Lupatech s Net Revenue and Adjusted EBITDA climbs 35%, and EBITDA reaches R$ 31.4 million in the first half of 2006

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1 Lupatech s Net Revenue and Adjusted EBITDA climbs 35%, and EBITDA reaches R$ 31.4 million in the first half of 2006 Caxias do Sul, August 3, 2006 Lupatech S.A. ( Lupatech or Company ), Brazil s leading manufacturer of industrial valves and development and production of complex metal alloy parts and sub-systems, announces today its results for the first half of The Company s financial statements are drawn up in line with the Brazilian Corporate Law and the financial and operating information contained herein is presented on a consolidated basis according to the accounting practices adopted in Brazil. All comparisons, except when otherwise indicated, are in respect with the first half of 2005 (1H05). CONFERENCE CALLS PERIOD HIGHLIGHTS Portuguese Friday, August 4, :00 a.m. (Brazil) 09:00 a.m. (NY) Phone: Replay: Code: Lupatech English Friday, August 4, :00 a.m. (Brazil) 10:00 a.m. (NY) Phone: Replay: Code: CONTACT Thiago Alonso de Oliveira CFO & IRO Telephones São Paulo:+55 (11) Caxias do Sul:+55 (54) On April 7, we concluded the acquisition of all the quotas of Metalúrgica Ipê Limitada MIPEL-SP, a renowned manufacturer of bronze industrial valves with a strong brand and a major presence in the Brazilian market. On June 14, we signed the documentation related to the acquisition of all ITASA s shares, an Argentinean-based company with state-of-the-art technology engaged in the casting of high-corrosion-resistant special alloys, primarily for applications in the oil and gas sector. Following investments of R$ 11.5 million, we began producing a new line of carbon and stainless steel valves, with important gains in synergy from the use of the MIPEL brand and its sales channel. First-half net revenue totaled R$ million, 35% higher than the R$ 79.1 million recorded in the first six months of Adjusted EBITDA 1 stood at R$ 31.4 million, 35% up from the R$ 23.2 million registered in the same period the year before. Adjusted net income reached to R$ 18.7 million, 32% more than the 1H05 figure of R$ 14.2 million. IPO and acquisitions costs, amounting to R$ 7.7 million reduced net income to R$ 13 million. 1 Adjusted EBITDA operating income before interest, taxes, depreciation and amortization, less non-recurring expenses (IPO and acquisitions). Page 1 of 14

2 Net Revenue Trends (R$MM) +35.1% Adjusted EBITDA (R$ MM) +35.5% H05 1H06 1H05 1H06 Flow Segment Metal Segment Flow Segment Metal Segment MANAGEMENT COMMENTS In the second quarter of 2006, Lupatech was listed at Bovespa s Novo Mercado, reinforcing its commitment to the best practices in corporate governance. The Company s Initial Public Offering totaled R$ million, R$ million of which came from the issuance of new shares and entered the Company. These resources will be used to foster Lupatech s growth, either organically and through acquisitions. Part of the resources were used to acquire MIPEL and ITASA in 2Q06. MIPEL s acquisition allowed us to: (i) offer a much wider range of valves under the brand name of the bronze valve leader (70% of the market); (ii) open a new sales channel, gaining immediate access to a nationwide chain of 600 distributors; (iii) benefit from the brand s strong recognition; and (iv) obtain a series of commercial synergies, by using the MIPEL brand for our new line of carbon and stainless steel valves, manufactured in our installations in Rio Grande do Sul. As expected, the acquisition of companies with lower margins than those of Lupatech reduced our average margins. We are currently working to ensure that MIPEL and ITASA repeat the success history of the Company s other acquisitions and profit levels of the group s other firms. ITASA s acquisition derives from our continuous pursuit of new technologies to improve products and processes. ITASA uses state-of-the-art sand casting techniques that ensure efficient production of high-corrosion-resistant metal alloys, which are experiencing increasing demand by the oil and gas industry equipment manufacturers. The purchase has also given us the technological know-how to implement a highly efficient casting unit in Brazil capable of delivering premium quality products. Both acquisitions lead to additional operating expenses, which we intend to reduce in the coming quarters through growth and the absorption of synergies. We shall continue to pursue high rates of organic growth, reinforced by strategic acquisitions, creating value for our shareholders and helping us expand the product portfolio, always focusing on consolidating our market leadership and employing the highest standards of technology. Page 2 of 14

3 Our commitment to profitable growth is unwavering, as is our focus on providing the best complex fluid control and precision casting solutions. ACQUISITIONS 1. Metalúrgica Ipê Limitada (MIPEL-SP) On April 7, 2006, the Company acquired outright control of MIPEL, a company with a 6,300 sq.m plant in Jacareí, in the state of São Paulo. The acquisition price was R$ 30 million. R$ 17 million of which has already been paid, with the remaining (R$ 13 million) being in an escrow account and, therefore, excluded from our cash balance. MIPEL has been operating in Brazil for 60 years and maintains a presence in 23 countries. Its products are used in various industrial segments, as well as construction, basic sanitation, irrigation and agribusiness. They are sold through an extensive distribution network, with more than 600 points of sale nationwide. The main reasons that have driven us to acquire MIPEL were: Offer a wider range of valves. MIPEL heads the Brazilian market for bronze valves, in various industries as well as the construction, basic sanitation, irrigation and agribusiness sectors. Its products complement those of Lupatech s subsidiaries, Metalúrgica Nova Americana (MNA) and Valmicro, making the Company a reference in the Brazilian valve sector. Open a new sales channel. An important part of the national valve market is supplied by distributors, a segment in which the Company intended to expand its presence. We expect to take full advantage of MIPEL s sales network to boost distribution of the valves produced by the Company s new operations in Rio Grande do Sul which started up at the end of 1H06 (see New Activities below). Enjoy strong brand recognition. MIPEL has a significant share of the bronze valve market and we complement our product portfolio with the new operation of steel, carbon-steel and stainless-steel valves in Rio Grande do Sul, reinforcing MIPEL s brand leadership in the Brazilian market. Gain commercial synergies. Users of MIPEL valves are also potential customers for Valmicro s products. The Company s current clients will be able to count on an even wider product range to successfully carry out their projects. In the first half of 2006, MIPEL generated gross revenues of R$ 15.6 million, recording end-ofperiod assets of R$ 29.7 million, financings of R$ 0.2 million and shareholders equity of R$ 14.6 million. Page 3 of 14

4 2. Industria y Tecnología en Aceros S.A. (ITASA) On June 14, 2006, we acquired 100% of ITASA through our subsidiary, Metalúrgica Nova Americana Ltda. (MNA). The company was founded more than 20 years ago by Tomás and Nestor Novillo and has become one of Latin America s most respected manufacturers of valve bodies and components and oil pump housings. It is based in the city of Paraná, in the Argentinean province of Entre Rios, and has a workforce of 70. ITASA employs the most up-to-date production technology to produce more than 1,000 tonnes per year of high-corrosion-resistant cast steel (in the form of finished parts), which includes Duplex and Superduplex. It has 5000 sq.m of factory space on a 22,000 sq.m site. Products are certified by rigorous chemical analysis, as well as physical and resistance tests. It specializes in cast parts, such as valves, pumps and rotors bodies and their components. ITASA has received ISO 9001/2000 certification. In 2005, it recorded gross revenues close to US$ 5 million, 21% of which from exports. It supplies the leading producers of valves and pumps for the oil and gas, petrochemical, and chemical industries, among others, and has assets of approximately US$ 2.5 million. As Lupatech announced throughout the IPO process, the acquisition is part of the Company s strategic development plan, reinforcing its capacity to consolidate the regional sector. The main reasons that have driven us to acquire ITASA were: Strengthen leadership. As well as strengthening MNA s leadership in the exceptionally demanding and high value-added corrosion-resistant ball valve segment, the purchase will allow Lupatech to set up a foundry in Brazil within 2 years using the same casting technology employed by ITASA. Add a new product line. Following the acquisition, ITASA will continue to supply its high-quality cast products, expanding Lupatech s market. Confirm our position in the Brazilian and Latin American industrial valve market. Access to high-corrosion-resistant alloy casting technology, coupled with the development of new products, will confirm our leadership in the industrial valve market, especially in the oil and gas sector. Investments over the next three years are estimated at US$ 9.0 million. The transition between ITASA and Lupatech s management will occur over the next 3 years. In order to ensure an alignment of interests between the sellers and the Company, ITASA s former owners will receive 30% of the ITASA s net income in the first year, 20% in the second and 10% in the third. Lupatech and ITASA have maintained commercial relations for more than 13 years, during which time ITASA was one of the Company s most important suppliers. Page 4 of 14

5 NEW ACTIVITIES Mipel Indústria e Comércio de Válvulas Limitada (MIPEL-SUL) We initiated a new steel valve operation in Rio Grande do Sul on June 27, 2006, to complement those of the recently acquired MIPEL and the investment castings produced by Carbonox Fundição de Precisão Ltda (Carbonox) and used by the new unit, we recorded substantial gains in synergy. The new facility is located in Veranópolis, in the Brazilian state of Rio Grande do Sul, and occupies 4,200 sq.m. It absorbed investments of approximately R$ 5.5 million, from the Company s own resources, and we foresee the initial injection of a further R$ 6.0 million in working capital. The new plant will generate 40 direct jobs in the first three months of operations. The new unit will supply the industrial market with an ample and up-to-date range of manual ball valves, made from carbon or stainless steel, under the MIPEL name. It has a production capacity of 250,000 valves per year. Its products will be sold in Brazil through a nationwide network of distributors and resellers, comprising around 600 points of sale, and abroad (Latin America, Asia, the Middle East, Oceania and Africa). It will make use of the efficient sales channel of MIPEL, the market leader in bronze valves for industry and construction. The combination of the latter s bronze valves with the recently launched steel ones, will allow the Company to offer an extended range of products. Carbonox, another Lupatech subsidiary, will be the main supplier of raw materials (carbon and stainless steel investment castings) for the new unit. The two firms are installed in the same industrial park, which will generate important logistical advantages as well as minimizing investment casting delivery times and generating gains in scale for Carbonox. The new steel product line has been developed by the Lupatech Research and Development Center, with technological funding from FINEP. Its start-up is the result of Lupatech s strategic planning and is rooted in the Company s 22 years of experience in the development, manufacture and sale of microcast steel valves. MANAGEMENT COMMENTS Net Revenue and Gross Profit Net Revenue (R$ thousands) 1Q06 2Q06 1H06 1H05 Flow Segment Metal Segment Total % Flow 68,9% 68,6% 68,7% 57,5% % metal 31,1% 31,4% 31,3% 42,5% The Company s net revenue moved up 35.1% in the 1H06, reaching R$ million, versus R$ 79.1 million in the same period last year. The Flow Segment increased 61.5% and contributed 68.7% to net revenue. The Metal Segment kept its growth and contributed 31.3% to net revenue. In the 1H05, the Flow Segment contributed 57.5% to net revenue and the Metal Segment, 42.5%. Page 5 of 14

6 The 61.5% increase in the Flow Segment s share was fueled by increased sales due to higher investments by the oil and gas industry. This upturn was is in line with the Company s strategy. The Metal Segment s share of net revenue fell by 0.5%. Sales were particularly affected by postponements in clients projects, which postponed the entry of around R$ 1.7 million. The total impact on the Metal Segment was R$ 2.3 million. We acquired two companies in the second quarter, MIPEL and ITASA, who jointly contributed R$ 8.2 million to 2Q06 revenue. MIPEL s revenue were booked to the Flow Segment and ITASA s to the Metal Segment. Gross Profit (R$ MM) % H05 1H06 Flow Segment Metal Segment First-half gross profit moved up 39.9% to R$ 45.5 million, versus R$ 32.5 million in the 1H05. The Flow Segment s gross profit climbed 53.3%, accounting for 82.5% of the consolidated 1H06 total, as against 75.3% in the 1H05. The Metal Segment s gross profit dipped by 1% and accounted for 17.5% of the total, versus 24.7% in the 1H05. Gross profit stood at 51.1% of net revenue in the Flow Segment and 23.8% of net revenue in the Metal Segment. The acquisition of MIPEL, whose current gross margin is below the Metal Segment average, reduced the gross margin of the Flow Segment by 2.8%. We expect to bring MIPEL s profitability up to the standard of Lupatech s other companies within 18 months. The commencement of supply to our clients projects was postponed, affecting the Metal Segment s costs, but the pace should return to normal in the 3Q06 In addition, there were certain internal operational problems which have now been resolved. All in all, Segment costs were R$ 2.35 million above expectations. Page 6 of 14

7 OPERATING EXPENSES Operating Expenses (R$ thousands) 1Q06 2Q06 1H06 1H05 Selling Expenses Segmento Flow Segmento Metal Total % Flow 72,1% 68,9% 70,2% 64,2% % metal 27,9% 31,1% 29,8% 35,8% G&A Expenses Segmento Flow Segmento Metal Total % Flow 58,6% 61,2% 60,1% 46,8% % metal 41,4% 38,8% 39,9% 53,2% Total Segmento Flow Segmento Metal Total % Flow 67,6% 66,6% 67,0% 58,6% % metal 32,4% 33,4% 33,0% 41,4% Operating expenses (selling and general and administrative) totaled R$ 16.7 million in the 1H06, 40.8% higher than the R$ 11.8 million reported in the first six months of Selling and G&A expenses climbed by 42.7% and 36.7%, respectively, both impacted by the non-recurring expenses arising from the Company s IPO (excluding commissions and fees). The acquisitions of ITASA and MIPEL have also contributed to this growth. We are working reducing these expenses to Lupatech s historical levels, both directly and by diluting costs through revenue growth of the acquired companies. Other Operating Revenue and Expenses (R$ thousands) 1Q06 2Q06 1H06 1H05 Other Operating Revenue Other Operating Expenses (115) (8.525) (8.640) (33) Total 645 (8.475) (7.830) (7) Other operating revenue and expenses were severely affected by the booking of IPO-related commissions and fees and expenses from the hiring of third parties for the two period acquisitions (MIPEL and ITASA), which totaled R$ 7.7 million in all. First-half depreciation expenses came to R$ 3.2 million (R$ 1.4 million in the Flow Segment and R$ 1.8 million in the Metal Segment), 7.2% up on the R$ 3.0 million recorded in the 1H05 (R$ 0.8 million and R$ 2.2 million, respectively). Page 7 of 14

8 FINANCIAL RESULT Financial Result (R$ thousands) 1Q06 2Q06 1H06 1H05 Financial Revenue Financial Expenses (2.721) (3.737) (6.457) (4.471) Total (1.549) (620) (2.168) (2.504) First-half financial revenue moved up a hefty 118% from R$ 2.0 million, in the 1H05, to R$ 4.3 million, mainly due to returns on financial investments effected with the proceeds from the IPO. In the same period, financial expenses totaled R$ 6.4 million, R$ 1.9 million more than the R$ 4.5 million posted in the 1H05. Part of this increase is a result of the CPMF (financial transaction tax) charged on the IPO proceeds, which alone came to R$ 0.6 million, added to already paidoff bridge loans taken out to finance the acquisition of MIPEL, generating financial charges, and financing lines for the acquisition of machinery and equipment and working capital. The net financial result was an expense of R$ 2.2 million, 13% lower than the R$ 2.5 million expense reported million in the 1H05. EBITDA EBITDA Trends (R$ millions) 1H06 1H05 Net Revenue 106,9 79,1 Adjusted EBITDA 31,4 23,2 EBITDA Margin 29,4% 29,3% Adjusted EBITDA came to R$ 31.4 million in the 1H06, 35.5% up year-on-year. We adjusted EBITDA by excluding the non-recurring expenses from the Company s IPO and the hiring of auditors and lawyers for the acquisition of MIPEL and ITASA, amounting to R$ 7.7 million. The Flow Segment contributed 92.2% of the total EBITDA, while the Metal Segment, 7.8%. The first-half EBITDA margin came to 29.4% of net revenue, versus 29.3% in the 1H05. Margin growth was mainly limited by the acquisitions and the decline in the Metal Segment s performance. Page 8 of 14

9 EBITDA (R$ thousands) Flow Segment Gross Profit Selling Expenses General & Administrative Expenses Other Operating Revenue (Expenses) Employees Profit Sharing Depreciation Divisão Metal Gross Profit Selling Expenses General & Administrative Expenses Other Operating Revenue (Expenses) Employees Profit Sharing Depreciation Total EBITDA Adjusted EBITDA 1Q06 2Q06 1H06 1H (3.258) (4.758) (8.016) (5.141) (1.325) (1.829) (3.154) (1.799) 445 (5.825) (5.380) (4) (586) (586) (374) (694) (1.258) (2.146) (3.404) (2.861) (935) (1.159) (2.094) (2.038) 201 (2.650) (2.449) (3) (15) (15) (162) NET INCOME Adjusted net income moved up 31.7% to R$ 18.7 million in the 1H06, versus R$ 14.2 million in the 1H05. The impact of the IPO expenses and the acquisition of MIPEL and ITASA totaled R$ 7.7 million, reducing the 1H06 figure to R$ 13.0 million. DEBT Debt (R$ millions) 2Q06 1Q06 Short Term 18,9 22,3 Long Term 13,1 13,5 Total Debt 32,0 35,8 Cash and Cash Equivalents 108,4 19,1 Net Cash (Debt) 76,4 (16,7) Lupatech s gross debt fell R$ 3.8 million, or 10.6%, in the quarter, totaling R$ 32.0 million on June 30, The reduction was due to the amortization of financial debt throughout the second quarter. Cash and cash equivalents grew by R$89.3 million, chiefly due to the entry of the IPO proceeds net of outlays on acquisitions, debt amortizations and period investments (both in terms of working capital and fixed assets), and came to R$ million at the close of June, versus R$ 19.1 million in the 1Q06. Currently Lupatech has no net debt, reversing the situation at the end of the first quarter, when net debt stood at R$ 16.7 million. Discounting total debt from cash and cash equivalents, the Company recorded a net cash position of R$ 76.4 million on June 30. Page 9 of 14

10 CAPEX Investments (R$ millions) 1H06 1H05 Aquisitions 50,6 5,3 Imobilizado 13,9 5,8 Deferred Assets 0,9 0,2 Total 65,4 11,3 Investments in acquisitions, fixed assets and deferred assets totaled R$ 65.4 million in the 1H06, a massive 478% more than the R$ 11.3 million invested in the 1H05. This increase is a result of the acquisitions made in the 2Q06 (MIPEL and ITASA), which totaled investments around R$50.6 millions. The MIPEL acquisition cost R$ 30 million, R$ 13 million of which is in an escrow account. ITASA cost R$ 20.6 million, or US$ 9 million, of which 70% (R$ 6.3 million) has already been disbursed. The remainder will be paid in three consecutive annual payments of US$ 900,000 (totaling US$ 2.7 million), plus a 30% share of ITASA s net income in the first year, 20% in the second and 10% in the third. Excluding the acquisitions, 1H06 capex grew by 142%, reaching R$ 14.8 million, versus R$ 6.0 million in the 1H05. In general, such investments are made in order to meet growing demand for our products, always respecting shareholder returns. The investment in deferred assets referred to new projects by the Lupatech Research and Development Center. Page 10 of 14

11 Attachment I Income Statement Income Statement 1Q06 1Q05 1H06 1H05 Gross Revenue: Cost of Goods and Services Sold Deductions from Gross Revenue: (8.557) (9.577) (18.134) (17.870) Returns (1.399) (1.274) (2.673) (4.419) Taxes and Contributions (7.158) (8.303) (15.461) (13.452) Net Operating Revenue Cost of Goods Sold (24.167) (37.240) (61.407) (46.579) Gross Profit Operating Expenses (6.776) (9.892) (16.669) (11.839) Selling Expenses (4.516) (6.904) (11.420) (8.002) General and Administrative Expenses (2.056) (2.670) (4.727) (3.198) Management Commissions (204) (318) (522) (639) Resultado before Financial Result EBITDA Financial Result: (1.549) (620) (2.168) (2.504) Financial Expenses (2.721) (3.737) (6.457) (4.471) Financial Revenue Result after Financial Result Other Operating Revenue Other Operating Expenses (115) (8.525) (8.640) (33) Equity Income - Operating Result Non-operating Revenue Non-operating Expenses (369) (264) (633) (1.413) Income before Taxes, Soc. Contrib. and Minority Interests Provisions for Income Tax and Soc. Contrib. (3.923) (3.879) (7.802) (2.492) Deferred Income Tax Management and Employees Profit Sharing (388) (213) (601) (536) Minority Interests Net Profit in the Period Shares (Thousands) Earnings per sahre 0, , , ,08470 Page 11 of 14

12 Attachment II Balance Sheet Balance Sheet 1Q06 2Q06 Current Assets 80,9 200,8 Cash 12,0 3,5 Financial Aplications 7,1 104,9 Account Receivables 31,2 41,7 Inventories 26,1 34,9 Income tax and social contribution advance - - Tax Recovery 3,7 11,8 Other receivable credits 0,6 4,0 Pre-payd Expenses 0,2 - Non-current Assets 3,5 11,9 Judicial Deposits 0,1 - Tax Recovery 3,0 3,0 Deferred Income Tax and Social Contribution 0,3 6,0 Other receivable credits 0,1 2,9 Permanent Assets 60,0 113,9 Investments 6,8 49,0 Fixed - Net 51,2 62,3 Deferred - Net 2,0 2,6 Total Assets 144,4 326,6 Current Liabilities 46,0 58,7 Suppliers 10,0 14,8 Loans and Financings 22,3 18,9 Salaries 3,1 4,7 Taxes and Social Charges 5,5 11,7 Client advances 1,5 2,2 Profit sahring 0,4 0,6 Related Parts 0,1 0,1 Investment payable 1,5 4,0 Others payables and accruals 1,6 1,7 Long Term Liabilities 16,1 27,1 Loans and financing 13,5 13,1 Provision for Contigencies 0,1 8,0 Taxes and Social Charges 0,9 0,9 Deferred income and social contribution taxes 0,2 0,2 Investment payable 1,4 4,9 Patrimônio Líquido 82,3 240,8 Capital 72,6 227,6 Capital to be paid in - - Capital Reserve - - Revaluation reserves 0,5 0,5 Profit Reserve - - Retained Earnings 9,2 12,7 Total Liabilities and Stockholder's Equity 144,4 326,6 Page 12 of 14

13 Attachment III Cash Flow Consolidated Statements of Cash Flows (in thousands of Brazilian reais - R$) 30/06/06 30/06/05 Cash Flow from Operational Activities Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Cost of sold or written-off fixed asset 45 Assets and Liabilities Changes (Increase) decrease in receivable accounts (4.812) (12.267) (Increase) decrease in inventories (2.912) (5.681) (Increase) decrease in tax recovery (11.954) (1.478) (Increase) decrease in other assets (2.043) (37) Increase (decrease) in suppliers Increase (decrease) in taxes Increase (decrease) in payable accounts (11.851) (3.485) Disponibilidades líquidas aplicadas nas atividades operacionais (10.593) (2.794) Cash Flow from Investment Activities Fixed Assets'Aquisition (13.911) (5.936) Investments'Aquisition (50.560) (5.244) Use in deferred (915) (240) Net cash used in ivesting activities (65.386) (11.420) Cash Flow From Financing Astivities Capital paid-up Proceeds of loans and financing Payments of loans and financing (7.923) (452) Payed loans interest (1.766) (336) Loan concessions to Related Parts (7) (3.043) Net cash provided by (used in) financing activities Increase (decrease) in cash and cash equivalents Beggining of the period Cash and cash equivalents from acquired subsidiary End of the period Page 13 of 14

14 Investor Relations Contacts Thiago Alonso de Oliveira CFO & IRO Telephones São Paulo: + 55 (11) or Caxias do Sul: + 55 (54) About Lupatech Lupatech S.A. possesses two business segments. The Flow Segment heads the national rankings in the production and sale of industrial valves, primarily for the oil and gas, chemical, petrochemical, pharmaceutical, pulp and paper and construction industries, under the MNA, Valmicro and Mipel brand names. The Metal Segment is among the international leaders in the development and production of parts, complex parts and sub-assemblies, mainly for the global auto industry. It employs the precision casting and steel injection processes, techniques that it pioneered in Latin America. It also produces high-corrosion-resistant cast-alloy housings for industrial valves and pumps, chiefly for applications in the oil and gas industry. This release contains forward-looking statements subject to risks and uncertainties. Such forward-looking statements are based on the management s beliefs and assumptions and information currently available to the Company. Forwardlooking statements include information on our intentions, beliefs or current expectations, as well as on those of the Company s Board of Directors and Officers. The reservations as to forward-looking statements and information also include information on possible or presumed operating results, as well as any statements preceded, followed or including words such as believes, may, will, expects, intends, plans, estimates or similar expressions. Forward-looking statements are not performance guarantees; they involve risks, uncertainties and assumptions because they refer to future events and, therefore, depend on circumstances which may or may not occur. Future results may differ materially from those expressed or suggested by forward-looking statements. Many of the factors which will determine these results and figures are beyond Lupatech s control or prediction capacity. Page 14 of 14