Innicor releases 2007 year end and fourth quarter financial results



    CALGARY, March 19 /CNW/ - Innicor Subsurface Technologies Inc., a leading
Canadian manufacturer and distributor of downhole tools and equipment used in
the oil and gas sector, today announced its financial results for the three
and twelve months ended December 31, 2007.
    Total revenues for the fourth quarter of 2007 were $15.2 million,
compared with $14.5 million in the fourth quarter of 2006. Revenues for the
year ended December 31, 2007 were $59.2 million compared with $62.3 million
during the same period in 2006.
    Innicor reported net income of $634,000, or $0.04 per share basic and
diluted, for the three months ended December 31, 2007, compared with a net
loss of $512,000, or ($0.03) per share basic and diluted during the same
period in 2006. For the year ended December 31, 2007, Innicor reported net
income of $519,000, or $0.03 per share basic and diluted, compared with net
income of $2.9 million, or $0.16 per share basic and diluted, in the year
ended December 31, 2006.
    "We delivered solid performance in 2007 considering the strong currency
headwinds and further deterioration in business fundamentals in the Western
Canadian Sedimentary Basin," said Delton Campbell, President and CEO of
Innicor. "Revenue was nearly flat on a year over year basis and we remained
profitable despite western Canadian oilfield activity levels dropping by as
much as 50% through parts of the year. Solid growth in our international
business, particularly in the fourth quarter, allowed us to mitigate some of
the impact of lower activity levels in our domestic markets."
    In 2007, lower prices for natural gas and uncertainty over the provincial
oil and gas royalty structure in Alberta led to a continuation of reduced
levels of oilfield activity in western Canada that began near the end of 2006.
Industry analysts are expecting the lower activity levels experienced in 2007
to continue well into 2008 and to be below the levels reached in recent years
in Canada.
    "Revenue from international sources grew from 18% in 2006 to more than
22% in 2007 on the strength of enhanced sales and marketing initiatives in key
markets," said Campbell. "With a muted outlook for oilfield activity in
western Canada in 2008, Innicor continues to focus on revenue-generating
opportunities from international markets including our operations in Indonesia
and the Middle East, which contributed to a 20% increase in international
revenue in 2007."
    Innicor's consolidated financial statements for the three and twelve
months ended December 31, 2007 and the associated management discussion and
analysis will be filed on SEDAR and copies can be obtained at www.sedar.com.

    
    HIGHLIGHTS

                                                      Year Ended December 31
                                               ($000's except per share data)
    -------------------------------------------------------------------------
                                             %                   %
                                2007    Change      2006    Change      2005
    Total Revenues            59,238      (5)%    62,279       13%    55,260
    EBITDA(*)                  4,580     (37)%     7,277        3%     7,060
    EBITDA
     - margin as a % of
     revenue                      8%     (4)pt       12%    (1)pts       13%
    Net Income                   519     (82)%     2,874      (2)%     2,926
    Net Income per share
     - basic and diluted
     (dollars per share)        0.03     (81)%      0.16        0%      0.16
    Total long-term
     liabilities               5,694     (10)%     6,294      109%     3,011
    Total assets at year end  52,350      (3)%    53,919       21%    44,463

    (*) EBITDA, or earnings before interest, taxes, depreciation and
        amortization, is calculated in the above table by adding these items
        back to reported net income (see also QUARTERLY DATA).

                                          2007      2006      2007      2006
    ($000's)                               Q-4       Q-4       YTD       YTD
                                       --------------------------------------
    Net Income (loss)                  $   634   $  (512)  $   519   $ 2,874
    Income Taxes                           285      (179)      515     1,764
    Depreciation & Amortization            760       592     2,954     2,147
    Interest                               115       197       592       492
                                       --------------------------------------
                                       $ 1,794   $    98   $ 4,580   $ 7,277
    

    Management uses EBITDA as a measurement to determine the ability of the
Company to generate cash from operations. EBITDA does not have a standardized
meaning prescribed under GAAP, and therefore, may not be comparable with
calculations of similar measures presented by other issuers. EBITDA is not
intended to represent operating or net income for the period nor should it be
viewed as an alternative to operating or net income or other measures of
financial performance calculated in accordance with GAAP.

    FINANCIAL AND OPERATIONAL PERFORMANCE

    Drilling activity levels in Canada throughout 2007 were significantly
below the levels experienced in 2006. In the second quarter of 2007 in
particular, activity levels in Canada were below the previous year by as much
as 50 percent according to industry statistics. This softening of field
activity was due in large part to declining natural gas prices and above
average North American storage volumes of natural gas. This trend was
exacerbated in the second quarter of 2007 when adverse weather conditions also
contributed to a reduction in oilfield activity levels. Although activity
levels in Canada improved in the third and fourth quarters compared to the
second quarter of 2007 they still lag behind the previous year levels by
approximately 30 percent.
    In September of 2007 the Provincial Government of Alberta announced the
results of a previously established Royalty Review Panel. The panel
recommended increases to the current level of provincial royalties on oil and
gas revenues derived from provincial oil and gas reserves. On October 25, 2007
the Provincial Government of Alberta announced changes to the province's oil
and gas royalty structure based on some of the Royalty Review Panel's
recommendations effective January 1, 2009. Many oil and gas exploration and
production companies, industry analysts, and industry associations have
predicted a further drop in activity in the coming year as a result of the
uncertainty and cash flow reduction caused by the new royalty regime.
    During 2007 the Canadian dollar strengthened significantly against the
United States dollar and by year end had gained approximately 15% against the
United Sates dollar. This had a direct effect on the Company's financial
results with a charge of $382,000 incurred during the year due to foreign
currency translations, primarily the United States dollar. Canadian oil and
gas producers as a whole are impacted by a strengthening Canadian dollar as it
has the effect of lowering the price received for oil and gas as prices for
these commodities are denominated in United States dollars.

    
    FOR THE THREE MONTHS ENDED DECEMBER 31
    ($000's, except per share data)

                                                                   Increase /
                                          2007      2006           (Decrease)
                                             $         $         $         %
    REVENUES
      Domestic                          11,858    12,245      (387)       (3)
      International                      3,375     2,250     1,125        50
                                       --------  --------  ------------------
                                        15,233    14,495       738         5

    COST OF GOODS SOLD                   8,081     8,731      (650)       (7)
                                       --------  --------  ------------------

    GROSS MARGIN                         7,152     5,764     1,388        24
                                           47%       40%

    OPERATING EXPENSES
      Salaries and wages                 3,568     3,776      (208)       (6)
      General and administrative         2,124     2,233      (109)       (5)
      Foreign exchange loss (gain)           4       (73)       77       105
      Interest                             115       197       (82)      (42)
      Depreciation and amortization        422       322       100        31
                                       --------  --------  ------------------
                                         6,233     6,455      (222)       (3)
                                       --------  --------  ------------------

    INCOME (LOSS) BEFORE INCOME TAXES      919      (691)    1,610       233

    PROVISION FOR (RECOVERY OF) INCOME
     TAXES                                 285      (179)      464       259
                                       --------  --------  ------------------

    NET INCOME (LOSS)                      634      (512)    1,146       224
                                       --------  --------  ------------------
                                       --------  --------  ------------------

    Net Income (Loss) per share
     - basic and diluted                  0.04     (0.03)     0.07       233
    

    Total revenues for the three months ended December 31, 2007 were
$15,233,000 or 5% above total revenues for the same period in the previous
year. Domestic revenues for the fourth quarter of 2007 were $387,000 or 3%
below domestic revenues for the fourth quarter of 2006, while revenue from
international customers increased by $1,125,000 or 50% in the fourth quarter
of 2007 versus the fourth quarter of 2006. The decline in domestic revenue is
primarily due to the reduced level of oilfield activity in Canada in 2007
compared to 2006. The increase in international revenues is the result of
additional sales and marketing initiatives undertaken during the year focused
on international customers
    The gross margin during the fourth quarter of 2007 increased by
$1,388,000 or 24% compared to the fourth quarter of 2006. The gross margin
percentage for the three months ended December 31, 2007 was 47% compared to
40% in the same period in 2006. The margin improvement in 2007 is due to
increased revenues in the current year and one time expenses recorded in the
fourth quarter of 2006. In December 2006, Innicor expensed the cost of certain
low dollar value parts and consumables held in inventory at its field
locations. These items are used by the field stations to service and refurbish
rental equipment. These items are now inventoried at the main warehouse in
Calgary only, and are expensed at the time they are requisitioned by the field
stations. The value of the existing inventory of these items at the field
stations totaled $466,000, at December 31, 2006 and was included in the cost
of goods sold as a one time expense, in the fourth quarter of 2006.
    Salaries and wages declined during the fourth quarter of 2007 compared to
the fourth quarter of 2006 by $208,000 or 6%. This was due to lower staff
levels resulting from a number of vacant positions and a reduction in the cost
of remunerating field service technicians due to reduced activity levels in
Canada. General and administrative expenses in the last three months of 2007
were $109,000 or 5% below the comparable expenses incurred in the same period
in 2006.
    Interest expense for the three months ended December 31, 2007 decreased
by $82,000 or 42% versus the three months ended December 31, 2006 due to a
reduction in the amount of the outstanding operating line to meet working
capital requirements.
    Depreciation and amortization expense during the fourth quarter of 2007,
including depreciation of manufacturing assets, which is allocated to cost of
goods sold, was $760,000 versus $592,000 in the fourth quarter of 2006. The
increase is due to the depreciation of the new manufacturing equipment added
in 2006. Depreciation and amortization of non-manufacturing assets was
$422,000 in the fourth quarter of 2006 compared to $322,000 in the fourth
quarter of 2006, reflecting the depreciation and amortization of additional
vehicles, new software and implementation costs and leasehold improvements
acquired during 2007.
    EBITDA was $1,794,000 for the three months ended December 31, 2007,
compared to $98,000 in the same period in 2006. For a reconciliation of EBITDA
to net income, see HIGHLIGHTS. The net income for the three month period ended
December 31, 2007 was $634,000 or $0.04 per share basic and diluted, compared
to a loss of $512,000 or $0.03 per share basic and diluted in the
corresponding period in 2006.
    During the three months ended December 31, 2007, cash flow from operating
activities, including the change in non-cash operating assets and liabilities
was $2,218,000 compared to $1,066,000 in the same period of the previous year.
The increase is primarily due to a decrease in non - cash operating assets and
liabilities and net income for the three month period.

    
    FOR THE TWELVE MONTHS ENDED DECEMBER 31
    ($000's, except per share data)
                                                                   Increase /
                                          2007      2006           (Decrease)
                                             $         $         $         %
    REVENUES
      Domestic                          45,869    51,169    (5,300)      (10)
      International                     13,369    11,110     2,259        20
                                       --------  --------  ------------------
                                        59,238    62,279    (3,041)       (5)

    COST OF GOODS SOLD                  31,795    32,772      (977)       (3)
                                       --------  --------  ------------------

    GROSS MARGIN                        27,443    29,507    (2,064)       (7)
                                           46%       47%

    OPERATING EXPENSES
      Salaries and wages                15,096    14,830       266         2
      General and administrative         8,722     8,519       203         2
      Foreign exchange loss (gain)         382       (90)      472     N/M(*)
      Interest                             592       492       100        20
      Depreciation and amortization      1,617     1,118       499        45
                                       --------  --------  ------------------
                                        26,409    24,869     1,540         6
                                       --------  --------  ------------------

    INCOME BEFORE INCOME TAXES           1,034     4,638    (3,604)      (78)

    PROVISION FOR INCOME TAXES             515     1,764    (1,249)      (71)
                                       --------  --------  ------------------

    NET INCOME                             519     2,874    (2,355)      (82)
                                       --------  --------  ------------------
                                       --------  --------  ------------------

    Net Income per share
     - basic and diluted                  0.03      0.16     (0.13)      (81)


    (*) N/M - non meaningful
    

    Total revenues for the year ended December 31, 2007 decreased by
$3,041,000 or 5% compared to the same period in 2006. Domestic revenues for
the twelve months ended December 31, 2007 were $5,300,000 or 10% below last
years levels, while revenue from international customers increased by
$2,259,000 or 20% over the same period. The decline in domestic revenue is
primarily due to the reduced level of oilfield activity in Canada in 2007
compared to 2006. The increase in international revenues is the result of
additional sales and marketing initiatives undertaken during the year focused
on international customers. Revenue from international customers represented
23% of total revenues in 2007 compared to 18% in 2006. The gross margin in
2007 decreased by $2,064,000 or 7% over the previous year, primarily due to a
5% reduction in annual revenues, and the gross margin as a percentage of sales
was 46% in 2007 versus 47% in 2006.
    Operating expenses for the twelve months ended December 31, 2007 were
$26,409,000 compared to $24,869,000 during the same period in the previous
year. Salaries and wages increased during the year by $266,000 or 2% over the
previous year. This increase is due to higher salary and wage rates offset by
lower staff levels and profit based incentive payments. Innicor had a total of
263 employees at the end of 2007 compared to 279 employees at the end of 2006.
    General and administrative expenses incurred in 2007 were $8,722,000
versus $8,519,000 in 2006, an increase of $203,000 or 2%. Following is a
breakdown of the major components of the increase:

    
                                                                   Increase /
    ($000's)                                        2007      2006 (Decrease)
                                                    ----      ---- ----------

    Professional fees                            $ 1,026   $ 1,106   $   (80)
    Facilities costs and related expenses          1,869     1,402       467
    Travel expenses including vehicle costs        2,306     2,297         9
    Other                                          3,521     3,714      (193)
                                                 --------  --------  --------
                                                 $ 8,722   $ 8,519   $   203
    

    The increase in facilities costs in 2007 is primarily due to the addition
of new facilities in Calgary to house Innicor's completion tool assembly and
distribution operations and the cost of a new sales and service outlet in Fort
St. John.
    The loss on foreign exchange was due to the strengthening of the Canadian
dollar in 2007 versus the United States dollar. Interest expense for the year
ended December 31, 2007, increased by $100,000 or 20% over the same period in
the previous year. The increase is due to additional interest expense on new
capital leases for vehicles acquired during the year and the full annual
impact of capital leases for production equipment acquired in 2006, offset by
a reduction in the balance of the operating line.
    Total depreciation and amortization, including depreciation of
manufacturing assets, which is allocated to cost of goods sold, was $2,954,000
in the current year versus $2,147,000, in 2006. Depreciation and amortization
on non-manufacturing assets was $1,617,000 in 2007 compared to $1,118,000 in
2006. The increase is due to the additional manufacturing assets, equipment
and leasehold improvements acquired during 2007 and 2006, and systems
development costs incurred during the same periods.
    EBITDA was $4,580,000 during 2007, compared to $7,277,000 in 2006, a
decrease of $2,697,000. For a reconciliation of EBITDA to net income, see
HIGHLIGHTS. Income before income taxes for the year ended December 31, 2007
was $1,034,000 compared to $4,638,000 in the corresponding period of the
previous year. Net income was $519,000 in 2007 or $0.03 per share basic and
diluted, versus $2,874,000 or $0.16 per share basic and diluted in the
previous year.

    PRODUCT LINES

    Innicor is in the business of designing, manufacturing, renting,
servicing, and selling equipment used in the completion phase or work-over of
oil and gas wells. The completion phase is the final phase of oil and gas well
development before a well goes into production.
    Innicor's customers are primarily oil and gas exploration and production
companies or other service providers that work for exploration and development
companies during the well completion phase. Innicor's business is considered
to be a single segment for reporting purposes consisting of a number of
related product lines.

    LIQUIDITY AND CAPITAL RE

SOURCES During the year ended December 31, 2007, cash flow from operating activities, including the change in non-cash operating assets and liabilities was $6,019,000 compared to $701,000 in the same period of the previous year. Cash flow from operating activities was impacted by a decrease of $1,916,000 in non-cash operating assets and liabilities in 2007 (2006 - increase of $5,231,000). Capital expenditures on plant and equipment during 2007 were $1,271,000, compared to $5,402,000 in 2006. The expenditures in 2007 were primarily for the replacement of aging manufacturing and shop equipment as well as computers. The expenditures in 2006 were primarily related to manufacturing and production equipment to increase the Company's production capacity. Also included in the capital expenditures for 2006 was a cost of $752,000 to acquire and install the new ERP software and related hardware, and $400,000 to acquire intellectual property and proprietary tool designs. Debt and capital lease repayments were $2,132,000 in 2007 versus $1,546,000 in 2006. The amount owing on the operating line decreased by $3,305,000 to $703,000 during 2007, due to the application of positive cash flow from operations. At December 31, 2007, Innicor had a positive working capital position of $23,510,000 and a working capital ratio of 3.1:1 compared to a working capital position of $22,053,000 or a ratio of 2.7:1, at December 31, 2006. The primary reason for the increase in the working capital position is the reduction in the amount outstanding on the operating line. In October 2005, Innicor renegotiated certain aspects of its credit facility at its existing bank. The changes provide the Company access to a total of over $18,000,000 available for capital and operating purposes. At December 31, 2007, Innicor had approximately $10,000,000 available on its operating line and approximately $6,500,000 available for capital purposes under the facility. Management believes that the current working capital position and access to funds available through its credit facility, together with positive cash flow from operations, will enable Innicor to meet its near term operating and capital requirements. CONTRACTUAL OBLIGATIONS ($000's) Less than 1-3 4-5 After Total 1 year years years 5 years Term Debt(1) $ 289 $ 289 $ - $ - $ - Capital Lease Obligations 7,173 2,261 3,756 1,156 - Operating Leases(2) 9,590 1,795 3,125 2,601 2,069 ------------------------------------------------- Total $17,052 $ 4,345 $ 6,881 $ 3,757 $ 2,069 ------------------------------------------------- ------------------------------------------------- (1) Term debt with principal repayments calculated on a 60 month amortization period. (2) Primarily facilities leases. OUTLOOK Activity levels in the oilfield services sector in Canada have been impacted by uncertainty related primarily to gas prices in the short term. Industry analysts are expecting the lower activity levels experienced in 2007 to continue well into 2008. The recently announced changes to the provincial royalty structure on oil and gas revenues could also have a negative impact on oilfield activity levels in western Canada. Reduced industry activity levels in Canada will have some impact on Innicor's business; however the Company is diversified geographically in Canada and internationally and its products are used in both oil and gas well operations and to some degree in the "workover" of producing wells as opposed to newly drilled wells. The success achieved to date in developing domestic and international markets is also expected to continue to contribute to the Company's revenue base for the remainder of the year and into the future. QUARTERLY DATA ($000's except per share data) 2007 2006 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 --------------------------------------------------------------- Revenue 15,233 15,642 9,403 18,959 14,495 16,494 11,440 19,850 Cost of goods sold 8,081 8,497 6,029 9,187 8,731 8,474 5,924 9,643 --------------------------------------------------------------- Gross margin 7,152 7,145 3,374 9,772 5,764 8,020 5,516 10,207 Operating expenses 6,233 6,590 6,323 7,264 6,455 6,448 5,523 6,443 --------------------------------------------------------------- Income (loss) before income taxes 919 555 (2,949) 2,508 (690) 1,572 (7) 3,764 Provision for (recovery of) income taxes 285 175 (835) 889 (179) 601 58 1,283 --------------------------------------------------------------- Net Income (loss) 634 380 (2,114) 1,619 (512) 971 (65) 2,481 --------------------------------------------------------------- --------------------------------------------------------------- Add back: Depre- ciation & amorti- zation 760 782 723 689 592 536 517 502 Interest 115 163 129 185 197 124 99 72 Taxes 285 175 (835) 889 (179) 601 58 1,283 --------------------------------------------------------------- EBITDA 1,794 1,500 (2,096) 3,382 98 2,231 609 4,338 --------------------------------------------------------------- --------------------------------------------------------------- Net Income (loss) per share ($) - basic and diluted 0.04 0.02 (0.12) 0.09 (0.03) 0.05 0.00 0.14 Certain figures in the above table have been rounded accordingly to conform to the financial statements. The seasonal nature of the business and the timing of business acquisitions impact the quarterly financial results. Financial performance in the second quarter of the year is normally not as strong as the other three quarters of the year. Weather conditions in Canada during the second quarter restrict access to a significant number of well sites as winter roads thaw and other roadways need to dry out before summer operations can be fully commenced. The impact of adverse weather conditions in the second quarter of 2007 was more severe than normal, and concerns over gas prices and over supply caused a dramatic reduction in oilfield activity in western Canada in the second quarter of 2007. The financial results for the fourth quarter of 2006 were impacted by a reduction in Canadian drilling activity compared to the same period of the previous year and a one time adjustment to inventory recorded during the quarter. Innicor Subsurface Technologies Inc. CONSOLIDATED BALANCE SHEETS December 31 2007 2006 ($000's) ASSETS CURRENT ASSETS Accounts receivable $11,669 $12,310 Inventory 22,342 22,806 Prepaid expenses and deposits 720 327 --------- --------- 34,731 35,443 CAPITAL ASSETS 15,287 16,144 GOODWILL 2,332 2,332 --------- --------- $52,350 $53,919 --------- --------- --------- --------- LIABILITIES CURRENT LIABILITIES Operating loan $ 703 $ 4,008 Accounts payable and accrued liabilities 8,330 7,198 Current portion of obligations under capital leases 1,899 1,758 Callable portion of long-term debt 289 426 --------- --------- 11,221 13,390 OBLIGATIONS UNDER CAPITAL LEASES 4,508 5,386 FUTURE INCOME TAX LIABILITY 1,186 908 --------- --------- 16,915 19,684 --------- --------- SHAREHOLDERS' EQUITY Share capital 25,804 25,517 Contributed surplus 1,076 682 Retained Earnings 8,555 8,036 --------- --------- 35,435 34,235 --------- --------- --------- --------- $52,350 $53,919 --------- --------- --------- --------- Innicor Subsurface Technologies Inc. CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS For the years ended December 31 2007 2006 ($000's, except per share amounts) REVENUE $59,238 $62,279 COST OF GOODS SOLD 31,795 32,772 --------- --------- GROSS MARGIN 27,443 29,507 --------- --------- OPERATING EXPENSES Salaries and wages 15,096 14,830 General and administrative 8,722 8,519 Foreign exchange (gain) / loss 382 (90) Interest 592 492 Depreciation and amortization 1,617 1,118 --------- --------- 26,409 24,869 --------- --------- INCOME BEFORE INCOME TAXES 1,034 4,638 PROVISION FOR INCOME TAXES Current 309 1,297 Future 206 467 --------- --------- 515 1,764 --------- --------- NET INCOME 519 2,874 RETAINED EARNINGS, beginning of year 8,036 5,162 --------- --------- RETAINED EARNINGS, end of year $ 8,555 $ 8,036 --------- --------- --------- --------- NET INCOME PER SHARE Basic $ 0.03 $ 0.16 --------- --------- --------- --------- Diluted $ 0.03 $ 0.16 --------- --------- --------- --------- CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME For the years ended December 31 2007 2006 ($000's) NET INCOME $ 519 $ 2,874 OTHER COMPREHENSIVE INCOME - - --------- --------- COMPREHENSIVE INCOME $ 519 $ 2,874 Accumulated other comprehensive income, beginning of year - - Other comprehensive income - - --------- --------- Accumulated other comprehensive income, end of year $ - $ - --------- --------- --------- --------- Innicor Subsurface Technologies Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31 2007 2006 ($000's) OPERATING ACTIVITIES Net Income $ 519 $ 2,874 Add items not involving cash Depreciation and amortization 2,954 2,147 Future income taxes 206 467 Stock based compensation expense 401 337 Loss on disposal of equipment 23 107 --------- --------- 4,103 5,932 Change in non-cash operating assets and liabilities 1,916 (5,231) --------- --------- 6,019 701 --------- --------- INVESTING ACTIVITIES Proceeds on disposal of capital assets 409 3,542 Purchase of capital assets (1,271) (5,402) --------- --------- (862) (1,860) --------- --------- FINANCING ACTIVITIES Issue of share capital, net of share issue costs 280 191 Proceeds (repayments) of operating loan (3,305) 2,514 Repayments of obligations under capital leases (1,996) (1,417) Repayment of long-term debt (136) (129) --------- --------- (5,157) 1,159 --------- --------- INCREASE IN CASH AND CASH EQUIVALENTS - - CASH AND CASH EQUIVALENTS, beginning of year - - --------- --------- CASH AND CASH EQUIVALENTS, end of year $ - $ - --------- --------- --------- --------- Supplementary cash flow information: Interest paid $ 592 $ 492 --------- --------- --------- --------- Income taxes paid $ 359 $ 2,293 --------- --------- --------- --------- Capital assets acquired under capital leases $ 1,259 $ 4,841 --------- --------- --------- --------- Certain information contained herein constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that we expect or anticipate may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "potential", "targeting", "intend", "could", "might", "should", "believe" or similar words suggesting future outcomes or outlook. The following discussion is intended to identify certain factors, although not necessarily all factors, which could cause future outcomes to differ materially from those set forth in the forward-looking information. The risks and uncertainties that may affect the operations, performance, development and results of Innicor's businesses include, but are not limited to, the following factors: the availability of capital, supplies and costs of materials, the demand for Innicor's products, the level of exploration and development activity in the petroleum industry and changing market conditions. The reader is cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate by Innicor at the time of preparation, may prove to be incorrect or may not occur. Accordingly, readers are cautioned that the actual results achieved will vary from the information provided herein and the variations may be material. Readers are also cautioned that the foregoing list of factors and risks is not exhaustive. Additional information on these and other risks, uncertainties and factors that could affect Innicor's operations or financial results are included in our filings with the securities commissions or similar authorities in certain provinces of Canada, as may be updated from time to time. There is no representation by Innicor that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Innicor does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement. THE TSX HAS NEITHER APPROVED NOR DISAPPROVED THE CONTENTS OF THIS NEWS RELEASE.

For further information:

For further information: For further information regarding Innicor,
please contact: Delton Campbell, President and CEO, (403) 236-2815, e-mail -
dcampbell@innicor.com; or Bob Jones, Executive Vice President and COO, (403)
236-2815, e-mail - bjones@innicor.com; or Ian Bootle, CFO, (403) 236-2815,
e-mail - ibootle@innicor.com

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INNICOR SUBSURFACE TECHNOLOGIES INC.

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