Noveko International Inc. Announces Fourth Quarter and Fiscal 2009 Results
Year marked by the strengthening of the group, product and market development and a 63.7% increase in revenues from continuing operations Positive outlook for the current fiscal year ------------------------------------------------------------------------- EKO / TSX </pre> <p/> <p><location>MONTREAL</location>, <chron>Sept. 25</chron> /CNW Telbec/ - Noveko International Inc. ("the Company") today announces the financial results for its fourth quarter and fiscal year ended <chron>June 30, 2009</chron>.</p> <p>"Despite a 63.7% increase in revenues from continuing operations over the previous year, we posted mixed results. However, they reflect the efforts we put into developing our products, distribution networks and group infrastructure by closing strategic acquisitions and adding key personnel, all of which are critical for our long-term growth. These developments required time and the investment of significant human and financial resources, the effects of which were felt all the more as the sales of our antimicrobial products are still only at their beginnings. Furthermore, certain items that affected our results had no impact on our cash position, such as stock-based compensation charge and goodwill impairment related notably to the recent conditions in a subsidiary's market," indicated André Leroux, Chairman of the Board and Chief Executive Officer of the Company.</p> <p/> <p>Financial Highlights for Continuing Operations (BLI's Operating Results Treated as Discontinued Operations)</p> <p/> <p>For the fiscal year and the fourth quarter, in comparison with the corresponding periods of the previous year:</p> <p/> <pre> - Consolidated revenues from continuing operations respectively up by 63.7% to $12.2 million, and up by 44.7% to $3.4 million - Loss before amortization, financial expenses, income taxes, other items and discontinued operations - including stock-based compensation - respectively up by $7.6 million and down by $1.6 million - Loss from continuing operations respectively up by $14.8 million and $3.4 million </pre> <p/> <p>"The pandemic threat gave us an opportunity to accelerate our growth, paving the way for a promising outlook throughout the current fiscal year and over the longer term. Our expected sales growth will improve our financial performance," added <person>Mr. Leroux</person>. "During the year, we concluded new agreements and partnerships that are already bearing fruit, as attested to by our significant order book for Noveko(TM) antimicrobial face masks and respirators and AZURO(TM) hand sanitizers, also demonstrating the greater interest in our know-how and expertise. In addition, we managed to have our suppliers increase their production capacity in order to meet the growing demand, thereby enabling us to better serve our clients."</p> <p>"Integrating the acquired entities into our group, and especially pooling our technologies, allowed us to achieve significant breakthroughs in the air filtration segment, notably in the farming sector, although the market deployment of our Noveko antimicrobial air filters was not as rapid as expected, due to the difficult conditions currently prevailing in the swine industry. We are however confident of being well positioned to benefit from an eventual recovery. We also believe that the current fiscal year will be promising in regard to new applications for our air filters in the aeronautics, rail transport and building segments."</p> <p>"All in all, we have the assets, organizational capabilities and human resources to further develop our primary growth vectors, namely our antimicrobial face masks and respirators, air filtration products, sanitizers and medical equipment," concluded <person>Mr. Leroux</person>.</p> <p/> <pre> Analysis of Operating Results Selected Consolidated Information (in thousands of $, except per-share amounts) (unaudited) ------------------------------------------------------------------------- 12 months Three months (audited) (unaudited) 2009(1) 2008 2009(1) 2008 ------------------------------------------------------------------------- Revenues(2) 12,162 7,428 3,373 2,331 Gross margin 5,481 3,650 1,100 951 Loss before amortization, financial expenses, income taxes, other items and discontinued operations(3) (21,579) (13,991) (5,002) (6,585) Goodwill impairment charge(4) (3,600) - (3,600) - Loss from continuing operations (28,860) (14,071) (10,262) (6,825) Loss from discontinued operations (3,016) (2,543) (2,425) (2,587) Net loss (31,876) (16,613) (12,637) (9,412) Loss per Class A share (basic and diluted) Continuing operations $ (0.43) $ (0.26) $ (0.15) $ (0.12) Discontinued operations $ (0.05) $ (0.04) $ (0.04) $ (0.05) Net loss $ (0.48) $ (0.30) $ (0.19) $ (0.17) Weighted average number of Class A shares outstanding basic and diluted (in thousands) 66,611 54,767 66,611 54,767 ------------------------------------------------------------------------- ------------------------------------------------------------------------- June 30, June 30, Balance Sheet Data 2009 2008 ------------------------------------------------ Total assets 50,897 62,858 Shareholders' equity 38,487 49,773 Total interest-bearing debt(5) 4,163 4,547 Cash, cash equivalents, deposit in trust and short-term investments 4,711 25,386 ------------------------------------------------ (1) The consolidated financial statements as at June 30, 2009 include the accounts of the Company and its wholly-owned subsidiaries. (2) Excluding BLI. (3) Including stock-based compensation charge of 11,036, 7,229, 1,742 and 4,181 for the respective periods of 2009 and 2008, which has no impact on the cash balance. (4) Step one of the Company's annual goodwill impairment tests resulted in a preliminary impairment (without impact on cash) within the medical equipment segment (ECM) reflecting market conditions, primarily the economic slowdown and the restructuring periods under way in the swine and bovine industries. (5) Including long-term debt and its current portion, bank advances and bank loan, and short and long-term convertible debentures. ------------------------------- Fiscal Year Ended June 30, 2009 ------------------------------- </pre> <p/> <p>Our segmented information is now reported based on five business segments to provide a better representation of our primary growth vectors, namely : Noveko(TM) antimicrobial surgical masks and respirators, air filtration products, including Noveko(TM) antimicrobial air filters, as well as EPURAIR(TM) air quality systems, AZURO(TM) sanitizers, medical equipment, primarily ultrasound scanners for human and veterinary medicine, along with our medical equipment import and distribution activities, and other activities consisting primarily of the marketing management services offered by Magnum to external clients, and also the activities of the parent company, Noveko International, and Noveko Trading. Data for prior quarters have been reclassified to reflect this new presentation.</p> <p/> <p>Discontinued Operations</p> <p/> <p>Since Bolduc Leroux Inc.'s activities no longer fit with our growth strategy, we are actively continuing our efforts to sell this subsidiary.</p> <p/> <pre> Summary of Results from Discontinued Operations (BLI) (in thousands of $) ------------------------------------------------------------------------- Fiscal Years Ended June 30, 2009 2008 ------------------------------------------------------------------------- Revenues 5,590 7,088 Gross margin 526 1,339 Loss from discontinued operations (3,016) (2,543) ------------------------------------------------------------------------- ------------------------------------------------------------------------- For this reason, BLI's results of operations and assets and liabilities have been withdrawn from continuing operations to be treated as discontinued operations in the Company's financial statements for the fiscal year ended June 30, 2009, as well as for the fiscal year ended June 30, 2008 for comparative purposes. Consolidated and Segmented Revenues from Continuing Operations (in dollars) ------------------------------------------------------------------------- Fiscal Years Ended June 30, 2009 2008 ------------------------------------------------------------------------- Medical equipment 7,558,144 6,894,908 ------------------------------------------------------------------------- Sanitizers 540,779 371,417 ------------------------------------------------------------------------- Face masks 602,947 39,657 ------------------------------------------------------------------------- Filtration 2,692,726 62,239 ------------------------------------------------------------------------- Other 767,718 59,742 ------------------------------------------------------------------------- Total 12,162,314 7,427,963 ------------------------------------------------------------------------- Consolidated revenues for the fiscal year ended June 30, 2009 grew by $4.7 million or 63.7% to $12.2 million. This growth came primarily from: - the $0.7 million increase in revenues from the medical equipment segment which benefited from the contribution of Noveko Algérie acquired in July 2008, whereas revenues from the sale of ultrasound scanners for use in veterinary medicine declined due to the decrease in selling prices for these devices at a time when the swine and bovine industries are experiencing difficulties worldwide - however, these selling price adjustments enabled ECM to maintain its sales volume and leadership in a more challenging market; - the increases of $0.5 million and $0.2 million in revenues recorded in the face masks and sanitizers segments respectively - it should be noted that the sharp increase in demand in the current context of a pandemic will yield benefits mostly in the coming fiscal years, given the sustained growth in orders for such products; - the $2.6 million increase in revenues from the filtration products segment thanks to the acquisition of Micron-Air and Purer Life, completed in July and August 2008 respectively, and the distribution agreements in the livestock farms market; and - the $0.7 million increase in revenues from the marketing management services offered by Magnum to external clients, namely manufacturers and distributors of pharmaceuticals, over-the-counter drugs and medical devices (other activities). </pre> <p/> <p>The operating profit margin slipped from 49.1% for the fiscal year ended <chron>June 30, 2008</chron> to 45.1% for the fiscal year ended <chron>June 30, 2009</chron>. This decline is due primarily to the different product mix resulting from the acquisitions closed at the beginning of the fiscal year and downward adjustments in the prices of filtration products for livestock farms and medical equipment for use in veterinary medicine due to the difficulties that continue to affect the swine and bovine industries worldwide, as indicated previously.</p> <p>Selling and administrative expenses increased by <money>$5.6 million</money> or 58.1% to <money>$15.3 million</money> due to the following main factors:</p> <p/> <pre> - the increase in the group's total payroll as a result of the acquisitions closed at the beginning of the year and the strengthening of the team at various levels of responsibility; - the costs related to product marketing and selling initiatives in the different business segments; and - the fees assumed by Noveko International with respect to its new status as a TSX-listed corporation. </pre> <p/> <p>Stock-based compensation charge, which has no impact on the Company's cash balance, increased by <money>$3.8 million</money> compared with the previous year to <money>$11.0 million</money>. Primarily pursuant to the acquisitions closed at the beginning of the fiscal year, the Company granted stock options to employees and consultants entitling them to purchase a total of 2,950,000 Class A shares at an average exercise price of <money>$2.76</money> per share with a vesting period extending over 12 to 30 months.</p> <p>Research and development costs increased by approximately <money>$0.3 million</money> over the previous year to <money>$1.2 million</money>, due notably to the costs related to the development phases and different effectiveness tests conducted in the face masks and filtration products segments.</p> <p>Research and development tax credits grew by approximately <money>$0.3 million</money> to more than <money>$0.5 million</money>, this increase being divided almost equally among the filtration products, face masks and medical equipment segments.</p> <p/> <pre> Loss before Amortization, Financial Expenses, Income Taxes, Other Items ------------------------------------------------------------------------- and Discontinued Operations --------------------------- (in dollars) ------------------------------------------------------------------------- Fiscal Years Ended June 30, 2009 2008 ------------------------------------------------------------------------- Medical equipment (238,542) (172,337) ------------------------------------------------------------------------- Sanitizers (1,686,310) (1,352,188) ------------------------------------------------------------------------- Face masks (2,286,884) (1,682,842) ------------------------------------------------------------------------- Filtration (3,722,963) (1,994,105) ------------------------------------------------------------------------- Other (13,644,590) (8,789,796) ------------------------------------------------------------------------- Total (21,579,289) (13,991,268) ------------------------------------------------------------------------- </pre> <p/> <p>Considering the aforementioned factors, the loss before amortization, financial expenses, income taxes, other items and discontinued operations totalled <money>$21.6 million</money>, compared with an operating loss of <money>$14.0 million</money> for the previous year.</p> <p>Amortization expenses amounted to <money>$2.0 million</money>, this <money>$1.7 million</money> increase being primarily attributable to the acquisitions closed at the beginning of the fiscal year, of which nearly half came from the amortization of intangible assets, notably patents in the filtration products segment.</p> <p>Financial expenses less investment revenues totalled <money>$2.2 million</money>, compared with a negative amount of approximately <money>$0.1 million</money> for the previous fiscal year.</p> <p>The Company recorded a <money>$3.6 million</money> goodwill impairment charge in its financial statements as at <chron>June 30, 2009</chron> related to the medical equipment segment (ECM), which impairment is without impact on the Company's cash balance. When it initiated its step-one analysis as at <chron>June 30, 2009</chron>, using the discounted estimated future cash flows method, it was determined that a comprehensive step-two analysis of the goodwill for ECM would be required because the net book value of this unit exceeded its estimated fair value. The goodwill impairment charge reflects market conditions related to ECM, primarily the economic slowdown and the restructuring periods under way in the swine and bovine industries. With the assistance of an independent valuator, the Company is currently carrying out this comprehensive assessment including a detailed calculation of the estimated fair values of recorded and unrecorded intangible assets. The final impairment calculation is expected to be completed during fiscal 2010 and the resulting final adjustments, if any, would result in a non-cash adjustment to the consolidated statement of operations.</p> <p/> <pre> Net Loss from Continuing Operations (in dollars) ------------------------------------------------------------------------- Fiscal Years Ended June 30, 2009 2008 ------------------------------------------------------------------------- Medical equipment (4,284,262) (311,347) ------------------------------------------------------------------------- Sanitizers (1,765,542) (1,280,275) ------------------------------------------------------------------------- Face masks (2,294,519) (1,740,628) ------------------------------------------------------------------------- Filtration (3,963,997) (1,994,105) ------------------------------------------------------------------------- Other (16,551,391) (8,744,373) ------------------------------------------------------------------------- Total (28,859,711) (14,070,728) ------------------------------------------------------------------------- </pre> <p/> <p>Considering the aforementioned factors and the fact that the Company recorded income tax recoveries of more than <money>$0.3 million</money> and future income taxes of approximately <money>$0.3 million</money>, the net loss from continuing operations for the fiscal year ended <chron>June 30, 2009</chron> amounted to <money>$28.9 million</money>, compared with a net loss of <money>$14.1 million</money> for the previous fiscal year.</p> <p>A <money>$3.0 million</money> loss from discontinued operations (BLI) was recorded in the year's results, compared with <money>$2.5 million</money> for the previous year; consequently, the net loss amounted to <money>$31.9 million</money>, compared with <money>$16.6 million</money> for the fiscal year ended <chron>June 30, 2008</chron>.</p> <p>Considering a net change in unrealized gains on translation of the financial statements of self-sustaining foreign operations of <money>$0.5 million</money> for the fiscal year, compared with an unrealized loss of <money>$0.8 million</money> for the previous year, a net loss of <money>$31.4 million</money> represented the comprehensive loss for the fiscal year ended <chron>June 30, 2009</chron>, compared with a net loss of <money>$17.4 million</money> for the previous year.</p> <p>The loss per Class A share (basic and diluted) from continuing operations amounted to <money>$0.43</money> on a weighted average of 66,610,725 outstanding shares, compared with a loss per share of <money>$0.26</money> on a weighted average of 54,767,174 shares for the previous fiscal year. The increased weighted average number of outstanding shares is due to the share issues during the fiscal year ended <chron>June 30, 2009</chron>. The net loss per Class A share (basic and diluted) totalled <money>$0.48</money>, after accounting for a loss from discontinued operations of <money>$0.05</money>, compared with <money>$0.30</money> for the previous year, after accounting for a loss from discontinued operations of <money>$0.04</money>.</p> <p/> <pre> Principal Quarterly Financial Information (Unaudited) ------------------------------------------------------------------------- (in thousands of $, except per-share First Second Third Fourth amounts) Quarter Quarter Quarter Quarter ------------------------------------------------------------------------- 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) ------------------------------------------------------------------------- ---------------------------------- Fourth Quarter Ended June 30, 2009 ---------------------------------- Consolidated and Segmented Revenues from Continuing Operations (in dollars) ------------------------------------------------------------------------- Quarters Ended June 30, 2009 2008 ------------------------------------------------------------------------- Medical equipment 1,880,108 2,146,366 ------------------------------------------------------------------------- Sanitizers 151,702 77,816 ------------------------------------------------------------------------- Face masks 261,822 18,221 ------------------------------------------------------------------------- Filtration 962,782 28,595 ------------------------------------------------------------------------- Other 116,882 59,742 ------------------------------------------------------------------------- Total 3,373,296 2,330,740 ------------------------------------------------------------------------- Consolidated revenues for the fourth quarter ended June 30, 2009 grew by $1.0 million or 44.7% to $3.4 million. This growth came primarily from: - a $934,187 increase in revenues from the filtration products segment thanks to the acquisition of Micron-Air and Purer Life and the new distribution agreements in the livestock farms market; - the increases of $243,601 and $73,886 in revenues recorded in the face masks and sanitizers segments respectively, reflecting a sales growth; - a $57,140 increase in revenues (other activities) from the marketing management services offered by Magnum to external clients, i.e. manufacturers and distributors of pharmaceutical, over-the-counter drugs and medical devices; - whereas revenues from the medical equipment segment decreased by $266,258 from the corresponding period of 2008, despite the contribution of Noveko Algérie. The decline in revenues in this segment is primarily attributable to the crisis in the swine and bovine industries worldwide. </pre> <p/> <p>Selling and administrative expenses increased by <money>$1.4 million to $4.1 million</money>.</p> <p>Stock-based compensation charge decreased by <money>$2.4 million</money> from the corresponding quarter of the previous year to <money>$1.7 million</money>. This decrease is due to the fact that in the fourth quarter of the year, the Company granted only a few new stock options, unlike last year when, in addition, the exercise price of the options was higher.</p> <p>Research and development costs decreased by <money>$0.3 million</money> from the corresponding quarter of the previous year to <money>$0.3 million</money>, the platform of new-generation ultrasound scanners for use in human and veterinary medicine being virtually complete. Research and development tax credits remained relatively stable compared with the fourth quarter of 2008.</p> <p/> <pre> Loss before Amortization, Financial Expenses, Income Taxes, Other Items ------------------------------------------------------------------------- and Discontinued Operations --------------------------- (in dollars) ------------------------------------------------------------------------- Quarters Ended June 30, 2009 2008 ------------------------------------------------------------------------- Medical equipment (232,346) (337,081) ------------------------------------------------------------------------- Sanitizers (60,748) (965,095) ------------------------------------------------------------------------- Face masks (722,912) (1,063,331) ------------------------------------------------------------------------- Filtration (1,374,845) (896,512) ------------------------------------------------------------------------- Other (2,611,145) (3,322,811) ------------------------------------------------------------------------- Total (5,001,996) (6,584,830) ------------------------------------------------------------------------- Considering the aforementioned factors, the loss before amortization, financial expenses, income taxes, other items and discontinued operations amounted to $5.0 million for the fourth quarter ended June 30, 2009, down by $1.6 million from the corresponding quarter of the previous year. Net Loss from Continuing Operations (in dollars) ------------------------------------------------------------------------- Quarters Ended June 30, 2009 2008 ------------------------------------------------------------------------- Medical equipment (3,539,670) (350,334) ------------------------------------------------------------------------- Sanitizers (76,366) (898,662) ------------------------------------------------------------------------- Face masks (715,256) (1,076,629) ------------------------------------------------------------------------- Filtration (1,185,548) (896,512) ------------------------------------------------------------------------- Other (4,745,288) (3,602,621) ------------------------------------------------------------------------- Total (10,262,128) (6,824,758) ------------------------------------------------------------------------- </pre> <p/> <p>The fourth-quarter net loss amounted to <money>$10.3 million</money>, compared with a net loss of <money>$6.8 million</money> for the corresponding quarter of the previous year, considering the aforementioned factors and a <money>$3.6 million</money> goodwill impairment charge attributable to ECM, as mentioned previously regarding the net loss for the fiscal year ended <chron>June 30, 2009</chron>. Considering a net change in gains on translation of the financial statements of self-sustaining foreign operations of <money>$0.9 million</money> for the quarter, whereas the net change in losses was <money>$0.1 million</money> for the fourth quarter of the previous year, a net loss of <money>$9.4 million</money> represented the fourth-quarter comprehensive loss, compared with <money>$6.9 million</money> for the corresponding quarter of the previous year.</p> <p>The loss per Class A share (basic and diluted) from continuing operations amounted to <money>$0.15</money> on a weighted average of 66,610,725 outstanding shares, compared with a loss per share of <money>$0.12</money> on a weighted average of 54,767,174 shares for the previous year. The net loss per Class A share (basic and diluted) totalled <money>$0.19</money> after accounting for a loss from discontinued operations of <money>$0.04</money>, compared with <money>$0.17</money> for the previous year, after accounting for a loss from discontinued operations of <money>$0.05</money>.</p> <p/> <pre> -------------------------------------------- Fiscal Year Highlights and Subsequent Events -------------------------------------------- Listing on Toronto Stock Exchange: Effective July 28, 2008, the Company's shares ceased trading on the TSX Venture Exchange and were listed on the Toronto Stock Exchange. Acquisition of Subsidiaries: July 2008 Acquisition of Unitam International Management Corporation Inc. ("Unitam"), an agency focused on the development of international business services established in North America and Asia. Unitam's activities have since been integrated with those of Magnum. The process of winding up Unitam in Magnum was initiated in June 2009. July 2008 Acquisition of SARL Noveko Algérie ("Noveko Algérie"), a medical equipment import business in North Africa. July 2008 Acquisition of Groupe Conseils Micron-Air Inc. and two other companies of the same group ("the Micron-Air group"), a designer and manufacturer of air quality systems for the residential and commercial markets sold under the EPURAIR(TM) brand. Since July 2009, subsequent to a reorganization to streamline the Company's corporate structure, the activities formerly conducted by the Micron- Air group are now conducted by Epurair Inc. ("Epurair"). August 2008 Acquisition of Purer Life Technology Co., Ltd. (and U-Bond Inc., an entity of the same group - collectively "Purer Life"), a company that develops and manufactures antimicrobial filtration fabric and holds an extensive portfolio of intellectual property rights with multiple applications. In May 2009, U-Bond Inc. was wound-up into Noveko Trading. Agreements and Orders for Product Development and Marketing: </pre> <p/> <p>Distribution Agreement with Aerosys Technologies - for the exclusive distribution of filters incorporating Noveko's antimicrobial filtration technology, worldwide, to aircraft manufacturers, aeronautics maintenance companies and air carriers and, in <location>France</location>, to the railway, auto manufacturing and defence industries. Aerosys Technologies also distributes Noveko(TM) surgical masks and AZURO(TM) hand sanitizers in the French market.</p> <p>Distribution Agreement with Garda - for the distribution of Noveko(TM) antimicrobial surgical masks and respirators and Azuro(TM) hand sanitizers to Garda's client base.</p> <p>Distribution Agreement with BLD Distribution - for the sale and promotion of the hand sanitizers within the <location>United States</location> to the foodservices and educational segments, industrial sectors such as janitorial, warehousing and farming, and government and pharmaceutical entities. BLD committed to purchase Noveko hand sanitizers for an amount of at least US$3 million within the first year.</p> <p>Licence and Supply Agreement with Microban - Microban, the global leader in built-in antimicrobial product protection, offering durable antimicrobial solutions for consumer, industrial and healthcare products around the world, granted us the right to sell our line of AZURO(TM) hand sanitizers under the Microban(R) brand name. This global agreement also granted us the right to use the Microban(R) brand as the lead/host brand or ingredient brand, and the right and licence to use the Microban(R) antimicrobial technology and proprietary antimicrobial additives in the manufacture of Noveko(TM) surgical masks and respirators through <chron>December 31, 2012</chron>.</p> <p>Air Transat Chooses Noveko(TM) Antimicrobial Technology - first order from Air Transat obtained in <chron>September 2009</chron> for some 500,000 Noveko(TM) antimicrobial face masks and respirators as well as for AZURO(TM) hand sanitizers. Additional orders are expected within the near term. The antimicrobial products purchased by Air Transat are intended to protect the airline's passengers, flights personnel and ground crew. Furthermore, discussions are still under way with Air Transat and the French company Aerosys Technologies to obtain the required certifications in order to equip Air Transat's aircraft fleet with filters incorporating Noveko's antimicrobial filtration technology.</p> <p/> <p>Private Placement of Approximately $10 Million:</p> <p/> <p>On <chron>September 4, 2009</chron>, we announced we had entered into an agreement with Desjardins Securities Inc. as lead agent on behalf of a syndicate of agents to raise approximately <money>$10 million</money> of units by way of a best efforts private placement. The placement process is currently under way and should close in the near term. Each unit will consist of one Class A share of the Company and one-half of one Class A share purchase warrant. The units will be offered to qualified investors in all Canadian provinces and potentially in other jurisdictions pursuant to applicable private placement exemptions. The offering is subject to the usual conditions and the receipt of all required regulatory approvals, including approval of the <location>Toronto</location> Stock Exchange.</p> <p/> <p>Progress at Operational Level:</p> <p/> <p>Agreement with McKesson Logistics Solutions - In <chron>August 2009</chron>, we concluded an agreement with McKesson Logistics Solutions ("MSL"), Canada's leading third-party logistics provider for the healthcare industry, pursuant to which MSL will provide us with full order-to-cash logistics management services, including order fulfillment, customer invoicing, accounts receivable management, customer service, storage, inventory and transportation management, for the distribution of our Noveko(TM) surgical masks and respirators and hand sanitizers.</p> <p>Steps to Secure Foothold in <location>China</location> - The Company has taken steps to establish its presence in the Chinese market through a subsidiary in order to accelerate the development of its various activities in <location>China</location>.</p> <p/> <p>Progress in our Business Segments:</p> <p/> <p>Masks and Respirators</p> <p/> <p>Increased Demand and Production - At the end of <chron>April 2009</chron>, we made a first delivery of about one million face masks to <location>Mexico</location>, this number representing most of the face mask inventories then available at Noveko's Terrebonne warehouse. During the fourth quarter of the fiscal year, in order to attempt to meet the growing demand and given the limited quantity of face mask inventories available, we took the necessary steps to increase our production, primarily by enhancing our assembly capacity. First, during the fourth quarter of the fiscal year ended <chron>June 30, 2009</chron>, we started assembling the inventories of the various face mask components at our disposal. The assembly of these different components will enable us to gradually produce approximately 7 million face masks. The face masks thus assembled are delivered as they become available. Conversely, limited working capital and the time required to increase the assembly rate have actually caused the pace to somewhat slow down. We expect to be able to finish assembling most of these 7 million face masks in the coming quarter. Delivery of these face masks will therefore be spread over the current and next quarter.</p> <p>Secondly, we started to produce approximately 20 million additional face masks during the fourth quarter of the fiscal year ended <chron>June 30, 2009</chron>. We expect to complete a large proportion of the production and assembly of these face masks in the second quarter ending <chron>December 31, 2009</chron>. We are also taking further steps to pursue the production of additional face masks.</p> <p>The value of our firm orders for our face masks, for the period beginning <chron>July 1, 2009</chron>, currently totals <money>$12 million</money>. In addition to these orders, negotiations are under way with respect to several more orders, which could potentially represent sales of at least 50 million face masks for the current fiscal year.</p> <p>We are still discussing with various suppliers to increase the assembly pace of the materials used in the manufacture of our face masks. We also remain on the lookout for opportunities to expand our production more efficiently. Consequently, after obtaining the expected net proceeds from the offering, we expect to gradually reach a monthly production rate of about 9 million face masks in the current fiscal year. We will thereby be in a position to produce a sufficient quantity of face masks to fill our existing order forecasts by the end of the current fiscal year.</p> <p>Effectiveness of Noveko(TM) Antimicrobial Face Masks Against the A (H1N1) Influenza Virus -In <chron>May 2009</chron>, we received the preliminary results of tests conducted by Microbiotest Lab, an independent laboratory located in Sterling, Virginia, USA, on the Noveko(TM) face masks with respect to a strain of the A (H1N1) influenza virus similar to the one responsible for the human swine flu. The purpose of these tests was to evaluate the effectiveness of Noveko(TM) face mask materials in neutralizing this virus on direct contact and to simulate the use of the face mask by a user. The tests demonstrated the bio-efficacy of a log 3 reduction over a period of 30 minutes, in other words the effectiveness of our face masks in neutralizing 99.9% of the A (H1N1) influenza virus.</p> <p>FDA certification process - At the beginning of <chron>April 2009</chron>, we filed the documentation relating to the results of the supplementary tests demonstrating a "log 4 reduction" bio-efficacy. Later in April, we held discussions with the FDA to clarify the request for information still required subsequent to its review of the test results submitted. We have taken the steps needed to fulfill these supplementary information requests. In this regard, we have been granted an extension until <chron>October 23, 2009</chron>.</p> <p>In <chron>September 2009</chron>, we also held discussions with the FDA at a formal pre-IDE (investigational device exemption) meeting to consider an additional labelling claim for our Noveko(TM) face masks and respirators for their marketing as a medical device reducing exposure to airborne influenza particles. In this regard, dialogue is continuing to obtain clarifications and guidelines for providing the supportive data for a future submission to market the Noveko(TM) face masks and respirators with such an antiviral claim in the <location>United States</location>.</p> <p>Additional Patent - In <chron>July 2009</chron>, the US Patent and Trademark Office ("USPTO") issued an additional patent for Noveko's antimicrobial filtration technology, a first patent having been issued by the USPTO in <chron>May 2006</chron>. This second U.S. patent reinforces the protection from which our antimicrobial face masks and respirators and antimicrobial air filters already benefit in several countries. In this regard, we would mention that an anonymous request for ex-parte re-examination of our patent was filed before the USPTO in <chron>May 2008</chron>. In <chron>July 2009</chron>, the USPTO rejected this request and our patent was thereby maintained.</p> <p/> <p>Air Filtration Products</p> <p/> <p>Air Filters for Farm Buildings - During the year, we equipped new Quebec-based hog farm sites through Monitrol and we also reaped the first benefits of the agreement with Geosane, although they were weaker than initially expected in light of the difficult conditions on global swine markets.</p> <p>Air Filters for the Transportation Industry - We are also in talks with other railway companies that have shown an interest in the superior filtration capacity and increased longevity of our filtration technologies, characteristics that are particularly valued in the transportation industry.</p> <p>In the aeronautics field, Aerosys Technologies has already successfully completed several of the prerequisite tests for the marketing of air filters incorporating Noveko's antimicrobial filtration technology in the aeronautics segment. Additional tests are under way, notably to certify the air filters in accordance with the industry's non-flammability standards. Aerosys Technologies also presented the new air filters incorporating Noveko(TM) technology at the <person>Paris Le Bourget</person> International Air and Space Show held in <chron>June 2009</chron>. Airlines have already shown an interest in fitting out their aircraft with such air filters, including Air Transat.</p> <p>Air Filters in the Institutional, Commercial and Residential Markets - We proceeded with the first installations of air filters incorporating Noveko's technology antimicrobial in commercial buildings in the Greater <location>Montreal</location> Area. Performance tests are currently in progress and the initial results have proven positive.</p> <p/> <p>Sanitizers</p> <p/> <p>Increased Demand and Production - During the fiscal year ended <chron>June 30, 2009</chron>, the activities related to the sanitizers marketed under the Azuro(TM) brand were integrated with those of Noveko. The current context of a pandemic had led to a sharp increase in the demand for sanitizers. To that effect, the value of our firm orders for our hand sanitizers, for the period beginning <chron>July 1, 2009</chron>, currently totals <money>$6 million</money>.</p> <p/> <p>Medical Equipment</p> <p/> <p>Progress in human and veterinary ultrasonography - Over the next year, ECM plans to finalize the setting-up of an exclusive distributors network for the human medicine market, which already assures it of a presence in 28 countries. In <chron>April 2009</chron>, ECM was granted Health <location>Canada</location> approval to sell the Imagyne(TM) ultrasound scanner in healthcare institutions across <location>Canada</location>. In veterinary medicine, thanks to its well established network of 55 exclusive distributors, ECM remains a leader in the swine market, despite the crisis in the swine industry. In <chron>October 2008</chron>, ECM launched the V Scan(TM) ultrasound scanner, a compact and competitively-priced unit completing the line of ultrasound scanners for use in veterinary medicine. ECM is currently finalizing the development of another high-end ultrasound scanner that it intends to bring to market by the end of the 2009 calendar year.</p> <p>Noveko Algérie - In <chron>April 2009</chron>, Noveko Algérie obtained significant new orders to supply various medical devices to the Algerian National Office of Equipment and Accessories for Handicapped People. The orders are estimated at approximately <money>$1.4 million</money>. The healthcare promotion in <location>Algeria</location> paves the way for promising breakthroughs for all our products, while also driving our medical equipment import activities.</p> <p/> <p>-------</p> <p>Profile</p> <p>-------</p> <p/> <p>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 filtration technology, including air filters, surgical masks and respirators, along with other products with antimicrobial properties such as AZURO(TM) hand sanitizers - and the development, manufacturing and marketing of medical equipment, primarily portable real-time ultrasound scanners for use in human and veterinary medicine.</p> <p/> <p>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.</p> <p/> <pre> ------------------------------------------------------------------------- The Management's Report, consolidated financial statements and accompanying notes for the fiscal year ended June 30, 2009 as well as the Annual Information Form will be filed on SEDAR (www.sedar.com). ------------------------------------------------------------------------- Noveko International inc. Consolidated balance sheets June 30, 2009 and 2008 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 937,319 $ 11,594,335 Deposit in trust 70,900 1,274,625 Short-term investments 3,702,958 12,516,884 Accounts receivable 3,845,527 2,939,068 Inventories 7,288,071 4,295,672 Prepaid expenses 734,777 795,145 Current portion of assets held for sale 1,998,371 3,750,470 ------------------------------------------------------------------------- 18,577,923 37,166,199 Fixed assets 4,124,110 2,396,171 Intangible assets 10,041,542 2,119,835 Other assets 1,198,345 1,442,283 Future income taxes 82,691 196,399 Goodwill 13,035,189 13,708,240 Non-current portion of assets held for sale 3,836,738 5,829,163 ------------------------------------------------------------------------- $ 50,896,538 $ 62,858,290 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and shareholders' equity Current liabilities: Bank advances $ - $ 132,108 Bank loans 162,970 561,435 Accounts payable and accrued liabilities 2,552,279 2,656,826 Current portion of secured convertible debentures 964,710 - Current portion of long-term debt 754,584 416,944 Current portion of liabilities held for sales 2,126,397 2,861,630 ------------------------------------------------------------------------- 6,560,940 6,628,943 Long-term debt 1,455,182 973,426 Secured convertible debentures 825,117 2,462,909 Future income taxes 1,644,474 398,426 Non-current portion of liabilities held for sales 1,924,217 2,621,403 Shareholders' equity: Capital stock 80,768,629 70,084,061 Portion of secured convertible debentures included in equity 372,473 611,537 Warrants - 85,983 Contributed surplus 18,718,376 7,967,778 Accumulated other comprehensive income (loss) (166,928) 347,359 Deficit (61,205,942) (29,323,571) ------------------------------------------------------------------------- 38,486,608 49,773,147 ------------------------------------------------------------------------- $ 50,896,538 $ 62,858,290 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International inc. Consolidated statements of operations Years ended June 30, 2009 and 2008 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Revenues $ 12,162,314 $ 7,427,963 Cost of sales 6,681,206 3,778,387 ------------------------------------------------------------------------- 5,481,108 3,649,576 Operating expenses: Administrative and selling expenses 15,320,326 9,693,075 Stock-based compensation 11,036,909 7,229,294 Research and development 1,247,938 983,975 Research and development tax credits (544,776) (265,500) ----------------------------------------------------------------------- 27,060,397 17,640,844 ------------------------------------------------------------------------- Loss before amortization, financial fees, income taxes, other items and discontinued operations (21,579,289) (13,991,268) Amortization 2,038,401 361,055 Financial expenses less investments revenues 2,246,674 (57,835) Goodwill impairment charge 3,600,000 - ------------------------------------------------------------------------- 7,885,075 303,220 ------------------------------------------------------------------------- Loss before income taxes (29,464,364) (14,294,488) Income taxes: Current (recovered) (348,246) (159,589) Future (256,407) (64,171) ----------------------------------------------------------------------- (604,653) (223,760) ------------------------------------------------------------------------- Net loss from continuing operations (28,859,711) (14,070,728) Net loss from discontinued operations (3,015,903) (2,542,660) ------------------------------------------------------------------------- Net loss $ (31,875,614) $ (16,613,388) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share: From continuing operations $ (0.43) $ (0.26) From discontinued operations $ (0.05) $ (0.04) Net loss $ (0.48) $ (0.30) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of outstanding shares, basic and diluted 66,610,725 54,767,174 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International inc. Consolidated statements of comprehensive loss Years ended June 30, 2009 and 2008 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Net loss $ (31,875,614) $ (16,613,388) Other comprehensive income, net of income taxes: Change in unrealized gains (losses) on translation of financial statements of self-sustaining foreign operations 514,287 (806,333) ------------------------------------------------------------------------- Comprehensive loss $ (31,361,327) $ (17,419,721) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International inc. Consolidated statements of deficit and contributed surplus Years ended June 30, 2009 and 2008 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- DEFICIT Deficit, beginning of year $ (29,323,571) $ (12,672,254) Restatement related to the adoption of new accounting policies 49,243 3,161 ------------------------------------------------------------------------- Restated balance (29,274,328) (12,669,093) Net loss (31,875,614) (16,613,388) Share issuance fees (56,000) (41,090) ------------------------------------------------------------------------- Deficit, end of year $ (61,205,942) $ (29,323,571) ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONTRIBUTED SURPLUS Contributed surplus, beginning of year $ 7,967,778 $ 1,325,504 Fair value of stock options granted 11,050,909 7,427,627 Warrants expired - 13,014 Fair value of stock options exercised (300,311) (798,367) ------------------------------------------------------------------------- Contributed surplus, end of year $ 18,718,376 $ 7,967,778 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International inc. Consolidated statements of cash flows Years ended June 30, 2009 and 2008 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Cash flows from operating activities: Net loss $ (31,875,614) $ (16,613,388) Adjustments for: Loss from discontinued operations 3,015,903 2,542,660 Future income taxes (256,407) (64,171) Accreted interest on secured convertible debentures 267,531 455,444 Stock-based compensation 11,036,909 7,229,294 Gain on disposal of fixed assets (7,231) - Amortization 2,134,489 361,055 Goodwill impairment charge 3,600,000 - Fair value adjustment on foreign denominated currency contracts (76,885) - Loss (gain) on fair value of short-term investments (838) 125,329 Foreigh exchange gain on disposal of short-term investments (579,292) - Foreign exchange loss (gain) 6,175 (1,653) --------------------------------------------------------------------- (12,735,260) (5,965,430) Net change in non-cash working capital (1,217,762) (3,020,994) ----------------------------------------------------------------------- (13,953,022) (8,986,424) Cash flows from financing activities: Net changes in bank advances (132,108) 68,020 Net changes in bank loan (407,425) 561,435 Increase in long-term debt 181,766 208,533 Repayment of long-term debt (459,236) (627,314) Interest paid on secured convertible debentures (165,660) (212,727) Proceeds from Class A shares and warrants issued 4,019,157 21,002,580 Class A shares issue expenses (12,800) (41,090) ----------------------------------------------------------------------- 3,023,694 20,959,437 Cash flows from investing activities: Business acquisitions (5,936,483) (576,474) Acquisition of short-term investments (61,566,736) (65,244,308) Proceeds from disposal of short-term investments 70,033,630 66,875,738 Acquisition of fixed assets (689,722) (1,832,125) Proceeds from disposal of fixed assets 8,859 - Acquisition of intangible assets (429,536) (98,067) Acquisition of other assets (58,150) (368,883) Deposit in trust 1,685 (1,274,625) Deferred development costs, net of related research tax credits received (342,183) (348,154) ----------------------------------------------------------------------- 1,021,364 (2,866,898) Cash generated (used) by continuing operations (9,907,964) 9,106,115 Cash used by discontinued operations (735,541) (264,450) ------------------------------------------------------------------------- (10,643,505) 8,841,665 Foreign exchange gain (loss) on cash in foreign currencies (13,511) 84,176 ------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (10,657,016) 8,925,841 Cash and cash equivalents, beginning of year 11,594,335 2,668,494 ------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 937,319 $ 11,594,335 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows related to continuing operating activities include interest paid of $111,720 ($256,306 in 2008) and income taxes received for $258,763 ($225,336 in 2008).
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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