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.
Highlights
- 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
Financial Results
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