Genesis Worldwide Inc.
TSX : GWI

Genesis Worldwide Inc.

August 05, 2009 20:57 ET

Genesis Worldwide Inc. Reduces Operating Losses by 47% in Q2 2009 Year Over Year and Strengthens Balance Sheet

Signs First Licensee in Asia with MegaStar Group

MISSISSAUGA, ONTARIO--(Marketwire - Aug. 5, 2009) - Genesis Worldwide Inc. ("Genesis" or the "Company"), (TSX:GWI), a leading provider of 'green' structural building products and technology in the light steel structural products industry, announces its financial results and business highlights for the second quarter ended June 30, 2009. All dollar amounts are in Canadian dollars unless otherwise stated.

Overall Performance

The following are the Company's key business highlights during the quarter -

- As previously announced, during the first and second quarter of 2009, Genesis closed a private placement of $3,035,000 for two convertible debentures. In July 2009, the Company closed two additional private placements for $1,825,000, which resulted in the previous secured convertible debentures being converted into equity. The result of these transactions is an improved book value and working capital position.

- Reduced operating losses for the quarter by 47% to $1,076,000, compared to $2,046,000 in Q2 2008.

- Genesis' operating expenses were reduced by approximately 32% in Q2 2009 to $2,197,000, compared to $3,214,000 in Q2 2008.

- Signed first licensee in the Asia market with MegaStar Corporation, a large player in the structural steel market in Vietnam. Genesis to provide MegaStar its CTP6000 industrial line.

- Received a $300,000 payment towards a potential new licensee in the Middle East.

- Genesis Products division signed an agreement to build its first commercial project with a growing United States based home furnishings retailer, and signed three other new projects during the quarter.

- Genesis Products division signed an agreement for its first green modular building in the United States, and ships model homes to South Africa to promote the Genesis products with new Solution Provider, Thuli.

- Subsequent to the second quarter, the Company renegotiated the terms of its Best Joist i-SPAN agreement, resulting in expected long term future cash flow improvements starting in 2011.

Financial Highlights

Three Months Ended June 30, 2009

- Total revenue for the second quarter ended June 30, 2009 decreased 20% to $3,059,000, compared to $3,826,000 for the same period in 2008, due primarily to two license sales in 2008 versus one in 2009.

- Revenue for the structural products division for the second quarter ended June 30, 2009 decreased $226,000 to $2,253,000, compared to $2,479,000 for the same period in 2008. We believe this reflects a stabilization occurring in the Ontario construction market in 2009.

- Revenue for the licensing division for the second quarter ended June, 2009 decreased to $806,000, compared to $1,347,000 for the same period in 2008. Comparative quarterly results will vary depending on timing of shipment of industrial products and signing of license agreements.

- Contribution margin percentage improved to 37% for the second quarter ended June 30, 2009, compared to 31% in the first quarter of 2008. This reflects improved project execution. 2008 results were negatively impacted by third party product defects.

- Operating expenses for the second quarter ended June 30, 2009 decreased approximately 32% to $2,197,000, compared to $3,214,000 for the same period in 2008. This represents the results of cost cutting initiatives executed by the Company over the last 12 months.

- Improved loss before other expenses for the second quarter ended June 30, 2009 to $1,076,000, compared to a loss of $2,046,000 for the same quarter in 2008.

Backlog

Backlog for the licensing division is defined as undelivered contractual commitments, other than minimum royalty obligations, and assumes that in cases of multi-year/multi-facility commitments by licensees, subsequent facilities match the industrial technology configured for the first facility. Backlog for the structural products division is defined as the undelivered portion of signed construction contracts. The timing of these contractual commitments into revenue is uncertain and the possibility exists that contractual commitments can be de-booked.

A breakdown of the Company's backlog is as follows:

- Total backlog as at June 30, 2009 was approximately $40.0 million, representing a decrease of $2.0 million compared to Q1 2009.

- Backlog for the licensing division as at June 30, 2009 was approximately $15.0 million. This excludes minimum royalty obligations.

- Backlog for the structural products division as at June 30, 2009 was approximately $25.0 million.

Conference Call/Webcast

The Genesis management team will discuss its second quarter 2009 financial results on a conference call to be held on Thursday, August 6, 2009 at 8:30 a.m. Eastern time (1:30 p.m. BST). As well, a webcast link (audio only) will be made available from the Investor Relations portal of Genesis' website at http://www.genesisworldwide.com/investor_relations.php?id=3. There will be a short presentation followed by a question and answer period lasting for approximately one (1) hour.

Conference Call Details

Date: Thursday, August 6, 2009

Time: 8:30 a.m. Eastern time (1:30 p.m. BST)

Local dial-in: 416-695-7806

North America toll-free: 888-789-9572

Global toll-free: 800-6578-9818 (dial the international access code of the country you are calling from, i.e. a call from the United Kingdom would be dialed 00-800-6578-9898)

Participant Passcode: 8813126

A replay of the call will be made available through the Genesis' Investor Relations website portal at http://www.genesisworldwide.com/investor_relations.php?id=3, or by dialing 416-695-5800 (local callers only), or toll-free at 1-800-408-3053 (passcode 6146314#), from approximately 12:00 p.m. Eastern time on the date of the call through to Thursday, August 13, 2009.

Further information regarding the Company, and its business and operations, may be obtained from the Company's continuous disclosure documents filed from time-to-time with the Canadian securities regulatory authorities. These continuous disclosure documents are available through the Company's web site at www.genesisworldwide.com, or through the SEDAR website maintained by the Canadian securities regulatory authorities, which can be accessed at www.sedar.com.

About Genesis Worldwide Inc.

Genesis is a leading provider of green light steel structural building products, systems and technology targeted at the global commercial, residential and institutional building sectors. Genesis delivers customized turnkey structural solutions including innovative light steel products, software packages, industrial equipment, training programs, professional services and support. Headquartered in the Greater Toronto Area in Ontario, Canada, Genesis has established a network of partners with engineering, manufacturing and distribution operations in Canada, the United States, the Middle East, Eastern Europe and Russia. For additional information about the Company, visit www.genesisworldwide.com.

Caution Regarding Forward-Looking Information

Certain statements in this press release which are not historical facts constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements") and are made pursuant to the "safe harbour" provisions of such laws. Statements related to the Company's projected revenues, earnings, growth rates, performance, business prospects and opportunities are forward-looking statements, as are any statements relating to future events, conditions or circumstances. The use of terms such as "may", "will", "should", "plan", "believes", "predict", "potential", "anticipate", "expect", "project", "target", "estimate", "continue", and similar terms are intended to assist in identification of these forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects, and opportunities. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect.

Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance or achievements of the Company to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements.

Many factors could cause the actual results of the Company to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements, including, without limitation, those factors discussed under the heading "Risk Factors" in the Company's most recent Annual Information Form ("AIF"), a copy of which is available on SEDAR at www.sedar.com. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and the Company does not undertake any obligation to update forward-looking statements, except required by law, should assumptions related to these plans, estimates, projections, beliefs and opinions change.



Genesis Worldwide Inc.

INTERIM CONSOLIDATED BALANCE SHEETS

(unaudited)

As at As at
June 30 December 31
2009 2008
$ $
------------------------
ASSETS
Current
Cash and cash equivalents 269,105 167,064
Accounts receivable 7,281,945 7,780,771
Inventories and deposits on equipment 923,002 1,626,187
Prepaid expenses 222,140 310,964
------------------------
Total current assets 8,696,192 9,884,986
Restricted cash 500,000 500,000
Property, plant and equipment 4,373,238 4,848,059
Intangible assets 2,004,758 2,105,862
------------------------
15,574,188 17,338,907
------------------------
------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 6,380,569 6,916,928
Term loan - current portion 594,579 570,943
Deferred revenue 1,368,029 2,779,266
Minimum royalty payment obligations 400,695 376,792
------------------------
Total current liabilities 8,743,872 10,643,929
------------------------

Long-term
Long-term payables 119,511 -
Convertible debenture 2,564,234 -
Term loan 683,963 983,253
Minimum royalty payment obligations 807,209 1,002,923
------------------------
Total long-term liabilities 4,174,917 1,986,176
------------------------

Shareholders' equity
Capital stock 56,733,075 56,733,075
Convertible debenture 449,487 -
Contributed surplus 1,308,155 1,246,358
Deficit (55,835,318) (53,270,631)
------------------------
Total shareholders' equity 2,655,399 4,708,802
------------------------
15,574,188 17,338,907
------------------------
------------------------



Genesis Worldwide Inc.

INTERIM CONSOLIDATED STATEMENT OF LOSS,
COMPREHENSIVE LOSS AND DEFICIT

(unaudited)

Three months ended Six months ended
----------------------------------------------------
June 30 June 30 June 30 June 30
2009 2008 2009 2008
$ $ $ $
----------------------------------------------------

Revenues
Licensing 805,636 1,347,004 3,031,169 4,564,489
Structural products 2,252,968 2,479,050 4,906,072 6,943,692
----------------------------------------------------
Total revenues 3,058,604 3,826,054 7,937,241 11,508,181
----------------------------------------------------

Direct cost of revenues
Licensing 70,107 48,201 1,545,775 1,820,603
Structural products 1,867,935 2,609,665 3,966,226 6,237,109
----------------------------------------------------
Total direct cost of
revenues 1,938,042 2,657,866 5,512,001 8,057,712
----------------------------------------------------
1,120,562 1,168,188 2,425,240 3,450,469
----------------------------------------------------

Expenses
Research and
development 125,678 294,053 325,222 727,274
SR&ED tax credit (45,000) (16,274) (95,000) (73,491)
Selling and marketing 402,780 713,022 704,334 1,303,758
Engineering and project
management 443,604 554,447 707,031 1,019,184
General and
administrative 920,779 1,313,690 1,613,985 2,688,413
Occupancy 349,086 355,471 699,780 735,415
----------------------------------------------------
2,196,927 3,214,409 3,955,352 6,400,553
----------------------------------------------------
Loss before other
expenses (1,076,365) (2,046,221) (1,530,112) (2,950,084)
----------------------------------------------------
Amortization of
property, plant and
equipment 234,474 235,448 470,123 436,338
Amortization of
intangible asset 69,455 67,169 136,868 134,825
Foreign exchange gain 350 (32,923) 27,941 12,212
Loss on disposal of
fixed assets 26,974 - 31,517 -
Bank interest expense
(income), net (395) (1,348) 32,336 (51,782)
Minimum royalty
accretion 62,049 74,019 128,190 147,468
Debenture accretion 60,804 - 60,804 -
Term loan and debenture
interest expense 89,188 - 146,298 -
----------------------------------------------------
542,899 342,365 1,034,077 679,061
----------------------------------------------------
Net loss and
comprehensive loss for
the period (1,619,264) (2,388,586) (2,564,189) (3,629,145)
----------------------------------------------------

Deficit, beginning of
period (54,216,054) (47,282,227) (53,271,129) (46,041,668)

Deficit, end of period (55,835,318) (49,670,813) (55,835,318) (49,670,813)
----------------------------------------------------
----------------------------------------------------
Loss per share
Basic and diluted $ (0.05) $ (0.08) $ (0.08) $ (0.12)
----------------------------------------------------
----------------------------------------------------
Weighted average number
of shares
outstanding 30,982,858 30,982,858 30,982,858 30,982,858
----------------------------------------------------
----------------------------------------------------



Genesis Worldwide Inc.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Three months ended Six months ended
-----------------------------------------------
June 30 June 30 June 30 June 30
2009 2008 2009 2008
$ $ $ $
-----------------------------------------------

OPERATING ACTIVITIES
Net loss for the year (1,619,264) (2,388,586) (2,564,189) (3,629,145)
Adjustments for non-cash
items
Amortization of property,
plant and equipment
and intangible asset 303,929 302,617 606,991 571,163
Loss on disposal of fixed
assets 26,974 - 31,517 -
Stock-based compensation
expense 25,374 45,000 61,797 90,000
Unrealized foreign exchange
loss (15,653) - (14,911) -
Debenture accretion 60,804 - 60,804 -
Minimum royalty accretion 62,049 74,019 128,190 147,468
-----------------------------------------------
(1,155,787) (1,966,950) (1,689,801) (2,820,514)

Changes in non-cash working
capital balances
related to operations
Accounts receivable, net (3,753) (910,490) 498,826 32,721
Inventories and deposits on
equipment 53,210 (1,042,474) 703,185 (1,191,819)
Prepaid expenses 73,369 (221,528) 88,824 (113,798)
Accounts payable and accrued
liabilities (568,331) 708,410 (536,361) (436,140)
Deferred revenue 265,533 2,516,486 (1,411,237) 119,223
-----------------------------------------------
Cash used in operating
activities (1,335,759) (916,546) (2,346,564) (4,410,327)
-----------------------------------------------

FINANCING ACTIVITIES
Repayment on term loan (138,928) - (275,654) -
Changes in long-term
liability 42,574 - 119,511 -
Convertible debenture
issued, net of issue costs
paid 1,455,752 - 2,952,917 -
-----------------------------------------------
Cash provided by financing
activities 1,359,398 - 2,796,774 -
-----------------------------------------------

INVESTING ACTIVITIES
Additions to property, plant
and equipment (483) (752,768) (34,974) (1,238,047)
Disposals to property, plant
and equipment (12,988) - 20,527 -
Deferred patent costs (13,856) - (33,722) -
Minimum royalties paid (150,000) (80,000) (300,000) (160,000)
-----------------------------------------------
Cash used in investing
activities (177,327) (832,768) (348,169) (1,398,047)
-----------------------------------------------

Net increase (decrease) in
cash and cash equivalents
during the year (153,688) (1,749,314) 102,041 (5,808,374)
Cash and cash equivalents,
beginning of period 422,793 1,928,802 167,064 5,987,862
-----------------------------------------------
Cash and cash equivalents,
end of period 269,105 179,488 269,105 179,488
-----------------------------------------------
-----------------------------------------------

Supplemental cash flow
information
Interest (received)/paid 56,263 - 85,116 -
-----------------------------------------------
-----------------------------------------------


Contact Information

  • Genesis Worldwide Inc.
    Catherine Smyth
    Manager, Investor Relations
    (905) 285-9909, ext. 302