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Hamilton Thorne, Inc. Announces 2012 Fourth Quarter and Year-End Financial Results


4/30/2013 11:30:33 AM

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BEVERLY, MA and TORONTO--(Marketwired - April 29, 2013) -

Hamilton Thorne Ltd. (TSX VENTURE: HTL), a leading provider of precision laser devices and advanced image analysis systems for the fertility, stem cell and developmental biology research markets, today reported operational and financial results for the fourth quarter and year-ended December 31, 2012.

Sales for the year were $6.3 million on the strength of a record fourth quarter of $2.06 million, which was up 2% over the prior year, and up 41% versus the third quarter of 2012. In addition, the Company generated a fourth quarter net income of $18,000 and positive cash flow from operations of $159,000. For the year-ended December 31, 2012, Hamilton Thorne sales decreased 12% versus the $7.15 million in the prior year, as the Company experienced a deep downturn in sales in the second quarter and to a lesser extent, the third quarter.

"2012 was a mixed year for Hamilton Thorne. While we were disappointed to see a decline in sales, particularly in the second quarter, we were pleased to see a strong rebound in Q4 resulting in the first period of positive net income and positive cash flow since the Company went public on the TSX Venture Exchange in 2009," said David Wolf, President and Chief Executive Officer of Hamilton Thorne Ltd.

Michael Bruns, the Company's Chief Financial Officer, commented, "At the beginning of the third quarter we made strategic cost cutting moves that trimmed almost $200,000 per quarter from our expense structure. This cost cutting, along with the sales growth in the fourth quarter, enabled us to generate positive cash flow for the quarter and dramatically reduce our use of cash for operations for the year."

Mr. Wolf added, "We continue to focus our efforts on the human clinical IVF market as well as the animal fertility and research markets where Hamilton Thorne has an established leadership position, strong brand recognition and quality products. The introduction of our updated, industry-leading computer assisted sperm analysis (CASA) hardware and software in the second half of the year positively contributed to our sales growth in Q4. We see continued opportunity for strong growth in these markets and we plan to invest judiciously in both R&D and sales and marketing activities to accelerate revenue growth, as we work to move Hamilton Thorne towards continued profitability and positive cash flow."

2012 Business Highlights

  • In March 2012, Hamilton Thorne launched its leading-edge XYRCOS ® laser system for advanced research applications. The XYRCOS® laser offers a significant advance in integrated laser optics, providing additional functionality, increased resolution and compatibility with all major microscope models. The XYRCOS®, which is engineered to have the laser and RED-i ® target locator built directly inside the objective, offers benefits for cutting-edge embryo micromanipulation applications such as transgenic animal production, gene targeting, stem cell research and laser-assisted animal IVF.

  • In July 2012, Hamilton Thorne commercially launched its IMSI-Strict™ imaging and analysis software at the 28th Annual Meeting of the European Society of Human Reproduction and Embryology (ESHRE). IMSI-Strict™ is the only automated software solution for live sperm morphology analysis under high magnification, combining Tygerberg Strict Criteria with motile sperm organelle morphology examination (MSOME).

  • In the third quarter, the Company shipped the first of its IVOS II best-in-class CASA systems, the first product introduction in its refreshed CASA hardware line. During the quarter, the Company also made a number of sales of its IMSI-Strict™ software system.

  • In November 2012, the Company shipped the first of its updated CASA II software products targeted for the animal breeding market. The software features a new, up to date user interface, multi-language support, advanced morphometry and a host of features targeted to specific markets.

  • The Company received FDA clearance for its Multi-Pulse software for performing embryo biopsy in clinical settings. The Multi-Pulse software, which comes standard on the LYKOS® laser, provides rapid, repeated firing of the laser to facilitate the trophectoderm biopsy process for IVF patients undergoing pre-implantation genetic diagnosis (PGD). The Company also received a CE Mark for its new LYKOS® assisted clinical reproductive laser system. The CE Mark provides conformity to European Medical Device Directive 93/42/EEC, which allows a company to market and sell products in the European Economic Area (EEA).

  • Hamilton Thorne received US patent approval covering its RED-i® target locator for the Company's line of lasers systems. The new patent further strengthens Hamilton Thorne's IP position, and its innovative technology can be widely used for important clinical and research applications.

  • In 2012, Hamilton Thorne's products were referenced in over 97 new peer-reviewed scientific articles by customers at world-leading research labs and academic institutions. Hamilton Thorne's image analysis products accounted for 68 articles and publications referencing our advanced laser systems appearing in many of the most prestigious scientific journals such as Nature, Fertility and Sterility, Stem Cells & Development, Journal of Cell Biology and Cell.

Financing Highlights:

  • In May 2012, the Company completed a non-brokered private placement of $450,000 of equity units to insiders for the price of Cdn $0.115 per unit (each unit consisting of one common share and one half warrant), and issued 4,006,668 common shares and 2,003,332 common share warrants expiring one year from the date of issue.

  • In August 2012, the Company exercised its option to convert the remaining $345,000 of principal amount of 10% convertible unsecured subordinated debentures issued in March 2011 into a total of 1,411,766 common shares. In addition, the Company issued 31,077 common shares upon the conversion of $2,282 of accrued interest thereon.

  • On August 29, 2012, the Company completed a non-brokered private placement to insiders of $300,000 of unsecured subordinated debentures (the "Debentures"). The Debentures are denominated in United States Dollars and will mature on October 1, 2013. The Debentures bear interest at a rate of 10% per annum until April 29, 2013 and 18% per annum thereafter until the maturity date. The interest is to be accrued and paid only upon maturity of the Debentures or the earlier redemption by the Corporation in accordance with the terms thereof. The net proceeds from the sale of the Debentures were used for working capital purposes.

Financial Results

All amounts are in US dollars, unless specified otherwise, and results expressed in accordance with the International Financial Reporting Standards ("IFRS").

Full Year 2012

The Company total sales were $6,326,006 for the year-ended December 31, 2012, a decrease of $833,156, or 11.6% from $7,159,162 during the previous year. This decrease was attributable to laser sales being down slightly, while CASA sales were off substantially, in part due to cyclical fluctuations in demand, and in part due to purchase deferrals in anticipation of new product announcements which began to be fulfilled in the fourth quarter.

Gross profit for the year decreased 18.4% to $3,687,749 in the year-ended December 31, 2012, compared to $4,518,797 in the previous year. Gross profit as a percentage of sales decreased from 63.1% to 58.38% for the year-ended December 31, 2012, due primarily to an increase in sales through distribution channels, two large sales of a low margin product formerly distributed by the Company, product mix and decreased sales spread over a relatively constant overhead base.

Operating expenses were $5,028,761 for the year-ended December 31, 2012, reduced 14.6% from $5,889,239 for the previous year, and also, as a percentage of sales, down to 79.5% versus 82.3% for the prior year. The substantial reduction in operating expenses of $860,478 (14.6%) was a result of significant cost cutting, particularly in the second half of the year, and to a lesser extent, lower variable costs on a lower sales volume. Research and development expenses decreased $243,444 from $1,220,316 to $976,872 for the year-ended December 31, 2012, as the Company refocused on products serving existing markets and substantially reduced investment in products serving unproven markets. Sales and marketing expenses decreased $228,541 (19.9%) from $2,634,452 to $2,405,911 for the year-ended December 31, 2012 due to the reduction of our sales and marketing staff, commissions, reduced travel, and lower variable costs of selling. General and administrative (G&A) expenses were reduced $388,493 (19.1%) from $2,034,471 to $1,645,978 for the year-ended December 31, 2012 due primarily to a reduction in staffing, strong expense controls, reduced consulting fees, and lower share-based compensation costs.

Net interest expense decreased from $521,178 to $297,318 for the year-ended December 31, 2012. The decrease of $223,860 was due primarily to the significant reduction of the Company's debt as a result of the conversion of approximately $1.6 million of convertible debentures to equity and the reduction of the Company's bank loan by $1.5 million, both of which were completed in the quarter ended September 30, 2011.

The net loss for the year-ended December 31, 2012 was $1,638,330, reduced from $1,891,620 in the previous year, an improvement of $253,290, as revenue decreases were offset by operating expense reductions, with the resulting savings attributable to reduced interest expense.

Fourth Quarter Results

The Company total sales increased 2.1% to $2,064,340 during the quarter ended December 31, 2012, which was up $42,167 from $2,022,173 during the previous year quarter. Gross profit was down 9.5% to $1,183,322, and gross profit as a percentage of sales declined to 57.3% from 64.7% in the previous year, due primarily to an increase in sales through distribution channels and two large sales of a low margin product formerly distributed by the Company.

Operating expenses were reduced $461,139 or 29.6% to $1,096,973 due primarily to a refocus of R&D priorities, decreases in staffing levels, particularly in administrative functions, and across the board spending restraint.

The net profit for the fourth quarter was $18,299, an improvement of $347,303 from the net loss of $329,003 for the same period of the previous year. The improvement was due primarily to increased sales, the substantial reduction in operating expenses, as well as reduced interest expenses.

As of December 31, 2012, the Company had 52,064,876 common shares, 2,127,767 warrants, and 6,591,906 options outstanding.

The financial statements are available on www.sedar.com.

About Hamilton Thorne Ltd. (www.hamiltonthorne.com)

Hamilton Thorne designs, manufactures and distributes precision laser devices and advanced imaging systems for the fertility, stem cell and development biology research markets. It provides novel solutions for Life Science that reduce cost, increase productivity, improve results and enable research breakthroughs in regenerative medicine, stem cell research and fertility markets. Hamilton Thorne's laser products attach to standard inverted microscopes and operate as robotic micro-surgeons, enabling a wide array of scientific applications and IVF procedures. Its imaging systems improve outcomes in human IVF clinics and animal breeding facilities and provide high-end toxicology analyses.

Hamilton Thorne's growing customer base includes pharmaceutical companies, biotechnology companies, fertility clinics, university research centers, and other commercial and academic research establishments worldwide. Current customers include world-leading research labs such as Harvard, MIT, Yale, McGill, DuPont, Monsanto, Charles River Labs, Jackson Labs, Merck, Novartis, Pfizer, and Oxford and Cambridge.

Neither the Toronto Venture Exchange, nor its regulation services provider (as that term is defined in the policies of the exchange), accepts responsibility for the adequacy or accuracy of this release.

Certain information in this press release may contain forward-looking statements. This information is based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Actual results might differ materially from results suggested in any forward-looking statements. The Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward-looking statements unless and until required by securities laws applicable to the Company. Additional information identifying risks and uncertainties is contained in filings by the Company with the Canadian securities regulators, which filings are available at www.sedar.com.

Financial results included below:

                                                                            
Hamilton Thorne Ltd.                                                        
Consolidated Statements of Financial Position                               
As at December 31, 2012 and 2011                                            
(Expressed in U.S. Dollars)                                                 
--------------------------------------------------------------------------- 
                                                December 31,   December 31, 
                                                        2012           2011 
                                               -------------  ------------- 
                                                                            
Assets                                                                      
Current                                                                     
  Cash and cash equivalents                    $     369,773  $     484,421 
  Accounts receivable                                794,600      1,021,326 
  Inventories                                        570,331        809,731 
  Prepaid expenses                                    64,220         67,393 
                                               -------------  ------------- 
  Total current assets                             1,798,924      2,382,871 
                                                                            
  Property and equipment                             136,701        214,204 
  Other assets                                       110,748        110,784 
                                               -------------  ------------- 
                                                                            
  Total assets                                 $   2,046,373  $   2,707,859 
                                               -------------  ------------- 
                                                                            
Liabilities                                                                 
Current                                                                     
  Accounts payable and accrued liabilities     $   1,590,430  $   1,393,090 
  Notes payable                                      358,937        338,961 
  Capital lease obligations, current                  37,368         30,860 
  Deferred revenue                                    60,597         84,066 
                                               -------------  ------------- 
  Total current liabilities                        2,047,332      1,846,977 
                                                                            
  Capital lease obligations, non-current              37,765         80,202 
  Deferred revenue, long-term                         29,900         28,000 
  Long-term debt                                   3,500,000      3,500,000 
                                               -------------  ------------- 
                                                                            
  Total liabilities                                5,614,997      5,455,179 
                                               -------------  ------------- 
                                                                            
Shareholders' Equity (Deficiency)                                           
  Common shares                                   29,351,663     28,699,248 
  Warrants                                           102,383        280,213 
  Contributed surplus                              1,138,786        798,623 
  Accumulated other comprehensive income               2,278            --- 
  Accumulated deficit                            (34,163,734)   (32,525,404)
                                               -------------  ------------- 
                                                                            
  Total Shareholders' (deficiency)                (3,568,624)    (2,747,320)
                                               -------------  ------------- 
                                                                            
  Total Liabilities and shareholders' equity                                
   (deficiency)                                $   2,046,373  $   2,707,859 
                                               -------------  ------------- 
                                                                            
                                                                            
Hamilton Thorne Ltd.                                                        
Consolidated Statements of Operations and Comprehensive Loss                
For the years ended December 31,2012 and 2011                               
(Expressed in U.S. Dollars)                                                 
--------------------------------------------------------------------------- 
                                                        2012           2011 
                                               -------------  ------------- 
                                                                            
Sales                                          $   6,326,006  $   7,159,162 
Cost of sales                                      2,638,257      2,640,365 
                                               -------------  ------------- 
                                                                            
Gross profit                                       3,687,749      4,518,797 
                                               -------------  ------------- 
                                                                            
Expenses                                                                    
  Research and development                           976,872      1,220,316 
  Sales and marketing                              2,405,911      2,634,452 
  General and administrative                       1,645,978      2,034,471 
                                               -------------  ------------- 
                                                                            
Total expenses                                     5,028,761      5,889,239 
                                               -------------  ------------- 
                                                                            
Loss from operations                              (1,341,012)    (1,370,442)
                                                                            
Other income (expense)                                                      
  Interest expense including accretion              (297,318)      (521,178)
                                               -------------  ------------- 
Net Loss                                          (1,638,330)    (1,891,620)
  Foreign currency translation gain as foreign                              
   operations                                          2,278            --- 
                                                                            
Comprehensive loss for the year                $  (1,636,052) $  (1,891,620)
                                               -------------  ------------- 
                                                                            
Loss per share:                                                             
  Basic                                        $       (0.03) $       (0.06)
  Diluted                                      $       (0.03) $       (0.06)
Weighted average number of common shares                                    
 outstanding:                                                               
  Basic                                           49,685,124     31,069,879 
  Diluted                                         49,685,124     31,069,879 
                                                                            
--------------------------------------------------------------------------- 
                                                                            
                                                                            
Hamilton Thorne Ltd.                                                        
Consolidated Statements of Cash Flows                                       
For the years ended December 31,2012 and 2011                               
(Expressed in U.S. Dollars)                                                 
--------------------------------------------------------------------------- 
                                                        2012           2011 
                                               -------------  ------------- 
                                                                            
Cash flows from operating activities:                                       
Net loss for the year                          $  (1,638,330) $  (1,891,620)
Adjustments to reconcile net loss to net cash                               
 used in operating activities:                                              
  Depreciation and amortization                       80,910         71,889 
  Non-cash interest expense/accretion                 26,569        189,146 
  Share-based compensation expense                    77,534        167,254 
  Changes in non-cash operating assets and                                  
   liabilities:                                                             
    Accounts receivable                              226,726        (49,920)
    Inventories                                      239,400       (265,561)
    Prepaid expenses                                   3,173         (9,152)
    Other assets                                          36          1,184 
    Accounts payable and accrued liabilities         197,340        (19,741)
    Deferred revenue                                 (21,569)       (58,506)
                                               -------------  ------------- 
                                                                            
Net cash flows used in operating activities         (808,211)    (1,865,027)
                                               -------------  ------------- 
                                                                            
Cash flows from investing activities:                                       
  Purchase of property and equipment                  (3,407)       (70,016)
                                               -------------  ------------- 
                                                                            
Cash flows from financing activities:                                       
  Proceeds from notes payable                         68,743         60,959 
  Payments on debt                                  (102,608)    (1,579,905)
  Proceeds from issuance of debentures               300,000            --- 
  Proceeds from issuance of convertible                                     
   debentures                                            ---        574,890 
  Issuance of common share units - net of                                   
   expenses                                          430,835      2,649,022 
                                               -------------  ------------- 
                                                                            
Net cash flows provided by financing                                        
 activities                                          696,970      1,704,966 
                                               -------------  ------------- 
                                                                            
Net (decrease) in cash and cash equivalents         (114,648)      (230,077)
Cash and cash equivalents, beginning of year         484,421        714,498 
                                               -------------  ------------- 
                                                                            
Cash and cash equivalents, end of year         $     369,773  $     484,421 
                                               -------------  ------------- 
                                                                            
Supplemental disclosure of cash flow                                        
 information:                                                               
Cash paid during the year for:                                              
  Interest                                     $     260,998  $     242,451 
Supplemental disclosure of non-cash financing                               
 activities:                                                                
  Equipment acquired under capital lease       $         ---  $      81,415 
  Conversion of debentures to equity                 313,067      1,577,359 
  Conversion of subordinated notes to equity             ---         54,145 
                                                                            
--------------------------------------------------------------------------- 
                                                                            

For more information, please contact:

David Wolf
President and CEO
Hamilton Thorne Ltd.
978-921-2050
ir@hamiltonthorne.com

Michael Bruns
CFO
Hamilton Thorne Ltd.
978-921-2050
ir@hamiltonthorne.com

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