TIDMEGI
RNS Number : 1949I
Electrical Geodesics, Inc
26 August 2016
Electrical Geodesics, Inc.
Interim Report 2016
A Period of Strong Revenue Growth
___________________________________________________________________
EUGENE, OREGON, US, 26 August 2016 - Electrical Geodesics, Inc.
("EGI" or the "Company"), a leading neurodiagnostic medical
technology company, today announces its unaudited interim results
for the six months ended 30 June 2016 (H1 2016).
Financial Highlights
-- Revenues up 27% to $6.6m (H1 2015: $5.2m)
-- North American sales increased 45% to $3.2m (H1 2015: $2.2m)
-- International sales increased 17% to $3.4m (H1 2015: $2.9m)
-- Grant and contract revenue increased to $0.9m (H1 2015: $0.6m)
-- Increased revenues and cost controls led to a reduced net loss of $1.9m (H1 2015: $2.3m)
-- New revolving line of credit agreement in place to help manage cash flows
Operating Highlights
-- June 2016 research market launch of a beta version of EGI's
ground breaking Geodesic Transcranial Electrical Neuromodulation
system (GTEN)
-- Introduction to the market of GeoSource 3 (GS3) a
sophisticated electrical source imaging software with a broad range
of advanced head modeling features
-- Introduction of Net Station 5.3, EGI's flagship software with added clinical features
-- GTEN small-scale safety and feasibility clinical trial, being
conducted at the University of Washington, for the treatment of
focal epilepsy expected to progress from the diagnostic phase to
the intervention phase
-- Receipt of IDE from the FDA for the study of dense array EEG
localization and rTMS treatment of focal epilepsy. The study is
being funded and administered by Stanford University Hospital
Don Tucker, CEO of EGI, commented: "We believe that dense-array
EEG (dEEG) has gained a firm foothold in our core research markets.
With this growing visibility we expect to see improving acceptance
of dEEG in the much larger clinical markets for neurodiagnostics
and pre-surgical planning where our source localization technology
can play an important role." He added: "We expect that our research
customers will assess the applicability of GTEN and GS3 across a
broad range of indications which will highlight the potential of
these technologies in the larger clinical markets both in diagnosis
and treatment of important neurological conditions."
Glossary
EEG Electroencephalography
Dense-array EEG
dEEG Geodesic transcranial electrical
GTEN neuromodulation
Geodesic Transcranial Electrical
GTEN Neurmodulation System
GS3 GeoSource 3
MRI Magnetic resonance imaging
fMRI Functional MRI
PET Positron emission tomography
MEG Magneto encephalography
NIRS Near-infra-red spectroscopy
Trans-cranial direct current
tDCS electrical stimulation
TES Trans-cranial electrical stimulation
TMS Trans-cranial magnetic stimulation
Repetitive Trans-cranial magnetic
rTMS stimulation
This announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation No 596/2014 and is
disclosed in accordance with the Company's obligation under Article
17 of those Regulations.
For more information contact:
EGI
Ann Bunnenberg +1 541 687 7962
Peel Hunt LLP (NOMAD
and Broker)
James Steel, Oliver +44 (0) 20 7418
Jackson 8900
Notes to Editors
Electrical Geodesics, Inc. in Summary
Founded in 1992, EGI designs, develops and commercialises a
range of non-invasive neurodiagnostic and neuromodulation products
used to monitor, interpret and modulate brain activity, based on
its proprietary dense array electroencephalography ("dEEG")
platform technology. The Company's technology uses up to 256
sensors, providing much higher resolution brain activity data
compared to conventional 8 or 16 channel EEG and is used in
medical, clinical and research settings in a diverse range of
applications including important areas such as the diagnosis and
monitoring of epilepsy, neurosurgical planning, sleep assessment,
and many others.
EGI's dEEG systems, available in the GES 400 lines, capitalise
on the Company's unique Hydrocel Geodesic Sensor Net which allows
faster, easier, and more convenient placement of many EEG sensors
in an even distribution over the entire scalp, providing more
accurate and precise diagnosis and measurement. EGI's technology is
now widely used in neuroscience research laboratories and is
becoming more commonly used in clinics, care centers, and hospitals
around the world. Data is measured and visualised using EGI's
proprietary amplifier technology and software, providing a
complete, advanced, high-resolution EEG platform. The Company's
products are compatible with multiple diagnostic and imaging
technologies, including magnetic resonance imaging (MRI),
functional MRI (fMRI), and magneto-encephalography (MEG).
The Company maintains a website that can be found at
www.egi.com. Information on our website is not incorporated by
reference or deemed a part of this report.
Operating Review
Our mission is to transform advances in neuroscience into
efficient, cost--effective tools for the research and treatment of
disease and the promotion of brain health. We design, develop and
commercialize research, diagnostic and interventional medical
products used to non--invasively monitor, interpret and modulate
naturally occurring electrical activity in the brain. Our
proprietary dense array electroencephalography, or dEEG, solutions
provide industry--leading precision for recording of the brain's
electrical activity.
Revenues for the six months ended 30 June 2016 (H1 2016) were
$6.6 million, an increase of 27% over the $5.2 million reported for
the same period of 2015 (H1 2015). In addition, we recognised grant
income of some $0.9 million in H1 2016 (H1 2015: $0.6 million). The
Company closed the period with a sales order book of $2.2 million,
all of which is expected to ship in the second half of 2016.
The gross margin percentage for H1 2016 was 52%, compared to 58%
in H1 2015. The decrease between the two periods related to the
inclusion of sales of $0.9 million of distributed products which
carry a lower margin, other sales product mix and slightly
increased manufacturing costs.
Since joining AIM in April 2013, EGI has committed significant
resources to the development of advanced dEEG and neuromodulation
technology. We have an installed base of over one thousand systems
and are continuing to grow our customer base. Our GES 400 system,
supported by our Net Station software, represents breakthrough
technology and can be found in many of the most prestigious
research and clinical facilities around the world.
The following significant advancements were achieved during the
first half of 2016:
EGI achieved a critical milestone in June 2016 with the beta
release to research customers of its GTEN product. The GTEN
targeting software allows a user to compute the optimal patterns of
electrical sources and sinks to stimulate a targeted area of the
cortex. This information is then fed to the GTEN hardware within
the GES 400 to deliver the treatment. A unique advantage of the
GTEN targeting software is that the same Sensor Net used to record
EEG can also be used to deliver the electrical stimulation allowing
up to 256 electrodes to be used in multiple combinations to
optimize the delivery of energy to the targeted location. The
Directors believe the GTEN system could improve the treatment of a
broad range of neurological diseases.
GeoSource 3 (GS3) software was introduced to the research
community at the recent meeting of the Organization for Human Brain
Mapping in Geneva, where Don Tucker, CEO was a featured speaker.
GS3 will provide for three levels of precision in head modeling:
individual head, conformal atlas head and 6 age-specific atlas head
models. The advantage of having three head modeling options rather
than the single atlas model provided by GS2 is that the user can
balance the time and complexity of the model used to the nature of
the work being performed. For simple diagnostic screening in
epilepsy, especially where no MRI of the patient is available, a
rapid easy--to--use atlas or conformal head model is ideal; for
epilepsy neurosurgical planning, additional precision offered by
the individual head model is preferred by neurologists and
neurosurgeons. Later in 2016, the Company intends to seek FDA
510(k) approval of GS3 for clinical applications. GS2, the
predecessor to GS3, is presently cleared by the FDA for clinical
application and carries a medical CE mark.
GS3 is an imaging platform that allows brainwaves and other
functional data to be displayed, analyzed and manipulated using
high resolution individual MRI and atlas--based head models. When
combined with the GTEN product, our GS3 platform provides the
planning environment for our neuromodulation products.
EGI has also introduced to the market its next generation Net
Station (NS) 5.3 software, which brings additional features and
functionality to both research and clinical customers. A much
awaited new feature of NS 5.3 is our Reciprocity Visualization
Environment (RVE). RVE provides for visualization of acquisition
data on a three dimensional head model. RVE also supports our new
GS3 and GTEN software described above. NS 5.3 now provides enhanced
workflow tools which enable the user to more easily manipulate
their data. A variety of customer requested features have also been
included in NS 5.3.
Our clinical trial activities are progressing as follows:
-- The small-scale clinical trial to assess safety and
feasibility for dense array EEG localisation and GTEN treatment of
focal epilepsy is progressing. At the US site, Harborview Hospital
University of Washington (Seattle), 15 patients have been evaluated
in the diagnostic phase and the intervention phase is expected to
begin in the third quarter. The diagnostic phase is now underway at
the China site, Huashan Hospital, Fudun University (Shanghai).
-- We received an Investigational Device Exemption (IDE) for the
study of dense array EEG localisation and rTMS (repetitive
Transcranial Magnetic Stimulation) treatment of focal epilepsy. The
study is funded by and will take place at Stanford University
Hospital.
The Directors intend to develop further the value of the
underlying monitoring, neurodiagnostic and pre-surgical planning
business. In addition, the Directors are strongly focused on
developing the significant potential of the GTEN platform,
including assessing the potential benefits of strategic industrial
partnerships.
Financial Review
Basis of Accounting:
The accompanying condensed consolidated financial statements are
prepared in conformity with accounting principles generally
accepted in the United States of America (US GAAP). Consolidated
financial statements released by EGI in 2013, 2014 and the first
six months of 2015 were presented under IFRS accounting principles.
The principal differences between the two methods of accounting as
they impact EGI relate to the accounting for research and
development expenses and deferred tax assets.
Under US GAAP, substantially all development costs are expensed
as incurred whilst IFRS requires the capitalization and related
amortization of certain development costs. Within EGI's activities,
no costs met the US GAAP criteria for capitalization and as such no
assets relating to product development costs are included in the
accompanying balance sheets. The basis of recognition of deferred
tax assets also varies between the two accounting conventions.
Pursuant to US GAAP, EGI has established a reserve for the full
amount of the net deferred tax asset, reporting no deferred tax
assets or liabilities in the accompanying balance sheets.
Condensed Consolidated Statements of Operations:
Revenues increased by 27% to $6.6 million for the six months
ended 30 June 2016 (H1 2016) compared to $5.2 million in the
comparable period of 2015 (H1 2015) and $13.6 million for the year
ended 31 December 2015 (FY 2015) .
Sales by product type were as follows:
H1 2016 H1 2015 FY 2015
$million $million $million
Systems and upgrades 2.5 2.5 7.8
Sensor Nets 1.8 1.0 2.1
Major peripherals 0.3 0.3 0.8
Software 0.6 0.6 1.5
Distributed products 0.9 0.3 0.3
Support & other 0.5 0.5 1.1
6.6 5.2 13.6
Revenue from the sale of Sensor Nets increased 80% to $1.8
million in H1 2016 compared to $1.0 million in H1 2015, driven by
the steady Increase in our installed systems base, coupled with a
wider variety of Sensor Nets including the Micronets. Under average
conditions Sensor Nets have a useful life of approximately two to
three years.
Sales of distributed third party products increased by $0.6
million to $0.9 million in H1 2016 from $0.3 million in H1 2015.
EGI distributes a line of products which are complimentary to EGI's
products, including the Hitachi NIRS systems. EGI's strategic
market objective is to bundle our proprietary products with core
third-party products to meet market needs.
Revenues from sales in North America increased by $1.0 million
or 45%, to $3.2 million in H1 2016 from $2.2 million in H1 2015.
For H1 2016, sales to Asia and Europe were up 33% and 28%,
respectively over H1 2015, for a combined increase of $0.8 million.
In H1 2015 the Company was buffeted by unfavorable currency
fluctuations in Europe and encountered a cautionary spending
environment in China. These international headwinds have not been
as pronounced in the first half of 2016 and we are expecting this
environment to continue through the remainder of 2016.
Cost of revenues were $3.2 million in H1 2016 compared to $2.2
million H1 2015, delivering a gross margin percentage of 52% for H1
2016, compared to 58% for H1 2015 and 55% for the full year in
2015. The decrease in the gross margin percentage related to an
increase in sales of lower-margin distributed product sales, other
sales product mix and slightly increased manufacturing costs.
EGI has been awarded research grants in support of various
EEG--related projects and grant and contract revenue recognized in
H1 2016 was $0.9 million and $0.6 million in H1 2015. Direct grant
related expenses totaled $0.7 million and $0.5 million during the
first six months of 2016 and 2015, respectively, including
subcontractor costs of $0.2 million in each of H1 2016 and H1
2015.
Selling and marketing expenses remained increased slightly to
$2.1 million in H1 2016 (31% of revenue) compared to $1.9 million
in H1 2015 (38% of revenue). General and administrative expenses
were also contained increasingly only $0.1 million from $1.8
million in H1 2015 (34% of revenue) to $1.9 million in H1 2016 (29%
of revenue). Research and development expenses decreased $0.2
million to $1.5 million, or 22% of revenues for H1 2016, compared
to $1.7 million, or 33% of revenues for H1 2015, primarily as a
result of an increased allocation of science resources to grant
supported projects.
No deferred tax asset has been recognized nor has credit been
taken for the benefits of the accumulated tax losses. As at 30 June
2016 net operating losses amounted to approximately $11 million and
the Company had an unrecognized deferred tax asset of approximately
$5 million.
Overall the business generated a net loss of $1.9 million for H1
2016 compared to a net loss of $2.3 million H1 2015. The basic and
diluted net loss per share was $0.07 and $0.09 for H1 2016 and H1
2015, respectively.
Balance Sheet:
The Company has entered into a new one-year revolving credit and
security agreement with a finance company, establishing an
asset-based senior secured credit facility bearing interest at the
prime rate plus 6.0%, with a minimum rate of 9.5%. As at 30 June
2016, EGI had outstanding borrowings of $1.0 million and a
remaining borrowing availability of approximately $0.6 million
under the credit facility. On 31 December 2015, EGI had $0.2
million outstanding under its accounts receivable factoring
agreement. No amounts were outstanding under the factoring
agreement as at 30 June 2016.
Cash and cash equivalents were $1.1 million at 30 June 2016
compared to $1.2 million at 31 December 2015. As a result of the
net loss incurred during H1 2016, working capital decreased from
$2.9 million at 31 December 2015 to $1.1 million at 30 June
2016.
Trade accounts receivable of $3.3 million at 31 December 2015,
decreased to $2.0 million at 30 June 2016. Revenues have
historically been heavily weighted towards the second half of the
year, principally the fourth quarter, which accounts for the change
in receivables between the two period ends. In preparation for
projected second half shipments, inventory at 30 June 2016 was $2.5
million compared to $2.0 million at 31 December 2015. Accounts
payable increased to $2.2 million at 30 June 2016 from $1.6 million
at 31 December 2015 as the Company sought to manage its liquidity
position.
Capital expenditures in H1 2016 were $0.4 million compared to
$0.2 million for the same period of 2015. The expenditures were
primarily for manufacturing equipment and demonstration equipment
in support of EGI's sales and marketing efforts.
Outlook
EGI continues to target double-digit revenue growth for 2016
this is based on the strong performance in H1 2016, the strong
order book at the period end and the release for sale of our new
products and features, including GTEN. The Company expects the
recent pattern of revenues being materially second half weighted to
be a feature of the current financial year. Current expectations
are for operating expenses to remain tightly controlled with
increases being in support of increased sales. The Directors are
carefully managing the Company's cash flows whilst also reviewing
options to increase the working capital available to the Company so
that growth opportunities can be exploited.
We believe that our dEEG technology provides a strong basis for
EGI's continuing growth in the neuroscience research market and see
significant growth opportunities in the clinical market,
particularly in the neurodiagnostic and pre-surgical planning
business. In the clinical market, our products offer ease of use,
more precise data acquisition and visualization, and faster
recording times than conventional EEG offerings.
In the longer term, we also intend to pursue neuromodulation
opportunities that leverage our existing dEEG products for
therapeutic uses with our GTEN product. This neuromodulation
opportunity will build upon our existing GES, source imaging and
Sensor Net technologies in order to target electrical stimulation
to the brain and disrupt, reset or modify the brain's
functioning.
Don Tucker Ann Bunnenberg
Chairman & CEO President & COO
26 August 2016
Electrical Geodesics, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
June 30, December
31,
------------------------------------------------
2016 2015 2015
------------------------- -------------------------- -------------------------
unaudited unaudited audited
Assets
Current assets:
Cash and cash equivalents $ 1,061 $ 1,353 $ 1,181
Trade accounts receivable,
net of allowance for
doubtful accounts 1,989 1,894 3,271
Grants and contracts
receivable 193 205 323
Inventories 2,540 2,006 1,993
Prepaid expenses and
other assets 418 388 361
Deferred stock issuance
costs 437 - 368
-------------------- ---------------------- ---------------------
Total current assets 6,638 5,846 7,497
Property and equipment,
net 1,770 1,738 1,642
Goodwill 210 210 210
Other intangible assets,
net 60 75 67
-------------------- ---------------------- ---------------------
Total assets $ 8,678 $ 7,869 $ 9,416
=== ==================== ====================== =====================
Liabilities
Current liabilities:
Accounts payable and
accrued expenses $ 2,211 $ 763 $ 1,554
Line of credit 1,048 - -
Recourse debt on factoring
agreement - - 216
Accrued payroll and
related liabilities 930 775 941
Product warranty reserve 146 161 136
Customer deposits 97 164 224
Deferred revenue 1,103 779 1,512
-------------------- ---------------------- ---------------------
Total current liabilities 5,535 2,642 4,583
Deferred revenue - noncurrent 487 534 423
-------------------- ---------------------- ---------------------
Total liabilities 6,022 3,176 5,006
-------------------- ---------------------- ---------------------
Stockholders' equity
Common Stock - $0.001
par value, 75,000,000
shares authorized and
27,525,709 shares outstanding
at June 30, 2016, 2015
and December 31, 2015 27 27 27
Additional paid-in-capital 13,171 12,922 13,069
Accumulated deficit (10,542) (8,256) (8,686)
-------------------- ---------------------- ---------------------
Total stockholder's
equity 2,656 4,693 4,410
-------------------- ---------------------- ---------------------
Total liabilities and
stockholder's equity $ 8,678 $ 7,869 $ 9,416
=== ==================== ====================== =====================
The accompanying notes are an integral part of these condensed
consolidated financial statements
Electrical Geodesics, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
For the
year
For the six months ended
ended June 30, December
31,
-----------------------------------------------------------------------------------
2016 2015 2015
---------------------------- --------------------------------------- -------------------------------------------
unaudited unaudited audited
Revenues $ 6,614 $ 5,170 $ 13,619
Cost of revenues (3,207) (2,162) (6,105)
--- ----------------------- ------------ ------------------------- ------------------ -----------------------
Gross margin 3,407 3,008 7,514
Grant and contract
revenue 904 588 1,497
Direct grant and contract (1,162
expenses (666) (474) )
--- ----------------------- ------------ ------------------------- ------------------ -----------------------
Gross margin
and
net grant
revenue 3,645 3,122 7,849
Operating expenses:
Selling and marketing
expenses (2,076) (1,942) (3,966)
General and administrative
expenses (1,895) (1,772) (3,750)
Research and Development (1,468) (1,700) (2,944)
--- ----------------------- ------------ ------------------------- ------------------ -----------------------
Total operating
expenses (5,439) (5,414) (10,660)
--- ----------------------- ------------ ------------------------- ------------------ -----------------------
Operating loss (1,794) (2,292) (2,811)
Other income (expenses):
Interest expense,
including factoring
fees (45) (4) (11)
Other income (expense) (6) (32) 69
--- ----------------------- ------------ ------------------------- ------------------ -----------------------
Loss before income
taxes (1,845) (2,328) (2,753)
Income tax expense (11) (4) (9)
--- ----------------------- ------------ ------------------------- ------------------ -----------------------
Net loss $ (1,856) $ (2,332) $ (2,762)
================= ======================= ============ ========================= ================== =======================
Basic and diluted weighted
average number of common
shares outstanding 27,525,709 26,247,859 26,918,754
=== ======================= ============ ========================= ================== =======================
Net loss per share:
Basic and diluted $ (0.07) $ (0.09) $ (0.10)
=== ======================= ============ ========================= ================== =======================
The accompanying notes are an integral part of these condensed
consolidated financial statements
Electrical Geodesics, Inc.
Condensed Consolidated Statements of Shareholders' Equity
(in thousands, except share amounts)
Common Stock Additional Accumulated Total
Paid-in Stockholders'
Shares Amount Capital Deficit Equity
----------- ------------------------------ ------------------ ------------------
Balance at
December
31, 2014 -
Audited 24,448,786 $ 24 $ 10,323 $ (5,924) $ 4,423
Stock issued
for
cash, net of
issuance
cost of $440 3,076,923 3 2,509 - 2,512
Share-based
compensation - - 90 - 90
Net loss - - - (2,332) (2,332)
----------- -------------------------- ---- ------------ ------------ ---------------------- ---- ------------
Balance at
June
30, 2015 -
Unaudited 27,525,709 27 12,922 (8,256) 4,693
Share-based
compensation - - 147 - 147
Net loss - - - (430) (430)
----------- -------------------------- ---- ------------ ------------ ---------------------- ---- ------------
Balance at
December
31, 2015 -
Audited 27,525,709 27 13,069 (8,686) 4,410
Share-based
compensation - - 102 - 102
Net loss - - - (1,856) (1,856)
----------- -------------------------- ---- ------------ ------------ ---------------------- ---- ------------
Balance at
June
30, 2016 -
Unaudited 27,525,709 $ 27 $ 13,171 $ (10,542) $ 2,656
=========== ========================== ==== ============ ============ ====================== ==== ============
The accompanying notes are an integral part of these condensed
consolidated financial statements
Electrical Geodesics, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
For the
year
ended
For the six
months ended December
June 30, 31,
----------------------------------------------------------------------
2016 2015 2015
---------------------------- -------------------------- --------------------------
unaudited unaudited audited
Cash flows from operating activities:
Net loss $ (1,856) $ (2,332) $ (2,762)
Adjustments to reconcile to net
cash used in operating activities
Depreciation and amortization 278 276 546
Loss on disposal of property
and equipment - - -
Share-based compensation 102 90 237
Changes in operating assets
and liabilities:
Trade accounts receivable 1,282 991 (386)
Grants and contracts receivable 130 (98) (216)
Inventories (547) (355) (342)
Prepaid expenses and other
assets (57) 81 (8)
Accounts payable and accrued
expenses 778 (280) 376
Accrued payroll and related
liabilities (11) (211) (45)
Product warranty reserve 10 (16) (26)
Customer deposits (127) 5 64
Deferred revenue (345) (323) 299
-------------- ------------ ------------ ------------ ------------ ------------
Net cash used in operating (2,172)
activities (363) (2,172) (2,263)
-------------- ------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Acquisition of property and
equipment (399) (175) (342)
-------------- ------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities (399) (175) (342)
-------------- ------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from stock issued - 2,949 2,952
Stock issuance costs (190) (437) (571)
Proceeds from line of credit,
net 1,048 - -
Proceeds (repayments) from
factoring agreement, net (216) - 216
Principal payments on debt - (44) (43)
-------------- ------------ ------------ ------------ ------------ ------------
Net cash provided by financing
activities 642 2,468 2,554
-------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
cash (120) 121 (51)
Cash and cash equivalents at
beginning of year 1,181 1,232 1,232
-------------- ------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at
end of year $ 1,061 $ 1,353 $ 1,181
============== ============ ============ ============ ============ ============
Non-Cash Financing Activities:
Accrued deferred stock issuance
costs $ - $ - $ 121
============== ============ ============ ============ ============ ============
Supplemental disclosure or
cash flow information:
Cash paid for interest and
factoring fees $ 43 $ 4 $ 9
============== ============ ============ ============ ============ ============
Income taxes paid $ 4 $ 4 $ 11
============== ============ ============ ============ ============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statement
ELECTRICAL GEODESICS, INC.
Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2016 and 2015 and for the Year
Ended December 31, 2015
(in thousands except share and per share amounts)
Note 1 -- Nature of Business
Electrical Geodesics, Inc., ("EGI" or the "Company") a Delaware
corporation, is a developer and manufacturer of hardware and
software for dense sensor array methods of human
electroencephalographic and event--related research. Revenues are
derived from sales of neuroimaging/neuro--monitoring equipment and
evaluative software to research and clinical organizations
worldwide and from Small Business Innovation Research (SBIR)
grants, and grants or grant sub--contracts from various federal
agencies.
Note 2 - Accounting Policies
These unaudited condensed consolidated financial statements have
been prepared in accordance with U.S. generally accepted accounting
principles for interim financial information. Accordingly, they do
not include all of the information and note disclosures required by
U.S. generally accepted accounting principles for complete
financial statements. In management's opinion, all adjustments
(which include only normal recurring adjustments) considered
necessary for a fair presentation have been included. Certain prior
year amounts have been reclassified in order to conform with the
2016 presentation. These unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
2015 Annual Report. The results of operations for these interim
periods are not necessarily indicative of the operating results for
any future period. The December 31, 2015 financial information has
been derived from the Company's audited consolidated financial
statements.
Use of estimates The preparation of the consolidated financial
statements in accordance with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the
reporting period. Such estimates include allowances for potentially
uncollectible accounts receivable, valuation of inventory,
intangible assets, goodwill, share-based compensation, deferred
income taxes, reserve for warranty obligations and the provision
for income taxes among others. Actual results could differ from
those estimates.
Concentration of credit risk Financial instruments that
potentially subject EGI to concentrations of credit risk consist
primarily of cash and cash equivalents and accounts receivable. EGI
places its cash and cash equivalents with high quality financial
institutions and limits the amount of credit exposure with any one
institution. Concentrations of credit risk with respect to accounts
receivable are limited because a large number of geographically
diverse customers make up EGI's customer base, thus spreading the
trade credit risk. At June 30, 2016, June 30, 2015 and December 31,
2015 one customer, a different customer for each period end, had an
accounts receivable balance of 21%, 15% and 12%, respectively, of
total accounts receivable. EGI controls credit risk through credit
approvals, credit limits, and monitoring procedures. EGI performs
credit evaluations of its commercial customers but generally does
not require collateral to support accounts receivable.
Share--based compensation EGI measures compensation cost for
share--based payment awards at fair value and recognizes it as
compensation expense over the service period for awards expected to
vest. Share--based compensation expense is recognized for all
share--based payment awards, net of an estimated forfeiture rate.
Compensation cost is only recognized for those share--based payment
awards expected to vest on a straight--line basis over the
requisite service period of the award. Determining the appropriate
fair value model and calculating the fair value of share--based
payment awards requires subjective assumptions, including the
expected life of the share--based payment awards and stock price
volatility. EGI utilizes the Black--Scholes options pricing model
to value the stock options granted under its options plans. In this
model, the assumptions utilized relate to stock price volatility,
stock option term and forfeiture rates that are based upon both
historical factors as well as management's judgment. Stock options
awarded to EGI's employees have an exercise price denominated in
British Pounds Sterling (GBP), which is the currency of the AIM, a
small company exchange operated by the London Stock Exchange, the
market in which a substantial portion of EGI's securities
trade.
Net loss per share Basic net income (loss) per share is computed
by dividing net income (loss) by the weighted average number of
shares of common stock outstanding during the period. Diluted net
income (loss) per share is computed by dividing net income (loss)
by the weighted average number of shares of common stock and common
stock equivalents outstanding during the period, calculated using
the treasury stock method. Common stock equivalents (common stock
options only) are not used to calculate diluted loss per share
because their effect would be anti-dilutive.
Subsequent Events Management of EGI has evaluated subsequent
events through the date these financial statements were available
to be issued, which was August 26, 2016.
Pending Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (FASB)
issued new guidance to simplify employee share-based payment
accounting. The areas for simplification in this guidance involve
several aspects of the accounting for share-based payment
transactions, including the income tax consequences, classification
of awards as either equity or liabilities, and classification on
the statement of cash flows. This new guidance is effective for the
Company's 2018 year with early adoption permitted. The Company is
currently evaluating the possible impact of this new guidance, but
does not anticipate that it will have a material impact on its
consolidated financial statements.
In February 2016, the FASB issued new guidance on the accounting
for leases. This new guidance will require that a lessee recognize
assets and liabilities on the balance sheet for all leases with a
lease term of more than twelve months, with the result being the
recognition of a right of use asset and a lease liability. The new
lease accounting requirements are effective for the Company's 2020
year with a modified retrospective transition approach required,
with early adoption permitted. The Company is currently evaluating
the impact of the new guidance on its consolidated financial
statements.
In July 2015, the FASB issued changes to simplify the
measurement of inventory valuation at the lower of cost or net
realizable value. Net realizable value is the estimated selling
price in the ordinary course of business, less reasonably
predictable costs of completion, disposal and transportation. The
new inventory measurement requirements are effective for the
Company's 2017 year, and will replace the current inventory
valuation guidance that requires the use of a lower of cost or
market framework. This change in the measurement of inventory does
not apply to inventory valued on a LIFO basis, which is the
accounting basis used for most of the Company's inventory. The
adoption of these changes is not expected to have a material impact
on the Company's consolidated financial statements.
In May 2014, the FASB issued changes to revenue recognition with
customers. This update provides a five-step analysis of
transactions to determine when and how revenue is recognized. An
entity should recognize revenue to depict the transfer of promised
goods or services to customers in an
amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. In
July 2015, the FASB approved a one-year deferral of the effective
date of this new guidance resulting in it now being effective for
the Company beginning in 2019. The Company plans to adopt this
accounting standard update using the modified retrospective method,
with the cumulative effect of initially applying this update
recognized in the first reporting period of 2019. The Company is
currently evaluating the impact of the new guidance on its
consolidated financial statements.
Note 3 - Inventories
Inventories consist
of the following:
December
June 30, 31,
2016 2015 2015
-------------------------- --------------------- ---------------
unaudited unaudited audited
Materials $ 2,312 $ 1,563 $ 1,899
Work in process 9 15 7
Finished products
and merchandise 219 428 87
------------- ----------- ---------- --------- -----------
Total Inventories $ 2,540 $ 2,006 $ 1,993
============ =========== ========== ========= ===========
Note 4 - Line of credit
In June 2016, EGI entered into a credit facility with a finance
company. The facility provides for borrowings of up to $2.0 million
or the maximum available under the borrowing base, whichever is
less. The borrowing base equals the sum of 85% of the value of
eligible accounts receivable plus $0.2 million of eligible
inventory limited to 15% of eligible accounts receivable. Interest
is payable at the prime rate plus 6%, but not less than 9.5%. The
prime rate at June 30, 2016 was 3.5%. The annual fee for the credit
facility is $20 thousand. The facility contains no financial
covenants and is collateralized by cash, cash equivalents, accounts
receivable, inventories and property and equipment. The credit
facility is scheduled to expire in June 2017. As of June 30, 2016,
EGI had $1.0 million outstanding under the facility and
approximately $0.6 million in availability. Availability is
computed as the total commitment of $2.0 million less amounts which
are utilized by borrowings, less amounts not supported by eligible
accounts receivable and inventory.
Note 5 - Recourse debt on factoring agreement
On September 24, 2015, EGI entered into a factoring agreement
for up to $1 million of qualifying receivables, with recourse to
the lender. EGI received 98.05% of the face value of such customer
invoices and paid interest of 4% per year on invoice balances that
exceed 90 days from the invoice date. Under the agreement, EGI
provides a security interest in individually factored customer
accounts. Factoring fees and, if applicable, any interest expense,
is reported as interest expense in the Condensed Consolidated
Statements of Operations. As of December 31, 2015, EGI reported
$216 in borrowings outstanding under the agreement. No amounts were
outstanding under the agreement as of June 30, 2016.
Note 6 -- Concentrations
Significant customer: For the six months ended June 30, 2016 no
customer accounted for more than 10% of revenue. For the six month
period ended June 30, 2015 one customer accounted for 10% of
revenue. During the full year 2015, one customer accounted for
approximately 12% of revenue.
Grant and contract revenue: Grant and contract revenue
principally consists of Small Business Innovation Research (SBIR)
grants sponsored by the U.S. Department of Health and Human
Services.
A substantial number of the materials EGI uses in manufacturing
its products are available from multiple sources and in sufficient
supply; however, certain suppliers and contract manufacturers have
been qualified to EGI standards. In the short-term any disruption
or termination of these arrangements could adversely affect our
operating results pending the qualification of replacement
suppliers.
Note 7 -- Segment information: Geographic Revenue
Distribution
EGI operates in a single operating segment that includes the
sales of neuroimaging/neuro--monitoring equipment and evaluative
software to research and clinical organizations. Substantially all
long--lived assets are located in the U.S.
The following table reflects revenue and percent of total
revenues based on the geographic location of the customer:
For the year
ended
For the six months
ended June 30, December 31,
-----------------------------------------------------------------------------------------------------------------------
2016 2015 2015
-------------------------------------------------------- ------------------------------------------------------ ---------------------------------------------------------
unaudited unaudited audited
United
States 43
and Canada $ 3,244 49 % $ 2,240 % $ 7,658 56 %
Europe 1,669 25 1,309 25 2,601 19
Asia 1,630 25 1,229 24 2,614 19
Other 71 1 392 8 746 6
-------------------------- ------------ -------------------------- ------------ ---------------
100
Total $ 6,614 100 % $ 5,170 % $ 13,619 100 %
============== ========================== ============ ========================== ============ ===============
Directors
Don Tucker, Chairman & Chief Executive Officer
Ann Bunnenberg, President & Chief Operating Officer
Christine Soden, Non-executive director, Company Secretary
John Brown, Non-executive director
Ray Englander, Non-executive director
Broker & Nominated Adviser
Peel Hunt LLP
Moor House, 120 London Wall
London EC2Y 5ET
Registrars
Capita Registrars (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue, St Sampson
Guernsey GY2 4LH
Legal Advisers
K&L Gates LLP
London, UK Seattle, US
One New Change 925 Fourth Avenue,
Suite 2900
London EC4M 9AF Seattle, Washington
98101
Independent Public Accounting Firm
Peterson Sullivan
LLP
601 Union Street
Suite 2300
Seattle, Washington
98101 USA
Registered Office
National Registered Agents Inc
160 Greentree Drive, Suite 101
Dover, Kent, DE 19904 USA
Principal Address UK Branch
500 East 4(th) 59-60, Thames Street
Ave
Suite 200 Windsor
Eugene OR 97401 SL4 1TX UK
USA
Special Note Regarding Forward Looking Statements
This Interim Report and the accompanying press release contain
"forward looking statements" that involve substantial risks and
uncertainties. The forward looking statements are contained
principally in the sections entitled "Operating Highlights,"
"Financial Highlights," "Operating Review," "Financial Review and
"Outlook." In some cases, you can identify forward looking
statements by the following words: "may," "will," "could," "would,"
"should," "expect," "intend," "plan," "anticipate," "believe,"
"estimate," "predict," "project," "potential," "continue,"
"ongoing" or the negative of these terms or other comparable
terminology, although not all forward looking statements contain
these words. These statements relate to future events or our future
financial performance or condition and involve known and unknown
risks, uncertainties and other factors that could cause our actual
results, levels of activity, performance or achievement to differ
materially from those expressed or implied by these forward looking
statements. These forward looking statements include, but are not
limited to, statements about:
-- our expectations regarding the sales and marketing of our
products and product candidates;
-- the timing and likelihood of FDA approvals and regulatory
actions on our product candidates and product marketing
activities;
-- our expectations for market acceptance of our dEEG solutions
in the therapeutic market;
-- our ability to retain the continued service of our key
professional and to identify, hire and retain additional qualified
professionals;
-- the potential for adverse application of health and safety
and other laws and regulations on our operations;
-- our ability to establish and maintain intellectual property
on our products and our ability to successfully defend these in
cases of infringement;
-- the implementation of our business strategies;
-- the potential for exposure to product liability claims;
-- the potential for our marketed products to be withdrawn due
to recalls, patient adverse events or deaths;
-- our financial performance expectations;
-- our ability to compete in the development and marketing of
our products and product candidates with other competitors in the
industry;
-- difficulties or delays in the development, production,
manufacturing and marketing of new or existing products, including
difficulties or delays associated with obtaining requisite
regulatory approvals or clearances associated with those
activities;
-- changes in laws and regulations or in the interpretation or
application of laws or regulations, as well as possible failures to
comply with applicable laws or regulations as a result of possible
misinterpretations or misapplications;
-- actions of regulatory bodies and other government
authorities, including the FDA and foreign counterparts, that could
delay, limit or suspend product development, manufacturing or sales
or result in recalls, seizures, consent decrees, injunctions and
monetary sanctions;
-- the results, consequences, effects or timing of any
commercial disputes, patent infringement claims or other legal
proceedings or any government investigations;
-- interruption in our ability to manufacture our products or an
inability to obtain key components or raw materials or increased
costs in such key components or raw materials;
-- uncertainties in our industry due to government healthcare reform; and
-- competitive pressures in the markets in which we operate.
You should read this document completely and with the
understanding that our actual results may differ materially from
what we expect as expressed or implied by our forward looking
statements. In light of the significant risks and uncertainties to
which our forward looking statements are subject, you should not
place undue reliance on or regard these statements as a
representation or warranty by us or any other person that we will
achieve our objectives and plans in any specified timeframe, or at
all. These forward looking statements represent our estimates and
assumptions only as of the date of this
report. Except as required by law, we undertake no obligation to
update or revise publicly any forward looking statements, whether
as a result of new information, future events or otherwise after
the date of this report.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DGGDISSDBGLU
(END) Dow Jones Newswires
August 26, 2016 02:00 ET (06:00 GMT)
Elec Geo(DI) (LSE:EGI)
Historical Stock Chart
From Apr 2024 to May 2024
Elec Geo(DI) (LSE:EGI)
Historical Stock Chart
From May 2023 to May 2024