-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D6FURMkoGsAJW7tav+qNgkz/ufIRy13InMztKISTTC9+ovQqZUmR/86NOZuIIsso sCmdIBvfPDnZjSczslyrHg== 0000897101-03-000803.txt : 20030724 0000897101-03-000803.hdr.sgml : 20030724 20030722144541 ACCESSION NUMBER: 0000897101-03-000803 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030722 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030722 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDAMICUS INC CENTRAL INDEX KEY: 0000833140 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 411533300 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19467 FILM NUMBER: 03796272 BUSINESS ADDRESS: STREET 1: 15301 HGHWY 55 W CITY: PLYMOUTH STATE: MN ZIP: 55447 BUSINESS PHONE: 7635592613 8-K 1 medamicus033096_8k.txt MEDAMICUS, INC. FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (date of earliest event reported): July 22, 2003 MEDAMICUS, INC. (Exact name of Registrant as specified in its charter) Minnesota 0-19467 41-1533300 --------- ------- ---------- (State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation) Identification No.) 15301 Highway 55 West Plymouth, MN 55447 - ------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (763) 559-2613 Items 1, 2, 3, 4, 6, 8, 10, and 11 are not applicable and therefore omitted. ITEM 5. OTHER INFORMATION On July 22, 2003, Medamicus, Inc. announced that it had entered into an Asset Purchase Agreement with BIOMEC, Inc. and BIOMEC Cardiovascular Inc. under which Medamicus will acquire the operating assets of BIOMEC Cardiovascular Inc. Copies of the press releases issued by Medamicus and by BIOMEC, Inc. are attached as Exhibits 99.3 and 99.4, respectively. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits The following are filed as Exhibits to this Report: Exhibit No. Description of Exhibit - ----------- ---------------------- 99.1 Press release dated July 22, 2003, reporting result for the three months ended June 30, 2003. 99.2 Statement of James D. Hartman, President and CEO of Medamicus, Inc., in connection with the July 22, 2003 Medamicus, Inc. conference call. 99.3 Press release of Medamicus, Inc. dated July 22, 2003, announcing the execution of the Asset Purchase Agreement. 99.4 Press release of BIOMEC, Inc. dated July 22, 2003, announcing the execution of the Asset Purchase Agreement. ITEM 9. REGULATION FD DISCLOSURE (ITEM 12, DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION). Pursuant to Item 12 of Form 8-K, Disclosure of Results of Operations and Financial Condition, Medamicus, Inc. hereby furnishes a press release, issued on July 22, 2003, disclosing material non-public information regarding its results of operations for the quarter ended June 30, 2003. Pursuant to Item 9, Regulation FD Disclosure and Item 12, Disclosure of Results of Operations and Financial Condition, Medamicus, Inc. also furnishes with this Form 8-K the Statement of James D. Hartman, President and CEO of Medamicus, Inc., to be issued in connection with the July 22, 2003 Medamicus, Inc. conference call reporting the results of operations for the quarter ended June 30, 2003. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEDAMICUS, INC. By /s/ James D. Hartman ------------------------------------- James D. Hartman President and Chief Executive Officer Dated: July 22, 2003 EX-99.1 3 medamicus033096_ex99-1.txt PRESS RELEASE Medamicus, Inc. File no. 0-19467 Exhibit 99.1 FOR IMMEDIATE RELEASE CONTACT: JIM HARTMAN MEDAMICUS, INC. (763) 577-2212 JULY 22, 2003 MEDAMICUS REPORTS SECOND QUARTER RESULTS MINNEAPOLIS--Medamicus, Inc. (NasdaqSC: MEDM) reported a one percent decline in revenues from continuing operations to $4,338,000 for the second quarter ended June 30, 2003, compared to $4,382,000 for the same quarter in 2002. The Company also reported net income of $474,000, or $.10 per diluted share, for the second quarter, compared to $628,000, or $.13 per diluted share, in the second quarter of 2002. For the six months ended June 30, 2003, Medamicus reported revenues from continuing operations of $9,006,000, compared to $8,681,000 for the same six months of 2002, a four percent increase. The Company also reported net income of $1,106,000, or $.22 per diluted share, for the first six months of 2003, compared to $1,225,000, or $.25 per diluted share, for the first six months of 2002. "Sales of our core introducer products increased 32 percent in the second quarter of 2003 to $3.4 million as compared to the second quarter of 2002, as we broadened our business base with new and existing customers," said James D. Hartman, president and CEO. "Our market share continues to grow and today most of the major companies using venous introducers are on our customer list. We are now operating at a unit run rate of nearly 2,000,000 introducers per year, compared to an annual run rate of 1,200,000 units in the same quarter of last year." "During the quarter we encountered a manufacturing issue with our newly release FlowGuardTM valved introducer, which caused us to suspend shipments until corrected," said Hartman. "In order to rectify the problem, we will need to qualify a new resin which will defer our resumption of shipments until late in the fourth quarter or early 2004. Our sales in the second quarter were modestly affected by our inability to ship this product. Our income, however, was materially affected by more than $200,000 of write-offs, primarily scrapped inventory, which reduced our after tax income by approximately $.03 per share. Despite this short-term setback, the feedback from physicians regarding the FlowGuard has been extremely positive and we expect an upbeat reception when we reintroduce the product." "As expected, sales of advanced delivery system procedural kits and related products totaled $564,000 in the quarter compared to $1,562,000 in last year's second quarter, a decline of nearly $1,000,000," Hartman continued. "Similarly, we experienced a reduction of $950,000 of advanced delivery system sales in the first quarter of 2003. Most of the sales in this category were to Medtronic. As we reported a year ago, Medtronic has transitioned packaging of the next generation of the left ventricle lead delivery procedural kits used with its congestive heart failure therapy to its own facility. Despite this significant decline in left ventricle kit sales , we were able to increase our overall revenue to within one percent of last year's second-quarter sales and on a year-todate basis have actually increased our total sales by 4 percent. This is the result of focusing on new customers and new products.We expect the sales reduction in the upcoming two quarters from the left ventricle lead kit transition to be equivalent to the reduction experienced in the last two quarters." "Safety needle sales increased to $61,000 from $34,000 a year ago," Hartman stated. "Although the amounts are small, these sales represent the launch of the safety needle in Medtronic procedural kits, a very important element of creating the market awareness required to move safety needle use to the standard of care in the guidewire introducer market. We are currently assembling individually packaged safety needles to fulfill the initial order from Cook, Inc. under our recently signed supply agreement and expect that Cook will launch the product late in the third or early fourth quarter of 2003. All safety needles are now being assembled on our automated assembly machine, and although the yields are not yet where we would expect them to be, the cost of assembly is dramatically less than the manual assembly we undertook in the first quarter." "Our gross margin of just less than 42 percent was approximately four percentage points less than the same quarter a year ago. This decline was caused by the write-off of scrapped material from the halted production of the FlowGuard valved introducer which reduced overall gross margin by more than 4.5 percentage points," Hartman said. "Research and development costs declined by 13 percent to 8.8 percent of sales compared to 10.1 percent last year," Hartman continued. "We continue to conduct research and development activities at the same or greater rate than last year, but more of our projects this year have a customer cost sharing component, and we have deferred some larger validation expenses to later in the year. Selling expenses increased $92,000 to $237,000 for the quarter or 5.5 percent of sales. We have completed hiring the full complement of sales/product managers we deemed necessary to execute our business strategy of highly attentive customer service plus cultivation of key physician relationships. General and administrative costs increased just slightly less than six percent. In total we earned $474,000 or $.10 per share while we replaced $1,000,000 of lost revenue from Medtronic. The FlowGuard issue cost us the opportunity to show sales and earnings gains compared to last year, but we are pleased with our effort to diversify our business base and grow our core introducer product line, " Hartman concluded. In a separate press release also issued on Tuesday, July 22, 2003, Medamicus announced that it had entered into a definitive agreement to acquire the operating assets of BIOMEC Cardiovascular Inc. ("BCI"), a Minneapolis based developer and manufacturer of implantable stimulation leads, lead delivery systems and accessories for cardiac rhythm management and neuromodulation. Medamicus, Inc., based in Plymouth, Minnesota, is a medical products company engaged in the design, development, manufacture and marketing of percutaneous delivery systems. Its products include venous vessel introducers, safety needles and other disposable delivery products for use in the implantation of pacemakers, defibrillators, catheters and infusion ports sold through OEM relationships with other medical device companies. This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Certain important factors could cause results to differ materially from those anticipated by some statements made herein. All forward-looking statements involve risks and uncertainties. A number of factors that could cause results to differ materially are discussed in our Annual Report on Form 10-KSB for the year ended December 31, 2002. Among the factors that could cause results to differ materially are the following: the Company's dependence upon a limited number of key customers for its revenue; the Company's dependence upon licensing agreements with third parties for the technology underlying some of its products, especially the safety needle; the ability of the Company to negotiate and enter into safety needle supply agreements with major medical device companies and the ability of the Company and these customers to achieve market acceptance of the safety needle; the Company's ability to effectively manufacture its safety needle using its automated safety needle assembly equipment in anticipated required quantities; the Company's ability to successfully manufacture and introduce its FlowGuard valved peelable introducer; the Company's ability to develop or acquire new products to increase its revenues; the Company's ability to attract and retain key personnel; introduction of competitive products; patent and government regulatory matters; economic conditions; and the Company's ability to raise capital. All forward-looking statements of the Company, whether written or oral, and whether made by or on behalf of the Company, are expressly qualified by these cautionary statements. In addition, the Company disclaims any obligation to update forward-looking statements to reflect events or circumstances after the date hereof. CONDENSED BALANCE SHEETS UNAUDITED AUDITED (1) Assets 06/30/03 12/31/02 ---------------- ---------------- Cash and cash equivalents $ 6,491,564 $ 7,304,362 Inventory, receivables and prepaids 4,605,349 4,395,861 Property, plant and equipment, net 5,305,692 4,947,354 Other assets 1,910,763 1,923,428 - --------------------------------------------------------- ---------------- TOTAL ASSETS $ 18,313,368 $ 18,571,005 - --------------------------------------------------------- ---------------- LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities $ 1,478,124 $ 2,842,575 Long-term liabilities 266,708 300,518 Shareholders' equity 16,568,536 15,427,912 - --------------------------------------------------------- ---------------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 18,313,368 $ 18,571,005 - --------------------------------------------------------- ---------------- (1) Derived from Audited Balance Sheet at 12/31/02.
STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2003 JUNE 30, 2002 ----------------------------- ------------------------------ Sales $ 4,338,341 $ 4,382,042 $ 9,005,664 $ 8,680,725 Cost of sales 2,518,589 2,363,767 5,115,270 4,693,751 - --------------------------------------------------------------- ------------------------------ GROSS PROFIT 1,819,752 2,018,275 3,890,394 3,986,974 - --------------------------------------------------------------- ------------------------------ OPERATING EXPENSES: Research and development 383,247 442,213 741,247 854,512 Selling, general and administrative 691,291 574,938 1,410,617 1,181,208 - --------------------------------------------------------------- ------------------------------ TOTAL OPERATING EXPENSES 1,074,538 1,017,151 2,151,864 2,035,720 - --------------------------------------------------------------- ------------------------------ - --------------------------------------------------------------- ------------------------------ OPERATING INCOME 745,214 1,001,124 1,738,530 1,951,254 - --------------------------------------------------------------- ------------------------------ OTHER INCOME (EXPENSE): Interest expense (4,251) (5,984) (8,870) (12,485) Interest income 11,897 18,879 26,979 39,453 Other (399) (1,519) (402) (1,968) - --------------------------------------------------------------- ------------------------------ TOTAL OTHER INCOME (EXPENSE) 7,247 11,376 17,707 25,000 - --------------------------------------------------------------- ------------------------------ INCOME BEFORE INCOME TAXES 752,461 1,012,500 1,756,237 1,976,254 Income tax expense (278,411) (384,750) (649,808) (751,738) - --------------------------------------------------------------- ------------------------------ NET INCOME 474,050 627,750 1,106,429 1,224,516 - --------------------------------------------------------------- ------------------------------ EARNINGS PER SHARE Basic $ 0.10 $ 0.13 $ 0.23 $ 0.26 Diluted 0.10 0.13 0.22 0.25 WEIGHTED AVERAGE SHARES Basic 4,733,950 4,714,066 4,730,964 4,700,260 Diluted 4,955,311 4,970,966 4,956,072 4,987,479
EX-99.2 4 medamicus033096_ex99-2.txt PRESS RELEASE Medamicus, Inc. File no. 0-19467 Exhibit 99.2 Medamicus intends to file a registration statement on Form S-4 in connection with the transaction with BIOMEC, Inc. discussed below. Investors and security-holders of Medamicus and BIOMEC are urged to read the registration statement and the joint proxy statement/prospectus that will be disseminated to the respective security-holders when they become available because these documents will contain important information. When available, investors and security-holders may obtain a free copy of the joint proxy statement/prospectus at the SEC's web site at www.sec.gov. A free copy of the joint proxy statement/prospectus may also be obtained from either of the companies. STATEMENT OF JIM HARTMAN PRESIDENT AND CEO OF MEDAMICUS, INC. JULY 22, 2003 Good day. My name is Jim Hartman and I'm the President and Chief Executive Officer of Medamicus. My comments today will contain forward-looking statements that involve risks and uncertainties. Any number of factors could cause our results to vary from those that may be anticipated by some statements made today. You should read our press release issued this morning and our SEC filings for a listing of some of the factors that could cause results to differ materially. During my remarks today I will discuss the pertinent points related to our second quarter results, provide some revenue guidance for the upcoming quarters, discuss in more detail our announcement regarding the acquisition of the operating assets of Biomec Cardiovascular Inc. and then, as in the past, I will attempt to answer any questions you may have. I'm joined today by Mark Kraus, our chief operating officer, who will assist me during our Q & A session in dealing with questions regarding our operations and the Biomec acquisition. Before beginning the substance of my remarks however, I want to read the following. IN CONNECTION WITH OUR PROPOSED ACQUISITION OF THE OPERATING ASSETS OF BIOMEC CARDIOVASCULAR INC., MEDAMICUS INTENDS TO FILE A REGISTRATION STATEMENT ON FORM S-4 IN CONNECTION WITH THE TRANSACTION, AND MEDAMICUS AND BIOMEC WILL MAIL A JOINT PROXY STATEMENT/PROSPECTUS TO THEIR RESPECTIVE SHAREHOLDERS. INVESTORS AND SECURITY HOLDERS OF MEDAMICUS AND BIOMEC ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANIES, THE TRANSACTION, THE PERSONS SOLICITING PROXIES RELATING TO THE TRANSACTION, THEIR INTERESTS IN THE TRANSACTION, AND RELATED MATTERS. WHEN AVAILABLE, INVESTORS AND SECURITY-HOLDERS MAY OBTAIN A FREE COPY OF THE JOINT PROXY STATEMENT/PROSPECTUS AT THE SEC'S WEB SITE AT WWW.SEC.GOV. A FREE COPY OF THE JOINT PROXY STATEMENT/PROSPECTUS MAY ALSO BE OBTAINED FROM EITHER OF THE COMPANIES. Having said that, let me turn to our second quarter results. Our second quarter results reflected a decline in sales to $4,338,000, compared to $4,382,000 in the second quarter of 2002. This decline is only one percent, even though sales of left ventricle lead delivery systems to Medtronic were nearly $1,000,000 less than in the same quarter a year ago. Our net income of $474,000, or $.10 per diluted share, was a twenty-four percent decline over net income of $628,000, or $.13 per diluted share, in the comparable period of last year. Year-to-date, our sales increased by 4 percent to $9,006,000, compared to $8,681,000 in the first six months of last year. Sales of left ventricle lead delivery systems to Medtronic in the first six months of 2003 were $1,940,000 less than during the same period last year. Net income declined 10 percent for the six months ended June 30, 2003 to $1,106,000, or $.22 per diluted share, from $1,225,000, or $.25 per diluted share a year earlier. In the second quarter, our core product line of bulk and kit-assembled venous introducers grew 32 percent over the second quarter of last year. This category includes standard introducer kits sold to Medtronic and bulk non-sterile introducers sold to a number of other companies. The increase came from a combination of growth in introducer sales to Bard Access Systems, as well as a broad based growth in introducer sales to other customers. Over the past two years, we have been successful in gaining the introducer business of a number of other significant players in the non-pacing venous access market, and sales to these companies continue to grow at double-digit rates. During the second quarter we manufactured introducers at a run rate of over 1,600,000 units on an annualized basis, over 40 percent of the estimated market. Unfortunately, we found it necessary to suspend shipments of our FlowGuard valved introducer during the quarter, because of concerns over the integrity of the sheath handle. We had no incidences of field failure but our internal tests indicated that the handle had the potential to be an issue and we made the decision to reformulate the handle resin and assure ourselves and our customers that products shipped from Medamicus are of the highest quality. This action had a modest impact on our sales but a more significant impact on our net income. We reversed sales of product already shipped of slightly less than $100,000 within the quarter and cancelled customer orders for amounts greater than that. We also took the write-offs necessary to account for the cost of stopping production and scrapping inventory. In total those costs reduced our after tax income in the quarter by approximately $.03 per share. The current timeline to return to the market would indicate that we could be selling FlowGuard introducers either late in the fourth quarter or early next year. The high level of enthusiasm for the FlowGuard at the physician level provides us with optimism that the re-launch of the product will be a successful one and give the year 2004 a boost from the start. We sold $61,000 of safety needles during the quarter compared to $34,000 a year ago. The majority of these sales came from the inclusion of our needle in procedural kits that we package for Medtronic. The initial release of the safety needle product is well underway, and at least anecdotally, the needle has been well received. Contrary to the first quarter when we had to assemble a large quantity of needles by hand, our automated safety needle assembly system is functioning, although we continue to work on our yields, and we are now producing safety needles to fulfill the initial orders from Cook Incorporated and continue supplying safety needles in Medtronic kits. We signed a supply agreement with Cook in April of 2003 to distribute single packaged needles to the hospital market in the US and we expect Cook will launch the product late in the third quarter. As stated earlier, we were able to replace nearly $1,000,000 in sales of advanced delivery products during the quarter and nearly $2,000,000 year-to-date. Those sales, totaling $1,562,000 in the second quarter last year and $564,000 in this year's second quarter, were primarily left ventricle lead delivery system kits (LVLDS) and related components, to Medtronic. As we announced last year, packaging of the next generation of LVLDS kits has transitioned to a Medtronic facility. We expect a reduction in LVLDS sales in the third and fourth quarters of this year similar to what we experienced in the first two quarters. While we hope to continue to play a role in the component portion of future LVLDS kit designs, there is no assurance that the components we now sell Medtronic for its next generation kit will be a part of any future designs Medtronic brings to market. Our gross margins were 42.0 percent for the quarter compared to 46.1 percent a year ago. This reduced level of gross margin was almost exclusively associated with the FlowGuard write-offs that reduced our gross margins by over four percentage points. We believe we have recognized all the costs of suspending production of the FlowGuard in the second quarter. The next two quarters will be influenced by the loss of the anticipated FlowGuard sales and minor research and development expenditures related to qualifying a new resin. Our research and development costs actually declined $59,000 during the quarter when compared to one year ago, and as a percent of sales they dropped from 10.1 percent to 8.8 percent. This decline is not indicative of a much lower level of activities taking place, but related in part to the amount of expenditures during the period that were billable to customers who have committed to pay some or all of the development costs related to their projects. Additionally, a portion of this reduction in expenditures relates to the timing of certain project costs that will now likely occur later in the year. Our sales and marketing expenses increased 64 percent to $237,000 when compared to the second quarter of 2002 and now approximate 5.5 percent of sales. This is the result of hiring the full complement of sales/product managers we deemed necessary to execute our business strategy of highly attentive customer service plus cultivation of key physician relationships. We now have a five person sales force consisting of a director, two product managers, a new product development manager and a marketing coordinator. General and administrative expenses increased 6 percent for the quarter compared to a year ago, and as a percentage of sales equaled 10.5 percent, compared to 9.8 percent in the same quarter of 2002. The primary cost increases were depreciation of our new software system, plus auditing, investor relations and insurance costs associated with our compliance to the Sarbanes-Oxley Act. As I stated earlier, in total we earned $474,000 after income taxes, or $.10 per fully diluted share compared to $628,000 or $.13 per diluted share one year ago, a decline of 25 percent. Had we not experienced the disappointing setback related to FlowGuard, we would have at least equaled or exceeded last year's income total. For the first six months of the year our net income of $1,106,000, or $.22 per diluted share is 10 percent below last years total. Our cash situation remains strong with nearly $6,500,000 in the bank. We have no bank debt and over $16,000,000 of net worth. Our assets are over $18 million compared to $1.75 million of liabilities. Over the next six months we will be focused on the following: 1. To resolve the FlowGuard design issue and continue work on the smaller sizes of the FlowGuard so that we will be able to re-launch into the dialysis market as well as commence the initial launch into the pacing and implantable port market. 2. To validate and ship the various needle configurations to fulfill the safety needle orders for Cook, and continue work on the next generation of safety devices. 3. To accelerate our efforts on advanced delivery system projects. Since exhibiting our capabilities in this area at a number of shows earlier this year, the response for requests to do product development has been overwhelming. Today we are working on eleven new products for specific customers related to fixed curve and articulating delivery systems. While not all of these projects may become commercial successes, the broad base of activity would indicate to us a significant level of potential future revenue. We are also developing for regulatory approval our own line of articulating guide catheters which should significantly reduce the time to market for our customers. Now let me provide some guidance for the two upcoming quarters. * With the loss of the FlowGuard revenue until late in the fourth quarter or early 2004, combined with the expected loss of LVLDS revenue in the third quarter, we anticipate that sales for the third quarter of 2003 will be approximately 10% less than the sales during last year's third quarter. Last year's third quarter equaled $4,542,000 aided by a one time shipment of specialty introducers to Medtronic totaling $380,000. We will commence shipments of safety needles to Cook during the third quarter as well as continue to include needles in Medtronic kits. * As regards to our fourth quarter, obviously, if we can be back in the market with FlowGuard earlier in the quarter, our anticipated sales would be favorably impacted. And while these comments have not reflected our pending acquisition of Biomec Cardiovascular, it is likely those sales will be combined with ours for some or all of the fourth quarter. * We expect our gross margin percent to show improvement in the third quarter when compared to quarter one since we have now resolved the issues associated with the automated safety needle assembly equipment and as compared to quarter two when we wrote off the scrapped inventory related to FlowGuard. We anticipate that our operating expenses will remain relatively the same when compared to the second quarter. Now I'd like to expand upon our announcement today regarding the acquisition of the operating assets of Biomec Cardiovascular Inc. ("BCI"), a private company located in the Twin Cities. We have been open about our interest in pursuing an acquisition that would be complementary to our product offering, broaden our customer base, add to our intellectual property portfolio and bring additional management talent into our organization. It was also important to us that the business philosophy of a potential acquisition be consistent with our strategy of developing proprietary products and marketing those products to other medical device companies. The acquisition of Biomec Cardiovascular Inc. meets all of these criteria. BCI's proprietary product line consists of specialty pacing leads used primarily for cardiac resynchronization therapy in the treatment of congestive heart failure, an implant tool for placing those leads, and finally, pacing lead adaptors which allow one generation of pacing lead wires to be attached to another generation of pulse generators. Those different generations are created by the adoption of new international standards. It is expected that a new lead connector standard (currently called IS-4) will be adopted sometime in the next two years requiring an entirely new set of adaptors. All of BCI's proprietary products are sold primarily to the big three pacing companies. BCI has laser welding capabilities and also does a significant amount of packaging for a variety of companies. BCI's sales have doubled in the first half of 2003 to over $4.5 million compared to 2002 and BCI's management believes they have an excellent opportunity to continue that pace of growth well into 2004. BCI is profitable having earned $495,000 on a pretax basis through the first half of 2003. There are a number of synergies between our two companies. The joint marketing of our combined product offering to pacing companies should allow us to bring one stop shopping and attractive pricing to those customers. Our development effort can focus on these specialty leads but now with a complementary delivery system. There are of course a number of cost savings that we will realize by conducting our business in the most efficient manner. We will pay $18,000,000 at closing less the assumed liabilities. Payment will be a combination of cash and stock. It is our current intention to secure a $5,000,000 term loan that would allow us to pay the maximum amount of cash at closing, approximately $11,000,000, and the minimum amount in stock which would be equal to $7,000,000 or approximately 933,000 shares. We will also have a contingent payment to make in early 2004 which is based on total annual 2003 sales achieved times two minus the $18,000,000 closing payment; and another contingent payment in 2005 equal to the increase in proprietary sales in 2004 over 2003. This payment could double if BCI has contracts in place that evidence long-term revenue potential. The transaction will require approval by both companies' shareholders and we expect to close the transaction around September 30, 2003. This is a transforming opportunity for our company. We will have revenues 50 percent higher than we have today. We will have more customers but much less dependence on any one customer. Our product offering will be one of the strongest in the pacing accessory field. We will again be participating in one of the highest growth areas in cardiac rhythm management, the treatment of congestive heart failure through resynchronization therapy. By virtue of being 50 percent larger, more profitable, having more shares in the public float, and by applying for listing on the Nasdaq National Market System, a condition of the transaction, Medamicus should be a far more attractive company for institutional investors, and that should prove beneficial for all shareholders. Thanks for listening today. Mark Kraus and I will be happy to entertain any questions you may have. EX-99.3 5 medamicus033096_ex99-3.txt PRESS RELEASE Medamicus, Inc. File no. 0-19467 Exhibit 99.3 FOR IMMEDIATE RELEASE CONTACT: JIM HARTMAN MEDAMICUS, INC. (763) 577-2212 JULY 22, 2003 MEDAMICUS, INC. TO ACQUIRE OPERATING ASSETS OF BIOMEC CARDIOVASCULAR INC. Medamicus, Inc. today announced that it has entered into a definitive agreement to acquire the operating assets of BIOMEC Cardiovascular Inc. ("BCI"), a Minneapolis based developer and manufacturer of implantable stimulation leads, lead delivery systems and accessories for cardiac rhythm management and neuromodulation. BCI is a subsidiary of BIOMEC Inc., a privately held medical technology company headquartered in Cleveland, Ohio. The definitive agreement provides for the acquisition by Medamicus of substantially all of the assets of BCI through a newly formed, wholly owned subsidiary of Medamicus. Medamicus has agreed to pay $18.0 million at closing, plus or minus specified adjustments. In addition, under the agreement, Medamicus has agreed to make a contingent payment based on total 2003 sales of BCI prior to the acquisition and Medamicus's BCI unit after the acquisition and a second contingent payment based upon sales of the Medamicus BCI unit's proprietary products in 2004 in excess of 2003 proprietary sales. Under the agreement, Medamicus is obligated to pay at closing not less than $7.0 million in cash and not less than $7.0 million through issuance of newly issued Medamicus, Inc. common stock valued at $7.50 per share. The remaining $4.0 million, subject to the adjustments, is payable by Medamicus at its option either in cash or by an additional issuance of Medamicus common stock valued at $7.50 per share or a combination of cash and stock. If Medamicus paid the minimum amount of the closing price in stock, it would issue 933,333 shares, and if Medamicus paid the estimated maximum amount of the closing price in stock, it would issue 1,466,667 shares. As of July 18, 2003, Medamicus had 4,739,293 shares of common stock outstanding. Each of the 2003 and the 2004 Contingent Payment is to be made in a combination of cash and of stock valued at the then-current market price. Jim Hartman, President and CEO of Medamicus, said, "I am pleased to announce this business combination with BCI. We expect this transaction to significantly expand our product line into complementary high growth markets, broaden our intellectual property portfolio, diversify our OEM customer base and add to our team of skilled and experienced managers and employees. BCI's business model of OEM sales coupled with proprietary product development is similar to that of Medamicus. The combination with BCI will materially enhance our ability to continue to provide world-class, value-added design and manufacturing services to OEM customers such as Bard, Cook, Guidant, Medtronic and St. Jude Medical. BCI's sales more than doubled to $4.5 million in the first half of 2003 compared to the same period in 2002 and we expect that its sales for all of 2003 will be in excess of $9 million." Trevor O. Jones, BIOMEC's Chairman and CEO, who will be elected to the Medamicus board and become its new Vice Chairman, stated that "BIOMEC's board enthusiastically endorses this opportunity and considers it a sound investment in a dynamic company with outstanding growth potential. The combination is an excellent synergistic fit of the two companies to the benefit of all shareholders." Mr. Jones added "this combination does not impact BIOMEC's Cleveland operations, which will continue in their current form." Vince Owens, President and CEO of BCI, said "Biomec Cardiovascular's sales have grown significantly over the last nine months due to our focused strategy on proprietary permanent implantable leads and delivery systems targeted for the cardiac rhythm management and neuromodulation markets. This business combination will allow us to accelerate the development of new specialized implantable leads with delivery systems that enable less invasive and more efficient placement in and on the heart, brain and spinal cord." The board of directors of Medamicus, Inc. as well as the boards of directors of BCI and BIOMEC Inc., have approved the acquisition and unanimously recommended approval by its respective shareholders. Besides requiring approval by the shareholders of Medamicus and BIOMEC Inc., the transaction is subject to SEC review, the absence of material adverse events and other customary closing conditions. The transaction is expected to close on or about September 30, 2003. Franklin Capital Partners, Inc. initiated this transaction on behalf of Medamicus and served as exclusive acquisition adviser to Medamicus. Goldsmith, Agio, Helms & Lynner, LLC reviewed the transaction for fairness from a financial point of view to the Medamicus shareholders and provided an opinion to that effect to the Medamicus board of directors. The issuance of the Medamicus common stock requires the approval of the Medamicus shareholders under applicable Nasdaq listing standards. As a condition of the agreement, Medamicus will apply for listing of its common stock on the Nasdaq National Market System. Medamicus, Inc., based in Plymouth, Minnesota, is a medical products company engaged in the design, development, manufacture and marketing of percutaneous delivery systems. Its products include venous vessel introducers, safety needles and other disposable delivery products for use in the implantation of pacemakers, defibrillators, catheters and infusion ports sold through OEM relationships with other medical device companies. Headquartered in Minneapolis, Minnesota, BIOMEC Cardiovascular Inc. is a developer and manufacturer of implantable stimulation leads, lead delivery systems, and lead accessories for cardiac rhythm management, neuromodulation, and hearing -restoration markets. Headquartered in Cleveland, Ohio, BIOMEC Inc. is a leading researcher, developer and manufacturer of advanced medical technologies. This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Certain important factors could cause results to differ materially from those anticipated by some statements made herein. All forward-looking statements involve risks and uncertainties. A number of factors that could cause results to differ materially are discussed in our Annual Report on Form 10-KSB for the year ended December 31, 2002. Among the factors that could cause results to differ materially are the following: the ability of Medamicus to obtain approval of the transaction by Medamicus and BIOMEC shareholders; the ability of Medamicus to successfully integrate the acquired business; Medamicus's dependence upon a limited number of key customers for its revenue; Medamicus's dependence upon licensing agreements with third parties for the technology underlying some of its products, especially the safety needle; the ability of Medamicus to negotiate and enter into safety needle supply agreements with major medical device companies, and the ability of Medamicus and these customers to achieve market acceptance of the safety needle; Medamicus's ability to effectively manufacture its safety needle using its automated safety needle assembly equipment in anticipated required quantities; Medamicus's ability to successfully manufacture and introduce its FlowGuard valved peelable introducer; Medamicus's ability to develop or acquire new products to increase its revenues; Medamicus's ability to attract and retain key personnel; introduction of competitive products; patent and government regulatory matters; economic conditions; and Medamicus's ability to raise capital. All forward-looking statements of Medamicus, whether written or oral, and whether made by or on behalf of Medamicus, are expressly qualified by these cautionary statements. In addition, Medamicus disclaims any obligation to update forward-looking statements to reflect events or circumstances after the date hereof. Medamicus intends to file a registration statement on Form S-4 in connection with the transaction, and Medamicus and BIOMEC Inc. intend to mail a joint proxy statement/prospectus to their respective shareholders in connection with the transaction. Investors and security-holders of Medamicus and BIOMEC are urged to read the joint proxy statement/prospectus when it becomes available because it will contain important information about the companies, the transaction, the persons soliciting proxies relating to the transaction, their interests in the transaction, and related matters. When available, investors and security-holders may obtain a free copy of the joint proxy statement/prospectus at the SEC's web site at www.sec.gov. A free copy of the joint proxy statement/prospectus may also be obtained from either of the companies. EX-99.4 6 medamicus033096_ex99-4.txt PRESS RELEASE Medamicus, Inc. File no. 0-19467 Exhibit 99.4 [BIOMEC LOGO] NEWS RELEASE July 22, 2003 [Contact: Trevor O. Jones, 216-937-2800, ext. 222, BIOMEC Inc., Cleveland, OH or Vincent P. Owens, 952-653-2410, BCI Minneapolis, MN] BIOMEC AGREES TO COMBINE ITS MINNEAPOLIS OPERATION WITH MEDAMICUS, INC. Cleveland, Ohio (July 22, 2003) - Trevor O. Jones, Chairman and CEO, announced today the combination of BIOMEC's Minneapolis operation, Biomec Cardiovascular Inc. (BCI), with Medamicus, Inc. BCI develops and manufactures implantable stimulation leads, lead delivery systems, and lead accessories for cardiac rhythm management, neuromodulation, and hearing-restoration markets. Medamicus, Inc., a publicly traded company (Nasdaq - MEDM) based in Plymouth, Minnesota, is a biomedical products company engaged in the design, development, manufacture and marketing of percutaneous delivery systems. Its products include venous vessel introducers, safety needles and other disposable delivery products for use in the implantation of pacemakers, defibrillators, catheters and infusion ports sold through OEM relationships with other medical device companies. The definitive agreement provides for the acquisition by Medamicus of substantially all of the assets of BCI through a newly formed, wholly owned subsidiary of Medamicus. Medamicus has agreed to pay $18.0 million at closing, plus or minus specified adjustments. Medamicus has agreed to make a contingent payment based on total 2003 sales of BCI prior to the acquisition and Medamicus's BCI unit after the acquisition and a second contingent payment based upon sales of the Medamicus BCI unit's proprietary products in 2004 in excess of 2003 proprietary sales. Under the agreement, Medamicus is obligated to pay at closing not less than $7.0 million in cash and not less than $7.0 million through issuance of newly issued Medamicus, Inc. common stock valued at $7.50 per share. The remaining $4.0 million, subject to the adjustments, will be paid either in cash or by common stock valued at $7.50 per share or a combination of cash and stock, at Medamicus's option. If Medamicus paid the minimum amount ($7.0 million) of the closing price in stock, it would issue 933,333 to shares to BIOMEC, and if Medamicus paid the estimated maximum amount ($11.0 million) of the closing price in stock, it would issue 1,466,667 shares to BIOMEC. As of July 18, 2003, Medamicus had 4,739,293 shares of common stock outstanding. If Medamicus elects to pay the maximum amount in stock, BIOMEC would own at closing approximately 24% of Medamicus, and the minimum amount would result in a BIOMEC ownership at closing of approximately 16%. In either case, BIOMEC will become Medamicus's largest single shareholder, and Trevor O. Jones will be elected to its board and be its new Vice Chairman. Trevor Jones stated that "BIOMEC's board enthusiastically endorses this opportunity and considers it a sound investment in a dynamic company with outstanding growth potential. The combination is an excellent synergistic fit of the two companies to the benefit of all shareholders." Mr. Jones added "this combination does not impact BIOMEC's Cleveland operations, which will continue in their current form." Vince Owens, President and CEO of BCI, said "Biomec Cardiovascular's sales have grown significantly over the last nine months due to our focused strategy on proprietary permanent implantable leads and delivery systems targeted for the cardiac rhythm management and neuromodulation markets. This business combination will allow us to accelerate the development of new specialized implantable leads with delivery systems that enable less invasive and more efficient placement in and on the heart, brain and spinal cord." Jim Hartman, President and CEO of Medamicus, said "I am pleased to announce this business combination with BCI. We expect this transaction to significantly expand our product line into complementary high growth markets, broaden our intellectual property portfolio, diversify our OEM customer base and add to our team of skilled and experienced managers and employees. BCI's business model of OEM sales coupled with proprietary product development is similar to that of Medamicus. The combination with BCI will materially enhance our ability to continue to provide world-class, value-added design and manufacturing services to OEM customers such as Bard, Cook, Guidant, Medtronic and St. Jude Medical. BCI's sales more than doubled to $4.5 million in the first half of 2003 compared to the same period in 2002 and we expect that its sales for all of 2003 will be in excess of $9 million." BIOMEC Inc. is a biomedical device company established in 1998 with the specific objective of accelerating promising technology from major medical and academic institutions, national laboratories, and from internal proprietary developments to successful commercial products. BIOMEC operates facilities in Cleveland and in Minneapolis. BIOMEC has more than 25 customers, which include both major medical device OEMs and start-up companies, primarily in the fields of cardiac rhythm management and neuromodulation. Additionally, BIOMEC has product development and investment coalitions with NeuroControl Corp. in Cleveland, and the newly formed Cleveland company, Imalux Inc. For further information, please contact Trevor O. Jones at 216-937-2800, ext. 222 (Fax: 216-937-2813 or e-mail to jones@biomec.com), 1771 East 30th Street, Cleveland, OH 44114 or Vincent P. Owens at 952-653-2410 (Fax: 952-943-1087 or e-mail to vowens@biomec.com), 9452 West 78th Street, Minneapolis, MN 55439. This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Certain important factors could cause results to differ materially from those anticipated by some statements made herein. All forward-looking statements involve risks and uncertainties. A number of factors that could cause results to differ materially are discussed in Medamicus's Annual Report on Form 10-KSB for the year ended December 31, 2002. Among the factors that could cause results to differ materially are the following: the ability of Medamicus to obtain approval of the transaction by Medamicus and BIOMEC shareholders; the ability of Medamicus to successfully integrate the acquired business; Medamicus's dependence upon a limited number of key customers for its revenue; Medamicus's dependence upon licensing agreements with third parties for the technology underlying some of its products, especially the safety needle; the ability of Medamicus to negotiate and enter into safety needle supply agreements with major medical device companies, and the ability of Medamicus and these customers to achieve market acceptance of the safety needle; Medamicus's ability to effectively manufacture its safety needle using its automated safety needle assembly equipment in anticipated required quantities; Medamicus's ability to successfully manufacture and introduce its FlowGuard valved peelable introducer; Medamicus's ability to develop or acquire new products to increase its revenues; Medamicus's ability to attract and retain key personnel; introduction of competitive products; patent and government regulatory matters; economic conditions; and Medamicus's ability to raise capital. All forward-looking statements of Medamicus, whether written or oral, and whether made by or on behalf of Medamicus, are expressly qualified by these cautionary statements. In addition, Medamicus disclaims any obligation to update forward-looking statements to reflect events or circumstances after the date hereof. Medamicus intends to file a registration statement on Form S-4 in connection with the transaction, and Medamicus and BIOMEC Inc. intend to mail a joint proxy statement/prospectus to their respective shareholders in connection with the transaction. Investors and security-holders of Medamicus and BIOMEC are urged to read the joint proxy statement/prospectus when it becomes available because it will contain important information about the companies, the transaction, the persons soliciting proxies relating to the transaction, their interests in the transaction, and related matters. When available, investors and security-holders may obtain a free copy of the joint proxy statement/prospectus at the SEC's web site at www.sec.gov. A free copy of the joint proxy statement/prospectus may also be obtained from either of the companies. -----END PRIVACY-ENHANCED MESSAGE-----