Noveko International Inc. Announces Results for the Second Quarter and First Six Months Ended December 31, 2007



    EKO/TSX Venture Exchange

    MONTREAL, Feb. 27 /CNW Telbec/ - Noveko International Inc. ("Noveko" or
the "Company") announces results for the second quarter and first six months
ended December 31, 2007.
    "The second quarter and the first two months of 2008 brought new
developments that hold potential for growth. In February, we closed our first
sales of antimicrobial air filters to hog farms in Canada and the U.S. and our
first sales of Azur(TM) products to the hospitals market. These benefits are
therefore not reflected in the results released today. As for our first sales
of antimicrobial face masks, we expect to realize them in the next six
months," indicated André Leroux, Chairman of the Board and Chief Executive
Officer of Noveko International Inc.
    "We are pursuing our initiatives to establish distribution networks, and
they are yielding benefits. We have signed an exclusive agreement for the
manufacture and distribution of Novek(TM) face masks for the dental care
market in Canada and the U.S., as well as an exclusive agreement for the
distribution of Azur(TM) products to the Canadian pharmacy market.
Furthermore, we were pleased in early February to take a key step toward a
strategic acquisition in Taiwan, namely Purer Life, which would enable us to
assure and control our production of antimicrobial air filters and to
penetrate new markets. We already do business with Purer Life, as a
Noveko Inc. supplier. This transaction could close by the end of April 2008,"
added Mr. Leroux.

    
    Operating Results for the Second Quarter and First Six Months Ended
    --------------------------------------------------------------------
    December 31, 2007
    -----------------

    Three-Month and Six-Month Periods Ended December 31, 2007 and 2006
    (in thousands of $, except per-share amounts) (unaudited)
    -------------------------------------------------------------------------
                                 Three Months                 Six Months
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Revenues                 3,809         3,474         6,611         6,362
    Gross margin             1,612         1,600         2,556         2,849
    EBITDA (earnings (loss)
     before amortization,
     financial expenses
     and income taxes)      (1,493)          131        (3,445)          279
    Net loss                (1,675)         (340)       (3,870)         (699)
    Loss per Class A share
     (basic and diluted)     (0.03)        (0.01)        (0.07)        (0.02)
    Weighted average
     number of Class A
     shares outstanding
     (in thousands)         53,728        41,212        52,713        40,500
    -------------------------------------------------------------------------


    For the second quarter ended December 31, 2007, consolidated revenues grew
by 9.6% to $3.8 million. This growth is due to an increase in BLI's revenues,
SyMa's contribution and a slight increase in ECM's revenues. BLI posted strong
growth of 11.2% in its revenues, which reflect the orders won from new clients
subsequent to the strengthening of its sales team and the positive impact of
the reorganization of its operations in recent months. For its part, ECM
achieved satisfactory revenues for the period. Until December, the subsidiary
focused on fine-tuning and preparing for the launch of its new ultrasound
scanners, which will enable it to develop the human medicine market and to
consolidate its global leadership in veterinary medicine.
    For the first six months of the current fiscal year, consolidated revenues
totaled $6.6 million, up by 3.9% due to SyMa's contribution for its first five
months within the Noveko group and a 3% increase in BLI's revenues. As
indicated in the Highlights section, Noveko Inc. won its first orders of
antimicrobial face masks for $2.3 million and of antimicrobial air filters for
$0.4 million in August 2007. These sales were not realized in the six-month
period as the delivery of these products is expected in the second half of the
current fiscal year.
    Second-quarter selling and administrative expenses increased to
$2.6 million, up by 76% due to the following main factors:

    - the expenses related to the accelerated marketing of the derivative
      products from the antimicrobial filtration technology, specifically
      antimicrobial face masks and air filters; and
    - the hiring of specialized resources at different levels of
      responsibility at head office as well as sales agents in the
      subsidiaries, notably in anticipation of the launch of new products.

    Stock-based compensation represented an expense of $0.5 million for the
second quarter, as opposed to a nil amount for the comparable period of 2006.
    For the first six months of the year, selling and administrative expenses
more than doubled to $4.9 million, due to the aforementioned factors.
Stock-based compensation represented an expense of $1.1 million for the first
half, as opposed to a nil amount for the comparable period of 2006.
    For the second quarter, the operating loss before amortization, financial
expenses and income taxes amounted to approximately $1.5 million, as opposed
to EBITDA of $130,540 for the second quarter ended December 31, 2006. ECM's
EBITDA amounted to $0.3 million, down from $0.6 million for the second quarter
of the previous year, due to an increase in expenses related to the intensive
preparations for marketing its new ultrasound scanners, which started up at
two major international trade shows specializing in medical equipment, held in
Germany and Dubai in December 2007 and January 2008. For its part, BLI's
EBITDA grew considerably, from a loss of $10,972 to a profit of more than
$0.2 million for the period, reflecting the impact of the increase in sales
and reorganization of its operations. As previously mentioned, Noveko Inc.
remained at the production preparation stage in view of honouring its first
orders beginning in the second half of the current fiscal year, while pursuing
its marketing initiatives; thus, the losses of the biomedical activities
amounted to $0.7 million for the period, and those of the head office to
$1.3 million.
    For the first six months, the operating loss before amortization,
financial expenses and income taxes totaled $3.5 million, as opposed to EBITDA
of $0.3 million for the first half of the previous year. This change is due to
the various aforementioned factors.
    Second-quarter amortization expenses amounted to approximately
$0.3 million, compared with close to $0.2 million for the corresponding period
of the previous year. ECM's amortization expenses decreased by $50,000 to
$32,165, due to the fact that the development costs related to the products of
ECM's Agroscan line had already been fully amortized whereas no amortization
was recognized for its newly designed platforms currently being marketed.
BLI's amortization expenses increased by $82,000 to $136,480 subsequent to a
first-quarter accounting adjustment. Biomedical activities incurred
amortization expenses of $69,800, related primarily to the subsidiary SyMa.
    Financial expenses posted a negative balance of $56,402, as opposed to a
positive balance of $245,283 for the second quarter of the previous year. This
change is due mainly to investment income of more than $0.2 million for the
period and a reduction in indebtedness.
    For the first six months, amortization expenses amounted to $0.5 million,
compared with $0.4 million for the first half of the previous year. This
change is due notably to the factors referred to for the second quarter.
    Financial expenses amounted to $39,222, compared with $0.5 million for the
first half of the previous year. This change is due mainly to investment
income of approximately $0.4 million for the period and a reduction in
indebtedness.
    The second-quarter net loss totaled $1.7 million, compared with a net loss
of $0.3 million for the second quarter of the previous year. It should be
pointed out that the subsidiaries ECM and BLI posted a net profit for the
period. Considering a net change in unrealized gains on the translation of
financial statements of self-sustaining foreign operations of approximately
$0.2 million for the second quarter, as opposed to $0.5 million for the same
period a year earlier, a net loss of $1.5 million represented the
comprehensive loss for the second quarter of the current fiscal year, compared
with comprehensive income of $0.2 million for the second quarter of the
previous year.
    The loss per Class A share (basic and diluted) amounted to $0.03 on a
weighted average of 53,727,729 outstanding shares (basic and diluted),
compared with a loss per share of $0.01 on 41,212,252 shares in the second
quarter of the previous year. The increased weighted average number of
outstanding shares is due to the various share issues over the past 12 months.
    For the first six months, the net loss totaled $3.9 million, compared with
a net loss of $0.7 million for the first half of the previous year.
Considering a net change in unrealized gains on the translation of financial
statements of self-sustaining foreign operations of $64,084 for the first six
months of the current fiscal year, as opposed to approximately $0.5 million
for the first half of the previous year, a net loss of $3.8 million
represented the comprehensive loss for the first six months of the current
fiscal year, compared with $0.2 million for the first half of the previous
year.
    The loss per Class A share (basic and diluted) amounted to $0.07 on a
weighted average of 52,712,744 outstanding shares (basic and diluted),
compared with a loss per share of $0.02 on 40,500,241 shares in the first half
of the previous year. The increased weighted average number of outstanding
shares is due to the various share issues over the past 12 months.

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

    Second-quarter operating activities, after net change in non-cash working
capital, used cash flows of $2.4 million, as opposed to a cash inflow of
$0.2 million in the second quarter ended December 31, 2006. This change is
explained primarily by the increase in the net loss, less the adjustments in
stock-based compensation, accreted interest on secured convertible debentures,
amortization, gain on fair value of short-term investments and net change in
non-cash working capital. Net change in non-cash working capital represented a
cash outflow of $1.6 million, compared with a cash inflow of approximately
$0.4 million in the second quarter of the previous year. This variation is due
mainly to the increase in accounts receivable as at December 31, 2007 and a
growth in medical equipment inventories, especially ECM's new ultrasound
scanners.
    Financing activities provided cash flows of $3.0 million, up from
$2.0 million in the equivalent quarter of the previous year. This change is
due mainly to the exercise of warrants for an amount of approximately
$3.0 million. The Company paid interest of more than $0.1 million on secured
convertible debentures, compared with $51,712 in the comparable period a year
earlier; this change reflects the interest paid on the debenture issued at the
end of December 2006 and the conversion of an amount of $1.4 million in
debentures into Class A shares. Finally, the Company made a net principal
repayment on long-term debt of $0.2 million.
    Investing activities used cash flows of approximately $0.2 million,
including some $0.1 million for the purchase of various fixed assets, about
$0.3 million related to the acquisition in progress of Taiwan-based Purer Life
and $0.1 million in capitalized development costs. The Company also recorded
short-term investments of $0.3 million during the second quarter.
    Also considering a $12,630 foreign exchange loss on cash in foreign
currencies, the period's aggregate cash inflows and outflows provided net cash
flows of $0.5 million, compared with $1.7 million in the second quarter of the
previous year.
    For the first six months, operating activities, after net change in
non-cash working capital, used cash flows of $4.3 million, compared with more
than $0.5 million in the six-month period ended December 31, 2006. This change
is explained primarily by the increase in the net loss, less the adjustments
in stock-based compensation, accreted interest on secured convertible
debentures, amortization, gain on fair value of short-term investments and net
change in non-cash working capital. Net change in non-cash working capital
represented a cash outflow of $2.2 million, compared with $0.3 million in the
first half of the previous year. This variation is due mainly to the increase
in accounts receivable as at December 31, 2007 and a growth in medical
equipment inventories, especially ECM's new ultrasound scanners.
    Financing activities provided cash flows of $3.1 million, compared with
$2.7 million in the first half of the previous year. This change is due mainly
to the exercise of warrants for an amount of approximately $3.4 million. Bank
indebtedness has increased by more than $0.1 million since the beginning of
the current fiscal year. The Company paid interest of approximately
$0.2 million on secured convertible debentures, compared with more than
$0.1 million in the equivalent period of the previous fiscal year; this change
reflects the interest paid on the debenture issued at the end of December 2006
and the conversion of an amount of $1.4 million in debentures into Class A
shares. Finally, the Company made a net principal repayment on long-term debt
of $0.5 million during the first half of the current fiscal year.
    Investing activities used cash flows of $1.1 million, including a cash
payment of $0.5 million for the acquisition of SyMa at the end of July 2007.
In addition, a consideration of $1.4 million was allocated to the purchase of
a building housing the head office as well as office equipment and information
technology, plus amounts of approximately $0.3 million for the acquisition in
progress of Taiwan-based Purer Life and $0.2 million in capitalized
development costs. The Company also recorded short-term investments of
$1.3 million during the first half.
    Aggregate cash inflows and outflows used net cash flows of $2.3 million
during the first half, whereas cash inflows and outflows for the first
six months of the previous year had provided cash flows of $1.5 million.
Noveko ended the first six months of the current fiscal year with cash and
cash equivalents of $0.4 million.

    Financial Position
    ------------------

    Balance Sheet Highlights as at December 31, 2007
    (in thousands of $)
    -------------------------------------------------------------------------
                                               December 31,          June 30,
                                                      2007              2007
    -------------------------------------------------------------------------
    Total assets                                    49,242            42,243
    Shareholders' equity                            34,183            27,351
    Total interest-bearing debt (1)                  7,211             8,367
    Cash, cash equivalents and
     short-term investments                         13,397            16,960
    -------------------------------------------------------------------------
    (1) Including long-term debt and its current portion, bank advances and
        bank loans, as well as convertible debentures.

    The changes in Noveko's financial position between June 30, 2007 and
December 31, 2007 mainly reflect the period's results, the purchase of a
building for a consideration of $1.2 million and the acquisition of all the
issued and outstanding shares of Laboratoire SyMa Inc., concluded on July 26,
2007. In addition to a cash consideration of $0.5 million, this acquisition
was settled by the issue of 745,156 Class A shares for a value of
$4.9 million.
    These transactions explain the increase in fixed assets, intangible assets
and goodwill over June 30, 2007.
    As at December 31, 2007, total assets amounted to $49.2 million, up by
16.6% or $7.0 million over June 30, 2007. Working capital totaled
$18.4 million for a current ratio of 3.6:1 as at December 31, 2007, compared
with $20.0 million and a 4.2:1 ratio as at June 30, 2007.
    As at December 31, 2007, shareholders' equity amounted to $34.2 million,
compared with $27.4 million as at June 30, 2007, primarily reflecting the
increase of $10.8 million in capital stock subsequent to the share issues and
of $0.8 million in contributed surplus, less the increase of $3.9 million in
the period's deficit.
    Considering the period's debt repayments, long-term debt including the
current portion totaled $3.6 million as at December 31, 2007, compared with
$4.0 million as at June 30, 2007. Total interest-bearing debt (consisting of
bank advances and bank loans, current portion of long-term debt, long-term
debt and secured convertible debentures) amounted to $7.2 million as at
December 31, 2007, compared with $8.4 million as at June 30, 2007, a decrease
of $1.4 million reflecting the $1.3 million decline in debentures from
June 30, 2007, due mainly to the conversion of $1.4 million in debentures into
Class A shares.

    Capital Stock Information
    -------------------------

    During the first six months ended December 31, 2007, the Company issued
745,156 Class A shares for a total of $4,932,933 in consideration of the
acquisition of all the issued and outstanding shares of Laboratoire Syma Inc.
    Noveko also issued 433,406 Class A shares subsequent to the exercise of
433,406 stock options for a cash consideration of $455,232 and a transfer of
$304,568 from contributed surplus, as well as 934,500 Class A shares
subsequent to the exercise of 934,500 warrants for a cash consideration of
$2,951,975 and a transfer of $746,195 from warrants.
    In addition, the Company issued 1,547,728 Class A shares subsequent to the
exercise of the conversion of $1,362,000 of convertible debenture. Amounts of
$1,228,655 and $183,718 were transferred from the secured convertible
debentures and from the secured convertible debentures included in equity,
respectively.
    Considering these issues, Noveko's capital stock consisted of
54,276,671 Class A shares as at December 31, 2007, compared with 50,615,881 as
at June 30, 2007.

    Highlights of the Second Quarter Ended December 31, 2007
    --------------------------------------------------------

    Agreement with China National Service Corporation - In October 2007,
Noveko signed an agreement with China National Service Corporation ("CNSC"),
one of China's most prominent state-owned companies, dealing with the
businesses of international cooperation, service and Chinese government
sponsored projects worldwide. This agreement aims to promote Noveko's
antimicrobial filtration technology to all levels of Chinese government and
its related food and health organizations, to obtain the government
authorizations required for the marketing of Noveko's antimicrobial face masks
and antimicrobial air filters, and to develop the supporting sales and
distribution channels in China. CNSC is responsible for providing Noveko with
monitoring and enforcement services in the Chinese market to prevent any
infringement of Noveko's intellectual property rights and trademarks.
    First Pig Farm in China Equipped with Noveko's Antimicrobial Air Filters -
In October 2007, Noveko signed a cooperation agreement with the Ma'anshan
Agriculture Committee (Anhui Province, China) to equip a first pig farm with
Noveko's antimicrobial air filters in the coming months in order to
demonstrate this technology's performance and to market it on a larger scale.
    Grant of Stock Options - On October 25, 2007, the Company granted to
directors, consultants and employees, stock options to acquire a total number
of 2,000,000 Class A shares, at a price of $6.80 per share. On December 12,
2007, the Board of Directors approved the grant of 200,000 stock options to
key employees, entitling them to purchase Class A shares at a price of
$9.68 per share, representing the closing price of the Class A shares as at
December 11, 2007. 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 and will expire in five years.
    Amendment to Stock Option Plan - On November 20, 2007, the TSX Venture
Exchange approved the amendment to the stock option plan adopted by the
Company's Board of Directors increasing the number of Class A shares that may
be issued followed the exercise of options granted or to be granted under the
plan from 8,242,776 to 10,698,780 Class A shares. This amendment to the stock
option plan was approved by Noveko's shareholders at the Annual General and
Special Meeting of Shareholders held on December 12, 2007.
    Health Canada Establishment Licence and DIN Delivered for SyMa's Azuro(TM)
Products - FDA Authorization to Market its Products in the United States -
Signature of Two Agreements with New Clients - In November 2007, SyMa was
issued a Health Canada establishment licence and DIN (drug identification
number) for all its products, more specifically the Azur(TM) Medical -
allowing it to sell them in healthcare institutions across Canada. It also
received FDA authorization to market its Azur(TM) products in the United
States. In addition, SyMa entered into an agreement with METRO INC., under
which it will supply its line of Azuro(TM) products to the METRO and METRO
Plus supermarkets as well as the Super C discount supermarkets, representing
more than 280 stores operating in Quebec. It also signed a three-year
agreement with the Fédération des Caisses Desjardins du Québec, whereby it
will supply its line of Azur(TM) products to the network of Desjardins credit
unions and their service centres, representing more than 1,400 Desjardins
branches across Canada.
    Conclusive Results of the Effectiveness Tests of the Noveko(TM)
Antimicrobial Air Filter for Hog Farms - In December 2007, Noveko announced
the results of a complete series of tests jointly conducted by Dr. Laura
Batista of the Faculty of Veterinary Medicine of the Université de Montréal
and the Centre de development du porc du Québec inc. (CDPQ). This study proved
that Noveko Inc's patented antimicrobial air filter can prevent airborne
introduction to swine facilities of the virus causing the porcine reproductive
and respiratory syndrome (PRRS) - a virus that infects up to 90% of swine
herds in certain regions having a large animal population, according to the
Faculty of Veterinary Medicine of the Université de Montréal (2007), and
causing annual losses of several hundred million dollars for the North
American swine industry. Thus, the subsidiary Noveko Inc. has developed a new
means of defence against porcine viruses that can be incorporated into a
global biosafety protocol for hog and poultry breeding farms.

    Events Subsequent to Balance Sheet Date
    ---------------------------------------

    Strengthening of the Subsidiary Noveko Inc.'s Management - In January
2008, Gaston Lavallée, Vice-President, Business Development of Noveko
International Inc., was appointed to the newly created position of President
and Chief Operating Officer of Noveko Inc. In addition to his new
responsibilities, Mr. Lavallée continues to act as Vice-President, Business
Development of Noveko International Inc.
    Exclusive Agreement Between Noveko Inc. and A.R. Medicom Inc. - In January
2008, Noveko Inc. signed an exclusive agreement with A.R. Medicom Inc.,
pursuant to which Medicom will manufacture antimicrobial surgical masks using
Noveko Inc.'s patented antimicrobial technology and ensure the distribution of
these face masks to the dental care market in Canada and the United States.
With offices in North America, Europe and Asia, Medicom benefits from a
leading share of the dental professional-use disposables market and the
support of distribution network consisting of some 300 distribution partners
who include world-renowned companies specializing in supplies, equipment and
services for dental care professionals. This agreement should yield
significant royalties as of 2008.
    Definitive Offer for the Strategic Acquisition of Purer Life in Taiwan -
Further to the execution on January 10, 2008 of a letter of intent to acquire
Purer Life, a Taiwan-based company specializing in the manufacture of
filtration fabric, Noveko announced on February 4, 2008 that it had agreed
with Purer Life and its shareholders on the terms and conditions of such a
transaction by of a Definitive Offer. Noveko will purchase, directly or
through a subsidiary, all the issued and outstanding shares of Purer Life and
those of a firm of the same group for a total consideration of CAN$2,500,000
plus the issue of 1,100,000 Class "A" Shares of Noveko. The shares of the
Company to be issued pursuant to this transaction will be subject to the
mandatory four-month hold period. The transaction could close no later than
April 30, 2008 (or any other date agreed to by the parties) subject to a full
satisfactory due diligence, particularly, in connection with the transfer, in
full ownership, to Purer of all patents and applications for patents linked
with the business of Purer, the applicable approvals, if any, of Taiwan
investment authorities, and the approval of the TSX Venture Exchange.
    Conversion of Convertible Debenture - On January 25, 2008, the Company
issued 800,001 Class A shares subsequent to the exercise of conversion right
of $762,586 of convertible debenture.
    Exclusive Agreement Between the Subsidiary Laboratoire SyMa Inc. and
Magnum Pharmaceutics Inc. - In February 2008, SyMa signed an exclusive
agreement with Magnum Pharmaceutics Inc., a management services company
specializing in the commercialization of pharmaceutical and related products
with operations in Canada and worldwide. This agreement will allow the
marketing of Azuro(TM) brand products throughout the Canadian pharmacy market
with the support of Magnum's services, primarily in sales and distribution.
    Grant of Stock Options - On February 27, 2008, the Board of Directors
approved the grant of 100,000 stock options to a consultant, entitling him to
purchase Class A shares at a price of $6.25 per share, representing the
closing price of the Class A shares as at February 26, 2008. 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 and will
expire in five years.

    Profile
    -------

    Noveko International Inc. currently has four subsidiaries: S.A.S. ECM,
Noveko Inc., Laboratoire SyMa Inc. ("SyMa") and Bolduc Leroux Inc. ("BLI").
ECM specializes in the design and marketing of portable real-time ultrasound
scanners for use in veterinary and human medicine. Noveko Inc. develops the
Company's biomedical and environmental business, specifically its patented
antimicrobial filtration technology and derivative products (Noveko(TM)
antimicrobial face masks and air filters). SyMa specializes in the manufacture
of sanitizers, more specifically the antimicrobial products (for hands, feet
and surfaces) sold under the Azuro(TM) trademark. 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 markets. Operating since
September 2002, the Company 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 are based on assumptions exposed
to major risks and uncertainties. Although Noveko deems the expectations
reflected in these forward-looking statements to be reasonable, the Company
cannot provide any guarantee as to the materialization of the expectations
reflected in these forward-looking statements. The TSX Venture Exchange has
not reviewed and does not accept responsibility for the adequacy or accuracy
of this release.



    Consolidated balance sheets

    As at December 31, 2007 and June 30, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                               December 31,          June 30,
                                                      2007              2007
    -------------------------------------------------------------------------
                                                (unaudited)         (audited)

    Assets
    Current assets:
      Cash and cash equivalents             $      370,040   $     2,668,494
      Short-term investments                    13,027,389        14,291,887
      Accounts receivable                        4,081,631         2,494,052
      Inventories                                4,340,890         3,276,904
      Prepaid charges                              415,759           502,982
      Investment in Canadian Immigrant
       Investor Program                          3,158,754         3,087,423
    -------------------------------------------------------------------------
                                                25,394,463        26,321,742

    Fixed assets                                 6,724,571         5,605,250
    Intangible assets                            4,531,461         1,656,586
    Other assets                                 1,188,857           911,354
    Future income taxes                            790,208           680,706
    Goodwill                                    10,612,097         7,067,385
    -------------------------------------------------------------------------
                                            $   49,241,657   $    42,243,023
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity

    Current liabilities:
      Bank advances                         $      360,972   $        18,287
      Bank loan                                    144,280                 -
      Accounts payable and accrued
       liabilities                               2,757,256         2,422,273
      Loans under Canadian Immigrant
       Investor Program                          3,158,754         3,087,423
      Current portion of long-term debt            560,801           801,029
    -------------------------------------------------------------------------
                                                 6,982,063         6,329,012

    Long-term debt                               3,086,104         3,158,442
    Secured convertible debentures               3,059,297         4,389,576
    Future income taxes                          1,931,138         1,014,814

    Shareholders' equity:
      Capital stock                             44,373,998        33,570,722
      Portion of the secured convertible
       debentures included in equity               735,017           918,735
      Warrants                                   3,921,251         4,667,446
      Contributed surplus                        2,112,269         1,325,504
      Deficit                                  (16,564,590)      (12,672,254)
      Accumulated other comprehensive loss        (394,890)         (458,974)
    -------------------------------------------------------------------------
                                                34,183,055        27,351,179
    -------------------------------------------------------------------------
                                            $   49,241,657   $    42,243,023
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated statement of operations

    Six and three month periods ended December 31, 2007 and 2006
    (unaudited)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                Three months                  Six months
                              2007          2006          2007          2006
    -------------------------------------------------------------------------

    Revenues          $  3,808,735  $  3,474,406  $  6,611,083  $  6,361,858

    Cost of sales        2,196,698     1,874,655     4,054,739     3,512,596
    -------------------------------------------------------------------------
                         1,612,037     1,599,751     2,556,344     2,849,262

    Operating expenses:
      Administrative
       and selling
       expenses          2,601,532     1,480,099     4,883,077     2,559,227
      Stock-based
       compensation        526,166             -     1,091,333             -
      Research and
       development         220,255       178,453       279,745       199,998
      Research and
       development tax
       credits            (242,587)     (189,341)     (252,587)     (189,341)
    -------------------------------------------------------------------------

                         3,105,366     1,469,211     6,001,568     2,569,884
    -------------------------------------------------------------------------

    Income (loss)
     before
     amortization,
     financial expenses
     and income taxes   (1,493,329)      130,540    (3,445,224)      279,378

    Amortization           256,358       151,087       491,106       443,785
    Financial expenses     (56,402)      245,283        39,222       496,475
    -------------------------------------------------------------------------

                           199,956       396,370       530,328       940,260
    -------------------------------------------------------------------------

    Loss before income
     taxes              (1,693,285)     (265,830)   (3,975,552)     (660,882)

    Income taxes:
      Current                2,058       160,817         2,058       235,891
      Future               (20,013)      (86,276)     (107,203)     (198,070)
    -------------------------------------------------------------------------

                           (17,955)       74,541      (105,145)       37,821
    -------------------------------------------------------------------------

    Net loss          $ (1,675,330) $   (340,371) $ (3,870,407) $   (698,703)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and
    diluted earnings
    per share         $      (0.03) $      (0.01) $      (0.07) $      (0.02)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     number of
     outstanding
     shares basic
     and diluted        53,727,729    41,212,252    52,712,744    40,500,241
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated statements of comprehensive loss

    Six and three month periods ended December 31, 2007 and 2006
    (unaudited)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                 Three months                 Six months
                              2007          2006          2007          2006
    -------------------------------------------------------------------------

    Net loss          $ (1,675,330) $   (340,371) $ (3,870,407) $   (698,703)
    Other
     comprehensive
     loss, net of
     income taxes:

    Change in
     unrealized gains
     on translation of
     financial
     statements of
     self-sustaining
     foreign
     operations            167,440       533,018        64,084       489,707
    -------------------------------------------------------------------------

    Comprehensive
     loss             $ (1,507,890) $    192,647  $ (3,806,323) $   (208,996)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated statement of deficit and contributed surplus
    Six-month periods ended December 31, 2007 and 2006
    (unaudited)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                               December 31,      December 31,
                                                      2007              2006
    -------------------------------------------------------------------------

    DEFICIT

    Deficit, beginning of period            $  (12,672,254)  $    (5,693,747)

    Restatement related to the new
     accounting policies regarding
     financial instruments                           3,161                 -
    -------------------------------------------------------------------------
    Restated balance                           (12,669,093)       (5,693,747)

    Net loss                                    (3,870,407)         (698,703)

    Share issuance fees                            (25,090)          (26,729)
    -------------------------------------------------------------------------
    Deficit, end of period                  $  (16,564,590)  $    (6,419,179)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CONTRIBUTED SURPLUS

    Contributed surplus, beginning of
     period                                 $    1,325,504   $        85,673

    Fair market value of stock options
     granted                                     1,091,333                 -

    Fair value of stock options exercised         (304,568)           (9,000)
    -------------------------------------------------------------------------
    Contributed surplus, end of period      $    2,112,269   $        76,673
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated statement of cash flows
    Periods ended December 31, 2007 and 2006
    (unaudited)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                 Three months                 Six months
                              2007          2006          2007          2006
    -------------------------------------------------------------------------

    Cash flows from
     operating
     activities:
      Net loss        $ (1,675,330) $   (340,371) $ (3,870,407) $   (698,703)
      Adjustments
       for :
        Future income
         taxes             (20,013)      (86,276)     (107,203)     (198,070)
        Accreted
         interest on
         secured
         convertible
         debentures        113,465        69,572       261,374       155,720
        Stock-based
         compensation      526,166             -     1,091,333             -
        Amortization       256,358       151,087       491,106       443,785
        Amortization -
         deferred
         financing
         costs                   -        17,515             -        35,030
        Loss (gain) on
         disposal of
         fixed assets            -           (53)            -        (2,115)
        Gain on fair
         value of
         short-term
         investments       (77,345)            -       (31,591)            -
        Foreign
         exchange
         loss (gain)           252        (1,479)        1,835         5,921
    -------------------------------------------------------------------------

                          (876,447)     (190,005)   (2,163,553)     (258,432)

    Net change in non-
     cash working
     capital            (1,550,432)      345,076    (2,177,086)     (267,715)
    -------------------------------------------------------------------------

                        (2,426,879)      155,071    (4,340,639)     (526,147)

    Cash flows from
     financing
     activities :
      Net changes in
       bank advances       346,813       (51,055)      278,597       203,206
      Increase in bank
       loan                  2,620             -       144,280             -
      Increase in
       long-term debt            -       307,540             -       307,540
      Principal
       repayment on
       long-term debt     (209,418)     (390,694)     (526,863)     (744,076)
      Proceeds of
       secured
       convertible
       debentures
       issued less
       related fees              -     2,178,669             -     2,178,669
      Interest paid on
       secured
       convertible
       debentures         (119,400)      (51,712)     (176,147)     (120,000)
      Proceeds of
       Class A shares
       and warrants
       issued less
       related
       expenses          2,998,385        15,000     3,382,117       849,602
    -------------------------------------------------------------------------
                         3,019,000     2,007,798     3,101,984     2,674,941

    Cash flows from
     investing
     activities:
      Business
       acquisition
       including bank
       overdraft
       assumed                   -             -      (525,403)            -
      Acquisition of
       fixed assets        (93,816)     (380,104)   (1,408,277)     (472,684)
      Proceeds from
       disposal of
       fixed assets              -         1,024             -        10,787
      Government
       assistance
       related to
       acquisition of
       fixed assets         47,500             -        47,500             -
      Acquisition of
       intangible
       assets               (2,250)      (32,294)       (9,750)      (32,294)
      Proceeds from
       disposal of
       short-term
       investments      19,256,074             -    20,259,564             -
      Acquisition of
       short-term
       investments     (18,982,559)            -   (18,982,559)            -
      Deferred charges           -       (98,599)            -       (98,599)
      Acquisition of
       other assets       (276,647)            -      (276,647)            -
      Deferred
       development
       costs              (105,919)       25,565      (164,949)      (94,145)
    -------------------------------------------------------------------------
                          (157,617)     (484,408)   (1,060,521)     (686,935)

    Foreign exchange
     loss on cash in
     foreign currencies     12,630        58,649           722        46,774
    -------------------------------------------------------------------------
    Net change in cash
     and cash
     equivalents           447,134     1,737,110    (2,298,454)    1,508,633
    Cash and cash
     equivalents,
     beginning of
     period                (77,094)      397,618     2,668,494       626,094
    -------------------------------------------------------------------------

    Cash and cash
     equivalents, end
     of period        $    370,040  $  2,134,728  $    370,040  $  2,134,728
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows related to operating activities include interest paid for
    $217,488 ($298,723 in 2006) and income taxes paid for $114,089 ($124,225
    in 2006).
    




For further information:

For further information: Jacques Tessier, Vice-President and Chief
Financial Officer; Roxanne Rinfret, Manager, Financial Information, Noveko
International Inc., (514) 344-3030, http://www.noveko.com

Organization Profile

Noveko International Inc.

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