Noveko International Inc. Announces Results for the Third Quarter Ended March
31, 2010
Revenue Growth of 15% for the Quarter and 42% for the First Nine Months of the Year
EKO/TSX
MONTREAL, May 13 /CNW Telbec/ - Noveko International Inc. ("the Company") today announces the results for its third quarter ended March 31, 2010.
"Our revenues increased by 42% for the first nine months of the fiscal year, of which a 15% increase in the third quarter over the same period of the previous year. Even though certain factors temporarily slowed down our growth, we are confident we will intensify our advancements in our four business segments. Since the beginning of the year, we have reduced our net loss by $5 million and are now operating with minimal debt. We have teamed up with solid partners who are leaders in their fields, as attested to by the recent agreements, such as the one with Bombardier Transportation. The breakthroughs achieved by our filtration segment offer promising growth opportunities in both the transportation industry and in institutional and commercial settings. We also expect our business to improve in the swine industry, with our new-generation, more cost-efficient filtration solutions targeted to a broader client base," indicated André Leroux, Chairman of the Board and Chief Executive Officer of the Company.
Financial Highlights
For the third quarter and first nine months of the current fiscal year, and in comparison with the corresponding periods of the previous year:
- Consolidated revenues from continuing operations up by 15% to $3.0 million, and up by 42% to $12.5 million, respectively; - Stock-based compensation down by $2.4 million and by $6.1 million, respectively; - Loss before amortization, financial expenses, income taxes, other items and discontinued operations down by $1.8 million and by $5.7 million, respectively; - Loss from continuing operations down by $0.7 million to approximately $4.9 million, and down by approximately $5.0 million to $13.6 million, respectively; - Net loss down by $0.5 million to $5.2 million, and down by $4.8 million to $14.3 million, respectively; - Total indebtedness down by $2.3 million since June 30, 2009. Three-Month and Nine-Month Periods Ended March 31, 2010 and 2009 (in thousands of $, except per-share amounts) (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three Months Nine Months 2010(1) 2009 2010(1) 2009 ------------------------------------------------------------------------- Revenues from continuing operations 3,005 2,609 12,480 8,789 Gross margin 1,158 1,418 5,288 4,381 Loss before amortization, financial expenses, income taxes, other items and discontinued operations(2) (3,891) (5,692) (10,835) (16,577) Loss from continuing operations (4,873) (5,577) (13,647) (18,598) Loss from discontinued operations(3) (324) (131) (698) (591) Net loss(4) (5,197) (5,708) (14,345) (19,188) Loss per Class A share (basic and diluted) Continuing operations $ (0.06) $ (0.08) $ (0.19) $ (0.28) Discontinued operations(3) $ (0.01) $ (0.01) $ (0.01) $ (0.01) Net loss(4) $ (0.07) $ (0.09) $ (0.20) $ (0.29) Weighted average number of outstanding Class A shares, basic and diluted (in thousands) 75,916 66,999 72,678 66,472 ------------------------------------------------------------------------- ------------------------------------------------------------------------- --------------------------------------------- --------------------------------------------- Balance Sheet Data March 31, June 30, 2010 2009 --------------------------------------------- Total assets 51,802 50,897 Shareholders' equity 42,193 38,487 Total interest- bearing debt(5) 1,885 4,163 Cash, cash equivalents, short-term investments and deposit in trust 6,133 4,711 --------------------------------------------- --------------------------------------------- (1) The consolidated financial statements include the accounts of the Company and all its wholly-owned subsidiaries as at March 31, 2010. (2) Including stock-based compensation of $599,101, $3,030,931, $3,165,463 and $9,294,848 for the respective periods of 2010 and 2009, which has no impact on the cash balance. (3) BLI's results. (4) Including BLI's results. (5) Including long-term debt and its current portion, bank loans, and short and long-term convertible debentures; excluding BLI. ------------------------------------------------------------------------- Analysis of Operating Results -------------------------------------------------------------------------
Our segmented information is reported based on the following business segments: medical equipment, sanitizers, antimicrobial surgical masks and respirators, filtration products and other activities consisting primarily of the activities of the parent company Noveko International Inc. ("Noveko International"), and of Noveko Trading 2008 LLC ("Noveko Trading"), as well as the marketing management services offered by Magnum Pharmaceutics Inc. ("Magnum") to external clients. Furthermore, the results of operations and the assets and liabilities of Bolduc Leroux Inc. ("BLI") are withdrawn from continuing operations to be treated as discontinued operations in the Company's financial statements.
Consolidated and Segmented Revenues from Continuing Operations (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three Months Nine Months Ended March 31 Ended March 31 ------------------------------------------------------------------------- 2010 2009 2010 2009 ------------------------------------------------------------------------- Medical equipment $ 1,951,538 $ 1,678,579 $ 6,744,101 $ 5,678,036 Sanitizers 174,973 191,108 2,484,763 389,077 Masks 255,452 322,657 1,339,910 341,125 Filtration 545,488 261,676 1,646,080 1,729,944 Other 77,330 154,643 264,946 650,836 ------------------------------------------------------------------------- Total $ 3,004,781 $ 2,608,663 $ 12,479,800 $ 8,789,018 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Consolidated revenues for the third quarter grew by $0.4 million or 15.2% to $3.0 million. This growth primarily reflects the $0.3 million increase in sales of filtration products mainly posted by the subsidiary Epurair Inc. ("Epurair") in the residential and institutional markets, including the initial impact of the agreement concluded in December 2009 with Desjardins Gestion Immobilière Inc. ("DGI") to equip the entire Complexe Desjardins with filters incorporating the Noveko(TM) antimicrobial filtration technologies. In this regard, the installation of the new filtration systems at Complexe Desjardins is right on schedule. To this increase was added a $0.3 million growth in medical equipment sales stemming from the commercialization efforts of SARL Noveko Algérie ("Noveko Algérie") and S.A.S. E.C.M. ("ECM"). In fact, whereas Noveko Algérie posted a 25% growth, ECM increased its sales by approximately 6% during the third quarter. Regarding ECM, this increase would have been higher - at 19% in euros - were it not for the impact of the conversion into Canadian dollars of ECM's sales in euros in the context of the major depreciation of the euro against the Canadian dollar. ECM is further penetrating the human medicine market and its ultrasound scanner sales continue to grow in this market as well as in the veterinary medicine market. Conversely, the mask and sanitizer segments' sales decreased by $67,205 and $16,135 respectively. This decline is notably attributable to the rapid end of the A (H1N1) influenza pandemic at the outset of 2010 and the delays to obtain the required additional certifications in order to market our products in certain territories that led to delays in certain order deliveries, as well as to the cancellation of orders by a distributor experiencing financial problems, combined with the other factors set forth in further detail in the Third-Quarter Highlights and Subsequent Events - Masks, Respirators and Hand Sanitizers section.
For the first nine months, consolidated revenues grew by $3.7 million or 42.0% to $12.5 million. This growth is due to a $1.1 million or 18.8% increase in medical equipment sales reflecting the contribution of Noveko Algérie and ECM, as well as an increase of $2.1 million in sanitizer sales and of $1.0 million in mask sales, subsequent to the sharp rise in demand seen in the first two quarters of the current fiscal year in the context of the pandemic threat then prevailing. Conversely, filtration product sales decreased by approximately $0.1 million due to the business slowdown in the swine market.
The operating profit margin for the third quarter was 38.5%, compared with 54.4% for the corresponding quarter of the previous year. This decline was caused by an increase in logistics services and transportation expenses in various overseas markets, the lower profit margins recorded in the retail market and the higher raw material supply costs that could not be reflected in selling prices due to exchange rates. For the first nine months, the operating profit margin was 42.4%, down from 49.8% for the corresponding period of the previous year. In addition to the previously mentioned factors, this decrease is due to downward price adjustments at the beginning of the year in the segments of filtration products for breeding farms and medical equipment for use in veterinary medicine.
Selling and administrative expenses for the third quarter and first nine months increased by $0.4 million and $0.9 million respectively, to $4.1 million and $12.1 million. This increase reflects the costs related to product marketing and sales initiatives in our various business segments and the reinforcement of the sales team during the third quarter. In addition, the Company had to recognize a provision for doubtful accounts of $0.2 million for the third quarter and of $0.6 million for the first nine months of the current fiscal year, most of which related to the financial problems experienced by one of our distributors.
Stock-based compensation charge for the third quarter and first nine months, which has no impact on the Company's cash balance, decreased by $2.4 million from the third quarter of the previous year and by $6.1 million from the first nine months of the previous year. Primarily as part of the acquisitions closed at the beginning of the previous year, the Company had granted stock options to employees and consultants entitling them to purchase a total of 2,950,000 Class A shares at a weighted average exercise price of $2.76 per share with a vesting period extending over 12 to 30 months. In this regard, it should be noted that the Company uses the fair value based method of accounting for all options granted, whereby a stock-based compensation charge is recognized over the vesting periods of the options with a corresponding increase in contributed surplus. The change in stock-based compensation charge between the first nine months ended March 31, 2010 and the first nine months ended March 31, 2009 thus stems from the fact that stock-based compensation is recorded gradually.
Earnings (Loss) before Amortization, Financial Expenses, Income Taxes, Other Items and Discontinued Operations (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three Months Nine Months Ended March 31 Ended March 31 ------------------------------------------------------------------------- 2010 2009 2010 2009 ------------------------------------------------------------------------- Medical equipment $ (64,912) $ (12,808) $ 438,086 $ (6,196) Sanitizers (1,244,360) (460,587) (1,929,676) (1,625,562) Masks (424,479) (606,930) (879,879) (1,563,972) Filtration (152,402) (1,150,053) (1,287,308) (2,348,118) Other (2,005,226) (3,161,750) (7,175,984) (10,733,444) ------------------------------------------------------------------------- Total $ (3,891,379) $ (5,692,128) $(10,834,761) $(16,577,292) ------------------------------------------------------------------------- -------------------------------------------------------------------------
Considering the above-mentioned factors, the Company reduced its loss before amortization, financial expenses, income taxes, other items and discontinued operations. This loss amounted to $3.9 million for the third quarter, down by $1.8 million from the third quarter of the previous year. For the first nine months, it totalled $10.8 million, down by $5.7 million from the first nine months ended March 31, 2009. This major reduction in the loss before amortization, financial expenses, income taxes, other items and discontinued operations is attributable to the following factors:
- a major reduction in the stock-based compensation charge of the parent company Noveko International (in the Other segment) during the third quarter and first nine months of the current fiscal year, combined with the positive impact of tighter cost management; - a reduction in the loss from the filtration products segment of $1.0 million for the third quarter and of $1.1 million for the first nine months of the current fiscal year, thanks to the sales growth, better operating cost management and a decrease in product development expenses during the third quarter; - a profit before amortization, financial expenses and income taxes of $0.4 million achieved by the medical equipment segment for the first nine months of the current fiscal year, compared with a loss of $6,196 for the corresponding period of 2009, thanks to Noveko Algérie's contribution and improvement in profitability, and that of ECM in the first quarter; - a reduction of approximately $0.2 million in the mask segment's loss for the third quarter and of $0.7 million for the first nine months of the current fiscal year, reflecting the decrease in stock-based compensation charge and the significant sales growth during the first two quarters of the current fiscal year; - finally, the sanitizer segment increased its loss by $0.8 million for the third quarter and by $0.3 million for the first nine months, due mainly to the increase in selling and administrative expenses allocated thereto since the integration of Laboratoire Syma Inc.'s operations with Noveko and the merger of these two entities in July 2009.
Amortization expenses increased by $0.2 million in the third quarter and by $0.4 million for the first nine months of the current fiscal year as the Company has started to amortize the expenses related to the Exago(TM) (veterinary medicine) since its market launch at the beginning of the quarter, along with the expenses related to its new integrated management system, the implementation of which was completed during the third quarter of the current fiscal year.
Financial expenses, less investment income, amounted to $0.5 million for the third quarter and to $1.3 million for the first nine months of the current fiscal year, compared with a negative amount of $0.4 million for the third quarter of the previous year and a positive amount of $0.9 million for the first nine months of the previous year. These changes are due primarily to the fact that the Company had to recognize exchange losses of $0.6 million and $1.4 million respectively for the third quarter and first nine months of the current fiscal year, whereas it had realized exchange gains of $0.8 million and $1.1 million respectively for the third quarter and first nine months of the previous year, on account of the more favourable exchange rate at that time. It is to be noted that the major portion of the exchange losses for the third quarter and first nine months of the current fiscal year is unrealized.
In its June 30, 2009 financial statements, the Company had recorded a $3.6 million goodwill impairment charge related to the medical equipment segment (ECM), which had no impact on the Company's cash balance. When the step-one analysis of the goodwill assessment was initiated as at June 30, 2009, it was determined that a comprehensive step-two analysis would be required for a business unit included in the medical equipment segment as the net book value of this unit exceeded its estimated fair value. Based on the preliminary assessment, determined using the discounted estimated future cash flows method, management had estimated that as at June 30, 2009, the fair value of goodwill in the medical equipment segment amounted to $2,454,551. Accordingly, the Company had recorded a $3.6 million goodwill impairment charge in its June 30, 2009 financial statements. This impairment reflects the market conditions affecting ECM, primarily the economic slowdown and the restructuring periods the swine and bovine industries are undergoing. With the assistance of an independent valuator, the Company proceeded with a comprehensive assessment, which yielded a detailed calculation of the estimated fair values of recorded and unrecorded intangible assets. The Company completed the final calculation of the goodwill impairment charge during the second quarter of the current fiscal year and the resulting non-cash adjustment yielded a $69,700 gain in the consolidated statement of operations for the first nine months of the year.
Net Earnings (Loss) from Continuing Operations (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three Months Nine Months Ended March 31 Ended March 31 ------------------------------------------------------------------------- 2010 2009 2010 2009 ------------------------------------------------------------------------- Medical equipment $ (430,475) $ (814,187) $ (231,449) $ (744,592) Sanitizers (1,349,955) (483,334) (2,269,697) (1,689,176) Masks (484,183) (621,968) (1,064,694) (1,579,263) Filtration (249,009) (1,356,569) (1,597,071) (2,778,449) Other (2,359,203) (2,300,853) (8,484,088) (11,806,102) ------------------------------------------------------------------------- Total $ (4,872,825) $ (5,576,911) $(13,646,999) $(18,597,582) ------------------------------------------------------------------------- -------------------------------------------------------------------------
In light mainly of the above-mentioned factors, the Company reduced its net loss from continuing operations by $0.7 million to approximately $4.9 million for the third quarter. For the first nine months of the current fiscal year, its net loss from continuing operations was lowered by $5.0 million to $13.6 million.
A $0.3 million loss from discontinued operations (BLI) was recognized in third-quarter results, compared with $0.1 million for the third quarter of the previous year. For the first nine months of the current fiscal year, the loss from discontinued operations totalled $0.7 million, compared with $0.6 million for the corresponding period of the previous year. Consequently, the net loss for the third quarter amounted to $5.2 million, compared with $5.7 million for the same quarter of the previous year. For the first nine months of the current fiscal year, the net loss was reduced to $14.3 million, down from $19.2 million for the corresponding period of the previous year.
Considering a net change in unrealized losses on translation of the financial statements of self-sustaining foreign operations of $0.7 million for the third quarter, compared with a net change in unrealized losses of $1.4 million for the corresponding quarter of the previous year, a net loss of $5.9 million represented the comprehensive loss for the quarter ended March 31, 2010, compared with a net loss of $7.1 million for the corresponding quarter of the previous year. For the first nine months, a net loss of $15.7 million represented the comprehensive loss, considering a net change in unrealized losses on translation of the financial statements of self-sustaining foreign operations of $1.4 million, compared with a net loss of $19.5 million for the corresponding nine months of the previous year, considering a change in unrealized losses of $0.3 million for the same period of the previous year.
For the third quarter, the loss from continuing operations and the net loss respectively amounted to $0.06 and $0.07 per Class A share (basic and diluted) on a weighted average of 75,916,023 outstanding shares, compared with a loss from continuing operations and a net loss of $0.08 and $0.09 per share respectively on a weighted average of 66,998,694 shares for the third quarter of the previous year. For the first nine months of the current fiscal year, the loss from continuing operations and the net loss amounted to $0.19 and $0.20 per Class A share (basic and diluted) respectively on a weighted average of 72,677,982 outstanding shares, compared with a loss from continuing operations and a net loss of $0.28 and $0.29 per share respectively on a weighted average of 66,471,880 shares for the corresponding period of the previous year. The increased weighted average number of outstanding shares is due to the issuance of Class A shares related to the private placement closed in October 2009 and the issuance of Class A shares subsequent to the exercise of stock options and to the conversion right of convertible debentures.
Principal Quarterly Financial Information (in thousands of $, except per-share amounts) (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------------------------------------------------------------------------- Fiscal 2010 Revenues 4,496 4,979 3,005 Loss from continuing operations (3,811) (4,963) (4,873) Comprehensive loss (4,417) (5,449) (5,859) Loss per Class A share from continuing operations (basic and diluted) (0.06) (0.07) (0.06) ------------------------------------------------------------------------- Fiscal 2009 Revenues 2,272 3,908 2,609 3,373 Loss from continuing operations (6,281) (6,740) (5,577) (10,262) Comprehensive loss (6,699) (5,305) (6,931) (9,411) Loss per Class A share from continuing operations (basic and diluted) (0.10) (0.10) (0.08) (0.15) ------------------------------------------------------------------------- Fiscal 2008 Revenues 1,295 2,182 1,621 2,331 Loss from continuing operations (2,127) (1,701) (3,418) (6,825) Comprehensive loss (2,230) (1,534) (2,573) (6,928) Loss per Class A share from continuing operations (basic and diluted) (0.04) (0.04) (0.06) (0.12) ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Third-Quarter Highlights and Subsequent Events -------------------------------------------------------------------------
Distribution Agreement with Israeli-Based Zer Hitech - In January 2010, we concluded an agreement with Israeli-based Zer Hitech (1976) Ltd. ("Zer Hitech"), a subsidiary of the Zer Group, for the distribution in Israel of our Noveko(TM) antimicrobial masks and respirators, our hand sanitizers, our air filters incorporating our antimicrobial filtration technologies to hospitals and commercial buildings and Epurair(TM) HEPA MA-1 air purifiers.
Filters Incorporating the Noveko(TM) Antimicrobial Filtration Technologies in a Pavilion at the Jewish General Hospital - On March 17, 2010, our subsidiary Epurair signed an agreement with the Jewish General Hospital, one of the largest and busiest hospitals in Quebec and also a teaching hospital affiliated with McGill University, to equip one of its pavilions with filters incorporating our Noveko(TM) antimicrobial filtration technologies. This 30-month agreement covers the supply of the filters and their cleaning. We are proud that the Jewish General Hospital is the first hospital to use our antimicrobial filtration solution. We believe this agreement will stimulate the commercialization of our filters in various institutional settings, a high-potential market.
Distribution Agreement with AMD-Ritmed - On March 22, 2010, we concluded a distribution agreement with AMD-Ritmed Inc., a North American leader in the development and distribution of specialized high-quality and disposable medical supplies. This agreement covers the sale and promotion of our hand sanitizers, in Canada, in the health professionals market, including hospital, medical and veterinary settings, and in the United States, to specialized healthcare providers, all subject to certain exceptions. This agreement, which has an initial term of two years, fits with our objective of expanding our client base for our hand sanitizers in these promising markets.
Agreement with Bombardier Transportation - On May 6, 2010, we announced the conclusion of an agreement with Bombardier Transportation, a world leader in rail technology. Pursuant to this agreement, the parties will jointly develop filtration solutions that will be offered to the clients of Bombardier Transportation, according to their specific needs. With operations in more than 60 countries, Bombardier Transportation is the global leader in the manufacture and maintenance of rail transportation equipment. It offers one of the most complete portfolios of rail vehicles worldwide, including mainline trains, subway cars, light rail vehicles and locomotives and has an installed base of more than 100,000 of its own vehicles worldwide, in addition to all those for which it ensures the maintenance. We therefore believe that this collaboration will represent a strategic advantage for marketing our filters. It showcases the recognition that the energy and cost savings associated with the use of our "green" air filtration solutions, along with their distinctive antimicrobial properties, are particularly valued characteristics in the transportation industry.
Masks, Respirators and Hand Sanitizers - Over the past 12 months, we have achieved several breakthroughs that pave the way for the production and distribution of our antimicrobial masks and respirators on a wider scale. However, the A (H1N1) influenza epidemic rapidly came to an end at the outset of the third quarter ended March 31, 2010, which had an adverse impact on the demand for masks compared with previous quarters. This disappearance of an emergency situation led to the deferral of a number of mask and respirator order deliveries. These deferrals add to the delivery delays that were caused by the small quantity of masks in stock when the pandemic threat emerged, combined with the limited working capital at our disposal until the closing of the private placement and the time then required to complete the mask production cycles. To these were also added the delays related to the steps that some of our distributors had to take in order to obtain the additional authorizations pursuant to the regulatory requirements specific to their respective territory throughout the quarter ended March 31, 2010. All these factors slowed down the marketing of our masks, respirators and sanitizers and account for our lower than forecasted sales, especially during the quarter ended March 31, 2010. The financial problems experienced by one of major distributors also had a negative impact on our third-quarter sales, this distributor having cancelled several orders. These various factors will mean that recognition of the revenues from orders and distribution agreements in progress will extend over a longer than expected period, beyond the current fiscal year. Despite these execution delays, we remain confident as to our sales growth in upcoming quarters.
Certification Processes - We have taken the steps to obtain the required additional certifications in order to market our respirators as individual protection equipment (IPE) in Europe. In this regard, we are confident that, within the next few months, our respirators will obtain FFP2 classification pursuant to European standard EN 149:2009. This certification will also facilitate our access to several other markets. During the second quarter of the current fiscal year, we announced we had taken the steps to submit an application to the National Institute for Occupational Safety and Health ("NIOSH") for the certification of our Noveko(TM) respirators. During the quarter ended March 31, 2010, we proceeded to carry out the tests and to obtain the data needed to comply with NIOSH standards, which enabled us just recently to complete and submit the applications for certification to the NIOSH. As a general rule, the average time between the official submission of an application for certification to the NIOSH and the receipt of an answer therefrom is 90 days. However, this timeframe can vary depending on several factors beyond our control. Furthermore, NIOSH reserves the right to require supplementary information. Concurrently with this process, we continue to work on obtaining the required performance data to draw up the file in order to support a future 510(k) submission to the US Food and Drug Administration ("FDA"). We expect to submit such an application once we obtain the NIOSH certifications.
Air Filters for Farm Buildings - Several early signs enable us to look forward to a certain improvement in business in the swine industry, particularly with our new, more cost-efficient filtration solutions offering adapted to a broader client base. In recent months, our filtration team has effectively developed a new filter that is installed directly on building air diffusers. This solution has the advantage of eliminating most of the costs related to filter installation. We have also re-engineered our filters designed for building air intakes.
Filters in the Aeronautics Segment - We are in the final phase of the required tests to obtain "STC" certification for our filters from Transport Canada. Despite certain start-up delays, we are confident as to our business plan for the commercialization of our filtration technology in this segment.
Launch of the Exago(TM) - In January 2010, ECM launched the Exago(TM), another high-end ultrasound scanner that is initially intended for veterinarians, especially in the equine market, and subsequently for the pets market. Once the required approvals are obtained, this device will also be designed for use in human medicine, in particular for emergency, anesthesia and army needs. ECM expects to obtain the authorization to affix CE Marking on this device during the fourth quarter of fiscal 2010.
Establishment of a Chinese Subsidiary - We were recently granted an operating licence authorizing us to operate a subsidiary in China. As of April 2, 2010, we therefore acquired all the outstanding shares of Beijing Oasis International Business Development Limited (since redesignated Noveko (Beijing) Hi-Tech Development Limited), in consideration of a total of one million renminbis (or the equivalent of $147,599 in Canadian dollars).
Issuance of Warrants - On May 12, 2010, subject to approval by the Toronto Stock Exchange, 300,000 warrants were granted to Maxim Group LLC, an American investment bank whose services were notably retained to enhance our visibility in the U.S. financial community and thereby favour our access to a larger group of investors. Subject to a mandatory hold period of six months and one day, these warrants entitle the holder to purchase 300,000 Class A shares at an exercise price of $1.00 per share. They mature in 36 months following their grant.
------- Profile -------
Noveko International Inc. offers innovative solutions in the environmental and medical fields worldwide. Through its subsidiaries, the Company specializes primarily in the following business segments: the development, manufacturing and marketing of derivative products from its patented antimicrobial air filtration technologies, mainly air filters, surgical masks and respirators, as well as other products with antibacterial properties such as hand sanitizers - and the development, manufacturing and marketing of medical equipment, primarily portable real-time ultrasound scanners for use in human and veterinary medicine.
Certain statements set forth in this press release constitute forward-looking statements. In some cases, these statements are identified by the use of terms such as "may", "could", "might", "intend", "should", "expect", "project", "plan", "believe", "estimate" or other comparable variants. These statements are based on the information available at the time they are written, on assumptions made by management and on the expectations of management, acting in good faith, regarding future events, including those relating to economic conditions, fluctuations in exchange rates and operating expenses, and the absence of unusual events entailing supplementary expenditures. Although management considers these assumptions and expectations reasonable based on the information available at the time they are written, they could prove inaccurate. Forward-looking statements are also subject, by their very nature, to known and unknown risks and uncertainties such as those related to the industry, acquisitions, labor relations, credit, key officers, supply and product liability. The actual results of Noveko International Inc. could differ materially from those indicated or underlying these forward-looking statements. The reader is therefore recommended not to unduly rely on these forward-looking statements. Forward-looking statements do not reflect the potential impact of special items, any business combination or any other transaction that may be announced or occur subsequent to the date hereof. Unless otherwise required under securities laws, the Company does not intend and undertakes no obligation to update or revise the forward-looking statements to account for new information, new events or new circumstances.
------------------------------------------------------------------------- The Management's Report, consolidated financial statements and accompanying notes for the quarter ended March 31, 2010 will be filed on SEDAR (www.sedar.com) and available on the Company's website (www.noveko.com). ------------------------------------------------------------------------- Noveko International inc. Consolidated balance sheets As at March 31, 2010 and June 30, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- March 31 June 30 2010 2009 (unaudited) (audited) ------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 1,843,376 $ 937,319 Deposit in trust 143,919 70,900 Short-term investments 4,145,780 3,702,958 Accounts receivable 3,604,426 3,845,527 Inventories 10,954,557 7,288,071 Prepaid expenses 576,856 734,777 Current portion of assets held for sale 1,510,339 1,998,371 ----------------------------------------------------------------------- 22,779,253 18,577,923 Fixed assets 3,695,918 4,124,110 Intangible assets 8,652,685 10,041,542 Other assets 1,163,179 1,198,345 Future income taxes 19,424 82,691 Goodwill 11,959,644 13,035,189 Non-current portion of assets held for sale 3,532,239 3,836,738 ------------------------------------------------------------------------- $ 51,802,342 $ 50,896,538 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and shareholders' equity Current liabilities: Bank loans $ 214,641 $ 162,970 Accounts payable and accrued liabilities 2,755,981 2,552,279 Current portion of secured convertible debentures 86,894 964,710 Current portion of long-term debt 535,176 754,584 Current portion of liabilities held for sales 1,945,971 2,126,397 ----------------------------------------------------------------------- 5,538,663 6,560,940 Long-term debt 1,047,955 1,455,182 Secured convertible debentures - 825,117 Future income taxes 1,215,565 1,644,474 Non-current portion of liabilities held for sales 1,807,616 1,924,217 Shareholders' equity: Capital stock 95,620,532 80,768,629 Portion of secured convertible debentures included in equity 23,906 372,473 Warrants 3,189,000 - Contributed surplus 22,525,898 18,718,376 Accumulated other comprehensive loss (1,545,997) (166,928) Deficit (77,620,796) (61,205,942) ----------------------------------------------------------------------- 42,192,543 38,486,608 ------------------------------------------------------------------------- $ 51,802,342 $ 50,896,538 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International inc. Consolidated statements of operations Nine and three month periods ended March 31, 2010 and 2009 (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months Nine months 2010 2009 2010 2009 ------------------------------------------------------------------------- Revenues $ 3,004,781 $ 2,608,663 $ 12,479,800 $ 8,789,018 Cost of sales 1,846,560 1,190,502 7,191,751 4,407,968 ------------------------------------------------------------------------- 1,158,221 1,418,161 5,288,049 4,381,050 Operating expenses: Administrative and selling expenses 4,100,589 3,680,189 12,110,425 11,180,001 Stock-based compensation 599,101 3,030,931 3,165,463 9,294,848 Research and development 466,357 422,493 1,261,782 911,158 Research and development tax credits (116,447) (23,324) (414,860) (427,665) ----------------------------------------------------------------------- 5,049,600 7,110,289 16,122,810 20,958,342 ------------------------------------------------------------------------- Loss before amortization, financial fees, income taxes, other item and discontinued operations (3,891,379) (5,692,128) (10,834,761) (16,577,292) Amortization 679,486 471,536 1,810,232 1,392,200 Financial expenses less investment revenues 502,411 (398,291) 1,332,540 883,725 Goodwill impairment charge adjustment - - (69,700) - ------------------------------------------------------------------------- 1,181,897 73,245 3,073,072 2,275,925 ------------------------------------------------------------------------- Loss before income taxes (5,073,276) (5,765,373) (13,907,833) (18,853,217) Income taxes: Current (recovered) (87,555) (166,514) 12,406 (175,360) Future (112,896) (21,948) (273,240) (80,275) ----------------------------------------------------------------------- (200,451) (188,462) (260,834) (255,635) ------------------------------------------------------------------------- Net loss from continuing operations (4,872,825) (5,576,911) (13,646,999) (18,597,582) Net loss from discontinued operations (323,713) (131,024) (697,538) (590,785) ------------------------------------------------------------------------- Net loss $ (5,196,538) $ (5,707,935) $(14,344,357) $(19,188,367) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share: From continuing operations $ (0.06) $ (0.08) $ (0.19) $ (0.28) From discontinued operations $ (0.01) $ (0.01) $ (0.01) $ (0.01) Net loss $ (0.07) $ (0.09) $ (0.20) $ (0.29) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of outstanding shares, basic and diluted 75,916,023 66,998,694 72,677,982 66,471,880 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International inc. Consolidated statements of comprehensive loss Nine and three month periods ended March 31, 2010 and 2009 (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months Nine months 2010 2009 2010 2009 ------------------------------------------------------------------------- Net loss $ (5,196,538) $ (5,707,935) $(14,344,537) $(19,188,367) Other comprehensive income, net of income taxes: Change in unrealized losses on translation of financial statements of self-sustaining foreign operations (661,763) (1,354,233) (1,379,069) (336,983) ------------------------------------------------------------------------- Comprehensive loss $ (5,858,301) $ (7,062,168) $(15,723,606) $(19,525,350) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International inc. Consolidated statements of deficit and contributed surplus Nine-month periods ended March 31, 2010 and 2009 (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- March 31 March 31 2010 2009 ------------------------------------------------------------------------- DEFICIT Deficit, beginning of period $(61,205,942) $(29,323,571) Restatement related to the adoption of new accounting policies - 49,243 ------------------------------------------------------------------------- Restated balance (61,205,942) (29,274,328) Net loss (14,344,537) (19,188,367) Share issuance fees (2,070,317) (56,000) ------------------------------------------------------------------------- Deficit, end of period $(77,620,796) $(48,518,695) ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONTRIBUTED SURPLUS Contributed surplus, beginning of period $ 18,718,376 $ 7,967,778 Fair value of stock options granted 3,165,463 9,308,848 Fair value of options granted to the agents 732,000 - Fair value of stock options exercised (89,941) (262,000) ------------------------------------------------------------------------- Contributed surplus, end of period $ 22,525,898 $ 17,014,626 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International inc. Consolidated statements of cash flows Nine and three month periods ended March 31, 2010 and 2009 (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months Nine months 2010 2009 2010 2009 ------------------------------------------------------------------------- Cash flows from operating activities: Net loss $ (5,196,538) $ (5,707,935) $(14,344,537) $(19,188,367) Adjustments for: Loss from discontinued operations 323,713 131,024 697,538 590,785 Future income taxes (112,896) (21,948) (273,240) (80,275) Accreted interest on secured convertible debentures 3,554 64,635 68,254 201,945 Stock-based compensation 599,101 3,030,931 3,165,463 9,294,848 Loss (gain) on disposal of fixed assets 1,502 - 7,439 (7,231) Amortization 679,486 471,536 1,810,232 1,392,200 Loss (gain) on fair value of short-term investments - (433) 11,676 (3,254) Unrealized loss (gain) on foreign denominated contracts - 472,420 - (76,885) Foreign exchange loss (gain) (11,089) (5,688) 6,040 (6,233) Adjustment from discontinued operations 36,276 72,210 482,043 (303,475) --------------------------------------------------------------------- (3,676,891) (1,493,248) (8,369,092) (8,185,942) Net change in non-cash working capital (887,337) (1,024,129) (3,127,334) (5,627,360) ------------------------------------------------------------------------- (4,564,228) (2,517,377) (11,496,426) (13,813,302) Cash flows from financing activities: Net changes in bank loans (67,531) (74,462) 77,271 (716,958) Increase in long-term debt - 153,331 60,000 153,331 Repayment of long-term debt (160,763) (114,713) (519,918) (341,903) Interest paid on secured convertible debentures (1,972) (39,747) (42,858) (125,911) Proceeds from Class A shares and warrants issued 8,700 30,000 15,874,066 3,969,575 Class A shares issue expenses 2,671 - (1,338,317) (12,800) Cash flows from discontinued operations (108) (70,755) (259,382) 148,082 ----------------------------------------------------------------------- (219,003) (116,346) 13,850,862 3,073,416 Cash flows from investing activities: Business acquisitions - (29,686) - (5,936,483) Acquisition of short-term investments (3,000,000) (1,297,584) (15,090,000) (55,603,116) Proceeds from disposal of short-term investments 7,998,164 4,421,842 14,634,425 62,177,235 Acquisition of fixed assets (91,741) (179,882) (225,165) (676,461) Proceeds from disposal of fixed assets (750) - 27,436 8,859 Acquisition of intangible assets - (56,652) (203,770) (332,693) Acquisition of other assets - - (44,400) - Deposit in trust (78,479) 380 (73,019) (1,755) Deferred development costs, net of related research tax credits received (88,457) (87,913) (267,586) (259,130) Cash flows from discontinued operations (36,015) 22,453 (47,788) 13,698 ----------------------------------------------------------------------- 4,702,722 2,792,958 (1,289,867) (609,846) Foreign exchange loss (gain) on cash in foreign currencies (36,488) (7,603) (158,512) 46,498 ------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 116,997 151,632 906,057 (11,303,234) Cash and cash equivalents, beginning of period 1,960,373 139,469 937,319 11,594,335 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 1,843,376 $ 291,101 $ 1,843,376 $ 291,101 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows related to operating activities include interest paid for $104,914 ($265,740 in 2009) and income taxes received for $269,345 ($104,300 in 2009).
For further information: Chantal Vennat, Director, Investor Relations and Corporate Communications, Noveko International Inc., (514) 875-0606; http://www.noveko.com
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