H2O Innovation Announces its First Quarter Results: Stock Options Granted to Key Employees
November 14 2007 - 9:12AM
Marketwired
QUEBEC CITY, QUEBEC Inc. ("H2O" or the "Company")(TSX VENTURE:
HEO)(ALTERNEXT:MNEMO:ALHEO) realized revenues totalling $2,4546,220
for the period ended September 30, 2007. This important increase in
revenues compared to the corresponding quarter of previous year is
characterized by the integration of Membrane Systems Inc. ("MSI")
to the operations of H2O. It is worth mentioning that the revenues
generated in the US market account for over 70%. Consequently, this
quarter was suffering from the sudden and unexpected raise of the
Canadian currency in comparison to the US dollar. Nevertheless, H2O
maintained an acceptable gross margin in the realization of its
projects, thus reducing the negative impact of the loss caused by
the exchange rate variation.
The Company recently reviewed its strategic orientations
targeting, among other things, to diversify its source of revenues
in the context of currency fluctuations, improve its operating
gross margin, enlarge its market territory and attack strong growth
markets.
Following the completion of municipal projects in North America,
the Company contemplates increasing its presence not only in new US
States such as Texas, Louisiana, Colorado and North Carolina, but
also in Canada in the industrial, mine and oil sectors as well as
in Western Canada. It is worth mentioning that the order book
stands now at 11.8 M$ CA. On the international scene, H2O
management has identified bearing markets with huge seawater
desalination needs. Accordingly, the Company pursues its business
development through partnerships in Algeria, Egypt, Morocco,
Senegal and Eastern Europe.
To protect itself from the negative impact of currency
fluctuation, H2O management has already signed an exchange contract
to insure the value of some current projects. Meanwhile, management
hired additional resources in its accounting and finance department
to better respond to the requirements of public society's
regulations and secure gross margins.
Results of Operations
When comparing the results of the current quarter with those of
the corresponding quarter the previous year, the reader should keep
in mind the significant impact of the integration of MSI on the
sales and expenses figures. This US based subsidiary was acquired
in October 2006.
Sales and gross margin
Sales during this quarter show an increase of 240% when compared
to the corresponding quarter last year, totalling $ 2,456,220 as of
September 30, 2007 in comparison to $ 721,645 as of September 30,
2006. This increase in revenues generated an increase in the gross
margin value, from $ 262,655 to $ 497,013 for the three month
periods ended September 30, 2006 and 2007 respectively. Despite
this important increase, the Company suffers a 16% reduction of its
gross margin when compared to the corresponding quarter in 2006.
Larger US municipal projects significantly generate reduced gross
margin. Moreover, the reallocation of indirect costs to General,
manufacturing, sales and administration expenses had a 6% positive
impact on the gross margin as of September 30, 2007 in comparison
to 8% for the corresponding period in 2006.
Operating expenses
During the first quarter, the Company reviewed the presentation
of its operating expenses in order to better reflect the trend of
the industry and restrict the information available to competitors.
Therefore the sales and administration expenses have been
reallocated to the unique designation of "Sales, administration and
general operating expenses".
Sales, administration and general operating expenses went from $
537,397 (74% of sales) for the three month period ended September
30, 2006 to $9 12,928 (37 % of sales) for the corresponding period
ended September 30, 2007. The inclusion of MSI's current sales and
administration costs makes up for this nominal increase. The
significant reduction in percentage of revenues reflects the
Management efforts towards the integration of MSI.
Net loss
The net loss increased from $ 266,507 ($ 0.011 per share) for
the three month period ended September 30, 2006 to $ 977,808 ($
0.028 per share) for the corresponding period ended September 30,
2007, mainly attributed to the loss on currency exchange and a
non-cash expense of $ 88,946 due to the issue of stock options to
directors and key employees of the Company.
Subsequent event
On October 26, 2007, the Company announced its decision to
terminate its acquisition project to acquire all the shares of a US
based company in the sector of water treatment. The decision to
terminate the acquisition negotiations results from a mutually
agreed to by the seller. We wish to remind that with no long term
debt and liquidities exceeding 19 M$, H2O is seeking new
acquisition opportunities to enlarge its activities and generate
added-value to its shareholders.
Issue of Share purchase options
H2O also announces the grant of 355,000 common share purchase
options of the Company to key-employees, in accordance with the
terms and conditions of its Share purchase option Plan. The
effective date of this grant is November 14, 2007. Each option
grants its holder the right to acquire one common share of the
Company at an exercise price of $1.50 before November 14, 2012.
Additional information on the Company is available on SEDAR at
www.sedar.com
About H2O
H2O mission is to develop, manufacture and market innovative,
environment-friendly, products intended for drinking water
production, wastewater treatment and industrial processes.
Prospective disclosures
This press release may contain prospective disclosures
representing current expectations of H2O and are subject to certain
risks and uncertainties. H2O rejects any obligation to revise or
update the prospective disclosures contained in this press
release.
The TSX Venture Exchange and the Alternext Exchange assume no
responsibility for the relevance or accuracy of this press
release.
Contacts: H2O Innovation (2000) Inc. Guy Goulet President and
Chief Executive Officer 450-227-1150 ggoulet@h2oinnovation.com H2O
Innovation (2000) Inc. Frederic Dugre Executive Vice-President
418-688-0170 fdugre@h2oinnovation.com
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