U.S.
Securities and Exchange Commission
Washington
D.C. 20549
FORM
10-QSB/A
(Mark
One)
[
X ] QUARTERLY REPORT PURSUANT TO SECTION 13
OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended March 31, 2005
[
] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF
THE EXCHANGE ACT
For the
transition period from
to
Commission
file number
0-12183
BOVIE
MEDICAL CORPORATION
(Exact
name of small business issuer as specified in its charter)
|
Delaware |
11-2644611 |
|
(State
or other jurisdiction |
(IRS
Employer Identification No.) |
|
Of
incorporation or organization) |
|
| |
|
734 Walt
Whitman Rd., Melville, New York 11747
(Address
of principal executive offices)
(631)
421-5452
(Issuer's
telephone number)
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 shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ X ]
No [ ]
APPLICABLE
ONLY TO CORPORATE ISSUERS
Indicate
the number of shares outstanding of each of the issuer’s class of
common
stock, as
of the latest practicable date: 13,897,858.
|
BOVIE
MEDICAL CORPORATION |
|
INDEX
TO FORM 10-QSB |
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Contents |
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BOVIE
MEDICAL CORPORATION |
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MARCH
31, 2005 AND DECEMBER 31, 2004 |
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Assets |
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(Unaudited) |
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(Audited) |
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March
31, 2005 |
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December
31, 2004 |
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Current
assets: |
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Cash |
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$ |
2,141,779 |
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$ |
2,294,746 |
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Trade
accounts receivable |
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2,169,062 |
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1,954,287 |
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Inventories |
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2,272,411 |
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2,001,637 |
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Prepaid
expenses |
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253,618 |
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328,765 |
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Deferred
tax asset |
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386,200 |
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386,200 |
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Total
current assets |
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7,223,070 |
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6,965,635 |
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Property
and equipment, net |
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2,295,717 |
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2,116,324 |
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Other
assets: |
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Repair
parts |
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95,668 |
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124,363 |
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Brand
name/Trademark |
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1,509,662 |
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1,509,662 |
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Patent
rights, net |
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74,473 |
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88,572 |
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License
Rights, net (restated) |
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347,500 |
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350,000 |
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Deposits |
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16,445 |
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14,445 |
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2,043,748 |
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2,087,042 |
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$ |
11,562,535 |
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$ |
11,169,001 |
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The
accompanying notes are an integral part of the financial
statements. |
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BOVIE
MEDICAL CORPORATION |
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CONSOLIDATED
BALANCE SHEET |
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MARCH
31, 2005 AND DECEMBER 31, 2004 |
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(CONTINUED) |
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Liabilities
and Stockholders' Equity |
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(Unaudited) |
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(Audited) |
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March
31, 2005 |
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December
31, 2004 |
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Current
liabilities: |
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Accounts
payable |
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$ |
894,059 |
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$ |
620,151 |
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Accrued
expense |
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602,285 |
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568,482 |
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Deferred
Revenue |
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144,944 |
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157,844 |
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Customer
deposits |
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36,000 |
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36,000 |
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Current
maturities of long-term debt |
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31,668 |
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31,668 |
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Total
current liabilities |
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1,708,956 |
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1,414,145 |
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Long
Term Liabilities |
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340,412 |
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348,325 |
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Minority
interest (restated) |
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147,500 |
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150,000 |
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Stockholders'
equity: |
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Preferred
Stock, par value $.001
10,000,000
shares authorized
0
issued and outstanding on March 31, 2005 and December 31,
2004 |
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-- |
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-- |
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Common
stock par value $.001; 40,000,000 shares authorized, issued and
outstanding 13,897,858 shares and 13,862,128 shares on March 31, 2005 and
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December
31, 2004 respectively |
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13,916 |
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13,881 |
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Additional
paid in capital |
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20,411,485 |
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20,391,407 |
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Accumulated
deficit |
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(11,059,734 |
) |
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(11,148,757 |
) |
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Total
stockholders' equity |
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9,365,667
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9,256,531 |
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Total
liabilities and stockholders' equity |
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$ |
11,562,535 |
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$ |
11,169,001 |
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The
accompanying notes are an integral part of the financial statements.
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BOVIE
MEDICAL CORPORATION. |
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FOR
THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 |
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(UNAUDITED) |
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March
31, 2005 |
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March
31, 2004 |
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Sales |
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$ |
4,743,211 |
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$ |
4,743,958 |
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Cost
of sales |
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3,092,741 |
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2,996,507 |
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Gross
profit |
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1,650,470 |
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1,747,451 |
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Costs
and expenses: |
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Research
and development |
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179,544 |
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|
144,209 |
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Professional
services |
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148,022 |
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129,252 |
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Salaries
and related costs |
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421,472 |
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442,117 |
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Selling,
general and administrative |
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778,295 |
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779,679 |
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Development
joint venture |
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40,803 |
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8,468 |
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1,568,136 |
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1,503,725 |
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Gain
from operations |
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82,334 |
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243,726 |
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Other
income (expense): |
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Interest
(net of income) |
|
|
6,689 |
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|
(3,894 |
) |
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Income |
|
|
89,023 |
|
|
239,832 |
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| |
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Provision
for income tax |
|
|
(
31,160 |
) |
|
(
86,340 |
) |
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Realized
benefit of loss carryforward |
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|
31,160 |
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|
86,340 |
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| |
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Net
income |
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$ |
89,023 |
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$ |
239,832
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Earnings
per share |
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Net
income: |
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Basic
|
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|
.01 |
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|
.02 |
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Diluted |
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|
.01 |
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|
.01 |
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Weighted
average number of shares outstanding |
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13,885,922 |
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13,565,320 |
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Weighted
average number of shares outstanding adjusted for dilutive securities
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16,243,973 |
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16,177,621 |
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The
accompanying notes are an integral part of the financial
statements. |
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BOVIE
MEDICAL CORPORATION |
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FOR
THE PERIOD ENDED JANUARY 1, 2004 TO MARCH 31,
2005 |
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Options |
Preferred |
Common |
Paid-in |
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Outstanding |
Shares |
Value |
Shares |
Value |
Capital |
Deficit |
Total |
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January
1, 2004 |
3,988,800 |
-- |
-- |
13,464,528 |
$
13,482 |
$20,097 |
$(12,660,750) |
$7,449,827 |
| |
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Options
granted |
370,000 |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
| |
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Options
exercised |
(397,600) |
-- |
-- |
397,600 |
399 |
294,312 |
-- |
294,711 |
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Options
forfeited |
(
10,000) |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
| |
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Income
for period |
-- |
-- |
-- |
-- |
-- |
-- |
1,511,993 |
1,511,993 |
| |
|
|
|
|
|
|
|
|
|
December
31, 2004 |
3,951,200 |
-- |
-- |
13,862,128 |
$
13,881 |
$20,391407 |
$
(11,148,757) |
$9,256,531 |
| |
|
|
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|
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|
Options
exercised |
(
35,730) |
-- |
-- |
35,730 |
35 |
20,078 |
-- |
20,113 |
| |
|
|
|
|
|
|
|
|
|
Income
for period |
-- |
-- |
-- |
-- |
-- |
-- |
89,023 |
89,023 |
| |
|
|
|
|
|
|
|
|
|
March
31, 2005 |
3,915,470 |
-- |
-- |
13,897,858 |
$
13,916 |
$
20,411,485 |
$
(11,059,734) |
$9,365,667 |
| |
|
|
BOVIE
MEDICAL CORPORATION AND SUBSIDIARIES |
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INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS |
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|
FOR
THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 |
|
|
(UNAUDITED) |
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| |
|
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| |
|
2005 |
|
2004 |
|
| |
|
|
|
|
|
Cash
flows from operating activities |
|
|
|
|
|
|
|
|
Net
income |
|
$ |
89,023 |
|
$ |
239,832 |
|
|
Adjustments
to reconcile net income |
|
|
|
|
|
|
|
|
to
net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
108,842 |
|
|
88,271 |
|
| |
|
|
|
|
|
|
|
|
Changes
in current assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables |
|
|
(
214,775 |
) |
|
(567,099 |
) |
|
Inventories
and repair parts |
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|
(
242,079 |
) |
|
(
57,364 |
) |
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Prepaid
expenses |
|
|
75,147 |
|
|
127,953 |
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Accounts
payable |
|
|
273,908 |
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|
324,100 |
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Accrued
expense |
|
|
33,803 |
|
|
72,708 |
|
|
Deferred
Revenue |
|
|
(12,900 |
) |
|
19,512 |
|
| |
|
|
|
|
|
|
|
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Net
cash provided (applied) by operating activities |
|
|
110,969 |
|
|
247,913 |
|
| |
|
|
|
|
|
|
|
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Cash
flows from investing activities |
|
|
|
|
|
|
|
|
Increase
in fixed assets |
|
|
(274,136 |
) |
|
(
268,351 |
) |
|
Increase
in deposits |
|
|
(
2,000 |
) |
|
-- |
|
| |
|
|
|
|
|
|
|
|
Net
cash used in investing activities |
|
|
(276,136 |
) |
|
(268,351 |
) |
| |
|
|
|
|
|
|
|
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Cash
flows from financing activities |
|
|
|
|
|
|
|
|
(Decrease)
in mortgage payable |
|
|
(
7,903 |
) |
|
(
11,591 |
) |
|
Common
shares purchased |
|
|
20,103 |
|
|
119,925 |
|
|
Obligations
from shareholders |
|
|
-- |
|
|
1,113 |
|
| |
|
|
|
|
|
|
|
|
Net
cash provided in financing activities |
|
|
12,200 |
|
|
109,447 |
|
| |
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents |
|
|
(152,967 |
) |
|
89,009 |
|
| |
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period |
|
|
2,294,746 |
|
|
306,137 |
|
| |
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period |
|
$ |
2,141,779 |
|
$ |
395,146 |
|
| |
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the financial
statements. |
BOVIE
MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
Cash paid
during the three months ended March 31:
|
|
|
2005 |
|
2004 |
|
| |
|
|
|
|
|
Interest
paid |
|
$ |
5,087 |
|
$ |
3,890 |
|
Income
taxes |
|
|
- 0
- |
|
|
- 0
- |
|
SUPPLEMENTAL
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
FOR THE
THREE MONTHS ENDED MARCH 31, 2004 AND 2005:
There
were no non-cash investing and financing activities in the first quarter of the
year 2004 or 2005.
BOVIE
MEDICAL CORPORATION
NOTE 1. INTERIM FINANCIAL INFORMATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (U.S.) for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information necessary for a fair presentation of
results of operations, financial position, and cash flows in conformity with
accounting principles generally accepted in the U.S. In the opinion of
management, the condensed consolidated financial statements reflect all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation of the results of Bovie Medical Corporation and its
subsidiaries for the periods presented. Operating results for interim periods
are not necessarily indicative of results that may be expected for the fiscal
year as a whole. The preparation of the financial statements in conformity with
accounting principles generally accepted in the U.S. requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, expenses, and the related disclosures at the date of the
financial statements and during the reporting period. Actual results could
materially differ from these estimates. For further information, refer to the
consolidated financial statements and notes thereto included in the Company’s
Annual Report on Form 10-KSB for the year ended December 31, 2004. Certain prior
year amounts have been reclassified to conform with the presentation used in
2005.
RESTATEMENT
OF FINANCIAL STATEMENTS
We
adopted FASB
Interpretation No. 46R, Consolidation of Variable Interest Entities - An
Interpretation of ARB51 that
requires the consolidation of legal structures, called Variable
Interest Entities (VIEs). Our
joint
venture with Jump Agentur Fur Electrotechnik GMBH (“the Joint Venture”, “JAG”)
qualifies as a VIE. We had
historically accounted for the investment in JAG on the equity basis. We have
restated our balance sheets and consolidated JAG in the period ended March 31,
2005 and for the year ended December 31, 2004. The most significant impact to
our financial statements is to add the intangible assets of JAG, totaling
approximately $347,500 for March 31, 2005 and $350,000 for December 31, 2004,
and minority interest of $147,500 on March 31, 2005 and $150,000 on December 31,
2004 to our balance sheets. The impacts on our consolidated statements of net
income or cash flows are not material.
NOTE
2. STOCK-BASED COMPENSATION
The
Company accounts for its employee stock option and stock purchase plans using
the intrinsic value method in accordance with Accounting Principle Board Opinion
No. 25, “Accounting for Stock Issued to Employee.” Accordingly, the Company does
not recognize compensation expense for employee or director stock options
granted not less than fair market value. For purposes of disclosures pursuant to
Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based
Compensation,” (SFAS 123), as amended by SFAS 148, “Accounting for Stock-Based
Compensation, Transition and Disclosure,” the estimated fair value of options is
amortized to expense over the options’ vesting period. The fair value of the
options is estimated at the date of grant using the Black-Scholes option pricing
model.
NOTE
3. INVENTORIES
Inventories
are stated at the lower of cost or market. Cost is determined principally on the
average cost method. Inventories at March 31, 2005 and December 31, 2004 were as
follows:
| |
|
March
31, 2005 |
|
December
31, 2004 |
|
| |
|
|
|
|
|
|
Raw
materials |
|
$ |
675,827 |
|
$ |
705,188 |
|
|
Work
in process |
|
|
941,942 |
|
|
742,289 |
|
|
Finished
goods |
|
|
654,642 |
|
|
554,160 |
|
| |
|
|
|
|
|
|
|
|
Total |
|
$ |
2,272,411 |
|
$ |
2,001,637 |
|
REPAIR
PARTS
The
Company acquired the inventory of repair parts in conjunction with the purchase
of the Bovie line of generators and Bovie trade name, on May 8, 1998. The
Company has maintained the inventory to service the previously sold generators.
The useful life of repair parts is estimated to be five to seven years and the
Company has set up an allowance for excess and obsolete parts.
As of
March 31, 2005 and December 31, 2004, the inventory of parts was
follows:
| |
|
March
31, 2005 |
|
December
31, 2004 |
|
| |
|
|
|
|
|
|
Raw
materials |
|
$ |
95,668 |
|
$ |
124,363 |
|
| |
|
|
|
|
|
|
|
BOVIE
MEDICAL CORPORATION
NOTE
4. INTANGIBLE ASSETS
At
December 31, 2004 and March 31, 2005 intangible assets consisted of the
following:
| |
|
March
31, 2005 |
|
December
31, 2004 |
|
| |
|
|
|
|
|
Indefinite
life assets: |
|
|
|
|
|
|
Brand
name/Trademark (life indefinite) |
|
$ |
1,509,662 |
|
$ |
1,509,662 |
|
| |
|
|
|
|
|
|
|
|
Other
intangibles: |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
License
rights (20 yr life) |
|
$ |
347,500 |
|
$ |
350,000 |
|
| |
|
|
|
|
|
|
|
|
Purchased
technology (5 yr life) |
|
|
278,763 |
|
|
278,763 |
|
|
Less:
Accumulated amortization |
|
|
(204,290 |
) |
|
(190,191 |
) |
| |
|
|
|
|
|
|
|
|
Net
carrying amount |
|
$ |
74,473 |
|
$ |
88,572 |
|
| |
|
|
|
|
|
|
|
NOTE
5. NEW ACCOUNTING PRONOUNCEMENTS
FASB
Interpretation No. 46R, Consolidation of Variable Interest Entities - An
Interpretation of ARB51 The FASB
finalized FIN 46R in December 2003. FIN 46R expands the scope of ARB51 and
various EITFs and can require consolidation of legal structures, called
Variable
Interest Entities (VIEs).
Companies with investments in Special
Purpose Entities (SPEs) were
required to implement FIN 46R in 2003; however, companies with VIEs are
permitted to implement in the first quarter of 2004. While we do not have SPEs,
we do have a VIE that we have determined will qualify for consolidation. This
include joint
venture with Jump Agentur Fur Electrotechnik GMBH (“the Joint Venture”,
“JAG”). We have
consolidated this VIE for period ended March 31, 2005 and for the year ended
December 31, 2004. The most significant impact to our financial statements is to
add the intangible assets of JAG, totaling approximately $350,000 in 2004 and
$347,500 for the period ended March 31, 2005, and minority interest of $150,000
in 2004 and $160,000 in 2003 to our balance sheets. The impacts on our
consolidated statements of net income or cash flows are not material.
In
November 2003 and March 2004, the Emerging Issues Task Force (EITF) reached a
consensus on 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 evaluation 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. In September 2004, the adoption date of 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 Issue
No. 03-1. The disclosures prescribed by Issue 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 our
consolidated earnings, financial position or cash flows.
In
December 2003, the Financial Accounting Standards Board (FASB) issued SFAS No.
132® “Employers’ Disclosure about Pensions and Other Post-retirement Benefits.”
This standard increases the existing disclosure requirements by requiring more
details about pension plan assets, benefit obligations, cash flows, benefit
costs and related information. The expanded disclosure require that plan assets
be segregated by category, such as debt, equity and real estate, and that
disclosures on certain expected rates of return be incorporated. SFAS No. 132®
will also require us to disclose various elements of pension and post-retirement
benefit costs in interim-period financial statements.
We adopted SFAS No. 132® in 2003. The Company does not have a pension plan or
post retirement benefits.
In
September 2004, the EITF reached a consensus regarding Issue No. 04-8, “The
Effect of Contingently Convertible Instruments on Diluted Earnings Per Share,”
requiring that the dilutive effect of contingent convertible debt instruments
(CoCos) be included in diluted earnings per share calculations for all periods
(if dilutive), regardless of whether the triggering contingency has been
satisfied. Adoption of Issue No. 04-8 requires retroactive restatement of prior
period dilutive earnings per share for CoCos outstanding at the implementation
date. The Company does not have contingently convertible instruments and the
adoption of this consensus for periods ending after December 15, 2004 did not
have a material impact on diluted earnings per share for the three months ended
March 31, 2005.
In
September 2004, the EITF reached a consensus on Issue No. 04-1 “Accounting for
Pre Existing Relationships between the Parties to a Business Combination,” which
requires that pre existing relationships between two parties of a business
combination be settled prior to the combination. The EITF also addresses the
measurement and recognition of settlements related to pre existing receivables
and payables, executory contracts, intangible asset rights, and gain settlements
among the parties to a business combination. This consensus is effective for the
fiscal year 2005. Adoption did not have a material impact on our consolidated
earnings, financial position or cash flows.
BOVIE
MEDICAL CORPORATION
NOTE
5. NEW ACCOUNTING PRONOUNCEMENTS (Continued)
In
September 2004, the EITF reached a consensus on Issue No. 04-10, “Applying
Paragraph 19 of FASB Statement No. 131, Disclosure
about Segments of an Enterprise and Related Information (SFAS No.
131), in Determining Whether to Aggregate Operating Segments That Do Not Meet
the Quantitative Thresholds.” Issue No. 04-10 clarifies the criteria for
aggregating an operating segment that does not meet all of the aggregation
criteria in paragraph 17 of SFAS No. 131, but also falls below the quantitative
criteria that would dictate that the segment be reported separately. The
consensus reached would enable an entity to aggregate two or more segments that
have similar economic characteristics and share a majority of the aggregation
criteria in paragraph 17 of SFAS No. 131. Although Issue No. 04-10 was to be
effective immediately, in November 2004 the EITF delayed the implementation of
this issue in order to have its effective date coincide with a related FASB
Staff Position (FSP), which will clarify the meaning of similar economic
characteristics. Issue No. 04-10 is to be applied by retroactive restatement of
previous periods. Adoption of Issue No. 04-10 is not expected to have an impact
on our consolidated earnings, financial position or cash flows.
In
November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of
Accounting Research Bulletin No. 43, Chapter 4,” which adopts wording from the
International Accounting Standards Board’s (IASB) IAS 2 “Inventories” in an
effort to improve the comparability of cross-border financial reporting. The
FASB and IASB both believe the standards have the same intent; however, an
amendment to the wording was adopted to avoid inconsistent application. The new
standard indicates that abnormal freight, handling costs, and wasted materials
(spoilage) are required to be treated as current period charges rather than as a
portion of inventory cost. Additionally, the standard clarifies that fixed
production overhead should be allocated based on the normal capacity of a
production facility. The Statement is effective beginning in fiscal year 2007.
Adoption is not expected to have a material impact on our consolidated earnings,
financial position or cash flows.
In
December 2004, the FASB issued FSP FAS 109-1, “Application of FASB Statement No.
109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of 2004.” The FSP
clarifies that the manufacturer’s deduction provided for under the American Jobs
Creation Act of 2004 (the Act) should be accounted for as a special deduction in
accordance with SFAS No. 109, “Accounting for Income Taxes,” and not as a tax
rate reduction. The Qualified Production Activities Deduction will not impact
our consolidated earnings, financial position or cash flows for fiscal year 2005
because the deduction is not available to us. We are currently evaluating the
effect that this deduction will have in subsequent years.
In
December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based
Payment” (“SFAS 123R”), which replaces SFAS No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”) and supercedes APB Opinion No. 25, “Accounting for
Stock Issued to Employee. “SFAS 123R requires that all share-based payments to
employees, including grants of employee stock options, be recognized in the
financial statements based on their fair values, beginning with the first
interim or annual period after June 15, 2005, with early adoption encouraged.
The pro forma disclosures previously permitted under SFAS 123, no longer will be
an alternative to financial statement recognition. We are required to adopt SFAS
123R in the fiscal year 2006. Under SFAS 123R, we must determine the appropriate
fair value model to be used in valuing share-based payments the amortization
method for compensation cost and the transition method to be used at the date of
adoption. Upon adoption, we may choose from two transition methods: the
modified-prospective transition approach or the modified-retroactive transition
approach. Under the modified-prospective transition approach we would be
required to recognize compensation cost for awards that were granted prior to,
but not vested as of the date of adoption. Prior periods remain unchanged and
pro forma disclosures previously required by SFAS No. 123 continue to be
required. Under the modified-retrospective transition method we would be
required to restate prior periods by recognizing compensation cost in the
amounts previously reported in the pro forma disclosure under SFAS No. 123.
Under this method, we would be permitted to apply this presentation to all
periods presented or to the start of the fiscal year in which SFAS No. 123R is
adopted. We would also be required to follow the same guidelines as in the
modified-prospective transition method for awards granted subsequent to adoption
and those that were granted and not yet vested. We are currently evaluating the
requirements of SFAS 123R and its impact on our consolidated results of
operations and earnings per share. We have not yet determined the method of
adoption or the effect of adopting SFAS 123R, and it has not been determined
whether the adoption will result in amounts similar to the current pro forma
disclosures under SFAS 123.
BOVIE
MEDICAL CORPORATION
NOTE
5. NEW ACCOUNTING PRONOUNCEMENTS (Continued)
In
December 2004, the FASB issued Staff Position (“FSP) No. 109-2, “Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004” (FSB 109-2”). This position provides
guidance under FASB Statement No. 109 (“SFAS 109”), “Accounting for Income
Taxes”, with respect to recording the potential impact of the repatriation
provisions of the American Jobs Creation Act of 2004 (the “Jobs Act”) on
enterprises income tax expense and deferred tax liability. The Jobs Act was
enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time
beyond the financial reporting period of enactment to evaluate the effect of the
Jobs Act on its plan for reinvestment or repatriation of foreign earnings for
purposes of applying SFAS 109. The Company does not have accumulated income
earned abroad and The Act and the FSP No. 109-2 do not have any effect on the
Company’s financial statements.
In
December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets -
An Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions”
(SFAS 153”). SFAS 153 eliminates the exception
From fair
value measurement for nonmonetary exchanges of similar productive assets in
paragraph 21(b) of APB Opinion No. 29, “Accounting for Nonmonetary
Transactions,” and replaces it with an exception for exchanges that do not have
commercial substance. SFAS 153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS 153 is effective for
fiscal periods beginning after June 15, 2005. We have considered SFAS 153 and
have determined that this pronouncement is not applicable to our current
operations.
In
November 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate
Time-Sharing Transactions- An amendment of SFAS No. 66 and 67”. This statement
amends SFAS No. 66,” Accounting for Sales of Real Estate, to reference the
financial accounting and reporting guidance for real estate time-sharing
transactions which is provided in AICPA Statement of Position (“SOP”) 04-2,
“Accounting for Real Estate Time-Sharing Transaction.” This statement also
amends SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real
Estate Projects,” to state the guidance for (a) incidental costs and (b) costs
incurred to sell real estate projects does not apply to real estate time-sharing
transactions. The accounting for those costs is subject to guidance in SOP 04-2.
SFAS 152 is effective for fiscal years beginning after June 15, 2005. We have
considered SFAS 152 and have determined that this pronouncement is not
applicable to our current operations.
NOTE
6. SHAREHOLDERS’ EQUITY
During
the three-month period ending March 31, 2005, we issued 35,730 common shares in
exchange for employee exercised options. The issuance of the common stock
resulted in an increase in capital of $20,103.
NOTE
7. EARNINGS PER SHARE
We
compute basic earnings per share (“basic EPS”) by dividing net income by the
weighted average number of common shares outstanding for the reporting period.
Diluted earnings per share (“diluted EPS”) gives effect to all dilutive
potential shares outstanding resulting from employee stock options during the
period. The following table sets forth the computation of basic and diluted
earnings per share for the three-month periods ended March 31, 2004 and
2005.
|
Three
months ended March 31 |
|
| |
|
2005 |
|
2004 |
|
|
Net
income |
|
$ |
89 |
|
$ |
240 |
|
| |
|
|
|
|
|
|
|
|
Basic-weighted
average shares outstanding |
|
|
13,886 |
|
|
13,565 |
|
| |
|
|
|
|
|
|
|
|
Effect
of dilutive potential securities |
|
|
2,358 |
|
|
2,612 |
|
| |
|
|
|
|
|
|
|
|
Diluted
- weighted average shares outstanding |
|
|
16,244 |
|
|
16,177 |
|
| |
|
|
|
|
|
|
|
|
Basic
EPS |
|
$ |
.01 |
|
$ |
.02 |
|
| |
|
|
|
|
|
|
|
|
Diluted
EPS |
|
$ |
.01 |
|
$ |
.01 |
|
BOVIE
MEDICAL CORPORATION
NOTE
7. EARNINGS PER SHARE (Continued)
All above
figures are in thousands except basic and diluted earnings per share which are
not. The shares used in the calculation of diluted EPS exclude options to
purchase shares where the exercise price was greater than the average market
price of common shares for the period. Such shares aggregated approximately .5
million and .47 million in the three months ended March 30, 2005 and 2004,
respectively.
Executive
Level Overview
We are a
medical device company engaged in the manufacturing and marketing of
electrosurgical devices. Our medical products include a wide range of devices
including electrosurgical generators and accessories, cauteries, medical
lighting, nerve locators and other products.
We divide
our operations into three reportable business segments: Electrosurgical
products, battery operated cauteries and other products. The electrosurgical
segment sells electrosurgical products generators, electrodes, electrosurgical
pencils and various ancillary disposable products. These products are used in
surgery for the cutting and coagulation of tissue. Battery operated cauteries
are used for precise hemostasis (to stop bleeding) in ophthalmology and in other
fields. Our other revenues are derived from nerve locators, disposable and
reusable penlights, medical lighting, license fees, development fees and other
miscellaneous income. Domestic sales accounted for 83% of total revenues in the
quarter ended March 31, 2005 as compared to 85% in the first quarter of 2004.
Most the Company’s products are marketed through medical distributors which
distribute to more than 6,000 hospitals and to doctors and other health-care
facilities.
International
sales accounts for 17% of total revenues for the period ended March 31, 2005 as
compared to 15% for March 30, 2004. The Company’s products are sold in more than
150 countries through local dealers. Local dealer support is coordinated by
sales and marketing personnel at the St. Petersburg, Florida facility. We have
no branch offices than the Florida facility. We sell our products to
distributors that distribute them in the following countries: Argentina,
Australia, Belgium, Brazil, Canada, Chile, Denmark, Finland, France, Germany,
Greece, India, Italy, Japan, Korea, Mexico, The Netherlands, New Zealand,
Norway, Poland, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland,
Taiwan and the United Kingdom, China, the CIS (former Soviet Union), Cyprus,
Indonesia, Ireland, Korea, Latin America, Malaysia, the Philippines, Thailand,
Turkey, and Vietnam. Our business is generally not seasonal in
nature.
Outlook
for 2005
Based
upon current preliminary forecasts, diluted net earnings per share from
operations for 2005 may be less than 2004. In addition, net earnings may be
negatively impacted by increased costs of selling, general payroll, professional
fees, research and development and administrative. Sales for the year 2005 are
expected to be comparable to 2004. For the next six months of the current fiscal
year, we expect similar sales to the same period last year, despite a decline in
orders from our main OEM customer. If foreign currency exchange rates hold at
current levels, we anticipate a favorable impact on foreign sales for the full
year of 2005.
Even
though our main OEM customer has reduced its orders during the second three
months of 2005 our overall sales for that period may be comparable with sales
for the same period last year. OEM business is marked by variables, making it
difficult to forecast future performance, as OEM contracts create limited
visibility. Significant OEM orders or new product development can favorably and
materially impact our performance. During fiscal 2005 we will direct increased
effort and resources at advancing product development, and geographic expansion
of distributors while continuing to take advantage of selective OEM
opportunities as they occur. We believe that this course of action will result
in a greater diversification to our revenue stream.
BOVIE
MEDICAL CORPORATION
Outlook
for 2005(Continued)
We have
paid off all previously outstanding borrowings under our existing credit
facility. We anticipate investing in future business growth, including business
and product line acquisitions to supplement our current product offerings, new
product launches and future manufacturing building expansions.
RESTATEMENT
OF FINANCIAL STATEMENTS
We
adopted FASB
Interpretation No. 46R, Consolidation of Variable Interest Entities - An
Interpretation of ARB51 that
requires the consolidation of legal structures, called Variable
Interest Entities (VIEs). Our
joint
venture with Jump Agentur Fur Electrotechnik GMBH (“the Joint Venture”, “JAG”)
qualifies as a VIE. We had
historically accounted for the investment in JAG on the equity basis. We have
restated our balance sheets and consolidated JAG in the years ended December 31,
2004 and 2003. The most significant impact to our financial statements is to add
the intangible assets of JAG, totaling approximately $350,000 in 2004 and
$360,000 in 2003, and minority interest of $150,000 in 2004 and $160,000 in 2003
to our balance sheets. The impacts on our consolidated statements of net income
or cash flows are not material.
Result
of Operations (to be read in conjunction with the profit and loss
statement)
The table
below outlines the components of the consolidated statements of earnings as a
percentage of net sales and the year-to-year percentage change in dollar
amounts:
Analysis
of Quarter Ended March 31, 2005/2004
| |
|
|
Percentage
change in |
| |
|
|
Dollar
amounts |
| |
2005 |
2004 |
2005/2004 |
| |
% |
% |
% |
| |
|
|
|
|
Sales |
100.0 |
100.0 |
0
- |
|
Cost
of sales |
65.2 |
63.2 |
3.2 |
|
Gross
profit |
34.8 |
36.8 |
5.5 |
| |
|
|
|
|
Other
costs: |
|
|
|
|
R
& D |
31.8 |
30.0 |
24.5 |
|
Professional
fees |
3.1 |
2.7 |
14.5 |
|
Salaries |
8.9 |
9.3 |
(4.7) |
|
SGA |
16.4 |
16.4 |
(0.2) |
|
Development
cost - joint venture |
.9 |
.2 |
381.8 |
| |
|
|
|
|
Total
other costs |
33.1 |
31.7 |
4.3 |
| |
|
|
|
|
Income
form operations |
1.7 |
5.1 |
(66.2) |
| |
|
|
|
|
Other
expense |
.2 |
(
.1) |
271.8 |
| |
|
|
|
|
Net
Income |
1.9 |
5.1 |
(
62.9) |
| |
|
|
|
|
Income
tax expense |
(
.7) |
(
1.8) |
(
62.9) |
|
Income
tax benefit |
.7 |
1.8 |
62.9 |
| |
|
|
|
|
Net
earnings |
1.9 |
5.1 |
(
62.9) |
| |
|
|
|
|
The
table below sets forth domestic/international and product line sales
information for the first quarter of 2005 and 2004. |
|
| |
|
|
|
|
|
|
|
|
|
Net
Sales (in thousands) |
|
|
|
|
|
Percentage
change |
|
Increase/ |
|
| |
|
2005 |
|
2004 |
|
2005/2004 |
|
(Decrease) |
|
Domestic/international
sales: |
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
4,015 |
|
$ |
4,063 |
|
|
(1.2 |
) |
|
(.48 |
) |
|
International |
|
|
728 |
|
|
681 |
|
|
6.9 |
|
|
47 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
net sales |
|
$ |
4,743 |
|
$ |
4,744 |
|
|
- 0
- |
|
|
(
1 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
line sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electrosurgical |
|
$ |
2,511 |
|
$ |
2,857 |
|
|
(12.1 |
) |
|
(346 |
) |
|
Cauteries |
|
|
1,330 |
|
|
1,258 |
|
|
5.7 |
|
|
72 |
|
|
Other |
|
|
902 |
|
|
629 |
|
|
43.4 |
|
|
273 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
net sales |
|
$ |
4,743 |
|
$ |
4,744 |
|
|
- 0
- |
|
|
( 1
|
) |
BOVIE
MEDICAL CORPORATION
2005
Compared with 2004
Our net
sales were comparable for the first quarter of 2005 as they were in the first
quarter of 2004, a net total of $4.7 million. Sales of electrosurgical products
decreased by 12% or $.3 million during the same quarterly period of 2004 while
sales of cauteries increased by 5% from 1.25 million to $1.33 million. Other
sales increased by 43% from $.6 million to $.9 million. This increase was the
result of $.1 million increase in development cost income and $.2 million in
other medical product sales. No sales of one particular electrosurgical product
dominated the number of units sold.
Domestic
sales were $4.0 million for first quarter 2005, representing a decrease of 1.2%
from the same period last year. International sales were $.7 million for the
first quarter of 2005, representing an increase of 6.9% over the same period
2004.
Cost of
sales represented 65.2% of sales in the first quarter of 2005 as compared to
63.2% of sales in the first quarter of 2004, a total of $3.09 million and $3
million, respectively, an increase of $.09 million. The reason for the increase
in cost of sales was due to an increase of 21% in indirect costs and a decrease
in material cost of 2.5%.
Research,
development and engineering expenses were 3.8% and 3.0% of sales for the first
quarters of 2005 and 2004, respectively. These expenses increased 25% in 2005 to
$179,544, an increase over the corresponding period of 2004 spending $35,335.
The higher spending level is the result of development spending in advance of
our proposed product launches in 2005. New products under development are the
suture removal device, plasma technology, GI device and various improvements to
our line of electrosurgical generators.
Professional
fees increased from $129,252 in the first quarter of 2004 to $148,022 in the
first quarter of 2005, an increase of $18,770 or 15%. Other legal fees increased
by $26,188, mainly associated with defense litigation.
Salaries
and related costs decreased by 4.7% from $.44 million to $.42 million from the
first of 2004 to the first quarter of 2005. The decrease was mainly attributable
to the decreased cost of representative training. Selling, general and
administrative expense remained practically the same for the first quarter of
2005 as compared to the first quarter of 2004, a total of $.78
million.
Net
interest earned increased by $10,583 from a net expense in the first quarter of
2004 to net income in the first quarter of 2005 as a result of our higher cash
balances being invested.
The
effective income tax rate was 36.2% in the first quarter of 2005 and the first
quarter of 2004. There was also a tax loss carryover benefit of 36.2% for each
respective quarter.
There
were net earnings of $.01 per share of $89,023 in the first quarter of 2005 as
compared to $239,832 or $.02 per share in the first quarter of 2004. The
decrease in earnings from the first quarter of 2004 to the first quarter of 2005
was mostly attributable to an increase in cost of sales and development
costs.
We sell
our products through distributors both overseas and in U.S. markets. New
distributors are contacted through responses to our advertising in international
and domestic medical journals and domestic or international trade
shows.
In the
fourth quarter of 1998, we made agreements with various sales representatives to
develop markets for our new products and to maintain customer relations. Our
current representatives receive an average commission of approximately 4% of
sales in their market areas. In the first quarter of 2005 and 2004, commissions
paid were $91,531 and $84,831 respectively, an increase of 8%.
An
adequate supply of raw materials is available from both domestic and
international suppliers. The relationship between us and our suppliers is
generally limited to individual purchase order agreements, supplemented by
contractual arrangements with key vendors to ensure availability of certain
products. We have developed multiple sources of supply where
possible.
BOVIE
MEDICAL CORPORATION
In order
to provide additional working capital, we have secured a $1.5 million credit
facility with a local commercial bank. This facility is payable on demand. For
the period ended March 31, 2005, we had zero funds drawn down on this credit
facility.
Our ten
largest customers accounted for approximately 61% of net revenues for the first
quarter of 2005 as compared to 70% in the same period of 2004. For both periods
ended March 31, 2005 and 2004, our ten largest trade receivables accounted for
approximately 53% and 71% of outstanding receivables, respectively. In the first
quarter of 2005 and 2004 one customer accounted for 12% and 30% of total sales,
respectively.
Product
Development
Most of
the Company’s products and product improvements have been developed internally.
Funds for this development have come from internal cash flow and the sale of
common stock upon the exercise of stock options. The Company maintains close
working relationships with physicians and medical personnel in hospitals and
universities who assist in product research and development. New and improved
products play a critical role in the Company’s sales growth. The Company
continues to place emphasis on the development of proprietary products and
product improvements to complement and expand its existing product lines. The
Company has a centralized research and development focus, with its one
manufacturing location responsible for new product development and product
improvements. Our research, development and engineering units at the
manufacturing location maintain relationships with distribution locations and
customers in order to provide an understanding of changes in the market and
product needs. During 2004 and into 2005 we invested in the J Plasma Technology,
the Suture Removal Technology, the Gastrointestinal “GI” device and undertook
development of Cardio and Urological Electrosurgical devices for a contractual
partner. The suture removal device and the GI device are slated to be marketed
during the fourth quarter of 2005. The ongoing cost for this development will be
paid from operating cash flows.
In the
next year we do not contemplate any material purchase or acquisition of assets
which our ordinary cash flow and or credit line would not be able to
sustain.
We
believe that Bovie has the financial resources needed to meet business
requirements in the foreseeable future, including capital expenditures needed
for the expansion of our manufacturing site, working capital requirements, and
product development programs, subject to Bovie maintaining compliance with our
credit facility.
Reliance
on Collaborative, Manufacturing and Selling Arrangements
We are
dependent on certain contractual OEM customers for product development wherein
we are to provide the manufacturing of the product developed. However, the
customers have no legal obligation to purchase the developed products. Should
the collaborative customer fail to give us purchase orders for the product after
development, our future business and value of related assets could be negatively
affected. Furthermore, no assurance can be given that a collaborative customer
may give sufficient high priority to our products. In addition, disagreements or
disputes may arise between Bovie and its contractual customers which could
adversely affect production of our products. We also have similar informal
collaborative arrangements with two foreign suppliers except that we request the
development of certain items and components and we purchase them from the
foreign supplier pursuant to purchase orders. Our purchase orders are never for
more than one year and are supported by customer purchase orders from our
customers.
Liquidity
and Capital Resources
Our
working capital at March 31, 2005 decreased $37,000 to $5.514 million from
$5.551 million at December 31, 2004. The decrease in working capital was
primarily a result of investing in fixed assets and not financing those
purchases. Accounts payable and other accrued liabilities together increased to
a small degree in 2004 as a result of the growth in the business. Accounts
receivable day sales outstanding were 41.8 days and 51.4 days at March 31, 2005
and March 31, 2004 respectively.
BOVIE
MEDICAL CORPORATION
We
generated cash from operations of .11 million for the three months ended March
31, 2005 compared with $.25 million in the same period of 2004. The decrease in
cash from operations for the period end March 30, 2005 in comparison to compared
in the prior year is primarily due to the reduction of earnings of $.15 million
in the quarter ended March 31, 2005.
In the
quarter ended March 31, 2005 we used $.27 million for the purchase of fixed
assets. Total borrowing declined by $7,913 which is the amount by which we
reduced our first mortgage.
We had
2.14 million in cash and cash equivalents at March 31, 2005. We also had
outstanding borrowings totaling $.37 million at that date. Current maturities of
long-term debt at March 31, 2005 were $31,668. We believe our cash on hand, as
well as anticipated cash flows from operations, will be sufficient to fund
future operating capital requirements, future manufacturing facility
construction and other capital expenditures and future acquisitions to
supplement our current product offerings. Should additional funds be required,
we have $1.5 million of additional borrowing capacity available under our
existing credit facility.
The
Company’s future contractual obligations for agreements with initial terms
greater than one year, including agreements to purchase materials in the normal
course of business, are summarized as follows (in thousands):
|
|
Nine
Months |
|
Payment
Period |
|
| |
2005 |
2006 |
2007 |
2008 |
2009 |
|
Long-term
debt |
$
24 |
$
348 |
$
-0- |
$
-0- |
$
-0- |
|
Operating
leases |
109 |
142 |
135 |
115 |
-0- |
|
Unconditional
purchase obligations |
2,137 |
712 |
-0- |
-0- |
-0- |
The
Company’s additional borrowing capacity, along with the expected expiration
period of the commitments, is summarized as follows (in millions):
|
|
|
|
|
Amount
of Commitment |
|
|
|
|
Total |
|
Expiration
Per Period |
|
|
|
|
Amount |
|
Less
than |
|
In
excess of |
|
|
|
|
Committed |
|
1
year |
|
1
year |
|
|
Secured
revolving credit agreement and other lines of credit |
|
$ |
1.5 |
|
$ |
1.5 |
|
|
-0- |
|
As of
March 31, 2005 the total amount is available.
Our
future results of operations and the other forward-looking statements contained
herein, particularly the statements regarding growth in the medical products
industry, capital spending, research and development, and marketing and general
and administrative expenses, involve a number of risks and uncertainties. In
addition to the factors discussed above, there are other factors that could
cause actual results to differ materially, such as business conditions and the
general economies; competitive factors including rival manufacturers’
availability of components at reasonable prices; risk of nonpayment of accounts
receivable; risks associated with foreign operations; and litigation involving
intellectual property and consumer issues.
We
believe that we have the product mix, facilities, personnel, competitive edge,
operating cash flows and financial resources for business success in the
immediate (1 year) future and distant future (after 1 year), but future
revenues, costs, margins, product mix and profits are all subject to the
influence of a number of factors, as discussed above.
Critical
Accounting Estimates
We have
adopted various accounting policies to prepare the consolidated financial
statements in accordance with accounting principles generally accepted (GAAP) in
the United States of America (U.S.). Our most significant accounting policies
are disclosed in Note 1 to the consolidated financial statements.
BOVIE
MEDICAL CORPORATION
The
preparation of the consolidated financial statements, in conformity with U.S.
GAAP, requires us to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Our
estimates and assumptions, including those related to bad debts, inventories,
intangible assets, property, plant and equipment, minority investment, legal
proceedings, research and development, warranty obligations, product liability,
pension obligations, sales returns and discounts, and income taxes are updated
as appropriate, which in most cases is at least quarterly. We base our estimates
on historical experience, actuarial valuations, or various assumptions that are
believed to be reasonable under the circumstances and the results form the basis
for making judgments about the reported values of assets, liabilities, revenues
and expenses. Actual results may materially differ from these
estimates.
Estimates
are considered to be critical if they meet both of the following criteria: (1)
the estimate requires assumptions about material matters that are uncertain at
the time the accounting estimates are made, and (2) other materially different
estimates could have been reasonably made or material changes in the estimates
are reasonably likely to occur from period to period. Our critical accounting
estimates include the following:
Allowance
for doubtful accounts
We
maintain an allowance for doubtful accounts for estimated losses in the
collection of accounts receivable. We make estimates regarding the future
ability of our customers to make required payments based on historical credit
experience and expected future trends. If actual customer financial conditions
are less favorable than projected by management, additional accounts receivable
write-offs may be necessary, which could unfavorably affect future operating
results.
Inventory
Reserves
We
maintain reserves for excess and obsolete inventory resulting from the potential
inability to sell our products at prices in excess of current carrying costs.
The markets in which we operate are highly competitive, with new products and
surgical procedures introduced on an ongoing basis. Such marketplace changes may
cause our products to become obsolete. We make estimates regarding the future
recoverability of the costs of these products and record a provision for excess
and obsolete inventories based on historical experience, and expected future
trends. If actual product life cycles, product demand or acceptance of new
product introductions are less favorable than projected by management,
additional inventory write-downs may be required, which could unfavorably affect
future operating results.
Income
Taxes
We
operate in multiple tax jurisdictions both inside and outside the United States.
Accordingly, management must determine the appropriate allocation of income to
each of these jurisdictions. Tax audits associated with the allocation of this
income and other complex issues may require an extended period of time to
resolve and may result in income tax adjustments if changes to the income
allocation are required between jurisdictions with different tax rates. Because
tax adjustments in certain jurisdictions can be significant, we record accruals
representing our best estimate of the probable resolution of these matters. To
the extent additional information becomes available, such accruals are adjusted
to reflect the revised estimated probable outcome.
Other
Matters
We
distribute our products throughout the world. As a result, our financial results
could be significantly affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in foreign markets. Our operating
results are primarily exposed to changes in exchange rates among the United
States dollar and European currencies, in particular the Euro and the British
pound. When the United States dollar weakens against foreign currencies, the
dollar value of sales denominated in foreign currencies increases. When the
United States dollar strengthens, the opposite situation occurs. We manufacture
our products in the United States, China and Bulgaria and incur the costs to
manufacture in US dollars. This worldwide deployment of factories serves to
partially mitigate the impact of the high costs of manufacturing in the US.
BOVIE
MEDICAL CORPORATION
In
December 2004, the Financial Accounting Standards Board (FASB) issued a revision
to Statement No. 123, Share-Based
Payment.
This
revision supersedes Accounting Principles Board (APB) Opinion No. 25,
Accounting
for Stock Issued to Employees, and its
related implementation guidance. This revision requires companies to recognize
the cost of stock options based on the grant-date fair value pursuant to their
employee stock option plans over the period during which the recipient is
required to provide services in exchange for the options, typically the vesting
period. Pursuant to the requirements of the Statement, and amendments we plan to
adopt the provisions of the standard during the fiscal year 2006. (See Note 1.
Significant Accounting Policies)
There
were no legal proceedings during the quarterly period ended 03/31/05 pending
that could have a material effect on our financial position.
None
None
None
(a)
Evaluation of disclosure controls and procedures
An
evaluation of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e) as of March 31, 2005 was carried out under the supervision and
with the participation of the Company’s management, including the President and
Chief Executive Officer and the Chief Financial Officer (“the Certifying
Officers”). Based on that evaluation, the Certifying Officers concluded that the
Company’s disclosure controls and procedures are effective to bring to the
attention of the Company management the relevant information necessary to permit
an assessment of the need to disclose material developments and risks pertaining
to the Company’s business in its periodic filings with the Securities and
Exchange Commission.
Disclosure
controls and procedures are designed to ensure that information required to be
disclosed in our reports filed or submitted under the Securities Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed or submitted under the Securities
Exchange Act is accumulated and communicated to management, including our
President and Chief Financial Officer, as appropriate, to allow timely decisions
and timely reporting regarding required disclosure.
(b)
Changes in internal controls
There was
no change to the Company’s internal control over financial reporting during the
quarter ended March 31, 2005 that materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial
reporting.
BOVIE
MEDICAL CORPORATION
SIGNATURES:
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bovie
Medical Corporation.
(Registrant)
Date: July 11,
2005
/s/Andrew
Makrides
Chief
Executive Officer - Andrew Makrides
/s/Charles
Peabody
Chief
Financial Officer- Charles Peabody