Augen Capital Reports 2008 Results

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Augen Capital Reports 2008 Results

posted on Apr 30, 2009 12:55PM

April 30, 2009

Augen Capital Reports 2008 Results

TORONTO, ONTARIO--(Marketwire - April 30, 2009) - Augen Capital Corp. ("Augen") (TSX VENTURE:AUG) today announced its audited consolidated financial results for the year ended December 31, 2008.

Augen generated income of $1.535 million in 2008, compared with income of $4.157 million in 2007. The Company generates income through the activities of its Merchant Banking (MB) and Managed Products (MP) segments, whose strength is closely related to global market conditions and the general economic environment. Global economic and capital market challenges have had a significant impact on the Company's ability to generate income.

The Company's MB segment generated consolidated income of $610,629 before income taxes, share of loss and dilution gains from equity accounted investment, non-recurring charges, unrealized losses on investments, adjustment of the fair value of liabilities, and amortization, compared with earnings of $2.039 million in 2007. The difference is mainly the result of a lower gain on the sale of investments of $80,668 in 2008 compared to a gain on the sale of investments of $1.494 million in 2007. As a result of the weakened markets, management has suspended the disposition of securities until the markets show signs of improvement.

Augen's MP segment generated consolidated income of $924,853 in 2008 compared with $2.118 million in 2007. The difference is mainly the result of a decline in consulting and due diligence fees of $1.046 million. In 2008, the MP segment did not generate setup fees, after generating $475,000 in setup fees, relating to LP2007, in 2007. Due diligence fees also declined in 2008 to $334,469, from $905,534 in 2007.

The Company incurred $514,876 of non-recurring charges in 2008, including legal expenses, proxy solicitation fees and other professional consulting fees relating to the 2008 Annual and Special Meeting of Shareholders, which was expected to be a contested meeting. These charges are not expected to reoccur. Fifty percent of these charges were allocated to each of Augen's operating segments.

Net loss, before income taxes, in the MB segment was $3.649 million, compared with a loss of $4.4 million in 2007. The difference was mainly the result of a decline in income of $1.428 million and was partially offset by a decrease of $206,769 in expenses, and a net gain of $464,970 which represents the Company's share of loss and dilution gains from an equity-accounted investment.

In the MP segment, the loss before income taxes was $660,111 in 2008, compared with earnings of $351,744 a year earlier. The change was primarily due to a decline in income of $1.193 million and was partially offset by a decrease in expenses of $443,583.

2008 consolidated net loss was $3.512 million in 2008, compared with a net loss of $3.538 million in 2007.

----------------------------------------------------------------------------
Consolidated Statements of Operations and Comprehensive Earnings
----------------------------------------------------------------------------
                                    Managed Products       Merchant Banking
For the years ended                 2008        2007       2008        2007
 December 31,                          $           $          $           $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 Income                          924,853   2,118,180    610,629   2,038,612
 Expenses                      1,316,244   1,759,827  1,430,260   1,637,029
----------------------------------------------------------------------------
 Earnings (loss) before
  undernoted items              (391,391)    358,353   (819,631)    401,583
 Share of loss and dilution
  gains from equity accounted
  investment                           -           -   (464,970)     34,526
 Unrealized loss on
  investments held for trading         -           -  3,246,331   5,302,553
 Non-recurring charges           257,438           -    257,438           -
 Adjustment to fair value of
  liabilities                          -           -   (220,380)   (542,516)
 Amortization                     11,282       6,609     11,283       6,608
----------------------------------------------------------------------------
 Earnings (loss) before income
  taxes                         (660,111)    351,744 (3,649,333) (4,399,588)
----------------------------------------------------------------------------
 Income taxes
  Current 
  Future
----------------------------------------------------------------------------

----------------------------------------------------------------------------
 Net earnings (loss) and
  comprehensive earnings
  (loss)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------
Consolidated Statements of Operations and Comprehensive
 Earnings
----------------------------------------------------------
                                                    Total
For the years ended,                     2008        2007
 December 31                                $           $
----------------------------------------------------------
 Income                             1,535,482   4,156,792
 Expenses                           2,746,504   3,396,856
----------------------------------------------------------
 Earnings (loss) before
  undernoted items                 (1,211,022)    759,936
 Share of loss and dilution
  gains from equity accounted
  investment                         (464,970)     34,526
 Unrealized loss on investments
  held for trading                  3,246,331   5,302,553
 Non-recurring charges                514,876           -
 Adjustment to fair value of
  liabilities                        (220,380)   (542,516)
 Amortization                          22,565      13,217
----------------------------------------------------------
 Earnings (loss) before income
  taxes                            (4,309,444) (4,047,844)
----------------------------------------------------------
 Income taxes
  Current                            (378,730)    145,527
  Future                             (418,364)   (654,955)
----------------------------------------------------------
                                     (797,094)   (509,428)
----------------------------------------------------------
 Net earnings (loss) and
  comprehensive earnings
  (loss)                           (3,512,350) (3,538,416)
----------------------------------------------------------
----------------------------------------------------------

For the year ended December 31, 2008, cash used in operations, excluding changes in non-cash working capital, totaled $1.064 million, compared to cash from operations of $118,998. This was primarily the result of a decrease of $642,423 in net realized and unrealized gains on investments held for trading and a change in the net share of loss and dilution gains from the equity accounted investment of $499,496.

Total consolidated assets decreased by 33% to $7.587 million on December 31, 2008, from $11.284 million on December 31, 2007.

----------------------------------------------------------------------------
Consolidated Assets
----------------------------------------------------------------------------
                                       Managed Products     Merchant Banking
As at December 31,                        2008     2007      2008       2007
                                             $        $         $          $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 Total assets                          540,012  733,415 7,047,232 10,550,270
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 Shareholders' equity per share (i)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 (i) Defined as shareholders' equity
  per financial statements, divided by
  common shares outstanding
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------
Consolidated Assets
----------------------------------------------------------
                                                     Total
As at December 31,                         2008       2007
                                              $          $
----------------------------------------------------------
----------------------------------------------------------
 Total assets                         7,587,244 11,283,685
----------------------------------------------------------
----------------------------------------------------------
 Shareholders' equity per share (i)        0.20       0.29
----------------------------------------------------------
----------------------------------------------------------
 (i) Defined as shareholders' equity
  per financial statements, divided by
  common shares outstanding
----------------------------------------------------------
----------------------------------------------------------

"2008 will be remembered for the exceptional magnitude and speed of the market correction. The fortunes of Augen's operating segments are closely tied to the overall strength of the broader economy and our businesses were directly affected by these challenging conditions," said J. David Mason, Chairman of the Board, President and CEO of Augen. "Augen has reduced expenses and entered into a management agreement with OreReserve Asset Management Inc. Both of these initiatives further our objective to create long-term shareholder value and help position Augen to fully participate in the eventual market recovery."

Note: The adoption of CICA Handbook Section 3855, which requires the reporting of unrealized fluctuations in the fair value of the Merchant Banking investment portfolio, has resulted in greater volatility in the net earnings of Augen since it was adopted in the first quarter of 2007. While these accounting standards provide insight into the current fair value of the MB investment portfolio, they do not necessarily provide an accurate indication of the ultimate realized gain or loss, which will be different.

Management Agreement with OreReserve Asset Management Inc.

Subsequent to year-end, on February 27, 2009, Augen announced that it had entered into a management agreement, effective March 1, 2009, pursuant to which OreReserve Asset Management Inc. ("OreReserve"), a newly formed subsidiary of Integrated Asset Management Corp. ("IAM") (TSX:IAM), will manage Augen's business. The transaction was overseen by a special committee and was unanimously approved by the Board of Directors. IAM is Canada's leading alternative asset management company and has approximately $2.1 billion in assets and committed capital under management in real estate, private corporate debt, private equity, managed futures and retail alternative investments. 51% of OreReserve is owned by IAM and 49% is owned by certain employees, of which 26% is owned by J. David Mason, Chairman and CEO of Augen and the President and CEO of OreReserve.

The full audited annual consolidated financial statements for the year ended December 31, 2008 are available at www.augencc.com or at www.sedar.com.

About Augen Capital

Augen Capital Corp. ("Augen") (TSX VENTURE:AUG) is a Toronto-based public merchant bank specializing in the financing of and investment in emerging resource companies. Augen manages a merchant banking hard dollar portfolio of emerging resource stocks including private companies and is an industry performance leader in tax-advantaged flow-through investments in Canada's resource sector having raised over $80 million in flow-through limited partnership assets since inception. Augen holds over one hundred gold, base metals and uranium exploration and development public and private companies with direct holdings in its merchant banking portfolio and consulting assets in flow-through limited partnerships.

For more information on Augen Capital, visit our website at www.augencc.com.

The Company's public documents may be accessed at www.sedar.com

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