BURLINGTON, ON, Nov. 8, 2016 /CNW/ - EcoSynthetix Inc. (TSX:
ECO) ("EcoSynthetix" or the "Company"), a renewable
chemicals company that produces a portfolio of commercially proven
bio-based products, today announced its financial and operational
results for the three months and nine months ended September 30, 2016. Financial references are in
U.S. dollars unless otherwise indicated.
Q3 2016 Highlights
- Secured first commercial customer for DuraBind™, the SWISS
KRONO GROUP, a top five global producer of wood composites with
multiple production facilities. SWISS KRONO completed
industrial-stage trials and is using DuraBind on one production
line on an ongoing basis for its NAF (No Added Formaldehyde)
engineered wood products.
- Advanced late-stage trials for DuraBind with multiple prospects
in its wood composite pipeline.
- Secured a new contract for EcoSphere® with a leading paperboard
mill in Europe, an indication that
the product maintains its value proposition, despite challenging
paper market conditions.
- Recorded $2.7 million in net
sales in the paper market in Q3 2016.
- Maintained a strong balance sheet with cash and term deposits
of $54.4 million as at September 30, 2016.
"Securing our first commercial customer for DuraBind was our key
priority in 2016. It is the first step in executing our
broader commercial strategy to establish DuraBind as a leading No
Added Formaldehyde wood composite binder. As retailers and
manufacturers search for alternatives that reduce or eliminate
formaldehyde from their engineered wood products our DuraBind
product offers the performance and price to deliver value in the
multi-billion dollar wood composite binder market," said
Jeff MacDonald, CEO of EcoSynthetix.
"DuraBind helps to overcome operating and cost challenges and
allows customers to deliver a sustainable product that provides a
healthy home and work environment. DuraBind is an effective NAF
binder for the full range of engineered wood product applications,
including orientated strand board (OSB), medium density fibre (MDF)
board and particle board (PB). We continue to advance our pipeline
of industrial-stage trials across multiple prospects. Our goal is
to add more production lines and win new customers as we
demonstrate the value of DuraBind."
Financial Summary
Net Sales
Net sales were $2.7 million and
$8.6 million for the three months
ended September 30, 2016 (Q3 2016)
and the nine months ended September 30,
2016 (YTD 2016), respectively, primarily from sales of
EcoSphere® biolatex® for the paper market. Net sales were
$3.3 million and $11.6 million in the corresponding periods last
year. The changes were primarily due to lower sales volumes as a
result of unfavourable market conditions in the coated paper
industry. Sales volume in the quarterly period were $0.3 million lower as a result of delayed
customer shipments due to a transportation disruption which has
been resolved subsequent to the quarter. Adjusted for this item,
the $0.3 million change in net sales
was a result of $0.1 million of lower
volumes to existing accounts, $0.1
million due to the closure of a North American paper mill
last year and $0.1 million due to
lower average selling prices. In the YTD 2016 period, sales volume
decreased by $1.9 million to existing
commercial accounts and $0.8 million
due to the closed mill, as well as, $0.3
million due to a lower average selling price as a result of
unfavourable market pricing dynamics.
Gross Profit
Gross profit was $0.4 million and
$1.3 million for Q3 2016 and YTD
2016, respectively, compared to $0.5
million and $1.8 million in
the corresponding periods last year. The changes were primarily due
to lower volume and pricing pressure partly offset by lower
manufacturing production costs.
Gross profit as a percentage of sales were 15.2% and 15.7% in Q3
2016 and YTD 2016, respectively, compared to 14.6% and 15.2% in the
corresponding periods last year. Gross profit as a percentage
of sales adjusted for manufacturing depreciation were 21.3% and
22.2% for Q3 2016 and YTD 2016, respectively compared to 21.1% and
20.8% for the corresponding periods last year. The improvements
were primarily due to lower manufacturing production costs, partly
offset by pricing pressure.
Selling, General and Administrative
(Excludes
share-based compensation, depreciation and amortization, provision
for termination benefits, impairment loss on PP&E and foreign
exchange gains and losses)
Selling, general and administrative expenses (SG&A) were
$1.2 million and $4.4 million in Q3 2016 and YTD 2016,
respectively, compared to $1.4
million and $5.4 million in
the corresponding periods last year. The decrease during both
periods was primarily due to lower people related costs and lower
discretionary spending.
Research and Development
(Excludes share-based compensation, depreciation and amortization,
provision for termination benefits, impairment loss on PP&E and
foreign exchange gains and losses)
Research and development (R&D) costs were unchanged at
$0.9 million in Q3 2016 compared to
the same period last year. R&D costs were $3.1 million in YTD 2016, compared to
$2.6 million in the same period last
year. Increased investment in the Company's DuraBind program during
Q3 2016 was offset by lower salary & benefits and an increase
in government grants recognized during the period. The increase in
YTD 2016 was primarily due to higher spending related to
commercialization activities for DuraBind, partly offset by the
favourable impact of a weaker Canadian dollar versus U.S.
dollar.
Foreign Currency Exchange Gain (Loss)
Foreign exchange gain (loss) was nil and $0.1 million in Q3 2016 and YTD 2016,
respectively, compared to ($0.1)
million and $(0.6) million in
the corresponding periods last year. The changes were primarily due
to the translation of cash balances denominated in Canadian dollars
and the performance of the Canadian dollar versus U.S. dollar.
Adjusted EBITDA
Adjusted EBITDA loss was unchanged at $1.6 million in Q3 2016 compared to the same
period last year as lower operating expenses were offset by lower
gross profit. Adjusted EBITDA loss was $5.9
million in YTD 2016, compared to $7.4
million in the same period last year. The improvement in the
YTD 2016 period was principally due to lower operating expenses
partly offset by lower gross profit.
Net Loss
Net loss was unchanged at $1.9
million, or $0.03 per common
share, in Q3 2016 compared to the same period last year. Net loss
was $6.9 million, or $0.12 per common share, in YTD 2016, compared to
$8.5 million, or $0.15 per commons share, in the same period last
year. The $1.6 million improvement in
the YTD 2016 period was principally due to lower operating expenses
of $1.8 million and higher interest
income of $0.2 million partly offset
by lower gross profit of $0.4
million.
Liquidity
Cash on hand and term deposits were $54.4
million as at September 30,
2016, compared to $60.7
million as at December 31,
2015. During the first quarter, the Company purchased a
$15.0 million fixed term deposit
maturing on January 8, 2018. Cash on
hand at September 30, 2016, excluding
the term deposit, was $39.3
million.
Notice of Conference Call
EcoSynthetix will host a conference call on Wednesday, November 9, 2016 at 8:30 AM ET to discuss its financial
results. Jeff MacDonald, CEO,
and Robert Haire, CFO, will co-chair
the call. All interested parties can join the call by dialling
(647) 427-7450 or (888) 231-8191. Please dial in 15 minutes prior
to the call to secure a line. A live audio webcast of the
conference call will also be available at www.ecosynthetix.com. The
presentation will be accompanied by slides, which will be available
via the webcast link and the Company's website. Please connect at
least 15 minutes prior to the conference call to ensure adequate
time for any software download that may be required to join the
webcast.
1Non-IFRS Financial Measures
This press release makes reference to certain non-IFRS measures.
These non-IFRS measures are not recognized measures under IFRS, do
not have a standardized meaning prescribed by IFRS and are
therefore unlikely to be comparable to similar measures presented
by other companies. Rather, these measures are provided as
additional information to complement those IFRS measures by
providing a further understanding of results of operations of
EcoSynthetix from management's perspective. Accordingly, they
should not be considered in isolation nor as a substitute for
analysis of the financial information of EcoSynthetix reported
under IFRS. The Company uses non-IFRS measures such as Adjusted
EBITDA to provide investors with a supplemental measure of
operating performance and thus highlight trends in its core
business that may not otherwise be apparent when relying solely on
IFRS financial measures. Management also believes that securities
analysts, investors and other interested parties frequently use
non-IFRS measures in the evaluation of issuers. Management also
uses non-IFRS measures in order to facilitate operating performance
comparisons from period to period, prepare annual operating budgets
and assess the Company's ability to meet its capital expenditure
and working capital requirements.
Adjusted EBITDA is not a measure recognized under IFRS and does
not have a standardized meaning prescribed by IFRS. See "IFRS and
Non-IFRS Measures." The Company presents Adjusted EBITDA because
the Company believes it facilitates investors' use of operating
performance comparisons from period to period and company to
company by backing out potential differences caused by variations
in capital structures (affecting relative interest expense), the
book amortization of intangibles (affecting relative amortization
expense) and the age and book value of property and equipment
(affecting relative depreciation expense). The Company also
presents Adjusted EBITDA because it believes it is frequently used
by securities analysts, investors and other interested parties as a
measure of financial performance. Adjusted EBITDA as presented
herein are not recognized measures under IFRS and should not be
considered as an alternative to operating income or net income as
measures of operating results or an alternative to cash flows as
measures of liquidity. Adjusted EBITDA is defined as consolidated
net income (loss) before net interest expense, income taxes,
depreciation, amortization, other non-cash expenses and charges
deducted in determining consolidated net income (loss).
The following table reconciles net loss to Adjusted EBITDA loss
for the three months and nine months ended September 30, 2016 and September 30, 2015:
|
Three months
ended
September
30, 2016
|
Three months
ended
September
30, 2015
|
Nine months
ended
September
30, 2016
|
Nine months
ended
September
30, 2015
|
Net Loss
|
$(1,918,350)
|
$(1,941,231)
|
$(6,931,658)
|
$(8,506,171)
|
Depreciation and
Amortization
|
290,614
|
351,196
|
886,838
|
1,064,034
|
Share-based
Compensation
|
184,072
|
79,000
|
481,309
|
241,427
|
Interest
Income
|
(121,713)
|
(69,172)
|
(383,872)
|
(223,081)
|
Adjusted EBITDA
loss
|
(1,565,377)
|
(1,580,207)
|
(5,947,383)
|
(7,423,791)
|
About EcoSynthetix Inc. (www.ecosynthetix.com)
EcoSynthetix offers a range of engineered biopolymers that
replace non-renewable chemicals used to manufacture many products,
such as paper and packaging, and wood composites. The Company's
flagship products, EcoSphere® biolatex® and DuraBind™ biopolymers,
provide customers with a sustainable alternative that reduces the
use of hazardous chemicals, improves performance and delivers
economic benefits. The Company is publicly traded on the Toronto
Stock Exchange (T:ECO).
Forward-Looking Statements
Certain statements in this Press Release constitute
"forward-looking" statements that involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance, objectives or achievements of the Company, or industry
results, to be materially different from any future results,
performance, objectives or achievements expressed or implied by
such forward looking statements. The forward-looking statements in
this Press Release include, but are not limited to, statements
regarding the Company's expected product pipeline, plans to expand
the Company's business into new markets, the Company's ability to
achieve organizational efficiencies, and other statements regarding
the Company's plans and expectations in 2016. These statements
reflect our current views regarding future events and operating
performance and are based on information currently available to us,
and speak only as of the date of this Press Release. These
forward-looking statements involve a number of risks, uncertainties
and assumptions and should not be read as guarantees of future
performance or results, and will not necessarily be accurate
indications of whether or not such performance or results will be
achieved. Those assumptions and risks include, but are not limited
to, the Company's ability to successfully allocate capital as
needed and to develop new products, as well as the fact that our
results of operations and business outlook are subject to
significant risk, volatility and uncertainty. Many factors could
cause our 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, including the factors identified in the
"Risk Factors" section of the Company's Annual Information Form
dated March 30, 2016. Should one or
more of these risks or uncertainties materialize, or should
assumptions underlying the forward-looking statements prove
incorrect, actual results may vary materially from those described
in this Press Release as intended, planned, anticipated, believed,
estimated or expected. Unless required by applicable securities
law, we do not intend and do not assume any obligation to update
these forward-looking statements.
EcoSynthetix
Inc.
|
|
|
|
Interim
Consolidated Balance Sheets
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
December 31,
2015
|
Assets
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
Cash
|
39,319,308
|
|
60,717,658
|
Accounts
receivable
|
1,790,993
|
|
1,177,719
|
Inventory
|
3,072,223
|
|
3,290,238
|
Government grants
receivable
|
489,800
|
|
528,436
|
Prepaid
expenses
|
254,521
|
|
242,983
|
|
44,926,845
|
|
65,957,034
|
|
|
|
|
Non-current
assets
|
|
|
|
Long-term term
deposit
|
15,109,256
|
|
-
|
Property, plant and
equipment
|
8,308,655
|
|
8,746,072
|
Total
assets
|
68,344,756
|
|
74,703,106
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Trade accounts
payable and accrued liabilities
|
2,003,015
|
|
1,262,709
|
Accrued termination
benefits
|
568,243
|
|
1,277,755
|
Total
liabilities
|
2,571,258
|
|
2,540,464
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
Common
shares
|
493,348,194
|
|
493,182,209
|
Contributed
surplus
|
8,394,436
|
|
8,017,907
|
Accumulated
deficit
|
(435,969,132)
|
|
(429,037,474)
|
Total
shareholders' equity
|
65,773,498
|
|
72,162,642
|
|
|
|
|
Total liabilities
and shareholders' equity
|
68,344,756
|
|
74,703,106
|
EcoSynthetix
Inc.
|
|
|
|
|
|
|
|
Interim
Consolidated Statements of Operations and Comprehensive
Loss
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended
September 30,
|
|
Nine months
ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Net
sales
|
2,723,638
|
|
3,333,534
|
|
8,605,118
|
|
11,598,469
|
|
|
|
|
|
|
|
|
Cost of
sales
|
2,310,478
|
|
2,846,695
|
|
7,256,528
|
|
9,840,442
|
|
|
|
|
|
|
|
|
Gross profit on
sales
|
413,160
|
|
486,839
|
|
1,348,590
|
|
1,758,027
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
1,370,262
|
|
1,539,097
|
|
4,700,674
|
|
6,367,070
|
Provision for
termination benefits
|
41,576
|
|
-
|
|
534,114
|
|
1,220,080
|
Research and
development
|
1,041,385
|
|
958,145
|
|
3,429,332
|
|
2,900,129
|
|
|
|
|
|
|
|
|
|
2,453,223
|
|
2,497,242
|
|
8,664,120
|
|
10,487,279
|
|
|
|
|
|
|
|
|
Loss from
operations
|
(2,040,063)
|
|
(2,010,403)
|
|
(7,315,530)
|
|
(8,729,252)
|
|
|
|
|
|
|
|
|
Interest
income
|
121,713
|
|
69,172
|
|
383,872
|
|
223,081
|
|
|
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(1,918,350)
|
|
(1,941,231)
|
|
(6,931,658)
|
|
(8,506,171)
|
|
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.03)
|
|
(0.03)
|
|
(0.12)
|
|
(0.15)
|
Weighted average
number of common shares outstanding
|
59,300,627
|
|
58,323,037
|
|
59,282,164
|
|
57,099,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EcoSynthetix
Inc.
|
|
|
|
|
|
|
|
Interim
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
Three
months ended
September 30,
|
|
Nine months
ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(1,918,350)
|
|
(1,941,231)
|
|
(6,931,658)
|
|
(8,506,171)
|
Items not affecting
cash
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
290,614
|
|
351,196
|
|
886,838
|
|
1,064,034
|
|
Share-based
compensation
|
184,072
|
|
79,000
|
|
481,309
|
|
241,427
|
|
Unrealized foreign
exchange loss (gain)
|
29,185
|
|
(153,175)
|
|
(18,494)
|
|
274,147
|
|
Other
|
(50,129)
|
|
407,169
|
|
(291,912)
|
|
496,348
|
Changes in non-cash
working capital
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
(131,885)
|
|
1,019,080
|
|
(613,274)
|
|
921,228
|
|
Inventory
|
(114,033)
|
|
468,677
|
|
189,647
|
|
1,590,356
|
|
Government grants
receivable
|
(205,933)
|
|
(104,716)
|
|
(458,181)
|
|
(768,131)
|
|
Prepaid
expenses
|
(24,483)
|
|
60,549
|
|
(11,538)
|
|
(30,464)
|
|
Trade accounts
payable and accrued
liabilities
|
(128,928)
|
|
(280,610)
|
|
840,306
|
|
(577,273)
|
|
Accrued termination
benefits
|
(876,485)
|
|
(157,446)
|
|
(709,512)
|
|
663,464
|
|
(2,946,355)
|
|
(251,507)
|
|
(6,636,469)
|
|
(4,631,035)
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
Cash used for
purchase of intangible assets and
property, plant and equipment
|
(86,095)
|
|
(140,573)
|
|
(521,053)
|
|
(777,720)
|
Purchase of long-term
term deposit
|
-
|
|
-
|
|
(15,000,000)
|
|
-
|
|
(86,095)
|
|
(140,573)
|
|
(15,521,053)
|
|
(777,720)
|
|
|
|
|
|
|
|
|
Financing
activity
|
|
|
|
|
|
|
|
Exercise of common
share options
|
61,205
|
|
573,119
|
|
61,205
|
|
573,119
|
Proceeds from
government grant
|
-
|
|
-
|
|
496,817
|
|
455,749
|
|
61,205
|
|
573,119
|
|
558,022
|
|
1,028,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(44,752)
|
|
(253,994)
|
|
201,150
|
|
(770,495)
|
|
|
|
|
|
|
|
|
Change in cash
during the period
|
(3,015,997)
|
|
(72,955)
|
|
(21,398,350)
|
|
(5,150,382)
|
|
|
|
|
|
|
|
|
Cash - Beginning
of period
|
42,335,305
|
|
62,168,543
|
|
60,717,658
|
|
67,245,970
|
|
|
|
|
|
|
|
|
Cash - End of
period
|
39,319,308
|
|
62,095,588
|
|
39,319,308
|
|
62,095,588
|
SOURCE EcoSynthetix Inc.