MonoGen, Inc.
TSX : MOG

MonoGen, Inc.

November 14, 2008 13:42 ET

MonoGen Reports 2008 Q3 & YTD Results

LINCOLNSHIRE, ILLINOIS--(Marketwire - Nov. 14, 2008) - MonoGen, Inc. (TSX:MOG) today announced its financial results for the three-month and nine-month periods ended September 30, 2008. The Unaudited Interim Consolidated Financial Statements, including our Management's Discussion and Analysis of the results, will be filed with SEDAR (www.sedar.com).

Unless otherwise indicated, all amounts are reported in United States dollars.

RECENT EVENTS

On October 7, 2008, we issued a press release announcing the cessation of commercial operations and a corresponding 75% reduction of our workforce. These actions were in response to our inability to raise additional financing to fund operations due to the recent deterioration of liquidity in the capital markets and increased challenges on the commercial front. As a result, we engaged the services of an investment bank specializing in the life science industry to assist in the process for finding a buyer of the Corporation or its assets. In the event that we are unable to find a buyer, we may be required to liquidate our assets or file for bankruptcy protection.

THIRD-QUARTER RESULTS

The 2008 third-quarter net loss was $43,619,000 or $0.23 loss per basic and diluted share, compared with a 2007 third-quarter loss of $10,893,000 or $0.06 loss per basic and diluted share. Revenue in the third quarter of 2008 was $49,000 compared to nil in the same period in 2007 as a result of the sale of MonoPrep® Pap Tests and related consumable items during the third quarter of 2008.

Research and development expenses decreased to $2,200,000 in the third quarter of 2008, from $2,788,000 for the same period in 2007, primarily due to a reduction in professional fees and regulatory costs associated with receiving United States Food and Drug Administration ("FDA") approval of our manufacturing facility in August 2008.

General and administrative expenses decreased to $1,530,000 in the third quarter of 2008, from $3,160,000 for the same period in 2007, primarily due to the third quarter 2007 charge for severance and termination benefits for the former Chairman and CEO.

Selling and marketing expenses decreased to $1,188,000 in the third quarter of 2008, from $4,451,000 for the same period in 2007, primarily due to the third quarter 2007 charge associated with the fair value of warrants issued as compensation for the cancellation of a distribution agreement, partially offset by an increase in compensation expense related to increased staffing of our direct sales force team and an increase in trade and marketing related initiatives.

During the third quarter of 2008, we recorded asset impairment charges of $35,179,000 and a write-down of inventory of $2,787,000 as a result of the decision to cease commercial operations in October 2008.

YEAR-TO-DATE RESULTS

Net loss for the nine months ended September 30, 2008, was $56,814,000, or a loss of $0.30 per basic and diluted share, compared to a net loss of $20,563,000, or a loss of $0.12 per basic and diluted share for the nine-month period ended September 30, 2007. Revenue for the nine-month period ended September 30, 2008 was $49,000 compared to nil for the nine-month period ended September 30, 2007.

Research and development and regulatory expenses decreased to $7,552,000 for the nine-month period ended September 30, 2008, from $7,707,000 for the same period in 2007, primarily due a reduction in professional fees and regulatory costs associated with receiving FDA approval of our manufacturing facility in August 2008.

General and administrative expenses decreased to $5,180,000 for the nine-month period ended September 30, 2008, from $6,243,000 for the same period in 2007, primarily due to the charge for severance and termination benefits recorded during the comparable period in 2007 for the former Chairman and CEO, partially offset by increases in compensation expense and professional fees and a non-cash charge related to the closure of an administrative office.

Selling and marketing expenses decreased to $3,743,000 for the nine-month period ended September 30, 2008, from $5,546,000 for the same period in 2007, primarily due to a charge recorded in the comparable period in 2007 associated with the fair value of warrants issued as compensation for the cancellation of a distribution agreement, partially offset by an increase in compensation expense related to increased staffing of our direct sales force team and an increase in trade and marketing related initiatives.

During the nine months ended September 30, 2008, we recorded asset impairment charges of $35,179,000 and a write-down of inventory of $2,787,000 as a result of the decision to cease commercial operations in October 2008.

MANAGEMENT COMMENTS

"As I stated in our press release of October 7, 2008, we are obviously very disappointed in the recent events leading us to take the actions that we've taken," commented Ted S. Geiselman, MonoGen President and CEO. "We understand that this news may appear to have come suddenly and unexpectedly and as such, I'd like to add some commentary around that. A confluence of events occurred in the end of September to early October 2008 timeframe that were unforeseen. After several months of preparation and several weeks of execution, the results from an equity raising effort were very disappointing. On October 6, 2008, the investment bank informed MonoGen that it was not going to be able to complete a financing in the current financial environment. In addition, results from our commercial activities were also disappointing as our sales goals for August and September had not been met and the commercial team confirmed that the future forecasts needed to be adjusted down significantly. After analyzing the primary reasons for the commercial difficulty, it was determined that it was primarily product offering based, especially the lack of imaging and an out-of-vial HPV claim, and that significant time and capital would be required to rectify that situation. This additional capital requirement would add even more challenge to any financing activity.

After a presentation of the information described above to our board of directors on October 7, 2008, and in concert with advice from counsel, the board determined that it was in the best interest of our shareholders, creditors and other stakeholders to significantly reduce our cash consumption and to cease commercial operations. Therefore, immediately after the conclusion of the board meeting, we announced the cessation of commercial activities and a corresponding reduction in 75% of our workforce.

In conjunction with this decision, the board directed the investment bank to change its focus from one of raising capital to one of finding a buyer of the Corporation or its assets, which the investment bank began doing effective October 8, 2008. After this process began, and as a result of interest expressed in the imaging technology as a stand-alone business or stand-alone acquisition, we prepared a business case and corresponding presentation which focuses on an imager-only opportunity as an alternative to the complete MonoPrep business for either acquisition or continued funding as a going concern. Many contacts have been made with potential purchasers and investors regarding these various scenarios; however, we do not currently have any material information regarding this process to disclose. We will consider all proposals with the goal of maximizing the value for our shareholders, creditors and other stakeholders. The timeline going forward will be determined based on a balance of cash available versus expressed interest by potential buyers and investors.

I encourage anyone interested in learning more detail surrounding this situation to review our MD&A filed November 14, 2008 at www.sedar.com."

ABOUT MONOGEN

MonoGen, Inc., headquartered in the Chicago area, is a medical device and diagnostics company providing high-quality and cost-effective cytological screening and diagnostic products to healthcare providers in the anatomic pathology industry.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements. Statements preceded by the words believe, expect, anticipate, plan, intend, continue, estimate, may, will, and similar expressions are forward-looking statements. Forward-looking statements are based on our beliefs and assumptions based on information available at the time the assumptions were made. Forward-looking statements relate to, among other things, anticipated financial performance, business prospects, strategies, regulatory developments, new services, market forces, commitments and technological developments. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause our actual results to differ materially from the anticipated results or other expectations expressed. Those risks and uncertainties include, but are not limited to, our ability to raise additional capital, our ability to execute our business plan while maintaining at all times our various regulatory approvals, and the response from existing and potential competitors. Additional discussions of the various risks are contained in our Annual Information Form dated March 19, 2008, which is available on SEDAR (www.sedar.com). Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this document.

CONFERENCE CALL

MonoGen, Inc., will host a teleconference/audio webcast to discuss three-month and nine-month periods ended September 30, 2008, results as well as its business outlook.

TIME: 3:15 PM CST on Friday, November 14, 2008

To participate, please call one of the following numbers at least 15 minutes prior to the start of the event.



Teleconference:

North America: (877) 795-3638
Rest of world: (719) 325-4781

Webcast:

Access at www.monogen.com

Replay: (Available until midnight, Friday, November 21, 2008)

North America: (888) 203-1112
Rest of world: (719) 457-0820

Passcode: 5075224


MonoGen, Inc.

UNAUDITED INTERIM CONSOLIDATED BALANCE SHEETS

(in thousands of United States dollars)

As of As of
September 30, December 31,
2008 2007
$ $
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ASSETS
Current
Cash and cash equivalents 8,931 571
Short-term investments - 11,554
Accounts receivable 49 -
Other receivables 117 236
Inventories 240 1,865
Prepaids and deposits 841 571
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Total current assets 10,178 14,797
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Restricted cash 280 280
Property, plant and equipment, net 866 3,661
Intangible assets, net 310 18,546
Goodwill 4,037 20,132
Other long-term assets 60 -
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15,731 57,416
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 2,604 1,519
Termination benefits - current portion 282 466
Convertible debenture 6,390 -
Convertible promissory note - 3,192
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Total current liabilities 9,276 5,177
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Termination benefits 818 929
Other long-term liabilities 155 63
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Shareholders' equity
Share capital 100,061 91,731
Warrants 8,245 7,078
Additional paid-in capital 7,701 6,122
Equity component of convertible note - 27
Deficit (118,395) (61,581)
Accumulated other comprehensive income 7,870 7,870
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Total shareholders' equity 5,482 51,247
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15,731 57,416
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UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF LOSS, COMPREHENSIVE LOSS
AND DEFICIT

(in thousands of United States dollars except per common share amounts)

Three-month periods Nine-month periods
ended September 30, ended September 30,
2008 2007 2008 2007
$ $ $ $
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REVENUES 49 - 49 -

EXPENSES
Cost of sales 2,802 - 2,802 -
Research and development
and regulatory 2,200 2,788 7,552 7,707
General and administrative 1,530 3,160 5,180 6,243
Selling and marketing 1,188 4,451 3,743 5,546
Asset impairment 35,179 - 35,179 -
Amortization of property,
plant and equipment 281 159 813 435
Amortization of intangible
assets 464 482 1,391 1,448
Interest and accretion expense 56 83 282 246
Recovery of promissory note - - - (325)
Loss on disposal of equipment - 48 5 69
Foreign exchange (gain) loss (4) 3 65 23
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43,696 11,174 57,012 21,392
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Interest income 28 281 149 830
Loss before income taxes (43,619) (10,893) (56,814) (20,562)
Income tax expense - - - (1)
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Net loss and comprehensive
loss for the period (43,619) (10,893) (56,814) (20,563)
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Deficit, beginning of period (74,776) (39,924) (61,581) (30,254)
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Deficit, end of period (118,395) (50,817) (118,395) (50,817)
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Loss per common share
Basic and diluted (0.23) (0.06) (0.30) (0.12)
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Weighted average number
of common shares
outstanding 192,633,524 182,288,245 188,317,245 175,451,270




UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of United States dollars)

Three-month periods Nine-month periods
ended September 30, ended September 30,
2008 2007 2008 2007
$ $ $ $
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OPERATING ACTIVITIES
Net loss for the period (43,619) (10,893) (56,814) (20,563)
Items not affecting cash:
Interest and accretion expense - 82 130 243
Asset impairment charges 35,179 - 35,179 -
Amortization of property,
plant and equipment and
intangible assets 745 641 2,204 1,883
Inventory write-down 2,787 - 3,090 -
Issuance of stock warrants - 3,372 - 3,772
Stock-based compensation 585 784 1,881 1,828
Foreign exchange loss 28 - 28 -
Loss on disposal of property,
plant and equipment - 48 5 69
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(4,295) (5,966) (14,297) (12,768)
Net change in non-cash
balances relating to
operations (905) 1,387 (793) 1,069
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Cash flows related to
operating activities (5,200) (4,579) (15,090) (11,699)
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INVESTING ACTIVITIES
Additions to property,
plant and equipment (113) (1,076) (262) (2,103)
Sale of short-term
investments - - 11,554 20,126
Additions to restricted cash - - - (280)
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Cash flows related to
investing activities (113) (1,076) 11,292 17,743
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FINANCING ACTIVITIES
Repayment of convertible
promissory note - - (3,362) -
Proceeds from issuance of
convertible debenture 6,549 - 6,549 -
Transaction costs of
convertible debentures (196) - (196) -
Proceeds from exercised
stock options 133 1 679 28
Proceeds from issuance
of common shares - - 7,931 10,841
Proceeds from issuance
of warrants - - 1,216 1,718
Share issuance costs (18) (17) (659) (1,121)
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Cash flows related to
financing activities 6,468 (16) 12,158 11,466
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Increase (decrease) in
cash and cash equivalents 1,155 (5,671) 8,360 17,510
Cash and cash equivalents,
beginning of period 7,776 24,155 571 974
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Cash and cash equivalents,
end of period 8,931 18,484 8,931 18,484
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Interest paid through September 30, 2008 was $1,482 (September 30, 2007 -
$0), and no taxes paid through September 30, 2008 (September 30, 2007 -
$0).


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