Gendis Inc.
TSX : GDS

Gendis Inc.

December 11, 2007 17:31 ET

Gendis Inc. Announces Third Quarter Results

WINNIPEG, MANITOBA--(Marketwire - Dec. 11, 2007) - Gendis Inc. (TSX:GDS) today announced its financial results for the 3rd quarter ended October 31, 2007 of the fiscal year ending January 31, 2008.

Revenue for the 3rd quarter was $0.9 -million compared to $1.1 -million last year. The 3rd quarter change in the market value of investments that were held for trading, net of gains on sale of investments, was loss of $0.9 -million compared to nil for the prior year comparative period. In the 3rd quarter, an assessment of the likelihood of collection of a note receivable and accrued interest of $2.3 -million from Saan Stores Ltd. was considered remote and accordingly, the Company has provided a full allowance for the doubtful collection as a provision for loss on this investment. The Company expects that rent payments from Saan will continue in the ordinary course of operations. The net loss for the 3rd quarter was $3.2 -million ($0.23 per share) compared to a net loss of $0.2 -million ($0.02 per share) last year.

Revenue year-to-date was $2.2 -million compared to $2.4 -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 $1.3 -million compared to a gain of $0.5 -million for the prior period. The net loss year-to-date was $4.8 -million ($0.33 per share) compared to a net loss of $0.3 -million ($0.02 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.

In the 2nd quarter, Gendis was a participant in Oil Sands Underground Mining Inc.'s ("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. Gendis holds 4.3% of OSUM's basic shares outstanding, 3.7% on a fully diluted basis.



Gendis Inc.
Consolidated Balance Sheet

Oct. 31, Jan. 31,
(unaudited - $,000's) 2007 2007
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Assets
Cash 99 195
Receivables 344 528
Income and capital taxes recoverable 5 -
Prepaid expenses 355 232
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803 955
Investments (note 2)
at fair value 33,316 38,914
at carrying value 4,821 2,566
Note receivable (note 2c) - 2,203
Property and equipment 10,653 10,909
Future tax asset 960 960
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50,553 56,507
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Liabilities and Shareholders' Equity
Credit facilities 15,789 14,798
Payables and accrued liabilities 1,088 1,013
Income and capital taxes payable - 212
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16,877 16,023
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Shareholders' equity
Capital stock 15,237 15,736
Accumulated other comprehensive income 2,014 3,008
Retained earnings 16,425 21,740
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33,676 40,484
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50,553 56,507
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Gendis Inc.
Consolidated Statement of Earnings (Loss)

quarter ended year-to-date ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
(unaudited - $,000's, except per
share) 2007 2006 2007 2006
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Revenue
Investment (note 2) 493 852 1,084 1,785
Real estate rental 380 258 1,140 587
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873 1,110 2,224 2,372
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Expenses
Property and administrative expenses 583 577 2,026 2,061
Amortization of property and equipment 88 93 263 267
Interest and finance expenses 239 220 680 508
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910 890 2,969 2,836
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Loss before the undernoted (37) 220 (745) (464)

Loss on disposal of capital assets (9) - (9) -
Provision for loss on note receivable (2,301) - (2,301) -
Provision for loss on investments - - (328) -
Change in fair value of investments
held for trading (940) - (2,045) -
Gain on sale of investments 63 29 749 477
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Loss before taxes (3,224) 249 (4,679) 13
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Provision for income taxes:
Current 70 57 118 103
Future - - - 200
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70 57 118 303
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Net loss (3,294) 192 (4,797) (290)
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Loss per share - basic and diluted (0.23) 0.01 (0.33) (0.02)
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Gendis Inc.
Consolidated Statement of Comprehensive Income (Loss)

quarter ended year-to-date ended
Oct. 3l, Oct. 31, Oct. 3l, Oct. 31,
(unaudited - $,000's) 2007 2006 2007 2006
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Other comprehensive loss
Change in the fair value of investments (225) - (515) -
Provision for loss on investments - - 328 -
Gain on sale of investments - - (45) -
Share of cumulative foreign exchange
translation adjustment from
flow-through entities
Realized foreign exchange translation 44 - 122 -
Unrealized foreign exchange
translation (418) - (972) -
Other 88 - 88 -
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Other comprehensive loss (511) - (994) -

Net earnings (loss) (3,294) 192 (4,797) (290)
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Comprehensive loss (3,805) (263) (5,791) (290)
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Gendis Inc.
Consolidated Statement of Retained Earnings

quarter ended year-to-date ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
(unaudited - $,000's) 2007 2006 2007 2006
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Balance - beginning of period 19,935 52,146 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 19,935 52,146 21,740 52,761
Net loss (3,294) 192 (4,797) (290)
Refundable dividend taxes - - - (2)
Purchase and cancellation of share
capital (216) (119) (518) (250)
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Balance - end of period 16,425 52,219 16,425 52,219
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Gendis Inc.
Consolidated Statement of Accumulated Other Comprehensive Income

quarter ended year-to-date ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
(unaudited - $,000's) 2007 2006 2007 2006
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Balance - beginning of period 2,525 - - -
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 2,525 - 3,008 -
Other comprehensive loss (511) - (994) -
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Balance - end of period 2,014 - 2,014 -
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Gendis Inc.
Consolidated Statement of Cash Flows

quarter ended year-to-date ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
(unaudited - $,000's) 2007 2006 2007 2006
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By operations:
Earnings (loss) (3,294) 192 (4,797) (290)
add (deduct) items not affecting cash:
Amortization of property and equipment 88 93 263 267
Loss on disposal of capital assets 9 - 9 -
Gain on sale of investments (63) (29) (749) (477)
Provision for loss on note receivable 2,301 - 2,301 -
Provision for loss on investments - - 328 -
Change in fair value of investments
held for trading 940 - 2,045 -
Future income tax - - - 200
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Cash flow from earnings (19) 256 (600) (300)
Change in working capital 40 (94) 38 (525)
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21 162 (562) (825)
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By investing activities:
Proceeds on sale of investments 685 494 5,562 2,846
Difference between distributions
and investment income 88 (33) 972 871
Investments acquired (1,429) (1,987) (5,811) (8,301)
Purchase of property and equipment (5) (37) (36) (96)
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(661) (1,563) 687 (4,680)
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By financing activities:
Advance from credit facilities 877 1,631 991 6,329
Purchase for cancellation of share
capital (411) (216) (1,017) (446)
Refundable dividend tax - - (195) (338)
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466 1,415 (221) 5,545
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Increase (decrease) in cash (174) 14 (96) 40

Cash - beginning of period 273 121 195 95
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Cash - end of period 99 135 99 135
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Supplementary information:
Taxes paid 69 57 312 441
Interest paid 281 194 701 496



Gendis Inc.
Notes to Consolidated Interim Financial Statements - unaudited
October 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)
Oct. 31, Jan. 31, Oct. 31, Jan. 31,
2007 2007 2007 2007
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Available for sale
Flow-through entities
Fort Chicago 2,190 2,190 22,578 24,090
Thunder Energy - 500 - 2,655
Held for trading
Flow-through entities
Fort Chicago 134 188 1,384 2,067
Other equity investments
Alberta Clipper 700 600 1,491 3,240
Bank of Nova Scotia 10 - 535 -
Ember Resources 673 655 1,177 1,762
FNX 80 65 3,046 1,163
International Nickel Ventures 375 325 356 497
Opti 85 90 1,618 1,779
Pioneer Resources - 20 - 965
Royal Bank 10 12 560 654
Other equity investments 571 42
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Total exchange-traded investments 33,316 38,914
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Number of shares/ Carrying
('000's) Value
face value ($000's) ($000's)
Oct. 31, Jan. 31, Oct. 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 ended year-to-date ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
($,000's) 2007 2006 2007 2006
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Interest & dividend income 40 74 242 166
Investment income from flow-through
entities:
Fort Chicago 453 632 1,032 1,288
Thunder Energy - 146 (190) 331
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493 852 1,084 1,785
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(c) In the 3rd quarter, Management assessed the likelihood of collection of its note receivable with Saan Stores Ltd. of $2.0 -million and $0.3 -million of accrued interest to be remote and accordingly, the Company has provided a full allowance for the doubtful collection as a provision for loss on this investment.



3. Capital Stock
(a) Number of shares quarter ended year-to-date ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
('000's) 2007 2006 2007 2006
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Balance - beginning of period 14,799 15,222 14,970 15,316
Shares purchased for cancellation (118) (92) (289) (186)
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Balance - end of period 14,681 15,130 14,681 15,130
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(b) Share capital quarter ended year-to-date ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
($,000's) 2007 2006 2007 2006
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Balance - beginning of period 15,432 16,001 15,736 16,100
Shares purchased for cancellation (195) (97) (499) (196)
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Balance - end of period 15,237 15,904 15,237 15,904
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4. Segment Information

quarter
ended Realty Corporate Inter- Total
($,000's) Oct. 31 segment
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Revenue 2007 395 535 (57) 873
2006 279 907 (76) 1,110

Expenses 2007 271 357 (45) 583
2006 259 369 (51) 577

Amortization 2007 82 6 - 88
2006 89 4 - 93

Interest 2007 12 239 (12) 239
2006 25 220 (25) 220

Investment - gain (loss)
on sale, provision
for loss and changes 2007 - (886) - (886)
in fair value, net 2006 - 29 - 29

Provision for loss on 2007 - (2,301) - (2,301)
note receivable 2006 - - - -

Provision for
(recovery of) 2007 10 60 - 70
income taxes 2006 (31) 88 - 57

Net loss 2007 20 (3,314) - (3,294)
2006 (63) 255 - 192
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year-to date
ended Realty Corporate Inter- Total
($,000's) Oct. 31 segment
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Revenue 2007 1,186 1,209 (171) 2,224
2006 617 1,930 (175) 2,372

Expenses 2007 965 1,197 (136) 2,026
2006 1,032 1,149 (120) 2,061

Amortization 2007 249 14 - 263
2006 255 12 - 267

Interest 2007 35 680 (35) 680
2006 55 508 (55) 508

Investment - gain (loss)
on sale, provision
for loss and changes 2007 - (1,633) - (1,633)
in fair value, net 2006 - 477 - 477

Provision for loss on 2007 - (2,301) - (2,301)
note receivable 2006 - - - -

Provision for
(recovery of) 2007 (22) 140 - 118
income taxes 2006 (238) 541 - 303

Net loss 2007 (41) (4,756) - (4,797)
2006 (487) 197 - (290)
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Total Assets 2007 12,204 38,889 (540) 50,553
2006 12,963 71,901 (1,575) 83,289
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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 except as follows. On September 2, 2005, an Application in the Ontario Superior Court of Justice was made by one of the landlords against the Corporation's subsidiary, Gendis Realty Inc. seeking $0.5 -million on the account of rent and occupancy charges. The Application was dismissed. The Landlord is appealed the decision to the Ontario Court of Appeal. On September 10, 2007, the Ontario Court of Appeal dismissed the appeal of the landlord.

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