Press Release
2/12/2010Noveko International Inc. Announces Results for the Second Quarter Ended December 31, 2009
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Revenue Growth of 27% for the Quarter and 53% for the Six Months
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Symbol: EKO/TSX
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Noveko International Inc. ("the Company") today announces the results for its second quarter ended December 31, 2009.
"Our revenues further increased, growing by 27% over the corresponding quarter of the previous year, and by 53% for the first six months, while the loss was reduced during these periods. Although they are encouraging, we believe that these results are still clearly below our potential. On the other hand, considering the advances in our market and product development during the quarter, we expect to keep up this momentum in upcoming quarters, when we will notably benefit from the distribution agreements concluded with SappTech Sdn Bhd and Zer Hitech, the launch of our Microban(R) line of hand sanitizers and all the efforts to commercialize our different products. To consolidate these advances and better meet our growth needs, we have initiated a review of our operations, giving special attention to the activities of our subsidiary Noveko. We have set up a more efficient structure, focused on our strategic priorities. We have reassigned some resources, and we also recently welcomed Messrs. Richard Durocher and Guy Bergevin to our team, as President and as Vice-President, Sales, respectively, of our subsidiary. Finally, we are proud of the breakthroughs achieved by our air filtration technologies which are attracting growing interest in the buildings field, as attested to by the agreements concluded with Desjardins Gestion Immobilière Inc. and Zer Hitech. Their superior filtration effectiveness and their antimicrobial properties make them a responsible and cost-effective environmental management solution," indicated Mr. André Leroux, Chairman of the Board and Chief Executive Officer of the Company.
Financial Highlights
For the second quarter and first six months of the current fiscal year, and in comparison with the corresponding periods of the previous year:
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- Consolidated revenues from continuing operations up by 27% to
approximately $5.0 million, and up by 53% to $9.5 million, respectively
- Stock-based compensation down by $1.8 million and by $3.7 million,
respectively
- Loss before amortization, financial expenses, income taxes and
discontinued operations down by $1.1 million and by $3.9 million,
respectively
- Loss from continuing operations down by $1.8 million to approximately
$5.0 million, and down by $4.2 million to $8.8 million, respectively
- Net loss down by $1.9 million to $5.0 million, and down by $4.3 million
to $9.1 million, respectively
- Total indebtedness down by $2 million since June 30, 2009
Three-Month and Six-Month Periods Ended December 31, 2009 and 2008
(in thousands of $, except per-share amounts) (unaudited)
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Three Months Six Months
2009(1) 2008 2009(1) 2008
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Revenues from
continuing
operations 4,979 3,908 9,475 6,180
Gross margin 1,927 1,767 4,130 2,963
Loss before
amortization,
financial
expenses,
income taxes and
discontinued
operations(2) (3,987) (5,081) (6,943) (10,885)
Loss from
continuing
operations (4,963) (6,740) (8,774) (13,021)
Loss from
discontinued
operations(3) (45) (201) (374) (460)
Net loss(4) (5,009) (6,941) (9,148) (13,480)
Loss per Class
A share (basic
and diluted)
Continuing
operations $ (0.07) $ (0.10) $ (0.12) $ (0.19)
Discontinued
operations(3) $ (0.00) $ (0.00) $ (0.01) $ (0.01)
Net loss(4) $ (0.07) $ (0.10) $ (0.13) $ (0.20)
Weighted
average number
of outstanding
Class A shares,
basic and diluted
(in thousands) 74,912 66,886 71,094 66,214
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Balance Sheet December 31, June 30,
Data 2009 2009
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Total assets 58,704 50,897
Shareholders'
equity 47,440 38,487
Total interest-
bearing debt(5) 2,188 4,163
Cash, cash
equivalents,
short-term
investments and
deposit in trust 11,170 4,711
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(1) The consolidated financial statements include the accounts of the
Company and all its wholly-owned subsidiaries as at December 31,
2009.
(2) Including stock-based compensation of $1,315,057, $3,207,094,
$2,566,362 and $6,263,917 for the respective periods of 2009 and
2008, which has no impact on the cash balance.
(3) BLI's results.
(4) Including BLI's results.
(5) Including long-term debt and its current portion, bank loans, and
short and long-term convertible debentures; excluding BLI.
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Analysis of Operating Results
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As indicated in the Annual Management's Report for the fiscal year ended June 30, 2009, we now report segmented information based on the following business segments: medical equipment, sanitizers, antimicrobial surgical masks and respirators, filtration products and other activities consisting primarily of the activities of the parent company, Noveko International Inc. ("Noveko International"), and of Noveko Trading 2008 LLC ("Noveko Trading"), as well as the marketing management services offered by Magnum Pharmaceutics Inc. ("Magnum") to external clients. Furthermore, the results of operations and the assets and liabilities of Bolduc Leroux Inc. ("BLI") have been withdrawn from continuing operations to be treated as discontinued operations in the Company's financial statements.
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Consolidated and Segmented Revenues from Continuing Operations
(unaudited)
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Three Months Six Months
Ended December 31 Ended December 31
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2009 2008 2009 2008
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Medical
equipment $ 2,496,617 $ 2,451,061 $ 4,792,562 $ 3,999,457
Sanitizers 1,517,033 131,231 2,309,791 197,969
Masks 290,181 7,568 1,084,458 18,468
Filtration 595,263 1,095,252 1,100,592 1,468,268
Other 79,779 223,194 187,616 496,193
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Total $ 4,978,873 $ 3,908,306 $ 9,475,019 $ 6,180,355
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Consolidated revenues for the second quarter grew by $1.1 million or 27.4% to $5.0 million. This growth primarily reflects the $1.4 million increase in sanitizer sales stemming from the commercialization efforts in different markets. Although the masks segment posted a growth of approximately $0.3 million, it is below the forecasted amount, due primarily to the small quantity of masks in stock at the beginning of the quarter, the production-related delays resulting from the limited working capital at the Company's disposal until the closing of its financing at the end of October 2009, and the time then required to mobilize suppliers, and to begin and complete the production cycles. The initiatives certain distributors had to take in order to obtain the additional authorizations pursuant to the regulatory requirements specific to their respective territories also slowed down the commercialization of the masks. Revenues in the filtration products segment decreased from the second quarter of the previous year due to the difficulties the swine market is experiencing worldwide. Revenues in the medical equipment segment were relatively stable, reflecting the contribution of SARL Noveko Algérie ("Noveko Algérie") and S.A.S. E.C.M. ("ECM"), which both increased their sales during the quarter; however, the impact of the conversion into Canadian dollars of ECM's revenues recorded in Euros did not permit the recognition of the revenue growth in this segment, due to the depreciation of the Euro against the Canadian dollar since the last fiscal year. It is to be noted that ECM is starting to benefit from solid penetration in the human medicine market, and its ultrasound scanner sales are up in this market as well as in the veterinary medicine market. For the first six months, consolidated revenues grew by $3.3 million or 53.3%. This growth is due to a $0.8 million or 19.8% increase in medical equipment sales reflecting the contribution of Noveko Algérie and ECM, as well as an increase of $2.1 million in sanitizer sales and of $1.1 million in mask sales, driven by a sharp rise in demand reflecting the population's greater awareness of the importance of maintaining healthy hand hygiene subsequent to the pandemic threat that has prevailed in the past quarters. Conversely, filtration product sales decreased by approximately $0.4 million due to the business slowdown in the swine market.
The operating profit margin for the second quarter was 39%, compared with 45% for the corresponding quarter of the previous year. This decline was caused primarily by an increase in transportation expenses in various overseas markets and the lower profit margins recorded in the retail market, which the Company started to further penetrate during the quarter. For the first six months, the operating profit margin was 44%, down from 48% for the corresponding period of the previous year. In addition to the previously mentioned factors, this decrease is due to downward price adjustments in the segments of filtration products for breeding farms and medical equipment for use in veterinary medicine.
Selling and administrative expenses for the second quarter and the first six months increased by $0.4 million and $0.5 million, respectively, to $4.2 million and $8.0 million. In addition to the costs related to product marketing and sales initiatives in the various business segments, this rise is due to the fact that in the second quarter, the Company had to recognize a $0.3 million provision for doubtful accounts.
Stock-based compensation charge for the second quarter and first six months, which has no impact on the Company's cash balance, decreased by $1.9 million from the second quarter of the previous year and by $3.7 million from the first six months of the previous year. Primarily as part of the acquisitions closed at the beginning of the previous year, the Company had granted stock options to employees and consultants entitling them to purchase a total of 2,950,000 Class A shares at a weighted average exercise price of $2.76 per share with a vesting period extending over 12 to 30 months. In this regard, it should be noted that the Company uses the fair value based method of accounting for all options granted, whereby a stock-based compensation charge is recognized over the vesting periods of the options with a corresponding increase in contributed surplus. The change in stock-based compensation charge between the first half ended December 31, 2009 and the first half ended December 31, 2008 thus stems from the fact that stock-based compensation is recorded gradually.
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Earnings (Loss) before Amortization, Financial Expenses, Income Taxes and
Discontinued Operations (unaudited)
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Three Months Six Months
Ended December 31 Ended December 31
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2009 2008 2009 2008
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Medical
equipment $ 385,511 $ 401,168 $ 502,997 $ 6,612
Sanitizers (427,640) (640,575) (685,316) (1,164,975)
Masks (494,813) (122,014) (455,399) (957,042)
Filtration (534,552) (862,420) (1,134,906) (1,198,065)
Other (2,915,641) (3,857,177) (5,170,758) (7,571,694)
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Total $ (3,987,135) $ (5,081,018) $ (6,943,382) $(10,885,164)
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Considering the above mentioned factors, the loss before amortization, financial expenses, income taxes and discontinued operations was reduced significantly. It stood at $4.0 million for the second quarter, down by $1.1 million from the second quarter of the previous year, and for the first six months, it amounted to $6.9 million, down by $3.9 million from the first six months ended December 31, 2008. The following business segments contributed to this significant improvement:
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- the medical equipment segment posted earnings before amortization,
financial expenses and income taxes of $0.4 million in the second
quarter, relatively equivalent to the corresponding quarter of 2008.
For the first six months, these earnings stood at $0.5 million,
compared with an immaterial amount for the corresponding period of
2008, thanks to Noveko Algérie's contribution and improvement in
profitability, and that of ECM in the first quarter;
- the sanitizers segment reduced its loss by $0.2 million during the
second quarter and by $0.5 million for the first six months due to a
strong second-quarter increase in the sales volume and an almost nil
stock-based compensation charge;
- the masks segment's loss increased by approximately $0.4 million in the
second quarter as a result of a sales volume that was insufficient to
offset the costs related to their commercialization; conversely, for
the first six months, its loss was reduced by $0.5 million, or almost
half, thanks to a strong first-quarter increase in sales and the
operating margin, as well as the decrease in stock-based compensation
charge;
- the filtration products segment lowered its loss by $0.3 million in the
second quarter and by approximately $0.1 million for the first six
months, due notably to better operating cost management;
- as for the other activities, they lowered their loss by $0.9 million in
the second quarter and by $2.4 million for the first six months, due
primarily to the decrease in Noveko International's stock-based
compensation charge.
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Financial expenses, less investment income, decreased by approximately $0.5 million for the second quarter and the first six months from the corresponding periods of the previous year. This change is due to the reduction in interest expense resulting from the conversion of debentures and to the fact that in the second quarter of the previous year, the Company had to recognize a $1.6 million loss on a foreign exchange contract. Furthermore, an exchange loss was recorded in the second quarter of the current fiscal year, as opposed to an exchange gain during the second quarter of the previous year as a result of the more favourable exchange rate at that time.
In its June 30, 2009 financial statements, the Company had recorded a $3.6 million goodwill impairment charge related to the medical equipment segment (ECM), which had no impact on the Company's cash balance. When the step-one analysis of the goodwill assessment was initiated as at June 30, 2009, it was determined that a comprehensive step-two analysis would be required for a business unit included in the medical equipment segment as the net book value of this unit exceeded its estimated fair value. Based on the preliminary assessment, determined using the discounted estimated future cash flows method, management had estimated that as at June 30, 2009, the fair value of goodwill in the medical equipment segment amounted to $2,454,551. Accordingly, as required by CICA Handbook Section 3062, the Company had recorded a $3.6 million goodwill impairment charge in its June 30, 2009 financial statements. This impairment reflects the market conditions affecting ECM, primarily the economic slowdown and the restructuring periods the swine and bovine industries are undergoing. With the assistance of an independent valuator, the Company proceeded with a comprehensive assessment, which yielded a detailed calculation of the estimated fair values of recorded and unrecorded intangible assets. The Company completed the final calculation of the goodwill impairment charge during the quarter ended December 31, 2009, and the resulting non-cash adjustment yielded a $69,700 gain in the period's consolidated statement of operations.
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Net Earnings (Loss) from Continuing Operations (unaudited)
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Three Months Six Months
Ended December 31 Ended December 31
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2009 2008 2009 2008
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Medical
equipment $ 267,518 $ 441,866 $ 199,025 $ 69,595
Sanitizers (636,795) (661,416) (919,742) (1,205,842)
Masks (571,575) (107,821) (580,511) (957,295)
Filtration (611,866) (971,203) (1,348,062) (1,421,880)
Other (3,410,567) (5,441,590) (6,124,884) (9,505,249)
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Total $ (4,963,285) $ (6,740,164) $ (8,774,174) $(13,020,671)
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Primarily considering the above mentioned factors, the Company reduced its second-quarter net loss from continuing operations by $1.8 million to approximately $5.0 million. Its net loss from continuing operations for the first six months ended December 31, 2009 was lowered by $4.3 million to $8.8 million.
In light of the recently undertaken turnaround measures, a $45,382 loss from discontinued operations (BLI) was recognized in second-quarter results, compared with $0.2 million for the second quarter of the previous year. Consequently, the net loss for the second quarter amounted to $5.0 million, compared with $6.9 million for the corresponding quarter of the previous year. For the first six months, a loss of approximately $0.4 million from discontinued operations (BLI) was recognized in the period's results, compared with a $0.5 million loss for the corresponding period of the previous year; consequently, the net loss for the first six months totalled $9.1 million, down from $13.5 million for the corresponding period of 2008.
Considering a net change in unrealized losses on translation of the financial statements of self-sustaining foreign operations of $0.4 million for the second quarter, compared with a change in unrealized gains of $1.4 million for the corresponding quarter of the previous year, a net loss of $5.4 million represented the comprehensive loss for the quarter ended December 31, 2009, compared with a net loss of $5.5 million for the corresponding quarter of the previous year. For the first six months, a net loss of $9.9 million represented the comprehensive loss, considering a net change in unrealized losses on translation of the financial statements of self-sustaining foreign operations of $0.7 million, compared with a net loss of $12.5 million for the corresponding six months of the previous year, considering a change in unrealized gains of $1.0 million for the same period of the previous year.
For the second quarter, the loss from continuing operations and the net loss amounted to $0.07 per Class A share (basic and diluted) on a weighted average of 74,911,651 outstanding shares, compared with a loss per share of $0.10 on a weighted average of 66,886,157 shares for the second quarter of the previous year. The increased weighted average number of outstanding shares is due to the issuance of Class A shares related to the private placement completed in October 2009 and the issuance of Class A shares subsequent to the exercise of stock options and to the conversion right of convertible debentures.
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Principal Quarterly Financial Information
(in thousands of $, except per-share amounts) (unaudited)
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First Second Third Fourth
Quarter Quarter Quarter Quarter
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Fiscal 2010
Revenues 4,496 4,979
Loss from
continuing
operations (3,811) (4,963)
Comprehensive loss (4,417) (5,449)
Loss per Class A
share from
continuing
operations (basic
and diluted) (0.06) (0.07)
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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)
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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)
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Second-Quarter Highlights and Subsequent Events
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Closing of a Private Placement for Total Gross Proceeds of $15.7 Million - On October 8, 2009, we announced the closing of an initial amount of $11.7 million units in connection with a best efforts private placement (the "Offering). On October 27, 2009, we closed this Offering when the Agents exercised in whole the option granted to them pursuant to the agency agreement, generating additional gross proceeds of $4 million, for total gross proceeds of $15.7 million under the Offering.
Distribution Agreement with Malaysian-Based SappTech Sdn Bhd - Agreement with an initial three-year term concluded in October 2009 for the distribution of our antimicrobial masks and respirators and our hand sanitizers, in Malaysia, Singapore, Indonesia, Thailand and the State of Brunei Darussalam. SappTech has undertaken to purchase a minimum of 100 million masks over the term of the agreement for an estimated value of approximately $25 million. SappTech has also taken various initiatives to obtain the authorizations required to market our masks in compliance with the national standards specific to certain countries covered by the agreement.
New Microban(R) Line of Hand Sanitizers and Access to Several New Points of Sale in Canada - Launch of our new Microban(R) line of hand sanitizers in November 2009. The hand sanitizers formerly marketed under the AZURO(TM) brand are now sold under the Microban(R) brand name. These use the same quality formula as formerly and will gradually replace the AZURO(TM) products.
Noveko's Antimicrobial Products Offered by Couche-Tard - The Noveko(TM) 4xEZU antimicrobial masks are sold in most Couche-Tard convenience stores across Quebec. Couche-Tard distributes the 25, 125 and 500 ml formats of Noveko's line of hand sanitizers, now marketed under the Microban(R) brand, along with the AZURO(TM) surface disinfectants. We are currently taking steps to extend the sale of our products throughout Couche-Tard's network in Canada.
A First: Complexe Desjardins Equipped with Noveko(TM) Antimicrobial Filtration Technology - In December 2009, our subsidiary Epurair entered into an agreement with Desjardins Gestion Immobilière Inc. ("DGI") to equip Complexe Desjardins, the largest multi-purpose building in the Montreal metropolitan area, with filters incorporating the Noveko(TM) antimicrobial filtration technology.
Distribution Agreement with Israeli-Based Zer Hitech - In January 2010, we concluded an agreement with Israeli-based Zer Hitech (1976) Ltd. ("Zer Hitech"), a subsidiary of Zer Group, for the distribution in Israel of Noveko(TM) antimicrobial masks and respirators, Microban(R) hand sanitizers, air filters incorporating the Noveko(TM) antimicrobial filtration technology to hospitals and commercial buildings, as well as Epurair(TM) MA-1 HEPA air purifiers. Filters incorporating the Noveko(TM) antimicrobial filtration technology will soon be installed, through Zer Hitech, in a Tel Aviv hospital where trials will then be conducted.
Masks, Respirators and Hand Sanitizers - Although the A (H1N1) influenza pandemic threat that emerged at the end of April 2009 has now abated in the population at large, it has had an accelerator effect on the demand for our face masks and hand sanitizers, the benefits of which should continue to materialize in the coming quarters. In the past quarters, we have taken the necessary steps to increase the production. However, the small quantity of products then in stock, the limited working capital at our disposal until the closing of the Offering, and the time then required to mobilize our suppliers and complete the production cycles, were all factors that caused delays in our product deliveries. These delays account in part for the lower than initially forecasted sales during the quarter ended December 31, 2009. Furthermore, the commercialization of these products was also slowed down by the steps that some of our distributors had to take in order to obtain the additional authorizations pursuant to the regulatory requirements specific to their respective territory. Due mainly to these various delays, recognition of the revenues from orders and contracts in progress will extend over a longer period than forecasted, probably beyond the current fiscal year. In addition, although demand is likely to return to a more stable growth rate following the abatement of the pandemic threat, we remain confident as to the evolution of the volume of orders for upcoming quarters.
Refocusing of Our Strategy for the Marketing of Masks and Respirators in North America - In November 2009, we announced that we were refocusing our strategy for the marketing of our Noveko(TM) masks and respirators in North America. In this regard, the initial 510(k) submission for the Noveko(TM) 3xEZ antibacterial surgical mask to the US Food and Drug Administration ("the FDA") has been withdrawn. We are now refocusing our strategy to prioritize the accelerated marketing of our Noveko(TM) masks and respirators in the United States, outside healthcare institutions, as well as in North America, globally.
To that end, we also announced that we would submit an application to the National Institute for Occupational Safety and Health ("NIOSH") for the certification of our Noveko(TM) respirators, which we could not do while the initial FDA submission was underway. During the second quarter of the current fiscal year, we have taken steps to submit an application to the NIOSH. We are currently proceeding to finalize the tests and to obtain the data needed to submit an application for certification complying with NIOSH standards. We have obtained our "Manufacturers' Code" from the NIOSH, confirming the official opening of our file as a manufacturer. We believe we will be able to proceed with the official filing of our application for the certification of our respirators within the near term. As a general rule, the average time between the official submission of an application for certification to the NIOSH and the receipt of an answer therefrom is 90 days. However, this timeframe can vary depending on several factors beyond our control. Furthermore, NIOSH reserves the right to require supplementary information to complete the file. Refocusing our strategy will also allow us to develop test protocols and to obtain the required performance data to support a future 510(k) submission to the FDA to market our Noveko(TM) masks and respirators with an antiviral claim to healthcare institutions in the United States.
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-------
Profile
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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 antibacterial properties such as Microban(R) brand 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 to account for new information, new events or new circumstances.
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The Management's Report, consolidated financial statements and
accompanying notes for the quarter ended December 31, 2009 will be filed
on SEDAR (www.sedar.com) and available on the Company's website
(www.noveko.com).
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Noveko International Inc.
Consolidated balance sheets
As at December 31, 2009 and June 30, 2009
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December 31 June 30
2009 2009
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(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,960,373 $ 937,319
Deposit in trust 65,440 70,900
Short-term investments 9,144,475 3,702,958
Accounts receivable 5,236,328 3,845,527
Inventories 9,289,940 7,288,071
Prepaid expenses 936,738 734,777
Current portion of assets held for sale 1,567,249 1,998,371
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28,200,543 18,577,923
Fixed assets 3,803,738 4,124,110
Intangible assets 9,252,561 10,041,542
Other assets 1,279,607 1,198,345
Future income taxes 19,424 82,691
Goodwill 12,521,630 13,035,189
Non-current portion of assets held for sale 3,626,566 3,836,738
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$ 58,704,069 $ 50,896,538
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Liabilities and shareholders' equity
Current liabilities:
Bank loans $ 276,563 $ 162,970
Accounts payable and accrued liabilities 4,030,369 2,552,279
Current portion of secured convertible
debentures - 964,710
Current portion of long-term debt 564,850 754,584
Current portion of liabilities held for
sales 1,808,058 2,126,397
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6,679,840 6,560,940
Long-term debt 1,261,296 1,455,182
Secured convertible debentures 85,313 825,117
Future income taxes 1,372,253 1,644,474
Non-current portion of liabilities held for
sales 1,864,995 1,924,217
Shareholders' equity:
Capital stock 95,931,823 80,768,629
Portion of secured convertible debentures
included in equity 23,906 372,473
Warrants 2,862,400 -
Contributed surplus 22,093,143 18,718,376
Accumulated other comprehensive loss (884,234) (166,928)
Deficit (72,586,666) (61,205,942)
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47,440,372 38,486,608
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$ 58,704,069 $ 50,896,538
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Noveko International Inc.
Consolidated statements of operations
Six and three month periods ended December 31, 2009 and 2008
(unaudited)
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Three months Six months
2009 2008 2009 2008
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Revenues $ 4,978,873 $ 3,908,306 $ 9,475,019 $ 6,180,355
Cost of sales 3,051,981 2,141,207 5,345,191 3,217,466
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1,926,892 1,767,099 4,129,828 2,962,889
Operating
expenses:
Administrative
and selling
expenses 4,236,451 3,861,412 8,009,836 7,499,812
Stock-based
compensation 1,315,057 3,207,094 2,566,362 6,263,917
Research and
development 552,355 163,952 795,425 488,665
Research and
development
tax credits (189,836) (384,341) (298,413) (404,341)
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5,914,027 6,848,117 11,073,210 13,848,053
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Loss before
amortization,
financial fees,
income taxes,
other element
and discontinued
operations (3,987,135) (5,081,018) (6,943,382) (10,885,164)
Amortization 567,873 600,995 1,130,746 920,664
Financial expenses
less investment
revenues 509,346 985,290 830,129 1,282,016
Goodwill impairment
charge adjustment (69,700) - (69,700) -
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1,007,519 1,586,285 1,891,175 2,202,680
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Loss before income
taxes (4,994,654) (6,667,303) (8,834,557) (13,087,844)
Income taxes:
Current
(recovered) 47,031 113,896 99,961 (8,846)
Future (78,400) (41,035) (160,344) (58,327)
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(31,369) 72,861 (60,383) (67,173)
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Net loss from
continuing
operations (4,963,285) (6,740,164) (8,774,174) (13,020,671)
Net loss from
discontinued
operations (45,382) (201,138) (373,825) (459,761)
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Net loss $ (5,008,667) $ (6,941,302) $ (9,147,999) $(13,480,432)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and
diluted loss
per share:
From
continuing
operations $ (0.07) $ (0.10) $ (0.12) $ (0.19)
From
discontinued
operations $ (0.00) $ (0.00) $ (0.01) $ (0.01)
Net loss $ (0.07) $ (0.10) $ (0.13) $ (0.20)
-------------------------------------------------------------------------
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Weighted average
number of
outstanding
shares, basic
and diluted 74,911,651 66,886,157 71,094,158 66,214,199
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Noveko International Inc.
Consolidated statements of comprehensive loss
Six and three month periods ended December 31, 2009 and 2008
(unaudited)
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-------------------------------------------------------------------------
Three months Six months
2009 2008 2009 2008
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Net loss $ (5,008,667) $ (6,941,302) $ (9,147,999) $(13,480,432)
Other
comprehensive
income, net of
income taxes:
Change in
unrealized
losses on
translation of
financial
statements of
self-sustaining
foreign
operations (440,065) 1,435,062 (717,306) 1,017,250
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Comprehensive
loss $ (5,448,732) $ (5,506,240) $ (9,865,305) $(12,463,182)
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-------------------------------------------------------------------------
Noveko International Inc.
Consolidated statements of deficit and contributed surplus
Six-month periods ended December 31, 2009 and 2008
(unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
December 31 December 31
2009 2008
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DEFICIT
Deficit, beginning of period $(61,205,942) $(29,323,571)
Restatement related to the adoption of
new accounting policies - 49,243
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Restated balance (61,205,942) (29,274,328)
Net loss (9,147,999) (13,480,432)
Share issuance fees (2,232,725) (56,000)
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Deficit, end of period $(72,586,666) $(42,810,760)
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-------------------------------------------------------------------------
CONTRIBUTED SURPLUS
Contributed surplus, beginning of period $ 18,718,376 $ 7,967,778
Fair value of stock options granted 2,566,362 6,277,917
Fair value of options granted to the agents 891,737 -
Fair value of stock options exercised (83,332) (244,000)
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Contributed surplus, end of period $ 22,093,143 $ 14,001,695
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-------------------------------------------------------------------------
Noveko International Inc.
Consolidated statements of cash flows
Six and three months periods ended December 31, 2009 and 2008
(unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months Six months
2009 2008 2009 2008
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Cash flows from
operating
activities:
Net loss $ (5,008,667) $ (6,941,302) $ (9,147,999) $(13,480,432)
Adjustments for:
Loss from
discontinued
operations 45,382 201,138 373,825 459,761
Future income
taxes (78,400) (41,035) (160,344) (58,327)
Accreted
interest on
secured
convertible
debentures 9,279 63,721 64,700 137,310
Stock-based
compensation 1,315,057 3,207,094 2,566,362 6,263,917
Loss (gain)
on disposal
of fixed
assets (1,346) (7,231) 5,937 (7,231)
Amortization 567,873 600,995 1,130,746 920,664
Loss on fair
value of
short-term
investments - (78,171) 11,676 (2,821)
Unrealized
gains on
foreign
denominated
contracts - (549,305) - (549,305)
Foreign
exchange
loss (gain) 17,983 2,733 17,129 (545)
Adjustment
from
discontinued
operations 242,179 108,249 445,767 (375,685)
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(2,890,660) (3,433,114) (4,692,201) (6,692,694)
Net change
in non-cash
working
capital (1,985,187) (4,099,930) (2,239,997) (4,603,231)
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(4,875,847) (7,533,044) (6,932,198) (11,295,925)
Cash flows from
financing
activities:
Net changes in
bank loan 144,802 (554,937) 144,802 (642,496)
Increase in
long-term debt 30,000 - 60,000 -
Repayment of
long-term debt (180,509) (126,119) (359,155) (227,190)
Interest paid
on secured
convertible
debentures (7,763) (39,748) (40,886) (86,164)
Proceeds from
Class A shares
and warrants
issued 15,792,868 348,000 15,865,366 3,939,575
Class A shares
issue expenses (1,340,988) - (1,340,988) (12,800)
Cash flows from
discontinued
operations (146,172) (1,358) (259,274) 218,837
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14,292,238 (374,162) 14,069,865 3,189,762
Cash flows from
investing
activities:
Business
acquisitions - (108,846) - (5,906,797)
Acquisition of
short-term
investments (12,000,000) (29,589,165) (12,090,000) (54,305,532)
Proceeds from
disposal of
short-term
investments 4,001,836 37,526,590 6,636,261 57,755,393
Acquisition of
fixed assets (83,183) (222,429) (133,424) (496,579)
Proceeds from
disposal of
fixed assets 16,020 8,859 28,186 8,859
Acquisition of
intangible
assets (165,992) (169,181) (203,770) (276,041)
Acquisition of
other assets (49,015) - (44,400) -
Deposit in
trust 1,480 (8,900) 5,460 (2,135)
Deferred
development
costs, net of
related
research tax
credits
received (95,263) (86,671) (179,129) (171,217)
Cash flows from
discontinued
operations (11,773) - (11,773) (8,755)
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(8,385,890) 7,350,257 (5,992,589) (3,402,804)
Foreign exchange
loss on cash in
foreign
currencies (71,629) 79,425 (122,024) 54,101
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Increase
(decrease) in
cash and cash
equivalents 958,872 (477,524) 1,023,054 (11,454,866)
Cash and cash
equivalents,
beginning of
period 1,001,501 616,993 937,319 11,594,335
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Cash and cash
equivalents,
end of period $ 1,960,373 $ 139,469 $ 1,960,373 $ 139,469
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-------------------------------------------------------------------------
>>
Cash flows related to operating activities include interest paid for $62,109 ($2,948 in 2008) and income taxes received for $261,330 ($99,853 in 2008).
SOURCE: NOVEKO INTERNATIONAL INC.
Chantal Vennat, Director, Investor Relations and Corporate Communications, Noveko
International Inc., (514) 875-0606; http://www.noveko.com