Mr. Bruce Rowlands reports

EUROCONTROL REPORTS THIRD QUARTER 2015 RESULTS

Eurocontrol Technics Group Inc. has filed its financial statements and management's discussion and analysis for its third quarter ending Sept. 30, 2015.

On Nov. 6, 2015, the company entered into a purchase agreement to sell 100 per cent of its wholly owned subsidiary, Global Fluids International SA (GFI) to SICPA Finance SA, a subsidiary of SICPA, each a privately owned company based in Switzerland, in exchange for cash and postclosing earn-out payments and certain additional payments as further described below. The completion of the transactions contemplated by the purchase agreement is subject to the prior satisfaction of a number of conditions, including the approval of the sale of GFI by the company's shareholders, which approval will be sought at a special meeting of shareholders that has been scheduled for Dec. 18, 2015, and the final approval of the TSX Venture Exchange. However, notwithstanding these conditions, in accordance with international financial reporting standards, the financial statements and MD&A are presented on an adjusted basis to include discontinued operations.

Bruce Rowlands, chairman and chief executive officer of the company, stated: "Our third quarter results are in line with our expectations as we head towards the special meeting of shareholders on Dec. 18, 2015, for the approval of the sale of GFI. The transaction builds on the foundation constructed by Eurocontrol over the past 10 years, and the long-term supply and support agreement to be entered into by Xenemetrix and GFI is expected to provide Eurocontrol with the resources necessary to grow the businesses of its remaining subsidiaries and also allow the company to continue to have significant exposure to the fuel marking market, where we began, through guaranteed minimum earn-out payments."

Key financial highlights for the nine months ended Sept. 30, 2015, including discontinued operations:

• Adjusted consolidated earnings before interest, taxes, depreciation and amortization, including discontinued operations, increased by $299,634 or 74 per cent to $702,652.
• Adjusted consolidated revenues, including discontinued operations, increased by 25 per cent to $5,658,885 as compared with $4,502,508 in the prior year. This increase is mainly due to increased sales of fuel marker plus the impact of the depreciation of the Canadian dollars versus the U.S. currency.
• Adjusted cash flow from operating activities, including discontinued operations, increased to $300,367 from $40,892 in the prior year.
• Adjusted cash flow from investing activities, including discontinued operations, increased to $219,108 from negative $38,753 in the prior year.
• Investment in R&D (research and development) increased by 128 per cent to $1,076,330 toward developing EDXRF technology and automated 2-D and 3-D image processing technologies for the semiconductor and related microelectronics industries.

  
                                FINANCIAL HIGHLIGHTS   
 
                         Three months ended Sept. 30,  Nine months ended Sept. 30,
                                 2015           2014          2015           2014
Revenue
Continuing operations        $275,491       $419,271      $868,799     $1,192,135
Discontinued operations     1,734,405      1,193,066     4,790,086      3,310,373
Total revenue               2,009,896      1,612,337     5,658,885      4,502,508
Cost of sales
Continuing operations
Cost of sales -- direct 
production costs              (99,936)      (168,189)     (383,556)      (556,872)
Cost of sales -- 
amortization and other 
non-cash items                (44,348)       (44,348)     (133,045)      (133,045)
                             (144,284)      (212,537)     (516,601)      (689,917)
Discontinued operations
Cost of sales -- direct 
production costs             (520,455)      (453,176)   (1,544,475)    (1,328,855)
Cost of sales -- 
amortization and other 
non-cash items                (68,953)       (68,953)     (206,858)      (206,858)
                             (589,408)      (522,129)   (1,751,333)    (1,535,713)
Gross profit -- continuing 
operations                    131,207        206,734       352,198        502,218
Gross profit -- 
discontinued operations     1,144,997        670,937     3,038,753      1,774,660
Expenses -- continuing 
operations                 (1,046,951)      (712,668)   (2,699,165)    (1,853,103)
Expenses -- discontinued 
operations                   (343,878)      (201,411)     (687,362)      (495,629)
Other (expense) income 
-- continuing operations      (88,095)       (46,317)      188,803        (37,086)
Other (expense) income -- 
discontinued operations        (9,529)        84,675        49,213         41,201
Income tax expense -- 
discontinued operations        (3,462)        (4,029)      (18,691)       (16,280)
Net income (loss) -- 
continuing operations      (1,003,839)      (552,251)   (2,158,164)    (1,387,971)
Net income (loss) -- 
discontinued operations       788,128        550,172     2,381,913      1,303,952
Net income (loss)            (215,711)        (2,079)      223,749        (84,019)
Basic and fully diluted 
(loss) per share   
Continuing operations           (0.01)         (0.01)        (0.02)         (0.02)
Discontinued operations          0.01           0.01          0.03           0.01
Net income (loss)               (0.00)         (0.00)         0.00          (0.00)
EBITDA                        (58,671)       153,600       702,562        402,928
EBIT                         (195,291)        26,034       292,616          7,013

Strategic positioning

The company has been focused on implementing a strategic plan designed to increase the company's value and create opportunities for growth. This strategic plan involves completing the transactions contemplated by the purchase agreement, which are intended to: result in a reorganization of the company's operations by narrowing the numbers of divisions in which it operates and allow the company to focus its resources and capital on its remaining businesses and pursue higher growth strategies; strengthen the company's financial position to execute these strategies; and enhance shareholder value by monetizing assets. Further details are included below under discontinued operations.

Areas of focus going forward

Upon closing of the sale transaction, the company's remaining operations will be through its two remaining wholly owned subsidiaries, Xenemetrix Ltd. and XwinSys Technology Development Ltd. The company intends to focus on growing Xenemetrix's existing business through Xenemetrix's continuing support of GFI's business, on an exclusive basis, in the field of oil and gas marking and monitoring, and through its continuing activities relating to the design, development, production and marketing of ED-XRF systems in the marine sector, and in other potential markets. In addition, the company plans to continue its development of its current XwinSys business, dedicated to the design, manufacture and marketing of novel solutions based on ED-XRF combined with automated 3-D vision for the semiconductor and related industries. This strategy is intended to achieve increased sales in Xenemetrix's current markets and generate new sales opportunities for both Xenemetrix and XwinSys, all with a view to producing strong free cash flows and returns on capital, with moderate levels of sustained capital investment.

In particular, going forward, Eurocontrol intends to focus its business growth efforts in the following areas: material analysis on mobile platforms; monitoring solutions for marine vessels and geological mapping; ED-XRF agricultural applications in precision farming; and ED-XRF/2-D/3-D semiconductor and related microelectronics industry applications. Management of the company believes that there will be increased demand for ED-XRF technology, and automated 2-D and 3-D image-processing technologies in these areas, and, as a result, new opportunities for the company to capitalize on this demand.

The proceeds of the disposition of GFI are expected to be used in connection with the above-mentioned business objectives, for pursuing and developing new opportunities for growth within the authentication and certification markets, and for other general corporate purposes.

Discontinued operations

On Nov. 6, 2015, the company entered into the purchase agreement, pursuant to which the company agreed to sell 100 per cent of its wholly owned subsidiary, GFI, to SICPA in exchange for cash and postclosing earn-out and additional payments. As a key part of the transaction, the company, through its wholly owned subsidiary, Xenemetrix, has agreed to enter into a strategic exclusive long-term supply, maintenance and support agreement, pursuant to which Xenemetrix will continue to supply to GFI, Xenemetrix's products and services currently used by GFI in its business, in each case, on an exclusive basis within the oil and gas marking and monitoring field of GFI's current operations. The consideration payable to the company for the sale of GFI is as follows:

• Cash consideration payable to the company by SICPA on closing of $16-million (less the $250,000 deposit received by the company and $286,000 in transaction payments, and assuming that, on closing, GFI has positive working capital of $1-million) subject to a working capital adjustment;
• Postclosing earn-out payments equal to 5 per cent of the net revenues earned by GFI from contracts entered into by it following the execution of the purchase agreement and during the period ending six years from the closing of the transaction, with a minimum guaranteed of $1.5-million per year for the six-year earn-out period (total payment of at least $9-million);
• Additional postclosing payments equal to 5 per cent of the net revenues earned by GFI from contracts signed during the fourth through sixth years following closing paid until the third anniversary of such contracts;
• The settlement of intercompany loan amounts owing by Eurocontrol to GFI.

The transaction is expected to close between Dec. 18, 2015, and Jan. 4, 2016. In accordance with international financial reporting standards, assets and liabilities related to GFI have been classified as held for sale, and are measured at the lower of their carrying amount and fair value less costs to sell in the consolidated statements of financial position. The operating results for the three- and nine-month periods ended Sept. 30, 2015, and 2014 related to GFI have been presented separately as the loss from discontinued operations in the consolidated statements of income (loss) and comprehensive income (loss).

Outlook

With the anticipated sale of GFI to SICPA, the company has identified a number of acquisition opportunities that it plans to perform due diligence on. Additionally, investments in R&D programs within Xenemetrix and Xwinsys, the company's two remaining wholly owned subsidiaries, will be a priority. The growth of Eurocontrol through acquisitions and integration of complementary businesses is an important component of the company's business strategy. Eurocontrol continues to seek opportunities to acquire or invest in businesses, products and technologies that are complementary and would provide for expansion in the areas of authentication, verification and certification.

We seek Safe Harbor.