MONTRÉAL, QUÉBEC–(Marketwired – May 13, 2016) – Orbite Technologies Inc. (TSX:ORT)(OTCQX:EORBF) (“Orbite”, or the “Company”) filed yesterday its financial statements for the first quarter ended March 31, 2016. The Company reported a loss before net finance expense (income) and taxes of $2.6 million for the quarter, up from $2.4 million for the comparable period in the prior year.
As at March 31, 2016, the Company had an aggregate cash and short-term investments balance of $2.6 million, and positive working capital (current assets less current liabilities) of $0.9 million. Subsequent to quarter’s end, the Company raised capital and secured a short term loan, strengthening its working capital position. Following the April 27, May 5 and May 6, 2016 announcements, the Company has, on a pro-forma basis, a cash and short-term investments balance of $18.5 million and pro-forma working capital of $11.9 million.
All dollar amounts are in Canadian dollars unless stated otherwise.
First Quarter and Subsequent Highlights
Operational
- During the quarter, the Company continued with its commissioning activities on the various equipment systems of its high purity alumina (“HPA”) facility in Cap-Chat.
- On March 7, 2016, the Company confirmed the installation of critical calcination system components, which had been withheld by a supplier in breach of the contract between the two companies. The Company also confirmed successful commissioning and operation of several equipment systems, including the feed system for delivering aluminum chloride hexahydrate crystals, and completion of the cold start-up of the decomposer and calciner and associated air and steam supply system.
- On March 15, 2016, the Company announced that due to the complexity of the piping to be installed at its HPA plant, piping installation advanced at one third of the budgeted installation rate. A comprehensive review of installation costs incurred to that date and still required to complete installation of specialty piping, led to an increase of the capital budget by approximately 9.9M$. To preserve working capital, pending the completion of additional financing, the Company reduced the number of external contractors on site.
- On April 27, 2016, the Company announced that it had entered into a letter of intent with Investissement Québec (“IQ”), acting as mandatory of the Government of Québec, whereby IQ agreed to provide the Company with an aggregate financing of $15 million.
- The Company anticipates completing the financings in the coming weeks, enabling Orbite to re-engage construction work towards completion. As a consequence of the extra time necessary to complete the required financings, management anticipates commencement of commercial production in Q3 2016.
- On May 12, 2016, the Company announced the appointment of Charles Taschereau as the Company’s Chief Operating Officer.
Management commentary
“While we were able to agree on terms for the $15 million financing in an exceptionally short time frame thanks to the co-operation and continued support from IQ, the timeline to complete the financings is such that the commencement of commercial production at our HPA plant will be in Q3 2016,” stated Glenn Kelly, CEO of Orbite. “We made good use of our time while in financing mode, and continued our commissioning activities at the plant, predominantly on the calcination system. The time has also enabled us to issue calls for tender for certain aspects of the work to be done towards completion, which we anticipate will reduce project costs.”
Mr. Kelly concluded, “With the addition of Charles to the management team, we have been able to attract someone with exceptionally strong project, budget and operations management skills. This will be of great help during the start-up of our commercial activities, as well as with the execution of our waste monetization strategy going forward.”
Continued highlights
Financing
- On February 3, 2016, the Company completed the first portion of a public offering of units in the amount of $8.5 million, comprised of $4.0 million raised on a bought deal basis, $1.5 million raised pursuant to the Underwriter’s option with Euro Pacific, and $2.9 million in outstanding supplier invoices. Euro Pacific purchased an additional $1.1 million of units pursuant to a second exercise of its option on February 23, 2016.
- On April 7, 2016, the Company forced the conversion into shares of all the outstanding 5% unsecured convertible debentures due April 6, 2020, of which, approximately $0.2 million of principal remained outstanding at such time.
- On April 27, 2016, the Company announced that it had entered into a letter of intent with Investissement Québec, acting as mandatory of the Government of Québec, whereby Investissement Québec agreed to provide the Company with an aggregate financing of $15 million, to be comprised of the purchase of 10% convertible non-secured debentures in the principal amount of $5 million, the purchase of class A shares of the Company in the amount of $5 million, together with the grant of a $4.9 million bridge loan secured by the Company’s 2016 refundable investment tax credits (“ITCs”).
- On May 5, 2016, the Company received a first installment of $2.3 million of the $4.9 million ITC bridge loan, while the balance of the loan will be disbursed as the capital expenditures underlying the ITCs are expended by the Company.
- On May 6, 2016, the Company announced that it had closed a first $1.0 million tranche of a private placement with US based investors independent of IQ.
- On May 11, 2016, Orbite announced that it received a first payment in the amount of $3.2 million from Québec tax authorities for its 2014 ITCs. This ITC payment represents approximately 80% of the $4.0 million of ITCs expected to be received for 2014. The sums received will be used to pay down a portion of the Company’s 2015 credit facility.
Samples
- To date the Company has shipped 26 samples to 20 prospective customers, entering the Company into the supplier qualification programmes with these organizations. Following positive feedback from test results on previously shipped samples, the Company received several requests for additional and larger samples for the production of end-products using Orbite’s HPA for qualification further down the supply chain. Two of these additional requests are commercial sample orders in the 50-100 kg range.
- The Company has also committed to sending samples to a further 17 prospective customers who have indicated an interest in testing Orbite’s HPA. In addition, the Company recently hosted a booth at a ceramics trade fair, which to date resulted in four new sample requests.
Board of Directors
- On February 23, 2016, Orbite announced the appointment of Mr. Pierre Gignac to the Board of Directors. Mr. Gignac was subsequently appointed member and Chair of the Audit Committee by the Board.
Patents & technology development
- On January 14, 2016, the Company announced that it was advised by the Federal Service for Intellectual Property (ROSPATENT) that its Russian patent application No. 2014131946 pertaining to its red mud monetization technology and titled “Processes for Treating Red Mud”, was deemed allowable. Patent No. 2,862,307 titled “Processes for Treating Fly Ash” was also granted by the Canadian Intellectual Property Office (“CIPO”). Additionally, the United States Patent and Trademark Office (“USPTO”) advised the Company that its patent application No. 14/413,940 titled “Processes for Preparing Titanium Oxide and Various Other Products” was found allowable. Furthermore, Australian patent No. 2012231686 titled “Processes for Recovering Rare Earth Elements from Aluminum-bearing Materials” was issued by IP Australia.
Summary of Q1 2016 Financial Results
Revenues and earnings
The Company is a development stage company and has no revenues.
Net loss for Q1 2016 decreased by $1.0 million to $1.7 million, as compared to the same period in the prior year. The decrease in net loss during the quarter is principally due to net finance expense (income) of $0.9 million.
HPA plant operations
HPA plant operations include administration, operating and maintenance costs for the HPA plant in Cap-Chat. HPA plant operation expenses increased marginally by $0.1 million during the quarter ended March 31, 2016 compared to the first quarter in 2015. The increase is due mainly to an increase in salaries and in headcount, partially offset by a decrease in consulting fees.
General and administrative charges
General and administration charges consist mostly of personnel related costs (salaries and benefits), share-based payment expenses, consulting, accounting, business development, legal, and investor relation costs relating to head office activities. General and administrative charges increased by $0.3 million during the quarter compared to the same period in 2015. This increase is due mainly to an increase in share-based payments (consulting fees), salaries, professional and recruiting fees.
Financial position
Cash and short-term investments and working capital
As at March 31, 2016, the Company had aggregate cash and short-term investments balance of $2.6 million, and positive working capital (current assets less current liabilities) of $0.9 million.
Subsequent to the quarter, the Company raised capital and secured a short term loan, strengthening its working capital position. Following the April 27, May 5 and May 6 announcements, the Company has, on a pro-forma basis, a cash and short-term investments balance of $18.5 million and pro-forma working capital of $11.9 million.
Financing activities
A more comprehensive description of the Company’s financing activities is provided in the Company’s MD&A and other filings available on http://www.sedar.com and on the Company’s website at www.orbitetech.com.
On February 3, 2016, the Company completed the first portion of a public offering of units in the amount of $8.5 million under the short form base shelf prospectus and prospectus supplement dated March 18, 2015 and January 28, 2016 respectively. The gross proceeds were comprised of $4.0 million raised on a bought deal basis, $1.5 million raised pursuant to the partial exercise by Euro Pacific Canada Inc., the sole underwriter of the offering (the “Underwriter”), of its Underwriter’s option, together with $2.9 million in outstanding supplier invoices which were converted into 2,938 units. The Underwriter purchased an additional $1.1 million pursuant to a second exercise of its option on February 23, 2016. For its services, the underwriter received 1,155,700 non-transferable broker warrants. Each broker warrant is exercisable into one share for a period of 36 months at a price of $0.40 per share.
On February 29, 2016, the Company filed a Notice of intent to force the conversion of all outstanding 5% unsecured convertible debentures due April 6, 2020, of which, approximately $0.2 million of principal remained outstanding at such time. The conversion occurred on April 7, 2016.
On April 27, 2016 the Company announced that it had entered into a letter of intent with Investissement Québec, acting as mandatory of the Government of Québec, whereby Investissement Québec agreed to provide the Company with an aggregate financing of $15 million (the “Financing”).
The Financing comprised of the purchase of 10% convertible non-secured debentures (the “Debentures”) in the principal amount of $5 million, the purchase of class A shares of the Company in the amount of $5 million, together with the grant of a $4.9 million bridge loan secured by the Company’s 2016 refundable ITCs.
As part of the Financing, the Company agreed to amend the terms of the 17,857,143 outstanding warrants issued to Ressources Québec inc., a subsidiary of Investissement Québec, in May 2014. The warrants will now be exercisable into shares of the Company at a price of $0.241 per share (instead of $0.33) and will expire on May 2, 2019 (instead of May 27, 2017).
On May 5, 2016, the Company received a first installment of $2.3 million of the $4.9 million bridge loan, while the balance of the loan will be disbursed as the capital expenditures underlying the ITCs are expended by the Company. The bridge loan bears interest at a rate of 3.5% over the prevailing prime lending rate payable monthly, is collateralized against the Company’s ITC receivables for the 2016 financial year and is repayable upon receipt by the Company of the 2016 ITC payments from tax authorities, but not later than July 23, 2018. The loan is also subject to other customary terms and conditions.
On May 6, the Company announced that it had closed a $1.0 million private placement with US based investors. Common shares were issued at a price of $0.241 per common share.
On May 11, 2016, Orbite announced that it received a first payment in the amount of $3.2 million from Québec tax authorities for its 2014 ITCs. This ITC payment represents approximately 80% of the $4.0 million of ITCs expected to be received for 2014. The sums received will be used to pay down a portion of the Company’s 2015 credit facility.
Property, plant, and equipment
The Company recorded a net increase in Property, plant, and equipment (“PP&E”) of $9.2 million, mainly attributable to investment in the HPA plant (which includes capitalized interest of $0.7 million), partially offset by the $3.4 million of ITCs accrued during the quarter.
Cash Flow Statement
Cash Flows from Operating Activities
Cash flows used in operating activities decreased by $1.7 million during the quarter, compared to the same period of 2015 mainly due to the increase in cash flows from non-cash working capital items of $1.6 million during the quarter. This increase is the result of increases in accounts payable and accrued liabilities and ITCs recognized during the period and a decrease in sales taxes and other receivables.
Cash Flows from Financing Activities
Cash flows from financing activities increased by $3.4 million during the quarter, as compared to the same period in 2015. The increase for the quarter is due mainly to the net proceeds received from the issuance of the 2016 Convertible Debentures and the proceeds from the exercise of warrants, partially offset by less proceeds received from short-term debt from Investissement Québec.
Cash Flows used in Investing Activities
Cash flows used in investing activities increased by $4.0 million, due mainly to higher investment in the Company’s HPA plant.
Conference call
Orbite management will hold a conference call and provide a live audio webcast today, May 13, 2016 at 10:00 a.m. to discuss the Company’s financials and provide an update on the Company’s HPA plant.
The call will be held in English. The Q&A session will be in English and French.
CONFERENCE CALL DETAILS:
| Date: | May 13, 2016 |
| Time: | 10:00 a.m. (ET) |
| Dial in number: | +1 888 231-8191 |
| +1 647 427-7450 | |
| Webcast: | http://bit.ly/23pyOIT |
| Taped replay: | +1 855 859-2056 |
| +1 514 807-9274 | |
| +1 416 849-0833 | |
| Encore password: | 6414681 |
| Available until: | 12:00 midnight (EDT), Friday, May 20 2016 |
Notice to Reader
The information provided in this press release is entirely qualified by the disclosures in the Company’s Consolidated Interim Financial Statements and Management Discussion & Analysis (MD&A) for the quarter ended March 31, 2016, which are available at www.orbitetech.com and under the Company’s profile at www.sedar.com.
About Orbite
Orbite Technologies Inc. is a Canadian cleantech company whose innovative and proprietary processes are expected to produce alumina and other high-value products, such as rare earth and rare metal oxides, at one of the lowest costs in the industry, and in a sustainable fashion, using feedstocks that include aluminous clay, kaolin, nepheline, bauxite, red mud, fly ash as well as serpentine residues from chrysotile processing sites. Orbite is currently in the process of finalizing its first commercial high-purity alumina (HPA) production plant in Cap-Chat, Québec and has completed the basic engineering for a proposed smelter-grade alumina (SGA) production plant, which would use clay mined from its Grande-Vallée deposit. The Company’s portfolio contains 16 intellectual property families, including 32 patents and 101 pending patent applications in 11 different countries and regions. The first intellectual property family is patented in Canada, USA, Australia, China, Japan and Russia. The Company also operates a state of the art technology development center in Laval, Québec, where its technologies are developed and validated.
Forward-looking statements
Certain information contained in this document may include “forward-looking information”. Without limiting the foregoing, the information and any forward-looking information may include statements regarding projects, costs, objectives and future returns of the Company or hypotheses underlying these items. In this document, words such as “may”, “would”, “could”, “will”, “likely”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate” and similar words and the negative form thereof are used to identify forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at or by which, such future performance will be achieved. Forward-looking statements and information are based on information available at the time and/or the Company management’s good-faith beliefs with respect to future events and are subject to known or unknown risks, uncertainties, assumptions and other unpredictable factors, many of which are beyond the Company’s control. These risks uncertainties and assumptions include, but are not limited to, those described in the section of the Management’s Discussion and Analysis (MD&A) entitled “Risk and Uncertainties” as filed on March 30, 2016 on SEDAR, including those under the headings “Recent increase in budgeted capital costs will require additional financing and may adversely impact our prospects”, “We will need to raise capital to continue our growth” and “Development Goals and Time Frames“.
The Company does not intend, nor does it undertake, any obligation to update or revise any forward-looking information or statements contained in this document to reflect subsequent information, events or circumstances or otherwise, except as required by applicable laws.
Marc Lakmaaker, External Investor Relations Consultant
416-848-1397
mlakmaaker@national.ca
For Media Inquiries:
NATIONAL Equicom
Scott Anderson, External Media Relations Consultant
416-586-1954
sanderson@national.ca