Kree Tech loses $29,021 in fiscal 2005

Kree Tech International Corp (TSX-V:KT)
Shares Issued 21,305,957
Last Close 8/29/2005 $0.26
Tuesday August 30 2005 - News Release

Mr. Greg Moffat reports

KREE TECH REPORTS FISCAL 2005 YEAR END FINANCIAL RESULTS

Kree Tech International Corp. has released its financial and operating results for the 12 months ended April 30, 2005. Highlights from fiscal 2005 include:

  • obtained public listing in Canada and began trading in March, 2005;
  • set up new manufacturing facility in Florida that will allow the company to expand its production capacity and diversity, broaden its customer reach, increase its flexibility to better serve its customers, and enable it to initiate relationships with other brand marketers seeking new suppliers;
  • began to pursue growth opportunities in the advanced-wound-care market segment; and
  • for the 12 months ended April 30, 2005, reported revenues of $5.03-million and net loss of $29,000.

"The past year was one of significant positive change for Kree," said Greg Moffat, chief executive officer. "We obtained a public listing and have taken definitive steps toward growing our business and capitalizing on new opportunities in our key markets. Through our recently established manufacturing facility in Florida, we are now able to vertically integrate our production in order to earn higher revenues and increased margins and are well positioned to penetrate the growing advanced-wound-care market segment."

Financial review

Net sales for the year ended April 30, 2005, were $5,029,000, compared with $5,687,000 for the year ended April 30, 2004, a decrease of approximately 11.5 per cent. The decline in revenues was due primarily to the effects of a transitional year in which the company devoted considerable time and energy to establishing a new manufacturing facility in Florida. In addition, Kree's senior management was heavily involved in the reverse takeover of Kree Tech International Corp. (formerly known as Cogivar Corp.) by Kree Technologies Inc., and the public issuance that took place in March, 2005, to finance the growth of the company. Another significant factor that influenced Kree's revenue performance in 2005 was the decline in the value of the United States dollar compared with the Canadian dollar, as Kree records approximately 80 per cent of its sales in U.S. dollars. The actual impact of this change in currency rates was approximately $230,000, or 4 per cent of revenues. Therefore, had the exchange rate been consistent throughout 2004 and 2005, Kree's management estimates that the normalized revenue decrease for the year ended April, 2005, would have been approximately 7.5 per cent. The fourth quarter of fiscal year 2005 showed a 27.2-per-cent increase in net sales compared with the same quarter in the previous fiscal year.

Kree's gross margin decreased slightly from 30.7 per cent in fiscal year 2004 to 28 per cent in fiscal year 2005 (26.9 per cent in the last quarter of fiscal year 2005). In addition to the factors described earlier, the company faced competitive pressures which required it to maintain price stability at the expense of profit. At the same time, the company faced considerable increases in the cost of raw materials, direct labour, and other fixed and variable production costs.

Kree's overall administrative expenses increased from $701,000 in fiscal year 2004 to $896,000 in the year ended April 30, 2005, due to a number of reasons, the most significant of which were as follows:

  • approximately $130,000 was spent in additional professional fees, including the reassessment of prior-years' tax filings, accounting help in reassessing prior-year financial statements, the preparation of tax credit claims for prior-years' research and development (R&D) work, computer system consultant fees, an engineer's services for the opening of the Florida plant, and recruiting fees; and
  • an increase of approximately $60,000 was due to the hiring of additional accounting personnel, the restructuring of the administration team due to increased accounting disclosures linked to the reverse takeover transaction, and a general increase in administrative remuneration.

The company posted a net loss for the year ended April 30, 2005, of $29,000 (0.32 cent per share), compared with net earnings in 2004. The decrease reflects the impact of the fluctuating U.S. dollar, the increased cost of sales and the increases in administrative expenses described earlier. For the same reasons, Kree reported a net quarterly loss in the fourth quarter of 2005 of $19,000 (0.13 cent per share), compared with net earnings of $11,000 (0.15 cent per share) in the same period one year before.

During fiscal year 2005, Kree's cash balance significantly increased due to the funds made available following the reverse takeover transaction and the March, 2005, public offering. The company's balance sheet included a substantial increase in receivables, which is due to higher sales realized in the fourth quarter of 2005 compared with the fourth quarter of 2004.

Full financial information is available on Stockwatch SEDAR files.

Outlook

Through vertical integration of its operations, Kree is pursuing its strategy of improved production efficiency, accelerated growth and maximized profitability. Throughout the coming year, the company expects to begin production out of its Florida facility while leveraging its relationships with smaller clients who are in the initial stages of building their business and are looking to outsource manufacturing. The advanced-wound-care market segment is robust and growing, and represents a substantial opportunity for Kree to use its development capacity and in-house expertise while building an agile and successful company.

© 2005 Canjex Publishing Ltd.