House of Brussels Chocolates Inc.
OTC Bulletin Board : HBSL

House of Brussels Chocolates Inc.

March 20, 2006 13:27 ET

House Of Brussels Chocolates Reports Record Third Quarter Over Quarter Sales, 40% Swing to Profitable Gross Margins and Cash Operating Loss Reduced by 70%

DELTA, BRITISH COLUMBIA--(CCNMatthews - March 20, 2006) - House of Brussels Chocolates ("Brussels" or "HBSL") (OTCBB:HBSL), through its Chairman of the Board, William Donovan, is pleased to announce Brussels very encouraging results for its Third Fiscal Quarter. Key for this record Third Quarter performance is best described by this one line from the Company initiative announced in the PR published Nov. 1, 2005, the first day of this reported quarter; "Currently however, the Board is convinced that the time has come to cut our costs and focus on the efficiency of newly acquired capacity." As reported at that time, the initiative required immediate termination of ineffective Staff and Management, better vendor pricing of raw materials and packaging, and dropping product lines and customers that could not deliver a significant gross profit. As can be gleaned from the current quarter 10QSB, the Company is confident that even more significant positive "Quarter over Quarter" comparisons will be reported in the current Fourth Quarter ending April 30, 2006, a Quarter which historically has been a very weak due to seasonality. This forecast is based on a combination of the above along with the Company's continuing success in flattening out the normal seasonality of the industry by continuously adding "day to day" products and customers. While the Company is certainly not forecasting a bottom line operating profit in the Fourth Quarter, attention should be paid to the continuation of the trend begun in the Third Quarter. This trend with our current line of products, paired with the expected International roll out this summer of our long awaited line of very profitable health conscious ChocoMed™ nutraceutical products, should portend a vast improvement in both top and bottom line in the new fiscal year.

Grant Petersen, CEO stated, "It is never easy to sever long term relationships in a growing young Company, but for the sake of productivity it was something we had to do. One thing that has never been in question is the growing demand from large customers for Brussels superior chocolates. This can be shown by our increased Third Quarter, sales, something that I am confident will continue into the Fourth Quarter. This top line improvement is happening in spite of some of the radical changes, which includes cutomers, that we had to make."

William (Bill) Donovan Brussels Chairman, and CEO of ChocoMed said, "As mentioned above, the Board gave Grant the difficult, but long overdue task at the beginning of the Third Quarter to do what was necessary to start bringing Brussels to profitability even if it meant a temporary slowing of top line growth. While we still have a long way to go, the Third Quarter results do show an immediate step in the right direction. As most shareholders know, remaining members of the BOD consist of some of the largest shareholders of the Company. Like any shareholder, we are not pleased with the current value of our equity, but are heartened looking out into the future that the decline of the past year will be reversed as recent moves to productivity and new products are reflected."

Donovan went on to add, "I am very pleased with the ongoing development of ChocoMed. After almost two years, we have now been able to combine pure science with gourmet chocolate. The impetus for launching ChocoMed was the realization that if we could be the first company to develop a great tasting Chocolate that offered Functional health benefits, then we could become the confectionary leader in the fast growing market for high margin Functional Foods. Currently in partnership with some of the top international nutraceutical developers we have finished gourmet chocolate products for 6 medical conditions with several others nearing completion." Additionally, "We are pleased that the word is getting out on our advancements in this area as can be shown by a recent unsolicited request of Brussels ChocoMed, by one of Wall Streets most respected Institutional and Industry subscriber services, the Wall Street Transcript, for an interview. If you missed it, I encourage you to read it. Here is the direct link on the TWST website for the six page report, http://www.twst.com/ceos/ADL632.htm."

Third Quarter Financial Highlights

Sales revenues for the three months ended January 31, 2006 increased 22% to $2,165,000, and increase of $395,000 over the revenues of $1,770,000 reported for the fiscal quarter ended January 31, 2005. Cost of sales for the three months ended January 31, 2006 were $1,856,000 a decrease of $380,000 or 17% under the cost of sales of $2,237,000 reported for the three months ended January 31, 2005. For the three months ended January 31, 2006 we generated a positive gross margin of 14%. For the same period during the previous year our margin was a negative 26%. In total, our gross margin improved 40% between the periods, comparatively.

Selling expenses for the three month period ended January 31, 2006 were $280,000, a decreased $161,000 or 36% under the selling expenses of $441,000 reported for the three month period ended January 31, 2005. General and administrative expenses for the three and nine month periods ended January 31, 2006 were $389,000, a decrease of $268,000 or 41% under the general and administrative expenses of $657,000 reported for the three month period ended January 31, 2005.

Our net losses for the ended January 31, 2005 was $912,000, a decrease of $683,000 or 43% from the $1,595,000 loss for the three months ended January 31,2005. However, the $1,595,000 loss from January 31, 2005 was effectively all "Operating Loss plus cash charge for interest expense" as compared to the all "Operating Loss plus cash charge for interest expense" for the Quarter ending January 31, 2006 which also included "non-cash charges" of approximately $430,000 primarily attributed to non-cash beneficial conversion features, amortization and discount charges from the Laurus debt that was not in place last year.

Complete third quarter and nine month results can be accessed through the Company's complete 10QSB filing.

About House of Brussels Chocolates Inc. (www.brusselschocolates.com)

For more than 20 years, House of Brussels Chocolates has manufactured and distributed high-end, award-winning chocolates. HBSL's signature product is the chocolate hedgehog, which marries the traditional Belgian symbol of good luck (i.e., the hedgehog) with taste (i.e., chocolate) for a strong customer appeal. In addition to its house brands, HBSL creates custom packaging, shaping and sizing as well as private labels for numerous North American retailers.

DeBas Chocolatier, a wholly owned subsidiary of HBSL, produces the Company's artisan chocolates. Every piece of DeBas chocolate is handcrafted to be a true work of art that is distinctly superior in quality and taste. DeBas is also famous for its panned chocolate products such as chocolate-covered coffee beans, fruits and nuts. The DeBas factory is certified as organic by the State of California, in addition to being Orthodox Kosher certified.

About ChocoMed™, Inc. (www.chocomed.com)

ChocoMed, Inc., as a wholly owned subsidiary of House of Brussels Chocolates, has a mission to interface with third party companies, laboratories, or organizations that provide us nutritional and dietary supplements, functional foods and pharmaceutical compounds that are suitable candidates for hosting in chocolate-based products. ChocoMed will then bring these compounds to House of Brussels' manufacturing division who will attempt to "marry" these compounds with chocolate. If successful, the resulting nutraceuticals using chocolate as a delivery mechanism should prove to be an extremely marketable product.

Safe Harbor: Certain statements in this news release regarding future expectations and plans may be regarded as "forward looking statements" as defined by federal law. Although the Company believes such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the "safe harbor" protections provided under the Private Securities Reform Act of 1995. They are subject to various risks, including uncertainties regarding timing, and capital availability, as discussed in detail in House of Brussels quarterly and annual reports filed with the SEC.


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