OXBOW Equities Corp.
TSX : XBO

OXBOW Equities Corp.

August 11, 2005 16:30 ET

Oxbow Equities Corp. Announces Financial Results for the Three-Month and Six-Month Periods Ended June 30, 2005

MONTREAL, QUEBEC--(CCNMatthews - Aug. 11, 2005) -

This press release is not for distribution in the United States.

Oxbow Equities Corp. ("Corporation") (TSX:XBO) today announced the results of its unaudited interim consolidated financial statements for the three-month and six-month periods ended June 30, 2005. The complete financial statements, including management's discussion and analysis ("MD&A") of the results will be filed with SEDAR (www.sedar.com) and are summarized as follows:

For the six-month period ended June 30, 2005, the Corporation reported a consolidated net loss of $2,203,000 compared to a consolidated net income of $1,335,000 for the same period in 2004. The net loss for the first two quarters of 2005 is primarily the result of the Corporation's accounting policy change to record its investment in MonoGen. In period priors to January 1, 2005, the Corporation recorded its investments in MonoGen at fair value. Effective January 1, 2005, the Corporation no longer qualifies to account for its investment at fair value in light of the fact that MonoGen is the only remaining investee company and the high level of involvement of the Corporation's officers in the day-to-day management of MonoGen. Thus, the Corporation adopted the equity method to account for its investments in common shares of MonoGen and the cost method to account for its other investments in MonoGen. The net effect of adopting the equity method accounting policy was to record a non-cash charge of $2,583,000 for the Corporation's prorata equity loss on investment in common shares in MonoGen for the six-month period ended June 30, 2005, thus reducing the carrying amount of the Corporation's investment in common shares to nil and the carrying amount of its subordinated secured convertible promissory notes by $1,741,000. Further details of the new accounting policy are provided in Note 3 of the unaudited interim consolidated financial statements and Section 4 of the MD&A.



Unaudited interim consolidated statements of income
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(in thousands except Three-month period Six-month period
per common share ended June 30, ended June 30
amounts) 2005 2004 2005 2004
$ $ $ $
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Revenues
Interest income 163 516 259 1,020
Dilution gain on
issuance of
common shares by
MonoGen, Inc. 7 - 24 -
Gain realized on the
disposition of the
investment in Mission
Medical, Inc. held
for sale
realized on February
25, 2005 - - 3,856 -
unrealized gain
previously recorded
in December 2004 - - (3,355) -
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170 516 784 1,020
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Expenses
General and
administrative 511 324 789 576
Foreign exchange
(gains) losses 164 (479) (255) (859)
Write-down of
investments - 143 - 190
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675 (12) 534 (93)
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Income before other
income (expense) (505) 528 250 1,113
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Other income (expense)
Consulting fees 47 112 130 222
Equity loss on
investment in common
shares in MonoGen, Inc. (249) - (2,583) -
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(202) 112 (2,453) 222
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Income (loss) before
income tax (707) 640 (2,203) 1,335
Provision for
income taxes - - - -
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Net income (loss)
for the period (707) 640 (2,203) 1,335
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Basic income (loss)
per common share (0.01) 0.01 (0.03) 0.02
Diluted income (loss)
per common share (0.01) 0.01 (0.03) 0.02
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Unaudited interim consolidated statements of cash flow

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(in thousands) Three-month period Six-month period
ended June 30, ended June 30
2005 2004 2005 2004
$ $ $ $
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Decrease in cash flows
related to operating
activities (53) (233) (417) (427)
Increase in cash flows
related to financing
activities - 1,479 2,333 1,479
Increase (decrease)
in cash flows
related to investing
activities (1,508) (1,445) 14,579 (1,492)
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Net increase (decrease)
in cash and cash
equivalents position
for the period (1,561) (199) 16,495 (440)
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Unaudited interim consolidated balance sheets
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(in thousands) June 30, 2005 December 31, 2004
(unaudited) (audited)
$ $
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Cash and cash equivalents
and short term investment 16,965 470
Investment in Mission Medical, Inc.
held for sale - 15,576
Investment in MonoGen, Inc. 20,080 20,689
Total assets 37,372 37,016
Total liabilities 140 187
Shareholders' equity 37,232 36,829
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Oxbow's investment in MonoGen is described in its Annual Information
Form. The carrying amount and fair value are detailed in notes 6 and
10 of the unaudited interim consolidated financial statements for the
three-month and six-month periods ended on June 30, 2005 and
summarized below:

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(in thousands except Fair Carrying Fair Carrying
percentage amounts) Value Amount Value Amount
June 30, December 31,
2005 2004
$ $ $ $
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Investments in
MonoGen, Inc.
Common shares 2,777 - 4,145 818
Subordinated
secured convertible
promissory notes 25,873 20,080 35,390 19,871
Warrants to purchase
common shares 29 - 196 -
Stock appreciation
rights - - - -
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28,679 20,080 39,731 20,689

Ownership
Basic 41.0% 41.3%
Fully diluted 46.1% 49.4%
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On February 7, 2005, the Corporation successfully completed a private placement of 4,700,000 common shares at a price of $0.50 per share for a total amount of $2,350,000.

On February 25, 2005, the Corporation sold its entire investment in Mission Medical, Inc. ("Mission") for cash of $16,124,000 (US$12,995,000). In the year 2004, the Corporation recorded a gain of $3,355,000 regarding this disposal and an additional gain of $501,000 was recorded during the first quarter of 2005 for a total gain of $3,856,000 on this investment.

As of June 30, 2005, approximately 53.7% (98.1% - December 31, 2004) of the Corporation's assets are invested in one U.S. based privately held health care company, MonoGen. This important percentage reduction in 2005 is explained by the sale on February 25, 2005 of its entire investment in its other U.S. based privately held health care company, Mission.

Our cash position as of August 10, 2005 is approximately $17 million. It is the current intent of the Corporation to distribute to its shareholders sometime in the fourth quarter of 2005 most of the net proceeds from the sale of Mission, representing approximately $15 million ($0.20 per share). However, such distribution will only occur once the Corporation is satisfied that the funding needs of MonoGen have been answered and that certain actual breaches of covenants potentially leading to events of default in respect of a secured loan agreement between MonoGen and with one of its strategic partners (the "Secured Lender") are waived.

Future Prospects

During the second quarter, MonoGen has progressed in the process of seeking up to US$20 million of additional funding by way of a private placement financing through the services of New York investment bank SG Cowen & Co., LLC. MonoGen is currently in the final negotiation stage with a potential institutional investor. These negotiations may not conclude favorably and the Corporation is currently examining alternative financing options for MonoGen which include investing all of its available capital into MonoGen. Funding of MonoGen came into the second quarter from a US$1.2 million investment by the Corporation and from the disbursement of the remaining US$1.3 million from MonoGen's Secured Lender.

On the regulatory front, MonoGen has progressed in the prosecution of its Pre-Market Approval submission with the U.S. Food and Drug Administration ("FDA") of its MonoPrep Pap test. MonoGen expects to receive FDA approval to commercialize the test before the end of the year. Finally, MonoGen is working actively with its distribution partner in the preparation of the commercialization of the MonoPrep Pap test upon FDA approval.

The Corporation currently has approximately $17 million in cash reserves. It is the current intent of the Corporation to distribute to its shareholders sometime in the fourth quarter of 2005 most of the net proceeds from the sale of Mission, representing approximately $15 million ($0.20 per share). However, such distribution will only occur once the Corporation is satisfied that the funding needs of MonoGen have been answered to its satisfaction and that certain breaches of covenants leading to events of default in respect of a secured loan agreement between MonoGen and the Secured Lender are waived.

The financial results of the Corporation will continue to be impacted by any variation in the exchange rate since a significant portion of its assets are denominated in U.S. dollars. The Corporation does not use and does not intend to use derivatives to hedge its foreign exchange rate risk. These fluctuations in the value of our assets due to the variation of exchange rates are non-cash items.

The common shares of the Corporation are listed for trading on the Toronto Stock Exchange under the trading symbol "XBO".

Forward-Looking Statements

This press release is not for distribution in the United States.

This press release contains statements that are forward-looking in nature. Statements preceded by the words; believe, expect, anticipate, plan, intend, continue, estimate, may, will, and similar expressions are forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to known and unknown risks and uncertainties such as, but not limited to, the capacity of the Corporation to obtain funding from third parties, the ability of MonoGen to meet government regulations such as those of the FDA, the eventual commercial success of MonoGen's products, the capability of the Corporation to realize the value of MonoGen on commercially reasonable terms and/or in a timely manner, changes in future foreign currency exchange rates and other factors referenced herein and in the Corporation's continuous disclosure filings. Therefore, the Corporation's actual results may be materially different from those expressed or implied by such forward-looking statements.

Contact Information

  • Oxbow Equities Corp.
    Mr. Andre Denis
    President and Chief Executive Officer
    (514) 286-0999, ext. 224
    (514) 286-3777 (FAX)
    adenis@oxbowequities.com