Mr. Brent Ashton reports

COVALON ANNOUNCES FOURTH QUARTER AND YEAR END RESULTS FOR FISCAL 2023

Covalon Technologies Ltd. has released its fiscal 2023 fourth quarter and year-end results for the period ended Sept. 30, 2023.

"I am pleased to announce that in the fourth quarter of 2023, the company achieved a significant increase in revenue and demonstrated a continued commitment to improve profitability. I am very proud of the team's strong efforts in delivering these results," said Brent Ashton, Covalon's chief executive officer.

Revenue for the three months ended Sept. 30, 2023, increased 28 per cent to $6.9-million compared with $5.4-million for the same period of the prior year. Product revenue for the three-month period ended Sept. 30, 2023, increased by $1.7-million, or 35 per cent, to $6.5-million compared with $4.8-million for the same period of the prior year, due substantially to increased customer demand for the company's collagen dressing product line in the U.S. market.

Revenue for the year ended Sept. 30, 2023, increased 47 per cent to $26.6-million compared with $18.1-million for the same period of the prior year. Product revenue for the year ended Sept. 30, 2023, increased 46 per cent to $23.9-million compared with $16.4-million for the same period of the prior year. Product revenue increased $7.5-million over the prior year due substantially to increased customer demand for collagen dressings in the U.S. market and silicone-based dressings internationally.

Gross margin for the three-month period ended Sept. 30, 2023, increased to 42 per cent compared with 24 per cent in the same period for the prior year. During the three months ended Sept. 30, 2023, the company booked inventory provision expense of $700,000, as compared with $1.3-million during the three months ended Sept. 30, 2022.

Gross margin for the year ended Sept. 30, 2023, increased to 54 per cent compared with 41 per cent in the same period for the prior year. During the year ended Sept. 30, 2023, the company recorded an inventory provision expense of $300,000 as a result of changes in obsolescence estimates, as compared with an inventory provision expense of $2.3M being recorded during the year ended Sept. 30, 2022. The gross margin is significantly influenced by source of revenue and by the relative mix of products sold in any given financial period.

Operating expenses for the three months ended Sept. 30, 2023, increased $400,000 to $5.8-million, compared with $5.4-million for the prior year's comparative period, substantially due to termination benefits to a former senior management team member.

Operating expenses for the year ended Sept. 30, 2023, increased $2.3-million to $18.9-million, compared with $16.6-million for the prior year's comparative period. Approximately $1.7-million of this increase relates to increased sales and marketing staffing and activities.

Both net loss and net loss from continuing operations for the three months ended Sept. 30, 2023, was $2.9-million or 12 cents per share, compared with a net loss of $4.1-million or 16 cents per share for the three months ended Sept. 30, 2022.

Net loss from continuing operations for the year ended Sept. 30, 2023, was $4.5-million or 18 cents per share, compared with a net loss of $9.3-million or 36 cents per share for the year ended Sept. 30, 2022. Net loss from discontinued operations for the year ended Sept. 30, 2023, was nil, compared with a net loss of $400,000 or two cents per share for the year ended Sept. 30, 2022. Net loss for the year ended Sept. 30, 2023, was $4.5-million or 18 cents per share, compared with a net loss of $9.7-million or 38 cents per share for the year ended Sept. 30, 2022.

Adjusted gross margin for the three-month period ended Sept. 30, 2023, was 53 per cent compared with 49 per cent for the same period of the prior year. Adjusted gross margin for the year ended Sept. 30, 2023, was 56 per cent compared with 55 per cent for the same period of the prior year. Gross margin is highly influenced by the mix of collagen-based dressings, silicone-based dressings, medical coating services, passive dressings and related service revenues generated in the periods. Gross margin fluctuates as a result of the mix of products sold in any given quarter, or year, by product type and geography.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss for the three months ended Sept. 30, 2023, was $1.8-million, compared with an adjusted EBITDA loss of $2.2-million for the three months ended Sept. 30, 2022. Adjusted EBITDA loss for the year ended Sept. 30, 2023, was $2.7-million, compared with an adjusted EBITDA loss of $5.6-million for the year ended Sept. 30, 2022.

Statement of operations

The attached audited table presents Covalon's consolidated statements of operations for the quarters and years ended Sept. 30, 2023, and 2022.

About Covalon Technologies Ltd.

Covalon Technologies is a patient-driven medical device company, built on the relentless pursuit to help the most vulnerable patients have a better chance at healing. Through a strong portfolio of patented technologies and solutions for advanced wound care, infection prevention and medical device coatings, it offers innovative, gentler and more compassionate options for patients to heal with less infections, less pain and better outcomes. Its solutions are designed for patients and made for care providers. Covalon leverages its patented medical technology platforms and expertise in two ways: (i) by developing products that are sold under Covalon's name; and (ii) by developing and commercializing medical products for other medical companies under development and licence contracts. The company is listed on the TSX Venture Exchange, having the symbol COV, and trades on the OTCQX Market under the symbol CVALF.

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