Stock symbol: TSX: TOS
Outstanding shares: 72,888,182
Highlights of 2012 activities
Commercial / Finance:
-
Completed program to upgrade the 125L Ozone Sterilizer to the new generation product (STERIZONE® 125L+ Sterilizer) for Canadian users with 90% success rate;
-
Changed commercial partner status;
-
Terminated channel agreement with 3M;
-
Entered into non-exclusive negotiations with Getinge Infection Control
(GETINGE AB) for a potential distribution agreement;
-
Closed private placement bought deal for net proceeds to TSO3 of $8.2M.
Regulatory:
-
Following a filing to the United States (US) Regulatory Agency in April
2012, the Company subsequently modified its approach in December by
submitting to the Agency a single cycle sterilizer with increased
claims (the simplified submission was filed in January, 2013).
Development:
-
In the second half of year, slowed STERIZONE® 80L Sterilizer development
activities (also called OR product) to redirect efforts to support US
filing activities for STERIZONE® 125L+ Sterilizer
QUEBEC CITY, March 20, 2013 /CNW Telbec/ - TSO3 Inc. ("TSO3") an innovator in sterilization technology for medical devices in
healthcare settings, today reported sales for the fiscal year ending
December 31, 2012 totalling $1,162,922 compared to $3,145,162 in 2011.
Most of the sales in 2012, or $1,037,545, were made during the first
semester while, in 2011, most of the sales or $2,357,745 were made in
the second semester. The end of shipments under the upgrade program and
a decrease in orders placed by the 3M Company created a sharp
contraction in sales in Q2-2012. Sales to the 3M Company during the
first semester of 2012 were 69% lower than in the last semester of
2011.
On June 15, 2012, TSO3 terminated the distribution agreement with the 3M Company. This
explains the significant decrease in revenues starting in Q2 2012, as
sales were then limited to services delivered to support the original 125L Ozone Sterilizer and comprised of consumables for the already installed
STERIZONE® 125L+ Sterilizers (3M™ Optreoz™ 125-Z). Meanwhile, the Company opened
discussions on a non-exclusive basis with a third party to establish a
new distribution agreement.
In 2012, TSO3 recognized licensing revenue of $1,690,971, as compared to $210,275 for
the same period in 2011. The increase from 2011 to 2012 is due to the
recognition as income, in June 2012, of the $1,585,833 unamortized
deferred licensing revenue from 3M.
In summary, for the fiscal year 2012, the Company experienced a loss of
$5,795,598 ($0.09 per share), as compared to $7,655,421 ($0.13 per
share) in 2011. This decrease in the net loss is primarily due to the
recognition as income of the unamortized deferred license revenue.
"In 2012, we made critical decisions to protect shareholder value and
prepare our steps forward", commented Mr. R.M. (Ric) Rumble, President
and Chief Executive Officer of TSO3. "Consistent with our interactions with the US regulatory agency,
towards the end of the year we modified our approach for clearance, by
simplifying our filing without impacting the value proposition for the
users. As previously announced, we submitted our cleaned-up and
simplified filing in January of 2013. We believe that this approach
improves the opportunity for a rapid and successful outcome", added Mr.
Rumble.
"Now that our file is back in the hands of the Agency, we have
reprioritized our efforts on the STERIZONE® 80L Sterilizer, our smaller
product targeted at the OR Sub-Sterile market segment as well as lower
price point product for Central Sterilization Departments in foreign
markets. Once finalized, our strategy is to file this new product for
clearance in the US and international markets after US clearance for
the STERIZONE® 125L+ Sterilizer has been obtained", commented Mr.
Rumble.
"In the third quarter of 2012, we also opened discussions with Getinge
Infection Control for the global distribution and service of our
product line to the healthcare and life science market. While the
dialogue between our companies has been productive, we have not yet
been able to agree on certain terms which remain open for discussion.
To be clear, TSO3 is not looking for a "quick agreement", but rather for the "right
agreement": one that reflects the value of not only the current
product, but also of the technology and opportunities for future
developments", he concluded.
Conference call details
TSO3 will host a conference call this morning at 10:30 a.m. (EDT). Analysts
and institutional investors are invited to participate. The numbers to
dial for access are 514-807-9895 (Montréal area), 647-427-7450 (Toronto
area) or the toll-free number 1-888-231-8191. Other interested parties
may listen to the live Webcast of the Conference Call accessible via
the TSO3 Web site at: http://www.newswire.ca/en/webcast/detail/906035/966553. The Webcast will be archived for 90 days.
Fourth Quarter and Fiscal 2012 Results Disclosure
The 2012 Annual Report is available on the TSO3 Web site at the following address:
http://www.tso3.com/en/investors/financial_reporting/annual_reports/ and full Y12 disclosure will be available shortly on SEDAR (www.sedar.com).
SUMMARY OF RESULTS
Years ended December 31
(Audited, IFRS Basis)
|
|
|
|
| 2012 $ |
| 2011 $ |
Revenues |
|
|
|
| Sales | 1,162,922 |
| 3,145,162 |
| License Revenue | 1,690,971 |
| 210,275 |
Total Revenues | 2,853,893 |
| 3,355,437 |
Expenses |
|
|
|
| Supply Chain | 1,801,735 |
| 2,934,597 |
| Customer Support and Communications | 639,766 |
| 769,862 |
| Research and Development | 2,877,203 |
| 3,999,794 |
| Administrative | 3,476,843 |
| 3,473,215 |
| Financial Income | (167,708) |
| (194,247) |
| Financial Costs | 21,652 |
| 27,637 |
Total Expenses | 8,649,491 |
| 11,010,858 |
Net Loss before Income Taxes | (5,795,598) |
| (7,655,421) |
Income Taxes | - |
| - |
Net Loss and Total Comprehensive Loss attributable to Shareholders | (5,795,598) |
| (7,655,421) |
Basic and Diluted Net Loss per Share | (0.09) |
| (0.13) |
Weighted Average Number of Shares Outstanding | 63,675,137 |
| 58,289,996 |
RESULTS ANALYSIS
In the following paragraphs, the Company discusses the variations of
certain accounts within the 12-month periods ended December 31, 2012
and 2011.
TOTAL REVENUES
Sales
In fiscal 2012, sales amounted to $1,162,922, as compared to $3,145,162
in 2011. Most of the sales in 2012, or $1,037,545, were made during the
first semester while, in 2011, most of the sales or $2,357,745 were
made in the second semester. In 2012, 54% of the sales were to the 3M
Company (69% in 2011) that had initiated, in June 2011, marketing the
STERIZONE® 125L+ Sterilizer underthe brand3M™ Optreoz™ 125-Z Sterilizer (STERIZONE® 125L+ Sterilizer). Having not received US regulatory clearance within
two years of the original filing date, and after it had experienced a
large reduction in orders from 3M in Q2-2012, the Company terminated
its Distribution Agreement, The lower sales in the second semester of
2012 are the result of a virtual elimination of sales to the 3M Company
since the middle of the second quarter of 2012.
In September 2011, the Company launched an upgrade program whereby users
of the 125L Ozone Sterilizers could trade-in their sterilizers to
acquire, at a discounted price, 3M™ Optreoz™ 125-Z Sterilizers
(STERIZONE® 125L+ Sterilizer). Most of the Q4-2011 and Q1-2012 sales made to clients other than 3M
were made under that upgrade program. Beginning in Q2-2012, after the
program had ended, the smaller installed base of 125L Ozone Sterilizers
generated fewer consumables and service revenues to TSO3 with the consequence that sales to clients other than 3M decreased to
minimal levels.
Subsequent to termination of the distribution agreement with the 3M
Company, TSO3 had other non-exclusive discussions to secure an alternative
partnership and signed a non binding letter of intent with Getinge
Infection Control, a division of the Getinge AB. The Company's strategy has not been to invest resources in developing
its own sales organization and, as a result of the foregoing, its sales
have been reduced to minimum levels.
License Revenue
Until June 2012, TSO3 was recognizing revenue over the expected initial term of its agreement
with the 3M Company by amortizing the payments it had received under
that agreement. In June 2012, as a result of the termination of the 3M
agreement, all unamortized license payments were recognized as revenue.
Therefore, in the second half of 2012, there was no license revenue.
For the twelve-month period ended December 31, 2012, license revenue
amounted to $1,690,971, as compared to $210,275 for the same period in
2011. The increase from 2011 to 2012 is due to the recognition as
income, in June 2012, of the $1,585,833 unamortized deferred license
revenue from 3M.
EXPENSES
Supply Chain
Supply Chain expenses include all of the expenses incurred in connection
with (1) the outsourcing of products and services for all departments,
(2) production, (3) related quality control and assurance, and (4)
shipping.
For the fiscal year ended December 31, 2012, the Supply Chain expenses
amounted to $1,801,735, as compared to $2,934,597 in 2011. The
variation is due to the reduction in sales which has led to reduced
sourcing activities and staff reductions. Staff has been reallocated to
other departments.
Customer Support and Communications
Beginning in 2012, TSO3 has regrouped all activities related to corporate communications,
customer service and technical assistance, including support to a
former partner in its customer support and communication activities.
For the fiscal year ended December 31, 2012, the customer support and
communication expenses amounted to $639,766, as compared to $769,862 in
2011. The cost of customer support activities and corporate
communications was lower in 2012 than in 2011 due to smaller technical
assistance expenses.
Research and Development
Starting in Q2-2012, there has been a reallocation of research and
development resources away from new product development and towards
work related to the filings with the US regulatory agency.
For the fiscal year ended December 31, 2012, the research and
development expenses amounted to $2,877,203, as compared to $3,999,794
in 2011. During the first three quarters, the R&D expenses were similar
in 2012 and in 2011. Lower expenses for the entire year 2012 are
primarily the result of (1) $603,521 related to the collection and the
recording of unbooked R&D tax credits for the years 2008 to 2011 and
(2) a decrease in expenses during the fourth quarter. The unbooked
investment tax credits are the result of additional claims made by the
Company for years 2008 to 2010 and the company's policy to provision
no more than 80% of the amounts claimed as well as. The lower expenses
in Q4-2012 were due to several items, including (1) lower maintenance
costs for medical devices, (2) fewer compatibility studies, and (3)
lower payroll expenses as a result of attrition.
Administrative
For the fiscal year 2012, the administrative expenses amounted to
$3,476,843, as compared to $3,473,215 in 2011. These variations were
offsetting each other, the largest ones being a reduction in
incentive-based compensation and an increase in professional fees and
in stock exchange listing fees.
Liquid Assets
As of December 31, 2012, cash, cash equivalents and short-term
investments amounted to $12,807,190, as compared to $11,384,373 in
2011.
Accounts Receivable
From their level of $1,893,470 on December 31, 2011, the accounts
receivable decreased to $1,029,265 on December 31, 2012. Most of the
decrease is due to a reduction in trade receivables as a result of
lower sales in Q2, Q3 and Q4 of 2012.
As at December 31, 2011, the receivable amount includes a $589,200
provision for R&D tax credits, which was increased to $893,066 as at
December 31, 2012.
Inventories
As at December 31, 2012, inventories amounted to $1,216,721, as compared
with $1,120,482 on December 31, 2011.
Raw materials inventory has increased primarily in the fourth quarter of
2012 as a result of the Company receiving raw materials and components
ordered prior to the termination of the 3M Agreement and on the basis
of a production plan reflecting market penetration in those markets
where regulatory clearance had been obtained.
In spite of interrupting the production due to an unplanned lack of
orders from the 3M Company in the second quarter of 2012, TSO3 has been able to postpone certain deliveries of raw materials, thereby
delaying the corresponding increase in inventories. A certain amount of
similar deliveries are still pending, but nothing that would materially
change the Company's financial position.
The combined level of work-in-progress and finished goods inventories
has decreased by $47,931 from December 31, 2011 to December 31, 2012.
The sterilizers that were in inventory at the end of 2011 were shipped
in 2012, but partly replaced by units manufactured prior to the
termination of the 3M Agreement. Such inventories at the end of 2012
primarily consist of 3M™ Optreoz™ 125-Z Sterilizers (STERIZONE® 125L+ Sterilizer) and branded related accessories but which could easily
be rebranded under the TSO3 trademark STERIZONE®.
Deferred Revenues
As at December 31, 2012, current and non-current deferred revenues
amounted to $103,035, as compared to $1,906,520 as at December 31,
2011.
The variation in deferred revenues in 2012 is explained by the
recognition, in June 2012, of the unamortized balance of the license
revenue for an amount of $1,585,833.
Any remaining deferred revenues stem from the prepaid portion of service
contracts on the 125L Ozone Sterilizers commercialized by the Company
up to the beginning of 2010.
FOURTH QUARTER ANALYSIS
(Unaudited, IFRS Basis)
Three-month period ending December 31, 2012, compared to the three-month
period ending December 31, 2011.
|
|
|
|
| 2012 $ |
| 2011 $ |
Revenues |
|
|
|
| Sales | 59,140 |
| 1,256,854 |
| License Revenue | - |
| 52,569 |
Total Revenues | 59,140 |
| 1,309,423 |
Expenses |
|
|
|
| Supply Chain | 270,543 |
| 960,456 |
| Customer Support and Communications | 168,170 |
| 104,366 |
| Research and Development | (184,923) |
| 965,605 |
| Administrative | 948,152 |
| 713,074 |
| Financial Income | (37,815) |
| (39,952) |
| Financial Costs | (5,013) |
| 4,067 |
Total Expenses | 1,159,114 |
| 2,707,616 |
Net Loss before Income Taxes | (1,099,974) |
| (1,398,193) |
Income Taxes | - |
| - |
Net Loss and Total Comprehensive Loss attributable to Shareholders | (1,099,974) |
| (1,398,193) |
Basic and Diluted Net Loss per Share | (0.02) |
| (0.02) |
Weighted Average Number of Shares Outstanding | 65,888,182 |
| 58,782,423 |
About TSO3
TSO3, founded in Québec City in 1998, specializes in the research and
development of innovative, high-performance medical instrument
sterilization technology with high commercial potential. TSO3 designs products for sterile processing areas in the hospital
environment and offers an advantageous replacement solutions to other
low temperature sterilization processes currently used in hospitals.
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.
The TSX has neither approved nor disapproved the information contained
herein and accepts no responsibility for it.
SOURCE: TSO3 Inc.
<p> </p> <p> Caroline Côté<br/> Director - Investor and Business Relations<br/> 418 651-0003, Ext. 237<br/> <a href="mailto:ccote@tso3.com">ccote@tso3.com</a> </p>