NBS Technologies Inc.
TSX : NBS

NBS Technologies Inc.

August 14, 2006 17:30 ET

NBS Technologies Inc. Reports Third Quarter 2006 Results

TORONTO, ONTARIO--(CCNMatthews - Aug. 14, 2006) - NBS Technologies Inc. (TSX:NBS), announced today its unaudited financial results for the third quarter ended June 30, 2006.



---------------------------------------------------------------
Three months ended
June 30
---------------------------------------------------------------
(CDN$ millions, except per share amounts) 2006 2005
Revenue $ 11.2 $ 17.0
Gross margin $ 3.9 $ 4.6
Gross margin % 34.9% 27.0%
Net loss $ (3.2) $ (5.1)
Loss per share $ (0.09) $ (0.13)
---------------------------------------------------------------


PERFORMANCE HIGHLIGHTS

For the third quarter ended June 30, 2006, the Company recorded a net loss of $3.2 million, or a loss of $0.09 per common share, compared with net loss of $5.1 million, or a loss of $0.13 per common share in the third quarter of fiscal 2005. Revenue for the quarter totalled $11.2 million, a decrease from $17.0 million reported in the third quarter of fiscal 2005. The revenue decrease relates primarily to a decline in the Smart Solutions business as a result of lower sales volumes, particularly in France and the United States. Gross margin percentage improved in the third quarter of 2006 to 34.9% from 27.0% for the three months ended June 30, 2005. The improvement is a result of Payment Solutions representing a larger percentage of total sales in the period and an inventory write down in 2005 of $0.9 million.

CURRENT DEVELOPMENTS AND THIRD QUARTER 2006 OPERATING HIGHLIGHTS

During the third quarter of fiscal 2006, management initiated organizational changes to improve the operational effectiveness of the business. These changes provide a customer account focus to improve sales and create business units of product and technology excellence to improve profitability. The number of management levels has been reduced to streamline decision making and improve internal communications.

"Our new team has taken on the challenge to build the profitability of our company. Serving our customers with quality products and excellent service is their mission. In this way we will drive down costs and improve our ability to meet customer requirements", said Kirk Hamilton, President & CEO.

The Company believes that this decline in the Smart Solutions business unit is a result of consolidations of our major customers in the marketplace and previous management changes. The Payment Solutions business is focused on the development and introduction of EMV products. Its programs for certification and approval through the third quarter were accomplished as planned. It is positioned for deployment with its major customer for the fourth quarter.

The Company continues to pursue the patent infringement suit against a major Smart Solutions competitor in the United States in order to protect its 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 U.K., along with a worldwide dealer network. For more information, visit www.nbstech.com.

This news release contains forward-looking statements that involve risk and uncertainties. These statements can be identified by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "estimate," "plans," "continue," "believe," or the negative thereof or other variations thereon or comparable terminology referring to future events or results. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of numerous factors. These factors include, without limitation, the timing of acquisitions and expansion opportunities, technological change that may affect the Company's capital expenditures and results of operations, and competitive factors that may alter the timing and amount of the Company's capital expenditures. The Company relies on its majority shareholder for continued financial support as the Company's principal lender. The financial support would likely have a material adverse affect on the Company's business, operating results and financial conditions. Any of these factors could cause actual results to vary materially from current results or the Company's currently anticipated future results. The Company wishes to caution readers not to place undue reliance on such forward-looking statements that are applicable only as of the date made. The Company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise.



NBS Technologies Inc.
Consolidated Balance Sheets

------------------------------------------------------------------------
June 30, September 30,
(CDN$ thousands) 2006 2005
------------------------------------------------------------------------
(unaudited) (unaudited)
ASSETS

Current
Cash $ 1,360 $ 3,625
Accounts receivable 9,774 11,063
Inventories 10,231 9,156
Prepaid expenses and deposits 542 573
------------------------------------------------------------------------

21,907 24,417

Capital assets 3,601 3,952
Intangible assets 7,739 9,569
Other assets 4,978 5,552
Goodwill 4,276 4,276
------------------------------------------------------------------------

$ 42,501 $ 47,766
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES

Current
Indebtedness $ 29,609 $ 22,786
Accounts payable and accrued liabilities 13,838 15,999
Deferred revenue 2,214 2,570
------------------------------------------------------------------------

45,661 41,355

Long-term
Indebtedness 10,583 11,057
------------------------------------------------------------------------

56,244 52,412

CAPITAL DEFICIENCY

Capital stock 45,692 45,692
Contributed surplus 1,048 831
Deficit (60,483) (51,159)
------------------------------------------------------------------------

(13,743) (4,646)
------------------------------------------------------------------------

$ 42,501 $ 47,766
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying note 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

Three months ended Nine months ended
June 30, June 30,
(CDN $ thousands,
except per share
amount) 2006 2005 2006 2005
------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues $ 11,205 $ 16,963 $ 37,615 $ 51,237
Cost of goods
sold 7,291 12,389 24,140 34,894
------------------------------------------------------------------------

Gross margin 3,914 4,574 13,475 16,343

Expenses

Selling, general
and administrative 4,271 4,371 12,647 13,867
Research and
development 2,372 2,042 6,635 7,786
------------------------------------------------------------------------

Loss before
undernoted items (2,729) (1,839) (5,807) (5,310)

Amortization of
capital assets 205 406 664 1,055
Amortization of
other assets 5 5 15 15
Amortization of
intangible assets 587 465 1,755 1,507
Interest expense 785 579 2,231 1,419
Restructuring
and other costs (1,074) 1,892 (1,137) 2,761
------------------------------------------------------------------------
Loss before income
taxes (3,237) (5,186) (9,335) (12,067)
Income taxes
(recovery) - (50) (21) 138
------------------------------------------------------------------------

Net Loss $ (3,237) $ (5,136) $ (9,314) $ (12,205)
------------------------------------------------------------------------
-------------------------------------------------------------------------

Deficit,
beginning of
period $ (57,246) $ (45,528) $ (51,169) $ (38,459)
Net loss (3,237) (5,136) (9,314) (12,205)
------------------------------------------------------------------------

Deficit, end of
period $ (60,483) $ (50,664) $ (60,483) $ (50,664)
------------------------------------------------------------------------
------------------------------------------------------------------------

Net Loss per
common share
Basic and
diluted $ (0.09) $ (0.13) $ (0.26) $ (0.32)
------------------------------------------------------------------------
------------------------------------------------------------------------

Weighted average
number of
common shares
Basic and
diluted 43,151,922 43,151,922 43,151,922 43,145,216

------------------------------------------------------------------------
------------------------------------------------------------------------

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

Three months ended Nine months ended
June 30, June 30,
(CDN $ thousands) 2006 2005 2006 2005
------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
OPERATING ACTIVITIES

Net loss $ (3,237) $ (5,136) $ (9,314) $ (12,205)
Items which do not
involve cash:
Amortization
(including amortized
R&D costs) 1,084 1,021 3,270 2,997
Restructuring and
other costs (1,027) 1,137 (947) 850
Accrued interest 804 547 2,210 1,352
Write-off of other
assets - - 294 -
Stock-based
compensation expense 87 101 217 308
Change in non-cash
working capital 570 1,052 (2,272) 5,044
------------------------------------------------------------------------

(1,719) (1,278) (6,542) (1,654)
------------------------------------------------------------------------

INVESTING ACTIVITIES

Acquisition of
Cybernetix
Microelectronique - - - (13,096)
Additions to other
assets (70) (927) (588) (1,663)
Purchase of capital
assets (25) (320) (313) (1,046)
------------------------------------------------------------------------

(95) (1,247) (901) (15,805)
------------------------------------------------------------------------

FINANCING ACTIVITIES

Advances of
indebtedness 2,830 2,865 5,178 18,163
Issuance of common
shares - - - 25
------------------------------------------------------------------------

2,830 2,865 5,178 18,188
------------------------------------------------------------------------

Increase/(decrease)
in cash during period 1,016 340 (2,265) 729
Cash, beginning of
period 344 1,191 3,625 802
------------------------------------------------------------------------

Cash, end of period $ 1,360 $ 1,531 $ 1,360 $ 1,531
------------------------------------------------------------------------
------------------------------------------------------------------------

Supplemental cash
flow information

Cash paid for
interest $ 23 $ 32 $ 81 $ 68
Cash paid for income
taxes $ - $ - $ 50 $ 188
------------------------------------------------------------------------
------------------------------------------------------------------------

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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