Orbite Reports Third Quarter 2017 Results

MONTRÉAL, QUÉBEC–(Marketwired – Nov. 28, 2017) – Orbite Technologies Inc. (NEX:ORT.H) (“Orbite”, or the “Company”) reports its financial and operating results for the third quarter ended September 30, 2017.

Summary of CCAA Proceedings

On March 31, 2017, Orbite announced that material issues had been encountered with the electrical heating system of the supplied calcination equipment at the Company’s high-purity alumina (“HPA”) plant. Accordingly, the Company announced the suspension of its operations at its HPA plant, the anticipated default under the Company’s credit facilities, and the ensuing existence of material uncertainty about the Company’s ability to continue as a going concern.

On April 3, 2017, the Company filed a Notice of Intention to make a proposal to its creditors under the Bankruptcy and Insolvency Act (“BIA”). On May 1, 2017, the Company announced it had successfully migrated from creditor protection under the BIA to protection under the Companies’ Creditors Arrangement Act (“CCAA”) and the issuance of an initial order providing for a stay of all proceedings (“Stay Period”) until May 29, 2017. It also announced that the Cap-Chat plant was under care, maintenance and control and in an effort to further limit its cash outflows approximately 39 full time employee equivalents, out of 81, were temporarily laid-off.

The Toronto Stock Exchange de-listed Orbite’s securities as of the close of business on May 16, 2017 for failure to meet its listing requirements. On May 19, 2017, the TSX Venture Exchange (“TSX-V”) issued a bulletin confirming the listing of the Company’s common shares on the NEX Board under the symbol ORT.H, towards a possible relisting, as a first step, on the TSX-V when and if the Company emerges from creditor protection and meets the listing requirements of the TSX-V.

On May 23, 2017, the Superior Court of Québec (the “CCAA Court”) granted a motion filed by the Company and issued orders namely (i) extending the Stay Period until August 4, 2017; and (ii) relieving Orbite from its obligation to call the annual meeting of shareholders on or before June 30, 2017 and postponing the annual meeting, up to January 31, 2018.

On August 1, Orbite announced that the CCAA court issued an amended and restated initial order approving (1) the extension of the Stay Period to October 31, 2017 and (2) a .8 million debtor-in-possession (“DIP”) financing from the holders of Orbite’s 7% Convertible Secured Debentures due September 28, 2018 (the “2015 ITC Debentures”) and a related DIP super-priority charge over the Company’s assets. The funds from the DIP financing were released to Orbite in two tranches: .6 million on August 4, 2017 and .0 million (representing .2 million less the financing fees) on November 2, 2017. The terms and conditions namely provide for an interest rate of 9.25% payable on the first day of each month starting on September 1, 2017 and a termination date which shall occur no later than February 23, 2018. Based on the cashflow projections filed by Orbite with the CCAA Court, the Company expects to have liquidities until the week of April 22, 2018 taking into account the released balance.

On October 31, 2017, the Company announced the CCAA Court granted a motion filed by the Company and issued orders (i) extending the Stay Period until January 31, 2018, (ii) relieving Orbite from its obligation to call the annual meeting of shareholders on or before January 31, 2018 and directing Orbite to call such annual meeting, as the case may be, by April 27, 2018; and (iii) establishing a claims procedure for claims against the Company, in preparation of a creditors’ meeting to be held in due course to vote on a plan of arrangement and hopefully allow Orbite to emerge from CCAA protection.

On November 16, 2017, the Company announced it has filed a motion with the CCAA Court for the issuance of certain orders against Royal Sun Alliance (“RSA”), Orbite’s insurer for its Machinery and Business Interruption policies (the “Insurance Policies”). The motion is namely for the payment of approximately .3 million to recover the costs associated with repairing the heating element system of the calcination equipment and the fixed costs incurred during the downtime experienced. To date, Orbite has been unable to obtain payment from RSA for the claims made under the Insurance Policies. There can be no assurance that the motion will be granted in favour of the Company or that the CCAA Court will order the full amount of the claims set forth in the motion to be paid to the Company.

Passing of Lionel Léveillé

On November 13, 2017, Orbite announced the passing of Mr. Lionel Léveillé, distinguished and long-time member of its Board of directors until his resignation in June 2017, for health reasons.

Calcination Equipment Repairs

As announced on October 31, 2017, Orbite and the calcination equipment supplier’s technical teams continued to work very closely to resolve the issues with the calcination equipment.

• An extensive root causes analysis was conducted and is now complete. The different causes contributing to the failures of the electric heating system have been identified and confirmed;
• The solution to the heating system failure issues has been identified, modeled, and evaluated and has entered the detailed engineering phase, by the equipment supplier;
• Solutions to the other issues identified are mostly finalized and are into the detailed engineering phase, also carried out by the equipment supplier.

The initial diagnostic phase carried out by the equipment supplier took longer than it originally planned, consequently, production activities are expected to commence in the latter part of Q1 2018, subject to raising adequate financing and implementing the contemplated supplier-related solutions.

Financial Highlights

(Compared to Q3, 2016, all dollar amounts are in Canadian dollars unless stated otherwise)

The Company reported a loss before net finance expense (income) of .7 million for the quarter, a slight increase from a loss of .6 million for the comparable quarter in the prior year.

The net loss decreased by .4 million due principally to a .9 million increase in net finance income partially offset by a decrease of {$content}.3 million in deferred income taxes, {$content}.2 million in general and administrative charges and {$content}.2 million in other income.

As at September 30, 2017, the Company had an aggregate cash and short-term investments balance of .8 million, and negative working capital of .6 million. Subsequent to September 30, 2017, the CCAA Court granted a motion filed by the Company and ordered PricewaterhouseCoopers to release the remaining balance of the DIP financing representing an amount of million that it held in trust. As a result, the Company has, on a proforma basis, cash and short-term investments of .8 million.

Cash flows used in operating activities for the third quarter of 2017 was .5 million compared to .5 million for the same quarter a year ago. The decrease is attributable mainly to HPA plant operations and changes in non-cash working capital items.

Cash flows from financing activities in the third quarter of 2017 decreased by .2 million due mainly to lower proceeds from the issuance of convertible debentures and the exercise of warrants and options, partially offset by lower repayment of short-term loans.

Cash flows used in investing activities during the third quarter of 2017 decreased by .7 million attributable to reduced investments in the HPA plant, changes in restricted cash and investment tax credits receivable.

Going Concern

The financial statements have been prepared on a going concern basis, meaning on the basis that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations.

The recent developments announced in this press release indicate the existence of material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

The financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate. If the going concern assumption was not appropriate for these financial statements, adjustments to the carrying value of assets and liabilities, reported expenses and statement of financial position classifications would be necessary. Such adjustments could be material.

Quarterly Results Conference call

Orbite management will not be hosting its usual quarterly results conference call.

Notice to Reader

The information provided in this press release is entirely qualified by the disclosures in the Company’s Unaudited Condensed Interim Financial Statements and Management Discussion & Analysis (“MD&A”) for the quarter ended September 30, 2017, 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 15 intellectual property families, including 44 patents and 33 pending patent applications in 11 different countries and regions. 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 include statements regarding projects, costs, objectives and future returns of the Company or hypotheses underlying these items. In particular, statements concerning (i) the solution identified and believed to remedy the issues with the Cap-Chat calcination equipment, and (ii) the setting-up of a task force with the equipment supplier to resolve the issues observed with the Cap-Chat calcination equipment are all forward-looking statements. In this document, words such as “may”,” confident”, “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.
In particular, the solution to remedy the electrical heating system issues and potentially increase the capacity of the decomposer to 5 tpd, and the costs and time required to implement such solution is based in particular on the Company’s available data and experience to date and that the operation of the HPA plant will continue as experienced and anticipated, the costs of materials and labour remaining at current levels, and the ability to keep the operations relating to such equipment running in the normal course. Factors that could impact the Company’s expectations expressed in the forward looking statements include (i) with respect to costs and timing, an increase in the price of materials and/or labour costs, unavailability of qualified personnel, inability to operate in the normal course, breakdown or failure of equipment of processes, design errors, operator errors, non-performance by third party contractors and major incidents or catastrophic events such as fires and explosions; and (ii) with respect to the current discussions with its equipment supplier, the inability to provide technical solutions on terms and timelines acceptable to the Company; Risks, uncertainties and other factors that could affect anticipated results and future events also 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 November 28, 2017 on SEDAR, and also including those under the headings “Going Concerns”, Commercial Operation of HPA Plant”, “We will need to raise capital to continue our growth” and “Development Goals and Time Frames” which are described in the MD&A filed on March 31, 2017.

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.