GC-Global Capital Corp.

GC-Global Capital Corp.

April 27, 2012 17:00 ET

GC-Global Capital Corp. Announces its Financial Results for the Year Ended December 31, 2011

TORONTO, ONTARIO--(Marketwire - April 27, 2012) - GC-Global Capital Corp. ("GC") (TSX VENTURE:GDE.A) is pleased to announce its financial results for the year ended December 31, 2011.

GC is a merchant bank which provides bridge loan services (asset back/collateralized financing), ranging from $300,000 to $3,000,000 to companies across many industries such as oil & gas, mining, real estate, manufacturing, retail, financial services, technology and biotechnology. GC takes a disciplined and systematic approach to investment and is guided by four core principles: Capital Preservation, Shareholder Value, Secure Generation of Income and Risk Management. GC also invests in emerging North American companies across all industries. GC's investments are made through equity financings and GC works with management of operating companies in order to create value for businesses in which GC assumes a position. These services can include additional equity financing, developing mergers and acquisitions, providing operational management support and structuring and negotiating debt and equity placements.

The Company focuses on 3 main long-term, financial measurements:

  1. Long-term/profitable investments
  2. Maintaining strong capital and liquidity
  3. Managing the success of its equity and investment portfolios
GC has 4 business activities or investments:
  1. Structuring Deals/Bridge Loans ("Deals")
  2. Market Investments ("Investments")
  3. Equity stakes in private companies ("Private Companies")
  4. Property/Land Investments ("Land")

Overall 2011 Performance

As noted above, GC's income is generated from 4 different business activities, some active (Deals, Investments and Private Companies) and some passive (Land). Correspondingly, revenues are presented to show the performance of each of these activities. As is common for all businesses, the performance of each of these business activities or investments will affect the Company's balance sheet and income statements in different ways which include the impact of non-operating activity, or adjusting the values to passive investments. As GC holds a significant portfolio of passive and equity investments, the presentation of the financial statements is greatly dependent on the valuation of these assets, due to market conditions in 2011 regardless of whether these investments are being held for the long term. With this in mind, it must be understood that the balance sheet presentation is greatly affected by the performance of the passive and equity investments and to a lesser extent the active investments. Going forward, the Company will be identifying opportunities to help the management of its equity investments improve the value of its active and equity investments through discussions on how they can improve their net income and corresponding asset value. As required for passive investments, they are valued according to IFRS requirements and any change in the value of these passive investments is recognized by adjustments to their value on the balance sheet and corresponding income statement impacts from these non-operating activities. These financial statements must be read with this perspective as accounting presentation does not always allow the flexibility to present forward looking values for long term equity and property investments. The Company anticipates that the valuation of the equity and property investments will reflect improvements in their respective sector opportunities and market conditions over the coming years.

As per the 2011 press releases, the Company is adjusting its equity investments in Private Companies in conjunction with the changing business cycle. New equity investments were added in 2011 which have no comparable in 2010. Business activities and investment valuations reflect significant changes to the economic climate of each market segment. To this end, the following discussion includes additional information for the sole purpose of simplifying year over year comparisons which may not be immediately evident when comparing the financial activities and portfolio investments common to both years.

As at December 31, 2011 GC's net assets were valued at $10.5 million or $0.58 per share compared to $15.6 million or $0.81 per share as at December 31, 2010. The $5.1 million dollar change in net assets is a combination of $4.1mm in net loss (mostly due to the valuation of equity and property investments and unrealized losses on fair value through profit or loss investments), $0.6mm in other comprehensive loss and $0.4mm in share buybacks through the Company's Normal Course Issuer Bid ("NCIB").

The net loss for the year ended December 31, 2011 was $4,110,050 (2010 - $46,751) and net comprehensive loss was $4,707,693 (2010 - $81,277). The bulk of the loss from the following 6 non-cash, valuation related sources may not be realized in the future: $1,338,569 due to unrealized losses on fair value through profit or loss investments (2010 - gain of $217,870), $969,619 provision for loan losses (2010 - $515,000), $745,176 loss on the valuation of investments using the equity method (2010 - loss of $51,153), $521,494 on write down of investment properties (2010 - $96,927), $450,976 for permanent impairment on portfolio investments (2010 - $143,318) and $600,000 write-down of a deferred income tax asset (2010 - $0). Net loss per share was $0.22 (2010 - $0.00). Excluding the 6 income statement items noted above, the adjusted net profit before tax per share was $0.03 (2010 - profit of $0.03) Also included in net loss for the year ended 2011 is a non-recurring settlement of contingency in the amount of $75,000 (2010 - $288,990). In 2012, the management team is focusing on reversing the impact of non-cash, valuation sources where possible. Efforts to reverse these non-cash expenses will focus on: 1) recovering capital from legacy bridge loans which have been written down, 2) identifying opportunities to reduce the provision for loan losses, 3) improving the valuation of equity investments through working with management to drive net profit, 4) capturing improvements in the United States real estate market.

The majority of the losses for 2011 stem from write downs of legacy real estate holdings and the bridge loan related to the museum exhibition called the Las Vegas Mob Experience ("LVME"). Global Capital continues to pursue through the courts, the assets of the LVME as part of its recovery process, which it expects to be resolved in 2012. Regarding the state of the U.S. real estate recovery, we continue to monitor the markets of North Carolina, New Mexico and Georgia where the real estate holdings are located. We believe these markets are showing signs of healing and expect relative improvement in these markets this year and next. The combination of the sluggish U.S. real estate market along with the lengthy legal process of the U.S. courts required the company to take conservative measures and write down these assets with the goal of creating an asset base and net asset value per share to now grow from.

In the second half of 2011 and leading into 2012, Global Capital made the strategic decision to refocus its resources and management team to support its repositioning as a merchant bank. Over the past few months, three new directors joined the company's board enhancing the board's skills in securities law, public reporting and finance. The company's governance has been enhanced with modification to oversight committees. The recent appointment of Mr. Robert Parent as Chief Operating Officer demonstrates Global Capital's commitment to strengthening the management team by adding a focus on operations that is consistent with the Company's recent investments in Marathon Mortgage Corporation, Fletcher Business Park, Attorneys Title Guarantee Fund, Inc. and Tanenbaum Landscape & Design Inc. These investments are expected to drive a growing portion of Global Capital's value in the second half of 2012. In addition the board and executive have made the strategic decision to co-locate Global Capital's head office with the Marathon Mortgage Corporation's head office to provide assistance as the business launches its operations.

Strategic Investments;

  1. Marathon Mortgage Corporation

In November, 2011, Global Capital announced that it had become one of the founding shareholders of Marathon Mortgage Corporation ("MMC"), a residential mortgage origination, sales and servicing business. Global Capital raised $7,801,000 on MMC's behalf of which Global Capital subscribed for and purchased 2,750,000 Preferred Shares and 2,138,890 Common Shares of Marathon Mortgage Corporation ("MMC") for a total subscription price of $2,750,213.89. In early 2012, MMC applied to CMHC for approval to commence CMHC insured mortgage origination and servicing in 2012. MMC brings together the former management team of First Marathon Mortgage Corp. which at the time of its sale in 2002 was servicing approximately $4 Billion in mortgages.

Through the MMC management team's alliances with major financial institutions and mortgage brokerage firms, MMC's goal is to become one of the most reliable residential and commercial mortgage lenders in Canada, providing mortgage products with competitive rates, terms and features supported by reliable service and quick approval turnaround to its borrowers and broker partners. MMC will underwrite prime-insured and conventional residential and commercial mortgages that will be sold to mortgage investors, such as banks or trust companies, co-operatives, securities firms and insurance companies. MMC expects to retain the majority of servicing for these mortgages.

MMC's Board of Directors includes:

-Stuart Henry, Chairman
-Harold Kennedy, President and CEO
-Michael MacKenzie
-Hank Cunningham
-Chris Kauffman

Global Capital's was the lead order of MMC Preferred and Common Shares in a financing of MMC which raised $7,801,000. The Preferred Shares are expected to yield a cumulative annual dividend equal to 8% of the issue price and the Preferred Shares are also redeemable at a redemption price equal to the issue price. It is expected that MMC will redeem all of the Preferred Shares within four years.

As consideration for being the lead order on the MMC financing, Global negotiated and entered into a Put/Call arrangement pursuant to which Global may purchase, or MMC may require Global to purchase, an additional 1.2 million Preferred Shares and 933,333 Common Shares for an aggregate purchase price of $1,200,093. The Put/Call shall remain available for exercise for a period of five years; however, MMC cannot exercise their Put rights until after one year from the date of closing of the MMC financing.

At the time of closing, Global Capital's CEO, Jason Ewart, commented "This transaction represents a significant investment for Global Capital. Given the track record of their previous company, First Marathon Mortgage Corp., we believe that this management team can once again create a leading national mortgage company."

  1. Tanenbaum Landscape & Design Inc.:

In 2011 closed a joint venture called TGC Acquisition Corp. ("TGC") with Rossmore and Partners Investments Corp. ("Rossmore"), under which the parties completed the acquisition of DDR Landscaping Contractors Ltd. ("DDR" and was subsequently renamed Tanenbaum Landscape & Design ("TLD"). The principal of Rossmore and Global Capital's partner in the deal, Susan Tanenbaum, has more than 20 years of senior management experience with industrial companies and has worked throughout the United States and Canada. Global Capital and Rossmore have an equal interest in the joint venture. Of the $2.5 million purchase, GC provided $1,000,000, Rossmore provided an additional $500,000 and the sellers provided a $1-million vendor take back loan for the balance of the purchase price. Based in Oakville, TLD is a commercial site contractor in the Ontario region. TLD is showing growth in operating results in 2012, adding to its pipeline of project contracts and expanding its business from its historical focus of municipal contracts into the private sector commercial landscaping industry.

  1. Fletcher Business Park, North Carolina:

Global Capital holds a 12.5% (thru a wholly owned U.S. subsidiary which has a 51% ownership interest in an LLC that owns a 25% ownership stake) in the Fletcher Business Park, a 900,000 square foot commercial building located on a 46 acre parcel of land outside of Asheville, North Carolina. Vacancy rate is currently two percent. In early 2012, the controlling shareholder of Fletcher Business Park, Pulliam Properties Inc., informed Global Capital that they expect to market the property for sale in 2012 at a price range beginning at US$18,000,000. Net of the current bank mortgage on the property, the approximate net proceeds to Global Capital would be US$1,500,000.

  1. Attorney's Title Guarantee Fund ("ATGF"):

Based in Denver, Colorado, ATGF is a fifty-two year old full service underwriter servicing independent title agents in the states of Colorado, Minnesota, Utah and South Dakota. Title insurance is issued throughout a vast network of licensed title agents in each state. Global Capital and its partner, Toronto based Lawyer Done Deal ("LDD"), acquired control of the company in 2011 with an investment of $1.2 million. Leveraging off of LDD's expertise in web-based business applications within the real estate market, a new software platform is being implemented into ATGF to enhance functionality and efficiency. Such capabilities as funds handling, multiple underwriter capabilities and the automation of ATGF's back-end operations are expected to increase the company's efficiency, tracking of agent transactions and offer new revenue streams thereby increasing ATGF's market share.

Comments on the First Quarter of 2012

The Company expects to file its first quarter financial statements for the period ending March 31, 2012 prior to the end of May, 2012.

2011 Audited Financial Statements and MD&A

A full set of the 2010 audited financial statements and the Management Discussion & Analysis will be filed today on SEDAR.

Global Capital's shares trade on the TSX Venture Exchange under the symbol "GDE.A".

Forward-Looking Information

These materials include certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Other than statement of historical fact, all statements in this material, including, without limitation, statements regarding fair values of marketable securities, investments, bridge loans, convertible debentures, estimated asset retirement obligations, and future plans and objectives of the Company, are forward-looking statements that involve various known and unknown risks, uncertainties and other factors. There can be no assurance that such statements will prove accurate. Actual results and future events could differ materially from those anticipated in such statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of these materials. Important factors that could cause actual results to differ materially from the Company's expectations include, without limitation, the level of bridge loans completed, the nature and credit quality of the collateral security, the sufficiency of cost estimates for remaining reclamation obligations as well as those factors discussed in the Company's documents filed from time to time with the TSX Venture Exchange, Canadian securities regulators and other regulatory authorities. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this notice.

About GC-Global Capital Corp.

Global Capital is a merchant bank which provides bridge loan services (asset back/collateralized financing), to companies across many industries such as oil & gas, mining, real estate, manufacturing, retail, financial services, technology and biotechnology.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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