Salona Global Medical Device Corporation (the
“
Company”, “
SGMD” or
“
Salona Global”) (TSXV:SGMD), an
acquisition-focused medical device company, has secured its first
European customer in Spain as part of its organic growth plan to
increase revenue growth of acquisition targets by expanding sales
in Europe and other global markets. The initial order, placed with
SDP, SGMD’s first acquisition, is expected to ship to the Spanish
customer before the end of the fiscal second quarter (August 31,
2021), and is for $193,000 of specialized drug delivery electrode
products with 35% margins. The Company anticipates recurring orders
from the same customer every four months which would result in
total estimated annual revenue of $550,000, which would be an
increase of about 3.5% of pre-Covid SDP annual revenues.
SGMD targets acquisitions with quality products
that have succeeded in the US medical device market but have little
or no revenue from Europe or other developed markets where SGMD
executives have relationships and a strong revenue track
record.
Global expansion post acquisition is a key part
of the SGMD organic growth strategy. As a result of the rapidly
maturing pipeline for potential acquisitions, management has
launched a European sales and marketing division in advance of
potentially closing on additional acquisitions. Leading that
division is Stephen Murphy. Mr. Murphy, a resident of the United
Kingdom, will work from the division headquarters near London. He
is the former President of DJO Global’s (“DJO”)
international business, with full P&L responsibility of the
European & International division. Mr. Murphy started his
27-year career at DJO in 1992 with responsibility for Ireland, and
ultimately being promoted to lead the international division of
DJO, where he grew revenue from $20M to in excess of $300M over 15
years in the European and International markets, then reporting to
Les Cross, the current SGMD Chair.
“I’m looking forward to SGMD closing additional
acquisitions quickly so that we can expand our products into our
existing relationships in Europe and around the world,” said Les
Cross, Chairman and interim CEO of SGMD. “It is good to see our
growth plan in action. While this is just one product in one
country, it is the first step in a plan where the execution path is
familiar to me and my team. We plan to complete more acquisitions,
which will provide us more products and I am confident we can break
into more EU countries. When I was CEO of DJO, we grew our sales
outside the US to one-third of total revenue. I have worked with
Stephen for 20 years as he grew the international business from
just a few million dollars to over 300 million dollars in sales. I
am confident that over time he can execute the same strategy for
Salona Global.”
The Company has posted its latest corporate
presentation, along with a webcast led by Chairman & interim
CEO Les Cross, at www.salonaglobal.com/investors.
Salona Global Today:
-
Revenue: SGMD’s first acquisition (SDP), has
standing purchase orders for 2021 of $6.6M or 40% of its earn out
target. SDP had $15.8M in 2019 audited annual revenue (Pre-COVID),
generating positive operational cash flow.* It recently secured a
contract with a Spanish customer estimated to generate $550,000 in
annual sales with margins of 35%.
- Cap Table and Concurrent
Financing: SGMD has approximately 63.8 million shares (on
a partially diluted basis)** upon commencement of trading, with
over 30 million shares either restricted or held by management or
advisors. (See below share capital table.)
- M&A Capacity:
Salona Global has a deep and full pipeline of private firms that
are discussing a potential acquisition by Salona Global – all
medical device companies with between $5M - $20M in revenues with
positive cash flow.
- The Salona Global team believes it has the capacity to close
1-2 acquisitions per quarter starting Q2 2021.
- Strong Balance Sheet, No
Parent Debt: The Company has an estimated $13M in net
assets, predominantly in cash and cash equivalents, with no parent
debt. Management has earmarked between $4-6M in cash and 15-18M
shares to close potential acquisitions in negotiations this
quarter.
- The majority of consideration would be tied to performance over
a future measurement period and could be financed with debt, as
priority acquisition targets under consideration are cash flow
positive and debt free.
- Experienced Wall Street Management
Team: Les Cross (Chairman of the Board) is former
Chairman of DJO Global (a medical device roll up that was listed on
the NYSE until Blackstone bought it for $2B); Jane Kiernan (Vice
Chairwoman) is former Chair of the Audit Committee for American
Medical Systems (purchased by Endo Pharmaceuticals for $3.5B).
- M&A advisors/bankers from PHM
(Now Viemed on the Nasdaq/TSX and Quipt on the Nasdaq/TSXV).
The SGMD post acquisition organic growth
plan:
European Sales
Expansion: SGMD is targeting companies that have
quality products that have succeeded in the US medical device
market but have little or no revenue from Europe or other developed
markets where SGMD executives have a history of marketing
success.
Leveraging the Operational
Platform: The State-of-the-Art FDA approved SDP
facility, the building block of the SGMD plan, will be used to
optimize production strategies, control costs and provide supply
chain assurances to US customers who are wary of risks from trade
tensions and poor-quality outsourced production methods.
Share Capital and Balance
Sheet
|
Shares |
Shares** |
44,677,545 |
Maximum shares reserved for issuance to SDP pending earn outs |
19,162,000 |
Shares outstanding at listing (partially diluted)*** |
63,839,545 |
|
|
Net Assets (estimated) |
$13,000,000 |
* For more
information on SDP and historical performance please see the
Company’s Management Information Circular dated 01/26/2021
available on the Company’s Sedar Profile at www.sedar.com.** The
Company completed a 7.37-for-10 share consolidation on
12/21/2020.*** Does not include the 15-18 million shares (described
above) earmarked for potential acquisitions (with between $5m and
$20m in sales) in negotiations or shares issuable pursuant to
options, warrants and Class A shares.
In addition, the Company announces that its
board of directors has granted stock options exercisable for an
aggregate of up to 400,000 common shares of the Company at $1.39
per share for five years. All options have been granted to eligible
persons (director and employee of the Company) pursuant to the
Company's 2021 Amended and Restated Stock Option Plan and will vest
over three years with the initial vesting after 1 year.
For more information please contact:
Les CrossChairman of the Board and Interim Chief
Executive OfficerTel: 1 (800) 760-6826Email:
Info@Salonaglobal.com
Additional Information
There can be no assurance that any of the
potential acquisitions in advanced negotiations will be completed
as proposed or at all and no definitive agreements have been
executed. Completion of any transaction will be subject to
applicable directors, shareholder and regulatory approvals.
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.
Certain statements contained in this press
release constitute "forward-looking information" as such term is
defined in applicable Canadian and United States securities
legislation. The words "may", "would", "could", "should",
"potential", "will", "seek", "intend", "plan", "anticipate",
"believe", "estimate", "expect" and similar expressions as they
relate to the Company, including: information relating to the
business plans of the Company; the timing of the shipment to the
Spanish customer; the potential recurring revenue from the Spanish
customer; statements regarding anticipated revenue and positive
cash of acquired companies; the Company’s acquisition strategy;
future acquisitions and the structure and financing of such
acquisitions; information with respect to future growth and growth
strategies; the Company’s organic growth plan and strategy and
the manner in which the Company proposes to accomplish it; and
anticipated trends in the Company’s industry; are intended to
identify forward-looking information. 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, including: the Company and a
target being satisfied with due diligence; the Company successfully
negotiating and executing definitive agreements for an acquisition;
closing conditions being satisfied or waived; and the Company
obtaining all requisite approvals for a transaction. Many factors
could cause the actual results, performance or achievements that
may be expressed or implied by such forward-looking
information to vary from those described herein should one or more
of these risks or uncertainties materialize. Examples of such
risk factors include, without limitation: credit; market (including
equity, commodity, foreign exchange and interest rate);
liquidity; operational (including technology and infrastructure);
reputational; insurance; strategic; regulatory; legal;
environmental; capital adequacy; the general business and
economic conditions in the regions in which the Company
operates; the ability of the Company 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; the ability to implement business
strategies and pursue business opportunities; disruptions in or
attacks (including cyber-attacks) on the Company'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 the Company is
exposed; the failure of third parties to comply with their
obligations to the Company 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 the
Company; the occurrence of natural and unnatural catastrophic
events and claims resulting from such events; and risks
related to COVID-19 including various recommendations, orders and
measures of governmental authorities to try to limit the
pandemic, including travel restrictions, border closures,
non-essential business closures, quarantines,
self-isolations, shelters-in-place and social distancing,
disruptions to markets, economic activity, financing, supply
chains and sales channels, and a deterioration of general
economic conditions including a possible national or global
recession; as well as those risk factors discussed or referred
to in the Company’s disclosure documents filed with United States
Securities and Exchange Commission and available at www.sec.gov,
and with the securities regulatory authorities in certain provinces
of Canada and available at www.sedar.com. Should any factor affect
the Company 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, the Company 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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