Brutal honesty marks Iatia's response to a tough 12 months

Microscopy company Iatia (ASX:IAT) released its annual results last Friday with a brutally honest assessment of their performance over the 2002-2003 year.

"While the directors are confident in the future of Iatia's technology... the company's financial performance over the year was well below expectations, and unacceptable. Sales were at an unviable level because of generally poor worldwide economic conditions impacting on our main target markets and difficulties in marketing new leading edge-technology in specialised market segments," read a statement accompanying the market announcement.

This week, CEO Brian Powell explained that the board felt it should be honest about the performance of the company, which posted a loss of AUD$3.8 million. In addition, $1 million of the $1.4 million revenues were due to the sale of Iatia's Mulgrave property.

"The point I'd like to make is that it's a loss, no question about that, but from an operations perspective it was an investment," Powell said. "We're really poised far better than we were."

According to Powell, one of the realisations made by management was the need to refocus on bulk sales of the company's phase imaging microscopy products to appropriate microscopy and imaging companies, rather than on individual sales to end users.

In May, the company entered into a three-year contract worth potentially $1 million with Bio-Rad Asia Pacific to package its QPm phase imaging software with into confocal microscopes. And Powell said the company recently finalised an expected sale into the FBI. Iatia has also received some interest from major pharmaceutical companies in the technology.

But the other potential market that is being developed by the company is in the use of the technology for defence applications. The Australian Army has sponsored Iatia for the Department of Defence's Capability and Technology Demonstrator program, which has the potential to bring the company $1 million a year. A large offshore defence organisation with a base in Australia is also interested, Powell said.

The cash position of the company, however, is tight. At the end of the financial year, Iatia had just under $300,000 in cash reserves, although since then an investor has stepped forward with $0.5 million in private equity and the promise of another $2.15 million more. A number of options for further capital raising are also under discussion by the management team. And the company has cut salaries, staff numbers and expenditure in an effort to reduce the cash burn.

"It is tight, and will continue to be tight until we pull off a big contract, but we have sufficient systems in place to ensure we will survive the year," Powell said.

"We are quietly confident."