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Hamilton Thorne, Inc. Announces 2012 Second Quarter Financial Results


8/31/2012 9:50:46 AM

BEVERLY, MA and TORONTO--(Marketwire - August 30, 2012) -

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 second quarter and six months year-to-date ended June 30, 2012.

"During the second quarter of 2012, Hamilton Thorne sales declined versus the prior year, interrupting the trend of nine consecutive quarters of year-over-year growth. Laser sales were down slightly, while CASA sales were off substantially, due in part to cyclical fluctuations in demand, particularly for toxicology products, and due in part to purchase deferrals in anticipation of new product announcements," said David Wolf, President and Chief Executive Officer of Hamilton Thorne Ltd. "While our year-to-date sales decline was disappointing, we expect to see a return to steady growth as the demand for new products such as our LYKOS® and XYRCOS™ lasers continues to grow, as the refreshed CASA product line roll-out proceeds, and as our new IMSI-Strict™ software captures market share."

Mr. Wolf continued, "In order to utilize our resources more effectively, we have reduced our R&D and marketing spending in new market development and have refocused our resources on penetrating and dominating the clinical IVF market and the animal fertility markets where Hamilton Thorne has an established business, strong brand recognition and quality products to truly transform the industry. Also, to increase our sales efficiency, we have realigned our sales personnel around target markets, rather than on a product-line basis. These changes, along with strong expense controls, have allowed us to right-size our overhead structure with a goal to be operational breakeven with sales in the range of $1.8 million per quarter, which are levels we achieved in three of four quarters in 2011."

Hamilton Thorne's well-respected CASA product line and cutting-edge ZILOS-tk® and LYKOS® clinical lasers have been leading products in their respective fertility fields. The Company believes that the clinical market will continue to be a strong growth opportunity as investments are increasing by an average of 10-20% in IVF clinic expansion and annual IVF cycles(1). Growth in mature markets like Europe and the United States is driven by adoption of new procedures such as pre-genetic diagnostic diagnosis (PGD), for which Hamilton Thorne's LYKOS® laser with Multi-Pulse software is ideally suited. Emerging markets have increasingly become important sales opportunities for the Company with the rise of disposable income and the increased need for assisted reproductive services as dual income families delay child birth. Signs of growth and capital markets interest in the sector have been evident in recent VC investments and several M&A deals announced in the first half of 2012.

(1)US and Global data (exc. Canada) published by American Society for Reproductive Medicine (ASRM) in 2009.

Second Quarter Highlights

  • 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).

  • The Company 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 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 in intricate research applications such as stem cell research and gene targeting.

  • The Company also 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 removal of cells from an embryo during the trophectoderm biopsy process. Trophectoderm biopsy is considered one of the best methods used to remove cells from the embryos of patients undergoing pre-implantation genetic diagnosis (PGD) to screen for genetic disease or aneuploidy.

Financing Highlights:

  • In May 2012, the Company completed a non-brokered private placement of $450,000 of equity units to insiders for 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 subordinate debentures issued in March 2011 into a total of 1,411,766 common shares.

  • On August 29, 2012, the Company improved its financial position through 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 will be used for working capital purposes.

The Company is continually exploring additional sources of funding to augment its cash position by raising additional equity, expanding its existing line of credit, and other financing alternatives. The Company is also exploring other strategic options to maximize shareholder value.

Financial Results

All amounts are in US dollars, unless specified otherwise, and results expressed in accordance with the International Financial Reporting Standards ("IFRS"), which replaces Canadian Generally Accepted Accounting Policies ("GAAP") effective January 1, 2010 for all publicly accountable enterprises in Canada.

The Company's total sales decreased 33% to $1,234,117 for the quarter ended June 30, 2012, a decrease of $599,125 from $1,833,242 during the previous year. Six months sales for 2012 of $2,808,142 were down 14%, from sales of $3,278,655 in 2011. These decreases were attributable to reduced sales of our existing products, partially due to purchase decision deferrals in anticipation of new product introductions, a slowdown in sales on toxicology testing products, a decline in sales in Europe due to economic problems and a slight softening of demand for products in the human clinical market in the US.

Gross profit for the quarter decreased 45% to $644,789 in the quarter ended June 30, 2012, compared to $1,172,842 in the previous year and decreased from $2,053,372 to $1,598,693 for the comparable six month periods. Gross profit as a percentage of sales were lower at 52.2% for the quarter and 56.9% for the six-months ended June 30, 2012, versus 64.0% and 62.7% for the comparable periods in 2011, primarily due to product and sales channel mix and decreased sales volume spread over a relatively constant manufacturing cost base.

Operating expenses were reduced to $1,361,066 and $2,762,651 for the quarter and six-months ended June 30, 2012, down from $1,460,591 and $2,960,476 for comparable periods during the previous year. This decrease in operating expenses represents continued focus on reducing operating expenses across all functional areas of the Company.

Research and development expenses decreased from $320,281 to $280,010 for the quarter ended June 30, 2012 and from $619,728 to $548,241 for the six-month period as certain spending incurred in 2011 related to development of the LYKOS® laser did not recur in 2012, as well as lower patent costs.

Sales and marketing expenses decreased from $675,063 to $638,665 for the quarter ended June 30, 2012 and from $1,309,240 to $1,253,727 for the six-month period due to lower commission expense on lower sales volume and reduced variable costs of selling, particularly travel and trade show expenses.

General and administrative (G&A) expenses decreased from $465,247 to $442,391 for the quarter ended June 30, 2012 versus the prior quarter, and decreased from $1,031,508 to $960,683 for the six-month period due primarily to strong expense controls and the non-repetition of 2011 foreign currency valuation adjustments related to the convertible debentures issued in August 2010 and March 2011, which were issued in Canadian dollars.

Net interest expense decreased from $155,489 to $74,538 for the quarter ended June 30, 2012 and from $282,510 to $155,846 for the six-month period. The decrease 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 quarter ended June 30, 2012 increased from $443,328 to $790,815 and from $1,189,614 to $1,319,804 for the six-month period of the previous year. The increased loss was due primarily to lower gross profits resulting from lower sales volumes and product and sales channel mix, partially offset by reduced spending and reduced interest expense.

As of June 30, 2012, there were 50,622,033 common shares issued and outstanding.

As of June 30, 2012, there were 7,732,772 warrants outstanding to purchase common shares: 5,500,005, at a price of Cdn $0.60, which will expire in October 2012; 2,003,332 at a price of Cdn $0.169, which will expire in May 2013; 194,435 at an exercise price of Cdn$0.50, expiring in August 2012 and March 2013; and 35,000 at an exercise price of Cdn$0.20, expiring in September 2013.

Stock options issued to employees and directors outstanding at June 30, 2012 totaled 4,630,393 at exercise prices ranging from Cdn $0.10 to Cdn $0.7712. Options for 2,935,796 shares are exercisable as of June 30, 2012. Options expire at varying times from July 2012 through January 2022.

In connection with the conversion of the remaining $345,000 in principal amount of 10% convertible unsecured subordinated debentures issued in March 2011, the Company also offered holders the option, exercisable by September 15, 2012, to convert approximately $47,000 of accrued interest to common stock at the conversion price of Cdn $0.07 per share.

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

Related Party Transactions

Pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the private placement of Debentures completed on August 29, 2012 to certain insiders of the Company is a "related party transaction". The Company is exempt from the formal valuation requirement of MI 61-101 in connection with the private placement in reliance on section 5.5(b) of MI 61-101, as no securities of the Company are listed or quoted for trading on the Toronto Stock Exchange, the New York Stock Exchange, the American Stock Exchange, the NASDAQ Stock Market or a stock exchange outside of Canada and the United States. Additionally, the Company is exempt from obtaining minority approval in connection with the private placement in reliance on section 5.7(1)(b) of MI 61-101, as, in addition to the foregoing, (i) neither the fair market value of the debentures nor the consideration received in respect thereof from insiders exceeds $2.5 million, (ii) the Company has one or more independent directors in respect of the private placement who are not employees of the Company, and (ii) all of the independent directors have approved the private placement.

A material change report in respect of the private placement will be filed less than 21 days before the closing date. The Company considers this is reasonable and necessary in order to address the Company's immediate funding requirements and corporate operations.

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 fertility, regenerative medicine, and stem cell research 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                               
For the periods ended June 30, 2012 and December 31, 2011                   
(Expressed in U.S. Dollars - unaudited)                                     
                                                                            
                                                   June 30,    December 31, 
                                                     2012          2011     
                                                 ------------  ------------ 
Assets                                                                      
Current                                                                     
  Cash and cash equivalents                           423,130       484,421 
  Accounts receivable                                 305,711     1,021,326 
  Inventories                                         809,291       809,731 
  Prepaid expenses and other current assets            82,235        67,393 
                                                 ------------  ------------ 
  Total current assets                              1,620,367     2,382,871 
  Property and equipment                              175,585       214,204 
  Other assets                                        110,783       110,784 
                                                 ------------  ------------ 
  Total assets                                      1,906,735     2,707,859 
                                                 ------------  ------------ 
                                                                            
Liabilities                                                                 
 Current                                                                    
  Accounts payable and accrued liabilities          1,447,374     1,393,090 
  Notes payable                                       360,782       338,961 
  Capital lease obligations, current                   30,860        30,860 
  Deferred revenue                                     62,961        84,066 
                                                 ------------  ------------ 
  Total current liabilities                         1,901,977     1,846,977 
  Capital lease obligations, non-current               63,850        80,202 
  Deferred revenue, long-term                          28,000        28,000 
  Long-term debt                                    3,500,000     3,500,000 
                                                 ------------  ------------ 
  Total liabilities                                 5,493,827     5,455,179 
                                                 ------------  ------------ 
Shareholders' Equity (Deficiency)                                           
  Common shares                                    29,106,815    28,699,248 
  Warrants                                            303,478       280,213 
  Contributed surplus                                 847,823       798,623 
  Accumulated deficit                             (33,845,208)  (32,525,404)
                                                 ------------  ------------ 
  Total Shareholders' equity (deficiency)          (3,587,092)   (2,747,320)
                                                 ------------  ------------ 
  Total Liabilities and shareholders' equity                                
   (deficiency)                                     1,906,735     2,707,859 
                                                 ------------  ------------ 
                                                                            
                                                                            
Hamilton Thorne Ltd.                                                        
Consolidated Statements of Operations and Comprehensive Loss                
For the three and six months ended June 30, 2012 and 2011                   
(Expressed in U.S. Dollars - unaudited)                                     
                                                                            
                                                                            
                            Three Months ended                              
                                  June 30          Six Months ended June 30 
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
                                                                            
Sales                      1,234,117    1,833,242    2,808,142    3,278,655 
Cost of sales                589,328      660,400    1,209,449    1,225,283 
                             644,789    1,172,842    1,598,693    2,053,372 
                         -----------  -----------  -----------  ----------- 
Expenses                                                                    
  Research and                                                              
   development               280,010      320,281      548,241      619,728 
  Sales and marketing        638,665      675,063    1,253,727    1,309,240 
  General and                                                               
   administrative            442,391      465,247      960,683    1,031,508 
                         -----------  -----------  -----------  ----------- 
Total expenses             1,361,066    1,460,591    2,762,651    2,960,476 
                                                                            
Loss from operations        (716,277)    (287,749)  (1,163,958)    (907,104)
                                                                            
Other income (expense)                                                      
  Interest expense, net,                                                    
   including accretion       (74,538)    (155,489)    (155,846)    (282,510)
                         -----------  -----------  -----------  ----------- 
                                                                            
Net loss and                                                                
 comprehensive loss         (790,815)    (443,238)  (1,319,804)  (1,189,614)
Loss per share                                                              
  Basic                  $     (0.02) $     (0.02) $     (0.03) $     (0.05)
  Diluted                $     (0.02) $     (0.02) $     (0.03) $     (0.05)
                                                                            
Weighted average number of common                                           
 shares outstanding                                                         
  Basic                   48,640,714   24,415,157   47,628,039   24,415,157 
  Diluted                 48,640,714   24,415,157   47,628,039   24,415,157 
                                                                            
                                                                            
                         -----------  -----------  -----------  ----------- 
                                                                            
                                                                            
                                                                            
Hamilton Thorne Ltd                                                         
Consolidated Statements of Cash Flows                                       
For the three and six months ended June 30, 2012 and 2011                   
(Expressed in U.S. Dollars - unaudited)                                     
                                                                            
                               Three Months ended       Six Months ended    
                                     June 30                 June 30        
                                2012        2011        2012        2011    
                             ----------  ----------  ----------  ---------- 
Cash flows from operating                                                   
 activities                                                                 
Net loss for the year          (790,815)   (443,238) (1,319,804) (1,189,614)
Adjustments to reconcile net                                                
 loss to net cash used in                                                   
 operating activities:                                                      
  Depreciation and                                                          
   amortization                  20,100      14,460      40,200      28,920 
  Non-cash interest                                                         
   expense/accretion             11,069     103,897      36,696     213,271 
  Share-based payments                                                      
   expense                       24,600      34,560      49,200      74,310 
  Changes in non-cash                                                       
   operating assets and                                                     
   liabilities:                                                             
  Accounts receivable           412,254    (277,422)    715,615     (15,227)
  Inventories                    37,460     (79,302)        440    (157,116)
  Prepaid expenses and other                                                
   current assets               (30,210)    (52,200)    (14,842)    (41,407)
  Other assets                        -         557           1      (1,028)
  Accounts payable and                                                      
   accrued liabilities            2,452     117,014      34,132     116,705 
  Deferred revenue               (5,416)    (22,067)    (21,105)    (36,101)
                             ----------  ----------  ----------  ---------- 
Net cash flows used in                                                      
 operating activities          (318,506)   (603,741)   (479,467) (1,007,287)
                             ----------  ----------  ----------  ---------- 
                                                                            
Cash flows from investing                                                   
 activities                                                                 
  Purchase of capital assets       (451)    (22,814)     (1,581)    (43,254)
                             ----------  ----------  ----------  ---------- 
Cash flows from financing                                                   
 activities                                                                 
  Proceeds from notes                                                       
   payable                       31,038      25,585      31,038      25,585 
  Payments on debt              (18,058)    (16,564)    (42,116)    (34,727)
  Proceeds from issuance of                                                 
   convertible debentures                                           574,890 
  Issuance of common share                                                  
   units - net                  430,835                 430,835             
                             ----------  ----------  ----------  ---------- 
Net cash flows provided by                                                  
 (used in) financing                                                        
 activities                     443,815       9,021     419,757     565,748 
                             ----------  ----------  ----------  ---------- 
Net Increase (decrease) in                                                  
 cash and cash equivalents      124,858    (617,534)    (61,291)   (484,793)
Cash and cash equivalents,                                                  
 beginning of period            298,272     847,239     484,421     714,498 
                             ----------  ----------  ----------  ---------- 
Cash and cash equivalents,                                                  
 end of period                  423,130     229,705     423,130     229,705 
                             ----------  ----------  ----------  ---------- 
Supplemental disclosure of                                                  
 cash flow information:                                                     
  Cash paid during the                                                      
   period for:                                                              
  Interest                       54,287      70,942     116,416     132,277 
Supplemental disclosure of                                                  
 non-cash financing                                                         
 activities:                                                                
  Equipment acquired under                                                  
   capital lease                      0      21,436           0      46,610 
                                                                            
                             ----------  ----------  ----------  ---------- 
                                                                            

For more information, please contact:

David Wolf
President & CEO
Hamilton Thorne Ltd.
978-921-2050
Email Contact

Lisa Rivero
Director of Corporate Communications
Hamilton Thorne Ltd.
978-921-2050
Email Contact

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