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MINRAD International, Inc. Announces Fourth Quarter 2006 Financial Results
ORCHARD PARK, N.Y., March 30 /PRNewswire-FirstCall/ -- MINRAD International, Inc. (AMEX: BUF) today announced its financial results for the quarter ended December 31, 2006. The Company generated revenue of $5,892,000 for the quarter and $16,341,000 for the year ended December 31, 2006. This compared to revenue of $2,466,000 in the same quarter of 2005 and $8,345,000 for all of 2005. 4th Quarter Year Ended December 31,
$ Thousands 2006 2005 % 2006 2005 %
United States 951 527 80% 7,062 2,465 186%
International 4,941 1,939 155% 9,279 5,880 58%
Total 5,892 2,466 139% 16,341 8,345 96%
Revenue and Gross Profit
Sales in the fourth quarter of 2006 increased to $5,892,000 an increase of 139% over the fourth quarter of 2005. The primary increase in sales was due the increase of sales of sevoflurane. In the fourth quarter of 2006, sales of sevoflurane comprised approximately 72% of the quarter's revenue. Gross profit in the fourth quarter of 2006 was $1,259,000, or 21% of sales, as compared to $1,017,000 or 41% of sales in the fourth quarter of 2005. For the year ended December 31, 2006, gross profit was $5,587,000 or 34% as compared to a gross profit of $3,516,000 or 42% of sales for 2005. The decrease in margins in the fourth quarter is due to several items, including difficulties in expanding the production volumes in sevoflurane, producing sevoflurane in equipment which was originally designed for other compounds, mix of product sales, and customer mix. We believe these items will be alleviated by the end of 2007 as a result of a number of steps we are undertaking, including: (a) completion of our anesthesia plant expansion (which will allow for dedicated lines for each compound, which are specifically designed for each compound, while eliminating shutdowns as we switch between lines), (b) change in customer mix (allowing for higher margins), and (c) increased economies of scale both on the production and purchasing cycles. Operating Expenses: Sales & Marketing In the fourth quarter of 2006, sales and marketing increased by $1,251,000, or 196% as compared to the fourth quarter of 2005. As a percentage of revenue, sales & marketing expenses increased from 26% of revenue during fourth quarter of 2005 to 32% of revenue during the same period in 2006. The primary difference between the two quarters is as a result of the expansion of our domestic and international sales and marketing personnel during 2006. Sales and marketing expense increased by $3,314,000, or 188%, to $5,074,000 for the year ended December 31, 2006 as compared to $1,760,000 for the year ended December 31, 2005. As a percentage of revenue, sales and marketing expenses increased from 21% of revenue during 2005 to 31% of revenue during 2006. This growth in sales and marketing expenses was driven by the expansion of our sales organization both domestically and internationally to accommodate anticipated expanded product launches in future periods. Growth in the field sales organization resulted in an increase in sales and marketing wages, employer taxes and health benefits of $1,481,000. Expenses related to auto, travel and entertainment for sales and marketing increased by $717,000 year-over-year, reflecting the increase in sales organization employees. Other increases between the two years include an increase of $568,000 in commissions and incentives due to an increase in sales and an increase of $160,000 in marketing and tradeshows expenses in the year ended December 31, 2006 as compared to the year ended December 31, 2005. Expensing employee options resulted in an increase of $267,000 non-cash expense for the year ended December 31, 2006 when compared to the same 2005. We believe that as a percentage of revenue our sales and marketing expenses will decline in future periods as sales increase and growth in related expenses levels off. Research & Development In the fourth quarter of 2006, research & development increased by $560,000, or 112% as compared to the fourth quarter of 2005. As a percentage of revenue, research & development expenses decreased from 20% of revenue during fourth quarter of 2005 to 18% of revenue in the fourth quarter of 2006. The primary cause of the increase in expenses between the two quarters is the expansion of our research and development programs (and associated personnel costs) related to our three product lines; anesthesia & analgesia, real-time image guidance, and conscious sedation. Research and development expenses for the year ended December 31, 2006 increased by $1,112,000, or 62%, to $2,916,000 from $1,804,000 in 2005. As a percentage of revenue, these expenses decreased from 22% for the year ended December 31, 2005 to 18% for 2006. The increase between the two years was due to an expansion of our research and development efforts related to our anesthesia & analgesia, real-time image guidance, and conscious sedation projects. Growth in research and development personnel expenses of approximately $486,000 was due primarily to the increase of staff working on our development projects. Expensing of employee options granted to research and development employees resulted in an increase in operating expenses of $108,000 in the year ended December 31 2006 as compared to 2005. Finance & Administration In the fourth quarter of 2006, finance & administration expenses increased by $633,000, or 91% as compared to the fourth quarter of 2005. As a percentage of revenue, finance & administration expenses decreased from 28% of revenue during the fourth quarter of 2005 to 23% of revenue during the same quarter in 2006. The increase in costs between the two periods is as a result of a number of factors, including; increased personnel costs, the move to our new facility in Orchard Park, NY (which resulted in additional depreciation and rental expenses) and professional services. Finance and administration expenses increased by $1,882,000 or 68%, to $4,636,000 for the year ended December 31, 2006 from $2,754,000 in 2005. The largest part of the increase, $477,000, between years was driven by the increase in employment costs driven by changes in and hiring of additional employees (including severance expenses). Loan fees increased $173,000, insurance and taxes increased $174,000, and rent increased $128,000 in 2006 as compared to 2005. Expensing of options granted to finance and administration resulted in an increase in operating expenses of $284,000 for the year ended December 31, 2006 as compared to 2005. For the fourth quarter, the Company experienced a loss available to common shareholders of $(3,011,000), $(0.07) per common share. This compares with a loss available to common shareholders of $(1,143,000), $(0.04) per common share for the fourth quarter in 2005. For the year ended December 31, 2006 the Company experienced a loss of $(7,272,000), $(0.20) per common share. The loss available to common shareholders for 2005 was $(12,053,000), $(0.42) per common share. In the second quarter of 2005 there were non cash dividends of $6,599,000 related to the preferred stock offering in that time period. On an operating basis, the loss for the quarter of $(3,020,000) compares to a loss of $(817,000) for the fourth quarter in 2005. For the year ended December 31, 2006 the operating loss increased to $(7,039,000) from $(2,802,000) for 2005. Contact: Timothy Sheehan, VP - Corporate Development tsheehan@minrad.com (716) 855-1068 http://www.minrad.com/ About the Company MINRAD International, Inc. is an interventional pain management company with real-time image guidance and anesthesia and analgesia product lines. The real-time image guidance products facilitate minimally invasive surgery especially for pain management and have broad applications in orthopedics, neurosurgery, and interventional radiology. These devices enable medical professionals to improve the accuracy of interventional procedures and reduce radiation exposure. MINRAD International also manufactures and markets generic inhalation anesthetics for use in connection with human and veterinary surgical procedures. The company is developing a drug/drug delivery system for conscious sedation, which, similar to nitrous oxide in dental surgery, provides a patient with pain relief without loss of consciousness. Additional information can be found at the company's website, http://www.minrad.com/. The information contained in this news release, other than historical information, consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. Factors that may cause actual results to differ materially from those expressed or implied by its forward-looking statements include, but are not limited to, Minrad International's limited operating history and business development associated with being a growth stage company; its dependence on key personnel; its need to attract and retain technical and managerial personnel; its ability to execute its business strategy; the intense competition it faces; its ability to protect its intellectual property and proprietary technologies; its exposure to product liability claims resulting from the use of its products; general economic and capital market conditions; financial conditions of its customers and their perception of its financial condition relative to that of its competitors; as well as those risks described under the heading "Risk Factors" of Minrad International's Form 10-KSB, filed with the Securities and Exchange Commission on March 29, 2006. Although Minrad International, Inc. believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS 4th QUARTER ENDED DECEMBER 31, 2006 (UNAUDITED) COMPARED TO 4th QUARTER ENDED DECEMBER 31, 2005 (UNAUDITED)
IN THOUSANDS
Three-Month Periods
Ended
December 31, December 31,
2006 2005
Revenue $5,892 $2,466
Cost of goods sold 4,633 1,449
Gross profit 1,259 1,017
Operating expenses:
Sales and marketing 1,890 639
Research and development 1,060 500
Finance and administrative 1,329 695
Total operating expenses 4,279 1,834
Operating loss (3,020) (817)
Interest expense:
Stockholders and affiliates - (54)
Bank and other - (73)
Interest Income 223 -
Loss on disposal of property and equipment (52) -
Total non-operating expenses 171 (127)
Net Loss (2,849) (944)
Less Preferred Stock
Dividends
Cash dividends (162) (171)
Non cash dividends - -
Net loss available for common stockholders $(3,011) $(1,115)
Net Loss per share basic and diluted $(0.07) $(0.04)
Weighted average common shares
outstanding basic and diluted 42,067 28,519
MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2006 (UNAUDITED) COMPARED TO YEAR ENDED
DECEMBER 31, 2005 (UNAUDITED)
IN THOUSANDS
Year Ended
December 31, December 31,
2006 2005
Revenue $16,340 $8,345
Cost of goods sold 10,753 4,829
Gross profit 5,587 3,516
Operating expenses:
Sales and marketing 5,074 1,760
Research and development 2,916 1,804
Finance and administrative 4,636 2,754
Total operating expenses 12,626 6,318
Operating loss (7,039) (2,802)
Interest expense:
Stockholders and affiliates - (2,015)
Bank and other (155) (267)
Interest Income 642 -
Loss on disposal of property and equipment (51) -
Total non-operating expenses 436 (2,282)
Net Loss (6,603) (5,084)
Less Preferred
Stock Dividends
Cash dividends (486) (370)
Non cash dividends (183) (6,599)
Net loss available for common stockholders $(7,272) $(12,053)
Net Loss per share basic and diluted $(0.20) $(0.42)
Weighted average common shares
outstanding basic and diluted 36,639 28,519
MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
IN THOUSANDS
December 31, December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $4,664 $670
Investments 7,249 -
Accounts receivable 10,473 3,459
Interest Receivable 87 -
Inventories, net 4,359 3,860
Prepaid expenses and other current assets 1,477 962
Total current assets 28,309 8,951
Net property and equipment 6,981 1,069
Other assets 439 163
Total assets $35,729 $10,183
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank demand note payable $- $2,720
Accounts payable 965 2,542
Dividends payable - 170
Accrued expenses 1,262 405
Total current liabilities 2,227 5,837
Stockholders' equity 33,502 4,346
Total liabilities and stockholders' equity $35,729 $10,183
MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS (UNAUDITED)
IN THOUSANDS
Year Ended
December 31, December 31,
2006 2005
Cash flows from operating activities:
Net loss $(6,603) $(5,084)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 590 187
Stock based compensation on options
extended and granted to non-employees 841 121
Loss on disposal of property and equipment 51 -
Amortization of bond discount (43) -
Decrease in allowance for doubtful accounts - (317)
Amortization of note discount - 925
Warrants issued for guarantee - 981
Increase in assets:
Accounts receivable (7,013) (2,536)
Interest receivable (87) -
Inventories (499) (2,791)
Prepaid expenses (664) (328)
Increase (decrease) in liabilities:
Accounts payable (2,450) (261)
Accrued expenses 855 (420)
Net cash used by operating activities (15,021) (9,523)
Cash flows from investing activities:
Purchases of investments (12,424) -
Sales of investments 5,218 -
Purchases of property and equipment (5,497) (376)
Acquisition of other assets (309) (107)
Net cash used by investing activities (13,012) (483)
Cash flows from financing activities:
Borrowings under demand notes payable,
net of costs 400 5,054
Repayments under demand notes payable (3,120) (2,971)
Proceeds from warrants exercised 475 -
Proceeds from sale of common stock,
net of costs 34,511 435
Preferred cash dividends (656) (199)
Proceeds from options exercised 418 239
Principal payments on long-term debt - (1,022)
Net repayments to affiliates - (375)
Net decrease in other assets - 49
Proceeds from sale of preferred stock,
net of costs - 9,463
Net cash provided by financing activities 32,028 10,673
Net increase in cash and cash equivalents 3,994 667
Cash and cash equivalents - beginning of period 670 3
Cash and cash equivalents - end of period $4,664 $670
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