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TSO3 Reports First Quarter 2019 Results

QUEBEC CITY and MYRTLE BEACH, SC , May 6, 2019 /CNW Telbec/ - TSO3 Inc. (TOS.TO) ("TSO3" or the "Company"), an innovator in sterilization technology for medical devices in healthcare settings, reported financial results for the first quarter ended March 31, 2019 .

Business Highlights

TSO3's direct sales force continues to increase market adoption of its technology. In the first quarter of 2019, TSO3 received purchase orders or commitment indications for 14 units of its industry-leading STERIZONE® VP4 Sterilizer and shipped nine sterilizers to end-users. The Company ended the quarter with 75 sterilizers installed at end-user locations, seven that have been shipped but not yet installed, and 28 which are under open purchase orders or commitment indications. 

"The Company is on a record pace with 35 units sold or committed to within the last two quarters. TSO3 continues to execute on its goal to sell the 230 sterilizers repurchased from our exclusive distributor last year," stated R.M. ( Ric) Rumble , President and CEO of TSO3.  "The Company now has over 450 opportunities in our pipeline and is also investing in contracting efforts with Integrated Delivery Networks (IDN's) and Group Purchasing Organizations (GPO's) to provide further access and credibility with acute care facilities in the USA.  We remain singularly focused on commercializing our innovative product and see real signs of progress."

2019 First Quarter Financial Summary

  • Revenues equaled $1.0 million , compared to $0.3 million in the first quarter of 2018. TSO3 revenues in the first quarter of 2019 reflect sales of sterilizers and related accessories, service and $0.4 million from the sale of consumables directly to end customers. The Company shipped nine sterilizers to hospitals in the first quarter of 2019 as compared to none in the first quarter of 2018.
  • Gross profit was positive $0.4 million , or 39% of revenues, as compared to negative ($0.3) million in the first quarter of 2018. Gross profit in the first quarter of 2019 increased as a result of growth in sterilizers and consumables sales at direct-to-user selling prices rather than the wholesale prices at which the Company sold to its distributor in the first quarter of 2018.
  • Research and Development (R&D) expenses amounted to $0.7 million , as compared to $1.7 million in the first quarter of 2018. The Company reduced its research and development expenditures as it focused more of its investments on selling and marketing activities.
  • Selling, general and administrative (SG&A) includes marketing, sales, service and administrative expenses. SG&A expenses were $2.6 million , which is comparable to the first quarter of 2018.
  • Financial expense was $0.5 million as compared to an immaterial amount in the first quarter of 2018. The Company recorded $0.7 million of accrued interest expense in the first quarter of 2019 related to a $20.0 million debt financing it obtained in August 2018 and a non-cash gain of $0.2 million on the revaluation of the embedded derivative within the Convertible Note associated with this financing.
  • The Company's net loss was $(3.4) million , or $(0.04) per share, as compared to $(4.5) million , or $(0.05) per share in the first quarter of 2018.
  • The Company had $11.3 million in cash and cash equivalents and $18.5 million of debt as of March 31, 2019 , as compared to $13.0 million in cash and cash equivalents and $18.0 million of debt at the end of 2018. The Company used $1.6 million for operating activities in the first quarter of 2019.

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.

 

IFRS to Non-IFRS adjusted EBITDA Reconciliation




 

$000's

2019

2018

Q1

Q4

Q3

Q2

Q1

Net loss

(3,426)

(2,676)

(2,104)

(3,952)

(4,512)

Financial expenses (income)

479

(1,055)

(599)

(12)

(14)

Amortization and depreciation

269

235

270

292

315

Write-down of tangible and intangible assets

-

1,026

-

-

-

Share-based compensation expense

356

369

688

627

371

Income taxes

32

7

11

7

-

Adjusted EBITDA

(2,290)

(2,094)

(1,734)

(3,038)

(3,840)

 

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) income taxes, and (7) other significant unusual items.

 

Summary of Results

Periods ended March 31, 2019 and 2018 (Unaudited, IFRS Basis, in thousands of US dollars, except per share amounts)




First Quarter


2019

2018


$

$

Revenues

960

255

Cost of sales

583

526

Gross profit

377

(271)




Expenses



Research and development

710

1,704

Selling, general and administrative

2,582

2,551

Financial expenses (income)

479

(14)

Total Expenses

3,771

4,241

Net loss before income taxes

(3,394)

(4,512)

Income taxes

32

-

Net loss and comprehensive loss

(3,426)

(4,512)

Weighted average number of outstanding shares (in thousands)

93,465

92,877

Basic and diluted net loss per share

(0.04)

(0.05)

Basic and diluted net comprehensive loss per share

(0.04)

(0.05)

 

Consolidated Statements of Financial Position

(Unaudited, IFRS Basis, in thousands of US dollars)





March 31,
2019

December 31,
2018


$

$

Current Assets



Cash and Cash Equivalents

11,268

12,961

Accounts Receivable

944

1,591

Inventories

3,438

3,534

Current Tax Assets

-

16

Prepaid Expenses

340

261


15,990

18,363

Non-current Assets



Property, Plant and Equipment

2,360

2,039

Intangible Assets

1,793

1,781


4,153

3,820


20,143

22,183

Current Liabilities



Accounts Payable and Accrued Liabilities

1,882

1,858

Warranty Provision

305

273

Current Tax Liabilities

16

-

Lease Liabilities

139

-

Deferred Revenues

185

103


2,557

2,234

Non-current Liabilities



Deferred Tax Liabilities

51

51

Lease Liabilities

250

-

Debt

17,453

16,711

Embedded Derivative

1,064

1,319

Deferred Revenues

-

-


21,345

20,315

Equity



Share Capital

111,470

111,470

Reserve – Share-based Compensation

8,896

8,540

Deficit

(119,856)

(116,430)

Accumulated Other Comprehensive Loss

(1,712)

(1,712)


(1,202)

1,868


20,143

22,183

 

Consolidated Statements of Cash Flows

As of March 31, 2019 and 2018 (Unaudited, IFRS Basis, in thousands of US dollars)




First Quarter


2019

$

2018

$

Cash flows from operating activities



Net loss

(3,426)

(4,512)

Adjustments for:



Depreciation and amortization

269

315

Loss on disposal of property, plant and equipment

7

-

Income tax

32

-

Share-based Compensation

356

371

Capitalized interest on long term debt

714

-

Gain on re-measurement at fair-value on embedded derivative

(255)

-

Investment income

(44)

(27)


(2,347)

(3,853)

Changes in non-cash operating working capital items

(657)

(948)

Interest received

(44)

35

Cash flows used by operating activities

(1,646)

(4,766)

Cash flows from investing activities



Disposal of investments

-

2,326

Acquisition of property, plant and equipment

(8)

(67)

Acquisition of intangible assets

(71)

(41)

Proceed from disposal of property, plant and equipment

4

-

Cash flows (used) generated by investing activities

(75)

2 218

Cash flows from financing activities



Financing fee

28

-

Options exercised

-

25

Cash flows generated by financing activities

28

25

Increase in cash and cash equivalents

(1,693)

(2,523)

Cash and cash equivalents at the beginning

12,961

8,044

Cash and cash equivalents at the end

11,268

5,521

 

Conference call

TSO3 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, May 7, 2019

Time:

8:00 a.m. Eastern Daylight Time

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:

5423529

 

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 Danielle Ste-Marie at 1-514-465-6701  

Other interested parties may listen to the live webcast of the conference call at https://event.on24.com/wcc/r/1993850/97C1DC5ABD2F78F31B0550ECA1263AEF which will be available for replay in the Investors section of the Company's website at www.tso3.com.  

First Quarter of 2019 Results Disclosure

The first quarter of 2019 Report is available on TSO3's website at www.tso3.com and 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 (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 long, multi-channel flexible endoscopes (with a maximum of four channels) of up to 3.5 meters in length - 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 at www.tso3.com.

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 evolution in customer demand for the Company's products and services, the plans for sales and marketing including the fact that the Company's customers may not commit to any purchases, 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, 2018 , 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.

 

Cision

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SOURCE TSO3 Inc.


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