QUEBEC CITY and MYRTLE BEACH, United States, Aug. 7, 2018 /PRNewswire/ - TSO3 Inc. (TSX: TOS) ("TSO3" or the "Company"), an innovator in sterilization technology for medical devices in healthcare settings, reported financial results for the second fiscal quarter ended June 30, 2018.
2018 Second Quarter Financial Summary
- Revenues equaled $0.4 million, as compared to $0.3 million in the first quarter of 2018 and $4.6 million in the second quarter of 2017. TSO3 recorded revenue from sales of consumables, accessories and service parts, and did not record revenue from STERIZONE® VP4 sterilizer sales or license fee amortization in the quarter. In the second quarter of 2017, the Company shipped 40 sterilizers to Getinge Infection Control AB ("Getinge"), the Company's former exclusive distributor, and recorded $0.2 million in license fee revenue.
- The Company delivered upgrades of 47 STERIZONE® VP4 Sterilizers to Getinge, totaling $0.5 million. In lieu of recording revenue, the Company recorded an associated $0.5 million repurchase provision and retained $0.3 million of associated upgrade costs of sales in inventory.
- Gross profit was positive $0.1 million, as compared to negative ($0.3) million in the first quarter of 2018 and $1.8 million in the second quarter of 2017. The Company generated gross profit from sales of consumables, accessories and service parts, but did not record gross profit contribution from sterilizer sales and license fee revenue, as it had in the same period in 2017.
- Research and Development expenses were $1.5 million, as compared to $1.7 million in the first quarter of 2018 and $1.5 million in the year-ago quarter.
- Sales, General and Administrative expenses were $2.5 million, as compared to $2.6 million in the first quarter of 2018 and $2.4 million in the year-ago quarter.
- The Company's net loss was $(4.0) million or $(0.04) per share in the second quarter of 2018, as compared to $(4.5) million, or $(0.05) per share, in the first quarter of 2018 and to $(2.3) million or $(0.02) per share in the year-ago quarter.
- The Company had $6.7 million in cash, cash equivalents and investments and no debt as of June 30, 2018, as compared to $14.8 million and no debt at the end of 2017. In the second quarter of 2018, the Company used $3.1 million for operations excluding changes in non-cash working capital, and $0.1 million for changes in non-cash working capital.
Business Highlight
The Company received clearance from US Regulators for its most recent 510(k) submission for the terminal sterilization of multi-channeled flexible endoscopes using the Company's STERIZONE® VP4 Sterilizer. The new clearance allows a hospital to terminally sterilize gastrointestinal endoscopes that have dimensions within the cleared intended use, such as certain colonoscopes, duodenoscopes and gastroscopes which have four or less channels, are up to 3.5 meters in length with internal diameters of 1.2 mm or greater.
Subsequent Event
Subsequent to the end of the second quarter of 2018, TSO3 announced it and a fund of which Courage Capital Management LLC, ("Courage") is the investment advisor, entered into a binding US$20 million debt financing to fund commercialization initiatives for its STERIZONE® VP4 Sterilizer. Courage is a Nashville, TN headquartered alternative asset management firm with a 20-year track record of investments in health care services, medical devices, and pharmaceuticals.
Concurrent with the Courage financing, TSO3 and Getinge mutually decided not to renew the distribution agreements that had existed between the parties and agreed to provide TSO3 unrestricted independent commercialization of its STERIZONE® VP4 Sterilizers, enable the Company's purchase of STERIZONE® VP4 Sterilizers from Getinge and transition the existing sales pipeline along with the service, maintenance and consumables sales of all existing STERIZONE® VP4 Sterilizer customers in the United States and Canada to TSO3.
http://www.newswire.ca/en/releases/archive/August2018/01/c6531.html
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.
Management is assessing its operational performance using supplemental non-IFRS measures which removes significant unusual items that do not reflect the recurring and ongoing operational results and trends.
| Additional Second Quarter 2018 Financial information |
||||||
|
$000's |
2018 |
2017 |
||||
| Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
|
| Net loss |
(3,952) |
(4,512) |
(1,449) |
(1,771) |
(2,254) |
(1,980) |
| Financial expenses (income) |
(12) |
(14) |
74 |
48 |
49 |
(39) |
| Amortization and depreciation |
292 |
315 |
246 |
331 |
221 |
168 |
| Share-based compensation expense |
627 |
371 |
301 |
632 |
592 |
609 |
| Income taxes |
7 |
- |
(59) |
33 |
29 |
27 |
| Adjusted Ebitda |
(3,038) |
(3,840) |
(887) |
(727) |
(1,363) |
(1,215) |
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) financial expenses (income), (3) amortization and depreciation expenses, (4) share-based compensation expense, (5) write-downs of certain tangible and intangible assets, (6) one-time write-off of inventory, (7) income taxes, and (8) other significant unusual items.
| Summary of Results |
|||||
| Second Quarter |
Six months |
||||
| 2018 $ |
2017 $ |
2018 $ |
2017 $ |
||
| Revenues |
373 |
4,630 |
628 |
8,841 |
|
| Cost of sales |
319 |
2,871 |
845 |
5,511 |
|
| 54 |
1,759 |
(217) |
3,330 |
||
|
Expenses |
|||||
| Research and development |
1,488 |
1,539 |
3,192 |
2,894 |
|
| Selling, general and administrative |
2,523 |
2,396 |
5,074 |
4,604 |
|
| Financial income |
(12) |
49 |
(26) |
10 |
|
| Total Expenses |
3,999 |
3,984 |
8,240 |
7,508 |
|
| Net loss before income taxes |
(3,945) |
(2,225) |
(8,247) |
(4,178) |
|
| Income taxes |
7 |
29 |
7 |
56 |
|
| Net loss and comprehensive loss |
(3,952) |
(2,254) |
(8,464) |
(4,234) |
|
| Weighted average number of outstanding shares (in thousands) |
92,891 |
92,328 |
92,884 |
92,162 |
|
| Basic and diluted net loss per share |
(0.04) |
(0.02) |
(0.09) |
(0.05) |
|
| Basic and diluted net comprehensive loss per share |
(0.04) |
(0.02) |
(0.09) |
(0.05) |
|
| Interim Consolidated Statements of Financial Position |
|||
| June 30, 2018 $ |
December 31, $ |
||
| Current Assets |
|||
| Cash and Cash Equivalents |
5,056 |
8,044 |
|
| Short-term Investments |
1,617 |
6,764 |
|
| Accounts Receivable |
727 |
651 |
|
| Inventories |
2,665 |
2,040 |
|
| Prepaid Expenses |
303 |
150 |
|
| 10,368 |
17,649 |
||
| Non-current Assets |
|||
| Property, Plant and Equipment |
2,809 |
3,184 |
|
| Intangible Assets |
1,868 |
1,886 |
|
| 4,677 |
5,070 |
||
| 15,045 |
22,719 |
||
| Current Liabilities |
|||
| Accounts Payable and Accrued Liabilities |
1,894 |
2,430 |
|
| Provision for Repurchase |
524 |
- |
|
| Warranty Provision |
1,094 |
1,263 |
|
| Current Tax Liabilities |
- |
68 |
|
| Deferred Revenues |
22 |
6 |
|
| 3,534 |
3,767 |
||
| Non-current Liabilities |
|||
| Deferred Tax Liabilities |
17 |
17 |
|
| Deferred Revenues |
6,044 |
6,044 |
|
| 9,595 |
9,828 |
||
|
Equity |
|||
| Share Capital |
111,254 |
111,215 |
|
| Reserve – Share-based Compensation |
7,558 |
6,574 |
|
| Deficit |
(111,650) |
(103,186) |
|
| Accumulated Other Comprehensive Loss |
(1,712) |
(1,712) |
|
| 5,450 |
12,891 |
||
| 15,045 |
22,719 |
||
| Interim Consolidated Statements of Cash Flows |
|||
| Six months |
|||
| 2018 $ |
2017 $ |
||
| Cash flows from operating activities |
|||
| Net loss |
(8,464) |
(4,234) |
|
| Adjustments for: |
|||
| Depreciation and amortization |
607 |
389 |
|
| Deferred income tax liabilities |
- |
56 |
|
| Share-based compensation |
998 |
1,201 |
|
| Investment income |
(62) |
(91) |
|
| (6,921) |
(2,679) |
||
| Changes in non-cash operating working capital items |
(1,087) |
723 |
|
| Interest received |
83 |
103 |
|
| Cash flows (used in) generated by operating activities |
(7,925) |
(1,853) |
|
| Cash flows from investing activities |
|||
| Acquisition of investments |
- |
(2,909) |
|
| Disposal of investments |
5,126 |
8,999 |
|
| Acquisition of property, plant and equipment |
(134) |
(909) |
|
| Acquisition of intangible assets |
(80) |
(151) |
|
| Cash flows generated by investing activities |
4,912 |
5,030 |
|
| Cash flows from financing activities |
|||
| Options exercised |
25 |
405 |
|
| Cash flows generated by financing activities |
25 |
405 |
|
| (Decrease) increase in cash and cash equivalents |
(2,988) |
3,582 |
|
| Cash and cash equivalents at the beginning |
8,044 |
2,698 |
|
| Cash and cash equivalents at the end |
5,056 |
6,280 |
|
Q2 Results Conference Call
Date: August 8, 2018
Time: 8:30 a.m. EDT
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: 1888566
TSO3's President and CEO R.M. (Ric) Rumble and CFO Glen Kayll, will host the conference.
Analysts and 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 Gilmartin Group at 1-610-368-6505.
Other interested parties may listen to the live webcast of the conference call at https://event.on24.com/wcc/r/1797562/02A40374E09B0B081C77081E12FCBA62 which will be available for replay in the Investors section of the Company's website at www.tso3.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 (H2O2) and ozone (O3) 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™ 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, duodenoscopes 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 TSO3's website, under the Products section.
About TSO3
Founded in 1998, TSO3'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. TSO3 also offers services related to the maintenance of sterilization equipment and compatibility testing of medical devices with such processes.
For more information about TSO3, visit the Company's website at www.tso3.com.
The statements in this release and oral statements made by representatives of TSO3 relating to matters that are not historical facts are forward-looking statements that involve certain risks, uncertainties and hypotheses, including, but not limited to, the limited history of sales or distribution of the Company, the ability of the Company to obtain the required regulatory clearances to market its products, general business and economic conditions, the condition of the financial markets, the ability of TSO3 to obtain financing on favourable terms and other risks and uncertainties. Although TSO3 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 versions of the cautionary note regarding forward-looking statements as well as a description of the relevant assumptions and risk factors likely to affect TSO3's actual or projected results are included in the Management's Discussion and Analysis for the year ended December 31, 2017, 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 TSO3 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.
SOURCE TSO3 Inc.
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