##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (MARK ONE)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT 1934
 FOR THE TRANSITION PERIOD FROM ____________ TO _________
 Commission file number 0-10521
 ADVANCED NEUROMODULATION SYSTEMS, INC.
  Texas
    
    75-1646002(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 6901 Preston Road, Plano, Texas
    
    75024(Address of Principal Executive Offices)
    
    (Zip Code)
 (972) 309-8000(Registrants Telephone Number, Including Area Code)
 þ  þ o
 þ þ o
  Number of Shares Outstanding atTitle of Each Class
    
    August 5, 2005Common stock, $.05 Par Value
    
    20,091,083




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ADVANCED NEUROMODULATION SYSTEMS, INC. AND SUBSIDIARIES
 Table of Contents
 PART I. Financial Information2Item 1. Financial StatementsCondensed Consolidated Balance Sheets June 30, 2005 (Unaudited) and December 31, 2004
    
    
    3-4Condensed Consolidated Statements of Income (Unaudited) For the Three Months and Six Months Ended June 30, 2005 and 2004
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2005 and 2004
    
    
    6Condensed Consolidated Statements of Stockholders Equity For the Year Ended December 31, 2004 and the Six Months Ended June 30, 2005 (Unaudited)
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8-16Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17-26Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26PART II. Other Information
    
    
    27Item 1. Legal Proceedings
    
    
    27-28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30Item 6. Exhibits
    
    
    31Signatures
    
    
    32Certification of the CEO Pursuant to Section 302Certification of the CFO Pursuant to Section 302Certification of the CEO Pursuant to Section 906Certification of the CFO Pursuant to Section 906
  -1-




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PART I
 FINANCIAL INFORMATION
 -2-




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS
 Advanced Neuromodulation Systems, Inc. and Subsidiaries
 
 Condensed Consolidated Balance Sheets
June 30, 2005 (Unaudited) and December 31, 2004
 June 30,
    
    December 31,2005
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    6,405,232
    
    
    $
    6,654,712Marketable securities
    
    
    148,074,550
    
    
    
    117,361,352Receivables:Trade accounts, less allowances of
$464,933 in 2005 and $398,627 in 2004
    
    
    29,860,358
    
    
    
    25,322,813Interest and other
    
    
    1,699,372
    
    
    
    638,987Total receivables
    
    
    31,559,730
    
    
    
    25,961,800Inventories:Raw materials
    
    
    8,219,072
    
    
    
    10,067,802Work-in-process
    
    
    6,051,168
    
    
    
    4,435,746Finished goods
    
    
    9,541,369
    
    
    
    9,420,303Total inventories
    
    
    23,811,609
    
    
    
    23,923,851Deferred income taxes
    
    
    1,997,418
    
    
    
    2,029,091Prepaid expenses and other current assets
    
    
    1,725,235
    
    
    
    1,888,957Total current assets
    
    
    213,573,774
    
    
    
    177,819,763Property, equipment and fixtures:Land
    
    
    3,191,427
    
    
    
    3,191,427Building
    
    
    17,715,521
    
    
    
    17,523,181Furniture and fixtures
    
    
    8,014,640
    
    
    
    6,829,357Machinery and equipment
    
    
    20,937,213
    
    
    
    18,757,126Leasehold improvements
    
    
    652,804
    
    
    
    638,77850,511,605
    
    
    
    46,939,869Less accumulated depreciation and amortization
    
    
    16,297,960
    
    
    
    13,764,540Net property, equipment and fixtures
    
    
    34,213,645
    
    
    
    33,175,329Minority equity investments in preferred stock
    
    
    1,104,000
    
    
    
    1,104,000Goodwill
    
    
    12,078,668
    
    
    
    12,078,668Patents and licenses, net of accumulated
amortization of $2,550,365 in 2005 and
$2,301,780 in 2004
    
    
    6,751,609
    
    
    
    6,208,520Purchased technology, net of accumulated
amortization of $4,434,545 in 2005 and
$3,917,268 in 2004
    
    
    10,897,632
    
    
    
    11,414,908Tradenames, net of accumulated amortization of
$1,349,759 in 2005 and $1,266,929 in 2004
    
    
    1,886,312
    
    
    
    1,901,470Customer and supplier relations, net of
accumulated amortization of $878,018 in 2005 and
$645,336 in 2004
    
    
    2,187,234
    
    
    
    2,429,671Other assets, net of accumulated amortization of
$1,415,463 in 2005 and $1,202,605 in 2004
    
    
    1,201,885
    
    
    
    1,354,812$
    283,894,759
    
    
    $
    247,487,141
  -3-




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##### Table of Contents



Advanced Neuromodulation Systems, Inc. and Subsidiaries
 Condensed Consolidated Balance Sheets (continued)
June 30, 2005 (Unaudited) and December 31, 2004
 June 30,
    
    December 31,2005
    
    2004Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    2,913,064
    
    
    $
    3,206,516Accrued salary and employee benefit costs
    
    
    3,549,714
    
    
    
    2,390,721Accrued commissions
    
    
    2,641,180
    
    
    
    2,656,112Income taxes payable
    
    
    16,626,851
    
    
    
    708,412Deferred revenue
    
    
    107,028
    
    
    
    165,861Other accrued expenses
    
    
    750,497
    
    
    
    342,075Total current liabilities
    
    
    26,588,334
    
    
    
    9,469,697Deferred income taxes
    
    
    6,126,604
    
    
    
    14,734,487Non-current deferred revenue
    
    
    643,605
    
    
    
    718,820Commitments and contingenciesStockholders equity:Common stock $.05 par valueAuthorized  100,000,000 shares;Issued  20,837,953 shares in 2005 and 20,337,501 in 2004
    
    
    1,041,897
    
    
    
    1,016,875Additional capital
    
    
    173,608,096
    
    
    
    161,625,018Retained earnings
    
    
    109,336,386
    
    
    
    45,681,864Accumulated other comprehensive income, net of tax expense of
$4,227 in 2005 and $8,544,328 in 2004
    
    
    7,045
    
    
    
    14,240,380Deferred compensation
    
    
    (7,879,159
    )
    
    
    Treasury stock, at cost  923,674 shares in 2005
    
    
    (25,578,049
    )
    
    
    Total stockholders equity
    
    
    250,536,216
    
    
    
    222,564,137$
    283,894,759
    
    
    $
    247,487,141
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##### Table of Contents



Advanced Neuromodulation Systems, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Income (Unaudited)
For the Three Months and Six Months Ended June 30, 2005 and 2004
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net revenue
    
    $
    38,693,227
    
    
    $
    30,487,851
    
    
    $
    71,028,690
    
    
    $
    57,120,714Cost of revenue
    
    
    10,475,418
    
    
    
    8,371,311
    
    
    
    18,922,252
    
    
    
    15,336,843Gross profit
    
    
    28,217,809
    
    
    
    22,116,540
    
    
    
    52,106,438
    
    
    
    41,783,871Operating expenses:Sales and marketing
    
    
    12,051,776
    
    
    
    9,454,727
    
    
    
    22,142,095
    
    
    
    18,018,773Research and development
    
    
    4,464,991
    
    
    
    2,869,660
    
    
    
    7,789,698
    
    
    
    5,184,610General and administrative
    
    
    4,007,926
    
    
    
    2,706,956
    
    
    
    7,351,380
    
    
    
    5,023,696Amortization of other intangibles
    
    
    657,547
    
    
    
    623,773
    
    
    
    1,297,527
    
    
    
    1,198,64721,182,240
    
    
    
    15,655,116
    
    
    
    38,580,700
    
    
    
    29,425,726Income from operations
    
    
    7,035,569
    
    
    
    6,461,424
    
    
    
    13,525,738
    
    
    
    12,358,145Other income (expense):Gain on sale of investment in
common stock of Cyberonics,
Inc.
    
    
    
    
    
    
    
    
    
    
    85,244,301
    
    
    
    Foreign currency transaction loss
    
    
    (117,190
    )
    
    
    (25,506
    )
    
    
    (164,815
    )
    
    
    (54,853
    )Investment income
    
    
    1,091,257
    
    
    
    229,842
    
    
    
    1,638,118
    
    
    
    481,171974,067
    
    
    
    204,336
    
    
    
    86,717,604
    
    
    
    426,318Income before income taxes
    
    
    8,009,636
    
    
    
    6,665,760
    
    
    
    100,243,342
    
    
    
    12,784,463Income taxes
    
    
    2,923,517
    
    
    
    2,342,348
    
    
    
    36,588,820
    
    
    
    4,492,460Net income
    
    $
    5,086,119
    
    
    $
    4,323,412
    
    
    $
    63,654,522
    
    
    $
    8,292,003Net income per share:Basic
    
    $
    .26
    
    
    $
    .22
    
    
    $
    3.18
    
    
    $
    .41Diluted
    
    $
    .25
    
    
    $
    .21
    
    
    $
    3.06
    
    
    $
    .39
  -5-




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Advanced Neuromodulation Systems, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2005 and 2004
 Six Months Ended June 30,2005
    
    2004Cash flows from operating activities:Net income
    
    $
    63,654,522
    
    
    $
    8,292,003Adjustments to reconcile net income to net cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    3,804,508
    
    
    
    3,221,292Deferred income taxes
    
    
    (9,852
    )
    
    
    (72,059
    )Stock-based compensation
    
    
    416,913
    
    
    
    (1,150
    )Increase in inventory reserve
    
    
    4,543
    
    
    
    Amortization of premiums on marketable securities
    
    
    470,104
    
    
    
    Gain on sale of marketable securities
    
    
    (85,242,293
    )Changes in operating assets and liabilities, net of acquisitions:Receivables
    
    
    (5,597,930
    )
    
    
    (5,637,013
    )Inventories
    
    
    107,699
    
    
    
    (204,256
    )Income taxes receivable
    
    
    
    
    
    
    931,075Prepaid expenses and other current assets
    
    
    (185,648
    )
    
    
    (1,029,176
    )Income taxes payable
    
    
    15,918,438
    
    
    
    Tax benefit from stock option exercises
    
    
    1,112,537
    
    
    
    3,429,444Accounts payable
    
    
    (293,452
    )
    
    
    (2,708,241
    )Accrued expenses
    
    
    1,552,483
    
    
    
    (1,665,633
    )Deferred revenue
    
    
    (134,047
    )
    
    
    (412,039
    )Total adjustments
    
    
    (68,075,997
    )
    
    
    (4,147,756
    )Net cash provided by (used in) operating activities
    
    
    (4,421,475
    )
    
    
    4,144,247Cash flows from investing activities:Purchases of marketable securities
    
    
    (254,606,951
    )
    
    
    (100,101,123
    )Proceeds from sale of investment in common stock of Cyberonics, Inc.
    
    
    135,287,911
    
    
    
    Proceeds from sales of marketable securities
    
    
    150,883,781
    
    
    
    101,157,866New facility construction
    
    
    
    
    
    
    (5,319,263
    )Acquisition of certain assets of microHelix, Inc.
    
    
    
    
    
    
    (2,046,105
    )Acquisition of certain operations of distributors
    
    
    
    
    
    
    (1,086,558
    )Additions to property, equipment, fixtures and intangible assets
    
    
    (4,458,116
    )
    
    
    (5,202,664
    )Net cash provided by (used in) investing activities
    
    
    27,106,625
    
    
    
    (12,597,847
    )Cash flows from financing activities:Purchase of treasury stock
    
    
    (25,578,049
    )
    
    
    Exercise of stock options
    
    
    2,599,491
    
    
    
    4,365,088Net cash provided by (used in) financing activities
    
    
    (22,978,558
    )
    
    
    4,365,088Net decrease in cash and cash equivalents
    
    
    (293,408
    )
    
    
    (4,088,512
    )Effect of exchange rates on cash and cash equivalents
    
    
    43,928
    
    
    
    (103,188
    )Cash and cash equivalents at beginning of year
    
    
    6,654,712
    
    
    
    8,588,281Cash and cash equivalents at June 30
    
    $
    6,405,232
    
    
    $
    4,396,581Non-cash activity:Stock issued for intangible assets
    
    $
    
    
    
    $
    767,511Assumed acquisition liabilities
    
    $
    
    
    
    $
    131,574
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Advanced Neuromodulation Systems, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Stockholders Equity
For The Year Ended December 31, 2004 and the Six Months Ended June 30, 2005 (Unaudited)
 AccumulatedOther
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    Additional
    
    Retained
    
    Comprehensive
    
    Deferred
    
    Treasury
    
    Stockholders'Shares
    
    Amount
    
    Capital
    
    Earnings
    
    Income (Loss)
    
    Compensation
    
    Stock
    
    EquityBalance at December 31, 2003
    
    
    19,712,938
    
    
    $
    985,647
    
    
    $
    149,644,033
    
    
    $
    27,515,001
    
    
    $
    (19,758
    )
    
    $
    
    
    
    $
    
    
    
    $
    178,124,923Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,166,863
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,166,863Adjustment to unrealized gains (losses) on
marketable securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,280,634
    
    
    
    
    
    
    
    
    
    
    
    14,280,634Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,496
    )
    
    
    
    
    
    
    
    
    
    
    (20,496
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,427,001Issuance of shares for stock option
exercises
    
    
    607,858
    
    
    
    30,393
    
    
    
    5,995,463
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,025,856Non-employee stock-based compensation
    
    
    
    
    
    
    
    
    
    
    115,892
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,892Issuance of earn-out shares for acquisition
    
    
    16,705
    
    
    
    835
    
    
    
    766,676
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    767,511Tax benefit from stock option exercises
    
    
    
    
    
    
    
    
    
    
    5,102,954
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,102,954Balance at December 31, 2004
    
    
    20,337,501
    
    
    
    1,016,875
    
    
    
    161,625,018
    
    
    
    45,681,864
    
    
    
    14,240,380
    
    
    
    
    
    
    
    
    
    
    
    222,564,137Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,654,522
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,654,522Adjustment to unrealized gains (losses) on
marketable securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,277,263
    )
    
    
    
    
    
    
    
    
    
    
    (14,277,263
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,928
    
    
    
    
    
    
    
    
    
    
    
    43,928Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,421,187Issuance of shares for stock option
exercises
    
    
    206,497
    
    
    
    10,325
    
    
    
    2,589,166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,599,491Non-employee stock-based compensation
    
    
    
    
    
    
    
    
    
    
    75,160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,160Tax benefit from stock option exercises
    
    
    
    
    
    
    
    
    
    
    1,112,537
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,112,537Issuance of restricted stock awards
    
    
    293,955
    
    
    
    14,697
    
    
    
    8,206,215
    
    
    
    
    
    
    
    
    
    
    
    (8,220,912
    )
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    341,753
    
    
    
    
    
    
    
    341,753Purchase of 923,674 treasury shares, at
cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,578,049
    )
    
    
    (25,578,049
    )Balance at June 30, 2005
    
    
    20,837,953
    
    
    $
    1,041,897
    
    
    $
    173,608,096
    
    
    $
    109,336,386
    
    
    $
    7,045
    
    
    $
    (7,879,159
    )
    
    $
    (25,578,049
    )
    
    $
    250,536,216
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##### Table of Contents



Advanced Neuromodulation Systems, Inc. and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements
 (1)
    
    BusinessAdvanced Neuromodulation Systems, Inc. (the Company or ANS) designs, develops, manufactures
and markets implantable neuromodulation devices. ANS devices are used primarily to manage
chronic severe pain. The Company also provides contract development and custom
manufacturing, also known as O.E.M. or original equipment manufacturing, for other medical
device companies through the Hi-tronics Designs, Inc. (HDI) subsidiary and through
operations in Portland, Oregon (formerly the Cable and Wire Division of microHelix, Inc.,
which was acquired in April 2004). ANS neuromodulation revenues are derived primarily from
sales throughout the United States, Europe and Australia while O.E.M. revenues are derived
within the United States.The research and development, manufacture, sale and distribution of medical devices is
subject to extensive regulation by various public agencies, principally the U.S. Food and
Drug Administration and corresponding state, local and foreign agencies. Product approvals
and clearances can be delayed or withdrawn for failure to comply with regulatory
requirements or the occurrence of unforeseen problems following initial marketing.In addition, ANS neuromodulation products are purchased by hospitals and other users who
then bill various third-party payors including Medicare, Medicaid, private insurance
companies and managed care organizations, and workers compensation programs. ANS also sells
and bills its neuromodulation products directly to third-party payors including Medicare,
Medicaid, private insurance companies and managed care organizations, and workers
compensation programs. These third-party payors reimburse fixed amounts for products and
services based on a specific diagnosis. The impact of changes in third-party payor
reimbursement policies and any amendments to existing reimbursement rules and regulations
that restrict or terminate the eligibility of ANS products could have an adverse impact on
the Companys financial condition and results of operations.(2)
    
    Condensed Financial StatementsThe unaudited condensed consolidated financial information contained in this report reflects
all adjustments (consisting of normal recurring accruals) considered necessary, in the
opinion of management, for a fair presentation of results for the interim periods presented.
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.Certain information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been condensed or
omitted. These financial statements should be read in conjunction with the financial
statements and notes thereto included in our December 31, 2004 Annual Report on Form 10-K.
The results of operations for the period ended June 30, 2005 are not necessarily indicative
of operations for the full year.
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##### Table of Contents



Advanced Neuromodulation Systems, Inc. and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Continued)
 The consolidated financial statements include the accounts of Advanced Neuromodulation
Systems, Inc. and its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.(3)
    
    Marketable SecuritiesIn August 2004, the Company acquired 3,500,000 shares, or approximately 14.7%, of the
outstanding common stock of Cyberonics, Inc. in open market purchases. The aggregate
purchase price paid for the shares was $49.7 million. In February 2005, the Company sold
the 3,500,000 shares and received gross proceeds on the sale of $135.3 million, resulting in
a pre-tax gain of $85.2 million, net of acquisition costs.(4)
    
    Stock-Based CompensationThe Company accounts for its stock-based compensation plans in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and
related interpretations. Under APB 25, no compensation expense is recognized for stock
option grants if the exercise price of the Companys stock option grants is at or above fair
market value of the underlying stock on the date of grant. Stock-based compensation to
non-employees is measured at fair market value over the service period and recorded as
compensation expense in the Condensed Consolidated Statements of Income. The Company
recorded $154,775 and $18,248 of stock-based compensation expense to non-employees in the
three months ended June 30, 2005 and 2004, respectively. The Company recorded $75,160 and
$(1,150) of stock-based compensation expense (benefit) to non-employees in the six months
ended June 30, 2005 and 2004, respectively. During the second quarter of 2005, the Company
issued 293,955 restricted stock awards to employees and directors of the Company pursuant to
the terms of the Companys 2004 Stock Incentive Plan. The fair market value of the awards,
based on the price of the Companys common stock at issuance, has been recorded to deferred
compensation in the Condensed Consolidated Statements of Stockholders Equity and is being
amortized over the associated four-year vesting period.The Company has adopted the pro forma disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123), as
amended by Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. The following table illustrates the effect on net
income and net income per share amounts if the Company had applied the fair value
recognition provisions of SFAS 123 to stock-based employee compensation:
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Advanced Neuromodulation Systems, Inc. and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Continued)
 Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Net income as
reported
    
    $
    5,086,119
    
    
    $
    4,323,412
    
    
    $
    63,654,522
    
    
    $
    8,292,003Add: Stock-based
employee
compensation expense
included in reported
earnings, net of tax
    
    
    217,013
    
    
    
    
    
    
    
    217,013
    
    
    
    Deduct: Total
stock-based employee
compensation expense
determined under
fair value based
methods for all
awards, net of tax
    
    
    (1,600,668
    )
    
    
    (1,259,896
    )
    
    
    (2,967,464
    )
    
    
    (2,426,203
    )Pro forma net income
    
    $
    3,702,464
    
    
    $
    3,063,516
    
    
    $
    60,904,071
    
    
    $
    5,865,800Basic shares
    
    
    19,678,020
    
    
    
    20,107,481
    
    
    
    20,022,505
    
    
    
    20,018,213Diluted shares
    
    
    20,442,848
    
    
    
    21,047,875
    
    
    
    20,817,647
    
    
    
    21,158,756Pro forma Basic EPS
    
    $
    .19
    
    
    $
    .15
    
    
    $
    3.04
    
    
    $
    .29Pro forma Diluted EPS
    
    $
    .18
    
    
    $
    .15
    
    
    $
    2.93
    
    
    $
    .28
 (5)
    
    Commitments and ContingenciesThe Company is a party to product liability claims related to its neurostimulation devices
and other ordinary routine litigation claims arising in the ordinary course of business.Product liability insurers have assumed responsibility for defending the Company against
product liability claims, subject to reservation of rights in certain cases. Historically,
product liability claims related to the Companys neurostimulation devices have not resulted
in significant monetary liability beyond its insurance coverage. The Company seeks to
maintain appropriate levels of product liability insurance with coverage that it believes is
comparable to that maintained by companies similar in size and serving similar markets,
although there can be no assurances that the Company will not incur significant monetary
liability to the claimants if such insurance is inadequate, and there can be no assurance
that the Companys neurostimulation business and future ANS product lines will not be
adversely affected by these product liability claims.On April 21, 2004, the Company filed a lawsuit in the U.S. District Court for the Eastern
District of Texas, Sherman Division (Docket No. 4:404-CV-00131-PNB-DDB) (the Texas Action)
against Advanced Bionics Corporation, asserting claims of patent infringement,
misappropriation of trade secrets, tortious interference with contract, misappropriation of
time, labor, skill, and money, violation of the Texas Theft Act, conversion and constructive
trust. As initially filed, the lawsuit alleged, among other things, that Advanced Bionics is
infringing U.S. Patent No. 4,793,353 entitled Non-Invasive Multiprogrammable Tissue
Stimulator and Method. In addition, the lawsuit alleged that Advanced Bionics hired a
former ANS employee to aid in the design, development and manufacture of its implantable
stimulation lead, that Advanced Bionics misappropriated the former employees knowledge of
ANS confidential, proprietary, and trade secret
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Advanced Neuromodulation Systems, Inc. and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Continued)
  GenesisRC Eon
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Advanced Neuromodulation Systems, Inc. and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Continued)
 In late May 2005, the United States District Court for the Eastern District of Texas granted
an order consolidating the three previously filed class action securities lawsuits against
the Company and certain of its officers and directors that were filed on behalf of
purchasers of the Companys securities between April 24, 2003 and February 16, 2005,
inclusive (the Class Period) into a single consolidated complaint styled as: PLA, LLC vs.
Advanced Neuromodulation Systems, Inc., et al. The court also granted an order appointing
lead and liaison counsel and appointing the lead plaintiff in the lawsuit. The three
previously filed suits each alleged the Company violated federal securities laws by the
issuance of false and misleading statements to the market regarding the Companys financial
performance throughout the Class Period, which statements allegedly had the effect of
artificially inflating the market price of the Companys securities. In particular, the
claims alleged that improper marketing and sales practices accounted for the Companys
revenue growth, citing, among other things, the Companys public announcement made on
February 17, 2005 that the Company had received a subpoena from the Office of the Inspector
General, Department of Health and Human Services, requesting documents related to sales and
marketing, reimbursement, Medicare and Medicaid billing and other business practices. The
plaintiffs were seeking unspecified compensatory damages and costs and expenses of
litigation. No class has been certified at this time. The Company currently anticipates that
the lead plaintiff will file an amended consolidated complaint in September 2005. The
Company intends to vigorously defend itself against the claims made in the lawsuit and
believes the lawsuit is without merit.Except for the litigation discussed above, and other ordinary routine litigation incidental
or immaterial to its business, the Company is not currently a defendant to any other pending
legal proceeding. The Company maintains general liability insurance against risks arising
out of the normal course of business.Under the Companys sales agreements with its independent sales agents, the Company can
terminate those agreements without cause by paying an early termination fee equal to 100% of
the commissions that would otherwise be payable on sales in the territory for the 90 days
after termination and 50% of the commission that would otherwise be payable on sales in the
territory for the 90 day period after the first 90 day period.In addition, under its distributor agreements, sales agent agreements and certain other
ordinary course commercial contracts with third parties, the Company typically agrees to
indemnify the other contracting party from damages and costs that may arise from product
liability claims. The terms of the agreements and contracts vary and the potential exposure
under these indemnities cannot reasonably be estimated or determined. The Company currently
is not aware of any indemnification claims, nor has the Company had any indemnification
claims historically.(6)
    
    Income TaxesThe Company recorded income tax expense during the three months and six months ended June
30, 2005 of $2,923,517 and $36,588,820, respectively, representing an overall effective tax
rate in both periods of 36.5%. For the three months and six months
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Advanced Neuromodulation Systems, Inc. and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Continued)
 ended June 30, 2004, the Company recorded income tax expense of $2,342,348 and $4,492,460,
respectively, representing an overall effective tax rate in both periods of 35.1%. The
increased effective tax rate in 2005 is due to the $85.2 million pre-tax gain resulting from
the sale of the Companys investment in Cyberonics, Inc., which had the impact of increasing
federal and state taxable income without a significant corresponding increase in other
permanent exclusions from taxable income. The effective tax rates in 2005 and 2004 reflect
a provision for federal income taxes at the statutory rate of 35% and a provision for state
taxes, offset by tax-exempt investment income, the research and development tax credit, and
benefits related to the extra-territorial income (ETI) exclusion.(7)
    
    Net Income Per ShareBasic net income per share is computed based only on the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the
additional dilutive effect, if any, of stock options and restricted stock awards using the
treasury stock method based on the average market price of the stock during the period. The
following table presents the reconciliation of basic and diluted shares:
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Weighted-average shares
outstanding (basic
shares)
    
    
    19,678,020
    
    
    
    20,107,481
    
    
    
    20,022,505
    
    
    
    20,018,213Effect of dilutive
stock options and
restricted stock awards
    
    
    764,828
    
    
    
    940,394
    
    
    
    795,142
    
    
    
    1,140,543Diluted shares
    
    
    20,442,848
    
    
    
    21,047,875
    
    
    
    20,817,647
    
    
    
    21,158,756
 For the three months and six months ended June 30, 2005 and 2004, the incremental
shares used for dilutive earnings per share relate to stock options whose exercise price was
less than the average market price in the underlying quarterly computations. For the three
months ended June 30, 2005 and 2004, options to purchase 647,957 and 745,158 shares,
respectively, and for the six months ended June 30, 2005 and 2004, options to purchase
643,260 and 374,919 shares, respectively, were outstanding but were not included in the
computation of diluted earnings per share because the options exercise price were greater
than the average market price of the common shares and, therefore, the effect would be
antidilutive.(8)
    
    Comprehensive IncomeComprehensive income is the total of net income and all other non-owner changes in equity
net of tax effects, and consists of net income, unrealized gains or losses on the Companys
available for sale marketable securities, and foreign currency translation adjustments.
Comprehensive income for the three months and six months ended June 30, 2005 and 2004 is
as follows:
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Advanced Neuromodulation Systems, Inc. and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Continued)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income
    
    $
    5,086,119
    
    
    $
    4,323,412
    
    
    $
    63,654,522
    
    
    $
    8,292,003Other comprehensive
income (loss)
    
    
    170,954
    
    
    
    (111,299
    )
    
    
    (14,233,335
    )
    
    
    (100,023
    )Comprehensive Income
    
    $
    5,257,073
    
    
    $
    4,212,113
    
    
    $
    49,421,187
    
    
    $
    8,191,980
 Components of accumulated other comprehensive income are net of tax and are as follows:
 June 30, 2005
    
    December 31, 2004Unrealized gains (losses) on marketable securities
    
    $
    (16,387
    )
    
    $
    14,260,876Foreign currency translation adjustments
    
    
    23,432
    
    
    
    (20,496
    )Accumulated Other Comprehensive Income
    
    $
    7,045
    
    
    $
    14,240,380
 The tax benefit (expense) on the unrealized gains (losses) on marketable securities was
$9,832 at June 30, 2005 and $(8,556,625) at December 31, 2004. The tax benefit (expense) on
foreign currency translation adjustment was $(14,059) at June 30, 2005 and $12,297 at
December 31, 2004.In connection with the realized gain resulting from the sale of the Companys investment in
Cyberonics, Inc. in February 2005 as discussed in Note 3, $14,275,238 of the December 31,
2004 unrealized gain on marketable securities was realized into other income, and the
associated tax expense of $8,565,143 was reclassified from deferred income taxes payable to
income taxes payable
 (9)
    
    Treasury StockIn May 2004, the Companys board of directors approved the repurchase of up to 1,000,000
shares of the Companys common stock. In April 2005, the Companys board of directors
approved an increase in the amount of shares authorized to be repurchased by the Company up
to a total of 2,000,000 shares. The Company repurchased 923,674 shares of its common stock
at a cost of $25,578,049 during March and April 2005.
 (10)
    
    Segment InformationThe Company operates in two business segments. The Neuro Products segment designs, develops,
manufactures and markets implantable medical devices that are used to manage chronic
intractable pain and other disorders of the central nervous system through the delivery of
electrical current or drugs directly to targeted nerve fibers. The O.E.M. segment provides
contract development and O.E.M. manufacturing primarily of electromechanical medical
devices. Intersegment revenue is billed at cost with no intercompany mark-up.
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Advanced Neuromodulation Systems, Inc. and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Continued)
 Segment data for the three months ended June 30, 2005 is as follows:
 Neuro
    
    
    
    
    
    Intercompany
    
    ConsolidatedProducts
    
    O.E.M.
    
    Eliminations
    
    TotalRevenue from
external customers
    
    $
    34,855,453
    
    
    $
    3,837,774
    
    
    $
    
    
    
    $
    38,693,227Intersegment revenues
    
    $
    
    
    
    $
    2,412,475
    
    
    $
    (2,412,475
    )
    
    $
    Segment income from
operations
    
    $
    7,298,034
    
    
    $
    (262,465
    )
    
    $
    
    
    
    $
    7,035,569
 Segment data for the three months ended June 30, 2004 is as follows:
 Neuro
    
    
    
    
    
    Intercompany
    
    ConsolidatedProducts
    
    O.E.M.
    
    Eliminations
    
    TotalRevenue from
external customers
    
    $
    27,633,459
    
    
    $
    2,854,392
    
    
    $
    
    
    
    $
    30,487,851Intersegment revenues
    
    $
    
    
    
    $
    1,598,442
    
    
    $
    (1,598,442
    )
    
    $
    Segment income from
operations
    
    $
    6,726,894
    
    
    $
    (265,470
    )
    
    $
    
    
    
    $
    6,461,424
 Segment data for the six months ended June 30, 2005 is as follows:
 Neuro
    
    
    
    
    
    Intercompany
    
    ConsolidatedProducts
    
    O.E.M.
    
    Eliminations
    
    TotalRevenue from
external customers
    
    $
    63,572,475
    
    
    $
    7,456,215
    
    
    $
    
    
    
    $
    71,028,690Intersegment revenues
    
    $
    
    
    
    $
    5,276,588
    
    
    $
    (5,276,588
    )
    
    $
    Segment income from
operations
    
    $
    13,482,086
    
    
    $
    43,652
    
    
    $
    
    
    
    $
    13,525,738
 Segment data for the six months ended June 30, 2004 is as follows:
 Neuro
    
    
    
    
    
    Intercompany
    
    ConsolidatedProducts
    
    O.E.M.
    
    Eliminations
    
    TotalRevenue from
external customers
    
    $
    51,861,143
    
    
    $
    5,259,571
    
    
    $
    
    
    
    $
    57,120,714Intersegment revenues
    
    $
    
    
    
    $
    3,281,020
    
    
    $
    (3,281,020
    )
    
    $
    Segment income from
operations
    
    $
    12,204,707
    
    
    $
    153,438
    
    
    $
    
    
    
    $
    12,358,145
 Foreign sales, primarily Europe and Australia, for the three months ended
June 30, 2005 and 2004 were approximately 10.0% and 9.5% of net revenue from the Neuro
Products segment, respectively. Foreign sales, primarily Europe and Australia, for the six
month ended June 30, 2005 and 2004 were approximately 9.6% and 9.5% of net
revenue from the Neuro Products segment. The O.E.M. segment had no foreign sales for the
respective periods.
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Advanced Neuromodulation Systems, Inc. and Subsidiaries
 Notes to Condensed Consolidated Financial Statements (Continued)
 (11)
    
    New Accounting StandardOn December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement
No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which is a revision of SFAS
123. SFAS 123(R) supersedes APB 25, and amends FASB Statement No. 95, Statement of Cash
Flows. Generally, the approach in SFAS 123(R) is similar to the approach described in SFAS
123. However, SFAS 123(R) requires all share-based payments to employees, including grants
of employee stock options, to be recognized in the income statement based on their fair
values. Pro forma disclosure is no longer an alternative.SFAS 123(R) required adoption no later than July 1, 2005; however, on April 14, 2005, the
Securities and Exchange Commission announced that it would require adoption of SFAS 123(R)
no later than the beginning of the first fiscal year beginning after June 15, 2005. Early
adoption will be permitted in periods in which financial statements have not yet been
issued. The Company will adopt SFAS 123(R) on January 1, 2006. The adoption of SFAS
123(R)s fair value method will have a significant impact on the Companys result of
operations which the Company is currently evaluating, although it will have no impact on the
Companys overall financial position. The Company is also currently assessing the method
(either the modified prospective or modified retrospective method, as defined) by which
SFAS 123(R) will be adopted.
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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Recent Developments
 Eon Eon Eon Eon Eon
 Libra Libra
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Critical Accounting Policies and Estimates
 General
   Revenue Recognition
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Bad Debt
  Inventory Reserve
  Intangible Assets
   Contingencies and Litigation
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##### Table of Contents



Income Taxes
  Stock Compensation
  Results of Operations
 Comparison of the Three Months and Six Months Ended June 30, 2005 and 2004
 Genesis® GenesisXP GenesisRC ä Eon ä
 Net revenue. Genesis GenesisRC Eon Renew GenesisRC Eon
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Gross profit.
 Operating expenses.
 Sales and marketing.
 Research and development.
 -21-




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General and administrative.
 Amortization of intangibles.
 Other income.
 Income tax expense.
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##### Table of Contents



Net income. Genesis, GenesisXP, and Eon
 Liquidity and Capital Resources
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Currency Fluctuations
  Off-Balance Sheet Arrangements
  Guidance
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Outlook and Uncertainties
 The following is a safe harbor statement under the Private Securities Litigation Reform Act of
1995: Certain matters discussed in this Quarterly Report on Form 10-Q contain statements that
constitute forward-looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, as amended. The words expect,
estimate, anticipate, predict, believe, plan, will, should, intend, would,
scheduled, potential, new market, potential market applications, and similar expressions
and variations thereof are intended to identify forward-looking statements, although not all
forward-looking statements contain such identifying words. Such statements appear in a number of
places in this Quarterly Report on Form 10-Q and include statements regarding our intent, belief or
current expectations with respect to, among other things: (i) trends affecting our financial
condition or results of operations; (ii) our financing plans; and (iii) our business growth
strategies. We caution our readers that any forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual results may differ materially from those
projected in the forward-looking statements as a result of various factors. These risks and
uncertainties include, but are not limited to, those discussed or identified from time to time in
our public filings, including the following:
 
    
    failure to gain market acceptance of our new rechargeable IPGs, to maintain continued market
acceptance of our conventional IPGs and radio-frequency powered spinal cord stimulation (SCS) systems,
or failure to replace a substantial portion of lost RF sales with sales of our new rechargeable IPGs
could adversely affect our revenue growth and profitability;
    
    failure to increase production of our new rechargeable IPG, Eon, to meet customer demand and a failure
to adequately manage allocation of supply could adversely affect our revenue growth and profitability;
    
    competition from and the launch of new competitive products by Medtronic, Advanced Bionics/Boston
Scientific or others, as well as other market factors that could impede growth in or reduce sales of
the Companys IPG and RF systems, which could adversely affect revenues and profitability;
    
    patient or physician selection of less invasive or less expensive alternatives;
    
    adverse changes in coverage or reimbursement amounts by Medicare, Medicaid, private insurers, managed
care organizations or workers compensation programs could limit our ability to market and sell our
products;
    
    intellectual property protection and potential infringement issues;
    
    the cost, uncertainty and other risks inherent in litigation generally, including without limitation,
the intellectual property and patent litigation against Advanced Bionics, and the ongoing securities
class action litigation filed in the first quarter of 2005;
    
    successful patient enrollment in and timely implementation of the IDE clinical studies for migraine
headache, essential tremor and Parkinsons disease; physician and patient acceptance of the LibraDBS
system for the essential tremor and Parkinsons disease studies, for which already-approved products
are already available on the market; the uncertainty of clinical results that may ensue from these
clinical studies; the risk that the FDA may not approve our PMA applications for these applications
following the completion of the clinical trials; and the satisfactory completion of
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##### Table of Contents



feasibility,pilot and pivotal studies and/or market tests prior to the introduction of new products generally;
    
    obtaining necessary government approvals for other new products or applications and maintaining
compliance with FDA product and manufacturing requirements;
    
    product liability;
    
    reliance on single suppliers for certain components;
    
    completion of research and development projects in an efficient and timely manner;
    
    successful integration of acquired businesses, products and technologies;
    
    international trade risks
  
 ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.  CONTROLS AND PROCEDURES
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PART II
 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Advanced Bionics Litigation
  GenesisRC Eon
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Securities Class Action Litigation
  Product Liability Litigation
  Other Litigation
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ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 TotalNumber of
    
    MaximumShares
    
    Number ofPurchased
    
    Shares thatTotal
    
    Average
    
    as Part of
    
    May Yet beNumber of
    
    Price
    
    Publicly
    
    PurchasedShares
    
    Paid Per
    
    Announced
    
    Under thePeriod
    
    Purchased
    
    Share
    
    Plans
    
    PlansMarch 1 through March 31, 2005
    
    
    381,894
    
    
    $
    27.96
    
    
    
    381,894
    
    
    
    1,618,106April 1 through April 30, 2005
    
    
    541,780
    
    
    $
    27.50
    
    
    
    923,674
    
    
    
    1,076,326
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  VotesVotes For
    
    Against
    
    Votes WithheldProposal
    
    Nominee
    
    Nominee
    
    From Nominee(1) Election of seven
directors for a
one-year termChristopher G. Chavez
    
    
    18,051,583
    
    
    
    
    
    
    
    621,722Robert C. Eberhart, Ph.D
    
    
    17,664,161
    
    
    
    
    
    
    
    1,009,144Joseph E. Laptewicz
    
    
    18,155,284
    
    
    
    
    
    
    
    518,021J. Philip McCormick
    
    
    18,149,944
    
    
    
    
    
    
    
    523,361Hugh M. Morrison
    
    
    17,655,125
    
    
    
    
    
    
    
    1,018,180Richard D. Nikolaev
    
    
    18,159,307
    
    
    
    
    
    
    
    513,998Michael J. Torma, M.D.
    
    
    17,650,321
    
    
    
    
    
    
    
    1,022,984
 Votes For
    
    Votes AgainstProposal
    
    Proposal
    
    Proposal
    
    Votes Abstained(2) Ratify the
selection of Ernst
& Young LLP as
independent
registered public
accounting firm for
the 2005 fiscal
year
    
    
    18,410,659
    
    
    
    257,090
    
    
    
    5,556
 VotesVotes For
    
    Against
    
    Votes
    
    BrokerProposal
    
    Proposal
    
    Proposal
    
    Abstained
    
    Non-Votes(3) Approval of an
amendment to the
Advanced
Neuromodulation
Systems, Inc. 2004
Stock Incentive
Plan to increase
the number of
shares available
from 750,000 shares
to 1,000,000 shares
    
    
    10,553,874
    
    
    
    4,305,517
    
    
    
    14,432
    
    
    
    3,799,482
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ITEM 6.  EXHIBITS
 (a)
    
    Exhibit 3.1  Articles of Incorporation, as amended and restated (1)Exhibit 3.2  Bylaws, as amended and restated (2)Exhibit 4.1  Rights Agreement dated as of August 30, 1996, between Quest Medical,
Inc. and KeyCorp Shareholder Services, Inc. as Rights Agent (3)Exhibit 4.2  Amendment to Rights Agreement dated as of January 25, 2002, between
Advanced Neuromodulation Systems, Inc and Computershare Investor Services LLC
(formerly KeyCorp Shareholder Services, Inc.) (4)Exhibit 10.27  Advanced Neuromodulation Systems, Inc. 2004 Stock Incentive Plan,
as amended (5)Exhibit 31.1  Certification of the Chief Executive Officer Pursuant to Rule 13a-14
of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (6)Exhibit 31.2  Certification of the Chief Financial Officer Pursuant to Rule 13a-14
of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (6)Exhibit 32.1  Certification of the Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(7)Exhibit 32.2  Certification of the Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(7)
 
 (1)
    
    Filed as an Exhibit to the report of the Company on Form 10-K for the year ended December
31, 2004, and incorporated herein by reference.(2)
    
    Filed as an Exhibit to the report of the Company on Form 10-K for the year ended December 31,
2000, and incorporated herein by reference.(3)
    
    Filed as an Exhibit to the report of the Company on Form 8-K dated September 4, 1996, and
incorporated herein by reference.(4)
    
    Filed as an Exhibit to the report of the Company on Form 8-K dated January 30, 2002, and
incorporated herein by reference.(5)
    
    Filed as an Exhibit to the Definitive Proxy Statement on Schedule 14A dated April 15, 2005,
and incorporated herein by reference.(6)
    
    Filed herewith.(7)
    
    Furnished herewith. -31-




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Signatures
  ADVANCED NEUROMODULATION SYSTEMS, INC.Date:  August 8, 2005
    By:
    /s/ F. Robert Merrill IIIF. Robert Merrill IIIExecutive Vice President, Finance
Chief Financial Officer and Treasurer -32-




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EXHIBIT INDEX
 Exhibit 3.1
    
    Articles of Incorporation, as amended and restated (1)Exhibit 3.2
    
    Bylaws, as amended and restated (2)Exhibit 4.1
    
    Rights Agreement dated as of August 30, 1996, between Quest Medical, Inc. and KeyCorp Shareholder
Services, Inc. as Rights Agent (3)Exhibit 4.2
    
    Amendment to Rights Agreement dated as of January 25, 2002 between Advanced Neuromodulation Systems, Inc
and Computershare Investor Services LLC (formerly KeyCorp Shareholder Services, Inc.) (4)Exhibit 10.27
    
    Advanced Neuromodulation Systems, Inc. 2004 Stock Incentive Plan, as amended (5)Exhibit 31.1
    
    Certification of the Chief Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (6)Exhibit 31.2
    
    Certification of the Chief Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (6)Exhibit 32.1
    
    Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (7)Exhibit 32.2
    
    Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (7)