WESTBOROUGH, Mass., Nov. 3, 2009 (GLOBE NEWSWIRE) -- Viking Systems, Inc. (OTCBB:VKNG), a supplier of 2D and 3D visualization systems for the medical market, today announced results for the quarter ended September 30, 2009. The Company reported that it has made significant progress in its objective to reach sustainable positive cash flow from operations and that it is exploring strategic and financing options in order to fund anticipated 2010 operating losses while the Company develops and launches its "Next Generation" 3DHD Visualization System. Additionally, the Company discussed a significant order for its current 3Di system, its technology outlook and several pending changes in its management and governance structure.
Third quarter and year-to-date financial results
Sales. Sales were $1,995,614 for the three months ended September 30, 2009 and $1,585,826 for the three months ended September 30, 2008, representing an increase of 26%. For the nine months ended September 30, 2009, sales increased 16% to $5,149,504 compared with the same period in the prior year. The increase in sales during the quarter ended September 30, 2009 was due to increased sales of approximately $590,000 of a proprietary visualization system designed for and distributed by one specific customer as they elected to increase inventory levels of such product. Sales to this customer increased by approximately $1,210,000 during the nine months ended September 30, 2009 compared with the same period in the prior year.
Net loss. The net loss was $195,877, or $0.00 per share for the quarter ended September 30, 2009 compared with a net loss of $43,599, or $0.00 per share for the same period in 2008. Other income included a $1,000,000 license fee in the quarter ended September 30, 2008. For the nine month periods ended September 30, 2009 and 2008 the Company incurred net losses of $882,669 or $0.02 and $5,055,726 or $0.12 per share, respectively.
Operating loss. As a result of increased sales, higher margins and reduced operating expenses the Company has substantially reduced its operating losses. The operating loss was $193,316 for the quarter ended September 30, 2009 compared with $1,044,557 for the same period in 2008. For the nine month periods ended September 30, 2009 and 2008 the Company incurred operating losses of $996,863 and $3,947,760, respectively. The operating loss before non-cash charges was $34,418 for the quarter ended September 30, 2009 compared with $803,047 for the same period in 2008. For the nine month periods ended September 30, 2009 and 2008 the Company incurred operating losses before non-cash charges of $435,654 and $2,595,724, respectively.
U.S. Army Orders 3D Systems
In October 2009, the Company received the largest order in its history for its proprietary 3Di vision systems. This order, totaling approximately $900,000, was from the U.S. Army for deployment of one of our complete 3Di systems at each of seven regional Army Medical Centers throughout the United States. We anticipate having all seven systems installed and operational before-year end 2009. This is a follow-on order to the single system already in place at Walter Reed Army Medical Center in Washington, DC.
Technology Update
In October, a major milestone was achieved when Viking Systems' "Next Generation" 3DHD camera system was demonstrated to the surgical community utilizing a prototype Sony 3DHD flat panel display at the American College of Surgeon's 95th annual Clinical Congress in Chicago. Jed Kennedy, Viking's president and chief operating officer, described the reaction of the medical community saying, "We were extremely pleased with the level of interest shown by all surgical specialties. Well over 1,500 attendees waited their turn to see the interactive 3DHD demonstration and appeared delighted with what they experienced. While 2D high definition cameras now represent the vast majority of placements in the approximately $1 billion surgical video systems market, it is now clear that 3DHD is the next advancement in endoscopic surgical vision." Viking and Sony plan a similar demonstration at MEDICA, the world's largest medical device trade show, held every year in November in Dusseldorf, Germany. In parallel, a group of clinical advisors is being organized to provide guidance on the clinical requirements for this "Next Generation" system.
Later this month, Viking Systems plans to deliver a "designed to specification" prototype high definition 3DHD visualization system to a manufacturer of surgical robotic systems as part of a development agreement. The system prototype is a key deliverable in the completion of the development arrangement. While there can be no assurance that at the completion of the development contract a supply agreement will be awarded, Viking believes that the new product has several unique features that will address specific market needs and that the Company is well positioned to support any production needs for the system.
Over the next twelve months Viking Systems intends to complete the development of its unique "Next Generation" 3DHD Visualization System for Minimally Invasive Surgery and currently plans to launch the system at the American College of Surgeon's 96th annual Clinical Congress in October 2010 in Washington, DC.
Financing Update
Viking disclosed in previous public filings that in the fourth quarter of 2008 it engaged an investment banking firm to assist management in exploring strategic options. A number of third parties executed confidentiality agreements with the Company during this process. Over the past nine months the Company has had and, in some instances, continues to have varying levels of discussion with certain of these parties. However, absent expeditious developments related to a potential sale of the Company, Viking plans to seek adequate financing to support operations during the commercialization of its "Next Generation" 3DHD system.
Management and Governance
When Viking Systems was recapitalized on January 4, 2008, William C. Bopp, currently chairman and chief executive officer, signed a two year employment agreement. At the end of 2009, it is the intention of the Board of Directors to promote and appoint John "Jed" Kennedy, currently president and chief operating officer, to the position of president and chief executive officer. It is anticipated that Mr. Bopp will continue to serve as Chairman of the Board of Directors. Mr. Bopp said, "This transition recognizes the contributions of Mr. Kennedy to the success of Viking Systems to date and the Board's confidence in his leadership ability for the future."
Separately, J. Winder Hughes has tendered his resignation from the Board effective November 2, 2009. Mr. Hughes has indicated his interest in assisting the Company in raising funds and believes it will be in the Company's and his best interest if he is an independent investor able freely to participate in such a financing. Mr. Bopp said, "We have valued Winder Hughes' counsel as a Board member and look forward to a continued association with him should a financing be undertaken."
About Viking Systems, Inc.
Viking Systems, Inc. (OTCBB:VKNG) is a leading worldwide developer, manufacturer and marketer of visualization solutions for complex minimally invasive surgery. The Company partners with medical device companies and healthcare facilities to provide surgeons with proprietary visualization systems enabling minimally invasive surgical procedures, which reduce patient trauma and recovery time. For more information visit the Company's website at: www.vikingsystems.com
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates reflecting the best judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors, including the following: the impact of the global economic recession and tight credit market and related impact on health care spending; possible health care reform in the United States and its implications on hospital spending, reimbursement, and fees which may be levied on certain medical device companies; timing and success of product development and market acceptance of developed products; regulatory approvals, clearances and restrictions; guidelines and recommendations in the health care and patient communities; intellectual property positions and litigation; competition in the medical device industry and in the specific markets of surgery in which Viking Systems operates; unanticipated manufacturing disruptions; the inability to meet demand for products, and the other factors detailed from time to time under the heading "Risk Factors" in our report on Form 10-K for the year ended December 31, 2008, as updated from time to time by our quarterly reports on Form 10-Q and our other filings with the Securities and Exchange Commission. Statements concerning forecasts, revenue growth, procedure growth, future financial results, and statements using words such as "estimate", "project", "plan", "intend", "expect", "anticipate", "believe" and similar expressions are intended to identify forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
VIKING SYSTEMS, INC.
Balance Sheets - Unaudited
September 30, December 31,
2009 2008
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 214,510 $ 168,767
Accounts receivable, net 621,135 837,229
Inventories, net 1,869,458 2,104,764
Prepaid expenses 50,867 151,048
------------- -------------
Total current assets 2,755,970 3,261,808
Property and equipment, net 55,249 223,609
Intangible assets, net 157,500 210,000
------------- -------------
Total assets $ 2,968,719 $ 3,695,417
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,174,668 $ 1,432,460
Accrued liabilities 772,873 794,219
Deferred revenue 175,005 51,254
Capital lease obligations -- 31,821
------------- -------------
Total current liabilities 2,122,546 2,309,754
Commitments and contingencies
Preferred Stock, 25,000,000 shares
authorized
Series B redeemable preferred stock,
$0.001 par value; No shares outstanding
at September 30, 2009 and December 31,
2008 -- --
Stockholders' Equity:
Common stock, $0.001 par value,
400,000,000 shares authorized; and
42,715,110 issued and outstanding at
September 30, 2009 and December 31, 2008 42,715 42,715
Additional paid-in capital 26,909,786 26,566,607
Accumulated deficit (26,106,328) (25,223,659)
------------- -------------
Total stockholders' equity 846,173 1,385,663
------------- -------------
Total liabilities and stockholders'
equity $ 2,968,719 $ 3,695,417
============= =============
VIKING SYSTEMS, INC.
Statements of Operations - Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2009 2008 2009 2008
------------- ------------- ------------- ------------
Sales, net $ 1,995,614 $ 1,585,826 $ 5,149,504 $ 4,447,528
Cost of sales
Cost of
goods sold 1,508,042 1,261,819 3,839,690 3,800,380
Inventory
valuation
charge -- 372,440 -- 372,440
------------- ------------- ------------- ------------
Total cost of
sales 1,508,042 1,634,259 3,839,690 4,172,820
------------- ------------- ------------- -------------
Gross
(loss)
profit 487,572 (48,433) 1,309,814 274,708
------------- ------------- ------------- -------------
Operating
expenses:
Selling and
marketing 174,252 278,927 685,226 1,072,491
Research and
development 121,951 183,711 402,751 613,917
General and
administrative 384,685 533,486 1,218,700 2,536,060
------------- ------------- ------------- -------------
Total
operating
expenses 680,888 996,124 2,306,677 4,222,468
------------- ------------- ------------- -------------
Operating
loss (193,316) (1,044,557) (996,863) (3,947,760)
Other income
(expense):
Interest
income 199 1,432 949 19,503
Interest
expense (2,760) (1,272) (3,815) (3,052)
Loss on
recapitalization
transaction -- -- -- (2,703,776)
License fee -- 1,000,000 115,000 1,000,000
Other income -- 798 2,060 272,298
Gain on
derivative
liability -- -- -- 307,061
------------- ------------- ------------- -------------
Total other
income
(expense) (2,561) 1,000,958 114,194 (1,107,966)
------------- ------------- ------------- -------------
Net loss $ (195,877) $ (43,599) $ (882,669) $ (5,055,726)
============= ============= ============= =============
Net loss per
share - basic
and diluted $ (0.00) $ (0.00) $ (0.02) $ (0.12)
============= ============= ============= =============
Weighted
average
shares -
basic and
diluted 42,715,110 42,556,610 42,715,110 42,105,975
============= ============= ============= =============
Operating Loss Before Non-Cash Charges
A reconciliation of net loss in accordance with U.S. generally accepted accounting principles (GAAP) to the non-GAAP measure of operating loss before non-cash charges is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2009 2008 2009 2008
------------- ------------- ------------- -------------
Net loss, as
reported $ (195,877) $ (43,599) $ (882,669) $ (5,055,726)
Adjustments:
Total other
(income)/
expense 2,561 (1,000,958) (114,194) 1,107,966
Non-cash stock
option
expense 113,161 120,533 343,179 965,857
Depreciation
and
amortization 45,737 120,977 218,030 386,179
------------- ------------- ------------- -------------
Operating loss
before non-
cash charges $ (34,418) $ (803,047) $ (435,654) $ (2,595,724)
============= ============= ============= =============