Applied Imaging Files Restated SEC Reports and Announces
Third-Quarter 2004 Results SAN JOSE, Calif., March 3
/PRNewswire-FirstCall/ -- Applied Imaging Corp. (NASDAQ:AICXE)
today announced that it has filed with the Securities and Exchange
Commission (SEC) the Company's restated financial statements on
Form 10-K/A for the fiscal year ended December 31, 2003, its
quarterly financial statements on Form 10-Q/A for the first and
second quarters of the fiscal year ending December 31, 2004, and
its Form 10-Q for the third quarter ended September 30, 2004. Third
Quarter Financial Results Revenues for the three months ended
September 30, 2004 were $5.7 million, an increase of 39.0% as
compared to $4.1 million, as restated, for the third quarter of
2003. The $1.6 million increase in revenues in the third quarter
was due primarily to the recognition of revenue on Ariol(R) systems
from sales contracts entered into in prior periods and for which
the Company has now fulfilled all obligations under the terms of
the original sales contract. Revenue from these sales contracts was
deferred from prior periods because the company had not at the time
completed development of the feature-rich Ariol(R) 2.0 software
release. Ariol(R) 2.0 was commercialized in August 2004. Gross
profit increased to $3.2 million in the third quarter of 2004, from
$2.2 million in the third quarter of 2003, as restated. Gross
margin for the third quarter of 2004 was 55.6%, as compared to
55.1% in the prior year period. Operating expenses were $3.4
million for the quarter, as compared to $3.5 million in the third
quarter of 2003. The Company reported a net loss of $237,000, or
$0.01 per share, for the quarter, as compared to a loss of
$1,233,000, as restated, or $0.08 per share, in the third quarter
of 2003. Nine Months Financial Results Revenues for the nine months
ended September 30, 2004 were $14.9 million, an increase of 7.7% as
compared to $13.8 million, as restated, for the corresponding
period in 2003. For the nine months ended September 30, 2004, gross
profit increased by 9.2% to $8.8 million, from $8.1 million, as
restated, in the same period of 2003. Gross margin for the first
nine months of 2004 was 59.0%, as compared to 58.2%, in the prior
year period. Operating expenses were $10.6 million for the first
nine months of 2004, as compared to $10.2 million for the same
period of 2003. The Company reported a net loss of $1.9 million, or
$0.11 per share, for the first nine months of 2004, as compared to
a loss of $2.1 million, as restated, or $0.13 per share, in the
comparable period of 2003. Financial Condition Cash used by
operations in the nine months ended September 30, 2004 was
$476,000, compared to $615,000 provided by operations in the first
nine months of 2003. Net cash used in operations in the first nine
months of 2004 resulted primarily from a $1.9 million operating
loss and a reduction in deferred revenue of $1.0 million, largely
offset by a reduction of $1.4 million in accounts receivable and a
deferred rent incentive received for our new office facilities of
$695,000. As of September 30, 2004, the Company had cash and cash
equivalents of $4.0 million and working capital of $2.0 million,
compared to $2.0 million and $340,000, respectively, at December
31, 2003. Restated Financials Results for 2004 and 2003 Periods On
November 15, 2004, the Company announced its intent to restate the
financial results for the fiscal year ended December 31, 2003 and
the quarterly financial results for the first and second quarters
of the fiscal year ending December 31, 2004. During the third
quarter of 2004, a transaction, which was recorded in June 2004,
was identified where revenue was recognized in a manner
inconsistent with the Company's policies and procedures then in
effect. Following the identification of this transaction, the Audit
Committee commenced an investigation. During the course of its
investigation, the Audit Committee identified several revenue
transactions principally recorded in fiscal 2002 and 2003 involving
its Cytovision and Ariol systems in which commitments were made for
the future delivery of software applications then under
development. Statement of Position (SOP) 97-2 "Software Revenue
Recognition" requires that vendor specific objective evidence
(VSOE) of the price attributable to the fair value of such "future
deliverables" be established in order to recognize a portion of
revenue in the reporting period in which the sale was originally
made. The Company did not have VSOE established for these "future
deliverables" at the time revenue was initially recognized. The
investigation also uncovered certain other transactions identified
where the Company recognized revenue inappropriately or without the
criteria necessary for revenue recognition under SOP 97-2. As a
result, the Company subsequently decided to restate its 2002
financial results as well. As previously reported on the Company's
Current Report on Form 8-K dated November 10, 2004, the Company
estimated that the adjustments to its income statement related to
the transactions investigated would result in the deferral of $1.0
million to $1.5 million in previously recognized revenues from 2003
until the third and fourth quarter reporting periods in 2004. The
Company also estimated that approximately $0.3 million to $0.5
million in revenues previously recognized related to the
investigated transactions in the first half of 2004 would be
deferred until the third and fourth quarters of 2004. The actual
impact of the adjustments to the Company's income statement related
to the investigated transactions was as follows: * For the year
ended December 31, 2002, revenue was reduced by $0.6 million from
$21.2 million to $20.6 million, as restated, and loss per share
increased by ($0.03) from ($0.03) to ($0.06), as restated. * For
the year ended December 31, 2003, revenue was reduced by $1.2
million from $20.2 million to $19.0 million, as restated, and loss
per share increased by ($0.05) from ($0.13) to ($0.18), as
restated. * For the quarter ended March 31, 2004, revenue was
increased by $0.1 million from $4.8 million to $4.9 million, as
restated, and there was no impact on loss per share of ($0.04). *
For the quarter ended June 30, 2004, revenue was increased by $0.1
million from $4.1 million to $4.2 million, as restated, and there
was no impact on loss per share of ($0.06). Additional details
concerning the impact of the restatements are available from the
Company's restated filings on the SEC's website at
http://www.sec.gov/ About Applied Imaging Applied Imaging Corp.,
based in San Jose, California, is the leading supplier of automated
imaging and image analysis systems for the detection and
characterization of chromosomes and molecular markers in genetics
and cancer applications. The Company markets a wide range of
imaging and image analysis systems for fluorescence and brightfield
microscopy, including the Company's Ariol(R), SPOT(TM) and
CytoVision(R) product families. Applied Imaging has installed over
4,000 systems in over 1,000 laboratories in more than 60 countries.
The Company is also developing a system for the detection,
quantification and characterization of circulating tumor cells from
the blood of cancer patients. More information about Applied
Imaging can be found at http://www.aicorp.com/. Safe Harbor
Statement Under the Private Securities Litigation Reform Act of
1995: This press release contains forward looking statements as
defined in the Private Securities Litigation Reform Act of 1995,
regarding, among other matters, the Company's ability to maintain
its listing on the Nasdaq SmallCap market, the Company's future
financial performance, financial condition and future needs for
liquidity, anticipated demand for the Company's products,
strategies to enhance profitability, our ability to research,
develop, patent and commercialize new technology to detect and
characterize circulating tumor cells in peripheral blood, as well
as regulatory approval, clinical value and market size for such a
technology. Actual results could differ materially from those
projected in the forward-looking statements as a result of a number
of factors, including the failure of Applied Imaging to
successfully develop its cancer diagnostics or genetic instrument
business, potentially unacceptable results from its preclinical and
clinical trials of circulating tumor cell enrichment methods and
other such factors as set forth in Applied Imaging's filings with
the Securities and Exchange Commission, including the Form 10-KA
for the Fiscal Year Ended December 31, 2003. The forward-looking
statements in this news release are made as of March 3, 2005, and
Applied Imaging is under no obligation to revise or update the
forward-looking statements. CCG Investor Relations Crocker Coulson,
President 15300 Ventura Boulevard, Suite 303 Sherman Oaks, CA 91403
(818) 789-0100 Applied Imaging Corp. Robin Stracey, Chief Executive
Officer 120 Baytech Drive, San Jose, CA 95134 (408) 719-6459
Applied Imaging Corp. and Subsidiaries Condensed Consolidated
Statements of Operations (Unaudited, in thousands, except per share
data) Three months ended Nine months ended September 30, September
30, 2004 Restated 2003 2004 Restated 2003 Revenues $5,709 $4,084
$14,895 $13,827 Cost of revenues 2,535 1,834 6,103 5,775 Gross
profit 3,174 2,250 8,792 8,052 Operating expenses: Research and
development 887 980 2,622 2,761 Sales and marketing 1,619 1,793
4,956 5,438 General and administrative 910 709 3,040 1,978 Total
operating expenses 3,416 3,482 10,618 10,177 Operating loss (242)
(1,232) (1,826) (2,125) Other income (expense), net 5 (1) (85) 30
Net loss $(237) $(1,233) $(1,911) $(2,095) Net loss per share -
basic and diluted $(0.01) $(0.08) $(0.11) $(0.13) Weighted average
shares outstanding - basic and diluted 19,073 15,961 17,885 15,938
Selected Consolidated Balance Sheet Data (Unaudited, in thousands)
September 30, December 31, 2004 2003 ASSETS Cash, cash equivalents
and restricted cash $4,133 $2,225 Current Assets 11,562 10,561
Total assets $15,245 $13,888 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $9,526 $10,221 Total liabilities 10,423 11,022
Stockholders' equity 4,822 2,866 Total liabilities and
stockholders' equity $15,245 $13,888 Applied Imaging Corp. and
Subsidiaries Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands, except per share data) Nine months ended
September 30, 2004 Restated 2003 Cash flows from operating
activities: Net loss $(1,911) $(2,095) Adjustments to reconcile net
loss to net cash provided by operating activities: Depreciation and
amortization 429 465 Provision for doubtful accounts -- (100) Loss
on sale of property and equipment -- 2 Changes in operating assets
and liabilities: Trade accounts receivable 1,353 2,698 Inventories
(413) 198 Prepaid expenses and other current assets (33) (536)
Other assets 99 (213) Accounts payable 22 (500) Accrued expenses
245 66 Deferred revenues (962) 630 Deferred rent incentive 695 --
Net cash provided by (used in) operating activities: (476) 615 Cash
flows from investing activities: Purchases of property and
equipment (884) (259) Net cash used in investing activities (884)
(259) Cash flows from financing activities: Net proceeds from
issuance of common stock 3,867 56 Bank loan proceeds 8,521 9,009
Bank loan payments (9,120) (10,190) Restricted cash (2) (11) Net
cash provided by (used in) financing activities: 3,266 -- (1,136)
Net increase in cash and cash equivalents 1,906 (780) Cash and cash
equivalents at the beginning of period 2,047 2,897 Cash and cash
equivalents at end of period $3,953 $2,117 DATASOURCE: Applied
Imaging Corp. CONTACT: Crocker Coulson, President of CCG Investor
Relations, +1-818-789-0100, , for Applied Imaging Corp.; or Robin
Stracey, Chief Executive Officer of Applied Imaging Corp.,
+1-408-719-6459, Web site: http://www.aicorp.com/
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