Subsequent Events The Company recognized net income of $9,000 for Q1 2022, as compared to a net loss of $1,865,000 for the same period in the prior year. The increase is primarily due to a one-time gain of $2,181,000 recognized as other income in the quarter relating to the restatement of the balance of the Company’s senior secured loan following the execution of the Loan Amendment in September 2021. This restatement was required as the changes met the criteria for a significant modification as described under International Accounting Standards Section 9 – Financial Instruments. Story continues
The Company’s senior secured loan facility was acquired from Export Development Canada by Vortex ENA LP (“Vortex LP”), a related party to the Company. Such senior secured loan facility was subsequently amended to lower the interest rate to 7.5% per annum, extend the maturity date to September 2025 (plus one six-month extension option), eliminate required principal amortization during the life of the loan and eliminate the need to pay cash interest (with interest accrued instead) on the loan until September 2023 (the modified loan being the “Loan Amendment”). The Company announced its plan to recapitalize the Company’s balance sheet by way of a share consolidation, shares-for-debt exchange, restructuring of its senior secured loan and by raising new capital through a planned private placement (the “Recapitalization Transaction”).
Company revenue increased by 6% during the three month period ended September 30, 2021 as compared to the same period in the prior year. Revenue gains were primarily driven by higher non-recurring engineering (“NRE”) revenue of $52,000 and an increase in third-party fabrication services work for a mega-cap technology company of $114,000, offset by a decrease of $132,000 in proprietary optical chip sales. The Company believes that the decline in optical chip sales is due to seasonal fluctuations in demand from its customers and expects chip sales to increase in future quarters based on positive market trends and inbound interest from both existing and new customers. Enablence is pleased to provide the following highlights for Q1 2022 (all dollar figures are rounded to the nearest thousand of United States dollars, unless otherwise noted):
The Company elected to temporarily withdraw marketing efforts relating to the proposed private placement. In its place, the Company has reached agreement with Vortex LP to provide up to C$2,000,000 in additional advances under the senior secured loan, in its sole discretion, to support short-term operating needs of the business. The Company plans to relaunch marketing efforts for a new private placement prior to the end of December 2021. The Company and Vortex LP agreed to certain other loan modifications that are intended to further support the Company’s balance sheet by way of (i) a transfer of $361,000 and C$275,000 of accounts payable liabilities to Vortex LP, (ii) Vortex LP has agreed to provide the Company with the aforementioned up to C$2,000,000 in new senior secured loan advances and (iii) Vortex LP has agreed to add all of the amounts in (i) and (ii) to the balance of the senior secured loan, with such amendments to be reflected in an amended and restated senior secured loan agreement to be entered into between the Company and Vortex LP prior to December 24, 2021. The Company received waivers of certain conditions in favour of a select group of major creditors relating to the proposed shares-for-debt settlements. In aggregate, the Company entered into debt settlement agreements with creditors representing approximately 96% of the $35,730,000 amount proposed for settlement (balances as of the end of Q1 2022). These waivers allow the Company to proceed to closing of the shares-for-debt settlements, subject to the approval of the TSX Venture Exchange.
The share consolidation was completed at a ratio of one (1) post-consolidation common share for every one hundred twenty (120) pre-consolidation common shares and the Company announced that the shares-for-debt exchange was planned to close prior to the end of November 2021. Subsequent to the end of Q1 2022, the following events occurred that are expected to have a material impact on the business of the Company:
The News Highlights
- Enablence Technologies Announces Financial Results for the Three Months Ended September 30, 2021
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