Excel-tech Ltd.
TSX : NRV

Excel-tech Ltd.

June 07, 2007 07:00 ET

XLTEK Announces Improved First Quarter Fiscal 2008 Results

OAKVILLE, ONTARIO--(Marketwire - June 7, 2007) - Excel-Tech Ltd. (TSX:NRV)("XLTEK") announced today improved results for the three months ended April 30, 2007. The Company completed its initial public offering ("IPO") on April 25, 2006.

Revenues for the three months ended April 30, 2007 increased 2.1% to $8.3 million compared to $8.2 million in the same quarter last year. The increase is due primarily to higher consumables and service revenues, which include accessories, warranties, repairs, professional services and support programs. Approximately 95% of the Company's sales were in US dollars in the first quarters of fiscal 2008 and fiscal 2007.

Gross profit increased to $4.3 million or 52.0% of revenues for the three months ended April 30, 2007 compared to $4.0 million or 49.1% of revenues in the same period last year. The increase is primarily due to measures taken late in fiscal 2007 and the first quarter of fiscal 2008 to curtail discounts, increase selling prices, negotiate improved warranty terms and reduce costs. Management is continuing to implement programs to further enhance gross profit margins.

Selling expenses decreased 25.4% in the first quarter of fiscal 2008 to $2.2 million or 26.0% of revenues from $2.9 million or 35.6% of revenues last year, primarily the result of cost reduction initiatives implemented in the fourth quarter of fiscal 2007.

General and administrative expenses were higher in the first quarter of fiscal 2008 compared to the same prior year period primarily due to increased costs associated with being a public company not incurred in the first quarter of fiscal 2007.

Net research and development expenditures were slightly higher in the first quarter of fiscal 2008 compared to the prior year due to the ongoing development of the Company's new SleepRite Continuous Positive Airway Pressure (CPAP) device used to treat patients with obstructive sleep apnea. The Company is showing significant progress on this device as it proceeds through clinical trials.

The Company incurred a net loss of $64,000 or $0.00 per common share in the first quarter of fiscal 2008 compared to a net loss of $1.4 million or a loss of $0.23 per common share in the prior year. Included in the net loss in the first quarter of fiscal 2007 was a $500,000 make-whole payment related to the repayment of a subordinated loan on April 25, 2006 related to the Company's initial public offering.

"We are very encouraged to see the restoration of our core neuro-diagnostic business through our margin improvement and cost reduction initiatives that are proving effective, and we remain cautiously optimistic that the Company will return to profitability within the next few quarters," commented John Mumford, President and Chief Executive Officer.

Mr. Mumford continued: "While the ongoing sales of our Neuro-Diagnostic Equipment will continue to form a solid foundation for the Company, we are encouraged that the reimbursement to physicians for the use of our NeuroPATH instruments is under review and may lead to new sales for this proven and effective product line. We are also very excited about the potential opportunity to grow the business over the longer term with our new products such as SleepRite."

As at April 30, 2007, the Company held a total of $17.6 million in cash and short-term investments, an increase from $16.9 million as at January 31, 2007. The increase was due primarily to an increase in cash from operations of $662,000 in the first quarter of fiscal 2008.



Financial Highlights

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(in $000 except per share amounts) Three months ended
Apr. 30
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2007 2006

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Revenues (US dollars)
Neuro-Diagnostic Equipment 5,218 5,670
Consumables & Services 1,933 1,436
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Total Revenues (US dollars) 7,151 7,106
Total Revenues (Canadian dollars) 8,344 8,173
Gross Profit 4,341 4,011
Selling Expenses 2,171 2,910
General and Administrative Expenses 1,353 888
Research and Development Expenses (net) 1,005 943
Net Loss (64) (1,398)
Net Loss per Share (basic) (0.00) (0.23)
Cash and Short-Term Investments 17,592 21,285
Long-Term Debt (including current portion) 1,940 2,159
Shareholders' Equity 20,790 26,818
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About XLTEK

XLTEK is a medical technology company that designs, develops and sells proprietary medical devices. XLTEK's core business consists of its Neuro-Diagnostic Equipment, used by neurology specialists to assist in the diagnosis and monitoring of the central and peripheral nervous systems. These core products, marketed since 1997, are sold into three main markets: the epilepsy market, the sleep disorders market, and the neuropphysiology market, including myopathy, neuropathy and surgical monitoring. Revenue from these core market segments currently generates the majority of XLTEK's revenue. The Company is leveraging these proprietary technologies and strong market position to develop new and related products targeted at complementary markets.

XLTEK is headquartered in Oakville, Ontario, Canada. The Company's common shares trade on the Toronto Stock Exchange (Symbol: NRV.TO). Additional information about XLTEK and its products may be found at www.xltek.com.

Forward-Looking Statements:

Certain statements contained in this release containing words like "believe", "intend", "may", "expect" and other similar expressions, are forward-looking statements that involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from those projected in the Company's forward-looking statements include the following: market acceptance of our technologies and products; our ability to obtain financing; our financial and technical resources relative to those of our competitors; our ability to keep up with rapid technological change; government regulation of our technologies; our ability to enforce our intellectual property rights and protect our proprietary technologies; the ability to obtain and develop partnership opportunities; the timing of commercial product launches; the ability to achieve key technical milestones in key products and other risk factors identified from time to time in the Company's filings.

The consolidated financial statements and Management's Discussion and Analysis for the period can be found at www.xltek.com.



Excel-Tech Ltd.

CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars)
(unaudited)


April 30, January 31,
2007 2007
$ $
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ASSETS
Current
Cash 1,563 1,024
Short-term investments 15,029 14,837
Restricted short-term investments 1,000 1,000
Accounts receivable 4,852 4,430
Investment tax credits receivable 248 398
Inventories 5,200 5,601
Prepaid expenses 530 181
Embedded derivative financial instruments - assets 58 -
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Total current assets 28,480 27,471
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Property, plant and equipment, net 4,115 4,133
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32,595 31,604
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 5,597 5,283
Current portion of deferred revenue 2,477 1,863
Current portion of long-term debt 218 218
Embedded derivative financial instruments
- liabilities 1 -
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Total current liabilities 8,293 7,364
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Deferred revenue 1,790 1,738
Long-term debt 1,722 1,777
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Total liabilities 11,805 10,879
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Commitments and contingencies

Shareholders' equity
Share capital 38,975 38,975
Contributed surplus 1,318 1,208
Share purchase loan (298) (298)
Deficit (19,205) (19,160)
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Total shareholders' equity 20,790 20,725
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32,595 31,604
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Excel-Tech Ltd.

CONSOLIDATED STATEMENTS OF OPERATIONS
AND DEFICIT
(in thousands of Canadian dollars, except per share data)
(unaudited)

Three months ended
April 30,
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2007 2006
$ $
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Revenues 8,344 8,173
Cost of sales 4,003 4,162
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Gross profit 4,341 4,011
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Expenses
Selling 2,171 2,910
General and administrative 1,353 888
Research and development, net 1,005 943
Financial
Investment loss (income) (172) 21
Interest expense 42 134
Net change in embedded derivative financial
instruments (73) -
Foreign exchange loss 79 13
Make-whole payment on convertible subordinated loans - 500
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4,405 5,409
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Net loss for the period (64) (1,398)

Deficit, beginning of period (19,160) (11,315)
Cumulative impact of adopting new accounting
requirements for financial instruments 19 -
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Deficit, end of period (19,205) (12,713)
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Basic and diluted loss per share $(0.00) $(0.23)
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Weighted average number of common shares (000's) 19,025 6,021
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Excel-Tech Ltd.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
(unaudited)

Three months ended
April 30,
---------------------
2007 2006
$ $
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OPERATING ACTIVITIES
Net loss for the period (64) (1,398)
Add (deduct) items not involving cash
Amortization of property, plant and equipment 86 103
Amortization of corporate transaction costs - 7
Accrued (income)/loss on short-term investments (157) 68
Net change in embedded derivative financial
instruments (73) -
Stock option compensation expense 76 -
Deferred share unit compensation expense 34 -
Net change in non-cash working capital balances
related to operations 760 1,153
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Cash provided by (used in) operating activities 662 (67)
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INVESTING ACTIVITIES
Redemption of short-term investments - 5,389
Purchase of short-term investments - (17,701)
Purchase of property, plant and equipment (68) (50)
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Cash used in investing activities (68) (12,362)
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FINANCING ACTIVITIES
Issuance of common shares, net - 19,623
Repayment of long-term debt (55) (5,054)
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Cash provided by (used in) financing activities (55) 14,569
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Net increase in cash during the period 539 2,140
Cash, beginning of period 1,024 1,511
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Cash, end of period 1,563 3,651
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Supplemental cash flow information
Interest paid 42 431
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