TSO3 Reports Record First Quarter 2016 Results

Commercial Rollout Drives Revenues of US$3.1 Million and Gross Profit of US$1.1 Million

QUÉBEC CITY, May 4, 2016 /CNW Telbec/ - TSO3 Inc. (TSX: TOS), an innovator in sterilization technology for medical devices in healthcare settings, reported record results for the first fiscal quarter ended March 31, 2016. All figures are in U.S. dollars unless otherwise noted.

First Quarter 2016 Financial Summary in US Dollars

  • Effective January 1, 2016, the company changed its functional and reporting currency from Canadian dollars to U.S. dollars as the significant majority of its current and future revenues are and are expected to be denominated in U.S. dollars. In addition, the company adopted a new financial statement presentation format that reflects its new level of operations.
  • Revenues of $3.1 million in the first quarter of 2016 as compared to $0.1 million in the first quarter of 2015. On December 21, 2015, TSO3 announced that it had received purchase orders for delivery in 2016 from Getinge Infection Control, its channel partner, for the full amount of its 2016 minimum purchase commitment. TSO3 delivered 25 STERIZONE® VP4 Sterilizers, and related accessories to Getinge in the first quarter of 2016 in relation to those orders.
  • Gross profit was $1.1 million, or 36% of revenues, in the first quarter of 2016 as compared to a gross loss of $0.1 million in the first quarter of 2015.
  • Net income in the first quarter of 2016 was $0.6 million, or $0.01 per share, as compared to a net loss of $1.5 million, or $0.02 per share, in the same year-ago quarter. The increase included a non-recurring foreign currency exchange gain of $1.6 million associated with the translation of Canadian dollar cash reserves into U.S. dollars. Excluding this foreign exchange gain, the company's net loss was $0.9 million in the first quarter of 2016, or $0.01 per share.
  • Adjusted EBITDA was negative $0.6 million in the first quarter of 2016 versus negative $1.1 million in the same year-ago quarter. See "About Presentation of Adjusted EBITDA" below for the definition of adjusted EBITDA, a non-GAAP financial metric and non-IFRS financial measure.
  • As of March 31, 2016, TSO3 had cash, cash equivalents and short-term investments of $24.4 million (CAD$31.7 million), 91 million shares outstanding, no outstanding warrants and no debt. The company received $10.1 million (CAD$14.1 million) in proceeds from the exercise of outstanding warrants in the first quarter of 2016.

Management Commentary

"Our Q1 results were driven by the commercial rollout of STERIZONE® VP4 Sterilizers with our global channel partner Getinge Infection Control," said TSO3 president and CEO, R.M. (Ric) Rumble. "The commitment to our technology and product line has remained very strong throughout Getinge and in the second quarter of 2016 we will continue to invest in retrofitting our assembly operations to expand our manufacturing capacity, and focus our sales and marketing efforts on helping our channel partner meet or exceed their contractual performance objectives."

First Quarter 2016 Operational Highlights

  • Received FDA 510(k) clearance from the U.S. Food and Drug Administration (FDA) for a universal design of its STERIZONE® VP4 Sterilizer.
  • Received and prepared preliminary responses to comments from the FDA regarding the company's expanded claims filed in December 2015 relating to the use of the STERIZONE® VP4 Sterilizer in the U.S. These expanded claims correspond to increasing scrutiny by regulatory authorities over medical device reprocessing, particularly for colonoscopes and other complex medical devices used during minimally invasive surgical procedures. The claims sought in the U.S. represent similar claims for the STERIZONE® VP4 Sterilizer already available in Canada and those which will accompany the sterilizers' introduction in Europe this year.
  • Reported an improved outlook for its production and operating capacity of STERIZONE® VP4 Sterilizers at its existing Québec, Canada facility. The company is investing in expanding its production capacity to one sterilizer per working day by the third quarter of 2016.

Annual General and Special Meeting of Shareholders

TSO3 will hold its Annual General and Special Meeting of Shareholders at 10:30 a.m. Eastern Daylight Time today. The meeting will be held at the Musée national des beaux-arts du Québec in Quebec City.

TSO3 President and CEO R.M. (Ric) Rumble and CFO Glen Kayll will host the meeting, where management will also discuss its first quarter 2016 financial results and provide an operational update, followed by a question and answer period.      

The meeting will be webcast live and available for replay at: 
http://event.on24.com/r.htm?e=1150732&s=1&k=3DFE465AE18FD41AF931DADAA9BD8D10 and via the Investors section of the company's website at www.tso3.com.

A replay of the meeting will be available on the same day through August 2, 2016.

Summary of Results

Income Statement
Periods ended March 31
(Unaudited, IFRS Basis)  (in thousands of US dollars, except per share amounts)



First quarter



2016

$

2015

$

Revenues


3,071

72

Cost of sales


1,961

156

Gross profit (loss)


1,110

(84)

Expenses





Research and development


606

441


Selling, general and administrative


1,385

955


Other income


(1,588)

(22)

Total Expenses


403

1,374

Net income (loss) before income taxes


707

(1,458)

Income taxes


58

-

Net income (loss)


649

(1,458)

Weighted Average Number of Outstanding Shares (in thousands)


88,552

76,160

Basic and diluted net income (loss) per Share (in $)


0.01

(0.02)





 

Financial Position Analysis 
(Unaudited, IFRS Basis) (in thousands of US dollars)







March 31,

2016

$

December 31,
2015

$

Cash, cash equivalents and short-term investments


24,385

15,111

Accounts receivable


2,030

437

Inventories


2,021

1,302

Property, plant and equipment


429

366

Intangibles assets


1,708

1,691

Accounts payable and accrued liabilities


2,032

1,288

Warranty provision


165

29

Deferred revenues (short and long term)


7,385

7,536

Equity


21,093

10,133

 

Summary of Quarterly Results
(Unaudited, IFRS Basis) (in thousands of US dollars, except per share amounts)

This table shows the quarterly evolution of sales, gross profit (loss), net income (loss) and net income (loss) per share.








2016




2015


Q1

Q4

Q3

Q2

Q1

Revenues

3,071

151

914

111

72

Gross Profit

1,110

(333)

248

(161)

(84)

Net income (loss)

649

(2,160)

(1,295)

(1,423)

(1,458)

Net income (loss) per Share (basic and diluted) (in $)

0.01

(0.03)

(0.02)

(0.02)

(0.02)

 

About Presentation of Adjusted EBITDA

Beginning with the reporting of results for the first quarter of 2016, the company began to report the measures of adjusted EBITDA, a non-IFRS financial measure. 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.

The principal supplemental non-IFRS metric the Company uses to assess its operational performance is adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA).  Adjusted EBITDA adjusts net income for (1) realized and unrealized foreign exchange gains or losses, (2) amortization and depreciation expenses (3) share-based compensation expense, (4) amortization or write-downs of certain tangible and intangible assets, (5) income taxes, and (6) other significant unusual items. 

Adjusted EBITDA(1)
(Unaudited, non-IFRS Basis)  (in thousands of US dollars)





2016

2015


Q1

Q4

Q3

Q2

Q1

Net income (loss), as reported

649

(2,160)

(1,295)

(1,423)

(1,458)

Income taxes

58

-

-

-

-

Depreciation of property, plant and equipment

39

63

61

58

57

Amortization of intangible assets

38

43

41

41

42

Share-based compensation 

216

182

114

118

62

Write-off of intangible assets

-

-

-

-

173

One-time foreign exchange gain on conversion of cash, cash equivalents and short-term investments

(1,578)

-

-

-

-

Adjusted EBITDA

(578)

(1,872)

(1,079)

(1,206)

(1,124)

(1) Non-IFRS financial measure. Refer to the Non-IFRS financial measures in the company's MD&A as filed on SEDAR.

About the STERIZONE® VP4 low temperature sterilizer

The STERIZONE® VP4 Sterilizer developed by TSO3 is a dual sterilant, low temperature sterilization system that utilizes vaporized hydrogen peroxide (H2O2) and ozone. Its single cycle can sterilize a large number and wide range of compatible devices, thereby allowing for a cost effective and error-free sterilization process. TSO3's unique Dynamic Sterilant Delivery SystemTM automatically adjusts the quantity of injected sterilant based on the load composition, weight and temperature. With its large 75 lb load capacity and a short cycle time, the STERIZONE® VP4 Sterilizer can enhance throughput and lower sterilization cost. The STERIZONE® VP4 Sterilizer was cleared for commercialization in the United States in December 2014.

More information about the STERIZONE® VP4 Sterilizer is available through TSO3's website, under the Products section:http://www.tso3.com/en/products/sterizone-vp4/

About TSO3

Founded in 1998, TSO3 is committed to improving the standard of healthcare sterile reprocessing by providing breakthrough sterilization systems, related consumable supplies and accessories for heat-sensitive medical devices. TSO3 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. It 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 web site 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 (including, without limitation, those regarding the timing or outcome of any financing undertaken by TSO3) are forward-looking statements that involve certain risks, uncertainties and hypotheses, including, but not limited to, 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. 

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.

The TSX has neither approved nor disapproved the information contained herein and accepts no responsibility for it.

 

SOURCE TSO3 Inc.

For further information: Company Contacts: TSO3 Inc., R.M. (Ric) Rumble, President and CEO, Tel: 418 651-0003, Email: info@tso3.com; TSO3 Inc., Glen Kayll, CFO, Tel: 418 651-0003, Email: info@tso3.com; Investor Relations: Liolios Group, Inc., Ron Both, Tel: 949 574-3860, TOS@liolios.com; Renmark Financial Communications Inc., Barry Mire, Tel: 416 644-2020 or 514 939-3989, bmire@renmarkfinancial.com

RELATED LINKS
http://www.tso3.com

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