Somanetics Reports Record Net Revenues and Earnings Per Share of $0.04 for the Second Quarter of 2004.TROY, Mich. -- Somanetics Corporation (Nasdaq:SMTS SMTS Space and Missile Tracking System SMTS Senior Member of Technical Staff SMTS Saskatchewan Mathematics Teachers' Society (Canada) SMTS So Much to Say (Dave Matthews Band song) ) --Net income increased to a record $409,730, or $0.04 per diluted common share. --Net revenues increased 38 percent to a record $3.0 million. --Gross margins improved eight percentage points to 83 percent. Somanetics Corporation (Nasdaq:SMTS) reported record net revenues of $3,032,976 for the second quarter ended May 31, 2004, a 38 percent increase from $2,203,442 in the same period of 2003. For the six months ended May 31, 2004, net revenues increased 37 percent to $5,703,241 from $4,154,388. U.S. net revenues climbed 38 percent in the second quarter to $2,506,494 from $1,812,007 in the same period of 2003. International net revenues increased 35 percent in the second quarter to $526,482 from $391,435. For the six-month period, U.S. net revenues increased 38 percent to $4,789,890 and international net revenues increased 32 percent to $913,351. Somanetics reported record second quarter net income of $409,730, or $0.04 per diluted share, compared with a net loss of $129,373, or $0.01 per diluted share, in the same period of 2003. For the six-month period, Somanetics reported net income of $702,475, or $0.06 per diluted share, compared with a net loss of $324,823, or $0.04 per diluted share, in the same period of 2003. Gross margins improved to 83 percent in the second quarter from 75 percent in the same period of 2003 and 81 percent in the first quarter of 2004. For the six-month period, gross margins were 82 percent, compared with 76 percent in the same period of 2003. At May 31, 2004, the Company's cash balance was $5.4 million. For the six-month period, net increase in cash was $3.1 million and net cash provided by operations was $1.1 million. "On the strength of our focused growth strategy, we achieved record net revenues and earnings per share, along with continued improvement in gross margins and 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 ," said Bruce Barrett, Somanetics' 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. . "Our financial progress reflects the positive trends within our business, including the growing body of clinical evidence that neurological neurological, neurologic pertaining to or emanating from the nervous system or from neurology. neurological assessment evaluation of the health status of a patient with a nervous system disorder or dysfunction. injuries related to cardiac and other high-risk surgeries can be reduced by using cerebral oximetry oximetry /ox·im·e·try/ (ok-sim´e-tre) determination of the oxygen saturation of arterial blood using an oximeter. oximetry (oksim´itrē), n to detect common brain oxygen desaturations and guide therapy." Clinical research presented during the quarter included the results of a 2,279 patient retrospective study retrospective study, a study in which a search is made for a relationship between one phenomenon or condition and another that occurred in the past (e.g. using the INVOS System in cardiac surgery Cardiac surgery is surgery on the heart and/or great vessels performed by a cardiac surgeon. Frequently, it is done to treat complications of ischemic heart disease (for example, coronary artery bypass grafting), correct congenital heart disease, or treat valvular heart disease that showed reductions in permanent stroke, time to extubation, frequency of prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. ventilation and length of hospital stay. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the study's lead investigator, Scott Goldman, M.D., chairman, department of surgery, Lankenau Hospital Lankenau Hospital is a 351-bed tertiary care, community based teaching hospital located in Wynnewood, Pennsylvania. Lankenau was founded in 1860 as the German Hospital of Philadelphia, and located in North Philadelphia on Morris Street. , the stroke reduction recognized by using the INVOS System occurred most frequently in cardiac surgery patients who were not assessed pre-operatively to be at high risk for stroke. A 199-patient prospective, randomized ran·dom·ize tr.v. ran·dom·ized, ran·dom·iz·ing, ran·dom·iz·es To make random in arrangement, especially in order to control the variables in an experiment. and blinded study led by John Murkin, M.D., professor of anesthesiology anesthesiology (ăn'ĭsthē'zēŏl`əjē), branch of medicine concerned primarily with procedures for rendering patients insensitive to pain, and for supporting life systems under the strains of anesthesia and surgery. , University of Western Ontario Western is one of Canada's leading universities, ranked #1 in the Globe and Mail University Report Card 2005 for overall quality of education.[2] It ranked #3 among medical-doctoral level universities according to Maclean's Magazine 2005 University Rankings. , found that using the INVOS Cerebral Oximeter oximeter /ox·im·e·ter/ (ok-sim´e-ter) a photoelectric device for determining the oxygen saturation of the blood. ox·im·e·ter n. Pulse oximeter. to monitor and help manage regional brain blood oxygen saturation oxygen saturation sO2 The O2 concentration of blood expressed as a ratio of its total O2-carrying capacity; the OS is a measure of the utilization of O2 transport capacity; sO2 in cardiac surgery patients resulted in a reduction in adverse clinical outcomes. Other studies published or expected to be presented this year: --Researchers in Italy completed the first prospective, randomized and blinded intervention trial using the INVOS Cerebral Oximeter to monitor elderly patients undergoing major abdominal surgery The term abdominal surgery broadly covers surgical procedures that involve opening the abdomen. Surgery of each abdominal organ is dealt with separately in connection with the description of that organ (see stomach, kidney, liver, etc. . The results are expected to be presented this year. --Results of a 594-patient trial using the INVOS Cerebral Oximeter in carotid endarterectomy carotid endarterectomy Neurology Removal of atherosclerotic plaque by “scraping” the vascular intima of the carotid arteries to ↓ risk of CVAs and TIAs. See Stroke, Transient ischemic attack. surgery were published in the European Journal European Journal is a weekly Deutsche Welle (DW) news program produced in English. It is broadcast from Brussels, Belgium and primarily covers political and economic developments across the European Union and the rest of Europe, as well as issues of particular concern to of Vascular and Endovascular Surgery Endovascular surgery is a form of minimally invasive surgery that was designed to access many regions of the body via major blood vessels. Endovascular techniques were originally designed for diagnostic purposes. . The study showed the merits of using the INVOS System to assess the need to insert a shunt To divert, switch or bypass. in patients who have insufficient cerebral blood flow Cerebral blood flow, or CBF, is the blood supply to the brain in a given time.[1] In an adult, CBF is 750 mls/min or 15% of the cardiac output. On a weight basis, this is 50 to 54 milllitres/100grams/minute. during the operation to increase brain perfusion perfusion /per·fu·sion/ (-zhun) 1. the act of pouring over or through, especially the passage of a fluid through the vessels of a specific organ. 2. a liquid poured over or through an organ or tissue. and increase chances of good neurological outcomes. --Results of an 18-patient study using the INVOS Cerebral Oximeter in the ICU ICU intensive care unit. ICU abbr. intensive care unit ICU see intensive care unit. ICU management of head trauma patients were published in The Journal of Trauma Injury, Infection and Critical Care. The study showed that cerebral hypoxia cerebral hypoxia ↓ O2 in brain; depending on the duration and severity, Sx range from mild–eg, lethargy to serious neurologic damage–eg, coma, seizures, death (low brain oxygen) in head-injured patients is common, is associated with poor outcomes and death and can be easily monitored with cerebral oximetry. Since a primary objective after severe traumatic brain injury Traumatic brain injury (TBI), traumatic injuries to the brain, also called intracranial injury, or simply head injury, occurs when a sudden trauma causes brain damage. TBI can result from a closed head injury or a penetrating head injury and is one of two subsets of acquired brain is to ensure affected tissue receives sufficient oxygen, the use of noninvasive non·in·va·sive adj. 1. Not penetrating the body, as by incision. Used especially of a diagnostic procedure. 2. Not invading healthy tissue. cerebral oximetry may help guide treatment interventions for these patients. "The new data related to the use of the INVOS System in cardiac and carotid endarterectomy surgeries support our objective to establish the INVOS System as a standard of care monitoring device in this initial target market. We are also encouraged by the forthcoming data about the potential benefits of using the INVOS System in other high-risk surgeries and in the ICU. We are building the foundation for Somanetics to pursue these additional markets in the future," Barrett said. "In the second half of the year, we will focus on using the new clinical data in our selling and marketing efforts. We also will continue to pursue additional clinical data to further demonstrate the usefulness of the INVOS System in cardiac surgery and other clinical applications. In addition, we are developing a SomaSensor for monitoring neonatal neonatal /neo·na·tal/ (ne?o-nat´'l) pertaining to the first four weeks after birth. ne·o·na·tal adj. Of or relating to the first 28 days of an infant's life. ICU patients and next generation INVOS Cerebral Oximeter products," Barrett said. During the second quarter, Somanetics completed a project to reduce manufacturing costs for the disposable SomaSensor by approximately 40 percent. Other cost reductions were achieved by the renewal of the lease on the Company's office in Troy, Michigan Troy is a city in Oakland County of the U.S. state of Michigan. It is a suburb of Detroit. As of the 2000 census, the city had a total population of 80,959, the 12th largest city in Michigan by population. through December 2009 in exchange for benefits including a 30 percent reduction in the minimum net rent rate beginning August 1, 2004. "Based on our first half of the year performance, we are revising upward our previous earnings guidance of $0.10 to $0.12 per diluted share ($0.12 to $0.15 per basic share) to $0.13 to $0.15 per diluted share ($0.15 to $0.18 per basic share) to reflect the impact of better-than-expected financial performance for the first half of the year," Barrett stated. About Somanetics Somanetics develops and markets two medical devices focused on the cardiac surgery market that offer solutions to help meet critical medical needs. The INVOS(R) Cerebral Oximeter is the only noninvasive and continuous monitor of changes in regional brain blood oxygen saturation that is commercially available in the U.S. The CorRestore(R) System is a cardiac implant for use in cardiac repair and reconstruction, including a procedure called Surgical Ventricular ven·tric·u·lar adj. Of or relating to a ventricle or ventriculus. ventricular pertaining to a ventricle. ventricular assist device Restoration, SVR Noun 1. SVR - Russia's intelligence service responsible for foreign operations, intelligence-gathering and analysis, and the exchange of intelligence information; collaborates with other countries to oppose proliferation of weapons of mass destruction, terrorism and , a treatment for patients with certain types of severe congestive heart failure congestive heart failure, inability of the heart to expel sufficient blood to keep pace with the metabolic demands of the body. In the healthy individual the heart can tolerate large increases of workload for a considerable length of time. . To learn more about Somanetics, please visit the Company's web site at www.somanetics.com. Somanetics to Host Conference Call Somanetics will webcast its second quarter conference call at 11:00 a.m. (ET) today. To join the webcast, visit the Investor Center section of Somanetics' website at www.somanetics.com and click on the "First Quarter Conference Call" link. The call also will be archived on the website. Safe-Harbor Statement Except for historical information contained herein, the matters discussed in this news release 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. , the accuracy of which is necessarily subject to risks and uncertainties. Actual results may differ significantly from results discussed in the forward-looking statements. Actual results may be affected by, among other things, economic conditions in general and in the healthcare market, the demand for and market for our products in domestic and international markets, our history of losses, our current dependence on the Cerebral Oximeter and SomaSensor, the challenges associated with developing new products and obtaining regulatory approvals if necessary, research and development activities, the uncertainty of acceptance of our products by the medical community, the lengthy sales cycle for our products, third party reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. , competition in our markets, including the potential introduction of competitive products by others, our dependence on our distributors, physician training, enforceability and the costs of enforcement of our patents, potential infringements of our patents and the other factors set forth from time to time in Somanetics' Securities and Exchange Commission filings, including Somanetics' Registration Statement on Form S-1 (file no. 333-74788) effective January 11, 2002. (Tables to follow)
SOMANETICS CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended May 31, Ended May 31,
----------------------- ------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
NET REVENUES $3,032,976 $2,203,442 $5,703,241 $4,154,388
COST OF SALES 519,316 561,196 1,039,709 1,011,393
---------- ---------- ---------- ----------
GROSS MARGIN 2,513,660 1,642,246 4,663,532 3,142,995
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Research,
development and
engineering 94,727 133,607 182,417 242,779
Selling, general
and
administrative 2,016,641 1,644,016 3,791,541 3,238,948
---------- ---------- ---------- ----------
Total
operating
expenses 2,111,368 1,777,623 3,973,958 3,481,727
---------- ---------- ---------- ----------
OPERATING INCOME
(LOSS) 402,292 (135,377) 689,574 (338,732)
---------- ---------- ---------- ----------
OTHER INCOME
(EXPENSE):
Interest income 7,438 6,004 12,901 13,909
---------- ---------- ---------- ----------
Total other
income 7,438 6,004 12,901 13,909
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 409,730 $ (129,373) $ 702,475 $ (324,823)
---------- ---------- ---------- ----------
NET INCOME (LOSS)
PER COMMON
SHARE - BASIC $ 0.04 $ (0.01) $ 0.07 $ (0.04)
---------- ---------- ---------- ----------
NET INCOME (LOSS)
PER COMMON
SHARE - DILUTED $ 0.04 $ (0.01) $ 0.06 $ (0.04)
---------- ---------- ---------- ----------
WEIGHTED AVERAGE
SHARES
OUTSTANDING -
BASIC 9,577,454 9,080,363 9,443,765 9,079,140
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
WEIGHTED AVERAGE
SHARES
OUTSTANDING -
DILUTED 11,588,715 9,080,363 11,264,434 9,079,140
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
BALANCE SHEETS
May 31, November 30,
2004 2003
------------ ------------
ASSETS (Unaudited) (Audited)
CURRENT ASSETS:
Cash and cash equivalents $ 5,355,094 $ 2,239,192
Accounts receivable 1,730,001 2,018,615
Inventory 860,817 1,090,261
Prepaid expenses 115,468 123,203
------------ ------------
Total current assets 8,061,380 5,471,271
------------ ------------
PROPERTY AND EQUIPMENT (at cost):
Machinery and equipment 2,316,096 2,071,758
Furniture and fixtures 252,971 248,657
Leasehold improvements 171,882 171,882
------------ ------------
Total 2,740,949 2,492,297
Less accumulated depreciation
and amortization (1,826,806) (1,782,559)
------------ ------------
Net property and equipment 914,143 709,738
------------ ------------
OTHER ASSETS:
Intangible assets, net 956,382 959,838
Other 15,000 15,000
------------ ------------
Total other assets 971,382 974,838
------------ ------------
TOTAL ASSETS $ 9,946,905 $ 7,155,847
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 468,846 $ 641,232
Accrued liabilities 298,798 349,547
------------ ------------
Total current liabilities 767,644 990,779
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred shares; authorized,
1,000,000 shares of $.01 par value;
no shares issued or outstanding - -
Common shares; authorized,
20,000,000 shares of $.01 par value;
issued and outstanding, 10,010,202
shares at May 31, 2004, and
9,298,669 shares at
November 30, 2003 100,102 92,987
Additional paid-in capital 61,965,407 59,660,804
Accumulated deficit (52,886,248) (53,588,723)
------------ ------------
Total shareholders' equity 9,179,261 6,165,068
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 9,946,905 $ 7,155,847
------------ ------------
------------ ------------
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