PhotoMedex Announces Third Quarter 2006 Results XTRAC(R) Business Increased 68% and Procedures Increased 45% From Prior

Year Third Quarter; Sequentially Overall Dermatology Business Increased 12%



    MONTGOMERYVILLE, Pa., Nov. 2 /PRNewswire-FirstCall/ -- PhotoMedex, Inc.
 (Nasdaq:   PHMD) today announced the results of its operations for the third
 quarter ended September 30, 2006. Revenues for the third quarter ended
 September 30, 2006 were $8,291,547, as compared to revenues for the third
 quarter ended September 30, 2005 of $7,623,838, an increase of 8.8 percent.
     XTRAC(R) procedures billed in this year's third quarter increased 45
 percent from 2005 third quarter levels. On a sequential basis, in the third
 quarter of 2006, revenue from the XTRAC(R) business (domestic and
 international) rose 37 percent from the levels reported in the second
 quarter of 2006 and 68 percent from the third quarter in 2005.
     Jeffrey O'Donnell, PhotoMedex CEO and President, commented, "Our
 dermatology business had a solid performance in the third quarter; up, in
 what typically is a historically difficult quarter. Total XTRAC revenues,
 including domestic treatments, revenues, and international laser sales
 experienced double digit growth again. Despite weaker than anticipated
 results from our Surgical Division, we believe that the Surgical Division
 has a bright future. Company-wide, our performance has resulted in positive
 cash flow and we are pleased with improvements in key metrics."
     Continuing, O'Donnell stated, "Our recently announced private placement
 changes the game for PhotoMedex. We now have the working capital to hire
 the additional human resources to create and implement a clinical
 specialists' field force, which we feel is needed to increase procedures,
 per laser, per quarter. We believe we will also be able to take advantage
 of new corporate partnerships on the surgical side, as well as expand our
 surgical services nationwide, through a major national hospital chain."
     The net loss for the quarter ended September 30, 2006 was $1,693,035,
 or $(0.03) per fully diluted share, compared to a net loss for the third
 quarter of 2005 of $1,349,900, or $(0.03) per fully diluted share. This
 year's third quarter net loss included charges for stock-based compensation
 expense of $349,553 and depreciation and amortization of $1,047,178. Last
 year's third quarter net loss included depreciation and amortization of
 $883,961. There was no employee stock-based compensation expense recorded
 for the three months ended September 30, 2005 because the adoption of the
 new accounting standard FAS 123R occurred on January 1, 2006. A
 reconciliation of non-GAAP financial measures used in this news release to
 GAAP financial measures, and a presentation of the most directly comparable
 GAAP financial measures is included below in the section on Non-GAAP
 Measures.
     Revenues for the nine months ended September 30, 2006 were $24,596,452,
 as compared to the revenues for the nine months ended September 30, 2005 of
 $20,662,340.
     The net loss for the nine months ended September 30, 2006 was
 $5,383,228, or $(0.10) per fully diluted share, compared to a net loss for
 the nine months of last year of $3,138,663, or $(0.07) per fully diluted
 share. This year's net loss included charges for stock-based compensation
 expense of $1,248,111 and depreciation and amortization of $3,101,689. Last
 year's net loss for the nine months included depreciation and amortization
 of $2,216,715. There was no employee stock-based compensation expense
 recorded for the nine months ended September 30, 2005.
     As of September 30, 2006, the Company had cash and cash equivalents of
 $4,437,457, including restricted cash of $156,000. On October 31, 2006, the
 company entered into a definitive agreement with institutional investors
 for the private placement of approximately 9.8 million shares of common
 stock at a price of $1.17 per share, together with warrants to purchase
 approximately 2.4 million shares of common stock at an exercise price of
 $1.60 per share. Gross proceeds from the private placement will be
 approximately $11.4 million.
     Non-GAAP Measures
     To supplement PhotoMedex's consolidated financial statements presented
 in accordance with GAAP, PhotoMedex has begun providing certain non-GAAP
 measures of financial performance. These non-GAAP measures include non-GAAP
 net loss and non-GAAP loss per fully diluted share.
     PhotoMedex's reference to these non-GAAP measures should be considered
 in addition to results prepared under current accounting standards, but are
 not a substitute for, nor superior to, GAAP results. These non-GAAP
 measures are provided to enhance investors' overall understanding of
 PhotoMedex's current financial performance and provide further information
 for comparative information due to the adoption of the new accounting
 standard FAS 123R.
     Specifically, the Company believes the non-GAAP measures provide useful
 information to both management and investors by isolating certain expenses,
 gains and losses that may not be indicative of its core operating results
 and business outlook. In addition, PhotoMedex believes non-GAAP measures
 that exclude stock-based compensation expense enhance the comparability of
 results against prior periods. Reconciliation to the most directly
 comparable GAAP measure of all non-GAAP measures included in this press
 release is as follows:
                             Three Months Ended          Nine Months Ended
                                September 30,              September 30,
                             2006          2005          2006         2005
 
     Net loss            $(1,693,035)  $(1,349,900)  $(5,383,228)  $(3,138,663)
        Adjustments
     Stock-based
      compensation           349,553            --     1,248,111            --
     Depreciation and
      amortization         1,047,178       883,961     3,101,689     2,216,715
     Other non-cash
      charges                 22,685        82,724       110,366       346,272
 
         Total
          adjustments     $1,419,416      $966,685    $4,460,166    $2,562,987
 
     Non-GAAP adjusted
      income (loss)        $(273,619)    $(383,215)    $(923,062)    $(575,676)
 
     Shares used in
      computing basic
      and fully diluted   52,659,132    51,198,095    52,486,758    47,972,456
 
     Non-GAAP adjusted
      loss per fully
      diluted share            $0.01         $0.01        $(0.02)       $(0.01)
 
 
 
     Conference Call and Webcast Details
     PhotoMedex will hold a conference call to discuss the Company's third
 quarter 2006 results on Thursday, November 2 at 4:30 p.m. Eastern Time.
     To participate in the conference call, dial 800.289.0529 (and
 confirmation code # 3184912) approximately 5 to 10 minutes prior to the
 scheduled start time. If you are unable to participate, a digital replay of
 the call will be available from Thursday, November 2, from 7:30 p.m. EST
 until midnight on Wednesday, November 15, by dialing 888.203.1112 and using
 confirmation code # 3184912.
     The live broadcast of PhotoMedex's quarterly conference call will be
 available online with an accompanying slide presentation by going to
 www.photomedex.com and clicking on the link to Investor Relations, and at
 www.streetevents.com. The online replay will be available shortly after the
 call at those sites.
     About PhotoMedex
     PhotoMedex is engaged in the development of proprietary excimer laser
 and fiber optic systems and techniques directed toward dermatological
 applications, with FDA clearance to market the XTRAC(R) laser system for
 the treatment of psoriasis, vitiligo, atopic dermatitis and leukoderma. In
 addition, the Company provides contract medical procedures to hospitals,
 surgi-centers and doctors' offices, offering a wide range of products and
 services across multiple specialty areas, including dermatology, urology,
 gynecology, orthopedics, and other surgical specialties. The Company is a
 leader in the development, manufacturing and marketing of medical laser
 products and services. In addition, as a result of the merger with ProCyte,
 PhotoMedex now develops and markets products based on its patented,
 clinically proven Copper Peptide technology for skin health, hair care and
 wound care. PhotoMedex sells directly to dermatologists, plastic and
 cosmetic surgeons, spas and salons and through licenses with strategic
 partners into the consumer market, including a long-term worldwide license
 agreement with Neutrogena(R), a Johnson & Johnson company. ProCyte brands
 include Neova(R), Ti-Silc(R), VitalCopper(R), Simple Solutions(R) and
 AquaSante(R).
     SAFE HARBOR STATEMENT
     Some paragraphs of this press release, particularly those describing
 PhotoMedex' strategies, contain forward-looking statements within the
 meaning of Section 27A of the Securities Act of 1993, as amended, and
 Section 21E of the Securities Exchange Act of 1934, as amended. While
 PhotoMedex is working to achieve those goals and strategies, actual results
 could differ materially from those projected in the forward-looking
 statements as a result of a number of factors, including difficulties in
 marketing its products and services, need for capital, competition from
 other companies and other factors, any of which could have an adverse
 effect on the business plans of PhotoMedex, its reputation in the industry
 or its expected financial return from operations. Factors such as these
 could have an adverse effect on PhotoMedex' results of operations. In light
 of significant uncertainties inherent in forward-looking statements
 included herein, the inclusion of such statements should not be regarded as
 a representation by PhotoMedex and its subsidiaries that they will achieve
 such forward-looking statements.
     Contact:  Allen & Caron                       PhotoMedex, Inc.
               Matt Clawson (investors)            Dennis McGrath, CFO
               949-474-4300                        215-619-3287
               matt@allencaron.com                 info@photomedex.com
 
                                 TABLES FOLLOW
 
 
 
                                PHOTOMEDEX, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
 
                      Three Months Ended September  Nine Months Ended September
                           2006           2005           2006          2005*
 
     Revenues           $ 8,291,547   $7,623,838     $24,596,452   $20,662,340
 
     Cost of sales        4,658,936    4,303,384      13,591,024    11,157,944
      Gross profit        3,632,611    3,320,454      11,005,428     9,504,396
 
      Operating expenses:
      Selling, general
       and administrative 4,899,404    4,526,178      15,206,041    11,944,593
      Research and
       development and
       engineering          267,062      304,935         764,445       819,845
                          5,166,466    4,831,113      15,970,486    12,764,438
 
      Loss from
       continuing
       operations before
       interest expense,
       net               (1,533,855)  (1,510,659)     (4,965,058)   (3,260,042)
 
     Other income                --      244,988              --       333,655
     Interest expense,
      net                  (159,180)     (84,229)       (418,170)     (212,276)
     Net loss        (1)$(1,693,035) $(1,349,900) (1)$(5,383,228)  $(3,138,663)
 
     Basic and diluted
      net loss per share     $(0.03)     $ (0.03)         $(0.10)       $(0.07)
     Shares used in
      computing basic
      and diluted
      net loss per
      share              52,659,132   51,198,095      52,486,758    47,972,456
 
     (1)Includes
       Depreciation
       and
       Amortization      $1,047,178    $883,961       $3,101,689    $2,216,715
 
     Share-based
      compensation
      expense              $349,553         $--       $1,248,111          $--
 
 
     *  PhotoMedex, Inc. acquired ProCyte Corporation ("ProCyte") on March 18,
        2005 and, as such, the operating results of ProCyte for the nine months
        ended September 30, 2005 include activity from ProCyte from March 19,
        2005 through September 30, 2005.
 
 
 
                                PHOTOMEDEX, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
 
                                          September 30, 2006  December 31, 2005
         Assets
     Cash and cash equivalents               $ 4,437,457          $5,609,967
     Accounts receivable, net                  4,721,340           4,651,080
     Inventories                               7,525,412           8,047,444
     Other current assets                        870,755             621,372
     Property and equipment, net               8,340,585           7,044,713
     Intangibles and other assets             23,028,316          22,701,030
         Total Assets                        $48,923,865         $48,675,606
 
         Liabilities and Stockholders' Equity
     Accounts payable and accrued
      liabilities                            $ 5,909,144          $5,171,387
     Other current liabilities                   834,608             670,740
     Bank and lease notes Payable              6,756,148           4,416,451
     Stockholders' equity                     35,423,965          38,417,028
         Total Liabilities and Stockholders'
          Equity                             $48,923,865         $48,675,606
 
 
 
                                PHOTOMEDEX, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
 
                              Three Months Ended         Nine Months Ended
                                September 30,              September 30,
                             2006          2005         2006         2005
     CASH FLOWS FROM
      OPERATING
      ACTIVITIES:
     Net loss            $(1,693,035)  $(1,349,900)  $(5,383,228)  $(3,138,663)
       Adjustments to
        reconcile net
        loss to net
        cash used in
        operating
        activities:
       Depreciation and
        amortization       1,047,178       883,961     3,101,689     2,216,715
       Stock-based
        compensation
        expense related
        to employee options
        and restricted
        stock                349,552            --     1,248,111            --
       Provision for bad
        debts                  7,965            --        66,211       276,124
       Other                  14,720        82,724        44,155        70,148
     Changes in assets and
      liabilities:
     (Increase) decrease
      in:
       Accounts Receivables  135,114        27,571      (136,471)      260,265
       Inventories           640,212       184,067       612,427      (403,335)
       Prepaid expenses
        and other assets     343,358       110,630       710,407       545,943
     Increase (decrease)
      in:
       Accounts payable
        & other accrued
        expenses             205,858       173,657       355,939    (2,242,753)
       Deferred revenues      28,051       (95,313)      198,758      (201,070)
     Net cash (used in)
      provided by
      operating
      activities           1,078,973        17,397       817,998    (2,616,626)
 
     CASH FLOWS FROM
      INVESTING
      ACTIVITIES:         (1,413,424)     (846,878)   (3,546,179)    2,942,393
 
     CASH FLOWS FROM
      FINANCING
      ACTIVITIES:            483,566       493,316     1,606,602       966,566
 
     NET INCREASE IN CASH    149,115      (336,165)   (1,121,579)    1,292,333
 
     CASH, BEGINNING OF
      PERIOD               4,132,342     5,513,315     5,403,036     3,884,817
 
     CASH, END OF PERIOD   4,281,457     5,177,150     4,281,457     5,177,150
 
     RESTRICTED CASH         156,000       206,931       156,000       206,931
 
     TOTAL                $4,437,457    $5,384,081    $4,437,457    $5,384,081
     The following tables reflect results of operations from our business
 segments for the periods indicated below:
                                     Three Months Ended September 30, 2006
 
                                      INTERN'L
                                      DOMESTIC        DERM.         SKIN
                                        XTRAC       EQUIPMENT       CARE
     Revenues                       $1,601,125      $616,342    $3,050,249
     Costs of revenues               1,224,007       320,502       913,012
      Gross profit                     377,118       295,840     2,137,237
      Gross profit %                      23.6%         48.0%         70.1%
 
     Allocated Operating expenses:
      Selling, general and
       administrative                  987,163        60,876     1,300,536
      Engineering and product
       development                          --            --       144,996
 
     Unallocated Operating expenses         --            --            --
                                       987,163        60,876     1,445,532
     Income (loss) from operations    (610,045)      234,964       691,705
 
     Interest expense, net                  --            --            --
 
     Net income (loss)               ($610,045)     $234,964      $691,705
 
 
                                      Three Months Ended September 30, 2006
 
                                                   SURGICAL
                                                   PRODUCTS
                                     SURGICAL        AND
                                     SERVICES       OTHER         TOTAL
     Revenues                       $1,793,088    $1,230,743    $8,291,547
     Costs of revenues               1,409,453       791,962     4,658,936
      Gross profit                     383,635       438,781     3,632,611
      Gross profit %                      21.4%         35.7%         43.8%
 
     Allocated Operating expenses:
      Selling, general and
       administrative                  226,436       120,908     2,695,919
      Engineering and product
       development                          --       122,066       267,062
 
     Unallocated Operating
      expenses                              --            --     2,203,485
                                       226,436       242,974     5,166,466
     Income (loss) from operations     157,199       195,808    (1,533,855)
 
     Interest expense, net                  --            --      (159,180)
 
     Net income (loss)                $157,199      $195,808   ($1,693,035)
 
 
 
                                       Three Months Ended September 30, 2005
 
                                                     INTERN'L
                                        DOMESTIC      DERM.        SKIN
                                         XTRAC      EQUIPMENT      CARE
     Revenues                         $1,019,184     $299,176  $2,928,681
     Costs of revenues                   859,061      244,065     869,405
      Gross profit                       160,123       55,111   2,059,276
      Gross profit %                        15.7%        18.4%       70.3%
 
     Allocated Operating expenses:
      Selling, general and
       administrative                    703,924       46,407   1,574,059
      Engineering and product
       development                            --           --     142,948
 
     Unallocated Operating expenses           --           --          --
                                         703,924       46,407   1,717,007
     Income (loss) from operations      (543,801)       8,704     342,269
 
     Other income
     Interest expense, net                    --           --          --
 
     Net income (loss)                 ($543,801)      $8,704    $342,269
 
 
                                      Three Months Ended September 30, 2005
 
                                                     SURGICAL
                                                     PRODUCTS
                                       SURGICAL        AND
                                       SERVICES       OTHER        TOTAL
     Revenues                         $1,903,336   $1,473,461   $7,623,838
     Costs of revenues                 1,465,502      865,351    4,303,384
      Gross profit                       437,834      608,110    3,320,454
      Gross profit %                        23.0%        41.3%        43.6%
 
     Allocated Operating expenses:
      Selling, general and
       administrative                    308,701      157,269    2,790,360
      Engineering and product
       development                            --      161,987      304,935
 
     Unallocated Operating expenses           --           --    1,735,818
                                         308,701      319,256    4,831,113
     Income (loss) from operations       129,133      288,854   (1,510,659)
 
     Other income                                                  244,988
     Interest expense, net                    --           --      (84,229)
 
     Net income (loss)                  $129,133     $288,854  ($1,349,900)
 
 

SOURCE PhotoMedex, Inc.

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