Noveko International inc. Announces Closing of its $6 Million Financing and its Results for the Fourth Quarter and Fiscal 2011
Sales in the filtration and medical equipment segments
up by 24% and 21% respectively in 2011
MONTREAL, Sept. 29, 2011 /CNW Telbec/ - Noveko International inc. (TSX: EKO) (the "Company") announces today the closing of its $6 million financing, consisting of a credit facility of up to $4 million and convertible debentures in the amount of $2 million, as well as its results for the fiscal year and fourth quarter ended June 30, 2011.
"In light of the advances we achieved with our filtration solutions and medical equipment, increasing their fiscal 2011 sales by 24% and 21% respectively, we are confident this momentum will keep up for the current year. We look forward to further progress in these business segments that will lead to sustainable growth for our Company. We are pleased to have closed our $6 million financing as it will provide us with the funds needed to support this growth and to reach the break-even point during fiscal 2012. This is an acknowledgement of confidence in our business plan from Third Eye Capital Corporation which is acting as agent in connection with this financing," indicated Mr. André Leroux, Chairman of the Board and Chief Executive Officer of the Company.
"If our consolidated results, all segments combined, appear mixed in comparison with the previous year which had benefited from exceptional circumstances in the masks and sanitizers segments, we were able to significantly reduce our loss through tight operating cost control, despite the non-recurring items included in our fiscal 2011 financial statements totalling close to $6 million."
Amongst Fiscal 2011 Operating Highlights and Subsequent Events:
- First filters procurement contract for a North American train line; STC certification and first agreement in the aeronautics segment;
- Real estate market: major breakthroughs in the filtration segment in the Canadian, U.S., European and Asian building markets; the PINNACLE INNOVATION awards granted by BOMA Québec and by BOMA Canada; new Noveko™ innovative high-efficiency filters; sales recovery in the swine industry;
- Masks segment: NIOSH certification on the Noveko™ RD5-V respirator; FFP2 European certification on the Noveko™ RD2 antimicrobial respirator;
- Medical equipment segment: sales growth and positive EBITDA; major contracts for ECM's new-generation ultrasound scanners; CE Marking on the Exago™ ultrasound scanners; major new orders for Noveko Algérie;
- New $6 million financing: credit facility of a maximum of $4 million and convertible debentures in the amount of $2 million, bearing interest at an annual rate of 12% and maturing in 24 months, subject to terms and conditions attached hereto.
"Furthermore, new orders and partnerships for marketing our masks and sanitizers to medical clinics and hospital centres allow us to look forward to a sales recovery in these segments. In light of these developments, we are definitely beginning the year more strategically positioned and on a stronger footing," concluded Mr. Leroux.
Financial Highlights for Fiscal 2011 in Comparison with the Previous Year:
- Consolidated results from continuing operations down by 5% to $14.3 million, but including filtration revenues up by 24% to $2.9 million and medical equipment revenues up by 21% to approximately $10.7 million;
- Including a loss on slow-turnover inventories of $2.5 million, a non-recurring item mainly attributable to the masks and sanitizers segments, loss before amortization, financial expenses, income taxes, other items and discontinued operations down by $3.6 million (25%) to $10.8 million;
- Were it not for this loss on slow-turnover inventories, the loss before amortization, financial expenses, income taxes, other items and discontinued operations would have been lowered by $6.1 million (43%);
- Net loss from continuing operations down by $5.9 million (29%) to $14.5 million, such loss including other non-recurring items, specifically an impairment of intangible assets of $1.5 million and a goodwill impairment charge attributable to the sanitizers segment for an amount of $0.5 million;
- Net loss down by $8.4 million (35%) to $15.8 million, despite the aforementioned non-recurring items, plus a $1.3 million loss from discontinued operations, of which $1.1 million consists of a loss on eventual disposal recognized for fiscal 2011 on account of the BLI divesting process and the recent filing of two related purchase offers. Hence, non-recurring items for the fiscal year amounted to $5.5 million.
|Selected Consolidated Annual Information|
|Fiscal Years Ended June 30||2011(1)||2010||2009|
|(in thousands of $, except per-share amounts)|
|Revenues from continuing operations||14,297||15,111||11,412|
|Loss before amortization, financial expenses, income taxes, other items and discontinued operations(2) (3)||(10,819)||(14,436)||(20,594)|
|Impairment of intangible assets||(1,458)||-||-|
|Goodwill impairment charge||(492)||(2,305)||(3,600)|
|Loss from continuing operations||(14,489)||(20,363)||(27,802)|
|Loss from discontinued operations(4)||(1,347)||(3,856)||(4,073)|
|Loss per Class A share (basic and diluted)|
Weighted average number of outstanding Class A shares, basic
and diluted (in thousands)
|Balance Sheet Data as at June 30||2011||2010||2009|
|Total interest-bearing debt(5)||624||1,446||4,043|
|Non-current liabilities held for sale(6)||1,535||1,753||1,924|
|Non-current liabilities related to discontinued operations(7)||-||-||200|
|Cash, cash equivalents, short-term investments and deposit in trust||1,830||2,873||4,711|
|(1)||The consolidated financial statements include the accounts of the Company and its subsidiaries, all wholly-owned as at June 30, 2011.|
Including stock-based compensation of $488,469, $3,413,576 and
$10,556,660 respectively for fiscal 2011, 2010 and 2009, which has no
impact on the cash balance.
|(3)||Including a loss on slow-turnover inventories of $2,520,411, which also has no impact on the cash balance.|
|(4)||Related to BLI's and Magnum's operations for fiscal 2010 and 2009, but solely to BLI's business for fiscal 2011.|
|(5)||Including long-term debt and its current portion as well as bank loans, excluding the data related to BLI.|
|(6)||Related to BLI.|
|(7)||Related to Magnum.|
In this press release, unless otherwise indicated or required by the
context, "Noveko International", "the Company", "we", "us", "our", "our
Company", "the Group" and "our Group" designate, as the case may be,
Noveko International Inc. or Noveko International Inc. and its
subsidiaries, and "Noveko" designates Noveko Inc., a subsidiary of the
Company. The Company's other subsidiaries are designated as follows:
"ECM" for S.A.S. E.C.M., "Epurair" for Epurair Inc., "Magnum" for
Magnum Pharmaceutics Inc., "Noveko Algérie" for SARL Noveko Algérie,
"Noveko Beijing" for Noveko (Beijing) Hi-Tech Development Limited,
"Noveko Taiwan" for Noveko Taiwan Co., Ltd., "Noveko Trading" for Noveko
Trading 2008 LLC, "Purer Life" for Purer Life Technology Co., Ltd. and
"BLI" for Bolduc Leroux Inc. Also, the fiscal year and fourth quarter
ended June 30, 2011, and the corresponding periods ended June 30, 2010,
are sometimes designated by the terms "fiscal 2011" and "fourth quarter
of 2011" as well as "fiscal 2010" and "fourth quarter of 2010", whereas
the fiscal year ending June 30, 2012 and those ended June 30 of prior years are sometimes designated by the terms "fiscal
2012", "fiscal 2011" and so on.
|Analysis of Operating Results|
Fiscal 2011 Compared with Fiscal 2010
Our segmented information is reported based on the following business segments: medical equipment ("medical equipment"), sanitizers ("sanitizers"), antimicrobial surgical masks and respirators ("masks"), filtration products ("filtration") and other activities consisting primarily of the activities of the parent company, Noveko International, and of Noveko Trading ("other"). Furthermore, the results of operations of BLI have been withdrawn from continuing operations to be treated as discontinued operations in the Company's financial statements. The assets and liabilities related to BLI have been reclassified as assets and liabilities held for sale. As Magnum proceeded with a voluntary assignment of its assets effective June 2, 2010, its results of operations are also treated as discontinued operations in the Company's financial statements for the periods ended prior to that date. As for the assets and liabilities related to Magnum, they no longer appear in the Company's financial statements subsequent to the voluntary assignment of its assets.
|Consolidated and Segmented Revenues from Continuing Operations|
|Fiscal Years Ended June 30,|
Revenues for fiscal 2011, although they included significant increases in the filtration and medical equipment segments, sustained a decline of approximately $1.0 million (5%) at the consolidated level from fiscal 2010, primarily reflecting:
- decreases in sales of masks and sanitizers of about $1.4 million (98%) and $1.8 million (72%) respectively from 2010, which benefited from the impact of the prevailing pandemic context. On the other hand, recently, there have been signs of a recovery of our commercialization activities in these segments. New orders attest to renewed interest in our products. We can also count on the set-up of marketing partnerships to stimulate our sales. However, it is hard to predict how long it will take for new marketing agreements to materialize and for our sales to pick up significantly in these segments;
- sales of medical equipment grew by $1.8 million (21%) during the year, due mainly to ECM's strong sales growth of $1.6 million (28%). The increase would have been greater in ECM's case - specifically a 37% increase revenues in Euros - were it not for the devaluation of the Euro against the Canadian dollar, which represented a negative impact of $0.5 million on our revenues. ECM's sales growth reflects its new-generation ultrasound scanners' advances in both human medicine and veterinary medicine. This was the first year that ECM's sales of new-generation ultrasound scanners exceeded those of its Agroscan™ ultrasound scanners, notably reflecting the major contracts concluded with China for the distribution of the Imagyne™ line, as well as the orders obtained from several key players in the North American veterinary medicine field for the distribution of the Exago™ ultrasound scanner; and
- revenues of filtration products also posted a $0.6 million (24%) growth, reflecting the sales increases in the institutional and commercial markets, for which the recognition of revenues generally extends over the term of the rental agreements, as well as the advances in the swine market, primarily the sales to the Villa Vista farms.
The operating profit margin for fiscal 2011 stood at 39.5%, up from 37.7% for fiscal 2010. This slight improvement reflects the relatively greater proportion of the medical equipment and filtration segments in fiscal 2011 consolidated revenues than the previous year, these segments posting higher margins than the masks and sanitizers segments.
Selling and administrative expenses decreased by $2.6 million (17%) to $12.8 million. This decline in part reflects the cost control measures taken in fiscal 2011, which notably involved the restructuring of certain teams.
The loss on slow-turnover inventories amounted to $2.5 million and represented an allowance related to the weak turnover of a portion of the accumulated inventories related to the masks and sanitizers segments further to the rapid end to the A (H1N1) influenza pandemic, and not to their obsolescence. In fact, tests conducted on our products allowed us to extend the expiration dates of most of the inventories related to the masks and sanitizers segments. This loss consists of a non-recurring item recognized in the fourth quarter of 2011.
Stock-based compensation charge for the year, which had no impact on the Company's cash balance, decreased by $2.9 million to $0.5 million. This reduction is explained by the fewer options granted during the year, a lower exercise price for the more recently issued options and the gradual recognition of the compensation charge.
Research and development expenses decreased by $0.7 million to $1.1 million due mainly to a reduction in development costs in the filtration and portable ultrasound scanners segments and a tightening up of development costs associated with the masks segment.
Earnings (Loss) before Amortization, Financial Expenses, Income Taxes,
|Other Items and Discontinued Operations|
|Fiscal Years Ended June 30,|
In light mainly of the aforementioned factors, the loss before amortization, financial expenses, income taxes, other items and discontinued operations was reduced significantly. It amounted to $10.8 million for fiscal 2011, a decrease of $3.6 million (25%) from the previous year, despite a slight 5% decline in revenues during the year and a $2.5 million loss on slow-turnover inventories, as mentioned above. Were it not for this loss on inventories consisting of a non-recurring item, the loss would have been lowered by a total of $6.1 million (42.5%). This distinct improvement is due primarily to the following factors:
- a major reduction in the stock-based compensation charge of the parent company Noveko International (in the "other" segment), for the previously indicated reasons;
- increases in Noveko Algérie's and ECM's profitability by way of which the medical equipment segment posted overall earnings before amortization, financial expenses and income taxes of $1.5 million for fiscal 2011, a distinct improvement of $1.2 million over the previous year;
- the loss attributable to the sanitizers segment remained relatively stable, reflecting the positive effects of the cost-tightening measures, offsetting the aforementioned allowance for loss on inventories allocated thereto in the amount of $0.8 million;
- the masks segment increased its loss by $0.4 million, primarily reflecting the allowance for loss on inventories allocated thereto in the amount of $1.5 million, thereby offsetting the positive effects of a reduction in development expenses and the stock-based compensation charge; and
- finally, the filtration segment increased its loss by $0.4 million during fiscal 2011 due to higher marketing expenses and the allowance for inventory obsolescence related to the frames of our previous filters model targeted to the swine industry.
Amortization expenses remained stable at $2.4 million for fiscal 2011, reflecting a decrease in the amortization attributable to intangible assets, offset by an increase related to amortization of the costs associated with the development of the Exago™ ultrasound scanner since its launch in the veterinary market, combined with an increase in amortization of fixed assets.
Financial expenses less investment revenues represented revenues of $0.4 million for fiscal 2011, compared with expenses of $1.6 million for the previous year. This change is due primarily to the recognition of exchange gains of $0.5 million for fiscal 2011, whereas exchange losses of $1.7 million had been recognized for the previous year. To a lesser extent, the absence of interest expense on convertible debentures for fiscal 2011 also accounted for this change and offset the decline in investment revenues for the year.
The impairment of intangible assets amounted to $1.5 million for fiscal 2011, which impairment is without impact on the Company's cash balance and consists of a non-recurring item for the year. It represents the writeoff of the contract of a commercial agent whose operations have been discontinued and a trademark that is no longer used.
The goodwill impairment charge amounted to $0.5 million for fiscal 2011, which impairment is without impact on the Company's cash balance and can be explained as follows. At the time of the step-one analysis as at June 30, 2011 (preliminary assessment), it was determined that the net book value of the business unit related to the sanitizers segment exceeded its estimated fair value. A comprehensive step-two analysis (comprehensive assessment) was therefore required. Based on the preliminary assessment, the estimated fair value of the sanitizers segment amounted to $2,329,357 as at June 30, 2011 and a goodwill impairment charge of $467,300 was hence recognized as at June 30, 2011. This loss adds to the increase in the impairment in the amount of $24,902 recognized at the beginning of fiscal 2011, subsequent to the final calculation of the goodwill impairment charge for the same segment, completing the preliminary assessment initiated during fiscal 2010. These losses reflect the market conditions affecting this segment, primarily the slowdown in the commercialization of sanitizers since the rapid end of the A (H1N1) influenza pandemic during fiscal 2010. With the assistance of an independent valuator, the Company is currently carrying out the comprehensive assessment, including a detailed calculation of the estimated fair values of recorded and unrecorded intangible assets. The Company expects to complete the final calculation of the goodwill impairment charge during fiscal 2012 and the resulting adjustments, if any, would result in a non-cash adjustment to the consolidated statement of operations. The reader is reminded that for fiscal 2010, a goodwill impairment charge of $2.3 million also primarily related to the sanitizers segment had been recognized.
|Net Earnings (Loss) from Continuing Operations|
|Fiscal Years Ended June 30,|
In light mainly of the aforementioned factors, including non-recurring items such as the loss on slow-turnover inventories of $2.5 million and the impairment of intangible assets of $1.5 million, as well as the goodwill impairment charge attributable to the sanitizers segment for an amount of $0.5 million, the net loss from continuing operations totalled $14.5 million for fiscal 2011, a major reduction of $5.9 million (29%).
A $1.3 million loss from discontinued operations (BLI) was recognized, which included a loss for eventual disposal of $1.1 million (the reader is referred in this regard to Description of the Company - Operational Overview - Eventual Sale of BLI), compared with a $3.9 million loss for the previous year. The reader is reminded that the discontinued operations include both BLI's and Magnum's accounts for fiscal 2010, but solely BLI's accounts for fiscal 2011. Consequently, the current fiscal year's net loss amounted to $15.8 million, compared with $24.2 million for the previous year, a major reduction of $8.4 million (35%).
Considering a net change in unrealized gains on translation of the financial statements of self-sustaining foreign operations of $0.3 million for fiscal 2011, compared with a net change in unrealized losses of $1.1 million for the previous year, a net loss of $15.6 million represented comprehensive loss for fiscal 2011, compared with $25.3 million a year earlier.
Principal Quarterly Financial Information
|(in thousands of $, except per-share amounts) (unaudited)|
|Loss from continuing operations||(2,838)||(2,828)||(2,643)||(6,179)|
|Loss per Class A share from continuing operations (basic and diluted)||$||(0.04)||$||(0.03)||$||(0.03)||$||(0.07)|
|Loss from continuing operations||(3,503)||(4,798)||(4,678)||(7,737)|
|Loss per Class A share from continuing operations (basic and diluted)||$||(0.05)||$||(0.06)||$||(0.07)||$||(0.10)|
|Loss from continuing operations||(6,057)||(6,526)||(5,216)||(10,003)|
|Loss per Class A share from continuing operations (basic and diluted)||$||(0.09)||$||(0.10)||$||(0.08)||$||(0.15)|
Fourth Quarter of 2011 Compared with the Fourth Quarter of 2010
|Consolidated and Segmented Revenues from Continuing Operations|
|Quarters Ended June 30,|
Consolidated revenues for the fourth quarter of 2011 grew by $0.2 million (7%) to $3.1 million. This growth primarily reflects:
- a $127,856 (6%) increase in sales of medical equipment, whereas sales of portable ultrasound scanners posted a significant growth of $0.7 million (48%), driven notably by the resumed deliveries of our Imagyne™ ultrasound scanners to China, which will enable us to meet our sales objectives with our Chinese distributor. ECM's commercialization efforts contributed to offset the decline in Noveko Algérie's sales. This decrease is partly explained by delays during the quarter of deliveries of the raw material used in the manufacture of its medical equipment. Furthermore, the amendment of the Algerian regulatory legislation with respect to the awarding of contracts by public bodies under the new Algerian Code on Government Procurement also caused delays in obtaining major orders and adversely affected Noveko Algérie's fourth-quarter sales. Pursuant to this regulatory legislation, contracts and calls for tenders by public bodies cannot be awarded to entities entirely held by foreign interests. As Noveko International assigned 30% of the shares held in Noveko Algérie to an officer of the subsidiary effective July 1, 2011, the latter's status is now in compliance with this new requirement;
- a $143,124 (21%) increase in filtration product revenues mainly reflecting the breakthroughs in the real estate market;
- relatively stable sales of sanitizers in relation to the corresponding quarter of the previous year, in the amount of $61,265 stemming mainly from hospital settings; and
- a $49,266 decrease in sales in the masks segment, for the aforementioned reasons.
The operating profit margin stood at 35.5% for the fourth quarter of 2011, compared with 23.5% for the fourth quarter of 2010. This improvement is due primarily to the relatively greater proportion of the medical equipment and filtration segments in consolidated revenues than the corresponding period of the previous year.
Selling and administrative expenses decreased by $1 million (24%) to $3.1 million for the fourth quarter of 2011. This reduction reflects primarily the cost-control measures.
The loss on slow-turnover inventories amounted to $2.5 million and represented an allowance related to the weak turnover of a portion of the accumulated inventories related to the masks and sanitizers segments, further to the rapid end to the A (H1N1) influenza epidemic, as previously explained. This allowance consists of a non-recurring item recognized in the fourth quarter of 2011.
Stock-based compensation charge, which has no impact on the Company's cash balance, declined by $0.4 million for the fourth quarter of 2011, for the aforementioned reasons.
Research and development expenses for the fourth quarter of 2011 decreased by $0.4 million to $0.2 million due mainly to a tightening up of development costs associated with the masks segment.
Earnings (Loss) before Amortization, Financial Expenses, Income
|Taxes, Other Items and Discontinued Operations|
|Quarters Ended June 30,|
In light mainly of the aforementioned factors, notably a $2.5 million loss on slow-turnover inventories, the loss before amortization, financial expenses, income taxes, other items and discontinued operations totalled $4.5 million for the fourth quarter of 2011, a slight increase of $0.3 million (6%) over the corresponding quarter of the previous year. Were it not for the loss on inventories consisting of a non-recurring item recognized in the fourth quarter of 2011, the loss would have been lowered by $2.3 million (53.7%). Segmented changes reflect the following factors:
- a $0.4 million reduction in the "other" segment's loss due to a major decrease in the stock-based compensation charge of the parent company Noveko International;
- improvements in the medical equipment segment which overall posted earnings before amortization, financial expenses and income taxes of $0.2 million for the fourth quarter of 2011, an increase of $0.4 million over the fourth quarter of 2010;
- a $0.1 million reduction in the filtration segment's loss reflecting the advances achieved in the segment;
- the loss attributable to the sanitizers segment totalled $1.2 million, an increase of $0.4 million reflecting the aforementioned allowance for loss on inventories in the amount of $0.8 million, which offset the positive effects of the cost-turnaround measures in the segment;
- the masks segment increased its loss by $0.7 million, reflecting the allowance for loss on inventories allocated thereto in the amount of $1.5 million, which offset the positive effects of the decrease in development expenses.
The impairment of intangible assets consisting of a non-recurring item recognized in the fourth quarter of 2011 represented primarily the writeoff of a commercial agent's contract and amounted to $1.1 million. This loss has no impact on the Company's cash balance.
The goodwill impairment charge recognized for the fourth quarter of 2011 and attributable to the sanitizers segment amounted to $0.5 million, compared with $2.4 million for the fourth quarter of 2010. This loss has no impact on the Company's cash balance.
|Net Earnings (Loss) from Continuing Operations|
|Quarters Ended June 30,|
The net loss from continuing operations amounted to $6.2 million for the fourth quarter of 2011, compared with $7.3 million for the corresponding quarter of the previous year, in light mainly of the aforementioned factors, including non-recurring items such as the loss on slow-turnover inventories of $2.5 million and the impairment of intangible assets of $1.1 million recognized in the fourth quarter of 2011, as well as the goodwill impairment charge attributable to the sanitizers segment for an amount of $0.5 million also recognized in the fourth quarter of 2011, compared with an amount of $2.4 million for the fourth quarter of 2010.
A loss of $1.1 million from discontinued operations consisting primarily of an amount for loss on eventual disposal, as previously described, was recognized in fourth-quarter results, compared with a loss of $2.5 million for the corresponding quarter of the previous year. Consequently, the fourth-quarter net loss amounted to $7.2 million, compared with $9.9 million for the same quarter a year earlier.
Considering a net change in unrealized gains on translation of the financial statements of self-sustaining foreign operations of $10,457 for the quarter, compared with a net change in unrealized gains of $0.2 million for the corresponding quarter of the previous year, a net loss of $7.3 million represented comprehensive loss for the fourth quarter, compared with $9.6 million for the corresponding quarter of the previous year.
|Balance Sheet Analysis|
As at June 30, 2011, total assets amounted to $35.7 million, down by $7.0 million from June 30, 2010. Working capital stood at $10.0 million for a current ratio of 2.5:1, compared with $12.8 million and a 3.1:1 ratio as at June 30, 2010. Shareholders' equity totalled $26.3 million as at June 30, 2011 compared with $33.1 million as at June 30, 2010. Total interest-bearing debt (bank loans, current portion of long-term debt and long-term debt) amounted to $0.6 million as at June 30, 2011, down by $0.8 million from June 30, 2010.
|Fiscal Highlights and Subsequent Events|
- Sale of the Terrebonne building effective March 31, 2011 for a consideration of $1.3 million.
- Eventual Sale of BLI: We have received a two-fold purchase offer in recent days, one relating to certain assets of BLI and the other relating to BLI's shares, which we consider serious and are currently reviewing. While no decision has been made in this regard and it could be accepted, refused or negotiated, we deemed it appropriate under the circumstances, in light of the divesting process initiated over two years ago and the filing of this offer, to recognize a loss for eventual disposal of $1.1 million under results from discontinued operations in our fiscal 2011 financial statements.
- Increase in Epurair's productivity and production capacity further to the relocation of its design, development and production activities to larger premises in Boucherville, Québec, and to the acquisition of new cutting-edge equipment. The McMasterville Quebec building that formerly housed these operations was divested for a consideration of $650,000.
- Financing: During fiscal 2011, we completed private placements for aggregate gross proceeds of $8.4 million, During the first quarter of 2012, we announced an interim financing in the amount of $670,000 obtained mainly from Company directors, officers and insiders. Closed on July 25, 011, this interim financing by way of convertible debentures bears interest at an annual rate of 12%. The debentures will be redeemed using the net proceeds from the above-described financing. On September 28, 2011, we proceeded with the closing of a $6 million financing consisting of a credit facility of up to $4 million and convertible debentures in the amount of $2 million, the Toronto-based investment firm Third Eye Capital Corporation acting as agent. The net proceeds from this financing will be used to pursue the Company's global growth objectives as well as for working capital purposes. The credit facility will mature 24 months from the Closing (the "Maturity Date"), subject to the Company's right to terminate it after the first anniversary of the Closing. The credit facility and the debentures bear interest at an annual rate, compounded and paid monthly, equal to a minimum of 12%, adjusted upward for any changes in a selected chartered bank rate. Maintenance fees at a rate of 1% per annum will also be due on the portion of the credit facility not disbursed. Debenture holders will have the right, at their sole discretion and at any time during the term, to convert, in whole or in part, the principal of the debentures into Class A shares of the Company, at a conversion price of $0.60 per share. All advances under the credit facility, as well as the remaining non-converted portion of the debenture, will be reimbursed by the Company on the Maturity Date. The remaining portion of the debentures, if any, will then be redeemable at 1.5 times their par value. To secure its obligations under the credit facility and the convertible debentures, the Company has granted hypothecs on all its assets, including the shares held in its subsidiaries. In addition, the Company's Canadian subsidiaries have each granted hypothecs on all their respective movable and immovable properties.
Air Filters for the Transportation Industry
- First agreement for a train line in North America: Kinkisharyo International, L.L.C. leases Noveko™ filters to equip the entire fleet of the Hudson-Bergen Light Rail Line in New Jersey.
- Ongoing tests in rail transportation and agreements with the Société de transport de Montréal (the "STM") covering the supply and cleaning of filters for the Anjou and St-Denis transportation centres.
- Aeronautics Segment: in June 2011, we were granted a Supplemental Type Certificate (or "STC") by Transport Canada paving the way for the commercialization of filters incorporating our filtration technologies throughout the Airbus A330 fleet worldwide. We intend to have the entire Airbus fleet certified and steps to that end have already been taken. We won our first contract with Air Transat, Canada's leading holiday airline, to equip its entire Airbus A330 fleet with our filters.
Air Filters for Buildings - Institutional, Commercial and Residential Markets
- Noveko keeps up its momentum in the Greater Montreal Area and the portfolio of Montreal area buildings that have opted for our air filtration solutions continues to grow. We recently implemented further efforts to expand our product offering and to provide integrated solutions meeting our clients' various air filtration needs. Consequently, we are now equipping our existing clients' buildings with our new line of high-efficiency solutions and are thereby gaining access to a potentially larger client base. We are also in active talks with other parties in the real estate market, especially major property owners and managers who would give us access to a broader buildings pool, all in line with our strategy of teaming up with strategic partners.
- Winner of the PINNACLE INNOVATION Award: On September 27, 2011, Canada's Building Owners and Managers Association (BOMA) granted Noveko Filtration the prestigious PINNACLE INNOVATION Award in connection with the BOMA Canada 2011 National Contest whereas it had already won it at the local level from BOMA Québec in May 2011.
- New Innovative High-Efficiency Filters Meeting the Needs of an Expanded Client Base: The energy savings and the reduction in filtration waste arising from the use of our recyclable filtration solutions make them particularly important advantages for building owners and managers seeking to obtain the certifications recognizing responsible environmental management and the design and construction of sustainable buildings, such as the LEED, ISO 14001 and BOMA BESt (Building Environmental Standards) certifications. To that end, Noveko Filtration recently expanded its filtration solutions offering by launching new innovative high-efficiency filters to accelerate our penetration of the air filtration market. This new line of bag filters meets the highest filtration effectiveness standards, yielding performances ranging from MERV 10 to MERV 16 based on the ASHRAE 52.2 standard. By combining these new high-efficiency filters with our MERV 8 filters already available (also called "pre-filters"), we now offer integrated solutions that not only meet users' various air filtration needs, but are also more effective, longer lasting and recyclable. The incorporation of antimicrobial agents into the filter fibres also protects them against deterioration due to the action of microorganisms. As we now feature a more complete portfolio of superior performance filtration solutions, we are confident we can meet the needs of an expanded client base, in line with our goal of accelerating the commercialization of our solutions in the real estate segment.
- First sale to the U.S. real estate market in March 2011: Noveko™ filters are installed in a luxury condominium tower, located in New York City. In April 2011, we strengthened our position in the U.S. market by entering into an agreement with HTS New York.
- In Europe, the Hilton Luxembourg Hotel is now equipped with our solutions. We have also closed sales of filters for office buildings in Switzerland.
- In Asia, a first order of filtering membranes has been won as part of an agreement entered into with the Taiwanese company JJMR-Clean-Air Solution, specializing in the production of filters for manufacturers of semi-conductors and LCD screens.
- Noveko™ filters are installed for pre-sale testing purposes in some important buildings worldwide, in New York, Dubai, Taipei, Geneva and Paris.
Air Filters for Farm Buildings
- The delivery of the filters designed for the Villa Vista Farms' 14 buildings as part of a contract worth close to a quarter million dollars has been completed. and we are currently in talks with several other hog farmers.
Antimicrobial Masks and Respirators Markets
- We are continuing talks with various parties - membrane producers, mask assemblers and distributors alike - and thereby hope to further stimulate our market development and the commercialization of our technologies in this segment during fiscal 2012. Despite the delays encountered in implementing our business plan in this regard, the interest shown by various parties attests to the gains in brand awareness achieved by our products, which are due primarily to the differentiation associated with our antimicrobial technologies. The order obtained this month from Dufort & Lavigne Ltd. ("Dufort & Lavigne"), a Quebec business specializing in the distribution of medical supplies and equipment, attests to this renewed interest in our products. As distributor, Dufort & Lavigne will ensure the Quebec-wide sale and promotion of Noveko™ antimicrobial masks to medical clinics and hospital centres. However, it is difficult to foresee how long it will take for new commercialization agreements to materialize and for our sales to pick up substantially in this segment. This recovery could also depend on obtaining the required approvals to bring them to market in the various targeted territories. We therefore do not anticipate any significant revenues in this regard within the near term.
- Certification Processes: During the fourth quarter of 2011, we earned N95 certification from the US National Institute for Occupational Safety and Health ("NIOSH") for our Noveko™ RD5-V respirator, a model without any antimicrobial agents. This certification confirms that our respirators meet the NIOSH's particle filtration criteria, and also that their design and manufacture meet its quality assurance requirements. A number of buyers still seek NIOSH recognition in their purchasing decisions. We therefore believe this approval will facilitate the commercialization of all our antimicrobial masks and respirators, even though it was granted for a respirator model without antimicrobial agents. This certification adds to the FFP2 classification obtained earlier in fiscal 2011 for our Noveko™ RD2 antimicrobial respirator, allowing its marketing in the European Union. The U.S. marketing of masks and respirators incorporating Noveko's antimicrobial technology also remains subject to our obtaining FDA certification. In this regard, the limited working capital at our disposal during fiscal 2011, which was further allocated to the development of our activities in the filtration segment, slowed down the continuation of the tests and obtaining of the required data to draw up a file to support a future 510(k) submission with the FDA. We now aim to file such an application by the end of fiscal 2012.
- We continue to prioritize the most promising hospital and institutional markets for our hand sanitizers. We recently launched a new compact format concept targeted to the private brand niche, notably in the foodservices, hospitality and aviation fields. Although we are witnessing a certain resumption of our marketing activities, particularly in the healthcare and institutional settings segment, both directly and through our distribution partners, that could take longer than initially expected. On the other hand, the order obtained this month from Dufort & Lavigne attests to renewed interest in our products. As distributor, Dufort & Lavigne will ensure the Quebec-wide sale and promotion of Microban® hand sanitizers to medical and dental clinics.
- Pursuant to a three-year agreement entered into during the first quarter of 2011 with Ningbo Xingaoyi Magnetism Co., Ltd ("NXM"), NXM has committed to purchase ultrasound scanners for use in human medicine in China, notably the Imagyne™, all for a value of 5.7 million Euros, of which 900,000 Euros are expected the first year.
- ECM continues to achieve breakthroughs in the equine market with its Exago™ ultrasound scanner, which has enjoyed considerable success since its launch in January 2010. At the beginning of the year, ECM was awarded contracts representing more than $4 million over a three-year period by key veterinary medicine players in North America. The Exago™ is now also intended for use in human medicine. In fact, during the second quarter of 2011, ECM was authorized to affix CE Marking on the Exago™. ECM plans to bring to market the Exagyne™ very shortly.
- Attesting to its market's potential, following a selection by way of a call for tenders, the Algerian National Office of Equipment and Accessories for Handicapped People recently awarded Noveko Algérie new orders for the supply of medical devices worth approximately $1.25 million. Deliveries of this equipment are scheduled to extend until December 31, 2011.
Noveko International Inc. offers innovative solutions in the environmental and medical fields worldwide. Through its subsidiaries, the Company specializes primarily in the following business segments: the development, manufacturing and marketing of derivative products from its patented antimicrobial filtration technologies, mainly air filters, surgical masks and respirators, as well as other products with antibacterial properties such as hand sanitizers - and the development, manufacturing and marketing of medical equipment, including portable real-time ultrasound scanners for use in human and veterinary medicine.
Certain statements set forth in this press release constitute forward-looking statements. In some cases, these statements are identified by the use of terms such as "may", "could", "might", "intend", "should", "expect", "project", "plan", "believe", "estimate" or other comparable variants. These statements are based on the information available at the time they are written, on assumptions made by management and on the expectations of management, acting in good faith, regarding future events, including those relating to economic conditions, fluctuations in exchange rates and operating expenses, and the absence of unusual events entailing supplementary expenditures. Although management considers these assumptions and expectations reasonable based on the information available at the time they are written, they could prove inaccurate. Forward-looking statements are also subject, by their very nature, to known and unknown risks and uncertainties such as those related to the industry, acquisitions, labor relations, credit, key officers, supply and product liability. The actual results of Noveko International Inc. could differ materially from those indicated or underlying these forward-looking statements. The reader is therefore recommended not to unduly rely on these forward-looking statements. Forward-looking statements do not reflect the potential impact of special items, any business combination or any other transaction that may be announced or occur subsequent to the date hereof. Unless otherwise required under securities laws, the Company does not intend and undertakes no obligation to update or revise the forward-looking statements.
|The Management's Report, consolidated financial statements and accompanying notes for the fiscal year ended June 30, 2011 as well as the Annual Information Form will be filed on SEDAR (www.sedar.com) and available on the Company's website (www.noveko.com).|
Consolidated balance sheets
June 30, 2011 and 2010
|Cash and cash equivalents||$||683,562||$||639,543|
|Deposit in trust||-||87,787|
|Current assets held for sale||973,595||1,231,858|
|Future income taxes||198,246||19,424|
|Non-current assets held for sale||2,871,840||5,896,657|
|Liabilities and shareholders' equity|
|Accounts payable and accrued liabilities||4,514,015||3,801,984|
|Current portion of long-term debt||350,345||475,432|
|Current liabilities held for sale||1,839,176||1,780,589|
|Future income taxes||748,798||830,291|
|Non-current liabilities held for sale||1,535,371||1,753,146|
|Accumulated other comprehensive loss||(1,032,213)||(1,285,522)|
NOVEKO INTERNATIONAL INC.
Consolidated statements of operations
Years ended June 30, 2011 and 2010
|Cost of sales||8,649,310||9,407,387|
|Administrative and selling||12,819,136||15,444,132|
|Provision for slow-moving inventories||2,520,411||-|
|Research and development||1,143,448||1,853,396|
|Research and development tax credits||(505,565)||(571,412)|
Loss before amortization, financial expenses, income
taxes, other items and discontinued operations
|Financial expenses less investment revenues||(371,436)||1,633,401|
|Impairment of intangible assets||1,458,113||-|
|Goodwill impairment charge||492,202||2,305,300|
|Loss before income taxes||(14,778,644)||(20,793,400)|
|Net loss from continuing operations||(14,488,712)||(20,362,591)|
|Net loss from discontinued operations (note 5)||(1,347,017)||(3,855,960)|
|Basic and diluted loss per share:|
|From continuing operations||$||(0.17)||$||(0.28)|
|From discontinued operations||$||(0.02)||$||(0.05)|
Weighted average number of outstanding shares, basic
NOVEKO INTERNATIONAL INC.
Consolidated statements of comprehensive loss
Years ended June 30, 2011 and 2010
|Other comprehensive loss, net of income taxes:|
Change in unrealized losses on translation of financial
statements of self-sustaining foreign operations
NOVEKO INTERNATIONAL INC.
Consolidated statements of deficit and contributed surplus
Years ended June 30, 2011 and 2010
|Deficit, beginning of year||$||(87,494,810)||$||(61,205,942)|
|Share issuance fees||(109,626)||(2,070,317)|
|Deficit, end of year||$||(103,440,165)||$||(87,494,810)|
|Contributed surplus, beginning of year||$||22,874,810||$||18,718,376|
|Fair value of stock options granted||488,359||3,514,375|
|Fair value of options granted to the agents||18,130||732,000|
|Stock options exercised||-||(89,941)|
|Contributed surplus, end of year||$||23,381,299||$||22,874,810|
NOVEKO INTERNATIONAL INC.
Consolidated statements of cash flows
Years ended June 30, 2011 and 2010
|Cash flows from operating activities:|
|Loss from discontinued operations||1,347,017||3,855,960|
|Future income taxes||(320,066)||(483,638)|
|Accreted interest on secured convertible debentures||-||59,644|
|Professional fees paid by warrants||-||159,000|
|Loss on disposal of fixed assets||198,503||7,438|
|Goodwill impairment charges||492,202||2,305,300|
|Loss (gain) on fair value of short-term investments||(148)||11,512|
|Impairment of intangible assets||1,458,113||-|
|Foreign exchange loss (gain)||(767)||935|
|Adjustments related to discontinued operations||158,444||563,956|
|Net change in non-cash working capital||1,329,093||(2,148,838)|
|Cash flows from financing activities:|
|Net changes in bank loans||(179,439)||36,661|
|Increase in long-term debt||290,000||-|
|Repayment of long-term debt||(984,602)||(598,252)|
|Proceeds from Class A shares and warrants issued||8,449,638||15,874,066|
|Class A shares issue expenses||(91,496)||(1,338,317)|
|Cash flows related to discontinued operations||(144,518)||(334,672)|
|Repayment of secured convertible debentures||-||(100,000)|
|Interest paid on secured convertible debentures||-||(21,142)|
|Cash flows from investing activities:|
|Acquisition of short-term investments||(1,590,000)||(15,090,000)|
|Proceeds from disposal of short-term investments||2,590,000||16,634,425|
|Acquisition of fixed assets||(1,304,912)||(279,721)|
|Proceeds from disposal of fixed assets||24,259||26,214|
|Acquisition of intangible assets||(214,436)||(295,713)|
|Deferred development costs, net of related research tax credits received||(336,117)||(353,766)|
|Cash flows related to discontinued operations||1,848,676||(76,700)|
|Acquisition of other assets||-||(755)|
|Deposit in trust||-||(44,540)|
|Foreign exchange gain on cash in foreign currencies||(9,409)||(193,871)|
|Increase (decrease) in cash and cash equivalents||44,019||(297,776)|
|Cash and cash equivalents, beginning of year||639,543||937,319|
|Cash and cash equivalents, end of year||$||683,562||$||639,543|
Cash flows related to continuing operations include interest paid of $187,229 ($76,990 in 2010) and income taxes paid of $86,857 ($230,473 recovered in 2010).
For further information:
Chantal Vennat, Director,
Investor Relations and Corporate Communications
Noveko International Inc.
Tel: (514) 875-0606