Published on April 2, 2008
LecTec
Corporation
Contact:
Bill Johnson, Controller (952-933-2291 X24)
LecTec
Corporation Reports 2007
Fourth Quarter and Year End Financial Results
and
Announces Annual Meeting April 25, 2008.
March
31, 2008 - - Edina, MN - LecTec Corporation (OTCBB: LECT) reported
today the financial results of the Company for the three and twelve months
ended
December 31, 2007 and 2006. The Company is an intellectual property licensing
and holding company.
Novartis
has launched an adult vapor patch product in the United States for the current
cough/cold and flu season. Product shipments are currently being made to U.S.
retail customers. This is a significant development for the Company in its
effort to rejuvenate its revenue stream. The Company has begun receiving royalty
income based on sales of these vapor patch products under the terms of the
licensing agreement with Novartis. Currently, the Company estimates that it
will
receive $100,000 to $400,000 annually in royalty income under the licensing
agreement the Company has with Novartis. There can be no assurance that the
Company will realize such amounts because there are many factors that the
Company cannot control.
Results
of Continuing Operations
The
Company recorded royalty income of $100,431 for the fourth quarter ended
December 31, 2007, consisting of $78,485 resulting from sales of a new adult
vapor patch, and $21,946 from the settlement of a royalty audit the Company
completed with Novartis Consumer Health (Novartis) under the Company’s only
licensing agreement. The Company had no revenue from operations for the fourth
quarter of 2006. The Company had a net loss from continuing operations of
($19,568) or ($0.00) per basic and diluted share for the fourth quarter of
2007,
compared to a net loss from continuing operations of ($115,972) or ($0.03)
per
basic and diluted share for the fourth quarter of 2006. The improvement in
the
net loss from continuing operations of $96,404 for the fourth quarter of 2007
compared to the same quarter of 2006 was due primarily to the lack of earned
royalty income in the fourth quarter of 2006.
The
Company recorded royalty income of $100,431 for the year ended December 31,
2007, compared to royalty income of $126,660 for the year ended December 31,
2006. The decline in royalty income is attributable to the previously announced
product recall of pediatric patches by Novartis. Net loss from continuing
operations for 2007 was ($748,980) or ($0.18) per basic and diluted share,
compared to a net loss from continuing operations for 2006 of ($335,532), or
a
loss of ($0.08) per basic and diluted share. The decrease of $413,448 in the
results from continuing operations for 2007 as compared to 2006 was due
primarily to an increase in compensation expense of $332,925 as a result of
the
Company granting fully vested options during 2007, increases in consulting
and
legal expenses relating to the Company’s efforts to evaluate the value of the
Company’s Intellectual Property (“IP”) portfolio for licensing, merger and
acquisition opportunities, new provisional patent costs, and other costs
surrounding potential infringement issues to protect the Company’s IP portfolio.
There was also a decrease of $26,229 in royalty income for 2007 from
2006.
Results
of Discontinued Operations
There
was
no net loss from discontinued operations for the fourth quarter or year ended
December 31, 2007. The net loss from discontinued operations for the fourth
quarter and year ended December 31, 2006 was ($31,650) resulting from increasing
a reserve for sales returns and credits for sales prior to the discontinuance
of
manufacturing operations. The loss per share (basic and diluted) from
discontinued operation was ($0.01) for the fourth quarter and year ended
December 31, 2006.
Net
Results of Operations
Net
loss
for the fourth quarter of 2007 was $19,568, or ($0.00) per basic and diluted
share, compared to a net loss for the fourth quarter of 2006 of ($147,622),
or
($0.04) per basic and diluted share.
Net
loss
for 2007 was ($748,980), or ($0.18) per basic and diluted share, compared to
a
net loss of ($367,182), or ($0.09) per basic and diluted share. The overall
decline in the net loss for the fourth quarter and the year ended December
31,
2007 over the comparable periods in 2006 is due to the reasons stated
above.
Liquidity
Total
assets decreased $414,668 to $1,099,989 at December 31, 2007 from $1,514,657
at
December 31, 2006. Cash and cash equivalents decreased $448,860 to $832,925
at
December 31, 2007 from $1,281,785 at December 31, 2006. The decrease in total
assets and the reduction in cash and cash equivalents resulted primarily from
a
lack of royalty income from Novartis relating to the previously discussed
product recall and the reduction in cash resulting from the general outflow
of
operating expenses.
The
Company believes its existing cash and cash equivalents will be sufficient
to
fund operations through 2008 and 2009, based upon its current cash on hand,
and
the anticipated operating expenses the Company is likely to incur during 2008
and 2009. The Company earns interest on its available cash. The Company earned
interest income of $50,941 and $61,846 during the years ended December 31,
2007
and 2006, respectively.
Other
Information
The
Company will hold its shareholder meeting on Friday April 25, 2008 at 3:00
pm
Central Daylight Time at the Hilton Garden Inn Eden Prairie Hotel, 6330 Point
Chase, Eden Prairie, Minnesota 55344. A proxy statement for the meeting and
a
copy of the Company’s Form 10-KSB will be mailed to shareholders of record as of
March 28, 2008 in April 2008.
This
press release contains forward-looking
statements concerning possible or anticipated future results of operations
or
business developments which are typically preceded by the words “believes,”
“wants,” “expects,” “anticipates,” “intends,” “will,” “may,” “should,” or
similar expressions. Such forward-looking statements are subject to risks and
uncertainties, which could cause results or developments to differ materially
from those, indicated in the forward-looking statements. Such risks and
uncertainties include, but are not limited to, the Company’s dependence on
royalty payments from Novartis Consumer Health, Inc. (“Novartis”), which
recently began selling an adult vapor patch licensed by the Company, the
Company’s dependence on key personnel and Board of Director members, the success
or failure of any attempt by the Company to protect or enforce its patents
and
territories of coverage, the issuance of new accounting pronouncements, the
availability of opportunities for licensing agreements related to patents that
the Company holds, limitations on market expansion opportunities, and other
risks and uncertainties detailed from time to time in the Company’s filings with
the Securities and Exchange Commission, and particularly as described in the
“Cautionary Statements” filed as Exhibit 99.01 to our Form 10-KSB for the year
ended December 31, 2006.
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LecTec
Corporation
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Statements
of Operations
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||||||||||
|
(in
thousands except per share
data)
|
||||||||||
|
|
|
Three
months ended
|
|
Twelve
months ended
|
|||||||||
|
December
31,
|
December
31,
|
||||||||||||
|
2007
|
2006
|
2007
|
2006
|
||||||||||
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|||||||||||
|
CONTINUING
OPERATIONS:
|
|||||||||||||
|
Revenue
- royalty and licensing fees
|
$
|
100
|
$
|
-
|
$
|
100
|
$
|
127
|
|||||
|
Operating
expenses
|
130
|
132
|
900
|
524
|
|||||||||
|
Loss
from continuing operations
|
(30
|
)
|
(132
|
)
|
(800
|
)
|
(397
|
)
|
|||||
|
Interest
income
|
10
|
16
|
51
|
62
|
|||||||||
|
Net
loss from continuing operations
|
(20
|
)
|
(116
|
)
|
(749
|
)
|
(335
|
)
|
|||||
|
DISCONTINUED
OPERATIONS:
|
|||||||||||||
|
Net
loss from continuing operations
|
-
|
(32
|
)
|
-
|
(32
|
)
|
|||||||
|
NET
LOSS
|
$
|
(20
|
)
|
$
|
(148
|
)
|
$
|
(749
|
)
|
$
|
(367
|
)
|
|
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING:
|
|||||||||||||
|
Basic
and diluted
|
4,176
|
4,149
|
4,166
|
4,149
|
|||||||||
|
LOSS
PER COMMON SHARE:
|
|||||||||||||
|
Basic
and diluted -
|
|||||||||||||
|
Continuing
operations
|
$
|
-
|
$
|
(0.03
|
)
|
$
|
(0.18
|
)
|
$
|
(0.08
|
)
|
||
|
Discontinued
operations
|
-
|
(0.01
|
)
|
-
|
(0.01
|
)
|
|||||||
|
Total
|
$
|
-
|
$
|
(0.04
|
)
|
$
|
(0.18
|
)
|
$
|
(0.09
|
)
|
||
|
Balance
Sheet Data
|
|
(in
thousands)
|
|
(unaudited)
|
|||||||
|
December
31, 2007
|
December
31, 2006
|
||||||
|
Cash
and cash equivalents
|
$
|
833
|
$
|
1,282
|
|||
|
Royalty
receivable
|
100
|
-
|
|||||
|
Prepaid
expenses and other
|
63
|
66
|
|||||
|
Total
current assets
|
996
|
1,348
|
|||||
|
Other
assets
|
104
|
167
|
|||||
|
Total
assets
|
$
|
1,100
|
$
|
1,515
|
|||
|
Accrued
expenses
|
$
|
71
|
$
|
88
|
|||
|
Discontinued
operations - liabilities
|
130
|
130
|
|||||
|
Total
current liabilities
|
201
|
218
|
|||||
|
Shareholders'
equity
|
899
|
1,297
|
|||||
|
Total
liabilities and shareholders' equity
|
$
|
1,100
|
$
|
1,515
|
|||
|
Working
capital
|
$
|
795
|
$
|
1,130
|
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