Escalon Reports on Discussions Regarding Potential Acquisition of
Haematology Business Assets
WAYNE, Pa., Nov. 13 /PRNewswire-FirstCall/ -- Escalon Medical Corp. (Nasdaq: ESMC) today announced results for its fiscal first quarter ended September 30, 2008.
For the first quarter of fiscal 2009, the Company reported increased net revenue of $8,697,000 compared with $6,893,000 in fiscal 2007. This included product revenue of $8,669,000 for the first quarter of fiscal 2009, a 27% increase compared with $6,833,000 in the prior year. The increase in fiscal 2009 net revenue was primarily due to higher product revenues.
The Company experienced strong customer demand across most of its core businesses, reporting 2009 first quarter product revenue growth at its Drew, Sonomed, Vascular and EMI business units of approximately 40%, 15%, 24% and 39%, respectively, compared with the same period last fiscal year. This growth was slightly offset by decreased 2009 first quarter sales in the Medical/Trek business unit of 16%.
Investing in Our Future
Focused on expanding its competitive positioning and building its product portfolio, the Company's 2009 first quarter profitability was impacted by increased operating, research and development and sales and marketing expenses. Cost of goods sold as a percentage of product revenue decreased slightly to approximately 56% of product revenues, compared to approximately 57% of product revenue for the 2008 first quarter, and operating expenses increased approximately 11.3% during the 2009 first quarter. This increase was primarily related to increased research and development expenses at the Sonomed division for the development of three new products. Operating expenses also grew due to increased marketing, general and administrative expenses at the Drew and Medical/Trek divisions. The increase at Drew was primarily related to the acquisition of JAS in May 2008 and an increase in technical service costs related to the increased placements of Drew's D3 instrument during the current period.
For the first quarter of fiscal 2009, the Company reported a net loss of $(480,862), or $(0.07) per diluted share, compared with net loss of $(828,791), or $(0.13) per diluted share, in the first quarter of fiscal 2008.
Recap of First Quarter 2009
Richard J. DePiano, Chairman and Chief Executive Officer, commented, "We produced solid revenue growth during the first fiscal quarter of 2009 while continuing to make strategic investments to broaden our product portfolio. Increased research and development expenses at Sonomed have resulted in the development of three new products. We expect that these new products will become available for sale during the second and third quarter of fiscal 2009. While operating expenses also rose during the quarter, much of this increase related to Drew's acquisition of JAS in May 2008, which enhanced Drew's position within the IVD reagent market. These actions, combined with the five FDA clearances we have received since July 2007, helped us realize product growth of 27% during the first fiscal quarter of 2009."
Mr. DePiano added, "In the Drew business unit, product revenue increased substantially to $1,214,000, or 40.0% year-over-year. Growth was driven by the JAS acquisition, improved reagent revenues and increased sales of Drew's D3 instrument. At Sonomed, we realized increased product revenue of $339,000, or 15.2%, as a expanded sales initiatives in Southeast Asia, India and the Pacific Rim. Sonomed's domestic sales also increased by approximately $80,000 related to cross-selling synergies achieved through utilizing EMI's sales force to represent Sonomed's products.
"Within Vascular, product revenue increased $194,000, or 24.1%, due to stronger sales of its core needle business. In the EMI business unit, product revenue increased $149,000, or 39.5%, due to the continued expansion of EMI's product offerings and by the increased effectiveness of new salespeople brought on during the last year. The only business unit to see a decrease in product revenue was the Medical/Trek business unit, where product revenue decreased $60,000, or 16% during the quarter compared to the same period last fiscal year. This decrease is attributable to Medical/Trek's aging product line of Ispan Intraocular gases and fiber optic light sources."
Mr. DePiano concluded, "Overall, we are pleased with our top-line performance during the first fiscal quarter of 2009, where we began to realize the benefits of our development efforts. We continue to take steps to diversify our product portfolio, enhance our market position as well as build on our strengths, and believe these initiatives will ultimately support the continued expansion of the organization and generate long-term financial growth."
To supplement the Company's consolidated financial statements presented in accordance with GAAP, the Company has begun providing certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP net loss and non-GAAP loss per fully diluted share.
The Company's reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to, GAAP results. These non-GAAP measures are provided to enhance investors overall understanding of the Company's current financial performance and provide further information for comparative purposes due to the adoption of the new accounting standard FAS 123R.
Specifically, the Company believes the non-GAAP measures provide useful
information to both management and investors by isolating certain expenses,
gains and losses that may not be indicative of its core operating results
and business outlook. In addition, the Company believes non-GAAP measures
that exclude stock-based compensation expense enhance the comparability of
results against prior periods. The non-GAAP measures and the reconciliation
to the most directly comparable GAAP measure of all non-GAAP measures are
9/30/2007 12/31/2007 3/31/2008 6/30/2008 9/30/2008
Net loss $(828,791) $(639,346) $(1,942,622) $(11,648,884) $(480,862)
impairment $- $- $- $9,574,655 $-
compensation $12,934 $159,977 $- $73,846 $148,868
amortization $145,083 $151,245 $137,773 $148,410 $167,098
adjustments $158,017 $311,222 $137,773 $9,796,911 $315,966
income $(670,774) $(328,124) $(1,804,849) $(1,851,973) $(164,896)
per share 6,388,086 6,389,315 6,389,315 6,389,315 6,413,930
share $(0.11) $(0.05) $(0.28) $(0.29) $(0.03)
Discussions Regarding Potential Acquisition of Haematology Business Assets
Escalon also announced that it is holding discussions to purchase, through its subsidiary, Drew Scientific Holdings, Inc., certain assets of the haematology business of Biocode Hycel, the French subsidiary of Immunodiagnostic Systems plc, a producer of diagnostic testing kits. The haematology business, if acquired, will be operated as part of Escalon's Drew business unit.
Final deal terms between the parties have not been reached.
The transaction will be subject to the satisfaction of a number of conditions, including the negotiation of definitive terms, the execution of a definitive purchase agreement, and assuming successful consultation with the relevant employee representative councils as required under applicable law.
The parties are seeking to conclude negotiations in the short term and to complete the transaction during Escalon's second quarter of fiscal 2009, although there is no assurance that the transaction will be successfully negotiated or that closing of the transaction will occur in that time frame, if at all.
Founded in 1987, the Company (http://www.escalonmed.com) develops markets and distributes ophthalmic diagnostic, surgical and pharmaceutical products as well as vascular access devices. Drew Scientific, which operates as a separate business unit, provides instrumentation and consumables for the diagnosis and monitoring of medical disorders in the areas of diabetes, cardiovascular diseases and hematology, as well as veterinary hematology and blood chemistry. The Company seeks to utilize strategic partnerships to help finance its development programs and is also seeking acquisitions to further diversify its product line to achieve critical mass in sales and take better advantage of the Company's distribution capabilities, although such partnerships or acquisitions may not occur. The Company has headquarters in Wayne, Pennsylvania and operations in Long Island, New York, New Berlin, Wisconsin, Lawrence, Massachusetts, Dallas, Texas, Waterbury, Connecticut, Miami, Florida and Barrow-in-Furness, U.K.
Note: This press release contains statements that are considered
forward-looking under the Private Securities Litigation Reform Act of 1995,
including statements about the Company's future prospects. These statements
are based on the Company's current expectations and are subject to a number
of uncertainties and risks, and actual results may differ materially. The
uncertainties and risks include whether the Company is able to:
-- implement its growth and marketing strategies, improve upon the
operations of the Company business units, including the ability to make
acquisitions and the integration of any acquisitions it may undertake,
if any, of which there can be no assurance,
-- implement cost reductions,
-- generate cash,
-- identify, finance and enter into business relationships and
-- new product development, commercialization, manufacturing and market
acceptance of new products,.
Other factors include uncertainties and risks related to:
-- marketing acceptance of existing products in new markets,
-- research and development activities, including failure to demonstrate
-- delays by regulatory authorities, scientific and technical advances by
the Company or third parties,
-- introduction of competitive products,
-- ability to reduce staffing and other costs and retain benefit of prior
-- third party reimbursement and physician training, and
-- general economic conditions.
Further information about these and other relevant risks and
uncertainties may be found in the Company's report on Form 10-K for year
ended June 30, 2008, and its other filings with the Securities and Exchange
Commission, all of which are available from the Securities and Exchange
Commission as well as other sources.
-Financial Tables Follow-
ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended September 30, 2008 2007
Product revenue $8,669,165 $6,833,350
Other revenue 28,278 59,921
Revenues, net 8,697,443 6,893,271
Costs and expenses:
Cost of goods sold 4,844,140 3,922,586
Marketing, general and administrative 3,276,317 2,939,908
Research and development 1,046,165 923,361
Total costs and expenses 9,166,622 7,785,855
Income (loss) from operations (469,180) (892,584)
Other (expense) and income:
Equity in Ocular Telehealth Management, LLC (21,000) (34,111)
Interest income 47,526 101,697
Interest expense (9,408) (3,793)
Total other income 17,118 63,793
Net (loss) before taxes (452,062) (828,791)
Provision for income taxes 28,800 0
Net (loss) $(480,862) $(828,791)
Basic net (loss) per share $(0.07) $(0.13)
Diluted net income (loss) per share $(0.07) $(0.13)
Weighted average shares - basic 6,413,930 6,388,086
Weighted average shares - diluted 6,413,930 6,388,086
ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
Cash and cash equivalents $2,310,537 $3,708,456
Total assets 30,676,515 31,896,020
Total current liabilities 5,567,300 6,025,676
Long-term debt, net of current portion 125,434 250,871
Total liabilities 6,779,734 7,363,547
Accumulated deficit (43,748,329) (43,267,466)
Total shareholders' equity 23,896,782 24,532,473
|SOURCE Escalon Medical Corp.|
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