WAYNE, Pa., May 15 /PRNewswire-FirstCall/ -- Escalon Medical Corp. today announced results for its fiscal third quarter and nine months ended March 31, 2007.
For the third quarter of fiscal 2007, the Company reported net revenue of $16,558,760, a 111.2% increase from the $7,839,758 reported in the prior year period. For the third quarter of fiscal 2007, the Company reported net income of $8,271,462, or $1.29 per diluted share, compared with a net loss of $(576,225), or $(0.09) per diluted share, in the third quarter of fiscal 2006. These increases were primarily due to the settlement agreement that the Company entered into with IntraLase Corp. during the third quarter ended March 31, 2007 to acquire the intellectual property under the licensing agreement and to resolve all outstanding disputes and litigation between the parties. Under the terms of the settlement agreement, IntraLase made a lump sum payment to the Company of $9.6 million, which was recorded during the third quarter of 2007. The settlement also marks the end of any future royalty payments to be received under the License Agreement, which is expected to have a material effect on earnings in subsequent periods. This effect will be partially offset by the elimination of legal fees related to this matter.
Product revenue decreased approximately 5.3% to $6,900,461 for the three- month period ended March 31, 2007, compared with $7,286,704 for the same period last fiscal year. Product revenue at the Company's Sonomed, Medical/Trek/EMI and Vascular business units increased approximately 9.1%, 11.7% and 2.4%, respectively, during the third quarter ended March 31, 2007, when compared with the same period last fiscal year. This growth was offset by a decrease in the Company's Drew business unit. Revenue at Drew decreased 16.8%, during the three-month period ended March 31, 2007, when compared with the same period last fiscal year.
For the nine-month period ended March 31, 2007, the Company reported net revenue of $31,363,660, compared with $22,582,918 in the prior period, and product revenue of $20,477,907, compared with $20,895,553 in the prior year nine-month period. The decrease in product revenue was primarily related to decreases in the Drew and Vascular business units. The Company reported net income for the nine months ended March 31, 2007 of $7,087,242, or $1.10 per diluted share, compared with a net loss of $(843,679), or $(0.14) per diluted share, in the prior year period. This increase was primarily due to the proceeds received from IntraLase as a result of the settlement agreement recorded during the third quarter of 2007.
Recap of Fiscal Third quarter 2007
"The integration of MRP's retinal imaging systems with EMI's existing ophthalmic photography product portfolio continues to enhance our operating results. Furthermore, we remain on track in our efforts to implement the previously announced reorganization of the Drew business, which we believe will reduce operating costs and expand operating margins for the Company as a whole," said Richard J. DePiano, Chairman and Chief Executive Officer.
Mr. DePiano added, "Reviewing our operating performance for the third quarter of fiscal 2007, product revenue decreased approximately $387,000, or 5.3%, to $6,900,000 during the three-month period ended March 31, 2007 as compared with the same period last fiscal year. As anticipated, product revenue in our Drew business unit decreased $651,000, or 16.8%, compared with the same period last fiscal year. The decrease is primarily due to a reduction of approximately $900,000 in international sales of diabetic and hematology instruments, offset by increased sales of spare parts.
"At our Sonomed business unit, product revenue increased $182,000, or 9.1%, compared with the same period last fiscal year. This increase was caused by an increase in sales of the Company's EZ scan ultrasound systems, primarily into international markets. In our Vascular business unit, product revenue increased $21,000, or 2.4%, to $914,000, primarily due to increased direct sales to end users by Escalon's domestic sales team."
"In the Medical/Trek/EMI business unit, product revenue increased $61,000, or 11.7%, to $583,000 during the three-month period ended March 31, 2007 as compared with the same period last fiscal year. The increase in Medical/Trek/EMI product revenue is primarily attributed to an increase of approximately $108,000 in EMI sales of digital imaging systems. With the integration of MRP's retinal imaging systems largely behind us, we have a much stronger position in the ophthalmic digital imaging marketplace than we have in the past and expect this to continue as we move forward."
Non-GAAP Measures
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 as follows:
Three Months Ended Nine-Months Ended March 31, March 31, 2007 2006 2007 2006 Net Income (Loss) $8,271,462 $(576,225) $7,087,242 $(843,679) Non-GAAP adjustments: Stock based compensation $123,772 $- $123,772 $- Depreciation and amortization $155,392 $120,884 $437,474 $338,829 Total adjustments $279,164 $120,884 $561,246 $338,829 Non-GAAP adjusted income (loss) $8,550,626 $(455,341) $7,648,488 $(504,850) Shares used in computing basic and fully diluted earnings per share 6,435,106 6,255,665 6,421,321 6,091,938 Non-GAAP adjusted income (loss) per fully diluted share $1.33 $(0.07) $1.19 $(0.08)
Founded in 1987, Escalon develops markets and distributes ophthalmic diagnostic, surgical and pharmaceutical products as well as vascular access devices. Drew, 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 Escalon's distribution capabilities. Escalon has headquarters in Wayne, Pennsylvania and manufacturing operations in Long Island, New York, New Berlin, Wisconsin, Dallas, Texas, Oxford, Connecticut 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. They 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's business units, including the integration of Drew's and MRP's operations, the reorganization of the Drew business 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. Other factors include uncertainties and risks related to -- new product development, commercialization, manufacturing and market acceptance of new products, -- 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 Escalon or third parties, -- introduction of competitive products, -- 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, and its other filings with the Securities and Exchange Commission, all of which are available from the Commission as well as other sources.
ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, 2007 2006 2007 2006 Net revenues: Product revenue $6,900,461 $7,286,704 $20,477,907 $20,895,553 Other revenue 9,658,299 553,054 10,885,753 1,687,365 Revenues, net 16,558,760 7,839,758 31,363,660 22,582,918 Costs and expenses: Cost of goods sold 4,036,285 4,382,268 11,544,879 12,010,652 Research and development 843,858 717,920 2,638,413 2,135,950 Marketing, general and administrative 3,361,582 3,283,722 10,062,093 10,395,612 Total costs and expenses 8,241,725 8,383,910 24,245,385 24,542,214 Income (loss) from operations 8,317,035 (544,152) 7,118,275 (1,959,296) Other (expense) and income: Gain on sale of available for sale securities 0 0 0 1,157,336 Equity in Ocular Telehealth Management, LLC (25,191) (18,508) (55,889) (69,972) Interest income 54,451 33,974 113,385 111,698 Interest expense (8,676) (27,515) (23,615) (47,421) Total other income (expense) 20,584 (12,049) 33,881 1,151,641 Net income (loss) before taxes 8,337,619 (556,201) 7,152,156 (807,655) Provision for income taxes 66,157 20,024 64,914 36,024 Net income (loss) $8,271,462 $(576,225) $7,087,242 $(843,679) Basic net income (loss) per share $1.30 $(0.09) $1.11 $0.14 Diluted net income (loss) per share $1.29 $(0.09) $1.10 $0.14 Weighted average shares - basic 6,378,757 6,255,665 6,363,251 6,091,938 Weighted average shares - diluted 6,435,106 6,255,665 6,421,321 6,091,938 ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS March 31, June 30, 2007 2006 (Unaudited) ASSETS Current assets: Cash and cash equivalents $9,548,207 $3,379,710 Available for sale securities 75,000 50,220 Accounts receivable, net 4,198,133 3,996,243 Inventory, net 8,301,816 7,122,916 Other current assets 267,171 362,160 Total current assets 22,390,327 14,911,249 Furniture and equipment, net 912,024 969,956 Goodwill 21,072,260 21,072,260 Trademarks and trade names, net 620,106 620,106 Patents, net 240,498 313,702 Covenant not to compete and customer list, net 351,023 420,073 Other assets 142,709 337,421 Total assets $45,728,947 $38,644,767 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $198,966 $232,837 Accounts payable 1,707,663 1,558,501 Accrued expenses 2,089,556 2,503,771 Total current liabilities 3,996,185 4,295,109 Long-term debt, net of current portion 14,113 162,551 Accrued post-retirement benefits 1,087,000 1,087,000 Total liabilities 5,097,298 5,544,660 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; 6,386,857 and 6,344,657 issued and outstanding at March 31, 2007 and June 30, 2006, respectively 6,387 6,345 Common stock warrants 1,601,346 1,601,346 Additional paid-in capital 66,006,248 65,699,370 Retained earnings (27,035,185) (34,122,427) Accumulated other comprehensive (loss) income 52,853 (84,527) Total shareholders' equity 40,631,649 33,100,107 Total liabilities and shareholders' equity $45,728,947 $38,644,767
Escalon Medical Corp.CONTACT: Richard J. DePiano, Chairman and CEO of Escalon Medical Corp.,+1-610-688-6830; or Joseph Calabrese of Financial Relations Board,+1-212-827-3772, for Escalon Medical Corp.
