GENESIS WORLDWIDE INC. ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2010 FINANCIAL RESULTS

MISSISSAUGA, ON, May 30, 2011 /CNW/ - Genesis Worldwide Inc. ("Genesis" or the "Company"), (NEX: GWI.H), today announces its financial results for the fourth quarter and fiscal year ended December 31, 2010. All dollar amounts are in Canadian dollars unless otherwise stated.

Business Update

The following are the Company's key business highlights as previously announced -

  • On February 16, 2011, the Company completed a brokered private placement through Canaccord Genuity Corp., acting as the Company's agent. Pursuant to the private placement, 20,000,000 units, including 6,500,000 units issued pursuant to the over-allotment option which was granted to the agent and exercised in full, were issued to arm's-length parties at a price of $0.05 per unit, raising gross proceeds of $1,000,000.  Each unit consists of one common share of the Company and one-half of one common share purchase warrant of the Company.  Each common share purchase warrant entitles the holder to acquire one common share at an exercise price of $0.10 at any time on or prior to February 16, 2013.  The net proceeds from the private placement will be used by the Company for working capital purposes.

  • In pursuit of its newly adopted strategic plan, following the divestiture in October 2010 of its structural products division, including KML Engineered Homes Ltd. ("KML"), a former subsidiary and licensee of the Company, the Company reduced its cost structure through layoff, attrition and the assumption of liabilities by KML through its divestiture.  Management believes that the Company has positioned itself to efficiently manage a significant revenue base with far fewer employees and reduced overhead.

  • As part of its new business strategy, in addition to its joint venture partnership, which the Company entered into in May 2010 with Genesis Steel Frame Solutions in California, the Company continues to explore additional joint venture relationships, as well as licensing arrangements with new and existing customers to develop light steel structural manufacturing operations in strategic global locations where the need for a more efficient building system is preferred or required.  Furthermore, structural products will be sold through these joint ventures to customers in their specific markets.  Joint ventures will provide Genesis the opportunity to participate more substantially in new and existing markets by partnering with well-established local companies with access to readily identifiable opportunities.  An equity stake in these joint ventures will allow Genesis to share in the potential profits of this operation and to directly influence the direction and success of the business. In addition, the Company may reduce significant portions of its overhead as the joint venture operations endeavour to reach profitability.

  • During the third quarter of 2010, Genesis signed a memorandum of understanding with a Vietnamese construction equipment company, Megastar Engineering and Construction ("Megastar E&C"), a current licensee of the Company, to form a joint venture partnership, which will bring the Genesis system and product to South East Asia.  Legal documentation for this transaction is now underway.  In March 2011, the Company announced the groundbreaking for the new production facility for Megastar E&C, in Hung Yen Province, Vietnam.  Plans are underway to open the new facility by the end of 2011, which will be used to supply cold formed steel building panels to South East Asia, including Vietnam, China and Japan.

  • It is anticipated that, in the future, the licensing division would derive a majority of its revenue through royalties, licensing fees and industrial equipment sales.  The Company will continue to develop additional licensees throughout its target markets.  The Company is currently developing software license seats to meet the demands from various general contractors, architects and engineering professionals who are interested in utilizing the FrameBuilder suite of software.  Management believes this may result in increased revenue to the Company and negotiations are taking place with potential customers in this regard.

  • In January 2011, the Company made application and received approval to voluntarily delist its common shares from the Toronto Stock Exchange (the "TSX"), effective February 18, 2011 at the close of market, as the Company was subject to a delisting review by the TSX as the Company did not meet continued listing requirements.  In an effort to ensure uninterrupted trading of the Company's common shares, the Company made application and received approval from the NEX exchange, a separate board of the TSX Venture Exchange, to list its common shares effective at market open on Tuesday, February 22, 2011.  The Company believes that a transfer in its stock exchange listing to the NEX will provide greater operational efficiency, further access to adequate financing, and lower public filing costs for the Company, while allowing shareholders continued liquidity on a recognized TMX Group board.

Financial Highlights

  • Revenue for the licensing division for the fiscal year ended December 31, 2010 decreased to $175,555, compared to $3,894,019 for the same period in 2009.  Revenue for the licensing division for the fourth quarter ended December 31, 2010 decreased to $1,486, compared to $422,214 for the same period in 2009.  The decrease is due to the Company's divesture of its structural products division which occurred in October 2010.  The Company will not record structural products revenues in the future.  Revenue has also been impacted by the current economic situation, which has resulted in a general slowdown in the construction industry.

  • Operating expenses for the fiscal year ended December 31, 2010 decreased to $2,328,483, compared to $5,670,303 for the same period in 2009, due to cost saving initiatives and the divesture of the Company's structural products division.  Operating expenses for the three months ended December 31, 2010 decreased to $323,155, compared to $1,637,374 for the same period in 2009.  The decrease is primarily due to the Company's divesture of its structural products division and its cost containment plan.

  • Net loss for continuing operations for the fiscal year ended December 31, 2010 was $2,656,693, or ($0.05) per common share, compared to a net loss from continuing operations of $5,457,838 or ($0.14) per common share, for the same period in 2009. Net income for discontinued operations for the fiscal year ended December 31, 2010 was $2,295,928, or $0.04 per common share, compared to a net loss from discontinued operations of $6,061,929, or ($0.15) per common share, for the same period in 2009.

  • Net loss for continued operations for the fourth quarter ended December 31, 2010 was $489,828, or ($0.01) per common share, compared to a net loss from continued operations of $2,612,918, or ($0.05) per common share, for the fourth quarter of 2009.  Net loss for discontinued operations for the fourth quarter ended December 31, 2010 was $130,648, or ($0.00) per common share, compared to a net loss from discontinued operations of $4,108,706, or ($0.08) per common share, for the fourth quarter of 2009.

"2010 was a period of positive change for Genesis, during which the Company divested its structural products division, reorganized its business strategy, implemented a cost containment plan, and moved forward on the development of its new software to meet the changing demands of the construction markets.  These strategic decisions, combined with the Company's cost containment plan, created a stronger balance sheet for Genesis to move forward on," stated Richard E. Pope, Chairman and CEO of the Company.  Mr. Pope added, "In 2011, the Company intends to finalize the development of its software product, which will integrate business information modeling and Genesis' current technology platform.  The Company expects the result of these endeavors to solidify its position in the global development and construction markets, allowing Genesis to generate software license seats revenue in addition to its license software, and position the Company as an attractive investment for shareholders."

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

About Genesis Worldwide Inc.

Genesis is a provider of green light steel building technology and solutions targeted at the global commercial, residential and institutional building sectors. Genesis delivers customized turnkey structural solutions, and provides software packages, industrial equipment, training programs, professional services and support ("Genesis Solution") to its customers and partners globally.  Headquartered in the Greater Toronto Area in Ontario, Canada, Genesis has established a network of partners with engineering, manufacturing and distribution operations in Canada, the United States, the Middle East, Eastern Europe, Russia and South East Asia.  For additional information about the Corporation, visit www.genesisworldwide.com.

Caution Regarding Forward-Looking Information

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

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

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

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Genesis Worldwide Inc. 

CONSOLIDATED BALANCE SHEETS
See Note 1 - Basis of Presentation and Going Concern Uncertainty
     
As at December 31,    
  2010 2009
  $ $
     
ASSETS        
Current    
Cash   7,051   72,247
Cash held in trust  —                    100,000
Restricted cash   —                    500,000
Accounts receivable, net 357,732                 2,818,204
Inventories, net  556                   346,219
Prepaid expenses 57,794                    255,719
Total current assets 423,133                 4,092,389
Notes receivable  1,049,704                    432,908
Property, plant and equipment 15,888                 2,232,604
Deposits      88,483                             —
Intangible assets                 1,015,101
           1,577,208     7,773,002
     
LIABILITIES AND SHAREHOLDERS' EQUITY
Current    
Accounts payable and accrued liabilities      2,344,866                 6,505,840
Short term loan payable       154,628                    991,587
Deferred revenue      349,215                    847,964
Minimum royalty payment obligations                          —                    682,548
Total current liabilities            2,848,709                 9,027,939
         
Long-term        
Long term payables   144,092                             —
Minimum royalty payment obligations      —     578,058
Total long-term liabilities    144,092  578,058
Commitments and contingencies      
         
Shareholders' equity      
Capital stock            61,830,420               61,114,911
Contributed surplus            1,905,150                 1,842,492
Deficit          (65,151,163)             (64,790,398)
Total shareholders' equity          (1,415,593)               (1,832,995)
               1,577,208                 7,773,002

Genesis Worldwide Inc.    
CONSOLIDATED STATEMENTS OF LOSS,
COMPREHENSIVE LOSS AND DEFICIT
See Note 1 - Basis of Presentation and Going Concern Uncertainty
Year ended December 31,    
  2010 2009
  $ $(1)
Revenues    
Licensing  175,555 3,894,019
Structural products
Total revenues 175,555 3,894,019
Direct cost of revenues    
Licensing 1,929,477
Structural products
Total direct cost of revenues 1,929,477
  175,555 1,964,542
Expenses (other income)    
Research and development 161,039 534,051
SR&ED tax credit (53,266)
Selling and marketing          405,681 1,023,514
Engineering and project management            29,940 268,478
General and administrative       1,639,438 3,570,096
Occupancy 92,385 327,429
  2,328,483 5,670,303
Loss before other expenses (2,152,929) (3,705,761)
Miscellaneous revenue and expense           (99,778)                   —
Amortization of property, plant and equipment              6,821           85,723
Bad debt expense          159,410                   —
Impairment loss on property, plant and equipment                            136,237
Loss on impairment of long-term investment          273,866                   —
Amortization of intangible asset                            298,484
Impairment of intangible assets                   —          887,626
Foreign exchange gain           (29,138)          (30,482)
Loss on disposal of property, plant and equipment                (214)            42,282
Bank interest expense and penalty charges            43,237          (56,994)
Loss on inventory evaluation          149,561                   —
Minimum royalty accretion                   —          214,701
Debenture accretion                              82,902
Term loan and debenture interest expense                              91,597
           503,765       1,752,077
Net loss and comprehensive loss from continuing operations      (2,656,693)     (5,457,838)
Loss from discontinued operations      (3,367,533)     (6,061,929)
Gain on sale of discontinued operations       5,663,461                   —
Net income (loss) from discontinued operations       2,295,928     (6,061,929)
Net (loss)         (360,765)   (11,519,767)
Deficit, beginning of year    (64,790,398)   (53,270,631)
Deficit, end of year    (65,151,163)   (64,790,398)
Loss per share    
Basic and diluted - net earnings - continuing operations $(0.05) $(0.14)
Basic and diluted - net earnings - discontinued operations $0.04 $(0.15)
Weighted average number of shares outstanding 57,527,106 39,510,309
(1) Fiscal 2009 numbers have been restated to reflect the divestiture  

                           

Genesis Worldwide Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
See Note 1 - Basis of Presentation and Going Concern Uncertainty
     
Year ended December 31,    
  2010 2009
  $ $(1)
OPERATING ACTIVITIES    
Net loss for the year (2,656,694)    (5,457,838)
Adjustments for non-cash items    
  Amortization of property, plant and equipment and intangible assets 4,462 370,767
  Provision for doubtful accounts (694,539) -
  Impairment loss on property, plant and equipment (977) 1,023,863
  Allocation of divesture assets (101,327) -
  Loss on divesture of long term investment 2,022,562 -
  Loss on impairment of long term asset 273,866 -
  Loss on disposal of property, plant and equipment - 42,282
  Stock-based compensation expense 6,422 169,384
  Unrealized foreign exchange loss (29,138) 131
  Debenture accretion - 82,902
  Minimum royalty accretion - 214,701
  (1,175,362) (3,553,807)
Changes in non-cash working capital balances related to operations    
  Accounts receivable 5,131,629 1,147,817
  Unbilled revenue 142,288 411,588
  Inventories and deposits on equipment 507,356 532,313
  Deposits 96,066 10,077
  Prepaid expenses 192,876 119,353
  Accounts payable and accrued liabilities (1,579,883) (372,308)
  Deferred revenue (147,408) (1,452,156)
  Cash in trust 100,000 (100,000)
Cash provided by (used by) operating activities 3,267,562 (3,257,125)
     
FINANCING ACTIVITIES    
Debenture proceeds - 2,952,919
Restricted cash 500,000 -
Repayment on term loan (961,342) (562,610)
Common stock issued 575,197 1,772,765
Convertible debenture 325,297 -
Cash provided by financing activities 439,152 4,163,073
     
INVESTING ACTIVITIES    
Additions to property, plant and equipment - (12,750)
Disposals of property, plant and equipment 1,515,813 19,051
Additions to intangible assets - (57,900)
Minimum royalties paid - (333,810)
Cash provided by (used by) investing activities 1,515,813 (385,408)
     
Net increase (decrease) in cash
during the year from continuing operations
5,222,526 520,540
     
Net increase (decrease) in cash
during the year from discontinued operations
(5,287,722) (615,357)
     
Cash, beginning of year   72,247 167,064
Cash, end of year 7,051 72,247

(1) Fiscal 2009 numbers have been restated to reflect the divestiture 

 

 

SOURCE Genesis Worldwide Inc.

For further information:

Genesis Worldwide Inc.
Richard Pope
Chief Executive Officer
Tel: (707) 478-6250

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Genesis Worldwide Inc.

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