Priva Inc.
TSX VENTURE : PIV

Priva Inc.

November 28, 2007 17:24 ET

Priva Inc.: Management Discussion & Analysis and Financial Results for the Quarter ended September 30th, 2007

Report to Shareholders for the Period Ended September 30th, 2007. All figures in Canadian Dollars.

MONTREAL, QUEBEC--(Marketwire - Nov. 28, 2007) - This MD&A report had been designed to assist the reader in better understanding Priva Inc.'s business and its key financial results. It shows the trends in the Company's financial position, operating results and balance sheet for the quarter period ended September 30th, 2007 and compares these results with the corresponding period ended September 30th, 2006.

The Company's financial statements have been prepared in accordance with Canadian generally accepted accounting principles "GAAP". The financial statements have been reviewed by Priva's audit committee and approved by the Company's Board of Directors.

These financial statements have been prepared in accordance with the National Instrument Policy 51-102, Continuous Disclosure Requirements. This Management Discussion and Analysis of Financial Conditions should be read in conjunction with the un-audited financial statements and accompanying notes for the quarter ended September 30th, 2007. The date of this MD&A is as of November 16th, 2007.

PRIVA'S BUSINESS

Priva Inc. was a supplier of waterproof, absorbent, protective textile products to retailers, resellers and users internationally.

PRINCIPLE KEY INDICATORS

Management assesses the Company's performance based on trends in various financial indicators such as sales, gross profit, operating income, net earnings, earnings per share and operating cash flows to name a few. Management also assesses the costs of manufacturing, including raw materials and labor. However, management cannot control the raw material costs, and transportation costs that are directly related to costs of petroleum and management cannot control the value of the Canadian dollar in relation to the US dollar or the UK pound, all of which can have a material impact on Priva's profitability.

MAJOR EVENT IN 3rd Quarter 2007

In this third quarter, Priva has received a large order of $822,026 from Costco Wholesale Corporation, and $209,241 was shipped and invoiced in the month of September 2007. The order was for table protectors and baby bibs.

FISCAL HIGHLIGHTS

Operating results for each of the last eight quarters are presented in the table below. Management is of the opinion that the information related to these quarters has been prepared in accordance with the same principles as the audited Financial Statements for the fiscal year ended December 31st, 2006.

QUARTERLY ANALYSIS



2007 2007 2007
-------------------------------------------------------------------
Q3 Q2 Q1

Sales 2,865,205 2,294,668 $2,413,412

Gross Profit Margin 21.21% 25.90% 23.94%

Selling & Admin.
Expenses $459,968 $488,239 $649,702


Selling & Admin.
Expense Ratio 16.05% 21.28% 26.92%

Operating Profit
(Loss) $2,101 ($32,376) ($157,538)

Operating Margin 0.07% (1.41%) (6.53%)

Net Profit
(Loss) $2,101 ($32,376) ($157,538)

Net Loss per share
(Basic) 0.000 (0.002) (0.009)

Net Loss per share
(Diluted) 0.000 (0.002) (0.009)

Average number of
Common Shares
Outstanding -
Issued 17,242,858 17,242,858 17,242,858

Average number of
Common Shares
Outstanding -
Diluted 19,479,048 19,479,048 19,479,048


2006 2006 2006 2006 2005
-------------------------------------------------------------------------
Q4 Q3 Q2 Q1 Q4

Sales $3,840,585 $4,174,681 $4,005,849 $3,820,214 $2,884,673

Gross
Profit
Margin 23.59% 20.92% 26.95% 22.24% 29.02%

Selling
& Admin.
Expenses $1,706,105 $754,916 $1,003,860 $752,368 $1,343,000


Selling
& Admin.
Expense
Ratio 44.42% 18.08% 25.06% 19.69% 50.72%

Operating
Profit
(Loss) ($359,556) ($270,201) ($179,627) ($21,639) ($201,766)

Operating
Margin (9.36%) (6.47%) (4.48%) (0.56%) (6.99%)

Net Profit
(Loss) ($447,918) ($276,997) ($156,076) ($45,190) ($196,015)

Net Loss
per share
(Basic) (0.026) (0.016) (0.009) (0.003) (0.012)

Net Loss
per share
(Diluted) (0.026) (0.016) (0.009) (0.003) (0.012)

Average
number of
Common
Shares
Outstanding -
Issued 17,242,858 17,242,858 17,242,858 17,242,858 17,242,858


Average
number of
Common Shares
Outstanding -
Diluted 19,479,048 19,479,048 19,479,048 19,479,048 19,479,048


A significant event that occurred was the sale of the wholly owned
subsidiary on January 16, 2007.



OPERATING RESULTS FOR THE QUARTER ENDED SEPTEMBER 30th, 2007

Quarter Ended September 30th,
------------------------------------------------------------------------
2007 2006 Change%

Sales $2,865,205 $4,174,681 (31.37%)

Cost of Goods Sold $2,257,469 $3,588,632 (37.09%)

Gross Profit $607,736 $586,049 3.70%

Gross Profit Margin 21.21% 14.04% 51.07%


QUARTER END ANALYSIS
Quarter Ended September 30th,
-------------------------------------------------------------------------
2007 2006 Change%

Sales $2,865,205 $4,174,681 (31.37%)

Gross Profit Margin 21.21% 20.92% 1.39%

Selling and Administrative
Expenses $459,968 $754,916 (39.07%)

Selling and Administrative
Expense Ratio 16.05% 18.08% (11.23%)

Operating Profit (Loss) $2,101 ($270,201) 100.78%

Operating Margin 0.07% (6.47%) 101.08%


Net Profit (Loss) $2,101 ($276,997) 100.76%

Net Loss per share (Basic) 0.000 (0.016) 100.00%

Net Loss per share (Diluted) 0.000 (0.016) 100.00%


Average number of Common
Shares Outstanding - Issued 17,242,858 17,242,858 -

Average number of Common
Shares Outstanding - Diluted 19,479,048 19,479,048 -



NINE MONTH ANALYSIS

Nine Months Ended September 30th,
-------------------------------------------------------------------------
2007 2006 Change%

Sales $7,573,285 $12,000,746 (36.89%)

Gross Profit Margin 23.50% 21.05% 11.64%

Selling and Administrative
Expenses $1,597,908 $2,511,145 (36.37%)

Selling and Administrative
Expense Ratio 21.10% 20.92% 0.86%

Operating Loss ($187,812) ($471,469) (60.16%)

Operating Margin (2.48%) (3.93%) (36.90%)


Net Loss ($187,812) ($478,265) (60.73%)

Net Loss per share (Basic) (0.011) (0.028) (60.71%)

Net Loss per share (Diluted) (0.011) (0.028) (60.71%)

Average number of Common Shares 17,242,858 17,242,858 -
Outstanding - Issued

Average number of Common Shares 19,479,048 19,479,048 -
Outstanding - Diluted


NET EARNINGS

Net sales decreased to $2,865,205 in 3rd Quarter ended 2007 compared with $4,174,681 in the previous year. The decrease in sales is attributable to the selling of the wholly owned subsidiary. As well, the foreign exchange devaluation has resulted in lower sales after converting sales from currencies other than the Canadian dollar.

Gross profit amounted to $607,736 or 21.21% of sales, for 3rd Quarter ended September 30th 2007 compared with a gross profit margin of 25.90% for the 2nd Quarter ended June 30th, 2007, and a gross profit margin of 20.92% for the 3rd Quarter ended September 30th 2006.

In the 3rd Quarter 2007, Selling and Administrative expenses totaled $459,968 or 16.05%, compared with $488,239, or 21.28% of sales in the 2nd Quarter 2007 and compared with $754,916, or 18.08% of sales in the 3rd Quarter of 2006.

For the quarter ending September 30th, 2007, the profit from operations amounted to $2,101, compared with a loss of $276,997 for the same quarter of 2006.



BALANCE SHEET POSITION

As at September 30th, 2007 As at December 31st, 2006
--------------------------------------------------------------------------

Cash - $290,644

Accounts Receivable $2,160,845 $2,735,478

Inventories $1,030,859 $3,012,521

Future Income Tax $184,487 $184,487

Fixed Assets $38,836 $130,354

Intangible Assets $377,551 $411,157

Total Assets $3,816,098 $6,790,060

Accounts Payable $2,135,364 $3,660,740

Short-Term Debt - $637,327

Long-Term Debt - -

Total Liabilities $3,880,312 $7,178,067


Accounts receivable decreased from $2,735,478 at the end of 2006 to $2,160,845 as at September 30th, 2007. Management believes that it has properly provided for potential bad debts. Inventory has decreased to $1,030,859 during the nine month period ending September 30th, 2007, from $3,012,521 at the end of 2006. The financing of the Company's financial requirements has primarily come from collecting the Accounts Receivable and decreasing the inventories. Payables were $2,135,364, a decrease from $3,660,740 for the nine months ended September 30th, 2007. The Bank indebtedness at the end of September 30th, 2007 was $1,610,000 compared with $2,880,000 as at the end of 2006.

All interest payments are in good standing. In order to meet working capital requirements, Priva continues to use the Company's line of credit.

OFF BALANCE SHEET ARRANGEMENTS

Priva Inc did not enter into any Off Balance Sheet arrangements during 2007.

RELATED PARTY TRANSACTIONS

Priva has entered into related party transactions. Priva Inc. purchases some finished products from its major shareholder, Med-I-Pant Inc as well as some administrative services. As of September 30th 2007 Priva Inc. owes Med-I-Pant Inc $1,012,019, down from $1,612,966 as at December 31st, 2006.

OUTLOOK

The Company is incorporated under the Laws of Alberta and due to financial difficulties, the Company has discontinued operations since November 1, 2007.

On October 26, 2007, the Company filed a Notice of Intention to a make a Proposal to its creditors pursuant to the Bankruptcy and Insolvency Act.

This filing provides the Company with a thirty day period to file its proposal or request an extension. Concurrently with the filing of the Notice, the Company applied for and obtained an order from the Superior Court of Quebec to appoint an Interim Receiver to certain of its assets and authorizing the sale of the majority of its assets (the "Court Order"). In addition, the Superior Court of Quebec authorized the Company to file articles of amendment to change its name.

On the basis of a fairness opinion obtained from the Interim Receiver, Priva is of the view that the proposed sale of assets represents the best outcome for all its stakeholders.

The majority of the Company's assets were sold on November 1st, 2007 for a total sale price of $1,288,010 and consisted of the following:

a) All inventories of finished goods, work in process, raw materials and other materials and supplies used in connection with the operation of the Company's business;

b) The goodwill of the Business together with the exclusive right to represent the Purchaser as carrying on the Business as successor to the Company and to all rights in respect of the name Priva and variations thereof and including all customer lists and lists of suppliers, all sales and promotional materials, all product specifications and all of the right, interest and benefit, if any, there under and to and in the telephone numbers and facsimile numbers used by it in the conduct of the Business.

c) All of the Company's right, title and interest in intellectual property, including all trade marks, trade names, websites and domain names, certification marks, service marks, and other source indicators, and the goodwill of any business symbolized thereby, patents, copyrights (including software programs, code, applications, systems, databases, data, documentation and website content), know-how, formulae, processes, inventions, technical expertise, research data, trade secrets, industrial designs and other similar property, and all registrations, applications for registration and other similar rights in respect thereof; and

d) All office furniture and fixtures and all computer hardware owned by the Company.

The proceeds of the sale price (after deducting amounts to be paid in connection with the transaction) will be distributed by the Interim Receiver to the Company's creditors in accordance with the terms of the Court Order.

RISKS AND UNCERTAINTIES

Priva is in an industry that is subject to various risks and uncertainties. The Company's operating results and financial position can be affected by some of the risks stated below.

Currency Risk. As the Company exports a high percentage of its sales outside of Canada, foreign exchange fluctuation is a risk. To reduce the risks, the Company purchases future contracts.

Cost of Raw Materials. Priva's products include many components manufactured by other companies and purchased from many countries. The price changes of these raw materials can have an effect on the cost of goods. The Company tries to seek out alternative suppliers where it can.

Competition. The market for absorbent textile products is strong and such there is the potential of Priva's products being displaced from the shelves of its customers by other competitors. In order to reduce this risk, Priva has been broadening its product line and distribution base in order to reduce the risk of a lost account having an impact on Priva's financial results. As well, the Company is providing added value to its customers.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

The Company has complied with the requirements of Multilateral Instrument 52-109 Certification of Disclosure in Issuer's Annual Interim Filings issued by the Canadian securities regulatory authorities.

In order to ensure that information with regard to reports filed or submitted under securities legislation present fairly in all material respects the financial information of the Company, the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) are responsible for establishing and maintaining disclosure controls and procedures as well as internal control over financial reporting.

Disclosure controls and procedures

Disclosure controls and procedures are designed and implemented by, or under the supervision of the CEO and CFO to ensure that material information relating to the Company is communicated to them by others in the Company as it becomes known and is appropriately disclosed as required under the continuous disclosure requirements of securities legislation. In essence, these types of controls are related to the quality and timing of financial and non financial information in securities filings. An evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures was conducted as at December 31st, 2006, by and under the supervision of the CEO and CFO. Based on this evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective.

Internal controls over financial reporting

Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of our financial reporting and compliance with Canadian generally accepted accounting principles in our consolidated financial statements. Management is assessing in the fourth quarter of every year the design of internal controls over financial reporting. During the course of this evaluation we have found no major weaknesses and we are satisfied that internal control functioned properly for the period of 2006 and 2007.

Contact Information

  • Priva Inc.
    David Arditi
    1-800-761-8881