FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For November 7, 2007
NORSAT INTERNATIONAL INC.
(Registrant's Name)
Suite 110 - 4020 Viking Way
Richmond, British Columbia
Canada V6V 2N2
(Address of principal executive offices)
Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F
Form 20-F
X
Form 40-F
Indicate by check mark whether the Registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes
No
X
If 'Yes' is marked, indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b).
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Norsat International Inc.
(Registrant)
Date: November 7, 2007
By: Signed "James Sharpe"
James Sharpe
Interim Chief Financial Officer
NORSAT ANNOUNCES THIRD QUARTER FINANCIAL RESULTS
Vancouver, British Columbia – November 7, 2007 – Norsat International Inc. (“Norsat”) (TSX: NII and OTC BB: NSATF), a leading provider of intelligent satellite solutions, announces financial results for the three- and nine-month period ended September 30, 2007. All results are in Canadian dollars unless otherwise stated.
Q3 2007 Summary
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Revenue increased to $4.0 million, up 26% from $3.1 million in Q3 2006
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Gross margin was 50%, compared to 23% for Q3 2006
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Net earnings were $0.2 million or $0.003 per share, representing Norsat’s fourth consecutive quarter of profitability, compared to net loss of $2.0 million, or $0.04 per share in Q3 2006
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Received U.S. patent for GLOBETrekker design
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Expanded Satellite System military customer base to a total of seven worldwide
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Unveiled the Norsat Rover, a single backpack portable satellite terminal
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Launched the Rapid Application Development Environment variant of GLOBETrekker, an ultra-portable satellite terminal which includes an environmentally-controlled baseband enclosure that is compatible with most commercial and specialized modems
“In the third quarter, we demonstrated notable financial and operational progress,” said Dr. Amiee Chan, president and CEO, Norsat International Inc. “We saw a significant improvement in our Satellite Systems segment, as revenue of $1.5 million was more than double compared to Q3 2006. In addition, as a result of new contract wins and additional sales into our existing customer base, we saw an increase in sales of higher-margin services.”
Dr. Chan continued: “Norsat is already a leader in the microwave product market, and we believe there continues to be significant opportunity for growth in the portable satellite systems industry. As we work to enhance our product offerings, expand into new market verticals and broaden our geographic reach, we believe we will be well positioned to extend our market leadership to span both our core business segments.”
Financial Review
Norsat’s revenue for Q3 2007 grew 26% to $4.0 million, from $3.1 million in Q3 2006, primarily driven by the Company’s increased penetration of the portable satellite systems market. Revenue from Satellite Systems grew to $1.5 million, from $0.7 million in Q3 2006, while revenue from Microwave Products was $2.5 million, in line with revenue of $2.5 million for the same period last year. Revenue for the nine months ended September 30, 2007 increased to $12.9 million from $9.8 million in 2006.
The U.S. military year end is September 30. As such, this can lead to Norsat receiving orders in the final days of Q3, which are not reflected until subsequent quarters. Norsat is entering Q4 with contracts totaling approximately $2.6 million, which reflects, in part, U.S. military orders the Company received within the final week of Q3.
Norsat’s overall gross margin improved to 50% of revenue, up from 23% of revenue in Q3 2006.
For Satellite Systems, gross margin improved to 51% in Q3 2007, compared to 5% last year, predominantly as a result of a provision for obsolete inventory and work-in-progress adjustments for customer ordersthat negatively impacted the Company’s gross margin in Q3 2006. Gross margins for Microwave Products increased to 49% in Q3 2007, compared to 28% last year, which reflects a one-time sale that was made at a lower margin in Q3 2006. Gross margin for the nine months ended September 30, 2007 increased to 54% from 37% for the same period in 2006.
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Operating expenses for the three months ended September 30, 2007, decreased 41% to $1.6 million from $2.7 million for the same period last year. The year-over-year reduction reflects Norsat management’s continued commitment to maintaining tight cost controls. Operating expenses for the first nine months of 2007 were $5.0 million, compared to $8.2 million in 2006.
For Q3, net earnings were $0.2 million, or $0.003 per share, compared to a net loss of $2.0 million or $0.04 per share during the same period last year. Net income for the nine months ended September 30, 2007, was $1.3 million, or $0.03 per share, compared to a net loss of $4.9 million or $0.10 per share for the same period last year.
During the quarter, Norsat generated $0.2 million in cash from operations, compared to ($0.5) million in Q3 2006.
As at September 30, 2007, Norsat’s cash balance was $0.7 million, a decrease of $1.1 million from $1.8 million as at December 31, 2006. In Q2, Norsat eliminated its entire debt position by making the final payment, in cash, on its $1.0 million short-term debt. As a result of the reduction in debt obligations, Norsat’s working capital improved to $4.3 million as at September 30, 2007, from $2.3 million as at December 31, 2006.
Subsequent Event
In October, Norsat was awarded a non-repayable $0.2 million government contribution through Canada’s National Research Council– Industrial Research Assistance Program (NRC-IRAP). The program provides non-repayable contributions to Canadian small- to medium-sized businesses that are interested in using technology to commercialize services, products and processes to grow their presence in Canadian and international markets. Norsat intends to use the proceeds for research and development initiatives targeted at expanding its portable satellite systems suite of offerings.
A full set of financial statements and MD&A for Norsat is available atwww.norsat.com and will be available atwww.sedar.com.
Notice of Conference Call and Webcast
Norsat will host a conference call on November 7, 2007 at 5:00 p.m. Eastern Standard Time. To access the conference call by telephone, dial 647-427-3420 or 1-888-300-0053. The conference call reference number is 22810826. Please connect approximately fifteen minutes prior to the beginning of the call to ensure participation.
About Norsat International Inc.
Norsat International In c. designs, engineers and markets intelligent satellite solutions for high-speed data transmission. Additional information is available at www.norsat.com. Further information is available through email at investor@norsat.com or by phone, 1-604-821-2808.
For further information, contact:
Dr. Amiee Chan
Kristen Dickson
Tel: 604 821-2808
The Equicom Group
Email:achan@norsat.com
Investor Relations
Tel: 416-815-0700 x 273
Email: kdickson@equicomgroup.com
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Forward Looking Statements
Statements in this news release relating to matters that are not historical fact are forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to, general economic conditions, changes in technology, reliance on third party manufacturing, managing rapid growth, global sales risks, limited intellectual property protection and other risks and uncertainties described in Norsat’s public filings with securities regulatory authorities.
This information should be read in conjunction with Norsat’s unaudited interim consolidated financial statements and related notes included therein for the nine months ended September 30, 2007, and the Management Discussion and Analysis for the nine months ended September 30, 2007. All of the company’s financial statements are prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP). Additional information may be found at www.norsat.com.
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Norsat International Inc.
Consolidated Balance Sheets
(Unaudited - Expressed in Canadian Dollars)
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| September 30, |
| December 31, |
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| 2007 |
| 2006 |
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Assets |
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Current assets: |
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| Cash and cash equivalents | $ | 734,231 | $ | 1,793,187 |
| Short-term investments |
| 37,000 |
| 69,500 |
| Accounts receivable |
| 1,978,678 |
| 2,799,554 |
| Inventories |
| 3,270,300 |
| 3,456,988 |
| Prepaid expenses and other |
| 685,131 |
| 372,982 |
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| 6,705,340 |
| 8,492,211 |
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Property and equipment |
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| 1,170,140 |
| 1,314,986 |
Deferred finance costs |
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| - |
| 13,561 |
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| $ | 7,875,480 | $ | 9,820,758 |
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Liabilities and Shareholders' Equity |
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Current liabilities: |
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| Accounts payable | $ | 686,012 | $ | 1,666,250 |
| Accrued liabilities |
| 1,431,636 |
| 1,848,632 |
| Deferred revenue |
| 260,412 |
| 467,731 |
| Convertible debt |
| - |
| 2,255,252 |
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| 2,378,060 |
| 6,237,865 |
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Shareholders' equity: |
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| Share capital |
| 45,242,762 |
| 44,854,902 |
| Contributed surplus |
| 5,133,221 |
| 2,708,991 |
| Equity component of long-term debt |
| - |
| 2,190,779 |
| Deficit |
| (44,878,563) |
| (46,171,779) |
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| 5,497,420 |
| 3,582,893 |
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| $ | 7,875,480 | $ | 9,820,758 |
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Consolidated Statements of Operations, Comprehensive Earnings and Deficit
(Unaudited - Expressed in Canadian Dollars)
Three months ended Septmeber 30, | Nine months ended September 30, | |||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||
Sales | $ | 3,954,575 | $ | 3,149,138 | $ | 12,889,375 | $ | 9,832,414 | ||||
Cost of sales | 1,994,373 | 2,416,899 | 5,925,584 | 6,211,689 | ||||||||
1,960,202 | 732,239 | 6,963,791 | 3,620,725 | |||||||||
Expenses: | ||||||||||||
Selling, general and administrative | 1,238,898 | 2,011,082 | 4,082,231 | 6,233,094 | ||||||||
Product development | 236,706 | 502,289 | 683,549 | 1,562,770 | ||||||||
Amortization | 94,830 | 145,582 | 254,762 | 429,837 | ||||||||
1,570,434 | 2,658,953 | 5,020,542 | 8,225,701 | |||||||||
Earnings (loss) from operations before | ||||||||||||
other expenses and income tax | $ | 389,768 | $ | (1,926,714 | ) | $ | 1,943,250 | $ | (4,604,976 | ) | ||
Other expenses | 215,014 | 103,321 | 647,883 | 273,541 | ||||||||
Earnings (loss) from operations | ||||||||||||
before income taxes | $ | 174,754 | $ | (2,030,035 | ) | $ | 1,295,366 | $ | (4,878,517 | ) | ||
Income tax expense | 77 | 22 | 2,150 | 1,844 | ||||||||
Net earnings (loss) and comprehensive | ||||||||||||
earnings (loss) | $ | 174,677 | $ | (2,030,057 | ) | $ | 1,293,216 | $ | (4,880,361 | ) | ||
Deficit, beginning of period | -45,053,240 | -44,674,009 | -46,171,779 | -41,823,705 | ||||||||
Deficit, end of period | $ | (44,878,563 | ) | $ | (46,704,066 | ) | $ | (44,878,563 | ) | $ | (46,704,066 | ) |
Net earnings (loss) per common share - | ||||||||||||
basic | $ | 0.003 | $ | (0.04 | ) | $ | 0.03 | $ | (0.10 | ) | ||
Net earnings (loss) per common share - | ||||||||||||
diluted | $ | 0.003 | $ | (0.04 | ) | $ | 0.02 | $ | (0.10 | ) |
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Consolidated Statements of Cash Flows
(Unaudited - Expressed in Canadian Dollars)
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| Three months ended September 30, | Nine months ended September 30, | ||||||
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| 2007 |
| 2006 |
| 2007 |
| 2006 |
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Cash provided by (used in): |
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Operations: |
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| Net earnings (loss) | $ | 174,677 | $ | (2,030,057) | $ | 1,293,216 | $ | (4,880,361) | |
| Items not involving cash: |
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| Amortization |
| 94,830 |
| 145,582 |
| 254,762 |
| 429,837 |
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| Interest accreted on long-term |
| - |
| 64,121 |
| 68,291 |
| 176,655 |
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| Foreign exchange gain |
| (1,845) |
| (12,893) |
| (34,112) |
| (204,134) |
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| Discount on ESOP |
| - |
| - |
| 79,947 |
| - |
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| Stock-based compensation |
| 9,247 |
| 30,751 |
| 64,435 |
| 97,260 |
| Changes in non-cash working capital |
| (53,862) |
| 1,293,616 |
| (909,138) |
| (637,297) | |
| Cash generated (used) in operations |
| 223,047 |
| (508,880) |
| 817,401 |
| (5,018,040) | |
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Investments: |
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| Purchase of property and equipment |
| (31,937) |
| (618,749) |
| (109,917) |
| (1,074,278) | |
| Redemption of short-term investments |
| - |
| - |
| 32,500 |
| - | |
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| (31,937) |
| (618,749) |
| (77,417) |
| (1,074,278) |
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Financing: |
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| Convertible debt issuance (repayment) |
| - |
| 1,117,693 |
| (2,309,200) |
| 1,117,693 | |
| Short term loan repayment |
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| - |
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| Proceeds on exercise of warrants |
| 2,813 |
| - |
| 2,813 |
| - | |
| Proceeds on exercise of stock options |
| 7,200 |
| - |
| 7,200 |
| 132,062 | |
| Proceeds from private placement |
| - |
| - |
| 466,916 |
| 3,622,091 | |
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| 10,013 |
| 1,117,693 |
| (1,832,271) |
| 4,871,846 |
Effect of change in exchange rates on cash |
| 1,845 |
| 665 |
| 33,330 |
| (30,065) | ||
Increase (decrease) in cash and cash equivalents |
| 202,968 |
| (9,271) |
| (1,058,956) |
| (1,250,537) | ||
Cash and cash equivalents, beginning of period |
| 531,263 |
| 548,591 |
| 1,793,187 |
| 1,789,857 | ||
Cash and cash equivalents, end of period | $ | 734,231 | $ | 539,320 | $ | 734,231 | $ | 539,320 | ||
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