Eurocontrol Reports Third Quarter 2016 Results and Provides Update

Eurocontrol Technics Group Inc. (TSX VENTURE:EUO)(OTCQB:EUCTF) (“Eurocontrol” or the “Company”), a Canadian public company specializing in the acquisition, development and commercialization of innovative test and measurement technologies for the authentication, verification and certification markets, announces that it has filed its interim financial statements and Management’s Discussion and Analysis (“MD&A”) for the third quarter ended September 30, 2016.
The third quarter results reflect a 9% increase in fiscal year revenue, excluding discontinued operations, to $947,484 compared to $868,799 for the nine month period ended September 30, 2016. The Company recognized EBITDA of $14,335,515 ($702,562 as at September 30, 2015) and a gain on the sale of its former subsidiary of $16,484,172 ($Nil in 2015) resulting in net income of $12,542,059 for the nine months ending September 30, 2016 (net income of $223,749 in 2015). Included below is a summary table outlining earnings for the second quarter of 2016 compared to the corresponding 2015 period which is followed by a description of recent developments. Subsequent to the end of the second quarter, the Company received the first of the semi-annual guaranteed earn-out payments of $750,000 from SICPA SA.
On January 4, 2016, the Company closed the sale of its wholly owned subsidiary, Global Fluids International (GFI) S.A. (“GFI”) to SICPA Finance SA (“SICPA”), a subsidiary of SICPA SA, each a privately owned company based in Switzerland, in exchange for cash and post-closing earn-out payments and certain additional payments. In accordance with International Financial Reporting Standards (“IFRS”), the third quarter 2016 financial statements and MD&A are presented on an adjusted basis to include discontinued operations. For a reconciliation of discontinued operations, readers should refer to MD&A sections “Adjusted Revenue and Profit from Continuing Operations” and “Reconciliation of IFRS to Adjusted Results”.
Operations Update
Sales in the first nine months of 2016 increased 9% to $947,484 over 2015. In the nine months of 2016, Eurocontrol invested $1,050,989 in research and development to update existing Xenemetrix product lines, to develop new products and solutions for field applications and to enhance its manufacturing facilities and its quality control processes. This investment has been made to ensure that Xenemetrix maintains its position as a leader in the ED-XRF technology field and can continue to meet the high manufacturing and systems integration standards that its customers have come to expect. In addition to its core customer base, Xenemetrix has a long term supply and support agreement with SICPA to supply ED-XRF equipment to support Petromark™ fuel marking technology which relies on Xenemetrix ED-XRF technology to detect Petromark™ fuel markers. It is anticipated that sales for the balance of 2016 will remain consistent with 2015 revenue numbers with an increase anticipated in 2017 as SICPA gains market acceptance with its clients for the Petromark™ technology, the updated product line is rolled out and the expansion into the field of precision agriculture solidifies. In March 2016, Xenemetrix announced that it had entered into a Memorandum of Understanding with Netafim, an Israeli company that is the global leader in drip and micro-irrigation solutions for sustainable agricultural productivity, to develop a unique and innovative testing system utilizing Xenemetrix’s ED-XRF technology for farmers and the greater farming community. The equipment solution and its calibration to the precision agriculture business has exceeded Netafim’s test parameters and finalization of the method that have been collaboratively developed are underway. Significant progress has been made towards implementing new methods of measuring Nitrogen involving both hardware and software. Xenemetrix intends to initiate the process of commercialization that would provide an integrated solution for almond growers early in the second quarter of 2017. In respect of the Memorandum of Understanding that was announced in May 2016 between Eurocontrol and DigiFlex Ltd., a private Israeli company that holds patents in inks and printing, to form a joint venture between Xenemetrix and DigiFlex that will focus on developing technology to address security inks to provide a security solution to governments and product brands protection to industry, DigiFlex and Xenemetrix have successfully completed feasibility tests and Eurocontrol has conducted a market survey and business plan to establish the business opportunity. Collaboration on the technology is continuing and further updates will be provided as progress occurs. Xenemetrix remains focused on the development of new applications for its ED-XRF and establishing new marketing and distribution agreements in various regions.
In the nine months ended September 30, 2016, Eurocontrol invested $1,460,665 in research and development in XwinSys. Earlier in 2016, XwinSys announced the finalized integration of its NMT (Noise-reduced Multilayer Thin-film Measurement System) technology (featured in Solid State Technology magazine) to respond to the evolving metrology and inspection needs of the semiconductor industry due to the advent of 3D stacking structures for continued miniaturization of devices at an affordable cost. In May 2016, XwinSys was granted a US patent on this unique multi-mode technology system that meets both fast in-line and in-depth metrology challenges without interrupting process flow. The XwinSys solution overcomes limitations of current technology that is used to measure thin and ultra-thin films, which can be a single layer of atoms of a specific material, and are a critical component in the construction of advanced semiconductor devices. With the XwinSys solution now finalized and demos, including the unveiling of the technology at SEMICON West this past summer where significant interest was generated, the XwinSys team continues to make progress towards commercialization of this disruptive technology that replaces the need for off-line analytical tasks.
Bruce Rowlands, Chairman and CEO stated, “In addition to a modest increase in sales revenue from continued operations for the third quarter of 2015, we continued our R&D investments in both XwinSys and Xenemetrix positioning both companies for market expansion in 2017. As well, our development work with both Netafim and DigiFlex in our new initiatives in precision agriculture and chemical authentication, respectively have made excellent progress.”
Third Quarter 2016 Financial and Operating Highlights *

• Investment in R&D increased by 133% to $2,511,654
• Working Capital of $14, 204,111 compared to $4,001,621 in December 31, 2015, a 255% increase
• The Company has no debt, compared to $1,378,731 in 2015
• Gross profit of $362,571 compared to $352,198 (does not include discontinued operations), an increase of 3%
• Recognized EBITDA of $14,335,515 compared to $702,562 in 2015
• Recognized income of $12,542,059 compared to $223,749 for the 2016 nine month period

				Three Months Ended September 30,						Nine Months Ended September 30,
				2016			2015			2016			2015
				$			$			$			$
Revenue:
	– from continuing operations			250,631			275,491			947,484			868,799
	– from discontinued operations			–			1,734,405			–			4,790,086
Total revenue				250,631			2,009,896			947,484			5,658,885
Cost of sales:
	– from continuing operations
		Cost of sales – direct production costs		(51,715	)		(99,936	)		(451,868	)		(383,556	)
		Cost of sales – amortization and other non cash items		(44,348	)		(44,348	)		(133,045	)		(133,045	)
				(96,063	)		(144,284	)		(584,913	)		(516,601	)
	– from discontinued operations
		Cost of sales – direct production costs		–			(520,455	)		–			(1,544,475	)
		Cost of sales – amortization and other non cash items		–			(68,953	)		–			(206,858	)
				–			(589,408	)		–			(1,751,333	)
Gross profit – continuing operations				154,568			131,207			362,571			352,198
Gross profit – discontinued operations				–			1,144,997			–			3,038,753
Expenses – continuing operations				(1,665,927	)		(1,046,951	)		(5,367,280	)		(2,699,165	)
Expenses – discontinued operations				–			(343,878	)		–			(687,362	)
Other (expense) income – continuing operations				221,999			(88,095	)		754,596			188,803
Other (expense) income – discontinued operations				–			(9,529	)		–			49,213
Income tax recovery – continuing operations				100,000			–			308,000			–
Income tax expense – discontinued operations				–			(3,462	)		–			(18,691	)
Gain on sale of subsidiary – discontinued operations				–			–			16,484,172			–
Net income (loss) – continuing operations				(1,189,360	)		(1,003,839	)		(3,942,113	)		(2,158,164	)
Net income (loss) – discontinued operations				–			788,128			16,484,172			2,381,913
Net income (loss)				(1,189,360	)		(215,711	)		12,542,059			223,749
Basic loss per share
	– from continuing operations			(0.01	)		(0.01	)		(0.04	)		(0.02	)
	– from discontinued operations			0.00			0.01			0.18			0.03
	– net income (loss)			(0.01	)		(0.00	)		0.14			0.00
Diluted loss per share
	– from continuing operations			(0.01	)		(0.01	)		(0.04	)		(0.02	)
	– from discontinued operations			0.00			0.01			0.17			0.03
	– net income (loss)			(0.01	)		(0.00	)		0.13			0.00
EBITDA				(1,463,945	)		(58,671	)		14,335,515			702,562
EBIT				(1,522,763	)		(195,291	)		14,163,541			292,616

About Eurocontrol Technics Group Inc.
Eurocontrol is a TSX Venture and OTCQB traded company that specializes in the acquisition, development and commercialization of innovative test and measurement technologies for the authentication, verification and certification markets. Eurocontrol has two wholly owned subsidiaries, Xenemetrix Ltd. and XwinSys Technology Development Ltd. and an agreement with SICPA S.A. for semi-annual earn-out payments of 5% (minimum $9 million over six years) on revenues generated from the oil and gas marking and monitoring field relating to the sale of its former subsidiary Global Fluids International (GFI) S.A. Xenemetrix is a leading designer, manufacturer and marketer of ED-XRF systems, a technology that is the most accurate and economic method for determining the chemical composition of many types of materials, including the analysis of petroleum oils and fuel. Xenemetrix has an exclusive long-term supply, maintenance and support agreement with SICPA/GFI to supply SICPA/GFI with Xenemetrix products and services related to the oil and gas marking and monitoring field. XwinSys has developed a patented, fully automated metrology system for the semiconductor industry that combines 2D and 3D image processing technology with Xenemetrix’s ED-XRF technology.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.
Forward-Looking Statements:
This press release contains forward-looking statements. More particularly, this press release contains statements. Forward-looking statements are frequently characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, anticipate”, “estimate”, “may”, “will”, “would”, “potential”, “proposed” and other similar words, or statements that certain events or conditions “may” or “will” occur. The forward-looking statements are based on certain key expectations and assumptions made by Eurocontrol. Although Eurocontrol believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Eurocontrol can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. In addition to other risks that may affect the forward-looking statements in this press release are those set out in Eurocontrol’s management discussion and analysis of the financial condition and results of operations for the quarter ended September 30, 2016 and the year ended December 31, 2015 which are available on the Corporation’s profile at www.sedar.com. The forward-looking statements contained in this press release are made as of the date hereof and Eurocontrol undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.