"Our first quarter of fiscal 2021, which ended
"We continue to monitor for signs of revenue recovery in our
"With cash-on-hand and amounts available under our HSBC operating bank line, we believe we have sufficient future cash flow to support our operating needs going forward. During the quarter,
"This quarter, we engaged in approximately 10 customer development projects of various sizes with 5 medical product companies. We are very excited about these projects, including the various projects currently underway with the previously announced major contract with one of the world's largest medical device companies."
"We are working hard to return
Outlook for 2021
We are seeing signs of improvement in product usage by our customer base in
Gross margins are expected to remain similar to Q1 for the remainder of fiscal 2021.
Reduced operating expenses in 2021 are anticipated to be consistent with fiscal 2020 and further reduced by additional government subsidies related to COVID-19 relief programs.
The changes made to our operations have placed the Company in a position to return to growth and profitability in 2021.
(1) | See "Non-IFRS Measures" below, including for a reconciliation of the non-IFRS measures used in this release to the most comparable IFRS measures. |
Strategic Review Process
As previously announced, in response to expressions of interest made by medical industry and private equity organizations,
While this process is underway, our Company continues to remain focused on continuing to execute its growth strategy, promoting its life-saving products to the medical industry, and providing meaningful growth opportunities to our dedicated staff.
Q1 Fiscal 2021 Financial Results
Revenue for the three months ended
Product revenue for the three months ended
Revenue in the
Gross margin was 60% for Q1 fiscal 2021, compared to 61% for the prior year. Gross margin is significantly influenced by source of revenue and the relative mix of collagen-based dressings, silicone-based dressings, medical coated devices, passive dressings, moisture barriers, and related service revenues in any given financial period.
Adjusted gross margin(1), which excludes inventory provisions and depreciation, was 61% for Q1 fiscal 2021, compared to 64% for the prior year. The decline is attributed to product mix.
Operating expenses decreased
Adjusted EBITDA(1) for Q1 fiscal 2021 was a loss of
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Statement of Operations
The following unaudited table presents
(unaudited) | Three months ended | ||||
2020 | 2019 | ||||
Revenue | |||||
Product | |||||
Development and consulting services | 541,750 | 733,128 | |||
Licensing and royalty fees | 60,590 | 40,788 | |||
Total revenue | 5,988,412 | 7,948,559 | |||
Cost of product sales | 2,402,884 | 3,112,775 | |||
Gross profit before operating expenses | 3,585,528 | 4,835,784 | |||
Operating expenses | |||||
Operations | 258,483 | 460,934 | |||
Research and development activities | 217,228 | 225,305 | |||
Sales, marketing and agency fees | 1,616,868 | 2,912,492 | |||
General and administrative | 1,746,272 | 2,186,046 | |||
3,838,851 | 5,784,777 | ||||
Financing expenses | 119,020 | 225,740 | |||
Net loss | |||||
Other comprehensive loss | |||||
Foreign currency translation adjustment | (850,137) | (411,153) | |||
Other comprehensive loss | |||||
Basic loss per share | |||||
Diluted loss per share |
Non-IFRS Financial Measures
This press release makes reference to certain non-IFRS measures. These measures are not recognized or defined measures under IFRS, do not have standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional financial information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our financial information reported under IFRS. The non-IFRS financial measures, adjustments, and reasons for adjustments should be carefully evaluated as these measures have limitations as analytical tools and should not be used in substitution for an analysis of the Company's results under IFRS. We use non-IFRS measures including "Adjusted Gross Margin" and "Adjusted EBITDA" to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. The following non-IFRS financial measures are presented in this news release, and a description of the calculation for each measure is included below:
- Adjusted Gross Margin is defined as gross profit before operating expenses, plus depreciation and amortization included in cost of sales, plus inventory provision amounts.
- Adjusted EBITDA is defined as net loss, plus interest expense, plus depreciation and amortization, plus stock-based compensation, less government subsidies, plus inventory provisions, plus accounts receivable write-off expenses.
You should also be aware that the Company may recognize income or incur expenses in the future that are the same as, or similar to some of the adjustments in these non-IFRS financial measures. Because these non-IFRS financial measures may be defined differently by other companies in our industry, our definitions of these non-IFRS financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
The table below provides a reconciliation of gross profit before operating expenses under IFRS in the consolidated financial statements to Adjusted Gross Margin for the three months. Management believes that Adjusted Gross Margin is useful in assessing the performance of the Company's ongoing operations and its ability to generate cash flows from period to period. The adjusting items below are considered to be outside of the Company's core operating results, and these items can distort the trends associated with the Company's ongoing performance, even though some of those expenses may recur.
(unaudited) | Three months ended | |
2020 | 2019 | |
Gross profit before operating expenses | 3,585,528 | 4,835,784 |
Add: Depreciation and amortization | 80,509 | 81,438 |
Add: Inventory provisions | 6,909 | 132,000 |
Adjusted Gross Margin | 3,672,946 | 5,049,222 |
Adjusted Gross Margin (%) | 61.33% | 63.52% |
The table below provides a reconciliation of net loss under IFRS in the consolidated financial statements to Adjusted EBITDA for the three months ended
(unaudited) | Three months ended | |
2020 | 2019 | |
Net loss | (372,343) | (1,174,733) |
Add: Interest expense | 119,020 | 225,740 |
Add: Depreciation and amortization | 290,700 | 293,378 |
Add: Stock based compensation | 124,078 | 397,489 |
Less: Government subsidies | (302,454) | - |
Add: Inventory provisions | 6,909 | 132,000 |
Adjusted EBITDA | (134,090) | (126,126) |
About
Neither
This news release contains forward-looking statements which reflect the Company's current expectations regarding future events. The forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan, "estimate", "expect", "intend" and statements that an event or result "may", "will", "should", "could" or "might" occur or be achieved and other similar expressions. These forward-looking statements involve risk and uncertainties, including completion of integration of the AquaGuard acquisition, the difficulty in predicting product approvals, acceptance of and demands for new products, the impact of the products and pricing strategies of competitors, delays in developing and launching new products, the regulatory environment, fluctuations in operating results, the impact and timing of COVID-19 on operating activities and market conditions, and other risks, any of which could cause results, performance, or achievements to differ materially from the results discussed or implied in the forward-looking statements. Many risks are inherent in the industry; others are more specific to the Company. Investors should consult the Company's ongoing quarterly filings for additional information on risks and uncertainties relating to these forward-looking statements. Investors should not place undue reliance on any forward-looking statements. The Company assumes no obligation to update or alter any forward-looking statements whether as a result of new information, further events or otherwise.
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