Here's the financials
Dimethaid announces second quarter financial results
TORONTO, Jan. 20 /CNW/ - Specialty pharmaceutical company, Dimethaid
Research Inc. (TSX: DMX) today reported consolidated fiscal 2003 financial
results for the second quarter ended November 30, 2002. Unless specified
otherwise, all amounts are in U.S. dollars.
Revenue for the second quarter of fiscal 2003 was $118,000 compared to
$217,000 for the same period last year. Revenue for the six months ended
November 30, 2002 was $228,000, a $52,000 decrease from the comparable period
last year. The resulting net loss for the three months ended November 30, 2002
was $3.1 million compared to $1.8 million for the same period last year. Net
loss per share for the second quarter was ($0.07) compared to ($0.04) for the
corresponding period last year.
In December 2002, the Company received an approvable letter from Health
Canada for PENNSAID(R), the Company's first commercial product utilizing its
patented transcellular technology. PENNSAID(R) is a topical solution for
treating the pain, stiffness and impaired physical function resulting from
osteoarthritis of the knee. "Health Canada's approvable letter for PENNSAID(R)
was an important achievement. It brings us significantly closer to getting the
product to the people who need it," said Rebecca Keeler, President and CEO,
Dimethaid Research Inc., "We are in the process of finalizing the labeling in
anticipation of launching PENNSAID(R) in Canada."
Dimethaid will market PENNSAID(R) as an alternative to oral nonsteroidal
anti-inflammatory drugs, competing in a Canadian market estimated to be worth
$500 million CDN annually, a number that is expected to grow as the population
ages.
During the second quarter, Dimethaid started the Mutual Recognition
Procedure (MRP), seeking regulatory approvals to market PENNSAID(R) in
Belgium, Denmark, France, Germany, Greece, Ireland, the Netherlands, Spain,
Sweden and Portugal. An estimated 30 million people are currently living with
osteoarthritis in Europe.
PENNSAID(R) has been approved for market in the U.K. and several European
countries, and is currently under review in the U.S. by the Food and Drug
Administration.
Subsequent to the second quarter, Provalis Healthcare Limited initiated
arbitration proceedings, challenging Dimethaid International's right to
terminate their exclusive distribution agreement for PENNSAID(R) in the U.K.
The Company believes this challenge is without merit.
Dimethaid completed the second installment payment, pursuant to the
May 15th purchase agreement with Swiss-based OXO Chemie AG ("OXO"). The
Company paid the $4.5 million installment using a combination of cash and
common shares. OXO has been restructured into three, wholly owned
subsidiaries: OXO Chemie AG in Switzerland, Dimethaid GmbH in Germany, and
Dimethaid (Thailand) Limited.
OXO Chemie AG develops and commercializes proprietary products for
treating diseases associated with immune system dysfunction. Results from a
placebo-controlled, Phase III study in late stage AIDS conducted in the U.S.
and Canada, are now undergoing final analysis.
The Company's Board of Directors also reports that Mr. Laurent A.
Bergeron has resigned from the board, citing health reasons. "I would like to
express my appreciation to Laurent Bergeron for his service and leadership at
Dimethaid Research over the past three years," said Ms. Keeler.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion and analysis covers the consolidated interim financial
statements of Dimethaid Research Inc. (the "Company") for the three- and six-
month periods ended November 30, 2002. This report should be read in
conjunction with management's discussion and analysis of operating results and
annual financial statements contained in the Company's 2002 Annual Report and
the financial statements for the second quarter ended November 30, 2002
together with the notes thereto.
All amounts in this discussion and analysis and financial statements are
expressed in U.S. dollars, unless otherwise noted.
Operating Results
-----------------
Dimethaid recorded revenue totaling $118,000 for the second quarter of
fiscal 2003, compared to $217,000 for the second quarter of fiscal 2002.
Revenue for the six months ended November 30, 2002 was $228,000, a $52,000
decrease from the comparable period last year.
Gross profit for the second quarter of fiscal 2003 was $67,000, up 116
percent from the same period a year ago. Year to date gross profit was
$102,000, up 200 percent from the corresponding period a year ago. The
improvement is attributable to a combination of inventory adjustments in the
previous year's results and the addition of margin on OXO products.
Other income recorded during the second quarter of fiscal 2003 was
$24,000, compared to $47,000 for the same period last year. For the six months
ended November 30, 2002, other income totaled $41,000, a decrease of $55,000
due to the elimination of notes receivable since May 31, 2002.
During the second quarter, Dimethaid continued to invest in the
infrastructure necessary to ensure the successful launch of the Company's lead
product, PENNSAID(R), in the North American and international markets. The
Company incurred a net operating loss of $3.1 million (or $0.07 per share)
during the second quarter of fiscal 2003, compared to a net loss of
$1.8 million (or $0.04 per share) for the comparable period last year. For the
six months ended November 30, 2002, the Company recorded a net operating loss
of $6.0 million (or $0.13 per share) versus $3.6 million (or $0.08 per share)
for the same period a year ago.
Operating expenses for the second quarter ended November 30, 2002
increased, reflecting the additional OXO costs as well as a $798,000
amortization charge on the OXO patents acquired in May, 2002. Research and
development expenses also increased during the second quarter to $883,000, up
from $422,000 during the same period last year. The increase reflects the
clinical study costs incurred of a PENNSAID(R) marketing study, as well as the
addition of OXO R&D costs. As these expenses are project related, spending
will vary from quarter to quarter.
Liquidity and Capital Resources
-------------------------------
Cash used in operating activities for the second quarter of fiscal 2003
totaled $1.9 million, compared to $1.4 million for the comparable period a
year ago, reflecting increased research and development spending on clinical
trials and OXO costs.
During the quarter, the Company effected three draws pursuant to its
January 2001 private placement agreement with Acqua Wellington North America
Equities Fund, Ltd, totaling $1.6 million ($2.5 million CDN) against the
issuance of 1,284,867 common shares. Under this agreement the Company has
realized proceeds totaling approximately $14.2 million ($22.2 million CDN)
from the sale of 5,869,421 common shares. This agreement expired on November
30, 2002. At the end of the quarter the Company completed a private placement
with Caledonia Corporate Management Group Limited for 769,230 common shares at
$1.30 CDN per share, raising aggregate proceeds of $638,570 ($1.0 million
CDN).
Pursuant to its May 15, 2002 purchase agreement with OXO Chemie AG, the
Company elected to pay the November 30th installment of $4.5 million using a
combination of cash and shares. The payment to OXO founder, Dr. Friedrich-
Wilhelm Kuhne, consisted of $500,000 ($783,000 CDN) cash and $4.0 million
($6.3 million CDN) in common stock totaling 3,239,092 shares. Under the
agreement, these shares will be held in escrow for one year.
In December 2002, the Company entered into a short-term loan agreement
for proceeds totaling $1.3 million ($2.0 million CDN). This agreement is
secured by a first mortgage on the Company's assets in Markham.
In January, the Company's Board of Directors approved the filing of a
draft rights offering circular with the securities commissions in each of the
provinces of Canada. The rights offering is subject to securities, regulatory
and Toronto Stock Exchange approvals. Proceeds will be used for general
corporate purposes, including the Canadian launch of PENNSAID(R), as well as
for capital expenditures and development of new products based on the
Company's proprietary technology platforms. The Company is also reviewing a
number of additional financing options.
Conference Call Details
The Company will hold a conference call to discuss these results at
4:15 p.m. Eastern time on January 20, 2003. A live audio webcast of the
conference call will be available through www.dimethaid.com and
www.newswire.ca/webcast/. Please connect to either of these websites at least
15 minutes prior to the start time of the conference call to ensure adequate
time for any software download that may be required to listen to the webcast.
A replay of the webcast will be available shortly after the completion of the
call at www.dimethaid.com and www.newswire.ca/webcast/. A replay of the
conference call will also be available by telephone from approximately
6:15 p.m. Eastern time on January 20 through to January 27, 2003. To access
the telephone replay, dial 1-877-289-8525 and enter reservation number 234077.
DIMETHAID RESEARCH INC.
CONSOLIDATED BALANCE SHEETS
UNAUDITED As at As at
Nov 30, May 31,
(thousands of U.S. dollars) 2002 2002
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ASSETS
CURRENT
Cash and cash equivalents $ 34 $ 802
Accounts receivable 175 168
Inventories 696 823
Prepaid expenses and other 172 200
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TOTAL CURRENT ASSETS 1,077 1,993
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LONG TERM ASSETS
Capital assets, net 6,292 6,335
Patents 39,788 41,383
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TOTAL ASSETS $ 47,157 $ 49,711
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 3,326 $ 3,121
Current portion of long term debt 36 33
Current commitment on acquisition 4,241 4,500
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TOTAL CURRENT LIABILITIES 7,603 7,654
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LONG TERM LIABILITIES
Long term debt 2,064 2,058
Non-current commitments on acquisition 27,722 31,962
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TOTAL LIABILITIES 37,389 41,674
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SHAREHOLDERS' EQUITY
Capital stock 69,638 61,840
Cumulative translation adjustment (38) 28
Deficit (59,832) (53,831)
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TOTAL SHAREHOLDERS' EQUITY 9,768 8,037
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 47,157 $ 49,711
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DIMETHAID RESEARCH INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
THREE MONTHS ENDED SIX MONTHS ENDED
UNAUDITED
(thousands of U.S. dollars, Nov 30 Nov 30 Nov 30 Nov 30
except per share data) 2002 2001 2002 2001
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REVENUE $ 118 $ 217 $ 228 $ 280
Cost of sales 51 186 126 246
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GROSS PROFIT 67 31 102 34
Other income 24 47 41 96
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91 78 143 130
EXPENSES
Research and development 883 422 1,590 1,217
Administration 853 869 1,773 1,611
Selling and marketing 479 560 944 761
Depreciation 90 71 179 141
Amortization of Patents 798 - 1,595 -
Interest expense 48 4 63 6
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TOTAL EXPENSES 3,151 1,926 6,144 3,736
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NET LOSS FOR THE PERIOD (3,060) (1,848) (6,001) (3,606)
Deficit, beginning of period (56,772) (47,655) (53,831) (45,897)
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DEFICIT, END OF PERIOD $ (59,832) $ (49,503) $ (59,832) $ (49,503)
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NET LOSS PER COMMON SHARE $ (0.07) $ (0.04) $ (0.13) $ (0.08)
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DIMETHAID RESEARCH INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SIX MONTHS ENDED
UNAUDITED Nov 30 Nov 30 Nov 30 Nov 30
(thousands of U.S. dollars) 2002 2001 2002 2001
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OPERATING ACTIVITIES
Net loss for the period $ (3,060) $ (1,848) $ (6,001) $ (3,606)
Add items not affecting cash:
Amortization and depreciation 888 70 1,774 140
Employer's portion of
share purchase plan - - 32 -
Net change in non-cash
working capital items 317 417 354 1,048
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CASH USED IN
OPERATING ACTIVITIES (1,855) (1,361) (3,841) (2,418)
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INVESTING ACTIVITIES
Issue of notes receivable - (112) - (458)
Acquisition of capital assets (29) (1,345) (226) (1,576)
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CASH USED IN INVESTING ACTIVITIES (29) (1,457) (226) (2,034)
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FINANCING ACTIVITIES
Issuance of common stock
(net of expenses) 6,152 1,740 7,766 2,926
Term loan and
acquisition commitments (4,499) 1,559 (4,481) 1,559
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CASH PROVIDED BY
FINANCING ACTIVITIES 1,653 3,299 3,285 4,485
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Effect of foreign currency
exchange rate changes 43 7 14 11
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Net increase (decrease)
in cash during the period (188) 488 (768) 44
Cash and cash equivalents,
beginning of period 222 142 802 586
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 34 $ 630 $ 34 $ 630
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DIMETHAID RESEARCH INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
These unaudited consolidated financial statements have been prepared by
management in accordance with Canadian generally accepted accounting
principles, on a basis consistent with prior years. These statements
should be read in conjunction with the audited consolidated financial
statements for the year ended May 31, 2002. These statements follow the
same accounting policies and methods as the most recent annual financial
statements, with the exception of the change in reporting currency noted
below.
Reporting Currency
------------------
Effective June 1, 2002, the Company has changed it reporting currency
from Canadian dollars to U.S. dollars as the majority of its assets and
liabilities are denominated in U.S. dollars.
At the entity level, monetary assets and liabilities denominated in
foreign currencies are translated into the functional currency of the
entity at the exchange rate prevailing at the consolidated balance sheet
dates. Non-monetary items are translated at historical exchange rates.
Revenue and expenses denominated in foreign currencies are translated at
the exchange rates prevailing at the transaction date. Exchange
differences arising from this accounting policy are included in the
results of operations.
On consolidation, the accounts of the non U.S. dollar entities are
translated into U.S. dollars as follows: All assets and liabilities are
translated at the exchange rate prevailing at the consolidated balance
sheet dates. Revenue and expenses are translated at the average exchange
rates prevailing during each reporting period. Adjustments resulting from
the translation are included in the cumulative translation adjustment in
shareholders' equity.
2. Capital Stock
Figures are reported in thousands of dollars.
Thousands
Common Shares of Shares U.S. $
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Balance, May 31, 2001 42,564 52,150
Options exercised 303 633
Net proceeds of private placement 847 2,292
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Balance, November 30, 2001 43,714 55,075
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Balance, May 31, 2002 46,383 61,840
Net proceeds of private placement 2,860 3,766
Settlement of OXO acquisition commitment 3,239 4,000
Issued under share option plan 16 32
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Balance, November 30, 2002 52,498 69,638
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Aggregate
Thousands Option Price
Share Purchase Options Outstanding of Options U.S. $
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Balance, May 31, 2001 2,650 7,578
Granted during the period 175 690
Expired during the period (32) (98)
Exercised during the period (303) (633)
Foreign exchange variance (9)
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Balance, November 30, 2001 2,490 7,528
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Balance, May 31, 2002 2,605 7,915
Granted during the period 221 466
Expired during the period (146) (559)
Exercised during the period - -
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Balance, November 30, 2002 2,680 7,822
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3. Stock-Based Compensation
Prior to June 1, 2002, the Company accounted for its stock-based
compensation plan using the intrinsic value-based method. The Company
grants stock options at the fair market value of the shares on the day
preceding the date of the grant of the options, consequently no stock
compensation expense is recognized in the financial statements.
Effective June 1, 2002, the Company has adopted the new accounting
recommendations of the CICA 3870 Stock-based Compensation and other
Stock-based payments for all options outstanding. The Company has chosen
to account for its share option plans for employees and directors using
the intrinsic value-based method and to disclose pro-forma net loss and
net loss per share information using the fair value-based method.
Shown in the following table are the Company's net losses and loss per
share on a pro-forma basis using the fair value method as determined by
using the Black-Scholes option pricing model with the following
assumptions: For the years ended May 31, 1997 to May 31, 1999, the risk
free interest rate was 5%, expected dividends were 0%, expected life
ranged from 5 to 10 years and expected volatility ranged from 11.36 % to
19.42%. For the years ended May 31, 2000 to May 31, 2002 the risk free
interest rate ranged from 2.59% to 5.5%, expected dividends were 0%,
expected life ranged from 2 to 10 years and expected volatility ranged
from 25.07% to 73.12%. For the 6 months ended November 30, 2002, the risk
free interest rate used ranged from 5.14% to 5.35%; expected dividends
were 0%; expected life 10 years; and expected volatility ranged from
66.5% to 70.11%. The weighted-average fair value of options granted
during the six months ending November 30, 2002 was $1.62 CDN.
Net Loss applicable to common shares:
THREE MONTHS ENDED SIX MONTHS ENDED
November 30,2002 November 30, 2002
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Reported $ (3,060) $ (6,001)
Pro-forma (3,319) (6,510)
Net Loss per common share:
Reported (0.07) (0.13)
Pro-forma (0.07) (0.14)
4. Segment Reporting by Geographic Area
The Company operates as one industry segment, in three geographic
regions.
THREE MONTHS ENDED SIX MONTHS ENDED
Nov 30 Nov 30 Nov 30 Nov 30
Revenue 2002 2001 2002 2001
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Canada $ 113 $ 217 $ 174 $ 244
Europe 5 - 19 33
Other - - 35 3
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$ 118 $ 217 $ 228 $ 280
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Net Income (Loss)
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Canada $ (1,931) $ (1,706) $ (3,693) $ (2,820)
Europe (157) (94) (393) (94)
Other (77) (36) (119) (641)
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Loss before interest, taxes,
Depreciation & amortization (2,165) (1,836) (4,205) (3,555)
Depreciation & amortization (888) (71) (1,774) (141)
Interest, net (7) 59 (22) 90
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$ (3,060) $ (1,848) $ (6,001) $ (3,606)
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As at As at
Nov 30, May 31,
Identifiable Assets 2002 2002
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Canada $ 6,127 $ 6,799
Europe 41,004 42,611
Other 26 301
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$ 47,157 $ 49,711
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5. Subsequent Events
Provalis Healthcare Limited has initiated arbitration proceedings,
challenging Dimethaid International's right to terminate their exclusive
distribution agreement for PENNSAID(R) in the U.K. The Company believes
this challenge is without merit.
In December 2002, the Company entered into a short-term loan agreement
for proceeds totaling $1.3 million ($2.0 million CDN). This agreement is
secured by a first mortgage on the Company's assets in Markham.
About Dimethaid Research Inc.
Dimethaid Research Inc. is a publicly traded, Canadian, pharmaceutical
company headquartered in Markham, Ontario, with manufacturing facilities
in Varennes, Québec and Wanzleben, Germany. The Company develops and
commercializes targeted therapeutic drugs that produce minimal side
effects. Dimethaid's two technology platforms focus on transcellular drug
delivery and immune system regulation. Products have potential
applications in such areas as osteoarthritis, onychomycosis and HIV/AIDS.
For more information, please visit www.dimethaid.com.
This release may contain forward-looking statements, subject to risks and
uncertainties beyond management's control. Actual results could differ
materially from those expressed here. Risk factors are discussed in the
Company's annual information form filed with the securities commissions
in each of the provinces of Canada. The Company undertakes no obligation
to revise forward-looking statements in light of future events.
%SEDAR: 00002418EB
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For further information: Dimethaid Research Inc., Investor Relations,
Tel. (905) 415-1446, info@dimethaid.com;
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