As filed with the Securities and Exchange Commission on January 18, 2002
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CARDIOGENESIS CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of incorporation or organization)
77-0223740
(I.R.S. Employer Identification No.)
26632 TOWNE CENTER DRIVE
SUITE 320
FOOTHILL RANCH, CALIFORNIA 92610
(714) 649-5000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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DARRELL F. ECKSTEIN
VICE PRESIDENT AND INTERIM CHIEF FINANCIAL OFFICER
26632 TOWNE CENTER DRIVE
SUITE 320
FOOTHILL RANCH, CALIFORNIA 92610
(714) 649-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
ROBERT K. MONTGOMERY, ESQ.
LAURENCE A. DENNY, ESQ.
2029 CENTURY PARK EAST
LOS ANGELES, CALIFORNIA 90067
(310) 552-8500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
SUBJECT TO COMPLETION, DATED JANUARY 18, 2002
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. YOU MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS
2,222,225 SHARES
CARDIOGENESIS CORPORATION
COMMON STOCK
The selling stockholder described in this prospectus is offering and
selling up to 2,222,225 shares of common stock, no par value per share, of
CardioGenesis Corporation (formerly known as Eclipse Surgical Technologies,
Inc.) under this prospectus.
Our common stock is quoted on the Nasdaq Stock Market's National Market
under the symbol: "CGCP." On January 17, 2002, the last reported sale price of
our common stock was $.70 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE
4.
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The shares of common stock offered or sold under this prospectus have
not been approved or disapproved by the SEC or any state securities commission,
nor have these organizations determined that this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
---------------------
The date of this prospectus is January 18, 2002
2
TABLE OF CONTENTS
Company Description...................................................... 3
Risk Factors............................................................. 4
Where You Can Find Additional Information................................ 16
Information Incorporated by Reference.................................... 17
Special Note Regarding Forward Looking Statements........................ 17
Use Of Proceeds.......................................................... 18
Plan Of Distribution..................................................... 18
Selling Stockholder...................................................... 19
Legal Matters............................................................ 20
Experts.................................................................. 20
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone to provide you with information that is different. This prospectus may
only be used in jurisdictions where it is legal to offer or sell these
securities. You should not assume that the information in this prospectus or any
prospectus supplement or any document incorporated by reference in this
prospectus is accurate as of any date other than the date on the front of those
documents.
COMPANY DESCRIPTION
CardioGenesis Corporation (formerly known as Eclipse Surgical
Technologies, Inc.), incorporated in California in 1989, designs, develops,
manufactures and distributes laser-based surgical products and disposable
fiber-optic accessories for the treatment of advanced cardiovascular disease
throughout North America, Europe and Asia. Cardiovascular disease is the leading
cause of death and disability in the U.S. according to the American Heart
Association. Coronary artery disease is the principal form of cardiovascular
disease and is characterized by a progressive narrowing of the coronary arteries
which supply blood to the heart. This narrowing process is usually due to
atherosclerosis, which is the buildup of fatty deposits, or plaque, on the inner
lining of the arteries. Coronary artery disease reduces the available supply of
oxygenated blood to the heart muscle, potentially resulting in severe chest pain
known as angina, as well as damage to the heart. Typically, the condition
worsens over time and often leads to heart attack and/or death.
Based on the Canadian Heart Association standards, a patient's severe
chest pain or angina is typically classified into four classes, ranging from
Class 1, in which angina pain results only from strenuous exertion, to the most
severe class, Class 4, in which the patient is unable to conduct any physical
activity without angina and angina may be present even at rest. The American
Heart Association estimates that more than six million Americans experience
angina symptoms.
The primary therapeutic options for treatment of coronary artery disease
are drug therapy, balloon angioplasty, other interventional techniques which
augment or replace balloon angioplasty such as stent placement, and coronary
artery bypass grafting which is more commonly referred to as bypass. The
objective of each of these approaches is to increase blood flow through the
coronary arteries to the heart.
Drug therapy may be effective for mild cases of coronary artery disease
and angina either through medical effects on the arteries that improve blood
flow without reducing the fatty deposits which line the coronary arteries or by
decreasing the rate of formation of additional fatty deposits by reducing blood
levels of cholesterol. Because of the progressive nature of the disease,
however, many patients with angina ultimately undergo either balloon angioplasty
or bypass.
When these treatment options are exhausted, the patient is left with no
viable surgical or interventional alternative other than, in limited cases,
heart transplantation. Without a viable surgical alternative, the patient is
generally managed with drug therapy, often with significant lifestyle
limitations.
3
The laser-based surgical products designed, developed, manufactured and
distributed by CardioGenesis Corporation are used for the treatment of advanced
cardiovascular disease through two procedures, transmyocardial revascularization
known as TMR and percutaneous transluminal myocardial revascularization known as
PMR. TMR and PMR are recent laser-based heart treatments in which channels are
made in the heart muscle. It is believed that the TMR and PMR procedures
encourage new blood vessel formation in the heart region known as angiogenesis.
Clinical studies have demonstrated a significant reduction in angina and an
increase in exercise duration in patients treated with TMR and PMR plus
medications when compared with patients who received medications alone.
We sell a laser system, called the TMR laser system, which is used in
the TMR surgical procedure. TMR, or transmyocardial revascularization, is a
surgical procedure performed by a cardiac surgeon on the beating or non-beating
heart, in which a laser device is used to create channels through the
myocardium, i.e. heart muscle, directly into the heart chamber. The channels are
intended to supply blood to oxygen-deprived, or ischemic, regions of the
myocardium and reduce angina in the patient. TMR can be performed using open
chest surgery or minimally invasive surgery through a small incision between the
ribs. TMR offers cardiac patients suffering from severe angina who have regions
in the heart that are oxygen-deprived but cannot be treated by balloon
angioplasty or bypass.
On February 11, 1999, we received final approval from the Food and Drug
Administration for our TMR products and procedures. They have been approved for
the treatment of a specific type of patient suffering from severe coronary
artery disease and so not all patients suffering from coronary artery disease
will qualify for our TMR treatment. As of July 1, 1999, the Health Care
Financial Administration began authorizing Medicare coverage for our TMR
products and procedures. Hospitals and physicians are now eligible to receive
Medicare reimbursement for the full costs of TMR procedures.
PMR, or percutaneous transluminal myocardial revascularization (formerly
referred to as PTMR), is an interventional procedure performed by a
cardiologist. PMR is based upon the same principles as TMR, but the procedure is
much less invasive. PMR is not performed using open chest surgery (which is
invasive), rather, the patient is under local anesthesia and is treated through
a catheter inserted in the femoral artery at the top of the leg. From the
femoral artery, a laser transmitting catheter is threaded up into the heart
chamber, where channels are created in the inner portion of the myocardium (i.e.
heart muscle).
We sell a laser system, called the PMR laser system, which is used in
the PMR procedure. PMR is currently being distributed in Europe and parts of
Asia. In the United States, we have offered our PMR laser systems for sale in
limited numbers for investigational use only pursuant to Investigational Device
Exemptions from the United States Food and Drug Administration. We have
completed pivotal clinical trials involving PMR, and study results were
submitted to the Food and Drug Administration in a Pre Market Approval
application in December of 1999. On July 9, 2001, the Food and Drug
Administration's Circulatory Devices Panel recommended to the Food and Drug
Administration against approval of our PMR device in the United States. We are
continuing to gather and submit additional evidence on the effectiveness and
safety of our PMR procedure to the Food and Drug Administration to gain their
approval. There can be no assurance, however, that we will receive a favorable
decision from that agency.
Our principal executive offices are located at 26632 Towne Center Drive,
Suite 320, Foothill Ranch, California 92610. Our telephone number is (714)
649-5000.
RISK FACTORS
Before you invest in our common stock, you should be aware of the
various risks and uncertainties described below associated with such an
investment which are all of the material risks and uncertainties that we can
identify. You should consider carefully these risk factors together with all of
the other information included in this prospectus and in the documents
incorporated by reference before you decide to purchase our common stock.
4
OUR ABILITY TO CONTINUE AS A GOING CONCERN IS DEPENDENT UPON ACHIEVING
PROFITABLE OPERATIONS IN THE FUTURE.
We will have a continuing need for new infusions of cash until revenues
are increased to meet our operating expenses. We plan to increase our sales
through increased direct sales and marketing efforts on existing products and
achieving regulatory approval for other products. If we are unable to increase
our sales or achieve regulatory approval for our products, we will be unable to
significantly increase our revenues. We believe that if we are unable to
generate sufficient funds from sales or from debt or equity issuances to
maintain our current expenditure rate, it will be necessary to significantly
reduce our operations. We may be required to seek additional sources of
financing, which could include short-term debt, long-term debt or equity. There
is a risk that we may be unsuccessful in obtaining such financing and will not
have sufficient cash to fund our operations.
WE MAY FAIL TO OBTAIN REQUIRED REGULATORY APPROVALS TO MARKET OUR PRODUCTS
INCLUDING OUR PMR LASER SYSTEM IN THE UNITED STATES.
Our business could be harmed if any of the following events,
circumstances or occurrences related to the regulatory process occurred thereby
causing a reduction in our revenues:
- the failure to obtain regulatory approvals for our PMR system;
- any significant limitations in the indicated uses for which our
products may be marketed; and
- substantial costs incurred in obtaining regulatory approvals.
The Food and Drug Administration has not approved our PMR laser systems
for any application in the United States. The PMR study compares PMR to
conventional medical therapy in patients with no option for other treatment. The
Food and Drug Administration may not accept the study as safe and effective, and
PMR may not be approved for commercial use in the United States. Responding to
Food and Drug Administration requests for additional information could require
substantial financial and management resources and take several years.
In October 2000, preliminary results from a competitor's clinical trial
of a catheter-based device employing Direct Myocardial Revascularization also
known as DMR were presented at a medical conference in Washington D.C. The
trial's principal investigator concluded that this catheter-based device did not
show significant evidence of clinical benefit with regard to angina class
reduction or exercise tolerance, and questioned the efficacy of other devices
and procedures relying on PMR. We believe that the preliminary results of that
catheter-based device study should not call the results of our PMR study into
question because the devices and procedures are substantially different. We
cannot predict, however, how those preliminary results of that catheter-based
device study will impact the Food and Drug Administration's decision on our PMR
system.
IN THE FUTURE, THE FOOD AND DRUG ADMINISTRATION COULD RESTRICT THE CURRENT USES
OF OUR TMR PRODUCT.
The Food and Drug Administration has approved our TMR product for sale
and use by physicians in the United States. At the request of the Food and Drug
Administration, we are currently conducting post-market surveillance of our TMR
product. We recently received a letter from the Food and Drug Administration
expressing concern about the progress of our post-market surveillance study for
our TMR product. We have drafted a plan to be submitted to the Food and Drug
Administration to enable the timely completion of our post-market surveillance
study. However, if we should fail to meet the requirements mandated by the Food
and Drug Administration or fail to complete our post-market surveillance study
in an acceptable time period, the Food and Drug Administration could withdraw
its approval for the sale and use of our TMR product by physicians in the United
States. Additionally, though we are not aware of any safety concerns during our
on-going postmarket surveillance of our TMR product, if concerns over the safety
of our TMR product were to arise, the Food and Drug Administration could
possibly restrict the currently approved uses of our TMR product. In the future,
if the Food and Drug Administration were to withdraw its approval or restrict
the range of uses for which our TMR product can be used by physicians, such as
restricting TMR's use with the coronary artery bypass grafting procedure which
occurs in more than half the procedures in which TMR is used, either outcome
could lead to reduced or no sales of our TMR product in the United States and
our business could be adversely affected.
5
THE CIRCULATORY DEVICES PANEL OF THE FOOD AND DRUG ADMINISTRATION IN JULY 2001
RECOMMENDED AGAINST APPROVAL OF OUR PMR DEVICE FOR PUBLIC SALE AND USE IN THE
UNITED STATES, WHICH HAS EFFECTIVELY DELAYED POTENTIAL REVENUE, IF ANY, THAT MAY
HAVE BEEN DERIVED IN THE FUTURE FROM THE SALE OF THAT DEVICE IN THE UNITED
STATES AND WHICH MAY HAVE OTHER ADVERSE EFFECTS.
The Circulatory Devices Panel of the Food and Drug Administration
recently recommended that the Food and Drug Administration not approve our PMR
device for public sale and use in the United States based on concerns related to
the safety of the device and the data regarding adverse events in the clinical
trials. Although we do not expect to conduct further clinical trials of our PMR
device, this recommendation has necessitated the further investment of
additional resources toward obtaining the Food and Drug Administration's
approval of our PMR device. We will not be able to derive any revenue from the
sale of that device in the United States until such time, if any, that the Food
and Drug Administration approves the device. Such inability to realize revenue
from sales of our PMR device in the United States may have an adverse effect on
our results of operations. Additionally, the trading price of our common stock
on the NASDAQ National Market fell substantially after the panel's
recommendation became public.
THE MEDICAL COMMUNITY HAS NOT BROADLY ADOPTED OUR PRODUCTS, AND UNLESS OUR
PRODUCTS ARE BROADLY ADOPTED, OUR BUSINESS WILL SUFFER.
Our TMR products and PMR products have not yet achieved broad commercial
and clinical adoption. We cannot predict whether or at what rate and how broadly
our products will be adopted by the medical community. Our business would be
harmed if our TMR and PMR systems fail to achieve significant market acceptance.
THE RECEIPT OF POSITIVE ENDORSEMENTS BY PHYSICIANS IS ESSENTIAL FOR THE SUCCESS
OF OUR PRODUCTS IN THE MARKET PLACE.
Positive endorsements, by physicians, are essential for clinical
adoption of our TMR and PMR laser systems. Physicians may elect not to recommend
TMR and PMR laser systems for any number of reasons.
Clinical adoption of these products will depend upon:
- our ability to facilitate training of cardiothoracic surgeons and
interventional cardiologists in TMR and PMR therapy;
- willingness of such physicians to adopt and recommend such
procedures to their patients; and
- raising the awareness of TMR and PMR with the targeted patient
population.
Patient acceptance of the procedure will depend on:
- physician recommendations;
- the degree of invasiveness;
- the effectiveness of the procedure; and
- the rate and severity of complications associated with the
procedure as compared to other procedures.
TO EXPAND OUR BUSINESS, WE MUST ESTABLISH EFFECTIVE SALES, MARKETING AND
DISTRIBUTION SYSTEMS.
To expand our business, we must establish effective systems to sell,
market and distribute products. To date, we have had limited sales which have
consisted primarily of U.S. sales of our TMR lasers and disposable handpieces on
a commercial basis since February 1999 and PMR lasers and disposable catheters
outside of the U.S. through international distributors.
6
IF OUR SALES FORCE IS NOT SUCCESSFUL IN INCREASING MARKET SHARE AND SELLING OUR
DISPOSABLE HANDPIECES, OUR BUSINESS WILL SUFFER.
With Food and Drug Administration approval of our TMR laser system, we
are marketing our products primarily through our direct sales force. If the
sales force is not successful in increasing market share and selling our
disposable handpieces, our business will suffer. In the fourth quarter of 1999,
we changed our U.S. sales strategy to include both selling lasers to hospitals
outright, as well as loaning lasers to hospitals in return for the hospital
purchasing a minimum number of disposable handpieces at a higher price.
Historically, the majority of lasers shipped have been under this loan program.
The purpose of this strategy is to focus our sales force on increasing market
penetration and selling disposable handpieces used in connection with our TMR
procedure.
EXPANSION OF OUR BUSINESS MAY PUT ADDED PRESSURE ON OUR MANAGEMENT AND
OPERATIONAL INFRASTRUCTURE AFFECTING OUR ABILITY TO MEET ANY INCREASED DEMAND
FOR OUR PRODUCTS AND POSSIBLY HAVING AN ADVERSE EFFECT ON OUR OPERATING RESULTS.
The growth in our business may place a significant strain on our limited
personnel, management, financial systems and other resources. The evolving
growth of our business presents numerous risks and challenges, including:
- the dependence on the growth of the market for our TMR and PMR
systems;
- our ability to successfully and rapidly expand sales to potential
customers in response to potentially increasing clinical adoption
of the TMR procedure;
- the costs associated with such growth, which are difficult to
quantify, but could be significant;
- domestic and international regulatory developments;
- rapid technological change;
- the highly competitive nature of the medical devices industry;
and
- the risk of entering emerging markets in which we have limited or
no direct experience.
To accommodate any such growth and compete effectively, we may need to
obtain additional funding to improve information systems, procedures and
controls and expand, train, motivate and manage our employees, and such funding
may not be available in sufficient quantities, if at all. If we are not able to
manage these activities and implement these strategies successfully to expand to
meet any increased demand, our operating results could suffer.
OUR OPERATING RESULTS ARE EXPECTED TO FLUCTUATE AND QUARTER-TO-QUARTER
COMPARISONS OF OUR RESULTS MAY NOT INDICATE FUTURE PERFORMANCE.
Our operating results have fluctuated significantly from
quarter-to-quarter and are expected to fluctuate significantly from
quarter-to-quarter due to a number of events and factors, including:
- the level of product demand and the timing of customer orders;
- changes in strategy;
- delays associated with the Food and Drug Administration and other
regulatory approval processes;
- personnel changes including our ability to continue to attract,
train and motivate additional qualified personnel in all areas;
- the level of international sales;
- changes in competitive pricing policies;
7
- the ability to develop, introduce and market new and enhanced
versions of products on a timely basis;
- deferrals in customer orders in anticipation of new or enhanced
products;
- product quality problems; and
- the enactment of health care reform legislation and any changes
in third party reimbursement policies.
We believe that quarter-to-quarter comparisons of our operating results
are not a good indication of our future performance. Due to the emerging nature
of the markets in which we compete, forecasting operating results is difficult
and unreliable. Over the past year, our revenue has been lower than anticipated,
largely attributable to the transition to our new sales strategy. It is likely
or possible that our operating results for a future quarter will fall below the
expectations of public market analysts and investors. When this occurred in the
past, the price of our common stock fell substantially, and if this occurs
again, the price of our common stock may fall again, perhaps substantially.
GROWTH IN OUR FUTURE OPERATING RESULTS IS HIGHLY CONTINGENT AND SUBJECT TO
SIGNIFICANT RISKS.
Our future operating results will be significantly affected by our
ability to:
- successfully and rapidly expand sales to potential customers;
- implement operating, manufacturing and financial procedures and
controls;
- improve coordination among different operating functions; and
- achieve manufacturing efficiencies as production volume
increases.
WE MAY NOT BE ABLE TO SUCCESSFULLY MARKET OUR PRODUCTS IF THIRD PARTY
REIMBURSEMENT FOR THE PROCEDURES PERFORMED WITH OUR PRODUCTS IS NOT AVAILABLE
FOR OUR HEALTH CARE PROVIDER CUSTOMERS.
Few individuals are able to pay directly for the costs associated with
the use of our products. In the United States, hospitals, physicians and other
healthcare providers that purchase medical devices generally rely on third party
payors, such as Medicare, to reimburse all or part of the cost of the procedure
in which the medical device is being used.
Effective July 1, 1999 the Health Care Financing Administration
commenced Medicare coverage for TMR systems for any manufacturer's TMR
procedures. Hospitals and physicians are now eligible to receive Medicare
reimbursement covering 100% of the costs for TMR procedures. The Health Care
Financing Administration has not approved reimbursement for PMR. If it does not
in the future provide reimbursement, our ability to successfully market and sell
our PMR products will be harmed.
Currently there are over 2,000 private health insurers and managed care
organizations in the United States. Even though Medicare beneficiaries appear to
account for approximately 52% of all patients treated with the TMR procedure,
the remaining 48% are beneficiaries of private insurance and private health
plans. We have limited data on the reimbursement of our TMR procedures by
private insurance and private health plans. If they do not provide
reimbursement, our business will suffer.
Based on physician feedback, we know that private insurers are
reimbursing hospitals and physicians when the procedure is performed on
non-Medicare patients. In May 2001, Blue Cross/Blue Shield's Technology
Evaluation Center ("TEC") assessed our therapy and confirmed that both TMR and
TMR used as an adjunct to bypass surgery, "improves net health outcomes." While
TEC decisions are not binding, many Blue Cross/Blue Shield plans and other
third-party payers use the center as a benchmark and adopt into policy those
therapies that meet the TEC assessment. The fact that the TMR procedure has met
TEC requirements is a positive indicator that private insurer coverage and
payment policies will be established for the TMR procedure in the future. We
have put in place a plan to continue to pursue nationwide coverage of the TMR
procedure from private insurer payers.
8
WE FACE COMPETITION FROM OUR COMPETITOR'S PRODUCTS WHICH COULD LIMIT MARKET
ACCEPTANCE OF OUR PRODUCTS AND RENDER OUR PRODUCTS OBSOLETE.
The market for TMR laser systems is competitive. If our competitor is
more effective in developing new products and procedures and marketing existing
and future products, our business will suffer. The market for TMR laser systems
is characterized by rapid technical innovation. Accordingly, our current or
future competitors may succeed in developing TMR products or procedures that:
- are more effective than our products;
- are more effectively marketed than our products; or
- may render our products or technology obsolete.
We currently compete with PLC Systems. PLC recently announced a
co-marketing agreement with Edwards Life Sciences to distribute their lasers and
disposables.
If we obtain the Food and Drug Administration's approval for our PMR
laser system, we will face competition for market acceptance and market share
for that product. Our ability to compete may depend in significant part on the
timing of introduction of competitive products into the market, and will be
affected by the pace, relative to competitors, at which we are able to:
- develop products;
- complete clinical testing and regulatory approval processes;
- obtain third party reimbursement acceptance; and
- supply adequate quantities of the product to the market.
OUR PRODUCTS DEPEND ON TMR TECHNOLOGY THAT IS RAPIDLY CHANGING WHICH MAY REQUIRE
US TO INCUR SUBSTANTIAL PRODUCT DEVELOPMENT EXPENDITURES TO PREVENT OUR PRODUCTS
FROM BECOMING OBSOLETE.
The medical device industry is characterized by rapid and significant
technological change. Our future success will depend in large part on our
ability to respond to such changes through further product research and
development. In addition, we must expand the indications and applications for
our products by developing and introducing enhanced and new versions of our TMR
and PMR laser systems. Product research and development requires substantial
expenditures and is inherently risky. We may not be able to:
- identify products for which demand exists; or
- develop products that have the characteristics necessary to treat
particular indications.
OVERALL INCREASES IN MEDICAL COSTS COULD ADVERSELY AFFECT OUR BUSINESS.
We believe that the overall escalating cost of medical products and
services has led, and will continue to lead, to increased pressures on the
health care industry, both foreign and domestic, to reduce the cost of products
and services, including products offered by them. We cannot assure you that in
either United States or international markets that:
- third party reimbursement and coverage will be available or
adequate;
- current reimbursement amounts will not be decreased in the
future; or
- future legislation, regulation or reimbursement policies of third
party payors will not otherwise adversely affect the demand for
our products or our ability to profitably sell our products.
Fundamental reforms in the healthcare industry in the United States and
Europe continue to be considered. We cannot predict whether or when any
healthcare reform proposals will be adopted and what effect such proposals might
have on our business.
9
WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.
We have incurred significant losses since inception. Our revenues and
operating income will be constrained:
- until such time, if ever, as we obtain broad commercial adoption
of our TMR laser systems by healthcare facilities in the United
States;
- until such time, if ever, as we obtain Food and Drug
Administration and other regulatory approvals for our PMR laser
systems; and
- for an uncertain period of time after such approvals are
obtained.
We may not achieve or sustain profitability in the future.
THIRD PARTIES MAY LIMIT THE DEVELOPMENT AND PROTECTION OF OUR INTELLECTUAL
PROPERTY, WHICH COULD ADVERSELY AFFECT OUR COMPETITIVE POSITION.
Our success is dependent in large part on our ability to:
- obtain patent protection for our products and processes;
- preserve our trade secrets and proprietary technology; and
- operate without infringing upon the patents or proprietary rights
of third parties.
The medical device industry has been characterized by extensive
litigation regarding patents and other intellectual property rights. Companies
in the medical device industry have employed intellectual property litigation to
gain a competitive advantage. Certain competitors and potential competitors of
ours have obtained United States patents covering technology that could be used
for certain TMR and PMR procedures. We do not know if such competitors,
potential competitors or others have filed and hold international patents
covering other TMR or PMR technology. In addition, international patents may not
be interpreted the same as any counterpart United States patents.
In September 1995, PLC sent the company formerly known as CardioGeneric
Corporation a notice of potential infringement of their patent regarding a
method for TMR utilizing synchronization of laser pulses to the electrical
signals from the heart. In 1996, the former CardioGenesis Corporation initiated
a suit in the United States against PLC seeking a judgment that the PLC patent
is invalid and unenforceable. In 1997, PLC counterclaimed in that suit alleging
infringement by the former CardioGenesis Corporation of the PLC patent. Also in
1997, PLC initiated suit in Germany against the former CardioGenesis Corporation
and the former CardioGenesis Corporation's former German sales agent alleging
infringement of a European counterpart to the PLC patent. In 1997, the former
CardioGenesis Corporation filed an Opposition in the European Patent Office to a
European counterpart to the PLC patent, seeking to have the European patent
declared invalid.
On January 5, 1999, before trial on the United States suit commenced,
the company formerly known as CardioGenesis Corporation and PLC settled all
litigation between them, both in the United States and in Germany, with respect
to the PLC patent and the European patents. Under the Settlement and License
Agreement signed by the parties, the former CardioGenesis Corporation stipulated
to the validity of the PLC patents and PLC granted the former CardioGenesis
Corporation a non-exclusive worldwide license to the PLC patents. The former
CardioGenesis Corporation agreed to pay PLC a license fee, and minimum
royalties, totaling $2.5 million in equal monthly installments over an
approximately forty-month period, with a running royalty credited against the
minimums.
10
The Settlement and License Agreement applies only to those products or
that technology covered by the PLC patents, and the agreement does not provide
PLC any rights to any former CardioGenesis Corporation intellectual property.
Our TMR 2000 laser system does not use the technology associated with the PLC
patents.
While we periodically review the scope of our patents and other relevant
patents of which we are aware, the question of patent infringement involves
complex legal and factual issues. Any conclusion regarding infringement may not
be consistent with the resolution of any such issues by a court.
COSTLY LITIGATION MAY BE NECESSARY TO PROTECT INTELLECTUAL PROPERTY RIGHTS.
We may have to engage in time consuming and costly litigation to protect
our intellectual property rights or to determine the proprietary rights of
others. In addition, we may 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.
Defending and prosecuting intellectual property suits, United States
Patent and Trademark Office interference proceedings and related legal and
administrative proceedings are both costly and time-consuming. We may be
required to litigate further to:
- enforce our issued patents;
- protect our trade secrets or know-how; or
- determine the enforceability, scope and validity of the
proprietary rights of others.
Any litigation or interference proceedings will result in substantial
expense and significant diversion of effort by technical and management
personnel. If the results of such litigation or interference proceedings are
adverse to us, then the results may:
- subject us to significant liabilities to third parties;
- require us to seek licenses from third parties;
- prevent us from selling our products in certain markets or at
all; or
- require us to modify our products.
Although patent and intellectual property disputes regarding medical
devices are often settled through licensing and similar arrangements, costs
associated with such arrangements may be substantial and could include ongoing
royalties. Furthermore, we may not be able to obtain the necessary licenses on
satisfactory terms, if at all.
Adverse determinations in a judicial or administrative proceeding or
failure to obtain necessary licenses could prevent us from manufacturing and
selling our products. This would harm our business.
The United States patent laws have been amended to exempt physicians,
other health care professionals, and affiliated entities from infringement
liability for medical and surgical procedures performed on patients. We are not
able to predict if this exemption will materially affect our ability to protect
our proprietary methods and procedures.
WE RELY ON PATENT AND TRADE SECRET LAWS, WHICH ARE COMPLEX AND MAY BE DIFFICULT
TO ENFORCE.
The validity and breadth of claims in medical technology patents involve
complex legal and factual questions and, therefore, may be highly uncertain.
Issued patent or patents based on pending patent applications or any future
patent application may not exclude competitors or may not provide a competitive
advantage to us. In addition, patents issued or licensed to us may not be held
valid if subsequently challenged and others may claim rights in or ownership of
such patents.
Furthermore, we cannot assure you that our competitors:
11
- have not developed or will not develop similar products;
- will not duplicate our products; or
- will not design around any patents issued to or licensed by us.
Because patent applications in the United States were, until recently,
maintained in secrecy until patents issue, we cannot be certain that:
- others did not first file applications for inventions covered by
our pending patent applications; or
- we will not infringe any patents that may issue to others on such
applications.
WE MAY NOT BE ABLE TO MEET FUTURE PRODUCT DEMAND ON A TIMELY BASIS AND MAY BE
SUBJECT TO DELAYS AND INTERRUPTIONS TO PRODUCT SHIPMENTS BECAUSE WE DEPEND ON
SINGLE SOURCE THIRD PARTY SUPPLIERS AND MANUFACTURERS.
We currently purchase critical products and components for lasers and
disposable handpieces from single sources. In addition, we are vulnerable to
delays and interruptions, for reasons out of our control, because we outsource
the manufacturing of some of these products to third parties. We may experience
harm to our business if these sources have difficulties supplying our needs for
these products and components. In addition, we do not have long term supply
contracts. As a result, these sources are not obligated to continue to provide
these critical products or components to us. Although we have identified
alternative suppliers and manufacturers, a lengthy process would be required to
qualify them as additional or replacement suppliers or manufacturers. Also, it
is possible some of our suppliers or manufacturers could have difficulty meeting
our needs if demand for our TMR and PMR laser systems were to increase rapidly
or significantly. In addition, any defect or malfunction in the laser or other
products provided by such suppliers and manufacturers could cause a delay in
regulatory approvals or adversely affect product acceptance. Further, we cannot
predict:
- if materials and products obtained from outside suppliers and
manufacturers will always be available in adequate quantities to
meet our future needs; or
- whether replacement suppliers and/or manufacturers can be
qualified on a timely basis if our current suppliers and/or
manufacturers are unable to meet our needs for any reason.
OUR PRODUCTS COULD CONTAIN DEFECTS WHICH COULD DELAY REGULATORY APPROVAL OR
MARKET ACCEPTANCE OF OUR PRODUCTS.
We may experience future product defects, malfunctions, manufacturing
difficulties or recalls related to the lasers or other components used in our
TMR and PMR laser systems. Any such occurrence could cause a delay in regulatory
approvals or adversely affect the commercial acceptance of our products. We are
unable to quantify the likelihood or costs of any such occurrences, but they
could potentially be significant. Our business could be harmed because we may be
unable to sufficiently remedy a significant product recall while still
maintaining our daily manufacturing quotas.
WE MUST COMPLY WITH FOOD AND DRUG ADMINISTRATION MANUFACTURING STANDARDS OR FACE
FINES OR OTHER PENALTIES INCLUDING SUSPENSION OF PRODUCTION.
We are required to demonstrate compliance with the Food and Drug
Administration's current good manufacturing practices regulations if we market
devices in the United States or manufacture finished devices in the United
States. The Food and Drug Administration inspects manufacturing facilities on a
regular basis to determine compliance. If we fail to comply with applicable Food
and Drug Administration or other regulatory requirements, we can be subject to:
- fines, injunctions, and civil penalties;
- recalls or seizures of products;
- total or partial suspensions of production; and
12
- criminal prosecutions.
The impact on the company of any such failure to comply would depend on
the impact of the remedy imposed on us.
WE MAY SUFFER LOSSES FROM PRODUCT LIABILITY CLAIMS IF OUR PRODUCTS CAUSE HARM TO
PATIENTS.
We are exposed to potential product liability claims and product
recalls. These risks are inherent in the design, development, manufacture and
marketing of medical devices. We could be subject to product liability claims if
the use of our TMR or PMR laser systems is alleged to have caused adverse
effects on a patient or such products are believed to be defective. Our products
are designed to be used in life-threatening situations where there is a high
risk of serious injury or death. We are not aware of any material side effects
or adverse events arising from the use of our TMR product. Though we are in the
process of responding to the Food and Drug Administration's Circulatory Devices
Panel's recent recommendation against approval of our PMR product because of
concerns over the safety of the device and the data regarding adverse events in
the clinical trials, we believe there are no material side effects or adverse
events arising from the use of our PMR product. When being clinically
investigated, it is not uncommon for new surgical or interventional procedures
to result in a higher rate of complications in the treated population of
patients as opposed to those reported in the control group. In light of this, we
believe that the difference in the rates of complications between the treated
groups and the control groups in the clinical trials for our PMR product are not
statistically significant, which is why we believe that there are no material
side effects or material adverse events arising from the use of our PMR product.
Any regulatory clearance for commercial sale of these products will not
remove these risks. Any failure to comply with the Food and Drug
Administration's good manufacturing practices or other regulations could hurt
our ability to defend against product liability lawsuits. Although we have not
experienced any product liability claims to date, any such claims could cause
our business to suffer.
OUR INSURANCE MAY BE INSUFFICIENT TO COVER PRODUCT LIABILITY CLAIMS AGAINST US.
Our product liability insurance may not be adequate for any future
product liability problems or continue to be available on commercially
reasonable terms, or at all.
If we were held liable for a product liability claim or series of claims
in excess of our insurance coverage, such liability could harm our business and
financial condition. We maintain insurance against product liability claims in
the amount of $10 million per occurrence and $10 million in the aggregate.
We may require increased product liability coverage as sales of approved
products increase and as additional products are commercialized. Product
liability insurance is expensive and in the future may not be available on
acceptable terms, if at all.
WE DEPEND HEAVILY ON KEY PERSONNEL AND TURNOVER OF KEY EMPLOYEES AND SENIOR
MANAGEMENT COULD HARM OUR BUSINESS.
Our future business and results of operations depend in significant part
upon the continued contributions of our key technical and senior management
personnel. They also depend in significant part upon our ability to attract and
retain additional qualified management, manufacturing, technical, marketing and
sales and support personnel for our operations. If we lose a key employee or if
a key employee fails to perform in his or her current position, or if we are not
able to attract and retain skilled employees as needed, our business could
suffer.
During the last two years, we have had significant change in our senior
management team. Our former Chief Executive Officer, Allen Hill, resigned from
the company in December 1999. One of our former Directors, Alan Kaganov, acted
as interim Chief Executive Officer until we hired our current Chief Executive
Officer, Michael Quinn, in October of 2000. Our former Chief Financial Officer,
Dick Powers, resigned from the company in July 2000. Ian Johnston, our then Vice
President of Finance who resigned in June 2001, acted as interim Chief Financial
Officer until our former Chief Financial Officer, J. Stephen Wilkins, was hired
in May 2001. In January 2002, our
13
former Chief Financial Officer, J. Stephen Wilkins, resigned and was replaced by
Darrell Eckstein who was originally hired in December 2000 as our Vice President
of Operations, originally replacing Bill Picht, who resigned earlier in 2000.
Additionally, Richard Lanigan moved from Vice President of Sales to Vice
President of Government Affairs and Business Development in March 2001 and
Michael A. Tuckerman was promoted to Vice President, U.S. Sales, after Thomas
Kinder, our former Vice President of Worldwide Sales resigned in January 2002.
In addition, Christopher M. Owens was hired as Vice President of Marketing in
March 2001 and William Von Brendel who was hired in August 2001 as Vice
President and General Manager of the International Business Unit resigned in
January 2002.
Our future business could be harmed by our turnover in senior management
if we have difficulty familiarizing and training our new management with respect
to our business. Further significant turnover in our senior management could
significantly deplete our institutional knowledge held by our existing senior
management team. We depend on the skills and abilities of these key employees in
managing the manufacturing, technical, marketing and sales aspects of our
business, any part of which could be harmed by further turnover.
WE MAY FAIL TO COMPLY WITH INTERNATIONAL REGULATORY REQUIREMENTS AND COULD BE
SUBJECT TO REGULATORY DELAYS, FINES OR OTHER PENALTIES.
Regulatory requirements in foreign countries for international sales of
medical devices often vary from country to country. In addition, the Food and
Drug Administration must approve the export of devices to certain countries. The
occurrence and related impact of the following factors would harm our business:
- delays in receipt of, or failure to receive, foreign regulatory
approvals or clearances;
- the loss of previously obtained approvals or clearances; or
- the failure to comply with existing or future regulatory
requirements.
To market in Europe, a manufacturer must obtain the certifications
necessary to affix to its products the CE Marking. The CE Marking is an
international symbol of adherence to quality assurance standards and compliance
with applicable European medical device directives. In order to obtain and to
maintain a CE Marking, a manufacturer must be in compliance with the appropriate
quality assurance provisions of the International Standards Organization and
obtain certification of its quality assurance systems by a recognized European
Union notified body. However, certain individual countries within Europe require
further approval by their national regulatory agencies.
We have completed CE mark registration for all of our products in
accordance with the implementation of various medical device directives in the
European Union. Failure to maintain the right to affix the CE Marking or other
requisite approvals could prohibit us from selling our TMR products in member
countries of the European Union or elsewhere. Any enforcement action by
international regulatory authorities with respect to past or future regulatory
noncompliance could cause our business to suffer. Noncompliance with
international regulatory requirements could result in enforcement action such as
not being allowed to market our product in the European Union, which would
significantly reduce international revenue.
WE SELL OUR PRODUCTS INTERNATIONALLY WHICH SUBJECTS US TO SPECIFIC RISKS OF
TRANSACTING BUSINESS IN FOREIGN COUNTRIES.
In future quarters, international sales may become a significant portion
of our revenue if our products become more widely used outside of the United
States according to our plan. Our international revenue is subject to the
following risks, the occurrence of any of which could harm our business:
- foreign currency fluctuations;
- economic or political instability;
- foreign tax laws;
14
- shipping delays;
- various tariffs and trade regulations;
- restrictions and foreign medical regulations;
- customs duties, export quotas or other trade restrictions; and
- difficulty in protecting intellectual property rights.
WE MAY NOT ACHIEVE WIDE ACCEPTANCE OF OUR PRODUCTS IN FOREIGN MARKETS IF WE FAIL
TO OBTAIN THIRD PARTY REIMBURSEMENT FOR THE PROCEDURES PERFORMED WITH OUR
PRODUCTS.
If we obtain the necessary foreign regulatory registrations or
approvals, market acceptance of our products in international markets would be
dependent, in part, upon the availability of reimbursement within prevailing
health care payment systems. Reimbursement is a significant factor considered by
hospitals in determining whether to acquire new equipment. A hospital is more
inclined to purchase new equipment if third-party reimbursement can be obtained.
Reimbursement and health care payment systems in international markets vary
significantly by country. They include both government sponsored health care and
private insurance. Although we expect to seek international reimbursement
approvals, any such approvals may not be obtained in a timely manner, if at all.
Failure to receive international reimbursement approvals could hurt market
acceptance of our TMR and PMR products in the international markets in which
such approvals are sought, which would significantly reduce international
revenue.
WE MAY ENGAGE IN FUTURE ACQUISITIONS THAT COULD DISTRACT OUR MANAGEMENT, CAUSE
US TO INCUR DEBT, OR DILUTE OUR SHAREHOLDERS.
We may, from time to time, acquire or invest in other complementary
businesses, products or technologies. While there are currently no commitments
with respect to any particular acquisition or investment, our management
frequently evaluates the strategic opportunities available in complementary
businesses, products or technologies. The process of integrating an acquired
company's business into our operations may result in unforeseen operating
difficulties and expenditures and may absorb significant management attention
that would otherwise be available for the ongoing development of our business.
Moreover, the anticipated benefits of any acquisition or investment may not be
realized. Any future acquisitions or investments by us could result in
potentially dilutive issuances of equity securities, the incurrence of debt and
contingent liabilities and impairment/amortization expenses related to goodwill
and other intangible assets, any of which could materially harm our operating
results.
THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY, WHICH MAY RESULT IN
LOSSES FOR INVESTORS.
The market price for our common stock has been and may continue to be
volatile. For example, during the 52-week period ended January 17, 2002, the
closing prices of our common stock as reported on the NASDAQ National Market
ranged from a high of $3.12 to a low of $0.60. We expect our stock price to be
subject to fluctuations as a result of a variety of factors, including factors
beyond our control. These factors include:
- actual or anticipated variations in our quarterly operating
results;
- announcements of technological innovations or new products or
services by us or our competitors;
- announcements relating to strategic relationships or
acquisitions;
- changes in financial estimates by securities analysts;
- statements by securities analysts regarding us or our industry;
- conditions or trends in the medical device industry; and
- changes in the economic performance and/or market valuations of
other medical device companies.
15
Because of this volatility, we may fail to meet the expectations of our
shareholders or of securities analysts at some time in the future, and our stock
price could decline as a result.
In addition, the stock market has experienced significant price and
volume fluctuations that have particularly affected the trading prices of equity
securities of many high technology companies. These fluctuations have often been
unrelated or disproportionate to the operating performance of these companies.
Any negative change in the public's perception of medical device companies could
depress our stock price regardless of our operating results. Our common stock
could be subject to certain consequences in the future established by the NASDAQ
National Market such as being delisted if we do not meet the Nasdaq's continued
listing standards. For instance, if our common stock were to trade under $1.00
for 30 consecutive days on the NASDAQ National Market, or our current net
tangible assets fell below $4 million, or if we do not in the future meet the
Nasdaq's $10 million in stockholder's equity test starting November 1, 2002, we
would be in violation of the Nasdaq's continued listing standards. If our common
stock were delisted, then we could apply for listing on the Nasdaq SmallCap
Market, subject to Nasdaq's approval. If our common stock is not approved for
trading on the Nasdaq SmallCap Market, then our common stock would trade only in
the secondary markets in the so-called "pink sheets" or Nasdaq's "OTC Bulletin
Board." Delisting from the Nasdaq National Market could adversely affect the
liquidity and price of our common stock and it could have a long-term adverse
impact on our ability to raise capital in the future.
Recently, when the market price of a stock has been volatile, holders of
that stock have often instituted securities class action litigation against the
company that issued the stock. If any of our shareholders brought such a lawsuit
against us, we could incur substantial costs defending the lawsuit. The lawsuit
could also divert the time and attention of our management.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission this
registration statement on Form S-3 under the Securities Act of 1933, as amended,
with respect to the shares of common stock offered in this prospectus. This
prospectus does not contain all of the information contained in the registration
statement and the exhibits and schedules filed with the registration statement.
For further information with respect to CardioGenesis and the common stock
offered in this prospectus, we refer you to the registration statement and the
exhibits and schedules filed as a part of the registration statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document referred to are not necessarily complete. We refer you to the
copy of such contract or document filed as an exhibit to the registration
statement.
Our registration statement, including exhibits and schedules attached
thereto, may be inspected without charge at the Securities and Exchange
Commission's public reference facilities in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Securities and Exchange Commission's regional
offices located at the Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048. You may also obtain copies of all or any part of our
registration statement from such offices after payment of fees prescribed by the
Securities and Exchange Commission. The Securities and Exchange Commission
maintains a worldwide website that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Securities and Exchange Commission at http://www.sec.gov.
We are subject to the information and periodic requirements of the
Securities Exchange Act of 1934 and accordingly, file periodic reports, proxy
statements and other information with the Securities and Exchange Commission.
Such periodic reports, proxy statements and other information are available for
inspection and copying at the Securities and Exchange Commission's public
reference rooms, and the website of the Securities and Exchange Commission
referred to above.
16
INFORMATION INCORPORATED BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and the information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below, as well as the information contained in all filings
made by us pursuant to the Securities Exchange Act of 1934, as amended, after
the date of the initial registration statement and prior to the effectiveness of
the registration statement, and any future filings after the effectiveness of
the registration statement made with the Securities and Exchange Commission
under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act until our offering
is completed.
(a) Our Registration Statement on Form 8-A filed with the SEC on
April 18, 1996;
(b) Our Annual Report on Form 10-K, filed April 17, 2001, as amended
by Amendment No. 1 to Form 10-K, filed April 27, 2001, Amendment
No. 2 to Form 10-K, filed June 13, 2001, and Amendment No. 3 to
Form 10-K, filed July 13, 2001, for the year ended December 31,
2000;
(c) Our Quarterly Reports on Form 10-Q, filed May 15, 2001, as
amended by Amendment No. 1 to Form 10-Q, filed June 13, 2001, and
Amendment No. 2 to Form 10-Q, filed July 13, 2001, for the
quarterly period ended March 31, 2001; Form 10-Q, filed August
14, 2001, as amended by Amendment No. 1 to Form 10-Q, filed
August 16, 2001, for the quarterly period ended June 30, 2001;
and Form 10-Q, filed November 9, 2001, for the quarterly period
ended September 30, 2001;
(d) Current Reports on Form 8-K filed December 31, 2001, and January
18, 2002; and,
(e) Our preliminary proxy statement, dated May 2, 2001, and our
definitive proxy statement, dated May 14, 2001, both on Schedule
14A.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
CardioGenesis Corporation
26632 Towne Center Drive
Suite 320
Foothill Ranch, California 92610
Attention: Vice President and Chief Financial Officer
Tel: (714) 649-5000
FORWARD-LOOKING INFORMATION
This prospectus contains or incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that involve risks and uncertainties. Forward-looking statements can typically
be identified by the use of forward-looking words, such as "may," "will,"
"could," "project," "believe," anticipate," "expect," "estimate," "continue,"
"potential," "plan," "forecasts," and the like. These statements appear in a
number of places in this prospectus and include statements regarding our
intentions, plans, strategies, beliefs or current expectations and those of our
directors or our officers with respect to, among other things:
- our financial prospects;
- our financing plans;
- trends affecting our financial condition or operating
results; and
17
- our strategies for growth, operations, and product
development and commercialization.
Forward-looking statements do not guarantee future performance and
involve risks and uncertainties that could cause actual results to differ
materially from those anticipated. The information contained in this prospectus,
or incorporated by reference, identifies important factors that could cause such
differences.
USE OF PROCEEDS
All net proceeds from the sale of the shares of common stock covered by
this prospectus will go to the selling stockholder who is offering and selling
its shares. We will not receive any proceeds from the sale of the shares of
common stock by the selling stockholder. See "Plan of Distribution."
PLAN OF DISTRIBUTION
CardioGenesis is registering the shares of common stock covered by this
prospectus for the selling stockholder. These shares have been issued and sold
by us in a transaction exempt from the registration requirements of the
Securities Act of 1933 to the selling stockholder in connection with a share
purchase agreement dated December 21, 2001. Pursuant to the terms of that share
purchase agreement, we have filed a Registration Statement on Form S-3 (Reg. No.
333-59572) to register these 2,222,225 shares for resale by the selling
stockholder. As used in this prospectus, "selling stockholder" includes the
pledgees, donees, transferees or others who later receive the selling
stockholder's interest for no additional consideration. We will pay the costs
and fees of registering the shares of common stock, but the selling stockholder
will pay any brokerage commissions, discounts or other expenses relating to the
sale of the shares of common stock.
The selling stockholder may sell the shares of common stock on the
Nasdaq National Market, in the over-the-counter market or otherwise, at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices, or at negotiated prices. The selling stockholder may sell some or
all of the shares of common stock in one or more of the following ways:
- a block trade in which a broker-dealer may resell a part of the
block, as principal, in order to facilitate the transaction;
- purchases by a broker-dealer, as principal, and resale by the
broker-dealer for its account;
- ordinary brokerage transactions and transactions in which a
broker solicits purchasers;
- transactions pursuant to Rule 144; or
- other privately negotiated transactions.
In addition to selling its shares of common stock under this prospectus,
the selling stockholder may transfer its shares of common stock in other ways
not involving market makers or established trading markets, including directly
by gift, distribution, or other transfer.
The selling stockholder may negotiate and pay broker-dealers
commissions, discounts or concessions for their services. Broker-dealers engaged
by the selling stockholder may allow other broker-dealers to participate in
resales. The selling stockholder and any broker-dealers involved in the sale or
resale of the shares of common stock may qualify as "underwriters" within the
meaning of the Section 2(11) of the Securities Act. In addition, the
broker-dealers' commissions, discounts or concessions may qualify as
underwriters' compensation under the Securities Act. The selling stockholder
will be responsible for compliance with any applicable prospectus delivery
requirements under the Securities Act.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in some
states the shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
18
Under the applicable rules and regulations of the Securities and
Exchange Act, any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to our shares of
common stock for a period of two business days prior to the commencement of such
distribution. In addition, the selling stockholder will be subject to applicable
provisions of the Exchange Act and the associated rules and regulations under
the Exchange Act, including Regulation M, which provisions may limit the timing
of purchases and sales of shares by the selling stockholder. We will make copies
of this prospectus available to the selling stockholder and have informed it of
the need for delivery of copies of this prospectus to purchasers at or prior to
the time of any sale of the shares.
We may suspend the use of this prospectus and any supplements due to
pending corporate developments, public filings with the SEC or similar events.
SELLING STOCKHOLDER
The selling stockholder described below is a stockholder that is
offering and selling these shares covered by this prospectus which were
purchased by the selling stockholder in a transaction exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant to
Rule 506 from CardioGenesis pursuant to a share purchase agreement dated
December 21, 2001 which closed on December 26, 2001. As part of this share
purchase agreement, we agreed, for ninety (90) days after the closing date, not
to sell shares of our common stock, options, warrants or any other securities
that could be converted into, or otherwise exchanged for, shares of our common
stock at a conversion or exercise price less than the per share price for which
we sold these shares pursuant to this share purchase agreement. In the event we
do, during the ninety (90) day period, sell any shares of our common stock at,
or any instruments that could be converted into or otherwise exchanged for our
common stock exercisable at, a price per share less than the per share price
under this share purchase agreement, we will have to refund the difference to
the selling stockholder. However, no such shares or instruments convertible into
shares of our common stock have been sold in violation of this share purchase
agreement as of the date of this prospectus.
The selling stockholder may donate or transfer as gifts some or all of
its CardioGenesis shares, or may transfer its shares for no additional
consideration to others. We will include any of these donees or transferees as a
selling stockholder in a prospectus supplement, if required.
The selling stockholder has held no position or office or has had any
other material relationship with CardioGenesis or any of our affiliates within
the past three years other than as a result of its ownership of shares of our
common stock. The selling stockholder is not a broker/dealer or an affiliate of
a broker/dealer. The selling stockholder is an independent agency in the
administrative branch of the Wisconsin state government. Pursuant to s. 15.76,
Wis. Stats., it is governed by a board of nine trustees, six of whom are
appointed by the Governor with confirmation by the State Senate. Two trustees
are appointed by separate boards made up of representatives elected by
participants in the Wisconsin Retirement System, the public pension plan managed
by the selling stockholder. The remaining trustee is the Secretary of the State
Department of Administration or the Secretary's designee. Four of the trustees
appointed by the Governor must have at least ten years of investment experience
and one of the Governor's appointees must have at least ten years' experience in
a local government finance position. This information is based upon information
provided by the selling stockholder.
The table below sets forth the following information regarding the
selling stockholder:
- The name of the selling stockholder;
- The number of shares of our common stock owned by the selling
stockholder on the date of this prospectus prior to the offering
for resale of any of the shares being registered by the
registration statement of which this prospectus is a part;
- The number of shares of our common stock that may be offered for
resale by the selling stockholder pursuant to this prospectus;
and
- The number of shares of our common stock to be held by the
selling stockholder after the resale of the offered shares.
19
SHARES OF SHARES OF PERCENTAGE OF
COMMON STOCK SHARES OF COMMON STOCK COMMON STOCK
BENEFICIALLY COMMON BENEFICIALLY OF REGISTRANT
OWNED STOCK OWNED BENEFICIALLY
PRIOR TO BEING AFTER OWNED AFTER
SELLING STOCKHOLDER OFFERING(1) OFFERED OFFERING(2) OFFERING(3)
------------------- ------------ --------- ------------ -------------
State of Wisconsin Investment Board ..... 5,122,225 2,222,225 2,900,000 8.0%
(1) The number in the shares of common stock beneficially owned prior to the
offering column is based on the number of shares owned by the selling
stockholder as of January 9, 2002.
(2) Since the selling stockholder may offer all, some or none of its common
stock, we cannot provide a definitive estimate of the number of shares
the selling stockholder will hold after the offering. The shares
beneficially owned after the offering column assumes the sale of all
shares offered, and that the selling stockholder acquires no additional
shares of common stock before the completion of this offering.
(3) The percentage owned after offering column is based on 36,373,947 shares
of CardioGenesis common stock outstanding as of January 7, 2002.
LEGAL MATTERS
Certain legal matters with respect to the shares of common stock offered
hereby will be passed upon for us by Gibson, Dunn & Crutcher LLP, Los Angeles,
California.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference to the Annual Report on Amendment
No. 3 to Form 10-K for the year ended December 31, 2000 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the amounts of expenses to be borne by
CardioGenesis in connection with the sale of shares of common stock being
registered. All amounts are estimates except the SEC registration fee:
(U.S.$)
Filing fees - SEC registration fee..................... $ 609.45
Legal Fees and Expenses................................ 50,000.00
Accounting Fees and Expenses........................... 10,000.00
Miscellaneous.......................................... 2,000.00
Total.................................................. $62,609.45
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California Corporations Code authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933. Article IV of the Amended and Restated
Articles of Incorporation and
20
Article V of the Amended and Restated Bylaws of CardioGenesis provide for
indemnification of its directors, officers, employees and other agents to the
maximum extent permitted by the California Corporations Code.
ITEM 16. EXHIBITS
The following exhibits are filed as part of this registration statement:
5.1 Opinion of Gibson, Dunn & Crutcher LLP
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants
24.1 Powers of Attorney for certain directors and officers of
CardioGenesis (signature page).*
* Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act,
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement, and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement,
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof;
21
To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated
by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Foothill Ranch, State of California, on January 18,
2002.
CARDIOGENESIS CORPORATION
By: /s/ Darrell F. Eckstein
-----------------------------------
Darrell F. Eckstein
Vice President and Interim Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Michael J. Quinn Chairman of the Board, Chief Executive January 18, 2002
----------------------------- Officer, President and Director
Michael J. Quinn (Principal Executive Officer)
/s/ Darrell F. Eckstein Vice President and Interim Chief January 18, 2002
----------------------------- Financial Officer
Darrell F. Eckstein (Principal Financial and Accounting
Officer)
/s/ * Director January 18, 2002
-----------------------------
Jack M. Gill, Ph.D.
/s/ * Director January 18, 2002
-----------------------------
Joseph R. Kletzel II
/s/ * Director January 18, 2002
-----------------------------
Robert L. Mortensen
/s/ * Director January 18, 2002
-----------------------------
Robert C. Strauss
*By: /s/ Michael J. Quinn Attorney-In-Fact
-------------------------
Michael J. Quinn
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
5.1 Opinion of Gibson, Dunn & Crutcher LLP
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
24.1 Powers of Attorney for certain directors and officers of
CardioGenesis (signature page).*
* Previously filed.
24