BOUCHERVILLE, QC, Feb. 15, 2013 /CNW Telbec/ - For the second quarter ended December 31, 2012 ("second quarter of 2013"), Noveko International Inc. (TSX: EKO) (the "Corporation") announces that its consolidated revenue totalled $0.64 million considering that the operations of SARL Noveko Algérie ("Noveko Algérie") and of S.A.S. E.C.M. ("ECM") are now being treated as discontinued operations in accordance with IFRS because of the Corporation's decision to divest itself of these subsidiaries. This is a decrease of $1.1 million compared with the revenues of the second quarter ended December 31, 2011 ("second quarter of 2012") computed on the same basis. The net loss from continuing operations amounted to $2.1 million ($0.02 basic and diluted per share) for the second quarter of 2013, compared with $1.7 million ($0.02 basic and diluted per share) for the second quarter of 2012. The net loss (including the net loss from discontinued operations) amounted to $1.0 million ($0.01 basic and diluted per share), compared with $1.5 million ($0.02 basic and diluted) for the second quarter of 2012.
Although, on a short-term basis, the Corporation's revenues have substantially decreased because of our decision to transfer our shareholdings in Noveko Algérie and in ECM (now stated as discontinued operations), management believes that the realignment of our resources in the air filtration segment should have a positive impact on the Corporation's financial situation, results and future prospects over the mid- to long-term.
Please refer to the end of this press release where you will find a table containing Selected Consolidated Information.
Despite a highly difficult financial situation during the second quarter of 2013, we have multiplied our efforts on the implementation of the measures contained in the Strategic Plan already described in our previous MD&As, especially the search for and implementation of funding initiatives in order to improve this financial situation and to allow the Corporation to focus its human and financial resources on the commercialization of its air filtration solutions.
This highly difficult financial situation, including our cash deficiencies, results from several factors, including: (i) previous quarters' sales well below anticipated levels, particularly, the sale of our antimicrobial masks and respirators and sanitizers but also those of our air filtration solutions, for which the characteristics significantly differ from those of conventional air filters including their commercialization by way of lease contracts that contrast with the buildings' owners and managers typical purchase patterns, (ii) breaches of our contractual undertakings toward Third Eye Capital Corporation ("TEC") with respect to the September 28, 2011 financing (the "2011 Financing") resulting, among other things, from missed sales forecasts, (iii) the failure to sell our shares of ECM and the ensuing opening of a procedure de sauvegarde (safeguarding procedure), and (iv) the postponement of the transfer of our shareholding in Noveko Algérie. As a direct consequence of these cash deficiencies, the amounts due to our suppliers have significantly increased which consequently caused serious bottlenecks in the supply of raw materials.
In such circumstances, the research and execution of new financings became during the second quarter and up to now management's utmost priority. With respect to the transfer of our shareholding in Noveko Algérie, we anticipate it will be completed it in the next few weeks.
Financings - In connection with its search for financing, the Corporation's Board of Directors approved the borrowing by the Corporation of an amount between $10 to $12 million (the "Primary Financing"), taking the form of (i) the issuance of secured convertible debentures for a minimum amount of $5 million to a maximum amount of $7 million, bearing interest at an annual rate of 8%, payable quarterly, reimbursable 36 months after their issuance and convertible into the Corporation's Class A Shares on the basis of one Class A Share for each $0.31 in capital debenture, and (ii) a 36-month term loan of a principal amount of $5 million, bearing interest at an annual rate of 10%, payable quarterly. These secured convertible debentures and term loan will be secured by a hypothec on all the Corporation's assets.
As of the date hereof, the Corporation holds in connection with the Primary Financing a $10 million commitment from a potential investor. The Corporation is in default to comply with its contractual undertakings to TEC, including the payment of interests payable for the months of October 2012 to January 2013. TEC has required the full reimbursement of the credit facility and of the secured convertible debentures of the 2011 Financing. The proceeds of the Primary Financing will be used notably to reimburse the 2011 Financing. Closing of this new financing is now anticipated to occur on or around February 28, 2013. In the event the minimal portion ($10 million) of the Primary Financing will not be completed or could not be completed within a delay satisfactory to TEC, the latter could exercise any available recourses, including hypothecary recourses, against the Corporation on all or part of the Corporation's assets, including its subsidiaries' shares and, in such a case, the consequences on the Corporation, its subsidiaries, and the Corporation's shareholders could be very severe. TEC, without renouncing any of its rights, agreed not to exercise its recourses until March 28, 2013 subject to several conditions including the commitment of said primary investor to make regular advances to the Corporation to be used for the partial reimbursement of interests due to TEC. As of the date hereof, all said conditions are not met and the Corporation continues to pursue discussions with the investor and with TEC. Even though management remain confident that the Primary Financing will be completed, there can be no assurance that the Corporation will be able to obtain other waivers from TEC concerning these breaches and no assurance can be given that TEC will not exercise its available recourses.
Furthermore, pursuant to our urgent need for working capital, the Corporation announced on January 11, 2013 its intent to proceed with a private placement of units at a price of $0.12 per unit for a minimum amount of $100,000 (833,333 units) and a maximum of $500,000 (4,166,667 units), each unit being comprised of one Class A Share and one-half of one warrant. Each entire warrant will entitle its holder to purchase one Class A Share at a price of $0.20 per share during a period of 24 months after the issuance of the units. On January 28, 2013, we proceeded with a first closing of this placement whereby the Corporation issued a total number of 1,566,667 Class A Shares and of 783,334 warrants for a total amount of $188,000. Additional closings could take place until the maximum amount of $500 000 is reached.
Air Filtration Segment
One of the main objectives of our Strategic Plan is to realign our human and financial resources in our most promising technologies, specifically the air filtration solutions, in order to ultimately optimize the Corporation's value. Our business model in the air filtration market for buildings other than farm buildings is based on the signing of agreements for a minimum term of three years. This stands apart from the traditional business model associated with standard air filters which is typically based on one-time orders, generally without a commitment to any particular supplier. The longer-term commitment of our filtration solutions' users, which is moreover rooted in their unique attributes, ensures us of recurring revenues and earns our clients' loyalty. However, since this business model is completely at odds from the current business model, that being a three month sales cycle for conventional air filters, the penetration of our air filtration solutions is much slower than we would like and that we had anticipated. Furthermore, when we introduce our air filtration solutions to a potential client, the first reaction is nearly always the same: scepticism to the numerous advantages that they represent over conventional air filters. For instance, Noveko® filters offer superior filtration capacity and durability while putting less restriction on ventilation, thereby requiring less power from ventilation systems, thus saving substantial energy. Our filters are also cleanable and recyclable significantly reducing the number of filters used and the labor costs associated with their replacement and the elimination of waste. It is notably the incorporation of antimicrobial agents into our filter fibres, protecting them against deterioration from the effects of microorganisms that accounts for cleanability and durability. All these positive features make them an ideal solution for users as part of a sustainable development strategy, but first raise a certain scepticism from the users lengthening the marketing cycle.
Fortunately, this scepticism tends to diminish following the results of tests conducted on our filters installed in excess of 36 months in the Greater Montreal Area buildings confirming their distinctive features. Moreover, other conclusive tests conducted by a well-known engineering firm, confirmed that Noveko® filters enable users to achieve ventilation systems related energy savings of approximately 15% to 25%. We have been authorized to divulge to our potential customers the results of these credible tests which could help us convince them more easily. Also, we are now experiencing from buildings owners and managers in Quebec and in Ontario an increasing interest in our air filtration solutions. Consequently the initial scepticism is now receding. In the second quarter we renewed the first lease agreement we signed three years ago (one of the most important in terms of revenues) for an additional 4-year period. This first renewal is indisputable proof of the efficiency and other advantages of our air filters.
SELECTED CONSOLIDATED INFORMATION
|Three months||Six months|
|December 31||December 31|
|(in thousands of Canadian $, except per-share amounts)||2012||2011||2012||2011|
|Provision (reversal of provision) for slow-moving inventories||35||1||150||-|
|Result before amortization, financial expenses, income taxes and discontinued operations (1)||(1,074)||(1,152)||(1,956)||(2,293)|
|Net result from continuing operations||(2,117)||(1,660)||(3,680)||(3,044)|
|Net result from discontinued operations (2)||1,134||135||940||(67)|
|Earnings per Class A share (basic and diluted)|
|From continuing operations||(0.02)||$||(0.02)||$||(0.04)||$||(0.03)||$|
|From discontinued operations (2)||0.01||$||-||$||0.01||$||-||$|
|Weighted average number of outstanding Class A shares, basic and diluted (in thousands)||91,946||91,946||91,946||91,946|
|Statement of Financial Position Data as at||December 31||June 30|
|(in thousands of Canadian $)||2012||2012|
|Total interest-bearing debt||5,971||5,221|
|Liabilities held for sale (3)||2,486||1,911|
|(1)||The operating result before amortization, net financial expenses, income taxes and discontinued operations is not a measure established in accordance with IFRS. In this regard, the reader is referred to the paragraph titled Compliance with IFRS of our last Annual MD&A.|
|(2)||Related to Noveko Algérie's and ECM's operations for the first and second quarters of 2013 and Noveko Algérie's, ECM's and Bolduc Leroux Inc.'s operations for the first and second quarters of 2012.|
|(3)||Related to Noveko Algérie's and ECM's operations.|
Profile of the Corporation
The Corporation specializes in the air filtration segment by providing its clientele with innovative and eco-energetic filtration solutions. As such, through its subsidiaries, the Corporation designs, develops, manufactures and markets air filters incorporating its patented air filtration technologies, which filters are cleanable and recyclable, and have a much longer life span than conventional air filters. These filters are used in farm buildings, in institutional, commercial, industrial and residential buildings, and in the ground and aeronautics transport industry.
Through distributors, the Corporation furthermore continues to commercialize antimicrobial masks and respirators, hands sanitizers and 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 Corporation does not intend and undertakes no obligation to update or revise the forward-looking statements.
The reader is furthermore recommended, before making any decision to purchase or to sell any of the Corporation's securities, to carefully consider the complete statement of the risk factors and uncertainties described in the Management's Report for fiscal 2012 as well as in the Annual Information Form for fiscal 2012, notably with respect to the Corporation's financial position and its sources and requirements of funds.
SOURCE: NOVEKO INTERNATIONAL INC.
Gary Mc Cone
Senior Vice-President and Chief Financial Officer
Tel: (514) 875-0606