Trinity Biotech plc (TRIB) Q2 2020 Earnings Call Transcript

Trinity Biotech plc (NASDAQ: TRIB) Q2 2020 earnings call dated Aug. 25, 2020

Corporate Participants:

Kevin Tansley — Chief Financial Officer

Ronan O’Caoimh — Chairman and Chief Executive Officer

Analysts:

Jim Sidoti — Sidoti & Company, LLC — Analyst

Paul Nouri — Noble Equity Fund, LP — Analyst

Charles Latario — GTM — Analyst

William Lapp — Private Investor — Analyst

Sam Roboski — SER Asset Management — Analyst

Presentation:

Operator

Good day, and welcome to the Trinity Biotech Second Quarter Financial Results Conference Call. [Operator Instructions] Please note, that this event is being recorded.

I’d now like to turn the conference over to Kevin Tansley, CFO. Please go ahead, sir.

Kevin Tansley — Chief Financial Officer

Thank you very much. Before we begin with our prepared remarks today, we submit for the record the following statements. Statements made by the management team of Trinity Biotech during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements.

The words believe, expect, anticipate, estimate, will and other similar statements of expectation identify those forward-looking statements. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, but not limited to, the results of research and development efforts; the effect of regulation by the United States Food and Drug Administration and other agencies; the impact of competitive products, product development, commercialization and technological difficulties; and other risks detailed in the company’s periodic reports filed with the Securities and Exchange Commission.

Forward-looking statements reflect management’s view only as of today. The company undertakes no obligation to publicly release the results of any revision to these forward-looking statements.

In addition, there is uncertainty about the spread of the COVID-19 virus and the impact it will have on the company’s operations, the demand for it’s products, global supply chains and economic activity in general.

So now, I will take you through the results for quarter two 2020. Beginning with our revenues, total revenues for the quarter were $16 million compared to just over $22.5 million in quarter two last year. Ronan will provide more details on the quarter two’s revenues later in the call. So I will move on now and discuss the other aspects of the income statement.

Our gross margin this quarter was 42.9%, which represents an improvement on the 42% reported in quarter two last year. This improvement was due to two factors. Firstly, the impact of lower instrument placements, which tend to have a lower average margin then other products, in addition to a lower depreciation charge during the period. You might also recall that our gross margin tends to fall in the event of lower revenues due to the largely fixed nature of our cost base. However this quarter, we were able to offset most of the impact of COVID-19 on revenue by swiftly implementing a range of cost-saving measures.

Moving next to our indirect costs. In total, they’ve fallen by over $1.9 million in the quarter to $6.4 million a reduction of nearly 23%. Within this, R&D expenses during the quarter decreased from $1.4 million to $1.2 million while SG&A expenses from $6.6 million to $5 million. Both of these decreases are largely due to cost-saving measures we implemented in response to COVID-19 such as the furloughing of employees.

So in the case of SG&A expenses, it would also choose the virtual elimination of travel costs and discretionary sales and marketing expenditure, including the costs of trade shows, many of which have been canceled or deferred. Meanwhile our share option expense increased slightly from $181,000 to $213,000 and that result was we’re reporting an operating profit of $0.5 million for the quarter down from $1.2 million last year. This reduction is entirely due to lower revenues and would’ve been significantly higher had we not undertaken the cost measures — cost saving measures, which I mentioned earlier.

Moving on to our financing costs, which includes the impact of our exchangeable notes, our financial income for the quarter was $2,000 versus $133,000 in the comparative period. This is primarily reflective of lower levels of cash deposits. Meanwhile financial expenses for the quarter were stable at $1.2 million and of this, $1 million relates to cash interest element of our exchangeable notes and the remaining $200,000 relates to the notional financing charge relating to lease payments as a result of IFRS16.

There is also the non-cash financial expense of $700,000 which is disclosed further down the income statement that relates to the accretion interest on our exchangeable notes and a fair value adjustments in relation to the derivatives embedded in those notes caused by the increase in the company’s share price during the quarter.

Tax charge for the quarter was $32,000 and this represents an effective tax rate of 6.4% of operating profit. The comparative tax charge in quarter two 2019 was $5.6 million. So this includes a charge of $5.5 million in relation to a tax settlement. In terms of overall results, the loss before tax and non-cash interest for the quarter was $718,000 compared to profit of $101,000 in 2019.

Meanwhile, after tax loss for the quarter was $1.5 million compared to a loss of $5.6 million in quarter two 2090. The basic EPS for the quarter excluding non-cash items was a loss of $0.036 compared to a loss of $0.266 in quarter two 2019. However, fully diluted EPS was a profit of $0.01 compared to a loss $0.179 in 2019.

Finally on the income statement, earnings before interest, tax, depreciation, amortization and share option expense was $1.5 million for the quarter.

I’ll now move on to talk about the significant balance sheet movements since the end of March 2020 and with an increase in property, plants and equipment of $87,000, addition for the quarter were $500,000 and this was offset by depreciation of $400,000. In the same period intangible assets increased by $1.3 million and this was made up of addition to $1.7 million offset by an amortization charge of $0.4 million.

Moving on to inventories, you’ve seen that these have decreased $1.2 million and now stand at $31.5 million. Meanwhile trade and other receivables have decreased by $2.9 million to $17 million, both reflecting the lower revenues in the quarter. Our trade and other payables including both current and noncurrent are broadly static at $39.9 million. This includes $4.5 million related to new loan received under the US government’s Paycheck Protection Program. Under provisions of the PPP, these loans will be partially or totally forgiven based on the extent to which a borrower’s workforce returns to normal levels in the period immediately following the granting of the loans.

On receipt of the loan, Trinity ended the furloughing of staff in each of its US and consequently we believe that a large percentage of not all of these loans will be forgiven later in the year once the necessary verification has taken place. Offsetting this increase was a $1 million decrease relation to interest accrued on exchangeable notes, as we made up annual interest payment of $2 million during the quarter and then accrued the next quarter of interest of $1 million. The remaining offsetting reduction related to lower trade creditors and lease liabilities due to payments which were made during the quarter.

I’ll now discuss our cash flows for the quarter. The cash generated from operations for the quarter was $2.8 million, capital expenditure in the quarter was $2.2 million, which represents a decrease of approximately $900,000 on the corresponding quarter last year. Then we incurred lease payments of $800,000 in relation to leased premises. These resulted in us having a negative free cash flow of approximate $200,000 for the quarter.

Also in the quarter, we then had our biannual exchangeable note interest payment of $2 million and finally there is the receipt of the aforementioned $4.5 million of PPP loans. The net result is that we had an increase in cash in the quarter of approximately $2.3 million bringing the quarter end cash balance to $15.6 million.

I’ll now hand over to Ronan.

Ronan O’Caoimh — Chairman and Chief Executive Officer

Thanks and I am going to review our revenues for quarter two before opening the call to question-and-answer session. Our revenues for quarter two were $16 million compared to $22.5 million in the corresponding quarter last year which is a decrease of 29%. Point-of-care revenues of $1.3 million compared to $2.1 million in the corresponding quarter, which is a decrease of 41%. Clinical Laboratory revenues were at $14.8 million compared to $20.3 million in the corresponding quarter last year, which is a decrease of 27%.

Moving back at point-of-care, our revenues decreased by 41% when compared to the corresponding quarter and the consequence of COVID which we saw the suspension or reduction of HIV testing programs in certain countries in Africa and this combined with supply chain difficulties caused by the major reductions in air traffic to Africa as well as general uncertainty as to how quickly COVID would spread throughout Africa led to a slowdown in orders. However, during quarter three we’ve seen a return to more normal levels of ordering and expect the outcome for quarter three to be marginally sort of normal.

Moving on to our Clinical Laboratory, our revenues declined 27.5% to $14.8 million. We saw a significant reduction in our hemoglobin and in our autoimmune business due entirely to COVID. The consequence of COVID in many countries testing for nonacute conditions were severely reduced as patients were reluctant to visit their physicians or hospitals and run the risk of contracting COVID and then subsequently and consequently that they would opt to do fair or forgo such testing.

It therefore comes as no surprise that we saw a sudden falloff in diabetes and also autoimmune testing during the quarter. For autoimmunity, this first manifested itself in our reference laboratory in Buffalo by testing volumes declined for example 90% in April. In the case of diabetes, we also saw instrument sales declined significantly with only 20 instruments placed during quarter two, as hospitals and clinics were likely to purchase new capital equipment in the midst of the pandemic. Diabetes testing and volumes also decreased significantly during the quarter.

On a positive note however, we are now seeing revenues for both also immunity and diabetes return to near normal levels with the exception being that hospitals continue to do fair capital equipment purchasing. However, the impact of COVID is not only negative from a revenue perspective. We are seeing higher sales of some of our point-of-care respiratory products such as Legionella urinary action and Strep pneumonia, given the increased testing for these conditions in light of COVID.

With regard to our life science considering Fitzgerald, we’re also seeing significant increased revenues for our COVID monoclonal antibodies and our complementary reagents. In addition, the company is benefiting from sales of our FDA approved transport medium, which is a sample collection device for COVID-19 PCR and molecular testing, which is used to store the nasopharyngeal swab, which contains the patient’s sample, allowing it to be transmitted in a stable environment.

The Transport Medium stabilizes the sample and prevents bacterial growth and maintains its integrity until such time that the test is running at laboratory. As recently announced the company has now launches its COVID-19 IgG ELISA antibody test and is now free to sell the products in the USA. We expect to have the product CE marked for sale in Europe within the next six weeks.

The product has demonstrated specificity in excess of 98% and sensitivity in excess of 95% in samples drawn at least 14 days of data symptom onset. These percentages comfortably exceed the minimum requirements of the FDA emergency use authorization partly. As the utility of this product is to detect individuals within antibody response to COVID-19 indicating path exposure and potential immunity, the specificity is the key performance metric.

A high percentage specificity means that there are virtually no false positives and therefore for example, patients are not given the false impression that they may be immune. The test will potentially be used within the screening of people prior to vaccination to avoid vaccinating individuals who already have a circulating antibody response. Additionally, the test can be used to monitor the patients serological response in the weeks and months following vaccination as their immune system builds an antibody response to the virus.

In addition the test can be used to prove further and individual had previously had COVID-19 and is now assumed immune and can also be used by governments to monitor the prevalence of COVID’s immunity in population.

As previously indicated, our rely to production capacity is a capability is a significant and the instrumentation platforms that perform this type of testing are available in virtually every laboratory in the world. So in summary, our quarter three revenues were autoimmune and diabetes anti-HIV would be below normal, but not significantly so, while our infectious disease revenues, which include COVID-19 products will be significantly higher than normal, reflecting significantly higher sales of our point-of-care rapid test and new antibody COVID-19 ELISA test the PCR transport medium and Fitzgerald-19 monoclonal antibodies. We estimate that quarter three revenues will exceed $28 million.

Moving back to the development of COVID-19 tests, we have previously indicated that the company is also developing a rapid point-of-care COVID-19 test to detect IgG antibodies under the test can run in 12 minutes using one drop of cold blood procured by spring-loaded lancet or a finger prick.

Like the ELISA test, this test will determine which individuals within the population have been exposed to COVID-19 and are therefore regarded as immune. We expect to complete the development of this test and transfer into manufacturing before year-end and again believe that the product is exhibiting performance characteristics that will enable us to gain FDA Emergency Use Authorization.

We already have in place existing and substantial automated manufacturing capability for such a test, given that we have already manufactured — that we already manufacture every year many millions of HIV tests on the same automated equipment.

In relating to the FDA warning letter, as you would have seen last week, we announced that our Primus subsidiary had received a warning letter from the FDA following an inspection of its Kansas City manufacturing facility that took place in January 2020. Firstly we kind of say that we’re obviously extremely disappointed to have received such a letter. And in fact, it is the first time that this has occurred with regard to any of our facilities during our 28 year history.

The principal issue that was identified was in relation to our Ultra2 instrument, which is used for Hemoglobin Variants testing. This product has been on the market for over 20 years, making it the oldest Primus instrument operating in the field. In its letter the FDA has pointed out that certain post-launch changes and enhancements made to the Ultra2 mean that it no longer bear sufficient similarity to enable its initial 510(k) approval to be relied upon.

In order to address this, the company intends to negotiate with the FDA to allow for a new 510(k) submission to be made within an agreed timeframe. In addition to this, we’re actively preparing more detailed remediation plans in relation to the 3483 findings identified during the January audits and again, these findings principally relate to the Ultra2 instruments.

I would like to point out that approximately $4.5 million of our revenues are derived from the Ultra2 in the USA as opposed to from the Premier 9210 where the majority of our hemoglobin revenues are earned. In addition, our Premier Resolution instrument which is already being sold in a number of countries, including CE Mark and it’s undergoing the process of obtaining its own FDA clearance at this time is the designated successor for Ultra2.

In fact put for COVID related delays in completing independent trials, it is likely that such clearance would have been obtained already. We now anticipate making the Premier Resolution submission by the end of November, ultimately allowing for the Ultra2 installed base to be replaced by the Premier Resolution new instrument.

I would like to assure you that we’re treating this letter with the utmost seriousness, and we’re giving the resolution of the issues contained in FDA’s letter to highest priority. We’ve assembled our highly qualified team who will spend the next two weeks completing our responses to the FDA, which will contain a detailed plan outlining how we intend to resolve all the issues that they’ve raised.

And so at this stage, we could turn back for a question-and-answer session please.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And our first question will come from Jim Sidoti with Sidoti & Company. Please go ahead.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Good afternoon, Ronan and Kevin. Can you hear me?

Ronan O’Caoimh — Chairman and Chief Executive Officer

Hi, Jim. How are you?

Kevin Tansley — Chief Financial Officer

Hi, Jim.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Yes, thank you. I hope you’re well. I just want to be clear. Did you say you expect third quarter revenue to be $28 million?

Kevin Tansley — Chief Financial Officer

Yes, $28 million.

Jim Sidoti — Sidoti & Company, LLC — Analyst

So that represents about 14% top line growth from a year-ago which was also an up quarter. You haven’t had a double-digit top line growth quarter in a couple of years. And we’re in the middle of the pandemic, what’s driving that growth?

Kevin Tansley — Chief Financial Officer

Yes, well I mean, I think it’s probably something like a 40% growth in the context of our current run rate, bearing in mind that I’d already indicated that autoimmune disease, HIV and diabetes have not returned to full levels that for example, our instrumentations are supposed to be reasonably modest in quarter three. So, I mean it reflects the fact that basically, we’re selling a new ELISA antibody test that PCR transport mediums. We’re selling more infectious disease products like Legionella Urinary Antigen and Strep pneumonia and Strep selling a lot of monoclonal antibodies with COVID related antibodies. So things accumulation those factors is giving rise to this. So again, that’d be five weeks to go to the end of the quarter, but I think we feel confident in that number.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Do you think those trends continue for the next few months? Or do you think that is, it could go up or down depending on what happens with COVID?

Ronan O’Caoimh — Chairman and Chief Executive Officer

I think for quarter four, it’s likely to accelerate. And quarter one, it’s pretty difficult to foresee.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Okay. But can you remind me of 2020?

Ronan O’Caoimh — Chairman and Chief Executive Officer

I think accelerations — deceleration is more likely.

Jim Sidoti — Sidoti & Company, LLC — Analyst

It sounds like for the remainder of 2020, you’re expecting double-digit top line growth year-over-year?

Kevin Tansley — Chief Financial Officer

More than that, yes.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Yes, okay. All right. And then on the expense side, I know you said you received the money for PPP money. Is there any effect on the income statement from that? Does that offset any expenses? Or is that something that will happen later on?

Kevin Tansley — Chief Financial Officer

That’s something that will happen later on. So at this point, I suppose that the scheme is relatively new, the rule has been changing somewhat since it was introduced. There’s a formal process to go, we’ve gone through with the lending bank and then in turn with the government agency, and just given all that at this point, we’ve taken a prudent approach and not recognized any forgiveness at this point. And we’ll just wait until there’s greater certainty as to exactly how that plans out. So at the moment the loans are included in our balance sheet as a liability.

Obviously, as I mentioned in my remarks, I believe that high percentage, if not all of them will be forgiven on the basis that we did bring back all of our furloughed employees in the U.S. immediately after receipt of the loan financing. So from our point of view, we’ve held up our end of the bargain.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Okay. And can you give us an update on the timetable for the approval practice for both the screening test in Africa and then for the point-of-care immunity test, the COVID immunity test or I’m sorry, the COVID antibody test here in the U.S.?

Ronan O’Caoimh — Chairman and Chief Executive Officer

Okay, Trin-Screen in Africa has just been held up because we can’t run any trials at the moment. So just waiting to finish off in two of the three countries, we haven’t been able to get going again, we’re hoping to get going in next month or so. But we don’t have complete clarity on that. And then in respect of the rapid test, and we’re virtually completed at the moment, we’re doing validations. But the other thing that has to be done is obviously it has to be transferred into manufacturing and mold issues, et cetera, et cetera. So they’re taking time, and then that new mold should be validated, et cetera. So because remember, it’s going on to automated systems. So what’s actually holding is up more than anything else at the moment probably is actually the manufacturing side of things. But I think we’ll be clear. We think we were satisfied we would be clear before year-end. So I mean the EUA, I think will come probably comfortably enough, probably sometime in November, the real issue is how quickly we can actually get off manufacturing and scale.

Jim Sidoti — Sidoti & Company, LLC — Analyst

And then last one for me for the IgG test that is already received the EUA approval, are you receiving inquiries regarding that? And when do you expect sales to commence?

Ronan O’Caoimh — Chairman and Chief Executive Officer

We have huge interest and it’s not just in the USA but around the world. And so we have huge interest. And yes, it’s looking very promising. We have we also of course are going to be CE Mark will enable us to sell in Europe and we hope to have that within the next six weeks.

Jim Sidoti — Sidoti & Company, LLC — Analyst

So does your revenue guidance with $28 million of revenue for the September quarter? Does that include any sales for that test?

Ronan O’Caoimh — Chairman and Chief Executive Officer

Yes, it does. Yes.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Okay. Thank you.

Ronan O’Caoimh — Chairman and Chief Executive Officer

Yes, thanks.

Operator

Our next question will come from Paul Nouri with Noble Equity. Please go ahead.

Paul Nouri — Noble Equity Fund, LP — Analyst

Hey. Good morning.

Ronan O’Caoimh — Chairman and Chief Executive Officer

Good morning, Paul

Paul Nouri — Noble Equity Fund, LP — Analyst

Did you say that the annualized impact of the Kansas City plant issue is $4 million? Did I miss here though?

Kevin Tansley — Chief Financial Officer

$4.5 million.

Paul Nouri — Noble Equity Fund, LP — Analyst

Okay. And the company issued a shelf statement a little while ago. What are the different financing options you’re considering? Is ATM one of them where you can issue shares at the market?

Kevin Tansley — Chief Financial Officer

With the first thing to say on that, Paul is that we’ve had a policy for some time now as always having a live shelf registration. The reason we put the shelf in place is because the previous one has expired and so in keeping with the policy to always have a shelf, we just placed one at the first available opportunity, we put in a whole range of broad categories of financing the broadest as such as is the norm in these situations when you’re doing your shelf registration, so I wouldn’t necessarily read anything into the fact that we put a registration there. And as I say again, it’s the broadest possible range of raising just and keeping with the spirit of those types of documents.

Ronan O’Caoimh — Chairman and Chief Executive Officer

So Paul, just to be clear. I mean it’s our policy to have a shelf registration in place as I think most companies would do. And so the fact that we actually did that filing in no way reflects an intention to actually raise money. In fact, it’s not our intention specifically not our intention to do so this kind of share price.

Paul Nouri — Noble Equity Fund, LP — Analyst

Okay. All right. Well, thank you.

Ronan O’Caoimh — Chairman and Chief Executive Officer

Thanks, Paul.

Operator

Our next question will come from Charles Latario [Phonetic] with GTM [Phonetic]. Please go ahead.

Charles Latario — GTM — Analyst

Hey, gentlemen, thank you for taking my call. Excellent job on the numbers and great job on basically terminating around the pandemic. Hopefully everyone is staying safe over there.

I just have a couple of quick questions. The first one is in New York facility. Can you tell us a little bit about what’s going on over there? And what the status on how the ramp-up over based on?

Ronan O’Caoimh — Chairman and Chief Executive Officer

We didn’t quite hear you there. Can you just give us a little bit more on the last — on just the exact question itself, please?

Charles Latario — GTM — Analyst

Okay. The New York facility that you guys are actually working on. What is the status on that? And actually, how much is the ramp-up going on now and what do you plan on doing with it over there?

Ronan O’Caoimh — Chairman and Chief Executive Officer

Charles, we have two facilities in New York with one in Jamestown. And we have one in Buffalo, right?

Charles Latario — GTM — Analyst

The one is Jamestown, I believe.

Ronan O’Caoimh — Chairman and Chief Executive Officer

Yes, but we’re not really ramping-up, I mean particular ramp-up. But that’s been part of the group for quite some time is the key part of our operations, it’s our main infectious diseases and facilities where we make all our ELISA production search. It will be where we make our ELISA IgG antibody tests for COVID. But it’s also a very established plant to such and has been part of the group for 20 years in the best way.

Kevin Tansley — Chief Financial Officer

I mean, it’s a very busy plant at the moment because we just talked about a huge increase in infectious disease revenues. And of course, a lot of — an awful lot of that is happening in that particular plant. So maybe that answers the question.

Charles Latario — GTM — Analyst

Yes. And as far as your employee count, I know you guys pulled back on your USA employees. Do you find you have enough actual employees to handle with what the current job and revenue going right now going forward is?

Kevin Tansley — Chief Financial Officer

Yes, I mean, we have I mean, we have probably, yes. What happened was when the pandemic hits, we’ve furloughed a lot of employees in the USA, and then the U.S. government brought in a program, and they send us a check for $4.5 million. And we just we brought everybody back in. Now since then particularly in Jamestown and New York, we’ve got really, really busy with the combination of the antibody test, the development of it, and then now the manufacturing of it with the PCR transport medium as well. So we’re busy. So we have brought on extra people, I don’t know, but it’s like 15 people something maybe 20. And therefore we found it difficult to get people because the pandemic payments are quite high. But so we have probably — we have probably marginally more employees than at the start of the pandemic in the USA.

Charles Latario — GTM — Analyst

Excellent, I know this question if you can give me some color on your burn rate going forward, obviously your revenue is going to be increasing. Would you expect your cash burn to stay similar to what it is go down, go up. I mean with your revenues going up increasing?

Kevin Tansley — Chief Financial Officer

You would have heard on previous calls talk about the fact that we’ve been making cost savings also we did closed our facility in Carlsbad in California. So we’ve been working very hard to get cash flow breakeven notwithstanding an uptick in revenues, but the fact that there’s an uptick in revenues, so the fact that there’s an uptick in revenues coinciding with those, I think we’re very well positioned to meet our objective becoming cash flow positive. So I don’t believe we’re going to be burning what we would have in the past.

Charles Latario — GTM — Analyst

So would you feel comfortable with your current cash level right now is that we get trying to color you’re trying to put out?

Ronan O’Caoimh — Chairman and Chief Executive Officer

We would anticipate that our cash balances will increase in coming quarters.

Charles Latario — GTM — Analyst

Excellent, well keep up the good work gentlemen, I think everything’s looking forward and hopefully, we can make a big impact on the COVID-19 because it looks like a lot of good product going out there. Thanks for taking the call.

Ronan O’Caoimh — Chairman and Chief Executive Officer

Thank you.

Kevin Tansley — Chief Financial Officer

Thank you.

Operator

Our next question will come from Jim Sidoti with Sidoti & Company. Please go ahead.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Hi, just want to follow-up on the issue with Ultra, does the fact you have the warning letter, does that prevent you from shipping either the device or the consumable for the device in the near-term?

Kevin Tansley — Chief Financial Officer

No Jim, I mean the instruction, we got an FDA inspection on the factory at the end of January, first few days of February, right. And then we received the letter now, right. So I mean, yes, there’s no question about nothing as to ship product, if it was something urgent, I think they would have written to us sooner.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Okay. And you said, I think that by the end of the year, you’re hoping to have Premier approved in the U.S., and that would basically absolutely alter anyway? Is that correct?

Kevin Tansley — Chief Financial Officer

To be clear, what we said was — what we said was that we actually hope to basically by the end of November submit, so I mean it could take three months, then I think it’ll be probably started in early next year, but before we would actually — before we’d actually have an approval, and we’ll just put one word of caution with all of that, and that is that we have been — we’re waiting to do actually it’s trial, right. And we can’t get in because of COVID at the moment right now, that I see in the first of September, but it possible I can change, has changed a couple of times, I think we will get in.

But the point I’m making is, it’s very difficult to do clinical trials at the moment. I mean, hospitals don’t want outside influences understandably. And that’s why again, for example, we have sold very few diabetes instruments over the past number of months because you really don’t want engineers wandering around your hospital installing instrumentation and similarly, you’re not going to welcome outside trials. So that’s just the one caveat, I put on that.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Okay. And then the last thing, I assume there’s some remediation expense related to the back and forth with the FDA. Can you just give an order of magnitude, are you talking 10s of 100s, 100s of 1000s, millions of dollars to clear this up?

Kevin Tansley — Chief Financial Officer

I think it’s probably like couple hundred thousand dollars, maybe we’re going to put extra regulatory people and all that in, we will be working on our technical files, things like that. But I mean, it’s not a couple hundred thousand maybe $200,000 or $300,000 that kind of money, but it’s not that magnitude.

Jim Sidoti — Sidoti & Company, LLC — Analyst

Okay. All right, thank you very much

Ronan O’Caoimh — Chairman and Chief Executive Officer

Yes, sorry Jim, just to point out, yes I mean it was always our intention to replace the old reason we developed the resolution was to replace the Ultra, I mean as you’ve heard to-date Ultra is an instrument that we inherited when we bought the business in 2005. So it’s had a good run and so the resolution is a much better instrument, you know as much more modern instruments. So, we would hope to enable a transfer from one to the other, but it needs to be negotiated.

Jim Sidoti — Sidoti & Company, LLC — Analyst

I understand. All right, thank you.

Ronan O’Caoimh — Chairman and Chief Executive Officer

Thanks, Jim.

Operator

Our next question will come from William Lapp, Investor. Please go ahead.

William Lapp — Private Investor — Analyst

Good afternoon. Thank you for taking the call. I just have a quick question on the rapid test, is that something that has to be done at the Doctor’s office? You know, if you have this rapid test like you do for HIV, how is that performed? Is that in a Doctor’s office or can it be done at home or in a business, I’m not sure about that?

Ronan O’Caoimh — Chairman and Chief Executive Officer

Bill, its Ronan here. It depend on the country but it would typically be done in a Doctor’s office, in a clinic, in a dental practice. But bear in mind, all it involves is a spring-loaded lancet which you release and we get a drop of blood and then you operate and then you just add a drop wash solution, then you wait 12 minutes and it operates like a pregnancy test.

William Lapp — Private Investor — Analyst

Great and that’s exactly in that test, that test is what they’re all saying they need. The rapid test, I mean they say if you get rapid test, as they say if you can do the rapid test, you can spot the infection first. You don’t have to wait 10, 3 to 4 days to get it. There is people from Harvard that have been talking about it. So this rapid test could really be a windfall or could be really great. I mean you guys do with HIV. I’m just wondering it could be business even have it, so people come in, they can do a rapid test or does it — you use that for care. Am I wrong?

Ronan O’Caoimh — Chairman and Chief Executive Officer

I appreciate your support but you need to clarify one thing. It has a lot of insignificant utility and I know I went to the dentist a few weeks ago and I was made to do one of these tests and I had to pay like $80 of this antibody test. But bear in mind, this isn’t an antibody test. So it’s not but you got the current infection and rather that you had in the past.

William Lapp — Private Investor — Analyst

Right. It isn’t a molecular test, right?

Ronan O’Caoimh — Chairman and Chief Executive Officer

But I have to say I was obliged to use it before, if you go to the dentist so it’s going to be used a lot, because a lot of them around. Let me just point out that there has been a lot of negative publicity surrounding them and activations being made that they don’t work and all of that. I can’t speak for any other test rather than to say that our test has exhibited 95% sensitivity, but most importantly specificity of 98%, just over of 98% which we believe it is right up there.

Operator

[Operator Instructions] Our next question will come from Sam Roboski with SER Asset Management. Please go ahead.

Ronan O’Caoimh — Chairman and Chief Executive Officer

This will be the last question and we close the call after this.

Sam Roboski — SER Asset Management — Analyst

Tell me how much money do you owe, what is the date of the obligation and the $28 million, did you say you to be cash flow positive and as long as you continue this into $28 million range, assuming you will continue to be cash flow positive. Thank you.

Ronan O’Caoimh — Chairman and Chief Executive Officer

And so our total indebtedness is $99.9 million which is at the 4% bonds and it falls due in May 2022. Yes, but $28 million worth of revenue we would be significantly profitable and depending on working capital movements, would expect over period of number of quarters to be significantly cash flow positive, but it’s just an element of building your dentist book first. You don’t take the X number of days before you get paid, but basically yes, and that level of revenues would generates significant profitability and significant cash flow positive.

Sam Roboski — SER Asset Management — Analyst

So would your 22, with the debt due in 2022 do have a plan have to pay this or you did a way to get closer to the timetable.

Ronan O’Caoimh — Chairman and Chief Executive Officer

Well, with many thoughts on that and something we review all of the time, but we don’t really go into all of our thoughts on that at this moment of time but we’re very encouraged by the strong revenue that we’re projecting for quarter three and which we see a sort of continuing and even being enhanced in quarter four.

Sam Roboski — SER Asset Management — Analyst

Okay. Well, good luck. Hopefully you get to numbers and the cash flow positive and profitability. So you could — the stock will give you more flexibility.

Ronan O’Caoimh — Chairman and Chief Executive Officer

So at this stage there seems to be no more questions. Thank you to everybody and the floor to speaking to you again soon. Good afternoon.

Operator

[Operator Closing Remarks]