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Second Quarterly Report Ending November 30, 2004 …
Tags: accounting principles, annual report, canadian dollars, cholesterol, cholesterol levels, clinical research, conjuncture, consolidated financial statements, development initiatives, executive analysis, financial situation, inflammation, neptune krill oil, neptune technologies, north america, quarterly report, research initiatives, skin cancer, tradeshows, treasury,Pages: 4
Language: english
Created: Mon Jan 31 15:20:21 2005
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Second Quarterly Report
Ending November 30, 2004
2
EXECUTIVE ANALYSIS ON THE FINANCIAL SITUATION AND PRODUCTION RESULTS /
EXECUTIVE COMMENTS AND ANALYSIS
This analysis is presented in order to provide the reader with an overview of the changes to the Neptune Technologies & Bioressources Inc.
("Neptune" or "the Company") financial situation between May 31, 2004 and November 30, 2004. It also includes a comparison between the
operation results, the treasury flow and the financial situation for the 3-month period ending November 30, 2004 and those from the 3 month
period ending November 30, 2003.
This analysis, completed on January 17, 2005, must be read in conjuncture with the Company's audited consolidated financial statements at
May 31, 2004 and presented in the last annual report. Neptune financial statements were produced in accordance with Generally Accepted
Accounting Principles (GAAP). Company results are published in Canadian dollars. All amounts appearing in this executive analysis are in
Canadian dollars, unless indicated otherwise.
OVERVIEW
Neptune's second quarterly report ending November 30, 2004 was dedicated to the marketing of its products in North America and Asia.
Neptune also deployed development initiatives in the European market. To accomplish this, the Company participated in various tradeshows
in order to promote its products and maintain its level of excellence, established and developed since its foundation.
The Company maintained its clinical research initiatives. As a result, the Company can now take advantage of scientific results demonstrating
the benefits of Neptune Krill Oil (NKOTM) on various human conditions, such as those relating to skin cancer, premenstrual syndrome, elevated
cholesterol levels and inflammation problems. Neptune is also pursuing clinical research aiming to demonstrate the benefits of NKOTM for
people suffering from osteoarthritis and arteriosclerosis.
During the first two quarters of the May 31, 2005 year end, the Company has realised sales of 2,3M, surpassing the total sales of last year
ending May 31, 2004. The Company expect to double its sales for the current year comparing to last years' total.
PRINCIPAL QUARTERLY FINANCIAL DATA
(In thousands of dollars, except per share data)
Fiscal Year Ending May 31, 2005
Total First Second Third Fourth
Quarter Quarter Quarter Quarter
Sales Figures 2,314 1,134 1,180
EBITDA (before loss on foreign exchange) 270 151 119
Net Loss 891 388 503
Loss per Share 0.035 0.015 0.020
Fiscal Year Ended May 31, 2004
Total First Second Third Fourth
Quarter Quarter Quarter Quarter
Sales Figures 2,262 643 956 602 61
EBITDA (1,659) (353) (269) (240) (797)
Net Loss 3,534 799 744 717 1,274
Loss per Share 0.161 0.037 0.034 0,033 0,057
Fiscal Year Ended May 31, 2003
Total First Second Third Fourth
Quarter Quarter Quarter Quarter
EBITDA (2,402) (653) (982) (265) (502)
Net Loss 3,335 760 1,336 525 714
Loss per Share 0.213 0.049 0.085 0.034 0.045
During the second quarter ending November 30, 2004, the Company has decrease its loss by 32% compared to the quarter ending November
30, 2003 despite a loss on foreign exchange of $ 93,631 for this quarter compared to a loss on foreign exchange of $3,885 for the quarter
ending November 30, 2003. This decrease is also due in part by an increase in sales by $225,000 between the two quarters. The Company
has also maintained a positive EBITDA for the second quarter in a row for a cumulative EBITDA of $270,000 for the first semester. The
Company also reduced its cost of sales and operating expenses by approximately $109,000 even though the sales had increase between the
two quarters.
3
TREASURY FLOW AND FINANCIAL SITUATION
Operating Activities
During the second quarter ending November 30, 2004, the Company's operations have generated an increase in liquidities of $210,325
compared to a decrease of $1,277,946 for the quarter ending November 30, 2003. This increase of 1,49M is due in large part by the changes
in the working capital items from one quarter to the other. The changes in the working capital items for the second quarter ending November
30, 2004 are mainly due to a decrease in receivables for $294,291, an increase in inventories for $131,502 and an increase in accounts
payable for $114,497 compared to the previous quarter.
Financing Activities
During the second quarter, there was no financing activity except for the long term debt reimbursement.
Investing Activities
The main variation in investing activities related to acquisitions of fixed assets and intangible assets for a total of $17,394.
Overall, taking the treasury flow into account, the Company increased its cash by $374,460 since May 31, 2004.
Financial Situation
The following table details the important changes to the balance sheets as at November 30, 2004 and May 31, 2004:
Accounts Increase Comments
(Reduction)
(In thousands of dollars)
Cash 375 See cash flow statement
Receivables 161 Directly linked to the increase of operation
and sales activities
Inventory (223) Decrease in inventory related
to increase in sales
Other assets (222) Amortisation of start-up costs
Accounts payable (264) Decrease in purchases of raw material
and improvement in payment conditions
Convertible debenture 296 Addition of capitalises interest
PRIMARY ANNUAL FINANCIAL RATIOS
Nov. 30, 2004 May 31, 2004 May 31, 2003
Working Capital Ratio 1.30 1.05 1.76
Solvency Ratio
Debt Capital/Shareholder Equity* 1.23 1.31 0.65
*
including convertible debentures
Most of the Company's financial ratios improved for the quarter ending November 30, 2004 compared to the year ended May 31, 2004, mostly
because of the increase in sales and the private placement.
The Company's contractual obligations, including payments due during the next 5 reporting periods and the following ones, are presented in
the following table:
Required Payments per Period
Contractual Obligations Less than 2 to 3 4 to 5 More than
Total one period periods periods 5 periods
Long-term Debt (1) 3,699,534 692,868 1,472,000 1,452,000 82,666
Loans guaranteed by investments in
rental contracts (2) 191,066 107,089 74,383 9,594 -
Total liabilities 3,890,600 799,957 1,546,383 1,461,594 82,666
(1) This amount does not consider the value of the warrants and stock issued.
(2) Including interest fees
Stock-based Compensation Plan
On November 26, 2004, the company has re-priced to $0.25 a share, the exercise price of all stock option granted before October 5, 2004.
This re-pricing of the exercise price of the options generates an additional charge of $40,992. From that amount, $19,398 has been recorded
as at November 30, 2004, and $21,594 will be affected at each date that the re-priced options will become exercisable.
Related Party Transactions
The transactions between related parties are described in note 2 "Related Party Transactions" of the Company's financial statements as at
November 30, 2004.
4
Change in Accounting Policies
No changes in accounting policies since May 31, 2004.
Subsequent Events
There was no subsequent events of importance after November 30, 2004.
RISK FACTORS
Financial Risks
Management intends to continue the careful management of risks relating to exports, foreign exchange, interest rates and sale prices for
merchandise.
The majority of the Company's accounts receivables are 90% guaranteed by insurers. All export sales are completed in American funds. The
exchange rate risks incurred by the Company are, at present, limited to those relating to the American dollar. Due to the fact that Company's
raw materials are being purchased in American dollars and that the Company intends to maintain its matching policies, the Executive is not
currently using financial instruments.
Product Liability
The Company acquires a $5M-liability insurance policy to cover civil liability relating to its products on a yearly basis. The Company also
maintains a quality-assurance process that is PGO certified by the Canadian Food Inspection Agency (CFIA). In addition, the Company has
begun implementing the initiatives required to receive Good Manufacturing Practices accreditation by Health Canada.
Prospective Statements
This Executive Analysis contains prospective information. Prospective statements include a certain amount of risk and uncertainty, and it is
possible that the actual future results of the Company may differ somewhat from those predicted. These risks include: the growth in demand
for Company products, seasonal variations in customer orders, changes in price and availability for raw materials and changes to economic
conditions in Canada, the United-States and Europe, including variations in exchange and interest rates.
The Company based its analysis on the prospective statement information available at the time of drafting. The inclusion of this information
should not be considered a declaration by the Company that the predicted results have been achieved.
Additional Information
Updated and additional Company information is available from the SEDAR Website at: http://www.sedar.com.
On January 17, 2005, the total number of common shares issued by the Company and in circulation was 25,594,805 and Company common
shares were being traded on the TSX stock exchange in Toronto under the listing NTB.
Henri Harland André Godin
President and CEO Vice-president, Administration & Finance