Westaim announces 2007 year-end results



    CALGARY, Feb. 15 /CNW/ - The Westaim Corporation announced today that for
the year ended December 31, 2007, it recorded a net loss of $58.0 million, or
62 cents per share, on revenues of $31.8 million compared to a net loss of
$50.6 million, or 54 cents per share, on revenues of $27.6 million in the
previous year. For the three months ended December 31, 2007, the Company
posted a net loss of $26.8 million, or 28 cents per share, compared to a net
loss of $11.0 million, or 12 cents per share, in the same period in the
previous year.
    The 2007 net loss includes significantly improved operating results at
Nucryst Pharmaceuticals Corp. due to lower R&D spending and to milestone
revenues from Smith & Nephew earned in the year; reduced operating costs at
iFire Technology Ltd.; gains on sale of real estate; and gains on the sale of
a non-core subsidiary. These improvements were offset in part by
reorganization and severance costs related to operational changes in both
Westaim and iFire that will reduce future annual operating costs; and by
write-downs and realized losses incurred on the Company's investment in
Canadian third-party asset-backed commercial paper (ABCP) totaling $5.1
million.
    The 2007 results also include a net loss from discontinued operations of
$55.2 million compared to a net loss from discontinued operations of $37.7
million in 2006. These losses, which relate to the Company's wholly owned
subsidiary iFire Technologies Ltd., include a write-down of capital assets of
$22.1 million in the fourth quarter of 2007.
    At December 31, 2007, Westaim had $31.0 million in consolidated cash and
short-term investments, compared to $62.5 million at December 31, 2006.
Westaim's cash position, excluding cash and short-term investments held by its
74.5 per cent owned affiliate NUCRYST Pharmaceuticals Corp., was $13.2
million. In addition, Westaim held ABCP with a book value of $6.0 million.
    "Westaim is continuing to explore strategic alternatives," said Drew
Fitch, President & CEO of Westaim. "Late in 2007 we announced our intention to
seek a buyer for the business or assets of iFire Technology and this process
is still underway. We are continuing our effort to monetize non-core assets
and early in 2008 we realized $4.5 million in proceeds from the sale of 75 per
cent of our equity interest in a non-core subsidiary. At the same time, we are
assessing alternative structures for the Company."
    As a result of Westaim's announcement in late 2007 that it would seek a
buyer for its iFire Technology subsidiary, the assets and liabilities of iFire
are reflected on Westaim's consolidated balance sheet as held for sale and the
results of iFire operations are reflected on the consolidated statement of
operations as discontinued operations.
    The Westaim Corporation's investments include iFire Technology Ltd., and
a 74.5 per cent interest in NUCRYST Pharmaceuticals Corp. (NASDAQ:   NCST; TSX:
NCS). Westaim's common shares are listed and on The Toronto Stock Exchange
under the trading symbol WED.
    A more detailed discussion of Westaim's 2007 consolidated year end
results can be found in the 2007 audited consolidated financial statements and
Management's Discussion and Analysis, which will be available at
www.westaim.com and www.sedar.com.

    This news release contains forward-looking statements. These statements
are based on current expectations that are subject to risks and uncertainties,
and Westaim can give no assurance that these expectations are correct. Various
factors could cause actual results to differ materially from those projected
in such statements, including but not limited to statements regarding the
effect of reorganization and severance costs related to operational changes in
both Westaim and iFire to reduce future annual operating costs, and Westaim's
intention to explore strategic alternatives, to seek a buyer for the business
or assets of iFire, and to monetize non-core assets. Westaim disclaims any
intention or obligation to revise forward-looking statements whether as a
result of new information, future developments or otherwise. Accordingly,
readers are advised not to place undue reliance on forward-looking statements,
and should not rely on this information at any date other than the date of
this news release. All forward-looking statements are expressly qualified in
their entirety by this cautionary statement.


    
    THE WESTAIM CORPORATION
    Financial Highlights
    (unaudited)
    (thousands of dollars except per share data)

    -------------------------------------------------------------------------
                                    Three Months Ended   Twelve Months Ended
                                           December 31           December 31
                                  --------------------- ---------------------
    Consolidated Statements of
     Operations                        2007       2006       2007       2006
    -------------------------------------------------------------------------

    Revenue                       $  11,174  $   5,140  $  31,830  $  27,591
    Income (loss) from continuing
     operations                       1,169     (2,200)    (2,830)   (12,861)
    Net loss                        (26,807)   (11,019)   (58,033)   (50,557)
    Net income (loss) per common
     share - basic and diluted
      Continuing operations            0.01      (0.02)     (0.03)     (0.14)
      Net loss                        (0.28)     (0.12)     (0.62)     (0.54)
    Weighted average number of
     common shares outstanding
     (thousands)                     94,136     93,797     94,070     93,523

    -------------------------------------------------------------------------
                                    Three Months Ended   Twelve Months Ended
                                           December 31           December 31
                                  --------------------- ---------------------

    Segmented Information              2007       2006       2007       2006
    -------------------------------------------------------------------------

    Revenue from continuing
     operations
      Nucryst Pharmaceuticals     $  11,174  $   5,140  $  31,830  $  27,591
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating income (loss)
      Nucryst Pharmaceuticals     $   3,532  $  (2,200) $    (635) $ (11,216)
      Other (including
       corporate costs)              (1,826)    (1,311)   (10,805)    (6,128)
    -------------------------------------------------------------------------
    Operating income (loss) from
     continuing operations        $   1,706  $  (3,511) $ (11,440) $ (17,344)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                   December   December
    Consolidated Balance Sheets    31, 2007   31, 2006
    ---------------------------------------------------

    Cash and short-term
     investments                  $  30,993  $  62,486
    Current assets                   51,561     80,256
    Other assets                     31,826     68,083
    Current liabilities               8,461     15,977
    Shareholders' equity             56,371    112,977




    THE WESTAIM CORPORATION
    Consolidated Statements of Operations and Consolidated Statements
    of Comprehensive loss and Deficit
    (unaudited)


    -------------------------------------------------------------------------
                                          Three Months         Twelve Months
                                     Ended December 31     Ended December 31
                                  --------------------- ---------------------
    (thousands of dollars except
      per share data)                  2007       2006       2007       2006
    -------------------------------------------------------------------------

    Revenue                       $  11,174   $  5,140  $  31,830  $  27,591
    Costs
      Manufacturing                   3,226      2,899     14,617     17,324
      Research and development        1,334      1,966      6,356     12,112
      General and administrative      2,660      2,101      9,348      6,762
      Depreciation and amortization     403        635      2,093      2,614
      Corporate costs                 1,845      1,050     10,856      6,123
    -------------------------------------------------------------------------
    Operating income (loss)           1,706     (3,511)   (11,440)   (17,344)

      Foreign exchange (loss)
       gain                            (305)     1,331     (3,804)      (720)
      Interest                          141        653      1,822      3,242
      Change in fair value of
       third party asset-backed
       commercial paper              (1,067)         -     (4,048)         -
      Loss on sale of third
       party asset-backed
       commercial paper              (1,067)         -     (1,067)         -
      Write-down of capital
       assets and intangible
       assets                             -     (1,210)    (1,203)    (1,210)
      Gain on sale of capital
       assets                            75          -      8,722          -
      Dilution gain                       -          -      4,525          -
      Gain on sale of investment      2,648          -      2,648          -
      Loss on issuance of shares
       of subsidiary                    (14)        (5)      (134)       (99)
      Non-controlling interest         (806)       466      1,293      3,222
    -------------------------------------------------------------------------

    Income (loss) from
     continuing operations
     before income taxes              1,311     (2,276)    (2,686)   (12,909)

    Income tax (expense) recovery      (142)        76       (144)        48
    -------------------------------------------------------------------------

    Income (loss) from continuing
     operations                       1,169     (2,200)    (2,830)   (12,861)
    Loss from discontinued
     operations net of income
     taxes                          (27,976)    (8,819)   (55,203)   (37,696)
    -------------------------------------------------------------------------

    Net loss                      $ (26,807) $ (11,019) $ (58,033) $ (50,557)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Income (loss) per common share
      Continuing operations
       - basic and diluted        $    0.01  $   (0.02) $   (0.03) $   (0.14)
      Net loss - basic and
       diluted                        (0.28)     (0.12)     (0.62)     (0.54)


    Weighted average number of
     common shares outstanding
     (thousands)                     94,136     93,797     94,070     93,523
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consolidated Statements of
     Comprehensive Loss

    Net loss for the period       $ (26,807) $ (11,019) $ (58,033) $ (50,557)
    Unrealized (loss) gain on
     translation of net foreign
     operations                        (145)       103     (1,103)      (173)
    -------------------------------------------------------------------------
    Comprehensive loss            $ (26,952) $ (10,916) $ (59,136) $ (50,730)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consolidated Statements of
     Deficit

    Deficit at beginning of
     period                       $(349,074) $(306,829) $(317,848) $(267,291)
    Net loss for the period         (26,807)   (11,019)   (58,033)   (50,557)
    -------------------------------------------------------------------------
    Deficit at end of period      $(375,881) $(317,848) $(375,881) $(317,848)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    THE WESTAIM CORPORATION
    Consolidated Balance Sheets
    (unaudited)

    -------------------------------------------------------------------------
                                                     December 31 December 31
    (thousands of dollars)                                  2007        2006
    -------------------------------------------------------------------------

    ASSETS

    Current
      Cash and cash equivalents                        $  30,993   $  45,035
      Short-term investments                                   -      17,451
      Accounts receivable                                 14,931       8,189
      Inventories                                          4,373       8,506
      Other                                                  674         589
      Current assets held for sale                           590         486
    -------------------------------------------------------------------------
                                                          51,561      80,256


    Investments                                            5,968           -
    Capital assets                                        12,581      19,201
    Capital assets held for sale                          10,086      44,757
    Intangible assets                                        799         951
    Intangible assets held for sale                        2,392       3,174
    -------------------------------------------------------------------------

                                                       $  83,387  $  148,339
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current
      Accounts payable and accrued liabilities         $   7,018  $    6,165
      Accounts payable and accrued liabilities held
       for sale                                            1,443       1,812
      Current portion of long-term debt                        -       8,000
    -------------------------------------------------------------------------
                                                           8,461      15,977

    Deferred gain                                            218           -
    Provision for site restoration                         6,580       6,580
    -------------------------------------------------------------------------
                                                          15,259      22,557
    -------------------------------------------------------------------------

    Non-controlling interest                              11,757      12,805

    Shareholders' equity
      Capital stock                                      426,262     426,122
      Contributed surplus                                  7,769       5,379
      Accumulated other comprehensive loss                (1,779)       (676)
      Deficit                                           (375,881)   (317,848)
    -------------------------------------------------------------------------
                                                          56,371     112,977
    -------------------------------------------------------------------------

                                                       $  83,387  $  148,339
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    THE WESTAIM CORPORATION
    Consolidated Cash Flow Statements
    (unaudited)

    -------------------------------------------------------------------------
                                    Three Months Ended   Twelve Months Ended
                                           December 31           December 31
                                  --------------------- ---------------------
    (thousands of dollars)             2007       2006       2007       2006
    -------------------------------------------------------------------------

    Operating Activities
    Net income (loss) from
     continuing operations        $   1,169  $  (2,200) $  (2,830)   (12,861)
    Items not affecting cash
      Gain on sale of capital
       assets                           (75)         -     (8,722)         -
      Gain on sale of investment     (2,648)         -     (2,648)         -
      Change in fair value of
       third party asset-backed
       commercial paper               1,067          -      4,048          -
      Loss on sale of third
       party asset-backed
       commercial paper               1,067          -      1,067          -
      Depreciation and
       amortization                     403        635      2,093      2,614
      Stock-based compensation
       expense                          667        372      2,469      1,412
      Non-controlling interest          806       (466)    (1,293)    (3,222)
      Loss on issuance of shares
       of subsidiary                     14          5        134         99
      Write-down of capital
       assets and intangible
       assets                             -      1,210      1,203      1,210
      Dilution gain                       -          -     (4,525)         -
      Foreign exchange on
       short-term investments             -          -          -        (52)
      Accounts receivable            (4,407)     1,690     (7,190)      (320)
      Inventories                     1,508       (587)     4,128       (838)
      Other                           1,087        173        (98)       (30)
      Accounts payable and
       accrued liabilities           (5,808)    (1,504)     1,131     (6,563)
    -------------------------------------------------------------------------
    Cash used in continuing
     operations                      (5,150)      (672)   (11,033)   (18,551)
    Cash used in discontinued
     operations                      (3,462)    (6,290)   (19,739)   (25,703)
    -------------------------------------------------------------------------
    Cash used in operating
     activities                      (8,612)    (6,962)   (30,772)   (44,254)
    -------------------------------------------------------------------------

    Investing activities
      Capital expenditures             (402)      (755)    (2,376)    (6,541)
      Capital expenditures
       - discontinued operations          -        (56)         -     (1,339)
      Maturity of short-term
       investments                        -      1,285     46,904     30,594
      Purchase of short-term
       investments                        -    (17,450)   (29,453)   (44,039)
      Purchase of short-term
       investments reclassified
       to investments                     -          -    (14,400)         -
      Reclassification of cash
       equivalents to investments       (16)         -     (2,650)         -
      Proceeds on sale of third
       party asset-backed
       commercial paper               5,968          -      5,968          -
      Intangible assets                 (11)       (50)       (72)      (245)
      Intangible assets
       - discontinued operations        (12)      (106)      (480)      (404)
      Proceeds on sale of
       investment                     1,582          -      1,582          -
      Proceeds on sale of
       capital assets                    75          -     14,437          -
      Proceeds on sale of
       discontinued operations           15          -         24        312
    -------------------------------------------------------------------------
    Cash provided from (used in)
     investing activities             7,199    (17,132)    19,484    (21,662)
    -------------------------------------------------------------------------

    Financing activities
      Repayment of long-term debt
       - discontinued operations          -          -          -    (10,434)
      Issuance of common shares
       of subsidiary                      -         40         14        325
      Issuance of common shares           -          -         27      4,484
      Issuance of convertible
       debentures of subsidiary           -          -          -      2,000
      Net cash outflow on
       deconsolidation of former
       subsidiary                         -          -     (2,306)         -
    -------------------------------------------------------------------------
      Cash provided from (used in)
       financing activities               -         40     (2,265)    (3,625)
    -------------------------------------------------------------------------

    Effect of exchange rate changes
      on cash and cash equivalents       29         33       (489)        26
    -------------------------------------------------------------------------

    Net decrease in cash and
     cash equivalents                (1,384)   (24,021)   (14,042)   (69,515)
    Cash and cash equivalents
     at beginning of period          32,377     69,056     45,035    114,550
    -------------------------------------------------------------------------

    Cash and cash equivalents
     at end of period             $  30,993  $  45,035  $  30,993  $  45,035
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents
     is comprised of:
      Cash                        $  12,537  $   9,180  $  12,537  $   9,180
      Cash equivalents               18,456     35,855     18,456     35,855

    Supplemental disclosure of
     cash flow information:
      Non-cash capital asset
       additions included in
       accounts payable and
       accrued liabilities        $     452  $     508  $     452  $     508
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00002793E




For further information:

For further information: David Wills, Investor Relations, (416)
504-8464, info@westaim.com, www.westaim.com


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