AgJunction Reports Q4 2015 Results and Provides Post-Merger Update

HIAWATHA, KS, March 28, 2016 /CNW/ - (TSX: AJX) – AgJunction Inc. ("AgJunction" or the "Company") today reported financial results for the fourth quarter and year ended December 31, 2015.  All currency amounts are expressed in U.S. dollars.

AgJunction also announces the adoption of an advance notice bylaw (the "Bylaw") and approval by the board of directors of AgJunction (the "Board") of an amended and restated shareholder rights plan agreement (the "Amended Agreement").

Post-Merger Update

AgJunction's mission is to become one of the world's leading original equipment manufacturer ("OEM") and value added reseller ("VAR") supplier for automated steering and machine control technology for precision agriculture.

During the fourth quarter of 2015, AgJunction successfully completed a merger with Novariant Inc., ("Novariant") strengthening its position within the OEM precision guidance and machine control markets.  The combined organization is differentiated by its ability to deliver application-specific technology to precision agriculture customers worldwide. The merger resulted in internal changes including leadership changes at the Board and management levels and structural changes allowing for the merger of both companies.

Leadership Team

In addition to the appointment of Dave Vaughn as the President and Chief Executive Officer, the Company has attracted and retained a strong leadership team focused on innovation and intellectual property, with a deep understanding of regional requirements for new product introduction.

Bob Barjesteh has been appointed VP Intellectual Property ("IP") and General Counsel.  Mr. Barjesteh is managing the Company's substantial patent portfolio and leading AgJunction's IP team. AgJunction's IP portfolio is a strategic asset and an area of focus and continued investment.

In addition, Kevin Monk joined the Company as Vice President of Global Marketing to lead marketing initiatives and develop go-to-market strategies for the combined company. Mr. Monk is leading the integration of our product road map to position AgJunction as the industry's supplier of choice.

Further, AgJunction is pleased to announce the appointment of Mike Manning as Senior Vice President and Chief Financial Officer of the Company effective April 1, 2016. Mr. Manning has been the Interim Senior Vice President and Chief Financial Officer of the Company since July 7, 2015.

Global Presence

Combined, the Company has a larger global presence with 160 employees worldwide. The Company maintains Executive Offices in Fremont, California, and Corporate Headquarters and Finance Offices in Hiawatha, Kansas. A global presence is maintained with research and development ("R&D") facilities in Scottsdale, Arizona, Brisbane, Australia, Fremont, California and Hiawatha, Kansas with worldwide sales and support presence in the USA, Canada, Europe, South America, and China.  AgJunction maps to its customers' locations and scales to the customer base, surrounding them with critical sales, product and engineering teams.  Customer pursuit, retention and care are paramount to AgJunction's go-to-market strategy.

Patents and Intellectual Property (IP)

AgJunction believes that its diverse intellectual property portfolio is among the broadest and most diverse in the precision steering and machine control market. Foundational and key patents are built around the core elements of guidance, auto-steering, mapping, task control, GNSS and machine control, with many patents valid past 2025. A key strength of patent IP is that it provides attractive security and protection for partners who integrate AgJunction solutions. 

Products

AgJunction designs, manufactures and markets innovative and cost-effective technology products for ground and air-based agriculture applications.  The precision solutions offered by AgJunction help end users gain efficiency and decrease costs resulting in higher returns to the customers' bottom line.   

With the completion of the merger, the Company offers customers a broader and differentiated product suite. Existing products will maintain their respective branding. AgJunction's engineering teams are working on complementary technologies around automated steering and machine control solutions including sensor fusion and control with an interoperable solutions architecture. 

OEM, VAR, and Aftermarket Retail Sales

Reliable auto-steering is a prerequisite to precision agriculture successfully increasing productivity in the field.  A strategic market shift is underway as machine manufacturers worldwide increasingly integrate auto-steer technologies at the factory level. Globally, AgJunction partners with leading OEM's in each region to integrate its solutions into their machines.  VAR customers integrate AgJunction technology into their solutions to provide a complete system for after-market customers.  AgJunction also provides a leading solution directly to the end user through its Outback® and Satloc® product lines.

State of the Agriculture market

In February 2016, the United States Department of Agriculture ("USDA") reported1 both net cash and net farm income are forecast to decline for the third consecutive year.  Net farm income is forecast to be $54.7 billion in 2016, down 2.5% from the 2015 forecast level.  The 2016 forecast for net farm income would be the lowest since 2006 and a drop 56% from the record high of $123.3 billion in 2013.

AgJunction management views the fundamentals of its global agriculture markets to be neutral to slightly down in 2016 vs. 2015.  However, management believes that globally, there are currently pockets of opportunity. In the long term, management believes that worldwide market demand driven by population growth, limited arable land, and a relatively low global penetration of precision agriculture technologies will lead to favorable conditions for the Company's products. 

The Company continues to experience increased activity in China as the Chinese government increased its support for the sector.  In recent press conference comments, China's Agriculture Minister Han Changfu discussed China's need to focus on supply side reform, especially in corn, because of bumper harvests and surplus grain stockpiles. Mr. Han indicated that increasing farmer incomes will be a government priority over the next five years, with a focus on agricultural industrialization, cutting costs, and improving technology.  AgJunction is providing core technology to Chinese partners resulting in Chinese-manufactured solutions which qualify for the government assistance programs.

"The industry forecast for 2016 remains challenging for companies in the agriculture space," said Dave Vaughn, AgJunction's CEO. "Due to this and to duplication of resources identified after the merger, at the end of 2015 we embarked on a proactive reduction in workforce to decrease our operating costs for 2016. Coinciding with our internal focus on operating costs and efficiencies, our external focus in 2016 is to leverage the synergies created by the merger, reducing costs and increasing customer satisfaction to return to profitable growth. The precision agriculture industry continues to evolve at an increased rate and as a combined Company, we believe we are uniquely positioned to support this high pace of innovation and technology integration with current and anticipated new product offerings for both end-users and farm equipment manufacturers."

Fourth Quarter Financial Review

AgJunction's consolidated 2015 fourth quarter results are presented as a combined entity.  However, because the merger was completed after the start of AgJunction's fourth quarter, the financial results in this fourth quarter financial report include only 77 days of Novariant's operations versus the full 92 days of AgJunction's operations.  The comparative fourth quarter ended December 31, 2014 does not include Novariant's operations. 

For the three months ended December 31, 2015, the Company reported revenue of $11.6 million, a 17% increase from $10.0 million in the fourth quarter of 2014.  Of the $11.6 million, $8.4 million- or 72%- was contributed by AgJunction and $3.2 million- or 28%- was contributed by Novariant. Year-over-year fourth quarter revenues for AgJunction (excluding Novariant) declined 15% as the Company's combined end-markets continued to experience general softness globally.

Total revenue in the Americas region for the quarter was up 14% from 2014 as a result of the acquisition of Novariant.   In other regions, sales increased 52% in Asia Pacific (APAC) to $0.9 million and 15% in Europe, Middle East and Africa (EMEA) to $5.4 million. The OEM and VAR business is a core focus of the recently merged entity and new partners were signed during the fourth quarter.

Special Operating Result Analysis and Expense Detail of Q4 2015

Due to the timing of the completion of the merger with Novariant in the fourth quarter of 2015 and the integration of the two companies, management has included additional information in the following tables that will not be provided in future reporting of financial results.  The table shows AgJunction and Novariant as stand-alone entities and on a consolidated basis.




AgJunction

Q4 2015


Novariant

Q4 2015








Consolidated


Sales


$

8,445


$

3,199


$

11,644

Cost of sales


6,385


2,496


8,881


Gross profit


2,060


703


2,762

*1



24%


22%


24%


Expenses:









Research and development


2,073


823


2,896



Sales and marketing


1,348


345


1,692



General and administrative


3,028


135


3,163




6,449


1,303


7,751

*2

Operating (loss)


$

(4,389)


$

(600)


$

(4,989)


The table below lists certain items impacting net income (loss) in Q4 which related to the acquisition of Novariant or related restructuring, which had a one-time impact on results.  The unusual decrease in gross margin was largely attributable to over $0.6 million of higher cost of goods sold relating to Q4 sales of Novariant inventory whereby that inventory had been written up to fair value at acquisition as part of standard purchase accounting processes. Also contributing to the gross margin decrease in Q4 was $0.3 million of inventory write-downs related to overlapping product lines between the merged companies. There is an additional $0.3 million fair value write up of Novariant inventory from purchase accounting processes on the balance sheet as of December 31, 2015 which will impact Q1 2016 results.  Total impact to gross margin in the fourth quarter of 2015 related to the merger, restructuring and other items denoted below was $1.1 million.  Excluding these non-recurring items gross profit in the fourth quarter of 2015 would have been approximately $3.9 million or 34% of sales.   

In addition to the non-recurring items detailed above, gross margin was impacted by an additional $0.5 million of obsolescence reserve, $0.3 million of warranty costs, and approximately $0.5 million in lower margins related to low sales volume in Q4.  These items had an impact of $1.3 million or an additional ten percentage points on gross margin after adjusting for the above non-recurring expenses.


Detail of certain expenses impacting Q4 2015 results of operations

Acquisition,
restructuring,
and other one-time items

* 1

Gross profit margin expenses





Release of FV increase of Novariant Inc. inventory


$

623



Increase in reserve for obsolescence


315



Acquisition related employee compensation


32



Restructuring accrual


132


Total gross profit margin impact


1,102





*2

Operating expenses





Agrian court awarded fees


85



Acquisition related employee compensation


827



Restructuring accrual


335



Acquisition related legal and other professional fees


264


Total operating expense impact


1,511


Total impact of detailed expenses


$

2,613

Standard Operating Expense Analysis of Q4 2015

Total operating expenses were $7.8 million in the fourth quarter up $3.1 million or 65% from $4.7 million in the fourth quarter of 2014 with $1.3 million of the increase a result of ongoing operating expenses picked up from the fourth quarter merger with Novariant, but also including non-recurring charges totaling approximately $1.5 million, detailed above. In the course of post-merger integration activities, duplicate resources were identified.  Accordingly, on December 30, 2015 the Company announced a reduction targeted at 20% of its work force. This restructuring is expected to reduce annual operating costs by approximately $3.3 million going forward with a related one-time restructuring charge of $0.5 million incurred in December 2015.

General and administrative expenses were $3.2 million and included non-recurring $0.6 million in increased compensation costs of key management personnel, $0.4 million in Novariant merger transaction related costs, and $0.4 million in restructuring costs. Research and development expense of $2.9 million was 81% or $1.3 million higher in the fourth quarter of 2015 of which approximately $0.8 million was attributable to Novariant departmental expenses, $0.4 million was related to lower capitalization of research and development costs, and $0.1 million was related to restructuring costs.  Sales and marketing expenses of $1.7 million were 21% higher than the fourth quarter of 2014.

AgJunction has capitalized certain development costs over the last several years, as required under International Financial Reporting Standards (IFRS) rules when specific requirements are met. IFRS accounting rules require that the completed project costs be amortized over the expected life of the intangible asset.  The major projects being worked on were completed in 2015, and a thorough analysis of all intangible assets was completed in the fourth quarter. AgJunction determined the recoverability of these research and development intangibles was not probable, which resulted in an impairment of $4.7 million, the full amount that was on the books for these intangible assets.  

For the fourth quarter ended December 31, 2015, the Company reported a net loss of $9.9 million, or ($0.09) per share, compared to a net loss of $16.5 million, or ($0.23) per share, in the fourth quarter of 2014.  The $9.9 million net loss for the quarter would have been about $2.6 million without the $4.7 million intangible impairment and the $2.6 million of acquisition related and other one-time expenses detailed above. 

Twelve Month Financial Review

For the year ended December 31, 2015, total revenue was $39.0 million representing a 13% decrease from $44.8 million in 2014.  Gross margin for the year was $14.8 million, or 38%, versus $20.3 million, or 45%, in 2014. The $5.5 million decrease resulted partly from decreased revenue, partly from acquisition related items, and partly from an inventory write-down and increase in the inventory allowance taken in the fourth quarter.

Total operating expenses were $20.6 million in 2015, down by 2% or $0.4 million from $21.0 million in 2014. Operating expenses were lower throughout 2015 primarily due to decreases in engineering headcount, the sale of the Agronomy Services business, decreases in project spending, and an increase in capitalized R&D.

R&D expenditures of $6.7 million declined from $7.1 million in 2014 representing a decrease of $0.4 million or 6%. Sales and marketing expenses were $5.4 million in 2015, down by 13% or $0.8 million from $6.2 million in 2014, due to reduced spending on external advertising.  

General and administrative expenses for 2015 were $8.4 million compared to $7.7 million in 2014 representing an increase of $0.7 million or 9%.  As reported in 2014, the Company incurred litigation costs of $1.8 million relating to a lawsuit the Company brought against a competitor believed to be infringing on the Company's proprietary software, however the current year also had significant legal costs related to the Novariant acquisition and other legal costs surrounding legal reviews of combined company synergies. Net of transaction specific costs in 2014 and 2015, the remaining difference of $0.6 million relates to increased compensation costs of key management personnel, of which $0.6 is non-recurring.

For the year, AgJunction realized a loss from continuing operations of $9.1 million or ($0.11) per share (basic and diluted) in 2015 compared to a loss from continuing operations of $16.7 million or ($0.23) per share (basic and diluted) in 2014.  In 2014, the Company recognized a goodwill impairment of $15.9 million. In October 2015, the company issued 49,291,026 common shares as consideration in the acquisition of Novariant representing $24.9 million. In 2016, the Company recognized an impairment charge to intangible assets of $4.7 million.  As of March 28, 2016, AgJunction has 123,405,391 common shares outstanding and 6,969,823 stock options outstanding.  Directors, officers, and other insiders directly or indirectly hold or represent approximately 28% of the outstanding common shares.

On December 31, 2015, the Company held cash of $13.0 million which included $1.6 million of the $3.6 million acquired in the merger with Novariant.  This compares to cash held of $11.2 million at the end of 2014. Working capital was $26.7 million, up from $22.4 million at December 31, 2014.

Advance Notice Bylaw

Like many other public companies, the Board has approved the Bylaw, which includes, among other things, a provision that requires advance notice to the Company in circumstances where nominations of persons for election to the Board are made by shareholders of the Company other than pursuant to: (i) a "proposal" made in accordance with section 136(1) of the Business Corporations Act (Alberta) (the "Act"); or (ii) or a requisition of the shareholders made in accordance with section 142(1) of the Act.

Among other things, the Bylaw fixes a deadline by which holders of record of common shares of AgJunction must submit director nominations to the Corporate Secretary of the Company prior to any annual or special meeting of shareholders and sets forth the specific information that a shareholder must include in the written notice to the Corporate Secretary of the Company for an effective nomination to occur. No person will be eligible for election as a director of the Company unless nominated in accordance with the provisions of the Bylaw.

In the case of an annual general meeting of shareholders, notice to the Corporate Secretary of the Company must be made not less than 30 nor more than 65 days prior to the date of the annual general meeting of shareholders; provided, however, that in the event that the annual general meeting of shareholders is to be held on a date that, is less than 50 days after the date (the "Notice Date") on which the first public announcement of the date of the  annual meeting was made, notice by the nominating shareholder may be made not later than the close of business on the tenth (10th) day following the Notice Date.

In the case of a special meeting (which is not also an annual general meeting) of shareholders called for the purpose of electing directors (whether or not called for other purposes), notice to the Corporate Secretary of the Company must be made not later than the close of business on the fifteenth (15th) day following the day on which the first public announcement of the date of the special meeting of shareholders was made.

The Bylaw is effective and in full force and effect as of the date hereof. In accordance with the terms of the Bylaw, the Bylaw will be put to shareholders of the Company for approval at its annual general and special meeting of shareholders that will be held on Thursday, May 26, 2016 (the "Shareholders Meeting"). If the Bylaw is not confirmed at the Shareholders Meeting by ordinary resolution of shareholders, the Bylaw will terminate and be of no further force and effect following the termination of the Shareholders Meeting.

The full text of the Bylaw will be available on AgJunction's SEDAR profile at www.sedar.com or upon request by contacting the Corporate Secretary of the Company at (785) 742-5149 or by email at MManning@agjunction.com.

Amended and Restated Shareholder Rights Plan Agreement

The Board has also approved the Amended Agreement, which will be placed before shareholders for approval at the Company's upcoming Shareholders Meeting. If the Amended Agreement is approved by the shareholders of AgJunction at such meeting, the Amended Agreement will be effective until the close of business of the annual general meeting of shareholders of AgJunction held in 2019, unless it is reconfirmed at such meeting or it is otherwise terminated in accordance with its terms.

The Amended Agreement was approved by the Board in response to the proposed legislative changes to Canada's take-over bid regime, including the Canadian Securities Administrators Notice dated February 25, 2016 Amendments to the Take-Over Bid Regime – Amendments to Multilateral Instrument 62-104 – Take-Over Bid and Issuer Bids and Changes to National Policy 62-203 – Take-Over Bids and Issuer Bids (the "CSA Notice") and the consequential amendments, which are expected to be effective May 9, 2016 (the "Legislative Changes"). In view of these proposed Legislative Changes as set forth in CSA Notice, under the terms of the Amended Agreement, it is proposed that the definition of a "Permitted Bid" be increased from 60 days to 105 days. Furthermore, it is proposed that provisions be added to make it clear that if the Company determines to announce that it is reducing a proposed bid period to a shorter period of at least 35 days, the shorter period would apply to all contemporaneous bids, and if the Company announces a friendly transaction, the minimum deposit period for all contemporaneous bids would automatically be reduced to 35 days.

In originally adopting the shareholder rights plan agreement, the Board considered the then existing legislative framework governing take-over bids in Canada. The directors believed such legislation did not provide sufficient time to permit shareholders to consider a take-over bid and make a reasoned and unhurried decision with respect to a bid or give the Board sufficient time to develop alternatives for maximizing shareholder value.

Shareholders also may have felt compelled to tender to a bid even if the shareholder considers such bid to be inadequate out of a concern that failing to tender may result in a shareholder being left with illiquid or minority-discounted common shares. While the Legislative Changes address many concerns related to unequal treatment of security holders, there remains the possibility that control of an issuer may be acquired pursuant to private agreements in which a small group of security holders disposes of securities at a premium to market price, which premium is not shared with the other security holders. The current shareholder rights plan agreement of the Company addresses this concern, as does the Amended Agreement.

The full text of the Amended Agreement will be available in AgJunction's information circular for the Shareholders Meeting, which will be mailed to shareholders.

Conference Call:  Tuesday March 29, 2016 at 11:00AM ET

A conference call and webcast has been scheduled for Tuesday March 29 at 11:00 a.m. Eastern Time to review the financial results.  To participate in the conference call, please dial +1 (647) 427-7450 approximately 10 minutes before the conference call and provide Conference ID: 50864670.  A recording of the call will be available through April 15, 2016. Please dial +1(416) 849-0833 and enter passcode 50864670 to listen to the rebroadcast.  A live webcast and archive can be found through

http://www.corp.agjunction.com/InvestorCenter/ConferenceCallsOtherEvents.aspx

About AgJunction

AgJunction (www.agjunction.com) provides innovative hardware and software applications for precision agriculture worldwide. The Company holds more than 140 patents and markets its products and services under leading brand names including Novariant, Outback Guidance® and Satloc®. The Company is headquartered in Hiawatha, Kansas, with Executive offices in Fremont, California, and facilities in Scottsdale, Arizona, Winnipeg, Manitoba and Brisbane, Queensland, Australia.  AgJunction is listed on the Toronto Stock Exchange (TSX) under the symbol "AJX." For more information, please go to www.agjunction.com.

Forward Looking Information

This press release contains forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws and is based on the expectations, estimates and projections of management of each of AgJunction as of the date of this news release, unless otherwise stated. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information. More particularly and without limitation, this press release contains forward-looking information concerning, but not limited to: the expected benefits of the merger with Novariant; AgJunction's mission to become the world's leading OEM and VAR supplier for automated steering and machine control technology for precision agriculture; AgJunction's plans to position the Company as the supplier of choice to the industry; the components of AgJunction's go-to-market strategy;  AgJunction's belief that it has one of the most diverse intellectual property portfolios in the precision steering and machine control market; the view of AgJunction's management that the fundamentals of its global agriculture markets are neutral to slightly down in 2016 vs. 2015 and its belief that there are current pockets of opportunity globally; management's beliefs regarding worldwide market demand; AgJunction's ability to obtain or qualify for government assistence programs in China; the Company's belief that it is uniquely positioned to support the high pace of innovation and technology integration in the precision agriculture industry with current and new product offerings for both end-users and farm equipment manufactures; AgJunction's expectation that the restructuring of the Company will  reduce annual operating costs, including the anticipated amount of such reduction;  and the Company's plans for the remainder of the year, including its focus on current customers and ensuring resources are in place to support new customers.  Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to its current and future operations. Investors are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Accordingly, readers should not place undue reliance on such forward-looking information contained in this press release.

In respect of the forward-looking information, AgJunction has provided such information in reliance on certain assumptions that it believes are reasonable at this time, including, but not limited to, planned synergies, capital efficiencies and cost-savings from the merger with Novariant;  the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labor and services; that AgJunction's future results of operations will be consistent with management expectations in relation thereto; the continued availability of capital at attractive prices to fund future capital requirements relating to existing and future assets and projects; future operating costs; that counterparties to material agreements will continue to perform in a timely manner; that there are no unforeseen events preventing the performance of contracts; availability of key supplies, components, services, networks and developments; the impact of increasing competition; conditions in general economic, agricultural and financial markets; demand for the Company's products; and the continuity of existing business relationships.

Since forward-looking information addresses future events and conditions, such information by its very nature involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the industries in which AgJunction operates; failure to realize the anticipated benefits of the merger and to successfully integrate AgJunction and Novariant; ability to access sufficient capital from internal and external sources; changes in legislation; departure of key personnel or consultants; competition; inability to introduce new technology and new products in a timely manner; legal claims for the infringement of intellectual property and other claims; fluctuation in foreign exchange or interest rates; uncertainties in the global economy; negative conditions in general economic, agricultural and financial markets; availability of key supplies and components; product liability; reduced demand for the Company's products; and changes in the Global Navigation Satellite System and other systems outside of our control.  Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the Company's operations or financial results, are included in reports of AgJunction on file with applicable securities regulatory authorities, including but not limited to, AgJunction's Annual Information Form for the year ended December 31, 2015 which may be accessed on its SEDAR profile at www.sedar.com.

Forward-looking information contained herein concerning the industry in the countries in which the Company operates and the Company's general expectations concerning this industry are based on data and information from publicly available industry sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which the Company believes to be reasonable. While the Company is not aware of any material misstatements regarding any industry data presented herein, the agricultural industry involves numerous risks and uncertainties and is subject to change based on various factors. Further, certain information contained herein is based on, or derived from, publicly available information and/or information provided by independent third-party sources. The Company believes that such information is accurate and that the sources from which it has been obtained are reliable; however, the Company is unable to independently verify such information.

The forward-looking information contained in this press release is made as of the date hereof and each of AgJunction undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

 

AgJunction Inc. 



Consolidated Statements of Financial Position






(Expressed in U.S. dollars)







December 31, 2015

December 31, 2014




Assets






Current assets:




Cash and cash equivalents

$

13,047,777

$

11,223,755


Accounts receivable, net

8,222,606

5,665,108


Inventories

11,800,917

9,692,923


Prepaid expenses and deposits

975,018

947,931


34,046,318

27,529,717




Property, plant and equipment

3,484,406

2,808,052

Intangible assets

12,391,146

7,772,064

Goodwill

11,444,419

5,374,519


$

61,366,289

$

43,484,352




Liabilities and Shareholders' Equity






Current liabilities:




Accounts payable and accrued liabilities

$

5,970,427

$

2,795,216


Provisions

995,938

302,987


Current portion of deferred revenue

342,095

2,016,183


Current portion of finance lease obligation

1,160

13,918


7,309,620

5,128,304




Deferred revenue

203,223

343,245

Finance lease obligation

1,160


7,512,843

5,472,709




Shareholders' equity:




Share capital

147,929,647

122,467,464


Equity reserve

4,669,173

5,150,466




Accumulated deficit

(98,745,374)

(89,606,287)


53,853,446

38,011,643


$

61,366,289

$

43,484,352


AgJunction Inc.



Consolidated Statements of Profit or Loss



Years ended December 31, 2015 and 2014



(Expressed in U.S. dollars)







2015

2014







Sales                            

$

39,048,487

$

44,809,579

Cost of sales 

24,220,178

24,501,704

Gross profit

14,828,309

20,307,875




Expenses:




Research and development

6,728,512

7,102,281


Sales and marketing

5,403,375

6,192,903


General and administrative

8,432,772

7,729,475


20,564,659

21,024,659




Operating (loss)

(5,736,350)

(716,784)




Intangible assets impairment

4,713,670

Goodwill impairment

15,856,000

Foreign exchange loss, net

203,486

172,064

Interest and other income

(23,608)

(42,675)

(Gain) loss on sale of property, plant and equipment

132,408

(8,175)

(Gain) on sale of other assets, net of liabilities

(1,623,219)

Net (loss) before income tax (recovery) 

(9,139,087)

(16,693,998)




Income tax (recovery)

(37,350)




Net (loss)

$

(9,139,087)

$

(16,656,648)







Loss per share:







Basic and diluted (loss) per share

$

(0.11)

$

(0.23)








AgJunction Inc.






Consolidated Statements of Changes in Equity






Years ended December 31, 2015 and 2014






(Expressed in U.S. dollars)













Share capital

Equity reserve

Deficit

Total equity

Number of shares













Balance at January 1, 2014  

$

121,096,751

$

6,091,297

$

(72,949,639)

$

54,238,409

69,805,628







Net (loss)

(16,656,648)

(16,656,648)

Issue of common shares for business acquisition, net of share issue cost

1,007,000

(1,007,000)

2,178,964

Share-based payment transactions

180,882

180,882







Stock options exercised

249,000

249,000

337,471

Transfer from equity reserve on exercise of stock options

114,713

(114,713)







Balance at December 31, 2014                                                  

122,467,464

5,150,466

(89,606,287)

38,011,643

72,322,063







Net (loss)                                                                                                      

(9,139,087)

(9,139,087)

Issue of common shares and restricted stock awards for business acquisition

24,900,841

24,900,841

49,291,026













Share-based payment transactions

80,049

80,049







Issue of restricted stock awards

561,342

(561,342)

1,216,130













Balance at December 31, 2015

$

147,929,647

$

4,669,173

$

(98,745,374)

$

53,853,446

122,829,219

AgJunction Inc.



Consolidated Statements of Cash Flows



Years ended December 31, 2015 and 2014



(Expressed in U.S. dollars)







2015

2014




Cash flows from (used in) operating activities:



Net (loss)

$

(9,139,087)

$

(16,656,648)

Items not involving cash:




Depreciation

558,810

579,897


Amortization

941,799

1,031,814


Share-based payment transactions

80,049

180,882


Allowance on trade receivables

50,625

109,467


Net realizable value write down of inventory

1,547,743

56,530


(Gain) loss on disposal of property, plant and equipment

132,408

(8,175)


(Gain on sale of other assets, net of liabilities

(1,623,219)


Intangible assets impairment, net of amortization

4,713,670


Goodwill impairment

15,856,000




Change in non-cash operating working capital, net of effects of business combination:




Accounts receivable

(1,121,544)

5,353,120


Inventories

88,895

291,359


Prepaid expenses and deposits

181,452

(239,442)


Accounts payable and accrued liabilities

366,900

(2,522,213)


Provisions

544,792

(493,331)


Deferred revenue

(931,688)

(574,457)


Income taxes refunded (paid)

59,000

(64,435)

Cash flows from (used in) operating activities

(3,549,395)

2,900,368




Cash flows from (used in) financing activities:




Payment of finance lease liability

(13,918)

(23,004)


Interest received (paid), net

2,426

42,675


Issuance of share capital

249,000


(11,492)

268,671





Cash used in discontinued operations

(162,388)

Cash flow from (used in) financing activities

(11,492)

106,283




Cash flows from (used in) investing activities:




Redemption of short-term investments

8,100,751


Proceeds from the sales of property, plant and equipment

5,351

65,141


Purchase of property, plant and equipment

(413,109)

(278,433)


Intangible asset addition

(2,130,380)

(2,646,833)


R&D expense reimbursement

1,875,795

1,332,200


Payment of acquisition consideration

(400,000)


Proceeds from sale of division

2,422,916


Cash acquired in business acquisition

3,624,336

Cash flow from investing activities

5,384,909

6,172,826




Increase in cash position

1,824,022

9,179,477




Cash and cash equivalents, beginning of year

11,223,755

2,044,278

Cash and cash equivalents, end of year

$

13,047,777

$

11,223,755

1 http://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/highlights-from-the-farm-income-forecast.aspx

SOURCE Agjunction Inc.

For further information: Michael Manning, Interim Chief Financial Officer, AgJunction Inc., (785) 742-5149; Cory Pala, Investor Relations, e.vestor Communications Inc., (416) 657-2400, Cory.Pala@evestor.com


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