Difference Capital Financial Inc.
TSX : DCF
TSX : DCF.DB

Difference Capital Financial Inc.

March 06, 2015 17:00 ET

Difference Capital Reports Fiscal Fourth Quarter and Full Year 2014 Results

TORONTO, ONTARIO--(Marketwired - March 6, 2015) - Difference Capital Financial Inc. ("DCF" or the "Company) (TSX:DCF)(TSX:DCF.DB) today reported its financial results for the three months and year ended December 31, 2014.

Fourth Quarter & Fiscal Year 2014 Highlights

(figures are in $'000 except per share amounts and shares outstanding) Q4 2014 FY 2014 Q4 2013 FY 2013
Net realized gain (loss) on investments and marketable securities $ 227 $ 4,635 $ (731 ) $ 1,680
Net change in unrealized gain (loss) on investments and marketable securities (23,407 ) (43,431 ) (17,578 ) (18,673 )
Other income 1,031 7,021 1,950 5,863
Total expenses (3,756 ) (16,313 ) (3,804 ) (8,888 )
Net income (loss) (25,905 ) (48,088 ) (20,163 ) (20,018 )
Basic and fully diluted earnings per share $ (0.68 ) $ (1.24 ) $ (0.52 ) $ (0.62 )
FY 2014 FY 2013
Total assets $ 114,952 $ 168,814
Total liabilities 49,018 53,276
Net asset value 65,934 115,538
Shares outstanding 38,197,734 39,132,334
Net asset value per share $ 1.73 $ 2.95
Share price $ 1.14 $ 2.75

"We have continued to aggressively reposition our portfolio towards quality late-stage private equity opportunities as well as restructure and revalue select underperforming holdings," said Henry Kneis, Chief Financial Officer of DCF. "Our team has made significant progress over the past six months, which resulted in additional write-downs included in our fourth quarter 2014 results. By revaluing these investments we hope to improve investor confidence in our asset values. As we look to 2015 and beyond, we believe the Company is well-positioned with a core portfolio of investment assets that are poised for potential liquidity events such as an IPO or trade sale within the next 24 months. These core holdings represented approximately 50% of DCF's total assets at year-end."

Operational Update

During 2014, the Company made significant efforts to refocus the portfolio on later stage investments, restructure underperforming investments and in the process also revalued several positions. In terms of restructuring, DCF allocated considerable time to several key investments to enhance overall portfolio returns and reduce future losses. DCF worked with the WG Limited ("World Gaming") management team to improve the business model and balance sheet as well as helped it complete a new round of funding that gives it more time to pursue several new opportunities. In the case of Lignol Energy Corporation ("Lignol"), the combination of no revenues, lower global oil prices, reduced outlook for Australian biodiesel subsidies and continued cash burn at the company resulted in DCF's decision to place the company into receivership and seek to recover on our secured debt position. This process is nearly complete and the Company expects to receive partial recovery in 2015.

The company also took steps to revalue several other investments in addition to World Gaming and Lignol. These primarily private securities include investments in Cricket Media Corporation ("Cricket Media"), Crailar Technologies Inc. ("Crailar"), Fem Med Formulas Limited Partnership ("Fem Med") and iPowow! Inc. ("iPowow"). These new valuations reflect past performance, current outlook and balance sheets, and, where applicable, valuations of comparable public companies and other transactions.

Full-Year 2014 Financial Results

For the year ended December 31, 2014, the Company reported a net loss of $48.1 million, or $1.24 per share compared to a net loss of $20.0 million, or $0.62 per share for the year ended December 31, 2013.

The Company realized a $4.6 million gain on dispositions of investments and marketable securities during 2014 compared with $1.7 million in realized gain during 2013. The realized gain during the year was primarily attributed to a $2.7 million gain on the conversion and disposition of the Enterprise Group Inc. common shares and a $1.7 million gain on the disposition of common shares in BENEV Capital Inc. ("Benev").

During 2014, the Company recorded $43.4 million of net change in unrealized depreciation on investments and marketable securities, compared to a net change in unrealized depreciation of $18.7 million during 2013. The net change in unrealized depreciation recorded during the year was primarily due to write-downs of privately held securities including those issued by Lignol, World Gaming, Cricket Media, Fem Med, iPowow, and Appinions Inc. ("Appinions"), as well as marked-to-market losses in publicly listed securities, including the common shares of Lignol. The net change in unrealized depreciation was partially offset by unrealized appreciation of privately held investments including BuildDirect.com Technologies Inc., Blue Ant Media Inc. and Carta Solutions Holding Corporation as well as approximately $3.3 million of net change in unrealized appreciation of foreign exchange during the year.

Other income for the year ended December 31, 2014 was $7.0 million, compared to $5.9 million during the same period in 2013. Included in other income were interest and dividend income from the investment portfolio totaling $5.8 million, up from $4.7 million in the same period of 2013. Also included in other income was the 40% revenue participation in Difference Capital Management's advisory revenue business of $0.7 million, compared to $1.2 million in 2013, and $0.5 million of gain recognized on the repurchase of the Company's convertible debentures.

Total expenses during the year ended December 31, 2014 were $16.3 million compared to $8.9 million for the year ended December 31, 2013. The year-over-year increase in total expenses was primarily due to the following three factors:

(i) a $3.4 million provision for uncollectible receivables, primarily due to uncertainty as to the full collectability of interest on the Fem MED, Lignol, Cricket Media and Appinions debts;
(ii) the full year impact of financing costs of $5.5 million compared to half year in 2013; and,
(iii) increased legal and professional fees associated with the Benev investment and the Lignol receivership proceedings.

Please refer to the section regarding forward-looking statements which form an integral part of this release. These results, along with the audited financial statements and the company's MD&A, are available on the company's website at www.differencecapital.com and on SEDAR at www.sedar.com.

Conference Call

DCF will host a conference call Monday, March 9, 2015, at 9:00 AM ET to discuss its results. Michael Wekerle, CEO, Henry Kneis, CFO and Tom Astle, Head of Investment Strategy will host the call. All interested parties can join the call by dialling (647) 427-7450 or (888) 231-8191. Please dial in 5-10 minutes prior to the call to secure a line. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.

About Difference Capital Financial Inc.

Difference Capital Financial Inc. invests in and advises growth companies. We leverage our capital market expertise to help unlock the value in technology, media and healthcare companies as they approach important milestones in their business lifecycle. Difference Capital Financial Inc. is traded under the Toronto Stock Exchange under the symbol "DCF".

Caution Regarding Forward-Looking Statements

Included in this press release are matters that constitute "forward-looking" information. Such forward-looking include statements regarding future financial results of the Company, potential liquidity events of portfolio investment assets and the ability to recover on secured debt positions. Forward-looking statements may be identified by words such as "plans", "proposes", "estimates", "intends", "expects", "believes", "may" or words of a similar nature. There can be no assurance that such statements will prove to be accurate. Actual results and future events could differ materially from such statements. Factors that could cause actual results to differ materially include among others, equity market regulatory risks, risk inherent in foreign operations and competition. These factors are largely outside the control of the Company. All subsequent forward-looking statements attributable to the Company or its agents are expressly qualified in their entirety by these cautionary comments. The Company expressly disclaims any intent or obligation to update publicly forward-looking information, whether as a result of new information, future events or otherwise.

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