Genesis Worldwide Inc. Announces Third Quarter ...

FOR: GENESIS WORLDWIDE INC. TSX, AIM SYMBOL: GWI November 6, 2008 Genesis Worldwide Inc. Announces Third Quarter Fiscal 2008 Results Licensing Division Achieves Sequential Operating Profitability and Signs Fourth License in Fiscal 2008 for the Baltic Market MISSISSAUGA, ONTARIO--(Marketwire - Nov. 6, 2008) - Genesis Worldwide Inc. ("Genesis" or the "Company"), (TSX:GWI)(AIM:GWI), a leading provider of 'green' building technology, announces its financial results for the third quarter ended September 30, 2008. The Company reports its financial statements in accordance with Canadian generally accepted accounting principles ("GAAP") and reports in Canadian dollars. Three Months Ended September 30, 2008 - Total revenue for the third quarter ended September 30, 2008 deceased 24.7% to $5,301,563, compared to $7,037,823 for the third quarter of 2007. - Operating expenses, excluding severance, for the third quarter ended September 30, 2008 decreased 16.6% to $2,679,749, compared to $3,214,409 for the second quarter of 2008. - Revenue for the licensing division for the third quarter ended September 30, 2008 decreased 15.2% to $2,746,520, compared to $3,239,065 for the same period in 2007. Comparative quarterly results will vary for this division depending primarily on the timing of shipments of its industrial products. - Revenue for the structural products division for the third quarter ended September 30, 2008 decreased 32.7% to $2,555,043, compared to $3,798,758 recorded in the third quarter of 2007. - Total contribution margin decreased by 32.5% in the third quarter ended September 30, 2008 to $1,677,391, compared to $2,486,840 for the same quarter last year. - Net loss for the third quarter ended September 30, 2008 increased to $1,906,844, or ($0.06) per common share, compared to a net loss of $872,748, or ($0.03) per common share for the third quarter of 2007. - The cash balance for the three months ended September 30, 2008 was $706,056. - The Company continues to look at other options/alternatives to add additional capital in the form of debt or new capital, which would allow the Company to advance its growth initiatives. Three Months Ended September 30, 2008 ------------------------------------- Structural (unaudited, in thousands of dollars) Licensing Products Corporate Total --------------------------------------------------------------------------- Revenue $ 2,746 $ 2,555 $ -- $ 5,301 Contribution margin 1,343 324 -- 1,667 Operating expenses (1,039) (1,019) (1,086) (3,144) Income/(loss) before other expenses 304 (695) (1,086) (1,477) Other income/(expenses) (165) (279) 14 (430) Net income/(loss) for the quarter 139 (974) (1,072) (1,907) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Financial Highlights Nine Months Ended September 30, 2008 - Total revenue for the nine months ended September 30, 2008 increased 4.8% to $16,809,744, compared to $16,045,385 for the same period in 2007. - Revenue for the licensing division for the nine months ended September 30, 2008 increased 6.3% to $7,311,009, compared to $6,875,689 for the same period in 2007. - Revenue for the structural products division for the nine months ended September 30, 2008 increased 3.6% to $9,498,735, compared to $9,169,696 for the first nine months of 2007. - Total contribution margin for the nine months ended September 30, 2008 decreased 4.5% to $5,117,860, compared to $5,358,983 recorded in the same period in 2007. Contribution margin, excluding costs associated with defective products and services received from third parties, would have increased to $5,947,860, an increase of 11.0%, compared to $5,358,983 recorded in the same period in 2007. - Net loss for the nine months ended September 30, 2008 was $5,535,989, or ($0.18) per common share, compared to a net loss of $4,698,695, or ($0.19) per common share, for the same period in 2007. Nine Months Ended September 30, 2008 ------------------------------------ Structural (unaudited, in thousands of dollars) Licensing Products Corporate Total --------------------------------------------------------------------------- Revenue $ 7,311 $ 9,499 $ -- $16,810 Contribution margin 4,087 1,031 -- 5,118 Operating expenses (3,945 (3,147) (2,453) (9,545) Income/(loss) before other expenses 142 (2,116) (2,453) (4,427) Other income/(expenses) (481) (688) 60 (1,109) Net loss for the period (339) (2,804) (2,393) (5,536) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Contracted Backlog Contracted backlog for the licensing division is defined as undelivered contractual commitments, other than minimum royalty obligations, and assumes that in cases of multi-year/multi-facility commitments by licensees, subsequent facilities match the industrial technology configured for the first facility. Contracted backlog for the structural products division is defined as the undelivered portion of signed construction contracts. The timing of these contractual commitments into revenue is uncertain and the possibility exists that contractual commitments can be de-booked. A breakdown of the Company's contracted backlog is as follows: - Total backlog as at September 30, 2008 was approximately $49,000,000, representing a 48% increase over backlog of approximately $33,000,000 as at September 30, 2007. - Backlog for the licensing division as at September 30, 2008 was approximately $20,000,000. This excludes minimum royalty obligations. - Backlog for the structural products division as at September 30, 2008 was approximately $29,000,000. Business Update Licensing Division - Achieved operating profitability (income before other expenses) of $304,000, and net income of $139,000 for the third quarter of fiscal 2008; - Operating expenses, excluding corporate reorganization costs, decreased by 19% as a result of cost cutting initiatives; - Signed its fourth license agreement in 2008 with UAB Baltic Light Steel Framing, targeting the Baltic region, which includes Lithuania, Latvia and Estonia. The Company achieved its 2008 goal of attaining four licensees one quarter ahead of target. The Company's Ireland office was successful in securing this transaction; - Backlog increased to $20,000,000, compared to $4,000,000 for the third quarter of 2007; - Completed the development, testing and manufacturing of its newest Material Optimization Technology ("MOT") series, MOT 6000, for its central Russia licensee, Greenford Trading, which was shipped in July 2008; and - Expanded its process patent filings for its Coil-to-Panel ("CTP") manufacturing line to markets in Dubai, Turkey, Russia, Ukraine, China, India, Australia, and the European Union. Structural Products Division - Commenced on-site installation of four new projects; - Signed contracts for new vertical building markets to provide light steel framing to schools, portable buildings, and government assisted-living affordable housing; - the Genesis Solution can now be applied to structures eight storeys and under, an increase of two storeys; - Completed remedial work relating to defective products and services provided by third party vendors in the previous quarter, incurring total costs of $300,000 for the quarter. - Expanded utilization of its MOT to produce roof solutions; - Backlog was $29,000,000, which was consistent with the third quarter of 2007; and - Operating expenses decreased by 13% as a result of cost cutting initiatives. Corporate Division - Announced the appointment of its new Chief Financial Officer, Greg Kent. "During the third quarter of 2008, the Company's licensing division, GenesisTP Inc., signed a new license agreement for the Baltic region. This brings the total number of new license agreements for the 2008 fiscal period to four, achieving the Company's fiscal year 2008 target one quarter early," stated Vince Mifsud, Genesis' President and Chief Executive Officer. "We are also pleased to report that this division achieved operating profit in the quarter." Mr. Mifsud continued, "The Company's structural products division, KML Building Solutions, continued to enter new vertical building markets, such as schools, portable buildings, and government assisted-living affordable housing. During the quarter, this division completed the remedial work incurred as a result of what the Company believes were defective products and services provided by third party vendors. With these costs behind us, the deployment of MOT and a strong backlog, we believe that this division has a clear road map to achieving operating profits." 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 website maintained by the Canadian securities regulatory authorities, which can be accessed at www.sedar.com. Conference Call The Genesis management team will discuss its third quarter 2008 financial results on a conference call to be held on Thursday, November 6, 2008 at 8:30 a.m. Eastern time (1:30 p.m. BST). There will be a short presentation followed by a question and answer period lasting for approximately one (1) hour. Conference Call Details Date: Thursday, November 6, 2008 Time: 8:30 a.m. Eastern time (1:30 p.m. BST) Local dial-in: 416-641-6123 North America toll-free: 866-300-7687 Global toll-free: 800-6578-9898 (dial the international access code of the country you are calling from, i.e. a call from the United Kingdom would be dialed 00-800-6578-9898) A replay of the call will be available by dialing 416-695-5800 (local callers only), or toll-free at 1-800-408- 3053 (passcode 3274156#), from approximately 12:00 p.m. Eastern time on the date of the call through to Thursday, November 13, 2008. About Genesis Worldwide Inc. Genesis develops and licenses 'green' building technology. Genesis offers licensees a turn-key solution which includes software applications, industrial technologies, and a wide range of services. The Genesis Solution encompasses engineered processes and materials that are environmentally sustainable or 'green'. Genesis is headquartered in Mississauga, Ontario, Canada, and has licensees in the United States, Canada, Europe and the Middle East. For additional information about the Company, 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 Company'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 Company at the time of preparation, may prove to be incorrect. Readers are cautioned not to place undue reliance upon any 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 Company 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 Company 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 Company'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 the Company does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change. Genesis Worldwide Inc. Interim Consolidated Balance Sheets (unaudited) As at As at September 30 December 31 2008 2007 $ $ ----------------------------- ASSETS Current Cash and cash equivalents 706,056 5,987,862 Accounts receivable 7,743,224 11,347,550 Inventories and deposits on inventory 689,306 895,686 Prepaid expenses 521,304 342,516 ----------------------------- Total current assets 9,659,890 18,573,614 Restricted cash 500,000 -- Long-term accounts receivable 431,250 287,500 Property, plant and equipment 5,153,359 4,530,567 Patent deferred costs 248,739 192,969 Intangible asset 1,848,310 2,050,548 ----------------------------- 17,841,548 25,635,198 ----------------------------- ----------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 6,242,214 7,566,970 Deferred revenue - current portion 1,639,040 4,459,648 Term loan - current portion 559,561 -- Minimum royalty payment obligations 355,511 173,330 ----------------------------- Total current liabilities 8,796,326 12,199,948 ----------------------------- Long-term Deferred revenue 431,250 287,500 Term loan 1,151,952 -- Minimum royalty payment obligations 1,105,123 1,377,869 ----------------------------- Total long-term liabilities 2,688,325 1,665,369 ----------------------------- ----------------------------- Shareholders' equity Capital stock 56,733,075 56,733,075 Contributed surplus 1,201,479 1,078,474 Deficit (51,577,657) (46,041,668) ----------------------------- Total shareholders' equity 6,356,897 11,769,881 ----------------------------- 17,841,548 25,635,198 ----------------------------- ----------------------------- Genesis Worldwide Inc. Interim Consolidated Statements of Loss and Comprehensive Loss and Deficit (unaudited) Three months ended Nine months ended --------------------------------------------------- September September September September 30 2008 30 2007 30 2008 30 2007 $ $ $ $ --------------------------------------------------- Revenues Licensing 2,746,520 3,239,065 7,311,009 6,875,689 Structural products 2,555,043 3,798,758 9,498,735 9,169,696 --------------------------------------------------- Total revenues 5,301,563 7,037,823 16,809,744 16,045,385 --------------------------------------------------- Direct cost of revenues Licensing 1,402,877 1,446,692 3,223,480 3,526,635 Structural products 2,231,295 3,104,291 8,468,404 7,159,767 --------------------------------------------------- Total direct cost of revenues 3,634,172 4,550,983 11,691,884 10,686,402 --------------------------------------------------- 1,667,391 2,486,840 5,117,860 5,358,983 --------------------------------------------------- Expenses Research and development 278,665 264,249 1,005,939 793,538 SR&ED investment tax credits (91,534) -- (165,025) (418,161) Selling and marketing 678,784 501,862 1,982,541 1,327,786 Engineering and project management 323,831 455,701 1,343,015 1,313,499 General and administrative 1,138,259 1,422,218 3,826,673 3,249,935 Occupancy 351,744 442,538 1,087,159 1,070,078 Corporate reorganization costs 464,448 -- 464,448 -- Plant commissioning and restructuring costs -- 27,121 -- 776,418 --------------------------------------------------- 3,144,197 3,113,689 9,544,750 8,113,093 --------------------------------------------------- Loss before other expenses (1,476,806) (626,849) (4,426,890) (2,754,110) --------------------------------------------------- Amortization of property, plant and equipment 220,763 133,030 657,101 509,091 Amortization of intangible asset 67,413 67,413 202,238 202,238 Foreign exchange loss (gain) (33,732) 36,289 (21,520) (13,331) Interest (income) /expense 67,560 (99,954) 15,778 (99,954) Minimum royalty accretion 71,966 74,804 219,434 223,276 Debenture and loan interest expense 36,068 34,317 36,068 1,123,265 --------------------------------------------------- 430,038 245,899 1,109,099 1,944,585 --------------------------------------------------- Net loss and comprehensive loss for the period (1,906,844) (872,748) (5,535,989) (4,698,695) Deficit, beginning of period (49,670,813) (45,359,753) (46,041,668) (41,533,806) --------------------------------------------------- Deficit, end of period (51,577,657) (46,232,501) (51,577,657) (46,232,501) --------------------------------------------------- --------------------------------------------------- Loss per share Basic and diluted $ (0.06) $ (0.03) $ (0.18) $ (0.19) --------------------------------------------------- --------------------------------------------------- Weighted average number of shares outstanding 30,982,858 30,765,467 30,982,858 24,279,561 --------------------------------------------------- --------------------------------------------------- Genesis Worldwide Inc. Interim Consolidated Statements of Cash Flows (unaudited) Three months ended Nine months ended ----------------------------------------------- September September September September 30 2008 30 2007 30 2008 30 2007 $ $ $ $ ----------------------------------------------- OPERATING ACTIVITIES Net loss for the period (1,906,842) (872,748) (5,535,989) (4,698,695) Adjustments for non-cash items Amortization of property, plant and equipment and intangible asset 288,175 200,443 859,338 711,329 Stock-based compensation expense 33,005 41,718 123,005 101,781 Debenture interest expense accretion -- 34,317 -- 815,965 Minimum royalty accretion 71,966 74,804 219,434 223,276 ----------------------------------------------- (1,513,696) (521,466) (4,334,212) (2,846,344) Changes in non-cash working capital balances related to operations Accounts receivable 3,571,603 (4,435,344) 3,604,326 (4,106,453) Inventories and deposits on inventory 1,294,395 10,483 (83,184) (78,376) Prepaid expenses 38,815 74,245 110,777 (356,331) Accounts payable and accrued liabilities (888,616) 1,097,062 (1,324,756) 687,876 Deferred revenue (2,939,831) 2,533,655 (2,820,608) 3,169,517 ----------------------------------------------- Cash used in operating activities (437,330) (1,241,365) (4,847,657) (3,530,111) ----------------------------------------------- FINANCING ACTIVITIES Debenture proceeds 1,800,000 -- 1,800,000 2,000,000 Debenture repayment (88,487) (6,120,000) (88,487) (6,120,000) Restricted cash (500,000) -- (500,000) -- Share issue proceeds (net of transaction costs paid) -- 16,343,175 -- 16,343,175 ----------------------------------------------- Cash provided by financing activities 1,211,513 10,223,175 1,211,513 12,223,175 ----------------------------------------------- INVESTING ACTIVITIES Additions to property, plant and equipment (41,845) (1,505,450) (1,279,892) (2,053,929) Deferred IPO costs -- (68,603) -- (68,603) Deferred patent costs (55,770) -- (55,770) -- Minimum royalties paid (150,000) (80,000) (310,000) (240,000) ----------------------------------------------- Cash used in investing activities (247,615) (1,654,053) (1,645,662) (2,362,532) ----------------------------------------------- Net increase/(decrease) in cash and cash equivalents during the period 526,568 7,327,757 (5,281,806) 6,330,532 Cash and cash equivalents, beginning of period 179,488 16,161 5,987,862 1,011,386 ----------------------------------------------- Cash and cash equivalents, end of period 706,056 7,343,918 706,056 7,341,918 ----------------------------------------------- ----------------------------------------------- Supplemental cash flow information Interest paid 36,068 10,479 36,068 323,321 ----------------------------------------------- ----------------------------------------------- FOR FURTHER INFORMATION PLEASE CONTACT: Genesis Worldwide Inc. Catherine Smyth Manager, Investor Relations (905) 285-9909, ext. 302 Website: www.genesisworldwide.com OR Canaccord Adams Robert Finlay / L. Warren Pimm +44 020 7050 6500 Genesis Worldwide Inc.

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