EcoSynthetix Reports 2014 First Quarter Results

BURLINGTON, ON, May 1, 2014 /CNW/ - EcoSynthetix Inc. (TSX: ECO) ("EcoSynthetix" or the "Company"), a renewable chemicals company that produces a family of commercially proven bio-based products, today announced its financial results for the three months ended March 31, 2014. Financial references are in U.S. dollars unless otherwise indicated.

First Quarter 2014 Highlights

• Net sales were $5.0 million for the three months ended March 31, 2014 (Q1 2014) compared to $6.1 million in the three months ended March 31, 2013 (Q1 2013)
• Introduced a new grade of EcoSphere^® biolatex^® which has been shown to be an optimal formulation for specific applications in the paperboard, lightweight coated paper and fine graphic paper segment
• Won two new customers during the quarter
• Appointed Jeff MacDonald as its Chief Operating Officer to lead business development, sales, operations and product development activities subsequent to quarter end

"Our new grades of EcoSphere biolatex continue to drive new customer trials. Our versatile binders offer formulation alternatives for the paper and paperboard market, while we pursue larger market applications for our bio-polymers in building material products," said John van Leeuwen, Chief Executive Officer. "With our focused R&D and sales efforts, we are confident that our expanding product pipeline will accelerate our growth."

Financial Summary

Net Sales

Net sales were $5.0 million in Q1 2014 compared to $6.1 million in Q1 2013. The change in sales was principally due to lower sales volume in EMEA, Asia Pacific and Latin America, which decreased $0.7 million, $0.5 million and $0.2 million, respectively. The decrease in sales in EMEA was primarily due to the closure of a customer's coated paper production line in Q4 2013. Sales in Asia Pacific continue to be negatively impacted by the over-supply of butadiene and related drop in styrene-butadiene (SB) latex prices. These changes in sales were partly offset by higher sales volume to existing commercial accounts in North America of $0.4 million. EcoSynthetix won two new customers during the current quarter.

Gross Profit

Gross profit was $1.0 million in Q1 2014, or 19.7% of sales, compared to $1.1 million, or 17.3% of sales, in Q1 2013.

Gross profit adjusted for manufacturing depreciation as a percentage of sales increased to 25.7% in Q1 2014 compared to 22.3% in Q1 2013. The change was primarily due to lower raw material costs.

Selling, General and Administrative
(Excludes share-based compensation, depreciation and amortization and foreign exchange loss or gain)

Selling, general and administrative (SG&A) costs were $2.6 million for Q1 2014 compared to $3.0 million in Q1 2013. The decrease was principally due to lower salaries and benefits and the favourable impact of the weakening Canadian dollar relative to the U.S. dollar in Q1 2014.

Research and Development
(Excludes share-based compensation, depreciation and amortization and foreign exchange loss or gain)

Research and development (R&D) expenses were $1.5 million in Q1 2014 compared to $1.3 million in Q1 2013. R&D is a key focus of EcoSynthetix to enhance its bio-engineered product portfolio and expand into new applications and markets. The increase was primarily due to increased trial activity in order to bring new products to market compared to Q1 of last year.

Adjusted EBITDA¹

Adjusted EBITDA for the quarter was ($2.8) million, compared to ($2.9) million in Q1 2013. The decrease in adjusted EBITDA loss is due to lower operating expenses partly offset by lower gross profit.

Net Loss

Net loss in Q1 2014 was $3.3 million, or $0.06 per common share, compared to $3.5 million, or $0.06 per share, for Q1 2013. The change in net loss is principally due to a decrease in loss from operations.

Liquidity

Working capital was $84.3 million at March 31, 2014 compared to working capital of $87.3 million at December 31, 2013.  The decrease in working capital was principally due to cash utilized in operating activities.

Notice of Conference Call

EcoSynthetix will host a conference call on Friday, May 2, 2014, at 8:30 AM ET to discuss its financial results.  John van Leeuwen, CEO, and Robert Haire, CFO, will co-chair the call. All interested parties can join the call by dialling [phone] or [phone]. 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 on the Investor Relations Events page 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. 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 is not a recognized measure under IFRS and should not be considered as an alternative to operating income or net income as a measure of operating results or an alternative to cash flows as a measure of liquidity. Adjusted EBITDA is defined as consolidated net income (loss) before interest, income taxes, depreciation, amortization and other non-cash expenses deducted in determining consolidated net income (loss) before interest, income taxes, depreciation, amortization, other non-cash expenses and charges which include the movement in the unrealized gains and losses on the Company's redeemable preferred shares and warrants classified as financial liabilities prior to the initial public offering and share based compensation expense.

The following table reconciles net loss to Adjusted EBITDA for Q1 2014 and Q1 2013:

		Three months ended
		March 31, 2014	March 31, 2013
Net loss		(3,322,254)	(3,533,486)
Depreciation and amortization		429,919	381,907
Share-based compensation		135,000	331,103
Interest Income		(83,101)	(85,372)
Adjusted EBITDA ^(1)		(2,840,436)	(2,905,848)

About EcoSynthetix Inc. (www.ecosynthetix.com)
EcoSynthetix Inc. is a renewable chemicals company specializing in bio-based products that can be used as inputs in industrial manufacturing for a wide range of consumer products. The Company's products offer a reduced carbon footprint and are marketed primarily on the basis of lower cost, stable pricing and equal or superior performance. EcoSynthetix's lead product, EcoSphere^® biolatex^® binders, is used commercially by a number of the global top 20 manufacturers in the coated paper and paperboard industry.

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. 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 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 31, 2014. 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)
	March 31, 2014		December 31, 2013
Assets
Current assets
Cash	77,212,911		80,506,957
Accounts receivable	3,534,237		3,691,791
Inventory	6,327,289		6,470,410
Government grants receivable	344,022		261,648
Prepaid expenses	271,247		276,856
	87,689,706		91,207,662
Non-current assets
Intangible assets	119,831		124,009
Property, plant and equipment	12,651,943		12,775,188
Total assets	100,461,480		104,106,859
Liabilities
Current liabilities
Accounts payable and accrued liabilities	3,373,150		3,947,385
Total liabilities	3,373,150		3,947,385
Shareholders' Equity
Common shares	492,732,150		492,600,022
Contributed surplus	7,780,831		7,661,849
Accumulated deficit	(403,424,651)		(400,102,397)
Total shareholders' equity	97,088,330		100,159,474
Total liabilities and shareholders' equity	100,461,480		104,106,859

EcoSynthetix Inc.
Interim Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
For the three months ended March 31, 2014 and March 31, 2013
(expressed in US dollars)
	2014		2013
Net sales	4,994,064		6,120,478
Cost of sales	4,011,075		5,064,352
Gross profit on sales	982,989		1,056,126
Expenses
Selling, general and administrative	2,844,083		3,405,462
Research and development	1,544,261		1,269,522
	4,388,344		4,674,984
Loss from operations	(3,405,355)		(3,618,858)
Interest income	83,101		85,372
Net loss and comprehensive loss	(3,322,254)		(3,533,486)
Basic and diluted loss per common share	(0.06)		(0.06)
Weighted average number of common shares outstanding	56,731,241		55,689,778

EcoSynthetix Inc.
Interim Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended March 31, 2014 and March 31, 2013
(expressed in US dollars)
		2014		2013
Cash provided by (used in)
Operating activities
Net loss		(3,322,254)		(3,533,486)
Items not affecting cash
	Depreciation and amortization	429,919		381,907
	Share-based compensation	135,000		331,103
Changes in non-cash working capital
	Accounts receivable	157,554		(379,649)
	Inventory	70,821		(1,000,062)
	Government grants receivable	(82,374)		3,619
	Prepaid expenses	5,609		(67,192)
	Accounts payable and accrued liabilities	(574,233)		1,548,543
	Deferred government assistance	-		(103,030)
		(3,179,958)		(2,818,247)
Investing activities
Cash used for purchase of intangible assets and property, plant and equipment		(230,198)		(467,190)
Financing activities
Exercise of common share options		27,930		234,879
Exercise of warrants		160,058		-
Repurchase of common shares		(71,878)		-
		116,110		234,879
Change in cash during the period		(3,294,046)		(3,050,558)
Cash - Beginning of period		80,506,957		93,260,296
Cash - End of period		77,212,911		90,209,738

SOURCE: EcoSynthetix Inc.

EcoSynthetix Inc.
Steve Snyder
Director, Marketing Communications
Phone: [phone]
E-mail: [email protected]  

Investor Relations
Ross Marshall
TMX Equicom
Phone: [phone] (Ext.238)
E-mail: [email protected]