UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(AMENDMENT NO. 2)
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
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
MINNEAPOLIS, MINNESOTA 55447
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (763) 553-7736
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock $.01
par value
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( X )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [X] No [ ]
The aggregate market value of voting and non-voting stock held by
non-affiliates of the registrant as of June 30, 2004, was approximately
$115,000,000 (based on the last sale price of such stock as reported by the
NASDAQ National Market).
The number of shares outstanding of each of the registrant's classes of
common stock as of April 27, 2005, was 30,973,354 shares of $.01 par value
common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Pursuant to General Instruction G, the responses to Items 10, 11, 12, and
14 of Part III of this report are incorporated herein by reference to certain
information contained in the registrant's definitive Proxy Statement for its
2005 Annual Meeting of Shareholders to be held on May 5, 2005.
EXPLANATORY NOTE
This Amendment No. 2 on Form 10-K/A to our Annual Report on Form 10-K for the
fiscal year ended December 31, 2004, initially filed with the Securities and
Exchange Commission (the "SEC") on March 14, 2005 (the "Initial Filing") and
amended on March 21, 2005 (the "Second Filing" and, collectively with the
Initial Filing, the "Prior Filings"), is being filed to amend the Prior Filings
as follows:
- Item 9A is amended to update Evaluation of Disclosure Controls and
Procedures and Management's Annual Report on Internal Control Over
Financial Reporting to include management's assessment of the
effectiveness of the Company's internal control over financial
reporting, and
- the related attestation report of the independent registered public
accounting firm is included.
This Amendment No. 2 on Form 10-K/A is filed pursuant to SEC Release No.
34-50754, which provides up to 45 additional days beyond the due date of the
Initial Filing for the filing of the above.
As a result of these amendments, the certifications pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, filed as exhibits to the Prior Filings,
have been re-executed and re-filed as of the date of this Amendment No. 2 on
Form 10-K/A.
Except for the amendments described above, this Amendment No. 2 on Form
10-K/A does not modify or update other disclosures in, or exhibits to, the Prior
Filings.
ATS MEDICAL, INC.
2004 FORM 10-K
PART II
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our Chief Executive Officer and our Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rule 13a-15 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that because of a material
weakness in internal control over our inventory cycle counting procedures, our
disclosure controls and procedures were not effective as of December 31, 2004.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting as that term is defined in Rule 13a-15 under
the Exchange Act. Our internal control system was designed to provide reasonable
assurance regarding the preparation and fair presentation of our published
financial statements. All internal control systems, no matter how well designed,
have inherent limitations.
Under the supervision and with the participation of management, including our
Chief Executive Officer and our Chief Financial Officer, we assessed the
effectiveness of our internal control over financial reporting as of the end of
the period covered by this report based on the framework in the "Internal
Control - Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO").
While conducting this assessment, we identified a material weakness in our
internal control over financial reporting. A material weakness is a control
deficiency, or combination of control deficiencies, that results in a more than
remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. The deficiency in our
internal control related to ineffective application of inventory verification
procedures, including cycle count procedures. Historically, we have relied on a
cycle counting procedure to substantiate inventory quantities in lieu of taking
physical inventories. During our evaluation of internal control over our cycle
counting procedures, we determined that our processes in place during 2004 were
neither sufficient nor documented adequately to rely upon. We therefore
conducted a physical inventory after year end which confirmed the accuracy of
our inventory as recorded in our financial statements for the year ended
December 31, 2004. Thus this deficiency did not result in any adjustments to our
annual or interim consolidated financial statements; however, this control
deficiency could cause a misstatement of inventory that could result in a
material misstatement in our annual or interim consolidated financial statements
that would not be prevented or detected. Accordingly, management determined that
this control deficiency constitutes a material weakness.
Because of the material weakness described above, management has concluded that,
as of December 31, 2004, the company did not maintain effective internal control
over financial reporting based on the criteria established in "Internal Control
- - Integrated Framework" issued by COSO.
Our management's assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2004, has been audited by Ernst & Young
LLP, the independent registered public accounting firm that audited the
consolidated financial statements included in Form 10-K, as stated in their
report which is included below.
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CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the fiscal quarter ended December 31, 2004, there has been no change in
our internal controls over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
The Company has implemented the following specific enhancements to our internal
control over financial reporting to address the material weaknesses described
above. During the first quarter of 2005, the Company conducted a full count of
its inventory. Such full inventory counting procedures will be repeated at
regular intervals until a formalized and enhanced process for documenting and
executing cycle counts has been developed and tested to be operating reliably.
REPORT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of ATS Medical, Inc.
We have audited management's assessment, included in the accompanying
Management's Report on Internal Control over Financial Reporting, that ATS
Medical, Inc. did not maintain effective internal control over financial
reporting as of December 31, 2004, because of the deficiency in ATS Medical's
internal controls related to ineffective application of inventory verification
procedures, including cycle count procedures, based on criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). ATS Medical's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Company's
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weakness has been identified and included in
management's assessment. The deficiency in ATS Medical's internal controls
related to ineffective application of inventory verification procedures,
including cycle count procedures. This control deficiency could cause a
misstatement of inventory that could result
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in a material misstatement in the Company's annual or interim consolidated
financial statements that would not be prevented or detected. This material
weakness was considered in determining the nature, timing, and extent of audit
tests applied in our audit of the 2004 financial statements, and this report
does not affect our report dated February 14, 2005 on those financial
statements.
In our opinion, management's assessment that ATS Medical, Inc. did not maintain
effective internal control over financial reporting as of December 31, 2004, is
fairly stated, in all material respects, based on the COSO control criteria.
Also, in our opinion, because of the effect of the material weakness described
above on the achievement of the objectives of the control criteria, ATS Medical,
Inc. has not maintained effective internal control over financial reporting as
of December 31, 2004, based on the COSO control criteria.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
April 15, 2005
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Note: Item 15 in the Prior Filings is unchanged except for the filing of (i) an
additional consent of Ernst & Young LLP relating to their report on management's
assessment of internal control, and (ii) additional certifications pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
23 Consent of Ernst & Young LLP.
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
as amended.
31.2 Certification of Chief financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
as amended.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this amendment
to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 29, 2005 ATS MEDICAL, INC.
By /s/ Michael D. Dale
------------------------
Michael D. Dale
Chief Executive Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
23 Consent of Ernst & Young LLP.
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
as amended.
31.2 Certification of Chief financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
as amended.
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