The current economic crisis continues to wreak havoc with the financial results of many dental product suppliers. One of the latest to report tough times is Zila, the manufacturer of the ViziLite Plus oral cancer screening product.
Zila announced this week that it failed to make a convertible note interest payment due January 31 and may have to file for Chapter 11 bankruptcy protection unless it can resolve its debt.
Zila reported a net loss of $25.3 million on revenues of $8.5 million in the second quarter of fiscal 2009 (end-January 31), compared to a net loss of $4.7 million on revenues of $10.5 million in the same quarter in 2008.
The loss was due primarily to a $23.2 million noncash charge required under accounting rules, Zila said. The decline in revenues is being attributed to the global economic downturn and customer concern about its viability as an ongoing business, according to the company.
"We are making every effort to conserve our cash," said David Bethune, chairman and CEO of Zila, in a press release. "We have, among other things, continued salary reductions for a number of management personnel, further reduced headcount throughout the organization, eliminated the employee stock purchase plan and its associated costs, furloughed certain manufacturing production personnel, reduced the number of seminar programs and streamlined the cost structure of these programs, and reduced tradeshow expenditures."
As a result of the technical default and sales declines, the company stated that it has substantial doubt about its ability to continue as a going concern.
"In order to continue as an ongoing business and fund our operations over the next 12 months, we will require additional funds and need to restructure our senior secured convertible notes," Bethune said. "We have had discussions with a number of potential investors, all of whom have required, as a condition of their investment, that the senior secured convertible notes be repaid from the funds provided by the investor(s) and that this repayment be at a substantial discount from the $12.0 million principal outstanding to reflect what they believe to be the current market value of those notes."
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