Diomed (AMEX:DIO)
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Diomed Holdings, Inc. (AMEX: DIO), a leading developer and
marketer of minimally invasive medical technologies, including its
patented EVLT® laser
treatment for varicose veins, today announced results for the third
quarter ended September 30, 2006.
Significant accomplishments during the third quarter of 2006 included:
Diomed’s third highest quarterly revenue
performance, at $5.3 million;
EVLT® revenue, 22%
above the third quarter of 2005;
EVLT® disposable
revenue, 44% over the third quarter of 2005;
EVLT® installed
base exceeds 1,000 laser systems;
Nearly 80,000 EVLT® procedures
successfully performed;
Close of $10 million preferred stock financing, increasing cash and
short term investments to $13.4 million.
Summary Judgment ruling that ‘777 patent is
valid and enforceable, eliminating two of the three defenses and
allowing trial on infringement action to proceed;
"We are pleased with our third quarter accomplishments," commented James
A. Wylie, CEO and President of Diomed Holdings, Inc. "The Company drove
significant year-over-year growth in what is traditionally our softest
quarter due to seasonality in our key North American EVLT®
market. Additionally, Diomed delivered revenue for the nine months ended
September 30, 2006 of $16 million, an increase of $2.5 million, or 18%,
over the first nine months of 2005, while EVLT®
sales increased a solid 23%."
“Of particular note is our continued growth
in laser market share. During the three-month period ending August 2006,
Diomed sold over three times the number of lasers sold by our largest
competitor, strengthening our belief that Diomed’s
installed base exceeds the installed base of all of our laser
competitors combined.” Wylie further
commented.
Gross profit for the third quarter of 2006 was $2.3 million,
representing an increase of $208,000, or 10%, over the third quarter of
2005. Gross profit as a percentage of sales of 43% decreased 2.4
percentage points against the third quarter of 2005, as a less favorable
product mix and lower overhead absorption offset favorable pricing
variances. The Company has targeted continued improvement in gross
profit levels to the 60% level and higher, consistent with other
proprietary medical device companies, as the EVLT®
product line grows.
Selling and marketing expenses for the third quarter of 2006 were $2.7
million, an increase of $606,000, or 29%, over the third quarter of
2005. The increase was driven by an expansion of our sales force, higher
sales commissions resulting from the increased sales volume and
increased marketing expenditures in support of our sales initiatives to
drive the growing commercialization of EVLT®.
For the nine months ended September 30, 2006, selling and marketing
expenses were $8.5 million, an increase of $1.8 million, or 27%, over
the same period of 2005.
General and administrative expenses for the third quarter of 2006 of
$1.9 million increased $95,000, or 5%, compared to the third quarter of
2005, and were relatively flat sequentially. Total third quarter legal
costs of $694,000 decreased $16,000 from the second quarter of 2006,
with a reduction in the continuing cost of litigation against our
primary laser competitors offset by the cost of litigation in the action
brought by our radio-frequency competitor. For the nine months ended
September 30, 2006, general and administrative expenses were $5.9
million, an increase of $390,000, or 7%, over the same period in 2005.
Losses from operations for the third quarter of 2006 of approximately
$2.7 million increased $513,000 from the third quarter of 2005, as gains
from incremental revenue were offset by increased selling and marketing
costs and $126,000 in SFAS 123R compensation costs. Losses from
operations for the nine months ended September 30, 2006 were $8.3
million, compared with $7.2 million for the same period in 2005, and
included $444,000 in SFAS 123R stock based compensation charges.
Net loss for the third quarter of 2006 of $3.0 million increased by
$620,000, or 26%, from the third quarter of 2005. Net loss for the third
quarter of 2006 includes a $69,000 non-cash, non-operating loss for the
increase in the fair value of the warrant obligation entered into on
September 30, 2005, as the market price of the Company’s
stock increased from $1.11 at June 30, 2006 to $1.20 at September 30,
2006. As a result of the financing which closed on September 29, 2006,
the Company marked to market the warrant obligation for a final time and
reclassified its mezzanine level preferred stock and warrant liability
to permanent equity.
Upon completion of the 2006 preferred stock financing, the Company
recorded a one-time, non-cash, non-operating beneficial conversion
feature charge of $469,938, since the market price of the Company’s
common stock on September 29, 2006 of $1.20 was above the $1.15
effective conversion price of the immediately convertible preferred
stock. The Company also recorded a one-time, non-cash, non-operating
deemed dividend of $3.0 million on the exchange of the 2005 preferred
stock for the 2006 preferred stock.
Net loss applicable to common stockholders for the third quarter of 2006
was $6.7 million, or $0.35 per share, compared to $3.1 million, or $0.16
per share, for the third quarter of 2005. Net loss applicable to common
stockholders for the third quarter of 2006 includes $167,000 of non-cash
preferred stock dividends accreted for future increasing rate dividends
and $149,000 of preferred stock cash dividends earned during the third
quarter on the 2005 preferred stock. As noted above, the 2005 preferred
stock was exchanged for the 2006 preferred stock under the 2006
financing, which does not accrue dividends unless a future dilutive
financing is completed within certain terms.
The Company ended the third quarter of 2006 with a cash and short term
investment balance of $13.4 million, compared to a cash and short term
investment balance of $7.0 million at the end of the second quarter of
2006. The cash balance includes approximately, $9.3 million in net
proceeds received from the 2006 preferred stock financing.
Conference Call Information
Diomed will hold a conference call to review its third quarter 2006
financial results on Thursday, October 26, 2006, at 10:00 a.m. (ET). The
call will be hosted by James A. Wylie, Jr., President and Chief
Executive Officer, and David B. Swank, Chief Financial Officer.
Interested parties may access the conference call by dialing
866-831-6162 (domestic) or 617-213-8852 (international), participant
pass code 146644724. The call will also be available via web cast at www.diomedinc.com.
If you are unable to participate, an audio digital replay of the call
will be available from Thursday, October 26, 2006, 12:00 p.m. ET, until
Thursday, November 2, 2006, 12:00 p.m. ET. The digital replay can be
accessed by dialing 1-888-286-8010, (domestic) or 1-617-801-6888 -
(international), using pass code 92289158. A web archive will also be
available during this time period at www.diomedinc.com.
About Diomed
Diomed develops and commercializes minimal and micro-invasive medical
procedures that use its proprietary laser technologies and disposable
products. Diomed’s EVLT®
laser vein ablation procedure is used in varicose vein treatments.
Diomed also provides photodynamic therapy (PDT) for use in cancer
treatments, and dental and general surgical applications. The EVLT®
procedure and the Company’s related products
were cleared by the United States FDA in January of 2002. Along with
lasers and single-use procedure kits for its EVLT®
laser vein treatment, the Company provides its customers with state of
the art physician training and practice development support. Additional
information is available on the Company’s
website: www.evlt.com.
EVLT® is a registered trademark of Diomed
Inc., Andover, MA.
Safe Harbor
Safe Harbor statements under the Private Securities Litigation Reform
Act of 1995: Statements in this news release looking forward in time
involve risks and uncertainties, including the risks associated with
trends in the products markets, reliance on third party distributors in
various countries outside the United States, reoccurring orders under
OEM contracts, market acceptance risks, technical development risks and
other risk factors. These statements relate to our future plans,
objectives, expectations and intentions. These statements may be
identified by the use of words such as "may," "will," "should,"
"potential," "expects," "anticipates," "intends," "plans," "believes"
and similar expressions. These statements are based on our current
beliefs, expectations and assumptions and are subject to a number of
risks and uncertainties. Our actual results could differ materially from
those discussed in these statements. Our Annual Report on Form SEC
10-KSB/A (the "Annual Report") contains a discussion of certain of the
risks and uncertainties that affect our business. We refer you to the
"Risk Factors" on pages 23 through 38 of the Annual Report for a
discussion of certain risks, including those relating to our business as
a medical device company without a significant operating record and with
operating losses, our risks relating to our commercialization of our
current and future products and applications and risks relating to our
common stock and its market value. Diomed disclaims any obligation or
duty to update or correct any of its forward-looking statements.
Diomed Holdings, Inc.
(Unaudited) Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended September 30, 2006 and 2005
Three Months
Three Months
Nine Months
Nine Months
Ended
Ended
Ended
Ended
September 30,
September 30,
September 30,
September 30,
2006
2005
2006
2005
Revenues
$ 5,321,080
$ 4,582,840
$ 15,972,476
$ 13,488,120
Cost of revenues
3,042,223
2,511,536
8,786,487
7,325,127
Gross profit
2,278,857
2,071,304
7,185,989
6,162,993
Operating expenses:
Research and development
422,596
403,498
1,140,170
1,150,712
Selling and marketing
2,687,000
2,080,723
8,490,263
6,693,660
General and administrative
1,906,886
1,811,921
5,865,439
5,475,535
Total operating expenses
5,016,482
4,296,142
15,495,872
13,319,907
Loss from operations
(2,737,625)
(2,224,838)
(8,309,883)
(7,156,914)
Other (income) expense
Gain (Loss) on fair value adjustment on warrant liability
68,995
-
(971,442)
-
Interest expense, non-cash
96,078
98,904
288,229
1,502,760
Interest expense, net and other (income)
76,480
35,405
(958)
187,773
Total other (income) expense, net
241,553
134,309
(684,171)
1,690,533
Net loss
(2,979,178)
(2,359,147)
(7,625,712)
(8,847,447)
Less preferred stock cash dividends
(149,063)
-
(447,353)
-
Less preferred stock non-cash dividends
(167,480)
(762,656)
(483,586)
(762,656)
Less beneficial conversion feature on 2006 preferred stock
(469,938)
-
(469,938)
-
Less deemed dividend on the exchange of 2005 preferred stock
(2,980,439)
-
(2,980,439)
-
Net loss applicable to common stockholders
$ (6,746,098)
$ (3,121,803)
$ (12,007,028)
$ (9,610,103)
Basic and diluted net loss per share applicable to common
stockholders
$ (0.35)
$ (0.16)
$ (0.62)
$ (0.50)
Basic and diluted weighted average common shares outstanding
19,448,728
19,423,728
19,447,812
19,143,276
Diomed Holdings, Inc.
Condensed Consolidated Balance Sheets
As of September 30, 2006 (unaudited) and December 31, 2005
ASSETS
September 30, 2006
December 31, 2005
Current assets:
Cash and cash equivalents
$ 12,941,840
$ 9,562,087
Short term investments
498,595
3,566,454
Accounts receivable, net
2,629,923
2,824,717
Inventories
3,874,721
3,059,886
Prepaid expenses and other current assets
713,820
444,453
Total current assets
20,658,899
19,457,597
Property, plant and equipment, net
1,272,790
1,171,703
Intangible assets, net
4,125,294
4,302,915
Investment
1,000,000
500,000
Other assets
229,014
294,810
Total assets
$ 27,285,997
$ 25,727,025
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$ 4,180,333
$ 3,561,786
Accrued expenses
2,104,597
2,298,823
Current portion of deferred revenue
260,625
257,889
Bank loan
420,519
53,924
Current maturities of capital lease obligations
1,389
2,047
EVLT technology payable (zero face value at September 30, 2006 and
$250,000 face value, net of $4,902 debt discount at December 31,
2005)
-
245,098
Warrant liability
-
1,898,213
Total current liabilities
6,967,463
8,317,780
Deferred revenue, net of current portion
108,527
144,428
Capital lease obligation, net of current maturities
2,778
4,094
Convertible notes payable ($3,712,000 face value, net of $3,712,000
debt discount at September 30, 2006 and $3,712,000 face value, net
of $1,081,727 debt discount at December 31, 2005)
-
2,630,273
Total liabilities
7,078,768
11,096,575
Preferred Stock
-
7,819,658
Stockholders’ equity
20,207,229
6,810,792
Total liabilities, preferred stock and stockholders’
equity
$ 27,285,997
$ 25,727,025
Diomed Holdings, Inc. (AMEX: DIO), a leading developer and
marketer of minimally invasive medical technologies, including its
patented EVLT(R) laser treatment for varicose veins, today announced
results for the third quarter ended September 30, 2006.
Significant accomplishments during the third quarter of 2006
included:
-- Diomed's third highest quarterly revenue performance, at $5.3
million;
-- EVLT(R) revenue, 22% above the third quarter of 2005;
-- EVLT(R) disposable revenue, 44% over the third quarter of
2005;
-- EVLT(R) installed base exceeds 1,000 laser systems;
-- Nearly 80,000 EVLT(R) procedures successfully performed;
-- Close of $10 million preferred stock financing, increasing
cash and short term investments to $13.4 million.
-- Summary Judgment ruling that '777 patent is valid and
enforceable, eliminating two of the three defenses and
allowing trial on infringement action to proceed;
"We are pleased with our third quarter accomplishments," commented
James A. Wylie, CEO and President of Diomed Holdings, Inc. "The
Company drove significant year-over-year growth in what is
traditionally our softest quarter due to seasonality in our key North
American EVLT(R) market. Additionally, Diomed delivered revenue for
the nine months ended September 30, 2006 of $16 million, an increase
of $2.5 million, or 18%, over the first nine months of 2005, while
EVLT(R) sales increased a solid 23%."
"Of particular note is our continued growth in laser market share.
During the three-month period ending August 2006, Diomed sold over
three times the number of lasers sold by our largest competitor,
strengthening our belief that Diomed's installed base exceeds the
installed base of all of our laser competitors combined." Wylie
further commented.
Gross profit for the third quarter of 2006 was $2.3 million,
representing an increase of $208,000, or 10%, over the third quarter
of 2005. Gross profit as a percentage of sales of 43% decreased 2.4
percentage points against the third quarter of 2005, as a less
favorable product mix and lower overhead absorption offset favorable
pricing variances. The Company has targeted continued improvement in
gross profit levels to the 60% level and higher, consistent with other
proprietary medical device companies, as the EVLT(R) product line
grows.
Selling and marketing expenses for the third quarter of 2006 were
$2.7 million, an increase of $606,000, or 29%, over the third quarter
of 2005. The increase was driven by an expansion of our sales force,
higher sales commissions resulting from the increased sales volume and
increased marketing expenditures in support of our sales initiatives
to drive the growing commercialization of EVLT(R). For the nine months
ended September 30, 2006, selling and marketing expenses were $8.5
million, an increase of $1.8 million, or 27%, over the same period of
2005.
General and administrative expenses for the third quarter of 2006
of $1.9 million increased $95,000, or 5%, compared to the third
quarter of 2005, and were relatively flat sequentially. Total third
quarter legal costs of $694,000 decreased $16,000 from the second
quarter of 2006, with a reduction in the continuing cost of litigation
against our primary laser competitors offset by the cost of litigation
in the action brought by our radio-frequency competitor. For the nine
months ended September 30, 2006, general and administrative expenses
were $5.9 million, an increase of $390,000, or 7%, over the same
period in 2005.
Losses from operations for the third quarter of 2006 of
approximately $2.7 million increased $513,000 from the third quarter
of 2005, as gains from incremental revenue were offset by increased
selling and marketing costs and $126,000 in SFAS 123R compensation
costs. Losses from operations for the nine months ended September 30,
2006 were $8.3 million, compared with $7.2 million for the same period
in 2005, and included $444,000 in SFAS 123R stock based compensation
charges.
Net loss for the third quarter of 2006 of $3.0 million increased
by $620,000, or 26%, from the third quarter of 2005. Net loss for the
third quarter of 2006 includes a $69,000 non-cash, non-operating loss
for the increase in the fair value of the warrant obligation entered
into on September 30, 2005, as the market price of the Company's stock
increased from $1.11 at June 30, 2006 to $1.20 at September 30, 2006.
As a result of the financing which closed on September 29, 2006, the
Company marked to market the warrant obligation for a final time and
reclassified its mezzanine level preferred stock and warrant liability
to permanent equity.
Upon completion of the 2006 preferred stock financing, the Company
recorded a one-time, non-cash, non-operating beneficial conversion
feature charge of $469,938, since the market price of the Company's
common stock on September 29, 2006 of $1.20 was above the $1.15
effective conversion price of the immediately convertible preferred
stock. The Company also recorded a one-time, non-cash, non-operating
deemed dividend of $3.0 million on the exchange of the 2005 preferred
stock for the 2006 preferred stock.
Net loss applicable to common stockholders for the third quarter
of 2006 was $6.7 million, or $0.35 per share, compared to $3.1
million, or $0.16 per share, for the third quarter of 2005. Net loss
applicable to common stockholders for the third quarter of 2006
includes $167,000 of non-cash preferred stock dividends accreted for
future increasing rate dividends and $149,000 of preferred stock cash
dividends earned during the third quarter on the 2005 preferred stock.
As noted above, the 2005 preferred stock was exchanged for the 2006
preferred stock under the 2006 financing, which does not accrue
dividends unless a future dilutive financing is completed within
certain terms.
The Company ended the third quarter of 2006 with a cash and short
term investment balance of $13.4 million, compared to a cash and short
term investment balance of $7.0 million at the end of the second
quarter of 2006. The cash balance includes approximately, $9.3 million
in net proceeds received from the 2006 preferred stock financing.
Conference Call Information
Diomed will hold a conference call to review its third quarter
2006 financial results on Thursday, October 26, 2006, at 10:00 a.m.
(ET). The call will be hosted by James A. Wylie, Jr., President and
Chief Executive Officer, and David B. Swank, Chief Financial Officer.
Interested parties may access the conference call by dialing
866-831-6162 (domestic) or 617-213-8852 (international), participant
pass code 146644724. The call will also be available via web cast at
www.diomedinc.com.
If you are unable to participate, an audio digital replay of the
call will be available from Thursday, October 26, 2006, 12:00 p.m. ET,
until Thursday, November 2, 2006, 12:00 p.m. ET. The digital replay
can be accessed by dialing 1-888-286-8010, (domestic) or
1-617-801-6888 - (international), using pass code 92289158. A web
archive will also be available during this time period at
www.diomedinc.com.
About Diomed
Diomed develops and commercializes minimal and micro-invasive
medical procedures that use its proprietary laser technologies and
disposable products. Diomed's EVLT(R) laser vein ablation procedure is
used in varicose vein treatments. Diomed also provides photodynamic
therapy (PDT) for use in cancer treatments, and dental and general
surgical applications. The EVLT(R) procedure and the Company's related
products were cleared by the United States FDA in January of 2002.
Along with lasers and single-use procedure kits for its EVLT(R) laser
vein treatment, the Company provides its customers with state of the
art physician training and practice development support. Additional
information is available on the Company's website: www.evlt.com.
EVLT(R) is a registered trademark of Diomed Inc., Andover, MA.
Safe Harbor
Safe Harbor statements under the Private Securities Litigation
Reform Act of 1995: Statements in this news release looking forward in
time involve risks and uncertainties, including the risks associated
with trends in the products markets, reliance on third party
distributors in various countries outside the United States,
reoccurring orders under OEM contracts, market acceptance risks,
technical development risks and other risk factors. These statements
relate to our future plans, objectives, expectations and intentions.
These statements may be identified by the use of words such as "may,"
"will," "should," "potential," "expects," "anticipates," "intends,"
"plans," "believes" and similar expressions. These statements are
based on our current beliefs, expectations and assumptions and are
subject to a number of risks and uncertainties. Our actual results
could differ materially from those discussed in these statements. Our
Annual Report on Form SEC 10-KSB/A (the "Annual Report") contains a
discussion of certain of the risks and uncertainties that affect our
business. We refer you to the "Risk Factors" on pages 23 through 38 of
the Annual Report for a discussion of certain risks, including those
relating to our business as a medical device company without a
significant operating record and with operating losses, our risks
relating to our commercialization of our current and future products
and applications and risks relating to our common stock and its market
value. Diomed disclaims any obligation or duty to update or correct
any of its forward-looking statements.
-0-
*T
Diomed Holdings, Inc.
(Unaudited) Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended September 30, 2006 and 2005
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September September September September
30, 30, 30, 30,
2006 2005 2006 2005
------------ ------------ ------------- ------------
Revenues $5,321,080 $4,582,840 $15,972,476 $13,488,120
Cost of revenues 3,042,223 2,511,536 8,786,487 7,325,127
------------ ------------ ------------- ------------
Gross profit 2,278,857 2,071,304 7,185,989 6,162,993
------------ ------------ ------------- ------------
Operating
expenses:
Research and
development 422,596 403,498 1,140,170 1,150,712
Selling and
marketing 2,687,000 2,080,723 8,490,263 6,693,660
General and
administrative 1,906,886 1,811,921 5,865,439 5,475,535
------------ ------------ ------------- ------------
Total
operating
expenses 5,016,482 4,296,142 15,495,872 13,319,907
------------ ------------ ------------- ------------
Loss from
operations (2,737,625) (2,224,838) (8,309,883) (7,156,914)
------------ ------------ ------------- ------------
Other (income)
expense
Gain (Loss) on
fair value
adjustment on
warrant liability 68,995 - (971,442) -
Interest expense,
non-cash 96,078 98,904 288,229 1,502,760
Interest expense,
net and other
(income) 76,480 35,405 (958) 187,773
------------ ------------ ------------- ------------
Total other
(income)
expense, net 241,553 134,309 (684,171) 1,690,533
------------ ------------ ------------- ------------
Net loss (2,979,178) (2,359,147) (7,625,712) (8,847,447)
Less preferred
stock cash
dividends (149,063) - (447,353) -
Less preferred
stock non-cash
dividends (167,480) (762,656) (483,586) (762,656)
Less beneficial
conversion
feature on 2006
preferred stock (469,938) - (469,938) -
Less deemed
dividend on the
exchange of 2005
preferred stock (2,980,439) - (2,980,439) -
------------ ------------ ------------- ------------
Net loss
applicable to
common
stockholders $(6,746,098) $(3,121,803) $(12,007,028) $(9,610,103)
============ ============ ============= ============
Basic and
diluted net
loss per share
applicable to
common
stockholders $(0.35) $(0.16) $(0.62) $(0.50)
============ ============ ============= ============
Basic and
diluted
weighted
average common
shares
outstanding 19,448,728 19,423,728 19,447,812 19,143,276
============ ============ ============= ============
*T
-0-
*T
Diomed Holdings, Inc.
Condensed Consolidated Balance Sheets
As of September 30, 2006 (unaudited) and December 31, 2005
September December 31,
ASSETS 30, 2006 2005
------------ ------------
Current assets:
Cash and cash equivalents $12,941,840 $9,562,087
Short term investments 498,595 3,566,454
Accounts receivable, net 2,629,923 2,824,717
Inventories 3,874,721 3,059,886
Prepaid expenses and other current assets 713,820 444,453
------------ ------------
Total current assets 20,658,899 19,457,597
Property, plant and equipment, net 1,272,790 1,171,703
Intangible assets, net 4,125,294 4,302,915
Investment 1,000,000 500,000
Other assets 229,014 294,810
------------ ------------
Total assets $27,285,997 $25,727,025
============ ============
LIABILITIES, PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $4,180,333 $3,561,786
Accrued expenses 2,104,597 2,298,823
Current portion of deferred revenue 260,625 257,889
Bank loan 420,519 53,924
Current maturities of capital lease
obligations 1,389 2,047
EVLT technology payable (zero face
value at September 30, 2006 and
$250,000 face value, net of $4,902
debt discount at December 31, 2005) - 245,098
Warrant liability - 1,898,213
------------ ------------
Total current liabilities 6,967,463 8,317,780
Deferred revenue, net of current portion 108,527 144,428
Capital lease obligation, net of current
maturities 2,778 4,094
Convertible notes payable ($3,712,000 face
value, net of $3,712,000 debt discount at
September 30, 2006 and $3,712,000 face
value, net of $1,081,727 debt discount at
December 31, 2005) - 2,630,273
------------ ------------
Total liabilities 7,078,768 11,096,575
Preferred Stock - 7,819,658
Stockholders' equity 20,207,229 6,810,792
------------ ------------
Total liabilities, preferred stock and
stockholders' equity $27,285,997 $25,727,025
============ ============
*T