VANCOUVER, Aug. 5, 2014 /CNW/ - Lignol Energy Corporation (TSXV: LEC) ("LEC" or the "Company"), today provided a corporate update in which management reported on its financial condition and progress with commercial negotiations.
The Company is engaged in discussions with respect to several commercial transactions that range from the sale or merger of each of the Company's respective holdings, to that of a sale or merger with LEC itself. As previously announced, the Company has been working with its financial advisors and major shareholders to establish the terms of a financing which it urgently needs to complete. Over the past few months, the Company has received bridge financing of $500,000 from Difference Capital Financial ("DCF") in anticipation of a pending financing, together with additional corporate and government financial contributions which enabled the Company to operate. In the meantime, the Company has recently received notices of default in respect of interest payments on the outstanding secured debt with DCF of approximately $13.1 million and also from its landlord B.C.I.T. for past rent totaling $198,000. There remains an urgent need to conclude a financing and the Company continues to negotiate with DCF the terms under which their secured note will be satisfied and their participation in any financing will be considered along with the participation of other prospective investors.
The Company has continued to take steps to reduce its monthly cash burn including, reducing headcount, revising contractual commitments and making certain reductions in executive compensation. In addition, Neutral Fuels Parent Company which manages the operations of Neutral Fuels (Melbourne) Pty Ltd. ("NF Melbourne") (which is 51% owned by LEC), recommended to place NF Melbourne into voluntary administration which was recently undertaken. The business of NF Melbourne had continued to be unprofitable and the prospects for its turnaround in the near future were hampered by recent adverse changes in market conditions.
The Company's primary focus has been to raise capital for the restart of its biodiesel plant located in Darwin, Australia, which management believes is the best course of action to realize value for shareholders. The Company's paramount objective is to complete a financing over the next month which will require an immediate bridge loan. Discussions with LEC's financial advisors, major shareholders, certain of its creditors and new investors have involved negotiations relating to various structures that address pricing and other terms as well as the treatment of the outstanding secured debt with DCF of approximately $13.1 million and the conversion of approximately $400,000 in other debt. Although discussions are continuing, as of today's date a financing has not yet been confirmed.
The Company currently has negative working capital of approximately $17.1 million and future government and corporate contributions receivable within the next 4-5 months of $1.7 million. The negative working capital includes the $13.1 million which has been drawn on the DCF credit facility and which is currently due in December, 2014. The Company continues to forecast that its working capital requirements for the next twelve months will exceed the funds available from a combination of its current working capital, 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 raise additional capital to fund its business objectives, to be able to repay amounts drawn under the DCF credit facility and to satisfy the defaults registered by DCF and BCIT. In the current economic climate there is significant doubt with respect to the validity of these assumptions.
About Lignol Energy Corporation ("LEC")
LEC is an emerging producer of biofuels, biochemicals and renewable materials. The Company is undergoing a transformation from a leading technology developer in the biorefining sector, to that of an owner of commercial biorefining assets. This strategy has leveraged LEC's expertise gained through its experience with the development of its proprietary biorefining technology.
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 continue as a going concern, to immediately obtain an injection of cash, and to continue to receive the support of its creditors in order to continue to operate and meet payroll and other basic commitments until a financing can be concluded, to complete one or more commercial transactions that range from the sale or merger of each of the Company's respective holdings, to that of a sale or merger with LEC, to complete discussions with DCF, investment advisors and major shareholders to establish the terms of a financing which it urgently needs to complete, LEC's ability to come to an arrangement with respect to the treatment of the outstanding secured debt with DCF of approximately $13.1 million and the conversion of approximately $400,000 in other debt, (however there can be no assurances that such finance will be forthcoming), LEC's ability to raise capital for the restart of its biodiesel plant located in Darwin, Australia and its ability to attract partners whom are willing to provide equity funding or other forms of investment in the project, LEC's ability to monetize some or all of its interests in each of Lignol Innovations Limited, Australian Renewable Fuels Limited, and the Neutral Fuels businesses, LEC's ability to complete its transition from a technology developer to an owner and operator of commercial biorefining assets, LEC's ability to restart the Darwin biodiesel plant and to subsequently integrate the plant with M Energy's pretreatment facility and with feedstock supply chains, LEC's ability to invest in, or otherwise obtain, equity interests in energy related projects which have potential synergies and 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 restart of the Darwin plant and to fund the operations of LEC and its affiliates, and LEC's ability to repay amounts owing to DCF under the secured revolving credit facility, LIL's ability to satisfy certain project deliverables and related funding conditions from existing and potential future government grants so as to enable LIL to receive future grant hold-backs, obtaining strategic partnership investments and government funding for initial commercial projects. LEC and its affiliates need an immediate injection of new funds in order to continue to meet payroll and other obligations, and in the current economic environment there is no certainty that this will be accomplished. 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 immediately 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, the effect of changes in government policy relating to the environment, and incentives for renewable fuels, the ability to meet relevant local and international 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