HMGN Hemagen Diagnostics Inc (CE)

Hemagen Diagnostics, Inc. (OTC:HMGN.OB) a biotechnology Company that develops, manufactures and markets proprietary medical diagnostic test kits, today reported its operating results for the fiscal year ended September 30, 2006. The net income for the year ended September 30, 2006 was $313,000 or $0.02 per share, which included a gain on sale of a building of $865,000, compared to a net loss of ($1,337,000) or ($0.09) per share during the prior fiscal year. Excluding the gain on sale the net loss would have been ($552,000) or ($0.03) cents per share compared to the net loss of ($1,337,000) or ($0.09) per share for the prior fiscal year. Operating Loss for the year ended September 30, 2006 was ($63,000) as compared to an Operating Loss of ($875,000) in the prior fiscal year. This decrease in operating loss is mainly attributed to higher gross margins from the previous year. After adjusting for non-cash charges including depreciation, amortization, non-cash interest, and other non-cash charges, the net income for the year ended September 30, 2006 was $413,000 compared to a net loss of ($820,000) for the year ended September 30, 2005. Revenues for the year ended September 30, 2006 decreased 4% to $7,250,000 compared to $7,586,000 during the prior fiscal year ended September 30, 2005. The overall decrease in sales resulted from $286,000 of decreased sales in the Company�s Analyst� product line, $278,000 of decreased sales in the Company�s Raichem product line, and was offset by $148,000 of increased sales of the Company�s Virgo autoimmune and infectious disease products line. The Analyst� product line sales declines mainly resulted from lower sales to physician office laboratories and the distributors that support that market. The decrease in the Company�s Raichem division resulted from the loss of sales to certain top customers. The increase in the Virgo product line sales mainly resulted from growth at the Company�s Brazilian subsidiary. Gross Margins for fiscal year 2006 were 36% as compared to 25% in fiscal year 2005. The gross margins for the year increased 11% in the current year 2006 as a result of lower production costs and higher production levels in certain product lines as compared to fiscal 2005. At September 30, 2006, Hemagen had $151,000 of cash on hand, working capital of $2,927,000 and a current ratio of 3.3 to 1.0. At the prior fiscal year end, the Company had $272,000 of cash on hand, working capital of $1,683,000 and a current ratio of 1.65 to 1.0. In the prior year the current ratio was affected by a construction loan for the Company�s new facility that was purchased in June 2005 that was to be used for the company�s new Corporate Headquarters. Therefore, $650,000 of debt was classified as short-term obligations that would have been converted to permanent long term financing once the build out was completed. The current ratio was also negatively affected by the borrowings on the traditional line of credit facility which was mainly used for the acquisition and expenses related to the Corporate facility. In July the building was sold and the Company recognized a gain on sale of $865,000 and all loans related to the building including the working capital line were paid off at that time. In addition, the company has a working capital line of credit for up to $500,000 based on the domestic receivables and inventory of the company and which provides for interest at the rate of the Prime Rate plus 3/4%. At September 30, 2006 the Company had no outstanding borrowings on this line of credit. William P. Hales, President and CEO said, �We are pleased to announce earnings and improved margins. We are optimistic about fiscal year 2007 revenues and certain new product introductions that are set to take place this year." HEMAGEN DIAGNOSTICS, INC AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) � Twelve Months Ended Sept 30, Sept 30, 2006� 2005� Revenues 7,250,000� $7,586,000� Costs and Expenses: Cost of Product sales 4,671,000� 5,677,000� Research and development 317,000� 281,000� Selling, general and administrative 2,326,000� 2,351,000� Impairment of goodwill --� 152,000� Other operating expenses --� --� � � Operating income (loss) (63,000) (875,000) Other income (expenses), net 376,000� (462,000) � Net income (loss) $313,000� ($1,337,000) Net income (loss) per share -Basic and Diluted $0.02� ($0.09) RECONCILIATION OF EARNINGS BEFORE NON-CASH ITEMS � Twelve Months Ended Sept 30, Sept 30, 2006� 2005� Net income (loss) $313,000� ($1,337,000) Adjusted for: Depreciation and Amortization 44,000� 301,000� Non-cash amortization of debt discount 56,000� 63,000� Other non cash charges, write off of goodwill --� 153,000� Net income (loss) before non cash charges $413,000� ($820,000) Hemagen Diagnostics, Inc., is a biotechnology company that develops, manufactures, and markets more than 150 FDA-cleared proprietary medical diagnostic test kits used to aid in the diagnosis of certain autoimmune and infectious diseases. Hemagen has three different product lines. The Virgo� product line consists of diagnostic test kits that are used to aid in the diagnosis of certain autoimmune and infectious diseases, using ELISA, Immunoflourescence, and hemagglutination technology. The Raichem� product line consists of a complete line of clinical chemistry reagents that are sold through Hemagen�s wholly owned subsidiary, Reagents Applications, Inc., under the brand name Raichem, as well as under various OEM arrangements. The Analyst� product line is an FDA-cleared clinical chemistry analyzer system, including consumables, that is used to measure important constituents in human and animal blood. In the United States, the Company sells its products through distributors and directly to physicians, veterinarians, clinical laboratories and blood banks and on a private-label basis through multinational distributors. Internationally, the Company sells its products primarily through distributors. Hemagen�s products are used in many of the largest Laboratories, Hospitals, and Blood Banks around the world. The company focuses on markets that offer significant growth opportunities. The Company was incorporated in 1985 and became a public company in 1993. Except for any historical information contained herein, the matters discussed in this press release contain forward-looking statements that involve risks and uncertainties, including those described in the Company�s Securities and Exchange Commission Reports and Filings. Certain Statements contained in this News Bulletin that are not historical facts constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created by that Act. Reliance should not be placed on forward looking statements because they involve unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied. Forward looking statements may be identified by words such as estimates, anticipates, projects, plans, expects, intends, believes, should and similar expressions and by the context in which they are used. Such statements are based upon current expectations of the Company and speak only as of the date made. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which they are made. Statements concerning the establishments of reserves and adjustments for dated and obsolete products, expected financial performance, on-going business strategies and possible future action, which Hemagen intends to pursue to achieve strategic objectives, constitute forward-looking information. The sufficiency of such reserves and adjustments, expected performance, implementation of on-going business strategies and possible future action, the achievement of financial performance are each subject to numerous conditions, uncertainties and risk factors. Factors which could cause actual performance to differ materially from these forward looking statements, include without limitation, management�s analysis of Hemagen�s assets, liabilities and operations, the failure to sell date sensitive inventory prior to its expiration, the inability of particular products to support goodwill allocated to them, competition, new product development by competitors which could render particular products obsolete, the inability to develop or acquire and successfully introduce new products or improvements of existing product costs and difficulties in complying with laws and regulations administered by the U. S. Food and Drug Administration and the ability to assimilate successfully product acquisitions.