Year end results filed today
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YEARS ENDED JUNE 30, 1998 AND 1997
NET SALES. From its inception in 1990, the Company has achieved average annual net sales growth of 30.9%. Net sales for the year ended June 30, 1998 was $2.59 million, a 6.4% increase from $2.44 million in 1997. A component of net sales, product sales, increased 13.7% to $2.58 million in 1998 from $2.27 million in 1997. Sales of Hyaluronic Acid product (HA) to Chugai for distribution in Japan increased 14.3% from $671,000 in 1997 to $767,000 in 1998, due to an increased marketing effort by Chugai following resolution of a
component design flaw in 1997.
Also included in net sales are partnership payments from strategic alliances that decreased from $200,000 in 1997 to $46,000 in 1998 due to timing of ongoing development projects.
COST OF SALES. Cost of sales decreased 31.6% to $902,000 in 1998 from $1,318,000 in 1997, due primarily to resolution of the design flaw in a critical raw material component used in the HA product. In 1997, an additional $479,000 was charged to cost of sales because of this problem. The gross profit increased from 45.9% in 1997 to 65.2% in 1998 due to this resolution. Excluding $479,000
in expense to correct the design flaw, gross profit would have been
approximately 65.5% in 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses were flat, increasing only 2.0% to $387,000 in 1998 from $380,000 in 1997. During 1998, several ongoing projects remained in development but no new projects were added during this period.
SELLING AND MARKETING. Selling and marketing expenses were also flat, $751,000 in 1998 versus $742,000 in 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased 41.3% to $1,023,000 in 1998 from $724,000 in 1997, due in part to legal, accounting and other costs relating to strategic partnering activities, financing activities and the costs of transforming into a public company.
OTHER EXPENSES. Other expenses increased 60.5% to $152,000 in 1998 from $95,000 in 1997 due primarily to higher interest expense resulting from higher debt levels throughout the year. Interest expense increased to $150,000 in 1998 from $50,000 in 1997, while factoring expenses decreased to $2,000 in 1998 from $45,000 in 1997.....
.....LOSSES INCURRED; FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company has incurred operating losses and negative cash flow from operations for the last two fiscal years and the first nine months of the current fiscal year. Losses incurred by the Company since its inception have aggregated over $3 million, and there can be no assurance that the Company will be able to generate positive cash flow to fund its operations in the near future. Assuming no significant uses of cash in acquisition activities or other significant changes, the Company believes it will have sufficient cash to satisfy its funding needs for at least the next four months. If the Company is not able to operate profitably and generate a positive cash flow, however, it may need to raise additional capital to fund its continuing operations......
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1998 1997
Net sales 2,592,175 2,435,965
Gross profit 1,690,476 1,117,709
Net loss (592,809) (822,713)
Net loss per share basic and diluted (.09) (.17)
Weighted average shares outstanding basic and diluted 6,343,133 4,920,000 |
