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This prospectus relates to the offering for resale of CardioTech
International,Inc. common stock. In this prospectus, the terms “CardioTech,”
“we,” or “us” will each refer to CardioTech International,Inc. The shares of
common stock being offered were issued to the selling security holders upon
exercise of certain warrants, which were issued in connection with a private
placement of units, each unit consisting of one share of common stock and
one warrant to purchase one share of common stock. Sales of the units were
made pursuant to Unit Purchase Agreements between CardioTech and each
of the unit purchasers, dated as of November9, 1998 and December15, 1998.
The private placement terminated on December15, 1998. Fechtor, Detwiler&
Co.,Inc. acted as placement agent for the offering. This prospectus will be
used by selling security holders to resell their shares of common stock. We
will not receive any proceeds from sales by the selling security holders.
Our common stock is traded on the American Stock Exchange under the
symbol “CTE.” On November20, 2003, the closing price of our common
stock on the American Stock Exchange was $5.70 per share.
We are a Massachusetts corporation. Our principal ofces are located at
78-E Olympia Ave., Woburn, Massachusetts 01801 and our telephone number
is (781)933-4772.
Investing in our common stock involves risks. Please read carefully the
section entitled “risk factors” beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined
if this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
TABLE OF CONTENTS
About This Prospectus
The Company
Risk Factors
Use of Proceeds
Selling Security Holders
Plan of Distribution
366 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
Legal Matters
Experts
Where You Can Find More Information
Special Note Regarding Forward-Looking Information
You should rely only on the information contained or incorporated by refer-
ence in this prospectus. We have not authorized anyone to provide you with
different information. You should not assume that the information contained
in this prospectus is accurate as of any date other than the date on the front
of this prospectus.
Information on any CardioTech internet web site or the web site
of any subsidiary of CardioTech is not part of this document and you
should not rely on that information in deciding whether to purchase
shares of CardioTech common stock, unless that information is also in
this document or in a document that is incorporated by reference in this
document.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we led with the
Securities and Exchange Commission (the “SEC”) on FormS-3. Under the
S-3, the selling security holders may, from time to time, sell the securities
described in this prospectus. Each time a selling security holder sells secu-
rities, the selling security holder is required to provide you with this pro-
spectus and, in certain cases, a prospectus supplement containing specic
information about the selling security holder and the terms of the securi-
ties being offered. Any prospectus supplement may add, update, or change
information in this prospectus. If there is any inconsistency between the
information in this prospectus and any prospectus supplement, you should
rely on the information in that prospectus supplement. Before deciding to
purchase the securities being offered by the selling security holders, you
should read both this prospectus and any prospectus supplement together
with all additional information described under “Where You Can Find More
Information.”
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THE COMPANY
CardioTech International,Inc., a Massachusetts corporation, operating since
1993, specializes in developing and manufacturing small-bore vascular grafts,
or synthetic blood vessels, made of ChronoFlex, a family of polyurethanes
that has been demonstrated to be biocompatible and non-toxic. Vascular
grafts are used to replace, bypass, or provide a new lining or arterial wall
for occluded, damaged, dilated or severely diseased arteries. CardioTech is
developing a layered microporous coronary artery bypass graft trade named
CardioPass. Through Gish Biomedical,Inc., its wholly-owned, subsidiary
(“GISH”), CardioTech designs, produces and markets innovative specialty
surgical devices. Gish’s products are single-use disposable products or have
a disposable component. Gish’s products include devices for use in cardiac
surgery, myocardial management, infusion therapy, and post-operative blood
salvage.
RISK FACTORS
In addition to the other information contained in, or incorporated by refer-
ence into, this prospectus, potential investors should consider the following
risk factors in evaluating whether to invest in our common stock. Additional
risks and uncertainties not currently known to us, or that are not currently
believed to be important to potential investors, if they materialize, may also
adversely affect an investment in our common stock.
RISKS RELATED TO OUR OPERATING RESULTS
We Have Incurred Substantial Operating Losses and Risk Never
Generating Any Meaningful Revenue or Earning Any Prots
We had sales of $3,394,000 for the year ended March31, 2003 and we
incurred losses aggregating $963,000 in the same period. An investor in
our shares must assume the risk that we will never be protable. None of
our coronary artery graft products and technologies has ever been utilized
on a commercial basis. Our ability to generate enough revenues to achieve
368 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
prots will depend on a variety of factors, many of which are outside our
control, including:
◾ the size of the market for our potential products,
◾ competition and other solutions,
◾ the extent of patent and intellectual property protection afforded to
our products,
◾ the cost and availability of raw material and intermediate component
supplies,
◾ changes in governmental (including foreign governmental) initiatives
and requirements,
◾ changes in domestic and foreign regulatory requirements,
◾ the costs associated with equipment development, repair and mainte-
nance, and
◾ the ability to manufacture and deliver products at prices that exceed
our costs.
The Medical Device Industry Is Cyclical, and an Industry
Downturn Could Adversely Affect Our Operating Results
Business conditions in the medical device industry have rapidly changed
between periods of strong and weak demand. The industry is characterized by:
◾ periods of overcapacity and production shortages;
◾ cyclical demand for products;
◾ changes in product mix in response to changes in demand;
◾ variations in manufacturing costs and yields;
◾ rapid technological change and the introduction of new products by
customers;
◾ price erosion; and
◾ expenditures for product development.
These factors could harm CardioTech’s business and cause its operating
results to suffer.
Our Gish Subsidiary Is Dependent on a Few Critical Vendors
Our Gish subsidiary has various “sole source” vendors who supply key com-
ponents for Gish’s products. While Gish believes alternate supply sources
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could be developed, Gish could incur signicant costs to obtain alter-
nate components. The alternate components could also require regulatory
approval, the denial or delay of which, could adversely affect Gish’s ability to
provide products to its customers.
Our Gish Subsidiary Faces a Risk of Declining
Average Selling Prices for Its Products
Gish is currently facing and may continue to face increasing pricing pres-
sures from its current and future competitors, especially from competitors in
the cardiovascular surgery products market. As a result of such pressures,
Gish may be forced to lower prices in order to maintain its market share.
There can be no assurance that Gish will be able to maintain its market
share in the cardiovascular surgery products market in the face of continuing
pricing pressures. Any material reduction in the prices for Gish’s products
would negatively affect CardioTech’s gross margin.
We Have Limited Manufacturing Experience in Arterial Grafts
and Once Our Products Are Approved, We May Not Be Able
to Manufacture Sufcient Quantities at an Acceptable Cost
We are still in the research and development phase of our arterial grafts.
Accordingly, once our products are approved for commercial sale we will
need to establish the capability to commercially manufacture our product(s)
in accordance with FDA and other regulatory requirements. We have lim-
ited experience in establishing, supervising, and conducting commercial
manufacturing. If we fail to adequately establish, supervise, and conduct
all aspects of the manufacturing processes, we may not be able to com-
mercialize our products. We do not presently own manufacturing facilities
necessary to provide clinical or commercial quantities of our coronary artery
bypass graft.
We presently rely on a third party contractor, LeMatre Vascular,Inc., to
manufacture our coronary artery bypass grafts. This exposes us to the risk
of not being able to directly oversee the production and quality of the man-
ufacturing process. This contractor, may experience regulatory compliance
difculty, mechanical shut downs, employee strikes, or any other unforesee-
able acts that may delay production.
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