Exhibit 99.1
LECTEC CORPORATION
Contact: Dr. Alan C. Hymes, M.D., CEO (952-933-2291 X27)
LECTEC CORPORATION REPORTS FOURTH QUARTER
AND YEAR END FINANCIAL RESULTS FOR 2004
MARCH 25, 2005 - - EDINA, MN - LECTEC CORPORATION (OTCBB: LECT) reported today
the financial results of the Company for the three and twelve months ended
December 31, 2004. During the fourth quarter ended December 31, 2004, the
Company wound down its manufacturing operations, exited from the contract
manufacturing business, and sold off a significant portion of its manufacturing
assets to Novartis Consumer Health, Inc. The Company will continue as an
intellectual property licensing and holding company. Due to these changes, the
Company's financial statement presentation has been revised to reflect the
Company's manufacturing business as discontinued operations and its intellectual
property licensing business as its only continuing operation. In accordance with
accounting principles generally accepted in the United States of America, the
Company has also restated prior period financial statements so that they reflect
the manufacturing business as a discontinued operation. Due to the complexity of
this change in presentation, the need to restate prior periods and the
comparatively low staffing levels at the Company, the Company anticipates that
its Annual Report on Form 10-KSB will not be ready for filing by its normal due
date of March 31, 2005. The Company expects to file for a fifteen day extension
of the due date and currently anticipates that it will be able to file the Form
10-KSB by the end of that extension period.
RESULTS OF CONTINUING OPERATIONS
The Company had no revenue from continuing operations for the fourth quarter of
2004 or the comparable quarter of 2003. The Company had a net loss from
continuing operations of ($278,462) or ($0.07) per basic and diluted share for
the fourth quarter of 2004, compared to a net loss from continuing operations of
($408,460) or ($0.10) per basic and diluted share for the fourth quarter of
2003. The improvement in the net loss from continuing operations of $129,998 for
the fourth quarter of 2004 compared to the same quarter of 2003 was due
primarily to lower salary and benefit expenses because of reduced staffing in
the fourth quarter of 2004.
The Company recorded licensing fee income of $1,065,000 for the year ended
December 31, 2004. There was no licensing fee income for the year ended December
31, 2003. The licensing fee income was paid under a supply and licensing
agreement that the Company entered into with Novartis Consumer Health, Inc.
during the third quarter of 2004. Net loss from continuing operations for 2004
was ($123,153) or ($0.03) per basic and diluted share, compared to a net loss
from continuing operations for 2003 of ($1,615,430), or a loss of ($0.40) per
basic and diluted share. The improvement in the results from continuing
operations for 2004 as compared to 2003 was due to receipt of licensing fee
income in 2004, coupled with lower salary and benefit expenses during 2004.
On January 21, 2005, LecTec's Board of Directors announced that it had declared
a cash dividend of $0.06 per share, payable on March 11, 2005 to shareholders of
record on February 25, 2005. LecTec Corporation had approximately 4,113,739
shares outstanding on the record date.
1
RESULTS OF DISCONTINUED OPERATIONS
Income from discontinued operations for the fourth quarter ended December 31,
2004 was $1,334,736 or $0.33 and $0.32 per basic and diluted share,
respectively, compared to income from discontinued operations of $263,530 or
$0.06 per basic and diluted share for the same period in 2003. Final sales to
Novartis Consumer Health, Inc. in the fourth quarter of 2004 were $2,334,646,
compared to sales to Novartis Consumer Health, Inc. of $1,262,300 for the same
period in 2003. The improvement in the income from discontinued operations for
the fourth quarter of 2004 over the comparable quarter of 2003 was attributable
primarily to a gain on the sale of manufacturing assets of $473,898, higher
gross margins on sales during the period, and reduced expenses and overhead
associated with the wind down of manufacturing operations.
Income from discontinued operations for the year ended December 31, 2004 was
$2,419,832, or $0.60 and $0.59 per basic and diluted share, respectively,
compared to income from discontinued operations of $333,669 or $0.08 per basic
and diluted share for 2003. Sales to the Company's largest customer, Novartis
Consumer Health, Inc. were $6,341,998 for 2004, compared to sales of $4,245,026
for 2003. The improvement in the income from discontinued operations for 2004
over 2003 is attributable to a gain on the sale of manufacturing assets of
$611,954, higher income and gross margins from manufacturing operations, and
reduced expenses and overhead reductions related to the wind down of
manufacturing operations.
NET RESULTS OF OPERATIONS
Net income for the fourth quarter of 2004 was $1,056,274, or $0.26 and $0.25 per
basic and diluted share, respectively, compared to a net loss for the fourth
quarter of 2003 of ($144,930), or ($0.04) per basic and diluted share.
Net income for 2004 was $2,296,679, or $0.57 and $0.56 per basic and diluted
share, respectively, compared to a net loss of ($1,281,761), or ($0.32) per
basic and diluted share. The overall improvement in net income for the fourth
quarter of 2004 and the year ended December 31, 2004 over the comparable periods
in 2003 is due to the reasons stated above.
LIQUIDITY
Total assets increased slightly from $2,690,650 at December 31, 2003 to
$2,803,134 at December 31, 2004; however, the Company's liquid assets in the
form of cash and cash equivalents increased from $483,844, or 18.0% of total
assets, at December 31, 2003 to $2,239,318, or 80.0% of total assets, at
December 31, 2004. This increase in liquid assets was due primarily to the sale
of the assets related to the Company's manufacturing business in the fourth
quarter of 2004, coupled with the receipt of licensing fee income of $1,065,000
during the third quarter of 2004.
This press release contains forward-looking statements that may include
statements regarding intent, belief or current expectations of the company and
its management. These forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties that may cause the
company's actual results to differ materially from the results discussed in
these statements. Factors that might cause such differences include, but are not
limited to, the Company's dependence on royalty income, the success or failure
of any attempt by the Company to protect or enforce its patents, and other risks
and uncertainties detailed from time to time in the Company's filings with the
Securities and Exchange Commission, and particularly in Exhibit 99.01 to our
Form 10-KSB for the year ended December 31, 2003.
2
LECTEC CORPORATION
STATEMENTS OF OPERATIONS
(in thousands except per share data)
Three months ended Twelve months ended
December 31, December 31,
----------------------------- -----------------------------
2004 2003 2004 2003
------------ ------------ ----------- -------------
(unaudited) (restated) (unaudited) (restated)
Continuing operations:
- ----------------------
Revenue - royalty and licensing fee income $ - $ - $ 1,065 $ -
Operating expenses 281 408 1,189 1,615
----------- ----------- ---------- ------------
Loss from continuing operations
before income taxes (281) (408) (124) (1,615)
Income tax benefit 3 - 1 -
----------- ----------- ---------- ------------
Loss from continuing operations (278) (408) (123) (1,615)
----------- ----------- ---------- ------------
Discontinued operations:
- ------------------------
Income from discontinued operations
before income taxes 1,350 263 2,448 333
Income tax expense (16) - (28) -
----------- ----------- ----------- ------------
Income from discontinued operations 1,334 263 2,420 333
----------- ----------- ----------- ------------
Net income (loss) $ 1,056 $ (145) $ 2,297 $ (1,282)
=========== =========== =========== ============
Weighted average common shares outstanding:
Basic 4,029 3,971 4,012 3,966
=========== =========== =========== ============
Diluted 4,162 3,971 4,131 3,966
=========== =========== =========== ============
Earnings (loss) per common share:
Basic -
Continuing operations $ (0.07) $ (0.10) $ (0.03) $ (0.40)
Discontinued operations 0.33 0.06 0.60 0.08
----------- ----------- ----------- ------------
Total $ 0.26 $ (0.04) $ 0.57 $ (0.32)
=========== =========== =========== ============
Diluted -
Continuing operations $ (0.07) $ (0.10) $ (0.03) $ (0.40)
Discontinued operations 0.32 0.06 0.59 0.08
----------- ----------- ----------- ------------
Total $ 0.25 $ (0.04) $ 0.56 $ (0.32)
=========== =========== =========== ============
BALANCE SHEET DATA
(in thousands)
(unaudited) (restated)
DECEMBER 31, 2004 December 31, 2003
----------------- -----------------
Cash and cash equivalents $ 2,239 $ 484
Prepaid expenses and other 138 64
Discontinued operations - assets 193 1,931
Working capital 2,049 (303)
Other assets 233 212
Total assets 2,803 2,691
Accrued expenses 248 172
Discontinued operations - liabilities 273 2,610
Shareholder's equity (deficit) 2,282 (154)
Total liabilities and equity 2,803 2,691
3