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Sofame Technologies (SDW.V) - recent news flow indicates the company continues to make progress
Comment by Objective Capital , Dec 17, 2008
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Board strengthened
On November 24, 2008, the company announced the appointment André Caillé, former President of Hydro-Quebec and Gaz Metropolitain, as senior strategic advisor. It should be recalled that Gaz Metroplitain was for eight years a major shareholder in Sofame.
The appointment lends much needed weight and ‘cred’ to Sofame’s presence in the market place. It should facilitate contact with key industry players and enable the company to better expand its distribution network - a key plank in Sofame’s ambitious marketing plan.
The consultancy agreement with Mr. Caillé means that he will not receive any salary as such, rather he has been granted a total of 1,690,000 stock options. A total of 845,000 options will vest as at the date of the consulting agreement while the remaining 845,000 options will vest quarterly over the next two years. The options may be exercised for a period of five years from the date of grant at a price of C$0.245 per share. The agreement is for a three-year term and may be renewed by the mutual consent of the parties.
Trading front
Apart from strengthening the Board, news on the trading front and funding has also been positive. It was confirmed on 3rd December that its Percotherm™ condensing heat recovery system will form part of a boiler plant efficiency improvement project at Princeton University in the United States.
Sofame has worked in close conjunction with Tozour Energy Systems (Sofame’s Manufacturing Representative) and is the first project by the two companies in co-gen/turbine installation in the United States. The two companies have shared the work involved in providing the engineering and equipment, and the construction and management of the unit respectively.
Tozour Energy Systems is a full-service HVAC and building automation provider.
Although the actual value to Sofame of this contract has not been announced, it is understood that it will make a material contribution to the company’s results in Q209/Q309. The company announced on 2nd December that it had received a C$200,000 payment as deposit for this contract from its Manufacturing Representative.
New funding
Concurrent with these announcements, the company announced that it had received C$100,000 in proceeds from the closing of a first tranche of a proposed private placement of common shares at a price per share of $0.20 for maximum aggregate gross proceeds to Sofame of up to C$1 million. .The company will apply the gross proceeds from this tranche of the private placement toward working capital and ongoing marketing and selling expenses. As a result of the private placement, there are now 85,048,846 common shares outstanding.
New stock options
On November 28, 2008, the Board of Directors granted stock options in respect of an aggregate of 1,379,000 common shares to five of Sofame's directors and senior officers, at an exercise price of $0.24 per share with all of the stock options granted pursuant to Sofame's stock option plan.
Objective's view:
A beefed up Board, a new funding initiative, and some mildly encouraging news on the trading front puts Sofame in a good position to exploit the opportunities available to it. In our opinion, the announcement of the Princeton University deal had largely been priced into the valuation, welcome as this deal may have been.
There remains a significant number of projects that could make a material difference to Sofame’s results in the current financial year (Year ending September 2009) providing management can close them. And whilst many deals are tantalizingly close to being signed, they will not form part of a confirmed order book until officially agreed.
Our initiation report issued less than two months ago on 28th October portrayed a number of different scenarios and based on these recent announcements, we have no reason to alter our core valuation of C$0.21 per share. Yet since the report was published the real economy looks to be now in even worse shape than previously expected and with oil and gas prices falling sharply, this is likely to negatively impact capital investment decisions. With pay back times becoming further stretched, we would not be that surprised to see capital investment decisions delayed and if this happens this could reduce our forecasts.
