ISON - all it seems and much more. Up til now I've just
scratched the surface with ISON and its Zinc monopoly-
and sure *if* their sole source of raw materials falls
through the stock will tank until they find a new source-
*but* the company has been around since 1992 and the
supplier hasn't failed yet *and* ISON's customers feel secure enough to sign long
term contracts.
The 2 million start-up stock options won't amount to
a hill of beans as this cash cow gets cranked up.
If ISON gets to $20, the employees have earned them.
I'm going to start a ISON thread when I get time, but until then
some ISON hilites:
1. No debt
2. 1.2 mil cash
3. increasing margins($597K profit on $1.7mil sales last quarter
vs. $126K profit on $840K profit same quarter last year)
4. Increasing demand for all DZ and silc products
5. Spending big R&D out of cash flow on exciting new
patented products- to wit, the WORLDS FIRST isotopically
pure silicon epitaxial wafer. And guess where they are-
right smack dab in silicon valley- is this going to be a hit
or what.
Its all in the latest 10Q- this ones a real gem-
an incredible combination of monopoly, technology, and profitability...
can't lose til it gets to $20.... comparitively the
risk of losing 1 raw materials supplier is small.
Check out the 10Q of a $20 stock in the making :
Overview
Founded in 1992, Isonics Corporation ("Isonics" or the "Company") is a specialty
chemical and advanced materials company which develops and commercializes
products based on stable isotopes. Stable isotopes are ultra-ultra pure
materials engineered at the molecular level to provide enhanced performance
properties in semiconductors, lasers and high performance lighting, and energy
production. Stable isotopes are also widely used in basic research,
pharmaceutical development and drug design, as well as in medical diagnostics
and imaging. By replacing materials traditionally used in these industries with
isotopically engineered versions of the same materials, product performance,
safety, and economics can be enhanced significantly. Using state-of-the-art
technology, Isonics produces a wide range of enriched stable isotopes which are
then converted into products which meet the specialized needs of Isonics'
customers.
Isonics' core business is production and supply of depleted zinc (DZ), a
non-radioactive stable isotope, to the energy industry. In fiscal 1996, Isonics
expanded its business scope to include development of isotopically engineered
materials for the medical research, medical diagnostic, and semiconductor
industries. In June 1997 Isonics produced the world's first isotopically pure
silicon epitaxial wafer suitable for semiconductor fabrication. In July 1997
Isonics exercised an option for an exclusive license for two U.S. patents owned
by Yale University concerning isotopically pure silicon and a wide range of
other semiconductor materials. The Company is currently evaluating potential
applications for isotopically pure silicon in collaboration with certain
industrial and university partners and is developing strategies for
commercialization. Isonics is supplying stable isotope labeled compounds
("SILCs"), mainly enriched carbon for pharmaceutical research and medical
diagnostic test development. The Company is developing advanced, lower cost,
production technology for enriched carbon which the Company believes will allow
it to become the cost leader in the potentially large enriched carbon market
supporting a new class of minimally invasive diagnostic tests which are being
developed by others. The Company believes that a substantial portion of its
revenues in the future will depend on its success in developing and selling
products in the semiconductor and SILC markets.
In September 1997, Isonics completed its initial public offering. The proceeds
of this offering will allow the Company to continue its silicon and carbon
development efforts, to selectively add key technical personnel and to perform
engineering studies prior to adopting a plan to increase and geographically
diversify manufacturing capacity necessary to support planned sales growth.
Historically, substantially all of the Company's net revenues in any particular
period have been attributable to a limited number of customers and sales of DZ.
The Company operates with little backlog and a significant portion of the
Company's total revenues to date have been, and the Company believes will
continue to be in the near term, derived from a limited number of DZ orders in
any particular quarter. Consistent with the Company's historical experience, the
Company's quarterly results are expected to be materially affected by the size,
timing and quantity of DZ orders, and products shipments made to DZ users during
such quarter. As a result, a lost or delayed sale could have a significant
impact on the Company's operating results for a particular period, and such
fluctuations could materially and adversely affect the Company's business,
financial condition and results of operations. The Company expects that if it
continues to increase sales of depleted zinc products to end users, develops
additional sources of SILCs and commercializes electronic material products,
concentration of net revenues from a limited number of customers will be
reduced.
8
<PAGE>
Results of Operations
<TABLE>
The following table sets forth, for the periods indicated, certain statement of
operations data expressed as a percentage of net sales. The table and the
discussion below should be read in conjunction with the condensed financial
statements and the notes thereto appearing elsewhere in this report.
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
--------------------- ---------------------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 66.3 85.0 70.8 76.4
----- ----- ----- -----
Gross Margin 33.7 15.0 29.2 23.6
----- ----- ----- -----
Operating expenses:
Selling, general and administrative 20.7 38.2 19.2 24.4
Research and development 11.5 11.7 10.7 7.9
----- ----- ----- -----
Total operating expenses 32.2 49.9 29.9 32.3
----- ----- ----- -----
Operating income (loss) 1.5 (34.9) (0.7) (8.7)
Other income (expense)
Interest income 1.1 0.2 0.8 0.1
Interest expense (4.4) (10.0) (6.5) (4.0)
----- ----- ----- -----
Total other expense, net (3.3) (9.8) (5.7) (3.9)
----- ----- ----- -----
Loss before extraordinary item and income taxes (1.8) (44.7) (6.3) (12.6)
Income tax expense 0.1 2.7 0.0 2.2
----- ----- ----- -----
Loss before extraordinary item (1.9) (47.4) (6.4) (14.8)
Extraordinary item - loss on extinguishment of debt (14.2) 0.0 (7.6) (0.0)
----- ----- ----- -----
NET LOSS (16.1)% (47.4)% (14.0)% (14.8)%
===== ===== ===== =====
</TABLE>
Net Revenues
Net revenues for the three and six months ended October 31, 1997 were $1.77
million and $3.31 million, respectively, an increase of 110.8% and 37.5% over
$840,000 and $2.40 million for the comparable periods in prior fiscal period.
The growth on a quarterly and year-to -date basis is due primarily to increased
demand for DZ and SILC products. Net revenues from DZ increased by approximately
$951,000 and $992,000 for the three and six months ended October 31, 1997, on
increased unit sales of approximately 152% and 45%, respectively. Average unit
sales prices for DZ increased in comparison to the previous fiscal years
comparable quarter. Net revenues from SILCs were approximately $323,000 for the
three months ended October 31, 1997, an increase of approximately $91,000 or 39%
from the same period of the previous year. For the six months ended October 31,
1997, SILC revenues were approximately $627,000, an increase of approximately
$338,000 or 117% for the comparable period of the previous year. The revenue
growth reflects the increasing demand for SILCs, specifically, enriched carbon
products.
International sales represented less than 10% of net revenues for the three and
six months ended October 31, 1997 and 1996.
9
<PAGE>
Gross Margin
Gross margin percentage for the three and six months ended October 31, 1997
increased to 33.7% and 29.2% of net revenues from 15.0% and 23.6% for the same
periods in the prior fiscal year. The improvement is due to increased average
unit sales prices for DZ and the increased proportion of net revenues generated
from DZ, which at present has a higher gross margin than SILCs. Increases in
gross margins were offset in part by charges associated with reducing the
Company's cadmium inventory to market value during the three months ended
October 31, 1997.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased on a dollar basis to
approximately $368,000 for the quarter ended October 31, 1997, from $321,000,
while declining on a percentage basis to 20.7% of net revenues for the second
quarter of fiscal 1998 from 38.2% of net revenues for the comparable period in
fiscal 1997. For the six months ended October 31, 1997, these expenses increased
on a dollar basis to $636,000 from $587,000 for the comparable period in fiscal
1997 while declining on a percentage basis to 19.2% of net revenues for the six
months ended October 31, 1997 from 24.4% for the comparable period in fiscal
1997. The dollar increase during the quarter and six months ended October 31,
1997 was primarily attributable to professional and media relations costs
associated with being a public company, while the decrease as a percentage of
net revenues was due to growth in energy and SILC product revenues. The Company
anticipates that selling, general and administrative expenses will generally
continue to increase in absolute dollars, but may vary as a percentage of net
revenues.
Research and Development Expenses
Research and development expenses increased by approximately $105,000, or
107.1%, to $203,000 for the quarter ended October 31, 1997 from $98,000 for the
comparable period in fiscal 1997, while declining on a percentage basis to 11.5%
of net revenues from 11.7%. For the six months ended October 31, 1997, research
and development expenses increased by $164,000 or 87.2%, to $352,000 from
$188,000 for the comparable period in the previous fiscal year, while increasing
on a percentage basis to 10.7% of net revenues from 7.9%. Both the dollar and
percentage increases during the quarter and six months ended October 31, 1997
were primarily due to increased staffing and consulting costs associated with
the development of isotopically pure silicon wafers; costs to develop advanced,
lower cost, production technology for enriched carbon; and commencement of a
feasibility study to increase isotope production. The decrease in research and
development expenses as a percentage of net revenues for the quarter ended
October 31, 1997 compared to the same period of the previous fiscal year was due
to revenue growth. The Company believes that the development and introduction of
new product applications is critical to its future success and expects that
research and development expenses will increase on a dollar basis, but may vary
as a percentage of net revenues.
Other Expense, Net
Other expense reflects interest and, prior to the Company's initial public
offering, amortization of issuance costs and discounts on outstanding debt.
Other expense, net decreased by $24,000 to $58,000 for the quarter ended October
31, 1997 from $82,000 for the comparable period of the previous fiscal year. For
the six months ended October 31, 1997, other expense, net increased to $187,000
from $94,000 for the comparable period in fiscal 1997. During the quarter ended
October 31, 1997, the Company repaid approximately $1.78 million of outstanding
debt which resulted in reduced interest expense. Interest expense, net,
increased for the six months ended October 31, 1997, as the debt was outstanding
for four months during fiscal 1998 versus two months during the prior years
comparable period.
10
|
