Gendis Inc.
TSX : GDS

Gendis Inc.

September 07, 2007 16:47 ET

Gendis Inc. Announces Second Quarter Results

WINNIPEG, MANITOBA--(Marketwire - Sept. 7, 2007) - Gendis Inc. (TSX:GDS) today announced its financial results for the 2nd quarter ended July 31, 2007 of the fiscal year ending January 31, 2008.

Revenue for the 2nd quarter was $1.0 -million compared to $0.8 -million last year. The 2nd quarter change in the market value of investments that were held for trading, net of gains on sale of investments, was loss of $0.6 -million compared to nil for the prior period. The net loss for the 2nd quarter was $0.7 -million ($0.05 per share) compared to a net loss of $0.3 -million ($0.02 per share) last year.

Revenue year-to-date was $1.4 -million compared to $1.3 -million last year. The year-to-date change in the market value of investments that were held for trading, net of gains on sale of investments was a loss of $0.7 -million compared to a gain of $0.4 -million for the prior period. The net loss year-to-date was $1.5 -million ($0.10 per share) compared to a net loss of $0.5 -million ($0.03 per share) last year.

Effective with the beginning of the current year, the Company adopted the mandatory new standards for the accounting and presentation of "Financial Instruments" and "Comprehensive Income" on a prospective basis in accordance with required transitional provisions. Accordingly, there are no comparative amounts for market value changes for the prior year quarter and year to date.

The increase in revenue in the 2nd quarter is primarily attributable to increased tenancy in the Company's Sony Place facility and increased investment income from the Company's share of earnings from its investment in Fort Chicago. The decline in earnings is due to unfavourable market value changes in its investments, primarily Fort Chicago and Alberta Clipper.

In the quarter, The Company invested a further $2.2 -million in OSUM Oil Sands Corp., a private company. Gendis was a participant in OSUM recent $56-million private placement equity financing at $9.00 per OSUM share which compares favourably to Gendis' $2.48 per OSUM share average cost base. Subsequent to the closing of the equity offering and the conversion of all outstanding convertible debentures, Gendis holds 4.3% of OSUM's basic shares outstanding, 3.7% on a fully diluted basis.



Gendis Inc.
Consolidated Balance Sheet

Jul. 31, Jan. 31,
(unaudited - $,000's) 2007 2007
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Assets
Cash 273 195
Receivables 334 528
Prepaid expenses 416 232
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1,023 955

Investments (note 2)
at fair value 34,049 38,914
at carrying value 4,821 2,566
Note receivable 2,267 2,203
Property and equipment 10,765 10,909
Future tax asset 960 960
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53,885 56,507
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Liabilities and Shareholders' Equity
Credit facilities 14,912 14,798
Payables and accrued liabilities 1,076 1,013
Income and capital taxes payable 5 212
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15,993 16,023
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Shareholders' equity
Capital stock 15,432 15,736
Accumulated other comprehensive income 2,525 3,008
Retained earnings 19,935 21,740
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37,892 40,484
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53,885 56,507
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Gendis Inc.
Consolidated Statement of Earnings (Loss)
quarter year-to-date
ended ended
(unaudited - Jul. 31, Jul. 31, Jul. 31, Jul. 31,
$,000's, except per share) 2007 2006 2007 2006
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Revenue
Investment (note 2) 596 557 591 933
Real estate rental 374 211 760 329
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970 768 1,351 1,262
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Expenses
Property and administrative expenses 686 777 1,443 1,484
Amortization of property and
equipment 87 84 175 174
Interest and finance expenses 235 161 441 288
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1,008 1,022 2,059 1,946
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Loss before the undernoted (38) (254) (708) (684)

Provision for loss on investments - - (328) -
Change in fair value of investments
held for trading (1,060) - (1,105) -
Gain on sale of investments 406 15 686 448
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Loss before taxes (692) (239) (1,455) (236)
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Provision for income taxes:
Current 30 24 48 46
Future - - - 200
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30 24 48 246
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Net loss (722) (263) (1,503) (482)
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Loss per share - basic and diluted (0.05) (0.02) (0.10) 0.03)
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Gendis Inc.
Consolidated Statement of Comprehensive Income (Loss)
quarter year-to-date
ended ended
Jul. 3l, Jul. 31, Jul. 3l, Jul. 31
(unaudited -$,000's) 2007 2006 2007 2006
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Other comprehensive loss
Change in the fair value of investments (878) - (290) -
Provision for loss on investments - - 328 -
Gain on sale of investments (45) - (45) -
Share of cumulative foreign exchange
translation adjustment
from flow-through entities
Realized foreign exchange translation 38 - 78 -
Unrealized foreign exchange
translation (485) - (554) -
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Other comprehensive loss (1,370) - (483) -

Net loss (722) (263) (1,503) (482)
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Comprehensive loss (2,092) (263) (1,986) (482)
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Gendis Inc.
Consolidated Statement of Retained Earnings
quarter year-to-date
ended ended
Jul. 31, Jul. 31, Jul. 31, Jul. 31,
(unaudited -$,000's) 2007 2006 2007 2006
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Balance - beginning of period 20,787 52,503 18,960 52,761
Restatement for financial instruments:
Adjustment to fair value for
investments held for trading, net of
future income taxes of $559 - - 1,484 -
Share of cumulative foreign exchange
translation adjustment from flow-
through entities - - 1,296 -
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Balance - restated 20,787 52,503 21,740 52,761
Net loss (722) (263) (1,503) (482)
Refundable dividend taxes - - - (2)
Purchase and cancellation of share
capital (130) (94) (302) (131)
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Balance - end of period 19,935 52,146 19,935 52,146



Gendis Inc.
Consolidated Statement of Accumulated Other Comprehensive Income

quarter year-to-date
ended ended
Jul. 31, Jul. 31, Jul. 31, Jul. 31,
(unaudited -$,000's) 2007 2006 2007 2006
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Balance - beginning of period 3,895 - - -
Restatement for financial instruments:
Adjustment to fair value for
investments available for sale, net of
future income taxes of $778 - - 4,304 -
Share of cumulative foreign exchange
translation adjustment from flow-
through entities - - (1,296) -
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Balance - restated 3,895 - 3,008 -
Other comprehensive loss (1,370) - (483) -
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Balance - end of period 2,525 - 2,525 -
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Gendis Inc.
Consolidated Statement of Cash Flows

quarter year-to-date
ended ended
Jul. 31, Jul. 31, Jul. 31, Jul. 31,
(unaudited -$,000's) 2007 2006 2007 2006
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By operations:
Earnings (loss) (722) (263) (1,503) (482)
add (deduct) items not affecting cash:
Amortization of property and equipment 87 84 175 174
Gain on sale of investments (406) (15) (686) (448)
Provision for loss on investments - - 328 -
Change in fair value of investments held
for trading 1,060 - 1,105 -
Future income tax - - - 200
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Cash flow from earnings 19 (194) (581) (556)
Change in working capital (227) (465) (2) (431)
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(208) (659) (583) (987)
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By investing activities:
Proceeds on sale of investments 3,115 164 4,877 2,352
Difference between distributions
and investment income 124 223 884 904
Investments acquired (3,675) (1,159) (4,382) (6,314)
Purchase of property and equipment (10) (59) (31) (59)
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(446) (831) 1,348 (3,117)
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By financing activities:
Advance from credit facilities 917 1,552 114 4,698
Purchase for cancellation of share
capital (254) (169) (606) (230)
Refundable dividend tax - - (195) (338)
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663 1,383 (687) 4,130
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Increase (decrease) in cash 9 (107) 78 26

Cash - beginning of period 264 228 195 95
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Cash - end of period 273 121 273 121
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Supplementary information:
Taxes paid 30 24 243 384
Interest paid 211 162 420 302



Gendis Inc.

Notes to Consolidated Interim Financial Statements - unaudited July 31, 2007

1. Significant Accounting Policies and Basis of Presentation

(a) These unaudited consolidated interim financial statements are prepared in accordance with accounting principles generally accepted in Canada.
However, these interim financial statements do not contain all the disclosures that would be required under generally accepted accounting principles for annual financial statements. These interim financial statements follow the same accounting policies and methods of application as the audited annual consolidated financial statements at January 31, 2007 except for the adoption of new accounting and presentation standards. Certain disclosures required for annual financial statements have been condensed or omitted in these interim financial statements. Accordingly, these interim financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto as presented in the Company's Annual Report for the fiscal year ended January 31, 2007. The following notes to the interim financial statements are supplemental to the notes to the annual consolidated financial statements.

(b) Effective with the beginning of the 1st quarter of the current year, the Company adopted the mandatory new standards for the accounting and presentation of "Financial Instruments" and "Comprehensive Income" on a prospective basis in accordance with the transitional provisions, with a restatement of the beginning balance of Retained Earnings and the establishment of another Shareholders' Equity classification "Accumulated Other Comprehensive Income." Under the new standards, all financial assets must be classified as held for trading, held-to-maturity, loans and receivables or available for sale. All financial liabilities are classified as held for trading or other financial liabilities. Initially, all financial instruments are recorded on the consolidated balance sheet at fair value. After initial recognition, at each period end, all financial instruments are re-measured to their fair value, except for held-to-maturity investments, loans and receivables and other financial liabilities, which are measured at amortized cost. Any gain or loss arising from a change in the fair value of a financial asset or financial liability classified as held for trading is included in net income for the period in which it arises. The gain or loss resulting from a change in fair value of a financial asset classified as available for sale is recognized in other comprehensive income until the financial asset is derecognized through disposal or becomes impaired.

In conjunction with the new standards for the accounting and presentation of Financial Instruments and Comprehensive Income, a restatement of the beginning balance of Retained Earnings with an offsetting amount recorded in Accumulated Other Comprehensive Income is also required for the Company to account for Fort Chicago's Cumulative Translation Adjustment. Beginning Retained Earnings was increased by $1,296,000 with a corresponding reduction to Accumulated Other Comprehensive Income.

Approximately 83% of the shares of Fort Chicago and all of the shares in Thunder have been designated as investments available for sale. These investments are recorded at fair value on the balance sheet with fair value changes recorded as other comprehensive income. Fair value is determined to be the quoted bid price in an active exchange traded market. The application of the new accounting policy resulted in an increase to the investment asset of $5,082,000, an increase to beginning Retained Earnings of $4,304,000 and a reduction to the Future tax asset of $778,000.

Private placement investments have been designated to be carried at carrying value as fair values cannot be reliably determined.

The remaining portfolio of investments has been designated as held for trading. These investments are recorded at fair value on the balance sheet with fair value changes recorded in the Statement of Earnings (Loss). The application of the new accounting policy resulted in an increase to the investment asset of $2,043,000, an increase to beginning Retained Earnings of $1,484,000 and a reduction to the Future tax asset of $559,000.



2. Investments
(a) Number
of shares/units Fair Value
(000's) ($000's)
Jul. 31, Jan. 31, Jul. 31, Jan. 31,
2007 2007 2007 2007
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Available for sale
Flow-through entities
Fort Chicago 2,190 2,190 23,126 24,090
Thunder Energy - 500 - 2,655
Held for trading
Flow-through entities
Fort Chicago 144 188 1,523 2,067
Other equity investments
Alberta Clipper 700 600 1,890 3,240
Ember Resources 655 655 1,579 1,762
FNX Mining 70 65 2,279 1,163
International Nickel Ventures 375 325 563 497
Opti Canada 80 90 1,832 1,779
Pioneer Resources - 20 - 965
Royal Bank 10 - 541 654
Other equity investments 716 42
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Total exchange-traded investments 34,049 38,914
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Number of shares Carrying Value
('000's)/
face value ($000's)
($000's)
Jul. 31, Jan. 31, Jul. 31, Jan. 31,
2007 2007 2007 2007
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Private investments
OSUM - shares 1,948 713 4,821 1,576
OSUM - debenture - $1,000 - 990
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4,821 2,566
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(b) Investment income represents: quarter year-to-date
ended ended
Jul. 31, Jul. 31, Jul. 31, Jul. 31,
($,000's) 2007 2006 2007 2006
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Interest & dividend income 133 46 202 92
Investment income from flow-through
entities:
Fort Chicago 463 365 579 656
Thunder Energy - 146 (190) 185
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596 557 591 933
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3. Capital Stock

(a) Number of shares quarter year-to-date
ended ended
Jul. 31, Jul. 31, Jul. 31, Jul. 31,
('000's) 2007 2006 2007 2006
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Balance - beginning of period 14,799 15,293 14,970 15,316
Shares purchased for cancellation (118) (71) (289) (94)
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Balance - end of period 14,681 15,222 14,681 15,222
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(b) Share capital quarter year-to-date
ended ended
Jul. 31, Jul. 31, Jul. 31, Jul. 31,
($,000's) 2007 2006 2007 2006
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Balance - beginning of period 15,556 16,076 15,736 16,100
Shares purchased for cancellation (124) (75) (304) (99)
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Balance - end of period 15,432 16,001 15,432 16,001
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4. Segment Information

quarter
ended Inter-
($,000's) July 31 Realty Corporate segment Total
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Revenue 2007 390 637 (57) 970
2006 216 605 (53) 768

Expenses 2007 314 418 (46) 686
2006 421 391 (35) 777

Amortization 2007 85 2 - 87
2006 80 4 - 84

Interest 2007 11 235 (11) 235
2006 18 161 (18) 161

Investment - gain
(loss) on sale,
provision for loss
and changes in fair 2007 - (654) - (654)
value, net 2006 - 15 - 15

Provision for
(recovery of) 2007 (7) 37 - 30
income taxes 2006 (92) 116 - 24

Net loss 2007 (13) (709) - (722)
2006 (211) (52) - (263)
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year-to-date
ended Inter-
($,000's) July 31 Realty Corporate segment Total
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Revenue 2007 791 674 (114) 1,351
2006 338 1,023 (99) 1,262

Expenses 2007 694 840 (91) 1,443
2006 773 780 (69) 1,484

Amortization 2007 167 8 - 175
2006 166 8 - 174

Interest 2007 23 441 (23) 441
2006 30 288 (30) 288

Investment - gain
(loss) on sale,
provision for loss
and changes in fair 2007 - (747) - (747)
value, net 2006 - 448 - 448

Provision for
(recovery of) 2007 (32) 80 - 48
income taxes 2006 (207) 453 - 246

Net loss 2007 (61) (1,442) - (1,503)
2006 (424) (58) - (482)
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Total Assets 2007 11,179 43,512 (806) 53,885
2006 13,059 70,400 (1,560) 81,899
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5. Commitments & Contingencies

There have been no material developments in the lawsuits that were disclosed in the annual financial statements for the year ended January 31, 2007.

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