Zila, Inc. (Nasdaq:ZILA) today reported financial results for its
2008 second quarter ended on January 31, 2008. For all periods
presented, financial results exclude results of operations for
businesses divested during fiscal 2007, which are now accounted for
as discontinued operations. Zila divested its nutraceuticals
business unit and Peridex� brand in the fiscal 2007 first quarter
and fourth quarter, respectively. In addition, the company
completed the acquisition of Pro-Dentec in November 2006.
Accordingly, fiscal 2007 second quarter financial results include
only two months of Pro-Dentec's results of operations. Fiscal 2008
Second Quarter Results -- Net revenues increased 47% to $10.5
million compared with net revenues of $7.1 million for the second
quarter of fiscal 2007. Sales of ViziLite� Plus grew 136% to $3.2
million from the second quarter of fiscal 2007 and grew 5% from the
fiscal 2008 first quarter. Combined sales of the company's other
products grew 26% to $7.3 million from the fiscal 2007 second
quarter. -- Gross profit grew to $6.2 million, or 60% of net
revenues, from $4.1 million, or 58% of net revenues, in the second
quarter of fiscal 2007, due to higher sales of ViziLite� Plus,
which the company began marketing directly to dental offices in the
fiscal 2007 second quarter. -- Marketing and selling expense
increased to $5.2 million compared with $3.6 million in the second
quarter of fiscal 2007 due to additions to the direct sales force
and expanded marketing programs. -- General and administrative
expense was $3.1 million compared with $3.8 million for the second
quarter of fiscal 2007. The decrease reflects cost cutting
initiatives implemented in the fourth quarter of fiscal 2007 and
lower stock-based compensation expense, offset by incremental costs
related to the acquisition of Pro-Dentec. -- Research and
development (R&D) expense, comprised primarily of costs
associated with the OraTest� regulatory program, was $800,000
compared with $1.8 million for the second quarter of fiscal 2007.
In the first quarter of fiscal 2008, the company closed enrollment
in the OraTest� clinical trial and reduced expenditures for the
regulatory program. -- Loss from continuing operations narrowed to
$4.6 million, or $0.08 per common share, compared with a loss from
continuing operations of $6.4 million, or $0.12 per common share,
for the second quarter of fiscal 2007. -- Cash and cash equivalents
at January 31, 2008 were $5.9 million compared with $14.9 million
at July 31, 2007. The decrease over the first six months of fiscal
2008 reflects cash used in operations of $6.7 million, the
repurchase of $1.4 million of common stock and warrants related to
the restructuring of the company's senior convertible note,
$100,000 of principal payments on long-term debt and $800,000 for
investing activities, primarily related to capital expenditures for
new systems and equipment. Working capital was $8.3 million at
January 31, 2008 compared with $14.3 million at July 31, 2007. --
The company�s EBITDA debt covenants, which will apply for the
quarters ended July 31 and October 31, 2008, may require it to
scale back or eliminate a number of ongoing or planned programs in
an effort to reduce expenses. Failure to successfully execute upon
these and other strategies may raise substantial doubt about the
company's ability to continue as a going concern. For a fuller
discussion of the above matters, see the company's Quarterly Report
on Form 10-Q for the quarter ended January 31, 2008. Recent
Business Growth Initiatives -- In November 2007, the company
launched ViziLite� Plus in Canada at the Toronto Academy of
Dentistry Winter Meeting, marking the initial launch of ViziLite�
Plus outside the United States and the beginning of a
multi-national expansion effort. -- In December 2007, the U.S.
Department of Veterans Affairs awarded the company a five-year
contract to market ViziLite� Plus to all 58 Veterans Administration
dental clinics and all 154 Department of Defense dental clinics. --
In March 2008, the company announced its plans to launch ViziLite�
Plus in the United Kingdom at the British Dental Conference &
Exhibition, the British Dental Association annual conference on May
1, 2008. �We continue to be encouraged by dental professional and
patient acceptance of ViziLite� Plus, as reflected in the
continuing quarterly revenue increases,� said Frank J. Bellizzi,
DMD, president of Zila Pharmaceuticals. �To capitalize on our
continuing business growth, as well as provide an increased level
of operating flexibility, we are making every effort to marshal the
financial and human resources necessary to enable and sustain our
growth and drive to profitability.� Six Months Ended January 31,
2008 Net revenues increased 193% to $21.9 million compared with
$7.5 million for the first six months of fiscal 2007. This growth
was largely driven by increased ViziLite� Plus net revenues which
resulted from selling directly to dental offices through the
company�s national sales organization. Gross margin rose to 60%
from 53% in the comparable period of fiscal 2007. Net loss
attributable to common shareholders was $9.6 million, or $0.16 per
share, compared with net loss attributable to common shareholders
of $6.4 million, or $0.13 per share, in the year ago period.
Financial results in the prior year period include an $11 million
pre-tax gain from the sale of the company�s Nutraceuticals Business
Unit, offset by expenses related to the company�s BDCF Credit
Facility including the non-cash loss of $3.8 million for the
write-off of unamortized debt financing costs and debt discount
upon the repayments of the BDCF Credit Facility and the Industrial
Revenue Bonds. Conference Call Dial-In Information The Company will
host a teleconference and webcast, which is scheduled to begin at
1:30 p.m. PT (4:30 p.m. ET) on March 11, 2008. To participate in
the teleconference, please call toll-free by dialing (866) 250-3615
(domestic) or (303) 262-2142 (international) approximately 10
minutes prior to the above start time. The conference call may also
be heard by interested parties through a live audio Internet
broadcast by visiting the "Investors" in the "Investor Relations
Home" section of Zila's website, www.zila.com. For those unable to
listen to the live broadcast, a playback of the webcast will be
available at the same website beginning shortly after the call. A
telephonic replay will be available for approximately 48 hours
following the conclusion of the call by dialing (800) 405-2236
(domestic) or (303) 590-3000 (international), and entering passcode
11110484#. About Zila, Inc. Zila, Inc. is a fully integrated oral
diagnostic company dedicated to the prevention, detection and
treatment of oral cancer and periodontal disease. ViziLite� Plus,
the Company's flagship product for the early detection of oral
abnormalities that could lead to cancer, is the first and only
adjunctive medical device cleared by the FDA for use in a
population at increased risk for oral cancer. In addition, Zila
designs, manufactures and markets a suite of proprietary products
sold exclusively and directly to dental professionals for
periodontal disease, including the Rota-dent� Professional Powered
Brush, the Pro-Select� Platinum ultrasonic scaler and a portfolio
of oral pharmaceutical products for both in-office and home-care
use. This press release may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are based largely on Zila's expectations
or forecasts of future events, can be affected by inaccurate
assumptions and are subject to various business risks and known and
unknown uncertainties, a number of which are beyond the Company's
control. Therefore, actual results could differ materially from the
forward-looking statements contained herein. A wide variety of
factors could cause or contribute to such differences and could
adversely affect revenue, profitability, cash flows and capital
needs. There can be no assurance that any forward-looking
statements contained in this press release will, in fact, transpire
or prove to be accurate. For a more detailed description of these
and other cautionary factors that may affect Zila's future results,
please refer to Zila's Form 10-K for its fiscal year ended July 31,
2007 and Zila�s Form 10-Q for the quarter ended January 31,2008.
For more information about the Company and its products, please
visit www.zila.com. ZILA, INC. AND SUBSIDIARIES Condensed
Consolidated Statements of Operations (Unaudited) (in thousands -
except for per share data) � � � � � � Three Months Ended January
31, Six Months Ended January 31, � 2008 � � 2007 � � � 2008 � �
2007 � � Net revenues $ 10,491 $ 7,149 $ 21,931 $ 7,489 Cost of
products sold � 4,245 � � 3,026 � � 8,826 � � 3,527 � � Gross
profit 6,246 4,123 13,105 3,962 � Operating costs and expenses:
Marketing and selling 5,221 3,590 10,517 5,013 General and
administrative 3,127 3,817 6,602 6,885 Research and development 789
1,818 1,991 3,352 Depreciation and amortization � 944 � � 699 � �
1,859 � � 1,089 � � Loss from operations � (3,835 ) � (5,801 ) �
(7,864 ) � (12,377 ) � Other income (expense): Interest income 73
181 198 277 Interest expense (801 ) (791 ) (1,567 ) (5,602 )
Derivative income (expense) - - (24 ) 1,059 Other income (expense)
� (26 ) � 24 � � (3 ) � 18 � � Other expense - net � (754 ) � (586
) � (1,396 ) � (4,248 ) � Loss from continuing operations before
income taxes (4,589 ) (6,387 ) (9,260 ) (16,625 ) Income tax
benefit (expense) � - � � (55 ) � (12 ) � 3,810 � � Loss from
continuing operations � (4,589 ) � (6,442 ) � (9,272 ) � (12,815 )
� Income (loss) from discontinued operations (146 ) 407 (319 ) (711
) Gain (loss) on disposal of discontinued operations - (116 ) -
10,994 Income tax expense � - � � - � � - � � (3,877 ) � Total
income (loss) from discontinued operations � (146 ) � 291 � � (319
) � 6,406 � � Net loss (4,735 ) (6,151 ) (9,591 ) (6,409 )
Preferred stock dividends � 10 � � 10 � � 20 � � 20 � � � Net loss
attributable to common shareholders $ (4,745 ) $ (6,161 ) $ (9,611
) $ (6,429 ) � Basic and diluted net income (loss) per common
share: � Loss from continuing operations $ (0.08 ) $ (0.12 ) $
(0.15 ) $ (0.25 ) Income (loss) from discontinued operations � - �
� 0.01 � � (0.01 ) � 0.12 � � Net loss attributable to common
shareholders $ (0.08 ) $ (0.11 ) $ (0.16 ) $ (0.13 ) � Weighted
average common shares outstanding - basic and diluted � 61,479 � �
55,545 � � 61,441 � � 50,671 � ZILA, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (in thousands) � January 31,
July 31, � 2008 � 2007 (Unaudited) � Current assets $ 17,878 $
24,854 Property and equipment - net 6,034 6,219 Goodwill and other
intangible assets - net 30,326 31,610 Other assets � 1,008 � 1,198
� Total assets $ 55,246 $ 63,881 � Current liabilities $ 9,606 $
10,568 Long-term liabilities 8,120 7,334 Shareholders' equity �
37,520 � 45,979 � Total liabilities and shareholders' equity $
55,246 $ 63,881
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