Innicor releases financial results for third quarter 2007



    CALGARY, Nov. 13 /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 nine months ended September 30, 2007.
    Total revenues for the third quarter of 2007 were $15.6 million, compared
with $16.5 million in the third quarter of 2006. Revenues for the nine months
ended September 30, 2007 were $44.0 million compared to $47.8 million during
the same period in 2006.
    Innicor reported a net income of $380,000, or $0.02 per share basic and
diluted, for the three months ended September 30, 2007, compared with net
income of $971,000, or $0.05 per share basic and diluted during the same
period in 2006. For the nine months ended September 30, 2007, Innicor reported
a net loss of $115,000, or $0.01 per share basic and diluted, compared to net
income of $3.4 million, or $0.19 per share basic and diluted, in the nine
months ended September 30, 2006.
    "Overall our third quarter revenues this year were within five per cent
of last years' levels and well ahead of the third quarter of 2005," said
Delton Campbell, President and CEO, "This is remarkable performance
considering that we are operating in an environment where oilfield activity
levels in Western Canada are down by as much as 30% on a year over year basis.
Most encouraging was the 23 per cent increase in international revenue over
the same quarter in 2006; further proof that our global strategy is gaining
traction and that there are opportunities for us to access outside of North
America."
    Lower prices for natural gas and uncertainty over the provincial oil and
gas royalty structure in Alberta have lead 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 year to
date to continue for the remainder of 2007 and into 2008 and to be below the
levels achieved in recent years in Canada.
    "With an outlook for continued low levels of oilfield activity in western
Canada, Innicor continues to focus on revenue opportunities from international
markets including our new operations based in Jakarta and Dubai that
contributed to the Company's improved performance in the 3rd quarter," said
Campbell.
    Innicor's consolidated financial statements for the three and nine months
ended September 30, 2007 and its associated management discussion and analysis
will be filed on Sedar and copies can be obtained at www.sedar.com.


    
    THIRD QUARTER FINANCIAL REPORT
    INNICOR SUBSURFACE TECHNOLOGIES INC.

    FINANCIAL HIGHLIGHTS

                                Three Months               Nine Months
                             Ended September 30         Ended September 30
                         ($000's except per share)  ($000's except per share)

                                              %                          %
                           2007     2006   change     2007     2006   change
    -------------------------------------------------------------------------

    Total Revenues      $15,642  $16,494     (5)%  $44,005  $47,784     (8)%

    Gross Margin          7,145    8,020    (11)%   20,291   23,743    (15)%

    EBITDA(*)             1,500    2,232    (33)%    2,786    7,179    (61)%

    EBITDA
    - margin as a %
     of revenue             10%      14%  (4) pts       6%      15%  (9) pts

    Net Income (loss)       380      971    (61)%     (115)   3,386   (103)%

    Net Income (loss)
     per share
    - basic and
     diluted              $0.02    $0.05      N/M   $(0.01)   $0.19      N/M

    (*) 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
                                        Q-3        Q-3        YTD        YTD
                                  -------------------------------------------
    Net Income (loss)                  $380       $971      $(115)    $3,386
    Taxes                               175        601        230      1,943
    Depreciation & Amortization         782        536      2,194      1,555
    Interest                            163        124        477        295
                                  -------------------------------------------
                                     $1,500     $2,232     $2,786     $7,179
    

    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 Canadian generally accepted accounting principles
("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 (see also NON-GAAP MEASURES).

    FINANCIAL AND OPERATIONAL PERFORMANCE

    Drilling activity levels in Canada throughout the first nine months of
2007 were significantly below the levels experienced in the first nine months
of 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. A slow-down in drilling activity that began in the third
quarter of 2006 continued into the fourth quarter of 2006 and the first nine
months of 2007. 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
quarter compared to the second quarter of 2007 they still lag behind the
previous year levels by approximately 30 percent.
    During the third quarter 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 the third quarter of 2007 the Canadian dollar strengthened by
approximately 7% against the United States dollar and year to date the
Canadian dollar has gained approximately 15% against the United Sates dollar.
This had a direct effect on the Company's third quarter results with a charge
of $218,000 incurred during the quarter 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 these prices for these
commodities are denominated in United States dollars.
    On February 1, 2007, Innicor opened a new sales and service outlet in
Fort St. John, British Columbia. Innicor now has distribution and service
outlets in thirteen locations in Alberta, Saskatchewan, and British Columbia
that allow the Company to provide equipment and services to its customers
located throughout the Western Canadian Sedimentary Basin.
    In late fall of 2006, Innicor expanded its presence in Indonesia by
opening an additional base of operation in Balikpapan to complement the outlet
established in 2005 in Jakarta. The operations in Indonesia were established
in conjunction with a local agent to provide distribution and service to
Innicor's customers in the region. Innicor has recently established a base of
operations in the United Arab Emirates to service its customers in the Middle
East. Innicor has hired two regional managers who are responsible for managing
the Company's international operations at a local level, one based in Jakarta
and the other based in Dubai. These expatriate employees have extensive
international industry experience in their respective geographic regions.
    In June of 2007, Innicor moved into a new 31,000 square foot facility in
Calgary constructed adjacent to the Company's existing 71,000 square foot
manufacturing and head office building. The new facility houses the Company's
completion tool assembly and distribution operations, as well as the Company's
research and development department. The new building was developed by the
owner of the existing Calgary facility, and is being leased by the Company
over a term that coincides with the lease on the existing facility. The
initial term of the lease is approximately seven and a half years with an
option to renew for a further ten year term on October 1, 2014. The additional
space is required to support Innicor's continued growth in Canada and
expansion in international markets.

    
    FOR THE THREE MONTHS ENDED SEPTEMBER 30
    (Thousands of dollars, except per share data)

                                       2007       2006    Increase/(Decrease)
                                        $          $          $          %

    REVENUES
      Domestic                       11,555     13,174     (1,619)       (12)
      International                   4,087      3,320        767         23
                                  ---------- ---------- ---------------------
                                     15,642     16,494       (852)        (5)

    COST OF GOODS SOLD                8,497      8,474         23          0
                                  ---------- ---------- ---------------------

    GROSS MARGIN                      7,145      8,020       (875)       (11)
                                        46%        49%

    OPERATING EXPENSES
    Salaries and wages                3,788      3,782          6          0
    General and administrative        1,982      2,281       (299)       (13)
    Foreign exchange loss (gain)        218        (13)       231        N/M
    Interest                            163        124         39         31
    Depreciation and amortization       439        274        165         60
                                  ---------- ---------- ---------------------
                                      6,590      6,448        142          2

    INCOME BEFORE INCOME TAXES          555      1,572     (1,017)       (65)
                                  ---------- ---------- ---------------------

    PROVISION FOR INCOME TAXES          175        601       (426)        71
                                  ---------- ---------- ---------------------

    NET INCOME                          380        971       (591)        61
                                  ---------- ---------- ---------------------
                                  ---------- ---------- ---------------------

    Net Income per share
    -basic and diluted                 0.02       0.05      (0.03)       (60)
    

    Total revenues for the three months ended September 30, 2007 were
$852,000, or 5% below total revenues for the same period in the previous year.
Domestic revenues for the third quarter of 2007 were $1,619,000 or 12% below
domestic revenues for the third quarter of 2006, while revenue from
international customers increased by $767,000, or 23%, over the same
comparable period. The decline in domestic revenue is primarily due to the
reduced level of oilfield activity in Canada in 2007 compared to 2006. The
gross margin during the third quarter of 2007 decreased by $875,000 or 11%
compared to the third quarter of 2006. This was due to lower revenues in the
third quarter of 2007 and a lower gross margin percentage of 46% compared to
49% in the previous year.
    Operating expenses for the three months ended September 30, 2007
increased by $142,000, or 2%, compared to the same period in the previous
year. Salaries and wages were virtually the same in the third quarter of 2007
compared with the same period in the previous year. General and administrative
expenses incurred in the third quarter of 2007 declined by $299,000, or 13%,
compared with the third quarter of 2006 due to a decrease in direct costs and
professional fees partially offset by increased facilities costs from the new
sales and service locations in Canada, Indonesia and the United Arab Emirates,
and increased costs at existing locations. The loss on foreign exchange during
the three months ended September 30, 2007 was $218,000 compared with a gain of
$13,000 during the three months ended September 30, 2006. This loss is
primarily due to the continued strengthening of the Canadian dollar over the
United States dollar.
    Interest expense for the three months ended September 30, 2007 increased
by $39,000, or 31%, over the same period in the previous year. The increase is
due to additional interest expense on new capital leases for production
equipment and vehicles.
    Total depreciation and amortization, including depreciation of
manufacturing assets, which is allocated to cost of goods sold, was $782,000
in the third quarter of 2007 versus $536,000 in the third quarter of 2006.
Depreciation and amortization on non-manufacturing assets was $439,000 during
the three months ended September 30, 2007 compared with $274,000 in the same
period in 2006. The increase is due to the additional manufacturing assets,
new software and implementation costs, and vehicles acquired through capital
leases during the latter part of 2006.
    EBITDA was $1,500,000 in the third quarter of 2007, compared with
$2,232,000 in the third quarter of 2006. The net income for the three months
ended September 30, 2007, was $380,000, or $0.02 per share basic and diluted,
compared to net income of $971,000, or $0.05 per share basic and diluted, in
the corresponding three months of 2006.

    
    FOR THE NINE MONTHS ENDED SEPTEMBER 30
    (Thousands of dollars, except per share data)

                                       2007       2006    Increase/(Decrease)
                                        $          $          $          %
    REVENUES
      Domestic                       34,011     38,924     (4,913)       (13)
      International                   9,994      8,860      1,134         13
                                  ---------- ---------- ---------------------
                                     44,005     47,784     (3,779)        (8)

    COST OF GOODS SOLD               23,714     24,041       (327)        (1)
                                  ---------- ---------- ---------------------

    GROSS MARGIN                     20,291     23,743     (3,452)       (15)
                                        46%        50%

    OPERATING EXPENSES
    Salaries and wages               11,528     11,054        474          4
    General and administrative        6,598      6,286        312          5
    Foreign exchange loss (gain)        378        (17)       395        N/M
    Interest                            477        295        182         62
    Depreciation and amortization     1,195        796        399         50
                                  ---------- ---------- ---------------------
                                     20,176     18,414      1,762         10

    INCOME  BEFORE INCOME TAXES         115      5,329     (5,214)       (98)
                                  ---------- ---------- ---------------------

    PROVISION FOR INCOME TAXES          230      1,943     (1,713)       (88)
                                  ---------- ---------- ---------------------

    NET INCOME (LOSS)                  (115)     3,386     (3,501)      (103)
                                  ---------- ---------- ---------------------
                                  ---------- ---------- ---------------------

    Net Income (loss) per share
    -basic and diluted                (0.01)      0.19      (0.20)       N/M
    

    Total revenues for the nine months ended September 30, 2007 were
$3,779,000, or 8% below total revenues for the same period in the previous
year. Domestic revenues for the first nine months of 2007 were $4,913,000, or
13% below domestic revenues for the first nine months of 2006, while revenue
from international customers increased by $1,134,000, or 13%, over the same
comparable period. The decline in domestic revenue is primarily due to the
reduced level of oilfield activity in Canada in 2007 compared with 2006. The
gross margin during the first nine months of 2007 decreased by $3,452,000, or
15%, compared to the first nine months of 2006. The gross margin percentage
for the nine months ended September 30, 2007 was 46% compared with 50% during
the same period in 2006. The gross margin in the first nine months of 2007 was
impacted by lower revenues compared to the same period of the previous year,
and an increased unfavorable manufacturing variance of $939,000 (2006 -
$173,000) incurred in the second quarter of 2007. In a manufacturing
environment, overhead expenses incurred in the manufacturing process are
allocated to the units produced at predetermined rates. When production
volumes fluctuate, overhead costs will be over or under applied resulting in a
manufacturing variance that is included in the cost of goods sold during the
period. The unfavorable manufacturing variance is due to the reduced levels of
manufacturing predicated by the lower levels of oilfield activity during the
second quarter of 2007 in Western Canada.
    Operating expenses for the nine months ended September 30, 2007 increased
by $1,762,000, or 10%, compared with the same period in the previous year.
Salaries and wages increased during the same period by $474,000, or 4%, over
the previous year. This increase is due to higher compensation levels and the
incremental cost of remunerating technicians that provide consulting services
at our customers' well sites. Innicor had a total of 256 employees at
September 30, 2007, compared to 284 employees at September 30, 2006. The lower
staff levels in 2007 are due to the impact of more efficient production
equipment installed in 2006 and a recent reduction in the workforce in
manufacturing due to lower levels of oilfield activity in Canada. General and
administrative expenses incurred in the first nine months of 2007 were
$6,598,000 versus $6,286,000 in 2006, an increase of $312,000 or 5%.
    The loss on foreign exchange incurred during the nine months ended
September 30, 2007 was $378,000 compared with a gain of $17,000 during the
same period in 2006. The loss is primarily due to the continued strengthening
of the Canadian dollar over the United States dollar.
    Interest expense for the nine months ended September 30, 2007 increased
by $182,000, or 62%, over the same period in the previous year. The increase
is due to additional interest expense on new capital leases for production
equipment and vehicles.
    Total depreciation and amortization, including depreciation of
manufacturing assets, which is allocated to cost of goods sold, was $2,194,000
in the first nine months of 2007 versus $1,555,000 in the first nine months of
2006. Depreciation and amortization on non-manufacturing assets was $1,195,000
to September 30, 2007 compared with $796,000 in the corresponding period in
2006. The increase is due to the additional manufacturing assets, new software
and implementation costs, and vehicles acquired through capital leases during
the latter part of 2006 and during 2007.
    EBITDA was $2,786,000 in the first nine months of 2007, compared with
$7,179,000 in the first nine months of 2006. The net loss for the nine months
ended September 30, 2007, was $115,000, or $0.01 per share basic and diluted,
compared to net income of $3,386,000, or $0.19 per share basic and diluted, in
the corresponding nine months of 2006.

    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 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 product lines.

    LIQUIDITY AND CAPITAL RE

SOURCES During the three and nine month periods ended September 30, 2007, cash flow from operating activities, including the change in non-cash operating assets and liabilities, was $1,000 and $3,801,000, respectively, compared with a deficit of $133,000 and $365,000 in the same periods of the previous year. The increase in cash flow from operating activities, including the change in non-cash operating assets and liabilities is due to a decrease in the change in non-cash operating assets and liabilities offset by a reduction of net income in 2007 compared to 2006. Expenditures on capital assets during the three and nine month periods ended September 30, 2007 were $317,000 and $853,000 respectively compared to $2,601,000 and $4,729,000 in the corresponding periods of the previous year. The capital expenditures in 2007 and 2006 related to the acquisition of additional manufacturing equipment, computer hardware and software and the cost of leasehold improvements. Debt and capital lease repayments were $1,596,000 in the first nine months of 2007 versus $1,097,000 in the first nine months of 2006. At September 30, 2007, Innicor had a positive working capital position of $22,538,000 and a working capital ratio of 3.1:1 compared with a working capital position of $22,053,000, or a ratio of 2.7:1, at December 31, 2006. CONTRACTUAL OBLIGATIONS ($000's) Less than 1-3 4-5 After Total 1 year years years 5 years Term Debt(1) $324 $324 $- $- $- Capital Lease Obligations 7,618 2,321 3,928 1,369 - Operating Leases(2) 10,047 1,823 3,182 2,669 2,373 ----------------------------------------------------- Total $17,989 $4,468 $7,110 $4,038 $2,373 ----------------------------------------------------- ----------------------------------------------------- (1) Term debt with principal repayments calculated on a 48 month amortization period. (2) Primarily facilities leases. OUTLOOK Activity levels in the Canadian oilfield services sector have been impacted by uncertainty related to oil and gas prices in the short term. Industry analysts are expecting the lower activity levels experienced year to date to continue for the remainder of 2007 and into 2008 and to be below the levels achieved in recent years in Canada. The recently announced changes to the Alberta royalty structure on oil and gas revenues could also have a negative impact on oilfield activity levels in Alberta. 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 "work-over" of producing wells as opposed to solely in 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 ($000's except where noted) 2007 2006 2005 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 --------------------------------------------------------- Revenue 15,642 9,403 18,959 14,495 16,494 11,440 19,850 17,595 Cost of goods sold 8,497 6,029 9,187 8,731 8,474 5,924 9,643 9,890 --------------------------------------------------------- Gross margin 7,145 3,374 9,772 5,764 8,020 5,516 10,207 7,705 Operating expenses 6,590 6,323 7,264 6,455 6,448 5,523 6,443 5,483 --------------------------------------------------------- Income (loss) before income taxes 555 (2,949) 2,508 (690) 1,572 (7) 3,764 2,222 Provision for (recovery of) income taxes 175 (835) 889 (179) 601 58 1,283 893 --------------------------------------------------------- Net Income (loss) 380 (2,114) 1,619 (512) 971 (65) 2,481 1,329 --------------------------------------------------------- --------------------------------------------------------- Add back: Depreciation & amortization 782 723 689 592 536 517 502 521 Interest 163 129 185 197 124 99 72 101 Taxes 175 (835) 889 (179) 601 58 1,283 893 --------------------------------------------------------- EBITDA 1,500 (2,096) 3,382 98 2,231 609 4,338 2,844 --------------------------------------------------------- --------------------------------------------------------- Net Income (loss) per share ($) - basic and diluted 0.02 (0.12) 0.09 (0.03) 0.05 0.00 0.14 0.07 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 (unaudited) September December ($000's) 30 2007 31 2006 ASSETS CURRENT ASSETS Accounts receivable $ 11,793 $ 12,310 Inventory 20,778 22,806 Prepaid expenses and deposits 596 327 ---------- ---------- 33,167 35,443 CAPITAL ASSETS 15,604 16,144 GOODWILL 2,332 2,332 ---------- ---------- $ 51,103 $ 53,919 ---------- ---------- ---------- ---------- LIABILITIES CURRENT LIABILITIES Operating loan $ 2,377 $ 4,009 Accounts payable and accrued liabilities 6,033 7,198 Current portion of obligations under capital leases 1,895 1,758 Current portion of term debt 324 425 ---------- ---------- 10,629 13,390 OBLIGATIONS UNDER CAPITAL LEASES 4,836 5,386 FUTURE INCOME TAX LIABILITY 1,159 908 ---------- ---------- 16,624 19,684 ---------- ---------- SHAREHOLDERS' EQUITY Share capital 25,558 25,517 Contributed surplus 1,000 682 Retained Earnings 7,921 8,036 ---------- ---------- 34,479 34,235 ---------- ---------- $ 51,103 $ 53,919 ---------- ---------- ---------- ---------- Innicor Subsurface Technologies Inc. CONSOLIDATED STATEMENTS OF INCOME, COMPREHENSIVE INCOME AND RETAINED EARNINGS For the periods ended (unaudited) Three Months Ended Nine Months Ended ($000's, except per September September September September share amounts) 30 2007 30 2006 30 2007 30 2006 REVENUE $ 15,642 $ 16,494 $ 44,005 $ 47,784 COST OF GOODS SOLD 8,497 8,474 23,714 24,041 --------------------- --------------------- GROSS MARGIN 7,145 8,020 20,291 23,743 --------------------- --------------------- OPERATING EXPENSES Salaries and wages 3,788 3,782 11,528 11,054 General and administrative 1,982 2,281 6,598 6,286 Foreign exchange loss (gain) 218 (13) 378 (17) Interest 163 124 477 295 Depreciation and amortization 439 274 1,195 796 --------------------- --------------------- 6,590 6,448 20,176 18,414 --------------------- --------------------- INCOME BEFORE INCOME TAXES 555 1,572 115 5,329 PROVISION FOR INCOME TAXES Current 115 403 33 1,585 Future 60 198 197 358 --------------------- --------------------- 175 601 230 1,943 --------------------- --------------------- NET INCOME (LOSS) 380 971 (115) 3,386 --------------------- --------------------- OTHER COMPREHENSIVE INCOME - - - - --------------------- --------------------- COMPREHENSIVE INCOME (LOSS) 380 971 (115) 3,386 --------------------- --------------------- RETAINED EARNINGS, beginning of period 7,541 7,577 8,036 5,162 Accumulated other comprehensive income - - - - --------------------- --------------------- RETAINED EARNINGS, end of period $ 7,921 $ 8,548 $ 7,921 $ 8,548 --------------------- --------------------- --------------------- --------------------- NET INCOME (LOSS) PER SHARE Basic $ 0.02 $ 0.05 $ (0.01) $ 0.19 --------------------- --------------------- --------------------- --------------------- Diluted $ 0.02 $ 0.05 $ (0.01) $ 0.19 --------------------- --------------------- --------------------- --------------------- Innicor Subsurface Technologies Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS For the periods ended (unaudited) Three Months Ended Nine Months Ended September September September September ($000's) 30 2007 30 2006 30 2007 30 2006 OPERATING ACTIVITIES Net Income (Loss) $ 380 $ 971 $ (115) $ 3,386 Add items not involving cash Depreciation and amortization 782 536 2,194 1,555 Future income taxes 60 198 197 358 Stock based compensation expense 109 98 325 254 Loss on disposal of equipment 23 3 36 6 --------------------- --------------------- 1,354 1,806 2,637 5,559 Change in non-cash operating assets and liabilities (1,353) (1,939) 1,164 (5,924) --------------------- --------------------- 1 (133) 3,801 (365) --------------------- --------------------- INVESTING ACTIVITIES Proceeds on disposal of equipment 140 3,438 245 3,492 Purchase of capital assets (317) (2,601) (853) (4,729) --------------------- --------------------- (177) 837 (608) (1,237) --------------------- --------------------- FINANCING ACTIVITIES Issue of share capital 28 2 35 191 Proceeds (repayments) of operating loan 733 (277) (1,632) 2,508 Repayment of obligations under capital lease (551) (397) (1,495) (1,001) Repayment of long-term debt (34) (32) (101) (96) --------------------- --------------------- 176 (704) (3,193) 1,602 --------------------- --------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - - - - CASH AND CASH EQUIVALENTS, beginning of period - - - - --------------------- --------------------- CASH AND CASH EQUIVALENTS, end of period $ - $ - $ - $ - --------------------- --------------------- --------------------- --------------------- Supplementary cash flow information: Interest paid $ 163 $ 124 $ 477 $ 295 --------------------- --------------------- --------------------- --------------------- Income taxes paid (refunded) $ (13) $ 742 $ 307 $ 2,127 --------------------- --------------------- --------------------- --------------------- Capital assets acquired under capital leases $ 500 $ 3,553 $ 1,082 $ 4,091 --------------------- --------------------- --------------------- --------------------- 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: 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

Organization Profile

INNICOR SUBSURFACE TECHNOLOGIES INC.

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