-----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, F3z33MteM8Kgul+Ir0rYSl7ATFwIxcfHtjVrnDzQBCSslUoooyGlF1r7nLrVvmJK mD86ltyL6mumimd9KXv3hw== 0000897101-97-000508.txt : 19970508 0000897101-97-000508.hdr.sgml : 19970508 ACCESSION NUMBER: 0000897101-97-000508 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970507 SROS: NASD 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-19467 FILM NUMBER: 97597119 BUSINESS ADDRESS: STREET 1: 15301 HGHWY 55 W CITY: PLYMOUTH STATE: MN ZIP: 55447 BUSINESS PHONE: 6125592613 10QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ___________ COMMISSION FILE NUMBER 0-19467 MEDAMICUS, INC. (Exact name of small business issuer in its charter) MINNESOTA 41-1533300 (State of Incorporation) (IRS Employer Identification No.) 15301 HIGHWAY 55 WEST, PLYMOUTH, MN 55447 (Address of principal executive office, including zip code) (612) 559-2613 (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No___ The number of shares of Registrant's Common Stock outstanding on March 31, 1997 was 4,066,774 Transitional Small Business Disclosure Format. Yes ___ No _X_ MEDAMICUS, INC. INDEX
- ----------------------------------------------------------------------------------------------------------- --------- Page # - ----------------------------------------------------------------------------------------------------------- --------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Balance Sheets as of March 31, 1997 and December 31, 1996 3 Statements of Operations for the three months ended March 31, 1997 and 1996 4 Statement of Shareholders' Equity for the three months ended March 31, 1997 4 Statements of Cash Flows for the three months ended March 31, 1997 and 1996 5 Condensed Notes to the Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6-8 PART II. OTHER INFORMATION ITEM 6(b). REPORTS ON FORM 8-K 8
MEDAMICUS, INC. BALANCE SHEETS (UNAUDITED)
MARCH 31, 1997 DECEMBER 31, 1996 ------------------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,068,986 $ 1,205,783 Accounts receivable 1,038,593 1,346,289 Inventories 1,180,525 1,203,372 Prepaid expenses and other assets 53,494 60,300 - ---------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 3,341,598 3,815,744 - ---------------------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT: Equipment 1,812,492 1,819,901 Office furniture, fixtures and computers 467,393 437,053 Leasehold improvements 363,950 362,759 - ---------------------------------------------------------------------------------------------- 2,643,835 2,619,713 Less accumulated depreciation and amortization (1,588,601) (1,477,554) - ---------------------------------------------------------------------------------------------- NET PROPERTY AND EQUIPMENT 1,055,234 1,142,159 - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS, RESTRICTED 29,265 28,888 PATENT RIGHTS, NET OF ACCUMULATED AMORTIZATION OF $107,963 AND $102,613, RESPECTIVELY 31,996 34,221 ============================================================================================== TOTAL ASSETS $ 4,458,093 $ 5,021,012 ============================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Note payable to bank $ 738,755 $ 782,783 Accounts payable 556,087 1,109,640 Accrued expenses 224,343 174,399 Current installments of note payable to customer 13,622 14,400 Current installments of capital lease obligations 38,670 48,791 - ---------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 1,571,477 2,130,013 - ---------------------------------------------------------------------------------------------- LONG-TERM LIABILITIES: Note payable to customer, less current installments 0 2,822 Capital lease obligations, less current intallments 79,572 88,248 - ---------------------------------------------------------------------------------------------- TOTAL LONG-TERM LIABILITIES 79,572 91,070 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- TOTAL LIABILITIES 1,651,049 2,221,083 - ---------------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY: Preferred stock-undesignated, authorized 1,000,000 0 0 shares, no shares issued or outstanding Common stock-$.01 par value, authorized 9,000,000 40,668 40,668 shares, issued and outstanding 4,066,774 and 4,066,774 shares, respectively Additional paid-in capital 8,515,636 8,515,636 Accumulated deficit (5,749,260) (5,756,375) - ---------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 2,807,044 2,799,929 ============================================================================================== TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,458,093 $ 5,021,012 ============================================================================================== See accompanying condensed notes to financial statements
MEDAMICUS, INC. STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 MARCH 31, 1996 ------------------------------- Sales $ 1,797,803 $ 1,233,946 Cost of sales 986,751 775,957 - ------------------------------------------------------------------------------------------------- GROSS PROFIT 811,052 457,989 - ------------------------------------------------------------------------------------------------- OPERATING EXPENSES: Research and development 119,488 196,113 Selling, general and administrative 665,850 559,234 - ------------------------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES 785,338 755,347 - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- OPERATING INCOME (LOSS) 25,714 (297,358) - ------------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE): Interest expense (24,611) (42,962) Interest income 12,914 8,844 Other (6,902) (1,752) - ------------------------------------------------------------------------------------------------- TOTAL OTHER INCOME (EXPENSE) (18,599) (35,871) - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ 7,115 $ (333,228) - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- NET INCOME (LOSS) PER SHARE $ 0.00 $ (0.10) - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 4,177,246 3,444,620 - ------------------------------------------------------------------------------------------------- See accompanying condensed notes to financial statements
MEDAMICUS, INC. STATEMENT OF SHAREHOLDERS' EQUITY THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
Common Stock Additional ----------------------- Paid In Accumulated Shares Amount Capital Deficit Total - ------------------------------------------------------------------------------------------------------------------------------- BALANCES AT DECEMBER 31, 1996 4,066,774 $40,668 $8,515,636 $(5,756,375) $2,799,929 Net income for the three month period ended 3/31/97 0 0 0 7,115 7,115 - -------------------------------------------------------------------------------------------------------------------------------- BALANCES AT MARCH 31, 1997 4,066,774 $40,668 $8,515,636 $(5,749,260) $2,807,044 - -------------------------------------------------------------------------------------------------------------------------------- See accompanying condensed notes to financial statements
MEDAMICUS, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 MARCH 31, 1996 --------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 7,115 $ (333,228) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 116,397 84,346 Interest accretion on notes payable to private investors 0 22,037 Interest added to investments (377) 0 Changes in operating assets and liabilities: Accounts receivable 307,696 (215,129) Inventories 22,847 (181,685) Prepaid expenses and other assets 6,806 6,114 Accounts payable (553,553) 284,378 Accrued expenses 49,944 (26,047) - ------------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN OPERATING ACTIVITIES (43,125) (359,214) - ------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment, net of retirements (24,122) (119,263) Additions to patent rights (3,125) (910) Sale of available-for-sale marketable securities, including sales of securities which matured 0 996,145 - ------------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (27,247) 875,972 - ------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on capital lease obligations (18,797) (13,078) Proceeds from exercise of stock options 0 20,400 Payments on notes payable to private investors 0 (500,000) Proceeds from note payable to bank (44,028) 506,545 Payments on note payable to customer (3,600) (3,600) - ------------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (66,425) 10,267 - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (136,797) 527,025 - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,205,783 143,273 - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,068,986 $ 670,298 - ------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 24,611 $ 20,925 See accompanying condensed notes to financial statements
CONDENSED NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) 1. BASIS OF PRESENTATION The financial statements included in this Form 10-QSB have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, pursuant to such rules and regulations, although management believes the disclosures are adequate to make the information presented not misleading. These statements should be read in conjunction with the Company's annual report on Form 10-KSB for the year ended December 31, 1996, filed by the Company with the Securities and Exchange Commission. The financial statements presented herein as of March 31, 1997 and for the three months ended March 31, 1997 and 1996 reflect, in the opinion of management, all material adjustments consisting only of normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for these interim periods. 2. INVENTORIES Inventories are stated at the lower of cost, determined on a first-in, first-out (FIFO) basis, or market. Inventories consist of the following: MARCH 31, 1997 DECEMBER 31, 1996 ------------------------------------------- Purchased parts and subassemblies $ 679,024 $ 655,584 Work in process 324,667 412,520 Finished goods 176,834 135,268 ------------------------------------------- $ 1,180,525 $ 1,203,372 =========================================== 3. NET INCOME (LOSS) PER SHARE Net income (loss) per common share is determined by dividing the net loss by the weighted average number of shares of common stock outstanding and the dilutive effect of common stock equivalents. Common stock equivalents have been excluded from the 1996 calculation of net loss per share since they are antidilutive. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information that the Company's management believes is relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read in conjunction with the accompanying financial statements and footnotes. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996 Total revenues were $1,797,803 for the three months ended March 31, 1997 compared to $1,233,946 for the three months ended March 31, 1996, representing a 45.7% increase. The increase was primarily due to increased vessel introducer sales to Medtronic, and less so to increased sales of transducer products. Sales of vessel introducers, primarily to Medtronic and Bard Access Systems under exclusive distribution arrangements, were $1,153,980 for the three months ended March 31, 1997, compared to $854,967 for the three months ended March 31, 1996. This increase is primarily due to Medtronic rebuilding its inventories of introducers which were depleted during the third quarter of 1996 because of a component supply problem. Medtronic has been supplying this component to the Company, purchased from another supplier, for use in the introducer kits sold to Medtronic. The Company has developed its own version of the component and Medtronic has approved full market release on all sizes of the component which will give the Company full control over all component purchases in the future. The Company expects introducer sales to decline in the second quarter of 1997, as compared to the first quarter, to levels consistent with Medtronic's normal sell-through to end user customers. Contract manufacturing sales were $187,240 for the three months ended March 31, 1997, compared to $119,749 for the three months ended March 31, 1996. One of the Company's contract manufacturing customers placed larger orders than expected in the first quarter of 1997. However, this customer also informed the Company that its sales of the product have not met forecast and that they will not be placing any additional orders for product until the third quarter at the earliest. The Company expects to see contract manufacturing sales drop significantly in the second and third quarters. Sales of the Company's fiber optic pressure sensing catheter and monitor transducer products were $456,583 for the three months ended March 31, 1997, compared to $259,230 for the three months ended March 31, 1996. Monitor sales increased 50.8% or $107,725 and catheter and accessory sales increased 290.0% or $89,629 over the comparable period. The Company has continued to actively market the upgraded version of its LuMax(TM) System into the gynecology and urology office markets by adding sales management and attending major trade shows. Total gross profit increased from $457,989 for the three months ended March 31, 1996, to $811,052 for the three months ended March 31, 1997, an increase of 77.1%. Total gross profit as a percent of sales increased from 37.1% to 45.1% in such periods. The gross profit percentage on vessel introducers and contract manufacturing totaled 57.5% for the three months ended March 31, 1997, compared to 42.7% for the three months ended March 31, 1996. The increase in the gross profit percentage on vessel introducers and contract manufacturing was primarily due to increased sales to Medtronic, which resulted in the existing overhead being allocated over more units. Additionally, the Company benefited from increased profit margins on its sales to Medtronic as it transitioned from using components supplied by Medtronic to using its own components. The Company will be lowering prices to Medtronic in May 1997 which will result in lower gross margin percentages to the Company in the second quarter. For fiber optic products, the gross profit percentage totaled 8.6% or $39,422 for the three month period ended March 31, 1997 compared to 16.2% or $42,077 for the three month period ended March 31, 1996. This decrease is due to several factors. First, the Company has increased its manufacturing capacity and spending in anticipation of increased LuMax sales which have developed more slowly than expected. Second, the Company has been experiencing some catheter manufacturing yield issues which have resulted in a larger than anticipated amount of scrap during the first quarter of 1997. The Company is focusing its efforts on resolving these yield issues, but does not expect to see improvement until the third quarter of 1997. Finally, margins have decreased due to refurbishing costs on demo 4114 LuMax Systems for sale in the marketplace as used equipment. The Company expects to refurbish additional systems in the second quarter which will negatively impact gross profit. The Company expects gross profit in the fiber optic business to improve in the future as the Company increases sales and better utilizes its capacity. Total research and development expenditures were $119,488 or 6.6% of sales for the three months ended March 31, 1997, compared to $196,113 or 15.9% of sales for the three months ended March 31, 1996. This decrease is due to lower spending on the development of the LuMax system during the first quarter of 1997 compared to the first quarter of 1996. Selling, general and administrative expenses increased from $559,234 for the three months ended March 31, 1996, to $665,850 for the three months ended March 31, 1997. Sales and marketing expenses increased $89,984 for the three months ended March 31, 1997 over the comparable period in 1996 primarily because of increased salary and commission expense. The Company hired a Vice President of Sales and Marketing and a regional sales manager which were not in place during the first quarter of 1996. Commission expense increased during the comparable periods due to increased sales activity. General and administrative expenses increased $16,632 for the first three months of 1997 over the comparable period in 1996. This increase is primarily due to additional spending on outside consultants to provide MIS support for the Company. Interest expense decreased from $42,962 for the three months ended March 31, 1996 to $24,611 for the three months ended March 31, 1997. This decrease can be attributed to the fact that the Company prepaid the $500,000 notes payable to private investors in the first quarter of 1996 which resulted in the recognition, as interest expense, of the remaining unamortized discount related to the notes. As a result, the Company achieved net income of $7,115 or $.00 per share for the three months ended March 31, 1997, compared to a net loss of $333,228 or $.10 per share for the three months ended March 31, 1996. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities for the three months ended March 31, 1997 was $43,125, consisting primarily of a decrease in accounts payable of $553,553, offset by a decrease in accounts receivable of $307,696 and non-cash expenses of $116,397. The Company saw a decrease in accounts receivable during the first quarter of 1997 primarily due to increased collections from its LuMax customers and increased sales to Medtronic which resulted in faster payments. The Company used the cash from accounts receivable and a portion of its money market account to pay down accounts payable during the quarter. The Company still anticipates inventory and receivables to increase in 1997 if sales of the fiber optic products materialize as expected. Net cash used in investing activities for the three months ended March 31, 1997 was $27,247. Equipment was purchased totaling $24,122 and the Company had additions to patent rights totaling $3,125 during the period. Net cash used in financing activities for the three months ended March 31, 1997 was $66,425. The Company made principal debt payments of $22,397 during the period and had additional borrowings on the line of credit totaling $44,028. As a result, the Company's cash and cash equivalents and marketable securities were $1,068,986 as of March 31, 1997 compared to $1,205,783 at December 31, 1996. Working capital increased from $1,685,731 as of December 31, 1996 to $1,770,121 as of March 31, 1997. In March 1996, the Company entered into a fifteen month agreement with a financial institution for a $1,200,000 revolving line of credit. The availability under the line is subject to borrowing base requirements and advances are at the discretion of the lender. The agreement calls for interest at the rate of 3% over the financial institution's base rate, with minimum interest due over the term of the agreement of $75,000. The line is secured by substantially all of the Company's assets. The Company anticipates that it will be able to extend the line of credit when it expires in June 1997. If the financial institution decides not to extend the agreement, depending on the level of cash flows generated from operating activities in 1997, if any, additional capital may be required to fund 1997 operations and capital expenditure requirements. Sources of additional capital may include additional debt financing and/or the sale of debt or equity securities. If the Company is unable to obtain financing when required, the Company could be forced to curtail its operations. Forward-looking statements herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995. Certain important factors could cause results to differ materially from those anticipated by some statements made herein. You are cautioned that all forward-looking statements involve risks and uncertainties. Among the factors that could cause results to differ materially are the following: delays in new product launches; lack of market acceptance of the Company's products; introduction of competitive products; patent and government regulation matters and the Risk Factors included in Form 8-K filed with the Securities and Exchange Commission on November 13, 1996. PART II - OTHER INFORMATION ITEM 6(b) - REPORTS ON FORM 8-K None SIGNATURE Pursuant to the requirements of Section 13 or 15(d) 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. Date: May 2, 1997 By: /s/ James D. Hartman President, Chief Executive Officer and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 MAR-30-1997 1,068,986 0 1,045,360 6,767 1,180,525 3,341,598 2,643,835 1,588,601 4,458,093 1,571,477 79,572 0 0 40,668 2,766,376 4,458,093 1,797,803 1,797,803 986,751 986,751 119,488 0 24,611 7,115 0 7,115 0 0 0 7,115 0.00 0.00
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