CVF Technologies Reports Results for 2007
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WILLIAMSVILLE, N.Y., April 18 -- CVF Technologies Corporation (BULLETIN BOARD: CNVT) a holding company that is involved in the business of developing and managing early stage companies primarily engaged in the clean-tech sector today reported financial results for the fiscal year 2007.
2007 Financial Results -- Judging CVF on its income statement alone is not very helpful due to significant changes in revenue and income that can occur from quarter to quarter and from year to year. An example of how this revenue fluctuation can occur is when CVF's ownership interest in one of its portfolio companies goes below 50%. The portfolio company may still have significant revenue as does Biorem whose revenue was cdn $9,469,000 for year ended December 31, 2007. However that revenue is not shown in CVF's income statement. It is therefore important to focus on CVF's business model which is to invest its capital and human resources primarily in early stage, clean-tech companies with significant growth potential. The intent is to develop these companies until they either go public as did Biorem in January 2005, or are acquired as was Gemprint in December 2005.
When these events occur there will be a significant increase in CVF's income, as there was in 2005, when Gemprint was sold. In order to pass this realization of value to its shareholders CVF may initiate a stock repurchase program as it did in 2006, when it repurchased a total of $1,626,400 of its preferred and common shares, or it may decide to issue dividends to its shareholders. It may also decide to invest some of its funds in its current portfolio or in new business opportunities.
Portfolio Highlights -- Biorem -- (24% owned by CVF) New orders received in the fourth quarter were cdn $3,400,000. The order backlog increased to cdn $10,017,000 from cdn $9,500,000 in the prior quarter. This is the fourth straight quarter of backlog increase. Revenue in the fourth quarter was cdn $2,938,000 (which is not included in CVF's consolidated revenue due to GAAP accounting rules), up from cdn $2,547,000 in the third quarter as well as up for the third straight quarter.
Biorem remained focused on building its order backlog, cost reduction and price adjustments to improve its gross margin. Biorem is projecting that the sales momentum and backlog increase that has been building for three straight quarters will continue. From the second quarter of 2007, bookings have approached an annualized rate of cdn $15,000,000. Its efforts are well advanced to shift operational and project expenses to the US in order to match the US-based orders and thereby minimize the effects of fluctuations in the US dollar value.
Operating expenses for Biorem in the fourth quarter of cdn $1,168,000 are up cdn $220,000 compared to 2006, primarily due to an increased focus on research and development combined with a lower offset of investment tax credits. In addition, there was a cdn $210,000 swing from a foreign exchange gain in the fourth quarter of 2006 of cdn $132,000 to a foreign exchange loss in the fourth quarter of 2007 of cdn $78,000 but significantly less than the prior quarter. This reflects a decrease in the value of US dollar denominated net working capital assets. Also affecting net income was a non-cash income tax expense of cdn $82,000 in the fourth quarter. This resulted in a net loss of cdn $152,000 for the fourth quarter 2007.
At the end of the year, Biorem had cash and cash equivalents in the amount of cdn $2,261,000 and net working capital of cdn $3,864,000. The cash balance and working capital are considered adequate to fund the future operating requirements of the business.
Xylodyne Corporation -- (40% owned by CVF) In March and April of 2006 CVF invested cdn $325,000 in Xylodyne Corporation, a newly formed company which focuses on the development and distribution of 4-wheel drive off road electric vehicles. The mission of Xylodyne Corporation is to further the sales of environmentally friendly electric vehicles. Xylodyne has two business units: Recreational Vehicles and Engineering Services. The Recreational Vehicle group sells and services off road electric vehicles that are targeted at outdoorsmen but also has applications in the mining and turf care area. The Engineering Services group assists companies in the development of new electric and hybrid vehicles. In 2007, Xylodyne established a joint venture with Ecoval to develop and market a line of products into Ecoval's sales channels. The first of these initiatives should launch in mid-2008.
These vehicles are offered to the personal recreational market as well as to government agencies, conservation authorities and the mining industry. Xylodyne is currently focusing its efforts on building its distribution network for its vehicles in the US and Canada, where it has now signed dealers in New York, Delaware, Maryland, Massachusetts, and Ontario. CVF owns 40% of the equity of the company plus holds a two year note for cdn $313,000 from Xylodyne. Xylodyne achieved sales of $1,799,700 for 2007 and in 2008 Xylodyne will continue to aggressively work to expand its dealer network in the northeastern United States and Canada.
Ecoval -- (85% owned by CVF) The Ecosense herbicide, produced and marketed by Scotts Canada, its licensee, is available in every major retail chain in Canada and has become the leading environmentally friendly herbicide in Canada. Ecoval has also signed an exclusive distribution agreement with Plant Products the largest commercial, non-retail horticultural distributor in Canada for Ecoval's EcoClear herbicide product. The Scotts and Plant Products agreements are expected to make Ecoval's herbicide the dominant product of the non-chemical herbicide products in Canada. Ecoval now plans to leverage off its success in Canada to begin an aggressive marketing campaign in the US as it seeks out partners similar to what has been achieved in Canada. Ecoval is continuing its negotiations with large multinational corporations to offer its herbicide product to the US market in an exclusive distribution agreement. An agreement of this type has the potential to produce significant income to Ecoval in future years. Ecoval hopes to complete these negotiations in the coming months. Ecoval is also in serious discussions with a number of companies to add additional products.
Ecoval will continue to grow its sales by further promotion of its current product line. This includes supporting the current marketing programs, signing up new distribution partners and licensees, and entering new markets. Ecoval will also look to cut expenses through improvements in manufacturing, raw materials cost, and logistical management. The company is working on a number of business development projects to launch new products into Ecoval's distribution channels, including the joint venture with Xylodyne Corporation.
G.P. Royalty Distribution Corporation -- (formerly Gemprint Corp,) -- (65% owned by CVF) was formed to receive potential royalty distributions from Collectors Universe Corp who purchased the assets of Gemprint in December 2005. The royalty agreement is for $1 for each Gemprint over 100,000 Gemprints per year until December 2010. Gemprint is a unique non-invasive identification system for diamonds. Based on Collectors Universe's recent press releases they have made their G Cal diamond grading program a core part of their business model and Gemprint is a key component of it.
Petrozyme -- (50% owned by CVF) is continuing to explore marketing opportunities for its proprietary biologically based remediation technologies for the petroleum and petrochemical industries. The company is seeking a partnership or licensing agreement with a major North American environmental company as well as licensing agreements in the Middle East.
CVF GAAP financial results for 2007 -- On a consolidated basis CVF reported an increase in revenue of $474,100 for 2007 primarily due to an increase in sales from Xylodyne, its new investee company. It should also be noted that Biorem's revenue of cdn $9,469,000 for 2007 is not consolidated in CVF's financial statements as CVF owns less than 50% of Biorem.
Net loss for 2007 of $2,085,800 compared to a loss of $1,845,100 in 2006. This equates to a loss per share of $0.16 for 2007 compared to a loss per share of $0.14 for 2006. In 2007 CVF's portion of Biorem's loss was $575,300 compared to CVF's portion of Biorem's loss in 2006 of $188,100.
CVF Technologies Corporation (www.cvfcorp.com) is headquartered in Williamsville, New York. CVF is a technology development company, whose principal business is sourcing, funding and managing emerging pre-public, clean-tech companies with significant market potential.
Certain statements made in this press release which are not historical facts are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that these statements involve risks and uncertainties, which may cause actual results or achievements to be materially different from any future results and achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, product demand and market acceptance risks for the products and technologies of CVF's subsidiary companies and investees; the impact of competitive products, technologies and pricing; delays or difficulties in developing, producing, testing and selling new products and technologies; the ability of the company's subsidiaries and investees to obtain necessary financing for their operations and to consummate initial public offerings of their stock; the effect of the Company's accounting policies; the effect of trade restrictions and other risks detailed in the company's Statement on Form 10-SB/A filed with the U.S. Securities and Exchange Commission and any subsequent filings with the Commission.
