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Escalon(R) Reports Third Quarter Fiscal 2009 Results

WAYNE, Pa., May 19 /PRNewswire-FirstCall/ -- Escalon Medical Corp. (Nasdaq: ESMC) today announced results for its fiscal third quarter ended March 31, 2009.

For the third quarter of fiscal 2009, the Company reported increased net revenue of $9,205,000, compared with $8,188,000 in the third quarter of fiscal 2008. This included product revenue of $9,174,000 for the third quarter of fiscal 2009, a 12.7% increase, compared with $8,139,000 in the prior year's third quarter.

The Company experienced continued customer demand at its Drew and EMI business units, which reported 2009 third quarter product revenue growth of 41.4% and 88.5%, respectively, compared with the same period last fiscal year. This growth was offset by decreased 2009 third quarter sales in the Sonomed, Vascular and Medical/Trek business units of 11.9%, 30% and 4%, respectively.

For the nine-month period ended March 31, 2009, the Company reported net revenue of $26,001,000, compared with $22,576,000 in the prior year comparable period. Product revenue increased approximately 15.5% to $25,904,000 during the nine-month period ended March 31, 2009, compared with $22,422,000 in the same period last fiscal year. The growth was driven by increased product revenue within three of the Company's business units, highlighted by 33.8% at Drew, primarily related to the acquisition of JAS Diagnostics in May 2008 and Biocode Hycel in December 2008. Sonomed and EMI product revenue increased 1.1% and 32.5%, respectively.

For the third quarter of fiscal 2009, the Company reported a net loss of $(683,173), or $(0.09) per diluted share, compared with net loss of $(1,942,622), or $(0.30) per diluted share, in the third quarter of fiscal 2008. Operating results were impacted by lower cost of goods sold, which totaled approximately $4,729,000, or 51.5% of product revenue, for the three-month period ended March 31, 2009, as compared to $4,913,000, or 60.4% of product revenue, for the same period last fiscal year.

The Company reported a net loss for the nine months ended March 31, 2009 of $(1,861,000), or $(0.27) per diluted share, compared with a net loss of $(3,410,759), or $(0.53) per diluted share, in the prior year period. Cost of goods sold as a percentage of product revenue decreased to approximately 54.8% during the nine-month period ended March 31, 2009, as compared to approximately 57.0% for the same period last fiscal year. Additionally, operating expenses increased approximately 2.7% during the nine-month period ended March 31, 2009, compared to the same period in the prior fiscal year. The increase is related to the acquisition of JAS Diagnostics in May 2008 and Biocode Hycel in December 2008.

Richard J. DePiano, Chairman and Chief Executive Officer, commented, "We produced solid revenue growth through the first nine months of fiscal 2009 and, despite increasing operating and research and development expenses, lowered our net loss. While we are still disappointed with our net loss, we are encouraged by the trend our clinical diagnostics division has been experiencing. Mr. DePiano concluded, "Overall, we continue to take steps to diversify our product portfolio, enhance our market position and seek potential growth opportunities we see ahead in our niche markets."

Non-GAAP Measures

To supplement the Company's consolidated financial statements presented in accordance with GAAP, the Company provides 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 as follows:

                         Three Months Ended        Nine Months Ended
                               March 31,                March 31,
                           2009       2008          2009        2008

    Net (loss)         $(683,173) $(1,942,622) $(1,861,030) $(3,410,759)
    Stock based
     compensation        $37,444     $142,454     $223,756     $203,367
    Depreciation and
     amortization       $193,238     $137,774     $525,652     $434,101

    Total adjustments   $230,682     $280,228     $749,408     $637,468

    Non-GAAP adjusted
     (loss)            $(452,491) $(1,662,394) $(1,111,622) $(2,773,291)

    Shares used in
     computing basic
     and fully diluted
     earnings per
     share             6,435,106    6,255,665    6,895,411    6,388,905

    Non-GAAP adjusted
     (loss) per fully
     diluted share        $(0.07)      $(0.27)      $(0.16)      $(0.43)

Founded in 1987, the Company ( 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, Barrow-in-Furness, U.K. and Le Rheu, France.

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 acquisitions, and make timely payments for any financing, 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 clinical efficacy,
  • 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 reductions,
  • 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, subsequent quarterly reports filed on Form 10-Q and the Company's other filings with the Securities and Exchange Commission, all of which are available from the Securities and Exchange Commission as well as other sources.


                      Three Months Ended March 31, Nine Months Ended March 31,
                              2009         2008         2009         2008

    Net revenues:
    Product revenue        $9,173,876   $8,138,627  $25,903,900  $22,421,603
    Other revenue              31,122       48,940       97,123      154,315
    Revenues, net           9,204,998    8,187,567   26,001,023   22,575,918

    Costs and expenses:
      Cost of goods sold    4,729,430    4,912,381   14,209,211   12,786,574
      Marketing, general
       and administrative   4,212,994    4,097,401   10,859,315   10,409,662
      Research and
       development            810,130    1,040,116    2,749,131    2,840,227
        Total costs and
         expenses           9,752,554   10,049,898   27,817,657   26,036,463
    (Loss) from operations   (547,556)  (1,862,331)  (1,816,635)  (3,460,545)

    Other (expense)
     and income:
      Equity in Ocular
       Management, LLC        (31,336)     (14,013)     (65,387)     (64,735)
      Gain on sale of assets        -            -       91,871            -
      Interest income             285       78,189       50,938      265,277
      Interest expense       (104,566)     (17,987)    (121,817)     (24,276)
        Total other income   (135,617)      46,189      (44,395)     176,266
    Net (loss) before
     taxes                   (683,173)  (1,816,142)  (1,861,030)  (3,284,279)
    Provision for
     income taxes                   0      126,480            0      126,480
    Net (loss)              $(683,173) $(1,942,622) $(1,861,030) $(3,410,759)

    Basic net (loss)
     per share                 $(0.09)      $(0.30)      $(0.27)      $(0.53)

    Diluted net (loss)
     per share                 $(0.09)      $(0.30)      $(0.27)      $(0.53)

    Weighted average
     shares - basic         7,413,930    6,389,315    6,895,411    6,388,905

    Weighted average
     shares - diluted       7,413,930    6,389,315    6,895,411    6,388,905


                                                      March 31,     June 30,
                                                        2009          2008

    Current assets:
      Cash and cash equivalents                      $1,222,647   $3,708,456
      Accounts receivable, net                        6,351,066    3,896,297
      Inventory, net                                 10,327,981    8,670,160
      Note receivable                                    80,000            -
      Other current assets                              404,863      297,807
        Total current assets                         18,386,557   16,572,720
    Furniture and equipment, net                        952,721    1,078,839
    Goodwill                                         11,590,786   11,590,786
    Trademarks and trade names                          694,006      694,006
    Patents, net                                      2,517,638      157,883
    Covenant not to compete, customer list and
     other intangibles, net                           1,546,055    1,691,610
    Other assets                                         27,577      110,176
      Total assets                                  $35,715,340  $31,896,020

    Current liabilities:
      Current portion of long-term debt                $376,314     $501,752
      Accounts payable                                3,343,379    2,628,004
      Accrued expenses                                1,868,815    2,895,920
      Deferred revenue                                  305,332            -
        Total current liabilities                     5,893,840    6,025,676
    Long-term debt, net of current portion            5,514,174      250,871
    Accrued post-retirement benefits                  1,087,000    1,087,000
        Total long-term liabilities                   6,601,174    1,337,871

      Total liabilities                              12,495,014    7,363,547
    Shareholders equity:
    Preferred stock,, $0.001 par value;
     2,000,000 shares authorized; no shares issued            -            -
    Common stock, $0.001 par value;
     35,000,000 share authorized; 7,413,930 and
     6,413,930 issued and outstanding at March 31,
     2009 and June 30, 2008, respectively                 7,414        6,414
    Common stock warrants                             1,733,460    1,601,346
    Additional paid-in capital                       67,418,884   66,299,242
    Accumulated deficit                             (45,128,496) (43,267,466)
    Accumulated other comprehensive (loss) income      (810,936)    (107,063)
      Total shareholders' equity                     23,220,326   24,532,473
      Total liabilities and shareholders' equity    $35,715,340  $31,896,020

                          CONSOLIDATED BALANCE SHEETS

                                     March 31,               December 31,
                                        2009                      2008

    Cash and cash equivalents        $1,222,647                $3,708,456
    Total assets                    $35,715,340               $31,896,020
    Long-term debt, net of
     current portion                   $376,314                  $501,752
    Total long-term liabilities      $6,601,174                $1,337,871
    Accumulated deficit            $(45,128,496)             $(43,267,466)
    Total Shareholders' equity      $23,220,326               $24,532,473
    Total liabilities and
     shareholders' equity           $35,715,340               $31,896,020

SOURCE Escalon Medical Corp.
Copyright©2009 PR Newswire.
All rights reserved

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