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ZILA REPORTS FISCAL 2009 3RD QTR NET REVENUES OF $8.5 MIL.

Zila, Inc. (Nasdaq:ZILA), Scottsdale, Ariz., has reported financial results for its fiscal 2009 third quarter ended April 30, 2009. "During the third quarter, revenues remained steady, and our cash position increased compared with the previous quarter," said David Bethune, chairman and chief executive officer of Zila. "Moreover, as a result of continued cost cutting throughout the organization, we narrowed our loss from operations to approximately $328,000 from approximately $1.1 million last quarter, excluding a $23.2 million non-cash impairment charge recognized last quarter." The company has stated that in order to continue as an on-going business and avoid bankruptcy, it will require additional funds to restructure or retire its Senior Secured Convertible Notes due in July 2010, and to grow its business. Efforts to seek additional funding have included discussions with several potential financial and strategic investors, as well as with the holders of the

Senior Secured Convertible Notes.

Fiscal 2009 Third Quarter Financial Results

-- Net revenues were $8.5 million, compared with $11.2 million for the third quarter of fiscal 2008. Sales of ViziLite Plus were $2.7 million, compared with $3.6 million for the third quarter of fiscal 2008. The company attributed the decline in revenues primarily to the global economic downturn and customer concern about the company's viability as an ongoing business.

-- Gross profit was $5.0 million, or 59% of net revenues, compared with $6.8 million, or 61% of net revenues, in the third quarter of fiscal 2008.

-- Marketing and selling expense decreased 48% to $3.2 million from $6.0 million in the third quarter of fiscal 2008. The decrease reflects a lower level of commissions and bonuses for the sales force on reduced sales levels, reduced sales force headcount and reductions in expenditures in non-direct selling related expenses. Because of the company's financial condition, there have been limited funds to spend for marketing programs to supplement the efforts of the direct sales force.

-- General and administrative expense decreased 46% to $1.8 million from $3.3 million for the third quarter of fiscal 2008, primarily due to headcount and salary reductions, as well as the reduction, deferral or elimination of certain employee benefits and non-critical programs across the organization.

-- Research and development (R&D) expense was $90,000, compared with $247,000 for the third quarter of fiscal 2008. The decrease in R&D is due to the curtailment of the OraTest regulatory program.

-- Net loss attributable to common shareholders was $1.5 million, or $0.14 per share, compared with $4.5 million, or $0.50 per share, for the third quarter of fiscal 2008.

-- Cash and cash equivalents at April 30, 2009 were $3.1 million, compared with $2.5 million at January 31, 2009 and $4.5 million at July 31, 2008. The company has made timely interest payments under the terms of the Senior Secured Convertible Notes and is otherwise in compliance with the terms of the notes, except for the interest payments due January 31, 2009 and April 30, 2009, which have not been made. The company was unable to issue shares for the January 31, 2009 and April 30, 2009 interest payments because the issuance of the required number of shares would have required shareholder approval under applicable NASDAQ rules. Accordingly, as of April 30, 2009, approximately $0.7 million of accrued but unpaid interest was due the holders of the Senior Secured Convertible Notes. In addition, given the company's current level of cash and cash equivalents and the impact of the global economic downturn on its business, the company may not have sufficient cash available to pay its future quarterly interest payments due under the Senior Secured Convertible Notes. The failures to make these payments are events of default under the Senior Secured Convertible Notes. Although the company has not received a notice of default or acceleration from the note holders, the company has reclassified the Senior Secured Convertible Notes to current liabilities.

As a result of the uncertainly surrounding the company's ability to repay the Senior Secured Convertible Notes when due as discussed more fully in the company's Form 10-Q for the quarter ended April 30, 2009, the company has substantial doubt about its ability to continue as a going concern.

Recent Events

During May 2009, members of the company's management team and other experts on oral oncology and oral cancer diagnostics testified at a congressional hearing on innovative technology for Veterans. Legislators were urged to press the U.S. Department of Veterans Affairs to expand the use of ViziLite Plus for Veterans, who are at a dramatically higher risk of oral cancer. In December 2007, the U.S. Department of Veterans Affairs awarded Zila a five year contract to market ViziLite Plus to 58 Veterans Administration dental clinics and 154 Department of Defense dental clinics; however, screens performed using ViziLite Plus by these clinics have not been as numerous as expected since the time this contract was entered into. Zila believes a significant opportunity exists for the company should the clinics covered by the contract with the Department of Defense realize the benefits of ViziLite Plus for Veterans and utilize and expand oral cancer screening with ViziLite Plus.

Nine Months Ended April 30, 2009

Net revenues were $26.6 million compared, with $33.2 million for the first nine months of fiscal 2008. Gross profit was $15.6 million, or 59% of net revenues, compared with $19.9 million, or 60% of net revenues, in the comparable period of fiscal 2008. Net loss attributable to common shareholders, which includes a non-cash impairment charge of $23.2 million, equal to $2.26 per share, was $29.6 million, or $2.89 per share, compared with $14.1 million, or $1.60 per share, in the year ago period.

About Zila, Inc.

Zila, Inc., headquartered in Scottsdale, Arizona, is a diagnostic company dedicated to the prevention, detection and treatment of oral cancer and periodontal disease. Zila manufactures and markets ViziLite Plus with TBlue ("ViziLite Plus), the company's flagship product for the early detection of oral abnormalities that could lead to cancer. ViziLite Plus is an adjunctive medical device cleared by the FDA for use in a population at increased risk for oral cancer. In addition, Zila designs, manufactures and markets a suite of proprietary products sold exclusively and directly to dental professionals for periodontal disease, including the Rotadent Professional Powered Brush, the Pro-Select Platinum ultrasonic scaler and a portfolio of oral pharmaceutical products for both in-office and home-care use. All of Zila's products are marketed and sold in the United States and Canada primarily through the company's direct field sales force and telemarketing organization. The company's products are marketed and sold in other international markets through the direct sales forces of third party distributors. Zila's marketing programs reach most U.S. dental offices.

For more information, visit www.zila.com or call 310/279-5969,
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Publication:Biotech Financial Reports
Article Type:Financial report
Date:Jul 1, 2009
Words:1153
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