OXBOW Equities Corp.
TSX : XBO

OXBOW Equities Corp.

November 15, 2005 12:01 ET

CORRECTION FROM SOURCE: Oxbow Equities Corp. Announces Financial Results for the Three-Month and Nine-Month Periods Ended September 30, 2005

MONTREAL, QUEBEC--(CCNMatthews - Nov. 15, 2005) -

On November 14, 2005, Oxbow Equities Corp. ("Corporation") (TSX:XBO) issued a press release announcing its financial results for the three-month and nine-month periods ended September 30, 2005. An administrative error was made and the press release that was issued was not in its final form. It is for this reason that the Corporation is filing today a revised and final press release. The financial results presented in this revised and final press release are identical as in the previous press release. We apologize for the inconvenience.

This press release is not for distribution in the United States.

Oxbow Equities Corp. ("Corporation"), (TSX:XBO) today announced the results of its unaudited interim consolidated financial statements for the three-month and nine-month periods ended September 30, 2005. The complete financial statements, including management's discussion and analysis ("MD&A") of the results will be filed with SEDAR (www.sedar.com) and are summarized as follows:

For the three-month and nine-month periods ended September 30, 2005, the Corporation reported a consolidated net loss of $2,852,000 and $5,055,000, respectively, compared to a consolidated net loss of $1,540,000 and $205,000 for the same periods in 2004. The net loss for the three-month and nine-month periods ended September 30, 2005 is primarily the result of the change in the Corporation's accounting policy with regard to the recording of its investment in MonoGen, Inc. ("MonoGen").

Effective January 1, 2005, the Corporation adopted the equity method to account for its investments in common shares of MonoGen and the cost method to account for its other investments in MonoGen.

The net effect of adopting the equity method accounting policy was to record equity losses on the Corporation's investment in MonoGen of $1,495,000 and $4,078,000 for the three-month and nine-month periods ended September 30, 2005, respectively. These non-cash expenses are applied against the carrying amount of the Corporation's investments in MonoGen. More specifically, during the nine-month period ended September 30, 2005, the carrying amount of the Corporation's investment in MonoGen common shares was reduced to zero as a result of allocating $842,000 of the equity loss, and the remaining balance of $3,236,000 of the equity loss reduced the carrying amount of the Corporation's investment in MonoGen subordinated secured convertible promissory notes.

Further details of the new accounting policy are provided in Note 3 of the unaudited interim consolidated financial statements and Section 4 of the MD&A.



Unaudited interim consolidated statements of income

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(in thousands except Three-month periods Nine-month periods
per common share amounts) ended ended
September 30, September 30,
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2005 2004 2005 2004
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$ $ $ $
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Revenues
Interest income 179 519 439 1,540
Dilution gain on issuance
of common shares
by MonoGen, Inc. - - 24 -
Gain realized on the
disposition of the
investment in Mission
Medical, Inc. held
for sale realized on
February 25, 2005 - 3,856 - -
unrealized gain previously
recorded in December 2004 - (3,355) - -
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179 519 964 1,540
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Expenses
General and administrative 299 238 1,089 823
Foreign exchange losses 1,282 1,929 1,027 1,062
Write-down of investments - - - 190
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1,581 2,167 2,116 2,075
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Loss before other
income (expense) (1,402) (1,648) (1,152) (535)

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Other income (expense)
Consulting fees 45 108 175 330
Equity loss on
MonoGen, Inc. (1,495) - (4,078) -
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(1,450) 108 (3,903) 330
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Loss before income tax (2,852) (1,540) (5,055) (205)
Provision for income taxes - - - -
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Net loss for the period (2,852) (1,540) (5,055) (205)
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Basic loss per common share (0.04) (0.02) (0.07) (0.00)
Diluted loss per common share (0.04) (0.02) (0.07) (0.00)
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Unaudited interim consolidated statements of cash flow

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(in thousands except Three-month periods Nine-month periods
per common share amounts) ended ended
September 30, September 30,
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2005 2004 2005 2004
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$ $ $ $
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Decrease in cash flows
related to operating
activities (183) (143) (600) (570)
Increase in cash flows
related to financing
activities - - 2,333 1,479
Increase (decrease) in
cash flows related to
investing activities (296) 150 14,283 (1,342)
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Net increase (decrease)
in cash and cash equivalents
position for the period (479) 7 16,016 (433)
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Unaudited interim consolidated balance sheets

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(in thousands) September 30, 2005 December 31, 2004
(unaudited) (audited)
$ $
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Cash and cash equivalents and
short term investment 16,486 470
Investment in Mission Medical, Inc.
held for sale - 15,576
Investment in MonoGen, Inc. 17,778 20,689
Total assets 34,584 37,016
Total liabilities 122 187
Shareholders' equity 34,462 36,829
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Oxbow's investment in MonoGen is described in its Annual Information
Form. The carrying amount and fair value are detailed in notes 6 and
10 of the unaudited interim consolidated financial statements for the
three-month and nine-month periods ended on September 30, 2005 and
summarized below:

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(in thousands except Fair Carrying Fair Carrying
percentage amounts) Value Amount Value Amount
September 30, 2005 December 31, 2004
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$ $ $ $
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Investments in MonoGen, Inc.
Common shares 2,505 - 4,145 818
Subordinated secured
convertible promissory
notes 24,221 17,778 35,390 19,871
Warrants to purchase
common shares 17 - 196 -
Stock appreciation rights - - - -
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26,743 17,778 39,731 20,689
Ownership
Basic 41.1% 41.3%
Fully diluted 46.3% 49.4%
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As of September 30, 2005, approximately 51.4% (98.1% - December 31, 2004) of the Corporation's assets were invested in one U.S. based privately held health care company, MonoGen. This important percentage reduction in 2005 is explained by the sale on February 25, 2005 of its entire investment in its other U.S. based privately held health care company, Mission Medical, Inc. ("Mission") for a cash amount of $16,124,000 (US$12,995,000). The Corporation recorded a total gain of $3,856,000 on the sale of its investment in Mission of which $3,355,000 was recorded in 2004 and $501,000 was recorded in the first quarter of 2005.

On February 7, 2005, the Corporation raised $2,350,000 of additional capital by completing a private placement of 4,700,000 common shares at a price of $0.50 per share.

Our cash position as of November 14, 2005 is approximately $16 million.

In previous years, the Corporation wrote down to zero all of its investments in Baseline Technologies Inc. ("Baseline"). Baseline has received and accepted a letter of intent from a prospective buyer to purchase all of its tangible and intangible business assets for an aggregate amount of up to US$5 million, comprised of an amount of US$1 million payable in cash at closing and additional amounts of up to a maximum of US$4 million in contingent (earn-out) annual payments based on revenues and operating earnings over the next five years. The closing of the transaction is expected for November 23, 2005. In the event that the sale of the Baseline assets is completed, the Corporation estimates that it will recuperate approximately $1 million at the closing of the transaction. It is impossible to estimate the value and the amount to recuperate of the contingent (earn-out) payments at this time.

The Corporation has previously stated that it intended to distribute to its shareholders approximately $15 million ($0.20 per share) in the fourth quarter of 2005. This statement was conditioned by the Corporation being satisfied that the funding needs of MonoGen have been answered and that certain actual breaches of covenants potentially leading to events of default in respect of a secured loan agreement between MonoGen and one of its strategic partners (the "Secured Lender") are resolved (see Section 2.5 "MonoGen - Secured Loans Default" of the MD&A). On September 30, 2005, the above mentioned breaches became an event of default of the secured loans aggregating US$4.3 million in principal amount (the "Loans"). To date, the Secured Lender has not demanded repayment of the Loans and has been supportive of MonoGen's efforts to secure third-party financing. There is no guarantee that this situation will continue in the future.

MonoGen is continuing its efforts to secure third-party financing with the assistance of investment bank SG Cowen & Co., LLC of New York. So far, MonoGen has not been able to secure third-party funding of US$20 million anticipated to be required until it becomes cash flow positive from operations. Should these efforts not conclude favorably, the Corporation may have to provide additional funding to MonoGen, either alone or together with existing shareholders, resulting in the Corporation investing a portion or substantially all of its existing cash resources into MonoGen under certain conditions. Thus far, the Corporation has been providing bridge financing to MonoGen at the rate of US$250,000 per month for a total of US$750,000 since September 2005. So far, the owner of MonoGen's manufacturing partner ("DMW") has matched the Corporation with additional bridge financings of US$750,000 as well. There is no guarantee that either the Corporation or DMW will continue providing bridge financing to MonoGen in the future.

On the regulatory front, MonoGen has progressed in the pre-market approval submission with the FDA for its MonoPrep Pap test. MonoGen believes that its submission is in the final stages of the evaluation by the FDA and anticipates a favorable decision by the FDA concerning the commercialization of the MonoPrep Pap test before the end of the year. Finally, MonoGen is working actively with its distribution partner in the preparation of the commercialization of the MonoPrep Pap test upon FDA approval.

The financial results of the Corporation will continue to be impacted by any variation in the exchange rate since a significant portion of its assets are denominated in United States dollars. The Corporation does not use and does not intend to use derivatives to hedge its foreign exchange rate risk.

The common shares of the Corporation are listed for trading on the Toronto Stock Exchange under the trading symbol "XBO".

Forward-Looking Statements

This press release contains statements that are forward-looking in nature. Statements preceded by the words believe, expect, anticipate, plan, intend, continue, estimate, may, will, and similar expressions are forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to known and unknown risks and uncertainties such as, but not limited to: a) the capacity of the Corporation to obtain funding for its operations, b) the capacity of MonoGen to i) obtain permanent funding, ii) resolve the existing default under a senior ranking secured loan, and iii) obtain regulatory approvals and maintain such approvals, including those of the United States FDA, c) the eventual commercial success of MonoGen's products, d) the ability of the Corporation to achieve a liquidity event in the public markets for its investment in MonoGen or to realize the value of MonoGen in a private sale on commercially reasonable terms and/or in a timely manner, e) changes in future foreign currency exchange rates, and f) other factors referenced herein and in the Corporation's continuous disclosure filings. Therefore, the Corporation's actual results may be materially different from those expressed or implied by such forward-looking statements.

Contact Information

  • Oxbow Equities Corp.
    Mr. Andre Denis
    President and Chief Executive Officer
    (514) 286-0999, ext. 224
    (514) 286-3777 (FAX)
    adenis@oxbowequities.com