Cervus Financial Group Inc.
TSX : CFG

Cervus Financial Group Inc.

January 31, 2006 08:40 ET

Cervus Financial Group Inc. Announces Financial Results for the Year Ended September 30, 2005

TORONTO, ONTARIO--(CCNMatthews - Jan. 31, 2006) -

"Mortgage Assets increased to $645 million"

Cervus Financial Group Inc. ("Cervus"), (TSX:CFG), is a financial services company dedicated to providing mortgages to selected mortgage broker firms. The Company is pleased announce results of operations for the year ended September 30, 2005 with revenues of $8.4 million and residential mortgage originations of $654.2 million. Total Administered Assets increased to $645 million.

Highlights for the year ended September 30, 2005:

- Increased Total Administered Assets to $645 million compared to $2 million as at September 30, 2004.

- The Company has future mortgage commitments of $218.1 million, compared to $11.3 million at September 30, 2004.

- Completed whole loan sales, totalling $648.8 million, to Canadian financial institutions under existing sales and servicing agreements compared to nil in the previous year.

- The Company completed the sale of mortgages into a securitization conduit channel.

- The Company launched an automated mortgage approval system, with a fully insured mortgage commitment issued in under three minutes from submission of the mortgage application by the mortgage professional.

- Commenced trading on the Toronto Stock Exchange on Monday April 11, 2005 under the trading symbol "CFG".

- Launched a multi-tiered mortgage partners program and further penetrated the mortgage broker market.

Cervus delayed the release of the annual financial statement statements while it determined the appropriate treatment of whole loan sales completed during the year. The Company has concluded its determination that the sales can be recorded as true sales as at September 30, 2005. However, as part of this determination, the Company determined that it is necessary to restate previously filed quarterly financial statements as sales to a counterparty did not comply with the evidential documentation requirements of the accounting rules. The effect on the loss for the prior quarters in question is not significant, but the principle is important. The prior quarter's restatements will not affect the results of the annual financial statements.



Cervus Financial Group Inc.
Consolidated Balance Sheets
September 30, 2005
September September
30, 2005 30, 2004
--------- ----------
ASSETS

CURRENT
Cash $ 3,890,362 $ 2,296,206
Restricted cash (Note 9) 1,500,000 2,500,000
Residential mortgages (Note 8) 4,448,436 2,085,867
Accounts receivable 1,866,587 -
Sales tax receivable 30,524 -
Prepaid expenses 385,544 364,188
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12,121,453 7,246,261

OTHER ASSETS 444,363 22,019

SECURITIZATION - RETAINED INTEREST
(Note 7) 553,139 -

CAPITAL ASSETS (Note 18) 2,863,254 1,037,356

INTANGIBLE ASSETS (Note 6) 3,557,976 3,461,133

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$ 19,540,185 $ 11,766,769
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LIABILITIES

CURRENT
Accounts payable and accrued expenses $ 8,655,126 $ 1,353,807
Sales tax payable 39,606 134,443
Warehouse credit facility
(Note 3, 9 and 19(b)) - 2,450,000
Other liabilities 48,490 -
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8,743,222 3,938,250

TRAILER COMMISSIONS 1,401,161 6,351

FUTURE SERVICING LIABILITY (Note 7) 48,960 -

LEASE INDUCEMENT 177,540 -

LEASE OBLIGATIONS 7,376 -

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10,378,259 3,944,601
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SHAREHOLDERS' EQUITY

COMMON SHARES (Note 11) 19,574,420 9,993,955

CONTRIBUTED SURPLUS (Note 11) 1,034,635 301,163
DEFICIT (11,447,129) (2,472,950)
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9,161,926 7,822,168
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$ 19,540,185 $ 11,766,769
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Cervus Financial Group Inc.
Consolidated Statements of
Operations and Deficit
September 30, 2005
For the period
For the Year from January 16,
ended 2004 to
September September
30, 2005 30, 2004

INTEREST INCOME (Note 4) $ 3,628,412 $ 28,480

INTEREST EXPENSE (Note 4) (3,164,276) (957)
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NET INTEREST INCOME 464,136 27,523

GAIN ON SALE OF LOANS (Note 4) 7,406,884 -
FEES AND OTHER INCOME 521,239 -
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8,392,259 27,523

BROKER COMMISSIONS (6,704,281) -
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1,687,978 27,523
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OPERATING EXPENSES
Human resources 4,913,531 1,617,842
Business processing 1,703,493 246,807
Selling, general and administration 1,746,295 441,772
Governance and public markets 1,328,418 923,661
Premises 348,469 113,728
Amortization 784,130 20,562
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10,824,336 3,364,372
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LOSS BEFORE INCOME TAXES 9,136,358 3,336,849

Future income tax benefit (Note 14) (162,179) (1,100,739)
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NET LOSS FOR THE PERIOD $ 8,974,179 $ 2,236,110

DEFICIT - BEGINNING OF PERIOD 2,472,950 -

NET LIABILITIES ACQUIRED (Note 5) - 236,840

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DEFICIT - END OF PERIOD $ 11,447,129 $ 2,472,950
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- -

NET LOSS PER COMMON SHARE
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Basic and diluted (Note 11(f)) $ 0.22 $ 0.11
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Cervus Financial Group Inc.
Consolidated Statements of Cash Flows
September 30, 2005

For the period
For the Year from January 16,
ended 2004 to
September September
30, 2005 30, 2004
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES

OPERATING
Net loss for the period $ (8,974,179) $ (2,236,110)
Items not affecting cash
Amortization of capital assets 405,371 20,562
Amortization of intangibles 378,759 -
Provision for servicing liability - 115
Future income tax benefit (162,179) (1,100,739)
Stock option expense 212,280 -
Lease inducement (24,939) -
Loan securitizations -
gain on sale of loans (54,179) -
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(8,219,066) (3,316,172)

Net changes in non-cash working
capital balance
Prepaid expenses (21,356) (312,166)
Residential mortgages (2,362,569) (2,085,867)
Accounts receivable (1,866,587) -
Other assets (422,344) (22,019)
Accounts payable and accrued expenses 7,559,319 1,064,830
Sales tax payable (125,361) 134,443
Proceeds from credit
facility borrowings (2,450,000) 2,450,000
Trailer commissions 1,394,810 6,351
Securitization - retained interest (450,000) -
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(6,963,154) (2,080,600)
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INVESTING
Lease inducement 245,160 -
Cash collateral - restricted cash 1,000,000 (2,500,000)
Acquisition of capital assets (2,214,757) (1,057,918)
Acquisition of intangible assets (26,600) (413,684)
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(996,197) (3,971,602)
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FINANCING
Proceeds from issuance of
common shares 10,000,000 9,108,508
Proceeds from exercise of
common share warrants 330,000 -
Common share issue costs (773,166) (760,100)
Repayment of obligations
under capital leases (3,327) -
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9,553,507 8,348,408
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NET INCREASE (DECREASE) IN CASH
FOR THE PERIOD 1,594,156 2,296,206

CASH, BEGINNING OF PERIOD 2,296,206 -
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CASH, END OF PERIOD $ 3,890,362 $ 2,296,206
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$ -
CASH IS REPRESENTED BY:
Cash in bank $ 3,890,362 $ 2,028,479
Cash held in trust - 267,727
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$ 3,890,362 $ 2,296,206
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Please see www.sedar.com for the following information: the
accompanying notes which are integral to these consolidated
financial statements, and Management's Discussion & Analysis.


About "Customer for Life"

The Cervus "Customer for Life" model enables the mortgage professional to retain the relationship with the borrower as a customer throughout the life of the mortgage. The compensation model also creates a continued revenue stream in the form of trailer fees, a one time origination fee and a renewal fee every time the customer renews with Cervus. This creates income security for the mortgage professional allowing a long-term relationship to be developed with the borrower. This long-term relationship subsequently gets passed along to the institutional investor of the mortgage security, creating a higher yield long-term investment cash flow stream. The Cervus "Customer for Life" model creates profitable relationships for the borrowers, mortgage professionals, institutional investors and for Cervus.

About Cervus

Cervus Financial Group Inc. is a Canadian financial services company created as an industry initiative with leading mortgage broker companies and fixed income investment banks to become a high-yield residential mortgage producer and the largest mortgage broker lender of conventional insured and insurable mortgages in Canada. Our new and innovative business model demonstrates contracted asset accumulation of $22.5 billion in mortgages over five to seven years by fusing industry ownership, technology, service delivery and long term recurring revenue for the mortgage brokers.

Cervus works on the basis of a "Customer for Life" model, where the borrower is the client of the mortgage broker and Cervus is effectively the "Back Office - Servicer" between borrowers and investors. Cervus has assembled an experienced management team and board of directors who are knowledgeable in banking, financial services and related businesses. Cervus is focused on funding and servicing insurable conventional and high ratio insured residential mortgages originated through mortgage brokers. Cervus is currently licensed under Ontario, Quebec, British Columbia and Alberta mortgage broker/lender legislation and is seeking similar regulatory approvals in other Canadian Provinces as required. Cervus's head office and Ontario operations centre is located in Toronto, with additional sales offices in Vancouver, Calgary and in Montreal. Cervus Financial Group Inc. conducts all lending operations through its wholly-owned subsidiary, Cervus Financial Corp.

Forward-looking (safe harbour) statement

Statements made in this news release that relate to future plans, events or performances are forward-looking statements. Any statement containing words such as "believes," plans," "expects" or "intends" and other statements which are not historical facts contained in this release are forward-looking, and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements.

Additional information about Cervus is available on SEDAR (www.sedar.com).

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

Contact Information

  • Cervus Financial Group Inc.
    Tracey McLaughlin
    Investor Relations
    (416) 861-1315 ext 262
    Cervus Financial Group Inc.
    or
    Cervus Financial Group Inc.
    Gary Bartholomew
    CEO
    (416) 861-1315 ext 226
    (416) 861-8484 (FAX)
    gbartholomew@cervus.com
    www.cervus.com