Powertech releases fiscal year 2008 financial statements
Canadian company ends year with only $1.4 in working capital, no mining revenue, and $18.7 million of accumulated losses; report includes warning that House Bill 1161 could "affect the profitability of the Centennial Project"
Posted June 26, 2008, Updated July 3, 2008
Powertech executives Wallace Mays and Richard Clement apparently waited until two weeks after the Synatom private placement announcement to release the annual financial statements for fiscal year 2008. I don't blame them. At March 31, 2008, the company's fiscal year-end, Powertech was down to only $1.4 million (Canadian) in net working capital. Net working capital is a measure of a company's liquidity, or its ability to meet its payment obligations.
During FY 2008, Powertech burned through its cash at an average rate of $1.2 million a month. Although it raised $5.4 million from investors, Powertech spent $14.9 million in cash on mineral properties, executive compensation, management and consulting fees, community and media relations, promotion, overhead, and fixed assets.
Powertech's March 31 cash flow statement reveals that the company was headed for insolvency unless investors could be persuaded to pony up more risk capital. By early June, Powertech's shrinking cash position must have been especially bleak.
The June 5 closing of the Synatom deal should have resulted in Powertech receiving a payment of $9 million from the Belgian company in exchange for the issuance of 6 million shares of Powertech stock. This investment should buy Powertech a few more months.
For some reason, as of early July the Toronto Stock Exchange website still shows the same number of outstanding shares it has shown for the last several months (49,429,020). The private placement agreement calls for the transfer of funds at closing, so it is unclear why the 6 million new shares are not shown on the TSX website.
As part of the deal, Synatom has the right to purchase uranium if and when Powertech permits, develops, and operates a mine. For over a year, Powertech executives, including Richard Clement, Richard Blubaugh, and Jim Bonner, have strenuously objected to opponents' claims that Powertech might sell Weld County uranium outside of the U.S. The private placement agreement with Synatom directly contradicts Clement, Blubaugh, and Bonner.
Like any good penny stock company, Powertech accentuates the positive and downplays the negative to attract new investors. Their financial statement notes and management reports have never mentioned the overwhelming opposition to the Centennial project. Not a word has been reported to investors about opposition to the project from U.S. Representative Marilyn Musgrave, the Colorado Medical Society, the City of Fort Collins, the City of Greeley, the Town of Wellington, the Town of Timnath, and the Town of Ault.
For the first time, however, Powertech has disclosed to investors that opposition to the Centennial project actually exists. The June 12, 2008 Management Discussion and Analysis report filed with Canadian securities regulators mentions the recently-signed House Bill 1161, and that the legislation originated from opposition to the project (page 29):
Amendments to current laws and regulation governing operations or more stringent implementation thereof could have a
substantial impact on the Company and cause increases in exploration expenses, capital expenditures or production costs or reduction in levels of production at producing properties or require abandonment or delays in development of new mining
properties.
Specific to the Company’s Centennial project, originating from opposition to the project by numerous interested parties in
Colorado, a new bill was recently signed (House Bill 1161) creating a specialized regulatory regime for in-situ uranium
recovery in the state of Colorado. This new law could, upon implementation, establish standards for ISR mining restoration
that may ultimately affect the profitability of the Centennial Project.
Apparently, Powertech attorneys have advised Mays and Clement that opposition to the Centennial project and the passage of House Bill 1161 are significant enough to be disclosed to investors.
JW
HOUSE BILL 1161 IS LAW - Governor Bill Ritter signs bill at Capitol ceremony; Governor and legislators praise grassroots campaign by CARD and bipartisan efforts to pass bill; legislation touted as model for other states - Posted May 20, 2008
Retraction and clarification of posting regarding financial statement disclosures - Posted January 1, 2008