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-----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, EDLqWURWMA4hwZdg5rWi7CB8DN5q1oZMC9ckjNNjiOZVAEfkoxwA+o9UBEbYaCwn raGwGKeXiWRreUGx5nh2GA== 0000950137-07-006907.txt : 20070507 0000950137-07-006907.hdr.sgml : 20070507 20070507162020 ACCESSION NUMBER: 0000950137-07-006907 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20070331 FILED AS OF DATE: 20070507 DATE AS OF CHANGE: 20070507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENPATH MEDICAL, 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19467 FILM NUMBER: 07824237 BUSINESS ADDRESS: STREET 1: 2300 BERKSHIRE LANE NORTH CITY: PLYMOUTH STATE: MN ZIP: 55441 BUSINESS PHONE: 763-951-8181 MAIL ADDRESS: STREET 1: 2300 BERKSHIRE LANE NORTH CITY: PLYMOUTH STATE: MN ZIP: 55441 FORMER COMPANY: FORMER CONFORMED NAME: ENPATH MEDICAL INC DATE OF NAME CHANGE: 20040202 FORMER COMPANY: FORMER CONFORMED NAME: MEDAMICUS INC DATE OF NAME CHANGE: 19960330 10-Q 1 c14945e10vq.htm FORM 10-Q e10vq

United States Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-19467

Enpath Medical, Inc.

(Exact name of registrant as specified in its charter)


Minnesota		41-1533300
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

2300 Berkshire Lane North, Plymouth, MN 55441
(Address of principal executive office, including zip code)

(763) 951-8181
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The number of shares of Registrant’s common stock outstanding on May 3, 2007 was 6,377,427.

Index


		Page
	PART I — FINANCIAL INFORMATION
Item 1	Condensed Financial Statements	3-10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10-16
Item 3	Quantitative and Qualitative Disclosures About Market Risk		16
Item 4	Controls and Procedures		17

	PART II – OTHER INFORMATION
Item 1	Legal Proceedings		17
Item 1A	Risk Factors		17
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds		17
Item 3	Defaults Upon Senior Securities		17
Item 4	Submission of Matters to a Vote of Security Holders		17
Item 5	Other Information		18
Item 6	Exhibits		18
Signatures			18
Exhibits
Employment Agreement - F. Anthony Headley, Jr.
Amendment to Confidential Supply Agreement
Letter Amendment No. 7 to Revolving Credit and Term Loan Agreement
Press Release
Certification of Principal Executive Officer
Certification of Principal Financial Officer
Certification Pursuant to Section 906

Item 1. Condensed Financial Statements

Enpath Medical, Inc.
Balance Sheets


	March 31, 2007			December 31, 2006
	Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	904,457		$	523,483
Accounts receivable, less allowance for doubtful accounts of $42,000 and $56,000, respectively		4,822,633			3,760,672
Inventories, less allowance for slow-moving inventory of $192,000 and $161,000, respectively		7,670,500			7,201,118
Prepaid expenses and other assets		221,217			215,396
Income taxes receivable		18,740			78,635
Notes receivable		45,000			45,000
Deferred income taxes		190,051			190,051

Total current assets		13,872,598			12,014,355


Property and equipment:
Equipment		8,582,881			8,334,622
Office furniture, fixtures and computers		2,463,246			1,935,093
Leasehold improvements		6,871,878			3,248,942

		17,918,005			13,518,657
Less accumulated depreciation and amortization		(8,004,030	)		(7,618,542	)

Net property and equipment		9,913,975			5,900,115


Non-current assets:
Goodwill		9,487,975			9,487,975
Intangible assets with finite lives, net		4,430,016			4,587,364
Deferred income taxes		1,403,102			1,403,102

Total non-current assets		15,321,093			15,478,441

TOTAL ASSETS	$	39,107,666		$	33,392,911


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,877,301		$	2,048,718
Current maturities of note payable to bank		1,714,286			1,000,000
Bank line of credit payable		—			—
Accrued compensation		1,119,396			1,145,460
Other accruals		408,784			226,770
Deferred revenue		56,250			56,250

Total current liabilities		5,176,017			4,477,198


Long-term liabilities:
Notes payable to bank, less current maturities		4,669,020			633,308
Deferred revenue		154,688			93,750

Total long-term liabilities		4,823,708			727,058


Total liabilities		9,999,725			5,204,256


Commitments and contingencies

Shareholders’ equity:
Preferred stock-undesignated, authorized 1,000,000 shares		—			—
Common stock-$.01 par value, authorized 20,000,000 shares; issued and outstanding 6,364,502 and 6,290,637 shares, respectively		63,645			62,906
Additional paid-in capital		24,450,671			23,862,156
Retained earnings		4,593,625			4,263,593

Total shareholders’ equity		29,107,941			28,188,655

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	39,107,666		$	33,392,911

See accompanying notes to condensed financial statements

Enpath Medical, Inc.
Statements of Operations (Unaudited)


	Three Months Ended
	March 31, 2007			March 31, 2006
Net sales	$	10,104,517		$	9,422,689
Cost of sales		6,509,684			5,709,670

Gross profit		3,594,833			3,713,019


Operating expenses:
Research and development		949,799			1,203,088
Selling, general and administrative		2,148,767			1,459,409

Total operating expenses		3,098,566			2,662,497


Operating income		496,267			1,050,522

Other income (expense):
Interest expense		(43,191	)		(50,599	)
Interest income		233			231
Other		(7,921	)		3,798

Total other income (expense)		(50,879	)		(46,570	)


Income before income taxes		445,388			1,003,952
Income tax expense		115,356			351,383

Net income	$	330,032		$	652,569


Net income per common share:
Basic	$	0.05		$	0.11
Diluted	$	0.05		$	0.11


Weighted average common and common equivalent shares outstanding:
Basic		6,336,515			6,104,568
Diluted		6,444,378			6,209,405

See accompanying notes to condensed financial statements

Enpath Medical, Inc.
Statement of Shareholders’ Equity (Unaudited)


					Additional
	Common Stock				Paid-In		Retained
	Shares		Amount		Capital		Earnings		Total

Balances at December 31, 2006		6,290,637	$	62,906	$	23,862,156	$	4,263,593	$	28,188,655
Options exercised		60,650		607		412,506		—		413,113
Restricted stock grants (net)		13,215		132		19,863		—		19,995
Stock-based compensation		—		—		128,218		—		128,218
Tax benefit from options exercised		—		—		27,928		—		27,928
Net income for the three months ended March 31, 2007		—		—		—		330,032		330,032

Balances at March 31, 2007		6,364,502	$	63,645	$	24,450,671	$	4,593,625	$	29,107,941

See accompanying notes to condensed financial statements

Enpath Medical, Inc.
Statements of Cash Flows (Unaudited)


	Three Months Ended
	March 31, 2007			March 31, 2006

Cash flows from operating activities:
Net income	$	330,032		$	652,569
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization, net		606,597			657,718
Non-cash stock-based compensation		148,213			56,490
Deferred income taxes		—			343,489
Loss on disposal of equipment		5,130			—
Changes in operating assets and liabilities:
Accounts receivable		(1,061,961	)		(1,118,994	)
Inventories		(469,382	)		(274,833	)
Prepaid expenses and other assets		(5,821	)		(77,857	)
Income taxes receivable		59,895			(48,299	)
Accounts payable		(561,296	)		484,659
Accrued expenses		155,950			360,692
Deferred revenue		60,938			(14,062	)

Net cash (used in) provided by operating activities		(731,705	)		1,021,572


Cash flows from investing activities:
Purchase of property and equipment		(4,030,240	)		(407,076	)
Proceeds from the sale of property and equipment		12,871			—
Additions to intangible assets		(60,990	)		(36,717	)

Net cash used in investing activities		(4,078,359	)		(443,793	)


Cash flows from financing activities:
Principal payments on capital lease obligations		—			(4,714	)
Proceeds on long-term debt		5,000,000			—
Principal payments on long-term debt		(250,002	)		(300,002	)
Proceeds from exercise of options and warrants		413,113			271,922
Tax benefit from options exercised		27,928			54,443

Net cash provided by financing activities		5,191,039			21,649


Net increase in cash and cash equivalents		380,974			599,428


Cash and cash equivalents, beginning of period		523,483			—


Cash and cash equivalents, end of period	$	904,457		$	599,428


Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	82,510		$	50,599
Net cash paid during the period for income taxes	$	27,533		$	1,750
Property and equipment additions included in accounts payable	$	389,879		$	—

See accompanying notes to condensed financial statements

Notes to Condensed Financial Statements
Three Months Ended March 31, 2007
(Unaudited)

1. Basis of presentation

The financial statements included in this Form 10-Q 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 accounting principles generally accepted in the United States have been condensed or omitted pursuant to these 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-K for the year ended December 31, 2006.

The financial statements presented herein as of March 31, 2007 and for the three month periods ended March 31, 2007 and 2006 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, 2007		December 31, 2006
Purchased parts and subassemblies	$	5,121,720	$	4,994,241
Work in process		1,602,332		1,344,082
Finished goods		946,448		862,795

Total Inventories	$	7,670,500	$	7,201,118

3. Finite Life Intangible Assets

Finite life intangible assets consist of the following at March 31, 2007, and December 31, 2006:


		March 31, 2007
	Estimated	Gross		Accumulated
	Lives (Years)	Carrying Amount		Amortization		Net Value
Licensed technology	2	$	115,000	$	115,000	$	—
Core technology	12		2,650,000		754,523		1,895,477
Developed technology	8		1,500,000		640,625		859,375
Customer relationships	6		615,000		350,222		264,778
Patents and inventions	5 to 9		1,879,188		989,397		889,791
Trade name	30		545,000		62,074		482,926
Other	5 to 10		103,690		66,021		37,669

Totals		$	7,407,878	$	2,977,862	$	4,430,016


		December 31, 2006
	Estimated	Gross		Accumulated
	Lives (Years)	Carrying Amount		Amortization		Net Value
Licensed technology	2	$	115,000	$	115,000	$	—
Core technology	12		2,650,000		699,314		1,950,686
Developed technology	8		1,500,000		593,750		906,250
Customer relationships	6		615,000		324,596		290,404
Patents and inventions	5 to 9		1,813,700		907,622		906,078
Trade name	30		545,000		57,532		487,468
Other	5 to 10		108,187		61,709		46,478

Totals		$	7,346,887	$	2,759,523	$	4,587,364

Amortization expense related to these assets is as follows:


Timeframe	Amount
Quarter ended March 31, 2007	$	218,339
Quarter ended March 31, 2006	$	234,018
Year ended December 31, 2006	$	869,216

Amortization expense on these assets over the next five years is estimated to be as follows:


Timeframe	Amount
Remainder of 2007	$	658,000
2008	$	868,000
2009	$	760,000
2010	$	477,000
2011	$	406,000

4. Financing arrangements

On October 23, 2003, the Company entered into two credit facilities with a bank that included a five-year term loan of $5 million, which was used to finance a portion of the BCI acquisition, and a $3 million operating line of credit that was subsequently increased to $4 million. Payments on the term loan consist of monthly principal payments of $83,334 plus interest at LIBOR plus 2.5%. The balance on the five-year term loan was $1,383,306 on March 31, 2007. The current operating line of credit bears interest at LIBOR plus 2.25% with no minimum interest due and expires on April 30, 2008. The availability under the line is subject to borrowing base requirements, and advances are at the discretion of the lender. There were no outstanding borrowings under the operating line of credit as of March 31, 2007.

In August 2006, the Company entered into a second financing arrangement with the same bank that included a seven-year term loan of up to $4 million which was used to finance the build-out of our new facility. This financing arrangement was amended in January 2007 to allow for a term loan of up to $5 million. The Company received advances on the new term loan and made interest only payments on the amounts borrowed at LIBOR plus 2.5% until the end of March 2007. At March 31, 2007, the entire amount of the $5 million loan was outstanding and payments at a monthly fixed rate of $59,524 plus interest at LIBOR plus 2.5% will commence in April 2007 and continue through March 2013. Interest only payments for the three months ended March 31, 2007 totaled $39,319, all of which were capitalized as part of our new facility expansion.

The borrowings of these facilities are secured by substantially all Company assets, including the new leasehold improvements, and also contain financial covenants that must be met on a quarterly basis. The agreement also prohibits the payment of dividends without the consent of the lender. At March 31, 2007, the Company was in violation of one of these covenants, primarily due to the additional costs related to the new facility build-out. On April 30, 2007, the bank renewed the operating line of credit extending its maturity to April 30, 2008 and modified the financial covenants to better reflect anticipated financial results

5. Net Income Per Common Share

Basic per-share amounts are computed by dividing net income by the weighted average number of common shares outstanding. Diluted per-share amounts are computed similar to basic per-share amounts except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from these exercises were used to acquire shares of common stock at the average market price during the measuring period. The dilutive effect of these additional shares for the quarters ended March 31, 2007 and 2006 was to increase the weighted average shares outstanding by 107,863 and 104,837 shares, respectively. Options and warrants totaling 425,400 and 509,900 shares were excluded from the calculation of diluted shares for the quarters ended March 31, 2007 and 2006, respectively, as their effect would have been anti-dilutive.

6. Income Taxes

The Company’s effective tax rate for the three months ended March 31, 2007 was approximately 26% compared to 35% for the same period in 2006. This decrease was primarily due to increased research and development credits and increased Section 199 deductions available to the Company in the first quarter of 2007. The Section 199 deduction is a domestic production activities deduction that allows manufacturing companies a deduction equal to 6% of their qualifying production activities income.

The Company adopted the provisions of FASB Interpretation 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. Previously, the Company had accounted for tax contingencies in accordance with Statement of Financial Accounting Standards 5, Accounting for Contingencies. As required by Interpretation 48, which clarifies Statement 109, Accounting for Income Taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied Interpretation 48 to all tax positions for which the statute of limitations remained open. As a result of the implementation of Interpretation 48, we recognized no material adjustment in the liability for unrecognized income tax benefits.

The amount of unrecognized tax benefits as of January 1, 2007, was $258,000. That amount includes unrecognized tax benefits which, if ultimately recognized, will reduce the Company’s annual effective tax rate. There have been no material changes in unrecognized tax benefits since January 1, 2007.

The Company is subject to income taxes in the U.S. federal jurisdiction and various states jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for the years before 2003.

The Company is not currently under examination by any taxing jurisdiction.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses for all periods presented. The Company had accrued $8,907 for the payment of interest at January 1, 2007. Subsequent changes to accrued interest have not been significant.

7. Stock-Based Compensation

We incurred a total of $148,213 and $56,490 in stock-based compensation expense for the three-month periods ended March 31, 2007 and 2006. We receive a tax deduction for certain employee stock option exercises during the period in which options are exercised, generally for the excess of the prices at which the options are exercised or sold over the exercise prices of the options. Proceeds from the exercise of stock options were $413,113 and $271,922, while the actual income tax benefit realized from stock option exercises was $27,928 and $54,443 for the three months ended March 31, 2007 and 2006, respectively.

At March 31, 2007, the Company had 164,210 shares available under existing plans for future stock option grants or restricted stock grants to employees and 176,500 shares available under existing plans for future stock option grants to directors.

Stock Options

We use the Black-Scholes option pricing model to estimate the fair value of stock-based awards with the following weighted-average assumptions for the indicated periods.


	Three Months Ended March 31,
	2007			2006
Expected dividend yield		0	%		0	%
Expected stock price volatility		55.34	%		75.60	%
Risk-free interest rate		4.75	%		4.35	%
Expected life of options (years)		6			6

Weighted average fair value of options granted	$	6.55		$	6.07

The Company calculates expected volatility for stock options using its historical volatility as the Company believes the future volatility will approximate historical volatility. The Company estimated the forfeiture rate for stock options to be 3% in 2007 and 4% in 2006 based on historical forfeitures and estimated the forfeiture rate for stock awards to be 9% in 2007 and 10% in 2006 based on historical employee turnover rates. The risk-free rates for the expected terms of the stock options are based on the five-year U.S. Treasury yield curve in effect the month prior to the grant. The expected life of the options is based on the historical life of previously granted options which are generally held to maturity.

At March 31, 2007, there was approximately $1.3 million of unrecognized compensation cost related to share-based payments that we expect to recognize over a weighted-average period of 4.0 years.

The following table represents stock option activity for the three months ended March 31, 2007:

Weighted

Average

Remaining

Aggregate

Exercise

Contractual

Intrinsic

# Shares

Price

Life

Value

Options outstanding, beginning of period

759,500

9.83

Options granted

75,000

11.49

Options exercised

(60,650

)

6.81

Options surrendered

(12,700

)

10.52

Options outstanding, end of period

761,150

10.22

3.83

789,197

Options exercisable, end of period

502,182

10.03

3.02

671,356

The weighted average fair value of stock options that vested during the periods ended March 31, 2007 and 2006 was $6.34 and $8.11, respectively. The total intrinsic value of options exercised during the periods ended March 31, 2007 and 2006 was $320,265 and $580,384, respectively.

The following table summarizes information about stock options outstanding at March 31, 2007:


			Options Outstanding				Options Exercisable
			Weighted Avg
	Number		Remaining				Number
Range of	Outstanding		Contractual Life		Weighed Avg		Exercisable at		Weighed Avg
Exercise Prices	at 03/31/07		Years		Exercise Price		03/31/07		Exercise Price

$2.00 to $7.00		141,650		3.16	$	6.44		120,483	$	6.22
$7.71 to $8.67		134,100		3.76		8.42		120,100		8.42
$8.69 to $10.93		134,200		4.11		9.70		80,399		10.09
$11.00 to $11.49		140,400		5.33		11.35		15,400		11.16
$11.50 to $13.60		141,000		3.95		12.85		96,000		13.14
$13.61 to $18.65		69,800		1.52		14.76		69,800		14.76

$2.00 to $18.65		761,150		3.83	$	10.22		502,182	$	10.03

Restricted Stock

Our 1999 Incentive Stock Option Plan and 1999 Non-Employee Director and Medical Advisory Board Stock Option Plan allow for the issuance of restricted stock awards that may not be sold or otherwise transferred until certain restrictions have lapsed. The unearned stock-based compensation related to these awards is being amortized to compensation expense over the period the restrictions lapse (generally five years). The share based expense for these awards was determined based on the market price of our stock on the date of grant applied to the total number of shares that were anticipated to fully vest and then amortized over the vesting period. As of March 31, 2007, we have unearned stock-based compensation of approximately $376,000 associated with these awards that we expect to recognize over a weighted average period of 4.4 years.

The following table presents the restricted shares that were granted and outstanding as of the three months ended March 31, 2007:


				Weighted-Average
				Grant Date
	Restricted Shares			Fair Value
Outstanding at December 31, 2006		37,300		$	9.80
Granted		17,830			11.57
Forfeited		(4,615	)		10.65

Outstanding at March 31, 2007		50,515		$	10.35

8. Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. The Company will be required to apply Statement No. 157 for the year ended December 31, 2007. The application of Statement No. 157 will not have any material impact on the Company’s financial statements.

In February 2007, the Financial Accounting Standards Board (FASB) issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115. Statement No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The Company will be required to apply Statement No. 159 for the year ended December 31, 2008 including interim periods within that year. The application of Statement No. 159 will not have any material impact on the Company’s financial statements.

9. Contingencies

On June 12, 2006, Enpath was named as defendant in a patent infringement action filed by Pressure Products Medical Supplies, Inc, and venued in the United States District Court in the Eastern District of Texas. On October 2, 2006, Enpath was officially served. Enpath has filed an answer denying liability and has filed counterclaims against the plaintiff alleging anti-trust violations and patent misuse.

The plaintiff has alleged that the Company’s FlowGuard™ valved introducer, which has been on the market for more than three years, infringes claims in the plaintiff’s patents and is seeking damages and injunctive relief. Enpath believes that the plaintiff’s claims are without merit and intends to pursue its defenses vigorously. Revenues from products sold that include the FlowGuard valved introducer were approximately 5% of Enpath’s total revenue for years ended December 31, 2006 and 2005.

The lawsuit is currently in the discovery stage. Enpath anticipates that the Court will hold a Hearing to construe the claims of the plaintiff’s patents in August 2007. It is not possible to predict the timing or outcome of this litigation, including whether it will affect the Company’s ability to sell its FlowGuard products, or to estimate the amount or range of potential loss.

10. Subsequent Event

On April 30, 2007, the Company announced that it has entered into a definitive merger agreement with Greatbatch, Inc., under which Greatbatch will acquire the Company for $14.38 per share in cash, or approximately $102 million, including assumption of debt. Under the terms of the agreement, Greatbatch will commence a tender offer for all of the Company’s outstanding shares no later than May 8, 2007.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of the results of operations and financial condition. This discussion should be read in conjunction with the accompanying financial statements and footnotes.

Overview

We are a medical products company engaged in designing, developing, manufacturing and marketing single use medical device products for the cardiac rhythm management (“CRM”), neuromodulation and interventional radiology markets. We also manufacture medical devices and components for medical product companies on a contract basis.

We manufacture and market a family of percutaneous venous vessel introducers with proprietary features, as well as our own proprietary valved introducer. Vessel introducers enable physicians to create a conduit through which they can insert infusion catheters, implantable ports and pacemaker leads into a blood vessel. These products make up our Introducer product line. We also develop and manufacture advanced delivery catheters that have a “fixed curve” or an articulating distal tip section that can be manipulated to enable the health care professional to access parts of the patient’s anatomy (such as the left ventricle of the heart) that cannot be reached by traditional introducers. These sophisticated advanced delivery catheters are designed and manufactured to meet the unique needs of each procedure being performed. These products make up our Advanced

Delivery Catheter product line. We also develop and manufacture proprietary and custom designed implantable stimulation leads, adaptors and delivery systems for the cardiac and neuromodulation markets. These products make up our Lead Technologies product line.

Overall, the business is aggregated into one reportable segment: the manufacture and sale of single use medical devices. Our products have similar customers, economic characteristics and regulatory requirements. We support all sales activities with one sales and marketing department and our general and administrative function has responsibility for the entire company.

Results of Operations

For the three month periods ended March 31, 2007 and 2006

The following table sets forth, for the periods indicated, certain items from our statements of operations expressed as a percentage of net sales:


	Quarters Ended March 31,
	2007			2006
Net sales		100.0	%		100.0	%
Cost of sales		64.4	%		60.6	%

Gross Profit		35.6	%		39.4	%


Operating expenses:
Research and development		9.4	%		12.8	%
Selling, general and administrative		21.3	%		15.5	%

Total operating expenses		30.7	%		28.3	%


Operating income		4.9	%		11.1	%


Other expense		0.5	%		0.5	%


Income before income taxes		4.4	%		10.7	%

Income tax expense		1.1	%		3.7	%


Net income		3.3	%		6.9	%

Our primary products are categorized into three product lines. The following table sets forth, for the periods indicated, net revenue by product line along with the percentage change from the prior year:


	Quarter Ended March 31,
	2007		2006					Percent
	Net Sales		Net Sales		Change $			Change
Introducers	$	6,601,000	$	5,705,000	$	896,000			15.7	%
Advanced Delivery Catheters		390,000		1,421,000		(1,031,000	)		(72.6	%)
Lead Technologies		3,114,000		2,297,000		817,000			35.6	%

Total Net Sales	$	10,105,000	$	9,423,000	$	682,000			7.2	%

Sales by geographic destination as a percentage of total net sales were as follows for the quarters ended March 31:


	2007			2006
Domestic		94	%		92	%
Foreign		6	%		8	%

For the quarter ended March 31, 2007, sales of $10.1 million increased 7.2% when compared to $9.4 million in 2006. Sales of our introducer products increased to $6.6 million, up 15.7% or $896,000, when compared to the $5.7 million reported in 2006 due primarily to increased sales of products to both our new and existing customers. Sales of our advanced delivery catheter products decreased to $390,000, down 72.6% or $1 million when compared to the $1.4 million reported in 2006 due primarily to two primary catheter customers that placed large stocking orders for product in the first quarter of 2006. Both of these customers have not penetrated their respective markets with their own products as quickly as

anticipated. Sales of our lead technologies products increased to $3.1 million, up 35.6% or $817,000 when compared to the $2.3 million reported in 2006 due primarily to increased sales of our leads and adaptor products, as well as increased sales of our contract accessory products to our largest customer.

Gross profit decreased to 35.6% in 2007 from 39.4% in 2006 due primarily to inefficiencies and higher costs associated with the move to our new facility in the first quarter of 2007. We also incurred higher levels of unallocated overhead related to our catheter product line due to the lower sales levels experienced in the first quarter. We completed our move into our new facility in April 2007, so we anticipate our gross margins to improve during the remainder of 2007.

Research and development expenses decreased to $950,000 in 2007 compared to $1.2 million in 2006. As a percentage of revenues, R&D spending decreased in 2007 to 9.4% of revenues as compared to 12.8% for 2006. This decrease was primarily due to incurring costs in 2006 related to gathering retrospective human clinical data on the performance of our steroid epicardial lead in Europe which we had planned to use for a June 2006 amended PMA submission to the FDA. We ultimately decided to withdraw the amended PMA submission from the FDA in the second quarter of 2006 due to timeline and cost issues. We expect our research and development expenses, on a year-to-year basis to be slightly lower than 2006 due to fluctuations in the nature of products being developed and as we recoup some of these costs as a portion of our non-recurring engineering billings.

Selling, general and administrative expenses for 2007 were $2.1 million or 21.3% of revenues, as compared to $1.5 million or 15.4% of revenues in 2006. Our selling expenses remained relatively unchanged between the comparable periods while our general and administrative costs increased $700,000. The increase was due to several expense items incurred in 2007 that were not present in 2006. These included approximately $200,000 of additional legal expenses associated with our patent infringement lawsuit, $76,000 of expenses related to the actual move to our new facility, $68,000 of additional stock-based compensation expense and $111,000 of incurred accounting fees in 2007. We also incurred $170,000 of additional rent expense related to our new facility. We will incur duplicate rent expense until the existing properties in both Bloomington and Plymouth have been sublet or the lease term expires, the earlier of which is June of this year and the later being the end of 2008. In 2007, we also anticipate additional legal costs associated with our patent infringement lawsuit, an increase in expenses related to Sarbanes-Oxley compliance work as well as the continued effects of stock-based compensation, all of which could likely result in an increase in our selling, general and administrative expenses in both absolute dollars and as a percent of revenue.

Interest expense decreased primarily due to lower balances on the note payable in 2007 than in 2006.

Income Taxes

Our effective tax rate for the three months ended March 31, 2007 was approximately 26% compared to 35% for the same period in 2006. This decrease was primarily due to increased research and development credits and increased Section 199 deductions available to the Company in the first quarter of 2007. The Section 199 deduction is a domestic production activities deduction that allows manufacturing companies a deduction equal to 6% of their qualifying production activities income.

We adopted the provisions of FASB Interpretation 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. Previously, we had accounted for tax contingencies in accordance with Statement of Financial Accounting Standards 5, Accounting for Contingencies. As required by Interpretation 48, which clarifies Statement 109, Accounting for Income Taxes, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, we applied Interpretation 48 to all tax positions for which the statute of limitations remained open. As a result of the implementation of Interpretation 48, we recognized no material adjustment in the liability for unrecognized income tax benefits.

The amount of unrecognized tax benefits as of January 1, 2007, was $258,000. That amount includes unrecognized tax benefits which, if ultimately recognized, will reduce our annual effective tax rate. There have been no material changes in unrecognized tax benefits since January 1, 2007.

We are subject to income taxes in the U.S. federal jurisdiction and various states jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, we are no longer subject to U.S. federal, state or local income tax examinations by tax authorities for the years before 2003.

We are not currently under examination by any taxing jurisdiction.

We recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses for all periods presented. We had accrued $8,907 for the payment of interest at January 1, 2007. Subsequent changes to accrued interest have not been significant.

Net Income

As a result, we had net income of $330,032 or $.05 per diluted share for the three months ended March 31, 2007, compared to net income of $652,569 or $.11 per diluted share for the three months ended March 31, 2006.

Liquidity and Capital Resources

Net cash used in operating activities for the three months ended March 31, 2007 was $732,000. This consisted of net income of $330,000, plus non-cash items of depreciation and amortization of $607,000, non-cash stock-based compensation of $148,000, and a loss on disposal of equipment of $5,000. This was offset by a net change in operating assets and liabilities of $1.8 million. Accounts receivable increased during the period primarily due to larger levels of sales toward the end of the quarter when compared to 2006. Receivable days outstanding continue to average 44 days. Inventory increased during the period primarily due to our increased sales levels, as well as inventory build-up related to our move into the new facility.

Net cash used in investing activities for the three months ended March 31, 2007 was $4.1 million. We purchased equipment totaling $250,000, leasehold improvements, furniture and fixtures and computer equipment associated with our new facility that totaled approximately $3.8 million and we had additions to intangible assets of $61,000. We also had proceeds from the sale of equipment of $13,000. We anticipate additional leasehold improvement related expenditures of approximately $600,000 during the second quarter of 2007.

Net cash provided by financing activities for the three months ended March 31, 2007 was $5.2 million. We borrowed $5 million on our new leasehold improvement note and made note payments in the amount of $250,002 on our existing note payable. This was offset by cash received from the exercise of options of $413,113 and a tax benefit from options exercised of $28,000.

As a result, our cash and cash equivalents were $904,000 as of March 31, 2007 compared to $523,000 at December 31, 2006 and $599,000 as of March 31, 2006. Working capital increased from $7.5 million as of December 31, 2006 to $8.7 million as of March 31, 2007.

We currently have four major customers that each account for more than 10% of our sales. The information below includes the percent of sales for the three months ended March 31, 2007 and 2006 and the related accounts receivable balance on March 31, 2007 and 2006 from these customers.


	March 31, 2007						March 31, 2006
Customer	% Sales			% A/R			% Sales			% A/R
A		30	%		27	%		26	%		20	%
B		17	%		15	%		16	%		15	%
C		12	%		11	%		14	%		9	%
D		14	%		11	%		12	%		18	%

A summary of our commercial commitments is shown below:

Total Amount

Outstanding at

Date of

Other Commercial Commitments

Committed

03/31/07

Expiration

Note payable for BCI acquisition

5,000,000

1,383,306

12/31/08

Working capital line of credit

4,000,000

—

04/30/08

Note payable for new construction

5,000,000

03/31/13

On October 23, 2003, we entered into two credit facilities with a bank that included a five-year term loan of $5 million, which was used to finance a portion of the BCI acquisition, and a $3 million operating line of credit that was subsequently increased to $4 million. Payments on the term loan consist of monthly principal payments of $83,334 plus interest at LIBOR plus 2.5%. The balance on the five-year term loan was $1,383,306 on March 31, 2007. The current operating line

of credit bears interest at LIBOR plus 2.25% with no minimum interest due and expires on April 30, 2008. The availability under the line is subject to borrowing base requirements, and advances are at the discretion of the lender. There were no outstanding borrowings under the operating line of credit as of March 31, 2007.

In August 2006, we entered into a second financing arrangement with the same bank that included a seven-year term loan of up to $4 million which was used to finance the build-out of our new facility. This financing arrangement was amended in January 2007 to allow for a term loan of up to $5 million. We received advances on the new term loan and made interest only payments on the amounts borrowed at LIBOR plus 2.5% until the end of March 2007. At March 31, 2007, the entire amount of the $5 million loan was outstanding and payments at a monthly fixed rate of $59,524 plus interest at LIBOR plus 2.5% will commence in April 2007 and continue through March 2013. Interest only payments for the three months ended March 31, 2007 totaled $39,319, all of which were capitalized as part of our new facility expansion.

The borrowings of these facilities are secured by substantially all of our assets, including the new leasehold improvements, and also contain financial covenants that must be met on a quarterly basis. The agreement also prohibits the payment of dividends without the consent of the lender. At March 31, 2007, we were in violation of one of these covenants, primarily due to the additional costs related to the new facility build-out. On April 30, 2007, the bank renewed the operating line of credit extending its maturity to April 30, 2008 and modified the financial covenants to better reflect anticipated financial results

A summary of our contractual cash obligations at March 31, 2007 is as follows:


	Long-term debt		Operating		Total
Timeframe	including interest		Leases		Obligations
Remainder of 2007	$	1,688,000	$	517,000	$	2,205,000
2008		1,689,000		605,000		2,294,000
2009		982,000		430,000		1,412,000
2010		926,000		429,000		1,355,000
2011		870,000		429,000		1,299,000
Thereafter		1,754,000		2,017,000		3,771,000

Totals	$	7,909,000	$	4,427,000	$	12,336,000

While we believe that we have sufficient resources with our current cash and credit facility to make payments to meet our long-term debt obligations and fund our planned operations for the remainder of fiscal 2007, there is no assurance that we will not need additional capital in the future. Sources of additional capital may include additional debt financing or the sale of debt or equity securities. There can be no assurance that we will be able to successfully obtain additional capital on favorable terms.

Critical Accounting Policies and Estimates

Our significant accounting policies and estimates are summarized in the footnotes to our annual consolidated financial statements. Some of our accounting policies require management to exercise significant judgment in selecting the appropriate assumptions for calculating financial estimates. These judgments are subject to an inherent degree of uncertainty and are based on our historical experience, known trends in our industry, terms of existing contracts and other information from outside sources, as appropriate. Actual results may differ from these estimates under different assumptions and conditions. Certain of the most critical policies that require significant judgment are as follows:

Revenue Recognition

We recognize revenue in accordance with Staff Accounting Bulletin 104, Revenue Recognition in Financial Statements when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable and collectability is reasonably assured.

Stock Based Compensation

The Company has two active stock-based compensation plans under which there are awards still available for grant. These plans are administered by the compensation committee of the Board of Directors, which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the award.

We use the Black-Scholes option pricing model to estimate the fair value of stock option granted. The assumptions used in this model are based on multiple factors, including historical exercise patterns of employees in relatively homogenous groups with respect to exercise and post-vesting employment termination behaviors, expected future exercising patterns for

these same homogeneous groups and the historical volatility of our stock price. The resulting fair value is then amortized as stock-based compensation expense over the vesting period of the option.

The fair value of restricted stock awards is determined based on the market price of our stock on the date of grant applied to the total number of shares anticipated to fully vest. This fair value is then amortized as stock-based compensation expense over the vesting period of the award.

Allowance for Doubtful Accounts

We establish estimates of the uncollectability of accounts receivable. Our management analyzes accounts receivable, historical write-offs as bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. We maintain an allowance for doubtful accounts at an amount that we estimate to be sufficient to provide adequate protection against losses resulting from collecting less than full payment on receivables. A considerable amount of judgment is required when assessing the realizability of receivables, including assessing the probability of collection and the current credit-worthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision for doubtful accounts may be required. We have not experienced significant bad debt expense and our reserve for doubtful accounts of $42,000 should be adequate for any exposure to loss in our March 31, 2007 accounts receivable.

Allowance for Excess and Slow-Moving Inventory

Inventories, which are composed of purchased parts and subassemblies, work in process and finished goods, are valued at the lower of cost or market with cost being determined by the first-in, first-out method. On a periodic basis, we analyze the level of inventory on hand, its cost in relation to market value and estimated customer requirements to determine whether write-downs for excess or slow-moving inventory are required. Actual customer requirements in any future periods are inherently uncertain and thus may differ from estimates. If actual or expected requirements were significantly greater or lower than the established reserves, a reduction or increase to the obsolescence allowance would be recorded in the period in which such a determination was made. We have established a reserve for excess and slow-moving inventories and believe the reserve of $192,000 at March 31, 2007 is adequate.

Valuation of Goodwill and Long-Lived Assets including Intangible Assets with Finite Lives

As a matter of policy, we review our major assets for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The test for impairment of finite life assets requires us to make estimates of the fair value of our long-lived assets, primarily based on projected future cash flows using discount rates determined by management to be commensurate with the risk inherent in the current business model or another valuation technique. For indefinite life intangibles, we determine whether the fair value of such assets exceeds the carrying amount of the reporting unit’s net assets. If we determine that the carrying value of these assets may not be recoverable, we will reduce the valuation of these assets on our financial statements. Significant intangible assets include the following:

Goodwill

The estimate of the fair value of the goodwill that resulted from our acquisition of BCI and the annual impairment test of this asset are significant estimates and require judgment relative to valuation, future cash flows, and market capitalization as well as other matters including the recorded balance of approximately $9.5 million.

Other Intangibles with Finite Lives

Other intangibles with finite lives consist primarily of purchased technology, trade name, patents, customer relationships and trademarks (aggregate net balance of $4.43 million at March 31, 2007) and are being amortized on a straight-line method over their estimated useful lives, ranging from 2 to 30 years.

Income Taxes

authority. At the adoption date, the Company applied Interpretation 48 to all tax positions for which the statute of limitations remained open. As a result of the implementation of Interpretation 48, we recognized no material adjustment in the liability for unrecognized income tax benefits.

Recently Issued Accounting Pronouncements

Subsequent Event

On April 30, 2007, we announced that we have entered into a definitive merger agreement with Greatbatch, Inc., under which Greatbatch will acquire us for $14.38 per share in cash, or approximately $102 million, including assumption of debt. Under the terms of the agreement, Greatbatch will commence a tender offer for all of our outstanding shares no later than May 8, 2007.

Forward Looking Statements

This Form 10-Q 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-K for the year ended December 31, 2006, as well as in our quarterly reports on Form 10-Q and Current Reports on Form 8-K. Among the factors that could cause results to differ materially are the following: Enpath’s dependence upon a limited number of key customers for its revenue; Enpath’s ability to successfully protect its intellectual property against misappropriation or claims of infringement by third parties including its ability to successfully resolve, or defend itself in, pending litigation; the ability of Enpath’s customers to successfully develop and market therapies that utilize the Company’s advanced delivery systems; Enpath’s ability to effectively manufacture its products, specifically steerable catheters, in anticipated required quantities; Enpath’s ability to develop or acquire new products to increase its revenues; Enpath’s ability to attract and retain key personnel; introduction of competitive products; government regulatory matters; economic conditions; and Enpath’s ability to raise capital. In addition to those risks, there are risks and uncertainties associated with the tender offer to be made by Greatbatch, Inc. for Enpath’s common stock. These include risks that the transaction will not be consummated on the terms or timeline first announced on Monday, April 30, 2007. Further information concerning those risks will be included in the Company’s filings with the Securities and Exchange Commission in response to the tender offer. All forward-looking statements of Enpath, whether written or oral, and whether made by or on behalf of Enpath, are expressly qualified by these cautionary statements. In addition, Enpath disclaims any obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to changes in interest rates primarily as a result of our borrowing activities used to maintain liquidity. Our earnings have not been materially affected by changes in interest rates on our floating interest rate debt because interest rates have remained fairly stable and we have paid down a substantial portion of our debt. Based on our current borrowings and anticipated line of credit requirements in 2007, an increase of 100 basis points in prevailing interest rates would increase our annual interest expense by less than $75,000.

Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1 – Legal Proceedings

The lawsuit is currently in the discovery stage. Enpath anticipates that the Court will hold a hearing to construe the claims of the plaintiff’s patents in August 2007. It is not possible to predict the timing or outcome of this litigation, including whether it will affect the Company’s ability to sell its FlowGuard products, or to estimate the amount or range of potential loss.

Item 1A – Risk Factors

There are risks and uncertainties associated with the tender offer to be made by Greatbatch, Inc. for Enpath’s common stock. These include risks that the transaction will not be consummated on the terms or timeline first announced on Monday, April 30, 2007. Further information concerning these risks will be included in the Company’s filings with the Securities and Exchange Commission in response to the tender offer. Other than the tender offer, there have been no material changes from the Risk Factors listed in our Form 10-K for the year ended December 31, 2006.

Item 2 – Unregistered Sale of Equity Securities and Use of Proceeds

None

Item 3 – Defaults Upon Senior Securities

None

Item 4 — Submission of Matters to a Vote of Security Holders

(a). The Company held its annual meeting of shareholders on May 3, 2007.

(b). The Company solicited proxies from its shareholders to vote on the following items:

	•		To elect seven directors to serve until the next Annual Meeting of Shareholders or until their successors are duly elected.

	•		To ratify the appointment of McGladrey & Pullen, LLP as independent registered public accounting firm for the Company for the fiscal year ending December 31, 2007.

A total of 5,966,602 of the eligible 6,364,502 votes were cast in person or by proxy at the annual meeting and the vote counts were as follows:


									Broker
Proposal	For		Against		Withhold		Abstain		Non Vote		Totals
Election of Directors
Thomas L. Auth		5,942,060		—		24,542		—		—		5,966,602
Michael D. Dale		5,943,060		—		23,542		—		—		5,966,602
Albert Emola		5,883,060		—		83,542		—		—		5,966,602
James D. Hartman		5,932,659		—		33,943		—		—		5,966,602
John C. Hertig		5,907,636		—		58,966		—		—		5,966,602
Richard F. Sauter		5,873,260		—		93,342		—		—		5,966,602
Richard T. Schwarz		5,930,688		—		35,914		—		—		5,966,602

Ratify Auditors		5,935,120		16,862		—		14,620		—		5,966,602

Accordingly, each nominee was elected to serve as a director and the appointment of McGladrey & Pullen, LLP as the Company’s independent auditor was ratified.

Item 5 – Other Information

On April 30, 2007, Enpath Medical, Inc. announced that it had entered into an Agreement and Plan of Merger under which it will be acquired by a subsidiary of Greatbatch, Inc. Under the Company's 1999 Non-Employee Director Plan, each Board member who is elected at the annual shareholders meeting is entitled to receive a stock option grant to purchase 5,000 shares of stock to be granted on the Monday following the shareholders meeting. In light of the announced transaction with Greatbatch, Inc. the Company's board of directors determined not to grant the options that would otherwise have been granted to non-employee directors as a result of their election at the shareholder meeting.

Item 6(a) – Exhibits

Exhibit 10.1 - Employment agreement dated as of April 16, 2007 between the Company and F. Anthony Headley, Jr.

Exhibit 10.2 - Amendment to Confidential Supply Agreement effective as of January 22, 2007 between Medtronic, Inc. and Enpath Medical, Inc.

Exhibit 10.3 - Letter Amendment No. 7 dated April 30, 2007, to the Revolving Credit and Term Loan Agreement dated as of October 17, 2003 between the Company and M&I Marshall & Ilsley Bank.

Exhibit 10.4 - Press release dated May 2, 2007, announcing results for the quarter ended March 31, 2007.

Exhibit 31.1 - Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)

Exhibit 31.2 - Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)

Exhibit 32 - Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (18 U.S.C. Section 1350)

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:

Enpath Medical, Inc.


Date: May 7, 2007		By: /s/ John C. Hertig
		Chief Executive Officer
		By: /s/ Scott P. Youngstrom
		Chief Financial Officer

EX-10.1 2 c14945exv10w1.htm EMPLOYMENT AGREEMENT - F. ANTHONY HEADLEY, JR. exv10w1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is made and entered as of April 16, 2007 (the “Commencement Date”), between Enpath Medical, Inc., a Minnesota corporation (the “Company”), and Anthony Headley (“Executive”), a resident of Minnesota.

RECITALS

WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and

WHEREAS, due to the Executive’s experience and knowledge, the Executive has made and is expected to continue to make a significant contribution to the profitability, growth and financial strength of the Company; and

WHEREAS, the Executive is willing to continue employment with the Company upon the understanding that the Company will provide income security if the Executive’s employment is terminated under certain terms and conditions;

WHEREAS, it is in the best interests of the Company, as a publicly held corporation, and its shareholders to reinforce and encourage the Executive’s continued attention and dedication to the assigned duties without distraction and to ensure the Executive’s continued availability to the Company in the event of a change in control;

AGREEMENT

NOW, THEREFORE, in consideration of the Executive’s employment with the Company and the foregoing premises, the mutual covenants set forth below, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Executive agree as follows:

ARTICLE 1: EMPLOYMENT, TERM AND DUTIES

1.1 Employment. The Company hereby continues to employ the Executive as Vice-President and General Manager of Catheters and Leads and the Executive accepts this continued employment and agrees to perform services for the Company, for the period and upon the other terms and conditions set forth in this Agreement

1.2 Term. This Agreement will be effective from and after the date hereof and will, unless terminated early as provided herein, continue in effect through December 31, 2008, and will automatically be extended for successive one-year periods thereafter unless either the Company or the Executive provides written notice to the other party no later than the September 30 prior to the expiration of the Agreement of the intent not to extend. If, however, a Change in

Control has occurred during the original or any extended term of this Agreement, this Agreement will continue in effect for a period of the later of:

	(a)		12 months from the date of the occurrence of a Change in Control;

	(b)		if an event triggering the Company’s severance payment obligations to the Executive under Section 3.2.4 has occurred, until the benefits payable to the Executive hereunder have been paid in full; or

	(c)		the date the Executive enters into a new employment agreement with the Company or its successor. This Agreement neither imposes nor confers any further rights or obligations on the Company or the Executive on the day after the end of the term of this Agreement. Expiration of the term of this Agreement of itself and without subsequent action by the Company or the Executive will not end the employment relationship between the Company and the Executive.

1.3 Position and Duties. The Executive agrees to serve the Company and to perform the duties of this position and such other duties not inconsistent with this position as the Chief Executive Officer of the Company will assign to the Executive from time to time. During the Term, the Executive agrees to serve Company faithfully and to the best of the Executive’s ability and to devote the Executive’s full business time, attention and efforts to the business and affairs of Company. Executive will perform all of the Executive’s responsibilities in compliance with all applicable laws and with all of the applicable policies generally in effect for employees of the Company, including without limitation, the Company’s Code of Conduct and related policies, as the same may be amended from time to time.

ARTICLE 2: COMPENSATION, BENEFITS AND EXPENSES

2.1 Base Salary. As the initial base compensation for all services the Executive renders under this Agreement, the Executive will receive an annualized base salary (“Annual Base Salary”) of $175,000. The Annual Base Salary will be paid in accordance with the Company’s normal payroll procedures and policies, as these procedures and policies may be modified from time to time. The Annual Base Salary will be reviewed and increased in the sole discretion of the Company according to a schedule and in a manner consistent with the Company’s practices for salary adjustment, which practices may be revised from time to time.

2.2 Incentive Compensation. The Executive will be eligible to participate in any incentive compensation plans established by the Company to the extent the Company in its sole discretion may determine from time to time. The Company does not guarantee the adoption or continuance of any particular incentive plan during the Term, and nothing in this Agreement is intended to, or will in any way restrict the right of the Company, to amend, modify or terminate any of its incentive plans during the Term.

2.3 Benefit Plans. During the Term, the Executive will be entitled to paid time off consistent with the Company’s policies and to participate in the employee benefits offered generally by the Company to its salaried employees, to the extent that the Executive’s position, tenure, salary, health, and other qualifications make the Executive eligible to participate. The

Executive’s participation in these benefits will be subject to the terms of the applicable plans, as the same may be amended from time to time. The Company does not guarantee the adoption or continuance of any particular employee benefit or benefit plan during the Term, and subject to the rights of the Executive in accordance with Section 3.2.4, nothing in this Agreement is intended to, or will in any way restrict the right of the Company, to amend, modify or terminate any of its benefits or benefit plans during the Term.

2.4 Expenses. During the Term, the Executive will be entitled to reimbursement for all reasonable business expenses the Executive incurs in carrying out the duties under this Agreement in accordance with the policies and practices of the Company for submission of expense reports, receipts, or similar documentation of these expenses as in effect from time to time by the Company.

ARTICLE 3: TERMINATION OF EMPLOYMENT

3.1 Termination. The Executive’s employment under this Agreement may be terminated during the Term as described in this Article 3.

3.1.1 Death or Disability. The Executive’s employment will terminate automatically upon the Executive’s death. The Executive’s employment will terminate due to the Executive’s Disability (as defined in Appendix A) immediately after 30 days’ written notice to the Executive if the Executive has not returned to the full-time performance of the Executive’s duties during this period.

3.1.2 Termination by Company Prior to a Change in Control. Prior to a “Change in Control” (as defined in Appendix A), the Company may terminate this Agreement and the Executive’s employment hereunder at any time and for any reason after providing written notice to the Executive. If, however, the Company terminates the Executive’s employment prior to a Change in Control for any reason other than “Cause” (as defined in Appendix A), the Company must pay the Executive in accordance with Section 3.2.2.

3.1.3 Resignation by the Executive. The Executive may, whether prior to or after a Change in Control, resign employment with the Company effective upon 30 days’ advance written notice to the Chief Executive Officer of the Company. In that event, the Chief Executive Officer may terminate the Executive’s employment effective immediately upon delivery of written notice to the Executive, at any time during the 30-day notice period, and the Company will continue to pay the Executive’s Base Salary and the Company’s portion of the Executive’s health insurance premiums for the duration of the 30-day notice period. Thereafter, except as provided in Section 3.2.4, the Company will pay the Executive in accordance with Section 3.2.3.

3.1.4 Termination by the Company other than for Cause or Resignation by the Executive for Good Reason After a Change in Control. If a Change in Control occurs and during the 12-month period following a Change in Control, the Company terminates the Executive’s employment for any reason other than Cause, or the Executive resigns employment for “Good Reason” (as defined in Appendix A), then the terms of Section 3.2.4 will apply. The Executive will have Good Reason to terminate employment if: (a) within 45 days following the

Executive’s actual knowledge of the event which the Executive determines constitutes Good Reason, the Executive notifies the Company in writing that the Executive has determined a Good Reason exists and specifies the event creating Good Reason, and (b) following receipt of the notice, the Company fails to remedy the event within 45 days. If either condition is not met, the Executive will not have a Good Reason to terminate employment.

3.2 Compensation Following Termination Prior to the End of the Term. In the event that the Executive’s employment is terminated prior to the end of the Term, the Executive will be entitled only to the following compensation and benefits upon termination, and only if the Executive is in compliance with the covenants contained in the Confidentiality, Noncompetition and Inventions Agreement (Technical and Executive Employees) described in Article 4. No rights to other compensation or benefits will accrue to Executive.

3.2.1 Termination by Reason of the Executive’s Death or Disability. If Executive’s employment is terminated prior to the expiration of the Term by reason of the Executive’s death or Disability as provided in Section 3.1.1, the Company will pay to the Executive, the Executive’s spouse or estate, as the case may be, any amounts due to the Executive for Base Salary through the date of employment termination, together with any other unpaid and pro rata amounts to which the Executive is entitled as of the date of termination pursuant to Article 2, including, without limitation, accrued paid time off in accordance with Company policy and amounts that the Executive is entitled to under any benefit plan of the Company in accordance with the terms of the plan. The Executive will have no rights to any unvested benefits or any other compensation or payments coming due after the date of the Executive’s employment termination.

3.2.2 Termination by the Company other than for Cause Prior to a Change in Control. If the Executive’s employment is terminated other than for Cause as provided in Section 3.1.2, and provided the Executive has executed a written release of any and all claims arising out of Executive’s employment in form acceptable to the Company and the rescission period specified therein has expired, the Company will pay to the Executive:

	(a)		any Annual Base Salary earned but not paid through the date of the Executive’s employment termination and payment of any accrued but unpaid time off in accordance with Company’s policy; and

	(b)		continuation of Executive’s Base Salary in accordance with the Company’s regular payroll policies for a period equal to the greater of (i) 17 weeks or (ii) two weeks severance for each completed whole year of employment from the Executive’s date of hire through the date of the Executive’s termination, and

	(c)		the amount of any other benefits to which the Executive is legally entitled as of such date under the terms and conditions of any benefit plans of the Company in which the Executive is participating as of such date.

Except as provided in (a) through (c) above, the Company will have no further obligations under this Agreement.

3.2.3 Termination by the Executive. If the Executive’s employment is terminated as provided in Section 3.1.3, the Company will pay to the Executive (a) any Annual Base Salary earned but not paid through the date of the Executive’s employment termination, plus (b) the amount of any other benefits to which the Executive is legally entitled as of such date under the terms and conditions of any benefit plans of the Company in which the Executive is participating as of such date. Thereafter, the Company will have no further obligations under this Agreement

3.2.4 Termination by the Company other than for Cause or Resignation by the Executive for Good Reason After a Change in Control. In the event the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason as provided in Section 3.1.4, and provided in either case that the Executive has executed a written release of any and all claims arising during the Executive’s employment in form acceptable to the Company and the rescission period specified therein has expired, the Company will pay or provide the following amounts or benefits to the Executive:

	(a)		any accrued but unpaid Annual Base Salary and any other form or type of compensation, benefit or perquisite that is vested or accrued at the date of termination of the Executive’s employment with the Company for services rendered to such date, and payment for any accrued paid time off in accordance with Company policy; and

	(b)		the annual incentive bonus for that fiscal year at target performance (or if the target goals have not been set at the time of Executive’s employment termination, then the target goals in effect for the prior fiscal year), waiving any other condition precedent, such as continued employment, multiplied by a fraction, the numerator of which is the number of days worked by the Executive in the bonus period prior to the termination of employment, and the denominator of which is the number of days in the bonus period, less any amount of any such incentive bonus that has been paid. The pro-rated incentive bonus will be payable and paid, however, only if senior management of the Company are paid a bonus based on achievement of goals at or above target for the year in which the termination occurs, and will be paid to the Executive at the same time and manner as the bonus is paid to other senior management of the Company; and

	(c)		a severance payment equal to 26 weeks, based upon the weekly equivalent of the Executive’s Annual Base Salary in effect on the date of termination (without regard to any reduction that is in breach of this Agreement), to be paid in cash in a single sum within 30 days of the date of the Executive’s termination of employment; and

	(d)		the amount of any other benefits to which the Executive is legally entitled as of such date under the terms and conditions of any benefit plans of the Company in which the Executive is participating as of the date of termination (without regard to any reduction in such benefit that is in breach of this Agreement).

Except as provided in (a) through (d) above, the Company will have no further obligations under this Agreement.

3.2.5 Dispute of Termination. If, following a Change in Control, within 10 days after any notice of termination by the Executive for Good Reason or by the Company for Cause, the party receiving the notice notifies the other party that a dispute exists concerning the termination, the effective date of the termination will be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal has expired and no appeal having been perfected). A notice of dispute will extend the date of termination only if the notice is given in good faith and the party giving the notice pursues the resolution of the dispute with reasonable diligence. Notwithstanding the pendency of any dispute, the Company will continue to pay the Executive full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, to the extent permissible under the terms of the applicable group plans and state and federal law, until the dispute is finally resolved in accordance with this subparagraph. Amounts paid under this Section 3.2.5 are in addition to any amounts otherwise due under this Agreement, but in no event must the Company pay more than 25% of the severance payment set forth in Section 3.2.4(c) pursuant to this Section 3.2.5.

3.2.6 Payments Subject to Code 409A. Notwithstanding anything herein to the contrary, if the Executive is designated as a “specified employee” as defined in Code §409A and Regulations applicable thereto at the time any payment is due, any payments that would constitute “deferred compensation” under Code §409A will be paid on the 181st day following the Executive’s separation from service (as defined in Code §409A), and any delay in payment will accrue interest at the applicable federal short term rate as determined under Code § 1274 in effect on the date payment was otherwise due.

3.3 No Other Benefits. If the Executive receives the payments and benefits described in this Article 3, the Executive will not be eligible to receive from the Company or any Affiliate any other severance payments provided by the Company under any plan or policy or arrangement to which the Executive is otherwise eligible. Nothing in this Agreement will extend the continuation period of any benefit beyond the maximum period otherwise required by law and regulation.

ARTICLE 4: CONFIDENTIALITY, NONCOMPETITION AND INVENTIONS

As a condition to and in consideration of the benefits to be provided by the Company to the Executive pursuant to the terms of this Agreement, the Executive agrees to execute and be bound by the provisions of the Confidentiality, Noncompetition and Inventions Agreement (Technical and Executive Employees) attached hereto as Exhibit A. Notwithstanding any termination of the Executive’s employment with the Company, the Executive, will remain bound by the provisions

of this Agreement that specifically relate to periods, activities or obligations upon or subsequent to the termination of the Executive’s employment, including, but not limited to, the covenants contained in Exhibit A, which are hereby incorporated into this Agreement as though fully set forth herein.

ARTICLE 5: DISPUTE RESOLUTION PROCESS

5.1 Dispute Defined. The Company and the Executive desire to establish a reasonable and confidential means of resolving any dispute, question or interpretation arising out of or relating to: (a) this Agreement or the alleged breach or threatened breach of it, (b) the making of this Agreement, including claims of fraud in the inducement, or (c) the Executive’s employment by the Company pursuant to this Agreement, including claims of wrongful termination or discrimination (each dispute to be referred to herein as a “Dispute”).

5.2 Procedure. In furtherance of the parties’ mutual desire, the Company and the Executive agree that if either party believes a Dispute exists, that party will provide the other with written notice of the claimed Dispute. If the parties are unable to mutually resolve a Dispute within 30 days of the first written notice, the Dispute will be resolved exclusively by final and binding arbitration held in accordance with the provisions of this Agreement and the American Arbitration Association (“AAA”) National Rules for the Resolution of Employment Disputes then in effect, unless those rules are inconsistent with the provisions of this Agreement. In connection with the arbitration:

	(a)		any such arbitration will be conducted: (i) by a neutral arbitrator appointed by mutual agreement of the parties; or (ii) failing such agreement, by a neutral arbitrator appointed in accordance with said AAA rules;

	(b)		the Company will pay the fees and expenses of the arbitrator;

	(c)		the parties will be permitted reasonable discovery in accordance with the provisions of the Minnesota Rules of Civil Procedure, including the production of relevant documents by the other party, the exchange of witness lists, and a limited number of depositions, including depositions of any expert who will testify at the arbitration;

	(d)		the summary judgment procedure applicable under Rule 56 of the Minnesota Rules of Civil Procedure will be available and apply to any arbitration conducted pursuant to this Agreement;

	(e)		the arbitrator’s award will include findings of fact and conclusions of law showing the legal and factual bases for the arbitrator’s decision;

	(f)		the arbitrator will have the authority to award to the prevailing party any remedy or relief that a United States District Court or court of the State of Minnesota could order or grant if the dispute had first been brought in that judicial forum, including costs (other than the arbitrator’s fees and expenses) and, in case of bad faith, attorneys’ fees;

	(g)		the arbitrator’s award may be entered by any court of competent jurisdiction; and

	(h)		unless otherwise agreed by the parties, the place of any arbitration proceeding will be Minneapolis, Minnesota.

5.3 Confidentiality of Dispute Resolution. Except as the parties agree in writing, upon court order, or as required by law, neither the Company nor the Executive will disclose to any third party, except for their counsel, retained experts and other persons directly serving counsel or retained experts, any fact or information in any way pertaining to the process of resolving a Dispute under this Article 5, or to the fact of or any term that is part of a resolution or settlement of any Dispute. This prohibition on disclosure specifically includes, without limitation, any disclosure of an oral statement or of a written document made or provided by either the Executive or the Company, or by any of the Company’s or the Executive’s representatives, counsel or retained experts, or other persons directly serving any representatives, counsel or retained experts.

5.4 Right to Injunctive Relief. The Executive acknowledges and agrees that the services to be rendered by the Executive hereunder are of a special, unique and extraordinary character, that it would be difficult to replace these services and that any violation of the Executive’s obligations under the Confidentiality, Noncompetition and Inventions Agreement (Technical and Executive Employees) would be highly injurious to the Company and to any Company Affiliate and that it would be extremely difficult to compensate the Company or any Company Affiliate fully for damages for any such violation. Accordingly, notwithstanding the terms of this Article 5, the Company or any Company Affiliate, as the case may be, will be entitled to seek temporary and permanent injunctive relief from a court of law, in the event of violation by the Executive of any of the obligations under any provision of the Confidentiality, Noncompetition and Inventions Agreement (Technical and Executive Employees) as set forth in Exhibit A. This provision with respect to injunctive relief will not, however, diminish the right of the Company or any Company Affiliate to claim and recover damages, or to seek and obtain any other relief available to it pursuant to the provisions of this Article 5.

ARTICLE 6: ASSIGNMENT; SUCCESSORS.

6.1 Assignment. This Agreement is personal to the Executive and, without the prior written consent of the Company, is not assignable by the Executive. This Agreement will inure to the benefit of and be enforceable by the Executive’s heirs, executors and administrators.

6.2 Successors. This Agreement will inure to the benefit of and be binding upon the Company and its successors and assigns. The Company may not assign this Agreement, however, except in connection with the sale or disposition of all or substantially all of the assets of the Company in a transaction described in Appendix A, or by law as a result of a merger or consolidation.

ARTICLE 7: MISCELLANEOUS PROVISIONS

7.1 Notices. All notices and other communications under this Agreement will be in writing and will be given by hand delivery to the other party, by registered or certified mail,

return receipt requested, postage prepaid, or by facsimile with printed confirmation, addressed to the Executive at the last know mailing address on file with the Company and to the Company as follows:

Enpath Medical, Inc.
2300 Berkshire Lane
Minneapolis, Mn 55441
Attention: Chief Executive Officer

With a copy to:
Thomas G. Lovett, IV
Lindquist & Vennum, PLLP
4200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402

or to such other address as either party furnishes to the other in writing in accordance with this paragraph. Notices and communications will be effective when actually received by the addressee or 3 days after the initiation of delivery.

Any party may change the address for the purpose of this Section by giving the other written notice of the new address in the manner set forth above.

7.2 Enforceability. To the extent any provision of this Agreement is determined to be invalid or unenforceable in any jurisdiction, that provision will be deemed deleted from this Agreement as to such jurisdiction only, and the validity and enforceability of the remainder of that provision and of this Agreement will be unaffected. In furtherance of and not in limitation of the foregoing, the Executive expressly agrees that should the duration of, geographical extent of, or business activities covered by, any provision of this Agreement be in excess of that which is valid or enforceable under applicable law in a given jurisdiction, then such provision, as to such jurisdiction only, will be construed to cover only that duration, extent or activities that may validly or enforceability be covered.

7.3 Taxes. Notwithstanding any other provision of this Agreement, the Company will withhold from any amount payable under this Agreement all federal, state, local and foreign taxes that are required under any and all applicable laws or regulations, or that are consistent with the Company’s prevailing practice.

7.4 Governing Law, Construction, and Severability. The laws of the State of Minnesota govern the validity, interpretation, performance and enforcement of this Agreement. In the event any provision of this Agreement is held to be illegal or invalid for any reason, said illegality or invalidity will not in any way affect the legality or validity of any other provision of this Agreement. It is the intention of the parties hereto that the Company be given the broadest possible protection respecting its confidential information and trade secrets and respecting competition by the Executive following the Executive’s separation from the Company.

7.5 Venue. Any action at law, suit in equity or judicial proceeding arising directly, indirectly or otherwise in connection with, out of, related to or from this Agreement or any provision hereof will be litigated only in the State of Minnesota, Hennepin County District Court, or the United States District Court for the District of Minnesota. The Executive waives any right the Executive may have to transfer or change the venue of any litigation brought against the Executive by the Company.

7.6 Entire Agreement; Amendment. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes all prior discussions between the Company and the Executive regarding the subject matter hereof. Except as provided in the next sentence, no modification of, or amendment to, this Agreement, nor any waiver of either party’s rights under this Agreement, will be effective unless in writing and signed by both parties. Notwithstanding the foregoing: (a) any subsequent change or changes in the Executive’s duties, obligations, salary or compensation as a result of the exercise of discretion in accordance with the provisions of this Agreement will not affect the validity or scope of this Agreement; and (b) the Company will have the right, without the consent of the Executive, to amend any provision of this Agreement as it may determine to avoid the imposition of any excise tax under Code §409A, preserving, to the greatest extent possible, the economic benefit provided by this Agreement to the Executive.

7.7 Counterparts. This Agreement may be simultaneously executed in any number of counterparts, and such counterparts executed and delivered, each as an original, will constitute but one and the same instrument.

7.8 Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and will not affect the construction or interpretation of this Agreement or any of the provisions hereof.

7.9 Survivability. The provisions of this Agreement that by their terms call for performance subsequent to termination of the Executive’s employment under this Agreement, or of this Agreement, will so survive such termination.

7.10 Waiver. No waiver by the Company of any breach or violation of this Agreement will be a waiver of any preceding or succeeding breach or violation. No waiver by the Company of any right under this Agreement will be construed as a waiver of any other right hereunder. The Company will not be required to give notice to enforce strict adherence to any of the terms or conditions of this Agreement.

7.11 Advice of Counsel. The Executive acknowledges that the Executive has been provided the opportunity to seek, and has obtained, the advice of counsel in connection with the negotiation and execution of this Agreement.

7.12 No Strict Construction. Each of the Executive and the Company acknowledge and agree that the language used in this Agreement and the other agreements referred to herein is, and will be deemed to be, the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against either party hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

Dated this 16 day of April, 2007


/s/ Anthony Headley
Executive

Enpath Medical, Inc.


By		/s/ John C. Hertig

		Its CEO

APPENDIX A

For purposes of this Agreement, the following definitions will apply:

Change in Control. Change in Control means:

(a)

any “person” as such term is used in Section 13(d) and 4(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), together with all Affiliates and Associates (as defined below) (collectively, the “Acquiring Person”) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities representing 50% or more of the combined voting power of the Company’s then outstanding securities, but will not include

i. the Company,

ii. any subsidiary of the Company or

iii. any employee benefit plan of the Company or of any subsidiary of the Company or any entity holding shares of common stock of the Company organized, appointed or established for, or pursuant to the terms of, any such plan;

	(b)		during any period of two consecutive years (not including any period ending prior to the Commencement Date of this Agreement), the Continuing Directors (as defined below) cease to constitute a majority of the Company’s Board of Directors;

	(c)		consummation of a merger or consolidation of the Company with any other entity, other than:

a merger or consolidation that:

	A)		results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the merged or consolidated entity) 50% or more of the combined voting power of the voting securities of the resulting entity outstanding immediately after such merger or consolidation, and

	B)		at least a majority of the members of the board of directors of the resulting entity were Continuing Directors at the time of the action of the Board of Directors of the Company approving the merger or consolidation; or

ii.

a merger or consolidation effected to implement a recapitalization of the Company or similar transaction in which no Acquiring Person is or becomes the “beneficial owner,” directly or indirectly of more than 50% of the combined voting power of the Company’s then outstanding securities; or

	(d)		consummation of the sale or disposition by the Company of all or substantially all of its assets. “The sale or disposition by the Company of all or substantially all of its assets” means a sale or other disposition transaction or series of related transactions involving assets of the Company or of any Company Affiliate (including the stock of any direct or indirect subsidiary of the Company) in which the value of the assets or stock being sold or otherwise disposed of (as measured by the purchase price being paid therefor or by such other method as the Board of Directors of the Company determines is appropriate in a case where there is no readily ascertainable purchase price) constitutes more than 50% of the fair market value of the Company. For purposes of the preceding sentence, the “fair market value of the Company” will be the aggregate market value of the Company’s outstanding common stock (on a fully diluted basis) plus the aggregate market value of the Company’s other outstanding equity securities plus the total of all debt outstanding. The aggregate market value of the Company’s common stock will be determined by multiplying the number of shares of the Company’s common stock (on a fully diluted basis) outstanding on the date of the execution and delivery of a definitive agreement (“Transaction Date”) with respect to the sale or disposition by the Company of all or substantially all of the Company’s assets by the average closing price for the Company’s common stock for the ten trading days immediately preceding the Transaction Date. The aggregate market value of any other equity securities of the Company will be determined in a manner similar to that prescribed in the immediately preceding sentence for determining the aggregate market value of the Company’s common stock or by such other method as the Board of Directors of the Company determines is appropriate; or

	(e)		approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

Continuing Director. “Continuing Director” means any person who is a member of the Company’s Board, who is not an Acquiring Person or an Affiliate or Associate (as defined below) of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, and who:

	(a)		was a member of the Board on the Commencement Date of this Agreement, or

	(b)		subsequently becomes a member of the Board, if such person’s initial nomination for election or initial election to the Board is recommended or approved by at least two thirds of the Continuing Directors.

Affiliate. “Affiliate” and “Associate” has the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

Cause. For purposes of this Agreement, “Cause” means:

	(a)		the willful and continued failure by the Executive (other than any such failure resulting from: (i) the Executive’s incapacity due to physical or mental illness, (ii) any such actual or anticipated failure after the issuance of a Notice of Termination by the Executive for Good Reason or (iii) the Company’s active or passive obstruction of the performance of the Executive’s duties and responsibilities) to perform substantially the duties and responsibilities of the Executive’s position with the Company after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the duties or responsibilities;

	(b)		the conviction of the Executive by a court of competent jurisdiction for felony criminal conduct which, in the good faith opinion of the Company, would impair the Executive’s ability to perform his or her duties or impair the business reputation of the Company; or

	(c)		the willful engaging by the Executive in fraud or dishonesty that is demonstrably and materially injurious to the Company, monetarily or otherwise.

No act, or failure to act, on the Executive’s part will be deemed “willful” unless committed, or omitted by the Executive in bad faith and without reasonable belief that the Executive’s act or failure to act was in the best interest of the Company and the Executive will have either failed to correct, or failed to take all reasonable steps to correct, such act or failure to act within sixty (60) days from the Executive’s receipt of written notice from the Company demanding that the Executive take such action.

Good Reason. Good Reason will exist in the event that the Company, without the Executive’s written consent:

	(a)		institutes a material adverse change in the Executive’s title or in the duties assigned to the Executive (except for any diminution that occurs solely as a result of the fact that the Company ceases to be a public company);

	(b)		requires the Executive to relocate the Executive’s principal residence to a location outside of a reasonable commuting distance from the Twin Cities metropolitan area;

	(c)		reduces the Executive’s Annual Base Salary below the amount in effect immediately prior to the Change in Control;

	(d)		materially reduces the aggregate monetary value of the Executive’s participation in, or payment or benefit under all incentive plans (other than equity plans), benefit plans, arrangements and perquisites, from the aggregate monetary value of those plans, arrangements or perquisites that were in effect immediately prior to the Change in Control;

	(e)		substantially fails to comply with the provisions of Article 2 hereof; provided, however, that an unintentional failure to comply or a failure to comply that results from administrative oversight will not give rise to Good Reason, if such failure is promptly corrected; or

(f)

the failure of the Company to obtain the assumption of this Agreement by the acquirer of substantially all the assets of the Company in a transaction that constitutes a Change in Control.

Disability. Disability means any medically determinable physical or mental impairment of the Executive that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months that either: (a) renders the Executive unable to engage in any substantial gainful activity; or (b) results in the Executive receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company.

Exhibit A

CONFIDENTIALITY, NONCOMPETITION
AND INVENTIONS AGREEMENT
(Technical and Executive Employees)

This is an Agreement between Enpath Medical, Inc., which is referred to as “you” or “your,” and the employee whose signature appears below, who is referred to as “I,” “me” or “my.”

I understand that I am being employed in a position of trust and confidence and that I will generate, have access to, and become familiar with confidential information. I also understand that you have expended significant time and money on the development of customer good will and a sound business reputation. As part of my duties, I will develop and maintain close working relationships with your clients.

I understand that my unauthorized use or disclosure of your confidential information, or my violation of my obligation not to compete with you, would seriously harm your business and cause monetary loss that would be difficult, if not impossible, to measure

I was advised of and understand the terms of this agreement before agreeing to work for you.

Agreement To Maintain Confidential Information

1. “Confidential information” means any information not generally known in your profession by third parties, including your competitors or the general public. It includes (but is not limited to) your methods, procedures, trade secrets, client lists, marketing plans and techniques, new products and new product development, strategic plans, business plans, budgets, product prices, sales volume, information about clients and potential clients (including identities of the clients and the clients’ contact person(s), the clients’ buying history and tendencies and other details about your relationship with them), drawings, specifications, reports and information about your compensation and finances. I will treat information that is not expressly identified as “confidential” as confidential unless, under the circumstances, I know or have reason to know that you do not intend to keep that type of information confidential.

2. Except to the extent required during the course of my employment for you, I will not, during or after the term of my employment, disclose your confidential information to any other person or entity, or use your confidential information for my own benefit or for the benefit of another, unless you expressly direct me to do so.

Return of Property

3. If either you or I terminate my employment, I will deliver to you immediately all records, documents or information I generated or received in connection with my employment with you, including but not limited to: all originals and all copies of any records, documents or information (whether in paper, computer or other form) including drawings, specifications, reports, client lists, financial information, or any confidential information as described above I

will at the same time also deliver to you all other property I received in connection with my employment with you, including but not limited to, computer equipment, computer hard drives or diskettes, telephone equipment, and facsimile machines.

Noncompetition Agreement

4. During my employment with you, I will devote my full time and energy to furthering your business and I will not become affiliated in any capacity with any individual or entities who are competing or planning to compete with you at that time.

5. For a period of 12 months after the termination of my employment (whether voluntary or involuntary), I will not directly or indirectly solicit, offer to provide, or provide any services on behalf of or to any entity with whom you compete, except with your written consent.

6. I will not, during the term of my employment or for a period of one year following the termination of my employment, directly or indirectly solicit any of your employees or independent contractors for the purpose of hiring them to work for me or another person, entity or employer, or for the purpose of inducing them to leave their employment with you, without your written consent.

Inventions

7. During my employment with you, I will promptly disclose to you in writing any ideas, inventions or discoveries (collectively known as “inventions”) related to your business, I agree that these inventions belong to you, and agree to assign or offer to assign to you all rights, title and interest in such inventions, and will cooperate in your efforts to protect your rights to them I understand that this agreement does not apply to any invention for which none of your equipment, supplies, facility or trade secret information was used and which was developed entirely on my own time, and (1) which does not relate (a) directly to your business, or (b) to your actual or demonstrably anticipated research or development, or (2) which does not result from any work that I performed for you.

Remedies

8. If I violate this Agreement, you may seek injunctive relief and/or any other remedy allowed by law and collect from me reasonable attorneys’ fees and costs incurred in bringing any action against me or otherwise enforcing the terms of this Agreement. I also agree that I will repay all profits, compensation, commissions or other benefits which I have realized as a result of my violation, and that I will permit an individual of your choosing to conduct an audit for that purpose.

9. Your action in not enforcing a breach of any part of this Agreement or similar agreement signed by another employee shall not prevent you from enforcing the Agreement as to any other breach of this Agreement that you discover. If a court rules that any part of this Agreement is not enforceable, that part may be modified by the court to make it enforceable to the maximum extent permitted by law or it may be severed and the other parts of the Agreement shall remain enforceable.

10. This Agreement incorporates our entire understanding about confidentiality, return of property, and my obligations not to compete. It is not intended to alter the at-will nature of our employment relationship. This Agreement may not be canceled or modified except by another written agreement signed by me and by your authorized officer, except that this Agreement may be assigned by you. This Agreement shall be interpreted according to the laws of the State of Minnesota, without reference to principles of conflict of laws. Any actions to interpret or enforce this Agreement shall be filed in the state or federal courts of Minnesota. I consent to jurisdiction in such courts.


EMPLOYEE:				Enpath Medical, Inc.

Anthony Headley				/s/ John C. Hertig
Print Name				By

/s/ Anthony Headley				CEO
Signature				Its

April 16, 2007				April 16, 2007
Date				Date

EX-10.2 3 c14945exv10w2.htm AMENDMENT TO CONFIDENTIAL SUPPLY AGREEMENT exv10w2

FN 99570742
SN 04
AP 48781

Amendment to Confidential Supply Agreement

This Amendment is effective as of January 22, 2007 to the Confidential Supply Agreement (the “Agreement”) between Medtronic, Inc., through its Cardiac Rhythm Management unit, having an address at 7000 Central Avenue NE, Minncapolis, Minnesota 55432 (“Medtronic”) and Med Amicus, Inc., now know as Enpath Medical, Inc., a Minnesota corporation, having its Principal address 2300 Berkshire Lane North Minneapolis,MN 55441 (“ Enpath ”).

The parties agree as follows:

	A.		All references to MedAmicus shall be deemed references to Enpath.

	B.		The reference to 2007 in Section 9.1 is deleted and replaced with 2012.

	C.		The parties agree further agree to the terms of the Quality Exhibit attached hereto.

	D.		The parties agree further to the terms of the Japan Regulatory Exhibit attached hereto.

	E.		The parties agree that the pricing as set forth in the Pricing Exhibit attached hereto shall be firm though April 30,2008.

All remaining provision of the Agreement remain in full force and effect.

Medtronic, Inc


By:		/s/ Lonnie Stormo

Date:		3/16/07

Enpath Medical, Inc.

By:		/s/ Steve Mogensen

Date:		3/19/07

EX-10.3 4 c14945exv10w3.htm LETTER AMENDMENT NO. 7 TO REVOLVING CREDIT AND TERM LOAN AGREEMENT exv10w3

Exhibit 10.3

LETTER AMENDMENT No. 7

Dated as of April 30, 2007

M&I Marshall & Ilsley Bank
651 Nicollet Mall
Minneapolis, Minnesota 55402-1611

Ladies/Gentlemen:

We refer to the Revolving Credit and Term Loan Agreement dated as of October 17, 2003, as amended (the “Credit Agreement”) between you and us (under our former name of MedAmicus, Inc.). Unless otherwise defined in this letter amendment, terms defined in the Credit Agreement are used in this letter amendment as defined in the Credit Agreement.

It is hereby agreed by you and us as follows:

The Credit Agreement is, effective the date first above written, hereby amended as follows:

(a)

Section 1.1(g) [Definition of Tangible Net Worth] is amended to read in full as follows:

(g) “EBITDA” means in any period the sum of the Borrower’s and Medacquisition’s consolidated net income during that period plus interest, depreciation, amortization and income tax expense during that period and plus non-cash, stock-based compensation during that period.

	(b)		Section 2.1 is amended by changing the Termination Date to be April 30, 2008.

	(c)		Section 5.1(f) is amended to read in full as follows:

(f) Tangible Net Worth. Maintain Tangible Net Worth of not less than the following amounts at each fiscal year end. The minimum Tangible Net Worth shall be $10,000,000.00 at December 31, 2007. At each fiscal year end thereafter, the minimum Tangible Net Worth shall increase by an amount equal to 25% of the net income (but not net loss) in the year then ended.

(d)

Section 5.1(g) is amended to read in full as follows:

(g) Senior Funded Debt Ratio. Maintain as of the end of each fiscal quarter a Senior Funded Debt Ratio of not more than the following:


Time Period		Maximum Ratio
Through 9/30/07		1.75 to 1
Thereafter		1.50 to 1

(e)

Section 5.1(h) is amended to provide that no minimum Fixed Charge Coverage Ratio shall apply in the fiscal quarters ended June 30, 2007 and September 30, 2007.

On and after the effective date of this letter amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, or words of like import referring to the Credit Agreement, and each reference in the Notes and the Security Agreement to “the Credit Agreement”, “thereunder”, “thereof”, or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by this letter amendment. The Credit Agreement, as amended by this letter amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed.

This letter amendment may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall be an original and all of which taken together shall constitute one and the same letter amendment.

If you agree to the terms and provisions hereof, please evidence your agreement by executing and returning one counterpart of this letter amendment to us. This letter amendment

-2-

shall become effective as of the date first above written when and if counterparts of this letter amendment shall have been executed by you and us.


		Very truly yours,

		Enpath Medical, Inc.

		By
		Its

Agreed as of the date
first above written:

M&I Marshall & Ilsley Bank


By
Its


By
Its

RENEWAL REVOLVING PROMISSORY NOTE


$4,000,000.00		Dated as of April 30, 2007

For value received, on April 30, 2008, Enpath Medical, Inc., a Minnesota corporation (the “Borrower”) promises to pay to the order of M&I Marshall & Ilsley Bank (the “Bank”), at its offices in Minneapolis, Minnesota, in lawful money of the United States of America, the principal amount of Four Million and no/100 Dollars ($4,000,000.00) or, if less, the aggregate unpaid principal amount of Advances made by the Bank to the Borrower pursuant to the Loan Agreement (as defined below); together with interest on any and all principal amounts remaining

-3-

unpaid hereon from the date of this Note until such principal amounts are fully paid at a fluctuating annual rate equal to 2.25% above LIBOR (as defined in the Loan Agreement). Interest shall be due and payable on the last day of each calendar month starting on May 31, 2007. Each change in the fluctuating interest rate shall take effect simultaneously with the corresponding change in LIBOR.

All Advances made by the Bank to the Borrower pursuant to the Loan Agreement and all principal payments made by the Borrower on this Note shall be recorded by the Bank.

This Note is the Revolving Note referred to in, and is entitled to the benefits of, the Revolving Credit and Term Loan Agreement dated as of October 17, 2003, as amended (the “Loan Agreement”) between the Borrower (under its former name of MedAmicus, Inc.) and the Bank, which Loan Agreement, among other things, contains provisions for the acceleration of the maturity of this Note upon the happening of certain stated events, for an increase to the interest rate upon the happening of certain stated events, and for prepayments of the principal amount due under this Note upon stated terms and conditions.

This Note is a renewal and replacement of a $4,000,000.00 promissory note dated as of May 1, 2006 from the Borrower to the Bank which prior note remains unpaid but the principal balance of which has been incorporated into this Note.

-4-

EX-10.4 5 c14945exv10w4.htm PRESS RELEASE exv10w4


Release 3:00pm CDT	Approved By:	Scott Youngstrom, CFO (763)
		951-8211
		Enpath Medical, Inc.

	Contacts:	Investors
		EVC Group (415) 896-6820
		Doug Sherk
		Jennifer Beugelmans

		Media
		EVC Group
		Steve DiMattia (646) 277-8706

May 2, 2007

Exhibit 10.4

Enpath Medical Reports Record First Quarter Revenues
Company Earns $.05 Per Share
Conference Call Previously Scheduled for Today is Cancelled

MINNEAPOLIS—Enpath Medical, Inc. (Nasdaq: NPTH), a leading developer and manufacturer of proprietary products for blue-chip medical device companies operating worldwide, today reported first quarter results.

Revenue increased 7% to $10.1 million, the Company’s first quarter over $10 million, compared with $9.4 million for the same quarter in 2006. Introducer and lead product line revenue increases were partially offset by a reduction in catheter product line revenue.

Revenue from the introducer product line increased 16% to $6.6 million compared with $5.7 million in the first quarter last year. Revenue from the stimulation leads product line for the quarter increased to $3.1 million, up from the $2.3 million in thefirst quarter of 2006 due primarily to increased leads and contract manufacturing revenues when compared to the same period last year.
Revenue from the catheter product line decreased to $390,000 compared with $1.4 million in the first quarter last year. First quarter 2006 catheter line revenue was favorably influenced by two customers preparing to launch their catheter based products.

Gross margins for the quarter were 36% compared with 39% in the first quarter of 2006 due primarily to costs associated with the duplicate facilities and the expenses associated with moving to our new facility. Selling, general and administrative expenses totaled $2.1 million, or 21% of revenue, during the first quarter of 2007 as compared to $1.5 million, or 16% of revenue, recorded for the first quarter of 2006. Recognition of additional rental expense on the new facility, legal expenses associated with our patent infringement defense and moving-related expenses impacted the Company’s overall quarterly SG&A results when compared to the 2006 first quarter. Research and development expenditures for the quarter totaled $900,000, or 9% of revenues, compared with $1.2 million in the first quarter of 2006, or 13% of revenues.

Net income was $330,000 or $0.05 per fully diluted share in the first quarter of 2007 as compared to $650,000 or $0.11 per fully diluted share in the first quarter of 2006.

Definitive Merger Agreement Signed on Monday, April 30, 2007

Enpath Medical, Inc. announced on Monday, April 30, 2007, that it has entered into a definitive merger agreement under which Greatbatch, Inc. will acquire Enpath for $14.38 per share in cash, or approximately $102 million, including assumption of debt. Under the terms of the agreement,

Greatbatch, Inc. will commence a tender offer for all of Enpath’s outstanding shares no later than May 8, 2007. The proposed transaction is subject to customary closing conditions and regulatory approvals and the tender of a majority of Enpath’s outstanding shares, on a fully diluted basis. The transaction has been unanimously approved by the Boards of Directors of both companies and is expected to close in late June 2007.

Annual Shareholder Meeting Update

Enpath’s Annual Shareholder Meeting, scheduled for 3:45 PM on Thursday, May 3, will proceed as scheduled but will not include an executive report on the Company’s business.

Conference Call Previously Scheduled for Today has been Cancelled

About Enpath Medical

Enpath Medical, Inc., headquartered in Plymouth, Minnesota, is a leader in the design, development, manufacture and marketing of percutaneous delivery systems and stimulation leads technologies. Its proprietary products include venous vessel introducers, articulating and fixed curve delivery catheters, epicardial and endocardial stimulation leads, and other products for use in pacemaker, defibrillator, catheter and infusion port procedures as well as neuromodulation markets. Its products, which are primarily finished goods, are sold worldwide through partnering relationships with other medical device companies.

Safe Harbor

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-K for the year ended December 31, 2006, as well as in our quarterly reports on Form 10-Q and Current Reports on Form 8-K. Among the factors that could cause results to differ materially are the following: Enpath’s dependence upon a limited number of key customers for its revenue; Enpath’s ability to successfully protect its intellectual property against misappropriation or claims of infringement by third parties; the ability of Enpath’s customers to successfully develop and market therapies that utilize the Company’s advanced delivery systems; Enpath’s ability to effectively manufacture its products, specifically steerable catheters, in anticipated required quantities; Enpath’s ability to develop or acquire new products to increase its revenues; Enpath’s ability to attract and retain key personnel; introduction of competitive products; government regulatory matters; economic conditions; and Enpath’s ability to raise capital. In addition to those risks, there are risks and uncertainties associated with the tender offer that will made by Greatbatch, Inc. for Enpath’s common stock. Those risks include risks that the transaction will not be consummated on the terms or timeline first announced on Monday, April 30, 2007. Further information concerning those risks will be included in the Company’s filings with the Securities and Exchange Commission in response to the tender offer. All forward-looking statements of Enpath, whether written or oral, and whether made by or on behalf of Enpath, are expressly qualified by these cautionary statements. In addition, Enpath disclaims any obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

Enpath Medical, Inc.
Condensed Balance Sheets


	Unaudited
	03/31/07		12/31/06
Assets
Cash and cash equivalents	$	904,457	$	523,483
Inventory, receivables and prepaids		12,714,350		11,177,186
Other current assets		253,791		313,686
Property, plant and equipment, net		9,913,975		5,900,115
Goodwill		9,487,975		9,487,975
Intangible assets with finite lives and other		5,833,118		5,990,466

Total Assets	$	39,107,666	$	33,392,911

Liabilities & Shareholders’ Equity
Bank line of credit	$	—	$	—
Current liabilities		5,176,017		4,477,198
Long-term liabilities		4,823,708		727,058
Shareholders’ equity		29,107,941		28,188,655

Total Liabilities & Shareholders’ Equity	$	39,107,666	$	33,392,911

Enpath Medical, Inc.
Statements of Operations (Unaudited)


	Three Months Ended
	March 31, 2007			March 31, 2006
Net sales	$	10,104,517		$	9,422,689
Cost of sales		6,509,684			5,709,670

Gross profit		3,594,833			3,713,019


Operating expenses:
Research and development		949,799			1,203,088
Selling, general and administrative		2,148,767			1,459,409

Total operating expenses		3,098,566			2,662,497


Operating income		496,267			1,050,522

Other income (expense):
Interest expense		(43,191	)		(50,599	)
Interest income		233			231
Other		(7,921	)		3,798

Total other income (expense)		(50,879	)		(46,570	)


Income before income taxes		445,388			1,003,952
Income tax expense		115,356			351,383

Net income	$	330,032		$	652,569


Net income per common share:
Basic	$	0.05		$	0.11
Diluted	$	0.05		$	0.11


Weighted average common and common equivalent shares outstanding:
Basic		6,336,515			6,104,568
Diluted		6,444,378			6,209,405

EX-31.1 6 c14945exv31w1.htm CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER exv31w1

Exhibit 31.1
CERTIFICATION

I, John C. Hertig, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Enpath Medical, Inc:

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 7, 2007		By: /s/ John C. Hertig
		Chief Executive Officer

EX-31.2 7 c14945exv31w2.htm CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER exv31w2

Exhibit 31.2
CERTIFICATION

I, Scott P. Youngstrom, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Enpath Medical, Inc:

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 7, 2007		By: /s/ Scott P. Youngstrom
		Chief Financial Officer

EX-32 8 c14945exv32.htm CERTIFICATION PURSUANT TO SECTION 906 exv32

Exhibit 32

CERTIFICATION

The undersigned certifies pursuant to 18 U.S.C. § 1350, that:

(1)

The accompanying Quarterly Report on Form 10-Q for the period ended March 31, 2007, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the accompanying Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: May 7, 2007		By: /s/ John C. Hertig
		Chief Executive Officer
		By: /s/ Scott P. Youngstrom
		Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----

Enpath Medical, Inc.