SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ___________ to ___________
COMMISSION FILE NUMBER 0-19467
MEDAMICUS, INC.
(Exact name of small business issuer in its charter)
MINNESOTA 41-1533300
(State of Incorporation) (IRS Employer Identification No.)
15301 HIGHWAY 55 WEST, PLYMOUTH, MN 55447
(Address of principal executive office, including zip code)
(612) 559-2613
(Registrant's telephone number, including area code)
N/A
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Former name, former address and former fiscal year, if changed since
last report
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
The number of shares of Registrant's Common Stock outstanding on June 30, 2000
was 4,129,474
Transitional Small Business Disclosure Format. Yes ___ No _X_
1
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MEDAMICUS, INC.
INDEX
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets as of June 30, 2000 and December 31, 1999 3
Statements of Operations for the three and six months ended June 30, 2000 and 1999 4
Statement of Shareholders' Equity for the six months ended June 30, 2000 4
Statements of Cash Flows for the six months ended June 30, 2000 and 1999 5
Condensed Notes to the Financial Statements 6-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 7-11
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
ITEM 6(a). EXHIBITS 11
ITEM 6(b). REPORTS ON FORM 8-K 11
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BALANCE SHEETS
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JUNE 30, 2000 DECEMBER 31, 1999
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<S> <C> <C>
ASSETS Unaudited
CURRENT ASSETS:
Cash and cash equivalents $ 918,180 $ 1,006,695
Accounts receivable, net of allowance for doubtful accounts of
$50,630 and $22,837, respectively 1,386,070 1,229,665
Inventories 1,416,886 1,407,189
Prepaid expenses and other assets 127,050 72,915
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TOTAL CURRENT ASSETS 3,848,186 3,716,464
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PROPERTY AND EQUIPMENT:
Equipment 2,495,699 2,401,566
Office furniture, fixtures and computers 710,290 673,338
Leasehold improvements 374,705 365,800
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3,580,694 3,440,704
Less accumulated depreciation and amortization (2,893,874) (2,750,073)
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NET PROPERTY AND EQUIPMENT 686,820 690,631
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PATENT RIGHTS, net of accumulated amortization of
$155,843 and $151,122, respectively 50,225 30,667
===================================================================================================================
TOTAL ASSETS $ 4,585,231 $ 4,437,762
===================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank $ 1,190,415 $ 1,252,213
Accounts payable 398,476 383,280
Accrued expenses 434,745 334,365
Current installments of capital lease obligations 21,378 21,744
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TOTAL CURRENT LIABILITIES 2,045,014 1,991,602
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LONG-TERM LIABILITIES:
Capital lease obligations, less current installments 35,868 47,299
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TOTAL LIABILITIES 2,080,882 2,038,901
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock-undesignated, authorized 1,000,000 shares 0 0
Common stock-$.01 par value, authorized 9,000,000 shares; issued and
outstanding 4,129,474 and 4,114,774 shares, respectively 41,295 41,148
Additional paid-in capital 8,597,217 8,578,117
Accumulated deficit (6,134,163) (6,220,404)
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TOTAL SHAREHOLDERS' EQUITY 2,504,349 2,398,861
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,585,231 $ 4,437,762
===================================================================================================================
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SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS
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STATEMENTS OF OPERATIONS (UNAUDITED)
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999
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<S> <C> <C> <C> <C>
Sales $ 2,805,291 $ 2,199,197 $ 5,415,855 $ 4,486,655
Cost of sales 1,325,013 1,080,230 2,694,966 2,267,943
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GROSS PROFIT 1,480,278 1,118,967 2,720,889 2,218,712
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OPERATING EXPENSES:
Research and development 249,062 226,141 488,810 443,315
Selling, general and administrative 1,037,409 870,206 2,086,024 1,710,353
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TOTAL OPERATING EXPENSES 1,286,471 1,096,347 2,574,834 2,153,668
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OPERATING INCOME 193,807 22,620 146,055 65,044
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OTHER INCOME (EXPENSE):
Interest expense (38,357) (19,679) (71,494) (37,647)
Interest income 12,266 8,907 23,473 17,786
Other (6,251) (1,064) (11,793) (7,903)
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TOTAL OTHER INCOME (EXPENSE) (32,342) (11,836) (59,814) (27,764)
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NET INCOME $ 161,465 $ 10,784 $ 86,241 $ 37,280
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NET INCOME PER SHARE
Basic $0.04 $0.00 $0.02 $0.01
Diluted $0.04 $0.00 $0.02 $0.01
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
Basic 4,129,273 4,112,274 4,122,781 4,112,274
Diluted 4,274,441 4,147,248 4,279,537 4,128,753
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS
STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
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Common Stock Additional
------------------------ Paid-In Accumulated
SIX MONTHS ENDED JUNE 30, 2000 Shares Amount Capital Deficit Total
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<S> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1999 4,114,774 $ 41,148 $8,578,117 $(6,220,404) $2,398,861
Options exercised 4,700 47 7,016 0 7,063
Warrants exercised 10,000 100 10,200 0 10,300
Warrants issued to consultant for services 0 0 1,884 0 1,884
Net income for the six month period ended 6/30/00 0 0 0 86,241 86,241
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BALANCES AT JUNE 30, 2000 4,129,474 $ 41,295 $8,597,217 $(6,134,163) $2,504,349
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SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS
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STATEMENTS OF CASH FLOWS (UNAUDITED)
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SIX MONTHS ENDED
June 30, 2000 June 30, 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 86,241 $ 37,280
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 148,522 183,825
Warrants issued for compensation 1,884 0
Changes in operating assets and liabilities:
Accounts receivable (156,405) 5,862
Inventories (9,697) (133,826)
Prepaid expenses and other assets (54,135) 9,197
Accounts payable 15,196 (47,034)
Accrued expenses 100,380 14,311
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NET CASH PROVIDED BY OPERATING ACTIVITIES 131,986 69,615
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net of retirements (139,990) (181,104)
Additions to patent rights (24,279) (934)
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NET CASH USED IN INVESTING ACTIVITIES (164,269) (182,038)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations (11,797) (22,860)
Proceeds from exercise of stock options 7,063 0
Proceeds from exercise of warrants 10,300 0
Payments on note payable to bank (61,798) (64,073)
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NET CASH USED IN FINANCING ACTIVITIES (56,232) (86,933)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (88,515) (199,356)
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,006,695 1,022,055
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 918,180 $ 822,699
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 69,141 $ 37,203
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SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS
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CONDENSED NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial statements included in this Form 10-QSB have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, pursuant to such rules and
regulations, although management believes the disclosures are adequate to make
the information presented not misleading. These statements should be read in
conjunction with the Company's annual report on Form 10-KSB for the year ended
December 31, 1999, filed by the Company with the Securities and Exchange
Commission.
The financial statements presented herein as of June 30, 2000 and for the three
and six months ended June 30, 2000 and 1999 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:
JUNE 30, 2000 DECEMBER 31, 1999
-----------------------------------------
Purchased parts and subassemblies $ 892,733 $ 844,775
Work in process 218,283 268,439
Finished goods 305,870 293,975
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TOTAL INVENTORY $1,416,886 $1,407,189
================================================================================
3. NET INCOME (LOSS) PER SHARE
Basic per-share amounts are computed, generally, by dividing net income or loss
by the weighted-average number of common shares outstanding. Diluted per-share
amounts assume the conversion, exercise, or issuance of all potential common
stock instruments unless the effect is anti-dilutive, thereby reducing the loss
or increasing the income per common share.
4. INCOME TAXES
No income tax provision has been presented in the Statements of Operations due
to the utilization of net operating loss carryforwards.
5. SEGMENT AND RELATED INFORMATION
The Company has two primary business units that comprise the internal reporting
structure for its management. These business units are the Percutaneous Delivery
Systems (formerly called Vascular Delivery Systems) business unit and the Fiber
Optic business unit which are defined below. The Company allocates its general
and administrative expenses, as well as interest income, interest expense and
other expenses evenly across both business units.
PERCUTANEOUS DELIVERY SYSTEMS (PDS): This segment consists of business
activities related to the development, manufacture and sale of vascular delivery
products, for use in the implantation of pacemakers, defibrillators, infusion
ports and dialysis catheters through value-added relationships with other
medical device companies.
FIBER OPTIC: This segment consists of business activities related to the
development, manufacture and sale of the Company's LuMax(TM) fiber optic monitor
and catheters for the diagnosis of incontinence and prostate conditions through
a direct sales force.
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Summarized financial information concerning the Company's reportable segments is
shown in the following table.
THREE MONTHS ENDED 06/30/00 PDS DIVISION FIBER OPTIC TOTAL
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Revenues $1,752,290 $1,053,001 $2,805,291
Segment profit (loss) 566,829 (405,364) 161,465
Total assets 2,490,570 2,094,661 4,585,231
Capital expenditures 32,914 21,003 53,917
Depreciation and amortization 27,386 42,051 69,437
Interest expense 19,179 19,178 38,357
Interest income 6,133 6,133 12,266
SIX MONTHS ENDED 06/30/00 PDS DIVISION FIBER OPTIC TOTAL
--------------------------------------------------------------------------------
Revenues $3,582,660 $1,833,195 $5,415,855
Segment profit (loss) 1,111,781 (1,025,540) 86,241
Total assets 2,490,570 2,094,661 4,585,231
Capital expenditures 72,599 67,391 139,990
Depreciation and amortization 53,156 95,366 148,522
Interest expense 35,748 35,746 71,494
Interest income 11,737 11,736 23,473
THREE MONTHS ENDED 06/30/99 PDS DIVISION FIBER OPTIC TOTAL
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Revenues $1,348,943 $850,254 $2,199,197
Segment profit (loss) 414,341 (403,557) 10,784
Total assets 1,865,380 2,272,044 4,137,424
Capital expenditures 88,094 (12,222) 75,872
Depreciation and amortization 26,668 54,918 81,586
Interest expense 9,840 9,839 19,679
Interest income 4,453 4,454 8,907
SIX MONTHS ENDED 06/30/99 PDS DIVISION FIBER OPTIC TOTAL
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Revenues $2,932,495 $1,554,160 $4,486,655
Segment profit (loss) 997,873 (960,593) 37,280
Total assets 1,865,380 2,272,044 4,137,424
Capital expenditures 96,282 84,822 181,104
Depreciation and amortization 48,625 135,200 183,825
Interest expense 18,824 18,823 37,647
Interest income 8,893 8,893 17,786
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis provides information that the Company's
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the accompanying financial statements and footnotes.
7
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RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
OVERVIEW
Total revenues were $5,415,855 for the six months ended June 30, 2000 compared
to $4,486,655 for the six months ended June 30, 1999, representing a 20.7%
increase. Total gross profit increased from $2,218,712 for the six months ended
June 30, 1999, to $2,720,889 for the six months ended June 30, 2000,
representing a 22.6% increase. Total gross profit as a percent of sales
increased from 49.5% to 50.2% in such periods. Total research and development
expenditures were $488,810 or 9.0% of sales for the six months ended June 30,
2000, compared to $443,315 or 9.9% of sales for the six months ended June 30,
1999. Sales and marketing expenses increased from $1,193,188 for the six month
period ended June 30, 1999 to $1,442,289 for the six month period ended June 30,
2000. General and administrative expenses increased from $517,165 for the six
months ended June 30, 1999 to $643,735 for the six months ended June 30, 2000.
This increase was primarily due to increased spending on salaries, registration
costs associated with maintaining ISO 9000 certification, and a $39,000 charge
to bad debts during the period related to two customers. Additionally, the
Company incurred $23,500 in consulting costs related to business evaluation
during the period. Interest income and other expenses remained relatively
unchanged in total during the comparable periods. Interest expense increased
$33,847 between the comparable periods primarily due to larger outstanding
borrowings on the line of credit and higher interest rates.
As a result, the Company had net income of $86,241 or $.02 per share for the six
months ended June 30, 2000, compared to net income of $37,280 or $.01 per share
for the six months ended June 30, 1999.
PERCUTANEOUS DELIVERY SYSTEMS
Sales of vessel introducers, primarily to Medtronic under an exclusive
distribution arrangement, were $3,176,529 for the six months ended June 30,
2000, compared to $2,621,666 for the six months ended June 30, 1999,
representing a 21.2% increase. This increase was primarily due to shipments of
the Left Ventricle Lead Delivery System (LVLDS) to Medtronic. This sophisticated
kit, which began shipping during the third quarter of 1999, allows physicians
access to the left ventricle of the heart in order to provide stimulation for
the effective treatment of patients with congestive heart failure. Medtronic
built some inventory of these kits during the first quarter, and the Company
expects orders for this product to return to normal ordering patterns in the
quarters ahead. The Company is following a strategy of expanding its product
offering and customer base for introducer products, which resulted in shipments
to eight different customers in the current second quarter, compared to four
customers during the second quarter of 1999. The Company is in the ramp-up stage
with a number of these customers, so future sales are expected to be favorably
influenced by these new relationships. The Company does expect to see a slight
drop in introducer sales to Medtronic during the third quarter compared to the
first two quarters of 2000.
Contract manufacturing sales were $407,201 for the six months ended June 30,
2000, compared to $275,083 for the six months ended June 30, 1999. This increase
was primarily due to one of the Company's contract customers ordering higher
quantities of product during the comparable periods. The Company expects
contract manufacturing sales to drop slightly in the third quarter to a level
consistent with those seen in the first quarter of 2000. The Company also does
some contract research and development work periodically for Medtronic but
realized no sales for the six months ended June 30, 2000 compared to $35,746 for
the six months ended June 30, 1999.
The gross profit percentage on vessel introducers and contract manufacturing
totaled 51.2% for the six months ended June 30, 2000, compared to 52.9% for the
six months ended June 30, 1999. The decrease in the gross profit percentage on
vessel introducers and contract manufacturing was primarily due to two factors.
First, the Company increased spending on overhead as it ramped up production for
the LVLDS product, as well as other new product introductions. Second, the mix
of introducer products sold during the first half of 2000 changed with the
introduction of several new customers, negatively impacting the gross profit
margins.
Total research and development expenditures were $253,203 or 7.1% of sales for
the six months ended June 30, 2000, compared to $208,796 or 7.1% of sales for
the six months ended June 30, 1999. The Company increased its engineering staff
and has been working on a number of projects for Medtronic. The Company is also
working on
8
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several new introducer product concepts. The Company expects research and
development expenditures in the second half of 2000 to approximate those
incurred during the first half of 2000.
Selling expenses increased from $70,590 for the six months ended June 30, 1999
to $116,451 for the six months ended June 30, 2000. This increase was primarily
due to two factors. First, commission expense increased due to the increase in
sales. Second, the Company hired a sales consultant in May 1999 to help expand
the customer base for its products. The costs associated with this sales
consultant and attending shows during the current period were not fully present
during the first half of 1999.
FIBER OPTIC
Sales of the Company's fiber optic pressure sensing products were $1,833,195 for
the six months ended June 30, 2000, compared to $1,554,160 for the six months
ended June 30, 1999, representing an 18.0% increase. Monitor sales increased
21.4% or $158,763 and catheter sales increased 16.3% or $120,230 over the
comparable period. Accessory and service sales remained constant over the
comparable periods. The increase in monitor sales was primarily due to selling
more systems at a higher average selling price during the comparable periods.
The average selling price per system increased significantly from the previous
year, primarily due to the introduction of the LuMax Pro, a next generation
version of the LuMax System which provides enhanced study management, reporting
and record keeping capabilities for clinicians. The Company also continues to be
pleased with the steady growth in its catheter sales.
The gross profit percentage on fiber optic products totaled 48.4% or $887,679
for the six month period ended June 30, 2000 compared to 43.0% or $668,987 for
the six month period ended June 30, 1999. This increase was primarily due to a
higher average selling price on the LuMax Pro System, better catheter yields,
and improved catheter margins related to the launch of the S-Series catheter
last fall. The Company expects gross profit in the fiber optic business to
improve in the future as the Company increases sales and better utilizes its
capacity.
Total research and development expenditures were $235,607 or 12.9% of sales for
the six months ended June 30, 2000, compared to $234,519 or 15.1% of sales for
the six months ended June 30, 1999. The Company completed development on the
next generation LuMax System, the LuMax Pro in March 2000. This product was
launched in March at the Company's sales meeting. The Company continues to
explore product enhancements and new technologies and expects research and
development expenditures in the second half of 2000 to approximate those
incurred during the first half of 2000.
Selling expenses increased from $1,122,598 for the six months ended June 30,
1999 to $1,325,838 for the six months ended June 30, 2000. The increase was
primarily due to a marketing campaign kicked off in the first quarter of 2000 to
help generate leads for our direct sales force and heighten awareness for the
LuMax System. Other reasons for the increase included increased spending on
salaries, commissions, and samples related to the launch of the S-Series
catheter and LuMax Pro System.
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
OVERVIEW
Total revenues were $2,805,291 for the three months ended June 30, 2000 compared
to $2,199,197 for the three months ended June 30, 1999, representing a 27.6%
increase. Total gross profit increased from $1,118,967 for the three months
ended June 30, 1999 to $1,480,278 for the three months ended June 30, 2000,
representing a 32.3% increase. Total gross profit as a percent of sales
increased from 50.9% to 52.8% in such periods. Total research and development
expenditures were $249,062 or 8.9% of sales for the three months ended June 30,
2000, compared to $226,141 or 10.3% of sales for the three months ended June 30,
1999. Sales and marketing expenses increased from $613,655 for the three month
period ended June 30, 1999 to $709,535 for the three month period ended June 30,
2000. General and administrative expenses increased from $256,551 for the three
months ended June 30, 1999 to $327,874 for the three months ended June 30, 2000,
primarily due to the factors discussed above. Interest income and other expenses
remained relatively unchanged in total during the comparable periods. Interest
expense increased $18,678 between the comparable periods primarily due to larger
outstanding borrowings on the line of credit and higher interest rates.
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As a result, the Company had net income of $161,465 or $.04 per share for the
three months ended June 30, 2000, compared to net income of $10,784 or $.00 per
share for the three months ended June 30, 1999.
PERCUTANEOUS DELIVERY SYSTEMS
Sales of vessel introducers, primarily to Medtronic under an exclusive
distribution arrangement, were $1,520,744 for the three months ended June 30,
2000, compared to $1,169,865 for the three months ended June 30, 1999,
representing a 30.0% increase. This increase was due to the factors stated
above. The Company expects introducer sales to drop slightly in the third
quarter.
Contract manufacturing sales were $230,041 for the three months ended June 30,
2000, compared to $164,921 for the three months ended June 30, 1999, due to the
factors stated above. The Company expects contract manufacturing sales in the
third quarter to be consistent with those in the first quarter of 2000. The
Company also does some contract research and development work periodically for
Medtronic and realized sales of $1,505 for the three months ended June 30, 2000
compared to $14,157 for the three months ended June 30, 1999.
The gross profit percentage on vessel introducers and contract manufacturing
totaled 53.3% for the three months ended June 30, 2000, compared to 51.7% for
the three months ended June 30, 1999. This increase was primarily due to the
increased contract manufacturing sales between quarters which carried a higher
gross profit percentage.
Total research and development expenditures were $127,869 or 7.3% of sales for
the three months ended June 30, 2000, compared to $113,263 or 8.4% of sales for
the three months ended June 30, 1999, due to the factors discussed above.
Selling expenses increased from $36,016 for the three months ended June 30, 1999
to $58,401 for the three months ended June 30, 2000, due to the factors
discussed above.
FIBER OPTIC
Sales of the Company's fiber optic pressure sensing products were $1,053,001 for
the three months ended June 30, 2000, compared to $850,254 for the three months
ended June 30, 1999, representing a 23.9% increase. Monitor sales increased
33.4% or $141,102 and catheter sales increased 12.6% or $50,037 over the
comparable period. The Company also saw increases in its accessory and service
sales totaling $11,608. The increase in monitor sales was primarily driven by a
higher average selling price.
The gross profit percentage on fiber optic products totaled 52.0% or $547,071
for the three month period ended June 30, 2000 compared to 49.5% or $421,152 for
the three month period ended June 30, 1999, due to the factors discussed above.
Total research and development expenditures were $121,193 or 11.5% of sales for
the three months ended June 30, 2000, compared to $112,878 or 13.3% of sales for
the three months ended June 30, 1999, due to the factors discussed above.
Selling expenses increased from $577,639 for the three months ended June 30,
1999 to $651,134 for the three months ended June 30, 2000. The increase is
primarily due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended June 30, 2000
was $131,986, consisting of net income of $86,241, adjusted for non-cash items
of depreciation and amortization of $148,522, plus warrants issued for
compensation of $1,884, minus a net change in operating assets and liabilities
of $104,661.
Net cash used in investing activities for the six months ended June 30, 2000 was
$164,269. Equipment was purchased totaling $139,990 and the Company had
additions to patent rights totaling $24,279 during the period. Net cash used in
financing activities for the six months ended June 30, 2000 was $56,232. The
Company made principal debt payments of $11,797 and paid down $61,798 on its
line of credit in order to reduce interest expense. This was offset by proceeds
of option and warrant exercises of $17,363.
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As a result, the Company's cash and cash equivalents were $918,180 as of June
30, 2000 compared to $1,006,695 at December 31, 1999. Working capital increased
from $1,724,862 as of December 31, 1999 to $1,803,172 as of June 30, 2000.
On May 26, 2000, the Company signed an extension through June 30, 2001 on its
revolving line of credit with a financial institution. The line was increased
from $2,000,000 to $2,500,000 and the agreement calls for interest at the rate
of 1.00% over the financial institution's base rate with no minimum interest
due. The availability under the line is subject to borrowing base requirements,
and advances are at the discretion of the lender. The line is secured by
substantially all of the Company's assets.
If sales and working capital needs meet the Company's estimates, the Company
believes its available cash and investments, along with borrowing availability
under its line of credit, will be sufficient to meet the Company's anticipated
operating expenses and cash requirements for the foreseeable future. If the
sales estimates are not realized or working capital requirements exceed those
anticipated, the Company may need to secure additional capital or, if capital is
not available, to curtail its marketing efforts.
Forward-looking statements herein are made pursuant to the safe harbor
provisions of the Private Securities Reform Litigation Act of 1995. Certain
important factors could cause results to differ materially from those
anticipated by some statements made herein. You are cautioned that all
forward-looking statements involve risks and uncertainties. Among the factors
that could cause results to differ materially are those discussed in our Annual
Report on Form 10-KSB and other recent filings with the Securities and Exchange
Commission, as well as, and without limitation, attracting and retaining key
personnel; lack of market acceptance of the Company's products; introduction of
competitive products; the availability of third party reimbursement; changes in
government regulations; protecting the Company's intellectual property rights;
exposure to product liability claims; performance of the Company's sales
representatives, and; ability to attract effective sales representatives; and
the Risk Factors included in Form 10-QSB filed with the Securities and Exchange
Commission on May 11, 2000.
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6(a) - EXHIBITS
10.1 Fifth Amendment to Credit and Security Agreement
10.2 Revolving Note Agreement
27. Financial Data Schedule
ITEM 6(b) - REPORTS ON FORM 8-K
None
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized:
MEDAMICUS, INC.
Date: July 28, 2000 By: /s/ James D. Hartman
President, Chief Executive Officer and
Chief Financial Officer
11
<PAGE>
EXHIBIT INDEX
------------- ----------------------------------------------------------- ------
EXHIBIT # DESCRIPTION PAGE
------------- ----------------------------------------------------------- ------
10.1 Fifth amendment to Credit and Security Agreement, dated
May 26, 2000, between the Company and Wells Fargo Business
Credit, Inc.
------------- ----------------------------------------------------------- ------
10.2 Revolving Note Agreement, dated May 26, 2000, between the
Company and Wells Fargo Business Credit, Inc.
------------- ----------------------------------------------------------- ------
27 Financial Data Schedule
------------- ----------------------------------------------------------- ------
12
