OrthoLogic Reports Third Quarter 2003 Results; Enrollment in Chrysalin Human Clinical Trials On Track; Q3 Bone Growth Stimulation Device Sales Increase 22% Over Prior Year.Business Editors/Health/Medical Writers TEMPE, Ariz.--(BUSINESS WIRE)--Nov. 5, 2003 OrthoLogic Corp. (Nasdaq:OLGC OLGC Ontario Lottery and Gaming Corporation ) today reported net income of $506,000, 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 $12.5 million for the third quarter ended Sept. 30, 2003 compared with net income of $1.4 million, or $0.04 per diluted share, on revenues of $10.8 million for the third quarter of 2002. Revenues for the third quarter of 2003 were composed entirely of sales of OrthoLogic's 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. devices. Revenues for the third quarter of 2002 included $501,000 of Hyalgan royalties, which ended in 2002. Net income for the third quarter of 2003 included a positive adjustment to the 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 of $134,000. Net income for the third quarter of 2002 included a positive adjustment to the CPM divestiture and related gains of $221,000. OrthoLogic ended the third quarter of 2003 with $39.5 million in cash and investments, an increase of $1.9 million over the prior quarter-ending balance. Nine Month Results For the nine months ended Sept. 30, 2003, OrthoLogic reported net income of $1.2 million, or $0.04 per diluted share, on revenues of $34.3 million, compared with net income of $4.1 million, or $0.13 per diluted share, on revenue of $30.1 million for the first nine months of 2002. Revenues for the first nine months of 2003 were composed entirely of sales of OrthoLogic's bone growth stimulation devices. Revenues for the first nine months of 2002 included $1.9 million of Hyalgan royalties. Net income for the first nine months of 2003 included a positive adjustment to the CPM divestiture and related gains of $479,000. Net income for the first nine months of 2002 included a positive adjustment to the CPM divestiture and related gains of $1.0 million. "OrthoLogic posted strong operating results for the third quarter of 2003," 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 22% compared with the same period last year, and the company posted 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, expenditures for the Chrysalin(R) Product Platform increased to approximately $2.5 million in the third quarter, as the pace of enrollment in our on-going human clinical trials 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. and spinal fusion spinal fusion n. A surgical procedure in which vertebrae are joined. Also called spondylosyndesis. Spinal fusion increased. During the quarter we also completed an important pre-clinical trial for our potential Chrysalin product 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." Update on the Chrysalin Product Platform Dr. James T. Ryaby, senior vice president and chief technology officer offered the following update on the Chrysalin Product Platform: "In the Phase 3 human clinical trial for fracture repair, we now have 20 of the projected 25-30 sites enrolling patients and expect to have the balance of the sites enrolling patients by year end. We are on-track to have enrollment completed for this trial by the summer of 2004. "In the Phase 1/2 human clinical trial for spinal fusion, we now have approximately one third of the projected sites enrolling patients and expect to complete enrollment in this trial before the end of 2004. "Finally, we completed a second pre-clinical trial of our potential Chrysalin product for articular cartilage articular cartilage n. The cartilage covering the articular surfaces of the bones forming a synovial joint. Also called arthrodial cartilage, diarthrodial cartilage, investing cartilage. defect repair with favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. results and plan to schedule a pre-IND meeting 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. ) early in 2004 to seek authorization to begin a human clinical trial for that indication." Update on the Sale of the Bone Growth Stimulation Business Commenting on the current status of the pending sale of the bone growth stimulation business, which was announced Oct. 9, 2003, Trotter commented, "We have completed several of the initial steps in the process and have scheduled a shareholder vote on the transaction for November 26, 2003. We expect to close this transaction before the end of this year." Outlook Trotter went on to say, "We are very pleased with the progress we have made thus far in 2003. As one of the very few pure-play public companies in the orthobiologics space, with potential Chrysalin products already in human clinical trials, we believe that OrthoLogic is now well positioned for an even brighter future." 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 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(R) Wrist Fixator, used in conjunction with certain surgical fracture repair procedures. OrthoLogic announced on Oct. 9, 2003 that it had entered into an agreement to sell substantially all the assets of its bone growth stimulation device business to dj Orthopedics, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control for $93.0 million in cash and the assumption of certain liabilities. After the completion of the transaction, OrthoLogic will emerge as a pure-play orthobiologics drug-development company focused on commercializing several potential therapeutics therapeutics Treatment and care to combat disease or alleviate pain or injury. Its tools include drugs, surgery, radiation therapy, mechanical devices, diet, and psychiatry. comprising its Chrysalin Product Platform. The Chrysalin Product Platform includes potential products in human clinical trials for fracture repair acceleration (Phase 3) and spinal fusion (Phase 1/2) as well as a third potential product in late-stage pre-clinical development Pre-clinical development is a stage in the development of a new drug that begins before clinical trials (testing in humans) can begin, and during which important safety and pharmacology data is collected. for cartilage defect repair. The transaction is subject to OrthoLogic stockholder approval and other customary conditions, and presently is expected to close by the end of the year. OrthoLogic has filed a definitive proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. and other documents with the SEC regarding the proposed sale of substantially all the assets of its bone growth stimulation device business. OrthoLogic stockholders are encouraged to read the proxy statement because it contains important information. Investors and security holders may obtain a copy of the proxy statement and any other relevant documents filed by OrthoLogic with the SEC for free at the SEC's Web site at www.sec.gov and at the Investors page of OrthoLogic's Web site, www.orthologic.com. Conference Call Information A conference call hosted by OrthoLogic management is scheduled for today at 11 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . To participate, use the following numbers: 877-297-4509 (domestic) or 973-935-2402 (international). No reservation number is required. A replay of this call will be available beginning Nov. 6, 2003 at 9 a.m. EST until Nov. 13, 2003 at 12 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. . To access the replay, dial 877-519-4471 (domestic) or 973-341-3080 (international) and enter the following access code: 4264233. 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. For more information, visit the company's Web site: www.orthologic.com. Statements in this press release or otherwise attributable to OrthoLogic regarding our business that are not historical facts are 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. These 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. , which include estimates of future market size, revenues and manufacturing costs and statements about the expected timing of clinical testing, the timing and acceptability of FDA filings and the efficacy and marketability of potential products, involve risks and uncertainties that could cause actual results to differ materially from predicted results. These risks include: the company's possible need to raise additional capital to fully develop the Chrysalin program if we do not successfully complete the sale of the company's bone growth stimulation device business to dj Orthopedics in accordance with the proposed terms; unfavorable outcomes in the company's pre-clinical and clinical testing; the development by others of competing technologies and therapeutics that may have greater efficacy or lower cost; delays in obtaining or inability to obtain FDA or other necessary regulatory approval of the company's products; the company's inability to successfully and cost effectively develop or outsource manufacturing and marketing of any products the company is able to bring to market; changes in FDA or other regulations that affect our ability to obtain regulatory approval of the company's products, increase the company's manufacturing costs or limit the company's ability to market its products; other factors discussed in the company's 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. for the fiscal year ended Dec. 31, 2002 and other documents the company files with the Securities and Exchange Commission. (Financial Tables Follow)
OrthoLogic Corp.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
Three months ended Nine months ended
Sept. 30, Sept. 30,
2003 2002 2003 2002
Net revenues $12,523 $10,780 $34,263 $30,093
Cost of revenues 1,926 1,865 5,088 4,621
Gross profit 10,597 8,915 29,175 25,472
Operating expenses
Selling, general and
administrative 7,823 7,179 22,505 20,534
Research and development 2,522 722 6,299 2,391
CPM Divestiture and related
charges (134) (221) (479) (1,047)
Total operating expenses 10,211 7,680 28,325 21,878
Operating income 386 1,235 850 3,594
Total other income 125 169 387 537
Income before income taxes 511 1,404 1,237 4,131
Provision for income taxes 5 12 31 37
Net income $506 $1,392 $1,206 $4,094
Basic earnings per share
Net income per common share $0.02 $0.04 $0.04 $0.13
Weighted average number of
common shares outstanding 32,975 32,719 32,892 32,615
Diluted earnings per share
Net income per common
and equivalent shares $0.02 $0.04 $ 0.04 $0.13
Weighted number of diluted
shares outstanding 33,659 33,249 33,277 32,711
OrthoLogic Corp.
Condensed Consolidated Balance Sheets
(in thousands)
Sept. 30, Dec. 31,
2003 2002
(Unaudited)
ASSETS
Cash and cash equivalents $12,287 $11,286
Short-term investments 22,174 18,660
Accounts receivable 9,479 9,641
Inventory 2,284 2,568
Prepaids and other current assets 595 598
Deferred income tax 1,667 1,667
Total current assets 48,486 44,420
Furniture and equipment 7,568 8,572
Accumulated depreciation (6,323) (7,074)
Furniture and equipment, net 1,245 1,498
Long-term investments 5,024 5,659
Deferred income taxes -- non-current 964 964
Chrysalin investment 750 750
Deposits and other assets 210 129
Total assets $56,679 $53,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $988 $477
Accrued liabilities 5,277 4,148
Accrued liabilities on CPM divestiture and
related charges -- 210
Total current liabilities 6,265 4,835
Deferred rent 298 352
Total liabilities 6,563 5,187
Stockholders' Equity
Common stock 16 16
Additional paid-in capital 139,700 136,945
Common stock to be used for legal
settlement -- 2,078
Accumulated deficit (89,463) (90,669)
Treasury Stock (137) (137)
Total stockholders' equity 50,116 48,233
Total Liabilities and Stockholders'
Equity $56,679 $ 53,420
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