UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended January 31, 2005
or
[ ] 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 0-944
POSSIS MEDICAL, INC.
(exact name of registrant as specified in its charter)
Minnesota 41-0783184
- --------------------------------------------- ----------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
organization) Identification No.)
9055 Evergreen Blvd NW Minnesota MN 55433-8003
- ------------------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
783-780-4555
- --------------------------------------------------------------------------------
(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 short 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 _
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes _X_ No ___
The number of shares outstanding of the Registrant's Common Stock, $.40 par
value, as of February 28, 2005 was 17,431,278.
1
POSSIS MEDICAL, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets, January 31, 2005
and July 31, 2004............................................. 3
Consolidated Statements of Income and Comprehensive Income for
the three and six months ended January 31, 2005 and 2004...... 4
Consolidated Statements of Cash Flows for the
six months ended January 31, 2005 and 2004 ................... 5
Notes to Consolidated Financial Statements.................... 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................10
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk ...18
ITEM 4. Controls and Procedures.......................................18
PART II. OTHER INFORMATION
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds...19
ITEM 4. Submission of Matters to a Vote of Security Holders...........20
ITEM 6. Exhibits......................................................20
SIGNATURES....................................................21
2
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POSSIS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
January 31, 2005 July 31, 2004
---------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 4,794,650 $ 8,411,784
Marketable securities ................................. 36,819,665 39,759,403
Trade receivables (less allowance for doubtful
accounts and returns of $516,000 and
$536,000, respectively) .......................... 8,365,936 10,232,180
Inventories ........................................... 6,075,061 5,389,653
Prepaid expenses and other assets ..................... 495,158 958,616
Deferred tax asset .................................... 890,000 890,000
------------ ------------
Total current assets ........................ 57,440,470 65,641,636
PROPERTY AND EQUIPMENT, net ................................ 4,907,753 5,073,775
DEFERRED TAX ASSET ......................................... 12,685,949 15,103,949
OTHER ASSET ............................................... 218,704 201,341
------------ ------------
TOTAL ASSETS ............................................... $ 75,252,876 $ 86,020,701
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable ................................ $ 939,798 $ 1,791,694
Accrued salaries, wages, and commissions .............. 2,535,380 4,228,804
Other liabilities ..................................... 2,165,809 2,222,465
------------ ------------
Total current liabilities .................... 5,640,987 8,242,963
OTHER LIABILITIES .......................................... 340,273 160,536
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock-authorized, 100,000,000 shares
of $0.40 par value each; issued and outstanding,
17,424,965 and 18,254,942 shares, respectively 6,969,986 7,301,977
Additional paid-in capital ............................ 76,581,908 88,434,540
Unearned compensation ................................. (33,000) (15,000)
Accumulated other comprehensive loss .................. (141,000) (136,000)
Retained deficit ...................................... (14,106,278) (17,968,315)
------------ ------------
Total shareholders' equity ....................... 69,271,616 77,617,202
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................. $ 75,252,876 $ 86,020,701
============ ============
See notes to consolidated financial statements.
3
POSSIS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2005 AND 2004
(UNAUDITED)
Three Months Ended Six Months Ended
---------------------------------- ----------------------------------
Jan. 31, 2005 Jan. 31, 2004 Jan. 31, 2005 Jan. 31, 2004
------------- ------------- ------------- -------------
Product sales ................................... $ 16,168,884 $ 17,448,677 $ 33,670,872 $ 33,050,965
Cost of sales and other expenses:
Cost of medical products ................... 4,283,418 3,967,145 8,587,757 7,786,376
Selling, general and administrative ........ 6,711,939 6,659,517 14,268,521 13,374,067
Research and development ................... 2,604,131 1,978,868 5,041,835 4,106,111
------------ ------------ ------------ ------------
Total cost of sales and other expenses 13,599,488 12,605,530 27,898,113 25,266,554
------------ ------------ ------------ ------------
Operating income ................................ 2,569,396 4,843,147 5,772,759 7,784,411
Gain (loss) on sale of securities .......... 1,950 (15,516) 20,031 (34,033)
Interest income ............................ 306,701 160,570 593,133 320,922
------------ ------------ ------------ ------------
Income before income taxes ...................... 2,878,047 4,988,201 6,385,923 8,071,300
Provision for income taxes ...................... 1,208,886 1,869,900 2,523,886 3,025,900
------------ ------------ ------------ ------------
Net income ...................................... 1,669,161 3,118,301 3,862,037 5,045,400
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on securities ....... (130,000) 82,000 (5,000) 151,000
------------ ------------ ------------
Comprehensive income ............................ $ 1,539,161 $ 3,200,301 $ 3,857,037 $ 5,196,400
============ ============ ============ ============
Weighted average number of common
shares outstanding:
Basic .................................. 17,669,526 17,774,155 17,875,233 17,775,941
Diluted ................................ 18,294,815 19,163,894 18,740,501 19,109,416
Net income per common share:
Basic .................................. $ 0.09 $ 0.18 $ 0.22 $ 0.28
============ ============ ============ ============
Diluted ................................ $ 0.09 $ 0.16 $ 0.21 $ 0.26
============ ============ ============ ============
See notes to consolidated financial statements.
4
POSSIS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JANUARY 31, 2005 AND 2004
(UNAUDITED)
2005 2004
------------ ------------
OPERATING ACTIVITIES:
Net income ................................................ $ 3,862,037 $ 5,045,400
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation .............................................. 1,142,743 844,159
Gain on asset disposal .................................... (11,569) (12,525)
Stock compensation expense ................................ 141,000 123,646
(Gain) loss on sale of marketable securities .............. (2,668) 34,033
Deferred taxes ............................................ 2,421,864 2,924,030
Decrease (increase) in trade receivables .................. 1,866,244 (1,262,758)
Increase in inventories ................................... (998,768) (953,798)
Decrease in prepaid expenses and other assets ............. 446,095 31,775
Decrease in trade accounts payable ........................ (851,896) (35,470)
Decrease in accrued and other liabilities ................. (1,570,343) (82,756)
------------ ------------
Net cash provided by operating activities ............. 6,444,739 6,655,736
INVESTING ACTIVITIES:
Additions to property and equipment ....................... (660,652) (1,336,087)
Proceeds from sale of fixed assets ........................ 8,860 14,370
Proceeds from sale of marketable securities ............... 26,149,824 11,914,534
Purchase of marketable securities ......................... (23,216,282) (14,222,867)
------------ ------------
Net cash provided by (used in) investing activities .. 2,281,750 (3,630,050)
FINANCING ACTIVITIES:
Proceeds from issuance and exercise of options and warrants 777,745 2,060,994
Repurchase of common stock ................................ (13,121,368) (2,794,306)
------------ ------------
Net cash used in financing activities ................ (12,343,623) (733,312)
------------ ------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .......... (3,617,134) 2,292,374
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......... 8,411,784 4,782,942
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................ $ 4,794,650 $ 7,075,316
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for income taxes ................................ $ 217,150 $ 101,870
Issuance of restricted stock .............................. 36,000 36,000
Inventory transferred to property and equipment ........... 39,360 --
See notes to consolidated financial statements.
5
POSSIS MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. The accompanying consolidated
financial statements and notes should be read in conjunction with the
audited financial statements and accompanying notes thereto included in the
Company's 2004 Annual Report.
2. STOCK OPTIONS
Pursuant to Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, we apply the recognition and
measurement principles of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, to our stock options and other
stock-based compensation plans.
In accordance with APB Opinion No. 25, compensation cost for stock options
is recognized in income based on the excess, if any, of the quoted market
price of the stock at the grant date of the award or other measurement date
over the amount an employee must pay to acquire the stock. The exercise
price for stock options granted to employees equals the fair market value
of our common stock at the date of grant, thereby resulting in no
recognition of compensation expense.
The following table illustrates the effect on net income and earnings per
share if we had applied the fair value recognition provisions of SFAS No.
123 to stock-based employee compensation.
Three Months Ended Six Months Ended
January 31, January 31,
2005 2004 2005 2004
-------------- -------------- -------------- --------------
Net income:
Net income - as reported .................... $ 1,669,161 $ 3,118,301 $ 3,862,037 $ 5,045,400
Less estimated stock-based employee
compensation determined under fair
value based method, net of tax ........... (704,000) (738,000) (1,288,000) (1,301,000)
-------------- -------------- -------------- --------------
Net income - pro forma ...................... $ 965,161 $ 2,380,301 $ 2,574,037 $ 3,744,400
============== ============== ============== ==============
Earnings per common share:
Basic - as reported ......................... $ 0.09 $ 0.18 $ 0.22 $ 0.28
Less estimated stock-based employee
compensation determined under
fair value based method, net of tax ...... (0.04) (0.05) (0.08) (0.07)
-------------- -------------- -------------- --------------
Basic - pro forma ........................... $ 0.05 $ 0.13 $ 0.14 $ 0.21
============== ============== ============== ==============
Diluted - as reported ....................... $ 0.09 $ 0.16 $ 0.21 $ 0.26
Less estimated stock-based employee
compensation determined under fair
value based method, net of tax ........... (0.04) (0.04) (0.07) (0.06)
-------------- -------------- -------------- --------------
Diluted - pro forma ......................... $ 0.05 $ 0.12 $ 0.14 $ 0.20
============== ============== ============== ==============
Weighted average common shares
outstanding
Basic ....................................... 17,669,526 17,774,155 17,875,233 17,775,941
Diluted ..................................... 18,294,815 19,163,894 18,740,501 19,109,416
6
We estimated the fair values using the Black-Scholes option-pricing model,
modified for dividends and using the following assumptions:
2005 2004
---------------- -----------------
Risk-free rate...................................... 4.1-4.5% 4.0-4.6%
Expected dividend yield............................. 0% 0%
Expected stock price volatility..................... 54-68% 59-64%
Expected option term................................ 10 years 10 years
Fair value per option............................... $8.72-19.88 $11.85-14.02
For purposes of determining the pro forma amounts, the fair value of
options is amortized to expense over the option-vesting period in
determining the pro forma impact. The option-vesting period is six months
to four years.
Beginning with our fiscal year 2006, an in accordance with SFAS 123(R), the
Company will be required to recognize the compensation costs relating to
share-based transactions in the consolidated statement of operations. See
note 4.
3. INTERIM FINANCIAL STATEMENTS
Operating results for the three and six month periods ended January 31,
2005 are not necessarily indicative of the results that may be expected for
the year ending July 31, 2005.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In November 2003 and March 2004, the Emerging Issues Task Force (EITF)
reached a consensus on EITF Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain
Investments." The consensus reached requires companies to apply new
guidance for evaluating whether an investment is other-than-temporarily
impaired and also requires quantitative and qualitative disclosure of debt
and equity securities, classified as available-for-sale or
held-to-maturity, that are determined to be only temporarily impaired at
the balance sheet date. The Company incorporated the required disclosures
for investments accounted for under SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," as required in the fourth
quarter of fiscal year 2004. In September 2004, the consensus was
indefinitely delayed as it relates to the measurement and recognition of
impairment losses for all securities in the scope of paragraphs 10-20 of
EITF 03-1. The disclosures prescribed by EITF No. 03-1 and guidance related
to impairment measurement prior to the issuance of this consensus continue
to remain in effect. Adoption is not expected to have a material impact on
the Company's consolidated earnings, financial position or cash flows.
In December 2004, the Financial Accounting Standards Board published SFAS
No. 123 (revised 2004), Share-Based Payment. SFAS No. 123(R) revises SFAS
No. 123, Accounting for Stock-Based Compensation, and supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees. The revised
statement addresses the accounting for share-based payment transactions
with employees and other third parties, eliminates the ability to account
for share-based payment transactions using APB Opinion No. 25 and requires
that the compensation costs relating to such transactions be recognized in
the consolidated statement of operations based on the grant-date fair value
of those instruments. The revised statement is effective as of the first
interim period beginning after June 15, 2005 and will be applicable for all
of the Company's fiscal year ending July 31, 2006. The Company is currently
determining what impact the newly issued statement will have on its results
of operations and financial position. See the "Stock-Based Compensation"
discussion in Note 2, which includes the pro forma impact of recognizing
stock-based compensation under SFAS No. 123, on the Company's net income
and income per common share for the three months and six months ended
January 31, 2005 and 2004.
7
5. MARKETABLESECURITIES
During the quarter ended January 31, 2005, the Company invested its excess
cash and cash equivalents in a professionally managed portfolio of
marketable securities. All securities in this portfolio as of January 31,
2005 were classified as available-for-sale and consisted primarily of U.S.
government securities and corporate bonds. These investments are reported
at fair value. The unrealized loss, net of taxes, on these investments of
approximately $130,000 and $5,000, respectively, for the three and six
months ended January 31, 2005 is included within other comprehensive loss.
The unrealized gain, net of taxes, on these investments, of approximately
$82,000 and $151,000, respectively, for the three and six months ended
January 31, 2004 is included within other comprehensive gain. The net
unrealized loss included in shareholders' equity as of January 31, 2005 was
$141,000, net of tax and the net unrealized gain included in shareholders'
equity as of January 31, 2004 was $51,000, net of tax.
6. INVENTORIES
Inventories are stated at the lower of cost (on the first-in, first-out
basis) or market. Inventory balances were as follows:
January 31, July 31,
2005 2004
-------------- ---------------
Finished goods................................. $ 2,493,846 $ 2,018,152
Work-in-process................................ 1,198,054 1,260,449
Raw materials.................................. 2,383,161 2,111,052
-------------- ---------------
$ 6,075,061 $ 5,389,653
============== ===============
8
7. PROPERTY AND EQUIPMENT
Property is carried at cost and depreciated using the straight-line method
over the estimated useful lives of the various assets. Property and
equipment balances and corresponding lives were as follows:
January 31, July 31,
2005 2004 Life
----------- ----------- -------------
Leasehold improvements ...... $ 2,223,769 $ 2,189,955 10 years
Equipment ................... 10,159,556 9,525,117 3 to 10 years
Assets in construction ...... 279,297 526,793 N/A
----------- -----------
12,662,622 12,241,865
Less accumulated depreciation 7,754,869 7,168,090
----------- -----------
Property and equipment - net $ 4,907,753 $ 5,073,775
=========== ===========
8. SEGMENT AND GEOGRAPHIC INFORMATION AND CONCENTRATION OF CREDIT RISK
The Company's operations are in one business segment: the design,
manufacture and distribution of cardiovascular medical devices. The Company
evaluates revenue performance based on the worldwide revenues of each major
product line and profitability based on an enterprise-wide basis due to
shared infrastructures to make operating and strategic decisions.
Total revenues from sales in the United States and outside the United
States are as follows:
Three Months Ended Six Months Ended
------------------------- ------------------------
Jan. 31 Jan. 31 Jan. 31 Jan. 31
2005 2004 2005 2004
------------ ----------- ----------- -----------
United States..................... $15,617,004 $17,008,188 $32,815,862 $32,318,259
Non-United States................. 551,880 440,489 855,010 732,706
------------ ----------- ----------- -----------
Total revenues.................... $16,168,884 $17,448,677 $33,670,872 $33,050,965
============ =========== =========== ===========
9. NET INCOME PER COMMON SHARE
Basic income per common share is computed by dividing net income for the
period by the weighted average number of common shares outstanding during
the period. Diluted income per share is computed using the treasury stock
method by dividing net income by the weighted average number of common
shares plus the dilutive effect of outstanding stock options, stock
warrants and shares issuable under the employee stock purchase plan.
10. COMMON STOCK
During the six months ended January 31, 2005, stock options for the
purchase of 70,089 shares of the Company's common stock were exercised at
prices between $3.88 and $16.66 per share resulting in proceeds of
$347,000. During the six months ended January 31, 2004, stock options and
warrants for the purchase of 202,921 shares of the Company's common stock
were exercised at prices between $2.22 and $17.50 per share resulting in
proceeds of $1,689,000.
9
During the six months ended January 31, 2005 and 2004, the Company issued
37,580 and 24,445 shares in connection with its employee stock purchase
plan.
During the six months ended January 31, 2005 and 2004, the Company issued
2,754 and 1,884 shares of restricted stock to the outside members of the
Board of Directors.
During the six months ended January 31, 2005, the Company repurchased
940,400 shares in the public market at stock prices between $10.66 and
$18.34 per share for $13,121,000. During the six months ended January 31,
2004, the Company repurchased 161,600 shares in the public market at stock
prices between $15.65 and $19.29 per share for $2,794,000.
11. ACCRUED WARRANTY COSTS
The Company estimates the amount of warranty claims on sold product that
may be incurred based on current and historical data. The actual warranty
expense could differ from the estimates made by the Company based on
product performance. The following table presents the changes in the
Company's product warranty liability:
Accrued warranty costs at July 31, 2004........................................ $293,500
Payments made for warranty costs............................................... (208,000)
Accrual for product costs...................................................... 89,000
----------
Accrued warranty costs at January 31, 2005..................................... $171,500
==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OUR BUSINESS
Possis Medical Inc. develops, manufactures and markets pioneering medical
devices for the large and growing cardiovascular and vascular treatment markets.
The AngioJet(R) Rheolytic(TM) Thrombectomy System (AngioJet System) is marketed
worldwide for blood clot removal from native coronary arteries, leg arteries,
coronary bypass grafts and AV dialysis access grafts. The AngioJet System
consists of a drive unit (capital equipment), which powers a disposable pump,
and a family of disposable catheters, each aimed at a specific indication.
The Company expanded its product line with the introduction of the XMI(R) Rapid
Exchange catheter (XMI RX) in December 2003 for the removal of blood clots in
peripheral arteries, the introduction of the AVX(TM)(R) catheter in July 2003
for the removal of blood clots in AV-access grafts and the introduction of the
Xpeedior(R) Plus 120 catheter in August 2002 to remove blood clots in peripheral
arteries greater than or equal to 3mm in diameter.
In February 2004, the Company released its XMI RX in a full market release for
peripheral arterial use in the U.S. In May 2004, the Company received approval
from the U.S. Food & Drug Administration (FDA) to market the XMI RX for coronary
indications. The Company also received Community Europe (CE) mark approval in
May 2004, allowing coronary marketing of the XMI RX in the European Community.
This new product will put our proven XMI technology into a configuration
preferred by many physicians, increasing our utility and acceptance in the
interventional lab.
10
The AVX catheter is an improved version of our Xpeedior 60 catheter and designed
specifically for the av-access market. The new AVX catheter is a slightly
shorter length catheter with a new hub design and hemostasis valve that is
easier to use. In addition, it is 25% more powerful than the Xpeedior 60,
putting more thrombectomy action in the hands of the physician. The Company's
Xpeedior Plus 120 catheter is an improved version of our Xpeedior 100. Compared
to the Xpeedior 100 catheter, the new Xpeedior Plus 120 catheter's increased
length will allow the physician to treat more distal vessels. The Xpeedior Plus
120 catheter also has the added features of dual marker bands, a braided shaft
and a sleek tapered tip for greater ease of use.
In addition to the Company's XMI RX and Xpeedior catheters, the XMI catheter and
XVG(R) (XVG) catheter continue to be utilized by physicians. The XVG, XMI, XMI
RX and Xpeedior catheters feature the Company's patented Cross-Stream(R)
Technology. This exclusive technology platform intensifies the action at the tip
of the catheter, which doubles the clot removal rate and triples the treatable
vessel size compared to other available mechanical thrombectomy devices on the
market today. In addition, Cross-Stream Technology has been able to deal more
effectively than previous catheters with "mural thrombus," the older, more
organized material that adheres to vessel walls and can complicate patient
results.
The Company employs a variety of flexible drive unit acquisition programs
including outright purchase and various evaluation programs. The Company has no
leasing programs for its capital equipment. The purchasing cycle for the
AngioJet System drive unit varies depending on the customer's budget cycle. The
Company has signed contracts with eight purchasing groups in order to accelerate
orders and increase market penetration. These purchasing groups evaluate and
screen new medical technologies on behalf of their members, and once they
recommend a technology, such as the AngioJet System, they negotiate
pre-determined discounts on behalf of their members. The benefit for the Company
is access to the recommended vendor list, along with marketing support provided
by the purchasing group. The purchasing groups receive a marketing fee on their
member purchases from the Company. These discounts and marketing fees have been
offset by the increase in sales to the member hospitals of the purchasing group.
There has been no material negative effect on the Company's margins due to these
discounts and marketing fees. The discounts reduce gross revenue on the income
statement, while marketing fees are included in selling, general and
administrative expense on the income statement.
11
In April 2004, the Company announced that it had signed a three year agreement
to be the exclusive distributor of the Angiometrx Metricath(TM) products in the
United States. The Metricath System is an innovative, catheter-based technology
that allows cardiologists to quickly and easily measure arterial size during
procedures for treatment of coronary artery disease. Such measurements are
helpful to select appropriately sized stents to achieve optimum patient outcomes
from coronary angioplasty and related stent implantation procedures. The
Metricath System was developed in response to the limitations of existing
measurement technologies, which require large capital investment and which do
not offer the ease of use of the Metricath System. The Metricath(TM) System
received FDA 510(k) clearance for sale in the United States in July 2003. During
a limited market release it was discovered that the Metricath System had several
product design issues that need to be addressed prior to full market release.
Angiometrx is currently addressing these product design issues. Future market
release for the Metricath System will be dependent upon the resolution of these
issues. The Company's AngioJet Rheolytic Thrombectomy System was approved by the
U.S. FDA in 1999 for removing thrombus in coronary vessels and saphenous vein
bypass grafts during percutaneous coronary intervention (balloon angioplasty and
stenting). This approval includes use in heart attack victims, who are assumed
to have thrombus whether or not it is angiographically visible. However, in the
years following approval, AngioJet was mostly used in patients with large
visible thrombus. Some physician customers proposed a study of AngioJet use
specifically in heart attack patients. Therefore, in order to further support
and expand AngioJet use in such patients, the Company agreed to sponsor a
post-marketing study to test the ability of AngioJet treatment to reduce the
final infarction size in patients with acute myocardial infarct (heart attack).
The AiMI study (AngioJet Rheolytic Thrombectomy In Patients Undergoing Primary
Angioplasty for Acute Myocardial Infarction) was a prospective randomized trial
that between 2001 and 2004 enrolled 480 patients with anterior or predicted
large inferior infarcts at 32 sites in the U.S. and Canada. Visible thrombus at
presentation was not a consideration for enrollment. AiMI patients were
randomized to receive either AngioJet treatment followed immediately by
conventional balloon angioplasty and stenting, or ballooning and stenting alone.
The study's primary endpoint was final infarct size assessed by nuclear imaging.
Clinical investigators and the Company were blinded to study outcomes until its
completion. The AiMI study results were first released in August 2004, and first
presented to the cardiology community at the Transcatheter Cardiovascular
Therapeutics (TCT) conference in September 2004. The study showed no benefit for
infarct size reduction using AngioJet, with larger infarct sizes occurring in
the AngioJet treatment group in patients with inferior myocardial infarcts.
However, other secondary endpoints were neutral. The AiMI investigators
concluded that routine use of AngioJet in all acute heart attack patients to
reduce final infarct size cannot be recommended. The results also suggested that
there may be a higher mortality risk when using the AngioJet in acute MI, but
this is less conclusive because of possibly important clinical differences
between the two treatment groups at baseline that favored the control group and
the unusually low death rate noted in the control group, compared to other
large, recent AMI studies. The investigators also noted that AngioJet has a
longstanding history of safe use in elective removal of large and potentially
dangerous thrombus, and the selective use of the AngioJet for acute myocardial
infarction in cases of such thrombus was not specifically studied in AIMI.
Still, these study results have negatively impacted AngioJet catheter sales for
coronary applications.
The Company expects U.S. AngioJet System sales to grow primarily through
obtaining additional FDA approved product uses, introduction of new catheter
models for existing indications, introduction of AngioJet System-related
products, more face-time selling to existing accounts, peer-to-peer selling, and
the publication of clinical performance and cost-effectiveness data.
CRITICAL ACCOUNTING POLICIES
The consolidated financial statements include accounts of the Company and all
wholly-owned subsidiaries. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions in certain circumstances
that affect amounts reported in the accompanying consolidated financial
statements and related footnotes. In preparing these financial statements,
management has made its best estimates and judgments of certain amounts included
in the financial statements, giving due consideration to materiality. The
Company's most critical accounting policies are those described below.
Application of these accounting policies involves the exercise of judgment and
use of assumptions as to future uncertainties and, as a result, actual results
could differ from these estimates.
12
Revenue Recognition
Revenues associated with products that are already maintained at customer
locations are recognized and ownership and risk of loss are transferred to the
customer when the Company receives a valid purchase order from the customer.
Revenues associated with products that are not maintained at the customer
locations are recognized and title and risk of loss are transferred to the
customer when a valid purchase order is received and the products are received
at the customer's location. Provisions for returns are recorded in the same
period the related revenues are recognized. Revenue recognition for drive unit
extended warranties is amortized on a straight-line basis over the life of the
warranty period.
Allowance for Returns
Accounts receivable are reduced by an allowance for items that may be returned
in the future. The allowance requires us to make estimates at the time the
account receivable is recorded concerning the likelihood for returns in the
future. The estimate is based upon historical product return experience,
customer complaint rates, information received from our customers and
assumptions that are believed to be reasonable under the circumstances.
Management, on a quarterly basis, evaluates the adequacy of the allowance for
returns. Management believes the amount of the allowance for returns is
appropriate; however, actual returns incurred could differ from the original
estimate, requiring adjustments to the allowance.
Allowance for Doubtful Accounts
Substantially all of the Company's receivables are due from health care
facilities located in the United States. The estimated allowance for doubtful
accounts is based upon the age of the outstanding receivables and the payment
history and creditworthiness of each customer. Management, on a quarterly basis,
evaluates the adequacy of the allowance for doubtful accounts. Management
believes the amount of the allowance for doubtful accounts is appropriate;
however, nonpayment of accounts could differ from the original estimate,
requiring adjustments to the allowance.
Inventories
Inventories are valued at the lower of cost or market. In order to determine the
market value of inventory on a quarterly basis, management assesses the
inventory quantities on hand to estimated future usage and sales and, if
necessary, sets up a obsolescence reserve for inventory deemed excess or
obsolete to estimated market value. Management believes the amount of the
reserve for inventory obsolescence is appropriate; however, actual obsolete
inventory could differ from the original estimate, requiring adjustments to the
reserve.
Warranty Reserve
The Company provides a one-year limited warranty on its AngioJet System drive
unit and a limited warranty on AngioJet System disposable products. The Company
establishes a warranty reserve at the time products are sold, which is based
upon historical frequency of claims relating to the Company's products and the
cost to replace disposable products and to repair drive units under warranty.
Management, on a quarterly basis, evaluates the adequacy of the warranty
reserve. Management believes the amount of the warranty reserve is appropriate,
given our historical experience; however, actual claims incurred could differ
from the original estimate, requiring adjustments to the reserve.
13
RESULTS OF OPERATIONS
Three and Six Month Periods Ended January 31, 2005 and 2004
Total product sales for the three months ended January 31, 2005 decreased
$1,280,000 or 7%, to $16,169,000 compared to $17,449,000 for the comparable
period in fiscal 2004. Total product sales for the six months ended January 31,
2005 increased $620,000, or 2%, to $33,671,000 compared to $33,051,000 for the
comparable period in fiscal 2004. The Company recorded net income for the
quarter ended January 31, 2005 of $1,669,000, or $0.09 per diluted share,
compared to net income of $3,118,000, or $0.16 per diluted share, in the
comparable quarter in 2004. For the six months ended January 31, 2005, the
Company recorded net income of $3,862,000 or $0.21 per diluted share, compared
to net income of $5,045,000, or $0.26 per diluted share, in the same period in
2004.
Revenue - AngioJet System
U.S. AngioJet System revenue for the three months ended January 31, 2005
decreased 8% to $15,585,000 from $17,001,000 for the same period in 2004. U.S.
AngioJet System revenue for the six months ended January 31, 2005 increased 1%
to $32,783,000 from $32,311,000 for the same period in 2004. The main factor in
the revenue decrease during the second quarter is due to the negative impact
from the results of the AiMI post-marketing study. The nominal increase in
revenue during the six months ended January 31, 2005 as compared to 2004 is also
due to this same impact from the results of the AiMI post-marketing study.
As of January 31, 2005, the Company had a total of 1,422 domestic drive units in
the field, compared to 1,168 drive units at January 31, 2004, and 1,371 units as
of October 31, 2004. During the three month period ended January 31, 2005, the
Company's catheter sales decreased approximately 6% to approximately 12,000
catheters versus approximately 12,800 catheters in the same prior year period.
During the six month period ended January 31, 2005, the Company's catheter sales
increased approximately 2% to approximately 24,900 catheters versus
approximately 24,200 catheters in the same prior year period. The average
catheter utilization rate per installed domestic drive unit was 8.3 in the
second quarter of fiscal 2004, compared to a rate of 10.8 in the same prior year
period, and compared to a rate of 9.3 in the first quarter of fiscal 2005. The
Company sold 58 and 115 drive units during the three and six months ended
January 31, 2005, respectively, compared to 51 and 106 drive units in the same
periods in the prior year, respectively.
Foreign sales of the AngioJet System for the three and six month periods ended
January 31, 2005 were $552,000 and $855,000, respectively. This compared to
foreign sales of the AngioJet System of $440,000 and $733,000, respectively, for
the same periods the previous year. The Company has recently hired an outside
consultant to expand product penetration in Germany. Limited foreign sales are
primarily due to cost constraints in overseas markets. In European markets,
where public sector funds are more crucial for hospital operation, Euro
devaluations generated higher public sector deficits, which, in turn, forced
reductions in hospital procedure and equipment budgets.
Cost of Medical Products
14
Cost of medical products increased $316,000 to $4,283,000 in the three month
period ended January 31, 2005 over the same period in the previous year, and
increased $801,000 to $8,588,000 for the six month period ended January 31, 2005
over the same period in the previous year. These increases are primarily due to
the unallocated production overhead and the increase in overhead.
For the three months ended January 31, 2005, gross profit decreased by
$1,596,000 to $11,885,000 over the same period in the previous year. This
resulted in a gross profit margin of 74% as a percentage of product sales. Gross
profit decreased $181,000 to $25,083,000, or 74% as a percentage of product
sales, for the six month period ended January 31, 2005 over the same period in
the previous year. This compares to gross margins as a percentage of product
sales of 77% and 76% for the three and six month periods ended January 31, 2004.
The decrease in the gross margin rate for the three and six months ending
January 31, 2005 was primarily due to lower revenue and to lower mix of XMI RX
and XMI catheters compared to the same periods in the previous year. This was
offset by the impact of higher international sales versus the prior year period.
The Company believes that gross margins as a percent of sales will be in the
lower to mid seventies for the remainder of fiscal 2005.
Selling, General and Administrative Expense
Selling, general and administrative expense increased $52,000 to $6,712,000 for
the three months ended January 31, 2005 and increased $894,000 to $14,269,000
for the six months ended January 31, 2005, compared to the same periods in the
previous year. The primary factors in the changes in the expense for the three
months ended January 31, 2005 were $283,000 of additional expenses associated
with the growth in the sales force, increased medical insurance expense of
$204,000 and increased depreciation of $112,000. These increases were offset by
a reduction in marketing clinical trial expense of $394,000 and reduction in
incentives of $141,000. The primary factors for the expense increase for the six
months ended January 31, 2005 were the $623,000 additional expenses associated
with the growth in the sales force, increased medical insurance expense of
$424,000, increase in executive benefit plan expense of $162,000, increase in
depreciation of $220,000, an increase in sales conventions and sales meetings of
$136,000, and increase in building rent and operating costs of $108,000 and an
increase in patent expense of $113,000. This increase was partially offset by a
reduction in expenses associated with marketing clinical trials of $572,000 and
a reduction of incentives of $215,000.
Research and Development Expense
Research and development expense increased $625,000 to $2,604,000, in the three
months ended January 31, 2005, when compared to the same period in the prior
year. Research and development expense increased $936,000 to $5,042,000 in the
six months ended January 31, 2005. The increase was largely due to the timing of
expenses incurred for various research and development projects including the
new drive unit, an associated project to combine the pump and catheter, 6 French
peripheral catheter and projects relating to the improvement of the rapid
exchange catheter and the distal occlusion guidewires. We expect research and
development expense to remain relatively stable for the balance of the fiscal
year.
15
Interest Income
Interest income increased $146,000 in the three months ended January 31, 2005 to
$307,000, when compared to the same period in the prior year. Interest income
increased $272,000 in the six months ended January 31, 2005, when compared to
the same period in the prior year. The increase was due to the recent interest
rate increases and the increase in the amount of cash available for investments.
Excess cash is invested in an enhanced cash management portfolio of marketable
securities. The Company expects interest income to increase in fiscal 2005 as
compared to fiscal 2004 as cash is generated from operations.
Provision For Income Taxes
The Company recorded a provision for income taxes of $1,209,000 and $1,870,000
for the three months ended January 31, 2005 and 2004, respectively. The Company
recorded a provision for income taxes of $2,524,000 and $3,026,000 for the six
months ended January 31, 2005 and 2004, respectively.
During the second quarter of fiscal 2005 the Company determined it had nexus in
states in which it had not previously filed corporate state income tax returns.
The Company will file the appropriate corporate state income tax returns in
these states including prior years to obtain the appropriate net operating loss
carry-forwards. The Company expensed an additional $100,000 of corporate state
income tax expense relating to the filing of these state corporate income tax
returns during the three months ended January 31, 2005. Going forward the
corporate income tax rate is expected to be approximately 38%.
The Company became profitable in the third quarter of fiscal 2001 and has
maintained profitability since. In fiscal 2004 and 2003, the Company increased
its deferred tax asset by an additional $2,578,000 and $2,777,000, respectively.
These increases were related to tax benefits from disqualified stock options
that are recorded directly in the Consolidated Statement of Changes in
Shareholders' Equity. Management believes the remaining valuation allowance is
necessary as it is more likely than not that $690,000 of the deferred tax asset
will not be realizable due to the expiration of research and development tax
credits.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and marketable securities totaled
approximately $41,614,000 at January 31, 2005 versus $48,171,000 at July 31,
2004.
The $6,557,000 net decrease in cash, cash equivalents and marketable securities
in the most recent six-month period was primarily due to the use of
$13,121,000of cash to repurchase common stock offset by net cash provided by
operating activities of $6,445,000. Net cash provided by operating activities
was primarily due to the net income of $3,862,000, depreciation of $1,143,000,
non-cash stock compensation expense of $141,000 and a decrease in the deferred
tax asset of $2,422,000, a decrease in accounts receivable of $1,866,000 and a
decrease in prepaid expenses of $446,000. This net cash provided by operating
activities was partially offset by an increase in inventory of $999,000, a
decrease in accounts payable of $852,000 and a decrease in accrued and other
liabilities of $1,570,000. Depreciation includes company-owned drive units at
customer locations, as well as property and equipment. The decrease in the
deferred tax asset was due to the utilization of the net operating loss
carryovers to offset current taxes payable. The decrease in accounts receivable
was due to the reduced revenue in the second quarter of fiscal 2005 compared to
the first quarter of fiscal 2005. The decrease to prepaid expenses was due to
the expensing of prepaid insurance. Inventory increased to meet the expected
increase in demand of the AngioJet System. This demand was less than expected
due to the AiMI post-marketing study results. The decrease in accounts payable
and accrued liabilities were due to the timing of payments. This decrease
included the payment of fiscal 2004 corporate incentives in September 2004. Cash
provided in investing activities was $2,282,000 including the net proceeds of
marketable securities of $2,934,000 and the purchase of $661,000 of property and
equipment. Net cash used in financing activities was $12,344,000, which resulted
from the repurchase of 940,400 shares of the Company's stock in open market
transactions for $13,121,000, offset by the cash received in connection with the
exercise of stock options of $778,000.
16
The Company expects its cash on hand and funds from operations to be sufficient
to cover both short-term and long-term operating requirements of its current
AngioJet business and the repurchase of its common stock as authorized by the
Board of Directors.
OFF-BALANCE SHEET OBLIGATIONS
The Company does not have any material off-balance-sheet arrangements.
OUTLOOK
The Company expects overall revenue from the AngioJet System, primarily in the
United States, will be in the range of $64 million to $66 million in fiscal
2005. Gross margin as a percent of sales for fiscal 2005 is expected to be in
the low to mid seventies. The Company expects selling, general and
administrative expenses to be relatively flat throughout the remainder of fiscal
2005 as a result of the Company's recent expansion of its sales force to enhance
market penetration and to address customer concerns about the recent AiMI
post-marketing study results. Research and development expenditures are expected
to be consistent with the levels during the first two quarters of fiscal 2005.
This level may change if the Company initiates a clinical trial relating to deep
vein thrombosis and or pulmonary embolism. The Company expects net income per
diluted share for the full year in the range of $0.30 to $0.36. The Company
anticipates third quarter revenue to be approximately $15 million and net income
in the range of $0.04 to $0.07 per diluted share.
FORWARD-LOOKING STATEMENTS
Certain statements made in Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this Form 10-Q, and
particularly the statements made in the section captioned "Outlook," are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. These forward-looking statements relate to among other
things, financial projections such as anticipated gross margins, overall
revenue, expected expense levels, anticipated revenue increases and investment
levels.
Forward-looking statements in this 10-Q are based on the Company's current
expectations and assumptions and entail various risks and uncertainties that
could cause actual results to differ materially from those expressed in such
forward-looking statements. Factors that could affect the realization of forward
looking statements include:
17
o changes in clinical and market acceptance of our products;
o changes in the health care industry generally, such as restrictions imposed
on sales time at interventional labs; consolidation of industry
participants, cost containment and trends toward managed care;
o changes in supplier requirements by group purchasing organizations;
unanticipated costs or other difficulties and uncertainties associated with
lengthy and costly new product development and regulatory clearance
processes;
o changes in governmental laws and regulations;
o changes in reimbursement;
o the development of new competitive products such as inexpensive aspiration
devices, combined aspiration/occlusion products and compounds that may make
our products obsolete;
o sudden restrictions in supply of key materials;
o the effectiveness of our sales and marketing efforts in re-establishing
coronary product usage,
o our ability to effectively manage new product development timelines,
o our ability to generate suitable clinical registry data to support growing
use of the AngioJet in coronary applications,
o our the ability to obtain additional regulatory approvals on a timely
basis;
o our ability to obtain regulatory clearance in new foreign markets and
o our ability to retain and motivate skilled employees, especially for sales
positions.
We also caution you not to place undue reliance on forward-looking statements,
which speak only as of the date made. Any or all forward-looking statements in
this report and in any other public statements we make may turn out to be
inaccurate or false. They can be affected by inaccurate assumptions we might
make or by known or unknown risks and uncertainties. Except as required by
federal securities laws, we undertake no obligation to update any
forward-looking statement. A discussion of these and other factors that could
impact our future results are set forth in the risk factors included in Exhibit
99.1 to the Company's Form 10-K for the year ended July 31, 2004 as filed with
the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company invests its excess cash in a professionally managed, institutional
fixed income portfolio of short duration. The market risk on a diversified
portfolio of relatively short duration is minimal, while enhancing returns above
money market levels.
The product sales for the Company's foreign subsidiary are in U.S. Dollars
("USD") except for product sales in Germany, which are in Euro's. The German
product sales were minimal during the second quarter. As of January 31, 2005,
the Company opened a foreign bank account in which the German product sales
receipts are deposited and immediately transferred to the operating bank account
in the United States. The balance in the German bank account was zero as of
January 31, 2005.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
- ------------------------------------------------
Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the "Exchange Act")). Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that, as of the
end of the period covered by this report, our disclosure controls and procedures
were adequately designed to ensure that information required to be disclosed by
us in the reports we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
applicable rules and forms.
18
Changes in internal control over financial reporting
- ----------------------------------------------------
During the fiscal quarter ended January 31, 2005, there has been no change in
our internal control over financial reporting (as defined in Rule 13a-15(f) or
15d-15(f) under the Exchange Act) that has materially affected, or are is likely
to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM. 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(C) COMPANY REPURCHASES OF EQUITY SECURITIES
- ----------------------------------------------------------------------------------------------------------------------------------
(d) Maximum Number (or
Approximate Dollar
(c) Total Number of Value) of Shares that
Shares Purchased as Part May Yet Be Purchased
(a) Total Number of (b) Average Price of Publicly Announced Under the Plans or
Period Shares Purchased (1) Paid per Share Plans or Programs Programs (1)
- ----------------------------------------------------------------------------------------------------------------------------------
November 1, 2004 to
November 30, 2004 - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
December 1, 2004 to
December 31, 2004 182,400 $12.21 182,400 -
- ----------------------------------------------------------------------------------------------------------------------------------
January 1, 2005 to
January 31, 2005 255,000 $13.01 255,000 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total 437,400 $12.56 437,400 -
- ----------------------------------------------------------------------------------------------------------------------------------
(1) The Company repurchased an aggregate of 437,400 shares of its
common stock pursuant to the repurchase program that it publicly
announced on August 23, 2004 providing for the repurchase of
shares having a value of up to $10,000,000. The shares were
purchased in open market transactions. The Company purchased all
of the remaining shares under the August 2004 authorization during
the second quarter of fiscal 2005. On February 23, 2005, the
Company announced authorization to use up to an additional $15
million to effect stock repurchases through December 2006.
19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. The 2004 annual meeting of shareholders of Possis Medical,
Inc. was held on December 8, 2004.
b. By the following vote, management's nominees were elected as
directors of the Corporation for one year or until their
successors are elected and qualified:
FOR WITHHELD
----------- ---------
Robert G. Dutcher ..................... 15,778,711 359,638
Mary K. Brainerd....................... 15,200,974 937,375
Seymour J. Mansfield................... 15,734,549 403,800
William C. Mattison, Jr................ 15,115,191 1,023,158
Whitney A. McFarlin.................... 14,461,731 1,676,618
Donald C. Wegmiller.................... 15,290,765 847,584
Rodney A. Young........................ 14,464,612 1,673,737
The names of each Director whose term of office as a
Director continued after the meeting are as follows: Robert
G. Dutcher, Mary K, Brainerd, Seymour J. Mansfield, William
C. Mattison, Jr., Whitney A. McFarlin, Donald C. Wegmiller,
and Rodney A. Young.
c. By a vote of 15,088,597 in the affirmative, 1,002,529 in the
negative and 47,223 abstaining, the appointment of Deloitte &
Touche LLP as the Corporation's certified public accountants
was ratified.
ITEM 6. EXHIBITS
Exhibits
Certain of the following exhibits are incorporated by reference from
prior filings. The form with which each exhibit was filed and the date of filing
are indicated below.
Exhibit Description
- --------------------------------------------------------------------------------
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
20
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 thereunto duly authorized.
POSSIS MEDICAL, INC.
DATE: March 4, 2005 BY: /s/ ROBERT G. DUTCHER
----------------------------------------
ROBERT G. DUTCHER
Chairman, President and
Chief Executive Officer
DATE: March 4, 2005 BY: /s/ EAPEN CHACKO
-----------------------------------------
EAPEN CHACKO
Vice President of Finance and
Chief Financial Officer
21
EXHIBIT INDEX
Certain of the following exhibits are incorporated by reference from prior
filings.
The form with which each exhibit was filed and the date of filing are indicated
below.
Exhibit Description
- --------------------------------------------------------------------------------
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
22