Material Subsequent Events
-
On January 14, 2015, Orbite announced it had received, from Investissement Québec, a $3.0 million bridge loan, collateralized against the Company's investment tax credits receivable for the year 2014, estimated at $4.0 million.
-
On January 30, 2015, the Company announced it had exercised the Series Y rights certificate, as amended, requiring the holder to purchase the corresponding number of units subject to applicable conditions and provisions. As shareholder approval is a condition of the aforementioned purchase requirement, Orbite convened a special meeting of shareholders to be held April 2, 2015. As circumstances have evolved since the calling of the special meeting of shareholders, the Company has postponed the date of the meeting to April 27, 2015.
-
On February 16, 2015, the Company announced it was selected to receive up to $4.5M in non-dilutive funding from Sustainable Development Technology Canada to be applied towards Orbite's red mud and waste monetization initiative.
-
On February 25, 2015, Orbite announced that the Europe-sourced components of the new castable material for the refractory system at the Company's HPA plant in Cap-Chat had arrived in the Port of Montreal.
-
Company announced two Notices of Allowance of Patents relative to Red Mod Monetization were received for Canada and the United States.
-
On March 12, RHI Canada was appointed for refractory installation, to commence March 30, 2015.
-
On March 20, announced filing of final Base Shelf Prospectus, allowing Company to raise up to $30 million over next 25 months.
-
On March 30, the Company received $4 million as the fourth installment related to its 2012 Québec Investment Tax Credits. The funds were due to the Company in relation to equipment purchased for manufacturing and processing in the Gaspé region during the 2012 financial year. Funds received to date total $20.3 million dollars.
-
On March 30, the Company entered into an underwriting agreement with Euro Pacific Canada Inc. (the "Underwriter") under which the Underwriter agreed to buy, on a bought deal basis, units of the Company for gross proceeds of $8,500,000 (the "Offering"). In addition, the Company also granted the Underwriter an option, exercisable at any time within 30 days of the closing of the Offering, to purchase additional Units for additional gross proceeds of up to $6,500,000.
Summary of Q4 and FY 2014 Financial Results
Comprehensive loss
Net loss for Q4 2014 decreased by $5.5 million to $3.5 million, or from $0.05 per share to $0.01 per share. For the quarter ended December 31, 2014, the net loss increase compared to the third quarter of 2014 was attributable mainly to a $1.8 million write-off following the redesign of the plant, and a lower amount recognized in the change in fair value of the derivative financial instruments relating to the series X convertible debentures.
The net loss for FY2014 came in at $12.4 million, as compared to a $15.0 million net loss for FY 2013. The decrease was due predominantly to a $3.4 favourable difference in net finance income (expense) compared to FY2013, a $1.7 million reduction in general and administrative charges, offset partially by a $1.8 million write-off following the redesign of the plant, an increase of $0.8 million in HPA plant operations and a $0.3 million increase in R&D expenses.
Research and development charges increased by $0.2 million during the quarter ended December 31, 2014, as compared to the same period in 2013. The increase was due to an increase in salaries, lab consumables, external lab analysis as well as an R&D tax credit provision adjustment, partially offset by a decrease in consulting fees and share-based payments.
For FY 2014, research and development charges increased by $0.3 million, as compared to the prior year, due to an increase in salaries, lab consumables as well as an R&D tax credit provision adjustment, partially offset by a decrease in consulting fees and share-based payments.
General and administration charges increased by $0.4 million for the fourth quarter, compared to the same period in 2013. General and administrative costs decreased by $1.7 million for FY2014, as compared to 2013. The increase during the quarter was due to share-based payments and a write-off of some claims in the Rimouski Cap-Chat region, partially offset by a decrease in salaries, professional fees, as well as a general reduction in expenses. The decrease during the year ended December 31, 2014 compared to 2013, was attributable mainly to a decrease in salaries, professional fees, as well as a general reduction in expenses resulting from the cost reduction program in place since mid-2013, partially offset by an increase in share-based payments and a write-off of some claims in the Rimouski Cap-Chat region.
HPA plant operation expenses decreased by $0.1 million during the fourth quarter, 2014, and increased by $0.8 million for FY 2014, as compared to the same prior year periods. The increase for the full year 2014, as compared to 2013, is due mainly to the costs associated with the incident at the Cap-Chat facility in Q1, 2014, and as HPA related costs in the first quarter of 2013 were mostly capitalized compared to 2014, partially offset by disassembly and handling costs of certain equipment incurred in 2013. Costs incurred at the HPA plant that directly relate to the installation of the equipment and the commissioning of the plant, and meet the IFRS criteria for capitalization, are capitalized in property, plant and equipment (PP&E).
Other expense decreased by $0.8 million and $0.4 million for the quarter and for the year, respectively, as compared to the same prior year periods, due mainly to a higher indemnity recognized in 2013 compared to 2014 to compensate purchasers of flow-through securities issued in December 2012 for adverse tax consequences incurred, as the Company did not meet the spending requirements related to qualifying Canadian mineral exploration expenses, partially offset by a flow-through tax provision.
Financial position
Cash and short-term investments
Cash and short-term investments decreased by $6.9 million, compared to December 31, 2013. The decrease was mainly due to the continued investment in the construction of the HPA plant, research and development, general administration and HPA plant operating expenses. The decrease was partially offset by the $10 million convertible debentures issued following exercise of the series X subscription rights, the $3.8 million financial contribution received from Canada Economic Development and the $10 million equity funding from Ressources Québec, a subsidiary of Investissement Québec.
Sales taxes and other receivables
Sales taxes and other receivables increased by $1.0 million during 2014, as compared to December 31, 2013. The increase of sales taxes (GST, QST and HST) receivable from the Federal and Provincial governments is primarily due to the increased level of activities of the Company in 2014 compared to 2013 and the construction of the HPA plant.
Investment tax credits
Investment tax credits classified as current increased by $3.8 million during 2014, compared to December 31, 2013. The increase is principally due to the recognition of the 2014 accrued investment tax credits receivable on the equipment purchased for manufacturing and processing in the Gaspé region, partially offset by research and development tax credits reimbursement relating to previously filed returns.
Investment tax credits classified as non-current decreased by $16.3 million during 2014, compared to December 31, 2013, due to payments received from tax authorities relating to the 2012 and 2013 fiscal years, which are pledged as security for the $25 million convertible debentures issued in December 2012.
Restricted cash
Restricted cash increased by $16.3 million during 2014, compared to December 31, 2013. These funds represent a portion of the refundable 2012 and 2013 investment tax credits, deposited in a segregated account, which serve 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 $13.5 million in 2014, as compared to December 31, 2013, resulting mainly from $22.1 million in investments in PP&E (which includes capitalized interest of $3.7 million), attributable to the HPA plant, partially offset by $6.4 million in government grants and refundable investment tax credits on equipment purchases for the HPA plant, and by a $1.8 million write-off to avoid duplication of capital costs following the engineering review and facility redesign conducted throughout 2014.
Patents and others
Patents increased by $0.6 million during 2014, compared to December 31, 2013, attributable principally to the costs related to 48 new patent filings, including national entry phases in various countries, as well as international, provisional and divisional patent filings.
Long-term debt and convertible debentures
Long-term debt (including short-term portion) and convertible debentures increased by $2.0 million, and decreased by $10.0, respectively during 2014, as compared to December 31, 2013. The decrease in convertible debentures is mainly due to the exercise of the conversion option of the 2013 convertible debentures. The increase in long term-debt is principally due to the receipt of the $3.8 million financial contribution by Canada Economic Development, recorded at amortized cost.
Share capital and warrants
Share capital and warrants increased by $31.0 million, mainly due to the issuance of common shares as a result of the conversion of the 2013 and Series X debentures during 2014, the $10 million equity funding from Ressources Québec and the exercise of stock options, warrants and shares issued for interest.
Contributed surplus
Contributed surplus increased by $1.1 million during 2014, compared to December 31, 2013, due to the recognition of share-based payments and broker's warrants, partially offset by the exercise of stock options.
Cash Flow Statement
Cash Flows from Operating Activities
Cash flows used in operating activities decreased by $0.3 million during the quarter ended December 31, 2014, compared to the same period in 2013. Cash flows used for operations decreased by $0.9 million during the fourth quarter, compared to the same quarter in 2013, while cash flows used for non-cash working capital items increased by $0.9 million during the fourth quarter ended December 31, 2014, as compared to the same period in the prior year.
Cash flows used in operating activities increased by $4.2 million for the year ended December 31, 2014, compared to the same period in 2013. Cash flows used for operations decreased by $1.6 million during 2014, compared to the same period in 2013. During 2014, cash flows used for non-cash working capital items amounted to $2.8 million, mainly due to accounts payable and sales tax receivables, whereas during 2013, the Company received cash from non-cash working capital items in the amount of $3.3 million, of which $3.7 million were sales taxes receivable.
Cash Flows from Financing Activities
Cash flows from financing activities decreased by $13.8 million and increased by $10.4 million during the fourth quarter and the year ended December 31, 2014, compared to the same periods in 2013. The increase during the year is mainly due to the financial contribution received from Canada Economic Development during the first quarter, the equity funding by Ressources Québec during the second quarter, as well as from the issuance of the Series X convertible debentures issued during the third quarter ended September 30, 2014, partially offset by a lower amount of net proceeds from convertible debentures.
Cash Flows used in Investing Activities
Cash flows used in investing activities increased by $0.5 million during the quarter ended December 31, 2014, compared to the same period in 2013, and decreased by $17.1 million during the year ended December 31, 2014, compared to the same period in 2013. These changes are mainly due to investments in the HPA plant construction, restricted cash, non-current investment tax credits receivable and in exploration and evaluation assets.
Liquidity and Capital Resources
The Company is a development stage company that has not generated any revenues or significant cash flows from its operations. The Company's source of funding has primarily been from the sale of equity and debt securities, and to a lesser extent, earning interest income, which is highly dependent on the cash balances and prevailing interest rates. The Company has limited financial resources, has no recurring revenues and continues to rely on the issuance of shares, debt or other sources of financing to fund its overhead, HPA plant construction, commissioning and ongoing operations and to advance its development-stage projects. As at December 31, 2014, the Company had aggregate cash and short-term investments balance of $3.4 million, and positive working capital (current assets less current liabilities) of $7.8 million. Following the bridge loan received from Investissement Québec on January 14, 2015, the Company had, on a pro-forma basis, a cash and short-term investments balance of $6.4 million.
On March 30, 2015, the Company entered into an underwriting agreement with Euro Pacific Canada Inc. (the "Underwriter"), under which the Underwriter agreed to buy on a firm underwriting (bought deal) basis by way of prospectus supplement, 8,500 units of the Company (each, a "Unit") at a price of $1,000 per Unit for gross proceeds of $8,500,000 (the "Offering"). In addition, the Company also granted the Underwriter an upsizing option to purchase up to an additional of 6,500 Units for additional gross proceeds of up to $6,500,000 (resulting in aggregate of gross proceeds of up to $15,000,000). Each Unit consists of $1,000 principal amount of convertible unsecured unsubordinated debentures (the "Debentures") and 1,077 share purchase warrants, each such warrant exercisable into one share for a period of 36 months at a price of $0.39 per share. The Debentures will mature 5 years from their issue date (the "Maturity Date") and will bear interest at a rate of 5% per annum. Each Debenture will be convertible at any time prior to the Maturity Date, into the number of shares computed on the basis of (i) the principal amount of the Debentures divided by the conversion price of $0.325 per share (the "Conversion Price"), and (ii) an amount equal to the additional interest amount that such holder would have received if it had held the Debenture until the Maturity Date (the "Make-Whole Amount") divided by the then 5 day volume weighted average trading price of the Common Shares on the TSX (the "Current Market Price"). The Make-Whole Amount shall be reduced by 1% for each 1% that the Current Market Price at time of conversion exceeds the Conversion Price. The aggregate number of shares to be issued upon conversion of the Debentures and for any payment of the Make-Whole Amount in Common Shares shall not exceed the number of Common Shares equal to the principal amount of the Debentures divided by $0.325 less the 25% maximum discount allowable in accordance with the rules of the Toronto Stock Exchange.
Orbite management will hold a conference call and provide a live audio webcast Wednesday, April 8th, 2015 at 10:00 a.m. (ET) to discuss the Company's financials and provide an update on the Company's HPA project.
CONFERENCE CALL DETAILS:
The call will be held in English. The Q&A session will be in English and French.
| Date: | April 8, 2015 |
| | |
| Time: | 10:00 a.m. (ET) |
| | |
| Dial in number: | +1 888 231-8191 |
| | +1 647 427-7450 |
| | |
| Webcast: | http://bit.ly/1ED3yhQ |
| | |
| Taped replay: | +1 855 859-2056 |
| | +1 514 807-9274 |
| | +1 416 849-0833 |
| | |
| Encore password: | 6252465 |
| | |
| Available until: | 12:00 midnight (ET), Wednesday, April 22, 2015 |
About Orbite
Orbite Aluminae Inc. is a Canadian clean technology based mineral-processing and resource development 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 15 patents and 98 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, Québec, where its technologies are developed and validated.
Notice to Reader
The information provided in this press release is entirely qualified by the disclosures in the Company's Financial Statements and Management Discussion & Analysis (MD&A) for the year ended December 31, 2014, which are available at www.orbitealuminae.com and under the Company's profile at www.sedar.com.
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 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 on SEDAR.
