|Summary of Quarterly Results||Q2 2014||Q1 2014||Q2 2013|
|Net realized gain (loss) on investments and marketable securities||$1,015||$3,053||$1,037|
|Net change in unrealized gain (loss) on investments and marketable securities||(11,217)||1,151||(2,410)|
|Net income (loss)||(12,995)||2,858||(1,197)|
|Basic and fully diluted earnings (loss) per share||($0.33)||$0.07||($0.04)|
|Net asset value||104,870||118,396||89,352|
|Net asset value per share||$2.70||$3.03||$3.27|
Q2 2014 Operational Highlights
- The Company’s investment and marketable securities portfolios decreased to $143.7 million from $152.7 million at June 30, 2014.
- Unrealized loss on investments in marketable securities of $11.2 million was driven by a change in valuation of primarily World Gaming and Lignol Energy.
- Recorded a realized gain of $1.0 million on the conversions of warrants and subsequent dispositions of publicly listed common shares.
- Subsequent to quarter end, the company disposed of all shares in BENEV Capital Inc. for gross proceeds of $22 million.
- Cash as of today’s date is over $26 million, or about $0.68 per common share.
“Our team recently announced an internal review process in order to provide greater clarity into our decision making and our ability to execute on our long term goals. These changes are necessary in order to streamline our investment process and bring greater focus to the portfolio in order to deliver positive gains to our shareholders,” said Michael Wekerle, CEO of Difference Capital Financial. “We remain focused on executing our investment strategy and have made positive steps towards divesting ourselves of non-core and underperforming holdings while targeting additional private late-stage opportunities in technology, media and healthcare growth companies.”
Second Quarter Financial Results
The Company reported a net loss of $13.0 million, or $0.33 per share compared to a net loss of $1.2 million, or $0.04 per share for the quarter ended June 30, 2013 and a net income of $2.9 million, or $0.07 per share for the quarter ended March 31, 2014.
The Company realized a $1.0 million gain on dispositions of investments and marketable securities during the quarter ended June 30, 2014 compared with $1.0 million in realized gain during the quarter ended June 30, 2013 and
a realized gain of $3.1 million during the first quarter of 2014. The Company recorded $11.2 million of net change in unrealized depreciation on investments and marketable securities, compared to a net change in unrealized depreciation of $2.4 million in the second quarter of 2013. The Company recorded $13.7 million of depreciation in privately held investments, primarily in WG Ltd. (formerly Virgin Gaming, now “World Gaming”) and Lignol Energy Corporation (“Lignol Energy”). On August 1, 2014, the Company served a default notice to Lignol Energy on its secured debt of $13.1 million. The net change in unrealized depreciation recorded during the quarter was partially offset by $3.7 million of marked-to-market gains in publicly listed marketable securities.
Other income for the quarter ended June 30, 2014 increased to $1.8 million compared to $1.1 million during the same period in 2013. Included in other income were interest and dividend income from the investment portfolio totaling $1.6 million, up from $0.9 million in the same period of 2013. Also included in other income was the 40% revenue participation in Difference Capital Management’s advisory revenue business of $0.3 million, compared to $0.2 million in the second quarter of 2013. Year over year, total assets increased by $62M and total expenses during the quarter ended June 30, 2014 were $4.6 million compared to $0.9 million for the quarter ended June 30, 2013 and $3.3 million for the prior quarter ended March 31, 2014. The year over year increase in total expenses was primarily due to increased management fees from this higher Net Asset Value ($0.8 million compared to $0.5 million in the second quarter of 2013), and financing costs associated with the issuance of convertible debentures in July 2013 ($1.4 million compared to nil in the second quarter of 2013). In addition, the quarter over quarter increase in total expenses was impacted by a $1.1 million provision for uncollectible receivables recorded during the second quarter of 2014, primarily due to uncertainty as to the full collectability of interest on the World Gaming and Lignol Energy loans.
Subsequent to quarter end, the Company sold its investment in Benev for gross proceeds of approximately $22 million. The Company’s cash balance as of the date of this announcement is over $26 million, or about $0.68 per share.
Please refer to the section regarding forward-looking statements which form an integral part of this release. These results, along with the unaudited financial statements and the company’s MD&A, are available on the company’s website at http://www.differencecapital.com and on SEDAR at http://www.sedar.com.
DCF will host a conference call Wednesday, August 13, 2014, at 9:00 AM ET to discuss its results. Michael Wekerle, CEO, Henry Kneis, CFO and Tom Astle, CIO will host the call. All interested parties can join the call by dialling (647) 427-7450 or (888) 231-8191. Please dial in 5-10 minutes prior to the call to secure a line. A live audio webcast of the conference call will also be available at http://www.differencecapital.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.
About Difference Capital Financial Inc.
Difference Capital Financial Inc. invests in and advises growth companies. We leverage our capital market expertise to help unlock the value in technology, media and healthcare companies as they approach important milestones in their business lifecycle. Difference Capital Financial Inc. is traded under the Toronto Stock Exchange under the symbol “DCF”.
Caution Regarding Forward-Looking Statements
Included in this press release are matters that constitute “forward-looking” information. Such forward-looking statements may be identified by words such as “plans”, “proposes”, “estimates”, “intends”, “expects”, “believes”, “may” or words of a similar nature. There can be no assurance that such statements will prove to be accurate. Actual results and future events could differ materially from such statements. Factors that could cause actual results to differ materially include among others, equity market regulatory risks, risk inherent in foreign operations and competition. These factors are largely outside the control of the Company. All subsequent forward-looking statements attributable to the Company or its agents are expressly qualified in their entirety by these cautionary comments. The Company expressly disclaims any intent or obligation to update publicly forward-looking information, whether as a result of new information, future events or otherwise.
Difference Capital Financial Inc.:
Chief Financial Officer
416 815-0700 ext. 253