VANCOUVER,
Aug. 30, 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 financial results for the year ended
April 30, 2013 (all figures in
Canadian dollars, unless otherwise noted).
"In Fiscal 2013 we successfully attracted two
new investors who now each own more than 25 percent of the Company,
and with their support, have acquired a majority and controlling
stake in the largest biodiesel plant in Australia (owned by TBF with an annual
capacity of 140 million litres) and also own an investment of 21
percent in ARW which is currently the largest producer of biodiesel
in Australia with an annual
capacity of 150 million litres", said Ross
MacLachlan, President and Chief Executive Officer. "Subject
to raising additional finance, this has positioned LEC to
potentially report future consolidated revenues and the potential
to generate cash flows to support the ongoing commercialization of
LIL's technology."
Fiscal 2013 Highlights:
- Closed a series of equity financings raising a total of
$6.97 million and issued a
$2.245 million debenture which was
converted into equity within the year;
- Established a secured credit facility for up to $5 million with Difference Capital Funding Inc.
("DCF");
- Made a series of strategic investments/acquisitions:
-
- Acquired a 21 percent interest in Australian Renewable Fuels
("ARW")
- Acquired a 40 percent interest in Territory Biofuels Limited
("TBF")
- Lignol Innovations Limited ("LIL"):
-
- Completed the successful optimization of ethanol production
with Novozymes
- Expanded its number of issued patents to 15
- Made further advances in HP-L TM lignin application
development
- Secured its first commercial supply agreement for HP-L™ lignin
in the thermoplastics sector
Subsequent Event Highlights:
- Replaced the DCF line of credit with a secured revolving credit
facility of up to $12.5 million
- Agreed to provide TBF with further equity funding of up to
A$1 million potentially increasing
LEC's investment to up to approximately 66% of the issued and
outstanding shares of TBF
Subsequent Events:
On May 27, 2013,
the Company announced that it had agreed to acquire an additional
2.67 million shares of TBF for A$1.0
million as part of a financing which also provides for the
further issuance of approximately 0.25 million shares of TBF to
other shareholders of TBF. Upon completion, LEC became the majority
shareholder of TBF with approximately 54% of the issued shares of
TBF and approximately 60% on a fully diluted basis.
On August 14,
2013, the Company announced that it had replaced its secured
credit facility of $5 million with
DCF, which was amended on July 9,
2013 for up to $6.25 million
(the "Amended Loan" or the "Drawn Amount"), with a new secured
revolving credit facility (the "Note") of up to $12.5 million with DCF. Under the terms of
the Note, 50% of the unpaid principal amount and accrued and unpaid
interest on such amount will be payable on the closing of an equity
financing of at least $20 million (as
long as none of the outstanding Warrants, as defined below, remain
unexercised) and the remaining unpaid principal amount and accrued
and unpaid interest on such an amount are payable on December 31, 2014. Amounts drawn under this
facility will bear interest at 9% per annum and any amount owing
under the Amended Loan (the "Drawn Amount") is deemed to be a
borrowing under the Note. The Company agreed to pay DCF a
commitment fee of $0.2 million, of
which $0.1 million had already been
paid in respect of the earlier credit facilities. In consideration
for providing the Note, DCF is entitled to receive 3,555 warrants
to purchase common shares in the capital of LEC (each a "Warrant
Share") for each $1,000 drawn down
under the Note, which allows for the issue of up to approximately
44.4 million warrants (the "Warrants") which if fully exercised
would provide LEC with $6.66 million
and would result in DCF owning 48.3 percent of LEC on a partially
diluted basis, assuming the exercise of only DCF's warrants. DCF
has received 21,418,875 Warrants in respect of the Drawn Amount.
Each Warrant is non-transferrable, shall expire on December 31, 2014 and entitle the holder to
purchase one Warrant Share at an exercise price of $0.15 per share (the "Exercise Price"), subject
to any adjustments necessary to comply with applicable securities
laws and requirements of the TSX Venture Exchange or any other
stock exchange in which the Lender's securities are listed.
On August 19,
2013, the Company announced it had agreed to provide TBF
with equity funding of up to A$1
million over the course of the next several months. The
first tranche of A$0.5 million is
payable in two instalments: the first instalment of A$0.2 million has been made and the second
instalment of A$0.3 million is due on
or before September 15, 2013. The
opportunity to subscribe for the remaining A$0.5 million worth of shares of TBF will be
offered to existing shareholders of TBF (other than LEC) who may
subscribe on the basis of their proportionate entitlement and LEC
has agreed to fund any amounts not subscribed by those existing
shareholders and to close this round of financing no later than
October 31, 2013. The closing of this
entire transaction is subject to regulatory approval.
The consolidated financial statements of the
Company for the year ended April 30,
2013 include the accounts of LEC, its wholly owned
subsidiary LIL and its controlling interest in TBF. The
Company acquired a 40 percent interest in TBF effective
April 15, 2013, and determined, from
a regulatory and reporting perspective, that it had achieved
control over TBF on that date and as a result, has consolidated the
results of TBF's operations and its balance sheet from the date of
April 30, 2013. The impact of
consolidating TBF resulted in the inclusion of assets totaling
$19.1 million (including $18 million in biorefinery plant and storage tank
assets), and total liabilities of $21.0
million, which included $15.4
in long term liability, representing a long term lease for the
storage tanks. Had TBF been consolidated from May 1, 2012, the impact would have been to
increase LEC's consolidated loss by approximately $0.7 million (amount unaudited).
The activities of LEC during the year were
largely directed to increasing its investment in ARW from 11
percent to 21 percent, and to providing funding for the acquisition
of a controlling interest in TBF, as well as continuing to
investigate other investments in similar energy-related projects.
During the year, LEC's wholly-owned subsidiary LIL actively pursued
commercial and technical partnerships to advance the
commercialization of its technology.
The Company's investments in ARW are carried at
market value, fluctuations in market value are adjusted on a
quarterly basis, and income is recorded at the time dividends are
declared or received, if any. 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.
On August 5, 2013,
ARW issued their June 30 2013
Investors Newsletter in which they reported (unaudited figures on
which LEC is relying but has not verified, and for which LEC should
not be held accountable):
"ARfuels expects net profit for the year
ending 30 June 2013 to be
approximately $2.2 million, subject
to audit clearance. This represents a turnaround of more than
$9 million on the previous year's
result and provides a solid platform for continued earnings growth.
The $2.2 million result will be
achieved after taking into account approximately $1.6 million of one-off expenses unique to the
2013 year. This result also includes the accounting gain on the
derivative (profit) of $1.1 million
reported in the 31 December 2012
half-year result."
One-off expenses included: capital raising costs
($500k), a foreign exchange reserve
relating to previous years written off ($500k), some historical bad debt write-offs, the
full impact of the fire at Largs Bay including the carrying costs
of staff and other overheads, and additional training and
maintenance costs for the Picton
and Largs Bay plants as we brought those plants back on line to
meet export orders.
LEC Financial Results
For the three month period ended April 30, 2013 ("Q4 FY13"), the Company reported
a net loss of $1.6 million, or
$0.01 per share (basic and fully
diluted) compared to a net loss of $0.4
million or $0.02 per share
(basic and fully diluted) for the three month period ended
April 30, 2012 ("Q4 FY12"). The
$1.2 million increase in the net loss
for the current period was due to an increase in research and
development expenses of $0.2 million,
increased operating costs of $1.3
million arising from increased professional, strategic
advisory, and legal fees related to the various financings and
acquisition transactions and related costs, a decrease in
government and corporate contributions of $0.2 million, offset by the other gain of
$0.5 million. The other (non-cash)
gain related to the acquisition of addition ARW shares during the
quarter.
LEC Going Concern
The Company entered into a secured credit
facility of $5 million in
February 2013, which was amended on
July 9, 2013 for up to $6.25 million (the "Amended Loan"), and this was
replaced with a new secured revolving credit facility with
Difference Capital Financial Inc. ("DCF") for up to $12.5 million in August
2013 (as further described in Notes 10 and 24 to the
Consolidated Financial Statements). A total of $5 million had been drawn on the credit facility
as of April 30, 2013; and by
August 28, 2013 a total of
$9.75 million had been drawn
down.
LEC 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 LEC to continue as a going
concern is dependent upon its ability to continue to fund its
business objectives and to be able to repay amounts drawn under the
DCF credit facility. There can be no assurance that LEC will be
able to obtain further financing on favourable terms and in such
event, LEC's working capital may not be sufficient to meet its
stated business objectives.
These consolidated financial statements 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.
These financial statements 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.
Liquidity and Capital Resources
LEC has historically financed its working
capital requirements largely through public and private sales of
equity securities, and more recently through access to a line of
credit. The ongoing funding requirements of its wholly owned
subsidiary LIL were met out of these funds together with funds
received directly by LIL in the form of government grants and
corporate contributions. LEC's recent investments in ARW and TBF
have also been made out of its general working capital and from the
Company's line of credit with DCF.
At April 30, 2013,
LEC and its subsidiaries, had $2.4
million in cash and cash equivalents and up to $2.9 million in future funding receivable from
contracted government and corporate funding agreements, and
$10.9 million in current liabilities.
The Company had a $3.1 million
surplus in net shareholders' equity after taking into account an
accumulated deficit of $35.7
million.
The $2.9 million
in funding receivable in the future from contracted government and
corporate funding agreements has not yet been recognized in the
financial statements. This remaining balance of funding is
available in the future subject to the satisfaction of certain
conditions specified in the relevant agreements, which includes LIL
completing the body of work required in respect of the previous
round of funding, demonstrating the ability to incur in the future
the budgeted program expenditures, and continuing to meet all of
its reporting requirements. Receipt of this additional funding is
also conditional in certain cases upon having sufficient matching
funds and completion of the funding agreements and there can be no
assurance that this funding will be received. The funding
receivable under these awards is intended to be applied against
future expenses incurred under various development programs.
As noted in the LEC Going Concern note above, in
order to continue funding its operations, LEC will continue to
explore a number of different options. There can be no assurance
that LEC will be able to obtain further financing on favourable
terms and in such event, LEC's working capital may not be
sufficient to meet its stated business objectives (see also "Risks
and Uncertainties").
The Company continues to manage and defer
non-priority expenditures, while at the same leveraging all
available funding sources to extend, as much as is possible, the
overall availability of its resources.
Lignol's complete financial statements for the
three months and fiscal year ended April 30,
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 the required adoption of International Financial
Reporting Standards.
About Lignol Energy Corporation
("LEC")
Lignol Energy Corporation is an emerging
producer of biofuels, biochemicals and renewable materials from
waste biomass. LEC is actively involved in the management of
its wholly owned subsidiary Lignol Innovations Ltd. and in the
management of Territory Biofuels Limited, in which it has a
controlling interest. LEC owns a 21 percent interest in Australian
Renewable Fuels Ltd., however it should be noted that LEC has no
direct influence or any representation on the board of directors 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.
Lignol Innovations Ltd.
("LIL")
The Company's wholly owned subsidiary, LIL is a
leading technology company in the advanced biofuels and renewable
chemicals sector undertaking the development of biorefining
technologies for the production of advanced biofuels, including
fuel-grade ethanol, and other renewable chemicals from non-food
cellulosic biomass feedstocks. LIL's modified solvent based
pre-treatment technology facilitates the rapid, high-yield
conversion of cellulose to ethanol and the production of
value-added biochemical co-products, including high purity
HP-LTM lignin. HP-LTM lignin represents a new
class of high purity lignin extractives (and their subsequent
derivatives) which can be engineered to meet the chemical
properties and functional requirements of a range of industrial
applications that until now has not been possible with traditional
lignin by-products generated from other processes. LIL is executing
on its development plan through strategic partnerships to further
develop and integrate its core technologies on a commercial
scale.
Territory Biofuels Limited
("TBF")
The Company presently owns a controlling 56%
equity stake in TBF (and is in the process of increasing that stake
to up to 66 percent) , a company which owns a large scale
biorefining facility located in Darwin, Northern Territory which
includes a Lurgi-designed biodiesel plant and the largest glycerine
refinery in Australia. The
facility was commissioned in 2008 at a cost of A$80 million, along with 38 million litres of
related tankage, now leased by TBF. The biodiesel plant is the
largest in Australia with a rated
capacity of 140 million litres per year. The plant was originally
built to run on palm oil and food-grade vegetable oil; however the
plant was shut down in 2009 due to challenging technical and
economic conditions. To take advantage of current market
opportunities, TBF is in the process of raising funds to restart
the existing facility utilizing a specific grade of palm oil;
environmentally certified, Refined Bleached & Deodorized (RBD)
palm oil. In 2014, TBF plans to integrate new feedstock
pre-treatment technologies and catalysts to process a broader range
of feedstocks such as lower quality tallow, used cooking oil and
palm sludge oil; a waste product from palm oil mill extraction. LEC
has appointed a majority of the Board of TBF which includes two
executives and directors of LEC, one of whom is Chairman of the
Board. Since obtaining a controlling interest on April 15, 2013, LEC has been actively engaged in
the operations of TBF and in supporting TBF to obtain access to
additional finance so as to restart the Darwin plant and to enable
the company to commence commercial operations.
Australian Renewable Fuels
("ARW")
The Company currently owns a 21% investment in
ARW, a company listed on the Australian Stock Exchange (ASX:ARW),
which is the largest biodiesel producer in Australia owning three plants with a total
nameplate capacity of 150 million litres per annum. ARW's three
plants were built with an initial investment of over A$100 million. ARW has made significant changes
in recent years to become a more cost effective producer of high
quality biodiesel to address growing biofuel demand in the
Australian market. In March 2013, ARW
completed an equity financing of A$12.3
million, which was partially funded by LEC, for the purpose
of repaying existing debt and to provide additional working
capital. Further information about ARW can be found at
www.arfuels.com.au
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 funding of Territory Biofuels
Limited ("TBF") within the agreed timeframes, the Company's ability
to draw down additional funds in the future from Difference Capital
Financial Inc. ("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 existing TBF shareholders to participate
in the current TBF financing, TBF's ability to finance and restart
its 140 million litre per year biodiesel plant and glycerine
refinery located in Darwin, Australia, TBF's ability to successfully
operate the Darwin facility and to generate revenues and near term
cash flow, TBF's ability to obtain US EPA approval, TBF's ability
to work with strong commercial partners and to become a major
regional player in the biodiesel market in the Pacific Rim, TBF's ability to integrate new
pretreatment technologies and catalysts to facilitate the
processing of a broad range of lower cost feedstocks, the
successful outcome of projects undertaken under the Technology
Collaboration Agreement between LEC and TBF, LEC's ability to
continue as a going concern and to raise additional financing to
fund the operations of LEC and its wholly-owned subsidiary, Lignol
Innovations Limited ("LIL"), and to support the financing
requirements of TBF, LEC's ability to invest in, or otherwise
obtain, equity interests in energy related projects which have
potential technical and commercial synergies with the Company and
which have the potential to generate future dividends and near term
cash flow, the development status of LIL's fully integrated pilot
scale biorefinery in Burnaby, British
Columbia, the planning and development of a commercial
plant, LIL's ability to complete project deliverables which are
funded in part by government agencies, 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, our ability to establish the validity of LIL's
technology at the fully integrated biorefinery pilot plant scale,
LIL's ability to satisfy the conditions of existing government
grants and to obtain new additional grants, our ability to continue
to finance our operations, to meet current obligations, and to
finance and complete the development of a commercial project, LIL's
ability to work with Novozymes to produce cellulosic ethanol at
production costs competitive with gasoline and corn ethanol, LIL's
ability to develop products and to obtain off-take agreements,
LIL's ability to obtain requisite regulatory approvals and its
ability to enter into agreements with strategic partners on terms
acceptable to us, 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 the Company 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, the technological challenges that
remain to be surpassed in obtaining the necessary operating data
from LIL's fully integrated biorefinery pilot plant that is
required prior to completing the next scale-up of the technology,
financial market conditions which will impact LEC's ability to
finance its operations and to finance the construction and
operation of an LIL commercial plant, the price of gasoline and
demand for ethanol, the market pricing and demand for renewable
chemicals, risks relating to the protection of LIL's core
technology from infringement and those risk factors which are
discussed elsewhere in documents that LEC's files from time to time
with securities 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, the Company 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