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Artaflex Reports 2012 Results

TORONTO, ONTARIO -- (Marketwire) -- 11/29/12 -- Artaflex Inc. (TSX VENTURE:ATF) ("Artaflex" or the " Company"), a specialist at delivering integrated product solutions and support to the global technology and electronics industry, today reports audited financial results for the year ended July 31, 2012 and unaudited financial results for the three months ended July 31, 2012.

Artaflex reports in U.S. dollars and all numbers below are expressed in thousands of U.S. dollars, except per share information and gross margin percentages.

The financial statements for the year ended July 31, 2012, including required comparative information, have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

Further information will be available on the Company's website at www.artaflex.com and the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com on November 29, 2012.

2012 Financial Highlights:                                                  

--  Sales increased by $2,084 or 11.0% in 2012 compared to 2011, 
--  Gross margin decreased to 12.9% compared to 24.8% for the same period
    last year, 
--  Net loss and comprehensive loss for period of $4,361 compared to net
    income of $937 for the same period last year, 
--  Adjusted EBITDA loss of $2,208 compared to an Adjusted EBITDA gain of
    $2,244 for the same period last year, 
--  Loss of $0.33 per share compared to net income of $0.08 per share for
    the same period last year, 
--  Net cash provided by operating activities of $990 during the year
    compared to net cash used by operating activities of $632 for the same
    period last year.

Q4 2012 Financial Highlights:                                               

--  Sales increased by $2,786 or 70.6% compared to the same quarter last
--  Gross margin decreased to 3.6% compared to 14.7% for the same quarter
    last year, 
--  Net loss of $2,942 compared to net loss of $341 for the same quarter
    last year, 
--  Adjusted EBITDA loss of $1,471 compared to an Adjusted EBITDA loss of
    $345 for the same quarter last year, 
--  Loss of $0.19 per share compared to loss of $0.03 per share for the same
    quarter last year, 
--  Net cash provided by operating activities of $558 compared to cash used
    in operating activities of $154 for the same quarter last year.

Sales increased 11.0% to $20,983 in 2012 compared to $18,899 in 2011. For the year 2011, sales to the Company's four largest customers represented an aggregate of 57% (2011 - 77%) of the Company's total sales. Sales attributed to the purchase of Adeptron accounted for an estimated increase of $9,371. The stand-alone Artaflex sales declined by approximately $6,000 due primarily to the loss of a large customer in 2012. Sales for the fourth quarter of 2012 of $6,733 increased 70.6% from $3,947 for the same period in 2011, primarily due to the acquisition of Adeptron in 2012.

Gross profit for the year decreased $1,996 or 42.5% to $2,700 compared to $4,696 for the year 2011. Gross profit, expressed as a percentage of sales for the year 2012, declined to 12.9% compared to 24.8% for 2011. The decrease in gross profit for the year is primarily due to the acquisition of Adeptron which historically has lower gross profit percentages and due to duplicate costs during the period of integration of the two Markham facilities. Management has and continues in its efforts to improve gross profits through cost reduction and effectively utilizing the synergies from the Adeptron acquisition. Gross profit for the fourth quarter of 2012 decreased $340, to $242 compared with $582 in the same period of 2011. Gross profit as a percentage of sales for the fourth quarter of 2012 was 3.6% compared to 14.7% for the same period in 2011. The decrease in gross profit and percentage in the quarter is largely due to the acquisition of Adeptron which historically had a lower gross profit and the incurrence of duplicate costs during the period of integration of the two Markham facilities.

Selling, general and administrative ("SG&A") expense for the year 2012 increased 129.2% to $5,918 compared to $2,582 for the year 2011. The increase was primarily due to one-time legal and professional costs associated with the acquisition of Adeptron and the attempt at another acquisition which subsequently was terminated. In addition, Artaflex incurred significant professional fees in order to switch from a private company to a public entity. SG&A expenses as a percentage of sales was 28.2% up from 13.7% in 2011. SG&A expenses increased $1,252 to $2,357 in the fourth quarter compared to $1,105 for the same period in 2011. The increase in SG&A expense for the fourth quarter was largely due to the one-time costs associated with the Adeptron acquisition and the terminated acquisition. Overall the percentage of SG&A as a percentage of sales for the fourth quarter of 2012 was 35.0% up from 28.0% for the same period in 2011.

The net loss and comprehensive loss in 2012 was $4,361 compared to a net income of $937 in 2011. Net loss for the fourth quarter 2012 was $2,942 compared to a net loss of $341 for the same period of 2011.

Adjusted EBITDA loss was $2,208 in 2012 compared to adjusted EBITDA income of $2,244 in 2011. During the fourth quarter of 2012 adjusted EBITDA loss was $1,471 compared with a loss of $345 in the same period last year.

EBITDA means earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA means earnings before interest, taxes, depreciation, amortization, stock-based compensation and restructuring costs. EBITDA and Adjusted EBITDA are not recognized measures under IFRS. However, management believes that EBITDA and Adjusted EBITDA as herein defined are useful supplemental measures to net income (loss), as it provides investors with an indication of cash earnings prior to debt service, capital expenditures, income taxes and other non-recurring and non-cash items. Readers should be cautioned, however, that EBITDA and Adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with generally accepted accounting principles as an indicator of the Company's performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. The Company's method of calculating EBITDA and Adjusted EBITDA may differ from the methods by which other companies calculate EBITDA and Adjusted EBITDA and, accordingly, the EBITDA and Adjusted EBITDA used herein may not be comparable to measures used by other companies.

About Artaflex:

Artaflex is a specialist at delivering integrated product solutions and support to the global technology and electronics industry. As a leading global provider of complete Electronics Manufacturing Services (EMS), Artaflex offers world class manufacturing facilities and global partners throughout Canada, the United States, Israel and China, allowing Artaflex to provide its customers the flexibility and scalability to competitively achieve total solutions to their present and future electronics outsourcing needs. Visit Artaflex at: www.artaflex.com.

This news release may contain forward-looking statements and information relating to such matters as expected financial performance, business prospects, technological developments, development activities and like matters. These statements involve risk and uncertainties, including but not limited to risk factors described in documents filed with regulatory authorities, such as the company's most recently filed annual and quarterly MD&A's. Actual results could differ materially from those projected as a result of these risks and should not be relied upon as a prediction of future events. Artaflex Inc. undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, unless required to do so under applicable law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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