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Viking Systems (VKNG.OB) Reports 2Q Financials, Details 3DHD Progress

|Includes: Viking Systems, Inc. (VKNG)

Viking Systems, Inc. ( – the leading global provider of advanced 2D and 3D visualization solutions which are revolutionizing minimally invasive surgery (MIS), today (Thursday, Aug. 5) reported financial results for 2Q FY10 (ended June 30) indicating strong sales growth, and disclosed details regarding the Company’s planned launch in Q4 of their Next Generation 3DHD vision system.

President and CEO of VKNG, Jed Kennedy, pointed to the 23% increase in sales in 2Q as an indicator of yet another strong quarter as the Company ramps up to the release of its Next-Gen 3DHD system.

Joining the already robust suite of VKNG solutions (like the Company’s flagship 3Di Vision System; 2Di-HD Vision System; ViView Vision Products; and the Infomatix™ platform), the Next-Gen 3DHD system will offer integrated 2D and 3D viewing capability, a 3DHD flat-panel alternative to the head mounted display, and major image quality upgrades.

The financial data looks really solid, especially in light of prevailing innovations and market position:
• Sales up 23% to $2.01M ($1.63M in 2009) – strong performance of the Company’s OEM products (specifically 2DHD cameras) offset decreased sales of VKNG branded products due to the upcoming release of the new 3DHD system
• Gross Profit up 24% to $547k or 27% of sales ($442k or 27% of sales in 2009)
• Selling and Marketing Expense down 30% to $207k ($295k in 2009) – diminished bad debt and depreciation expense related to demo equipment mothballed in 2009
• R&D Expense up 196% to $412k ($139k in 2009) – costs related to developing the 3DHD technology including retention of a VP of R&D in January this year
• General and Administrative Expense down 4% to $379k – lower noncash stock option expense on options given to administrative personnel

• Sales up 24% to $3.92M
• Gross Profit up 29% to $1.05M
• Selling and Marketing Expense down 25%
• R&D Expense up 112% to $326k
• General and Administrative Expense up $1,983

Operating losses were up 16.8% for the three-month due to R&D costs, but down over the six-month due to robust gross profits, while the Company also posted a net loss of $450,850 or ($0.01) per share.

Executive VP and CFO of VKNG, Robert Mathews, noted the excellent financing facility relationship the Company has with Dutchess Opportunity Fund, II, LP, which has enabled strategic plan execution via the sale of some 6.91M common shares to date ($1.52M in proceeds or an average price per share of $0.22).

The Company will present its 3DHD technology at the upcoming 5th ISHAC (International Symposium on Hybrid Approach to Congenital Heart Disease) workshop, whose director, Dr. Alistair Phillips, a Cardiothoracic Surgeon, called the currently-used VKNG systems a vital tool which will play an increasingly central role with the advent of the 3DHD technology.

Kennedy noted the prevalence of 2D cameras in nearly all current laparoscopic procedures, and said that the exposure VKNG’s 3DHD technology will get at the ISHAC, combined with the cost-effective reality of the 3D vision solution, would produce a real winner both for shareholders and the MIS industry as a whole.

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