CLEMEX Management Discussion and Analysis

Transcription

1 1 CLEMEX Management Discussion and Analysis

2 Longueuil, Canada Bordeaux, France

3 Interim Management Discussion and Analysis For the quarter ended July 31 st, 2013 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 July 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 July 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 before September 19 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 July 31 st ( in Canadian dollars) Three months July 31 st 2013 July 31 st 2012 Sales 1,042,744 1,305,152 Cost of sales 520, ,286 Gross margin 522, ,866 Commercial & administrative expenses 601, ,851 Research & development expenses 208, ,791 Financial expenses 3,308 19,681 Loss (gain) on foreign currency transactions (25,127) (9,692) Net Result before income taxes (265,025) (18,765) Income taxes 2,350 25,500 Net result (267,375) (44,265) Gain on foreign exchange 2,499 - GLOBAL RESULT (264,876) (44,265) Global Result attributable to Clemex Technologies Inc. (253,921) (44,265) Sales Sales reached $1,042,744 for the first quarter ended July 31 st, 2013, compared to $1,305,152 for the same period ended July 31 st, In Canada, there was a slight increase of 3.5% rising to $354,804 this first quarter from $342,842 last year. The Leica products have contributed to this slight increase this first quarter when compared to last year. In the United States, sales were down by 38% from $505,366 last year to $314,144 this year. In total, sales were down by 21.2% in North America this first quarter compared to the same period last year. 2

5 In Europe, sales have increased from $65,935 to 93,454$, an increase of 41.7% for this first quarter when compared to last year. Sales in other countries abroad decreased by 28.3%, from $391,009 to $280,342 explaining why total sales abroad have declined by 18.27% for this first quarter when compared to last year. Various economic and political factors may affect the sales from one quarter to the next. We found sales to be slower than usual in the past three months. We are seeing a drop in energy levels in all market segments in North America and abroad. Long cycles and long delivery times for some components may also affect sales levels from one quarter to the next. Gross margin Gross profit was 50.1% for the first quarter, ended July 31 st, 2013, compared to 50.9% for the three months ended July 31 st, Sales of Leica products in Canada being slightly higher this quarter has impacted the gross margin, as the gross margin on these products is lower than for other products sold by the Company. These other 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 $601,474 for the first quarter ended July 31 st, 2013, compared to $523,851 for the quarter ended July 31 st, Since the beginning of the new year, several commercial activities took place for the launch of the product line of medical instruments. The Company participated in two major trade shows in North America for the biomedical industry and one most important in Europe for the traditional sectors. 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 only 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 quarter, R&D expenses totalled $208,019, compared to $149,791 for the same period last year. The variation is primarily related to an increase in salaries, professional fees paid and lower income tax payable credited to R&D expenses as compared to the same period last year. The work carried out by the R&D team for the first three months of the year are mainly concentrated in the launch demos 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. 3

6 Financial expenses Financial expenses represent interest paid on loans and bank charges. The following financial expenses were incurred. Quarter July 31 st, July 31 st, Interest and bank charges 9,235 7,995 Interest income (9,441) - Interest on the long-term debt 3,514 11,686 3,308 19,681 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 July 31 st, 2013, a gain of $25,127 was recorded in the Company s results compared to a gain of $9,692 for the three month period ended July 31 st, 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 for this first quarter is $2,350 compared to $25,500 for the same period last year. Net loss and comprehensive loss This first quarter ended with a net loss of $ (net loss of $256,567 attributable de Clemex Technologies Inc) compared to a net loss of $44,265 for the same period last year. 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 loss of $2,646 for the period. Interim results The interim results for the last eight quarters are presented in the table below: 4

7 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Sales 1, 042,744 1, 514,050 1, 494,978 1, 570,451 1, 305,152 1, 649,734 1, 634,138 1, 414,314 Net earnings (loss) (267,375) 25,155 19, ,047 (44,265) 11,369 66, , 004 Global result (264,876) 21,351 21, ,047 (44,265) 11,369 66,341 12,004 Net Result attributable to Clemex Technologies (256,567) 29,219 17, ,047 (44,265) 11,369 66,341 12,004 Net earnings (loss) per share (basic and diluted) (0.008) (0.001) Financial resources and cash position The following table summarizes the Company s cash flows. (in Canadian dollars) Quarters July 31 st July 31 s Funds generated by operations before working capital items (239,444) (14,248) Non-cash working capital 358,185 (144,525) Operating activities 118,741 (158,773) Financing activities (30,198) 848,356 Net investment activities (128,770) (44,794) Gain on foreign exchange attributable To cash and cash equivalents 2,467 - Variation in Net cash and Cash Equivalents (37,760) 644,789 Operating activities generated a cash flow of $118,741, compared to having used $158,773 for the same period in 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. 5

8 Financing activities used $30,198 in the first quarter, compared to having generated $848,356 for the same period in the previous fiscal year. The variation in financing activities for this first quarter of the current fiscal year is is due mostly to issuance of a term loan in the amount of $63,591 and the repayment of $ 25,589 toward long term debt as when compared to the same period last year when a private placement had been concluded cashing an amount of $1,044,000. Net investment activities used $128,770 in the first quarter, compared to $44,794 for the same period last year. The main acquisitions involved new demo equipment to be used by the subsidiary in Europe for a total amount of $63,591. Some other acquisitions were made for laboratory equipment and to replace obsolete computer equipment. The continuity of projects under development relies greatly of the ability to generate sufficient liquidity to meet needs. In this regard, the Company has contracted two new loans during first quarter, the first one with Investissement Québec for an amount of $ 250,000 and the second one with Canada Economic Development for an amount of $ 95,000. These loans are to be 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. 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. July 31 st, 2013 April 30 th, 2013 Current assets $2,882,914 $ 3,669,518 Current liabilities $1,025,440 $ 1,468,984 Inventories $ 880,987 $ 823,585 Working capital ratio Cash ratio Capital management 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. 6

9 Main financial date from the consolidated balance sheets As of July 31 st, 2013 As of April 30 th, 2013 Current assets 2,882,914 3,669,518 Inventories 880, ,585 Investment 536, ,250 Current liabilities 1,025,440 1,468,984 Bank debt and operating credit 250, ,000 Long-term debt (including short term portion) ,652 Shareholders equity 6,383,560 6,383,560 The notes to the principal elements in the consolidated balance sheets above are as follows: Current assets have decreased by $786,604 over the three-month period. The fluctuation of accounts receivable, inventories and investment tax credits receivable explain most of the variation between the two periods. Inventories increased by $57,402 over the three-month period. Microscope parts that must be kept in inventory to meet client demand since the beginning of the Leica distribution agreement and the wide range of equipment sold require that minimum inventory levels be maintained. Some components in inventory have longer delivery times, and some parts are ordered in larger, more economical batches. Bank debt and operating credits decreased by $75,000 over the three-month period ending July 31 st, This decrease is related to reimbursement of the $75,000 line of credit. 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. Long-term debt has increased by $38,002 in the three-month period, due to a new term loan of $63,591 less payments of $25,589 made towards the short-term portion of the total debt. The Company s authorized share capital, issued and outstanding, is set out below: September 19 th July 31 st, April 30 th, July 31 st, Total number of shares issued and outstanding 30, 999, , 999, , 102,823 29,799,810 The share capital of the Company has not changed since April 30,

10 Contractual commitments 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 nine months) 128, , , ,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 On 6 September 2013, the Company signed the purchase commitment to acquire a parcel of land located in the Technopark St-Bruno-de-Montarville for a total of $ 449,914. This land is acquired in order to build the new headquarters in Outlook The first demo units of the Hematology medical instruments are still undergoing tests at specific health establishments All testing is going as planned, and members of the R & D team working closely with these establishments to correct any issues raised by users. The "education" version of the software, specifically designed for college students and university students was recently implemented at a college establishment and is currently being tested. This version will allow the users to better understand the characteristics of the Clemex HémaCyto. It will eventually be used by the education field. Other imaging applications with even more efficient technologies are also being developed by the R&D team to improve the instrument s performance and competitiveness. In addition to software development part, the R&D is working to complete all the necessary documentation to obtain the license approval from Health Canada. The Company has entered into agreements for term loans with Canada Economic Development and Investment Quebec during this first quarter. These loans, with favourable payment options will help keep the pace with business development in the biomedical field, in line with the business plan. The targeted 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 September 19 th, For more information, please visit the SEDAR website at 8

11 Information Headquarters Clemex Technologies Inc., 800 Guimond, Longueuil, Quebec J4G 1T5 Canada Telephone: (450) , Fax: (450) , 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 Anna Ruhland Project Manager Zwick, GmbH & Co Officers Clément Forget Director, President and Chief Executive Officer, Clemex Technologies Inc. Monique Dallaire, ing., MBA Chief of Operations Clemex Technologies Inc. Caroline Trudel, MBA Treasurer, Vice-President, Finances & Administration, Clemex Technologies Inc. September 25 th, 2013

12 CLEMEX Copyrights 2013

13 1 CLEMEX Financial Statements

14 The interim consolidated financial statements as of July 31 st, 2013, 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,

15 CLEMEX Technologies Inc. Consolidated Statements of Earnings & Other comprehensive income For the three month periods ending July 31 st, (unaudited) Three months ( in canadian dollars) July 31 st, July 31 st, Notes Sales 11 1,042,744 1,305,152 Cost of Sales 520, ,286 Gross margin 522, ,866 Commercial & Administrative expenses 601, ,851 Research & Development expenses 208, ,791 Net earnings (loss) before the below items (286,844) (8,776) Financial expenses 3,308 19,681 Loss (gain) on foreign exchange (25,127) (9,692) Net Earnings before income taxes (265,025) (18,765) Income taxes 2,350 25,500 Net Result (267,375) (44,265) Net income attributable to: Shareholders of Clemex Technologies Inc. (256,567) (44,265) Non-controlling interests (10,808) - Net earnings per share attributable to Clemex Technologies Inc. shareholders Basic (0.008) (0.001) Diluted (0.008) (0.001) Consolidated Statements of Other Comprehensive Income Net Result (267,375) (44,265) Gain from foreign exchange 2,499 - Global Result (264,876) (44,265) Total Global result attributable to: Shareholders of Clemex Technologies Inc. (253,921) (44,265) Non controlling interest (10,808) - See accompanying notes to the consolidated financial statements. 2

16 CLEMEX Technologies Inc. Consolidated Statements of Shareholders' Equity For the three month periods ending July 31 st (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 (256,567) (256,567) (10,808) (267,375) Gain on foreign exchange 2,646 2,646 (147) 2,499 Issuance of share from non subsidiary to shareholders with non controlling interests 6,800 6,800 Balance as at July 31 st ,383, ,273 - (3,822,051) 728 2,953, ,953,637 Balance as at May 1 st ,189, ,313 17,527 (3,669,154) - 1,868,246-1,868,246 Net Earnings (Loss) (44,265) - (44,265) - (44,265) Issuance of shares 1,044,000 1,044,000 1,044,000 Balance as at July 31 st ,233, ,313 17,527 (3,713,419) - 2,867,981-2,867,981 See accompanying notes to the consolidated financial statements. 3

17 Consolidated Cash Flow Statements For the three month periods ending July 31 st (unaudited) Three Months ( in canadian dollars) July 31 st July 31 st Notes OPERATING ACTIVITIES Net loss from operations (267,375) (44,265) Non-cash items : Amortization 30,403 29,600 Increased value of the convertible debenture - 2,509 Deferred rental incentive benefit amortization (2,500) (2,500) Stock-based compensation - - Loss (gain) on disposal of capital assets (239,444) (14,248) Net change in non-cash working capital items ,185 (144,525) Cash flows from operating activities 118,741 (158,773) INVESTING ACTIVITIES Acquisition of capital assets (128,770) (44,794) Proceeds from disposal of capital assets Cash flows from investing activities (128,770) (44,794) FINANCING ACTIVITIES Bank loan (75,000) (175,000) Bank loan on demand - 1,044,000 Long-term debt 63,591 - Issuance of shares - - Issuance of shares from subsidiary to non controlling interests 6,800 Repayment of long-term debt (25,589) (20,644) Cash flows from financing activities (30,198) 848,356 Gain on conversion attributable to cash and cash equivalents 2,467 - NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (37,760) 644,789 CASH AND CASH EQUIVALENTS, BEGINNING 798, ,583 CASH AND CASH EQUIVALENTS, END 760, ,372 See accompanying notes to the consolidated financial statements. 4

18 CLEMEX Technologies Inc. Consolidated Statements of Financial Position (unaudited) (in canadian dollars) July 31 st April 30 th, Assets Current Notes Cash and Cash equivalents 760,851 $ 798,611 $ Accounts receivable 4 797,719 1,361,817 Tax credits receivable 407, ,478 Inventories 5 880, ,585 Prepaid expenses 35,364 58,027 Total current assets 2,882,914 3,669,518 Investment 536, ,250 Capital Assets 6 685, ,398 Intangible assets 6 10,191 10,191 Total assets 4,115,125 4,803,357 Liabilities Current Bank indebtness 250,000 $ 325,000 $ Accounts payable and accrued liabilities 8 683,334 1,073,992 Current portion of long-term debt 9 92,106 69,992 Total current liabilities 1,025,440 1,468,984 Long-term debt 9 128, ,660 Deffered lease incentive benefits 7,500 10,000 Total Liabilities 1,161,488 1,591,644 Shareholder's Equity Share Capital 10 6,383,560 6,383,560 Contributed surplus 391, ,273 Non controlling interest (3,822,051) 0 Other elements of global result 728 (1,918) Total equity attributable to shareholders of Clemex Technologies Inc. 2,953,510 6,772,915 Non-controlling interests 127 4,282 Total Shareholder's Equity 2,953,637 6,777,197 Total Liabilities and Shareholder's equity 4,115,125 8,368,841 See accompanying notes to the consolidated financial statements. 5

19 Notes to the Interim Consolidated Financial Statements for period ending July 31, 2013 (unaudited) 1. 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 fuctional 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 recognised 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 judgment, estimates and assumptions are the same as those presented in the Corporation's April 30 th, 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 July 31 st as of April 30 th Trade accounts 760,402 1,323,365 Commodity taxes 23,787 23,545 Other 13,530 14, ,719 1,361,817 6

20 Notes to the Interim Consolidated Financial Statements for period ending July 31, 2013 (unaudited) 5. Stocks as of July 31 st as of April 30 th Finished goods 841, ,305 Components 39,582 33, , , Capital and Intangible Assets as of July 31 st as of April 30 th Net Value Cost 2,213,712 2,086,520 Accumulated amortization (1,527,942) (1,499,122) 685, ,398 Amortization of capital and intangible assets The total amount of amortization of capital assets recognized during the three month periods of this and last fiscal years is as detailed below: Three month periods as of July 31 st as of July 31 st Amortization recognized to cost of sales 6,227 6,180 Amortization recognized to commercial and administration expenses 10,045 11,300 Amortization recognized to research and development expenses 14,131 12,120 30,403 29,600 No amortization expense had been recognized for the patent this first quarter as the total amount would have been less than 300$. 7. Bank Debt and Bank Loans The Company has at its disposal a revolving operating line of credit 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 the universality of goods. 8. Accounts Payables and Accrued Liabilities as of July 31 st as of April 30 th Suppliers 504, ,943 Accrued liabilities 154, ,615 Salaries and fringe benefits 23,960 94,828 Deffered revenues & client deposits 0 11, ,334 1,073,992 7

21 Notes to the Interim Consolidated Financial Statements for period ending July 31, 2013 (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, in US dollars ($34,845 US), secured by machining equipment with a net book value of $109,412 at 6.75% interest payable in monthly instalments of $3,051 (3,051 US) principal and interest due in November 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 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 July 31 st as of April 30 th , ,251 17,396 16,941 18, , , , ,652 Short-term portion of long-term debt (92,106) (69,992) Long-term debt 128, , 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 and July 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 July 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 0 96,635 Weighted average number of shares outstanding (diluted) 30,999,810 30,199,458 8

22 Notes to the Interim Consolidated Financial Statements for period ending July 31, 2013 (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 month periods ending July 31 st 2013 and 2012 are as follows: Three month periods as of July 31 st as of July 31 st Canada 354, ,842 United States of America 314, ,366 Europe 93,454 65,935 Other countries 280, ,009 1,042,744 1,305, 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 July 31 st as of April Debt ratio Tangible net worth $ 2,953,637 $ 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 as of July 31 st as of July 31 st Accounts receivable 564, ,125 Investment tax credits receivable 219,485 (76,672) Inventories (57,403) (7,459) Prepaid expenses 22,663 (16,801) Accounts payable (390,658) (204,718) 358,185 (144,525) 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 no 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 as of July 31 st as of July 31 st Wages and salaries 136, ,997 R&D fees paid to a management member 25,000 Other related costs 2,202 2,065 Total compensation 163, ,062 Key personnel and board members have not exercised stock options during the presented periods. 9

23 Information Headquarters Clemex Technologies Inc., 800 Guimond, Longueuil, Quebec J4G 1T5 Canada Telephone: (450) , Fax: (450) , 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 Anna Ruhland Project Manager Zwick, GmbH & Co Officers Clément Forget Director, President and Chief Executive Officer, Clemex Technologies Inc. Monique Dallaire, ing., MBA Chief of Operations Clemex Technologies Inc. Caroline Trudel, MBA Treasurer, Vice-President, Finances & Administration, Clemex Technologies Inc. September 25 th, 2013

24 CLEMEX Copyrights 2013