Victhom second quarter revenues up 30.4%

Aug 26 2011

Victhom Human Bionics Inc. (("Victhom") (TSXV: VHB)) today reported its second quarter 2011 financial results.

Mr. Normand Rivard, President and CEO of Victhom, said: "The positive second quarter financial results generated from the significant gain on disposal of our participation in Neurostream represents a clear confirmation of the value creation achieved by our Neurobionix business over the last few years.  Our significantly strengthened balance sheet and reduced cost base, places us in a strong position to leverage the royalty potential from the leading-edge products developed by both of our divisions, the Neurostep^® and the Power Knee. The fact that two global market leaders in the prosthetic and orthotic field, Otto Bock for the Neurostep^® and Ossur for the Power Knee, are fully committed to commercialize these products gives us great confidence in our ability to generate value for our shareholders".

On June 30, 2011, the Company sold its 44.4% participation in Neurostream to a related party to its joint venture partner Otto Bock Healthcare for an aggregate consideration of $10 million in cash as well as the payment of royalties on the future net sales of the Neurostep^® System and eventual monetization proceeds of the sleep apnea and epilepsy technologies of Neurostream.

Second Quarter Results

For the quarter ended on June 30, 2011, the Company recorded revenues of $36,252 compared with $27,791 for the same period in 2010, representing an increase of $8,461 or 30.4%. The revenues for the six-month period ended on June 30, 2011 were generated from royalties on the Power Knee for an amount of $51,180 ($27,791 in 2010). There was $2,482 of revenues generated from other sources in 2010 while there was none for the same period in 2011.

At this time, the Company does not expect to engage in additional and new R&D activities in the near future.

For the quarter ended on June 30, 2011, tax credits amounted to $102,404 compared with $1,126,214 for the same period in 2010, representing a decrease of $1,023,810 or 90.9%. Tax credits amounted to $199,835 for the six-month period ended on June 30, 2011, compared with $1,183,370 for the same period in 2010, representing a decrease of $983,535 or 83.1%. The decrease is mainly explained by amended tax credit claims from previous years for which the Company received positive confirmation and payment from tax authorities in May 2010. The Company had not recognized these investment tax credits in previous quarters since the government ruling on the nature of the claim was uncertain.

G&A expenses, for the three-month period ended on June 30, 2011, amounted to $221,945 compared with $611,415 for the same period in 2010, representing a decrease of $389,470 or 63.7%. For the six-month period ended on June 30, 2011, G&A expenses amounted to $444,925 compared with $842,291 for the same period in 2010, representing a decrease of $397,366 or 47.2%. The decrease in G&A expenses is mainly due to non-recurring professional fees related to amended investment tax credits, received during the second quarter of 2010.

For the three-month period ended on June 30, 2011, the consolidated net income amounted to $9,890,006 compared with a net loss of $1,473,970 for the same period in 2010, representing an increase in net income of $11,363,976 or 771.0%. The consolidated net income amounted to $8,769,414 for the six-month period ended on June 30, 2011, compared with a net loss of $3,147,312 for the same period in 2010, representing an increase in net income of $11,916,726 or 378.6%. The increase in net income is mainly explained by the gain on disposal of our interest in joint venture, lower G&A expenses and a favorable exchange rate variation on preferred shares, which was partially offset by lower investment tax credits.

Shareholders' equity amounted to $5,051,776 on June 30, 2011, compared with a shareholders' deficiency of $3,720,264 on December 31, 2010. Total assets amounted to $11,893,193 on June 30, 2011, compared with $8,130,753 on December 31, 2010.

Financial Situation

As of June 30, 2011, the Company had $5,692,122 in cash and short-term investments. For the six-month period ended on June 30, 2011, the net increase in cash was $4,146,411 compared with a net decrease of $938,027 for the same period in 2010. During the first six months of 2011, the cash was mainly provided by the disposal of our interest in Neurostream joint venture, which was partially offset by cash used for the repayment of the demand loan.

As of August 22, 2011, the Company had $2,583,427 in cash and short-term investments, representing a decrease in cash of $3,108,695 since June 30, 2011. The decrease is mainly due to the redemption, on July 19, 2011, of 4,685,798 Series A preferred shares for a total redemption payment of US$ 3,092,626.

On August 22, 2011, the number of common shares outstanding totaled 18,649,613 while 226,696 options were outstanding under the stock option plan. The outstanding options are exercisable at a weighted average exercise price of $5.83 per share. On August 22, 2011, the number of preferred shares outstanding totaled 13,259,263 for a redemption amount of US$ 8,751,114, which can be converted into common shares, at any time and from time to time, at the holder's option on a 1-for-1 basis.