SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
April 15, 2004
----- --- ----
Date of Report (Date of earliest event reported)
VIKING SYSTEMS, INC.
------ -------- ----
(Name of Small Business Issuer as specified in its charter)
Nevada 86-0913802
------ ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification No.)
SEC File Number 000-49636
7514 Girard Ave, Suite 1509, La Jolla, CA 92037
(Address of principal executive offices)
Registrant's telephone no., including area code: (858) 456-6608
In this current report references to "Viking," "we," "us," and "our" refer to
Viking Systems, Inc.
FORWARD LOOKING STATEMENTS
This current report contains certain forward-looking statements and any
statements contained in this current report that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"estimate" or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors, many of which are not within Viking's control. These factors
include, but are not limited to, economic conditions generally and in the
markets in which Viking may participate, competition within Viking's markets and
failure by Viking to successfully develop business relationships.
ITEM 2: ACQUISITION AND DISPOSITION OF ASSETS
General
On December 22, 2003, Viking entered into an Asset Purchase Agreement
("Purchase Agreement") with Vista Medical Systems, Inc. ("Vista"), a Delaware
corporation. Pursuant to the Purchase Agreement, Viking agreed to purchase,
subject to the terms and conditions of the Purchase Agreement, certain assets
used by Vista in its medical device and technology business (the"Medical
Technology Business"). The closing of the Purchase Agreement ("Closing")
occurred on April 15, 2004. In addition to the purchase of assets from Vista, at
Closing Viking entered into a "License Agreement" with Vista whereby Viking now
has the exclusive, worldwide license to commercialize certain intellectual
property owned by Vista which is used in the Medical Technology Business.
Description of Business
The purchase of the assets and the licensing of the technologies from Vista
will, allow us to operate the Medical Technology Business. We intend, through
our operations of the Medical Technology Business, to develop, manufacture and
market products which provide surgeons and interventional physicians performing
complex minimally invasive procedures with a more effective, ergonomic method of
visualization of anatomical structures. Our products will involve 3-D
Visualization which is generally regarded as a critical enabler to the broader
adoption of complex minimally invasive procedures in numerous clinical
specialties.
We anticipate that our principal product line related to the Medical
Technology Business will be the Endosite Advanced Visualization and Information
System for general surgery, which combines a stereo head mounted display with
3-D video cameras to provide critical visual information during complex
minimally invasive procedures, combined with the real-time ability to view new
additional information in a voice-controlled, picture-in-picture format to
facilitate decision-making. The head mounted display, incorporating
picture-in-picture capability and voice control, is designed to give the surgeon
2
ergonomic real-time access to such critical information, integrated with the
anatomical images generated by the endoscopic camera system.
All necessary 510(k) clearances and CE marks which are required to market
the components of the EndoSite System have been received.
General Terms of the Purchase Agreement
At Closing, we acquired from Vista, the assets relating to the Medical
Technology Business for the following consideration: (i) cash in an amount of
$158,717.74; (ii) the issuance of 3,054,000 shares of Viking common stock to
Vista; and (iii) the assumption of certain liabilities relating to the Medical
Technology Business and the assets purchased.
Currently 21 employees of Vista are employed in the Medical Technology
Business. One of these employees will retain employment with Vista and we have
offered the remaining employees employment in our operation of the Medical
Technology Business.
We have agreed to appoint John Lyons, the CEO of Vista, to our board of
directors at the time of the Closing of the purchase transaction. We anticipate
that Mr. Lyon will assume a position on the Viking Board in the near future.
License Agreement
In addition to the assets we purchased from Vista, we also licensed certain
"Intellectual Property" from Vista. The Intellectual Property we are licensing
includes any and all patents, patent registrations, patent applications, data
rights, utility models, business processes, trademarks, trade secrets, know how,
trade names, registered or unregistered designs, mask works, copyrights, moral
rights and any other form of proprietary protection afforded by law to
intellectual property, or any applications therefore, which arises or is
enforceable under the laws of the United States, any other jurisdiction or any
bi-lateral or multi-lateral treaty regime which relate to the Medical Technology
Business.
The License Agreement requires us to pay a royalty of 5% of gross revenues
(as defined in the License Agreement) for certain product sales transactions and
10% of gross revenues for other product sales transactions. The License
Agreement grants us the worldwide, exclusive license to use the Intellectual
Property to manufacture, market, sublicense or otherwise commercialize products
using the technology included in the Intellectual Property. The License
Agreement provides for minimum annual royalties ranging from $150,000 to
$375,000 per year.
The royalties agreed to in the License Agreement are to be paid until the
earlier of the date on which we have paid Vista an aggregate of Four Million
Five Hundred Thousand Dollars ($4,500,000) or the fifth anniversary of effective
date of the License Agreement ("Total Royalty"). At the end of the fifth year or
if we pay Vista the Total Royalty, Vista is required to assign and transfer to
us all of Vista's rights, title and interests in and to the Intellectual
Property for no additional consideration. If we fail to pay the required minimum
royalties are otherwise breach the License Agreement, Vista may terminate the
license.
3
Consideration for the Acquisition
The consideration we paid Vista pursuant to the Purchase Agreement was
negotiated at "arms length" and our management relied on representations made by
Vista's management and other documents and information provided to us. Our
management considered factors used in similar proposals to determine the amount
of consideration appropriate for the acquisition of the assets. These factors
included the relative value of the assets, the present and past operations of
the Medical Technology Business, the future potential of the Medical Technology
Business, the continued employment of employees of the Medical Technology
Business, and the potential benefit of the transaction to the stockholders of
Viking.
Our board of directors determined that the terms of the Purchase Agreement
and License Agreement are reasonable based upon the above factors. Our board did
not seek a third party fairness opinion or any valuation or appraisal of the
terms of the transaction. Thus, our stockholders will not have the benefit of a
third party opinion that the terms of the Purchase Agreement and License
Agreement are fair from a financial point of view.
Interests of Certain Persons
Other than as described in this report, there have been no contacts,
negotiations or transactions within the past two years between Viking or any of
our directors, executive officers or their affiliates, on the one hand, and
Vista or its affiliates, on the other hand, regarding the acquisition,
consolidation, acquisition of shares or election of directors.
ITEM 5: OTHER EVENTS AND REGULATION FD DISCLOSURE
At the time of the Closing, we appointed Joseph A. Warrino, as our Chief
Financial Officer and Secretary. Mr. Warrino was the controller of the Vista's
Medical Technology Business. Mr. Warrino's resume is as follows:
Joseph Warrino. Mr Warrino was appointed the Chief Financial Officer and
Secretary of Viking on April 16, 2004. From 2000 to April 16, 2004, he was the
controller of Vista Medical Technologies, Inc. From 1999 to 2000 he was a
Division Controller and Human Resources Manager of DT Industries, Inc. Lasko
Company. M From 1998 to 1999, he was a senior cost accountant for Visat Medical
Technologies, Inc. From 1989 to 1998, Mr. Warrino worked as an accountant for
several different companies. Mr. Warrino earned his BS Degree in accounting from
Salem State College and his AS Degree in Management from Middlesex Community
College.
On April 15 we appointed Ronald Walrod as a director of Viking. Mr.
Walrod's resume is as follows:
Ronald Walrod. Mr. Walrod was appointed a director of Viking on April 15,
2004. He has served as President, Chief Executive Officer and director of JMAR
Technology since October, 2002 of JMAR Technology. From 1998 to 2000, Mr. Walrod
served as President and CEO of Kinetic Probe, a privately-held company engaged
in the development of semiconductor probe cards. While there, he established a
4
new business model for the start-up operation and secured funding from a range
of sources to develop and commercialize its product. From 1996 to 1998, Mr.
Walrod served as President and CEO of Nautronix, a leading supplier of dynamic
positioning, autopilot and automation systems for marine applications. From 1984
to 1993, Mr. Walrod served as President and CEO of Applied Remote Technology,
Inc. (ART), a company he founded to develop autonomous undersea vehicle (AUV)
systems, advanced undersea sensors, and acoustic communications links, all of
which have both commercial and military applications. The effectiveness of ART's
AUV and sensor systems earned the Company recognition as a leading innovator in
the field and led directly to ART's acquisition by General Dynamics. Mr. Walrod
graduated with Honors from the United States Coast Guard Academy and earned both
Masters of Science and Professional Engineer Degrees from the Massachusetts
Institute of Technology in 1970, and received a Masters of Business
Administration degree from the University of San Diego in 1983. He was awarded a
fellowship for graduate studies in Ocean Engineering from the National Science
Foundation and has twice received the Industrial Research and Development IR 100
Award for Remotely Operated Vehicles developed under his direction. Mr. Walrod
holds a United States Patent for "Comminution by Cryogenic Electrohydraulics"
that was issued in 1998.
Viking was originally engaged in the computer training and services
business but we terminated those operations in December 2002. In November 2003,
our Board of Directors, as then constituted, considered and approved a proposal
from a third party relating to a change of Viking's business plan and an
infusion of capital. The new Board of Directors adopted a business plan which
calls for Viking to engage in the business of development, manufacturing and
marketing of medical devices. As stated in Item 2 above, on April 15, 2004, we
acquired assets of Vista Medical Technologies which were used in Vista Medical
Technologies' medical device and technology business. Dennis Blomquist was an
officer and a director of Viking when we changed our business plan in November
2003. At the request of new management of Viking, Dennis Blomquist agreed to
serve as an interim chief financial officer and as an interim director of Viking
until various SEC filings had been completed and the Vista acquisition closed.
Since November 2003, we have become current in all of our SEC filings. We have
also completed the acquisition of assets of Vista, we have appointed Mr. Warrino
as chief financial officer of Viking and we have appointed Ronald Walrod as a
director of Viking. As result of the completion of these matters, and at
Viking's request and Mr. Blomquist's agreement, Mr. Blomquist tendered his
resignation as a director and chief financial officer of Viking. Mr. Blomquist's
resignation was not the result of any disagreement or dispute with Viking or
with any policy or action of Viking but was effected as part of the long term
business plan of Viking with Mr. Blomquist's concurrence.
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements and (b) Proforma Financial Statements
We will file, as an amendment to this report and within the time period set
forth in Item 7, the financial statements and/or pro forma financial information
specified in Regulation S-X, as promulgated under the Securities and Exchange
Act of 1934, as amended, together (as appropriate) with the signed accountants
reports as provided in Regulation S-X.
5
(c) Exhibits.
Exhibit No. Title
2.1 Asset Purchase Agreement *
10.1 Patent and Technology License Agreement *
* Filed as an exhibit to a Form 8-K filed by Viking on December 22, 2003
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: April 19, 2004 VIKING SYSTEMS, INC.
By /s/ Thomas B. Marsh
-------------------------------
Thomas B. Marsh,
President/Chairman of the Board
6