Quantcast
Last updated on April 23, 2014 at 11:31 EDT

Lignol Reports Fiscal 2014 First Quarter Financial Results

September 30, 2013

VANCOUVER, Sept. 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 unaudited
consolidated financial results for the three months ended July 31, 2013
(all figures in Canadian dollars, unless otherwise noted).

During the quarter, LEC continued to develop its Canadian based
technology platform for the production of cellulosic ethanol, high
value cellulose and high purity HP-L(TM) lignin and consolidated its shareholding in Territory Biofuels limited
(“TBF”). It also identified an additional strategic investment
opportunity in the form of an investment, currently in progress, in
Neutral Fuels Parent Company, to develop a biodiesel program for the
APMEA region, and laid the groundwork for gaining access to additional
funding in August 2013.

Highlights

        --  Increased investment in TBF to obtain majority control with
            approximately 54% non-diluted and 60% fully diluted
            shareholding
        --  Increased its credit facility with Difference Capital Financial
            Inc. ("DCF") from $5 million to up to $6.25 million in July
            2013
        --  Reported an operating loss of $0.98 million for the quarter
            compared to a loss of $0.96 million for the comparable quarter
            last year
        --  Achieved a comprehensive profit for the quarter of $3.96
            million as a result of a $4.08 million increase in the market
            value of its investment in ARW and a non-cash foreign exchange
            gain of $1.7 million arising from the consolidation of TBF

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 funding of up to an
            additional A$1 million to increase LEC's investment up to
            potentially between 76% and 87% of the issued shares of TBF and
            between 75% and 86% on a fully diluted basis
        --  Agreed to provide funding of A$4.07 million to acquire a 40%
            equity stake in Neutral Fuels Parent Company ("Neutral Fuels")
            and a 51% interest in Neutral Fuels' Australia and New Zealand
            biodiesel operation

Subsequent Events

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 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 result in DCF owning 48.3 percent of LEC on a
partially diluted basis, assuming the exercise of only DCF’s warrants.
As of September 30, 2013, DCF was entitled to receive a total of
34,661,250 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$1,000,000 over the course of the next
several months.  Subsequently on September 30, 2013, the Company
announced it had agreed to vary the the terms and conditions of its
existing loan to TBF in the amount of A$500,000 (the “Loan”) and LEC’s
investment (the “Investment”) in TBF of up to A$1,000,000.   The
Company and TBF have agreed that the Loan and the Investment amounts
will be applied to the subscription for secured convertible notes (the
“Notes”) of TBF, in the aggregate amount of up to A$1,500,000.  In
accordance with its previous Investment commitment, LEC has provided
funding to TBF totaling A$500,000 and is in the process of providing
the opportunity to existing TBF investors to subscribe for the
remaining A$500,000 worth of Notes. Existing investors of TBF may
subscribe for these Notes on the basis of their proportionate
entitlement and LEC has agreed to fund any amounts not subscribed by
these existing shareholders and to close this transaction no later than
November 15, 2013.  The closing of this entire transaction is subject
to regulatory approval.  Each of the Notes is convertible into ordinary
shares of TBF after June 30, 2014 and at any time up to November 15,
2018. The Notes are interest free, due if not converted on December 15,
2018 and are secured by TBF’s assets. The terms for the conversion of
the Notes into TBF equity depends on a range of criteria related to the
development of the Darwin facility amongst other matters, the outcome
of which are expected to be known by June 30, 2014.  Upon completion of
the Investment, and the conversion of all the Notes, LEC is expected to
increase its majority holding up to potentially between 76% and 87% of
the issued and outstanding shares of TBF, and up to potentially between
75% and 86% on a fully diluted basis, assuming no other existing
investors participate in this investment opportunity.

On September 5, 2013, the Company announced that it will provide funding
of A$4.07 million to acquire a 40% equity stake in Neutral Fuels Parent
Company (“Neutral Fuels”) and a 51% interest in Neutral Fuels’
Australia and New Zealand biodiesel operation, Neutral Fuels
(Melbourne) Pty Ltd. (“NFANZ”). This funding is for the deployment of
the next phase of a planned rollout of closed loop biorefineries
throughout the Asia Pacific/Middle East/Africa region (“APMEA”) in an
agreement with the McDonald’s Restaurants used cooking oil biodiesel
program. Under the agreement with McDonald’s, Neutral Fuels currently
operates two closed loop biorefineries located in Dubai, United Arab
Emirates and Melbourne, Australia.

Financial Results

The consolidated financial statements of the Company for the quarter
ended July 31, 2013 include the accounts of LEC, its wholly owned
subsidiaries LIL and TBF. The Company acquired a 40 percent 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 the  date of
April 15, 2013.

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. ARW
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 continued to develop its Canadian based
technology platform for the production of cellulosic ethanol, high
value cellulose and high purity HP-L(TM) lignin and consolidated its shareholding in Territory Biofuels limited
(“TBF”). It also identified an additional strategic investment
opportunity in the form of an investment, currently in progress, in
Neutral Fuels Parent Company, to develop a biodiesel program for the
APMEA region, and laid the groundwork for gaining access to additional
funding in August 2013. 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.

For the three month period ended July 31, 2013 (“Q1 FY14″), the Company
reported an operating loss of $0.98 million, or $0.001 per share (basic
and fully diluted) compared to a net loss of $0.96 million or $0.02 per
share (basic and fully diluted) for the three month period ended July
31, 2012 (“Q1 FY13″). Research and development expenses increased by
$0.2 million as a result of the impact of consolidating the results of
TBF during the quarter, and this was offset by a $0.2 million increase
in government and corporate cointributions.

LEC achieved a total $3.96 million comprehensive profit for the quarter
compared with a comprensive loss of $0.97 million in Q1 FY13. The
current reported profit reflects a $4.08 million increase in the market
value of its investment in ARW and a non-cash foreign exchange gain of
$1.7 million which arose from the devaluation of the Australian dollar
relative to the Canadian dollar and its impact on the consolidation of
TBF.

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 (as further described in Notes 8 and 15 to the Interim
Financial Statements).  A total of $6.0 million had been received as of
July 31, 2013; and by September 27, 2013 a total of $9.75 million had
been drawn down under the facility.

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 objectives 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.

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 capital requirements largely through
public and private sales of equity securities. It has more recently
gained access to a revolving line of credit from DCF to support,
amongst other things, recent investments in ARW, TBF and Neutral Fuels
which have potential synergies with the Company. The ongoing funding
requirements of LEC’s wholly owned subsidiary LIL, were met out of
these funds together with government grants and corporate contributions
received directly by LIL.

At July 31, 2013, LEC and its subsidiaries, LIL and TBF, had on a
consolidated basis, $1.5 million in cash and cash equivalents and up to
$2.6 million in future funding receivable from contracted government
funding agreements.  There were also $2.6 million in trade payables,
and $2.3 million in current lease obligations, and $6.0 million
outstanding under the DCF credit facility as of July 31, 2013, which is
repayable on December 31, 2014. The Company had a $7.2 million surplus
in net shareholders’ equity after taking into account an accumulated
deficit of $36.2 million.

The $2.6 million in funding receivable in the future from contracted
government funding agreements has not yet been recognized in the
financial statements. These funds are intended to be applied against
future expenses incurred under various development programs. This
funding is available subject to the satisfaction of certain conditions
which includes LIL completing the body of work required in respect of
the previous round of funding, LIL demonstrating the ability to incur
future budgeted program expenditures, and continuing to meet all of its
reporting requirements. Receipt is also conditional in certain cases
upon having sufficient matching funds and there can be no assurance
that this funding will be received.

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 July 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 (“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, but it has no
significant influence over the activities of Australian Renewable Fuels
Limited.  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. On
September 5, 2013 LEC announced that it had agreed to provide funding
of A$4.07 million to acquire a 40% stake in Neutral Fuels Parent
Company (“Neutral Fuels”) and a 51% interest in Neutral Fuels
(Melbourne) Pty Ltd. Funding is due in two tranches of approximately
A$2 million each on or about October 15, 2013  and on January 15, 2014.

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-L(TM) lignin. HP-L(TM) 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 54% equity stake in TBF (and is
in the process of increasing that stake up to potentially between 76%
and 87%), 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 at an aggregate cost 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

Neutral Fuels Parent Company (“Neutral Fuels”)

In accordance with Neutral Fuels’ agreement with the McDonald’s
Restaurants used cooking oil biodiesel program, Neutral Fuels intends
to rollout its closed loop biorefineries throughout the Asia
Pacific/Middle East/Africa region (“APMEA”). Under this agreement with
McDonald’s, Neutral Fuels currently operates two closed loop
biorefineries located in Dubai, United Arab Emirates and Melbourne,
Australia.

Neutral Fuels owns and manages biorefineries that convert used cooking
oil into biodiesel, the modern, sustainable replacement for fossil
diesel. On a lifecycle basis, biodiesel accounts for over an 80%
reduction in carbon dioxide and equivalents, the major contributors to
climate change. Neutral Fuels pioneered the closed loop business model
which was developed specifically for McDonald’s, where used cooking oil
is collected from McDonald’s restaurants by the same vehicles that
deliver the fresh oil. The used oil is then backhauled to the
co-located Neutral Fuels biorefinery where it is converted, litre for
litre, into biodiesel, which is then pumped back into the delivery
fleet in an ongoing recycling process.  Further information about
Neutral Fuels can be found at www.neutral-fuels.com/

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 Parent
Company (“Neutral Fuels”) within the agreed timeframes, LEC’s ability
to invest in, or otherwise obtain, equity interests in energy related
projects which have potential synergies with the Company 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 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 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 agreed 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, LEC’s ability to complete the funding of TBF in the above
timeframes, the creation of the Notes through the conversion of the
Loan and the applicable amount of the Investment, possible conversion
of the Notes into equity of TBF, the ability of existing TBF
shareholders to participate in the current TBF financing, TBF’s ability
to obtain US EPA approval, TBF’s ability to integrate new pretreatment
technologies and catalysts to facilitate the processing of a broad
range of lower cost feedstocks, 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 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, 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’s
subsidiary, associate and investee company 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 satisfy the conditions of existing government
grants and to obtain new additional grants, 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 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, 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, 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


Source: PR Newswire