Thu, 5 Apr 2007 4:00:00 PDT
OAKVILLE, ONTARIO -- (MARKET WIRE) -- 04/05/2007 -- Excel-Tech Ltd. ("XLTEK") (
Revenues for the three months ended January 31, 2007, in US dollars, were $6.7 million compared to $8.2 million in the comparable period last year. During the fourth quarter of fiscal 2007, unfavourable timing of order flow in our Neuro-Diagnostic Equipment business resulted in delays in the awarding and recognition of several large epilepsy and surgical monitoring orders. These revenues are expected to be recognized during fiscal 2008. Revenues for fiscal 2007, in US dollars, were $28.3 million compared to $28.8 million last year. Approximately 94% of the Company's sales were in US dollars in fiscal 2007. In Canadian dollars, revenues were $7.6 million in the fourth quarter and $32.0 million for fiscal 2007 compared to $9.6 million and $34.7 million, respectively, in the same periods for fiscal 2006.
As previously announced, due to restrictions implemented by government and private insurance companies in the reimbursement to physicians for nerve conduction testing for the initial identification of peripheral neuropathy, during the fourth quarter of fiscal 2007 the Company reduced its sales and marketing staff related to its FrontLine NeuroPATH product line. The Company also suspended certain validation studies and development activities related to the product and reduced expenditures in its core business in order to accelerate XLTEK's return to profitability. As a result of these cost savings initiatives, the Company incurred a restructuring charge to earnings in the fourth quarter of fiscal 2007 of approximately $1.4 million, discussed in more detail below.
Gross profit as a percentage of revenues decreased to 41.5% in the fourth quarter and to 46.2% for fiscal 2007 from 55.5% and 53.5%, respectively, in the same periods last year. The decline is the result of a $755,000 charge incurred in the fourth quarter related to the restructuring initiative outlined above, the decline in the average value of the US dollar relative to the Canadian dollar, and lower margins on certain Neuro-Diagnostic equipment sales. Excluding the restructuring charge to earnings, the Company's gross margin would have been 50.1% in the fourth quarter (48.3% for fiscal 2007), a significant improvement over the prior quarters of fiscal 2007 due to the cost reduction and margin enhancement initiatives implemented in the third and fourth quarters.
Selling expenses increased in the fourth quarter and the fiscal year compared to the same periods last year due primarily to the $2.1 million in costs incurred in fiscal 2007 related to the Company's FrontLine Neuro products and services. As discussed above, the Company significantly reduced its sales and marketing expenses in the fourth quarter resulting in a restructuring charge of approximately $418,000 in the period.
General and administrative expenses increased in fiscal 2007 compared with the prior year due primarily to increased costs associated with being a public company and higher legal costs related to patent applications during the first half of the year.
Net research and development expenditures were higher in fiscal 2007 compared to the prior-year due to approximately $1.1 million incurred in the development of the NeuroPATH and other Front-Line Neuro products, and a decrease in tax credits as a result of becoming a public company. Included in research and development expenditures during fiscal 2007 was $232,000 representing a portion of the restructuring charge noted above, relating primarily to the termination of various validation studies relating to Front-Line NeuroPATH, as well as other cost-saving initiatives.
Largely as a result of the losses incurred during fiscal 2007 related to the development and sales of the FrontLine Neuro products and services, and the total restructuring charge to earnings of $1.4 million taken in the fourth quarter, the Company generated a net loss of $2.7 million or a loss of $0.14 per common share in the fourth quarter. For the fiscal year ended January 31, 2007 the net loss was $7.8 million or a loss of $0.49 per common share. Included in the net loss in fiscal 2007 was a pre-tax $500,000 make-whole payment on the Subordinated Loan in connection with the IPO incurred in the first quarter of the year, the restructuring charges of $1.4 million, and $2.7 million in net losses associated with the development and marketing of the FrontLine Neuro products. Excluding these costs, the Company's net loss would have been approximately $3.2 million or a loss of $0.20 per common share in fiscal 2007.
The following table summarizes the impact of certain items on the Company's net loss for the fourth quarter and for fiscal 2007:
Q4 FY 2007
Net loss, as reported 2,721 7,845
Front-Line product and service losses prior to
restructuring (248) (2,725)
Restructuring charges (1,405) (1,405)
Make-Whole Payment - (500)
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Adjusted net loss 1,068 3,215
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"Our core business remains strong, and with the cost savings initiated late in the year, and recent programs aimed at enhancing the profitability of our core Neuro-Diagnostic business, we are confident our losses and cash burn will reduce considerably in fiscal 2008," commented John Mumford, President and Chief Executive Officer.
Mr. Mumford continued: "Looking ahead, we are excited about the growth potential in our core markets, as well as opportunities for new and re-designed products currently under development, including our promising SleepRite device used in monitoring the effectiveness of the treatment of obstructive sleep apnea."
On April 25, 2006, the Company raised net proceeds of $19.1 million on the completion of its initial public offering. As at January 31, 2007, the Company held a total of $16.9 million in cash and short-term investments, an increase from $6.9 million as at January 31, 2006. Net cash used for operating activities was $4.0 million for the fiscal year ended January 31, 2007 compared to cash provided by operating activities of $440,000 in fiscal 2006. The decrease resulted primarily from the higher net loss due to the factors outlined above, partially offset by a positive net change in non-cash working balances related to operations.
Financial Highlights
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(in $000 except per share amounts) Three months ended Fiscal years ended
Jan. 31 Jan. 31
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2007 2006 2007 2006
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Revenues (US dollars)
Neuro-Diagnostic Equipment 4,741 6,718 21,495 23,884
Consumables & Services 1,916 1,531 6,807 4,941
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Total Revenues (US dollars) 6,657 8,249 28,302 28,825
Total Revenues (Canadian dollars) 7,616 9,645 32,001 34,711
Gross Profit 3,160 5,349 14,799 18,577
Selling Expenses 3,477 3,026 13,189 11,911
General and Administrative Expenses
1,322 1,048 4,665 3,616
Research and Development
Expenses (net) 1,119 760 4,492 2,526
Net Income (Loss) (2,721) (85) (7,845) (322)
Net Loss per Share (basic) $(0.14) $(0.02) $(0.49) $(0.06)
Cash and Short-Term Investments 15,861 6,901
Long-Term Debt
(incl current portion) 1,995 7,213
Shareholders' Equity 20,725 9,026
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About XLTEK
XLTEK is a medical technology company that designs, develops and sells proprietary medical devices. XLTEK's core business consists of its Neuro-Diagnostic Equipment, used by neurology specialists to assist in the diagnosis and monitoring of the central and peripheral nervous systems. These core products, marketed since 1997, are sold into four main markets: the epilepsy market, the sleep disorders market, the myopathy and neuropathy market, and the surgical monitoring market. Revenue from these core market segments currently generates the majority of XLTEK's revenue. The Company is leveraging these proprietary technologies and strong market position to development new and related products targeted at complementary markets.
XLTEK is headquartered in Oakville, Ontario, Canada. The Company's common shares trade on the Toronto Stock Exchange (
Forward-Looking Statements:
Certain statements contained in this release containing words like "believe", "intend", "may", "expect" and other similar expressions, are forward-looking statements that involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from those projected in the Company's forward-looking statements include the following: market acceptance of our technologies and products; our ability to obtain financing; our financial and technical resources relative to those of our competitors; our ability to keep up with rapid technological change; government regulation of our technologies; our ability to enforce our intellectual property rights and protect our proprietary technologies; the ability to obtain and develop partnership opportunities; the timing of commercial product launches; the ability to achieve key technical milestones in key products and other risk factors identified from time to time in the Company's filings.
The consolidated financial statements and Management's Discussion and Analysis for the period can be found at www.xltek.com.
CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars)
(unaudited)
January 31, January 31,
2007 2006
$ $
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ASSETS
Current
Cash 1,024 1,511
Short-term investments 14,837 5,390
Restricted short-term investments 1,000 -
Accounts receivable 4,430 6,142
Investment tax credits receivable 398 1,770
Inventories 5,601 4,897
Prepaid expenses 181 232
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Total current assets 27,471 19,942
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Corporate transaction costs - 591
Property, plant and equipment, net 4,133 4,408
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31,604 24,941
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 5,283 6,209
Current portion of deferred revenue 1,863 1,677
Current portion of long-term debt 218 5,218
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Total current liabilities 7,364 13,104
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Deferred revenue 1,738 816
Long-term debt 1,777 1,995
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Total liabilities 10,879 15,915
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Commitments and contingencies
Shareholders' equity
Share capital 38,975 19,785
Contributed surplus 1,208 854
Share purchase loan (298) (298)
Deficit (19,160) (11,315)
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Total shareholders' equity 20,725 9,026
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31,604 24,941
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CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(in thousands of Canadian dollars, except per share data)
(unaudited)
Three months ended Fiscal years ended
January 31, January 31,
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2007 2006 2007 2006
$ $ $ $
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Revenues 7,616 9,645 32,001 34,711
Cost of sales 4,456 4,296 17,202 16,134
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Gross profit 3,160 5,349 14,799 18,577
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Expenses
Selling 3,477 3,026 13,189 11,911
General and administrative 1,322 1,048 4,665 3,616
Research and development, net 1,119 760 4,492 2,526
Stock option compensation on
repeal of plan - 491 - 491
Financial
Investment income (96) (39) (496) (151)
Interest expense 40 156 271 603
Make-whole payment on convertible
subordinated loans - - 500 -
Foreign exchange loss (gain) 19 (8) 23 (97)
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5,881 5,434 22,644 18,899
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Net income (loss) for the period (2,721) (85) (7,845) (322)
Deficit, beginning of period (16,439) (11,230) (11,315) (10,993)
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Deficit, end of period (19,160) (11,315) (19,160) (11,315)
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Earnings (loss) per share
Basic and diluted $(0.14) $(0.02) $(0.49) $(0.06)
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Weighted average shares
outstanding (000's)
Basic and diluted 19,025 5,081 15,854 5,081
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
(unaudited)
Three months ended Fiscal years ended
January 31, January 31,
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2007 2006 2007 2006
$ $ $ $
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OPERATING ACTIVITIES
Net income (loss) for the period (2,721) (85) (7,845) (322)
Add (deduct) items not
involving cash
Amortization of property, plant
and equipment 88 127 399 439
Amortization of corporate
transaction costs - 8 7 30
Unrealized income on short-term
investments 195 37 (51) (20)
Stock option compensation expense 78 516 252 690
Deferred share unit compensation
expense 34 - 102 -
Net change in non-cash working
capital balances related to
operations 2,631 (598) 3,123 (377)
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Cash provided by (used in)
operating activities 305 5 (4,013) 440
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INVESTING ACTIVITIES
Redemption of short-term
investments 3,411 1,290 11,250 2,580
Purchase of short-term
investments (3,668) (1,353) (21,646) (1,353)
Purchase of property, plant and
equipment 36 (86) (124) (336)
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Cash provided by (used in)
investing activities (221) (149) (10,520) 891
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FINANCING ACTIVITIES
Issuance of common shares, net - (74) 19,264 (74)
repayment of long-term debt (54) (55) (5,218) (219)
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Cash provided by (used in)
financing activities (54) (129) 14,046 (293)
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Net increase (decrease) in cash
during the period 30 (273) (487) 1,038
Cash, beginning of period 994 1,784 1,511 473
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Cash, end of period 1,024 1,511 1,024 1,511
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Supplemental cash flow information
Interest paid 39 97 566 364
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Contacts: Excel-Tech Ltd. Peter Kastelic Chief Financial Officer (905) 829-5300 or Toll Free: 1-800-387-7516 Email: pkastelic@xltek.com Website: www.xltek.com
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