Noveko International Inc. Announces its Results for the Third Quarter Ended March 31, 2013 and Updates Français
BOUCHERVILLE, QC, May 15, 2013 /CNW Telbec/ - For the third quarter ended March 31, 2013 (the "third quarter of 2013"), Noveko International Inc. (TSX: EKO) (the "Corporation") announces that its consolidated revenue totalled $0.38 million considering that the operations of SARL Noveko Algérie ("Noveko Algérie") and of S.A.S. E.C.M. ("ECM") are now being treated as discontinued operations in accordance with IFRS because of the Corporation's decision to divest itself of these subsidiaries. This is a decrease of $0.6 million compared with the revenues of the third quarter ended March 31, 2012 (the "third quarter of 2012") computed on the same basis. The net loss from continuing operations amounted to $2.2 million ($0.02 basic and diluted per share) for the third quarter of 2013, compared with $2.6 million ($0.02 basic and diluted per share) for the third quarter of 2012. The net loss (including the net loss from discontinued operations) amounted to $5.0 million ($0.05 basic and diluted per share), compared with $2.8 million ($0.03 basic and diluted per share) for the third quarter of 2012.
Although, on a short-term basis, the Corporation's revenues have substantially decreased because of our decision to transfer our shareholdings in Noveko Algérie and in ECM (now stated as discontinued operations), management believes that the realignment of our resources in the air filtration segment should have a positive impact on the Corporation's financial situation, results and future prospects over the mid- to long-term.
Please refer to the end of this press release where you will find a table containing Selected Consolidated Financial Information.
Summary
Despite a highly difficult financial situation during the last quarters, we have multiplied our efforts on the implementation of the measures contained in the Strategic Plan already described in our previous MD&As, especially the search for and implementation of funding initiatives in order to improve this financial situation and to allow the Corporation to focus its human and financial resources on the commercialization of its air filtration solutions.
This highly difficult financial situation, including our cash deficiencies, results from several factors, including: (i) previous quarters' sales well below anticipated levels, particularly, the sale of our antimicrobial masks and respirators and sanitizers but also those of our air filtration solutions, for which the characteristics significantly differ from those of conventional air filters including their commercialization by way of lease agreements that contrast with the buildings' owners and managers typical purchase patterns, (ii) breaches of our contractual undertakings toward Third Eye Capital Corporation ("TEC") with respect to the September 28, 2011 financing (the "2011 Financing") resulting, among other things, from missed sales forecasts, (iii) the failure to sell our shares of ECM and the ensuing opening of a procedure de sauvegarde (safeguarding procedure), and (iv) the postponement of the transfer of our shareholding in Noveko Algérie. As a direct consequence of these cash deficiencies, the amounts due to our suppliers have significantly increased which consequently caused serious bottlenecks in the supply of raw materials.
In such circumstances, the research and execution of new financings remained during the third quarter management's utmost priority. With respect to the transfer of our shareholding in Noveko Algérie, it has been completed effective March 31, 2013.
Financings - Pursuant to our urgent need for working capital, the Corporation announced on January 11, 2013, a private placement of units, at a price of $0.12 per unit, for a minimum amount of $100,000 (833,333 units) and a maximum amount of $500,000 (4,166,667 units), each unit being comprised of one Class A Share and one-half of one warrant. Each entire warrant entitles its holder to purchase one Class A Share at a price of $0.20 per share during a period of 24 months after the issuance of the units. On January 28, 2013, we proceeded with a first closing of this placement whereby a total number of 1,566,667 Class A Shares and 783,334 warrants were issued by the Corporation for a total amount of $188,000, from which an amount of $50,000 was subscribed to by a Corporation's insider. On March 22, 2013, taking into account the prevailing market conditions, the Corporation announced the end of this private placement of units and approved a new private placement of Class A Shares, at a price of $0.06 per share, for a minimum amount of $320,000 (5,333,333 Class A Shares) and a maximum amount of $500,000 (8,333,333 Class A Shares). A first closing occurred on March 28, 2013 whereby a total number of 6,000,000 Class A Shares were issued by the Corporation for a total amount of $360,000, from which a total amount of $326,000 was subscribed to by Corporation's insiders.
In connection with our search for financing, the Corporation's Board of Directors had approved during the second quarter 2013, resolutions for the borrowing by the Corporation of an amount between $10 to $12 million, that was supposed to take the form of (i) the issuance of secured convertible debentures for an amount of $5 million to $7 million, bearing interest at an annual rate of 8%, payable quarterly, reimbursable 36 months after their issuance and convertible into the Corporation's Class A Shares on the basis of one Class A Share for each $0.31 in capital debenture, and (ii) a 36-month term loan of a principal amount of $5 million, bearing interest at an annual rate of 10%, payable quarterly.
On May 14, 2013, the Corporation's Board of Directors approved resolutions for the borrowing of an amount of $10,000,000 that should take the form of a 36-month term loan, and bearing interest at an annual rate of 9% payable quarterly (the "Primary Financing"). This term loan shall be secured by all the Corporation's assets. These resolutions replace the resolutions previously adopted during the second quarter of 2013. It is now anticipated that the closing of the Primary Financing will occur before the end of May 2013. Proceeds of the Primary Financing will be used to pay TEC the amounts due pursuant to the 2011 Financing.
The Corporation is in default and is not compliant with its contractual undertakings to TEC, and TEC may require at any time the full reimbursement of the credit facility and of the secured convertible debentures of the 2011 Financing and exercise all hypothecary recourses provided for in the agreements governing the 2011 Financing, against the Corporation's assets, including the shares of its subsidiaries, and against the assets of its Canadian subsidiaries, which will have a huge negative impact for the Corporation and its shareholders. The Corporation monitors its financial situation on a continuous basis with TEC. Even though management is confident that the closing of the Primary Financing will occur as anticipated, no assurance can be given that TEC will not exercise the aforementioned hypothecary recourses before the closing of the Primary Financing.
Remedial review Process - Since mid-February 2013, the listing of the Corporation's Class A Shares at the TSX is subject to a remedial review process by the Exchange. At the Corporation's request, the Exchange has granted the Corporation extensions ending no later than June 17, 2013, to demonstrate that the deficiencies identified have been rectified. The identified deficiencies are connected with the Corporation's financial situation taking into account the continued listing criteria. The closing of the Primary Financing anticipated to occur before the end of May 2013 is a key factor to maintain the listing of the Corporation's Class A Shares on the Toronto Stock Exchange. No guarantee can be however provided that the Exchange will consider that the closing of the Primary Financing is sufficient to maintain such listing.
Air Filtration Segment
One of the main objectives of our Strategic Plan is to realign our human and financial resources in our most promising technologies, specifically the air filtration solutions, in order to ultimately optimize the Corporation's value. The filtration segment also suffered as did our other activities segments from the difficult situation of the last quarters. However, we are optimistic that the closing of the Primary Financing will allow the Corporation to accelerate our commercialization approaches in that segment.
Our business model in the air filtration market for buildings other than farm buildings is based on the signing of long-term agreements (now generally 4 years). This stands apart from the traditional business model associated with standard air filters which is typically based on one-time orders, generally without a commitment to any particular supplier. The longer-term commitment of our filtration solutions' users, which is moreover rooted in their unique attributes, ensures us of recurring revenues and earns our clients' loyalty. However, since this business model is completely at odds from the current business model, that being a three month sales cycle for conventional air filters, the penetration of our air filtration solutions is much slower than we would like and that we had anticipated. Now that the novelty of the numerous advantages that they represent over conventional air filters is no longer an obstacle to the adoption of our air filtration solutions, and given a closing of the Primary Financing before the end of May 2013, we are confident of being able to accelerate the commercialization of our air filtration solutions.
Our Noveko® filters offer superior filtration capacity and durability while putting less restriction on ventilation, thereby requiring less power from ventilation systems, thus saving substantial energy. Our filters are also cleanable and recyclable significantly reducing the number of filters used and the labor costs associated with their replacement and the elimination of waste. It is notably the incorporation of antimicrobial agents into our filter fibres, protecting them against deterioration from the effects of microorganisms that accounts for cleanability and durability. All these positive features make them an ideal solution for users as part of a sustainable development strategy.
Helped by the results of tests conducted on our filters installed in excess of 36 months in the Greater Montreal Area buildings confirming their distinctive features, and other conclusive tests conducted by a well-known engineering firm, we have demonstrated that our filters enable users to achieve ventilation systems related energy savings of approximately 15% to 25%. We have been authorized to divulge to our potential customers the results of these credible tests which could help us convince them more easily. Also, we are now experiencing from buildings owners and managers in Quebec and in Ontario an increasing interest in our air filtration solutions. In the second quarter we renewed the first lease agreement we signed three years ago (one of the most important in terms of revenues) for an additional 4-year period. This first renewal is indisputable proof of the efficiency and other advantages of our air filters.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Three month | Nine month | ||||||||||
March 31 | March 31 | ||||||||||
(in thousands of Canadian $, except per-share amounts) | 2013 | 2012 | 2013 | 2012 | |||||||
Revenue | $ | 376 | $ | 1,025 | $ | 2,023 | $ | 3,962 | |||
Gross profit | $ | 32 | $ | (43) | $ | 827 | $ | 1,289 | |||
Operating loss before amortization, net financial expenses, income taxes and discontinued operations | $ | (1,135) | $ | (1,825) | $ | (3,092) | $ | (4,118) | |||
Net result from continuing operations | (2,211) | (2,546) | (5,891) | (5,590) | |||||||
Net result from discontinued operations (1) | (2,794) | (294) | (1,854) | (304) | |||||||
Net result | $ | (5,004) | $ | (2,839) | $ | (7,744) | $ | (5,894) | |||
Earnings per Class A share (basic and diluted) | |||||||||||
From continuing operations | $ | (0.02) | $ | (0.03) | $ | (0.06) | $ | (0.06) | |||
From discontinued operations (1) | $ | (0.03) | $ | - | $ | (0.02) | $ | - | |||
Total | $ | (0.05) | $ | (0.03) | $ | (0.08) | $ | (0.06) | |||
Weighted average number of outstanding Class A shares, basic and diluted (in thousands) | 93,471 | 91,946 | 92,447 | 91,946 | |||||||
Statement of Financial Position Data as at | March 31 | June 30 | |||||||||
(in thousands of Canadian $) | 2013 | 2012 | |||||||||
Total assets | $ | 18,616 | $ | 22,274 | |||||||
Equity | $ | 3,910 | $ | 11,153 | |||||||
Total interest-bearing debt | $ | 6,929 | $ | 5,221 | |||||||
Liabilities held for sale (2) | $ | 1,876 | $ | 1,512 | |||||||
Cash | $ | 168 | $ | 295 |
(1) | Related to Noveko Algérie's operation for the period from July 1st, 2012 to December 31, 2012 and ECM's operation for the three quarters of 2013 and Noveko Algérie, ECM's and Bolduc Leroux's operation for the three quarters of 2012. |
(2) | Related to Noveko Algérie and ECM as at June 30, 2012 and to ECM only as at March 31, 2013. |
Profile of the Corporation
The Corporation specializes in the air filtration segment by providing its clientele with innovative and eco-energetic filtration solutions. As such, through its subsidiaries, the Corporation designs, develops, manufactures and markets air filters incorporating its patented air filtration technologies, which filters are cleanable and recyclable, and have a much longer life span than conventional air filters. These filters are used in farm buildings, in institutional, commercial, industrial and residential buildings, and in the ground and aeronautics transport industry.
Through distributors, the Corporation furthermore continues to commercialize antimicrobial masks and respirators, hands sanitizers and 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 Corporation does not intend and undertakes no obligation to update or revise the forward-looking statements.
The reader is furthermore recommended, before making any decision to purchase or to sell any of the Corporation's securities, to carefully consider the complete statement of the risk factors and uncertainties described in the Management's Report for the quarter ended March 31, 2013 and in the Management's Report for fiscal 2012 as well as in the Annual Information Form for fiscal 2012, notably with respect to the Corporation's financial position and its sources and requirements of funds.
The Management's Report, and Unaudited Condensed Consolidated Interim Financial Statements and accompanying notes for the third quarter ended March 31, 2013 are filed on SEDAR (www.sedar.com) and available in the Investor Relations section of the Corporation's website (www.noveko.com). |
SOURCE: NOVEKO INTERNATIONAL INC.
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Gary Mc Cone
Senior Vice-President and Chief Financial Officer
Tel: (514) 875-0606
http://www.noveko.com
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