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Lignol Reports Fiscal 2013 Second Quarter Financial Results
By: PR Newswire
Dec. 27, 2012 06:00 AM
VANCOUVER, Dec. 27, 2012 /CNW/ - Lignol Energy Corporation (TSXV: LEC) ("LEC" or "the Company"), a leading technology development company in the advanced biofuels and renewable chemicals sector, today announced its consolidated financial results for the three months ended October 31, 2012 ("Q2 FY13"). All figures in Canadian dollars, unless otherwise noted.
During the quarter, the Company strengthened its balance sheet and closed a non-brokered financing to raise gross proceeds of $2.46 million. Of the total proceeds, $0.5 million was used as part of the total consideration for an acquisition of an 11.2% interest in ARW for a total of $4.26 million. The balance was settled in the form of LEC shares and the issue of a $2.245 million convertible debenture.
As of the end of the quarter, LIL's growing intellectual property portfolio consisted of more than ninety patent applications in various stages of prosecution. Two further patents were awarded during the quarter, covering inventions made in the field of lignin composition of matter, bringing to twelve the number of patents awarded to LIL, including five awarded this calendar year.
LIL pilot plant and research facilities successfully completed a major body of work with Novozymes, showing performance improvements of up to 35% as compared to previously best achieved results. During the quarter pilot plant operations were largely dedicated to achieving milestones for government funded work plans to process different feedstocks to enhance hemicellulosic sugars recovery and the production of a range of lignins for ongoing application development activities. These process optimization activities have the potential to double the amount of usable hemicellulose sugars produced for subsequent bioconversion. LIL also successfully produced a sizeable quantity of lignin from wheat straw for new product development purposes.
For the three months ended October 31, 2012 ("Q2 FY13") LEC reported a net comprehensive loss of $2.8 million, or ($0.03) per share (basic and fully diluted). Included in the total comprehensive loss are non-cash charges relating to the fair market accounting treatment of the acquired investment in ARW of a total of $1.5 million. After excluding these $1.6 million non-cash charges, the adjusted loss for Q2 FY12 would have been the same as the $1.3 million loss incurred for the three months ended October 31, 2011 ("Q2 FY12").
Total research and development expenditures (excluding amortization) were $0.6 million in the quarter ended Q2 FY13 compared to $1.3 million in the prior year. The current quarter decrease in operating expenses of $0.7 million was a result of reductions in headcount and related expenses of $0.4 million, reductions in pilot plant operating expenses of $0.2 million, and a reduction in general overheads of $0.1 million. General and administrative expenses increased by $0.1 million largely due to increased headcount for corporate development and professional expenses incurred related to various financing and strategic transactions under consideration during the quarter.
Total funding from government and corporate contributions were $0.2 million for the current quarter, compared to $0.9 million in the same quarter of 2011. A certain number of projects which were supported by various government grant programs during the prior quarter in 2011, had been completed by the start of the current quarter. Accordingly there were fewer grants available to contribute to the work completed in the current quarter, while at the same time, overall grant related research expenses had also declined by $0.8 million.
On November 9, 2012, the Company announced that it had completed the acquisition of an additional 88,000,000 ordinary shares of ARW for an aggregate purchase price of CAD$1.10 million. Consideration was comprised of CAD $0.23 million in cash and 7,000,000 in LEC common shares issued at $0.125 per share. Upon the closing of the acquisition, LEC's ownership increased from 11.2% to 14.9% of the issued and outstanding ordinary shares of ARW.
On November 15, 2012, the Company held its Annual and Special Meeting of Shareholders, and passed an ordinary resolution to change the stock option plan to a "rolling" plan allowing for a maximum number of common shares issuable on the exercise of options granted under the Amended Plan to be 10% of the number of Common Shares which are issued and outstanding at the time the options are granted.
On December 17, 2012 the Company announced that it had closed its previously announced private placement for gross proceeds of $4.52 million (the "Offering"). Included in the Offering was the receipt of $1.15 million related to the subscription by Difference Capital of 7,666,667 subscription receipts of the Company (the "Subscription Receipts"). This amount will be retained in escrow until such time as certain Shareholder approvals have been obtained. Also, in connection with the Offering, Wasabi Energy Limited converted the $2.246 million convertible debenture it held resulting in the issuance of 14,971,800 common shares of the Company at an exercise price of $0.15 per share.
Going Concern and Subsequent Events
LEC's consolidated financial statements have been prepared on a going concern basis which assumes that LEC will continue its operations and those of LIL for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business.
LEC's consolidated financial statements and the accompanying Management's Discussion and Analysis do not reflect adjustments to the amounts and classification of assets and liabilities that may be necessary if the going concern assumptions were not appropriate and such adjustments could be material should LEC be unable to continue as a going concern.
LEC has historically financed its working capital requirements and the research and development activities, capital expenditures and operations undertaken by its subsidiary LIL, and its acquisition of an equity interest in ARW, largely through public and private sales of equity securities, government and corporate contributions, and interest income.
At October 31, 2012, LEC had $1.4 million in cash and short-term investments currently available, and up to $1.6 million in future funding receivable, from contracted government and corporate funding agreements, and $1.3 million in current liabilities. LEC also had a $1.5 million surplus in shareholders' equity after taking into account an accumulated deficit of $32.4 million.
In assessing its cash projections for the next year, LEC has not factored in the availability of the funding currently held in escrow related to the issue of Subscription Receipts of $1.15 million, to Difference Capital, the potential receipt of additional funding from government awards currently being negotiated by its subsidiary, LIL, or the impact of its recent acquisitions of shares in ARW. Accordingly, 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 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 stated business objectives. 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.
Lignol's complete financial statements for the three months ended October 31, 2012 and the related Management's Discussion & Analysis of Financial Condition and Results from 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")
LEC (TSXV: LEC) owns 100% of the issued and voting shares of Lignol Innovations Ltd. ("LIL") and owns an 14.9% stake in Australian Renewable Fuels Ltd (ASX: ARW). LEC also intends to invest in, or otherwise obtain, equity interests in energy related projects which have synergies with its biorefining technology.
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 nonfood cellulosic biomass feedstocks. LIL's modified solvent based pretreatment 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 lignins. 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 byproducts 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. For more information please visit Lignol's website at www.lignol.ca.
ARW 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 at an aggregate cost of approximately A$150 million. ARW has made significant changes in recent years to become a cost effective producer of high quality biodiesel to address growing biofuel demand in the Australian market. More information on ARW can be found at their website; 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 the conversion of the Subscription Receipts into Units through the approval of the shareholders of the Company of the Release Conditions, the transaction entered into by ARW and the resulting change to the LEC equity interest in ARW and to continue as a going concern and to raise additional financing to fund the operations of LEC and Lignol, the development status of Lignol's fully integrated pilot scale biorefinery in Burnaby, British Columbia, the planning and development of a commercial plant, Lignol'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 Lignol's technology at the fully integrated biorefinery pilot plant scale, Lignol's ability to satisfy the conditions of existing government grants and to obtain new additional grants, our ability to continue to finance our operations and to finance and complete the development of a commercial project, Lignol's ability to work with Novozymes to produce cellulosic ethanol at production costs competitive with gasoline and corn ethanol, Lignol's ability to develop products and to obtain off-take agreements, our ability to obtain requisite regulatory approvals and our ability to enter into agreements with strategic partners on terms acceptable to us, the inability to influence the strategy, operations and financial performance of Australian Renewable Fuels Limited ("ARW"), the reliance on publically available information of ARW in the Company's evaluation of its acquisition of shares in ARW, the potential inability to divest the ARW ordinary shares due to modest trading volumes, the cost of future ARW capital investment, the fluctuation of biodiesel and feedstock prices on ARW, the effect on ARW of changes in government policy relating to the environment, and incentives for renewable fuels. 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 Lignol'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 our ability to finance our operations and to finance the construction and operation of a commercial plant, the price of gasoline and demand for ethanol, the market pricing and demand for renewable chemicals, risks relating to the protection of Lignol's core technology from infringement and those risk factors which are discussed elsewhere in documents that LEC 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
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