Noveko International Inc T.EKO

NOVEKO INTERNATIONAL INC. Announces Results for th

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Press Release
5/11/2011
NOVEKO INTERNATIONAL INC. Announces Results for the Third Quarter Ended March 31, 2011
MONTREAL, May 11, 2011 (Canada NewsWire via COMTEX) --
Noveko International Inc. (TSX: EKO) (the "Company") today discloses the results for its third quarter ended March 31, 2011.
"Our third quarter was highlighted by several advances. The signing of our first filter supply agreement for a train line in North America and the achievement of major breakthroughs in the building markets, notably in New York City, Europe and Asia, validate our vision of these markets and our business model. We are also pleased that a transportation body of the size of the STM has recognized the value of our filtration solutions as part of its sustainable development strategy. The many other processes underway in the rail transportation and real estate fields will also yield benefits in the near term and enable us to consolidate our positioning in these markets," indicated Mr. André Leroux, Chairman of the Board and Chief Executive Officer of the Company.
"We are delighted with the growth and positive EBITDA posted by our medical equipment segment, even though we experienced a momentary delay in the delivery of our Imagyne(TM) ultrasound scanners in China. The recently taken corrective measures will allow us to remedy this situation and to meet our sales targets with our Chinese distributor. Furthermore, our cost-cutting efforts have paid off as our loss has been reduced by some $6 million since the beginning of the fiscal year. We plan to intensify our efforts to that end and remain confident we can count on our investors' support in order to achieve our growth and financing objectives. I also wish to point out that although the masks and sanitizers segments have not yielded the expected results, the initiatives taken to stimulate their commercialization in the most promising niches are continuing," concluded Mr. Leroux.
Financial Highlights
For the third quarter and first nine months of the current fiscal year, and in comparison with the corresponding periods of the previous year:
<<- Consolidated revenues from continuing operations up by 17% to$3.4 million, and down by 8% to $11.2 million, respectively;- Loss before amortization, financial expenses, income taxes, other itemsand 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 $1.0 million since June 30, 2010, to
.5 million.Selected consolidated information--------------------------------------------------------------------------------------------------------------------------------------------------Periods EndedMarch 31 Three Months Nine Months(in thousands of$, except per-share amounts)(unaudited) 2011(1) 2010 2011(1) 2010-------------------------------------------------------------------------Revenues fromcontinuingoperations 3,415 2,927 11,187 12,215Gross margin 1,376 1,081 4,545 5,023Loss beforeamortization,financialexpenses,income taxes,other items anddiscontinuedoperations(2) (2,052) (3,716) (6,347) (10,226)Loss fromcontinuingoperations (2,643) (4,678) (8,310) (12,979)Loss fromdiscontinuedoperations(3) (88) (519) (276) (1,365)Net loss (2,731) (5,197) (8,586) (14,345)Loss per Class Ashare (basicand diluted)Continuingoperations $ (0.03) $ (0.06) $ (0.10) $ (0.18)Discontinuedoperations(3) $ (0.00) $ (0.01) $ (0.00) $ (0.02)Net loss $ (0.03) $ (0.07) $ (0.10) $ (0.20)Weighted averagenumber ofoutstandingClass A shares,basic anddiluted (inthousands) 85,940 75,916 82,077 72,678----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Balance Sheet Data March 31 June 302011 2010-------------------------------------------------------------------------Total assets 42,301 42,675Shareholders' equity 33,049 33,063Total interest-bearing debt(4) 506 1,446Non-current liabilities forsale(5) 1,589 1,753Cash, cash equivalents,short-term investments anddeposit in trust 2,874 2,873--------------------------------------------------------------------------------------------------------------------------------------------------1) The consolidated financial statements include the accounts of theCompany 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 of2010, but solely to BLI's operations for the third quarter of 2011.4) Including long-term debt and its current portion, as well as bankloans, excluding BLI.5) Related to BLI.-------------------------------------------------------------------------In this press release, unless otherwise indicated or required by thecontext, "Noveko International", "the Company", "we", "us", "our", "ourCompany", "Group" and "our Group" designate, as the case may be, NovekoInternational Inc. or Noveko International Inc. and its subsidiaries, and"Noveko" designates Noveko Inc., a subsidiary of the Company. TheCompany's other subsidiaries are designated as follows: "ECM" for S.A.S.E.C.M., "Epurair" for Epurair Inc., "Magnum" for Magnum PharmaceuticsInc., "Noveko Algérie" for SARL Noveko Algérie, "Noveko Beijing" forNoveko (Beijing) Hi-Tech Development Limited, "Noveko Taiwan" for NovekoTaiwan Co., Ltd., "Noveko Trading" for Noveko Trading 2008 LLC, "PurerLife" for Purer Life Technology Co., Ltd. and "BLI" for Bolduc LerouxInc. Also, the second quarter and the six-month period ended December 31,2010 and the corresponding periods ended December 31, 2009 are sometimesrespectively designated by the terms "second quarter of 2011" and "firstsix months of fiscal 2011", and "second quarter of 2010" and "first sixmonths of fiscal 2010", while the fiscal year ending June 30, 2011 andthose ended June 30 of prior years are sometimes designated by the terms"fiscal 2011", "fiscal 2010" and so on.-------------------------------------------------------------------------Analysis of Operating Results------------------------------------------------------------------------->>
Third Quarter of 2011 Compared with the Third Quarter of 2010
Our segmented information is reported based on the following business segments: medical equipment ("medical equipment"), sanitizers ("sanitizers"), antimicrobial surgical masks and respirators ("masks"), filtration products ("filtration") and other activities consisting primarily of the activities of the parent company, Noveko International, and of Noveko Trading ("other"). Furthermore, the results of operations of BLI have been withdrawn from continuing operations to be treated as discontinued operations in the Company's financial statements. The assets and liabilities related to BLI have been reclassified as assets and liabilities held for sale. As Magnum proceeded with a voluntary assignment of its assets effective June 2, 2010, its results of operations are also treated as discontinued operations in the Company's financial statements for the periods ended prior to that date. As for the assets and liabilities related to Magnum, they no longer appear in the Company's financial statements subsequent to the voluntary assignment of its assets.
<<Consolidated and Segmented Revenues from Continuing Operations(unaudited)--------------------------------------------------------------------------------------------------------------------------------------------------Three Months Nine MonthsEnded March 31 Ended March 31-------------------------------------------------------------------------2011 2010 2011 2010-------------------------------------------------------------------------Medicalequipment $ 2,503,431 $ 1,951,539 $ 8,436,684 $ 6,744,101Sanitizers 68,758 174,972 657,578 2,484,763Masks 12,097 255,452 26,773 1,339,910Filtration 830,545 545,487 2,066,275 1,646,079-------------------------------------------------------------------------Total $ 3,414,831 $ 2,927,450 $ 11,187,310 $ 12,214,853-------------------------------------------------------------------------------------------------------------------------------------------------->>
Consolidated revenues for the third quarter of 2011 grew by
.5 million or 17% to $3.4 million. This growth is due mainly to the
.6 million or 28% increase in sales of medical equipment. Noveko Algérie recorded a substantial sales growth of
.4 million or 77% for the quarter; and sales of portable ultrasound scanners posted an increase of
.2 million or 13% stemming primarily from the veterinary medicine market. To this increase was also added a growth in filtration product revenues of
.3 million or 52% over the third quarter of 2010, reflecting the advances achieved in the hog market, primarily the sales to the Villa Vista farms, plus the sales increase in the institutional and commercial markets where the recognition of revenues generally extends over the term of the leasing agreements. Sales of masks and sanitizers declined by
.2 million or 95% and by
.1 million or 61%, respectively, from the third quarter of 2010, which still benefited from the consequences of the pandemic context prevailing until the beginning of that period. Signs of a recovery of our commercialization activities have been seen in the sanitizers segment, as attested to by the recent orders from hospitals, although it could take longer than expected to materialize due notably to the significant inventories accumulated industry-wide. In the masks segment, we believe we can stimulate the marketing of our technologies thanks notably to the fact that we have obtained European certification for our antimicrobial respirators and to our ongoing talks with a number of 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.
For the first nine months, revenues declined by $1.0 million or 8%, reflecting reductions in sales of masks and sanitizers of $1.3 million or 98% and of $1.8 million or 74%, respectively, stemming from the aforementioned factors. Sales of medical equipment increased by $1.7 million or 25%, due mainly to the growth of more than $1.2 million or 27% in ECM's sales during the period. In ECM's case, the increase would have been higher - at 48% in Euros - were it not for the depreciation of the Euro against the Canadian dollar, which represented a negative impact of $1.0 million on our revenues. The growth in ECM's sales reflects both the breakthroughs in the human medicine market and the ongoing advances in the veterinary medicine market. Revenues from filtration products also posted an increase of
.4 million or 26% for the aforementioned reasons.
The operating profit margin for the third quarter of 2011 stood at 40.3%, up from 36.9% for the third quarter of 2010. This slight improvement is due primarily to the better margins posted in the filtration segment. For the first nine months, the operating profit margin stood at 40.6%, compared with 41.1% for the corresponding period of the previous year. Besides the aforementioned factors, this figure reflects the weighting of certain logistics services expenses in a context of lower sales in the masks and sanitizers segments, as well as an increase in the allowance for inventory obsolescence related to the frames of our former filters model targeted to the swine industry.
Selling and administration expenses for the third quarter of 2011 and the first nine months declined by
.7 million or 18% and by $1.6 million or 14%, respectively, to $3.2 million and $9.7 million. This reduction partly reflects the cost control measures implemented.
Stock-based compensation charge for the third quarter of 2011 and the first nine months, which is without impact on the Company's cash balance, decreased by
.5 million and $2.5 million, respectively, to
.1 million and
.5 million. These reductions can be explained by the lower number of options granted in the past quarters, the reduced exercise price for the options issued more recently and the gradual recognition of the stock-based compensation charge.
Research and development expenses for the third quarter of 2011 and the first nine months decreased by
.2 million and
.3 million, respectively, to
.3 million and $1.0 million, due primarily to the tightening of development costs associated with the masks segment.
<<Earnings (Loss) before Amortization, Financial Expenses, Income Taxes,Other Items and Discontinued Operations (unaudited)--------------------------------------------------------------------------------------------------------------------------------------------------Three Months Nine MonthsEnded March 31 Ended March 31-------------------------------------------------------------------------2011 2010 2011 2010-------------------------------------------------------------------------Medicalequipment $ 306,724 $ (64,911) $ 1,270,313 $ 438,086Sanitizers (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)-------------------------------------------------------------------------------------------------------------------------------------------------->>
Considering mainly the aforementioned factors, the loss before amortization, financial expenses, income taxes, other items and discontinued operations was reduced significantly to $2.1 million for the third quarter of 2011, down by $1.7 million or 45% from the corresponding quarter of the previous year. For the first nine months, it amounted to $6.3 million, a decrease of $3.9 million or 38%, despite a 8% decline in revenues during the period. This major improvement is due primarily to the following factors:
<<- a major reduction in the stock-based compensation charge of the parentcompany Noveko International (in the "other" segment) for thepreviously mentioned reasons;- improvements in the profitability of Noveko Algérie and ECM as theoverall medical equipment segment achieved earnings beforeamortization, financial expenses and income taxes of
.3 million inthe third quarter of 2011, an improvement of
.4 million over thethird quarter of 2010, and earnings of $1.3 million for the first ninemonths, an increase of
.8 million over the corresponding period ofthe previous year;- a reduction in the loss incurred by the sanitizers segment ofapproximately
.8 million for the third quarter of 2011 and
.3 million for the first nine months, resulting primarily from thecost tightening measures;- a reduction in the loss attributable to the masks segment of close to
.4 million for the third quarter, mainly reflecting the lowerdevelopment expenses and stock-based compensation charge. For the firstnine months, the segment's loss also declined by approximately
.4 million;- conversely, the filtration segment increased its loss by
.4 millionand
.5 million, respectively, for the third quarter and the firstnine months of fiscal 2011, due to an increase in commercializationexpenses and the allowance for inventory obsolescence.>>
Amortization expenses for the third quarter of 2011 remained stable at
.7 million, whereas they increased by
.4 million for the first nine months. This increase is primarily attributable to the amortization of the expenses related to the development of the Exago(TM) since its launch in the veterinary market and the increase in amortization expenses related to tangible and intangible assets, including our integrated management system, the implementation of which was completed during the third quarter of fiscal 2010.
Financial expenses less investment revenues represented revenues of
.1 million and
.2 million respectively for the third quarter and the first nine months of fiscal 2011, compared with expenses of
.5 million and $1.3 million for the corresponding periods of the previous year. These changes are due primarily to the recognition of exchange gains of
.1 million and
.3 million for the third quarter and the first nine months of fiscal 2011, whereas exchange losses of
.6 million and $1.4 million had been recognized in the same periods of the previous year. To a lesser extent, the reduction in interest on convertible debentures also explains these changes and offsets the decrease in investment revenues.
<<Net Earnings (Loss) from Continuing Operations (unaudited)--------------------------------------------------------------------------------------------------------------------------------------------------Three Months Nine MonthsEnded March 31 Ended March 31-------------------------------------------------------------------------2011 2010 2011 2010-------------------------------------------------------------------------Medicalequipment $ 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)-------------------------------------------------------------------------------------------------------------------------------------------------->>
Considering mainly the aforementioned factors, the net loss from continuing operations for the third quarter of 2011 and the first nine months decreased significantly from the corresponding periods of the previous year, by $2.0 million or 44% and by $4.7 million or 36%, respectively, to $2.6 million and $8.3 million.
A loss of
.1 million from discontinued operations (BLI) was recognized, compared with a loss of
.5 million for the corresponding period of the previous year. In this regard, discontinued operations include the accounts of both BLI and Magnum for the third quarter of 2010, but solely the accounts of BLI for the third quarter of 2011. Consequently, the third-quarter net loss totalled $2.7 million, compared with $5.2 million for the same quarter of the previous year, a major reduction of $2.5 million or 47%. For the first nine months, a loss of
.3 million from discontinued operations (BLI) was recognized, compared with a loss of $1.4 million for the corresponding period of the previous year. Consequently, the net loss for the first nine months totalled $8.6 million, compared with $14.3 million for the same period of the previous year, a major reduction of $5.8 million or 40%.
Considering a net change in unrealized gains on translation of the financial statements of self-sustaining foreign operations of
.1 million for the quarter, compared with a net change in realized losses of
.7 million for the corresponding quarter of the previous year, a net loss of $2.6 million represented the comprehensive loss for the third quarter of 2011, compared with a net loss of $5.9 million for the corresponding quarter of the previous year. For the first nine months, a net loss of $8.3 million represented the comprehensive loss, considering a net change in unrealized gains on translation of the financial statements of self-sustaining foreign operations of
.2 million, compared with a net loss of $15.7 million for the corresponding period of the previous year, considering a net change in unrealized losses on translation of the financial statements of self-sustaining foreign operations of $1.4 million.
The loss from continuing operations and the net loss per Class A share (basic and diluted) for the third quarter of 2011 both amounted to
.03 on a weighted average of 85,940,149 outstanding shares, compared with a loss from continuing operations and a net loss of
.06 and
.07 per share, respectively, on a weighted average of 75,916,023 shares for the third quarter of 2010. For the first nine months, the loss from continuing operations and the net loss per Class A share (basic and diluted) both amounted to
.10 on a weighted average of 82,077,304 shares, compared with a loss from continuing operations and a net loss of
.18 and
.20 per share, respectively, on a weighted average of 72,677,982 shares for the corresponding period of the previous year. The increased weighted average number of outstanding shares is due mainly to the issue of Class A shares related to the private placements completed during the first three quarters of fiscal 2011.
<<Principal Quarterly Financial Information(in thousands of $, except per-share amounts)(unaudited)--------------------------------------------------------------------------------------------------------------------------------------------------First Second Third FourthQuarter Quarter Quarter Quarter-------------------------------------------------------------------------Fiscal 2011Revenues 2,747 5,026 3,415Loss fromcontinuingoperations (2,838) (2,828) (2,643)Comprehensiveloss (2,654) (3,096) (2,593)Loss per Class Ashare fromcontinuingoperations(basic anddiluted) (0.04) (0,03) (0.03)-------------------------------------------------------------------------Fiscal 2010Revenues 4,388 4,899 2,927 2,896Loss fromcontinuingoperations (3,503) (4,798) (4,678) (7,737)Comprehensiveloss (4,417) (5,449) (5,858) (9,612)Loss per Class Ashare fromcontinuingoperations(basic anddiluted) (0.05) (0.06) (0.07) (0.10)-------------------------------------------------------------------------Fiscal 2009Revenues 2,014 3,687 2,454 3,257Loss fromcontinuingoperations (6,057) (6,526) (5,216) (10,003)Comprehensiveloss (6,957) (5,506) (7,062) (12,865)Loss per Class Ashare fromcontinuingoperations(basic anddiluted) (0.09) (0.10) (0.08) (0.15)---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Balance Sheet Analysis------------------------------------------------------------------------->>
As at March 31, 2011, total assets amounted to $42.3 million, down by
.4 million from June 30, 2010. Working capital stood at $14.1 million for a current ratio of 3.1:1, compared with $12.8 million and a 3.1:1 ratio as at June 30, 2010. Shareholders' equity totalled $33.0 million as at March 31, 2011, remaining relatively stable compared with June 30, 2010. Total interest-bearing debt (bank loans, current portion of long-term debt and long-term debt) amounted to
.5 million as at March 31, 2011, down by approximately $1 million from June 30, 2010.
<<-------------------------------------------------------------------------Quarter Highlights and Subsequent Events-------------------------------------------------------------------------- Sale of the Terrebonne building effective March 31, 2011 for aconsideration of $1.3 million.- Increase in Epurair's productivity and production capacity further tothe relocation of its design, development and production activities tolarger premises and to the acquisition of new cutting-edge equipment.- Financing: On March 16, 2011, closing of $2.5 million of units inconnection with the offering announced on February 22, 2011. On April8, 2011, termination of this offering and announcement of a new privateplacement pursuant to which each unit is offered at a price of
.70and consists of one (1) Class A share and one-half of one warrant. OnApril 29, 2011, we proceeded with a first closing of $595,104 of thisoffering. 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, wesigned a three-year agreement with Kinkisharyo International, L.L.C.,pursuant to which the latter will lease Noveko(TM) filters to equip theentire fleet of the Hudson-Bergen Light Rail Line in New Jersey.- Ongoing tests in rail transportation: In cooperation with varioustransportation bodies, we are conducting further adaptability trials onseveral systems, including subway cars, trains, tunnels and subwaystations in various major cities in North America. In this context, theprocess with Bombardier Transportation is also continuing and therepresentatives of the two companies are working to ensure that theagreement binding them materializes.- Agreements with the STM: At the end of April 2011, the Société detransport de Montréal (the "STM") opted for Noveko(TM) filtrationsolutions to equip its transportation centres. To that end, we enteredinto two first agreements covering the supply and cleaning of filtersfor the Anjou and St-Denis transportation centres. This initialcollaboration follows a period of conclusive tests conducted at theAnjou transportation centre.- Aeronautics segment in final phase toward certification: Most of theprerequisite tests to obtain "STC" certification from Transport Canadahave been completed and all proved highly conclusive. We are now in thefinal phase of the process as we are conducting the last series oftests needed to complete the file. We believe we could obtain STCcertification at the beginning of fiscal 2012.Air Filters for Buildings - Institutional, Commercial and ResidentialMarkets- 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 condominiumtower, located in New York City. In April 2011, we strengthened ourposition in the U.S. market by entering into an agreement with HTS NewYork.- In Europe, the Hilton Luxembourg Hotel is now equipped with oursolutions. We have also closed a sale of filters for an office buildingin Switzerland.- In Asia, a first order of filtering membranes has been won as part ofan agreement entered into with the Taiwanese company JJMR-Clean-AirSolution, specializing in the production of filters for manufacturersof semi-conductors and LCD screens.- Noveko(TM) filters are being installed for pre-sale testing purposes insome important buildings worldwide, in New York, Dubai, Taipei, Genevaand Paris.- Noveko keeps up its momentum in the Greater Montreal Area: About 10office 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' 14buildings as part of a contract worth close to a quarter milliondollars has been completed.Antimicrobial Masks and Respirators Markets- During the third quarter of 2011, an application for certification of aNoveko(TM) respirator model without any antimicrobial agent wassubmitted to the US National Institute for Occupational Safety andHealth ("NIOSH"). The certification process with NIOSH is currentlyunderway.- Although we are directly pursuing some commercialization activities, weare focusing further efforts on the search for partners. We are intalks with various parties; however, it is difficult to foresee howlong it will take for new commercialization agreements to materializeand for our sales to pick up in this segment.Sanitizers- We continue to prioritize the most promising hospital and institutionalmarkets for our hand sanitizers. We recently launched a new compactformat concept targeted to the private brand niche, notably in thefoodservices, hospitality and aviation fields. Although we arewitnessing a certain resumption of our marketing activities in thissegment, that could take longer than expected due notably to thesignificant inventories accumulated at all levels of the supply chainindustry-wide.Medical Equipment- Pursuant to a three-year agreement entered into during the firstquarter of 2011 with Ningbo Xingaoyi Magnetism Co., Ltd ("NXM"), NXMhas committed to purchase ultrasound scanners for use in human medicinein China, notably the Imagyne(TM), all for a value of 5.7 millionEuros, of which 900,000 Euros are expected the first year. Despite somedelays in the delivery of our Imagyne(TM) ultrasound scanners duringthe third quarter of 2011, the recently taken corrective measures willenable 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 itsExago(TM) ultrasound scanner.-------------------------------------------------------------------------Profile------------------------------------------------------------------------->>
Noveko International Inc. offers innovative solutions in the environmental and medical fields worldwide. Through its subsidiaries, the Company specializes primarily in the following business segments: the development, manufacturing and marketing of derivative products from its patented antimicrobial filtration technologies, mainly air filters, surgical masks and respirators, as well as other products with antibacterial properties such as hand sanitizers - and the development, manufacturing and marketing of medical equipment, primarily portable real-time ultrasound scanners for use in human and veterinary medicine.
Certain statements set forth in this press release constitute forward-looking statements. In some cases, these statements are identified by the use of terms such as "may", "could", "might", "intend", "should", "expect", "project", "plan", "believe", "estimate" or other comparable variants. These statements are based on the information available at the time they are written, on assumptions made by management and on the expectations of management, acting in good faith, regarding future events, including those relating to economic conditions, fluctuations in exchange rates and operating expenses, and the absence of unusual events entailing supplementary expenditures. Although management considers these assumptions and expectations reasonable based on the information available at the time they are written, they could prove inaccurate. Forward-looking statements are also subject, by their very nature, to known and unknown risks and uncertainties such as those related to the industry, acquisitions, labor relations, credit, key officers, supply and product liability. The actual results of Noveko International Inc. could differ materially from those indicated or underlying these forward-looking statements. The reader is therefore recommended not to unduly rely on these forward-looking statements. Forward-looking statements do not reflect the potential impact of special items, any business combination or any other transaction that may be announced or occur subsequent to the date hereof. Unless otherwise required under securities laws, the Company does not intend and undertakes no obligation to update or revise the forward-looking statements.
<<-------------------------------------------------------------------------The Management's Report, consolidated financial statements andaccompanying notes for the quarter ended March 31, 2011 will be filed onSEDAR (www.sedar.com) and available on the Company's website(www.noveko.com).-------------------------------------------------------------------------Noveko International Inc.Consolidated balance sheetsAs at March 31, 2011 and June 30, 2010--------------------------------------------------------------------------------------------------------------------------------------------------March 31, June 30,2011 2010(unaudited) (audited)-------------------------------------------------------------------------ASSETSCurrent assets:Cash and cash equivalents $ 503,306 $ 639,543Deposit in trust 1,225,123 87,787Short-term investments 1,145,954 2,145,631Accounts receivable 4,246,607 3,026,436Inventories 11,921,893 11,259,316Prepaid expenses 667,323 627,644Current portion of assets held for sale 1,096,100 1,231,858-----------------------------------------------------------------------20,806,306 19,018,215Fixed assets 2,141,911 1,592,999Intangible assets 6,997,268 7,782,150Other assets 785,947 945,653Future income taxes 47,406 19,424Goodwill 7,585,498 7,420,012Non-current portion of assets held for sale 3,936,839 5,896,657-------------------------------------------------------------------------$ 42,301,175 $ 42,675,110--------------------------------------------------------------------------------------------------------------------------------------------------Liabilities and shareholders' equityCurrent liabilities:Bank loans $ - $ 167,011Accounts payable and accrued liabilities 4,305,820 3,801,984Current portion of long-term debt 396,552 475,432Current portion of liabilities heldfor sales 1,996,967 1,780,589-----------------------------------------------------------------------6,699,339 6,225,016Long-term debt 109,110 803,647Future income taxes 854,766 830,291Non-current portion of liabilities heldfor sales 1,588,519 1,753,146Shareholders' equity:Capital stock 103,003,764 95,620,532Warrants 3,811,801 3,348,000Contributed surplus 23,440,849 22,874,810Accumulated 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 operationsNine and three month periods ended March 31, 2011 and 2010(unaudited)--------------------------------------------------------------------------------------------------------------------------------------------------Three months Nine months2011 2010 2011 2010-------------------------------------------------------------------------Revenues $ 3,414,831 $ 2,927,450 $ 11,187,310 $ 12,214,853Cost of sales 2,038,520 1,846,560 6,642,675 7,191,751-------------------------------------------------------------------------1,376,311 1,080,890 4,544,635 5,023,102Operatingexpenses:Administrativeand sellingexpenses 3,170,705 3,847,798 9,718,177 11,352,164Stock-basedcompensation 110,158 599,139 547,909 3,049,927Research anddevelopment 262,055 466,357 963,113 1,261,782Research anddevelopmenttax credits (115,097) (116,447) (337,476) (414,860)-----------------------------------------------------------------------3,427,821 4,796,847 10,891,723 15,249,013-------------------------------------------------------------------------Loss beforeamortization,financial fees,income taxes,other item anddiscontinuedoperations (2,051,510) (3,715,957) (6,347,088) (10,225,911)Amortization 709,703 655,065 2,103,671 1,736,970Financialexpenses lessinvestmentrevenues (129,201) 500,480 (227,691) 1,325,898Goodwillimpairmentchargeadjustment - - 24,902 (69,700)-------------------------------------------------------------------------580,502 1,155,545 1,900,882 2,993,168-------------------------------------------------------------------------Loss beforeincome taxes (2,632,012) (4,871,502) (8,247,970) (13,219,079)Income taxes:Current(recovered) 47,686 (87,555) 118,904 12,406Future (36,425) (105,916) (57,055) (252,299)-----------------------------------------------------------------------11,261 (193,471) 61,849 (239,893)-------------------------------------------------------------------------Net loss fromcontinuingoperations (2,643,273) (4,678,031) (8,309,819) (12,979,186)Net loss fromdiscontinuedoperations (88,142) (518,507) (276,499) (1,365,351)-------------------------------------------------------------------------Net loss $ (2,731,415) $ (5,196,538) $ (8,586,318) $(14,344,537)--------------------------------------------------------------------------------------------------------------------------------------------------Basic anddiluted lossper share:Fromcontinuingoperations $ (0.03) $ (0.06) $ (0.10) $ (0.18)Fromdiscontinuedoperations $ (0.00) $ (0.01) $ (0.00) $ (0.02)Net loss $ (0.03) $ (0.07) $ (0.10) $ (0.20)--------------------------------------------------------------------------------------------------------------------------------------------------Weighted averagenumber ofoutstandingshares, basicand diluted 85,940,149 75,916,023 82,077,304 72,677,982--------------------------------------------------------------------------------------------------------------------------------------------------Noveko International Inc.Consolidated statements of comprehensive lossNine and three month periods ended March 31, 2011 and 2010(unaudited)--------------------------------------------------------------------------------------------------------------------------------------------------Three months Nine months2011 2010 2011 2010-------------------------------------------------------------------------Net loss $ (2,731,415) $ (5,196,538) $ (8,586,318) $(14,344,537)Othercomprehensiveincome, net ofincome taxes:Change inunrealizedgains (losses)on translationof financialstatements ofself-sustainingforeignoperations 138,548 (661,763) 242,852 (1,379,069)-------------------------------------------------------------------------Comprehensiveloss $ (2,592,867) $ (5,858,301) $ (8,343,466) $(15,723,606)--------------------------------------------------------------------------------------------------------------------------------------------------Noveko International Inc.Consolidated statements of deficit and contributed surplusNine-month periods ended March 31, 2011 and 2010(unaudited)--------------------------------------------------------------------------------------------------------------------------------------------------March 31 March 312011 2010-------------------------------------------------------------------------DEFICITDeficit, 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 SURPLUSContributed surplus, beginning of period $ 22,874,810 $ 18,718,376Fair value of stock options granted 547,909 3,165,463Fair value of agent's warrant granted tothe broker 18,130 732,000Fair 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 flowsNine and three month periods ended March 31, 2011 and 2010(unaudited)--------------------------------------------------------------------------------------------------------------------------------------------------Three months Nine months2011 2010 2011 2010-------------------------------------------------------------------------Cash flows fromoperatingactivities:Net loss $ (2,731,415) $ (5,196,538) $ (8,586,318) $(14,344,537)Adjustmentsfor:Loss fromdisconti-nued opera-tions 88,142 518,507 276,499 1,365,351Futureincometaxes (36,425) (105,916) (57,055) (252,299)Accretedinterest onsecuredconvertibledebentures - 3,554 - 68,254Stock-basedcompensa-tion 110,158 599,139 547,909 3,049,927Loss ondisposalof fixedassets 114,230 1,502 205,505 7,439Amortization 709,703 655,065 2,103,671 1,736,970Goodwillimpairmentchargeadjustment - - 24,902 (69,700)Loss on fairvalue ofshort-terminvestments - - - 11,676Foreignexchangeloss (gain) (652) (11,089) (1,287) 6,040Adjustmentsfrom discon-tinuedoperations (95,023) 49,815 50,420 524,586---------------------------------------------------------------------(1,841,282) (3,485,961) (5,438,754) (7,896,293)Net change innon-cashworkingcapital (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 fromfinancingactivities:Net changes inbank loans (179,079) (67,531) (176,582) 77,271Repayment oflong-term debt (612,744) (160,763) (803,923) (519,918)Interest paidon securedconvertibledebentures - (1,972) - (42,858)Proceeds fromClass Ashares andwarrantsissued 2,507,033 8,700 7,847,033 15,874,066Class A sharesissueexpenses (48,787) 2,671 (65,045) (1,338,317)Cash flowsfromdiscontinuedoperations 85,739 (108) (24,679) (199,382)-----------------------------------------------------------------------1,752,162 (219,003) 6,776,804 13,850,862Cash flows frominvestingactivities:Acquisition ofshort-terminvestments - (3,000,000) (1,590,000) (15,000,000)Proceeds fromdisposal ofshort-terminvestments - 7,998,164 2,590,000 14,634,425Acquisition offixed assets (428,836) (91,741) (1,028,766) (225,165)Proceeds fromdisposal offixed assets 1,851,179 (750) 1,873,821 27,436Acquisition ofintangibleassets (31,621) - (190,178) (203,770)Acquisition ofother assets - - - (44,400)Deposit intrust (1,225,123) (78,479) (1,225,123) (73,019)Deferreddevelopmentcosts, net ofrelatedresearch taxcreditsreceived (79,484) (88,457) (250,868) (267,586)Cash flowsfromdiscontinuedoperations - (36,015) (3,200) (137,788)-----------------------------------------------------------------------86,115 4,702,722 175,686 (1,289,867)Foreign exchangeloss on cash inforeigncurrencies (3,723) (36,488) (16,553) (158,512)-------------------------------------------------------------------------Increase(decrease) incash and cashequivalents (694,303) (116,997) (136,237) 906,057Cash and cashequivalents,beginning ofperiod 1,197,609 1,960,373 639,543 937,319-------------------------------------------------------------------------Cash and cashequivalents,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 ($270,445received in 2010).>>
SOURCE: NOVEKO INTERNATIONAL INC.
Chantal Vennat, Director, Investor Relations and Corporate Communications, NovekoInternational Inc., [phone]; https://www.noveko.com