CLEMEX Management Discussion & Analysis

Transcription

1 3 CLEMEX Management Discussion & Analysis

2 Longueuil, Canada Bordeaux, France

3 Interim Management Discussion and Analysis For the quarter ended January 31 st, 2014 This discussion and analysis is provided to assist readers in their understanding of the financial statements and to express management views on the consolidated operating results, the financial position and changes in cash flow for this third quarter ended January 31 st, This report was prepared in accordance with National Instrument on continuous disclosure obligations and should be read in conjunction with the annual consolidated financial statements of April 30 th, 2013, and the quarterly consolidated financial statements of January 31 st, The disclosures and values in this MD&A were prepared in accordance with International Financial Reporting Standards (IFRS) and with current issued and adopted interpretations applicable to fiscal years beginning as of April 30 th, This MD&A has been reviewed and approved by the Company s Board of Directors. It includes all important events that occurred since the last Board meeting of December 9, 2013 and March 17 th, Corporate profile Clemex Technologies Inc. has its head office at 800 Guimond Boulevard in Longueuil, Quebec. The Company has a business address in the United States and a subsidiary, Clemex Europe, in Martillac, France, as well as distributors in Europe, Asia, South America, and the Middle East. The Company is publicly traded on the TSX Venture Exchange under the symbol CXG.A. Clemex Technologies Inc. ( Clemex or the Company ) develops, manufactures and markets image analysis systems and software used by microscopy quality control and research laboratories. Clemex s customer base spans many countries around the world and includes large manufacturing firms in numerous industries, particularly in the life sciences, automotive, aerospace, raw materials, pharmaceuticals and mining sectors. Forward-looking statements and use of estimates Some sections of this MD&A present forward-looking statements based on management assumptions and forecasts regarding events which, by their nature, involve certain risks and uncertainties. Actual results may differ from those presented. Detailed information on risks and uncertainties may be found under Risks and Uncertainties in the the MD&A for the fiscal year ended April 30 th, In preparing consolidated financial statements in accordance with IFRS, management must exercise judgment when applying accounting policies and use assumptions and estimates that affect the amounts of the assets, liabilities, sales and expenses reported in these summarized interim consolidated financial statements. The main assumptions and estimates used by management are as follows: - Evaluation of inventory - Useful life of depreciable assets - Evaluation of assets - Income taxes - Investment tax credits - Stock-based compensation 1

4 Because the use of assumptions and estimates is inherent to the financial reporting process, the actual results of certain items may differ from these assumptions and estimates. Note 4 of the consolidated interim financial statements present detailed information on the Company s accounting judgments and assumptions. Quarterly financial information Consolidated results on operations for the three and nine month periods ended January 31 st Three months Nine Months January 31, 2014 January 31, 2013 January 31, 2014 January 31, 2013 $ $ $ $ Sales 1,741,464 1,494,978 4,345,567 4,370,581 Cost of Sales 699, ,039 1,904,433 1,986,709 Gross Margin 1,042, ,939 2,441,134 2,383,872 Net result before income taxes 259,899 55,465 93, ,247 Income taxes 68,000 36, , ,100 Net Result 191,899 19,365 (19,789) 76,147 Net Results Attributable to Clemex Technologies Inc. 200,042 16,180 (1,288) 72,962 Gain on foreign currency exchange (1,070) 1,886 2,539 1,886 Global Result 190,829 21,251 (17,220) 78,033 Attributable to shareholders of les Technologies Clemex Inc. 199,207 17,669 1,273 74,451 Sales Sales reached $1,741,464 for the third quarter ended January 31 st, 2014, compared to $1,494,978 for the same period ended January 31 st, After nine months, the total sales reached $4,345,567 compared to 4,370,581 for the same period of last year. Sales have increased by 45.5% ($420,263) on the North America territory during this third quarter from $923,972 to $1,344,235 when compared to last year. In Canada, sales have increased by 21.8% ($69 781) this third quarter, from $322,756 to $392,537 when compared to last year, but have decreased by $ after nine months, from $1,035,640 to $850,193 when compared to the same nine month period last year from. In the United States, sales have increased by 58.2% ($ ), from $601,216 to $951,698 during this last quarter and have also increased by 18.6% ($326,455), from $1,746,597 to $2,073,052 after nine months when compared to the same nine month period last year. Sales for the North America territory reached $2,923,245 this fiscal year when compared to $2,782,237 for the nine month period of the past last year, an increase of 5,0%($141,008). 2

5 In Europe, sales have decreased by 68.4% during this third quarter from $343,454 last year to $108,391 this year. After nine months, sales remain lower by 41.6% this year as they reached $310,465 compared to $532,221 after nine months last year. On the other hand, sales in other countries abroad have increased their sales from $227,552 last year to $288,838 this year, an increase by 26.9%. After nine months, sales in those countries have contributed to maintain the overall sales abroad to $1,422,322 when compared to $1,588,344 for the same nine period last year. The capital investment uncertainties felt in the manufacturing sector since the beginning of this fiscal year has somewhat dispersed during this last quarter, which help conclude sales that were postponed for a few months. We feel however that the manufacturing sector in North America remains fragile to market changes. The same situation is also felt overseas, explaining why sales growth in 2013 compared to 2012 is more difficult to achieve. Long cycles and long delivery times for some components may also affect sales levels from one quarter to the next. Furthermore, various economic and political factors may affect the sales from one quarter to the next. Gross margin Gross profit was 59.8% for the third quarter, ended January 31 st, 2014, compared to 56.3% for the three months ended January 31 st, After nine months, the gross margin reached 56.2% when compared to 54.5% last year. The Gross Margin has raised by 4.5% in this Quarter given that less Leica products were sold from in relation to the native Clemex products, which carry a much better Margin. These Native products also have particular characteristics. They include hardware and software with distribution that is often spread unevenly, which explains why the gross margin may vary slightly from one quarter to another. Commercial and administrative expenses Commercial and administrative expenses totalled $687,109 for the third quarter ended January 31 st, 2014, compared to $634,754 for the quarter ended January 31 st, After nine months, the commercial and administrative expenses totalled $1,892,729 when compared to $1,730,515 the previous year. Increase of these expenses is mainly due to commercial expenses where important investments were made since the beginning of the current Fiscal Year. Since the beginning of this fiscal year, several commercial activities took place for the launch of the product line of medical instruments. A new market segment is also coveted by sales and marketing to develop new business, it is that of veterinary field. Members of our sales team attended an international tradeshow held in Montreal in December These activities are essential and are used for technology watch and developing lists of new potential customers. Administration expenses remain stable, consisting largely of fixed costs such as rent, salaries and professional fees that have changed slightly between last year and this year. Research and development expenses R&D expenses include labour and external consulting services in product development. During the third quarter, R&D expenses totalled $146,896, compared to $145,267 for the same period last year. After nine months into the fiscal year, the R&D expenses totalled $506,549 compared to $418,924 for the same period last year. The variation is primarily related to an increase in salaries, professional fees with regards to the efforts provided to complete validation procedures. 3

6 During the last quarter, the adaptation of a new instrument for the veterinary field occupied a part of the team. However, work carried out by the R&D team since the beginning of this fiscal year are mainly concentrated in the launch of demo-versions of haematology systems and the preparation of documentation for ISO accreditation for the certification of systems to Health Canada. The validation procedures and early betas tests are ongoing in three hospital sites. The Company has received notice that a patent has been granted for Automatic calibration and measuring systems on microscopes from intellectual property authorities in Canada and the U.S. during the last fiscal year. Another application is in progress for a component used in the haematology system. Financial expenses Financial expenses represent interest paid on loans and bank charges. The following financial expenses were incurred. Three months Nine months January 31 January 31 January 31 January $ $ $ $ Interest and bank charges 14,180 5,549 33,342 18,890 Interest income (2,933) - (14,847) Interest on long term debt 4,125 4,260 10,972 19,449 15,372 9,809 29,467 38,339 Loss (gain) on foreign currency Currency fluctuations may affect the Company s results from one quarter to another, since exposure to foreign currencies, especially the U.S. dollar, is considerable. These fluctuations also affect sales, since approximately 75% of our sales are originally in U.S. dollars. During the quarter ended January 31 st, 2014, a gain of $ 67,012 was recorded (a gain of $81,202 after nine month) to the Company s results compared to a gain of $3,356 for the three month period ended January 31 st, 2013 (a loss of $10,847 for nine months). Income taxes The provision for taxes is calculated on the basis of taxable income determined by applying the taxation rules in force. The income tax rates used are the same as those used in the Company s annual financial statements dated April 30 th, 2013, with activities unchanged since then. The total amount of income taxes recorded for this third quarter is $68,000 ($113,350 for nine months) compared to $36,100 for the same period last year ($109,100 for the nine months). Net global result and comprehensive earnings This third quarter ended with a net global result of $190,829 ($199,207 attributable to Clemex Technologies Inc) compared to a net global result of $21,251 for the same period last year ($17,669 attributable to Clemex Technologies Inc.). After nine months, the Company has accumulated a net loss of $17,220 (with a net profit of $1,273 attributable to Clemex Technologies inc compared to a net global 4

7 result of $78,033 for the same nine month period last year ($74,451 attributable to Clemex Technologies Inc). The new activities generated by the Clemex Europe subsidiary are now included in the Company s financial results. The Company s overall result includes other elements related to foreign exchange in the comprehensive earnings of ($1,070) for the period (and $2,539 after nine months). Interim res ults The interim results for the last eight quarters are presented in the table below: T3 T2 T1 T4 T3 T2 T1 T4 $ $ $ $ $ $ $ $ Sales 1,741,464 1,561,359 1,042,744 1,514,050 1,494, ,451 1,305,152 1,649,734 Net earnings (loss) 191,899 55,716 (267,375) 25,155 19, ,047 (44,265) 11,369 Global result 190,829 56,680 (264,876) 21,351 21, ,047 (44,265) 11,369 Net Global result attributable to Clemex Technologies inc. 199,207 55,987 (256,567) 29,219 17, ,047 (44,265) 11,369 Net earnings (loss) per share (basic & diluted) 0, Financial resources and cash position The following table summarizes the Company s cash flows Quarters Nine months January January January January $ $ $ $ Funds generated by operations before working capital items 231,028 59,192 76, ,596 Non-cash working capital 113,047 (36,707) 23,891 (222,693) Operating activities 344,075 22, ,177 (39,097) Financing activities (250,654) 60,606 (10,374) 888,355 Net investment activities (127,896) (76,140) (696,243) (177,683) Gain on foreign exchange attributable to cash and cash equivalent (1,246) 1,700 2,363 1,700 Variation in net cash and cash equivalents (35,721) 8,651 (604,077) 673,275 5

8 Operating activities generated cash flow of $344,075, compared to having generated $22,485 for the same nine month period the previous fiscal year. Non-cash working capital has increased from the same period a year earlier, due largely to fluctuations in accounts receivable and accounts payable during the third quarter. After nine months, the cash flow generated by operating activities generated $100,177 this year compared to having used $39,097 for the same period last year. This variation is mainly due to the profit generated during the third quarter and since the beginning of the year when compared to the same periods last year. Financing activities used $250,654 in the third quarter, compared to having generated $60,606 for the same period in the previous fiscal year. The variation in financing activities for this third quarter of the current fiscal year is due mostly to the reimbursement of the credit line in the amount of $ 225,000, to the issuance of a term loan in the amount of $40,513 and the repayment of $ 16,167 toward the short portion of the long term debt as when compared to the same period last year. After nine month, the financing activities have used $10,374 this fiscal year compared to having generated $888,355 for the same nine month period last year. Net investment activities used $127,896 in the third quarter, compared to $76,140 for the same period last year. After nine months, investment activities used $696,243 when compared to $177,683, for the same nine month period last year. The balance paid towards the purchase of the land in the Technoparc located in St-Bruno-de-Montarville for a total amount of $414,000 explains mainly the variation between the both periods. Some other acquisitions were made for laboratory equipment for the hematology project and replace obsolete computer equipment. The continuity of projects under development relies greatly of the ability to generate sufficient liquidity to meet the needs. In this regard, the Company has contracted two new loans since the beginning of this fiscal year, one with Investissement Quebec for an amount of $ 250,000 and a second one with Canada Economic Development for an amount of $ 95,000. These loans are being used specifically for the commercial activities of the haematology instruments. They will help finance commercial expenses such as trade shows, consultants, R&D and "demos" units over the course of the current fiscal year and the next year also. During the third quarter, $40,513 was cashed from Investissement Quebec (after nine months $12,361 were received from Economic Development of Canada and $96,710 from Investissement Quebec) Working capital and ratios Although not in accordance with IFRS, certain financial measurements, such as working capital ratios and cash ratios, are used by the Company to assess whether currents assets are sufficient to cover current liabilities. January 31 st, 2014 April 30 th, 2013 Current assets $2,806,636 $ 3,669,518 Current liabilities $1,131,183 $ 1,468,984 Inventories $ 926,861 $ 823,585 Working capital ratio Cash ratio Capital management 6

9 In capital management, the Company includes the following in the definition of capital: components of equity, long-term debt. The main objective of the Company s capital management is to ensure that it has sufficient financial resources to fund its research and development, continue its marketing efforts and support its ongoing operations, such as the development of new image analysis tools and the hematology project. Management often assesses the various financing options available to ensure that it has the necessary capital to pursue the development of future projects. Capital requirements may be met through new credit facilities or the sale of debt securities or equity. However, the ability to raise capital may be influenced by the Risks and Uncertainties set out in the annual MD&A. The Company is not subject to any requirement imposed by regulatory authorities regarding its capital. Main financial date from the consolidated balance sheets As of January 31 st, 2014 As of April 30 th, 2013 $ $ Current assets 2,806,636 3,669,518 Inventories 926, ,585 Investment 536, ,250 Current liabilities 1,131,183 1,468,984 Bank debt and operating credit 200, ,000 Long-term debt (including short term portion) 290, ,652 Shareholders equity 3,201,293 3,211,713 The notes to the principal elements in the consolidated balance sheets above are as follows: Current assets have decreased by $862,882 over the nine-month period. The balance payment towards the purchase of the land, the fluctuation of accounts receivable, inventories and investment tax credits receivable explain most of the variation since the beginning of this fiscal year. Inventories have decreased by $38,886 during the third quarter and by $103,276 since the beginning of the fiscal year. A good number of parts were purchased since the beginning of this fiscal year in preparation orders of medical instruments for haematology and contribute to the increase of the stock level since the beginning of this fiscal year. Many microscope parts and other inventory parts need to be kept in to maintain minimum inventory levels to meet client s demands. Some components in inventory have longer delivery times, and some parts are ordered in larger, more economical batches. Bank loans and operating credits decreased by $275,000 over the three-month period ending January 31 st, This decrease is related to the reimbursement of the credit line. The Company now has at its disposal an on-demand credit line of $700,000. This credit bears interest at the bank prime rate plus 1.25% and is secured by a first-rank moveable mortgage of $1,275,000 on all property ($ used as of January 31, 2014). 7

10 Long-term debt (including short portion) has increased by $40,513 in the three-month period, with the cash received from Investissement Québec s loan for the haematology project, to which we deduct $16,167$ applied to the short term portion of loans. Since the beginning of the fiscal year, the term loans (including short term portion) have increased by $172,656, less the deducted short term payments of $64,830 applied. The Company s authorized share capital, issued and outstanding, is set out below: March 17 th January 31 st April 30 th January 31 st Total number of shares issued and outstanding 30, 999, , 999, , 999,810 30,999,810 The share capital of the Company has not changed since April 30, Contractual commitments During the month of January 2014, the Company signed an agreement to extend its current lease. The lease has been extended to end on 31 December 2014, as originally it was to end on April 30, Future minimum payments under long-term leases for the next three fiscal years, mainly related to the Company s rental obligations, are as follows: Fiscal year $ 2014 (next three months) 42, , , ,069 Accounting policies and future accounting changes The unaudited interim condensed consolidated financial statements were prepared using the same accounting policies as those described in Note 3 to the consolidated financial statements for the year ended April 30 th, Furthermore, no new future accounting policy changes have been identified other than the ones described in Note 5 to the consolidated financial statements for the year ended April 30 th, The unaudited interim condensed consolidated financial statements do not include all of the notes required in the annual financial statements. Subsequent event There are no subsequent events to report. 8

11 Outlook The development of new products designed for biomedical and veterinary markets have occupied much of the Company s R&D resources during this last quarter. More specifically, the design and manufacturing of an automated loading robotic system specially designed to be sold with the haematology instruments has been an important project during the last quarter. This automated system will become a valuable component for customers who use larger volumes of pathology slides for their analysis. Other important validation steps were performed in connection with the certification process of haematology instruments to be used in hospitals and laboratories for human blood. In addition, the validation test protocol has been filed with Health Canada is currently being analyzed by the authorities. The validation tests are still ongoing as soon as they are approved, the testing protocols prescribed by Health Canada will be implanted in targeted hospital sites. Members of the R & D team are working closely with these institutions to validate the performance of instruments and tests correct any issues rose by users. The Company continues to explore new market opportunities for blood analysis applications for the field of veterinary pathology. Instruments as Hemacyto can be easily adapted to the particularities of animal blood. Given that the process of ISO certification and Health Canada approval is not required for animal blood, sales could be concluded immediately. In addition to the product development, the construction of a new head office building in 2014 remains a priority and this project is currently being re-evaluated. The necessary steps for its implementation are being reviewed to ensure that each critical step meets both current and future needs of the Company. The targeted traditional product markets remain sensitive to both currency fluctuations and economic uncertainties, which can affect the level of sales and profitability from one quarter to the next. The Company remains alert to other business opportunities that could improve its competitive position. This Management Discussion and Analysis report is dated March 17 th, For more information, please visit the SEDAR website at 9

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15 I Information Headquarters Clemex Technologies Inc., 800 Guimond, Longueuil, Quebec J4G 1T5 Canada Telephone: (450) , Fax: (450) , info@clemex.com, Subsidiaries Clemex Corp, Silver Parkway, suite 409, Fenton, MI USA Clemex Europe, Site Montesquieu Martillac, Bordeaux, France Transfer Agent Computershare, Montreal, Quebec Auditors Raymond Chabot Grant Thornton L.L.P., Chartered Accountants, Brossard, Quebec Solicitors Miller, Thompson, Pouliot, Montreal, Quebec Bankers National Bank of Canada, Montreal, Quebec Trading Symbol Trading Symbol Clemex Technologies Inc. is listed on TSX Venture Exchange under the symbol CXG.A Authorized Number of Class A Shares Unlimited Issued Class A Shares 30,999,810 Board of Directors Me Lisane Dostie, ASC (Certified Board Director) Chairperson of the Board and Corporate Secretary, President, ISA Legal inc. Normand Beauregard Director, Marketing Consultant and UQAM Adjunct Professor Clément Forget Director, President and Chief Executive Officer, Clemex Technologies Inc. Fréderic IMBS CEO RAL Diagnostics Dr. Jan Stefan Roell CEO Zwick, GmbH & Co Officers Clément Forget Director, President and Chief Executive Officer, Clemex Technologies Inc. Caroline Trudel, MBA Treasurer, Vice-President, Finances & Administration, Clemex Technologies Inc. March 19 th, 2014

16 CLEMEX Copyrights 2014

17 3 CLEMEX Financial Statements

18 The interim consolidated financial statements as of January 31 st, 2014, have been prepared by the Management of Clemex Technologies Inc., and have not been reviewed by the Company's external auditors. They should be read in conjunction with the annual financial statements dated April 30 th,

19 CLEMEX Technologies Inc. Consolidated Statements of Earnings & Other comprehensive income For the three and nine month periods ending January 31 st, (unaudited) Three months Nine months ( in canadian dollars) January 31 st, January 31 st, January 31 st, January 31 st, Notes $ $ $ $ Sales 11 1,741,464 1,494,978 4,345,567 4,370,581 Cost of Sales 699, ,039 1,904,433 1,986,709 Gross margin 1,042, ,939 2,441,134 2,383,872 Commercial & Administrative expenses 687, ,754 1,892,729 1,730,515 Research & Development expenses 146, , , ,924 Net earnings (loss) before the below items 208,259 61,918 41, ,433 Financial expenses 15,372 9,809 29,467 38,339 Loss (gain) on foreign exchange (67,012) (3,356) (81,202) 10,847 Net Earnings before income taxes 259,899 55,465 93, ,247 Income taxes 68, , ,100 Net Result 191,899 19,365 (19,759) 76,147 Net income attributable to: Shareholders of Clemex Technologies Inc. 200,042 16,180 (1,288) 72,962 Non-controlling interests (8,143) 3,185 (18,471) 3,185 Net earnings per share attributable to Clemex Technologies Inc. shareholders Basic (0.001) Diluted (0.001) Consolidated Statements of Other Comprehensive Income Net Result 191,899 $ 19,365 $ (19,759) $ 76,147 $ Gain (Loss) from foreign exchange currencies (1,070) 1,886 2,539 1,886 Global Result 190,829 21,251 (17,220) 78,033 Total Global reulst attributable to : Shareholders of Clemex Technologies Inc. 199,207 17,669 1,273 74,451 Non controlling interest (8,378) 3,582 (18,493) 3,582 See accompanying notes to the consolidated financial statements. 3

20 CLEMEX Technologies Inc. Consolidated Statement of Share Capital For the nine month periods ended January 31, (unaudited) (in canadian dollars) Other Total Attributable Non Share Contributed Other Retained elements of to shareholders of Controlling Total Capital surplus elements Earnings Global result Clemex Technologies Interests $ $ $ $ $ Balance as at May 1 st ,383, ,273 - (3,565,484) (1,918) 3,207,431 4,282 3,211,713 Net Earnings (Loss) for the period (1,288) (1,288) (18,471) (19,759) Gain on foreign exchange 2,561 2,561 (22) 2,539 Issuance of share from non subsidiary to shareholders with non controlling interests 6,800 6,800 Balance as at January 31 st ,383, ,273 - (3,566,772) 643 3,208,704 (7,411) 3,201,293 Balance as at May 1 st ,189, ,313 17,527 (3,669,154) - 1,868,246-1,868,246 Net Earnings 72,962-72,962 3,185 76,147 Net Earnings for the period Gain on foreign exchange 1,489 1, ,886 Issuance of shares 1,044,000 1,044,000 1,044,000 Issuance of shares 150, , ,000 Issuance of shares to the non controlling interest ,500 Stock option compensation 25, ,922 Balance as at January 31 st ,383, ,235 17,527 (3,596,192) 1,489 3,162,619 10,082 3,172,701 See accompanying notes to the consolidated financial statements. 4

21 Clemex Technologies inc. Consolidated Cash flow statements. For the three and nine month periods ended January 31, (unaudited) Three month periods Nine month periods ( in canadian dollars) January 31 st January 31 st January 31 st January 31 st Notes $ $ $ $ OPERATING ACTIVITIES Net loss from operations (19 759) Non-cash items : Amortization of tangible assets Amortization of intangible assets Increased value of the convertible debenture Deferred rental incentive benefit amortization (2 500) (2 500) (7 500) (7 500) Stock-based compensation Loss (gain) on disposal of capital assets Net change in non-cash working capital items (36 707) ( ) Cash flows from operating activities (39 097) INVESTING ACTIVITIES Acquisition of capital assets ( ) (76 140) ( ) ( ) Proceeds from disposal of capital assets - - Cash flows from investing activities ( ) (76 140) ( ) ( ) FINANCING ACTIVITIES Bank loan ( ) ( ) ( ) Bank loan on demand Long-term debt Issuance of shares Issuance of shares from subsidiary to non controlling interests Repayment of long-term debt (16 167) (20 894) (64 830) (62 145) Cash flows from financing activities ( ) (10 374) Gain on conversion attributable to cash and cash equivalents (1 246) Net Increase (decrease) in cash (35 721) ( ) Cash and cash equivalents beginning CASH & CASH EQUIVALENTS END $ $ $ $ See accompanying notes to the consolidated financial statements.

22 CLEMEX Technologies Inc. Consolidated Statements of Financial Position For the nine month periods ending January 31 st, January 31 st April 30 th, Notes Assets Current Cash and Cash equivalents $ $ Accounts receivable Tax credits receivable Inventories Prepaid expenses Total current assets Investment Capital Assets Intangible assets Total assets Liabilities Current Bank indebtness $ $ Accounts payable and accrued liabilities Current portion of long-term debt Total current liabilities Long-term debt Deffered lease incentive benefits Total Liabilities Shareholder's Equity Share Capital Contributed surplus Deficit ( ) ( ) Other elements of global result 643 (1 918) Total equity attributable to shareholders of Clemex Technologies Inc Non-controlling interests (7 411) Total Shareholder's Equity Total Liabilities and Shareholder's equity See accompanying notes to the consolidated financial statements.

23 Notes to the Interim Consolidated Financial Statements for period ending January 31, 2014 (unaudited) Nature of Activities Clemex Technologies, Inc.(the Company) is incorporated under the Canada Business Corporations Act, and is listed on the TSX Venture stock exchange. The company designs and manufactures Image analysis systems and software for microscopy in research and quality control laboratories. The Company's head office is located at 800 Guimond Blvd, Longueuil, Quebec. 2. Statement of Compliance The Company's interim consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They apply the same accounting policies as those described in the Company's annual financial statements for the year ended April 30 th, 2013, prepared in compliance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). These interim consolidated financial statements do not include all of the information required under the IFRS for complete financial statements. They should threrefore be read in conjunction with the Company's annual consolidated financial statements for the year ended April 30 th, The Company's annual financial statements are available on the SEDAR website at and on the Company's website at Principles of consolidation The Consolidated Financial Statements include the accounts of "CLEMEX TECHNOLOGIES INC." and its U.S.-based, wholly-owned subsidiary, "CLEMEX CORP" and the accounts of "CLEMEX EUROPE", a subsidiary located in Martillac (France) in which the company has a participation of 75%. Foreign currency translation The consolidated financial statements are presented in canadian dollars, which is also the Company's functional currency and its subsidiary, CLEMEX CORP, as the functional currency for CLEMEX EUROPE is the Euro. Transactions occuring in other currencies than the functional currency of the Company are converted to the functional currency at the date of transaction. Monetary assets and liabilities in foreign currencies are translated using the exchange rate in effect at closing dates of each period. Foreign exchange gains and losses resulting from the settlement of monetary transactions or from the remeasurement of monetary items using different exchange rates than those used initially in prior periods or in prior financial statements are recognized in the current statement of earnings in which they occured. Non monetary items evaluated at historic rates are converted using the current rates at date of transaction. At each closing date, the financial statements of an entity in an other functionnal currency than canadian will be converted using the following method: The assets and liabilities will be converted using the exchange rate the date of closing, as for elements of the statement of earnings will be converted using the average rates of the period. The gains and losses resulting from will be presented in the other elements of the comprehensive income. Accounting judgments and sources of estimation uncertainty In preparing consolidated financial statements in accordance with IFRS, management must apply judgment and make estimates and assumptions that affect the amounts recorded in the financial statements and notes to the financial statements. Judgment is commonly used in determining whether a balance or transaction should be recognized in the Interim Consolidated Financial Statements and estimates and assumptions are more commonly used in determining the measurement of recongnized transations and balances. However, judgment and estimates are often interrelated. The most significant uses of judgement, estimates and assumptions are the same as those presented in the Corporation's April 30th, 2013 audited Consolidated Financials Statements. 3. Seasonability of Interim Period Operations Given the long sales cycles, the Company s results can fluctuate from quarter to quarter, especially during summer season, when purchasing & sales activities are slowed down in the manufacturing sector. 4. Trade accounts and receivables as of January 31 st as of April 30 th $ $ Trade accounts 1,355,247 1,323,365 Commodity taxes 30,588 23,545 Other 16,321 14,907 1,402,156 1,361,817 7

24 Notes to the Interim Consolidated Financial Statements for period ending January 31, 2014 (unaudited) 5. Stocks as of January 31 st as of April 30 th Finisned goods 887, ,305 Components 39,586 33, , , Capital and Intangible Assets as of January 31 st as of April 30 th Net Value $ $ Cost 2,737,452 2,086,520 Accumulated amortization (1,556,453) (1,499,122) 1,180, ,398 Amortization of capital and intangible assets The total amount of amortization of capital assets recognized during the three and nine month periods of this and last fiscal years is as detailed below: Three month periods Nine month periods as of January 31 st as of January 31 st as of January 31 st as of January 31 st $ $ $ $ Amortization recognized to cost of sales 6,227 6,227 18,681 18,633 Amortization recognized to commercial and administration expenses 20,773 8,711 40,863 29,802 Amortization recognized to research and development expenses 14,130 8,457 42,392 34,961 41,130 23, ,936 83, Bank Debt and Bank Loans The Company has at its disposal a revolving operating line of credit of $700,000 ( $200,000 used on January 31, 2014). This credit bears interest at the bank prime rate plus 1.25% and is secured by a first rank moveable mortgage of $1,275,000 on the universality of goods. 8. Accounts Payables and Accrued Liabilities as of January 31 st as of April 30 th $ $ Suppliers 609, ,943 Accrued liabilities 184, ,615 Salaries and fringe benefits 44,829 94,828 Deffered revenues & client deposits - 11, ,077 1,073,992 8

25 Notes to the Interim Consolidated Financial Statements for period ending January 31, 2014 (unaudited) 9. Long-term Debt Capital lease contract for microscopes for total amount of $ (47996 euros) payable in monthly payments of 1333 euros, principal and interest maturing in June Obligations under capital leases, secured by machining equipment at 6.75% interest payable in monthly instalments of $3,051 (US) principal and interest due in October Term debt, securred by automotive equipment with a net book value of $17,952, carrying interest at 3.90%, with monthly payments of $634 principal and interest, maturing in December Term loan from Investissement Québec, bearing interest at the variable rate plus 4.65% to a maximum of $ 250,000, payable in monthly installments of $ 4,166.67, due October 2019 Term loand from Canada Economic Development for the hemacyto project for a maximum of $ 95,000, payable once the project is completed or no later than 31 December 2014, by 48 equal installments $1,979, commencing 24 months after completion. Term loan from Investissement Québec for a maximum of $225,000, secured by a $225,000 principal mortgage and an additional $45,000 mortgage on the universality of moveable property, and a guarantee from a shareholder in the amount of $22,500, at creditor's rate plus 3.50%, (6.50%) payable in monthly installments of $3,750, plus interest, and maturing in October 2016 as of January 31 st as of April 30 th $ $ 53, ,396 13,439 18,667 96,710-12, , , , ,652 Short-term portion of long-term debt (92,106) (69,992) Long-term debt 198, , Share Capital AUTHORIZED The Company's share capital consists of an unlimited number of ordinary Class "A" shares. ISSUED AND OUTSTANDING # of shares $ Balance as of April 30 th 2013 and January 31 st, ,999,810 6,383,560 Other transactions related to financial instruments such as convertible debenture are included in other elements of capital. The contributed surplus includes expenses related to stock-based compensation. Retained earnings includes the cumulated net earnings and losses of the current and previous fiscal years. Outstanding shares as of January 31 st as of April 30 th The average weighted number of outstanding shares is as follows: Weighted average number of shares outstanding 30,999,810 30,102,823 Dilutive effet of granted stock option - 96,635 Weighted average number of shares outstanding (diluted) 30,999,810 30,199,458 9

26 Notes to the Interim Consolidated Financial Statements for period ending January 31, 2014 (unaudited) 11. Segmented Information The sales are broken in geographic area as follows. The sales attributed to each geographic area are based on the location of the customer. Sales for the three and nine month periods ending January 31 st 2014 and 2013 are as follows: Three month periods Nine month periods as of January 31 st as of January 31 st as of January 31 st as of January 31 st $ $ $ $ Canada 392, , ,193 1,035,640 United States of America 951, ,216 2,073,052 1,746,597 Europe 108, , , ,221 Other countries 288, ,552 1,111,857 1,056,123 1,741,464 1,494,978 4,345,567 4,370, Capital Management The Company manages its capital through various measures, including maintaining a debt ratio not exceeding 2.00 and maintaining a minimum tangible net worth of $1,000,000 as required by the financial institution. The tangible net worth consists of the equity component. as of January 31 st as of April Debt ratio Tangible net worth $ 3,201,293 $ 3,209,349 There has been no change in the Company's strategy related to capital management over the current period. 13. Rental commitments In May 2009, the lease was renegotiated to replace the original lease that would have expired on October 31 st, This new lease will be in effect until April 30 th, 2014, and has rental incentive advantages worth $50,000 which consists of benefits in respect of leasehold improvements in the amount of $833 per month which are credited to deferred incentive benefits. 14. Additional information concerning cash flows The changes in non-cash working capital items are detailed as follows: Three month periods Nine month periods as of January 31 st as of January 31 st as of January 31 st as of January 31 st $ $ $ $ Accounts receivable (97,163) 143,712 (40,337) 312,131 Investment tax credits receivable 226,567 (83,628) 361,445 (239,573) Inventories 38,886 (43,136) (103,276) 17,362 Prepaid expenses 26,751 (12,568) 40,973 (15,347) Accounts payable (81,994) (41,087) (234,914) (297,266) 113,047 (36,707) 23,891 (222,693) 15. Related party transactions The related parties of the Company include the board members and key management personnel. There are no other related transactions with associated companies. Key management personnel include the president and vice-presidents. Compensation for members of the board and key management personnel include the following: Three month periods Nine month periods as of January 31 st as of January 31 st as of January 31 st as of January 31 st $ $ $ $ Wages and salaries 145, , , ,832 R&D fees paid to a management member 28,000-77,000 - Other related costs 2,203 2,203 6,974 6,471 Total compensation 175, , , ,303 Key personnel and board members have not exercised stock options during the presented periods. 10

27 I Information Headquarters Clemex Technologies Inc., 800 Guimond, Longueuil, Quebec J4G 1T5 Canada Telephone: (450) , Fax: (450) , info@clemex.com, Subsidiaries Clemex Corp, Silver Parkway, suite 409, Fenton, MI USA Clemex Europe, Site Montesquieu Martillac, Bordeaux, France Transfer Agent Computershare, Montreal, Quebec Auditors Raymond Chabot Grant Thornton L.L.P., Chartered Accountants, Brossard, Quebec Solicitors Miller, Thompson, Pouliot, Montreal, Quebec Bankers National Bank of Canada, Montreal, Quebec Trading Symbol Trading Symbol Clemex Technologies Inc. is listed on TSX Venture Exchange under the symbol CXG.A Authorized Number of Class A Shares Unlimited Issued Class A Shares 30,999,810 Board of Directors Me Lisane Dostie, ASC (Certified Board Director) Chairperson of the Board and Corporate Secretary, President, ISA Legal inc. Normand Beauregard Director, Marketing Consultant and UQAM Adjunct Professor Clément Forget Director, President and Chief Executive Officer, Clemex Technologies Inc. Fréderic IMBS CEO RAL Diagnostics Dr. Jan Stefan Roell CEO Zwick, GmbH & Co Officers Clément Forget Director, President and Chief Executive Officer, Clemex Technologies Inc. Caroline Trudel, MBA Treasurer, Vice-President, Finances & Administration, Clemex Technologies Inc. March 19 th,

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