Word from the President
In recent years, sales at Ergoresearch have seen a significant increase. Between 2005 and 2014, the Company increased its sales by 1,931%, thereby confirming its status as Quebec’s leading manufacturer of “intelligent” custom orthotics and speciality orthotics. Efforts in 2015 were dedicated to consolidating gains and developing the ERP-Health platform, which will support future growth. As a consequence, financial results are down this year. Revenues reached $15,498,000 this year, a decrease of 13% from last year. Last year’s results included the non-recurring revenue generated by the monetization of the sleep apnea technology, in the amount of $589,948. Revenues for the period ending June 30, 2015, were negatively affected by the closure of two orthopaedic labs in Laval. Non-recurring charges, in the amount of $339,912, also affected the current year’s earnings.
As for the financial position, Ergoresearch still has a cash equivalent of more than $10 million that the Company plans to use over the next few years. However, given the recent decline in activities, the absence of cash flow investment to fuel growth in 2015 and within the IFRS’ regulations, management has decided to revise the amount of deferred income taxes and tax credits appearing as assets, by an amount of $6,401,319. This readjustment has no impact on cash flow, and the Company still benefits from the same fiscal attributes as shown in the 2015 Consolidated Financial Statements, Note 19. The amount of the said fiscal attributes appearing as assets will be reviewed periodically. The net income and comprehensive income for the period ending June 30, 2015, therefore amounted to $(7,023,218) compared to $1,230,153 for the period ending June 30, 2014. The adjusted EBITDA amounted to $665,601 in 2015, compared to $2,247,785 for the period ending June 30, 2014. Cash provided by operations decreased from $1,774,141 in 2014 to $1,335,207 for the period ending June 30, 2015.
This past year was dedicated to consolidating our gains and laying out the foundations for future growth. We have simplified the corporate structure by merging eight legal entities. We also bought out our minority partner, Orthoconcept (now merged into Laboratoire Victhom Inc.), and have completed three major initiatives:
- 1. We finalized the implementation of our ERP¹- Health platform.a. Far from the usual ERP—we have designed a software ecosystem in the health sector. We have developed and added a point-of-sale module on the basic modules, as well as a calendar module, which is linked to the electronic patient file, and a monitoring module for our manufacturing units; we have also integrated our proprietary platforms such as the pressure sensor pad and 3D scanner.
b. By integrating tools for measurement, analysis and medical imaging into patient files, we have facilitated multidisciplinary practices, sharing of information, all while optimizing the efficiency and effectiveness of patient services. In the context in which having access to a physician remains a challenge, this tool could become a key development factor in years to come.
- The Company finished rolling out its new corporate banner, reuniting its various clinical divisions under one brand name “Équilibre“. As a result, since October 2014, Orthoconcept, Laboratoire Podotech, Laboratoire Langelier and Clinique du Pied Équilibre have all operated under this same banner. Given the nature of our activities (by medical prescription), transitioning to a single banner is complex and requires an adjustment period. Nevertheless, management sees many advantages to this amalgamation, from a marketing standpoint as well as from the perspectives of medical representation and patient communication. Prior to the transition, the Company had three laboratories in the Laval area. The restructuring led to the closure of two laboratories. The redirection and transfer of patient files was seamless, but it negatively impacted a portion of this year’s revenues.
- Despite implementation of the consolidation strategy, the Company intensified its R&D efforts. Today, the Company holds eight families of patents in more than twelve countries, in orthotics, prosthetics, medical technologies and human bionics.a. Our R&D team is currently working on four projects. The National Research Council of Canada (NRC) and the Natural Sciences and Engineering Research Council (NSERC) have agreed to contribute funding for these projects, and it appears that once these efforts come through, new patents could be applied for.
b. Also, work continued on clinical studies confirming the OdrA’s effectiveness, and we expect to release the results soon.
Development and perspectives
Our current priorities and development plans include the following:
- Strengthened by our cash position, reactivate the exploration of potential acquisitions in Quebec and across Canada.
- Developing a multidisciplinary approach that unites “Équilibre” with dedicated orthopaedic health professionals under one roof.
- Continuing to market the OdrA brace.
- Turning a profit from investment in our ERP-Health platform by increasing the group’s efficiency and effectiveness.
- Continuing our investments in Research and Development (R&D).
I would like to thank all of our employees for their dedication and their ongoing desire to improve. The development and deployment of our ERP-Health platform required involvement at every level. Such a success is remarkable given the relatively small size of the group but the platform’s potential is huge. Progress and commitment are values we all share and they have allowed us to make great achievements this year.
I would also like to acknowledge the work of our senior management; my gratitude toward the Corporation’s Board of Directors for their advice and guidance and finally to thank our shareholders for their confidence. We are all confident that Ergoresearch will reach higher levels in 2016 and will continue to grow for years to come.
President and CEO Ergoresearch Ltd
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