NOVEKO INTERNATIONAL INC. Announces Results for the Third Quarter Ended March 31, 2011

MONTREAL, May 11 /CNW Telbec/ - Noveko International Inc. (TSX: EKO) (the "Company") today discloses the results for its third quarter ended March 31, 2011.

"Our third quarter was highlighted by several advances. The signing of our first filter supply agreement for a train line in North America and the achievement of major breakthroughs in the building markets, notably in New York City, Europe and Asia, validate our vision of these markets and our business model. We are also pleased that a transportation body of the size of the STM has recognized the value of our filtration solutions as part of its sustainable development strategy. The many other processes underway in the rail transportation and real estate fields will also yield benefits in the near term and enable us to consolidate our positioning in these markets," indicated Mr. André Leroux, Chairman of the Board and Chief Executive Officer of the Company.

"We are delighted with the growth and positive EBITDA posted by our medical equipment segment, even though we experienced a momentary delay in the delivery of our Imagyne(TM) ultrasound scanners in China. The recently taken corrective measures will allow us to remedy this situation and to meet our sales targets with our Chinese distributor. Furthermore, our cost-cutting efforts have paid off as our loss has been reduced by some $6 million since the beginning of the fiscal year. We plan to intensify our efforts to that end and remain confident we can count on our investors' support in order to achieve our growth and financing objectives. I also wish to point out that although the masks and sanitizers segments have not yielded the expected results, the initiatives taken to stimulate their commercialization in the most promising niches are continuing," concluded Mr. Leroux.

Financial Highlights

For the third quarter and first nine months of the current fiscal year, and in comparison with the corresponding periods of the previous year:

    <<
    - Consolidated revenues from continuing operations up by 17% to
      $3.4 million, and down by 8% to $11.2 million, respectively;

    - Loss before amortization, financial expenses, income taxes, other items
      and discontinued operations down by $1.7 million (45%) to $2.1 million,
      and down by $3.9 million (38%) to $6.3 million, respectively;

    - Loss from continuing operations down by $2.0 million (44%) to
      $2.6 million, and down by $4.7 million (36%) to $8.3 million,
      respectively;

    - Net loss down by $2.5 million (47%) to $2.7 million, and down by
      $5.8 million (40%) to $8.6 million, respectively;

    - Total indebtedness down by $1.0 million since June 30, 2010, to
      $0.5 million.


    Selected consolidated information
    -------------------------------------------------------------------------
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    Periods Ended
     March 31                   Three Months                 Nine Months
    (in thousands of
     $, except per-
     share amounts)
    (unaudited)             2011(1)         2010        2011(1)         2010
    -------------------------------------------------------------------------
    Revenues from
     continuing
     operations              3,415         2,927        11,187        12,215
    Gross margin             1,376         1,081         4,545         5,023
    Loss before
     amortization,
     financial
     expenses,
     income taxes,
     other items and
     discontinued
     operations(2)          (2,052)       (3,716)       (6,347)      (10,226)
    Loss from
     continuing
     operations             (2,643)       (4,678)       (8,310)      (12,979)
    Loss from
     discontinued
     operations(3)             (88)         (519)         (276)       (1,365)
    Net loss                (2,731)       (5,197)       (8,586)      (14,345)

    Loss per Class A
     share (basic
     and diluted)
      Continuing
       operations     $      (0.03) $      (0.06) $      (0.10) $      (0.18)
      Discontinued
       operations(3)  $      (0.00) $      (0.01) $      (0.00) $      (0.02)
      Net loss        $      (0.03) $      (0.07) $      (0.10) $      (0.20)

    Weighted average
     number of
     outstanding
     Class A shares,
     basic and
     diluted (in
     thousands)             85,940        75,916        82,077        72,678
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    Balance Sheet Data                  March 31                     June 30
                                            2011                        2010
    -------------------------------------------------------------------------
    Total assets                          42,301                      42,675
    Shareholders' equity                  33,049                      33,063
    Total interest-bearing debt(4)           506                       1,446
    Non-current liabilities for
     sale(5)                               1,589                       1,753
    Cash, cash equivalents,
     short-term investments and
     deposit in trust                      2,874                       2,873
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    1) The consolidated financial statements include the accounts of the
       Company and of its subsidiaries, all wholly-owned as at March 31,
       2011.
    2) Including stock-based compensation of $110,158, $599,139, $547,909 and
       $3,049,927 for the respective periods of fiscal 2011 and fiscal 2010,
       which has no impact on the cash balance.
    3) Related to BLI's and Magnum's operations for the third quarter of
       2010, but solely to BLI's operations for the third quarter of 2011.
    4) Including long-term debt and its current portion, as well as bank
       loans, excluding BLI.
    5) Related to BLI.


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    In this press release, unless otherwise indicated or required by the
    context, "Noveko International", "the Company", "we", "us", "our", "our
    Company", "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 second quarter and the six-month period ended December 31,
    2010 and the corresponding periods ended December 31, 2009 are sometimes
    respectively designated by the terms "second quarter of 2011" and "first
    six months of fiscal 2011", and "second quarter of 2010" and "first six
    months of fiscal 2010", while the fiscal year ending June 30, 2011 and
    those ended June 30 of prior years are sometimes designated by the terms
    "fiscal 2011", "fiscal 2010" and so on.


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    Analysis of Operating Results
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    >>

Third Quarter of 2011 Compared with the Third Quarter of 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
    (unaudited)
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                                 Three Months                Nine Months
                                Ended March 31              Ended March 31
    -------------------------------------------------------------------------
                              2011          2010          2011          2010
    -------------------------------------------------------------------------

    Medical
     equipment        $  2,503,431  $  1,951,539  $  8,436,684  $  6,744,101
    Sanitizers              68,758       174,972       657,578     2,484,763
    Masks                   12,097       255,452        26,773     1,339,910
    Filtration             830,545       545,487     2,066,275     1,646,079
    -------------------------------------------------------------------------
    Total             $  3,414,831  $  2,927,450  $ 11,187,310  $ 12,214,853
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    >>

Consolidated revenues for the third quarter of 2011 grew by $0.5 million or 17% to $3.4 million. This growth is due mainly to the $0.6 million or 28% increase in sales of medical equipment. Noveko Algérie recorded a substantial sales growth of $0.4 million or 77% for the quarter; and sales of portable ultrasound scanners posted an increase of $0.2 million or 13% stemming primarily from the veterinary medicine market. To this increase was also added a growth in filtration product revenues of $0.3 million or 52% over the third quarter of 2010, reflecting the advances achieved in the hog market, primarily the sales to the Villa Vista farms, plus the sales increase in the institutional and commercial markets where the recognition of revenues generally extends over the term of the leasing agreements. Sales of masks and sanitizers declined by $0.2 million or 95% and by $0.1 million or 61%, respectively, from the third quarter of 2010, which still benefited from the consequences of the pandemic context prevailing until the beginning of that period. Signs of a recovery of our commercialization activities have been seen in the sanitizers segment, as attested to by the recent orders from hospitals, although it could take longer than expected to materialize due notably to the significant inventories accumulated industry-wide. In the masks segment, we believe we can stimulate the marketing of our technologies thanks notably to the fact that we have obtained European certification for our antimicrobial respirators and to our ongoing talks with a number of parties. However, it is difficult to foresee how long it will take for new commercialization agreements to materialize and for our sales to pick up in this segment.

For the first nine months, revenues declined by $1.0 million or 8%, reflecting reductions in sales of masks and sanitizers of $1.3 million or 98% and of $1.8 million or 74%, respectively, stemming from the aforementioned factors. Sales of medical equipment increased by $1.7 million or 25%, due mainly to the growth of more than $1.2 million or 27% in ECM's sales during the period. In ECM's case, the increase would have been higher - at 48% in Euros - were it not for the depreciation of the Euro against the Canadian dollar, which represented a negative impact of $1.0 million on our revenues. The growth in ECM's sales reflects both the breakthroughs in the human medicine market and the ongoing advances in the veterinary medicine market. Revenues from filtration products also posted an increase of $0.4 million or 26% for the aforementioned reasons.

The operating profit margin for the third quarter of 2011 stood at 40.3%, up from 36.9% for the third quarter of 2010. This slight improvement is due primarily to the better margins posted in the filtration segment. For the first nine months, the operating profit margin stood at 40.6%, compared with 41.1% for the corresponding period of the previous year. Besides the aforementioned factors, this figure reflects the weighting of certain logistics services expenses in a context of lower sales in the masks and sanitizers segments, as well as an increase in the allowance for inventory obsolescence related to the frames of our former filters model targeted to the swine industry.

Selling and administration expenses for the third quarter of 2011 and the first nine months declined by $0.7 million or 18% and by $1.6 million or 14%, respectively, to $3.2 million and $9.7 million. This reduction partly reflects the cost control measures implemented.

Stock-based compensation charge for the third quarter of 2011 and the first nine months, which is without impact on the Company's cash balance, decreased by $0.5 million and $2.5 million, respectively, to $0.1 million and $0.5 million. These reductions can be explained by the lower number of options granted in the past quarters, the reduced exercise price for the options issued more recently and the gradual recognition of the stock-based compensation charge.

Research and development expenses for the third quarter of 2011 and the first nine months decreased by $0.2 million and $0.3 million, respectively, to $0.3 million and $1.0 million, due primarily to the tightening of development costs associated with the masks segment.

    <<
    Earnings (Loss) before Amortization, Financial Expenses, Income Taxes,
    Other Items and Discontinued Operations (unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                 Three Months                Nine Months
                                Ended March 31              Ended March 31
    -------------------------------------------------------------------------
                              2011          2010          2011          2010
    -------------------------------------------------------------------------

    Medical
     equipment        $    306,724  $    (64,911) $  1,270,313  $    438,086
    Sanitizers            (404,683)   (1,244,360)   (1,608,860)   (1,929,676)
    Masks                  (71,765)     (424,480)     (498,538)     (879,879)
    Filtration            (534,416)     (152,402)   (1,775,091)   (1,287,308)
    Other               (1,347,370)   (1,829,804)   (3,734,912)   (6,567,134)
    -------------------------------------------------------------------------
    Total             $ (2,051,510) $ (3,715,957) $ (6,347,088) $(10,225,911)
    -------------------------------------------------------------------------
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    >>

Considering mainly the aforementioned factors, the loss before amortization, financial expenses, income taxes, other items and discontinued operations was reduced significantly to $2.1 million for the third quarter of 2011, down by $1.7 million or 45% from the corresponding quarter of the previous year. For the first nine months, it amounted to $6.3 million, a decrease of $3.9 million or 38%, despite a 8% decline in revenues during the period. This major 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 mentioned reasons;
    - improvements in the profitability of Noveko Algérie and ECM as the
      overall medical equipment segment achieved earnings before
      amortization, financial expenses and income taxes of $0.3 million in
      the third quarter of 2011, an improvement of $0.4 million over the
      third quarter of 2010, and earnings of $1.3 million for the first nine
      months, an increase of $0.8 million over the corresponding period of
      the previous year;
    - a reduction in the loss incurred by the sanitizers segment of
      approximately $0.8 million for the third quarter of 2011 and
      $0.3 million for the first nine months, resulting primarily from the
      cost tightening measures;
    - a reduction in the loss attributable to the masks segment of close to
      $0.4 million for the third quarter, mainly reflecting the lower
      development expenses and stock-based compensation charge. For the first
      nine months, the segment's loss also declined by approximately
      $0.4 million;
    - conversely, the filtration segment increased its loss by $0.4 million
      and $0.5 million, respectively, for the third quarter and the first
      nine months of fiscal 2011, due to an increase in commercialization
      expenses and the allowance for inventory obsolescence.
    >>

Amortization expenses for the third quarter of 2011 remained stable at $0.7 million, whereas they increased by $0.4 million for the first nine months. This increase is primarily attributable to the amortization of the expenses related to the development of the Exago(TM) since its launch in the veterinary market and the increase in amortization expenses related to tangible and intangible assets, including our integrated management system, the implementation of which was completed during the third quarter of fiscal 2010.

Financial expenses less investment revenues represented revenues of $0.1 million and $0.2 million respectively for the third quarter and the first nine months of fiscal 2011, compared with expenses of $0.5 million and $1.3 million for the corresponding periods of the previous year. These changes are due primarily to the recognition of exchange gains of $0.1 million and $0.3 million for the third quarter and the first nine months of fiscal 2011, whereas exchange losses of $0.6 million and $1.4 million had been recognized in the same periods of the previous year. To a lesser extent, the reduction in interest on convertible debentures also explains these changes and offsets the decrease in investment revenues.

    <<
    Net Earnings (Loss) from Continuing Operations (unaudited)
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                                 Three Months                Nine Months
                                Ended March 31              Ended March 31
    -------------------------------------------------------------------------
                              2011          2010          2011          2010
    -------------------------------------------------------------------------

    Medical
     equipment        $     54,235  $   (430,474) $    494,788  $   (231,449)
    Sanitizers            (550,290)   (1,349,955)   (2,060,615)   (2,269,697)
    Masks                  (87,304)     (484,183)     (511,310)   (1,064,694)
    Filtration            (628,328)     (249,009)   (1,867,733)   (1,597,071)
    Other               (1,431,586)   (2,164,410)   (4,364,949)   (7,816,275)
    -------------------------------------------------------------------------
    Total             $ (2,643,273) $ (4,678,031) $ (8,309,819) $(12,979,186)
    -------------------------------------------------------------------------
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    >>

Considering mainly the aforementioned factors, the net loss from continuing operations for the third quarter of 2011 and the first nine months decreased significantly from the corresponding periods of the previous year, by $2.0 million or 44% and by $4.7 million or 36%, respectively, to $2.6 million and $8.3 million.

A loss of $0.1 million from discontinued operations (BLI) was recognized, compared with a loss of $0.5 million for the corresponding period of the previous year. In this regard, discontinued operations include the accounts of both BLI and Magnum for the third quarter of 2010, but solely the accounts of BLI for the third quarter of 2011. Consequently, the third-quarter net loss totalled $2.7 million, compared with $5.2 million for the same quarter of the previous year, a major reduction of $2.5 million or 47%. For the first nine months, a loss of $0.3 million from discontinued operations (BLI) was recognized, compared with a loss of $1.4 million for the corresponding period of the previous year. Consequently, the net loss for the first nine months totalled $8.6 million, compared with $14.3 million for the same period of the previous year, a major reduction of $5.8 million or 40%.

Considering a net change in unrealized gains on translation of the financial statements of self-sustaining foreign operations of $0.1 million for the quarter, compared with a net change in realized losses of $0.7 million for the corresponding quarter of the previous year, a net loss of $2.6 million represented the comprehensive loss for the third quarter of 2011, compared with a net loss of $5.9 million for the corresponding quarter of the previous year. For the first nine months, a net loss of $8.3 million represented the comprehensive loss, considering a net change in unrealized gains on translation of the financial statements of self-sustaining foreign operations of $0.2 million, compared with a net loss of $15.7 million for the corresponding period of the previous year, considering a net change in unrealized losses on translation of the financial statements of self-sustaining foreign operations of $1.4 million.

The loss from continuing operations and the net loss per Class A share (basic and diluted) for the third quarter of 2011 both amounted to $0.03 on a weighted average of 85,940,149 outstanding shares, compared with a loss from continuing operations and a net loss of $0.06 and $0.07 per share, respectively, on a weighted average of 75,916,023 shares for the third quarter of 2010. For the first nine months, the loss from continuing operations and the net loss per Class A share (basic and diluted) both amounted to $0.10 on a weighted average of 82,077,304 shares, compared with a loss from continuing operations and a net loss of $0.18 and $0.20 per share, respectively, on a weighted average of 72,677,982 shares for the corresponding period of the previous year. The increased weighted average number of outstanding shares is due mainly to the issue of Class A shares related to the private placements completed during the first three quarters of fiscal 2011.

    <<
    Principal Quarterly Financial Information
    (in thousands of $, except per-share amounts)(unaudited)
    -------------------------------------------------------------------------
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                             First        Second         Third        Fourth
                           Quarter       Quarter       Quarter       Quarter
    -------------------------------------------------------------------------
    Fiscal 2011
    Revenues                 2,747         5,026         3,415
    Loss from
     continuing
     operations             (2,838)       (2,828)       (2,643)
    Comprehensive
     loss                   (2,654)       (3,096)       (2,593)
    Loss per Class A
     share from
     continuing
     operations
     (basic and
     diluted)                (0.04)        (0,03)        (0.03)
    -------------------------------------------------------------------------
    Fiscal 2010
    Revenues                 4,388         4,899         2,927         2,896
    Loss from
     continuing
     operations             (3,503)       (4,798)       (4,678)       (7,737)
    Comprehensive
     loss                   (4,417)       (5,449)       (5,858)       (9,612)
    Loss per Class A
     share from
     continuing
     operations
     (basic and
     diluted)                (0.05)        (0.06)        (0.07)        (0.10)
    -------------------------------------------------------------------------
    Fiscal 2009
    Revenues                 2,014         3,687         2,454         3,257
    Loss from
     continuing
     operations             (6,057)       (6,526)       (5,216)      (10,003)
    Comprehensive
     loss                   (6,957)       (5,506)       (7,062)      (12,865)
    Loss per Class A
     share from
     continuing
     operations
     (basic and
     diluted)                (0.09)        (0.10)        (0.08)        (0.15)
    -------------------------------------------------------------------------
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    -------------------------------------------------------------------------
    Balance Sheet Analysis
    -------------------------------------------------------------------------
    >>

As at March 31, 2011, total assets amounted to $42.3 million, down by $0.4 million from June 30, 2010. Working capital stood at $14.1 million for a current ratio of 3.1:1, compared with $12.8 million and a 3.1:1 ratio as at June 30, 2010. Shareholders' equity totalled $33.0 million as at March 31, 2011, remaining relatively stable compared with June 30, 2010. Total interest-bearing debt (bank loans, current portion of long-term debt and long-term debt) amounted to $0.5 million as at March 31, 2011, down by approximately $1 million from June 30, 2010.

    <<
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    Quarter Highlights and Subsequent Events
    -------------------------------------------------------------------------

    - Sale of the Terrebonne building effective March 31, 2011 for a
      consideration of $1.3 million.
    - Increase in Epurair's productivity and production capacity further to
      the relocation of its design, development and production activities to
      larger premises and to the acquisition of new cutting-edge equipment.
    - Financing: On March 16, 2011, closing of $2.5 million of units in
      connection with the offering announced on February 22, 2011. On April
      8, 2011, termination of this offering and announcement of a new private
      placement pursuant to which each unit is offered at a price of $0.70
      and consists of one (1) Class A share and one-half of one warrant. On
      April 29, 2011, we proceeded with a first closing of $595,104 of this
      offering. Additional closings are expected until May 23, 2011.

    Air Filters for the Transportation Industry

    - First agreement for a train line in North America: In April 2011, we
      signed a three-year agreement with Kinkisharyo International, L.L.C.,
      pursuant to which the latter will lease Noveko(TM) filters to equip the
      entire fleet of the Hudson-Bergen Light Rail Line in New Jersey.
    - Ongoing tests in rail transportation: In cooperation with various
      transportation bodies, we are conducting further adaptability trials on
      several systems, including subway cars, trains, tunnels and subway
      stations in various major cities in North America. In this context, the
      process with Bombardier Transportation is also continuing and the
      representatives of the two companies are working to ensure that the
      agreement binding them materializes.
    - Agreements with the STM: At the end of April 2011, the Société de
      transport de Montréal (the "STM") opted for Noveko(TM) filtration
      solutions to equip its transportation centres. To that end, we entered
      into two first agreements covering the supply and cleaning of filters
      for the Anjou and St-Denis transportation centres. This initial
      collaboration follows a period of conclusive tests conducted at the
      Anjou transportation centre.
    - Aeronautics segment in final phase toward certification: Most of the
      prerequisite tests to obtain "STC" certification from Transport Canada
      have been completed and all proved highly conclusive. We are now in the
      final phase of the process as we are conducting the last series of
      tests needed to complete the file. We believe we could obtain STC
      certification at the beginning of fiscal 2012.

    Air Filters for Buildings - Institutional, Commercial and Residential
Markets

    - First sale to the U.S. real estate market in March 2011: Noveko(TM)
      filters are in the process of being 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 a sale of filters for an office building
      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(TM) filters are being installed for pre-sale testing purposes in
      some important buildings worldwide, in New York, Dubai, Taipei, Geneva
      and Paris.
    - Noveko keeps up its momentum in the Greater Montreal Area: About 10
      office and commercial buildings are currently equipped with Noveko(TM)
      filters and about 30 bids are under review for the Montreal area alone.

    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.

    Antimicrobial Masks and Respirators Markets

    - During the third quarter of 2011, an application for certification of a
      Noveko(TM) respirator model without any antimicrobial agent was
      submitted to the US National Institute for Occupational Safety and
      Health ("NIOSH"). The certification process with NIOSH is currently
      underway.
    - Although we are directly pursuing some commercialization activities, we
      are focusing further efforts on the search for partners. We are in
      talks with various parties; however, it is difficult to foresee how
      long it will take for new commercialization agreements to materialize
      and for our sales to pick up in this segment.

    Sanitizers

    - 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 in this
      segment, that could take longer than expected due notably to the
      significant inventories accumulated at all levels of the supply chain
      industry-wide.

    Medical Equipment

    - 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(TM), all for a value of 5.7 million
      Euros, of which 900,000 Euros are expected the first year. Despite some
      delays in the delivery of our Imagyne(TM) ultrasound scanners during
      the third quarter of 2011, the recently taken corrective measures will
      enable us to make up these delays and to meet our sales objectives.
    - During the fourth quarter of 2011, ECM plans to launch the Exagyne(TM).
    - ECM continues to achieve breakthroughs in the equine market with its
      Exago(TM) ultrasound scanner.


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    Profile
    -------------------------------------------------------------------------
    >>

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, primarily 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.

    <<
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    The Management's Report, consolidated financial statements and
    accompanying notes for the quarter ended March 31, 2011 will be filed on
    SEDAR (www.sedar.com) and available on the Company's website
    (www.noveko.com).
    -------------------------------------------------------------------------


    Noveko International Inc.

    Consolidated balance sheets

    As at March 31, 2011 and June 30, 2010

    -------------------------------------------------------------------------
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                                                      March 31,      June 30,
                                                          2011          2010
                                                    (unaudited)     (audited)
    -------------------------------------------------------------------------

    ASSETS
    Current assets:
      Cash and cash equivalents                   $    503,306  $    639,543
      Deposit in trust                               1,225,123        87,787
      Short-term investments                         1,145,954     2,145,631
      Accounts receivable                            4,246,607     3,026,436
      Inventories                                   11,921,893    11,259,316
      Prepaid expenses                                 667,323       627,644
      Current portion of assets held for sale        1,096,100     1,231,858
      -----------------------------------------------------------------------
                                                    20,806,306    19,018,215

    Fixed assets                                     2,141,911     1,592,999
    Intangible assets                                6,997,268     7,782,150
    Other assets                                       785,947       945,653
    Future income taxes                                 47,406        19,424
    Goodwill                                         7,585,498     7,420,012
    Non-current portion of assets held for sale      3,936,839     5,896,657
    -------------------------------------------------------------------------
                                                  $ 42,301,175  $ 42,675,110
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
    Current liabilities:
      Bank loans                                  $          -  $    167,011
      Accounts payable and accrued liabilities       4,305,820     3,801,984
      Current portion of long-term debt                396,552       475,432
      Current portion of liabilities held
       for sales                                     1,996,967     1,780,589
      -----------------------------------------------------------------------
                                                     6,699,339     6,225,016

    Long-term debt                                     109,110       803,647
    Future income taxes                                854,766       830,291
    Non-current portion of liabilities held
     for sales                                       1,588,519     1,753,146

    Shareholders' equity:
      Capital stock                                103,003,764    95,620,532
      Warrants                                       3,811,801     3,348,000
      Contributed surplus                           23,440,849    22,874,810
      Accumulated other comprehensive loss          (1,042,670)   (1,285,522)
      Deficit                                      (96,164,303)  (87,494,810)
      -----------------------------------------------------------------------
                                                    33,049,441    33,063,010
    -------------------------------------------------------------------------
                                                  $ 42,301,175  $ 42,675,110
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Noveko International Inc.

    Consolidated statements of operations

    Nine and three month periods ended March 31, 2011 and 2010
    (unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                 Three months                Nine months
                              2011          2010          2011          2010
    -------------------------------------------------------------------------
    Revenues          $  3,414,831  $  2,927,450  $ 11,187,310  $ 12,214,853
    Cost of sales        2,038,520     1,846,560     6,642,675     7,191,751
    -------------------------------------------------------------------------
                         1,376,311     1,080,890     4,544,635     5,023,102
    Operating
     expenses:
      Administrative
       and selling
       expenses          3,170,705     3,847,798     9,718,177    11,352,164
      Stock-based
       compensation        110,158       599,139       547,909     3,049,927
      Research and
       development         262,055       466,357       963,113     1,261,782
      Research and
       development
       tax credits        (115,097)     (116,447)     (337,476)     (414,860)
      -----------------------------------------------------------------------
                         3,427,821     4,796,847    10,891,723    15,249,013
    -------------------------------------------------------------------------
    Loss before
     amortization,
     financial fees,
     income taxes,
     other item and
     discontinued
     operations         (2,051,510)   (3,715,957)   (6,347,088)  (10,225,911)

    Amortization           709,703       655,065     2,103,671     1,736,970

    Financial
     expenses less
     investment
     revenues             (129,201)      500,480      (227,691)    1,325,898

    Goodwill
     impairment
     charge
     adjustment                  -             -        24,902       (69,700)
    -------------------------------------------------------------------------
                           580,502     1,155,545     1,900,882     2,993,168

    -------------------------------------------------------------------------
    Loss before
     income taxes       (2,632,012)   (4,871,502)   (8,247,970)  (13,219,079)

    Income taxes:
      Current
       (recovered)          47,686       (87,555)      118,904        12,406
      Future               (36,425)     (105,916)      (57,055)     (252,299)
      -----------------------------------------------------------------------
                            11,261      (193,471)       61,849      (239,893)
    -------------------------------------------------------------------------
    Net loss from
     continuing
     operations         (2,643,273)   (4,678,031)   (8,309,819)  (12,979,186)

    Net loss from
     discontinued
     operations            (88,142)     (518,507)     (276,499)   (1,365,351)
    -------------------------------------------------------------------------
    Net loss          $ (2,731,415) $ (5,196,538) $ (8,586,318) $(14,344,537)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and
     diluted loss
     per share:
      From
       continuing
       operations     $      (0.03) $      (0.06) $      (0.10) $      (0.18)
      From
       discontinued
       operations     $      (0.00) $      (0.01) $      (0.00) $      (0.02)
      Net loss        $      (0.03) $      (0.07) $      (0.10) $      (0.20)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     number of
     outstanding
     shares, basic
     and diluted        85,940,149    75,916,023    82,077,304    72,677,982
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Noveko International Inc.

    Consolidated statements of comprehensive loss

    Nine and three month periods ended March 31, 2011 and 2010
    (unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                 Three months                Nine months
                              2011          2010          2011          2010
    -------------------------------------------------------------------------
    Net loss          $ (2,731,415) $ (5,196,538) $ (8,586,318) $(14,344,537)
    Other
     comprehensive
     income, net of
     income taxes:
    Change in
     unrealized
     gains (losses)
     on translation
     of financial
     statements of
     self-sustaining
     foreign
     operations            138,548      (661,763)      242,852    (1,379,069)
    -------------------------------------------------------------------------

    Comprehensive
     loss             $ (2,592,867) $ (5,858,301) $ (8,343,466) $(15,723,606)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Noveko International Inc.

    Consolidated statements of deficit and contributed surplus

    Nine-month periods ended March 31, 2011 and 2010
    (unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                      March 31      March 31
                                                          2011          2010
    -------------------------------------------------------------------------
    DEFICIT

    Deficit, beginning of period                  $(87,494,810) $(61,205,942)
    Net loss                                        (8,586,318)  (14,344,537)
    Share issuance fees                                (83,175)   (2,070,317)
    -------------------------------------------------------------------------
    Deficit, end of period                        $(96,164,303) $(77,620,796)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CONTRIBUTED SURPLUS

    Contributed surplus, beginning of period      $ 22,874,810  $ 18,718,376
    Fair value of stock options granted                547,909     3,165,463
    Fair value of agent's warrant granted to
     the broker                                         18,130       732,000
    Fair value of stock options exercised                    -       (89,941)
    -------------------------------------------------------------------------
    Contributed surplus, end of period            $ 23,440,849  $ 22,525,898
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Noveko International Inc.
    Consolidated statements of cash flows
    Nine and three month periods ended March 31, 2011 and 2010
    (unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                 Three months                Nine months
                              2011          2010          2011          2010
    -------------------------------------------------------------------------
    Cash flows from
     operating
     activities:
      Net loss        $ (2,731,415) $ (5,196,538) $ (8,586,318) $(14,344,537)
      Adjustments
       for:
        Loss from
         disconti-
         nued opera-
         tions              88,142       518,507       276,499     1,365,351
        Future
         income
         taxes             (36,425)     (105,916)      (57,055)     (252,299)
        Accreted
         interest on
         secured
         convertible
         debentures              -         3,554             -        68,254
        Stock-based
         compensa-
         tion              110,158       599,139       547,909     3,049,927
        Loss on
         disposal
         of fixed
         assets            114,230         1,502       205,505         7,439
        Amortization       709,703       655,065     2,103,671     1,736,970
        Goodwill
         impairment
         charge
         adjustment              -             -        24,902       (69,700)
        Loss on fair
         value of
         short-term
         investments             -             -             -        11,676
        Foreign
         exchange
         loss (gain)          (652)      (11,089)       (1,287)        6,040
        Adjustments
         from discon-
         tinued
         operations        (95,023)       49,815        50,420       524,586
        ---------------------------------------------------------------------
                        (1,841,282)   (3,485,961)   (5,438,754)   (7,896,293)
      Net change in
       non-cash
       working
       capital            (687,575)   (1,078,267)   (1,633,420)   (3,600,133)
    -------------------------------------------------------------------------
                        (2,528,857)   (4,564,228)   (7,072,174)  (11,496,426)
    Cash flows from
     financing
     activities:
      Net changes in
       bank loans         (179,079)      (67,531)     (176,582)       77,271
      Repayment of
       long-term debt     (612,744)     (160,763)     (803,923)     (519,918)
      Interest paid
       on secured
       convertible
       debentures                -        (1,972)            -       (42,858)
      Proceeds from
       Class A
       shares and
       warrants
       issued            2,507,033         8,700     7,847,033    15,874,066
      Class A shares
       issue
       expenses            (48,787)        2,671       (65,045)   (1,338,317)
      Cash flows
       from
       discontinued
       operations           85,739          (108)      (24,679)     (199,382)
      -----------------------------------------------------------------------
                         1,752,162      (219,003)    6,776,804    13,850,862
    Cash flows from
     investing
     activities:
      Acquisition of
       short-term
       investments               -    (3,000,000)   (1,590,000)  (15,000,000)
      Proceeds from
       disposal of
       short-term
       investments               -     7,998,164     2,590,000    14,634,425
      Acquisition of
       fixed assets       (428,836)      (91,741)   (1,028,766)     (225,165)
      Proceeds from
       disposal of
       fixed assets      1,851,179          (750)    1,873,821        27,436
      Acquisition of
       intangible
       assets              (31,621)            -      (190,178)     (203,770)
      Acquisition of
       other assets              -             -             -       (44,400)
      Deposit in
       trust            (1,225,123)      (78,479)   (1,225,123)      (73,019)
      Deferred
       development
       costs, net of
       related
       research tax
       credits
       received            (79,484)      (88,457)     (250,868)     (267,586)
      Cash flows
       from
       discontinued
       operations                -       (36,015)       (3,200)     (137,788)
      -----------------------------------------------------------------------
                            86,115     4,702,722       175,686    (1,289,867)
    Foreign exchange
     loss on cash in
     foreign
     currencies             (3,723)      (36,488)      (16,553)     (158,512)
    -------------------------------------------------------------------------
    Increase
     (decrease) in
     cash and cash
     equivalents          (694,303)     (116,997)     (136,237)      906,057
    Cash and cash
     equivalents,
     beginning of
     period              1,197,609     1,960,373       639,543       937,319
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     end of period    $    503,306  $  1,843,376  $    503,306  $  1,843,376
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows related to operating activities include interest paid for
    $ 150,510 ($101,894 in 2010) and income taxes paid for $30,938 ($270,445
    received in 2010).
    >>

SOURCE NOVEKO INTERNATIONAL INC.

For further information: Chantal Vennat, Director, Investor Relations and Corporate Communications, Noveko International Inc., (514) 875-0606; http://www.noveko.com

Profil de l'entreprise

NOVEKO INTERNATIONAL INC.

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