In a management discussion and analysis document filed Thursday on SEDAR – the electronic dissemination service for publicly traded Canadian firms – Enablence stated it was in the company’s “best interest to terminate all negotiations on the second Chinese joint venture,” without elaborating why.
The venture, first announced last October, was among three partners including JV2 and was meant to develop, manufacture and sell high-speed communication modules based on Enablence’s photonic integrated circuit technology.
The local optical component manufacturer stated that it will “continue to pursue opportunities and partnerships for the development and commercialization of its next generation 100G optical products.”
Enablence will maintain its first Chinese joint venture established in 2010, called Sunblence Technologies Co. Ltd. That venture is “well capitalized and expects to produce positive cash flow in calendar 2013,” the document states.
In its quarterly results, Enablence reported revenues of $2.3 million – a 22.5 per cent decrease year-over-year – and a net loss of $4.1 million. That compares to a net loss of $3.05 million during the same period the year previous.
The steep drop in revenues is mainly due to soft market conditions in the Asia Pacific and Americas regions, as well as customer concerns related to Enablence’s financial status, according to the company.
This quarter saw the completion of the company’s sale of its wholly owned Swiss subsidiary Enablence Switzerland AG for $2 million. Those proceeds were used to repay most of the $3 million bridge loan from a California bank last November, which was meant to temporarily maintain operations while the company teetered on the brink of insolvency.
Despite the negative figures, the company maintains that its future outlook is promising because of its Sunblence joint-venture. China has announced a multi-billion dollar, multi-year investment in a national broadband strategy, which Enablence says it hopes to capitalize on.
However, short-term prospects for the company remain bleak, with soft industry demand compounded by the company’s financial difficulties and limited working capital.
In February, Enablence closed two previously announced transactions aimed at stabilizing its business, including a non-brokered private placement and conversion of some of its debt.
The company also announced the appointment of a new CEO, Louis De Jong, to take the place of John Roland who acted as interim CEO after Tim Thorsteinson left the post last June.
To return to profitability, Enablence plans to reduce the company’s cost structure and increase consumer confidence in its financial condition with its recently announced financing, the company stated in its regulatory filings.