OrthoLogic Reports Second-Quarter, Six-Month 2003 Results.Business Editors/Health/Medical Writers TEMPE, Ariz.--(BUSINESS WIRE)--July 24, 2003 Enrollment In Chrysalin Human Clinical Trials On Track Q2 Bone Growth Stimulation Bone Growth Stimulation Definition Bone growth stimulation is the technique of promoting bone growth in difficult to heal fractures by applying a low electrical current or ultrasound to the fracture. Product Sales Increase 23% Versus Prior Year OrthoLogic Corp. (Nasdaq:OLGC OLGC Ontario Lottery and Gaming Corporation ) today reported net income of $558,000, or $0.02 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, on revenues of $11.4 million for the second quarter ended June 30, 2003 compared with net income of $1.3 million, or $0.04 per diluted share, on revenues of $9.7 million for the second quarter of 2002. Net income for the second quarter of 2003 included cash payments of $345,000 associated with the legal settlement that is included in the Continuous Passive Motion continuous passive motion n. Abbr. CPM A technique in which a joint, usually the knee, is moved constantly in a mechanical splint to prevent stiffness and to increase the range of motion. (CPM (1) (Critical Path Method) A project management planning and control technique implemented on computers. The critical path is the series of activities and tasks in the project that have no built-in slack time. ) divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). and related gains line. Net income for the second quarter of 2002 included a positive adjustment to the CPM divestiture and related gains of $226,000 involving higher-than-anticipated collection of CPM accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying . Revenues for the second quarter of 2003 were comprised entirely of sales of OrthoLogic's bone growth stimulation products. Revenues for the second quarter of 2002 included $9.2 million of bone growth stimulation product sales and $467,000 of Hyalgan royalties. Hyalgan-related royalties ended Dec. 31, 2002. For the six months ended June 30, 2003, the company reported net income of $700,000, or $0.02 per diluted share, on revenues of $21.7 million, compared with net income of $2.7 million, or $0.08 cents per diluted share, on revenues of $19.3 million for the first six months of 2002. Net income for the first six months of 2003 included the previously noted positive adjustment to the CPM divestiture and related gains of $345,000. Net income for the first six months of 2002 included a positive adjustment to the CPM divestiture and related gains of $826,000. Revenues for the first six months of 2003 were comprised entirely of sales of OrthoLogic's bone growth stimulation products. Revenues for the first six months of 2002 included $17.9 million of bone growth stimulation product sales and $1.4 million of Hyalgan royalties. "OrthoLogic's financial and operational results for the second quarter of 2003 were excellent," said Thomas R. Trotter trotter: see Standardbred horse. , president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "Revenues from our bone growth stimulation products increased 23% compared with the same period last year, and the company continued to achieve both profitability and positive cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses . In addition, we continued to invest significant resources in our Chrysalin(R) Product Development Platform. "For the first six months of 2003, total revenues for our bone growth stimulation products increased 21% compared with the same period in 2002. We believe that this growth rate is significantly higher than the overall market growth rate and that we are continuing to gain market share." Update on the Chrysalin(R) Product Development Platform "During the second quarter, we continued to make significant progress with our Chrysalin product development program. Orthobiologic products continue to command a great deal of attention in the orthopedic orthopedic /or·tho·pe·dic/ (-pe´dik) pertaining to the correction of deformities of the musculoskeletal system; pertaining to orthopedics. community, and we believe that our therapeutic peptide, Chrysalin, potentially offers one of the broadest platforms available anywhere in the world," Trotter added. "Approximately one-half of the projected 25-30 clinical sites are now initiated in a Phase 3 human clinical trial of Chrysalin for fracture repair Fracture Repair Definition Fracture repair is the process of rejoining and realigning the ends of broken bones. This procedure is usually performed by an orthopedist, general surgeon, or family doctor. . We are on track to have all clinical sites initiated by the fall of this year and anticipate completing the enrollment for this trial in the summer of 2004," said Dr. James T. Ryaby, senior vice president and chief technology officer. "In addition, enrollment continues in a combined Phase 1/2 human clinical trial of Chrysalin for spinal fusion spinal fusion n. A surgical procedure in which vertebrae are joined. Also called spondylosyndesis. Spinal fusion . We anticipate that all clinical sites for this trial will be initiated by the end of 2003. "Finally, we expect to meet with the U.S. Food and Drug Administration (FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. ) this year to discuss a potential human clinical trial of Chrysalin for cartilage cartilage (kär`təlĭj), flexible semiopaque connective tissue without blood vessels or nerve cells. It forms part of the skeletal system in humans and in other vertebrates, and is also known as gristle. defect repair and, data permitting, intend to proceed with filing of an Investigational New Drug (IND) application for this indication after our FDA meeting," said Ryaby. Looking Ahead Summarizing the results for the first half of 2003 and the outlook for the rest of this year, Trotter concluded, "We are pleased with OrthoLogic's outstanding performance in the first half of 2003. With the continued progress of our Chrysalin product development program, we believe that our movement into orthobiologics is well underway." About OrthoLogic Corp. OrthoLogic is a specialty orthopedic medical company poised to enter the orthobiologics market, one of the most promising areas in the biotech bi·o·tech n. Informal Biotechnology. biotech Noun short for biotechnology Noun 1. sector. The company's current products include the OL1000, approved by the FDA in 1994, which utilizes patented Combined Magnetic Field technology to deliver a highly specific, low-energy signal for the non-invasive treatment of an established nonunion fracture nonunion fracture Orthopedics A fracture unhealed after 9 months. See Pseudoarthrosis. acquired secondary to trauma, excluding vertebrae Vertebrae Bones in the cervical, thoracic, and lumbar regions of the body that make up the vertebral column. Vertebrae have a central foramen (hole), and their superposition makes up the vertebral canal that encloses the spinal cord. and all flat bones; and SpinaLogic(R), a state-of-the-art device used as an adjunct adjunct (aj´ungkt), n a drug or other substance that serves a supplemental purpose in therapy. adjunct to primary lumbar lumbar /lum·bar/ (lum´bar) pertaining to the loins. lum·bar adj. Of, near, or situated in the part of the back and sides between the lowest ribs and the pelvis. spinal fusion surgery for one or two levels, approved by the FDA in late 1999. The company also manufactures and markets an external wrist fixation fixation: see psychoanalysis. product, the OrthoFrame/Mayo Wrist Fixator, used in conjunction with certain surgical fracture repair procedures. For more information, visit the company's Web site: www.orthologic.com. Conference Call Information A conference call hosted by OrthoLogic management is scheduled for today at 11 a.m. Pacific and Arizona time (2 p.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ). To participate, use the following numbers: 877/715-5321 (domestic) or 973/935-8506 (international). No reservation number is required. A replay of this call will be available beginning July 24, 2003 at 5 p.m. EDT until July 31, 2003 at 12 p.m. To access the replay, dial 877/519-4471 (domestic) or 973/341-3080 (international) and enter the following access code: 4046950. A live webcast and Internet replay of the call will also be provided and can be accessed from the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of OrthoLogic's Web site at www.orthologic.com. Additionally, all StreetEvents subscribers can access the webcast from www.streetevents.com. Statements in this press release or otherwise attributable to OrthoLogic regarding our business that are not historical facts are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Words such as "continue," "optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op ," "believe," "expect," "anticipate," "remain hopeful," "poised to enter," and similar expressions are intended to identify such forward-looking statements. Some examples of forward looking statements in this press release include the expected schedule and progress of the Chrysalin human clinical trials; our ability to obtain the necessary regulatory approval for Chrysalin trials and uses; the size of the market for Chrysalin; and the market acceptance of Chrysalin-based products. These forward-looking statements are not guarantees of performance and are inherently subject to risks and uncertainties, some of which cannot be predicted or anticipated. Many factors could cause actual results to differ from those expressed in the forward-looking statements, including lower-than-expected acceptance of our products by new physicians and new patients; our reliance on the efficacy of our outside marketing and distribution partners to continue to promote new sales of our products; delays in commencing or completing the clinical trials due to lack of available patients or funding; unexpected and unfavorable results from the clinical trials; inability to obtain ultimate approval for marketing of Chrysalin regardless of the results of the clinical trials due to changes in the regulatory schemes; and advances in our competitors' products. For additional risks associated with the company, please see the "Risk Factors" in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and its regular periodic reports filed with the Securities and Exchange Commission.
OrthoLogic Corp.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
Net revenues $11,366 $9,705 $21,740 $19,313
Cost of revenues 1,682 1,443 3,161 2,755
Gross profit 9,684 8,262 18,579 16,558
Operating expenses
Selling, general and
administrative 7,272 6,652 14,683 13,356
Research and development 2,318 749 3,778 1,669
CPM Divestiture and related
gains (345) (226) (345) (826)
Total operating expenses 9,245 7,175 18,116 14,199
Operating income 439 1,087 463 2,359
Total other income 131 181 263 368
Income before income taxes 570 1,268 726 2,727
Provision for income taxes 12 12 26 25
Net income $ 558 $1,256 $700 $2,702
Basic earnings per share
Net income per common share $0.02 $0.04 $0.02 $0.08
Weighted average number of common
shares outstanding 32,889 32,609 32,849 32,556
Diluted earnings per share
Net income per common
and equivalent shares $0.02 $0.04 $0.02 $0.08
Weighted number of diluted
shares outstanding 33,131 33,415 33,079 33,364
OrthoLogic Corp
Condensed Consolidated Balance Sheets
(in thousands)
June 30, Dec. 31,
2003 2002
(Unaudited)
ASSETS
Cash and cash equivalents $ 12,927 $ 11,286
Short-term investments 17,969 18,660
Accounts receivable 8,960 9,641
Inventory 2,445 2,568
Prepaids and other current assets 454 598
Deferred income tax 1,667 1,667
Total current assets 44,422 44,420
Furniture and equipment 7,632 8,572
Accumulated depreciation (6,303) (7,074)
Furniture and equipment, net 1,329 1,498
Long-term investments 6,642 5,659
Deferred income taxes -- non-current 964 964
Chrysalin investment 750 750
Deposits and other assets 110 129
Total assets $ 54,217 $ 53,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 703 $ 477
Accrued liabilities 3,932 4,148
Accrued liabilities on CPM divestiture
and related charges 38 210
Total current liabilities 4,673 4,835
Deferred rent 316 352
Total liabilities 4,989 5,187
Stockholders' Equity
Common stock 16 16
Additional paid-in capital 139,318 136,945
Common stock to be used for legal settlement -- 2,078
Accumulated deficit (89,969) (90,669)
Treasury Stock (137) (137)
Total stockholders' equity 49,228 48,233
Total Liabilities and Stockholders'
Equity $ 54,217 $ 53,420
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