Viking Systems Inc. Announces Third Quarter 2005 Financial Results.SAN DIEGO San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. -- Viking Systems Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :VKSY), a manufacturer of three dimensional laparoscopic Laparoscopic A minimally-invasive surgical or diagnostic procedure that uses a flexible endoscope (laparoscope) to view and operate on structures in the abdomen. Mentioned in: Obstetrical Emergencies vision systems for use in minimally invasive surgery minimally invasive surgery Laparoscopic surgery, see there. See Laparoscopic cholecystectomy. , today announced the financial results for the third quarter of 2005. For the three months ended September 30, 2005, the Company reported revenue of $1.12 million, representing approximately a 3% increase, compared to revenue of $1.09 million for the three months ended September 30, 2004. Gross profits decreased to $320 thousand, or 28.6% of total revenues, for the three months ended September 30, 2005, compared to gross profit of $334 thousand, or 30.5% of total revenues, for the three months ended September 30, 2004, representing a decrease of $13,878. The decrease in gross profit during the quarter was due to the increase in royalty expense, in accordance with the Vista Royalty agreement. The Company expects gross profit, as a percentage of revenues, to improve as 3Di System sales System sales is a business term used in the franchising industry. Franchisors provide supplies, marketing and administration services to franchisees in return for a part of the franchisees' revenues. Some franchisors also operate some outlets directly. increase. The Company had a net loss of $2.08 million, or $(0.06) per share fully 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. , for the three months ended September 30, 2005, compared to a net loss of $438 thousand, or $(0.05) per share, fully diluted for the three months ended September 30, 2004. The increase in net loss is attributable to the implementation of the sales and marketing plan, further development and optimization of the 3Di product line, and an increase in interest expense of $1 million. For the nine months ended September 30, 2005, revenue increased by approximately $952 thousand, or 45% to $3.08 million, compared to revenue of $2.13 million for the nine months ended September 30, 2005. For the nine months ended September 30, 2005 gross profits increased to $853 thousand, or 27.7% of total revenues, compared to $587 thousand, or 27.6% of total revenues, for the nine months ended September 30, 2004. VKSY had a net loss of $4.82 million, or $(0.15) per share fully diluted, for the nine months ended September 30, 2005 compared to a net loss of approximately $908 thousand, or $(0.11) per share, fully diluted for the nine months ended September 30, 2004. The increase in net loss to date for 2005 was due to the increase in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. due to nine full months of operations. The Company incurred significant costs, implementing a sales and marketing plan, developing and improving the 3Di product line, and maintaining operations of the visualization Using the computer to convert data into picture form. The most basic visualization is that of turning transaction data and summary information into charts and graphs. Visualization is used in computer-aided design (CAD) to render screen images into 3D models that can be viewed from all business. We also incurred $1.68 million in non-cash interest expense related to the amortization of the debt discount on the Convertible Notes for the nine months ended September 30, 2005. Tom Marsh Thomas Owen Marsh (born December 27, 1965 in Toledo, Ohio) is an American former Major League Baseball player. He played college baseball at the University of Toledo and made his Major League Baseball debut in 1992 for the Philadelphia Phillies. , Viking President & 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. , stated, "During the third quarter we continued to execute our marketing plan and aggressive promotion our flagship product A primary product of a company, which is typically why the company was founded and/or what made it well known. For example, MS-DOS, Windows and the Microsoft Office suite have been flagship products of Microsoft. CorelDRAW is a flagship product of Corel Corporation. , the EndoSite 3Di Digital Vision System, to new market opportunities in urology urology Medical specialty dealing with the urinary system and male reproductive organs. It traces its origin to medieval lithologists, itinerant healers who specialized in surgical removal of bladder stones. and gynecology gynecology (gīn'əkŏl`əjē), branch of medicine specializing in the disorders of the female reproductive system. Modern gynecology deals with menstrual disorders, menopause, infectious disease and maldevelopment of the . We added renowned surgeons to our growing list of 3Di advocates, and we were chosen by the Society of Laparoendoscopic Surgeons as a recipient of the 2005 Innovations of the Year Award. In our first year of commercial development, we continue to build on our pipeline of quality sales opportunities for the 2006 capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. cycle. With the release of a new camera optimized for complex urology and gynecology procedures, our 3-D vision technology continues to gain acceptance both domestically and internationally." Conference Call Announcement Reminder The conference call will take place at 4:15 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. on Monday, November 21, 2005. Those interested in participating should dial 800-322-0079 if calling within the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , or 973-935-2100 if calling internationally. Participants should call in approximately 5 to 10 minutes prior to the start of the call. There will be an audio playback of the proceedings available until November 28, 2005. To listen to the playback, please call 877-519-4471 if calling within the United States, or 973-341-3080 if calling internationally. Please use pass code 6726189 for the replay. The call is also being webcast by ViaVid Broadcasting, and may be accessed through Viking's website at www.vikingsystems.com, or through ViaVid's website at www.viavid.net. The webcast will be available on either site through February 28, 2006. To access the webcast, you will need to have the Windows Media Player Digital jukebox software for Windows from Microsoft that plays a variety of audio, video and streaming formats including MP3, WMA, CD audio and MIDI. Starting with Version 6.2 in 1999, the Windows Media Rights Manager was added for securing copyrighted content. on your desktop. For the free download of the Media Player, please visit: www.microsoft.com/windows/windowsmedia/en/download/default.asp. About Viking Systems Inc. Viking Systems, Inc. (OTCBB:VKSY) provides high performance 3-D laparoscopic vision systems to hospitals for minimally invasive surgery (MIS). Our focus is to deliver integrated information, visualization and control solutions to the surgical team, enhancing their capability and performance in MIS and complex surgical procedures Surgical procedures have long and possibly daunting names. The meaning of many surgical procedure names can often be understood if the name is broken into parts. For example in splenectomy, "ectomy" is a suffix meaning the removal of a part of the body. "Splene-" means spleen. . Viking Systems is headquartered in La Jolla La Jolla (lə hoi`yə), on the Pacific Ocean, S Calif., an uninc. district within the confines of San Diego; founded 1869. The beautiful ocean beaches, in particular La Jolla shores and Black's Beach, and sea-washed caves attract visitors and , Calif. For more information, please visit the Company's website at www.vikingsystems.com.
VIKING SYSTEMS, INC.
Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Sales, net $1,117,806 $1,094,096 $3,076,622 $2,125,058
Cost of sales 797,936 760,348 2,223,586 1,537,783
Gross profit 319,870 333,748 853,036 587,275
Operating expenses:
General and
administrative 418,928 414,026 1,248,172 826,436
Selling and marketing 734,915 204,765 1,903,956 378,666
Research and
development 242,421 152,378 669,701 288,706
Total operating
expenses 1,396,264 771,169 3,821,829 1,493,808
Operating loss (1,076,394) (437,421) (2,968,793) (906,533)
Other income
(expense):
Interest expense (1,003,649) (956) (1,851,581) (1,707)
Net loss $(2,080,043) $(438,377) $(4,820,374) $(908,240)
Net loss per common
share - basic and
diluted $(0.06) $(0.05) $(0.15) $(0.11)
Weighted average
shares - basic
and diluted 33,403,000 9,720,000 32,027,000 8,298,000
VIKING SYSTEMS, INC.
Unaudited Balance Sheet
September 30, 2005
Assets
Current assets:
Cash and cash equivalents $161,263
Accounts receivable, net 769,870
Inventories 501,597
Prepaids and other current assets 88,134
Total current assets 1,520,864
Property and equipment, net 448,493
$1,969,357
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $762,241
Accrued expenses 535,419
Short-term bank borrowings 425,686
Convertible notes payable net of debt discount of
$1,071,377 2,178,623
Total current liabilities 3,901,969
Commitment and contingencies
Stockholders' deficit:
Preferred stock, $.001 par value, 25,000,000 shares
authorized, no shares issued and outstanding -
Common stock, $.001 par value, 100,000,000 shares
authorized; 34,639,050 shares issued and outstanding 34,639
Additional paid-in capital 5,234,544
Deferred Compensation (66,000)
Accumulated deficit (7,135,795)
Total stockholders' deficit (1,932,612)
$1,969,357
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