Orbite Announces Second Quarter 2015 Results and Provides Update on HPA Construction
MONTREAL, QUEBEC--(Marketwired - July 31, 2015) - Orbite Technologies Inc. (TSX:ORT)(OTCQX:EORBF) ("Orbite", or the "Company") announced today the filing of its Consolidated Interim Financial Statements for the second quarter ended June 30, 2015. The Company reported a net loss of $3.7 million (or $0.01 per share) for the second quarter, as compared to a net loss of $4.3 million ($0.02 per share) for the same period in 2014, representing a decrease of 12.7%. The company also reported a net working capital of $8.5 million. All dollar amounts are in Canadian dollars unless stated otherwise.
Second Quarter Highlights
-- The Company completed several financing initiatives during the quarter
towards the funding of its HPA facility.
-- A public offering of units in the amount of $10 million in a bought
deal was closed on April 6, 2015, with a $5 million over-allotment
option retained by EuroPacific Canada Inc., the underwriter.
Subsequently, on May 6, the Company announced issuance of additional
units for gross proceeds of $5 million as a result of the exercise
by Euro Pacific Canada Inc. of its over-allotment option.
-- Orbite received a $2 million installment and announced it would be
receiving an additional $3.0 million installment from the Government
of Quebec towards its 2012 and 2013 Quebec Investment Tax Credits,
related to equipment purchased for manufacturing and processing in
the Gaspe region. The Company received or expects to receive shortly
the totality of the $25.7 million of tax credits due to the Company
related to the 2012 and 2013 financial years. $25.0 million of these
funds will be deposited in a segregated account and serve as
security for the convertible debentures issued in 2012. The
remaining $0.7 million along with $0.2 million in related interest
to be received will be applied towards the financing of the HPA
-- The Company received confirmation from its tax advisors that it
should be eligible to receive up to $7.5 million in tax credit
refunds for fiscal 2015, as well as be eligible to receive
investment tax credits for investments in the Gaspe region to be
made in 2016 and 2017.
-- Investissement Quebec ("IQ") agreed to provide Orbite with a $5.0
million bridge loan, collateralized against the Company's investment
tax credits receivable for the year 2015.
-- Orbite and Crede Capital, the holder of the Series Y Subscription
Rights, mutually agreed to terminate the Series Y Subscription
-- Orbite shipped high purity alumina ("HPA") samples to five prospective
customers, thereby entering their supplier qualification programs. The
samples were produced using a modified set-up of the existing
calcination equipment at the Company's HPA facility in Cap-Chat.
-- The Company received patents in both Canada and the United States
pertaining to its Red Mud Monetization technology, namely Canadian
patent 2,857,574 and U.S. patent 9,023,301, both titled Processes for
Treating Red Mud.
-- Orbite announced that it received notification from IP Australia of the
granting and the delivery of patent 2012308068 pertaining to Processes
for preparing alumina and various other products.
-- Orbite announced that effective June 17, 2015, the Company had changed
its name to Orbite Technologies Inc. to better reflect Orbite's current
vision and growth prospects. Concurrently with its name change, the
Company's shares began trading under the "Industrial/Technology" listing
segment on the Toronto Stock Exchange, instead of "Mining".
-- On June 18, 2015, the Company held its 2015 annual and special
shareholders meeting during which shareholders approved all of the
resolutions proposed by management, including the approval of the
Company's newly implemented restricted share unit plan and deferred
share unit plan.
-- Orbite announced that the National Research Council of Canada (NRC) will
evaluate Orbite's High Purity Alumina (HPA) for use in lithium-ion
battery separators in collaboration with Orbite's Technology Development
-- On July 10, 2015, the Company received $2.7 million from the Government
of Quebec in consideration of investment tax credits on the equipment
purchased for manufacturing and processing in the Gaspe region. The
payment relates to the 2012 and 2013 financial year and the Company
expects subsequent payments to follow. At the date of publication of the
consolidated financial statements a total amount of $25,000,000 had been
received and was deposited in a segregated account to serve as security
for the convertible debentures issued in December 2012.
-- On July 20, 2015, the Company drew $3.7 million on the $5 million bridge
loan from Investissement Quebec. As of July 20, 2015, $6.7 million was
drawn on the aggregate $8.03 million available.
HPA Construction Update (Recent pictures can be found in the Media section of Orbite's website www.orbitetech.com)
Further to the Company's press release of June 12, 2015, refractory materials installation is now materially complete.
Decomposer and Calciner
-- Refractory installation process and internal prepping of the ovens at
Cap-Chat commenced at the end of March, as planned, with CNC Mechanical
(2002) Inc. ("CNC") and RHI Canada Inc. ("RHI").
-- Replacement bricks were successfully precast using the new refractory
material and refractory installation in the calciner system auxiliary
piping was completed at RHI in Boucherville and underwent curing at Les
Services Mobiles Thermetco's ("Thermetco") facility in Montreal.
-- Installation of refractory materials (bricks, mortar, and castable) in
the calciner, decomposer and piping under technical oversight from
Outotec and refractory suppliers is now materially complete. One last
small section of the calciner floor will be cast August 1.
-- A four-week heating and curing process of the refractory in both ovens
will thus commence the first week of August and will be carried out by
-- Shop prefabrication of specialty alloy piping, required for the high-
temperature steam supply to the decomposer and calcinator is ongoing,
and onsite installation is to commence in August, as planned.
-- Prefabrication of lined piping (acid duty) is ongoing and delivery to
site for installation is scheduled for August, as planned.
All piping, including utilities
-- Bids for installation of all piping have been received and the
contractor has been selected. The Company is in the process of
finalizing contractual agreements with the selected company and site
installation work will commence in early August.
-- CNC, who successfully installed the decomposer and calciner, has been on
site on a continuous basis installing minor and major mechanical
equipment. This segment of construction is proceeding as planned and is
expected to be concluded by in August.
Electrical and Instrumentation
-- Contract was awarded to Les entreprises d'electricite JMN Inc. from
Matane (Quebec). Electrical work, including installation of the main
inlet transformer and the Outotec electrical supply system, has
commenced and will continue until start-up.
Structural, buildings and foundations
-- Foundation work was awarded to Les Entreprises Roy Duguay & Associes
from Cap-Chat. All major exterior foundations (hydroxide silo, cooling
tower, new building extensions, etc) are completed. Major equipment
foundations inside the plant have also been completed.
-- The structural and building contracts were awarded to Atelier de Soudure
Gilles Roy Inc. ("ASGR") from Amqui (Quebec). Prefabrication of the new
building extensions, to house the crystallizer heat exchangers and the
electrical control room for the calcination system, is complete. Onsite
installation commenced in June and is proceeding as planned.
-- ASGR is also presently completing various internal modifications to the
structure as well as the installation of equipment and personnel
Ventilation and Insulation
-- The bid evaluation process for supply and installation of insulation on
calcination equipment and high temperature piping and vessels and for
the installation of a new ventilation system is complete. The Company is
negotiating final contractual agreements with the selected contractors
and installation will begin in August.
Procurement, Schedule and Budget
-- Delivery dates for the majority of critical long lead items continue to
be respected by suppliers.
-- Orbite anticipates commencement of commissioning in Q3 2015, and the
start of commercial production in Q4 2015.
-- The project is tracking on budget.
-- Operating personnel have completed a 40-module operations training
program, representing approximately 275 training hours per person to
date. Practical operations training commenced in late June and will
continue through commissioning and start-up.
-- Health and Safety and Emergency Response Plans for continuous operations
have been completed and continue to be implemented.
-- Commissioning and start-up procedures continue to be finalized by
project and operations personnel.
Samples Production Update
Feedback on purity and chemical composition of samples sent to date is positive. Prospective customers would also like to test HPA that is more representative of full-scale, commercial production, notably relative to mechanical properties.
Orbite subsequently modified its existing calcination equipment and process to mimic more closely the new permanent setup. New samples were produced at Cap-Chat, and are now undergoing final calcination. These new samples are even more representative of the Company's intended final products and are to ship late August-early September.
Furthermore, following the start-up and commissioning of the milling equipment at Cap-Chat, to be carried out in August, Orbite intends to prepare additional samples meeting certain specific potential customer requirements relative to particle size and distribution. These samples are expected to ship in October.
"We are making steady progress towards the completion of our HPA plant," stated Glenn Kelly, CEO of Orbite. "The work on our calcination system is materially done, and we are now working on the auxiliary systems to integrate the calcination system with the rest of the plant. We are on the home stretch now, with the finishing line in sight. Modifying our existing calcination system, though time consuming, has enabled us to accelerate the qualification process with a number of potential customers. The fact that we have been invited to supply additional samples, more representative of what we anticipate to be our output once HPA2 is operational, validates our assumptions that there is demand in the market place for suppliers who are able to provide a consistent supply of high-grade HPA."
"During the quarter we made further progress towards shoring up our capital structure and continue to pursue funding that will have the least dilutive impact on our shareholder base. We are confident of concluding the funding required to complete our plant and the period beyond, when we can start focusing on our existence as a commercial, revenue generating entity, and accelerate our waste monetization strategy."
Summary of Q2 2015 Financial Results
Revenues and earnings
The Company is a development stage company and has no revenues.
Net loss for Q2 2015 decreased by $0.55 million to $3.7 million, or from $0.02 per share to $0.01 per share, as compared to the same period in the prior year. The decrease in net loss was due primarily to a reduction in financing costs and other expense, offset partially by an increase in HPA plant operating expenses, reflecting increased activity at the Company's HPA facility.
Net loss for the six months ending June 30, 2015 fell by $2.3 million to $6.4 million, as compared to the same period in 2014. The reduction in net loss was attributable mainly to a $1 million reduction in General and Administrative expense and a reduction in financing costs and other expense.
Cash and short-term investments
As at June 30, 2015, the Company had aggregate cash and short-term investments balance of $4.1 million, and positive working capital (current assets less current liabilities) of $8.5 million.
Investment tax credits and other government assistance receivable
Investment tax credits and other government assistance receivable increased by $2.3 million during the six-month period compared to December 31, 2014. The increase is mainly due to the recognition of the 2015 investment tax credits, receivable on the equipment purchased for manufacturing and processing in the Gaspe region.
Restricted cash increased by $6.1 million during the first six months of 2015, compared to December 31, 2014. These funds represent a portion of the refundable 2012 and 2013 investment tax credits, as well as the interest earned on such deposits, in a segregated account, which serves as security for the 2012 convertible debentures. These funds will be released to the Company according to the terms of the trust indenture agreement.
Property, plant, and equipment
Property, plant, and equipment ("PP&E") increased by $6.9 million in the first six months of 2015 compared to December 31, 2014. The net increase results from $9.3 million, before investment tax credits, invested in PP&E, partially offset by $2.3 million investment tax credits.
Short term loan increased by $3.0 million during 2015 compared to December 31, 2014 due to the receipt of the $3.0 million loan from Investissement Quebec.
Cash Flow Statement
Cash Flows from Operating Activities
Cash flows used in operating activities increased by $1.0 million during the quarter ended June 30, 2015 compared to the same period of 2014, and decreased by $0.8 million during the first six months of 2015, as compared to the same period in 2014. Cash flows used for operations, which is cash flows used in operating activities, adjusted for certain non-cash working capital items and net interest payments, decreased by $0.1 million and by $0.5 million for the quarter and the six month-period ended June 30, 2015 respectively, compared to the same periods in 2014, while cash flows used in non-cash working capital items increased by $1.1 million during the quarter ended June 30, 2015, and decreased by $0.2 million for the six months ended June, 2015 as compared to the same period of 2014.
The decreases in cash flows used for operations during the quarter and six-month period ended June 30, 2015, are due mainly to a reduction in general and administrative expenses. The increase in non-cash working capital items during the quarter ended June 30, 2015, is principally due to investment tax credits and other governmental assistance receivable recognized during the period.
Cash Flows from Financing Activities
Cash flows from financing activities increased by $2.9 million and by $2.0 million during the quarter and the first six months ended June 30, 2015, respectively, as compared to the same periods in 2014. The increase for the six-month period ended June 30, 2015 compared to the same period in 2014 is due mainly to the net proceeds from the issuance of the 2015 convertible debentures and short-term debt from Investissement Quebec, partially offset by lower proceeds from issuance of shares, warrants, exercise of options, and long-term debt.
Cash Flows used in Investing Activities
Cash flows used in investing activities increased by $3.8 million and by $0.8 million during the quarter and the six months ended June 30, 2015, respectively, mainly due to increased investments in the Company's HPA plant construction.
In order to finance ongoing construction and subsequent commissioning of its HPA plant, the Company closed a $10 million bought deal on April 6, 2015 and an additional $5 million on May 6, 2015.
On June 19, 2015 Orbite entered into a loan agreement with Investissement Quebec for up to $5.0 million, collateralized against the Company's investment tax credits to be received for fiscal 2015, which the Company's tax advisors estimate at $7.5 million. This is in addition to the $3.0 million loan agreement entered into with Investissement Quebec on January 13, 2015, and collateralized against the Company's 2014 investment tax credits. As of July 30, 2015, $6.7 million had been drawn from the available aggregate of $8.03 million.
Finally, with the receipt of a $2.7 million instalment related to the Company's investment tax credits for the fiscal years 2012 and 2013, the Company has a total of $25 million, as restricted cash, pledged against the 2012 convertible debenture.
Orbite management will hold a conference call and provide a live audio webcast today, July 31, 2015 at 10:00 a.m. to discuss the Company's financials and provide an update on the Company's HPA project.
The call will be held in English. The Q&A session will be in English and French.
CONFERENCE CALL DETAILS:
Date: July 31, 2015
Time: 10:00 a.m. (ET)
Dial in number: +1 888 231-8191
+1 647 427-7450
Taped replay: +1 855 859-2056
+1 514 807-9274
+1 416 849-0833
Encore password: 91927016
Available until: 12:00 midnight (ET), Friday, August 7, 2015
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 June 30, 2015, which are available at www.orbitetech.com and under the Company's profile at www.sedar.com.
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, Quebec and has completed the basic engineering for a proposed smelter-grade alumina (SGA) production plant, which would use clay mined from its Grande-Vallee deposit. The Company's portfolio contains 15 intellectual property families, including 18 patents and 107 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, Quebec, where its technologies are developed and validated.
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 31, 2015.
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Marc Lakmaaker, External Investor Relations Consultant
1-800-385-5451, ext. 248
For Media Inquiries:
Scott Anderson, External Media Relations Consultant
1-800-385-545, ext. 252