Source: triangle.bizjournals.com
Author: Angela Gonzales

Zila Inc. continues to bleed red ink, but bandages have been put in place to help stem the flow.

The Phoenix oral cancer diagnostics company released its fiscal third-quarter results Tuesday, showing a loss of $1.5 million on $5 million in revenue for the three months ended April 30. That compares with a $4.4 million loss on $6.8 million in revenue for the same period in 2008. For the first nine months of 2009, Zila lost nearly $30 million on revenue of $15.6 million, compared with $14 million in losses on $20 million in revenue.

In its quarterly filing with the U.S. Securities and Exchange Commission, Zila said revenue has been negatively impacted by the economy and because of customer concern about its viability as an ongoing business.

“Concerns about our financial viability have also contributed to an increased turnover in our field sales force and other key staff areas and have led to a reduction in our marketing effectiveness and our reach to new and existing customers,” the company said in its 10-Q.

To stem the blood loss, Zila has continued salary reductions for a number of management personnel, reduced its field sales force by 15 percent, eliminated its employee stock purchase plan, furloughed certain manufacturing production personnel and reduced trade show expenditures.

Still, the decline in revenue means Zila has been cutting into its cash reserves. As of April 30, the company had $3.1 million in cash and cash equivalents, compared with $2.5 million on Jan. 31, $3.2 million Oct. 31, 2008, and $4.5 million July 31, 2008.

“In order to continue as a going concern and fund our current level of operations over the next 12 months, we will require additional funding and need to restructure or retire our senior secured convertible notes,” the filing reads. “If we are unable to execute these strategies, we will likely be forced to file for protection under Chapter 11 of the Federal Bankruptcy Code or liquidate the company under Chapter 7 of the Federal Bankruptcy Code.”

The company has morphed over the years, from selling Zilactin cold cream medication and vitamin C products to focus on cancer detection products marketed directly to dentists. In May, company officials testified at a congressional hearing on innovative technology for veterans, urging legislators to press the U.S. Department of Veterans Affairs to expand the use of Zila’s ViziLite Plus for veterans, who are at a higher risk of oral cancer. Zila has a five-year contract to market ViziLite Plus to 48 VA dental clinics and 154 Department of Defense dental clinics.