Electrohome announces third quarter results



    TORONTO, Aug. 14 /CNW/ -

    Management Discussion and Analysis - dated August 14, 2008
    ----------------------------------
    The following comments and the accompanying unaudited interim financial
statements of Electrohome Limited ("Electrohome" or the "Corporation") for the
three and nine months ended June 30, 2008 have been prepared by management and
approved by the Board of Directors of the Corporation. These interim financial
statements and MD&A ("interim filings") have been certified by the CEO and CFO
of the Corporation.
    These comments and financial statements should be read in conjunction
with the Corporation's September 30, 2007 audited consolidated financial
statements, which form part of the Electrohome Limited 2007 Annual Report
dated November 8, 2007.
    This report contains certain "forward looking statements" that involve a
number of risks and uncertainties. There can be no assurance that such
statements will prove to be accurate and future events could differ materially
from those anticipated.
    Additional information pertaining to the Corporation's regulatory filings
including annual reports, annual information forms, management information
circulars, etc. can be found on the SEDAR website at www.sedar.com.

    Description of the Business
    ---------------------------
    Electrohome's business is that of a holding company with a 26% interest
in Mechdyne Corporation which is the largest international company operating
exclusively in the advanced visualization marketplace. Electrohome's
obligations primarily consist of post-employment benefit costs, general and
administrative expenses and environmental remediation associated with a
previously discontinued operation.

    Subsequent Events
    -----------------
    On August 5, 2008, Electrohome Limited announced that it is planning an
orderly wind-up of the Corporation pursuant to a court supervised "Plan of
Arrangement".
    The Plan of Arrangement proposed by the Corporation under the Business
Corporations Act (Ontario) provides an expeditious and efficient way for the
Corporation to sell its remaining assets, satisfy its outstanding obligations
and maximize the amount of residual proceeds that can be distributed to its
shareholders prior to the dissolution of the Corporation, all in an orderly
fashion within a condensed and finite timeframe under the supervision of the
Court.
    The proposed Plan of Arrangement includes the sale of the Corporation's
investment in Mechdyne Corporation, fulfillment and/or discharge of the
Corporation's outstanding liabilities and obligations, cancellation of the
issued and outstanding Class X Shares and the Class Y Shares, delisting of the
Corporation's shares from the NEX board of the TSX Venture Exchange and the
ceasing of the Corporation to be a reporting issuer, change of the
Corporation's name to ELXY Holdings Inc., change in the Corporation's minimum
number of directors from 3 to 1, appointment of an administrative agent to
assist the Corporation with implementation of the Plan of Arrangement,
distribution to shareholders of any residual proceeds, and dissolution of the
Corporation.
    As part of the Plan of Arrangement the Corporation proposes to sell its
shares of Mechdyne Corporation (which the Corporation carried on its books for
Cdn. $4,000,000) back to Mechdyne in exchange for an initial cash payment of
US $616,444 and a 10 year promissory note in the amount of US $3,082,222
bearing interest at an annual rate of 4.3% with principal payments subject to
Mechdyne's annual earnings. Since the Corporation intends to wind up its
operations, the Corporation's Chairman, President, Chief Executive Officer and
controlling shareholder, Mr. John A. Pollock, has agreed to purchase the 10
year promissory note from the Corporation for a cash amount of US $2,394,592.
A committee of independent directors of the Corporation reviewed the proposed
sale transactions and engaged an independent Chartered Business Valuator
("CBV") to provide the committee with an independent fairness opinion. The CBV
concluded that that the proposed transaction is fair to the shareholders from
a financial perspective.
    In the interests of maximizing the amount of residual proceeds that can
be distributed to shareholders, Mr. Pollock has also agreed to forgo payment
of approximately $450,000 with respect to the funding of his supplemental
retirement plan with the Corporation. An independent actuary has determined
that the liability of the Corporation to fully fund the retirement benefits
under this plan is approximately $700,000.
    A special meeting of the Class X and Class Y shareholders of the
Corporation will be held on September 11, 2008 to consider and vote on the
proposed Plan of Arrangement.
    Electrohome Limited also announced on August 7, 2008, that its
wholly-owned subsidiary, 2112126 Ontario Inc., closed the sale of its land on
Victoria Street in Kitchener, Ontario. The property is currently undergoing
remediation and rehabilitation as a result of contamination from a previously
discontinued historic operation.
    The property was sold on an "as is" basis for nominal consideration with
the purchaser agreeing to remediate the property.
    As a result of the sale, Electrohome will take approximately $375,000
into income in the fourth quarter being the reversal of the remaining related
remediation accrual in its financial statements.

    Results from Operations - Three Months Ended June 30, 2008
    ----------------------------------------------------------
    A loss for the third quarter of $1,279,000 compares to a loss of $184,000
last year.
    There was no income for the third quarter of fiscal 2008. Income from the
third quarter of fiscal 2007 consisted of royalty income of $69,000 and
investment income from marketable securities of $7,000 (for which the
underlying marketable securities have since been completely sold).
    Retiree post-employment benefit costs and general and administrative
expenses were $324,000 for the current quarter which compares to $260,000 last
year. The increase was due to legal and consulting expenses associated with
the pending wind up of the Corporation.
    During the third quarter of fiscal 2008, the Corporation wrote down its
investment in Mechdyne Corporation by $955,000 due to the subsequent
transactions associated with Mechdyne, which provide evidence as to the fair
value of that investment at June 30, 2008.

    Results from Operations - Nine Months Ended June 30, 2008
    ---------------------------------------------------------
    A loss for the first nine months of fiscal 2008 of $311,000 compares to a
loss of $189,000 last year.
    Royalty income of $78,000 compares to $260,000 last year. The decrease is
a result of one quarter of royalties in fiscal 2008 versus three quarters in
fiscal 2007 and also due to lower sales of Electrohome branded products during
the first quarter.
    There was no investment income from marketable securities for the nine
months of fiscal 2008 as they were completely sold during fiscal 2007.
Investment income was $54,000 for the nine months of fiscal 2007.
    Retiree post-employment benefit costs and general and administrative
expenses were $934,000 for the nine months which compares to $829,000 last
year. The increase was primarily due to a non-cash pension expense of $133,000
during the first quarter associated with a settlement for one of two members
in the supplementary pension plan and increased legal costs associated with
the pending wind up of the Corporation.
    During the third quarter of fiscal 2008, the Corporation wrote down its
investment in Mechdyne Corporation by $955,000 due to the subsequent
transactions associated with Mechdyne, which provide evidence as to the fair
value of that investment at June 30, 2008.
    During the second quarter of fiscal 2008 the Corporation recorded a gain
on sale of the Corporation's trademarks of $1,500,000 as noted above.
    During the second quarter of fiscal 2007, the Corporation realized a net
gain of $328,000 for surplus received from the Hourly Pension Plan under a
surplus sharing arrangement with the members of that Plan.

    
    Summary of Quarterly Information for the Last Eight Quarters
    -------------------------------------------------------------------------
    (thousands          Jun    Mar    Dec    Sep    Jun    Mar    Dec    Sep
     except per          30     31     31     30     30     31     31     30
     share amounts)    2008   2008   2007   2007   2007   2007   2006   2006
    -------------------------------------------------------------------------
    Royalties         $   -  $   -  $  78  $  80  $  69  $  79  $ 112  $ 104
    Investment income     -      -      -      -      7      4     43     20
    -------------------------------------------------------------------------
    Total revenue         -      -     78     80     76     83    155    124
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Earnings (loss)
     from Continuing
     operations      (1,279) 1,263   (295)  (169)  (184)   110   (115)  (151)
      - Per share
       basic          (0.14)  0.14  (0.03) (0.02) (0.02)  0.01  (0.01) (0.01)
      - Per share
       diluted        (0.14)  0.14  (0.03) (0.02) (0.02)  0.01  (0.01) (0.01)
    -------------------------------------------------------------------------
    Net earnings
     (loss)          (1,279) 1,263   (295)  (442)  (184)   110   (115)  (151)
      - Per share
       basic          (0.14)  0.14  (0.03) (0.05) (0.02)  0.01  (0.01) (0.01)
      - Per share
       diluted        (0.14)  0.14  (0.03) (0.05) (0.02)  0.01  (0.01) (0.01)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Notes:               1      2      3      4             5
    -------------------------------------------------------------------------

    1.  Includes a $955,000 writedown of the investment in Mechdyne
    2.  Includes a $1,500,000 gain on sale of trademarks effective
        January 31, 2008.
    3.  Includes a $133,000 non-cash pension expense associated with the
        settlement with one of the two members in the supplemental pension
        plan.
    4.  Includes a $273,000 discontinued operation expense associated with
        environmental remediation of a historic property.
    5.  Includes a $328,000 gain from receipt of surplus funds from the
        Hourly Pension Plan.
    

    Liquidity and Cash Flows

    During the third quarter of fiscal 2008 cash decreased $313,000 as it was
used by operations.
    During the third quarter of fiscal 2007 cash decreased $120,000. Cash was
generated by the sale of marketable securities of $175,000 and it was used by
operations of $295,000.
    For the nine months ended June 30, 2008, cash increased $368,000. Cash
was generated from proceeds of $1,500,000 from the sale of the Corporations
trademarks effective January 1, 2008 and from $300,000 of advances from the
purchaser of the trademarks. Cash used to repay in its entirety, the advances
of $600,000 associated from the sale of the trademarks ($300,000 of which was
advanced in the prior fiscal year) and was used by operations of $832,000.
    For the nine months ended June 30, 2007, cash increased $4,000. Cash was
generated by the sale of marketable securities of $550,000. It was used by
operations of $529,000 and to reduce other liabilities of $17,000.

    Long-Term Obligations

    The Corporation has several long-term obligations as set out in the table
below.

    
    As at June 30, 2008 (thousands)
    -------------------------------------------------------------------------
                                    Current
                           Total    /12 Mo.  13-36 Mo.  37-60 Mo.   60 Mo. +
    -------------------------------------------------------------------------

    Executive supplem-
     ental pension(1,2)   $   660   $   187    $     -    $     -    $   473
    Post-employment
     health benefits(1)       930        87        273        181        389
    Environmental             398       124        170        104          -
    -------------------------------------------------------------------------
    Total(2)              $ 1,988   $   398    $   443    $   285    $   862
    -------------------------------------------------------------------------

    (1) actuarially determined - these figures represent the present value of
        future cash outflows.
    (2) the payment schedule takes into account a $1.4 million deposit in an
        associated Retirement Compensation Arrangement.
    

    The proposed Plan of Arrangement is approved, the Corporation should have
sufficient funds to satisfy it remaining obligations and perhaps provide a
final distribution to its shareholders prior to the formal dissolution. If the
Plan is not approved, the Corporation may be forced into insolvency
proceedings.

    Critical Accounting Estimates

    The financial statements are prepared using a number of accounting
estimates. A discussion of the critical accounting estimates is as follows:

    Investment in Mechdyne
    ----------------------
    The carrying value of the Corporation's investment in Mechdyne was set at
$4,000,000 during the fourth quarter of fiscal 2004 based on a valuation range
by an Accredited Senior Appraiser ("ASA"). The same ASA provided an updated
valuation in September 2007, which again supported the Corporation's carrying
value.
    Subsequent to the third quarter of fiscal 2008, the Corporation entered
into agreements (which are subject to certain future conditions being met),
which provide evidence as to the fair value of the investment in Mechdyne at
June 30, 2008. As a result, the Corporation wrote down this investment by
$955,000 to $3,045,000. Also, see the comments under Risks and Uncertainties.

    Environmental Accrual
    ---------------------
    The environmental liability is based on an ongoing analysis by an
independent third party environmental consulting firm that has been associated
with the remediation of the property in question since 1991. It is estimated
that the property had contaminants dumped on it in the early to mid-1900s. The
remediation process continues to be monitored and regulated by the Ontario
Ministry of the Environment ("MOE") under a Certificate of Approval. It is the
Corporation's position at June 30, 2008 that the carrying value of this
liability is appropriate. As remediation activities occur, they are recorded
as a reduction to the accrual, however, they require an outflow of cash. The
Corporation is also aware that the consultant's judgment is subject to risk as
its assessment is based on assumptions about certain events that may or may
not occur.
    Subsequent to the end of the third quarter of fiscal 2008, the
Corporation sold its Victoria St., Kitchener, Ontario property on an "as is"
basis for nominal consideration with the purchaser agreeing to remediate the
property. As a result of the sale, Electrohome will take approximately
$375,000 into income in the fourth quarter of fiscal 2008 from the reversal of
the remaining related remediation accrual in its financial statements.

    Post-Retirement Health and Pension Benefits
    -------------------------------------------
    The pension and post-employment health benefits are calculated based on
assumptions of management with the assistance of an independent actuary and
consulting firm. These assumptions include liability discount rates, health
care cost trend rates, mortality rates, etc. These assumptions require
significant judgment and therefore have inherent risk and uncertainty
associated with them as follows:

    
    -   With regards to the executive supplemental pension, the actuarial
        estimate is based on a small population, which results in a greater
        degree of uncertainty.

    -   With regards to the post-retirement health benefits, management
        implemented certain adjudication procedures in February 2005 which
        are now providing cost savings and effective October 1, 2007 further
        cost reduction changes were made to the plan. As a result, during the
        first quarter of fiscal 2008, the Corporation commissioned an
        actuarial valuation of the plan which resulted in an unrecognized
        actuarial gain of $490,000 to be amortized over the average remaining
        life of the plan members. Other factors, however, such as rising
        health care costs and potential changes to the Ontario Drug Benefit
        Program, may also have a positive or negative impact on the remaining
        obligation. These are issues that require further analysis and
        consideration.

    -   With regards to the salary pension plan, the Corporation has recorded
        a valuation allowance against the assets based on management's
        estimate of the Corporation's ability to realize on those assets.
    

    Income Taxes
    ------------
    Since the Corporation has determined it does not meet the "more likely
than not" test required by CICA Handbook Section 3465, Income Taxes, potential
future income tax assets of $8,065,000, at September 30, 2007, as set out in
Note 8 to the Consolidated Financial Statements in the Corporation's 2007
Annual Report, have not been recorded.

    Risks and Uncertainties

    Going Concern
    -------------
    These financial statements have been prepared on a going concern basis in
accordance with Canadian generally accepted accounting principles ("GAAP").
The going concern basis of presentation assumes that the Corporation will
continue in operation for the foreseeable future and be able to realize its
assets and discharge its liabilities and commitments in the normal course of
business. There is doubt about the appropriateness of the use of the going
concern assumption because on August 5, 2008 the Corporation announced that it
is planning an orderly wind-up of the Corporation pursuant to a court
supervised Plan of Arrangement. Currently the Corporation's only significant
cash inflow will consist of proceeds from the sale of its investment in
Mechdyne, however, the timing and amount of any potential proceeds is subject
to the satisfaction of various conditions. Current annual cash outflows of the
Corporation are approximately $1,200,000. Consequently, given management's
best estimate of future actions, it is estimated that the Corporation would
run out of funds in the first quarter of fiscal 2009.
    The financial statements do not reflect any adjustments that would be
necessary if the going concern assumption were not appropriate. If the going
concern basis was not appropriate for these financial statements, then
adjustments may be necessary in the carrying value of assets and liabilities,
the reported revenues and expenses, and the balance sheet classifications
used.

    Other
    -----
    Mechdyne operates in a market in which there are various uncertainties
and risks. While its technology and products continue to be more commercially
acceptable, its revenue is generally dependent on the availability of funds
for large capital expenditures. Mechdyne primarily competes with a few
international corporations whose main hardware and software products address
the large screen, high resolution projection business. The Corporation is also
aware that since the carrying value of this investment is in Canadian dollars
and the subsequent transactions are based in U.S. dollars, there is the
potential for volatility in foreign exchange gains or losses upon the
completion of the proposed transactions. More information about Mechdyne can
be found on its website at www.mechdyne.com.
    The Corporation's two registered pension plans are in the process of
being wound-up. The assets in the Hourly Plan have now been distributed as
approved by the Financial Services Commission of Ontario and the Corporation
is in the final stages of dissolving this Plan. At the time of the Salaried
Plan wind-up on December 31, 2003, based on an actuarial report as of that
date, the Salaried Plan was reported to have over a $1,000,000 surplus.
However, since that time there have been unfavourable changes in long-term
interest rates, which could result in a potential funding cost in the future.
The likelihood of the need for the Corporation to pay such funding cost to the
Salaried Plan cannot be ascertained at the moment as it depends on a number of
factors including the change in costs of purchasing annuities. In addition,
the July 2004 Monsanto court ruling dealing with surpluses at the time of any
partial plan wind-up, of which the Corporation had four in respect of its
Salaried Plan between 1990 and 1992, has added to the complexity of this
issue. The Corporation is continuing to investigate its options with regard to
purchasing annuity contracts, as well as the need and means of funding this
potential cost, if required.
    Similarly, there is uncertainty associated with the total obligation
amounts of the supplemental pension plan and the post-employment health
benefit plan, both of which are based on a number of assumptions.
    During the fourth quarter of fiscal 2007, the Corporation increased its
accrual by $273,000 for the environmental remediation of its remaining
historic properties. The additional accrual was based on new information
provided by the Corporation's consultants which was largely affected by ever
increasing remediation requirements of the Ministry of the Environment. The
Corporation believes that the accrual as of June 30, 2008 is adequate. On
August 7, 2008 the Corporation sold the property on an "as is" basis for
nominal consideration with the purchaser agreeing to remediate the property.
    During the first quarter of fiscal 2008, the Corporation made a
settlement with one of the two members in the supplementary pension plan
effectively removing the associated assets and liability from the Corporation.
The result of this transaction was a non-cash expense of $133,000.

    
    Capital Stock

                                                                 Options((*))
    Description                           Authorized     Issued  Outstanding
    -------------------------------------------------------------------------

    Class X voting participating shares    5,000,000  1,800,127          Nil
    Class Y non-voting participating
     shares                               10,000,000  7,323,277          Nil
    -------------------------------------------------------------------------
    All stock options of the Corporation have now expired.
    

    Related Party Transactions

    Mr. John A. Pollock, Chairman, President, Chief Executive Officer
("CEO"), director and controlling shareholder, provides his services as
Chairman, President and CEO under a consulting agreement at the rate of
$88,000 annually. The CEO's compensation is determined by the independent
members of the Corporation's board.
    Note, the Corporation's discussion of Disclosure Controls and Procedures
and Internal Control Over Financial Reporting have not changed from the
Management Discussion and Analysis included in the September 30, 2007 annual
report.

    Outlook

    Going forward, providing the proposed Plan of Arrangement is approved,
the Corporation should have sufficient funds to satisfy it remaining
obligations and perhaps provide a final distribution to its shareholders prior
to the formal dissolution. However, the Corporation's earnings will be subject
to volatility due to the nature and extent of the transactions required to
affect the Plan. If the Plan is not approved, the Corporation may be forced
into insolvency proceedings.
    Electrohome's shares are traded on the NEX board of the TSX Venture
Exchange under the symbols ELL.H and ELL.K. Trading data for these shares can
be found on www.tsx.com/en/nex/index.html. Electrohome's regulatory filings
including its Annual Report, Audited Financial Statements, Management
Discussion and Analysis, Proxy Information Circular, Annual Information Form
and all other interim filings can be found on www.sedar.com. Also visit
Electrohome's website at www.electrohome.com.

    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.



    
                             Electrohome Limited
                       Unaudited Financial Statements

    -------------------------------------------------------------------------
    BALANCE SHEETS                                          As At      As At
                                                           Jun 30     Sep 30
    -------------------------------------------------------------------------
    (thousands)                                              2008       2007
    -------------------------------------------------------------------------
    Assets                                                          (audited)
    Current assets
      Cash                                                $   571    $   203
      Accounts receivable                                      24         83
      Prepaid expenses                                         37         27
    -------------------------------------------------------------------------
                                                              632        313
    -------------------------------------------------------------------------
      Capital assets, net of amortization                       7          7
      Investment in Mechdyne Corporation                    3,045      4,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          $ 3,684    $ 4,320
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Liabilities & shareholders' equity
    Current liabilities
    Accounts payable and accrued liabilities              $   239    $    76
    Loan payable                                                -        300
    Current portion of other liabilities                      456        581
    -------------------------------------------------------------------------
                                                              695        957
    -------------------------------------------------------------------------
    Other liabilities                                       1,593      1,658
    -------------------------------------------------------------------------
    Shareholders' equity
    Capital stock                                           7,086      7,086
    -------------------------------------------------------------------------
    Contributed surplus                                        19         17
    -------------------------------------------------------------------------
      Retained earnings (deficit)                          (4,594)    (4,283)
      Accumulated other comprehensive income               (1,115)    (1,115)
    -------------------------------------------------------------------------
                                                           (5,709)    (5,398)
    -------------------------------------------------------------------------
                                                            1,396      1,705
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          $ 3,684    $ 4,320
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    STATEMENTS OF EARNINGS,
     COMPREHENSIVE INCOME AND        Three Months Ended     Nine Months Ended
     RETAINED EARNINGS                      June 30               June 30
    -------------------------------------------------------------------------
    (thousands, except per
     share amounts)                     2008       2007       2008       2007
    -------------------------------------------------------------------------
    Revenue
      Royalty income                $     -    $    69    $    78    $   260
      Investment income from
       marketable securities              -          7          -         54
    -------------------------------------------------------------------------
    Total revenue                         -         76         78        314
    -------------------------------------------------------------------------
    Expenses and other items
      General and administrative       (324)      (260)      (934)      (829)
      Write down of investment in
       Mechdyne                        (955)         -       (955)         -
      Recovery of pension surplus         -          -                   328
      Gain on sale of trademarks          -          -      1,500          -
      Amortization                        -          -          -         (2)
    -------------------------------------------------------------------------
                                     (1,279)      (260)      (389)      (503)
    -------------------------------------------------------------------------

    Net earnings (loss) and
     comprehensive income (loss)     (1,279)      (184)      (311)      (189)
    Retained earnings (deficit)
     at beginning of period          (3,315)    (3,657)    (4,283)    (3,652)
    -------------------------------------------------------------------------
    Retained earnings (deficit)
     at end of period               $(4,594)   $(3,841)   $(4,594)   $(3,841)
    -------------------------------------------------------------------------

    Weighted average shares
     outstanding (000's)              9,123      9,123      9,123      9,123
    Earnings (loss) per share       $ (0.14)   $ (0.02)   $ (0.03)   $ (0.02)
    -------------------------------------------------------------------------
    Earnings (loss) per share
     diluted                        $  (0.14)  $ (0.02)   $ (0.03)   $ (0.02)
    -------------------------------------------------------------------------

    See Notes to the Financial Statements



                             Electrohome Limited
                       Unaudited Financial Statements

    -------------------------------------------------------------------------
    CASH FLOW STATEMENTS             Three Months Ended    Nine Months Ended
                                            June 30               June 30
    -------------------------------------------------------------------------
    (thousands)                        2008       2007       2008       2007
    -------------------------------------------------------------------------
    Cash flows from operating
     activities
    Net earnings (loss)             $(1,279)   $  (184)   $  (311)   $  (189)
    Items not affecting cash:
      Amortization                        -          -          -          2
      Stock-based compensation            -          1          1          2
      Write down of investment in
       Mechdyne                         955          -        955          -
      Gain on sale of trademarks          -          -     (1,500)         -
      Investment income (loss)
       from marketable securities         -         (7)         -        (54)
      Net increase (decrease) in
       defined benefit plans            (69)       (39)       (25)      (112)
    Change in non-cash working
     capital                             80        (66)        48       (178)
    -------------------------------------------------------------------------
                                       (313)      (295)      (832)      (529)
    -------------------------------------------------------------------------
    Cash flows from financing
     activities
    Loan payable                          -          -        300          -
    Repayment of loan                     -          -       (600)       (17)
    -------------------------------------------------------------------------
                                          -          -       (300)       (17)
    -------------------------------------------------------------------------
    Cash flows from investing
     activities
    Proceeds from sale of trademarks      -                 1,500          -
    Redemption of marketable
     securities                           -        175          -        550
    -------------------------------------------------------------------------
                                          -        175      1,500        550
    -------------------------------------------------------------------------

    Increase (decrease) in cash        (313)      (120)       368          4
    Cash at beginning of period         884        211        203         87
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash at end of period           $   571    $    91    $   571    $    91
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See Notes to the Financial Statements
    -------------------------------------------------------------------------
    



    Notes to the Financial Statements
    For the three and nine months ended June 30, 2008

    In accordance with CICA Handbook Section 1751 regarding Interim Financial
Statements, these financial statements do not include all the disclosure
required by generally accepted accounting principles applicable to annual
financial statements and therefore, should be read in conjunction with the
September 30, 2007 annual financial statements.
    These interim financial statements follow the same accounting policies
and methods of their application as the September 30, 2007 annual financial
statements.

    Going Concern

    These financial statements have been prepared on a going concern basis in
accordance with Canadian generally accepted accounting principles ("GAAP").
The going concern basis of presentation assumes that the Corporation will
continue in operation for the foreseeable future and be able to realize its
assets and discharge its liabilities and commitments in the normal course of
business. There is doubt about the appropriateness of the use of the going
concern assumption because on August 5, 2008 the Corporation announced that it
is planning an orderly wind-up of the Corporation pursuant to a court
supervised Plan of Arrangement. (See subsequent events). Currently the
Corporation's only significant cash inflow will consist of proceeds from the
sale of its investment in Mechdyne, however, the timing and amount of any
potential proceeds is subject to the satisfaction of various conditions.
Current annual cash outflows of the Corporation are approximately $1,200,000.
Consequently, given management's best estimate of future actions, it is
estimated that the Corporation would run out of funds in the first quarter of
fiscal 2009.
    The financial statements do not reflect any adjustments that may be
necessary if the going concern assumption were not appropriate. If the going
concern basis was not appropriate for these financial statements, then
adjustments may be necessary in the carrying value of assets and liabilities,
the reported revenues and expenses, and the balance sheet classifications
used.

    Defined Benefit Costs

    During the third quarter of fiscal 2008, the Corporation expensed $65,000
(2007 - $72,000). During the first nine months of the year, the Corporation
expensed $247,000 (2007 - $200,000) to its defined benefit plans, which was
primarily related to a recognized actuarial loss associated with a settlement
with one of the two members in the supplementary pension plan during the first
quarter of fiscal 2008.

    Sale of Trademarks/Bridge Financing

    During the second quarter of fiscal 2008, the Corporation completed the
sale of its trademarks and a related licensing agreement for $1,500,000. The
sale was previously approved by shareholders on May 10, 2007. The purchaser
advanced Electrohome $600,000 over six months from July to December 2007. The
advanced payments carried a 7.0% interest rate and nominal fees, which were
deducted from the proceeds of the sale of the trademarks netting $887,000.
Proceeds from the sale will be used to fund operations while Electrohome's
remaining assets are monetized and its liabilities are addressed.
    As a result of the sale, Electrohome will no longer receive any royalty
income from trademarks.

    Retiree Health Benefit Plan

    During the fourth quarter of fiscal 2008, the Corporation commissioned an
actuarial valuation of its retiree health benefit plan which resulted in an
unrecognized actuarial gain of $490,000 to be amortized over the average
remaining life of the plan members.

    Subsequent Events

    On August 5, 2008, Electrohome Limited announced that it is planning an
orderly wind-up of the Corporation pursuant to a court supervised Plan of
Arrangement.
    The Plan of Arrangement proposed by the Corporation under the Business
Corporations Act (Ontario) provides an expeditious and efficient way for the
Corporation to sell its remaining assets, satisfy its outstanding obligations
and maximize the amount of residual proceeds that can be distributed to its
shareholders prior to the dissolution of the Corporation, all in an orderly
fashion within a condensed and finite timeframe under the supervision of the
Court.
    The proposed Plan of Arrangement includes the sale of the Corporation's
investment in Mechdyne Corporation, fulfillment and/or discharge of the
Corporation's outstanding liabilities and obligations, cancellation of the
issued and outstanding Class X Shares and the Class Y Shares, delisting of the
Corporation's shares from the NEX board of the TSX Venture Exchange and the
ceasing of the Corporation to be a reporting issuer, change of the
Corporation's name to ELXY Holdings Inc., change in the Corporation's minimum
number of directors from 3 to 1, appointment of an administrative agent to
assist the Corporation with implementation of the Plan of Arrangement,
distribution to shareholders of any residual proceeds, and dissolution of the
Corporation.
    As part of the Plan of Arrangement the Corporation proposes to sell its
shares of Mechdyne Corporation back to Mechdyne in exchange for an initial
cash payment of US $616,444 and a 10 year promissory note in the amount of
US $3,082,222 bearing interest at an annual rate of 4.3% with principal
payments subject to Mechdyne's annual earnings. Since the Corporation intends
to wind up its operations, the Corporation's Chairman, President, Chief
Executive Officer and controlling shareholder, Mr. John A. Pollock, has agreed
to purchase the 10 year promissory note from the Corporation for a cash amount
of US $2,394,592. A committee of independent directors of the Corporation
reviewed the proposed sale transactions and engaged an independent Chartered
Business Valuator ("CBV") to provide the committee with an independent
fairness opinion. The CBV concluded that that the proposed transaction is fair
to the shareholders from a financial perspective.
    In the interests of maximizing the amount of residual proceeds that can
be distributed to shareholders, Mr. Pollock has also agreed to forgo payment
of approximately $450,000 with respect to the funding of his supplemental
retirement plan with the Corporation. An independent actuary has determined
that the liability of the Corporation to fully fund the retirement benefits
under this plan is approximately $700,000.
    A special meeting of the Class X and Class Y shareholders of the
Corporation will be held on September 11, 2008 to consider and vote on the
proposed Plan of Arrangement.
    Electrohome Limited also announced on August 7, 2008, that its
wholly-owned subsidiary, 2112126 Ontario Inc., closed the sale of its land on
Victoria Street in Kitchener, Ontario. The property is currently undergoing
remediation and rehabilitation as a result of contamination from a previously
discontinued historic operation.
    The property was sold on an "as is" basis for nominal consideration with
the purchaser agreeing to remediate the property.
    As a result of the sale, Electrohome will take approximately $375,000
into income in the fourth quarter being the reversal of the remaining related
remediation accrual in its financial statements.





For further information:

For further information: John A. Pollock, Chairman and Chief Executive
Officer; or Gary Dumoulin, Vice-President, Chief Financial Officer and
Secretary at (519) 749-3319

Organization Profile

ELECTROHOME LIMITED

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890