NBS Technologies Inc.
TSX : NBS

NBS Technologies Inc.

May 15, 2006 17:29 ET

NBS Technologies Inc. Reports Second Quarter 2006 Results

TORONTO, ONTARIO--(CCNMatthews - May 15, 2006) - NBS Technologies Inc. (TSX:NBS), announced today its unaudited financial results for the second quarter ended March 31, 2006.



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Three-months ended
March 31st,
(CDN$ millions, except per share amounts) 2006 2005
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Revenue $ 12.2 $ 17.6
Gross margin $ 4.3 $ 6.0
Gross margin % 35.7% 33.8%
Net loss $ (4.1) $ (4.8)
Loss per share $(0.11) $(0.12)
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PERFORMANCE HIGHLIGHTS

For the second quarter ended March 31, 2006, the Company recorded a net loss of $4.1 million, or a loss of $0.11 per common share, compared with net loss of $4.8 million, or a loss of $0.12 per common share in the second quarter of fiscal 2005. Revenue for the quarter totalled $12.2 million, a decrease from $17.6 million reported in the second quarter of fiscal 2005. The revenue decrease relates primarily to a decline in the Smart Solutions business as a result of lower sales volumes. Gross margin percentage improved in the second quarter of 2006 to 35.7% from 33.8% for the three months ended March 31, 2005. The improvement is a result of Payment Solutions representing a larger percentage of total sales in the period.

The Company's Smart Solutions business unit generated $8.8 million in revenue, representing 72% of the Company's total revenue base. The Company's Payment Solutions business contributed $3.4 million of revenue, the same as the previous year.

CURRENT DEVELOPMENTS AND SECOND QUARTER 2006 OPERATING HIGHLIGHTS

During the second quarter of fiscal 2006, the Board undertook a significant leadership and senior management change. The recruitment of a new CEO, Kirk Hamilton, and CFO, Bryan Hills has been completed. Both executives bring experience in raising the operating performance of organizations.

"A review of the operations and the previously announced restructuring plans are underway. I am impressed with the talent, creativity and dedication of our employees. For the balance of the year, we will focus on initiatives that improve the profitability to set the business on a firm foundation to serve our customers and shareholders better", concluded Kirk Hamilton, President & CEO.

The Smart Solutions business continues to be adversely affected by industry consolidation resulting in elongated sales cycles and pricing pressure. Delays in the production and acceptance process have negatively impacted shipments to customers. The Payment Solutions business is proceeding with the necessary approvals to capitalize on the previously announced new major contract that will realize additional revenues in the second half of fiscal 2006. Additionally, the business is very focused on the development and introduction of products for Canada's conversion to the Euorpay Mastercard Visa ("EMV") standard beginning the last quarter of fiscal 2006.

We continue to pursue our patent infringement suit against a major Smart Solutions competitor in the United States in order to protect our intellectual property.

About NBS Technologies Inc.

NBS Technologies (TSX:NBS) - NBS is a leading provider of smart card manufacturing and personalization equipment, secure identity solutions, and point of sale transaction services for financial institutions, governments, and corporations worldwide. NBS Technologies is a global company with locations in Canada, China, France, U.S., and the UK, along with a worldwide dealer network. For more information, visit www.nbstech.com.

This news release contains certain forward-looking statements that reflect the current views and/or expectations of NBS Technologies Inc. with respect to its performance, business and future events. Such statements are subject to a number of risks, uncertainties and assumptions. Actual results and events may vary significantly. No stock exchange or regulatory authority has reviewed or accepts responsibility for the adequacy or accuracy of this release.



NBS Technologies Inc.
Consolidated Balance Sheets

(Unaudited)

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March 31, September 30,
(CDN$ thousands) 2006 2005
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ASSETS

Current
Cash $ 344 $ 3,625
Accounts receivable 10,401 11,063
Inventories 10,033 9,156
Prepaid expenses and deposits 683 573
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21,461 24,417
Capital assets 3,831 3,952
Intangible assets 8,401 9,569
Other assets 5,209 5,552
Goodwill 4,276 4,276
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$ 43,178 $ 47,766
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LIABILITIES

Current
Indebtedness $ 27,292 $ 22,786
Accounts payable and accrued liabilities 13,967 15,999
Deferred revenue 2,085 2,570
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43,344 41,355
Long-term
Indebtedness 10,427 11,057
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53,771 52,412

CAPITAL DEFICIENCY

Capital stock 45,692 45,692
Contributed surplus 961 831
Deficit (57,246) (51,169)
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(10,593) (4,646)
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$ 43,178 $ 47,766
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See accompanying notes to Consolidated Financial Statements.
These interim consolidated financial statements should be read in
conjunction with the annual consolidated audited financial
statements.



NBS Technologies Inc.
Consolidated Statements of Operations and Deficit

(Unaudited)

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Three months ended Six months ended
March 31, March 31,
(CDN$ thousands,
except per share amounts) 2006 2005 2006 2005
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Revenues $ 12,158 $ 17,627 $ 26,410 $ 34,274
Cost of goods sold 7,819 11,661 16,857 22,505
Gross margin 4,339 5,966 9,553 11,769


Expenses
Selling, general and
administrative 4,688 5,252 8,376 9,496
Research and
development 2,300 2,815 4,263 5,744
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Loss before undernoted
items (2,649) (2,101) (3,086) (3,471)
Amortization of
capital assets 217 244 451 649
Amortization of other
assets 5 5 10 10
Amortization of
intangible assets 583 469 1,168 1,042
Interest expense 736 458 1,446 840
Restructuring and
other costs (26) 1,286 (63) 869
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Loss before income taxes (4,164) (4,563) (6,098) (6,881)
Income taxes (recovery) (21) 188 (21) 188
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Net Loss $ (4,143) $ (4,751) $ (6,077) $ (7,069)
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Deficit, beginning of
period $ (53,103) $ (40,777) $ (51,169) $ (38,459)
Net loss (4,143) (4,751) (6,077) (7,069)
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Deficit, end of
period $ (57,246) $ (45,528) $ (57,246) $ (45,528)
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Net loss per common
share
Basic and diluted $ (0.11) $ (0.12) $ (0.17) $ (0.19)
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Weighted average
number of common
shares
Basic and diluted 43,151,922 43,151,922 43,151,922 43,141,845

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See accompanying notes to Consolidated Financial Statements.
These interim consolidated financial statements should be read in
conjunction with the annual consolidated audited financial statements.



NBS Technologies Inc.
Consolidated Statements of Cash Flows

(Unaudited)

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Three months ended Six months ended
March 31, March 31,
(CDN$ thousands) 2006 2005 2006 2005
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OPERATING ACTIVITIES
Net loss $ (4,143) $ (4,751) $ (6,077) $ (7,069)
Items which do not involve
cash:
Amortization (including
amortized R&D costs) 1,085 858 2,186 1,976
Restructuring and other
costs 119 727 122 (287)
Accrued interest 717 428 1,406 805
Write-off of other assets 294 - 294 -
Stock-based compensation
expense 30 108 130 207
Change in non-cash working
capital (1,282) 1,336 (2,842) 3,992
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(3,180) (1,294) (4,781) (376)
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INVESTING ACTIVITIES

Acquisition of Cybernetix
Microelectronique - - - (13,096)
Additions to other assets (127) (268) (518) (736)
Purchase of capital assets (262) (523) (330) (726)
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(389) (791) (848) (14,558)
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FINANCING ACTIVITIES

Advances of indebtedness 2,867 1,419 2,348 15,298
Issuance of common shares 25
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2,867 1,419 2,348 15,323
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(Decrease)/increase cash
during period (702) (666) (3,281) 389
Cash, beginning of period 1,046 1,857 3,625 802
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Cash, end of period $ 344 $ 1,191 $ 344 $ 1,191
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Supplemental cash flow
information
Cash paid for interest $ 28 $ 31 $ 58 $ 36
Cash paid for income taxes $ 50 $ 188 $ 50 $ 188
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See accompanying notes to Consolidated Financial Statements.
These interim consolidated financial statements should be read in
conjunction with the annual consolidated audited financial statements.


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