Paradigm Medical Industries Outlines Plan to Achieve Profitability, Positive Cash Flow
Friday October 26, 8:51 am ET
SALT LAKE CITY--(BUSINESS WIRE)--Paradigm Medical Industries’ (OTCBB: PMED.OB/PMEDW.OB) Chief Executive Officer, Raymond Cannefax, today outlined the Company’s plan to achieve profitability and positive cash flow in a special report to shareholders. Following is the complete text of Mr. Cannefax’s Letter to Shareholders
October 26, 2007
Dear Shareholder:
While 2007 results won’t be finalized for several more months, and our preliminary budgeting process has only just begun, the Company believes now is an appropriate time to communicate its progress and plans for the future.
Paradigm Medical Industries has been through turbulent times during the last few years. And much has happened in the last 20 months, since I was named Chief Executive Officer. Further, 2007 has been a year of major transition for the Company.
My message to you today is we have met many challenges and obstacles and are now poised to make substantial progress in the Company’s major goals of reaching profitability and consistent positive cash flow and enhancing shareholder value.
Hidden within the Company’s most recent quarterly financial results are several “pluses” that provide optimism for Paradigm Medical’s strategies, goals, and commitment. Specifically:
(1) We have substantially reduced the Company’s operating expenses without sacrificing quality and have improved on-time delivery. During the last five years, we have reduced the Company’s annual operating expenses by $9.5 million.
(2) We have refocused and reformulated the Company’s product portfolio into high-margin, fast-growing proprietary products. Paradigm Medical is clearly the most unique, full-service provider of Ultrasound devices to the ophthalmic industry.
(3) We have become more globally oriented with our U.S. and international regulatory-approved products. And we have already established foot prints in the fastest-growing regions of the world, namely Asia and East Europe. A major part of this success has been the establishment of partnerships with leading developers and producers of ultrasound devices like China’s MEDA Co. Ltd., and new-generation software with innovative companies like Reliacon Global (San Ramon, CA).
(4) We have resolved long-standing litigation matters without jeopardizing the Company’s financial and operational structure.
(5) We have strengthened the Company’s financial structure with the completion of several fundings, completed in 2005 and 2006, that have allowed us to upgrade our facilities and further advance our research and development programs.
(6) Organizationally, we now have a professional management team in place that is dedicated and capable of achieving the corporate strategy with a viable business model that compliments the Company’s strengths. And we have, this year, significantly upgraded our global sales and marketing efforts to allow us to move aggressively into the “growth” phase of our matrix.
Our financial results for 2007 will be relatively flat, compared with the year-ago period. Our revenues will be stable, and our operating loss will widen slightly. Clearly, that is unacceptable. Nonetheless, during a year when “uncontrollable” costs--such as higher raw material and energy bills--soared, and we incurred significant expense (some one-time) on a global launching of our new-generation P60 Ultrasound BioMicroscope (UBM), as well as considerable management time in resolving financial and legal issues, the Company made substantial progress toward reaching some short-term and intermediate-term goals.
Since 2002, the Company has reduced its operating expense by $9.5 million. In 2007, such expense will be somewhat higher than a year ago. However, a good part of the increase reflects higher costs associated with launching the P60 (including costs in receiving U.S. and international regulatory approvals) and dramatically expanding and repositioning marketing and distribution channels.
Since 2002, the Company improved its gross profit margin from 21.6% to more than 50%. Again, our margin will be somewhat lower in 2007 than a year ago. The major factor in the decline reflects lower revenues—as we reposition our portfolio toward higher-margin, proprietary products—and higher fixed and variable costs (especially energy).
The results—and rewards—for our actions are expected to be more visible in 2008 and beyond.
Specifically, the Company will be entering a fast-track path in revenue and margin growth. By the end of 2008, our goal is to be at an annualized revenue run-rate of $4 million. We believe gross profit margin will be at least 50% (likely higher), which would result in gross profit of $2 million.
Our indirect expense (e.g., selling, general, administrative, and research and development costs) will likely approximate $2 million. The “bottom line” for us is break even. This will mark a dramatic change in our financial performance, where losses have exceeded $1.0-3.4 million annually during the last few years. Management’s ability to control costs and improve operating margins could enhance the 2008 results.
More importantly, our goal is to be slightly cash flow positive by the end of 2008. Again, this will reflect a dramatic improvement from our recent year “negative” cash flows. We view our cash flow performance as one of the true benchmarks of determining the success of our corporate goals.
During the next 24 months the Company’s goal is to reach annualized sales of $5 million, and gross profit of $2.75 million. Management is committed to maintaining an indirect expense level of $2.5 million during that timeframe. At such performance levels, Paradigm Medical would generate a modest profit from operations and achieve consistently positive cash flow.
Is the goal “reasonable?” We believe so. More importantly, is it “achievable?”
Barring unforeseen external events, management believes the successful launch and global growth of our new-generation Ultrasound devices, coupled with a rededication to our Blood Flow Analyzer™ and the introduction of at least six new product offerings could bolster the base sales level and help expand the Company’s gross profit margin by several basis points.
Paradigm Medical has already achieved substantial reduction in its operating expenses and has isolated areas for additional savings. These can be achieved without penalizing the integrity of our operations. And the higher costs associated with expanding our global sales team and efforts will be offset by the higher revenues and margins we are projecting.
Too often, programs aimed at substantially reducing expenses underscore a company’s maturing and subsequent decline. This is not the case at Paradigm Medical. Reducing expense was a starting point in our strategy of growth, not a stopgap approach to combat complacency. Our manufacturing efficiency has made a quantum leap during the last 18-24 months. Our on-spec and on-time delivery performance has been outstanding.
We have successfully launched a new generation of proprietary devices and carefully scrutinized our product mix. We are more product focused and performance oriented. We believe we are able to meet the challenges ahead and reward our patient shareholders and customers and our outstanding and loyal employees.
Sincerely,
Raymond Cannefax
President and Chief Executive Officer
Paradigm Medical Industries, Inc. (Salt Lake City, UT), currently develops, manufactures and markets high-tech, proprietary diagnostic equipment and consumable products for the medical industry. The Company is a leading developer of Ultrasound devices, and has been dubbed “The UBM Company” (Ultrasound BioMicroscope). Contact us at 801-977-8970 or visit us at www.paradigm-medical.com.
This press release contains statements that, if not verifiable historic fact, may be viewed as forward-looking statements that could predict future events and outcomes with respect to Paradigm and its business. The predictions embodied in these statements will involve risk and uncertainties and, accordingly, actual results may differ significantly from the results discussed or implied in such forward-looking statements.
Contact:
Paradigm Medical Industries, Inc.
Raymond Cannefax, CEO
801-977-8970
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