TSO3 INC. QUÉBEC CITY, March 21, 2017 /PRNewswire/ - TSO(3 )Inc. (TSX: TOS) ("TSO(3)" or the "Company"), an innovator in sterilization technology for medical devices in healthcare settings, reported its operating results for the fourth quarter and year ended December 31, 2016. All figures are in US dollars unless otherwise noted.
2016 Fourth Quarter Financial Summary
-- Revenue increased to a record $3.75 million compared to $0.15 million in
the same period last year and $3.5 million in the third quarter of 2016.
The Company shipped 30 STERIZONE(®) VP4 Sterilizers, along with
associated accessories and consumables, to Getinge Infection Control,
its exclusive global distributor, in the fourth quarter of 2016.
-- Gross profit was $1.3 million, or 36% of revenue, excluding a one-time
write-down of $0.3 million for obsolete raw materials inventory. This
compares to $1.1 million or 32% in the third quarter of 2016, and
negative ($0.3) million in the fourth quarter of 2015. Including the
inventory write down, fourth quarter 2016 gross profit was $1.0 million,
or 28% of revenue.
-- Research and Development (R&D) expense grew to $1.3 million, as compared
to $0.8 million in the third quarter of 2016 and $0.7 million in the
year-ago quarter.
-- Sales, General and Administrative (SG&A) expense was $1.8 million, which
was consistent with the third quarter of 2016 and grew from $1.2 million
in the year-ago quarter.
-- The Company's net loss was $(2.1) million or $0.02 per as compared to
$(2.2) million or $0.03 per share in the year-ago quarter and ($1.5)
million, or $0.02 per share, in the third quarter of 2016. Non-IFRS net
loss in the fourth quarter of 2016 was $(1.8) million or $0.02 per
share.
-- The Company had $19.3 million in cash, cash equivalents and investments
and no debt as at December 31, 2016, as compared to $20.7 million and no
debt at the end of the third quarter of 2016.
2016 Full Year Financial Summary
-- Revenue increased to a record $13.3 million, which included shipments of
110 STERIZONE(®) VP4 Sterilizers and associated accessories and
consumables to Getinge, as compared to $1.2 million in 2015.
-- Gross profit increased to $4.1 million, or 31% of revenue, as compared
to negative (26%) in 2015. Excluding a one-time write-down of obsolete
raw materials inventory, gross profit would have been $4.4 million, or
33% of revenue, in 2016.
-- R&D expense grew to $3.5 million from $2.2 million in 2015.
-- SG&A expense grew to $6.5 million from $3.9 million in 2015.
-- The Company's net loss was $(4.4) million or $(0.05) per share, vs
$(6.3) million or $(0.08) per share in 2015.
Fourth Quarter 2016 and Subsequent Event Operational Highlights
-- TSO(3) secured a purchase order for a significant number of
STERIZONE(®) VP4 Sterilizers for delivery in 2017. This provides the
Company with operational and supply chain predictability.
-- The Company improved supply chain financing through an automated
receivable factoring program through a joint effort with Getinge and a
major financial institution. This program provides a simple and
economical instrument for both parties to finance working capital.
-- The Company signed three leading US healthcare institutions in our newly
established TSO(3) Strategic Partnership Program, which provides an
avenue for these institutions to independently study and provide
feedback on the impact of TSO(3) technology on low temperature
sterilization and/or endoscope reprocessing in their hospitals.
-- TSO(3) added Dr. Linda Rosenstock and Mr. Jeffrey Pompeo to the
Company's board of directors early 2017, adding more than 30 years of
public company experience in health and life sciences. These
appointments add significant and relevant US medical practice,
regulatory and business development skills to the Company independent
board.
-- The Company appointed Dr. Mark Pasmore Ph.D. as Vice President of
Research and Development. Dr. Pasmore brings extensive experience,
having held scientific research positions in biofilms, sterilization,
sterility assurance and microbial control for pharmaceuticals and
medical devices for leading organizations.
Management Commentary
"We are pleased with TSO(3)'s strong finish to 2016. In the fourth quarter of 2016 we reached important operational milestones, added strategic key personnel, and made substantial improvement in revenues and gross margins," said TSO(3) President and CEO, R.M. (Ric) Rumble. "We continue to invest in our team and our game-changing technology as we look to transform how low temperature sterilization and endoscope reprocessing is performed in healthcare."
"Looking ahead into 2017," Rumble continued , "We will continue to support Getinge in North America, Europe and other international markets, conduct comprehensive sales training meetings and provide marketing collateral support. 2017 will also see us expand upon the use of our existing laboratories in Québec and South Carolina in an effort to further support device compatibility testing, pursue expanded regulatory claims for duodenoscopes in the United States, and new product development."
Supplemental Non-IFRS Financial Measures
In addition to IFRS financial measures, management uses non-IFRS financial measures to assess the Company's operational performance. It is likely that the non-IFRS financial measures used by the Company will not be comparable to similar measures reported by other issuers or those used by financial analysts as their measures may have different definitions. The measures used by the Company are intended to provide additional information and should not be considered in isolation or as a substitute for IFRS financial performance measures.
Generally, a non-IFRS financial measure is a numerical measure of an entity's historical or future financial performance, financial position or cash flows that is neither calculated nor recognized under IFRS. Management believes that such non-IFRS financial measures are important as they provide users of the financial statements with a better understanding of the results of the Company's recurring operations and their related trends, while increasing transparency and clarity into its operating results. Management also believes these measures can be useful in assessing the Company's capacity to discharge its financial obligations.
In 2016, management began assessing its operational performance using supplemental non-IFRS statement of income which removes typically one-time unusual items that do not reflect the recurring and ongoing operational results and trends. The results of the associated adjustments in 2016 included the removal of a one-time expense associated with a commitment to purchase of raw materials made in the year but made obsolete by adjustments and improvements in installation alternatives in response to feedback from end customers, which resulted in the calculation of adjusted gross profit, adjusted EBITDA and adjusted net income.
Additional Fourth Quarter and Full Year 2016 Financial Information
$000's Quarterly 2016 Full Year 2016
Q1 Q1 Q2 Q3 Q4 Q4
IFRS Adjust- Non- IFRS IFRS IFRS Adjust- Non- IFRS Adjust- Non-
IFRS ments(1) IFRS ments IFRS
ments(1)
-------
Revenues 3,071 - 3,071 2,977 3,507 3,746 - 3,746 13,301 - 13,301
Cost of
Goods Sold 1,961 - 1,961 2,143 2,368 2,716 (312) 2,404 9,188 (312) 8,876
----------- ----- --- ----- ----- ----- ----- ---- ----- ----- ---- -----
Gross
Profit 1,110 - 1,110 834 1,139 1,030 (312) 1,341 4,113 (312) 4,424
Gross
Margin 36% - 36% 28% 32% 28% (8%) 36% 31% (2%) 33%
R&D 606 - 606 803 806 1,297 - 1,297 3,512 - 3,512
SGA 1,385 - 1,385 1,529 1,841 1,774 - 1,774 6,529 - 6,529
Financial (1,588) 1,578 (10) - (50) (21) - (21) (1,658) 1,578 (80)
--------- ------ ----- --- --- --- --- --- --- ------ ----- ---
Net Income
(loss)
before tax 707 (1,578) (871) (1,499) (1,458) (2,020) (312) (1,708) (4,270) 1,266 (5,536)
Tax 58 - 58 (12) 15 48 - 48 109 - 109
--- --- --- --- --- --- --- --- --- --- --- ---
Net Income
(loss) 649 (1,578) (929) (1,487) (1,473) (2,068) (312) (1,756) (4,379) 1,266 (5,645)
Net Income
(loss) per
share 0.01 (0.02) (0.01) (0.02) (0.02) (0.02) 0.00 (0.02) (0.05) (0.01) (0.06)
Adjusted
Ebitda 1,000 (1,578) (578) (1,128) (977) (1,614) (312) (1,302) (2,719) 1,266 (3,985)
-------- ----- ------ ---- ------ ---- ------ ---- ------ ------ ----- ------
Non-IFRS cost of goods sold, non-IFRS gross profit and non-IFRS gross margin in Q4-2016 was impacted by a one-time write-off of inventory of $0.3 million associated with a commitment to purchase of raw materials made in the year, but made obsolete by adjustments and improvements in installation alternatives in response to feedback from end customers. The Company plans to sell these materials in 2017, but the amount of potential recovery could not be estimated at the end of 2016.
Non-IFRS financial income in Q1-2016 was impacted by the one-time foreign exchange gain realized of $1.6 million following the change in functional currency from Canadian dollars to US dollars.
Adjusted EBITDA, is adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA). Adjusted EBITDA adjusts net income for (1) significant realized and unrealized foreign exchange gains or losses, (2) amortization and depreciation expenses (3) share-based compensation expense, (4) amortization or write-downs of certain tangible and intangible assets, (5) one-time write-off of inventory, (6) income taxes, and (7) other significant unusual items.
Summary of Results
Periods ended December 31 (Audited, IFRS Basis, in thousands of US
dollars, except per share amounts)
2016 Restated
2015
$ $
--- ---
Revenues 13,301 1,248
Cost of sales 9,188 1,578
------------- ----- -----
Gross profit 4,113 (330)
------------ ----- ----
Expenses
Research and development 3,512 2,181
Selling, general and
administrative 6,529 3,946
Financial expenses (income) (1,658) (121)
-------------------------- ------ ----
Total Expenses 8,383 6,006
-------------- ----- -----
Net loss before income
taxes (4,270) (6,336)
Income taxes 109 -
------------ --- ---
Net loss (4,379) (6,336)
Other comprehensive
income (loss) item that
will not be reclassified
subsequently to net
income
Translation adjustments - (1,712)
----------------------- --- ------
Total comprehensive loss (4,379) (8,048)
------------------------ ------ ------
Weighted average number
of outstanding shares
(in thousands) 90,810 81,264
----------------------- ------ ------
Basic and diluted net
loss per share (in $) (0.05) (0.08)
---------------------- ----- -----
Basic and diluted net
comprehensive loss per
share (in $) (0.05) (0.10)
----------------------- ----- -----
Fourth Quarter Analysis
(Unaudited, IFRS Basis, in thousands of US dollars, except per share
amounts)
Three-month period ended December 31, 2016, compared to the three-month
period ended December 31, 2015:
Fourth Quarter Fourth Quarter
Restated
2016 2015
$ $
--- ---
Revenues 3,746 151
Cost of sales 2,716 484
------------- ----- ---
Gross profit 1,030 (333)
------------ ----- ----
Expenses
Research and development 1,297 674
Selling, general and
administrative 1,774 1,210
Financial expenses (income) (21) (57)
-------------------------- --- ---
Total Expenses 3,050 1,827
-------------- ----- -----
Net loss before income
taxes (2,020) (2,160)
Income taxes 48 -
------------ --- ---
Net loss (2,068) (2,160)
Other comprehensive income (loss) item that will
not be reclassified subsequently to net income
Translation adjustments - (379)
----------------------- --- ----
Total comprehensive loss (2,068) (2,539)
------------------------ ------ ------
Weighted average number of
outstanding shares (in
thousands) 90,810 81,263
-------------------------- ------ ------
Basic and diluted net loss
per share (in $) (0.02) (0.03)
-------------------------- ----- -----
Basic and diluted net
comprehensive loss per
share (in $) (0.02) (0.03)
----------------------- ----- -----
Consolidated Statements of Financial Position
As of December 31, 2016 and 2015 (Audited, IFRS Basis, in thousands of US dollars)
Restated
2016 2015
$ $
--- ---
Current Assets
Cash and Cash Equivalents 2,698 12,654
Short-term Investments 15,064 2,457
Accounts Receivable 2,318 437
Inventories 1,703 1,302
Prepaid Expenses 102 79
---------------- --- ---
21,885 16,929
Non-current Assets
Long-term Investments 1,498 -
Property, Plant and Equipment 2,357 366
Intangible Assets 1,836 1,691
----------------- ----- -----
5,691 2,057
----- -----
27,576 18,986
====== ======
Current Liabilities
Accounts Payable and Accrued
Liabilities 2,272 1,288
Warranty Provision 575 29
Deferred Revenues 1,004 801
----------------- ----- ---
3,851 2,118
Non-current Liabilities
Deferred Income Tax Liabilities 109 -
Deferred Revenues 5,945 6,735
----------------- ----- -----
9,905 8,853
----- -----
Equity
Share Capital 110,406 98,817
Reserve - Share-based Compensation 4,709 3,990
Reserve - Warrants - 493
Deficit (95,732) (91,455)
Accumulated Other Comprehensive Loss (1,712) (1,712)
------------------------------------ ------ ------
17,671 10,133
------ ------
27,576 18,986
====== ======
Consolidated Statements of Cash Flows
As of December 31, 2016 and 2015 (Audited, IFRS Basis, in thousands of US
dollars)
Restated
2016 2015
$ $
--- ---
Cash flows from operating
activities
Net loss (4,379) (6,336)
Adjustments for:
Depreciation and amortization 448 407
Write-off of intangible assets - 173
Deferred income tax liabilities 109 -
Share-based compensation 1,103 476
Investment income (180) (87)
----------------- ---- ---
(2,899) (5,367)
Changes in non-cash operating
working capital items (2,597) 7,859
Interest received 106 86
----------------- --- ---
Cash flows generated by (used
in) operating activities (5,390) 2,578
----------------------------- ------ -----
Cash flows from investing
activities
Acquisition of investments (26,195) (6,939)
Disposal of short-term investments 12,164 4,282
Acquisition of property, plant and
equipment (1,085) (192)
Acquisition of intangible assets (314) (259)
-------------------------------- ---- ----
Cash flows used in investing
activities (15,430) (3,108)
---------------------------- ------- ------
Cash flows from financing
activities
Issuance of share capital and
warrants - 9,108
Share capital and warrants issue
expenses - (912)
Options exercised 719 41
Warrants exercised 10,145 918
------------------ ------ ---
Cash flows generated by
financing activities 10,864 9,155
----------------------- ------ -----
Effect of exchange rates on
cash and cash equivalents - (1,120)
--------------------------- --- ------
Increase (decrease) in cash
and cash equivalents (9,956) 7,505
Cash and cash equivalents at
the beginning 12,654 5,149
---------------------------- ------ -----
Cash and cash equivalents at
the end 2,698 12,654
============================ ===== ======
Consolidated Statements of Cash Flows
(Unaudited, IFRS Basis, in thousands of US dollars)
Three-month period ended December 31, 2016, compared to the three-month
period ended December 31, 2015:
Restated
Q4-2016 Q4-2015
$ $
--- ---
Cash flows from operating activities
Net Income (loss) (2,067) (2,160)
Adjustments for:
Depreciation and amortization 120 106
Deferred income tax liabilities 109 -
Share-based compensation 286 182
Financial income (49) (26)
---------------- --- ---
(1,601) (1,898)
Changes in non-cash operating
working capital items 537 8,303
Interest received 11 25
----------------- --- ---
Cash flows used in operating
activities (1,053) 6,430
---------------------------- ------ -----
Cash flows from investing activities
Acquisition of short-term
investments (3,278) (2,457)
Disposal of short-term investments 3,319 1,734
Acquisition of property, plant and
equipment (450) (90)
Acquisition of intangible assets (66) (107)
-------------------------------- --- ----
Cash flows generated by
(used in) investing
activities (475) (920)
----------------------- ---- ----
Cash flows from financing activities
Options exercised 47 23
----------------- --- ---
Cash flows generated by
financing activities 47 23
----------------------- --- ---
Effect of exchange rates on
cash and cash equivalents - (228)
--------------------------- --- ----
Increase in cash and cash
equivalents (1,481) 5,305
Cash and cash equivalents at
the beginning 4,179 7,349
---------------------------- ----- -----
Cash and cash equivalents at
the end 2,698 12,654
---------------------------- ----- ------
Conference Call
TSO(3) President and CEO R.M. (Ric) Rumble and CFO Glen Kayll, will host the conference call, followed by a question and answer period.
Date: Tuesday, March 21, 2017
Time: 10:30 a.m. Eastern Daylight Time (7:30 a.m. PDT)
Toll-free dial-in number: 1-888-231-8191
International dial-in number: 1-514-807-9895 (Montreal); 1-647-427-7450 (Toronto)
Conference ID: 1379182
Analysts and institutional investors are invited to participate on the call. Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.
Other interested parties may listen to the live webcast of the conference call at http://event.on24.com/r.htm?e=1379182&s=1&k=E0EFC15542DE35C9FC078DECC7B0B6F7, which will also be available for replay in the Investors section of the Company's website at www.tso3.com.
Fourth Quarter and Fiscal 2016 Results Disclosure
The 2016 Annual Report is available on TSO(3)'s website at the following address http://www.tso3.com/en/investors/financial_reporting/annual_reports/ and full 2016 disclosure will shortly be available on SEDAR (www.sedar.com).
About the STERIZONE(®) VP4 Sterilizer
The STERIZONE(®) VP4 Sterilizer is a low-temperature sterilization system that utilizes the dual-sterilants of vaporized hydrogen peroxide (H(2)O(2)) and ozone (O(3)) to achieve terminal sterilization of heat and moisture sensitive medical devices. Its single pre-programmed cycle can sterilize a large number and wide range of compatible devices, creating a cost-effective sterilization process with error free cycle selection. The device's unique Dynamic Sterilant Delivery System(TM) automatically adjusts the quantity of injected sterilant based on the load composition, weight and temperature. This capability removes the guesswork and potential for human error, as there is no need to sort instruments and choose the appropriate cycles as with other machines.
The STERIZONE(®) VP4 Sterilizer is the only terminal sterilization method that is FDA cleared to sterilize multi-channeled flexible endoscopes (with a maximum of four channels) of up to 3.5 meters in length, such as video colonoscopes and gastroscopes - an industry first for any medical device sterilization process.
The STERIZONE(®) VP4 Sterilizer is also the only cleared low temperature sterilizer that can process a mixed load consisting of general instruments, single channel flexible endoscopes, and single or double channel rigid endoscopes in the same cycle with load weights of up to 75 lb. The ability to run mixed loads significantly reduces labor costs by minimizing the amount of instrument sorting required, while maximizing the device turns (more productivity from increased throughput capacity).
More information about the STERIZONE(®) VP4 Sterilizer is available through TSO(3)'s website, under the Products section at http://www.tso3.com/en/products/sterizone-vp4/.
About TSO(3)
Founded in 1998, TSO(3)'s activities encompass the sale, production, maintenance, research, development and licensing of sterilization processes, related consumable supplies and accessories for heat-sensitive medical devices. The Company designs products for sterile processing areas in the hospital environment that offer an advantageous replacement solution to other low temperature sterilization processes currently used in hospitals. TSO(3 )also offers services related to the maintenance of sterilization equipment and compatibility testing of medical devices with such processes.
For more information about TSO(3), visit the Company's website at www.tso3.com
The statements in this release and oral statements made by representatives of TSO(3) relating to matters that are not historical facts (including, without limitation, those regarding the timing or outcome of TSO(3)'s sales, business or operations) are forward-looking statements that involve certain risks, uncertainties and hypotheses, including, but not limited to, the ability of the Company to obtain the required regulatory clearance to market its products on a worldwide basis; general business and economic conditions, the condition of the financial markets, the ability of TSO(3) to obtain financing on favourable terms and other risks and uncertainties. Although TSO(3) believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The complete version of the cautionary note regarding forward-looking statements as well as a description of the relevant assumptions and risk factors likely to affect TSO(3)'s actual or projected results are included in the Management's Discussion and Analysis for the year ended December 31, 2016, which is available on the Company's website. The forward-looking statements contained in this press release are made as of the date hereof and TSO(3) does not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.
SOURCE TSO3 Inc.
