TechCana Inc.

April 11, 2006 10:44 ET

TechCana Announces its Results for the Third Quarter 2005-2006

ST-FELICIEN, QUEBEC--(CCNMatthews - April 11, 2006) - Following the reverse take-over of Pinexel Inc. by TechCana Inc. (the "Corporation") (TSX VENTURE:THA) in June 2005 and the beginning of its manufacturing activities of engineered wood flooring, for the period starting November 1 st , 2005 to January 31, 2006, TechCana posted sales of $449,000. However, the Corporation has incurred a net loss of $1.1 million, $0.06 per share on a fully diluted basis, which is primarily attributable to the fact that the Corporation is still in the start-up phase of its production operations. Despite a very low level of orders, the Corporation must constitute a large stock inventories of finished products to be able to meet higher client needs during the summer period, which can explain its negative gross margin. Lets remind that, in this market, sales level depends on the construction industry and the commercial and residential renovations. This two industries, mainly in the Canadian market, are very active in spring and summer and less active in the winter period, consequently, it is necessary to have important inventories to meet adequately the summer demand. Numerous marketing efforts have been deployed during this quarter to make the Corporation's product known in the market.

For the first nine (9) months of the current fiscal year, the Company posted sales of $721,000 but incurred a loss of $3.2 million or $0.18 per share on a fully diluted basis. However, it is important to mention that 50% of this loss is attributable to depreciation in sawing equipment for an amount of $1.6 million resulting from the disassembling of the sawmill that was installed inside the Pan-O-Starr Inc. (a subsidiary of the Company) building. This dismantling was necessary to obtain additional space for purposes of manufacturing operations of multi-layer wood flooring. The sale of this equipment in parts did not enable material amounts to be recovered on installation costs, primarily because of the current unfavourable climate in the sawing industry.

As for the financial structure of the Corporation, as of January 31, 2006, it is affected by the lack of liquidity and by the fact that the Corporation has not met the financial ratios set by its secured creditors. In fact, all loans have been registered in the short term debt, totalizing more than $6 million, which has a direct impact on its working capital. The Corporation has financed the growth of its inventories through advances of funds made by its shareholders. In that respect, the Corporation has obtained a moratory from its principal secured creditors for the reimbursement of the capital for a three-month period.

As for liquidity, an amount of $1.1 million was used for the operations during the first nine months out of which $504,000 has been capitalized, $536,000 has been immobilized and $485,000 has been affected to the reimbursement of long term debts. Steps are currently on their way to recapitalized the Corporation in order to proceed with a vertical integration of its manufacturing operations.

In conclusion, the management of the Corporation is confident to increase the level of its sales in the next months, because of the technical advantages of its product on conventional hardwood flooring, which should improve the financial situation of the Corporation.

Restatement of financial statements

The adjustments to the financial statements mainly concern the impairment of capital assets, the accrued interest and the presentation of long-term debt and debentures.

Impairment in the amount of $1,561,417 was recognized related to transformation equipments that are no longer used in the Company's operating. Interest on long-term debt in the amount of $23,358 was not accounted for and has been added to interest expense and to accrued interest.

Upon the cashing in of the $4,000,000 loan, an amount of $130,000 was kept in trust and was not recognized. The long-term debt has been increased by this amount in consideration of $110,721 in cash, $16,761 in deferred financing costs, and $2,518 in accounts receivable.

Certain covenants required under the terms of the bank loans were not satisfied as at October 31, 2005. The corresponding loans were reclassified for an amount of $6,279,401 in "Long-term debt reclassified in current liabilities".

The two convertible debentures of $500,000, initially accounted for in liabilities, have been presented with respect to their debt and equity components. The decision to use this presentation follows the conversion of each of these convertible debentures, initially debentures of Pinexel Inc., into convertible debentures of TechCana Inc. on June 29, 2005. The interest related to the debentures was also adjusted to reflect this new presentation; this was done by increasing financial expenses by $4,412 in earnings and by $8,109 in retained earnings. In consideration, these amounts were respectively capitalized to the liability and equity components. In addition, accrued interests of $20,000, initially accounted for in accrued expenses, were reclassified in the liability and convertible debenture component.

Net losses for the three- and six-month periods ended October 31, 2005 increased respectively from $263,532 to $1,852,719 and from $552,469 to $2,141,656.

Granting of options

The Corporation also wishes to announce the granting, on March 29, 2006, of a total of 400,000 options to one of its officers, Mr. Alain Brunet, President and Chief Executive Officer, under the stock option plan. These options can be exercised at a price of $0.75 per share until December 22, 2010.

About the Corporation

TechCana is the manufacturer, marketer and supplier of Evolution Hardwood Floors TM ("Evolution"), a pre-finished engineered multi-layered wood flooring product offering structural stability, durability and resistance to warping. Evolution has the distinct advantage of being more stable than traditional solid hardwood flooring in either extremely humid or dry conditions owing to its patented gluing technology called "Cold Fusion LCL".

Forward looking statements

Certain statements in this release are forward looking. These statements are based on the Corporation's current expectations and involve many risks and uncertainties. The Corporation undertakes no obligations to publicly update or revise any forward looking statements contained herein.

The TSX Venture Exchange Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • TechCana Inc.
    Mr. Alain Brunet
    President and Chief Executive Officer
    (418) 630-3444