Orbite Technologies Inc.
NEX BOARD : ORT.H
TSX VENTURE : ORT.H

Orbite Technologies Inc.

July 28, 2017 17:50 ET

Orbite Reports Second Quarter 2017 Results

MONTRÉAL, QUÉBEC--(Marketwired - July 28, 2017) - Orbite Technologies Inc. (NEX:ORT.H) ("Orbite", or the "Company") reports its financial and operating results for the second quarter ended June 30, 2017.

SECOND QUARTER HIGHLIGHTS

Summary of Operations

On March 31, 2017, Orbite announced that material issues had been encountered with the electrical heating system of the supplied calcination equipment at the Company's high-purity alumina ("HPA") plant. These issues were equipment related and not process related, the Orbite process having been previously proven with the production of HPA up to that date. The Company also announced that it had a solution to solve these issues, which required additional external capital costs and time to implement. Accordingly, the Company announced the suspension of its operations at its HPA plant, the anticipated default under the Company's credit facilities, and the ensuing existence of material uncertainty about the Company's ability to continue as a going concern.

On April 3, 2017, the Company filed a Notice of Intention to make a proposal to its creditors under the Bankruptcy and Insolvency Act ("BIA"). Following this announcement, the Toronto Stock Exchange (the "TSX") suspended trading of the Company's securities and commenced a delisting review as to whether Orbite continued to meet the TSX listing requirements. Orbite's securities were de-listed effective as of the close of business on May 16, 2017 for failure to meet such listing requirements.

On May 1, 2017, the Company announced it successfully migrated from creditor protection under the BIA to protection under the Companies' Creditors Arrangement Act ("CCAA") and the initial order provided for a stay of all proceedings ("Stay Period") until May 29, 2017. It also announced that:

  • Following a meeting with its calcination equipment provider, both parties had agreed to set up a task force approach and action plan to resolve the issues identified with the calcination equipment in the most expeditious fashion possible;
  • Investissement Québec and Canada Economic Development (as announced on May 5, 2017) both confirmed they intended to maintain the loan agreements in place under the current terms and were willing to support Orbite in its restructuring efforts;
  • The Cap-Chat plant was now under care, maintenance and control and in an effort to further limit its cash outflows approximately 39 full time employee equivalents, out of 81, were temporarily laid-off.

On May 5, 2017, the Company announced it had entered into an amendment to the credit facilities with MidCap Financial ("MidCap") which essentially pushed back the Company's obligations under the credit facilities into early 2018, in return for the release to MidCap of the USD 3 million in restricted cash, to be applied to the partial repayment of one of the term loans and the monthly debt service payments until January 1, 2018. The amendment also provided for the forbearance by MidCap from exercising its rights and remedies under the credit facilities, provided certain conditions are met.

On May 19, 2017, the TSX Venture Exchange ("TSX-V") issued a bulletin confirming the listing of the Company's common shares on the NEX Board under the symbol ORT.H, towards a possible relisting, as a first step, on the TSX-V when and if the Company emerges from creditor protection and meets the listing requirements of the TSX-V.

On May 23, 2017, the Company filed a motion seeking, namely, the extension of the Stay Period and the Superior Court of Québec granted the motion and issued an order:

  • extending the Stay Period until August 4, 2017;
  • amending the Initial Order to approve a Key Employee Retention Program ("KERP") in respect of certain employees of Orbite and authorizing a KERP charge against the property of Orbite; and
  • relieving Orbite from its obligation to call the annual meeting of shareholders on or before June 30, 2017 and postponing the annual meeting, up to January 31, 2018.

On June 21, Orbite announced the resignation of Lionel Léveillé, as a member of its Board of Directors, due to health reasons. Mr. Léveillé had been a Director of the Company since 2006.

On July 27, Orbite announced it had filed a motion to the CCAA court seeking (1) the extension of the Stay Period to November 30, 2017 and (2) the approval of a $6.8 million debtor-in-possession ("DIP") financing from the holders of Orbite's 7% Convertible Secured Debentures due September 28, 2018 (the "2015 ITC Debentures") and a related DIP super-priority charge over the Company's assets. The DIP financing would serve for working capital and other general corporate purposes as well as to pay fees and expenses related to Orbite's restructuring process, and is expected to close two business days after the day an order approving the DIP financing is received. There can be no guarantees that the DIP financing will be approved by the CCAA Court and implemented or that Company will otherwise be successful in its restructuring efforts and will emerge from CCAA protection.

Calcination Equipment Repairs

The Company and its calcination equipment supplier have had numerous meetings and joint working sessions to review in detail and establish the root causes for the issues observed with the Cap-Chat calcination equipment. Both companies have a dedicated team working to resolve these issues. The diagnostic phase (root causes) is almost completed and the teams have started preparing the detailed action plan to implement the required solutions to resolve these issues in the most expeditious fashion possible. In parallel, Orbite has continued to work on the solution it had identified, the installation of a predecomposer. The Cap-Chat plant remains under care, maintenance and control.

FINANCIAL HIGHLIGHTS

(Compared to Q2, 2016, all dollar amounts are in Canadian dollars unless stated otherwise)

The Company reported a loss before net finance expense (income) of $2.9 million for the quarter, an increase from a loss of $1.8 million for the comparable quarter in the prior year.

The net loss increased by $0.3 million to $2.2 million due principally to a $1.0 million decrease in other income partially offset by an increase of $0.8 million in net finance income.

As at June 30, 2017, the Company had an aggregate cash and short-term investments balance of $1.2 million, and negative working capital of $5.4 million.

Cash flows used in operating activities for the second quarter of 2017 was $2.4 million compared to $4.3 million for the same quarter a year ago. The decrease is attributable mainly to accounts payable and accrued liabilities.

Cash flows from financing activities in the second quarter of 2017 decreased by $13.7 million due mainly to lower proceeds from the issuance of convertible debentures, short-term loans and issuance of shares partially offset by the repayment of long-term debt compared to the same quarter a year ago.

Cash flows used in investing activities during the second quarter of 2017 decreased by $7.8 million attributable to reduced investments in the HPA plant and changes in restricted cash.

Going Concern

The financial statements have been prepared on a going concern basis, meaning on the basis that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations.

The recent developments announced above indicate the existence of material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.

The financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate. If the going concern assumption was not appropriate for these financial statements, adjustments to the carrying value of assets and liabilities, reported expenses and statement of financial position classifications would be necessary. Such adjustments could be material.

Quarterly Results Conference call

Orbite management will not be hosting its usual quarterly results conference call.

Notice to Reader

The information provided in this press release is entirely qualified by the disclosures in the Company's Unaudited Condensed Interim Financial Statements and Management Discussion & Analysis (MD&A) for the quarter ended June 30, 2017, which are available at www.orbitetech.com and under the Company's profile at www.sedar.com.

About Orbite

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, 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 44 patents and 38 pending patent applications in 11 different countries and regions. The Company also operates a state of the art technology development center in Laval, Québec, where its technologies are developed and validated.

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 include statements regarding projects, costs, objectives and future returns of the Company or hypotheses underlying these items. In particular, statements concerning (i) the solution identified and believed to remedy the issues with the Cap-Chat calcination equipment, and (ii) the setting-up of a task force with the equipment supplier to resolve the issues observed with the Cap-Chat calcination equipment are all forward-looking statements.
In this document, words such as "may"," confident", "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. In particular, the solution identified to remedy the electrical heating system issues and increase the capacity of the decomposer to 5 tpd, and the costs and time required to implement such solution is based in particular on the Company's available data and experience to date and that the operation of the HPA plant will continue as experienced and anticipated, the costs of materials and labour remaining at current levels, and the ability to keep the operations relating to such equipment running in the normal course. Factors that could impact the Company's expectations expressed in the forward looking statements include (i) with respect to costs and timing, an increase in the price of materials and/or labour costs, unavailability of qualified personnel, inability to operate in the normal course, breakdown or failure of equipment of processes, design errors, operator errors, non-performance by third party contractors and major incidents or catastrophic events such as fires and explosions; and (ii) with respect to the current discussions with its equipment supplier, the inability to provide technical solutions on terms and timelines acceptable to the Company; Risks, uncertainties and other factors that could affect anticipated results and future events also 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 July 28, 2017 on SEDAR, and also including those under the headings "Going Concerns", Commercial Operation of HPA Plant", "We will need to raise capital to continue our growth" and "Development Goals and Time Frames" which are described in the MD&A filed on March 31, 2017.

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.

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