8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 16, 2006

Enpath Medical, Inc.

(Exact name of registrant as specified in its charter)

Minnesota

(State or Other Jurisdiction of Incorporation)

0-19467	41-1533300
(Commission File Number)	(IRS Employer Identification No.)
15301 Highway 55 West
Plymouth, Minnesota	55447
(Address of Principal Executive Offices)	(Zip Code)

(763) 559-2613

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01  Entry into a Material Definitive Agreement

Agreement on Biomec Director

On February 16, 2006, Enpath Medical, Inc. (“Enpath”) entered into a Letter Agreement with BIOMEC Inc. under which BIOMEC and Enpath agreed that

•BIOMEC and its affiliates continued to own 5% of the outstanding stock of Enpath for purposes of determining whether BIOMEC had the right to designate a director for election at the Enpath Annual Meeting of Shareholders,

•Richard T. Schwarz would be elected as the BIOMEC designee on the Enpath board at the February 16, 2006 Enpath board meeting and would be nominated for re-election as a director at the 2006 Enpath annual meeting of shareholders, and

•Mr. Trevor O. Jones would resign as a director of Enpath effective with Mr. Schwarz’s election.

Executive Compensation

On February 16, 2006, Enpath adopted the 2006 Salaried Employee Bonus Plan under which all salaried employees would be eligible to earn up to 3% of salary for completing specific objectives, if Enpath attains a specified level of after tax income. In addition, the Company adopted an employee bonus plans for its salaried employees in its Introducer, Advanced Delivery Catheter and Stimulation Leads product lines, its sales and marketing personnel and its administrative corporate employees, in which officers of the Company can earn up to 15% of base salary (18% in the case of Mr. Hertig, CEO) by achieving specified income targets. In addition, the Company adopted an executive officer only plan under which the officers may earn an additional 10% of base salary by achieving net income after taxes over and above that income which would maximize the bonus payout at the all salaried bonus plan.

Enpath also granted options to the following officers:

Name	Options
Mark C. Kraus	10,000
James E. Mellor	10,000
Michael Erdmann	4,000
James M. Reed	12,000
David A. Grenz	15,000

Each option was granted at a price of $9.18, vesting 20% per year beginning one year from the date of grant and expires five years from grant date. In addition, Steven O. Mogenson was elected Vice President of Sales and was granted an option to purchase 15,000 shares at a price of $8.81 on February 20, 2006.

Item 2.02   Results of Operations and Financial Disclosure

On February 23, 2006, Enpath Medical, Inc. (the “Company”) issued a press release reporting the

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results of its operations for the quarter and the year ended December 31, 2005. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K.

The Company also furnishes as Exhibit 99.2 to this Form 8-K the statement of John C. Hertig, Chief Executive Officer and James D. Hartman, Chief Financial Officer, that will be issued in connection with the February 23, 2006, Enpath Medical, Inc. conference call reporting the results of operations for the quarter and year ended December 31, 2005.

The information provided pursuant to Items 2.02 of this Form 8-K is being furnished and is not “filed” for purposes of Section 18 of the Securities Act of 1934, and may not be deemed incorporated by reference in any filing under the Securities Act of 1933, except as expressly set forth by specific reference in that filing.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

On February 16, 2006, the Board of Directors of the Company elected John C. Hertig and Richard T. Schwarz to the Board of Directors of the Company. Mr. Schwarz is the designee of BIOMEC Inc. and replaces Trevor O. Jones, who resigned effective with the election of Mr. Schwarz. Mr. Hertig became the Chief Executive Officer of the Company in January 2006.

Section 9. - - Financial Statements and Exhibits.

Item 9.01   Financial Statements and Exhibits

(c)           Exhibits

The following are filed or furnished as Exhibits to this Report:

Exhibit No.	Description of Exhibit
10.1	Letter Agreement dated February 16, 2006 between Enpath Medical, Inc. and BIOMEC Inc
99.1	Press release dated February 23, 2006, reporting results for the quarter and year ended December 31, 2006.
99.2	Statement of John C. Hertig, Chief Executive Officer and James D. Hartman, Chief Financial Officer of Enpath Medical, Inc, in connection with the February 23, 2006 Enpath Medical, Inc. conference call.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ENPATH MEDICAL, INC.
Dated: February 23, 2006	By:	/s/ John C. Hertig
		John C. Hertig
		Chief Executive Officer

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EX-10.1

Exhibit 10.1

AGREEMENT ON BOARD REPRESENTATION

This agreement (“Agreement”) is entered into as of the 16^th day of February 2006 between Enpath Medical Inc., a Minnesota corporation formerly known as Medamicus, Inc. (“Enpath”), and BIOMEC Inc., an Ohio corporation (“Biomec”).

RECITALS:

1.Enpath and Biomec entered into that certain Asset Purchase Agreement, dated as of July 21, 2003 which closed on October 23, 2003 (the “Asset Purchase Agreement”), under which Enpath purchased assets of Biomec and agreed to circumstances under which Biomec’s Chair would serve on the Enpath Board of Directors.

2.Biomec and Enpath entered into an Amendment to Asset Purchase Agreement dated as of March 14, 2005 (the “2005 Amendment”) and a Letter Agreement dated as of March 15, 2005 (the “2005 Letter Agreement”) (collectively “2005 Agreements”).

3.Under the terms of the 2005 Amendment, Enpath agreed that it would continue to nominate and solicit proxies for the re-election of the Chairman of Biomec to the Enpath Board until such time as Biomec and its affiliates held less than 5% in the aggregate of Enpath stock.

4.Under the 2005 Letter Agreement, Enpath and Biomec agreed that the person to be nominated as a director of Enpath would be the Chair of Biomec “or such other person as Enpath and Biomec may mutually agree.”  In addition, under the terms of the 2005 Letter Agreement, Biomec was required to provide to Enpath, on or prior to February 1 of each year beginning in 2006, a list of Biomec affiliates and their ownership of Enpath common stock so that Enpath could confirm the 5% threshold was met.

5.Trevor O. Jones, the Chair of BIOMEC, has discussed with Enpath the possibility of Biomec designating a person other than the Chair of Biomec to serve on the Enpath board, as contemplated by the 2005 Letter Agreement.

The parties hereby agree as follows:

1.Biomec hereby represents to Enpath that as of December 1, 2005, affiliates of Biomec owned a total of 346,078 shares of Enpath, which was equal to 5.7% of the total outstanding Enpath shares.

2.Enpath and Biomec hereby agree that Richard T. Schwarz is the designee of Biomec. Enpath agrees to elect Mr. Schwarz to the Enpath Board on February 16, 2006 and hereby agrees to nominate Mr. Schwarz for election as a director at the 2006 Enpath Annual Meeting of Shareholders.

3.Concurrently with the election of Mr. Schwarz to the board, Mr. Trevor O. Jones will resign as Vice Chair and a director of Enpath.

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

ENPATH MEDICAL, INC.
By:		/s/James D Hartman
Name:					James D. Hartman
Title:				Chair
BIOMEC INC.
By:	/s/Trevor O. Jones
Name:					Trevor O. Jones
Title:			Chair

I hereby resign as a member of the Enpath Board, to be effective as of February 16, 2006 with the election of Richard Schwarz to the Enpath Board of Directors.

/s/Trevor O. Jones

Trevor O. Jones

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE	Approved By:	Jim Hartman (763) 559-2613 Enpath Medical, Inc.
	Contacts:	Investors EVC Group Doug Sherk (415) 896-6820 Jennifer Beugelmans (415) 896-6820

Enpath Medical Reports Fourth Quarter EPS of $0.11

Profitable Year Achieved

Company Anticipates 15-20% Revenue Growth in 2006

MINNEAPOLIS/February 23, 2006—Enpath Medical, Inc. (NasdaqNM: NPTH) today reported financial results for the fourth quarter and full year ended December 31, 2005.

Sales increased one percent in the fourth quarter of 2005 to $7.9 million compared with $7.8 million in the fourth quarter of 2004.  For the full year 2005, sales were $29.4 million compared with $29.5 million in the prior year.

Enpath Medical reported net income for the fourth quarter of $670,000, or $.11 per diluted share, compared with net income of $37,000, or $.01 per diluted share in the fourth quarter of 2004.  For the full year 2005, the Company reported net income of $333,000, or $0.05 per diluted share, compared with a net loss in 2004 of $1.3 million, or $0.22 per share for 2004.  The net loss in 2004 included a $2.8 million asset impairment charge related to the Company’s safety needle license and equipment.

“We are very pleased to report a profit for the full year,” said James D. Hartman, chairman and acting CFO.  “During the first six months of 2005, we incurred a net loss of $576,000.  As a result, we implemented a number of expense saving strategies in the second half of the year that allowed us to achieve significant bottom line improvements.  We also determined the amount of prior year research and development tax credits and have claimed or received refunds of taxes paid, and as a result were able to record a tax benefit of $341,000 in the fourth quarter.

“While we were cost conscious, we were also focused on positioning ourselves for growth in 2006,” Hartman continued.  “Two of our partners in marketing our steerable catheter have placed first quarter orders for commercial launches, and we continue to move forward in identifying an appropriate partner for our next application.  We have expanded our introducer customer base and with the launch of our next generation valved introducer later this year, believe we can significantly increase our market share beyond the 50% we currently hold.

“Our current marketing partner for our epicardial steroid lead in Europe has had positive results and is now proceeding with the launch of the FasTac Flex^TM, our proprietary epicardial lead delivery tool,” Hartman stated.  “In addition, we are optimistic that the number of successful steroid epicardial lead implants in Europe will ease the challenge for both the Company and our partner, of gathering human clinical data needed for a US PMA submission.”

Leadership Changes

As the Company announced in early December, John C. Hertig has assumed the position of Chief Executive Officer effective January 16, 2006.  Mr. Hertig was also elected to the Board of Directors at the February 16, 2006 Board meeting.  Mr. Hertig replaces Mr. Hartman, who is continuing to serve as Chief Financial Officer and Chairman of the Board until April 28, 2006.  Mr. Hartman will stand for re-election to the Board at the Company’s upcoming annual meeting on April 27.

The Company also announced the addition of two members to the senior management team.  David A. Grenz (age 57) was elected Vice President and General Manager of the Stimulation Leads Business Unit and Steven Mogensen (age 44) was elected Vice President of Sales and Marketing Programs.  Mr. Grenz held management positions at Medtronic for more than 15 years in both manufacturing and product development and will report to Mr. Hertig.  Mr. Mogensen has a

strong history in medical device sales having held similar positions at Smith Industries Medical Systems and MedSource Technologies and will report to Jim Mellor, Vice President of Sales and Marketing.

The Company also stated that Trevor O. Jones (age 75) has resigned from the Board of Directors.  Mr. Jones was the representative of BIOMEC Inc. on the Board of Directors pursuant to the provisions of the Asset Purchase Agreement related to the Company’s acquisition of BIOMEC Cardiovascular in 2003.  The BIOMEC Board of Directors proposed Richard T. Schwarz (age 54) to replace Mr. Jones, and Mr. Schwarz was elected to the Enpath Board of Directors at the February 16, 2006 Board meeting.  Mr. Schwarz is an investor, entrepreneur and is Chairman of NineSigma, Inc., which facilitates “Open Innovation” with client companies world-wide.

2006 Guidance

“Based on our current business trends, we expect 2006 sales to increase between 15 and 20% over 2005,” said Mr. Hertig.  “As we build stocking quantities of steerable catheters for our two partners to facilitate their commercial launch, we anticipate sales in the first quarter to be quite strong, although we are still challenged with low yields and related inefficiencies in building these catheters that is currently compromising our margins.  The sales volume of the steerable catheters will go down in the second quarter, but we expect those volumes to steadily increase over the remainder of the year as our partners gain market share through their distribution efforts.  We expect to be profitable throughout 2006, although the second quarter could be near break-even.”

Conference Call Today

The Company will host a conference call today at 1:30 PM, CST/2:30 EST to discuss its fourth quarter and full year 2005 financial results, outlook for 2006 and current corporate developments.  To participate in the call dial (800) 240-7305, provide the Company name and Jim Hartman as the Leader’s name.  International participants may access the call live by dialing (303) 262-2125.  A live webcast can be accessed on the Enpath Medical website, www.enpathmed.com, by clicking on the 4th Quarter 2005 Earnings Call icon. A taped replay of the call will be available approximately one hour after the conclusion of the call until March 1, 2006, by calling (800) 405-2236 (domestic participants) or (303) 590-3000 (international participants) and referencing pass code 11053503#.  An audio replay of the webcast will be archived on the Enpath website for one year.

About Enpath Medical, Inc.

Enpath Medical, Inc., headquartered in Plymouth, Minnesota, is a leader in the design, development, manufacture and marketing of percutaneous delivery systems and stimulation lead technologies.  Its products include venous vessel introducers, epicardial and endocardial stimulation leads, safety needles and other products for use in pacemaker, defibrillator, catheter and infusion port procedures as well as neuromodulation and hearing restoration markets.  Its products 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, 2004, 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 ability to complete development of its Myopore Rx steroid epicardial lead and FasTac Flex delivery tool and obtain regulatory approval to market these devices in a number of countries without significant delay or expenditure of resources; the ability of Enpath and its distribution partners to successfully introduce the Myopore Rx and FasTac Flex;  Enpath’s dependence upon a limited number of key customers for its revenue; the ability of Enpath’s customers to successfully develop and market therapies that utilize Enpath’s advanced delivery systems; Enpath’s dependence upon licensing agreements with third parties for the technology underlying some of its products; Enpath’s ability to effectively manufacture its products, including the new Myopore Rx steroid lead and the FasTac Flex delivery device, 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; Enpath’s ability to successfully protect its intellectual property against misappropriation or claims of infringement by third parties; government regulatory matters; economic conditions; and Enpath’s ability to raise capital.  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.

Consolidated Condensed Balance Sheets

	Audited		Audited
	12/31/05		12/31/04
Assets
Cash and cash equivalents	$	—	$	362,625
Inventory, receivables and prepaids	8,566,254		8,514,675
Other current assets	394,202		504,683
Property, plant and equipment, net	4,686,121		5,176,086
Goodwill	9,487,975		9,593,662
Intangible assets with finite lives and other	6,916,406		7,016,009
Total Assets	$	30,050,958	$	31,167,740
Liabilities & Shareholders’ Equity
Bank line of credit	$	—	$	881,652
Other current liabilities	2,966,933		3,280,349
Long-term liabilities	2,058,316		3,230,882
Shareholders’ equity	25,025,709		23,774,857
Total Liabilities & Shareholders’ Equity	$	30,050,958	$	31,167,740

Consolidated Income Statements (Unaudited)

	Three Months Ended						Twelve Months Ended
	Unaudited			Unaudited			Audited			Audited
	Dec 31, 2005			Dec 31, 2004			Dec 31, 2005			Dec 31, 2004
Sales	$	7,888,622		$	7,833,316		$	29,368,519		$	29,489,034
Cost of sales	5,201,106			4,985,022			18,711,334			18,318,793
Gross profit	2,687,516			2,848,294			10,657,185			11,170,241
Operating expenses:
Research and development	1,215,932			1,434,111			5,393,277			4,730,013
Selling, general and administrative	1,185,378			1,386,525			5,277,849			5,415,287
Safety needle asset impairment	0			0			0			2,809,199
Total operating expenses	2,401,310			2,820,636			10,671,126			12,954,499
Operating income (loss)	286,206			27,658			(13,941		)	(1,784,258		)
Other income (expense):
Interest expense	(56,091		)	(59,000		)	(253,516		)	(205,636		)
Interest income	0			0			0			1,613
Other	99,118			(3,986		)	77,685			(6,907		)
Total other income (expense)	43,027			(62,986		)	(175,831		)	(210,930		)
Income (loss) before income taxes	329,233			(35,328		)	(189,772		)	(1,995,188		)
Income tax benefit	340,905			72,323			522,557			698,822
Net Income (loss)	$	670,138		$	36,995		$	332,785		$	(1,296,366	)
Earnings (loss) per share
Basic	$	0.11		$	0.01		$	0.06		$	(0.22	)
Diluted	$	0.11		$	0.01		$	0.05		$	(0.22	)
Weighted average shares
Basic	6,022,528			5,886,247			5,961,111			5,843,103
Diluted	6,138,623			6,104,760			6,074,780			5,843,103

EX-99.2

Exhibit 99.2

Fourth Quarter 2005 Conference Call

Statement of John Hertig and Jim Hartman

Enpath Medical, Inc.

February 23, 2006

Welcome to the Enpath Medical fourth quarter, 2005 conference call.  Thank you for joining us today.  My name is John Hertig and I am the Chief Executive Officer of Enpath Medical.  Joining me on the call today is Jim Hartman, acting Chief Financial Officer and Enpath’s retired former Chief Executive.  Our comments today will contain forward-looking statements that involve risks and uncertainties.  Any number of factors could cause our results to vary from those that may be anticipated by some statements made today.  You should read our press release issued this morning and our SEC filings, specifically our 2004 Annual Report on Form 10-K filed in March 2005, for a listing of some of the factors that could cause results to differ materially.

During our remarks today, Jim Hartman will highlight certain aspects of our fourth quarter and 2005 financial results that were not covered in our press release issued this morning.  I will then review our new organizational structure, new growth opportunities the company is pursuing and provide our outlook and guidance for 2006.   At the conclusion of our remarks, Jim and I, along with Mark Kraus, Executive Vice President and General Manager of our Introducer Business Unit, and Jim Mellor, Senior Vice President of Sales and Marketing will be available to answer questions.  Jim, please give us an update on how the 2005 fiscal year finished up.

Thanks John.  We were very pleased with our strong finish for 2005.  Thanks to the third and fourth quarter performances, we were able to report a profit for the full year.  Fourth quarter revenues were $7.9 million, compared to $7.8 million in the fourth quarter of 2004, a 1% increase.  For the year ended December 31, 2005, sales of $29.4 million declined slightly compared to $29.5 million in 2004.  Within delivery systems, fourth quarter sales were $5.5 million, a 6% decrease when compared to the previous year and for 2005 delivery systems sales

were $20.5 million, a decrease of 2%.  The primary factor in the sales decline in the fourth quarter and the year was a reduction in sales of kits and components to support the marketing of Medtronic’s Left Ventricle Lead Delivery Systems.  This change reduced fourth quarter sales by $500,000 and full-year sales by over $1 million.  As announced several years ago, Medtronic moved the manufacture of this product line to its own facility and our sales during 2005 represent primarily components plus a modest amount of kits for sale in countries in which Medtronic had not yet received regulatory approval for its next generation product.  Sales to Medtronic of this product line are no longer material to overall revenue results.

Sales of our lead technologies product line increased during the fourth quarter from $1.96 million last year to $2.4 million, a 21% improvement.  For the year, sales were $8.9 million compared to $8.5 million in 2004.  Our epicardial steroid lead partner that is distributing the product in Europe has experienced favorable reception for the lead and placed a larger than expected second order for shipment during the fourth quarter and into early this year.  Our largest leads customer, which significantly reduced orders in 2004 due to an overstock situation, has now increased its orders which contributed to the sales improvement in the fourth quarter.  We believe that the overstock issues have been substantially resolved.

Fourth quarter gross margins on a consolidated basis were 34.1% compared to 36.4% a year ago. Delivery systems gross margins for the fourth quarter of 2005 were 37.1% and declined from 44.0% reported in the fourth quarter of 2004.  The most significant factors contributing to the decrease was the substantial investment in steerable catheter manufacturing capabilities we are making in order to meet the anticipated needs of our customers starting in 2006.

Margins on the lead technologies product line increased to 26.9% in the fourth quarter of 2005 from 13.6% in the fourth quarter of 2004.  Most of this improvement was driven by the

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efficiencies derived from higher levels of sales this year compared to last, along with the elimination of several low-margin manufacturing projects last year.  For the full year our company-wide gross margins declined to 36.3% from 37.9% driven primarily by the steerable catheter manufacturing ramp-up activity.

Our research and development expenditures increased 14% in 2005 compared to 2004 to nearly $5.4 million or 18.4% of sales.  In the fourth quarter, research and development expenditures declined from $1.4 million to $1.2 million or 15.4% of sales.  In terms of dollars invested in R & D, the fourth quarter represented a substantial reduction compared to the first two quarters of 2005 when we spent on average nearly $1.5 million each quarter as we pursued the appeal process with the FDA on our epicardial steroid lead.

As we disclosed previously, one of our partners has gained approval for the steroid epicardial lead in Europe and has been encouraged by favorable customer response to this product.  These European implants have opened the door to enable us to gather clinical performance data in a lower cost manner with this partner.  We believe this data collection could satisfy the requirements of the Food and Drug Administration’s request for human clinical performance which is needed before it would grant marketing clearance for this partner in the US.  Our other remaining partner decided not to pursue either European or US approval.

We are also conducting significant R & D work on steerable introducers for our own family of steerable devices for which we have received both FDA and European marketing clearance.  Our announced agreement with Bard EP for an exclusive arrangement to market our steerable device into the electrophysiology field is the initial validation for this investment.  Bard EP along with a second steerable catheter customer are launching products in the next several months and our first quarter will be favorably affected by their initial launch orders.

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Selling, general and administrative expenses were 15.0% of sales for the quarter, compared to 17.7% in the fourth quarter of 2004.  SG&A for 2005 was 18% of sales, roughly equivalent to 2004.  In real dollars, SG&A expenses declined more than $200,000 in the fourth quarter compared to last year and for the year they declined approximately $140,000.  At mid-year of 2005 when we had incurred two consecutive quarters of losses, we made certain expense reductions with the intent of getting back to profitability and are pleased to have achieved profitable outcomes in both the third and fourth quarters.

We determined the amount of prior year research and development tax credits and have claimed or received refunds of taxes paid, and as a result, were able to record a tax benefit of $341,000 in the fourth quarter.  Net income for the fourth quarter was $670,000, or $.11 per fully diluted share, and for the year, we recorded net income of $333,000 or $.05 per fully diluted share, compared to income of $37,000 or $.01 per diluted share in the fourth quarter of last year and a loss of $1.3 million, or $.22 per share for all of 2004.  The full year 2004 also included a one-time impairment charge of our safety needle investment of $2.8 million.

Our cash situation improved dramatically during the quarter, aided by the refund of prior year research and development income tax credits.  While we had $1.1 million borrowed on our $4 million line of credit at the end of the third quarter, we were able to fully pay off the line during the quarter.  Our operations and accounting people do an excellent job in managing our inventory and receivables and the result of this effort is that these accounts have remained relatively constant during this past year.  Over the past two years we have paid down our term loan by over $2 million and at December 31, 2005 had an outstanding balance of $2.8 million.

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I’ll now turn the presentation over to John to discuss a new organizational structure, our key plans for the coming year and provide guidance for 2006.

Thanks Jim.  I am delighted to be joining Enpath Medical as Chief Executive Officer and to have the opportunity to share with you my thoughts about the future direction of our company.  My first month has been exciting and rewarding as we undertook, with the enthusiastic support of the senior management team, a restructuring of our company around product lines.  We are focusing on three key core product categories:  Introducers, Advanced Delivery Catheters and Stimulation Leads and the management of each have responsibility for R&D, Manufacturing and Quality Control in delivering products which exceed our customer expectations.   Mark Kraus, our longest term executive besides Jim Hartman, will lead our Introducer effort as Vice President and General Manager.  The Introducer product line is our largest and most profitable business.  Jim Reed, our former Vice President of Sales is now Vice President and General Manager of the emerging, but not yet profitable, advanced delivery catheter product line.  And David Grenz, named Vice President and General Manager at the February 16th Board meeting, will lead the stimulation leads business activity.  Dave is a fifteen-year veteran of Medtronic’s cardiac rhythm management business with the last eight years managing stimulation lead development activities and we are extremely pleased to have his expertise on our management team.

Regarding our new sales and marketing strategy, Jim Mellor, our Senior Vice President of Sales & Marketing, will oversee strategic marketing and new business development activities across all of Enpath’s product lines.  We believe this arrangement will allow us to efficiently and strategically build our pipeline of new products and maximize the potential return from our R&D investments.

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In addition, Mr. Mellor will oversee a selling effort that will create one Enpath “face” to our OEM customers, and combine all of our product lines into one comprehensive sales approach. To manage the sales and business relationships with our OEM partners, we have hired Steve Mogensen as Vice President of Sales.  Steve is a highly experienced sales executive having held a variety of key positions including marketing and sales at Medsource Technologies and Smith Industries Medical Systems.  Together the marketing and sales team will provide significant insights that will help us direct our overall growth strategy, identify and prioritize new product opportunities, ensure accountability for new product timelines, and successfully launch the new products through the distribution organizations of our OEM partners.

We expect our focus on R&D and new product development to yield significant and positive results this year and have several important product launches scheduled for 2006.  We are currently building and shipping inventory in support of the Bard EP launch of our steerable catheter into the worldwide electrophysiology market.  Another customer is also being shipped steerable catheters for use in a commercial launch of its diagnostic device.  These shipments will have a favorable impact on our first quarter sales.

In the third quarter of 2006, we expect to launch a second generation valved introducer for use in the pacing market.  This product is being designed specifically to reduce the potential for back bleeding and air embolisms during the placement of pacing leads.  While the current FlowGuard valved introducer has become the standard of care in the dialysis placement market, it does not yet meet the more rigorous requirements of lead placement, and we have redesigned the new valve to meet those needs.

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Development of the steerable introducer for the placement of a carotid artery stent, our next clinical application for the advanced delivery product platform, started in earnest during the last quarter.  The carotid artery stenting market is an ideal application for the steerable introducer due to the fact that a large percentage of the potential patients have a very difficult-to-access vascular anatomy.  The steering feature of the introducer makes accessing these tortuous path anatomy’s significantly easier.  Initial prototypes of the product were greeted with strong support and enthusiasm among key opinion leaders in this market segment during two recent clinician based conferences dedicated to this type of clinical procedure.  Based on our current development plan, we expect to be able to select a marketing partner for this product in the next several months and to launch the product in late Q4 or early in 2007.

Favorable cardiac surgeon response to our epicardial lead implant tool has resulted in one of our marketing partners selling the FasTac Flex^TM in Europe.  The FasTac Flex is our proprietary epicardial lead delivery tool.  Surgeon requests for the FasTac Flex tool in the U.S. have just recently motivated this same partner to begin the process required to distribute this product in the U.S. together with our non-steroid epicardial lead which it already markets in the U.S.

In addition, we have begun diligently working on our own proprietary designs for neurological stimulation and next generation epicardial leads in combination with our unique catheter delivery systems. In both of these product categories, we now have the opportunity to leverage our lead and delivery system capabilities to increase the value of our offering by providing a complete stimulation lead and catheter delivery system to our customers.   By designing the lead and delivery tool together, Enpath will offer the clinician the most effective therapeutic device and the most efficient and elegant means to deliver a stimulation lead to the desired location in the human anatomy.

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We also continue to work on a product development project in support of the CRM industry’s move to a new quadra-polar, inline connector, the IS-4 adaptor.  This project remains on track and we expect this new product will provide us with some significant revenue beginning in early 2007.

For our focus on our manufacturing initiative, one of our major challenges this year will be to improve manufacturing processes in our steerable advanced delivery catheter product line which is having a detrimental effect on overall gross margins.  We have identified and fully understand the areas where operational improvements can be made and have activities underway to address this margin improvement opportunity.

Finally, in addition to these initiatives, our success will depend on our ability to continue to exceed the expectations of our customers and our entire team is dedicated to meeting that commitment.   As part of the new organization we have moved Customer Service into the Sales and Marketing area, which will have a very pro-active role in driving the service side of customer satisfaction.

In other developments, the Board of Directors at the Board meeting held on February 16 accepted the resignation of Trevor Jones from the Board.  Mr. Jones was the BIOMEC representative on the board to which BIOMEC is entitled as long as the company and its affiliates hold more than 5% of Enpath’s stock.  Mr. Jones is now 75 years old and desired to reduce his heavy travel schedule.  In his place, BIOMEC proposed Richard Schwarz as its representative on the Board and both I, and Mr. Schwarz, were elected to the Board at the February 16^th board meeting.  Mr. Schwarz is an investor, entrepreneur and currently is Chairman of NineSigma Corp., a consulting

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firm headquartered in Cleveland. We want to express our gratitude to Mr. Jones for his contribution to the Board and wish him well in his future activities.

Now to provide you with some performance guidance for 2006.  We expect revenue to increase between 15% and 20% over 2005 revenues.  We expect strong first quarter sales performance with the launch orders from two of our advanced delivery catheter customers.  We expect second quarter sales to decline sequentially from the first quarter following the first quarter launch orders, and then accelerate again through the remaining last two quarters of the year.   We anticipate that we will be profitable throughout 2006, although the second quarter could be close to a breakeven quarter for the company.

Regarding the steroid lead, we are planning to gather retrospective human clinical data for an FDA submission on our steroid lead, however, we do not believe these costs will be of the same magnitude as the costs from one year ago when we went through the rigorous appeal process.  I also want to caution you that there is no certainty that we will be able to gather the necessary data, or even if we do, that it will be adequate to gain marketing clearance from the FDA.

Jim Hartman and I will also be conducting investor meetings in various cities during March and possibly April.  The primary intent of those meetings will be for me personally to become acquainted with our key investors and communicate the exciting new opportunities for Enpath and its future organic growth potential based upon the investments that have been made during the past few years.

Thank you for listening today.  Jim and I along with Mark Kraus and Jim Mellor will now answer any questions you may have.

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