the tax consequence, describe
the
degree of uncertainty, disclose possible outcomes and provide
appropriate risk factors. As examples only, we note the
uncertainty
mentioned in the last paragraph on page 32, in the fourth
paragraph
on page 33, the first full paragraph on page 34.
23. We note the disclaimer language in the third paragraph on page
29. Given that Section 10.35(b)(2)(ii)(B)(3) of IRS Circular 230
appears to exclude opinions regarding material federal income tax
consequences filed as exhibits to registration statements, tell us
why your disclaimer is applicable and appropriate.
24. We refer to your disclosure in the second paragraph on page
37.
You may not disclaim responsibility for your disclosure. Please
remove your statement that the disclosure is "for general
information
only" which we view as an inappropriate disclaimer.
Selling Securityholders, page 37
25. Tell us whether any selling shareholder is a broker-dealer or
an
affiliate of a broker dealer. If a selling shareholder is a
broker-
dealer, it must be identified as an underwriter with respect to
the
shares that it is offering for resale.
Plan of Distribution, page 40
26. Refer to the penultimate paragraph on page 41. If purchasers
in
this offering may not freely resell their securities in all
states,
please add appropriate risk factors and identify the states in
which
sales are not permitted.
Undertakings, page II-3
27. Please provide the undertakings required as of December 1,
2005.
Likewise, please update your entire document, including the list
of
incorporated documents.
Exhibits
28. We note your pending request for confidential treatment. We
will
issue any comments on that request separately. All comments on
confidential treatment requests must be resolved before we may
accelerate the effective date of your registration statement.
Exhibit 5.1
29. The exhibit you file as an exhibit should not include
assumptions
of law which are a necessary requirement of ultimate opinion. We
note the assumptions regarding third parties in the third sentence
of
the second paragraph and the assumptions in paragraph (b) on the
last
page of the opinion. Please tell us why those assumptions are
needed
to reach legal conclusions on the matters required to be addressed
by
Regulation S-K Item 601(b)(5). If the assumptions are necessary,
please tell us why they are appropriate, particularly without
prominent disclosure of the risks to investors if no opinion on
those
maters is provided.
30. Please tell us why the matters mentioned in clause (ii) of the
third paragraph are applicable to the legal conclusions required
to
be addressed by Regulation S-K Item 601(b)(5). Also please tell
us
why exclusion of an opinion on those matters is appropriate,
particularly without prominent disclosure of the risks to
investors
if no opinion on those maters is provided.
31. Given the risk factor disclosure under the caption "If we do
not
receive shareholder approval to increase the number of common
stock
authorized in our articles of incorporation,..." please provide us
with a legal analysis which shows how counsel was able to reach
the
conclusions in the third to last paragraph with respect to the
Conversion Shares and the Warrant Shares.
* * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
Please contact Tim Buchmiller at (202) 551-3635 or me at
(202)
551-3617 with questions regarding our comments.
Sincerely,
Russell Mancuso
Branch Chief
cc: Timothy S. Hearn, Esq. (via fax)
Michael D. Dale
ATS Medical, Inc.
December 2, 2005
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