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QIS Update #21 2012 - August 21st 2012


QIS Update #21 - August 20, 2012  

Included in this update:

  • Audiotech Healthcare reports profitable third quarter financial results
  • Dalmac Energy to release its fiscal 2012 annual results and host a conference call on Aug. 28
  • Virtutone Networks to conduct a non-brokered private placement

Please feel free to email us anytime at or call us at (250) 377-1182. We look forward to your comments, questions, and feedback.


Audiotech Healthcare Corporation (AUD:TSX-V)
Current Price: $0.315 (coverage commenced Nov. 8/04 - $0.14)


Audiotech is pleased to report its financial results for the three and nine month periods ended June 30, 2012.


Total revenues for the third quarter ended June 30, 2012, were $1,402,215, a decrease of 2.3% as compared to the same quarter in fiscal 2011, but still represented the third strongest quarterly sales in the company’s history. Revenues from the Canadian operations slipped 4.1% from $1,024,966 during the third quarter of fiscal 2011 to $982,759 in the current quarter. Sales from the U.S. clinics during the third quarter were $419,456, an increase of 2.1% over the same quarter in the prior fiscal year. Total revenues for the 9 months ended June 30, 2012, were $4,240,716, an increase of 5.1% over the $4,036,682 in sales posted during the first 9 months of the prior fiscal year. For the first three quarters of fiscal 2012, Canadian and U.S. sales rose 3.8% and 8.5%, respectively. The variations in revenues during the quarter and for the 9 month period ended June 30, 2012, were within the expected range that would be anticipated with typical month to month variations in marketing activities and success, sales mix, and currency fluctuations.


Gross margins of 71.6% during the third quarter continued to exceed the long-term historical average and were slightly ahead of expectations for the quarter. This compares to 67.9% during the comparable quarter last year, 70.1% in fiscal 2011, and the long-term (5 year) average of 68.9%. While more favorable than expected, the change in gross margins experienced during the quarter was within the expected range that would be anticipated with typical day-to-day minor variations in the mix of product sold as well as due to the maturing of some of the clinics opened during the past couple of years. Over the past 5 years, the company has generally achieved steadily increasing gross margins as a result of the negotiation of bulk purchasing agreements with major hearing aid manufacturers. The greater number of new clinics operating during fiscal 2008 contributed to the temporary decline in margins in fiscal 2008. Management expects gross margins to range from roughly 69% to 71% during the remainder of fiscal 2012.


Direct clinic costs, which include selling and advertising costs, rent and clinic overheads, clinic labour costs, and amortization of audiology equipment, increased by 9.4% during the third quarter of fiscal 2012 as compared to the same quarter a year ago, due primarily to a 26.2% increase in selling expenses to support advertising initiatives undertaken during the quarter. Salaries and benefits increased 7.6% and amortization by 27.2%. Rent utilities and clinic overheads remained relatively unchanged, increasing just 0.5%. Direct clinic costs as a percentage of sales increased from 48.0% to 53.8% during the third quarter. Similarly, for the first 9 months of fiscal 2012, direct clinic costs increased by 10.8%, with similar percentage changes in each expense category.


General and administrative expenses totaled $125,269 for the quarter, a decrease of 5.5% from the $132,514 reported during the third quarter of fiscal 2011. The decrease on a year-over-year basis was primarily due to a decrease in interest costs and professional fees, offset by an increase in general administrative costs and salaries. G&A costs as a percentage of sales were 8.9% during the quarter, down from 9.2% in the comparative quarter a year ago. For the first 9 months of fiscal 2012, general and administrative expenses rose 4.2% and accounted for 10.4% of sales.


Income before taxes for the quarter ended June 30, 2012, totaled $125,073, a decrease of 18.5%. For the first 3 quarters, income before taxes declined 2.0% from $445,083 in fiscal 2011 to $436,290 in fiscal 2012.


The company reported after-tax net income of $93,524 or $0.0070 per share (basic) as compared to $102,304 or $0.0077 per share (basic) in the same quarter a year earlier, a decrease of 8.6%. Net income for the first three quarters of fiscal 2012 totaled $314,925 or $0.0237 per share (basic), a decrease of 9.2% over the comparative period in fiscal 2011.


As at June 30, 2012, Audiotech had a cash balance of $1,049,038 and working capital totaling $1,060,535. Management is confident that the company has sufficient working capital to meet its short and long-term needs, growth requirements, and accelerated debt repayment plans for the foreseeable future.


Audiotech has continued with its aggressive debt reduction program in fiscal 2012, reducing long-term debt and long-term capital leases by a total of $320,209 during the 9 months ended June 30, 2012. In light of the company’s increasing cash balances and operating cash flows, management has been accelerating the repayment of its long-term debt. Management plans to continue its program of accelerated debt repayment.


(As at June 30, 2012)
Current Assets $ 1,691,530
Total Assets 2,462,715
Current Liabilities 630,995
Long-Term Debt 848,376
Shareholders' Equity 973,058


  3 months ended Jun. 30 9 months ended Jun. 30
  2012 2011 2012 2011
Sales $1,402,215 $1,435,942 $4,240,716 $4,036,682
Gross Margin 1,004,229 975,112 3,028,243 2,810,085
Direct Clinic Costs 753,887 689,105 2,153,022 1,943,784
Income before Tax 125,073 153,493 436,290 445,083
Net Income 93,524 102,304 314,925 346,654
per share 0.007 0.008 0.024 0.026


QIS Capital Comments:


Another solid quarter of profitability for Audiotech Healthcare. At first glance it appears that the quarter shows a declining trend, however, the third quarter last year was a record period for the company and resulted in the decrease. Overall, Q3 results were in line with historical averages.


We are currently waiting for the independent evaluation and fairness opinion being prepared  pursuant to the going private transaction announced on July 24th. Once this is received, the company will need to send a circular out to all registered shareholders and will call a special shareholder meeting. The proposed “going private” transaction would pay $0.35 per share, representing a 70% premium to the trading price prior to the announcement and a current premium of over 11% to the last traded price.


Dalmac Energy Inc. (DAL:TSX-V)
Current Price: $0.47 (coverage commenced Nov 15/11 - $0.37)


Dalmac Q4 Earnings Release and Conference Call


EDMONTON, August 20, 2012 - Dalmac Energy Inc. ("Dalmac") (TSXV: DAL) announced today that it intends to release results for the fiscal fourth quarter and year ended April 30, 2012 before market opening on Tuesday August 28, 2012.


A conference call to discuss the results will be held the same day at 1:30 pm EST, 11:30am MST.

To participate in the conference call please dial, 416-644-3414 Local in Toronto, or Toll free, 1-800-814-4859 and request the Dalmac Energy Conference.


QIS Capital Comments:


We would encourage our subscribers to participate in the conference call next Tuesday following the release of annual financial results. This has been a great year for Dalmac and management continues to forecast record results going forward. The company is presently trading at just 3.6 times annualized 9 month results.


Virtutone Networks Inc. (VFX:TSX-V)
Current Price: $0.24 (coverage commenced Sep. 9/11 - $0.10)


Virtutone Networks Inc. has recently announced that it will be conducting a non-brokered private placement of up to 1,500,000 common shares of the company at a price of $0.20 per share for aggregate proceeds of up to $300,000, subject to the receipt of all applicable regulatory approvals. This private placement is expected to close on or around August 31, 2012.


The common shares issued pursuant to the private placement will be subject to a hold period of four months and one day from the closing date as well as other restrictions with respect to sales from control positions.


The proceeds of the private placement will be used for general working capital and corporate purposes.


QIS Capital Comments:


As evidenced in the latest press release with Virtutone amassing 44 million minutes per month of new wholesale services since April, the company requires a small amount of additional financing for working capital to fund its expansion. This financing should be completed very quickly. Management continues to move forward aggressively and should have further announcements in this regard in the near future. Anyone wanting further information on the placement can contact QIS Capital at 250-377-1182.


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Disclaimer: This article is for informational purposes only. The information contained within this article should not be construed as offering investment advice. Those seeking direct investment advice should consult a qualified, registered, investment professional. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The company profiled assumes no liability for the information presented. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock. The author(s) owns directly or indirectly 659,500 shares of Audiotech Healthcare Corporation, 8,500 shares and 200,000 options of Dalmac Energy Inc. and 794,000 shares of Virtutone Networks Inc. QIS Capital may have a financial relationship with these companies and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright © 2003 - 2012 QIS Capital Corporation.





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