QUÉBEC CITY, March 21, 2017 /PRNewswire/ - TSO3 Inc. (TSX: TOS) (“TSO3” 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
- TSO3 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 TSO3 Strategic Partnership Program, which provides an avenue for these institutions to independently study and provide feedback on the impact of TSO3 technology on low temperature sterilization and/or endoscope reprocessing in their hospitals.
- TSO3 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 TSO3‘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 TSO3 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.
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