easyhome Ltd.
TSX : EH

easyhome Ltd.

December 09, 2010 16:07 ET

easyhome Ltd. Announces $10 Million Private Placement Offering of Common Shares and Report of Audit Committee on Review of Employee Fraud and Internal Controls

TORONTO, ONTARIO--(Marketwire - Dec. 9, 2010) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

easyhome Ltd. (TSX:EH) ("easyhome" or the "Company") announced today that it has entered into an agreement with Raymond James Ltd., as lead underwriter and sole book-runner on behalf of a syndicate of underwriters including Cormark Securities Inc. and Paradigm Capital Inc. (collectively, the "Underwriters"), to sell to the Underwriters, on a "bought deal", private placement basis, 1,176,470 Common Shares ("Shares") at a price of $8.50 per Share, for gross proceeds to easyhome of $10.0 million (the "Financing"). easyhome has also granted the Underwriters an over-allotment option to purchase up to an additional 176,470 Shares at the same offering price ("Over-allotment Option"), exercisable in whole or in part at any time up until the closing date of the Financing. Should the Over-allotment Option be exercised in full, the total gross proceeds of the Financing would be approximately $11.5 million. The Shares will be offered pursuant to prospectus and registration exemptions in each of the provinces and territories of Canada, as well as in the United States under applicable private placement exemptions. The Financing is expected to close on or about December 23, 2010 and is subject to regulatory approval. easyhome intends to use the net proceeds from the Financing to fund growth initiatives at its existing easyfinancial services kiosks and for general corporate purposes, including debt repayment.

With respect to the previously reported employee fraud at one easyfinancial kiosk, the Company announced that its Audit Committee, with the advice and assistance of its legal and forensic accounting advisors, completed its investigation. The investigation confirmed that the scope and magnitude of the employee fraud was as previously disclosed; there was no evidence to suggest that the perpetrator of the fraud conspired with others at the Company; there was no indication that senior management of the Company or any other employee participated in, knew of or attempted to cover up the fraud; and that while other instances of fraud have occurred, no other significant instances of fraud were discovered. Additionally, the Audit Committee made a number of recommendations intended to improve internal controls at easyhome, including:

  • the preparation by management, in consultation with the Company's auditors and under the direction of the Audit Committee, of a detailed plan for the remediation of identified control weaknesses, to be provided to the Board of Directors for its consideration and approval

  • formal assumption by the Audit Committee of responsibility for oversight of the Company's anti-fraud programs

  • establishing an independent risk management function, including hiring a Vice-President, Risk Management

  • enhancing legal oversight and assessment of potential legal and reputational risk issues

  • adherence to standard operating procedures ("SOP"), particularly those related to document collection and retention

  • hiring qualified Regional Managers and field auditors and enhancing SOP review procedures

  • developing and enhancing reporting and monitoring of key performance indicators to assist in the identification of anomalies and trends, including benchmarking the Company against others in the industry

  • remediating or replacing the easyfinancial transaction software to address certain process control deficiencies.

The Company has either already taken or intends to take in the near future appropriate action to remediate these issues and enhance its internal controls. In addition to other initiatives, the Company has: hired a Vice President, Risk Management with extensive risk management experience in the financial services industry, hired two new field auditors who are independent of operations and three former Wells Fargo employees as easyfinancial Regional Managers; increased monitoring of additional key performance indicators; conducted a review of and made refinements to its standard operating procedures; introduced modifications to the easyfinancial transaction software; and will be implementing a new electronic automated loan decision-making and identity verification tool. The total cost of the Audit Committee's investigation, a portion of which may be reimbursed by insurance, is expected to amount to approximately $2.3 million, which will be expensed in the fourth quarter of this year.

As previously announced, the Company is in the process of preparing restated consolidated financial statements for each of the two quarterly periods of March 31, 2010 and June 30, 2010, including the respective comparatives, and the annual consolidated financial statements for the year ended December 31, 2009 and the associated MD&A disclosures, which will be completed and filed on SEDAR prior to year end.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

About easyhome

As at November 30, 2010, easyhome Ltd. had 254 stores, including 36 franchised/licensed locations. The Company also operated 63 easyfinancial kiosks within existing easyhome stores. easyhome Ltd. is Canada's largest merchandise leasing company and the third largest in North America, offering top quality, brand-name household furnishings, appliances and home electronic products to consumers under weekly or monthly leasing agreements through both corporate and franchise stores. In addition, the Company offers a variety of financial services, including loans, prepaid credit cards and cheque cashing through its easyfinancial services business. easyhome Ltd. is listed on the TSX under the symbol 'EH'.

Forward-Looking Statements

This news release includes forward-looking statements about easyhome Ltd. including its business operations, strategy and expected financial performance and condition. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as 'expects', 'anticipates', 'intends', 'plans', 'believes' or negative versions thereof and similar expressions. In addition, any statement that may be made concerning future financial performance (including revenue, earnings or growth rates), ongoing business strategies or prospects about future events is also a forward-looking statement. Forward-looking statements are based on certain factors and assumptions, including expected growth, results of operations and business prospects and are inherently subject to, among other things, risks, uncertainties and assumptions about our operations, economic factors and the industry generally. They are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements made by us, due to, but not limited to important factors such as our ability to enter into new lease and/or financing agreements, collect on existing lease and/or financing agreements, open new locations on favourable terms, secure new franchised locations, purchase products which appeal to our customers at a competitive rate, cope with changes in legislation, react to uncertainties related to regulatory action, raise capital under favourable terms, manage the impact of litigation (including shareholder litigation), control costs at all levels of the organization and maintain and enhance our system of internal controls. We caution that the foregoing list is not exhaustive. The reader is cautioned to consider these and other factors carefully and not place undue reliance on forward-looking statements, which may not be appropriate for other purposes. We are under no obligation (and expressly disclaim any such obligation) to update or alter the forward-looking statements whether as a result of new information, future events or otherwise, unless otherwise required by law.

Contact Information

  • easyhome Ltd.
    David Ingram
    President & Chief Executive Officer
    (905) 272-2788
    or
    easyhome Ltd.
    Steve Goertz
    Sr. VP & CFO
    (905) 272-2788