Zila, Inc. (Nasdaq GM: ZILA) announced results for its third
quarter of fiscal 2007 for the period ended April 30, 2007. The
increase in the Company�s quarterly revenue was driven by growth in
ViziLite� Plus coupled with a full quarter of Professional Dental
Technologies, Inc. ("Pro-Dentec") revenues. The Pro-Dentec
acquisition provided Zila with a national sales force that
continues to strengthen the Company's oral cancer screening
business. The third quarter and prior period results for continuing
operations now exclude the results for the Peridex� brand following
its previously announced sale on May 31, 2007. All assets and
liabilities related to the Peridex� brand have been reclassified to
assets and liabilities of discontinued operations. Highlights for
the Quarter Include: -- Net revenues for continuing operations
increased to $10.8 million compared to net revenues of $1.2 million
for the 2006 fiscal third quarter. The increase was due primarily
to the acquisition of Pro-Dentec and its contribution to ViziLite�
Plus with TBlue630�revenue growth, which increased 112% over the
third quarter of 2006 to $2.5 million. -- Quarterly revenues
increased 52% to $10.8 million compared to the second quarter of
fiscal 2007, which is attributable to the inclusion of a full
quarter of revenues for Pro-Dentec and the continued growth of
ViziLite Plus, which increased 132%. -- Gross margin improved to
61% in the third quarter compared to 42% in the same period last
year. Prior year gross margins reflect the distributor-only
business model and the impact of discounts and incentives during
the initial launch phase of ViziLite Plus. -- Marketing and selling
expenses were $4.3 million for the third quarter compared to $1.8
million in the same period last year. The increase primarily
reflects the acquisition of the Pro-Dentec selling and marketing
capabilities. As a percentage of net revenues, marketing and
selling expenses were 40% for the third quarter compared to 146%
for the comparable period last year. The improvement versus a year
ago reflects primarily the leverage gained from the addition of
ViziLite Plus to the existing revenue base of Pro-Dentec. --
General and administrative expenses were $2.7 million, or 24% of
net revenues for the three month period compared to $2.7 million or
218% of net revenue for the third quarter last year. The current
quarter�s expenses reflect the addition of Pro-Dentec, but also
benefit from a $0.8 million reduction in the Company�s incentive
compensation expense. The fiscal fourth quarter will be further
negatively impacted by ongoing systems integration costs at
Pro-Dentec. -- Research and development expense decreased 3% to
$2.4 million in the third quarter this fiscal year compared with
$2.5 million in the comparable quarter a year ago. These expenses
include, in both periods, the expenses for the OraTest� Phase III
clinical trial and other related regulatory program expenses. The
prior year also included the expense to re-commission the Company�s
Phoenix-based tolonium chloride manufacturing facility in support
of TBlue630 and OraTest. -- Depreciation and amortization expense
for the quarter increased to $0.9 million from $0.4 million a year
ago. The increase primarily reflects the acquisition of Pro-Dentec
and its related property, plant and equipment in support of its
manufacturing, distribution and administrative operations as well
as the acquired intangibles. -- Loss from continuing operations for
the fiscal third quarter of this year was reduced to $4.4 million
from $7.6 million a year ago and $6.4 million in the immediately
preceding quarter. The improvement compared to the second quarter
of fiscal 2007 was due primarily to continued revenue growth
coupled with lower relative operating expenses as a percent of net
revenues, 96% in the current quarter versus 139% in the preceding
quarter. Versus a year ago, the acquisition of Pro-Dentec was the
primary contributor to the lower losses. -- Net loss for the
quarter, inclusive of discontinued operations, was $4.3 million or
7 cents per common share versus a loss of $8.1 million or 18 cents
per common share a year ago. Based upon currently available funds,
we may be required to delay, scale back or eliminate a number of
ongoing or planned programs. 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 April 30, 2007. Nine Months
Ended April 30, 2007 Net revenues from continuing operations for
the nine months ended April 30, 2007 increased to $18.1 million,
compared to $2.7 million for the same period of fiscal 2006. The
increase was due primarily to the acquisition of Pro-Dentec and its
positive contribution to ViziLite Plus revenue growth, which
increased 48% versus the same nine-month period a year ago. Gross
margin for the nine-month period was 57% versus 42% a year ago
reflecting the prior year�s distributor-only business model and the
impact of discounts and incentives during the initial launch phase
of ViziLite Plus. Net loss, inclusive of discontinued operations,
for the nine months ended April 30, 2007, was $10.7 million versus
$20.4 million a year ago or losses of 20 cents and 45 cents per
common share, respectively. The improvement versus a year ago
reflects primarily a lower loss from operations and the gain from
the disposition of businesses offset by higher interest or
financing expense. 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 June 19, 2007. To participate in
the teleconference, please call toll-free 866-585-6398 (or
416-849-9626 for international callers) approximately 10 minutes
prior to the above start time. You may also listen to the
teleconference live via the Internet by visiting the �Event
Calendar� in the �News� section of Zila�s website, www.zila.com.
For those unable to attend, the website will host an archive of the
call. A telephone playback will be available for 48 hours beginning
at 9:30 p.m. PST on June 21, 2007. The playback can be accessed by
calling 866-245-6755 (or 416-915-1035 for international callers)
and providing passcode 375491. About Zila, Inc. Zila, Inc.,
headquartered in Phoenix, is a cancer screening company focused on
oral cancer: Zila is dedicated to establishing ViziLite� Plus for
the early detection of oral abnormalities that could lead to
cancer, with an initial focus on the dental market through
Pro-Dentec, a leading designer, manufacturer and marketer of Soft
Tissue Management (STM�) products. Sold exclusively and directly to
dental professionals, Pro-Dentec's core products include the
Rota-dent� Professional Powered Brush, the Pro-Select3�
Piezo-Ultrasonic Scaler System and a suite of pharmaceutical STM�
products for both in-office and home-care use. For more information
about Zila, visit www.zila.com. Safe Harbor Statement This press
release contains 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 impact revenues,
profitability, cash flows and capital needs. There can be no
assurance that the forward-looking statements contained in this
press release will, in fact, transpire or prove to be accurate, and
we disclaim any obligation to update or revise any such
forward-looking statements. For a more detailed description of
these and other cautionary factors that may affect Zila's future
results, please refer to the documents we file with the Securities
and Exchange Commission, including our Form 10-K for the fiscal
year ended July 31, 2006, our Current Report on Form 8-K filed on
December 28, 2006, and our Form 10-Q for the quarter ended April
30, 2007. ZILA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS Unaudited (in thousands, except per share amounts) �
Three months ended April 30, Nine months ended April 30, 2007� �
2006� 2007� 2006� Net revenues $ 10,750� $ 1,218� $ 18,147� $
2,701� Cost of products sold � 4,231� � 710� � 7,758� � 1,566� �
Gross profit 6,519� 508� 10,389� 1,135� � Operating costs and
expenses: Marketing and selling 4,326� 1,782� 9,248� 4,088� General
and administrative 2,682� 2,651� 9,567� 7,600� Research and
development 2,389� 2,452� 5,741� 5,739� Depreciation and
amortization � 909� � 369� � 1,997� � 1,025� � � 10,306� � 7,254� �
� 26,553� � � 18,452� � Loss from operations � (3,787� ) � �
(6,746� ) � (16,164� ) � (17,317� ) � � Other income (expense):
Interest income 120� 64� 397� 201� Interest expense (878� ) (622� )
(6,480� ) (640� ) Derivative income �� (98� ) 1,059� (98� ) Other
expense � (47� ) � (247� ) � (29� ) � (315� ) � � (805� ) � (903� )
� (5,053� ) � (852� ) � � Loss from continuing operations before
income taxes (4,592� ) (7,649� ) (21,217� ) (18,169� ) Income tax
(expense) benefit � 191� � �� � 4,001� � (4� ) � Loss from
continuing operations � (4,401� ) � � (7,649� ) � (17,216� ) �
(18,173� ) � (Loss) gain from disposal of operations (20� ) ��
10,974� �� Income (loss) from discontinued operations 303� (426� )
(408� ) (2,150� ) Income tax expense � (191� ) � �� � (4,068� ) �
�� Income (loss) from discontinued operations � 93� � (426� ) �
6,498� � (2,150� ) � Net loss (4,308� ) (8,075� ) (10,718� )
(20,323� ) Preferred stock dividends � 10� � 10� � 29� � 29� � Net
loss attributable to common shareholders $ (4,318� ) � $ (8,085� )
$ (10,747� ) $ (20,352� ) � Basic and diluted net income (loss) per
common share: Loss from continuing operations $ (0.07� ) $ (0.17� )
$ (0.32� ) $ (0.40� ) Income (loss) from discontinued operations �
(0.00� ) � (0.01� ) � 0.12� � (0.05� ) � Net loss $ (0.07� ) $
(0.18� ) $ (0.20� ) $ (0.45� ) � Weighted average shares
outstanding 62,117� 45,734� 54,411� 45,684� � Balance Sheet Data
Unaudited (in thousands) � � April 30, July 31, � 2007� � 2006� �
Cash and cash equivalents $ 9,652� $ 3,958� Other current assets
11,445� 19,012� Property - net 6,100� 1,684� Intangibles - net
32,549� 6,395� Other � 5,458� � 25,315� � Total assets $ 65,204� $
56,364� � � Current liabilities $ 8,801� $ 29,824� Long-term
liabilities 6,815� 3,289� Shareholders equity � 49,588� � 23,251� �
Total liabilities and equity $ 65,204� $ 56,364�
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