QIS Update #12 2014 - April 15th 2014
Included in this update:
- Blackbird Energy and Pennant Energy jointly announce court approval of business combination
- NTG Clarity Networks announces 2013 year-end financial results
- Newlox Gold Ventures closes acquisition of Oro Roca, provides company update
- Virtutone Networks announces daily revenue record of $500,000
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Our Guest Speakers will include Fabrice Taylor, columnist for The Globe and Mail who also operates The President’s Club Investment Letter, Ryan Irvine, President of KeyStone Financial, and Brent Todd, a small-cap specialist from Canaccord. As always, a wide variety of companies will be speaking this year. Our first ever participating company from Prince Edward Island will be presenting as one of many intriguing opportunities on May 7th. If you are able to attend this conference, please pre-register ahead of time at www.smallcapconference.ca/register. Feel free to let us know if you have any questions at all about The Small-Cap Conference.
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Blackbird Energy Inc. (BBI:TSX-V)
Current Price: $0.115 (coverage commenced Aug 19/11 - $0.18)
Pennant Energy Inc. (PEN:TSX-V)
Current Price: $0.05 (coverage commenced Dec 7/12 - $0.075)
Blackbird Energy Inc. and Pennant Energy Inc. have announced that the Supreme Court of British Columbia has approved the plan of arrangement between Blackbird and Pennant pursuant to the Business Corporations Act (British Columbia). As previously announced on February 18, 2014, Blackbird and Pennant entered into an arrangement agreement dated February 17, 2014, whereby Blackbird will acquire all of the outstanding shares of Pennant from the shareholders of Pennant in exchange for shares of Blackbird on the basis of one Pennant share for 0.42857 corresponding shares of Blackbird. The Arrangement is expected to result in Pennant becoming a wholly-owned subsidiary of Blackbird and Blackbird continuing to trade on the TSX Venture Exchange under the trading symbol BBI. The consolidated entity is expected to carry on business as an oil and liquids focused emerging producer.
Blackbird and Pennant expect that the closing of the Transaction will occur on or about April 17, 2014. The Closing remains subject to final approval of the TSX Venture Exchange.
Additional information regarding the Transaction is included in the management information circular dated March 10, 2014 of Pennant, a copy of which is available on SEDAR under Pennant's profile.
QIS Capital: The pro forma company will be geared toward increasing production through further acquisitions and drilling opportunities. Pennant's assets are complimentary to Blackbird's existing portfolio and the pro forma company will control a 100% working interest at Mantario and a 50% interest at Bigstone. The integration of the operations of Blackbird and Pennant are intended to allow the combined company to realize improvements in operating costs and corporate overhead costs which are expected to result in improved netbacks and cash flow. The combined company will have over 25 net sections of Montney land with current production of greater than 60 boe/d. Current corporate production after the amalgamation will be over 160 boe/d and reserves will total 1.683 mmboe of proved plus probable reserves with significant upside.
NTG Clarity Networks Inc. (NCI:TSX-V)
Current Price: $0.34 (coverage commenced Feb. 4/10 - $0.045)
NTG Clarity Networks Inc. has reported its annual financial results for the fiscal year ended December 31, 2013.
2013 continued the positive trend for NTG Clarity with record performance on all fronts. The company reported a 111% increase in revenues and a 151% improvement in net income for the year. The majority of the increase resulted from new orders totaling over $9.5 million being booked in the final 9 months of the year. In addition, NTG significantly strengthened its balance sheet during 2013 with the successful completion of a convertible debenture financing which was subsequently converted to common shares prior to year-end.
Revenues for the year ended December 31, 2013 were $10,571,915 versus $5,002,537 for 2012. The gross profit margin was 46% in 2013 compared to 51% in 2012. The small decrease in margins was due to higher costing of some of the resources. The company recorded net income before taxes of $1,947,314 or $0.062 per share in 2013 as compared to $776,688 or $0.026 in 2012.
General and administration expenses for 2013 were $1,117,671 as compared to $491,972 in 2012. Selling and marketing expenses were $866,681 compared to $634,423 and total other expenses were $1,151,093 compared to $562,835. Most of the increase in expenses was directly proportional to the increase in overall revenues. Some of the more notable changes in other expenses included a 38% increase in amortization to $349,155, a 97% increase in depreciation to $50,936, a 231% increase in foreign taxes to $67,426, a 756% increase in share based compensation to $513,261, and a 10% decrease in interest expense to $154,821. Share based compensation was significantly higher due to the granting and exercise of options.
NTG Clarity also continued to strengthen its balance sheet during 2013 which has been instrumental in the company being able to acquire new work. Shareholders’ Equity improved by 97% during the year to $7.26 million and long-term debt was eliminated. As at December 31, 2013, NTG Clarity had positive working capital of $4,444,547 or $0.12 per basic share.
|LATEST FINANCIAL RESULTS|
|3 Mos. Ended Dec. 31||Year Ended Dec. 31|
|Cost of Sales||2,003,505||344,267||5,686,900||2,458,750|
|Selling and G&A Exp.||620,326||372,990||1,984,352||1,126,395|
|Forex Loss (gain)||(35,908)||10,870||(197,744)||77,869|
|Stock Based Comp. Exp.||320,349||11,359||513,261||59,941|
(as at Dec. 31, 2013)
|Current Assets||$ 7,323,086|
NTG continued to develop and improve its existing suite of products and services during 2013 which has enhanced customer satisfaction as well as financial performance. Management is also building the necessary framework to expand the company’s customer base outside of the Middle East and has made several quality connections in this regard.
NTG Clarity has started 2014 on a rapid pace with the announcement of agreements during the first quarter totaling more than $6 million. This is in addition to approximately 25% of revenues related to prior announcements still in its work backlog at the beginning of the year. Management is excited with the opportunities and prospects with which NTG enters a new year and expects to produce another year of record results for its shareholders.
QIS Capital: Overall this was an excellent year for NTG Clarity with record performance on all fronts with more than 100% gains in most areas. Some investors have commented today about the slower Q4 compared to last year. It is important to point out that stock based compensation during Q4 showed a drastic jump due to the exercise of management options. This caused net earnings to drop by a full $0.01 per share in the quarter. Otherwise, net income would have been in line with the prior year.
NTG Clarity has already announced over $6 million in new business during the first quarter of 2014 and continues to work on additional contracts. Management has indicated that it expects growth to continue at a rapid pace in 2014. NTG Clarity is presently trading at 5.5 times trailing earnings and has over $4.4 million or $0.12 per share in positive working capital with no long-term debt. If one removes the $0.12 for working capital, NTG Clarity is currently trading at a trailing eps multiple of only 3.5 times.
Newlox Gold Ventures Corp. (LUX:CSE)
Current Price: $0.06 (coverage commenced March 31/14 - $0.05)
Newlox Gold Ventures Corp. has closed on its acquisition of 100% of the shares of Oro Roca S. A. (Oro). Newlox issued 20 million common shares as consideration for the acquisition for a total issued share capital of 45,006,911. The consideration paid is supported by an independent valuation & fairness opinion undertaken by RwE Growth Partners, Inc. of Vancouver British Columbia, which valued the transaction at $4.5 million.
A recently installed environmental reclamation pilot plant has been operating for almost one month and consistent positive results are being achieved (processing existing tailings acquired from various local artisanal mining operations on individually negotiated terms). For the first 20 days the pilot plant yielded approximately 500 kilograms of gold concentrate, averaging 320 grams per tonne as confirmed by three labs. This is the result of reprocessing high-grade tailings, and is in line with forecasts.
During this period samples from tailings stockpiles were shipped to the University of British Columbia and other processing technology providers for analysis and design of an optimized reprocessing circuit. The UBC testing has confirmed the company’s assays, indicating an average head grade of 22.73 grams per tonne in the tailings. An investigation of gold grain size distribution has revealed that the largest proportion of the gold is contained within the fines, providing excellent data for the evaluation of processing techniques. Lab concentrate testing indicates that a combination of gravity concentration and flotation can achieve 70% recovery. The ultimate objective however, is to achieve +85% recovery. Lower recovery will be profitable and therefore will be acceptable in the meantime.
The company plans to reach processing capacity of 384 tonnes per month within the next month jumping to 2,496 within the following three months. A preliminary estimate for environmental reclamation costs approximate 28% of the achieved revenue (inclusive of all costs, basis $1,200 per oz gold).
Income generated through the company’s already functioning trading program will supplement that from the reclamation business and should support organic growth over the longer term. This program is proving its viability and is gaining momentum. Early results are encouraging. Frequent trades at modest margins will yield +20% monthly profits.
Mr. Jeffrey Benavides has been appointed as Director and CFO of Newlox Gold Ventures Corp, replacing Donald Gordon who continues as Director and CEO. Mr. Jeffrey Benavides continues as President of Oro Roca, S.A. Ryan Jackson is appointed VP Corporate Development, and continues on the board as announced on January 10, 2014.
QIS Capital: Newlox is developing into a very intriguing small gold producer on a fundamental basis. Taking some of the numbers in today’s press release, the company would produce approximately 6,109 grams of gold per month using 384 tonnes of throughput, an average grade of 22.73 g/t , and a recovery rate of 70%. 6,109 grams equates to 215 ozs of gold or $280,000 at today’s spot price. Once ramped up and using the same parameters, 832 tonnes per month would yield 467 ozs of gold worth $600K. On an annualized rate that is $7.2 million if all parameters hold steady. The company is also yielding 20%+ monthly profits through its trading program. While we still don’t have the numbers to determine profitability or cash flow, the stock is presently trading with a market capitalization of only $2.4 million.
Virtutone Networks Inc. (VFX:TSX-V)
Current Price: $0.41 (coverage commenced Sep. 9/11 - $0.10)
Virtutone Networks Inc. has announced that the company has achieved a new daily revenue record of over $500,000 in revenue Wednesday April 9, 2014.
This is a great milestone that we have achieved said Jason Allen President and Chief Executive Officer. Due to our strong balance sheet, we are leveraging our strong financial position to increase organic sales as we had projected, while maintaining our margins. We have also updated our investor presentation, which is available now on our website at www.virtutone.com.
Disclaimer: This article is for informational purposes only. The information contained within this article should not be construed as offering investment advice. Those seeking direct investment advice should consult a qualified, registered, investment professional. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The company profiled assumes no liability for the information presented. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock. The author(s) owns directly or indirectly 214,000 shares and 650,000 options of Blackbird Energy Inc., 1,330,500 shares of NTG Clarity Networks Inc., 200,000 options of Pennant Energy Inc., 205,000 shares of Newlox Gold Ventures Corp., and 584,000 shares and 212,500 warrants of Virtutone Networks Inc. QIS Capital may have a financial relationship with these companies and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright © 2003 - 2014 QIS Capital Corporation.