"2020 was a strategically important year for
- generate new sales opportunities for our infection prevention portfolio of products;
- engage virtually and in-person with existing customers;
- significantly reduce operating expenses year-over-year;
- launch several new products; and
- adapt our sales and service processes to engage with our customers during COVID-19 restrictions.
"With fiscal 2020 in the rear-view mirror, I believe the steps we have taken to mitigate the impacts of COVID-19 have positioned
Outlook for 2021
We are seeing signs of improvement in product usage by our customer base in
The inventory write-downs we recorded in fiscal 2020 due to delays in product shipments to the
Reduced operating expenses in 2021 are anticipated to be consistent with fiscal 2020 and may be 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.
With cash-on-hand and amounts available under the HSBC operating bank line, we believe we have sufficient future cash flow to support our operating needs going forward.
Fiscal 2020 Operating Highlights
- Restrictions imposed by governments and the significant reduction in elective procedures by hospitals in
the United States and internationally negatively impacted our product sales and our ability to sell to new customers during a majority of fiscal 2020, which resulted in negative growth in our sales in key markets. - We launched three new products during fiscal 2020 into our
United States hospital and clinic customer base and experienced strong engagement from hospitals in evaluating these new products despite the lockdown restrictions. - We engaged in 39 customer development projects of various sizes with approximately 10 medical product companies in our medical coating business. These projects included those associated with our previously announced major licensing agreement with one of the world's largest medical device companies.
- Key antimicrobial patents were granted to the Company by the United States Patent and Trademark Office, the Canadian Intellectual Property Office, and the
European Patent Office that are integral to the Company's IV Clear, MediClear Pre-Op, and SurgiClear products. - To reduce risk and position our product brands for growth in the
Middle East , we transferred distribution rights in the region to a multinational medical device company and a new local agent, who has a stronger sales force and distribution capabilities throughout major markets in that region. - In response to the COVID-19 pandemic, we developed and launched a patent-pending 24-hour persistent hand sanitizer, mask spray, and surface disinfectant under our CovaGuard and CovalonGuard brands in various markets.
Strategic Review Process
As previously announced, in response to expressions of interest made by medical industry and private equity organizations,
Mr.
"The entire Board of Directors, including the Company's major shareholders believe that
"We will carefully deliberate on what actions, if any, are in the best interests of the Company's shareholders.
"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,"
Fiscal 2020 Financial Results
Revenue for the year ended
Product revenue for fiscal 2020 was
Revenue in
Gross margin was 48% for fiscal 2020, compared to 64% for the prior year. The decline in gross margin is attributed to the impact of
Adjusted gross margin(1), which excludes the inventory provisions, was 58% for fiscal 2020, compared to 66% for the prior year. The decline is attributed to product mix.
Operating expenses were
Adjusted EBITDA(1) for 2020 improved to a loss of
Fiscal 2020 saw the Company end the year with a strengthened and more diversified revenue base. In fiscal 2020, approximately 82% of revenue was from sales in
Conference Call Scheduled
A conference call to discuss
North American Toll-Free: 1.888.664.6392
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Confirmation Number: 10953934
A recording of the call will be available by calling 1.888.390.0541 or 416.764.8677 and entering the encore replay enter code 953934# from
Statement of Operations
The following unaudited table presents
(unaudited) | Three months ended, | Year ended | ||||||
2020 | 2019 | 2020 | 2019 | |||||
Revenue | ||||||||
Product | ||||||||
Development and consulting services | 424,318 | 1,201,981 | 1,979,282 | 3,265,636 | ||||
Licensing and royalty fees | 41,162 | 52,145 | 199,436 | 591,132 | ||||
Total revenue | 5,919,581 | 6,576,601 | 25,800,106 | 34,004,622 | ||||
Cost of product sales | 4,106,092 | 2,641,257 | 13,313,976 | 12,182,263 | ||||
Gross profit before operating expenses | 1,813,489 | 3,935,344 | 12,486,130 | 21,822,359 | ||||
Operating expenses | ||||||||
Operations | 227,615 | 527,354 | 1,355,851 | 1,909,748 | ||||
Research and development activities | 140,457 | 224,399 | 794,241 | 1,359,417 | ||||
Sales, marketing and agency fees | 1,633,724 | 2,581,422 | 7,789,305 | 14,952,989 | ||||
General and administrative | 1,791,597 | 3,886,068 | 8,638,800 | 11,848,837 | ||||
3,793,393 | 7,219,243 | 18,578,197 | 30,070,991 | |||||
Financing expenses | 203,132 | 231,101 | 860,157 | 889,141 | ||||
Net income (loss) | ||||||||
Other comprehensive loss | ||||||||
Foreign currency translation adjustment | (327,745) | 539,273 | 193,160 | 448,726 | ||||
Other comprehensive loss | ||||||||
Basic loss per share | ||||||||
Diluted loss per share | ||||||||
See "Non-IFRS Measures" below, including for a reconciliation of the non-IFRS measures used in this release to the most comparable IFRS measures.
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, and year ended
(unaudited) | Three months ended | Year ended | |||
2020 | 2019 | 2020 | 2019 | ||
Gross profit before operating expenses | 1,813,489 | 3,935,344 | 12,486,130 | 21,822,359 | |
Add: Depreciation and amortization | 89,705 | 85,742 | 349,595 | 328,056 | |
Add: Inventory provisions | 1,353,653 | 69,330 | 2,083,932 | 111,019 | |
Adjusted Gross Margin | 3,256,847 | 4,090,416 | 14,919,657 | 22,261,434 | |
Adjusted Gross Margin (%) | 55.0% | 62.2% | 57.8% | 65.5% |
The table below provides a reconciliation of net loss under IFRS in the consolidated financial statements to Adjusted EBITDA for the three months, and year ended
(unaudited) | Three months ended | Year ended | |||
2020 | 2019 | 2020 | 2019 | ||
Net loss | (2,183,036) | (3,515,000) | (6,952,224) | (9,137,773) | |
Add: Interest expense | 203,132 | 231,101 | 860,157 | 889,141 | |
Add: Depreciation and amortization | 284,266 | 189,954 | 1,206,094 | 629,888 | |
Add: Stock based compensation | 89,656 | 383,833 | 935,624 | 1,717,091 | |
Less: Government subsidies | (412,932) | - | (2,147,174) | - | |
Add: Inventory provisions | 1,353,653 | 69,330 | 2,083,932 | 111,019 | |
Add: Accounts receivable write-off | - | - | 1,420,002 | - | |
Adjusted EBITDA | (665,261) | (2,640,782) | (2,593,589) | (5,790,634) |
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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