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Hamilton Thorne, Inc. Announces 2012 Third Quarter Financial Results



11/29/2012 9:23:20 AM

BEVERLY, MA and TORONTO--(Marketwire - November 28, 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 third quarter and nine months year-to-date ended September 30, 2012.

"During the third quarter of 2012, Hamilton Thorne sales increased 18% versus the second quarter, but declined versus the same quarter last year. Laser sales were down slightly, while CASA sales continued to be off substantially, due in large part to purchase deferrals in anticipation of new product announcements," said David Wolf, President and Chief Executive Officer of Hamilton Thorne Ltd. "We have seen improvement as we continue to focus our efforts on the clinical IVF market and the animal fertility markets where Hamilton Thorne has an established leadership position, strong brand recognition and quality products. We have also begun to see a rebound in CASA sales as our refreshed CASA product line roll-out proceeds."

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. Based on a combination of these expense reductions plus increased sales versus the second quarter, we were able to cut our net loss for the quarter in half. With continued sales growth and the full impact of these expense controls in place for the fourth quarter, our goal is to operate at or near breakeven and generate cash on an operating basis for the quarter."

Third Quarter Highlights

  • The Company shipped the first of its IVOS II CASA systems, the first product introduction in its refreshed CASA product line. During the quarter, the Company also made a number of sales of its IMIS-Strict™ software system, which had its commercial launch at ESHRE in June 2012.

  • The European Patent Office issued a notice of Intention to Grant a European Patent on the "Modular Objective Assembly" utilized in the Company's LYKOS® and XYRCOS™ lasers. Upon final approval, the patent can be officially filed in over 30 European countries.

  • 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.

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 22% to $1,453,524 for the quarter ended September 30, 2012, a decrease of $404,809 from $1,858,333 during the previous year. Nine months sales for 2012 of $4,261,666 were down 17%, from sales of $5,136,989 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 and a slight softening of demand for products in the human clinical market.

Gross profit for the quarter decreased 22% to $905,734 in the quarter ended September 30, 2012, compared to $1,157,166 in the previous year and decreased from $3,210,539 to $2,504,427 for the comparable nine-month periods. Gross profit as a percentage of sales were consistent for the quarter at 62.3%, improving from the second quarter, and lower at for the nine months ended September 30, 2012 at 58.8%, versus 62.5% for the comparable nine-month period in 2011, due primarily to product and sales channel mix and decreased sales volume spread over a relatively constant manufacturing cost base.

Operating expenses were $1,169,137 and $3,931,788 for the quarter and nine months ended September 30, 2012, down from $1,370,652 and $4,331,127 for comparable periods during the previous year. This reduction in operating expenses reflects a continued strategic focus on reducing operating expenses across all functional areas of the Company.

Research and development expenses decreased 17%, from $267,842 to $221,027 for the quarter ended September 30, 2012 and decreased 13%, from $887,570 to $769,268 for the nine-month period as certain spending incurred in 2011 related to development of the LYKOS® laser, which did not recur in 2012, as well as reduced patent costs.

Sales and marketing expenses decreased 19%, from $675,734 to $545,277 for the quarter ended September 30, 2012 and decreased 9%, from $1,985,974 to $1,799,004 for the nine-month period due to lower commission expense on lower sales volume and reduced variable costs of selling, particularly travel and demo equipment expenses as well as headcount reductions.

General and administrative (G&A) expenses were reduced from $426,076 to $402,833 for the quarter ended September 30, 2012 versus the prior quarter and decreased from $1,457,583 to $1,363,516 for the nine-month period due primarily to reduced regulatory costs and executive compensation, offset by the non-repetition of approximately $150,000 of foreign currency valuation gains in 2011 related to convertible debentures issued in Canadian dollars. The Company expects further decreases in operating expense in the fourth quarter as the full impact of spending reductions implemented in the third quarter of 2012 take effect.

Net interest expense decreased from $159,518 to $73,422 for the quarter ended September 30, 2012 and from $442,028 to $229,268 for the nine-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 September 30, 2012 decreased 10%, from $373,004 to $336,825 and increased 6%, from $1,562,616 to $1,656,629 for the nine-month period of the previous year. The decreased quarterly loss was attributable to lower revenues, offset by reduced spending and interest costs. The increased year to date loss was due primarily to lower gross profits resulting from lower sales volumes, particularly in the second quarter, and product and sales channel mix, partially offset by reduced spending and reduced interest expense.

As of September 30, 2012, there were 52,064,876 common shares issued and outstanding.

As of September 30, 2012, there were 7,627,772 warrants outstanding to purchase common shares: 5,500,005, at a price of Cdn $0.60, which expired in October 2012; 2,003,332 at a price of Cdn $0.169, which expire in May 2013; 89,435 at an exercise price of Cdn $0.50, expiring in March 2013, issued to its financial advisors in connection with the March 2011 sales of convertible debentures; and 35,000 at an exercise price of Cdn $0.20, expiring in September 2013, issued to its financial advisor in connection with a common stock private placement.

Stock options issued to employees and directors outstanding at September 30, 2012 totaled 4,291,133 at exercise prices ranging from Cdn $0.10 to Cdn $0.7712. Options for 3,342,063 shares are exercisable as of September 30, 2012. Options expire at varying times from November 2017 through January 2022.

In addition, the Company announced that in November it granted a total of 2,400,000 stock options to purchase common shares pursuant to the Company's incentive stock option plan. The options are exercisable at Cdn $0.10 per share, vest over four years, and expire ten years from the date of grant. A total of 1,300,000 of these options were granted to the Company's CEO, CTO and CFO.

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.

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 As at September 30, 2012 and December 31, 2011 (Expressed in U.S. Dollars - unaudited) September 30, December 31, 2012 2011 ------------- ------------- Assets Current Cash and cash equivalents 211,456 484,421 Accounts receivable 698,620 1,021,326 Inventories 683,799 809,731 Prepaid expenses and other current assets 65,029 67,393 ------------- ------------- Total current assets 1,658,904 2,382,871 Property and equipment 157,761 214,204 Other assets 110,783 110,784 ------------- ------------- Total assets 1,927,448 2,707,859 ------------- ------------- Liabilities Current Accounts payable and accrued liabilities 1,479,663 1,393,090 Notes payable 49,767 338,961 Capital lease obligations, current 30,860 30,860 Deferred revenue 77,468 84,066 ------------- ------------- Total current liabilities 1,637,758 1,846,977 Capital lease obligations, non-current 58,214 80,202 Deferred revenue, long-term 28,000 28,000 Long-term debt 3,787,659 3,500,000 ------------- ------------- Total liabilities 5,511,631 5,455,179 ------------- ------------- Shareholders' Equity (Deficiency) Common shares 29,421,949 28,699,248 Warrants 299,408 280,213 Contributed surplus 876,493 798,623 Accumulated deficit (34,182,033) (32,525,404) ------------- ------------- Total Shareholders' equity (deficiency) (3,584,183) (2,747,320) ------------- ------------- Total Liabilities and shareholders' equity (deficiency) 1,927,448 2,707,859 ------------- ------------- Hamilton Thorne Ltd. Consolidated Statements of Operations and Comprehensive Loss For the three and nine months ended September 30, 2012 and 2011 (Expressed in U.S. Dollars - unaudited) Three Months ended Nine Months ended September 30 September 30 2012 2011 2012 2011 ----------- ----------- ----------- ----------- Sales 1,453,524 1,858,333 4,261,666 5,136,989 Cost of sales 547,790 701,167 1,757,239 1,926,450 Gross Profit 905,734 1,157,166 2,504,427 3,210,539 ----------- ----------- ----------- ----------- Expenses Research and development 221,027 267,842 769,268 887,570 Sales and marketing 545,277 676,734 1,799,004 1,985,974 General and administrative 402,833 426,076 1,363,516 1,457,583 ----------- ----------- ----------- ----------- Total expenses 1,169,137 1,370,652 3,931,788 4,331,127 Loss from operations (263,403) (213,486) (1,427,361) (1,120,588) Other income (expense) Interest expense, net, including accretion (73,422) (159,518) (229,268) (442,028) ----------- ----------- ----------- ----------- Net loss and comprehensive loss (336,825) (373,004) (1,656,629) (1,562,616) Loss per share Basic $ (0.01) $ (0.01) $ (0.03) $ (0.06) Diluted $ (0.01) $ (0.01) $ (0.03) $ (0.06) Weighted average number of common shares outstanding Basic 51,361,647 28,616,836 48,886,083 25,831,108 Diluted 51,361,647 28,616,836 48,886,083 25,831,108 ----------- ----------- ----------- ----------- Hamilton Thorne Ltd Consolidated Statements of Cash Flows For the three and nine months ended September 30, 2012 and 2011 (Expressed in U.S. Dollars - unaudited) Three Months ended Nine Months ended September 30 September 30 2012 2011 2012 2011 ---------- ---------- ---------- ---------- Cash flows from operating activities Net loss for the year (336,825) (373,004) (1,656,629) (1,562,616) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 20,100 24,460 60,300 53,380 Non-cash interest expense/accretion 38,687 (65,393) 75,383 147,878 Share-based payments expense 24,600 36,560 73,800 110,870 Changes in non-cash operating assets and liabilities: Accounts receivable (392,909) (189,943) 322,706 (205,170) Inventories 125,492 (54,955) 125,932 (212,072) Prepaid expenses and other current assets 17,206 14,345 2,364 (27,062) Other assets 870 1 (158) Accounts payable and accrued liabilities 831 (67,887) 34,963 48,818 Deferred revenue 14,507 (8,849) (6,598) (44,950) ---------- ---------- ---------- ---------- Net cash flows used in operating activities (488,311) (683,796) (967,778) (1,691,082) ---------- ---------- ---------- ---------- Cash flows from investing activities Purchase of capital assets (2,276) (15,670) (3,857) (58,924) ---------- ---------- ---------- ---------- Cash flows from financing activities Proceeds from notes payable 0 12,457 31,038 600,475 Payments on debt (21,087) (1,573,360) (63,203) (1,595,630) Proceeds from issuance of debentures 300,000 0 300,000 0 Issuance of common share units - net of expenses 0 2,649,022 430,835 2,649,022 ---------- ---------- ---------- ---------- Net cash flows provided by financing activities 278,913 1,088,119 698,670 1,653,867 ---------- ---------- ---------- ---------- Net Increase (decrease) in cash and cash equivalents (211,674) 388,653 (272,965) (96,139) Cash and cash equivalents, beginning of period 423,130 229,706 484,421 714,498 ---------- ---------- ---------- ---------- Cash and cash equivalents, end of period 211,456 618,359 211,456 618,359 ---------- ---------- ---------- ---------- Supplemental disclosure of cash flow information: Cash paid during the period for: Interest 96,405 69,860 212,821 202,137 Supplemental disclosure of non-cash financing activities: Equipment acquired under capital lease 0 0 0 46,610 Conversion of debentures to equity 313,067 1,573,212 313,067 1,573,212 Conversion of subordinated note to equity 0 54,145 0 54,145 ---------- ---------- ---------- ----------


For more information, please contact:

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

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