January 19, 1999 19:51
VASOMEDICAL INC files 1130 qtr 10-Q. Reports $0.7 mil tot rev and $-0.08 EPS.
Excerpted from 10-Q filed on 01/19 by VASOMEDICAL INC:
VASOMEDICAL INC files 1130 qtr 10-Q. Reports $0.7 mil tot rev and $-0.08 EPS. Results of Operations Six and Three Months Ended November 30, 1998 and 1997
The Company generated revenues from the sale and lease of EECP systems of $792,000 and $2,177,000 and $364,000 and $1,135,000 for the six- and three-month periods ended November 30, 1998 and 1997, respectively. The Company incurred net losses of $2,895,000 and $2,005,000 for the six months ended November 30, 1998 and 1997, respectively (before deducting $864,000 and $857,000, respectively,in deemed dividends on preferred stock which represented the discount resulting from the allocation of proceeds to the beneficial conversion feature and the fair value of the underlying warrants, and $108,000 and $53,000, respectively, in dividend requirements, in connection with the Company's April 1998 and June 1997 financings). The Company incurred net losses of $1,486,000 and $1,007,000 for the three months ended November 30, 1998 and 1997, respectively (before deducting $203,000 in fiscal 1999 in incremental deemed dividends on preferred stock which represented the additional discount resulting from the allocation of proceeds to the beneficial conversion feature and $53,000 and $25,000,
respectively, in dividend requirements in connection with the Company's April 1998 and June 1997 financings).
Management believes that the number of cardiology practices and hospitals interested in becoming providers of EECP therapy has increased following the announcement of the results of the Company's multicenter clinical study at the American Heart Association (AHA) meeting in November 1997, additional reports presented at the American College of Cardiology meeting in March 1998, and the
one-year follow-up quality-of-life outcomes study presented at the AHA in November 1998. The number of units placed in the first two quarters of fiscal 1999 has exceeded that of the comparable prior-year period, however, revenues in the current fiscal year have been adversely affected by the nature of the commercial arrangements under which those units were placed, including the
decline in outright sales. The Company expects that many of the placements currently under rental or use arrangements will become outright sales or financed leases in the latter part of fiscal 1999, although there can be no assurance that this will occur.
Management believes that the publication of the results of a multicenter, controlled clinical study in a major peer-review journal and decisions by the Health Care Financing Administration (which administers the Medicare program) and other third-party payers to provide coverage for EECP treatment are essential to the commercial success of the Company. The Company expects
publication of the multicenter clinical study and determination of positive coverage policies to occur during the course of the current fiscal year.
Gross margins are dependent on a number of factors, particularly the mix of EECP units sold and rented during the period, the ongoing costs of servicing such units, and by certain fixed period costs, including facilities, payroll and insurance. Gross margins are furthermore affected by the location of the Company's customers and the amount and nature of training and other initial costs required to place the EECP system in service for customer use. Accordingly, the gross margin realized during the current period may not be indicative of future margins.
Selling, general and administrative (SGA) expenses for the six- and three-month periods ended November 30, 1998 and 1997 were approximately $2,648,000 and $2,507,000, and $1,378,000 and $1,485,000, respectively. The $141,000 increase in SGA expenses for the comparable six-month period resulted primarily from the expansion of the Company's direct sales force and customer
services personnel and marketing expenses related to customer support activities and programs, offset by a decrease in commissions and other related selling expenses as a result of decreased revenues. The $107,000 decrease in SGA expenses for the comparable three-month period resulted primarily from
substantial expenditures in the prior period for public relations programs related to the announcement of the aforementioned multicenter study's results and for new promotional and educational materials and a decrease in commissions and other related selling expenses as a result of decreased revenues, offset by expenses in connection with the expansion of the Company's direct sales force
and customer services personnel.
Research and development (R&D) expenses decreased $609,000 and $200,000 for the six and three months ended November 30, 1998 compared to the prior periods. The decreases were the result of significant prior period expenses related to the completion of the Company's multicenter clinical study of EECP (completed in July 1997) and the front-loaded expenses for the development of a new model of
the EECP system. Current period expenses relate to the long-term follow-up phase of the multicenter clinical study, i.e., a quality-of-life outcomes study (completed in July 1998), the expansion of the International EECP Patient Registry at the University of Pittsburgh, and the ongoing feasibility study in
congestive heart failure, all of which, to some extent, are expected to further affect operating results in fiscal 1999.
(End of Item Excerpt)
----------FINANCIAL DATA SCHEDULE--------
PERIOD-TYPE 6-MOS
FISCAL-YEAR-END MAY-31-1999
PERIOD-END NOV-30-1998
CASH 1,509,002
SECURITIES 0
RECEIVABLES 418,045
ALLOWANCES 0
INVENTORY 965,655
CURRENT-ASSETS 2,993,281
DEPRECIATION (361,514)
TOTAL-ASSETS 4,197,756
CURRENT-LIABILITIES 1,083,133
BONDS 0
PREFERRED-MANDATORY 0
PREFERRED 2,085
COMMON 48,917
OTHER-SE 2,719,121
TOTAL-LIABILITY-AND-EQUITY 4,197,756
SALES 792,100
TOTAL-REVENUES 792,100
CGS 573,790
TOTAL-COSTS 573,790
OTHER-EXPENSES 3,105,683
LOSS-PROVISION 0
INTEREST-EXPENSE 7,337
INCOME-PRETAX (2,894,710)
INCOME-TAX 0
INCOME-CONTINUING (2,894,710)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (2,894,710)
EPS-PRIMARY (.08)
EPS-DILUTED (.08)
------------------------------------------------------------------------
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