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Q2 2014 Financial Results

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junkHustler Member Level  Tuesday, 08/12/14 11:12:00 PM
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Q2 2014 Financial Results

·Revenues for Q2 2014 as reported under GAAP were $697,000 compared to $924,000 in 2013, a decline of 25% compared to the prior year;
·Proportional revenues for Q2 2014 were $1,873,000 compared to $2,008,000 in 2013, a decline of 7% compared to the prior year;
·Earnings for the current quarter include a recovery of $300,000 from a bad debt expense originally recognized in 2010;
·Adjusted earnings before interest, tax, depreciation and amortization ("adjusted EBITDA") for Q2 2014 was income of $203,000 compared to a loss of $468,000 in 2013;
·Net loss for the quarter as reported under GAAP was $16,000 compared to a loss of $844,000 in 2013; and
·Cash and short-term investments, including our share held in joint ventures, was $1.9 million compared to $3.2 million at December 31, 2013.

Other Items
During the second quarter, BioteQ further amended the payment terms of its legal settlement with NWM Mining Corporation ("NWM"). Under the amended terms, the final $600,000 balance due June 30, 2014 is now due as follows: $300,000 has been paid and the remaining $300,000 by no later than September 30, 2014. All other terms and conditions remain unchanged.

During the quarter, BioteQ and Aditya Birla Minerals ("Birla") met for court ordered mediation related to lawsuits commenced in 2010. The parties failed to come to an agreement and the litigation continues to be in progress.

Water Treatment Operations
In June, BioteQ commenced operations at its plant at the Raglan mine site in Quebec. The current operating season is expected to continue until the end of October. BioteQ staff will also be operating a lime treatment plant for water that is not treated by BioteQ's ChemSulphide® plant. During the quarter, BioteQ treated and discharged 72,000 cubic metres of water.

Water treatment operation at the Dexing mine site, a joint venture with mine site owner Jiangxi Copper Company ("JCC"), treated 2.6 million cubic metres of water and recovered a total of 681,000 pounds of copper compared to Q2 2013 when BioteQ treated 3.4 million cubic metres of water and recovered 592,000 pounds of copper.

New Plant Construction Update
During the second quarter, BioteQ completed construction and commissioning of one of the two new plants in China with joint venture partner JCC. The second copper recovery plant is in the final stages of commissioning and will commence operations in the third quarter.

The plant at JCC's Yinshan mine site began operations in early June. During the quarter, the plant processed 260,000 cubic metres of wastewater and recovered 44,000 pounds of copper. The plant is expected to recover approximately 450,000 pounds of copper to the end of the year and 900,000 pounds of copper on an annual basis.
A second copper recovery plant at JCC's Dexing mine site is in the final commissioning phase and expected to begin operations later in Q3. Once in operation, the plant is also expected to recover approximately 900,000 pounds of copper on an annual basis.

Sales and New Technology Development
Since the personnel changes announced at the beginning of the year, management has been actively engaging existing and potential new customers to advance joint business opportunities and have been working with several new channel partners to broaden BioteQ's outreach and capacity to execute projects.

The following is an update on key opportunities in progress:

Selenium Removal - Selen-IX™

During the quarter, BioteQ secured a contract with a Canadian company to conduct pilot scale testing of our Selen-IX™ technology for selenium removal. The current value of the contract is $890,000 and work is already under way to allow the pilot plant to begin operating in August and complete the pilot campaign by the end of October 2014.

EcoMetales Limited - BioSulphide® Plant Design

During the quarter, BioteQ secured a technical services contract with its Chilean strategic partner EcoMetales Limited ("ECL") for the detailed process engineering of a smelter effluent treatment plant using our BioSulphide® process.

Consulting Contracts - Latin America

BioteQ has also entered into several small contracts for the supply of technical services to a number of customers and sites across Latin America. The scope of these contracts range from technical feasibility studies, to operational reviews including on-site operations assistance, and laboratory testing. While the financial amounts to be received from these contracts are limited, BioteQ has performed rigorous screening of the sites and customer requirements to ensure a long-term strategic fit with the new business strategy, and as a result BioteQ is optimistic that these service contracts will prove to be a catalyst for larger contracts in the future.

As previously noted, the new sales model being implemented by management will take time to begin bringing cash flow into the Company. This shortfall in near term sales has brought working capital resources to lower than expected levels. In recent months, BioteQ has completed various short-term measures to manage working capital through the next three to six months including: a repatriation of funds from our Chinese joint venture, receipt of funds from our legal settlement with NWM Mining, and cost deferrals and reductions. Although the Company believes it can manage its working capital through this period, non-operational sources of capital may be required beyond this period.

For the current fiscal year, BioteQ projects Proportional Revenues to be in the range of $6.8 million to $7.3 million. BioteQ projects Adjusted EBITDA loss to be in the range of $2.1 million to $2.6 million. In the prior year, BioteQ had Proportional Revenues of $7.6 million and an Adjusted EBITDA loss of $2.3 million. The current year's forecast include the impact of significant one-time restructuring costs and provisions incurred in the first quarter. Projections also include anticipated earnings from two new plants in China as well as successful completion of the selenium removal piloting contract recently awarded.

David Kratochvil, President & Interim CEO, said, "Our results for the second quarter are beginning to reflect the impact of cost savings through internal restructuring and our new sales model and strategy to rebuild our sales pipeline. This, in combination with the working capital initiatives implemented earlier in the year have stabilized our short-term financial position. We intend to carry this momentum to ultimately generate long-term, sustainable, profitability for the company."

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