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 /PRNewswire/ - 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)

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

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.

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)

⁽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 System^TM 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.

Related Links

http://www.tso3.com