OXBOW Equities Corp.
TSX : XBO

OXBOW Equities Corp.

April 03, 2006 10:40 ET

Oxbow Equities Corp. Announces Restatement of its Financial Statements for its First Three Quarters of 2005

MONTREAL, QUEBEC--(CCNMatthews - April 3, 2006) - This press release is not for distribution in the United States.

Oxbow Equities Corp. ("Corporation")(TSX:XBO) today announced that the results of its unaudited interim consolidated financial statements for the first three quarters of 2005 have been restated including the management's discussion and analysis ("MD&A") of the results for each of these quarters. The restated financial statements and MD&A will be filed with SEDAR (www.sedar.com).

The Corporation's management realized in the course of the 2005 year-end audit process that the change in the accounting policy disclosed in note 3 in each of these restated financial statements was not properly applied and therefore affected the unaudited interim consolidated financial statements for each of the first three quarters of 2005.

Restated Financial Statements

The following table presents the changes to the amounts previously reported arising from the restatement adjustments for each of the first three quarters of 2005:

The restated unaudited interim consolidated statements of loss for each of the first three quarters of 2005 are as follows:



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(in thousands except
per common share amounts) Three-month period ended
March 31, June 30, September 30,
2005 2005 2005
(unaudited and not reviewed by an auditor)
Restated
Consolidated Statements
of Loss $ $
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Revenues
Interest income 556 637 654
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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1,057 637 654
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Expenses
General and administrative 278 511 299
Foreign exchange losses
(gain) 41 (296) 1,282
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319 215 1,581
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Income (loss) before other
income, income taxes and
other items 738 422 (927)
Other income
Consulting fees 83 47 45
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Income (loss) before income
taxes and other items 821 469 (882)
Provision for income taxes - - -
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Income (loss) before other
items 821 469 (882)
Equity loss in
MonoGen, Inc. (1,785) (2,102) (2,151)
Dilution gain on issuance
of common shares by
MonoGen, Inc. 25 - -
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Net loss for the period (939) (1,633) (3,033)
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Basic loss per common share (0.01) (0.02) (0.04)
Diluted loss per common share (0.01) (0.02) (0.04)
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The restated unaudited interim consolidated balance sheets for each
of the first three quarters of 2005 are as follows:

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(in thousands except
per common share amounts)
March 31, June 30, September 30,
2005 2005 2005
(unaudited and not reviewed by an auditor)
Restated
Consolidated Balance Sheets $ $ $
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Cash and cash equivalents
and short term investment 118,52 16,965 16,486
Accounts receivable and
other assets 284 327 320
Investment in MonoGen, Inc. 19,522 19,592 17,669
Total assets 38,332 36,884 34,475
Total liabilities 130 140 122
Share capital 62,018 62,018 62,018
Additional paid-in capital 897 1,158 1,240
Deficit (24,680) (26,313) (29,346)
Cumulative translation
adjustment (33) (119) 441
Shareholders' equity 38,202 36,744 34,353
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The following two tables present the net adjustments to items of the
unaudited interim consolidated statements of loss and consolidated
balance sheets previously reported:

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(in thousands except
per common share amounts) Three-month period ended
March 31, June 30, September 30,
2005 2005 2005
(unaudited and not reviewed by an auditor)
Consolidated Statements
of Loss $ $
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Increase in interest income - 474 475
Increase in foreign
exchange gain - 460 -
Decrease (increase) in equity
loss in MonoGen, Inc. 549 (1,853) (656)
Increase (decrease) in
dilution gain on issuance of
common shares by MonoGen, Inc. 8 (7) -
Decrease (increase) in net
loss for the period 557 (926) (181)
Decrease (increase) in basic
and diluted loss per common
Share 0.01 (0.01) 0.00
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(in thousands except
per common share amounts) Three-month period ended
March 31, June 30, September 30,
2005 2005 2005
(unaudited and not reviewed by an auditor)
Consolidated Balance Sheets $ $ $
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Increase (decrease) in
investment in MonoGen, Inc. 524 (488) (109)
Decrease (increase) in deficit 557 (369) (550)
Cumulative translation
adjustment (33) (119) 441
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Details of Restatement Adjustments

The net effects on the unaudited interim consolidated financial statements for the three-month periods ended March 31, June 30, and September 30, 2005 were to increase (decrease) the net loss for each of these periods by ($557,000), $926,000 and $181,000, respectively, and to reduce, before the effect of the cumulative translation adjustment of $441,000, the carrying value of the investment in MonoGen by $550,000 as of September 30, 2005. The Corporation has therefore restated its unaudited interim consolidated financial statements for each of the first three quarters of 2005 for the following adjustments:

(a) Equity loss in MonoGen, Inc.

Due to the change of the accounting policy disclosed in note 3 of each of the restated unaudited interim consolidated financial statements, the Corporation was required to reevaluate to fair value on January 1, 2005 all assets and liabilities of MonoGen, as Oxbow was deemed to have acquired MonoGen's common shares at that date. Any difference between the carrying and fair value of MonoGen's assets and liabilities ("Difference") would then need to be considered when the Corporation reports the equity pick up of MonoGen in its consolidated financial statements.

The Difference should have been allocated to intangible assets with a determinable useful life, such as patents, developed technologies, products under development, trademark, know how, designs and licenses ("Intangible Assets"). Intangible Assets are then amortized over the useful life of the assets. In the unaudited interim consolidated financial statements, the Difference was allocated to goodwill, which is not amortized. The equity pick up of MonoGen reported by Oxbow therefore did not include any amortization of the Difference.

The financial statements of MonoGen are prepared under the United States generally accepted accounting principles ("GAAP"). For the purposes of the equity pick up of MonoGen, the Corporation is required to adjust for any differences between United States GAAP and Canadian GAAP ("GAAP Difference"). The GAAP Difference identified on January 1, 2005 relates to compound financial instruments such as convertible promissory notes ("Notes") whereby under Canadian GAAP a portion of the carrying value of the Notes held by third parties (other than Oxbow) needs to be reclassified into equity ("Equity Component"), which is not the case under United States GAAP. The Equity Component is then accreted to the value of the original Notes with an additional charge to interest expense until maturity of the Notes.

The net effects of the restatement on the unaudited interim consolidated statements of loss for the three-month periods ended March 31, June 30, and September 30, 2005 were to increase (decrease) the equity loss in MonoGen, Inc. for each of these periods by ($549,000), $1,853,000 and $656,000, respectively.

(b) Interest income

As explained above, under Canadian GAAP a portion of the face value of a compound financial instrument such as convertible promissory notes is required to be reclassified into equity. However, in the context where the Corporation is accounting for its investment in MonoGen under the equity method, this reclassification should not be performed. The Corporation, in the second and third quarter of 2005, wrongly reclassified into equity a portion of the Notes it held in MonoGen, which resulted in a reduction of the interest income earned of these Notes for those quarters.

The net effects of the restatement on the unaudited interim consolidated statement of loss for the three-month periods ended June and September 30, 2005 were to increase the interest income and foreign exchange gain by $474,000 and $460,000, respectively, in the second quarter of 2005 and the interest income by $475,000 in the third quarter of 2005.

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

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