Salona Global Announces Debt Reduction, Provides Update on Cost Cuts and Debt Restructuring; Appoints Mike Seckler as permanent Chief Executive Officer
July 25 2023 - 7:30AM
Salona Global Medical Device Corporation (“
SGMD”,
“
Salona Global” or the
“
Company”) (TSXV:SGMD) today announced a 15% debt
reduction as part of a restructuring effort with the seller of
Biodex Medical Systems, Inc. (“
Biodex”) and
provided an update on costs cuts and other debt restructuring
plans. Additionally, the Company announced Mr. Mike Seckler has
moved from interim CEO to permanent CEO.
Update on Cost Cuts and Turn Around Plan
Effective July 2023, management has taken action
to cut over US$2 million of annualized salary and other costs,
including senior management and mid-level staff as well as other
operational expenses. While Q2 (April-June) is expected to see
significant sales increases as a result of the acquisition of
Biodex in April 2023 (details in the March 16, 2023 and April 3,
2023 press releases), losses continued to mount during that
quarter. Unfortunately, Biodex operated at a loss when first
acquired. The new management team started implementing cuts during
June 2023. Given the current revenue run rate, the new expense
budget is designed to generate a profit for the quarter ending
September 30, 2023.
Debt Restructuring
On April 3, 2023, the Company acquired Biodex.
As a result of the acquisition, SGMD assumed three payment
obligations to the seller of Biodex totaling approximately US$10
million: approximately US$1.5 million in debt associated with
nuclear medicine medical device inventory (the “Inventory
Debt”), of which SGMD is a supplier of a key component of
these medical devices produced by the seller of Biodex;
approximately US$1.5 million in a working capital loan; and US$7
million in deferred cash payments for the acquisition.
SGMD and the seller of Biodex have agreed to an
offset for the Inventory Debt (approximately US$1.5 million) in
exchange for product already delivered, reducing the aggregate debt
from approximately US$10 million to approximately US$8.5 million.
The Company is in late-stage discussion with the seller of Biodex
to restructure all remaining payment obligations as a result of the
acquisition. SGMD has discussed an outline of a payment plan with
the Biodex sellers that it finds acceptable, however the plan must
still be documented in a binding agreement. There can be no
guarantee that a final written amendment will be executed.
“I have worked hard to implement major and rapid
change with the goal of achieving profitability this quarter,” said
Mike Seckler, CEO. “After restructuring debt and cutting costs, I
plan to conduct a strategic review with an aim to put us back on a
path to revenue growth and achieve a market multiple consistent
with our peers thereby increasing our share price. We have a
sizable revenue base, solid product offerings and reasonable gross
margins in this vast and growing healthcare market, all attributes
that can serve to build a stronger and more focused business.”
In connection with his appointment as permanent
CEO, Mr. Seckler has been granted options under the Company’s
2021 Amended and Restated Stock Option Plan to purchase up to
750,000 common shares, vesting equally over a three year period,
with a term of five years and an exercise price of $0.29. The
options and underlying common shares are subject to a four month
and one day hold period pursuant to the TSX Venture Exchange.
For more information please contact:
Mike SecklerChief Executive OfficerTel: 1 (800)
760-6826Email: Info@Salonaglobal.com
Additional Information
Neither the TSXV nor its Regulation Services
Provider (as that term is defined in the policies of the TSXV)
accepts responsibility for the adequacy or accuracy of this
release.
There can be no assurance that definitive
agreements with the sellers of Biodex and Simbex will be completed
or the timing of any agreements and the Company will continue to be
indebted to such sellers for certain payments until such time.
Completion of any transaction will be subject to, amongst other
things, negotiation and execution of definitive agreements,
applicable director, shareholder and regulatory approvals.
Certain statements contained in this press
release constitute "forward-looking information" within the
meaning of the Private Securities Litigation Reform Act of 1995
and applicable Canadian securities laws. These statements can be
identified by the use of forward-looking terminology such as
“expects” “believes”, “estimates”, "may", "would", "could",
"should", "potential", "will", "seek", "intend", "plan",
and "anticipate", and similar expressions as they relate to
the Company, including: the Company believing it can operate
profitably for the quarter ending September 30, 2023; and the
Company increasing its share price.
All statements other than statements of
historical fact may be forward-looking information. Such
statements reflect the Company's current views and intentions with
respect to future events, and current information available to
the Company, and are subject to certain risks, uncertainties and
assumptions. Salona cautions that the forward-looking statements
contained herein are qualified by important factors that could
cause actual results to differ materially from those reflected by
such statements. Such factors include but are not limited to the
general business and economic conditions in the regions in
which Salona operates; the ability of Salona to execute on key
priorities, including the successful completion of acquisitions,
business retention, and strategic plans and to attract,
develop and retain key executives; difficulty integrating newly
acquired businesses; ongoing or new disruptions in the supply
chain, the extent and scope of such supply chain disruptions, and
the timing or extent of the resolution or improvement of such
disruptions; the ability to implement business strategies
and pursue business opportunities; disruptions in or attacks
(including cyber-attacks) on Salona ’ s information
technology, internet, network access or other voice or data
communications systems or services; the evolution of various
types of fraud or other criminal behavior to which Salona
is exposed; the failure of third parties to comply with their
obligations to Salona or its affiliates; the impact of new
and changes to, or application of, current laws and regulations;
granting of permits and licenses in a highly regulated business;
the overall difficult litigation environment, including in
the United States; increased competition; changes in foreign
currency rates; increased funding costs and market
volatility due to market illiquidity and competition for funding;
the availability of funds and resources to pursue
operations; critical accounting estimates and changes to
accounting standards, policies, and methods used by Salona;
the occurrence of natural and unnatural catastrophic events
and claims resulting from such events; www.sec.gov, and with
the securities regulatory authorities in certain provinces of
Canada and available at www.sedar.com. Should any factor affect
Salona in an unexpected manner, or should assumptions
underlying the forward-looking information prove incorrect, the
actual results or events may differ materially from the
results or events predicted. Any such forward-looking information
is expressly qualified in its entirety by this
cautionary statement. Moreover, Salona does not assume
responsibility for the accuracy or completeness of such
forward-looking information. The forward-looking information
included in this press release is made as of the date of
this press release and the Company undertakes no obligation to
publicly update or revise any forward-looking information,
other than as required by applicable law.
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