QIS Update #22 2014 - July 25th 2014
Included in this update:
- California Nanotechnologies reports Q1 financial results
- Manado Gold commences 2014 exploration program at Takla-Rainbow property
- Virtutone Networks secures new US$10 million line of credit
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California Nanotechnologies Corp. (CNO:TSX-V)
Current Price: $0.125 (coverage commenced May 5/14 - $0.15)
California Nanotechnologies Corp. has reported record financial results for the first quarter of fiscal 2015, ended May 31, 2014. In the March to May period, revenues increased by 182% to US$159,198 (CAD$172,550), compared to US$56,535 (CAD$58,446) during the same period last year. Gross margin for the first quarter was 95% compared to 86% during the first quarter of fiscal 2014. This increase in revenues was due mainly to increased sales in the oil and gas division.
Cal Nano continued to operate at a near cash flow break even basis during the first quarter. Cash flow provided by (used for) operations for the period was (US$8,711) compared to (US$77,591) for the same period last year. This is the second quarter in a row for the company to achieve near cash flow break-even results.
Cal Nano's net loss for the first quarter was US$54,218 or $0.01 per share, a significant improvement from a loss of US$111,148 last year. Overall operating expenses of US$181,843 were higher by 16% when compared to the prior period. These expenses are in response to the increased sales and the resulting expenses related to salaries, wages and benefits. To support the growth of the company, Cal Nano has added new engineering staff to facilitate increased commercial and developmental programs.
|LATEST FINANCIAL RESULTS (US Dollars)|
|3 Months Ended May 31|
|Cost of Sales||7,681||7,984|
|Cash flow used for operations*||(8,711)||(77,591)|
(Note: at 05/28/14, $1US = $1.084 CAD; 05/28/13, $1US = $1.034 CAD)
*Cash flow used for operations is a non-GAAP term requested by the oil and gas investment community that represents net earnings adjusted for non-cash items including depreciation, depletion and amortization, deferred taxes, asset write-downs and gains (losses) on sale of assets, if any.
|BALANCE SHEET (US Dollars)
(as at May 31, 2014)
|Current Assets||$ 717,371|
Following the financing completed in April 2014, Cal Nano is in a much stronger financial position with a cash balance of US$536,644. The proceeds from this transaction are being utilized for growth opportunities as the company transitions toward commercialization.
As reported previously, the company recently purchased a larger high-energy mill that is being modified for advanced cryogenic processing. This new mill will increase the company's cryomilling capacity by a factor of six. This equipment is currently being commissioned to assist Cal Nano in meeting the growing demand for its nano-engineered materials.
Management is very pleased with the continued strong financial results achieved in the first quarter of fiscal 2015. The company is strategically based in Southern California, one of the most significant centers of Nanoscale research. This encourages active collaboration and partnership with leading US Corporations and Academic Institutions to support the commercialization of nanotechnology in the Oil and Gas, Sports and Recreation, Aerospace and Automotive Industries.
QIS Capital: This was the second quarter in a row of Cal Nano posting improved revenues and near cash flow break-even status. The gross margin was very impressive for Q1 at 95%. We continue to advocate that investors look at the company with a long term perspective. Cal Nano is in the process of commercializing its products and technology and it only takes one significant contract at very high margins to make a massive difference on an earnings perspective. In the meantime, the company has significantly reduced and has almost eliminated its cash burn which limits some of the financial downside risk.
Manado Gold Corp. (MDO:TSX-V)
Current Price: $0.05 (coverage commenced Dec. 6/13 - $0.065)
Manado Gold Corp. has announced that it has commenced the first phase of its 2014 exploration program on its Takla-Rainbow Property to follow up on its successful 2013 drill program where hole number TR13-88 finished in a mineralized zone.
This program is a follow up to the 2013 drill program where the results of drill hole number TR13-88 indicated that there may be a porphyry-style copper and gold-bearing mineralized zone associated with pervasive siliceous and potassic flooding. The TR13-88 drill hole intersected 24.52 metres (66.0 to 90.52 m, end of hole) of mineralization grading 2.011 gpt gold, 2.0 gpt silver and 0.18% copper, including a 6-metre section (66.0 to 74.0 m) with an average grade of 4.225 gpt gold, 4.0 gpt silver and 0.35% copper (Note: these intercepts are drilling lengths, not true widths).
This phase will concentrate on re-logging and sampling the 8,000 metres of unsplit diamond drill core that remains on site originating from the pre-1992 Imperial Metals and Eastfield Resources drilling programs. This work will focus on identifying porphyry-style copper-gold mineralization that was not sampled during the previous exploration drilling. Manado will also carry out prospecting, geological mapping, and rock and basal till sampling within the known South and Red Zones. The South Zone has several large, untested copper-gold soil geochemical anomalies that may be reflecting a buried porphyry-style copper-gold mineralizing system. The Red Zone is situated 1.2 kilometres to the northwest and has known copper-gold mineralization typical of a calc-alkaline porphyry copper-gold system. Historic drill hole collars in these two zones have to be located and surveyed, plus the locations of reported geochemical and geophysical anomalies will be investigated for possible future drill testing. The program is expected to take approximately 10 days.
Doug Blanchflower, P. Geo, is a Qualified Person as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects and is responsible for the work program on the Takla-Rainbow Property. Mr. Blanchflower has reviewed and approved the technical information in this news release.
QIS Capital: Drill hole TR13-88 was an exciting discovery for Manado Gold and follow up drilling will clarify some of the scope of opportunity for the company. While the mining industry has largely been ignored by investors over the past few years, we are starting to see some preliminary signs of interest coming back into the sector. Manado should be generating a decent amount of news flow over the next 6 months as it completes follow up work.
Virtutone Networks Inc. (VFX:TSX-V)
Current Price: $0.255 (coverage commenced Sep. 9/11 - $0.10)
Virtutone Networks Inc. has recently announced that it has secured a new US$10 million line of credit with a tier one U.S. bank.
The line of credit is a one-year renewable term at a rate of prime plus 1.5% per annum. The facility is based on 85% of good accounts receivable.
This new facility will significantly increase our revenues and goes a long way to helping us meet and potentially exceed our financial projections for this year, said Jason Allen, Chief Executive Officer. It will also substantially lower our cost of capital and therefore help drive profitability. We see a lot of attractive business that, prior to obtaining this line, we were unable to land, so we will have no trouble deploying this capital to the benefit of our shareholders.
We are pleased to be working with this new bank, which understands our business and is willing to work with us to grow it. Although it took longer than we expected to find the right lending partner, finding this one has made the wait worthwhile.
With this new line of credit, the company has declined the previously announced $7.5 million credit facility on November 1, 2013, as the cost of the capital was very high, and had restrictive terms. Virtutone required a larger and more long-term partnership providing the company with more flexibility and a lower cost of capital.
QIS Capital: While earnings performance at Virtutone has been slower than previously anticipated, this line of credit is a significant and necessary step for the company in moving forward. Virtutone is now in a much stronger position to finance its growth and reduce borrowing costs. Revenues have been about 25-30% higher thus far in Q2 over Q1. If costs can be maintained around Q1 levels then we would expect a significant improvement in earnings. While an investment in Virtutone has required some patience, we are hopeful with this line of credit announcement that critical parts of the business are starting to fall in line with the huge growth in revenues.
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 414,500 shares, 100,000 warrants, and 200,000 options of California Nanotechnologies Corp., 279,000 shares and 200,000 warrants of Manado Gold Corp., and 487,000 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.