E.G. Capital Inc.
NEX BOARD : EGC.H

January 29, 2007 13:49 ET

E.G. Capital Inc. Announces Results for the Third Quarter Ended November 30, 2006

BROSSARD, QUEBEC--(CCNMatthews - Jan. 29, 2007) - E.G. Capital Inc. (NEX:EGC.H), ("E.G. Capital"), formally National Construction Inc., today announces results for the third quarter ended November 30, 2006.

Comparison of three months ended November 30, 2006 and November 30, 2005

Revenues increased by 265% from $157,617 for the three months ended November 30, 2005 to $417,000 for the three months ended November 30, 2006. Revenue in the third quarter ended November 30, 2005 was composed of $150,000 in deferred revenue along with lease revenues related to the subletting of warehouse space. Revenue in third quarter ended November 30, 2006 was entirely composed of an increase in the actual recoverable earn-out distribution.

For the three months ended November 30, 2006, the Corporation achieved a gross profit of $417,000 representing 100% of total revenue compared to $157,617 or 100% for the three months ended November 30, 2005. This increase was entirely due to an increase in the actual recoverable earn-out distribution.

Selling, General and Administrative ("SG & A") expenses were $63,254 for the three months ended November 30, 2006 as compared to $209,375 for the same period last year. For the three month period ended November 30, 2006, the $63,254 included approximately $50,000 in professional and advisory accruals and approximately $13,000 in regulatory related filing expenses, consulting, and sundry administrative costs. For the three month period ended November 30, 2005, the $209,375 included $30,000 in CSST expense, $100,000 in professional fee, regulatory filing and administrative expense accruals, $24,000 in accrued capital tax, $7,000 in rent expense, $16,000 in closing costs related to the sale to B & M and $32,000 in consulting and sundry administrative costs. The reduction is consistent with the reduction in administrative activity year over year since the sale of the Plant Maintenance Division in February, 2005.

Earn-Out allowance expense for the three months ended November 30, 2005 was $1,000,000 as compared to $nil for the same period this year. As at November 30, 2005, management reviewed the recoverable amount of the Asset Sale Balance, which is based on the net profit before taxes earned by the division, up to a maximum of $1,200,000. As at November 30, 2005, based upon the operating results of the division to date, as well as the conclusion that forecasts for the remaining term were significantly less than originally expected, management revised the estimated recoverable amount to $ 200,000. Consequently, the Corporation recorded an impairment loss of $ 1,000,000 within the fiscal year ended February 28, 2006.

CSST receivable allowance expense for the three months ended November 30, 2005 was $340,000 as compared to $nil for the same period this year. As at November 30, 2005, management reviewed the recoverable amount of the CSST (workmen's compensation) refunds and due to adverse assessments from CSST, Management revised its estimated recoverable value to $500,000, and recorded an impairment loss of $340,000.

The Corporation incurred interest and bank charges of $2,368 for the three months ended November 30, 2006 as compared to interest expense of $6,292 for the same period last year. The reduction was due to a reduction in interest bearing leases and reduced banking activity.

The Corporation incurred amortization expenses of $nil for the three months ended November 30, 2006 as compared to $26,583 for the same period last year. Amortization expenses were higher in the prior period due to reducing the net book value of fixed assets down to an estimate of fair market value.

As a result of the foregoing factors, the income before income taxes for the three months ended November 30, 2006 was $351,378 as compared to a loss before income taxes of $1,424,633 for the same period last year.

The net income for the three months ended November 30, 2006 was $351,378 after income tax of $nil as compared to a net loss of $1,424,633 after income tax expense of $nil for the same period last year.

Comparison of the nine months ended November 30, 2006 and November 30, 2005

Revenues increased by 9% from $382,515 for the nine months ended November 30, 2005 to $417,000 for the nine months ended November 30, 2006. Revenue in the nine months ended November 30, 2005 was composed of $300,000 in deferred revenue along with $50,000 of further proceeds of disposition related to the sale of the Plant Maintenance Division as well as lease revenues related to the subletting of warehouse space. Revenue in the nine months ended November 30, 2006 was entirely composed of an increase in the estimated recoverable earn-out distribution.

For the nine months ended November 30, 2006, the Corporation achieved a gross profit of $417,000 representing 100% of total revenue compared to $382,515 or 100% for the nine months ended November 30, 2005. This increase was entirely due to an increase in the estimated recoverable earn-out distribution.

Selling, General and Administrative Expenses were $83,308 for the nine months ended November 30, 2006 as compared to $504,168 for the same period last year. For the nine month period ended November 30, 2006, the $83,308 included approximately $50,000 in professional and advisory accruals and approximately $33,000 in regulatory related filing expenses, consulting, and sundry administrative costs. For the nine month period ended November 30, 2005 the $504,168 included $60,000 in CSST expense, $100,000 in professional fee, regulatory filing and administrative expense accruals, $37,000 in GST, $24,000 in capital tax, $39,000 in rent expense, $76,000 in closing and other expenses related to the sale to B & M, $172,000 in consulting and sundry administrative costs, $23,000 in prepaid write downs and $59,000 in option expense adjustments partially offset by $86,000 in reversal of bad debts expense. The reduction is consistent with the reduction in administrative activity year over year since the sale of the Plant Maintenance Division in February, 2005.

Earn-Out allowance expense for the nine months ended November 30, 2005 was $1,000,000 as compared to $nil for the same period this year. As at November 30, 2005, management reviewed the recoverable amount of the Asset Sale Balance, which is based on the net profit before taxes earned by the division, up to a maximum of $1,200,000. As at November 30, 2005, based upon the operating results of the division to date, as well as the conclusion that forecasts for the remaining term were significantly less than originally expected, management revised the estimated recoverable amount to $ 200,000. Consequently, the Corporation recorded an impairment loss of $ 1,000,000 within the fiscal year ended February 28, 2006.

CSST receivable allowance expense for the nine months ended November 30, 2005 was $340,000 as compared to $nil for the same period this year. As at November 30, 2005, management reviewed the recoverable amount of the CSST (workmen's compensation) refunds and due to adverse assessments from CSST, Management revised its estimated recoverable value to $500,000, and recorded an impairment loss of $340,000.

The Corporation incurred interest and bank charges of $7,199 for the nine months ended November 30, 2006 as compared to interest expense of $26,209 for the same period last year. The reduction was due to a reduction in interest bearing leases and reduced banking activity.

The Corporation incurred amortization expenses of $nil for the nine months ended November 30, 2006 as compared to $32,155 for the same period last year. Amortization expenses were higher in the prior period due to reducing the net book value of fixed assets down to an estimate of fair market value.

As a result of the foregoing factors, the income before income taxes for the nine months ended November 30, 2006 was $326,493 as compared to a loss before income taxes of $1,520,017 for the same period last year.

The net income for the nine months ended November 30, 2006 was $326,493 after income tax of $nil as compared to a net loss of $1,544,703 after income tax expense of $24,686 for the same period last year.

About E.G. Capital Inc.

The Corporation is an inactive company listed on the NEX board of the TSX Venture Exchange Inc ("the Exchange"). The business of the Corporation is to identify and evaluate businesses or assets with a view to completing a reactivation transaction on the Exchange. The Corporation's principal activities in the current fiscal year have been the wind-down of remaining current assets and liabilities subsequent to the sale of it's Plant Maintenance Division on February 4, 2004 and preparation for the completion of a private placement which was completed on July 11, 2005.

The Corporation intends to use the proceeds of the Private Placement to review and pursue opportunities to unlock the value of its tax pools of approximately $20,000,000.

The Corporation also cancelled 1,400,000 stock options and granted options to purchase up to 1,882,000 common shares at a price of $0.10 per share to directors and officers during the year ended February 28, 2006.

This press release may contain forward-looking statements relating to the Corporation. Among the important factors that could cause actual results to differ materially from those indicated by such forward looking statements are competitive pressures, technical difficulties, market acceptance, changes in customer requirements, and general economic conditions, and other risks and uncertainties as described from time to time in Corporation's reports, registration statements and filings filed by the Corporation with securities regulatory authorities.

The TSX Venture Exchange Inc. does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • E.G. Capital Inc.
    William G. Edwards
    CFO
    (450) 444-2405 ext 237