false 2023-11-15 0001617765 00-0000000 Salona Global Medical Device Corp. 0001617765 2023-11-15 2023-11-15

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 15, 2023

SALONA GLOBAL MEDICAL DEVICE CORP.
(Exact name of registrant as specified in its charter)

British Columbia 333-255642 Not Applicable
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)

49 Natcon Dr
 Shirley, New York, United States 11967
 (Address of principal executive offices) (ZIP Code)

Registrant’s telephone number, including area code: (800) 760-6826

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b -2 of this chapter).

Emerging growth company ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition

On November 15, 2023, Salona Global Medical Device Corporation issued a press release announcing its financial results for the fiscal quarter ended September 30, 2023.  A copy of the press release is furnished as Exhibit 99.1 to this report. 

The information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.    Financial Statements and Exhibits.

(d)    Exhibits.

Exhibit No. Description
   
99.1 Press Release of Salona Global Medical Device Corporation dated November 15, 2023.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

  SALONA GLOBAL MEDICAL DEVICE CORPORATION
     
     
Date:  November 15, 2023 By: /s/ Natalia Vakhitova
  Name:  Natalia Vakhitova
  Title: Chief Financial Officer

EXHIBIT 99.1

Salona Global Completes Turn Around Plan with Profitable Third Quarter, Posting Record Results with 18.5% Quarterly Organic Revenue Growth and 29% Quarterly Gross Profit Growth; Generates $749,425 in Adjusted EBITDA for the Quarter

New York, New York, November 15, 2023 - Salona Global Medical Device Corporation (the ‎‎"Company") (TSXV:SGMD), soon to be renamed Evome Medical Technologies Inc., today announced financial highlights for its third quarter, ending September 30, 2023.

Financial Headlines

Revenues

  • Generated $19,647,489 in revenue for the quarter ending September 30, 2023.
    • 18.5% increase from the previous quarter.
    • 78.3% increase from the same period in the prior year.

Profits

  • Generated $7,268,163 in gross profit for the quarter ending September 30, 2023.
    • 29.0% increase from the previous quarter.
    • 128.4% increase from the same period in the prior year.
  • Improved gross profit margins to 37% from 34% in the previous quarter.
  • Generated $749,425 in positive Adjusted EBITDA (defined below) for the quarter ending September 30, 2023 as compared to negative Adjusted EBTIDA of $819,394 in the previous quarter, a difference of $1,568,819 for the quarter.
  • Generated $2,998,468 in net income for the quarter ending September 30, 2023 as compared to a net loss of $1,115,843 in the previous quarter, a difference of $4,114,311 for the quarter.

Acquisition Debt Reduction

The Company reduced acquisition debt by US$428,237.45 in the third quarter pursuant to the previously announced forbearance agreement. On October 31, 2023, the Company further reduced its acquisition debt by making a scheduled payment.

"We have succeeded in implementing our turnaround plan very quickly this quarter with fantastic results," said CEO Mike Seckler. "We had record revenue with solid organic revenue and gross profit growth. With this sales momentum I now want to focus on getting our gross profit figures up above 40%. I am also optimistic our operational challenges will be overcome and we are now assessing a pathway to eliminate our going concern issues."

"Most importantly, we can now look to the future and focus on revenue growth. We have some very exciting product launches and international partnerships that look to fuel growth in 2024. I look forward to announcing our new product tomorrow and soon we will debut our entire next generation line of products."

Earnings Call

On Wednesday, November 15, 2023, at 4:00 p.m. (Eastern Time), CEO Mike Seckler and CFO Natalia Vakhitova will hold an earnings call (see details below) to discuss the third quarter financial results. The call-in numbers for participants are:

Toll Free Dial In: +1 (800) 245-3047

Direct Dial: +1 (203) 518-9765

Conference ID: SALONA

Sign up at http://tinyurl.com/salonaglobalnewsletter for updates on the Company delivered directly to your inbox.

Full Financial Statements

Condensed financial statements for the third quarter ending September 30, 2023 are attached at end of this release. The full financial statements and related management discussion and analysis (in the form of a quarterly report on Form 10-Q) for the three and nine months ended September 30, 2023 have been filed with the 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.sedarplus.com.

For more information please contact:


Mike Seckler

Chief Executive Officer

Tel: 1 (800) 760-6826

Email: Info@Salonaglobal.com

Non-GAAP Measures ‎

This press release refers to "Adjusted EBITDA" which is a non-GAAP and non-IFRS financial ‎measure that does ‎not have a standardized meaning prescribed by GAAP or IFRS. The ‎Company's presentation of this financial ‎measure may not be comparable to similarly titled ‎measures used by other companies. This non-GAAP financial measure assists the Company's ‎management in comparing its operating performance over time because certain items may ‎obscure underlying business trends and make comparisons of long-term performance difficult, ‎as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete ‎acquisition plans that are fundamentally different from the ongoing operating plans of the ‎Company. The Company's management also believes that presenting this measure allows ‎investors to view the Company's performance using the same measures that the Company ‎uses in evaluating its financial and business performance and trends.‎

"Adjusted EBITDA" is defined as net loss excluding interest expense, provision for income ‎taxes, depreciation of property and equipment, amortization of right-of-use asset, amortization ‎of intangible asset, foreign exchange (loss) gain, other income, provision for impairment, ‎change in fair value of contingent consideration, transaction costs, and stock-based ‎compensation.‎

The following table provides reconciliation between net income (loss) and Adjusted EBITDA:‎

    For the three months ended     For the nine months ended  
    September 30     September 30     September 30     September 30  
    2023     2022     2023     2022  
                         
Net Loss $ 2,988,468   $ (9,801,081 ) $ 209,881   $ (14,045,048 )
Interest Expense   641,466     196,788     1,373,998     432,005  
Provision for income taxes   9,561     (69,033 )   48,105     (214,750 )
Depreciation of property and equipment   273,092     172,654     722,422     313,594  
Amortization of right-of-use asset   518,873     133,991     1,441,014     304,027  
Amortization of intangible asset   392,615     254,706     1,093,714     718,716  
Foreign exchange (loss) gain   80     62,971     (4,438 )   66,904  
Other income   (1,185,110 )   (1,252 )   (2,000,671 )   (1,300 )
                         
Provision for impairment   -     -     -     5,527,913  
Change in fair value of earnout consideration   -     -     (1,165,697)     2,451,600  
Change in fair value of contingent consideration   (3,542,325 )   8,053,337     (3,269,230)     2,659,329  
Transaction costs   72,839     838,957     607,151     2,407,366  
Severance Expenses   315,569     -     544,318     -  
Stock based compensation   264,637     378,683     1,001,733     1,306,341  
Adjusted EBITDA $ 749,765   $ 220,721   $ 602,300   $ 1,926,697  

Additional Information

Unless otherwise specified, all dollar amounts in this press release are expressed in Canadian ‎dollars.‎

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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 getting gross profit figures up above 40%; the Company launching new products in 2024, including announcing new products on November 16 , 2023 and debuting an entire next generation line of products soon.

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 finding additional cost restructuring opportunities and reductions.

The Company 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 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; ‎‎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 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; 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.sedarplus.ca. 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.‎

SALONA GLOBAL MEDICAL DEVICE CORPORATION
Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss

    For the three months ended     For the nine months ended  
    September 30     September 30     September 30     September 30  
    2023     2022     2023     2022  
                         
Revenue $ 19,647,489   $ 11,019,251   $ 46,905,793   $ 29,448,811  
Cost of revenue:                        
Direct service personnel   1,509,715     1,508,339     4,987,474     4,382,736  
Direct material costs   10,546,970     6,036,325     23,937,770     14,588,950  
Other direct costs   322,641     292,528     984,112     792,049  
Total cost of revenue   12,379,326     7,837,192     29,909,356     19,763,735  
Gross margin   7,268,163     3,182,059     16,996,437     9,685,076  
Operating expenses                        
Selling, general and administrative   7,098,604     3,340,021     17,940,188     9,064,720  
Depreciation of property and equipment   273,092     172,654     722,422     313,594  
Amortization of operating lease right-of-use assets   518,873     133,991     1,441,014     304,027  
Amortization of intangible assets   392,615     254,706     1,093,714     718,716  
Total operating expenses   8,283,184     3,901,372     21,197,338     10,401,057  
Net operating (loss)   (1,015,021 )   (719,313 )   (4,200,901 )   (715,981 )
Interest expense   (641,466 )   (196,788 )   (1,373,998 )   (432,005 )
Foreign currency exchange gain (loss)   (80 )   (62,971 )   4,438     (66,904 )
Other income   1,185,110     1,252     2,000,671     1,300  
Provision for impairment   -     -     -     (5,527,913 )
Change in fair value of earnout consideration   -     -     1,165,697     (2,451,600 )
Change in fair value of contingent consideration   3,542,325     (8,053,337 )   3,269,230     (2,659,329 )
Transaction costs   (72,839 )   (838,957 )   (607,151 )   (2,407,366 )
Net income (loss) before taxes   2,998,029     (9,870,114 )   257,986     (14,259,798 )
Provision for income taxes   (9,561 )   69,033     (48,105 )   214,750  
Net income (loss) $ 2,988,468   $ (9,801,081 ) $ 209,881   $ (14,045,048 )
Other comprehensive income                        
Foreign currency translation gain   324,132     400,253     386,682     1,068,257  
Comprehensive income (loss) $ 3,312,600   $ (9,400,828 ) $ 596,563   $ (12,976,791 )
Net loss per share                        
Basic   0.04     (0.18 )   0.00     (0.27 )
Diluted   0.03     (0.18 )   0.00     (0.27 )
Weighted average number shares outstanding:                        
Basic   77,978,130     54,719,867     71,504,018     52,981,400  
Diluted   88,483,489     54,719,867     82,003,843     52,981,400  

SALONA GLOBAL MEDICAL DEVICE CORPORATION
Unaudited Interim Condensed Consolidated Balance Sheets

    September 30,     December 31,  
    2023     2022  
             
Assets            
Cash and cash equivalents $ 1,052,647   $ 1,928,464  
Accounts receivable, net   9,986,167     6,353,275  
Inventories, net   12,132,422     8,102,626  
Prepaid expenses and other receivables   2,203,034     216,489  
Total current assets   25,374,270     16,600,854  
Security deposit   608,459     566,198  
Long-term accounts receivable   -     189,616  
Long-term prepaid expenses and other receivables   241,024     441,025  
Property and equipment, net   3,843,493     3,399,898  
Operating lease right-of-use assets, net   11,489,568     7,781,300  
Intangible assets, net   10,191,624     9,376,162  
Goodwill   16,143,398     13,695,194  
Total assets $ 67,891,836   $ 52,050,247  
             
Liabilities and stockholders' equity            
Liabilities            
Line of credit $ 7,682,971   $ 5,162,711  
Accounts payable and accrued liabilities   9,918,137     6,641,181  
Current portion of debt   9,463,750     195,489  
Current portion of operating lease liability   1,514,813     847,253  
Other liabilities   2,152,083     1,807,702  
Obligation for payment of earn-out consideration   9,278,389     15,506,531  
Total current liabilities   40,010,143     30,160,867  
Debt, net of current portion   764,235     574,515  
Operating lease liability, net of current portion   7,722,597     5,983,333  
Total liabilities $ 48,496,975   $ 36,718,715  
             
Stockholders' equity            
Common stock; no par value, unlimited shares authorized; 56,791,592 shares issued and outstanding as of September 30, 2023 (December 31, 2022: 53,707,780)   39,680,472     38,767,442  
Class A shares; no par value, unlimited shares authorized; 21,378,799 shares issued and outstanding as of September 30, 2023 (December 31, 2022: 3,403,925)   12,542,088     1,800,064  
Class A Shares to be issued: 6,261,340 Class A shares to be issued as of September 30, 2023 (December 31, 2022: 19,019,000)   4,696,005     14,264,250  
Additional paid-in-capital   9,452,567     8,072,610  
Accumulated other comprehensive income   2,075,134     1,688,452  
Deficit   (49,051,405 )   (49,261,286 )
Total stockholders' equity   19,394,861     15,331,532  
Total liabilities and stockholders' equity $ 67,891,836   $ 52,050,247  

v3.23.3
Document and Entity Information Document
Nov. 15, 2023
Document Information [Line Items]  
Document Type 8-K
Document Creation Date Nov. 15, 2023
Document Period End Date Nov. 15, 2023
Amendment Flag false
Entity Registrant Name Salona Global Medical Device Corp.
Entity Address, Address Line One 49 Natcon Dr
Entity Address, City or Town Shirley
Entity Address, State or Province NY
Entity Address, Country US
Entity Address, Postal Zip Code 11967
Entity Incorporation, State Country Name A1
City Area Code 800
Local Phone Number 760-6826
Entity File Number 333-255642
Entity Central Index Key 0001617765
Entity Emerging Growth Company true
Entity Tax Identification Number 00-0000000
Entity Ex Transition Period false
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
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