LEC Reports Fiscal 2014 Second Quarter Financial Results
VANCOUVER, Dec. 10, 2013 /CNW/ - Lignol Energy Corporation (TSXV: LEC) ("LEC" or "the Company"), a leading technology company in the advanced biofuels and renewable chemicals sector, today announced its unaudited consolidated financial results for the three months and six months ended October 31, 2013 (all figures in Canadian dollars, unless otherwise noted).
During the quarter, LEC secured an increase in its credit facility to $12.5 million and made further steps to consolidate its shareholding in Territory Biofuels Limited ("TBF"). LEC also completed further due diligence in respect of an investment in Neutral Fuels Parent Company ("Neutral Fuels"), and its subsidiary Neutral Fuels (Melbourne) Pty Ltd. ("Neutral Fuels Melbourne") and completed the first phase of its investment on November 12, 2013. Neutral Fuels intends to roll-out a biodiesel program for the APMEA region in conjunction with McDonald's restaurants.
- LEC replaced its $6.25 million credit facility with Difference Capital Financial Inc. ("DCF") with a secured revolving credit facility of up to $12.5 million in August 2013
- Agreed to provide TBF with further funding of up to an additional A$1 million which could have the potential to increase LEC's investment to up to approximately 87% non-diluted and 86% on a fully diluted basis
- Reported a loss of $3.9 million for the current quarter compared to a loss of $2.6 million for the comparable quarter last year
- Reported a comprehensive loss for the quarter of $7.3 million as a result of an unrealized loss of $3.4 million arising from a decrease in the market value of LEC's investment in Australian Renewable Fuels ("ARW")
Subsequent Event Highlights
- Completed funding of A$2.0 million to acquire a 20% equity stake in Neutral Fuels and a 51% interest in Neutral Fuels Melbourne
The consolidated financial statements of the Company for the quarter ended October 31, 2013 include the accounts of LEC, its wholly owned subsidiary Lignol Innovations Limited ("LIL") and majority owned TBF. The Company acquired a 40% interest in TBF effective April 15, 2013, and determined that it had achieved de facto control over TBF on that date and as a result, has consolidated the results of TBF's operations and its balance sheet from that date.
The Company's investments in ARW are carried at market value. ARW has a June 30 year end, issues financial statements twice per year for the six months ended December 31 and for the year ended June 30. Quarterly newsletters are also sent out to shareholders. This information is available on ARW's website under the heading Investor Relations.
During the quarter, LEC successfully replaced its $6.25 million line of credit with a $12.5 million secured revolving line of credit with DCF. Much of LEC's activities were related to various investment and acquisition opportunities. These included successfully negotiating an increased investment in Territory Biofuels limited ("TBF") which will potentially increase the Company's investment to between 76% and 87%. LEC also completed its due diligence related to making a strategic investment in Neutral Fuels. Neutral Fuels is committed to rolling out a closed-loop biodiesel program for the APMEA region refining McDonalds restaurants used cooking oil into biodiesel. These activities are consistent with the Company's intention to invest in, or otherwise obtain, equity interests in energy related projects which have synergies with the Company and have the potential to generate near term cash flow.
During the quarter, LIL's management continued to expand upon its early stage discussions with a number of parties as it seeks to find a suitable partner with whom to construct its first commercial plant. On December 5, 2013, LIL announced that it had signed a non-binding Letter of Intent ("LOI") with Sichuan Xilin IM/EX Co of Chengdu, China ("Xilin"). The LOI provides for LIL and Xilin to explore options to cooperate in pursuing opportunities to commercialize LIL's proprietary biorefining technology in China, and contemplates, amongst other things, the possible formation of a joint venture company as well as various potential investment options.
During the quarter, LEC provided TBF with additional A$0.5 million funding for general working capital purposes. TBF continued to make progress with various activities related to the planning of the re-start of the plant including; continuing its application process with the United States EPA as well as various European regulatory agencies for establishing exportation to those markets, performing certain capital cost validation studies by third party engineering firms, and holding various discussions relating to feedstock supply and the identification of potential local and international demand for biodiesel.
For the three month period ended October 31, 2013 ("Q2 FY14"), the Company reported a loss of $3.9 million, an increase of $1.3 million over the three month period ended October 31, 2012 ("Q2 FY13"). This translated to a loss of $0.03 per share (basic and fully diluted) for both of the Q2 FY14 and Q2 FY13. The increase loss for the period was offset by the increased average number of shares in issue during Q2 FY14.
Research and development expenses increased by $0.8 million as a result of the consolidation of $0.6 million in TBF related plant development expenses and $0.2 million in additional lignin development expenses incurred by LIL. General and administrative expenses increased by $0.3 million during the quarter due to an increase of $0.2 million in accrued incentive compensation expenses, and of $0.1 million in legal and accounting fees related to various investments related transactions. LIL's government grant receipts increased by $0.7 million resulting from an increased number of contracted grants and corporate contribution agreements supporting current related work plans. Interest charges increased by $1.2 million during the current quarter, as a result of increased non-cash charges of $0.7 million in respect of TBF's refinery lease, $0.2 million of accrued interest related to the DCF credit facility, and $0.3 million related to the amortization of warrants issued to DCF.
The total comprehensive loss for the quarter was $7.3 million, which includes the $3.9 million loss for the quarter and an unrealized loss of $3.4 million arising from a decrease in the market value of the Company's investment in ARW.
LEC Going Concern
In August 2013, the Company entered into a secured revolving credit facility with Difference Capital Financial Inc. ("DCF") for up to $12.5 million. On October 31, 2013 a total of $9.75 million had been drawn down under the facility. On November 1, 2013, additional amounts were drawn increasing the total amount drawn to $11.785 million, the additional proceeds of which were utilized to fund the investments in Neutral Fuels and Neutral Fuels Melbourne.
The Company currently forecasts that its working capital requirements for the next twelve months may exceed the combination of its current working capital, and those funds which are expected to be received in the future under its revolving secured credit facility and those funds which are expected to be received in the future from LIL's existing government grants and corporate relationships. The ability of the Company to continue as a going concern is dependent upon its ability to continue to fund its business activities and to be able to repay amounts drawn under the DCF credit facility. There can be no assurance that the Company will be able to obtain further financing on favourable terms and in such event, the Company's working capital may not be sufficient to meet its stated business objectives.
The consolidated financial results have been prepared on a going concern basis which assumes that the Company will continue its operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business. The conditions and risks noted above cast significant doubt on the validity of that assumption.
The consolidated financial results do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary and could potentially be material, should the Company be unable to continue as a going concern. Readers should also refer to the Liquidity and Capital Resources section of the related Management's Discussion & Analysis of Financial Condition and Results from Operations that is available on the Company's website, www.lignol.ca.
Lignol's complete financial statements for the three and six month
periods ended October 31, 2013 and the related Management's Discussion
& Analysis of Financial Condition and Results of Operations are
available at the Company's website, www.lignol.ca, or at www.sedar.com under the Company's profile. These financial statements were prepared
in accordance with International Financial Reporting Standards.
About Lignol Energy Corporation
Lignol Energy Corporation is an emerging producer of biofuels, biochemicals and renewable materials. LEC is actively involved in the management of its wholly owned subsidiary LIL and in the management of TBF, in which it has a controlling interest, but it has no significant influence over the activities of ARW. The Company intends to invest in, or otherwise obtain, equity interests in energy related projects, which have synergies with the company and have the potential to generate near term cash flow.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Caution concerning forward-looking statements:
Certain statements contained in this document may constitute forward-looking information within the meaning of applicable securities laws. Such forward-looking statements or information include, without limitation, statements or information about LEC's ability to complete the provision of funding of A$4.07 million to Neutral Fuels within the agreed timeframes, LEC's ability to fund the balance of its agreed investment in TBF, LEC's ability to invest in, or otherwise obtain, equity interests in energy related projects which have potential synergies with LEC and which have the potential to generate near term cash flow, LEC's ability to continue as a going concern and to raise additional financing to fund the operations of LEC and its affiliates, the LEC's ability to draw down additional funds in the future from DCF, DCF's ability to provide funding to LEC in accordance with the terms of the Note signed between the two companies, the ability of the Neutral Fuels Group to complete the transfer of all of its liquid fuels business to Neutral Fuels before the completion of the funding of the transaction, the ability of Neutral Fuels to complete the rollout of closed loop biorefineries in accordance with its expected timetable, TBF's ability to finance and restart its 140 million litre per year biodiesel plant and glycerine refinery, to commence commercial operations and to generate revenues and near term cash flow, TBF's ability to integrate new pretreatment technologies and catalysts to facilitate the processing of a broad range of lower cost feedstocks, the ability of existing TBF shareholders to participate in the current TBF financing, TBF's ability to obtain US EPA approval, the development status of Lignol Innovations Limited's ("LIL") fully integrated pilot scale biorefinery in Burnaby, British Columbia, the planning and development of a commercial plant, LIL's ability to satisfy certain project deliverables and related funding conditions from existing and potential future government grants, obtaining strategic partnership investments and government funding for initial commercial projects. Often, but not always, forward looking statements or information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes" or variations of such words and phrases or words and phrases that state or indicate that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.
Such statements or information reflect LEC's current views with respect to future events and are subject to certain risks, uncertainties and assumptions including, without limitation, LEC's ability to raise additional capital to fund operations and to support the capital requirements of its affiliates, the requirements of the potential effect of changes in government policy relating to the environment, and incentives for renewable fuels, the potential impact of changes in the prices of feedstock and the market price of liquid fuels including biodiesel, ethanol and renewable chemicals, the ability of LEC and its affiliates to generate future profits and to pay dividends, and to meet increasing regulatory requirements, LEC's ability to divest the ARW ordinary shares due to modest trading volumes, LIL's ability to finance and complete the development of a commercial project, LIL's ability to develop products and to obtain off-take agreements, LEC's reliance on publically available information of ARW in its evaluation of its acquisition of shares in ARW, the potential fluctuation of biodiesel and feedstock prices and their impact on ARW, the potential inability to divest the ARW ordinary shares due to modest trading volumes, the potential inability to divest the ordinary shares LEC owns of TBF, the effect on ARW of changes in government policy relating to the environment, and incentives for renewable fuels, the ability of ARW to generate cash flow and pay dividends, and the ability of ARW to market their products overseas and to meet relevant regulatory requirements. the estimated cost of any future TBF capital investment, the fluctuation of biodiesel and feedstock prices on TBF, the effect on TBF of changes in government policy relating to the environment, and incentives for renewable fuels, the ability of TBF to generate cash flow and pay dividends, and the ability of TBF to market their products overseas and to meet relevant regulatory requirements.
Many factors could cause LEC's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements or information, including among other things, financial market conditions which will impact LEC's ability to finance its operations and to meet future capital and investment requirements, the demand for the market price of liquid fuels including gasoline, biodiesel, ethanol, the market price and demand for renewable chemicals, risks relating to the protection of technology from infringement and those risk factors which are discussed elsewhere in documents that LEC files from time to time with securities and other regulatory authorities. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements or information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Except as required by law, LEC expressly disclaims any intention or obligation to update or revise any forward looking statements and information whether as a result of new information, future events or otherwise. All written and oral forward-looking statements and information attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements.
SOURCE Lignol Energy Corporation