ORTHOsoft Triples Direct Sales in 2006



    
    2006 Highlights:
    - Direct sales up 266%, from $1.2M to $4.4M
    - Recurring revenues up 97%, from $1.3 M to $2.5 M
    - Total revenues up 24%, from $10.2 M to $12.6 M
    - Third largest CAOS company in North America
    - Launch of new universal hip and knee software program
    - Completion of a hip resurfacing software program
    - Expansion of its distribution network and sales force
    - $7.0 million private financing with SGF Santé Inc.
    

    MONTREAL, April 10 /CNW Telbec/ - ORTHOsoft Inc. (TSX-Venture: OSH), an
international company that develops and markets software applications,
instruments and computerized medical systems improving the accuracy of knee,
hip and spine procedures, made considerable progress in 2006 as its growth
strategy was successfully implemented. The Corporation developed universal
software programs and marketed them through a strengthened distribution
network and sales force. As a result, total revenues and direct sales
increased by 24% and 266% respectively, making the Corporation the third
largest in its industry in the United States with an 18.1% market share,
almost neck to neck with the second player, Stryker Corp.
    "With its direct sales force, Orthosoft has navigated an average of 13
procedures every day in 2006, three times more than last year. Patients
seeking superior outcomes are now requesting navigation of their orthopaedic
procedures. We are expanding our network of partners and exclusive
representatives in order to continue focusing on surgeons and enable them to
use our technology." indicated Dr Louis-Philippe Amiot, Chairman of the Board,
and Chief Executive Officer of ORTHOsoft.

    
    -------------------------------------------------------------------------
                                                Three-month
                                               period ended
                                                December 31
    Revenues by category                    2006          2005     Variation
    -------------------------------------------------------------------------
    Software applications               $877,109       803,800         9.12%
    -------------------------------------------------------------------------
    Development services                  92,873       283,501       (67.24%)
    -------------------------------------------------------------------------
    Hardware
    (cart & instruments)               1,688,915       977,813        72.72%
    -------------------------------------------------------------------------
    Recurring revenues                   702,331       385,688        82.10%
    -------------------------------------------------------------------------
    Total                              3,361,228     2,450,802        37.15%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                               Twelve-month
                                               period ended
                                                December 31
    Revenues by category                    2006          2005     Variation
    -------------------------------------------------------------------------
    Software applications              2,850,590     1,884,462        51.27%
    -------------------------------------------------------------------------
    Development services                 646,406     2,225,128       (70.95%)
    -------------------------------------------------------------------------
    Hardware
    (cart & instruments)               6,669,671     4,846,680        37.61%
    -------------------------------------------------------------------------
    Recurring revenues                 2,495,403     1,264,802        97.30%
    -------------------------------------------------------------------------
    Total                             12,662,070    10,221,072        23.88%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating Results for Fiscal 2006

    For the fiscal year ended December 31, 2006, ORTHOsoft's revenues rose
23.9% to $12.7 million, compared with $10.2 million for the fiscal year ended
December 31, 2005. Revenues from the U.S. reached $8.4 million and from Europe
$4.1 million, representing a growth of 25.0% and 29.0% respectively over the
12-month period ended December 31, 2005.
    Driven by sales of the Corporation's new universal applications, software
application revenues reached $2.9 million or 22.5% of total revenues in 2006,
compared with $1.9 million or 18.4% of total revenues for the previous year.
    Hardware revenues totalled $6.7 million, representing a growth of 37.6%
over $4.8 million for the year ended December 31, 2005.
    Recurring revenues, which include pay-per-use (PPU) charges, maintenance
fees and other miscellaneous revenues, were $2.5 million, up 97.3% over     
$1.3 million for the previous year. Total navigated surgeries reached 12,500
in 2006.
    For the year ended December 31, 2006, development revenues were decreased
by 71.0% to $646,406 as planned, compared with $2.2 million for the year ended
December 31, 2005.
    "Our direct sales to hospitals reached $4.4 million, compared with    
$1.2 million in 2005. The increase in software revenues and direct sales is
mainly attributable to the January 2006 launch of the Corporation's universal
software hip and knee applications and the strengthening of its sales force,"
stated Yvan Beaudoin, Chief Operating Officer of the Corporation.
    The gross profit margin rose to 67.8% for the year ended December 31,
2006, compared with 66.0% for the previous year. This improvement results from
the increase in direct sales.
    Following its plan, the Corporation has spent $4.3 million in R&D or 34.2%
of sales compared to 37% for the previous year.
    Sales and marketing expenses were $4.2 million, accounting for 33.36% of
total revenues for the year ended December 31, 2006. That represents a 48.6%
increase over the previous year, reflecting the Corporation's commitment to
continue with its active efforts to build up an in-house sales structure,
primarily as a base for the commercialization of its universal applications.
    In accordance with building its sales infrastructure and technology
development, the Corporation recorded a net loss of $3.8 million or $0.09 per
share for fiscal year 2006, compared with a net loss of $3.2 million or $0.08
per share for 2005. On December 19, 2006, pursuant to a private placement, the
Corporation issued 9,722,223 common shares for gross cash proceeds of $7.0
million. This transaction had a slight impact on the weighted average number
of common shares outstanding for fiscal 2006, which stood at 41,680,166
shares, compared with 41,360,532 for fiscal 2005.

    Operating Results for the Quarter ended December 31, 2006

    During the quarter ended December 31, 2006, revenues totalled $3.4
million, up 37.2% over fourth quarter of the previous fiscal year. Revenues
from software applications, hardware and recurring revenues were up 9.1%,
72.7% and 82.1% respectively over the same period a year ago.
    The business generated a gross profit margin oft 71.0%, compared with
68.2% for the same period of the previous year. Sales and marketing expenses
were $1.4 million, representing an increase of 89.4% over the same period of
the previous year. General and administrative expenses amounted to $911,370,
representing an increase of 87.1% over the same period of the previous year.
    For the quarter ended December 31, 2006, the Corporation recorded a net
loss of $1.3 million or $0.03 per share, compared with $0.3 million or $0.01
per share for the fourth quarter of 2005.

    Liquidity and Financial Condition

    During the year ended December 31, 2006, net cash outflow from operating
activities reached $1.5 million. As at December 31, 2006, the Corporation had
cash and equivalents of $8.2 million.

    Strong Sales Growth Leading to Profitability

    "Technology and marketing are the key growth drivers in our industry. We
have taken considerable initiatives in this regard, which makes us confident
about the future. We are counting on rapid growth in direct sales to increase
our total revenues annually by 50%. We plan to be profitable by the end of
2008, driven by the momentum and greater profitability of direct sales,"
concluded Dr. Amiot.

    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.

    About ORTHOsoft

    Founded in 1995, ORTHOsoft Inc. (TSX-Venture: OSH) develops and markets
best-in-class medical software, instruments and computerized systems designed
to help orthopaedic surgeons increase accuracy in hip, knee and spine implant
surgery. ORTHOsoft's FDA-approved patented software solutions are developed by
surgeons for surgeons, resulting in intuitive and easy-to-use navigation that
tracks surgical flow and provides surgeons with real-time data, thus helping
to improve the surgical process and patient outcomes. For further information,
visit www.orthosoft.ca.

    Financial Highlights

    Consolidated Statements of Loss
    Years ended December 31,
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          2006          2005
    -------------------------------------------------------------------------
    Revenue                                         12,662,070    10,221,072
    Cost of sales                                    4,078,954     3,478,552
    -------------------------------------------------------------------------
                                                     8,583,116     6,742,520
    -------------------------------------------------------------------------
    Research and development expenses, net           4,330,534     3,777,688
    Sales and marketing expenses                     4,224,591     2,843,264
    General and administrative expenses              3,057,676     2,710,644
    Amortization                                       879,268       691,398
    Financial expenses (income)                       (147,598)      (85,432)
    -------------------------------------------------------------------------
                                                    12,344,471     9,937,562
    -------------------------------------------------------------------------
    Net Loss                                        (3,761,355)   (3,195,042)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per share - basic and fully diluted         (0.09)        (0.08)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Deficit
    Years ended December 31,
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          2006          2005
    -------------------------------------------------------------------------
    Deficit, beginning of year                     (11,202,379)   (8,007,337)
    Share issue costs (Note 10 A (i))                  (75,823)            -
    Net loss                                        (3,761,355)   (3,195,042)
    -------------------------------------------------------------------------
    Deficit, end of year                           (15,039,557)  (11,202,379)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated balance sheets
    as at December 31,
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          2006          2005
    -------------------------------------------------------------------------
    Assets
    Current assets
      Cash and cash equivalents                      8,181,734     4,344,957
      Short-term investment                            493,190             -
      Accounts and other receivable, net of
       allowance for doubtful accounts               2,961,199     2,387,089
      Tax credits receivable                         1,677,844       939,674
      Inventory                                      1,042,154       986,154
      Prepaid expenses and other                       230,515       124,000
    -------------------------------------------------------------------------
                                                    14,586,636     8,781,874

    Long-term deposit                                  167,400       167,400
    Capital assets, net                              1,299,462     1,253,534
    Patents, net                                     1,071,837       933,237
    -------------------------------------------------------------------------
                                                    17,125,335    11,136,045
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current liabilities
      Accounts payable and accrued liabilities       3,439,239     1,980,102
      Deferred revenues                                556,419        99,373
      Current portion of deferred lease inducements     21,739             -
    -------------------------------------------------------------------------
                                                     4,017,397     2,079,475
    Deferred lease inducements                          65,216             -
    -------------------------------------------------------------------------
                                                     4,082,613     2,079,475
    -------------------------------------------------------------------------
    Shareholders' equity
      Common shares                                 25,679,341    18,679,340
      Contributed surplus                            2,402,938     1,579,609
      Deficit                                      (15,039,557)  (11,202,379)
    -------------------------------------------------------------------------
                                                    13,042,722     9,056,570
    -------------------------------------------------------------------------
                                                    17,125,335    11,136,045
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated statements of cash flows
    Years ended December 31,
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          2006          2005
    -------------------------------------------------------------------------
    Operating activities
      Net loss                                      (3,761,355)   (3,195,042)
      Items not affecting cash
        Inventory write-down                            94,212       119,882
        Stock-based compensation                       823,329       749,682
        Amortization                                   879,268       691,398
        Write-off of patent costs                       40,675        97,097
        Loss on disposal of fixed assets                 2,806             -
    -------------------------------------------------------------------------
                                                    (1,921,065)   (1,536,983)
      Change in non-cash operating working
       capital items                                   368,915     2,437,893
      Increase in deferred lease inducements            65,216             -
    -------------------------------------------------------------------------
                                                    (1,486,934)      900,910
    -------------------------------------------------------------------------
    Investing activities
      Short-term investment                           (493,190)            -
      Acquisitions of capital assets                  (933,698)     (705,568)
      Acquisitions of patents                         (191,616)     (228,606)
      Proceeds from sale of capital assets              18,037             -
    -------------------------------------------------------------------------
                                                    (1,600,467)     (934,174)
    -------------------------------------------------------------------------
    Financing activities
      Issuance of share capital, net of share
        issue costs                                  6,924,178             -
    -------------------------------------------------------------------------
                                                     6,924,178             -
    -------------------------------------------------------------------------
    Cash and cash equivalents inflow (outflow)       3,836,777       (33,264)
    Cash and cash equivalents, beginning of year     4,344,957     4,378,221
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year           8,181,734     4,344,957
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    
    %SEDAR: 00020173EF




For further information:

For further information: Yvan Beaudoin, COO, (514) 861-4074 ext.215;
Peggy Katsiroumbas, Chief Financial Officer, (514) 861-4074 ext. 221,
peggy.katsiroumba@orthosoft.ca; Investors and Media: Dominic Sicotte, Echoes
Financial Network Inc., 1 (866) 633-9551, dsicotte@roadshows.tv

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ORTHOSOFT INC.

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