HispanicBusiness

Dividend

The Board declared an eligible quarterly dividend of Canadian dollar $0.08 per share, payable on March 29, 2013, to all shareholders of record as at March 15, 2013.

Conference call

Financial analysts, shareholders, and other interested individuals are invited to attend the third quarter conference call to be held on January 8, 2013, at 4:30 PM (EDT). The toll free call-in number is 1-888-224-7971, access code 21628978. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558- 5253, access code 21628978.

About Velan

Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of $437 million in its last reported fiscal year. The Company employs over 2,000 people and has manufacturing plants in 10 countries. Velan Inc. is a public company with its shares listed on the Toronto Stock Exchange under the symbol VLN.

Safe harbour statement

Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.

Non-GAAP measures

In this press release, the Company presented measures of performance and financial condition that are not defined under Canadian GAAP ("non-GAAP measures") and are therefore unlikely to be comparable to similar measures presented by other companies. These measures are used by management in assessing the operating results and financial condition of the Company.

Net cash is defined as cash and cash equivalents plus short-term investments less bank indebtedness, short-term loans, and current portion of long-term bank borrowings.

Velan Inc.Condensed Interim Consolidated Statements of Income (Loss)(Unaudited)(in thousands of U.S. dollars, excluding number of shares and per shareamounts)                                Three-month periods      Nine-month periods                                              ended                   ended                                        November 30             November 30                                   2012        2011        2012        2011                                      $           $           $           $Sales                           134,203     118,939     358,504     319,351Cost of sales                   100,862      91,652     275,035     255,094                            ------------------------------------------------Gross profit                     33,341      27,287      83,469      64,257Administration costs             23,592      21,634      68,540      62,214Other expense (income)              112        (101)       (718)       (317)                            ------------------------------------------------Operating profit (loss)           9,637       5,754      15,647       2,360Finance income                      142          69         500         230Finance costs                     1,230         213       2,577       1,036                            ------------------------------------------------Finance income (costs) - net     (1,088)       (144)     (2,077)       (806)                            ------------------------------------------------Income (Loss) before income tax                              8,549       5,610      13,570       1,554Provision for (Recovery of) income tax                       2,421       1,778       3,317         203                            ------------------------------------------------Net income (loss) for the period                           6,128       3,832      10,253       1,351                            ------------------------------------------------                            ------------------------------------------------Net income (loss) attributable to:Subordinate Voting Shares and Multiple Voting Shares       5,712       3,992       9,724       2,028Non-controlling interest            416        (160)        529        (677)                            ------------------------------------------------                                  6,128       3,832      10,253       1,351                            ------------------------------------------------                            ------------------------------------------------Net income (loss) per Subordinate and Multiple Voting ShareBasic                              0.26        0.18        0.44        0.09Diluted                            0.26        0.18        0.44        0.09                            ------------------------------------------------                            ------------------------------------------------Dividends declared per Subordinate and Multiple Voting                            0.08        0.07        0.24        0.24  Share                       (CDN$0.08)  (CDN$0.08)  (CDN$0.24)  (CDN$0.24)                            ------------------------------------------------                            ------------------------------------------------Total weighted average number of Subordinate and Multiple Voting SharesBasic                        22,022,256  22,180,538  22,022,256  22,180,538Diluted                      22,027,043  22,197,471  22,030,500  22,218,713                            ------------------------------------------------                            ------------------------------------------------Velan Inc.Condensed Interim Consolidated Statements of Comprehensive Income (Loss)(Unaudited)(in thousands of U.S. dollars)                                Three-month periods      Nine-month periods                                              ended                   ended                                        November 30             November 30                                    2012       2011        2012        2011                                       $          $           $           $Comprehensive income (loss)Net income (loss) for the period                            6,128      3,832      10,253       1,351Other comprehensive income (loss)Foreign currency translation adjustment on foreign operations whose functional currency is other than the U.S. dollar                       4,321    (11,055)     (4,683)     (7,210)                            ------------------------------------------------Comprehensive income (loss)       10,449     (7,223)      5,570      (5,859)                            ------------------------------------------------                            ------------------------------------------------Comprehensive income (loss) attributable to:Subordinate Voting Shares and Multiple Voting Shares        9,662     (6,117)      5,161      (4,090)Non-controlling interest             787     (1,106)        409      (1,769)                            ------------------------------------------------                                  10,449     (7,223)      5,570      (5,859)                            ------------------------------------------------                            ------------------------------------------------Velan Inc.Condensed Interim Consolidated Statements of Financial Position(Unaudited)(in thousands of U.S. dollars)As At                                        November 30,      February 29,                                                     2012              2012                                                        $                 $AssetsCurrent assetsCash and cash equivalents                          57,840            65,414Short-term investments                              2,279             4,954Accounts receivable                               132,717           111,856Income taxes recoverable                            6,963             9,682Inventories                                       264,952           258,684Deposits and prepaid expenses                       6,578             6,209Derivative assets                                     663             1,737                                        ------------------------------------                                                  471,992           458,536Non-current assetsProperty, plant and equipment                      87,663            72,961Intangible assets and goodwill                     54,941            58,845Deferred income taxes                              11,086            10,152Other assets                                        1,740             1,476                                        ------------------------------------                                                  155,430           143,434                                        ------------------------------------Total assets                                      627,422           601,970                                        ------------------------------------                                        ------------------------------------LiabilitiesCurrent liabilitiesBank indebtedness                                  45,916            32,438Short-term loans                                    2,112               858Accounts payable and accrued liabilities           78,239            82,088Income tax payable                                  2,168             2,484Dividend payable                                    1,766             1,791Customer deposits                                  84,802            86,544Provisions                                          5,179             5,149Accrual for performance guarantees                 25,163            21,679Derivative liabilities                                963               534Current portion of long-term debt                  10,269             1,696Current portion of other liabilities                2,540             5,753                                        ------------------------------------                                                  259,117           241,014Non-current liabilitiesLong-term debt                                     17,976             7,891Deferred income taxes                               7,528             8,270Other liabilities                                   9,344             9,218                                        ------------------------------------                                                   34,848            25,379                                        ------------------------------------Total liabilities                                 293,965           266,393                                        ------------------------------------EquityEquity attributable to the Subordinate and Multiple Voting shareholdersShare capital                                      76,517            78,764Contributed surplus                                 1,745             1,871Retained earnings                                 255,399           250,951Accumulated other comprehensive income (loss)                                            (8,780)           (4,217)                                        ------------------------------------                                                  324,881           327,369Non-controlling interest                            8,576             8,208                                        ------------------------------------Total equity                                      333,457           335,577                                        ------------------------------------Total liabilities and equity                      627,422           601,970                                        ------------------------------------                                        ------------------------------------Velan Inc.Condensed Interim Consolidated Statements of Changes in Equity(Unaudited)(in thousands of U.S. dollars, excluding number of shares)                Equity attributable to the Subordinate and Multiple                                                Voting shareholders                ------------------------------------------------------------                                               Accumulated                                                     other                                                   compre-                                                   hensive                 Number of   Share Contributed      income Retained                    shares capital     surplus      (loss) earnings   Total                ------------------------------------------------------------Balance - March 1, 2012        22,148,968  78,764       1,871      (4,217) 250,951 327,369Net income (loss) for the period                  -       -           -           -    9,724   9,724Other comprehensive income (loss)           -       -           -      (4,563)       -  (4,563)                ------------------------------------------------------------                22,148,968  78,764       1,871      (8,780) 260,675 332,530Effect of share- based compensation            -       -          43           -        -      43Dividends  Multiple   Voting Shares         -       -           -           -   (3,739) (3,739)  Subordinate   Voting Shares         -       -           -           -   (1,537) (1,537)  Non-   controlling   interest              -       -           -           -        -       -Share repurchase  (206,500) (2,247)       (169)          -        -  (2,416)                ------------------------------------------------------------Balance - November 30, 2012           21,942,468  76,517       1,745      (8,780) 255,399 324,881                ------------------------------------------------------------                ------------------------------------------------------------Balance - March 1, 2011        22,195,568  79,271       1,898       2,275  250,254 333,698Net income (loss) for the period                  -       -           -           -    2,028   2,028Other comprehensive income (loss)           -       -           -      (6,118)       -  (6,118)                ------------------------------------------------------------                22,195,568  79,271       1,898      (3,843) 252,282 329,608Effect of share- based compensation            -       -          50           -        -      50Dividends  Multiple   Voting Shares         -       -           -           -   (3,852) (3,852)  Subordinate   Voting Shares         -       -           -           -   (1,582) (1,582)  Non-   controlling   interest              -       -           -           -        -       -Share repurchase   (27,800)   (302)        (85)          -        -    (387)Non-controlling interest arising on acquisition             -       -           -           -        -       -                ------------------------------------------------------------Balance - November 30, 2011           22,167,768  78,969       1,863      (3,843) 246,848 323,837                ------------------------------------------------------------                ------------------------------------------------------------                              Non-controlling                                     interest                  Total equity                ------------------------------------------------------------Balance - March 1, 2012                                8,208                       335,577Net income (loss) for the period                                   529                        10,253Other comprehensive income (loss)                           (120)                       (4,683)                ------------------------------------------------------------                                        8,617                       341,147Effect of share- based compensation                               -                            43Dividends  Multiple   Voting Shares                            -                        (3,739)  Subordinate   Voting Shares                            -                        (1,537)  Non-   controlling   interest                               (41)                          (41)Share repurchase                            -                        (2,416)                ------------------------------------------------------------Balance - November 30, 2012                                   8,576                       333,457                ------------------------------------------------------------                ------------------------------------------------------------Balance - March 1, 2011                                4,025                       337,723Net income (loss) for the period                                  (677)                        1,351Other comprehensive income (loss)                         (1,092)                       (7,210)                ------------------------------------------------------------                                        2,256                       331,864Effect of share- based compensation                               -                            50Dividends  Multiple   Voting Shares                            -                        (3,852)  Subordinate   Voting Shares                            -                        (1,582)  Non-   controlling   interest                               (84)                          (84)Share repurchase                            -                          (387)Non-controlling interest arising on acquisition                            8,372                         8,372                ------------------------------------------------------------Balance - November 30, 2011                                  10,544                       334,381                ------------------------------------------------------------                ------------------------------------------------------------Velan Inc.Condensed Interim Consolidated Statements of Cash Flows(Unaudited)(in thousands of U.S. dollars)                                Three-month periods      Nine-month periods                                 ended November 30,      ended November 30,                                   2012        2011        2012        2011Cash flows from                       $           $           $           $Operating activitiesNet income (loss) for the period                           6,128       3,832      10,253       1,351Adjustments to reconcile net profit to cash provided operating activities  Depreciation of property,   plant and equipment            2,413       2,172       6,941       6,396  Amortization of intangible   assets                           607       1,478       2,257       3,836  Deferred income taxes             100         430      (1,673)       (512)  Share-based compensation   expense                           14          33          43          50  Loss (Gain) on disposal of   property, plant and   equipment                        (23)        (39)       (144)         11  Interest accretion on   proceeds payable                 156         291         505         702  Income from fair value   adjustment of proceeds   payable                            -           -        (196)          -  Unrealized foreign   exchange gain on proceeds   payable                          149           -        (425)          -  Net change in other   liabilities                      373        (734)        (61)       (106)                            ------------------------------------------------                                  9,917       7,463      17,500      11,728Changes in non-cash working capital items                    5,344     (21,500)    (26,138)    (40,096)                            ------------------------------------------------Cash provided (used) by operating activities            15,261     (14,037)     (8,638)    (28,368)                            ------------------------------------------------Investing activitiesShort -term investments             378        (776)      2,675      (1,427)Additions to property, plant and equipment                  (11,559)     (1,563)    (22,641)     (8,940)Proceeds on disposal of property, plant and equipment                          (75)         34         384          61Additions to intangible assets                            (139)        (93)       (405)       (738)Net change in other assets         (123)        131        (267)        148Business acquisition - net of cash acquired                     -           -           -     (37,281)                            ------------------------------------------------Cash provided (used) by investing activities           (11,518)     (2,267)    (20,254)    (48,177)                            ------------------------------------------------Financing activitiesDividends paid to Subordinate and Multiple Voting shareholders             (1,801)     (1,773)     (5,301)     (5,453)Dividends paid to non- controlling interest               (41)          -         (41)        (84)Repurchase of shares               (346)       (109)     (2,416)       (388)Payment of proceeds payable           -           -      (2,905)          -Short -term loans                   151           -       1,254      (4,842)Increase in long-term debt            -         388      20,715       4,612Repayment of long-term debt      (1,749)     (2,579)     (2,706)     (2,636)                            ------------------------------------------------Cash provided (used) by financing activities            (3,786)     (4,073)      8,600      (8,791)                            ------------------------------------------------Effect of exchange rate differences on cash                509      (1,349)       (760)     (1,037)                            ------------------------------------------------Net change in cash during the period                         466     (21,726)    (21,052)    (86,373)Net cash - Beginning of the period                          11,458      49,715      32,976     114,362                            ------------------------------------------------Net cash - End of the period     11,924      27,989      11,924      27,989                            ------------------------------------------------Net cash is composed of:  Cash and cash equivalents      57,840      49,822      57,840      49,822  Bank indebtedness             (45,916)    (21,833)    (45,916)    (21,833)                            ------------------------------------------------Supplementary information        11,924      27,989      11,924      27,989                            ------------------------------------------------Interest received (paid)           (489)       (647)     (1,349)       (752)Income taxes received (paid)        693      (1,835)     (2,282)     (5,854)