PharmEng International Inc.
TSX VENTURE : PII

PharmEng International Inc.

April 30, 2007 17:51 ET

PharmEng Reports Earnings for 2006

TORONTO, ONTARIO--(CCNMatthews - April 30, 2007) - PharmEng International Inc. (TSX VENTURE:PII),a full-service consulting and contract manufacturing company, today reported its results for the period ended December 31, 2006. The Company has demonstrated continued strong revenue growth of 43% during 2006 over the previous year and continues to reinvest in its business plan. While this growth in 2007 continues, management is focused on reducing operational expenses in order to return to previous profit margins.

- For the twelve-month period ended December 31, 2006, the Company had revenues of $10,813,000 on a consolidated basis compared to $7,563,000 for the same period in the prior year, an increase of $3,250,000, or 43%. This increase was a result of the Company's continuing successful penetration into the U.S. market and the incremental revenue from the acquisition of two companies, Rootlink and Pharmlink.

- For the quarter ended December 31, 2006, the Company had revenues of $3,746K on a consolidated basis, representing a 131% increase compared to the fourth quarter of 2005 of $1,622K. The loss for the quarter was $389K compared to a loss of $587K for the fourth Quarter of 2005 (after the restatement of stock options expense in 2005).

- The Consulting division's fee revenues for the twelve-month period ended December 31, 2006 were $8,831,000 compared to $6,173,000 for the same period last year. This increase of $2,658,000 or 43% is due to continuing demand for our services. Margins on consulting income decreased from 45.0% for the twelve-month period ended December 31, 2005 to 31.0% for the twelve-month period ended Dec 31, 2005. These margins reflect a reclassification of direct costs and are the direct result of the mix of consulting contracts between "fixed fee" contracts and "time and expense". The Company has begun cost cutting programs in 2007 that will improve margins from those reported in 2006.

- Consulting operations had a positive EBITDA of $1.1 M for the twelvemonth period ended December 31, 2006 while manufacturing operations continued to contribute negatively. Losses before income taxes for the twelve-month period ended December 31, 2006 were $1,886,000 compared to $1,484,000 for the same twelve-month period last year.

- Revenues from Keata, the Company's pharmaceutical manufacturing facility, increased $592,000, or 43%, to $1,982,000 for the twelvemonth period ended December 31, 2006 from $1,390,000 in 2005.

"Our consulting operations continue to grow. The construction of our new manufacturing facility is expected to come to an end in the summer. We have customers for the new facility but will not realize any revenues until the facility is completed and comes on stream," commented Alan Kwong, CEO and Chairman of PharmEng. "It has been a difficult year with corrective cost reduction measures being taken until our manufacturing operation begins contributing to our bottom line," concluded Mr. Kwong.

The following are financial highlights for the twelve-months ended December 31, 2006.



Selected Annual Financial Information - December 31, 2006, 2005 and 2004

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2006 2005 2004
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(thousands of dollars) $ $ $
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Revenue - Consulting 8,831 6,173 5,499
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- Manufacturing 1,982 1,390 395
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Direct Costs - Consulting 5,471 3,268 2,528
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- Manufacturing 2,965 1,590 395
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Gross Margins - Consulting 3,360 2,905 2,971
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- Manufacturing (983) (200) -
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Selling, Administration and Overhead 4,349 4,254 2,481
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EBITDA (1,972) (1,549) 490
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Amortization 676 289 97
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Interest Expense 299 104 48
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Income tax expense (benefit) (1,061) (458) 74
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Net Income (Loss) (1,886) (1,484) 271
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Earnings (Loss Per Share) ($0.04) ($0.05) $ 0.01
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Assets 12,727 5,307 3,234
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Liabilities 10,224 3,518 1,979
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Selected Quarterly Financial Results

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Q4 Q3 Q2 Q1
12/31/06 09/30/06 06/30/06 03/31/06
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(thousands)
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Revenue
Consulting 3,084 2,043 1,968 1,736
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Revenue
Manufacturing 662 549 403 368
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Direct Cost
Consulting 2,125 1,045 1,015 1,286
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Direct Cost
Manufacturing 922 880 638 525
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Gross Margin
Consulting 959 998 953 450
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Gross Margin
Manufacturing (260) (331) (235) (157)
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Selling, Admin &
Overhead 1,001 984 1,287 1,077
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EBITDA (302) (317) (569) (784)
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Amortization 307 189 115 65
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Interest Expense 79 136 53 31
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Income tax
expense(benefit) (299) (177) (265) (320)
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Net Income (Loss) (389) (465) (472) (560)
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Assets 12,727 10,420 7,892 6,197
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Liabilities 10,224 5,548 6,302 4,870
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Q4 Q3 Q2 Q1
12/31/05 09/30/05 06/30/05 03/31/05
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(thousands)
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Revenue
Consulting 1,361 1,528 1,857 1,427
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Revenue
Manufacturing 261 515 345 269
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Direct Cost
Consulting 748 637 993 890
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Direct Cost
Manufacturing 324 567 392 307
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Gross Margin
Consulting 613 891 864 537
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Gross Margin
Manufacturing (63) (52) (47) (38)
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Selling, Admin &
Overhead 1,145 1,045 1,146 918
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EBITDA (595) (206) (329) (419)
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Amortization 105 54 67 63
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Interest Expense 51 17 15 21
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Income tax
expense (benefit) (164) (69) (100) (125)
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Net Income (Loss) (587) (208) (311) (378)
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Assets 5,307 4,372 3,234 3,733
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Liabilities 3,518 1,634 1,836 1,494
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Prior periods have been adjusted for comparative purposes.


Business Highlights Reported

- $1,750,000 of the total government assistance from the Cape Breton Growth Fund was restructured from secured debt to preferred equity.

- Successfully raised additional financing in the form of an accounts receivable convertible revolving line and a convertible term loan totalling $7.0 million (USD), as well as equity through a private placement of $1.8 million (CAD).

- For the quarter ended December 31, 2006, the Company had revenues of $3,746K on a consolidated basis, representing a 131% increase from the fourth quarter of 2005.

About PharmEng International Inc.

PharmEng International Inc., headquartered in Toronto, Canada, is a full-service consulting and contract manufacturing company that serves the pharmaceutical and biotechnology industries in North America and internationally. Consulting services include project management, engineering, GMP, validation, calibration, regulatory compliance and certified training services. Contract manufacturing includes pharmaceutical support, formulation development, analytical methods development, laboratory testing, and finished solid dosage and liquid products. Building on a foundation of over eight years of successful consulting, PharmEng in combination with its wholly owned manufacturing subsidiary, Keata, has evolved into one of Canada's leading pharmaceutical companies. PharmEng's shares trade on the TSX Venture Exchange under the symbol PII. For more information about PharmEng, please visit the Company's website at www.pharmeng.com.

FORWARD LOOKING STATEMENTS

Certain statements in this press release may include "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of PharmEng to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this press release, such statements use such words as "may", "will", "expect", "anticipate", "project", "believe", "plan", and other similar terminology. The risks and uncertainties are detailed from time to time in reports filed by PharmEng with the securities regulatory authorities in all of the provinces and territories of Canada. New risk factors may arise from time to time and it is not possible for management to predict all of those risk factors or the extent to which any factor or combination of factors may cause actual results, performance and achievements of PharmEng to be materially different from those contained in forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction actual results.

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