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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 28, 2004
DIGIRAD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 000-50789 33-0145723
(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation) File Number) Identification Number)
13950 Stowe Drive
Poway, California 92064
(Address of Principal Executive Offices) (Zip Code)
(858) 726-1600
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On November 1, 2004, Digirad Corporation issued a press release
announcing financial results for the three and nine months ending September 30,
2004. A copy of this press release is attached hereto as Exhibit 99.1. This
information and the exhibits hereto, are being furnished and shall not be deemed
to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or otherwise subject to the liability of that
section, nor shall it be deemed incorporated by reference in any filing under
the Securities Act of 1933, as amended, or the Exchange Act, except as expressly
set forth by specific reference in such a filing.
Item 5.02. Departure of Directors or Principal Officers; Election
of Directors; Appointment of Principal Officers.
(d) On October 28, 2004, Gary Burbach was appointed by Digirad
Corporation's board of directors to serve as a director. This appointment by the
remaining board of directors was based on the recommendation of our corporate
governance committee. Mr. Burbach was recommended to our corporate governance
committee by existing members of our board of directors, and has been determined
by our board of directors to be independent, as independence is currently
defined in Rule 4200(a)(15) of the Nasdaq listing standards. Mr. Burbach's
appointment fills a vacancy on our board of directors, increasing the number of
directors from six to seven. Also on October 28, 2004, Mr. Burbach was appointed
to our corporate governance committee in the place of Ray Dittamore, who was
appointed to our compensation committee.
In his capacity as a director, Mr. Burbach will be compensated in a
manner consistent with other non-employee directors. Mr. Burbach will be paid
$4,000 for attending in-person board meetings and $500 for attending board
meetings telephonically. As a member of our corporate governance committee, Mr.
Burbach will be paid $1,000 for attending in-person committee meetings and $500
for attending telephonic committee meetings. In addition, Mr. Burbach will be
granted an option to purchase 10,000 shares of our common stock.
We issued a press release on November 1, 2004 announcing Mr. Burbach's
appointment to our board of directors, a copy of which is attached hereto as
Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
----------- -----------
99.1 Press release dated November 1, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DIGIRAD CORPORATION
November 1, 2004 By: /s/ Todd P. Clyde
-----------------------------
Todd P. Clyde
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Press release dated November 1, 2004.
Exhibit 99.1
Digirad Third Quarter Revenues Rose 23% to $17.2 Million
POWAY, Calif.--(BUSINESS WIRE)--Nov. 1, 2004--Digirad Corporation
(Nasdaq:DRAD):
-- Second Consecutive Quarter of Positive Net Income
-- Gary Burbach Named to Board
Digirad Corporation (Nasdaq:DRAD), a leader in providing
solid-state medical imaging products and services to physician
offices, hospitals and imaging centers, today reported financial
results for the three and nine months ended September 30, 2004.
For the third quarter of 2004, total revenues rose 23% to $17.2
million, compared with total revenues of $14.0 million in the third
quarter of 2003. Product revenues, which include sales of gamma
cameras, accessories and maintenance contract revenues, reached a
record $6.2 million, up 24% from $5.0 million a year ago. Third
quarter revenues for Digirad Imaging Solutions' (DIS) mobile leasing
services rose 22% to $11.0 million, compared with $9.0 million for the
third quarter of the prior year.
For the quarter ended September 30, 2004, gross profit increased
32% to $5.8 million, or 33% of revenue, from $4.3 million, or 31% of
revenue in the prior-year period. This increase is a result of higher
revenues, reductions in camera production costs and a decrease in per
unit warranty costs. Operating expenses for the quarter increased 36%
to $5.4 million, compared with $4.0 million for the comparable 2003
period. The increase in operating expenses was due to higher research
and development costs incurred in developing new products, additional
sales headcount and various general and administrative costs required
to operate as a public company.
Net income for the third quarter of $0.4 million compared with net
income of $47,000 for the third quarter of 2003. When calculated on a
pro forma basis to account for the conversion of all preferred stock
into common stock in Digirad's initial public offering, net income per
diluted share for the third quarter of 2004 was $0.02, compared with
the pro forma net income per share of $0.00 for the comparable 2003
period. This marks the second consecutive quarter of profitability.
"The continuing market demand for our products and services is
evidenced by our strong third quarter revenue growth over the third
quarter of 2003, including the record revenues from sales in our
product segment and our second consecutive quarter of profitability,"
said David Sheehan, President and CEO of Digirad. "We continued our
leadership as innovators in the industry with the September
introduction of the Cardius(TM)-3, the first and only triple-head
gamma camera designed specifically for cardiac imaging. We believe the
launch of the Cardius-3, which allows for faster image acquisition
times and improved workflow for the physician, was a significant event
for Digirad. Feedback from the unveiling and product demonstration at
the American Society of Nuclear Cardiology's 9th Annual Scientific
Session was very positive.
"The planned expansion of our sales force continued during the
quarter with the addition of five new sales representatives, bringing
us to 32 total reps," commented Sheehan. "We are on track to have 35
to 40 sales professionals by the end of 2004."
The Company reported cash and cash equivalents and short-term
investments of $57.8 million as of September 30, 2004.
Year-to-Date Financial Results
Comparing revenues for the first nine months of 2004 with the
first nine months of 2003, total revenues rose 23% to $50.4 million.
DIS revenues rose 29% to $32.7 million and product revenues increased
12% to $17.7 million.
Gross margin for the first nine months of 2004 increased to 32%,
up from 28% for the first nine months of 2003. Nine-month operating
expenses increased 27% to $15.5 million, compared with $12.2 million
for the comparable 2003 period. Net income for the first nine months
of 2004 totaled $0.2 million, compared with a net loss of $1.7 million
in the prior-year period. When calculated on a pro forma basis to
account for the conversion of all preferred stock into common stock in
Digirad's initial public offering, net income per diluted share for
the 2004 nine-month period was $0.01, compared with the pro forma net
loss per share of $0.13 for the comparable 2003 period.
Financial Guidance
Digirad today reaffirmed 2004 financial guidance previously
provided on August 9, 2004. Although third quarter DIS revenues were
adversely affected by physician office closures due to the hurricanes
on the East Coast and a higher number of DIS customers purchasing
cameras, Digirad continues to anticipate 2004 total revenues to be
between $67 million and $70 million.
Operating expenses for 2004 will reflect increases in investments
to continue the Company's growth, including DIS sales force expansion
through the end of the year, as well as ongoing investments in
research and development and higher general and administrative costs
associated with operating as a public company. The Company anticipates
2004 net income will range from $0.2 million to $0.5 million, or $0.01
to $0.03 on a per-share diluted basis. The Company expects quarterly
results and growth rates to continue to fluctuate, based on
seasonality stemming from physician vacations, holidays and inclement
weather.
This guidance is based on information and expectations as of
November 1, 2004. These and other statements herein are
forward looking, and actual results could differ dramatically. Please
see the "Forward-Looking Statements" portion of this press release for
a description of certain risk factors and Digirad's filings with the
Securities and Exchange Commission for a more complete discussion of
risks.
Digirad Bolsters Board with Additional Nuclear Medicine and Device
Expertise
On October 28, 2004, Gary F. Burbach was appointed to the
Company's board of directors. Mr. Burbach currently serves as
President and CEO of Bacchus Vascular, a developer of catheter-based
medical devices for the removal of blood clots. He held the position
of CEO of Philips Nuclear Medicine, a division of Philips Electronics,
from 2001 to 2003 and, before its acquisition by Phillips, worked for
four years for ADAC Laboratories, most recently as president and
general manager of its nuclear medicine division. Mr. Burbach holds an
M.B.A. from Harvard Business School and a B.S. in industrial
engineering from Stanford University.
Conference Call Information
Management will be hosting an investment community conference call
beginning at 4:45 p.m. Eastern Time (1:45 p.m. Pacific Time) today to
discuss this announcement and to answer questions.
Individuals interested in listening to the conference call may do
so by dialing 877-815-7177 for domestic callers, or 706-634-1178 for
international callers. A telephone replay will be available for 48
hours following the conclusion of the call by dialing 800-642-1687 for
domestic callers, or 706-645-9291 for international callers, and
entering reservation code 1502671.
The live conference call also will be available via the Internet
on the investor relations section of the Company's Web site at
www.digirad.com. A recording of the call will be available on the
Company's Web site for one year following the completion of the call.
About Digirad
Digirad Corp. develops, manufactures and markets solid-state,
medical imaging products and services to physician offices, hospitals
and imaging centers. Digirad offers a comprehensive line of
solid-state nuclear gamma cameras that can be used for the detection
of various medical conditions, including cardiovascular disease.
Digirad believes that its imaging systems produce a high-quality
image; and, due to their lightweight, compact design, they fit easily
within small office spaces and allow the delivery of nuclear imaging
procedures in a wide range of clinical settings -- physician offices,
outpatient clinics or within multiple departments in hospitals.
Through its wholly owned subsidiaries, Digirad Imaging Solutions
and Digirad Imaging Systems, Digirad also offers a comprehensive,
mobile imaging leasing and services program for physicians who wish to
perform nuclear cardiology procedures in their offices but do not have
the patient volume, capital or resources to justify purchasing a gamma
camera. Digirad Corp., Digirad Imaging Solutions and Digirad Imaging
Systems are headquartered in Poway. For more information, please visit
www.digirad.com.
Forward-Looking Statements
Digirad cautions that statements included in this press release
that are not a description of historical facts are forward-looking
statements. Forward-looking statements give expectations or forecasts
of future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. They use
words such as "anticipate," "estimate," "expect," "project," "intend,"
"plan," "believe" and other words and terms of similar meaning in
connection with a discussion of future operating or financial
performance or events. In particular, these include statements
relating to future actions, prospective products, services or market
opportunities, future performance or results of current and
anticipated products or services, sales efforts, expenses, the outcome
of contingencies such as legal proceedings, and financial results. The
inclusion of forward-looking statements should not be regarded as a
representation by Digirad that any of its plans will be achieved.
Actual results may differ materially from those set forth in this
press release due to the risks and uncertainties inherent in Digirad's
business, including, without limitation: the degree to which Digirad's
existing imaging systems and services will be accepted by physicians
and hospitals; Digirad's ability to compete against large,
well-established competitors with significantly greater resources; any
unforeseen changes in domestic and international legislation,
regulation or coverage and reimbursement policies of third-party
payors; Digirad's ability to timely develop new products, product
enhancements and services that are accepted by the market; Digirad's
lack of a diversified line of products and services; any technical
problems that may develop with respect to Digirad's imaging systems,
including the Cardius-3, or any manufacturing or supply problems or
price fluctuations that may affect Digirad's third-party suppliers;
the ability of Digirad to effectively market, sell and distribute its
imaging systems, including the Cardius-3, and services given its
limited capabilities in these areas; Digirad's ability to retain and
attract key executives, qualified managers, engineers and imaging
technologists; Digirad's ability to manage risks relating to product
liability, warranty claims, recalls, property damage and personal
injury with respect to its imaging systems, including the Cardius-3;
Digirad's reliance on a limited number of customers for its products
and imaging services; Digirad's compliance with extensive and complex
product service and reimbursement regulations, licensure and reporting
requirements of the Food and Drug Administration and other state and
federal agencies, including with respect to the DIS business, those
that are subject to variable interpretations; Digirad's ability to
protect its intellectual property and proprietary technology through
patents and other means and defend against claims by third parties;
and other risks detailed in Digirad's Securities and Exchange
Commission filings, including its Prospectus filed pursuant to Rule
424(b) under the Securities Act of 1933, as amended, with the
Securities and Exchange Commission on June 10, 2004.
Given these uncertainties, readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only
as of the date hereof. All forward-looking statements are qualified in
their entirety by this cautionary statement and Digirad undertakes no
obligation to revise or update this press release, including the
forward-looking statements contained herein, to reflect events or
circumstances after the date hereof or to update the reasons actual
results could differ materially from those anticipated in these
forward-looking statements, even if new information becomes available
in the future.
Digirad(R) and Digirad Imaging Solutions(R) are registered
trademarks of Digirad Corporation. Cardius(TM) is a trademark of
Digirad Corporation.
Digirad Corporation
Consolidated Statements of Operations
(Unaudited)
Three months Nine months
ended Sept. 30, ended Sept. 30,
2004 2003 2004 2003
Revenues:
DIS $ 11,023,280 $ 9,020,629 $ 32,725,167 $ 25,287,141
Product 6,200,614 5,001,105 17,656,629 15,726,083
Total revenues 17,223,894 14,021,734 50,381,796 41,013,224
Cost of revenues:
DIS 7,701,999 6,295,078 22,476,022 18,024,458
Product 3,673,598 3,346,180 11,296,904 11,318,326
Stock-based
compensation 96,016 35,788 342,022 66,917
Total cost of
revenues 11,471,613 9,677,046 34,114,948 29,409,701
Gross profit 5,752,281 4,344,688 16,266,848 11,603,523
Operating expenses:
Research and
development 871,822 483,677 2,196,889 1,658,679
Sales and
marketing 1,851,590 1,405,463 5,491,422 4,387,889
General and
administrative 2,521,167 1,927,521 7,164,327 5,761,908
Amortization
and
impairment of
intangible
assets 16,076 142,131 48,228 355,789
Stock-based
compensation 172,190 32,810 609,462 63,169
Total operating
expenses 5,432,845 3,991,602 15,510,328 12,227,434
Income (loss)
from
operations 319,436 353,086 756,520 (623,911)
Other income
(expense):
Interest income 236,978 7,864 278,771 27,898
Interest expense (176,433) (314,075) (788,475) (1,079,236)
Other 6,154 -- (23,588) --
Total other
income (expense) 66,699 (306,211) (533,292) (1,051,338)
Net income (loss) 386,135 46,875 223,228 (1,675,249)
Accretion of
deferred issuance
costs on
preferred
stock -- (78,154) (161,335) (247,610)
Net income (loss)
applicable to
common
stockholders $ 386,135 $ (31,279) $ 61,893 $ (1,922,859)
Net income (loss)
per common share:
Historical --
basic and
diluted $ 0.02 $ (2.05) $ 0.01 $ (134.97)
Pro forma --
basic $ 0.02 $ -- $ 0.02 $ (0.13)
Pro forma --
diluted $ 0.02 $ -- $ 0.01 $ (0.13)
Shares used in
computing
historical net
income (loss)
per common
share:
Weighted average
shares
outstanding --
basic 18,011,393 15,244 7,387,755 14,247
Weighted average
shares
outstanding --
diluted 19,391,569 15,244 16,124,892 14,247
Shares used in
computing
pro forma net
income (loss)
per common
share:
Weighted average
shares
outstanding --
basic 18,011,393 12,459,515 14,745,317 12,458,518
Weighted average
shares
outstanding --
diluted 19,391,569 13,671,122 16,124,892 12,458,518
(1) As a result of the conversion of our preferred stock into 12.4
million shares of our common stock upon completion of our initial
public offering in June 2004, there is a lack of comparability in
the basic and diluted net income (loss) per share amounts for the
periods presented above.
Digirad Corporation
Consolidated Balance Sheets
Sept. 30, 2004 Dec. 31, 2003
(Unaudited)
Assets
Currents assets:
Cash and cash equivalents $ 28,254,594 $ 7,681,407
Short-term investments 29,528,656 --
Accounts receivable, net 10,149,169 12,195,031
Inventories, net 5,210,780 3,709,321
Other current assets 1,419,914 854,170
Total current assets 74,563,113 24,439,929
Property and equipment, net 10,931,018 10,087,030
Intangibles, net 508,861 511,832
Restricted cash 120,000 120,000
Total assets $ 86,122,992 $ 35,158,791
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $ 2,839,849 $ 3,036,209
Accrued compensation 1,947,784 1,893,336
Accrued warranty 1,313,571 1,051,242
Other accrued liabilities 3,826,158 2,647,741
Deferred revenue 2,190,662 1,514,488
Current portion of notes payable to
stockholders -- 245,000
Current portion of debt 2,381,187 11,473,619
Total current liabilities 14,499,211 21,861,635
Deferred rent 322,357 --
Notes payable to stockholders, net
of current portion -- 490,000
Long-term debt, net of current portion 2,685,368 4,232,071
Commitments and contingencies:
Redeemable convertible preferred stock,
$0.0001 par value: no shares and
46,023,000 shares authorized at
Sept. 30, 2004, and Dec. 31, 2003,
respectively; no shares and
43,555,313 shares issued and
outstanding at Sept. 30, 2004
(unaudited), and Dec. 31, 2003,
respectively -- 84,277,992
Stockholders' equity (deficit):
Preferred stock, $0.0001 par value:
10,000,000 and no shares authorized
at Sept. 30, 2004, and Dec. 31, 2003,
respectively; no shares issued and
outstanding at Sept. 30, 2004, and
Dec. 31, 2003, respectively -- --
Common stock, $0.0001 par value:
150,000,000 and 53,000,000 shares
authorized at Sept. 30, 2004, and
Dec. 31, 2003, respectively;
18,012,619 and 23,540 shares issued
and outstanding at Sept. 30, 2004
(unaudited), and Dec. 31, 2003,
respectively 1,801 2
Additional paid-in capital 149,926,111 5,031,891
Accumulated other comprehensive loss (6,064) --
Deferred compensation (1,187,260) (554,375)
Accumulated deficit (80,118,532) (80,180,425)
Total stockholders' equity (deficit) 68,616,056 (75,702,907)
Total liabilities and stockholders'
equity (deficit) $ 86,122,922 $ 35,158,791
CONTACT: Digirad Corporation
Todd Clyde, 858-726-1600
ir@digirad.com
or
Lippert/Heilshorn & Associates
Ina McGuinness or Bruce Voss, 310-691-7100
imcguinness@lhai.com