TSO3 Reports First Quarter 2018 Results
TSO3 Reports First Quarter 2018 Results
QUEBEC CITY and MYRTLE BEACH, SC, May 8, 2018 /PRNewswire/ - TSO(3) Inc. (TSX: TOS) ("TSO(3)" or the "Company"), an innovator in sterilization technology for medical devices in healthcare settings, reported financial results for the first quarter 2018 ended March 31, 2018.
Operational Highlights
-- The Company successfully hired, trained and deployed a team of talented
and experienced sales, marketing, clinical and support personnel, as
well as launched several marketing initiatives.
-- To date, the TSO(3) sales team has effectively targeted and connected
with 531 potential customers, many of which have led to follow up visits
or calls. TSO(3) has submitted quotations to US medical facilities for
over 30 sterilizers, plus related accessories, consumables and service
contracts. These now populate the Company's sales pipeline and each is
moving through the sales process.
-- The Company entered into a co-commercialization agreement with Getinge
Infection Control AB ("Getinge"), which allows TSO(3) to sell directly
to end-users in the US and Canada and purchase sterilizer inventory from
Getinge at favourable pricing.
-- The Company provided its final additional information response to US
Regulators in support of extending the claims of the Company's
STERIZONE(®) VP4 Sterilizer to include the terminal sterilization of
duodenoscopes.
2018 First Quarter Financial Summary
-- Revenues equaled $0.3 million, as compared to $5.8 million in the fourth
quarter of 2017 and $4.2 million in the first quarter of 2017. TSO(3)
did not ship any STERIZONE(® )VP4 Sterilizers to Getinge in the first
quarter of 2018, but recorded revenue from sales of consumables and
service parts. The Company shipped 50 sterilizers in the fourth quarter
of 2017 and 36 in the first quarter of 2017.
-- The Company did not record license fee revenue in the first quarter of
2018, as opposed to $0.3 million recorded in the fourth quarter of 2017
and $0.2 million recorded in the first quarter of 2017. The Company
expects to recognize this license fee revenue in the future in a manner
which reflects the outcome of the negotiations with Getinge.
-- Gross profit was negative ($0.3) million, as compared to positive $2.3
million or 40% of revenue in the fourth quarter of 2017 and $1.6 million
or 37% of revenue in the first quarter of 2017. Gross profit declined
as the Company did not record revenue from sterilizer sales to Getinge
or from deferred license fee amortization, as compared to prior periods.
Gross profit was negative as the contribution to gross profit from
consumables and service parts did not exceed manufacturing overhead and
other costs incurred by the Company.
-- Research and Development expenses were $1.7 million, as compared to $1.8
million in the fourth quarter of 2017 and $1.4 million in the year-ago
quarter. The Company incurred expenditures in connection with its
laboratory in Myrtle Beach, extended regulatory claims activity and
product development.
-- Sales, General and Administrative expenses were $2.6 million, as
compared to $2.0 million in the fourth quarter of 2017 and $2.2 million
in the year-ago quarter. The Company incurred additional expenses
related to its increased sales and marketing activity, while it reduced
its general and administrative expenses.
-- The Company's net loss was $(4.5) million or $(0.05) per share in the
first quarter of 2018, as compared to $(1.4) million, or $(0.02) per
share, in the fourth quarter of 2017 and to $(2.0) million or $(0.02)
per share in the year-ago quarter.
-- The Company had $10.0 million in cash, cash equivalents and investments
and no debt as of March 31, 2018, as compared to $14.8 million and no
debt at the end of 2017. In the first quarter of 2018, the Company used
$3.9 million for operations excluding changes in non-cash working
capital, and $0.9 million for changes in non-cash working capital,
particularly for inventory in support of sterilizer upgrades for which
the Company has received a purchase order from Getinge.
Management Commentary
"In the first quarter of 2018, we initiated commercialization efforts on a stand-alone basis as well as continued support of our relationship with Getinge Infection Control and are measuring our progress to date," stated (R.M.) Ric Rumble, TSO(3)'s President and CEO. "We continue to add to our sales pipeline weekly and are moving accounts in the pipeline toward closure. Not all of our quotations will lead to sales, but we have achieved traction in these early stages and look forward to a productive 2018."
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 First Quarter 2018 Financial information
2018 2017 2016
$000's
------
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
--- --- --- --- --- --- --- ---
Net loss (4,512) (1,449) (1,771) (2,254) (1,980) (2,068) (1,473) (1,487)
Financial expenses
(income) (14) 74 48 49 (39) (69) (50) -
Amortization and
depreciation 315 246 331 221 168 120 147 103
Share-based
compensation
expense 371 301 632 592 609 286 333 268
One-time write-off
of inventory - - - - - 312 - -
Income taxes - (59) 33 29 27 48 15 (12)
------------ --- --- --- --- --- --- --- ---
Adjusted Ebitda (3,840) (887) (727) (1,363) (1,215) (1,371) (1,028) (1,128)
--------------- ------ ---- ---- ------ ------ ------ ------ ------
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
Periods ended March 31 (Unaudited, IFRS Basis, in thousands of US
dollars, except per share amounts)
First Quarter
2018 2017
$ $
--- ---
Revenues 255 4,211
Cost of sales 526 2,641
------------- --- -----
(271) 1,570
---- -----
Expenses
Research and development 1,704 1,353
Selling, general and
administrative 2,551 2,209
Financial income (14) (39)
---------------- --- ---
Total Expenses 4,241 3,523
-------------- ----- -----
Net loss before income
taxes (4,512) (1,953)
Income taxes - 27
------------ --- ---
Net loss and comprehensive
loss (4,512) (1,980)
-------------------------- ------ ------
Weighted average number of
outstanding shares (in
thousands) 92,877 91,995
-------------------------- ------ ------
Basic and diluted net loss
per share (0.05) (0.02)
-------------------------- ----- -----
Basic and diluted net
comprehensive loss per
share (0.05) (0.02)
----------------------- ----- -----
Consolidated Statements of Financial Position
(Unaudited, in thousands of US dollars)
March 31, December 31,
2018 2017
$ $
--- ---
Current Assets
Cash and Cash Equivalents 5,521 8,044
Short-term Investments 4,430 6,764
Accounts Receivable 582 651
Inventories 2,456 2,040
Prepaid Expenses 261 150
---------------- --- ---
13,250 17,649
Non-current Assets
Property, Plant and Equipment 2,984 3,184
Intangible Assets 1,879 1,886
----------------- ----- -----
4,863 5,070
----- -----
18,113 22,719
------ ------
Current Liabilities
Accounts Payable and Accrued
Liabilities 2,025 2,430
Warranty Provision 1,182 1,263
Current Tax Liabilities 68 68
Deferred Revenues 2 6
----------------- --- ---
3,277 3,767
Non-current Liabilities
Deferred Tax Liabilities 17 17
Deferred Revenues 6,044 6,044
----------------- ----- -----
9,338 9,828
----- -----
Equity
Share Capital 111,254 111,215
Reserve - Share-based Compensation 6,931 6,574
Deficit (107,698) (103,186)
Accumulated Other Comprehensive Loss (1,712) (1,712)
------------------------------------ ------ ------
8,775 12,891
----- ------
18,113 22,719
------ ------
Consolidated Statements of Cash Flows
As of March 31, 2018, and 2017 (Unaudited, in thousands of US dollars)
First Quarter
2018 2017
$ $
--- ---
Cash flows from operating activities
Net loss (4,512) (1,980)
Adjustments for:
Depreciation and amortization 315 168
Deferred income tax liabilities - 27
Share-based compensation 371 609
Investment income (27) (75)
----------------- --- ---
(3,853) (1,251)
Changes in non-cash operating
working capital items (948) 1,765
Interest received 35 41
----------------- --- ---
Cash flows (used in) generated by
operating activities (4,766) 555
--------------------------------- ------ ---
Cash flows from investing activities
Acquisition of investments - (1,412)
Disposal of investments 2,326 3,504
Acquisition of property, plant and
equipment (67) (193)
Acquisition of intangible assets (41) (129)
-------------------------------- --- ----
Cash flows generated by investing
activities 2,218 1,770
--------------------------------- ----- -----
Cash flows from financing activities
Options exercised 25 63
----------------- --- ---
Cash flows generated by financing
activities 25 63
--------------------------------- --- ---
(Decrease)
increase in cash
and cash
equivalents (2,523) 2,388
Cash and cash
equivalents at
the beginning 8,044 2,698
-------------- ----- -----
Cash and cash equivalents at the end 5,521 5,086
------------------------------------ ----- -----
Q1 Results Conference Call
Date: May 9, 2018
Time: 8:00 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: 2845669
TSO(3)'s President and CEO R.M. (Ric) Rumble and CFO Glen Kayll will host.
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/1660076/E86DE808AFF783FA01BE70885CC0BDEF 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 (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 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 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 versions 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, 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 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.
Company Contacts: R.M. (Ric) Rumble, President and CEO, Tel: 418 651-0003, Email: info@tso3.com; Glen Kayll, CFO, Tel: 418 651-0003, Email: info@tso3.com; Investor Relations: Gilmartin Group, Greg Chodaczek, Tel: 610-368-6505, Email: Greg@gilmartinir.com; Renmark Financial Communications Inc., Barry Mire, Tel: 416 644-2020 or 514 939-3989, Email: bmire@renmarkfinancial.com
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SOURCE TSO3 Inc.
