Noveko International Inc. Announces Results for the Second Quarter and First Six Months Ended December 31, 2006



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    Results - Noveko International Inc. increased its second-quarter revenues
    by 92.0% and achieved an operating profit before depreciation,
    amortization, financial expenses and income taxes.

    New milestones in the development of the antimicrobial technology during
    the second quarter and announcement of the initial production of
    antimicrobial face masks on February 26, 2007.
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    Ticker Symbol: EKO / TSX Venture Exchange

    MONTREAL, March 1 /CNW Telbec/ - Noveko International Inc. ("Noveko" or
"the Company" or "the Group") announces its financial results for its second
quarter and first six months ended December 31, 2006. "Noveko pursued the
turnaround initiated in the first quarter and achieved a further profit before
depreciation, amortization, financial expenses and income taxes for the second
quarter ended December 31, 2006. On December 29, 2006, we were also pleased to
close a new $2.2 million financing arrangement that will be used primarily for
the development of our antimicrobial technology and the initial production and
marketing of our antimicrobial face masks," indicated André Leroux, President
and Chief Executive Officer:

    Operating Results
    -----------------

    Consolidated revenues rose 92.0% to $3.5 million, up by $1.7 million over
the second quarter the previous year. This sharp rise is due primarily to the
revenues of BLI (acquired on April 28, 2006) which totaled $1.5 million - as
well as a major 11.2% increase in ECM's revenues, which amounted to
$2.0 million for the second quarter. BLI continued to reap the benefits of its
2005 investments, which enabled it to double its manufacturing capacity and to
install new cutting-edge equipment in order to increase its client base and
execute larger-scale contracts. The subsidiary ECM actively pursued its growth
in the veterinary medicine market, especially in Europe and in new markets
such as Russia where it achieved a major advance, due to its market
development efforts and the launch of its Agroscan branded A14 ultrasound
scanner.
    The gross margin grew by 55.3% or $0.6 million to $1.6 million. The gross
profit margin as a percentage of revenues worked to an appreciable 46.0%,
compared with 56.9% for the equivalent quarter the previous year. This change
is due to the fact that there was only one business sector during the three
months ended December 31, 2005, specifically portable ultrasound scanners
which yield higher profit margins than BLI's operations. It should be noted
that the second-quarter gross margin reflects a significant increase over the
first-quarter gross margin of 43.3%.
    Selling and administrative expenses amounted to $1.5 million, up by 34.6%
or $0.4 million over the second quarter the previous year. This rise is due
mainly to the integration of BLI. Research and development expenses increased
by approximately $0.1 million in the second quarter, as a result primarily of
the intensified R&D on the new technological platforms that ECM is poised to
launch in the fall of 2007. During the period, Noveko also obtained a $189,341
research and development tax credit, primarily for ECM's R&D and an adjustment
related to BLI's R&D.
    BLI's contribution and ECM's solid performance enabled Noveko to achieve
an operating profit before depreciation, amortization, financial expenses and
income taxes of $130,540, as opposed to an operating loss of $150,442 for the
second quarter the previous year.
    Depreciation and amortization expenses totaled $151,087, compared with
$82,187 for the same quarter the previous year. This increase is due primarily
to the integration of BLI's fixed assets, specifically a building and
specialized manufacturing equipment. It should be pointed out that the Company
re-evaluated some of the subsidiary's assets in connection with the
acquisition of BLI, such as the patent for its antibacterial filtration
technology, net tangible assets and client relationships, as stated in the
Annual Report as at June 30, 2006. Financial expenses amounted to $245,283 for
the second quarter, up slightly over $218,116.
    Noveko's net loss was reduced to $340,371, down considerably from
$567,794 for the second quarter ended December 31, 2005. The loss per Class A
share (basic and diluted) amounted to $0.008 on a weighted average of
41,212,252 outstanding shares, compared with a loss per share of $0.020 on
28,062,007 shares for the second quarter the previous year. The increased
weighted average number of outstanding shares is due to the Class A share
issues in connection with the acquisition of BLI; also, Noveko issued
1,800,000 units in September 2006, as well as 30,000 Class A shares on the
exercise of 30,000 stock options.

    Principal Cash Flows
    --------------------

    Operating activities before net change in non-cash working capital items
used cash flows of $190,005, as a result primarily of the period's net loss as
well as the increase in depreciation and amortization of fixed assets related
mainly to the acquisition of BLI, intangible assets, the write-off of deferred
development costs, future income taxes and accreted interest on convertible
debentures. However, net change in non-cash working capital items provided
cash flows of $0.3 million for the second quarter ended December 31, 2006. It
is hence interesting to note that operating activities provided net cash flows
of about $0.2 million after net change in non-cash working capital items,
whereas they had used net cash flows of $0.2 million during the second quarter
the previous year.
    Financing activities provided cash flows of $2.0 million, arising from
the issue of secured convertible debentures on December 29, 2006, for a
nominal value of $2.2 million. In addition, the Company reduced its long-term
debt by $0.4 million and paid interest of $51,712 on its secured convertible
debentures during the period.

    Operating Results for the First Six Months Ended December 31, 2006
    ------------------------------------------------------------------

    Consolidated revenues more than doubled to $6.4 million, up by almost
$3.3 million over the first half of the previous year. This increase is due
primarily to BLI's $3.0 million contribution for the entire six-month period,
as well as a 7.0% increase in ECM's revenues, which exceeded $3.3 million for
the first six months of the current fiscal year, up from $3.1 million for the
first half of the previous year.
    The gross margin grew by 58.7% or almost $1.1 million to $2.8 million.
The gross profit margin as a percentage of revenues worked to an appreciable
44.8%, compared with 57.9% for the first half of the previous year. This
change is due to the fact that there was only one business sector during the
six months ended December 31, 2005, specifically portable ultrasound scanners
which yield higher profit margins than BLI's operations.
    For the first six months ended December 31, 2006, Noveko posted an
operating profit before depreciation, amortization, financial expenses and
income taxes of $279,378, as opposed to an operating loss of $163,126 for the
equivalent period the previous year. This important turnaround can be
attributed to BLI's contribution for the full first half, ECM's solid
performance throughout the period and tight operating cost controls.
    Noveko reduced its net loss to $0.7 million for the first half of the
current fiscal year, down from $0.9 million for the six-month period ended
December 31, 2005. The loss per Class A share (basic and diluted) totaled
$0.017 on a weighted average of 40,500,241 outstanding shares, compared with a
loss per share of $0.031 on 27,940,132 shares for the first half of the
previous year.

    Cash as at December 31, 2006
    ----------------------------

    Operating activities before net change in non-cash working capital items
used cash flows of $258,432, as a result primarily of the period's net loss as
well as the increase in depreciation and amortization of fixed assets related
mainly to the acquisition of BLI, intangible assets, the write-off of deferred
development costs, future income taxes and accreted interest on secured
convertible debentures. Net change in non-cash working capital items used cash
flows of $267,715 for the first half ended December 31, 2006. After net change
in non-cash working capital items, operating activities used net cash flows of
$0.5 million, compared with $0.6 million the previous year.
    Financing activities provided cash flows of $2.7 million, including    
$2.2 million from the issue of secured convertible debentures on December 29,
2006 - $0.8 million from the issue of Class A shares and warrants in September
2006 - bank advances of $0.2 million and long-term debt of $0.3 million. In
addition, the Company made a $0.7 million principal repayment on its long-term
debt and paid interest of $120,000 on the secured convertible debentures
during the period. Also considering the $46,774 exchange gain on cash
denominated in foreign currency, as opposed to a $30,441 exchange loss for the
equivalent period comparable the previous, the aggregate cash inflows and
outflows for the first six months ended December 31, 2006 provided net cash
flows of $1.5 million, whereas cash inflows and outflows for the first half of
the previous year had used net cash flows $0.1 million. Noveko closed the
period with cash of $2.1 million, up from $1.1 million as at December 31,
2005.

    Financial Position as at December 31, 2006
    ------------------------------------------

    Working capital totaled about $2.0 million as at December 31, 2006 for a
current ratio of 1.3:1, compared with a deficiency of $0.2 million as at
June 30, 2006. Shareholders' equity totaled $9.4 million as at December 31,
2006, up from $8.4 million as at June 30, 2006. This $1.0 million growth
mainly reflects - first, the increase of $0.8 million in share capital
subsequent to the issuance of shares during the period, of $0.3 million in the
equity component of the secured convertible debentures and of $0.1 million
from the exercise of warrants - and second, a significant reduction in the
foreign currency translation adjustment which went from a negative amount of
$0.5 million as at June 30, 2006 to $14,711 as at December 31, 2006. Long-term
debt including its current portion totaled $5.7 million as at December 31,
2006, compared with $6.0 million as at June 30, 2006, after accounting for a
net repayment of $0.3 million. Deducting available cash, Noveko had total net
debt of $10.0 million, representing 51.6% of total invested capital (sum of
total net debt and shareholders' equity), compared with total net debt of
$9.8 million or 53.8% of total invested capital as at June 30, 2006.

    Highlights for the Second Quarter and Subsequent to December 31, 2006
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    As at November 10, 2006, the Company approved an amendment to its stock
option plan to increase the total number of Class A shares that may be
acquired under the plan to 8,242,776 Class A shares. As at December 31, 2006,
the amendment to the stock option plan was ratified by the Company's
shareholders at the Annual General Meeting, and this amendment was approved by
the TSX Venture Exchange. The Company also granted to certain Company
employees, consultants and directors, of options to acquire a total number of
3,100,000 Class A shares, at a price of $0.87 per share. These options can
only be exercised on the basis of one-sixth (1/6) of the total number of
options per every completed three-month period following their grants.
    On December 29, 2006, Noveko concluded a $2.2 million financing
arrangement with the Quorum Group, by way of a secured convertible debenture
bearing interest at a rate of 8% per annum and maturing on December 29, 2011.
    On February 26, 2007, Noveko announced that its subsidiary Noveko Inc.
has started to produce antimicrobial face masks. In partnership with key
American suppliers, Noveko Inc. has successfully completed its manufacturing
tests and produced fabrics for the manufacture of bioactive filtering
products. This initial production will allow the manufacturing of some 50,000
face masks for clinical trials and marketing. The tests conducted on these
fabrics demonstrated that Noveko's face masks provide 100% bioprotection
(superior to N-99-approved products) and reduce weight by over 40%, thereby
greatly facilitating breathing and offering more comfortable skin contact.
This initial production of antimicrobial face masks will be ensured by Suzhou
Fangtian Industries Co., a major Chinese manufacturer and distributor of a
wide range of face masks across the United States, Asia, the Middle East and
Africa. Part of this production will also lead to the completion of the 510K
and FDA certification process, under Dr. Goranov's supervision. Moreover,  
CIBA(R) Experts Services will assist Noveko Inc. in this process.
    Furthermore, in February 2007, Dr. Goranov joined Noveko International
Inc.'s team on an exclusive, full-time basis as Chief Technical Officer of
Noveko Inc.
    Grant of Options - On February 28, 2007, Noveko's Board of Directors
granted 550,000 options to key employees, including 100,000 options to Valérie
Leroux, who was appointed Vice-President, Legal Affairs and Corporate
Secretary on December 14, 2006. Pursuant to the terms of the Company's stock
option plan, the exercise price of the options is the listed market price at
the close of business on the grant date, being a unit price of $1.31.

    Profile
    -------

    Noveko International Inc. currently has three subsidiaries: Noveko Inc.,
S.A.S. ECM (France), and Bolduc Leroux Inc. (BLI). The first two specialize in
the design and marketing of portable real-time ultrasound scanners for use in
veterinary medicine and animal breeding, as well as in human medicine. For its
part, BLI specializes in the custom processing and distribution of steel
products based on client specifications and designs. It has also developed and
markets a line of downdraft particle extraction tables for various industrial,
commercial and pharmaceutical markets. Finally, a U.S. patent for an
antibacterial filtration technology (air filtration systems and masks) is held
by BLI for the benefit of the Group. This technology is now developed by
Noveko Inc. Operating since September 2002, Noveko International was listed on
the TSX Venture Exchange on February 3, 2004.

    The information set forth in this press release includes certain
forward-looking statements. Such statements depend on a certain number of
factors and involve risks and uncertainties. Actual results could differ from
forecasts. The information contained in this press release is dated February
28, 2007, the date on which the release was approved. Unless required to do so
by law, the Company assumes no obligation as to the updating or revision of
these forward-looking statements as a result of new information or future
events.

    
    NOVEKO INTERNATIONAL INC.
    Consolidated balance sheets

    As at December 31, 2006 and June 30, 2006
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                                                   December 31,      June 30,
                                                          2006          2006
                                                    (unaudited)     (audited)
    Assets

    Current assets:
      Cash                                        $  2,134,728  $    626,094
      Short-term investments                             6,082         5,634
      Accounts receivable                            2,304,328     2,527,231
      Inventories                                    4,091,447     3,621,741
      Prepaid charges                                  335,950       261,178
      Current portion of grant receivable               47,500        95,000
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                                                     8,920,035     7,136,878

    Fixed assets                                     5,496,729     5,302,859
    Intangible assets                                1,727,015     1,774,199
    Other assets                                     1,105,726     1,031,277
    Grant receivable                                    95,001        95,001
    Investment in Canadian Immigrant
     Investor Program                                3,022,273     2,942,387
    Future income taxes                                719,220       636,989
    Goodwill                                         7,426,999     7,020,682

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                                                  $ 28,512,998  $ 25,940,272
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    Liabilities and shareholders' equity

    Current liabilities:
      Bank advances                               $  1,885,154  $  1,593,948
      Bank loan                                                       88,000
      Accounts payable and accrued liabilities       2,839,985     3,015,849
      Current portion of long-term debt              2,311,025     2,620,146
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                                                     7,036,164     7,317,943

    Long-term debt                                   3,384,870     3,409,407
    Secured convertible debentures                   4,599,626     2,682,651
    Loans under Canadian Immigrant
     Investor Program                                3,022,273     2,942,387
    Future income taxes                              1,113,068     1,228,907

    Shareholders' equity:
      Capital stock                                 13,756,804    12,976,804
      Portion of secured convertible debentures
       included in equity                              723,410       404,665
      Warrants                                       1,234,000     1,090,000
      Contributed surplus                               76,673        85,673
      Foreign currency translation adjustment          (14,711)     (504,418)
      Deficit                                       (6,419,179)   (5,693,747)
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                                                     9,356,997     8,358,977

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                                                  $ 28,512,998  $ 25,940,272
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    NOVEKO INTERNATIONAL INC.
    Consolidated statement of operations

    Periods ended December 31, 2006 and 2005
    (unaudited)
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                                    Three months                  Six months
                              2006          2005          2006          2005
    -------------------------------------------------------------------------
    Revenues          $  3,474,406  $  1,809,150  $  6,361,858  $  3,101,697

    Cost of sales        1,874,655       778,922     3,512,596     1,305,904
    -------------------------------------------------------------------------
                         1,599,751     1,030,228     2,849,262     1,795,793

    Operating expenses:
      Administrative
       and selling
       expenses          1,480,099     1,099,249     2,559,227     1,830,107
      Stock-based
       compensation              -         2,475             -         4,950
      Research and
       development         178,453        78,946       199,998       123,862
      Research and
       development tax
       credits            (189,341)            -      (189,341)            -
    -------------------------------------------------------------------------

                         1,469,211     1,180,670     2,569,884     1,958,919
    -------------------------------------------------------------------------
    Income (loss)
     before amortization,
     financial expenses
     and income taxes      130,540      (150,442)      279,378      (163,126)

    Amortization           151,087        82,187       443,785       164,172
    Financial expenses     245,283       218,116       496,475       347,905
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                           396,370       300,303       940,260       512,077
    -------------------------------------------------------------------------
    Loss before income
     taxes                (265,830)     (450,745)     (660,882)     (675,203)

    Income taxes:
      Current              160,817       117,049       235,891       192,183
      Future               (86,276)            -      (198,070)            -
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                            74,541       117,049        37,821       192,183
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    Net loss          $   (340,371) $   (567,794) $   (698,703) $   (867,386)
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    Basic and
     diluted earnings
     per share        $     (0.008) $     (0.020) $     (0.017) $     (0.031)
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    Weighted average
     number of
     outstanding
     shares basic
     and diluted        41,212,252    28,062,007    40,500,241    27,940,132
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    NOVEKO INTERNATIONAL INC.
    Consolidated statement of deficit and contributed surplus

    Periods ended December 31, 2006 and 2005
    (unaudited)
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                                                   December 31,  December 31,
                                                          2006          2005
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    DEFICIT
    Deficit, beginning of period                  $ (5,693,747) $ (3,100,805)
    Net loss                                          (698,703)     (867,386)
    Share issue expenses                               (26,729)            -
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    Deficit, end of period                          (6,419,179) $ (3,968,191)
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    CONTRIBUTED SURPLUS

    Contributed surplus, beginning of period      $     85,673  $     75,773
    Fair value of stock options granted                      -         4,950
    Fair market value of stock options exercised        (9,000)            -
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    Contributed surplus, end of period            $     76,673  $     80,723
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    NOVEKO INTERNATIONAL INC.
    Consolidated statement of cash flows

    Periods ended December 31, 2006 and 2005
    (unaudited)

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                                    Three months                  Six months
                              2006          2005          2006          2005
    -------------------------------------------------------------------------
    Cash flows from
     operating
     activities:
      Net loss        $   (340,371) $   (567,794) $   (698,703) $   (867,386)
      Adjustements
       for:
        Future income
         taxes             (86,276)            -      (198,070)            -
        Accreted
         interest on
         secured
         convertible
         debentures         69,572        24,527       155,720       102,387
        Stock-based
         compensation            -         2,475             -         4,950
        Amortization       151,087        82,187       443,785       164,172
        Amortization -
         deferred
         financing
         costs              17,515        13,337        35,030        20,255
        Loss (gain) on
         disposal of
         fixed assets          (53)            -        (2,115)        1,405
        Foreign
         exchange loss      (1,479)        4,737         5,921           243
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                          (190,005)     (440,531)     (258,432)     (573,974)
    Net change in
     non-cash working
     capital               345,076       206,504      (267,715)       12,381
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                           155,071      (234,027)     (526,147)     (561,593)

    Cash flows from
     financing activities:
      Net changes in
       bank advances       (51,005)            -       203,206             -
      Increase in
       long-term debt      307,540     1,300,000       307,540     1,349,011
      Principal repayment
       on long-term debt  (390,694)     (265,499)     (744,076)     (455,259)
      Proceeds of secured
       convertible
       debentures
       issued less
       related fees      2,178,669             -     2,178,669             -
      Interest paid on
       secured
       convertible
       debentures          (51,712)            -      (120,000)            -
      Proceeds of
       Class A shares
       and warrants
       issued less
       related expenses     15,000             -       849,602             -
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                         2,007,798     1,034,501     2,674,941       893,752

    Cash flows from
     investing activities:
      Acquisition of
       fixed assets       (380,104)       (2,321)     (472,684)      (81,273)
      Proceeds from
       disposal of fixed
       assets                1,024             -        10,787        16,221
      Acquisition of
       intangible assets   (32,294)            -       (32,294)            -
      Deferred charges     (98,599)     (154,148)      (98,599)     (169,148)
    Deferred development
     costs                  25,565      (114,228)      (94,145)     (210,332)
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                          (484,408)     (270,697)     (686,935)     (444,532)

    Foreign exchange
     loss on cash in
     foreign currencies     58,649       (11,410)       46,774       (30,441)

    Net change in cash   1,737,110       518,367     1,508,633      (142,814)

    Cash, beginning
     of period             397,618       597,970       626,094     1,259,151
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    Cash, end of
     period           $  2,134,728  $  1,116,337  $  2,134,728  $  1,116,337
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows related to operating activities include interest paid for
    $298,723 ($91,960 in 2005) and income taxes paid for $124,225 ($164,106
    in 2005).
    




For further information:

For further information: André Leroux, President and Chief Executive
Officer; Sylvain Levasseur, CA, CFA, Corporate Controller, Noveko
International Inc., (514) 344-3030, www.noveko.com

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