TSO3 Reports Third Quarter 2016 Results

Repeats Record Shipments and Receives Industry-Changing Regulatory Clearances

QUÉBEC CITY, Nov. 7, 2016 /CNW Telbec/ - TSO3 Inc. (TSX: TOS) ("TSO3" or the "Company"), an innovator in sterilization technology for medical devices in healthcare settings, reported its financial and operating results for the third fiscal quarter ended September 30, 2016. All figures are in U.S. dollars unless otherwise noted.

Q3 2016 Highlights

  • Record revenues of $3.5 million, a sequential increase of 17% compared to $3.0 million in the second quarter of 2016, and a year over year increase of 284% over $0.9 million of Q3 2015.
  • Shipped 30 STERIZONE® VP4 Sterilizers to Getinge Infection Control, the Company's exclusive distribution partner, in the U.S., as well as associated accessories and consumables.
  • Gross margin of 32%, as compared to 28% in Q2 2016 and 27% in Q3 2015.
  • Adjusted EBITDA of negative $1.0 million as compared to negative $1.1 million in both Q2 2016 and Q3 2015.
  • Net loss of $1.5 million, or $0.02 per share, which was unchanged from Q2 2016, and compares to $1.3 million, or $0.02 per share in Q3 2015.
  • Cash, cash equivalents and short-term investments at quarter-end of $20.7 million, as compared to $21.3 million at the end of Q2 2016.
  • Early in the quarter, TSO3 announced that it had received Food and Drug Administration (FDA) clearance for TSO3's expanded indications for use of its universal STERIZONE® VP4 Sterilizer, which then became the world's first low temperature sterilizer validated to terminally sterilize multi-channeled endoscopes (with four or fewer channels) such as video colonoscopes and gastroscopes.

Management Commentary

"During the third quarter, we assembled and shipped 30 sterilizers to Getinge, our exclusive distribution partner, driving record revenues of $3.5 million," said TSO3 President and CEO R.M. (Ric) Rumble, "and we announced FDA clearance of our expanded indications for use of our STERIZONE® VP4 Sterilizer. It is now the only sterilizer with such claims. These extended claims further expand our technology leadership – offering enhanced patient protection in applications where terminal sterilization was not previously possible."

"While this clearance is supportive of our next generation technology, we are not done yet. During the quarter, we continued rigorous scientific testing with a goal to create sufficient documentation to add duodenoscopes, which represent a major health safety concern to many hospitals, to our existing claims of endoscopes. We expect this testing to be complete by year end."

"As we look ahead, we remain focused on supporting Getinge accelerate adoption of our sterilizers into hospitals throughout North America. This includes building our sales, marketing and operating infrastructure to support anticipated future growth. In addition, we continue to prepare for the introduction of our sterilizer in Europe and other selected markets."

Subsequent Event

Subsequent to the third quarter of 2016, a peer-reviewed paper titled "The First Dual-sterilant Low-temperature Sterilization System" highlighting the STERIZONE® VP4 Sterilizer was published in an issue of the Canadian Journal of Infection Control. The paper highlights our innovative approach of controlling the sterilization process by use of pressure rather than the traditional sterilization method of sterilant dose and time, underlining TSO3's commitment to advancing the science of sterilization.

Q3 2016 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:

Monday, November 7, 2016

Time:

10:30 a.m. EST (7:30 a.m. Pacific 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:

1282126

 

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 Liolios Group at 1-949-574-3860.

Other interested parties may listen to the live webcast of the conference call at
http://event.on24.com/r.htm?e=1282126&s=1&k=925FF1F86E7FCF88CBB618B5582002E0
which will be available for replay in the Investors section of the Company's website at www.tso3.com.

Q3 2016 Results Disclosure

The 2016 Third Quarter Report is available on TSO3's website at the following address http://www.tso3.com/en/investors/financial_reporting/quarterly_reports/ and will shortly be available on SEDAR (www.sedar.com).

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

 










Q1 2015

$

Q2 2015

$

Q3 2015

$

Q4 2015

$

Q1 2016

$

Q2 2016

$

Q3 2016

$









Revenues

72

111

914

151

3,071

2,977

3,507

Cost of sales

156

272

666

484

1,961

2,143

2,368

Gross profit (loss)

(84)

(161)

248

(333)

1,110

834

1,139









Expenses









Research and development

441

524

542

673

606

804

806


Selling, general and administrative

955

755

1,026

1,210

1,385

1,529

1,841


Other income

(22)

(17)

(25)

(56)

(1,588)

-

(50)

Total Expenses

1,374

1,262

1,543

1,827

403

2,333

2,597

Net income (loss) before income taxes

(1,458)

(1,423)

(1,295)

(2,160)

707

(1,499)

(1,458)

Income taxes

-

-

-

-

58

12

15

Net income (loss)

(1,458)

(1,423)

(1,295)

(2,160)

649

(1,487)

(1,473)

Basic and diluted net income (loss) per share

(0.02)

(0.02)

(0.02)

(0.03)

0.01

(0.02)

(0.02)

 

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

 










Q1 2015

$

Q2 2015

$

Q3 2015

$

Q4 2015

$

Q1 2016

$

Q2 2016

$

Q3 2016

$









Cash, cash equivalents and short-term investments

11,906

10,336

9,147

15,111

24,385

21,338

20,744

Accounts receivable

227

414

1,127

437

2,030

3,516

3,634

Inventories

1,081

1,267

1,134

1,302

2,021

1,974

2,100

Property, plant and equipment

428

385

361

366

429

752

1,221

Intangibles assets

1,744

1,773

1,690

1,691

1,708

1,750

1,812

Accounts payable and accrued liabilities

800

703

1,090

1,288

2,032

1,876

2,718

Warranty provision

-

-

-

29

165

285

429

Deferred revenues (short and long term)

36

57

30

7,536

7,385

7,228

7,073

Equity

14,647

13,521

12,414

10,133

21,093

20,016

19,405

 

Statement of Cash Flows
(Unaudited, IFRS Basis, in thousands of US dollars)

 
























Q1 2015

$

Q2 2015

$

Q3 2015

$

Q4 2015

$

Q1 2016

$

Q2 2016

$

Q3-2016

$

Cash flows from operating activities









Net Income (loss)









Adjustments for:

(1,458)

(1,423)

(1,295)

(2,160)

649

(1,487)

(1,474)



Depreciation and amortization

99

100

102

106

77

103

148



Write-off of intangible assets

173

-

-

-

-

-

-



Share-based compensation

62

118

114

182

216

268

333



Investment income

(13)

(35)

(26)

(26)

(38)

(28)

(65)


(1,137)

(1,240)

(1,105)

(1,898)

904

(1,144)

(1,058)



Changes in non-cash operating working capital items

203

(459)

(188)

8,303

(1, 656)

(1,760)

282



Interest received

13

28

33

25

29

19

47


Cash flows used in operating activities

(921)

(1,671)

(1,260)

6,430

(723)

(2,885)

(729)


Cash flows from investing activities









Acquisition of short-term investments

(2,684)

-

(1,798)

(2,457)

(2,000)

(10,121)

(10,796)



Disposal of short-term investments

-

-

2,548

1,734

2,466

(9)

6,388



Acquisition of property, plant and equipment

(32)

(8)

(62)

(90)

(102)

(226)

(307)



Acquisition of intangible assets

(35)

(45)

(73)

(107)

(55)

(87)

(106)

Cash flows generated (used) in investing activities

(2,751)

(53)

615

(920)

309

(10,443)

(4,821)

Cash flows from financing activities










Issuance of share capital and warrants

9,108

-

-

-

-

-

-



Share capital and warrants issue expenses

(846)

(66)

-

-

-

-

-



Options exercised

2

17

-

23

-

142

530



Warrants exercised

-

-

918

-

10,145

-

-

Cash flows generated by financing activities

8,264

(49)

918

23

10,145

142

530

Effect of exchange rates on cash and cash equivalents

(519)

157

(530)

(228)

-

-

-

Increase (decrease) in cash and cash equivalents

4,073

(1,616)

(257)

5,305

9,731

(13,186)

(5,020)

Cash and cash equivalents at the beginning

5,149

9,222

7,606

7,349

12,654

22,385

9,199

Cash and cash equivalents at the end

9,222

7,606

7,349

12,654

22,385

9,199

4,179

 

About Presentation of Adjusted EBITDA

TSO3 reports 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) significant 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)

 






IN THOUSANDS OF US DOLLARS






Q1-2015

$

Q2-2015

$

Q3-2015

$

Q4-2015

$

Q1-2016

$

Q2-2016

$

Q3-2016

$

Net income (loss), as reported

(1,458)

(1,423)

(1,295)

(2,160)

649

(1,487)

(1,473)


Adjustments









Income taxes

-

-

-

-

58

(12)

15


Depreciation and amortization

99

100

102

106

77

103

148


Share-based compensation

62

118

114

182

216

268

333


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

(1,124)

(1,205)

(1,079)

(1,872)

(578)

(1,128)

(977)

(1) Non-GAAP financial measure. Refer to the "Supplemental Non-IFRS Financial Measures" section of the Company's MD&A for further information.

 

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 FDA 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. It is also the only terminal sterilization method 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 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). Other H2O2 sterilizers are limited to load weights of up to only 25 lb and require dedicated fixed cycles for different types of instruments (reducing overall throughput).

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

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.

TSO3 announced in July 2016 that it received FDA clearance in the U.S. for extended claims relating to the terminal sterilization of multi-channel flexible endoscopes. The FDA clearance of additional claims represents an entirely new level of patient protection against ineffective device reprocessing resulting from the use of less robust systems like high-level disinfection, particularly for video colonoscopes and gastroscopes.

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 TSO3's sales, business or operations) are forward-looking statements that involve certain risks, uncertainties and hypotheses, including, but not limited to, the ability of the Company to obtain the required regulatory clearance to market its products on a worldwide basis; 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.

 

SOURCE TSO3 Inc.

For further information: Company Contacts: TSO3 Inc., R.M. (Ric) Rumble, President and CEO, Tel: 418 651-0003, info@tso3.com; TSO3 Inc., Glen Kayll, CFO, Tel: 418 651-0003, 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
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