wir ja zu hören bekommen..
Gross margin improved from a loss of $1,734,000 (-480% of sales) in 2004 to a
loss of $292,000 (-45% of sales) in 2005 primarily as a result of transition
costs attributable to our Legacy Business in both years. Under the terms of the
manufacturing services agreement with Maxim, our gross margin on the Legacy
Business has been significantly reduced compared with the higher labor and
overhead costs incurred during the third quarter of 2004, when we were
manufacturing the Western Blot products at Rockville, Maryland and transitioning
the EIA manufacturing processes there, following our second quarter closure of
our Alameda, California EIA screening test manufacturing facility. Additionally,
the increase in sales of our BED incidence tests has improved our gross margin.
Research and development costs decreased by $104,000 or 20%, from $509,000 in
2004 to $405,000 in 2005. The decrease reflects the elimination of our former
R&D staff and related operations at Rockville in response to the implementation
of our business restructuring. We continued to incur travel and other costs
related to the transfer of our manufacturing technology to Thailand and China
and for various international clinical trials of our rapid tests during the
third quarter of 2005. We also incurred costs related to the transfer of
technology for our BED incidence test to a contract manufacturer in the
Portland, Oregon area in the third quarter of 2005.
Selling, general and administrative costs decreased by $392,000 or 26%, from
$1,487,000 in 2004 to $1,095,000 in 2005. The primary components of the decrease
include the following:
o a decrease of approximately $150,000 in selling expenses, primarily due
to the reduction in outside consultant expenses;
o a reduction of approximately $175,000 in compensation and travel and
entertainment expenses primarily related to the elimination of the
position of Executive Chairman in the fourth quarter of 2004 as well as
the elimination of the former Rockville and Pleasanton administrative
staff.
Our loss from operations for the third quarter of 2005, at $1,792,000, reflects
a 51% decrease compared with the $3,730,000 loss reported for the third quarter
of 2004.
We recorded net interest expense of $1,067,000 for the third quarter of 2005
compared with $79,000 of interest income in the third quarter of 2004
principally due to the accounting for the derivative and anti-dilution
obligations of our recent financings which are required to be adjusted to their
fair value at each balance sheet date with the change in value being recognized
in interest expense. The table below summarizes the components of interest
expense (in thousands):
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