Innicor releases financial results for second quarter 2007



    CALGARY, Aug. 13 /CNW/ - Innicor Subsurface Technologies Inc., a leading
Canadian manufacturer and distributor of downhole tools and equipment used in
the oil and gas sector, today announced its financial results for the three
and six months ended June 30, 2007.
    Total revenues for the second quarter of 2007 were $9.4 million, compared
to $11.4 million in the second quarter of 2006. Revenues for the six months
ended June 30, 2007 were $28.4 million compared to $31.3 million during the
same period in 2006. "Our second quarter results were significantly impacted
by dramatically reduced levels of oilfield activity in western Canada in
2007," said Delton Campbell, President and CEO. "Abnormally wet weather
conditions and lower prices for natural gas exacerbated the seasonal slow down
in activity normally experienced in the second quarter of the year, which saw
rig utilization rates in western Canada fall to a near all time low of
approximately 12%. Although many industry analysts are expecting an upturn in
Canadian conventional activity late in 2007, which is expected to become more
pronounced in 2008, we continue to believe that the establishment of
international operations with locally based management will be a key factor in
our ability to increase revenues from markets outside of North America where
oilfield activity continues to grow", said Campbell.
    Innicor reported a net loss of $2.1 million or $0.12 per share basic and
diluted for the three months ended June 30, 2007, compared to a net loss of
$65,000 or $0.00 per share basic and diluted during the same period in 2006.
For the six months ended June 30, 2007, Innicor reported a net loss of
$495,000 or $0.03 per share basic and diluted, compared to net income of
$2.4 million, or $0.13 per share basic and diluted in the six months ended
June 30, 2006.
    Innicor's consolidated financial statements for the three and six months
ended June 30, 2007 and its associated management discussion and analysis will
be filed on Sedar and copies can be obtained at www.sedar.com.

    
    SECOND QUARTER FINANCIAL REPORT
    INNICOR SUBSURFACE TECHNOLOGIES INC.

    FINANCIAL HIGHLIGHTS
    $000's except share and per share data

                                                    Three Months
                                                    Ended June 30

                                              2007         2006     % change
    -------------------------------------------------------------------------
    Total Revenues                          $9,403      $11,440        (18)%
    Gross Margin                             3,374        5,516        (39)%
    EBITDA(*)                               (2,096)         609       (444)%
    EBITDA
    -  margin as a % of revenue              (22)%           5%     (27) pts
    Net Income (loss)                       (2,114)         (65)         N/M
    Net Income (loss) per share
    -  basic and diluted                    ($0.12)       $0.00          N/M
    Number of shares outstanding
     (weighted average)
    -  basic                            18,124,595   18,060,159
    -  diluted                          18,124,595   18,260,964


                                                     Six Months
                                                    Ended June 30

                                              2007         2006     % change
    -------------------------------------------------------------------------
    Total Revenues                         $28,362      $31,290         (9)%
    Gross Margin                            13,146       15,723        (16)%
    EBITDA(*)                                1,286        4,947        (74)%
    EBITDA
    -  margin as a % of revenue                 5%          16%     (11) pts
    Net Income (loss)                         (495)       2,415       (120)%
    Net Income (loss) per share
    -  basic and diluted                    ($0.03)       $0.13       (123)%
    Number of shares outstanding
     (weighted average)
    -  basic                            18,121,759   18,002,797
    -  diluted                          18,121,759   18,111,585

    (*) EBITDA, or earnings before interest, taxes, depreciation and
        amortization, is calculated in the above table by adding these items
        back to reported net income (see also "QUARTERLY DATA").


                                          2007      2006      2007      2006
                                           Q-2       Q-2       YTD       YTD
                                      ---------------------------------------
    Net Income (loss)                 $ (2,114) $    (65) $   (495) $  2,415
    Taxes                                 (834)       58        55     1,342
    Depreciation & Amortization            723       517     1,412     1,019
    Interest                               129        99       314       171
                                      ---------------------------------------
                                      $ (2,096) $    609  $  1,286  $  4,947
    

    Management uses EBITDA as a measurement to determine the ability of the
Company to generate cash from operations. EBITDA does not have a standardized
meaning prescribed under Canadian generally accepted accounting principles
("GAAP"), and therefore, may not be comparable with calculations of similar
measures presented by other issuers. EBITDA is not intended to represent
operating or net income for the period nor should it be viewed as an
alternative to operating or net income or other measures of financial
performance calculated in accordance with GAAP (see also NON-GAAP MEASURES).

    FINANCIAL AND OPERATIONAL PERFORMANCE

    Drilling activity levels in Canada throughout the first six months of
2007 were significantly below the levels experienced in the first six months
of 2006. In the second quarter of 2007 in particular, activity levels in
Canada were below the previous year by as much as 50 percent according to
industry statistics. A slow-down in drilling activity that began in the third
quarter of 2006 continued into the fourth quarter of 2006 and the first half
of 2007. This softening of field activity was due in large part to declining
natural gas prices and above average North American storage volumes of natural
gas. This trend was exacerbated in the second quarter of 2007 when adverse
weather conditions also contributed to a reduction in oilfield activity
levels.
    On February 1, 2007, Innicor opened a new sales and service outlet in
Fort St. John, British Columbia. Innicor now has distribution and service
outlets in thirteen locations in Alberta, Saskatchewan, and British Columbia
that allow the Company to provide equipment and services to its customers
located throughout the Western Canadian Sedimentary Basin.
    In late fall of 2006, Innicor expanded its presence in Indonesia by
opening an additional base of operation in Balikpapan to complement the outlet
established in 2005 in Jakarta. The operations in Indonesia were established
in conjunction with a local agent to provide distribution and service to
Innicor's customers in the region. Innicor has recently established a base of
operations in the United Arab Emirates to service its customers in the Middle
East. Innicor has hired two regional managers who are responsible for managing
the Company's international operations at a local level, one based in Jakarta
and the other based in Dubai. These expatriate employees have extensive
international industry experience in their respective geographic regions.
    In June of 2007, Innicor moved into a new 31,000 square foot facility in
Calgary constructed adjacent to the Company's existing 71,000 square foot
manufacturing and head office building. The new facility houses the Company's
completion tool assembly and shipping operations, as well as the Company's
research and development department. The new building was developed by the
owner of the existing Calgary facility, and is being leased by the Company
over a term that coincides with the lease on the existing facility. The
initial term of the lease will be approximately seven and a half years with an
option to renew for a further ten year term on October 1, 2014. The additional
space is required to support Innicor's continued growth in Canada and
expansion in international markets.

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

                                          2007      2006  Increase/(Decrease)
                                             $         $         $         %
    REVENUES
      Domestic                           6,548     8,372    (1,824)      (22)
      International                      2,855     3,068      (213)       (7)
                                       --------  --------  ------------------
                                         9,403    11,440    (2,037)      (18)

    COST OF GOODS SOLD                   6,029     5,924       105         2
                                       --------  --------  ------------------

    GROSS MARGIN                         3,374     5,516    (2,142)      (39)
                                           36%       48%

    OPERATING EXPENSES
    Salaries and wages                   3,244     3,110       134         4
    General and administrative           2,415     2,056       359        17
    Foreign exchange loss (gain)           145        (6)      151       N/M
    Interest                               129        99        30        30
    Depreciation and amortization          390       264       126        48
                                       --------  --------  ------------------
                                         6,323     5,523       800        14

    (LOSS) BEFORE INCOME TAXES          (2,949)       (7)   (2,942)      N/M
                                       --------  --------  ------------------

    PROVISION FOR (RECOVERY OF)
     INCOME TAXES                         (835)       58      (893)      N/M
                                       --------  --------  ------------------

    NET (LOSS)                          (2,114)      (65)   (2,049)      N/M

    Net (loss) per share
    - basic and diluted                  (0.12)     0.00     (0.12)      N/M
    

    Total revenues for the three months ended June 30, 2007 were $2,037,000
or 18% below total revenues for the same period in the previous year. Domestic
revenues for the second quarter of 2007 were $1,824,000 or 22% below domestic
revenues for the second quarter of 2006, while revenue from international
customers decreased by $213,000 or 7% over the same comparable period. The
decline in domestic revenue is primarily due to the reduced level of oilfield
activity in Canada in 2007 compared to 2006. The gross margin during the
second quarter of 2007 decreased by $2,142,000 or 39% compared to the second
quarter of 2006. The gross margin percentage in the second quarter of 2007 was
36% compared to the percentage gross margin of 48% in the second quarter of
2006. Lower revenues and an unfavorable manufacturing variance of $939,000
(2006 - $173,000) included in the cost of goods sold for the three months
ended June 30, 2007, had an adverse effect on the gross margin and the gross
margin percentage for the period. In a manufacturing environment, overhead
expenses incurred in the manufacturing process are allocated to the units
produced at predetermined rates. When production volumes fluctuate overhead
costs will be over or under applied resulting in a manufacturing variance that
is included in the cost of goods sold during the period. The unfavorable
manufacturing variance is due to the reduced levels of manufacturing
predicated by the lower levels of oilfield activity in western Canada.
    Operating expenses for the three months ended June 30, 2007 increased by
$800,000 or 14% compared to the same period in the previous year. Salaries and
wages increased during the same period by $134,000 or 4% over the previous
year. General and administrative expenses incurred in the second quarter of
2007 were $2,415,000 versus $2,056,000 in 2006, an increase of $359,000 or
17%. This increase is primarily due to the cost of establishing and
maintaining the new sales and service locations in Canada, Indonesia and the
United Arab Emirates, and increased facilities costs at existing locations.
    Interest expense for the three months ended June 30, 2007 increased by
$30,000 or 30% over the same period in the previous year. The increase is due
to additional interest expense on new capital leases for production equipment
and vehicles.
    Total depreciation and amortization, including depreciation of
manufacturing assets, which is allocated to cost of goods sold, was $723,000
in the second quarter of 2007 versus $517,000 in the second quarter of 2006.
Depreciation and amortization on non-manufacturing assets was $390,000 during
the three months ended June 30, 2007 compared to $264,000 in the same period
in 2006. The increase is due to the additional manufacturing assets, new
software and implementation costs, and vehicles acquired through capital
leases during the latter part of 2006.
    EBITDA was negative $2,096,000 in the second quarter of 2007, compared to
positive $609,000 in the second quarter of 2006. The net loss for the three
months ended June 30, 2007, was $2,114,000 or $0.12 per share basic and
diluted, compared to a net loss of $65,000 or $0.00 per share basic and
diluted in the corresponding three months of 2006.

    
    FOR THE SIX MONTHS ENDED JUNE 30
    (Thousands of dollars, except per share data)

                                          2007      2006  Increase/(Decrease)
                                             $         $         $         %

    REVENUES
      Domestic                          22,454    25,750    (3,296)      (13)
      International                      5,908     5,540       368         7
                                       --------  --------  ------------------
                                        28,362    31,290    (2,928)       (9)

    COST OF GOODS SOLD                  15,216    15,567      (351)       (2)
                                       --------  --------  ------------------

    GROSS MARGIN                        13,146    15,723    (2,577)      (16)
                                           46%       50%

    OPERATING EXPENSES
    Salaries and wages                   7,740     7,272       468         6
    General and administrative           4,616     4,005       611        15
    Foreign exchange loss (gain)           161        (3)      164       N/M
    Interest                               314       171       143        84
    Depreciation and amortization          756       521       235        45
                                       --------  --------  ------------------
                                        13,587    11,966     1,621        14

    INCOME (LOSS) BEFORE INCOME TAXES     (441)    3,757    (4,198)     (112)
                                       --------  --------  ------------------

    PROVISION FOR INCOME TAXES              54     1,342    (1,288)      (96)
                                       --------  --------  ------------------

    NET INCOME (LOSS)                     (495)    2,415    (2,910)     (120)

    Net Income (loss) per share
    - basic and diluted                  (0.03)     0.13     (0.16)     (123)
    

    Total revenues for the six months ended June 30, 2007 were $2,928,000 or
9% below total revenues for the same period in the previous year. Domestic
revenues for the first half of 2007 were $3,296,000 or 13% below domestic
revenues for the first half of 2006, while revenue from international
customers increased by $368,000 or 7% over the same comparable period. The
decline in domestic revenue is primarily due to the reduced level of oilfield
activity in Canada in 2007 compared to 2006. The gross margin during the first
six months of 2007 decreased by $2,577,000 or 16% compared to the first six
months of 2006. The gross margin percentage for the six months ended June 30,
2007 was 46% compared to 50% during the same period in 2006. The gross margin
in the first six months of 2007 was impacted by lower revenues compared to the
same period of the previous year, and an increased unfavorable manufacturing
variance incurred in the second quarter of 2007.
    Operating expenses for the six months ended June 30, 2007 increased by
$1,621,000 or 14% compared to the same period in the previous year. Salaries
and wages increased during the same period by $468,000 or 6% over the previous
year. This increase is due to increased compensation levels and the
incremental cost of remunerating technicians that provide consulting services
at our customers' well sites. Innicor had a total of 250 employees at June 30,
2007, compared to 277 employees at June 30, 2006. The lower staff levels in
2007 are due to the impact of more efficient production equipment installed in
2006 and a recent reduction in the workforce in manufacturing due to lower
levels of oilfield activity in Canada and the seasonal slow down anticipated
in the second quarter. General and administrative expenses incurred in the
first half of 2007 were $4,616,000 versus $4,005,000 in 2006, an increase of
$611,000 or 15%.
    Interest expense for the six months ended June 30, 2007 increased by
$143,000 or 84% over the same period in the previous year. The increase is due
to additional interest expense on new capital leases for production equipment
and vehicles.
    Total depreciation and amortization, including depreciation of
manufacturing assets, which is allocated to cost of goods sold, was $1,412,000
in the first half of 2007 versus $1,019,000 in the first half of 2006.
Depreciation and amortization on non-manufacturing assets was $756,000 in the
first six months of 2007 compared to $521,000 in the first six months of 2006.
The increase is due to the additional manufacturing assets, new software and
implementation costs, and vehicles acquired through capital leases during the
latter part of 2006.
    EBITDA was $1,286,000 in the first half of 2007, compared to $4,947,000
in the first half of 2006. The net loss for the six months ended June 30,
2007, was $495,000 or $0.03 per share basic and diluted, compared to net
income of $2,415,000 or $0.13 per share basic and diluted in the corresponding
six months of 2006.

    PRODUCT LINES

    Innicor is in the business of designing, manufacturing, renting,
servicing, and selling equipment used in the completion phase or work-over of
oil and gas wells. The completion phase is the final phase of oil and gas well
development before a well goes into production.
    Innicor's customers are primarily exploration and production companies or
other service providers that work for exploration and development companies
during the well completion phase. Innicor's business is considered to be a
single segment for reporting purposes consisting of a number of product lines.

    LIQUIDITY AND CAPITAL RE

SOURCES. During the three and six month periods ended June 30, 2007, cash flow from operating activities, including the change in non-cash operating assets and liabilities, was $2,614,000 and $3,800,000 respectively compared to a deficit of $802,000 and $231,000 in the same periods of the previous year. The increase in cash flow from operating activities, including the change in non-cash operating assets and liabilities is due to a decrease in the change in non-cash operating assets and liabilities offset by a reduction of net income in 2007 compared to 2006. Expenditures on capital assets during the three and six month periods ended June 30, 2007 were $438,000 and $536,000 respectively compared to $1,828,000 and $2,128,000 in the corresponding periods of the previous year. The capital expenditures in 2007 and 2006 related to the acquisition of additional manufacturing equipment, computer hardware and software and the cost of leasehold improvements. Debt and capital lease repayments were $1,011,000 in the first six months of 2007 versus $668,000 in the first six months of 2006. At June 30, 2007, Innicor had a positive working capital position of $21,918,000 and a working capital ratio of 3.7:1 compared to a working capital position of $22,053,000 or a ratio of 2.7:1, at December 31, 2006. At June 30, 2007, Innicor had approximately $9,000,000 available on its operating line and approximately $2,000,000 available for capital purposes under the Company's existing credit facility. Management believes that the current working capital position and access to funds available through its credit facility, together with positive cash flow from operations, will enable Innicor to meet its operating and capital requirements in the foreseeable future. As at August 13, 2007, the Company has 18,134,595 common shares issued and outstanding and 1,660,881 stock options outstanding. CONTRACTUAL OBLIGATIONS ($000's) Less than 1-3 4-5 After Total 1 year years years 5 years Term Debt(1) $ 358 $ 358 $ - $ - $ - Capital Lease Obligations 7,649 2,232 3,675 1,742 - Operating Leases 10,531 1,878 3,238 2,738 2,677 ------------------------------------------------- Total $ 18,538 $ 4,468 $ 6,913 $ 4,480 $ 2,677 ------------------------------------------------- ------------------------------------------------- (1) Term debt with principal repayments calculated on a 48 month amortization period. OUTLOOK Activity levels in the oilfield services sector have been impacted by uncertainty related to oil and gas prices in the short term. Industry analysts are expecting oilfield activity levels in 2007 to be below the levels achieved in recent years in Canada. Reduced industry activity levels in Canada will have some impact on Innicor's business; however the Company is diversified geographically in Canada and internationally and its products are used in both oil and gas well operations and to some degree in the "workover" of producing wells as opposed to newly drilled wells. The success achieved to date in developing domestic and international markets is also expected to continue to contribute to the Company's revenue base for the remainder of the year and into the future. QUARTERLY DATA ($000's except where noted) 2007 2006 Q2 Q1 Q4 Q3 Q2 Q1 --------------------------------------------------------- Revenue 9,403 18,959 14,495 16,494 11,440 19,850 Cost of goods sold 6,029 9,187 8,731 8,474 5,924 9,643 --------------------------------------------------------- Gross margin 3,374 9,772 5,764 8,020 5,516 10,207 Operating expenses 6,323 7,264 6,455 6,448 5,523 6,443 --------------------------------------------------------- Income (loss) before income taxes (2,949) 2,508 (690) 1,572 (7) 3,764 Provision for (recovery of) income taxes (835) 889 (179) 601 58 1,283 --------------------------------------------------------- Net Income (loss) (2,114) 1,619 (512) 971 (65) 2,481 --------------------------------------------------------- --------------------------------------------------------- Add back: Depreciation & amortization 723 689 592 536 517 502 Interest 129 185 197 124 99 72 Taxes (835) 889 (179) 601 58 1,283 --------------------------------------------------------- EBITDA (2,096) 3,382 98 2,231 609 4,338 --------------------------------------------------------- --------------------------------------------------------- Net Income (loss) per share ($) - basic and diluted (0.12) 0.09 (0.03) 0.05 0.00 0.14 2005 Q4 Q3 ----------------- Revenue 17,595 13,767 Cost of goods sold 9,890 7,209 ----------------- Gross margin 7,705 6,558 Operating expenses 5,483 5,231 ----------------- Income (loss) before income taxes 2,222 1,327 Provision for (recovery of) income taxes 893 530 ----------------- Net Income (loss) 1,329 798 ----------------- ----------------- Add back: Depreciation & amortization 521 428 Interest 101 119 Taxes 893 530 ----------------- EBITDA 2,844 1,875 ----------------- ----------------- Net Income (loss) per share ($) - basic and diluted 0.07 0.04 Certain figures in the above table have been rounded accordingly to conform to the financial statements. The seasonal nature of the business and the timing of business acquisitions impact the quarterly financial results. Financial performance in the second quarter of the year is normally not as strong as the other three quarters of the year. Weather conditions in Canada during the second quarter restrict access to a significant number of well sites as winter roads thaw and other roadways need to dry out before summer operations can be fully commenced. The impact of adverse weather conditions in the second quarter of 2007 was more severe than normal, and concerns over gas prices and over supply caused a dramatic reduction in oilfield activity in western Canada in the second quarter of 2007. The financial results for the fourth quarter of 2006 were impacted by a reduction in Canadian drilling activity compared to the same period of the previous year and a one time adjustment to inventory recorded during the quarter. Innicor Subsurface Technologies Inc. CONSOLIDATED BALANCE SHEETS (unaudited) December June 30 31 ($000's) 2007 2006 ASSETS CURRENT ASSETS Accounts receivable $ 7,917 $ 12,310 Inventory 21,625 22,806 Prepaid expenses and deposits 636 327 --------- --------- 30,178 35,443 CAPITAL ASSETS 15,732 16,144 GOODWILL 2,332 2,332 --------- --------- $ 48,242 $ 53,919 --------- --------- --------- --------- LIABILITIES CURRENT LIABILITIES Operating loan $ 1,644 $ 4,009 Accounts payable and accrued liabilities 4,413 7,198 Current portion of obligations under capital leases 1,845 1,758 Current portion of term debt 358 425 --------- --------- 8,260 13,390 OBLIGATIONS UNDER CAPITAL LEASES 4,938 5,386 FUTURE INCOME TAX LIABILITY 1,081 908 --------- --------- 14,279 19,684 --------- --------- SHAREHOLDERS' EQUITY Share capital 25,524 25,517 Contributed surplus 898 682 Retained Earnings 7,541 8,036 --------- --------- 33,963 34,235 --------- --------- $ 48,242 $ 53,919 --------- --------- --------- --------- Innicor Subsurface Technologies Inc. CONSOLIDATED STATEMENTS OF INCOME, COMPREHENSIVE INCOME AND RETAINED EARNINGS For the periods ended (unaudited) Three Months Ended Six Months Ended ($000's, except per June 30 June 30 June 30 June 30 share amounts) 2007 2006 2007 2006 REVENUE $ 9,403 $ 11,440 $ 28,362 $ 31,290 COST OF GOODS SOLD 6,029 5,924 15,216 15,567 ------------------- ------------------- GROSS MARGIN 3,374 5,516 13,146 15,723 ------------------- ------------------- OPERATING EXPENSES Salaries and wages 3,244 3,110 7,740 7,272 General and administrative 2,415 2,056 4,616 4,005 Foreign exchange loss (gain) 145 (6) 161 (3) Interest 129 99 314 171 Depreciation and amortization 390 264 756 521 ------------------- ------------------- 6,323 5,523 13,587 11,966 ------------------- ------------------- INCOME (LOSS) BEFORE INCOME TAXES (2,949) (7) (441) 3,757 PROVISION FOR (RECOVERY OF) INCOME TAXES Current (886) (69) (83) 1,182 Future 51 127 137 160 ------------------- ------------------- NET INCOME (LOSS) (2,114) (65) (495) 2,415 ------------------- ------------------- OTHER COMPREHENSIVE INCOME - - - - ------------------- ------------------- COMPREHENSIVE INCOME (LOSS) (2,114) (65) (495) 2,415 ------------------- ------------------- RETAINED EARNINGS, beginning of period 9,655 7,642 8,036 5,162 Accumulated other comprehensive income - - - - ------------------- ------------------- RETAINED EARNINGS, end of period $ 7,541 $ 7,577 $ 7,541 $ 7,577 ------------------- ------------------- ------------------- ------------------- NET INCOME (LOSS) PER SHARE Basic $ (0.12) $ - $ (0.03) $ 0.13 ------------------- ------------------- ------------------- ------------------- Diluted $ (0.12) $ - $ (0.03) $ 0.13 ------------------- ------------------- ------------------- ------------------- Innicor Subsurface Technologies Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS For the periods ended (unaudited) Three Months Ended Six Months Ended June 30 June 30 June 30 June 30 ($000's) 2007 2006 2007 2006 OPERATING ACTIVITIES Net Income (Loss) $ (2,114) $ (65) $ (495) $ 2,415 Add (deduct) items not involving cash Depreciation and amortization 723 517 1,412 1,019 Future income taxes 51 127 137 160 Stock based compensation expense 122 92 216 156 Loss on disposal of equipment 14 4 13 3 ------------------- ------------------- (1,204) 675 1,283 3,753 Change in non-cash operating assets and liabilities 3,818 (1,477) 2,517 (3,984) ------------------- ------------------- 2,614 (802) 3,800 (231) ------------------- ------------------- INVESTING ACTIVITIES Proceeds on disposal of equipment 87 13 105 53 Purchase of capital assets (438) (1,828) (536) (2,128) ------------------- ------------------- (351) (1,815) (431) (2,075) ------------------- ------------------- FINANCING ACTIVITIES Issue of share capital, net of share issuance costs - 95 7 189 Proceeds (repayments) of operating loan (1,756) 2,864 (2,365) 2,785 Repayment of obligations under capital lease (473) (310) (944) (604) Repayment of long-term debt (34) (32) (67) (64) ------------------- ------------------- (2,263) 2,617 (3,369) 2,306 ------------------- ------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - - - - CASH AND CASH EQUIVALENTS, beginning of period - - - - ------------------- ------------------- CASH AND CASH EQUIVALENTS, end of period $ - $ - $ - $ - ------------------- ------------------- ------------------- ------------------- Supplementary cash flow information: Interest paid $ 129 $ 99 $ 314 $ 171 ------------------- ------------------- ------------------- ------------------- Income taxes paid (refunded) $ (187) $ 569 $ 320 $ 1,384 ------------------- ------------------- ------------------- ------------------- Capital assets acquired under capital leases $ 491 $ 84 $ 583 $ 538 ------------------- ------------------- ------------------- ------------------- Certain information contained herein constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that we expect or anticipate may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "potential", "targeting", "intend", "could", "might", "should", "believe" or similar words suggesting future outcomes or outlook. The following discussion is intended to identify certain factors, although not necessarily all factors, which could cause future outcomes to differ materially from those set forth in the forward-looking information. The risks and uncertainties that may affect the operations, performance, development and results of Innicor's businesses include, but are not limited to, the following factors: the availability of capital, supplies and costs of materials, the demand for Innicor's products, the level of exploration and development activity in the petroleum industry and changing market conditions. The reader is cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate by Innicor at the time of preparation, may prove to be incorrect or may not occur. Accordingly, readers are cautioned that the actual results achieved will vary from the information provided herein and the variations may be material. Readers are also cautioned that the foregoing list of factors and risks is not exhaustive. Additional information on these and other risks, uncertainties and factors that could affect Innicor's operations or financial results are included in our filings with the securities commissions or similar authorities in certain provinces of Canada, as may be updated from time to time. There is no representation by Innicor that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Innicor does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement. THE TSX HAS NEITHER APPROVED NOR DISAPPROVED THE CONTENTS OF THIS NEWS RELEASE.

For further information:

For further information: Delton Campbell, President and CEO, (403)
236-2815, e-mail - dcampbell@innicor.com; or Bob Jones, Executive Vice
President and COO, (403) 236-2815, e-mail - bjones@innicor.com; or Ian Bootle,
CFO, (403) 236-2815, e-mail - ibootle@innicor.com

Organization Profile

INNICOR SUBSURFACE TECHNOLOGIES INC.

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