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NOVEKO INTERNATIONAL INC. Announces Results for the Third Quarter Ended March 31, 2011

^{Published on 2011-05-11 12:10:47 - Market Wire}
 

 - Consolidated revenues from continuing operations up by 17% to $3.4 million, and down by 8% to $11.2 million, respectively; - Loss before amortization, financial expenses, income taxes, other items and discontinued operations down by $1.7 million (45%) to $2.1 million, and down by $3.9 million (38%) to $6.3 million, respectively; - Loss from continuing operations down by $2.0 million (44%) to $2.6 million, and down by $4.7 million (36%) to $8.3 million, respectively; - Net loss down by $2.5 million (47%) to $2.7 million, and down by $5.8 million (40%) to $8.6 million, respectively; - Total indebtedness down by $1.0 million since June 30, 2010, to $0.5 million. Selected consolidated information ------------------------------------------------------------------------- ------------------------------------------------------------------------- Periods Ended March 31 Three Months Nine Months (in thousands of $, except per- share amounts) (unaudited) 2011(1) 2010 2011(1) 2010 ------------------------------------------------------------------------- Revenues from continuing operations 3,415 2,927 11,187 12,215 Gross margin 1,376 1,081 4,545 5,023 Loss before amortization, financial expenses, income taxes, other items and discontinued operations(2) (2,052) (3,716) (6,347) (10,226) Loss from continuing operations (2,643) (4,678) (8,310) (12,979) Loss from discontinued operations(3) (88) (519) (276) (1,365) Net loss (2,731) (5,197) (8,586) (14,345) Loss per Class A share (basic and diluted) Continuing operations $ (0.03) $ (0.06) $ (0.10) $ (0.18) Discontinued operations(3) $ (0.00) $ (0.01) $ (0.00) $ (0.02) Net loss $ (0.03) $ (0.07) $ (0.10) $ (0.20) Weighted average number of outstanding Class A shares, basic and diluted (in thousands) 85,940 75,916 82,077 72,678 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance Sheet Data March 31 June 30 2011 2010 ------------------------------------------------------------------------- Total assets 42,301 42,675 Shareholders' equity 33,049 33,063 Total interest-bearing debt(4) 506 1,446 Non-current liabilities for sale(5) 1,589 1,753 Cash, cash equivalents, short-term investments and deposit in trust 2,874 2,873 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 1) The consolidated financial statements include the accounts of the Company and of its subsidiaries, all wholly-owned as at March 31, 2011. 2) Including stock-based compensation of $110,158, $599,139, $547,909 and $3,049,927 for the respective periods of fiscal 2011 and fiscal 2010, which has no impact on the cash balance. 3) Related to BLI's and Magnum's operations for the third quarter of 2010, but solely to BLI's operations for the third quarter of 2011. 4) Including long-term debt and its current portion, as well as bank loans, excluding BLI. 5) Related to BLI. ------------------------------------------------------------------------- In this press release, unless otherwise indicated or required by the context, "Noveko International", "the Company", "we", "us", "our", "our Company", "Group" and "our Group" designate, as the case may be, Noveko International Inc. or Noveko International Inc. and its subsidiaries, and "Noveko" designates Noveko Inc., a subsidiary of the Company. The Company's other subsidiaries are designated as follows: "ECM" for S.A.S. E.C.M., "Epurair" for Epurair Inc., "Magnum" for Magnum Pharmaceutics Inc., "Noveko Algérie" for SARL Noveko Algérie, "Noveko Beijing" for Noveko (Beijing) Hi-Tech Development Limited, "Noveko Taiwan" for Noveko Taiwan Co., Ltd., "Noveko Trading" for Noveko Trading 2008 LLC, "Purer Life" for Purer Life Technology Co., Ltd. and "BLI" for Bolduc Leroux Inc. Also, the second quarter and the six-month period ended December 31, 2010 and the corresponding periods ended December 31, 2009 are sometimes respectively designated by the terms "second quarter of 2011" and "first six months of fiscal 2011", and "second quarter of 2010" and "first six months of fiscal 2010", while the fiscal year ending June 30, 2011 and those ended June 30 of prior years are sometimes designated by the terms "fiscal 2011", "fiscal 2010" and so on. ------------------------------------------------------------------------- Analysis of Operating Results ------------------------------------------------------------------------- 

 Consolidated and Segmented Revenues from Continuing Operations (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three Months Nine Months Ended March 31 Ended March 31 ------------------------------------------------------------------------- 2011 2010 2011 2010 ------------------------------------------------------------------------- Medical equipment $ 2,503,431 $ 1,951,539 $ 8,436,684 $ 6,744,101 Sanitizers 68,758 174,972 657,578 2,484,763 Masks 12,097 255,452 26,773 1,339,910 Filtration 830,545 545,487 2,066,275 1,646,079 ------------------------------------------------------------------------- Total $ 3,414,831 $ 2,927,450 $ 11,187,310 $ 12,214,853 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 Earnings (Loss) before Amortization, Financial Expenses, Income Taxes, Other Items and Discontinued Operations (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three Months Nine Months Ended March 31 Ended March 31 ------------------------------------------------------------------------- 2011 2010 2011 2010 ------------------------------------------------------------------------- Medical equipment $ 306,724 $ (64,911) $ 1,270,313 $ 438,086 Sanitizers (404,683) (1,244,360) (1,608,860) (1,929,676) Masks (71,765) (424,480) (498,538) (879,879) Filtration (534,416) (152,402) (1,775,091) (1,287,308) Other (1,347,370) (1,829,804) (3,734,912) (6,567,134) ------------------------------------------------------------------------- Total $ (2,051,510) $ (3,715,957) $ (6,347,088) $(10,225,911) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 - a major reduction in the stock-based compensation charge of the parent company Noveko International (in the "other" segment) for the previously mentioned reasons; - improvements in the profitability of Noveko Algérie and ECM as the overall medical equipment segment achieved earnings before amortization, financial expenses and income taxes of $0.3 million in the third quarter of 2011, an improvement of $0.4 million over the third quarter of 2010, and earnings of $1.3 million for the first nine months, an increase of $0.8 million over the corresponding period of the previous year; - a reduction in the loss incurred by the sanitizers segment of approximately $0.8 million for the third quarter of 2011 and $0.3 million for the first nine months, resulting primarily from the cost tightening measures; - a reduction in the loss attributable to the masks segment of close to $0.4 million for the third quarter, mainly reflecting the lower development expenses and stock-based compensation charge. For the first nine months, the segment's loss also declined by approximately $0.4 million; - conversely, the filtration segment increased its loss by $0.4 million and $0.5 million, respectively, for the third quarter and the first nine months of fiscal 2011, due to an increase in commercialization expenses and the allowance for inventory obsolescence. 

 Net Earnings (Loss) from Continuing Operations (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three Months Nine Months Ended March 31 Ended March 31 ------------------------------------------------------------------------- 2011 2010 2011 2010 ------------------------------------------------------------------------- Medical equipment $ 54,235 $ (430,474) $ 494,788 $ (231,449) Sanitizers (550,290) (1,349,955) (2,060,615) (2,269,697) Masks (87,304) (484,183) (511,310) (1,064,694) Filtration (628,328) (249,009) (1,867,733) (1,597,071) Other (1,431,586) (2,164,410) (4,364,949) (7,816,275) ------------------------------------------------------------------------- Total $ (2,643,273) $ (4,678,031) $ (8,309,819) $(12,979,186) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 Principal Quarterly Financial Information (in thousands of $, except per-share amounts)(unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------------------------------------------------------------------------- Fiscal 2011 Revenues 2,747 5,026 3,415 Loss from continuing operations (2,838) (2,828) (2,643) Comprehensive loss (2,654) (3,096) (2,593) Loss per Class A share from continuing operations (basic and diluted) (0.04) (0,03) (0.03) ------------------------------------------------------------------------- Fiscal 2010 Revenues 4,388 4,899 2,927 2,896 Loss from continuing operations (3,503) (4,798) (4,678) (7,737) Comprehensive loss (4,417) (5,449) (5,858) (9,612) Loss per Class A share from continuing operations (basic and diluted) (0.05) (0.06) (0.07) (0.10) ------------------------------------------------------------------------- Fiscal 2009 Revenues 2,014 3,687 2,454 3,257 Loss from continuing operations (6,057) (6,526) (5,216) (10,003) Comprehensive loss (6,957) (5,506) (7,062) (12,865) Loss per Class A share from continuing operations (basic and diluted) (0.09) (0.10) (0.08) (0.15) ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance Sheet Analysis ------------------------------------------------------------------------- 

 ------------------------------------------------------------------------- Quarter Highlights and Subsequent Events ------------------------------------------------------------------------- - Sale of the Terrebonne building effective March 31, 2011 for a consideration of $1.3 million. - Increase in Epurair's productivity and production capacity further to the relocation of its design, development and production activities to larger premises and to the acquisition of new cutting-edge equipment. - Financing: On March 16, 2011, closing of $2.5 million of units in connection with the offering announced on February 22, 2011. On April 8, 2011, termination of this offering and announcement of a new private placement pursuant to which each unit is offered at a price of $0.70 and consists of one (1) Class A share and one-half of one warrant. On April 29, 2011, we proceeded with a first closing of $595,104 of this offering. Additional closings are expected until May 23, 2011. Air Filters for the Transportation Industry - First agreement for a train line in North America: In April 2011, we signed a three-year agreement with Kinkisharyo International, L.L.C., pursuant to which the latter will lease Noveko(TM) filters to equip the entire fleet of the Hudson-Bergen Light Rail Line in New Jersey. - Ongoing tests in rail transportation: In cooperation with various transportation bodies, we are conducting further adaptability trials on several systems, including subway cars, trains, tunnels and subway stations in various major cities in North America. In this context, the process with Bombardier Transportation is also continuing and the representatives of the two companies are working to ensure that the agreement binding them materializes. - Agreements with the STM: At the end of April 2011, the Société de transport de Montréal (the "STM") opted for Noveko(TM) filtration solutions to equip its transportation centres. To that end, we entered into two first agreements covering the supply and cleaning of filters for the Anjou and St-Denis transportation centres. This initial collaboration follows a period of conclusive tests conducted at the Anjou transportation centre. - Aeronautics segment in final phase toward certification: Most of the prerequisite tests to obtain "STC" certification from Transport Canada have been completed and all proved highly conclusive. We are now in the final phase of the process as we are conducting the last series of tests needed to complete the file. We believe we could obtain STC certification at the beginning of fiscal 2012. Air Filters for Buildings - Institutional, Commercial and Residential Markets - First sale to the U.S. real estate market in March 2011: Noveko(TM) filters are in the process of being installed in a luxury condominium tower, located in New York City. In April 2011, we strengthened our position in the U.S. market by entering into an agreement with HTS New York. - In Europe, the Hilton Luxembourg Hotel is now equipped with our solutions. We have also closed a sale of filters for an office building in Switzerland. - In Asia, a first order of filtering membranes has been won as part of an agreement entered into with the Taiwanese company JJMR-Clean-Air Solution, specializing in the production of filters for manufacturers of semi-conductors and LCD screens. - Noveko(TM) filters are being installed for pre-sale testing purposes in some important buildings worldwide, in New York, Dubai, Taipei, Geneva and Paris. - Noveko keeps up its momentum in the Greater Montreal Area: About 10 office and commercial buildings are currently equipped with Noveko(TM) filters and about 30 bids are under review for the Montreal area alone. Air Filters for Farm Buildings - The delivery of the filters designed for the Villa Vista Farms' 14 buildings as part of a contract worth close to a quarter million dollars has been completed. Antimicrobial Masks and Respirators Markets - During the third quarter of 2011, an application for certification of a Noveko(TM) respirator model without any antimicrobial agent was submitted to the US National Institute for Occupational Safety and Health ("NIOSH"). The certification process with NIOSH is currently underway. - Although we are directly pursuing some commercialization activities, we are focusing further efforts on the search for partners. We are in talks with various parties; however, it is difficult to foresee how long it will take for new commercialization agreements to materialize and for our sales to pick up in this segment. Sanitizers - We continue to prioritize the most promising hospital and institutional markets for our hand sanitizers. We recently launched a new compact format concept targeted to the private brand niche, notably in the foodservices, hospitality and aviation fields. Although we are witnessing a certain resumption of our marketing activities in this segment, that could take longer than expected due notably to the significant inventories accumulated at all levels of the supply chain industry-wide. Medical Equipment - Pursuant to a three-year agreement entered into during the first quarter of 2011 with Ningbo Xingaoyi Magnetism Co., Ltd ("NXM"), NXM has committed to purchase ultrasound scanners for use in human medicine in China, notably the Imagyne(TM), all for a value of 5.7 million Euros, of which 900,000 Euros are expected the first year. Despite some delays in the delivery of our Imagyne(TM) ultrasound scanners during the third quarter of 2011, the recently taken corrective measures will enable us to make up these delays and to meet our sales objectives. - During the fourth quarter of 2011, ECM plans to launch the Exagyne(TM). - ECM continues to achieve breakthroughs in the equine market with its Exago(TM) ultrasound scanner. ------------------------------------------------------------------------- Profile ------------------------------------------------------------------------- 

 ------------------------------------------------------------------------- The Management's Report, consolidated financial statements and accompanying notes for the quarter ended March 31, 2011 will be filed on SEDAR ([ www.sedar.com ]) and available on the Company's website ([ www.noveko.com ]). ------------------------------------------------------------------------- Noveko International Inc. Consolidated balance sheets As at March 31, 2011 and June 30, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- March 31, June 30, 2011 2010 (unaudited) (audited) ------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 503,306 $ 639,543 Deposit in trust 1,225,123 87,787 Short-term investments 1,145,954 2,145,631 Accounts receivable 4,246,607 3,026,436 Inventories 11,921,893 11,259,316 Prepaid expenses 667,323 627,644 Current portion of assets held for sale 1,096,100 1,231,858 ----------------------------------------------------------------------- 20,806,306 19,018,215 Fixed assets 2,141,911 1,592,999 Intangible assets 6,997,268 7,782,150 Other assets 785,947 945,653 Future income taxes 47,406 19,424 Goodwill 7,585,498 7,420,012 Non-current portion of assets held for sale 3,936,839 5,896,657 ------------------------------------------------------------------------- $ 42,301,175 $ 42,675,110 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and shareholders' equity Current liabilities: Bank loans $ - $ 167,011 Accounts payable and accrued liabilities 4,305,820 3,801,984 Current portion of long-term debt 396,552 475,432 Current portion of liabilities held for sales 1,996,967 1,780,589 ----------------------------------------------------------------------- 6,699,339 6,225,016 Long-term debt 109,110 803,647 Future income taxes 854,766 830,291 Non-current portion of liabilities held for sales 1,588,519 1,753,146 Shareholders' equity: Capital stock 103,003,764 95,620,532 Warrants 3,811,801 3,348,000 Contributed surplus 23,440,849 22,874,810 Accumulated other comprehensive loss (1,042,670) (1,285,522) Deficit (96,164,303) (87,494,810) ----------------------------------------------------------------------- 33,049,441 33,063,010 ------------------------------------------------------------------------- $ 42,301,175 $ 42,675,110 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International Inc. Consolidated statements of operations Nine and three month periods ended March 31, 2011 and 2010 (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months Nine months 2011 2010 2011 2010 ------------------------------------------------------------------------- Revenues $ 3,414,831 $ 2,927,450 $ 11,187,310 $ 12,214,853 Cost of sales 2,038,520 1,846,560 6,642,675 7,191,751 ------------------------------------------------------------------------- 1,376,311 1,080,890 4,544,635 5,023,102 Operating expenses: Administrative and selling expenses 3,170,705 3,847,798 9,718,177 11,352,164 Stock-based compensation 110,158 599,139 547,909 3,049,927 Research and development 262,055 466,357 963,113 1,261,782 Research and development tax credits (115,097) (116,447) (337,476) (414,860) ----------------------------------------------------------------------- 3,427,821 4,796,847 10,891,723 15,249,013 ------------------------------------------------------------------------- Loss before amortization, financial fees, income taxes, other item and discontinued operations (2,051,510) (3,715,957) (6,347,088) (10,225,911) Amortization 709,703 655,065 2,103,671 1,736,970 Financial expenses less investment revenues (129,201) 500,480 (227,691) 1,325,898 Goodwill impairment charge adjustment - - 24,902 (69,700) ------------------------------------------------------------------------- 580,502 1,155,545 1,900,882 2,993,168 ------------------------------------------------------------------------- Loss before income taxes (2,632,012) (4,871,502) (8,247,970) (13,219,079) Income taxes: Current (recovered) 47,686 (87,555) 118,904 12,406 Future (36,425) (105,916) (57,055) (252,299) ----------------------------------------------------------------------- 11,261 (193,471) 61,849 (239,893) ------------------------------------------------------------------------- Net loss from continuing operations (2,643,273) (4,678,031) (8,309,819) (12,979,186) Net loss from discontinued operations (88,142) (518,507) (276,499) (1,365,351) ------------------------------------------------------------------------- Net loss $ (2,731,415) $ (5,196,538) $ (8,586,318) $(14,344,537) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share: From continuing operations $ (0.03) $ (0.06) $ (0.10) $ (0.18) From discontinued operations $ (0.00) $ (0.01) $ (0.00) $ (0.02) Net loss $ (0.03) $ (0.07) $ (0.10) $ (0.20) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of outstanding shares, basic and diluted 85,940,149 75,916,023 82,077,304 72,677,982 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International Inc. Consolidated statements of comprehensive loss Nine and three month periods ended March 31, 2011 and 2010 (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months Nine months 2011 2010 2011 2010 ------------------------------------------------------------------------- Net loss $ (2,731,415) $ (5,196,538) $ (8,586,318) $(14,344,537) Other comprehensive income, net of income taxes: Change in unrealized gains (losses) on translation of financial statements of self-sustaining foreign operations 138,548 (661,763) 242,852 (1,379,069) ------------------------------------------------------------------------- Comprehensive loss $ (2,592,867) $ (5,858,301) $ (8,343,466) $(15,723,606) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International Inc. Consolidated statements of deficit and contributed surplus Nine-month periods ended March 31, 2011 and 2010 (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- March 31 March 31 2011 2010 ------------------------------------------------------------------------- DEFICIT Deficit, beginning of period $(87,494,810) $(61,205,942) Net loss (8,586,318) (14,344,537) Share issuance fees (83,175) (2,070,317) ------------------------------------------------------------------------- Deficit, end of period $(96,164,303) $(77,620,796) ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONTRIBUTED SURPLUS Contributed surplus, beginning of period $ 22,874,810 $ 18,718,376 Fair value of stock options granted 547,909 3,165,463 Fair value of agent's warrant granted to the broker 18,130 732,000 Fair value of stock options exercised - (89,941) ------------------------------------------------------------------------- Contributed surplus, end of period $ 23,440,849 $ 22,525,898 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Noveko International Inc. Consolidated statements of cash flows Nine and three month periods ended March 31, 2011 and 2010 (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months Nine months 2011 2010 2011 2010 ------------------------------------------------------------------------- Cash flows from operating activities: Net loss $ (2,731,415) $ (5,196,538) $ (8,586,318) $(14,344,537) Adjustments for: Loss from disconti- nued opera- tions 88,142 518,507 276,499 1,365,351 Future income taxes (36,425) (105,916) (57,055) (252,299) Accreted interest on secured convertible debentures - 3,554 - 68,254 Stock-based compensa- tion 110,158 599,139 547,909 3,049,927 Loss on disposal of fixed assets 114,230 1,502 205,505 7,439 Amortization 709,703 655,065 2,103,671 1,736,970 Goodwill impairment charge adjustment - - 24,902 (69,700) Loss on fair value of short-term investments - - - 11,676 Foreign exchange loss (gain) (652) (11,089) (1,287) 6,040 Adjustments from discon- tinued operations (95,023) 49,815 50,420 524,586 --------------------------------------------------------------------- (1,841,282) (3,485,961) (5,438,754) (7,896,293) Net change in non-cash working capital (687,575) (1,078,267) (1,633,420) (3,600,133) ------------------------------------------------------------------------- (2,528,857) (4,564,228) (7,072,174) (11,496,426) Cash flows from financing activities: Net changes in bank loans (179,079) (67,531) (176,582) 77,271 Repayment of long-term debt (612,744) (160,763) (803,923) (519,918) Interest paid on secured convertible debentures - (1,972) - (42,858) Proceeds from Class A shares and warrants issued 2,507,033 8,700 7,847,033 15,874,066 Class A shares issue expenses (48,787) 2,671 (65,045) (1,338,317) Cash flows from discontinued operations 85,739 (108) (24,679) (199,382) ----------------------------------------------------------------------- 1,752,162 (219,003) 6,776,804 13,850,862 Cash flows from investing activities: Acquisition of short-term investments - (3,000,000) (1,590,000) (15,000,000) Proceeds from disposal of short-term investments - 7,998,164 2,590,000 14,634,425 Acquisition of fixed assets (428,836) (91,741) (1,028,766) (225,165) Proceeds from disposal of fixed assets 1,851,179 (750) 1,873,821 27,436 Acquisition of intangible assets (31,621) - (190,178) (203,770) Acquisition of other assets - - - (44,400) Deposit in trust (1,225,123) (78,479) (1,225,123) (73,019) Deferred development costs, net of related research tax credits received (79,484) (88,457) (250,868) (267,586) Cash flows from discontinued operations - (36,015) (3,200) (137,788) ----------------------------------------------------------------------- 86,115 4,702,722 175,686 (1,289,867) Foreign exchange loss on cash in foreign currencies (3,723) (36,488) (16,553) (158,512) ------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (694,303) (116,997) (136,237) 906,057 Cash and cash equivalents, beginning of period 1,197,609 1,960,373 639,543 937,319 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 503,306 $ 1,843,376 $ 503,306 $ 1,843,376 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows related to operating activities include interest paid for $ 150,510 ($101,894 in 2010) and income taxes paid for $30,938 ($270,445 received in 2010).