Valoe Corporation's Half-Year Financial Report January - June 2024

Valoe Corporation        Half-Year Report         30 September 2024 at 19.10 Finnish time

THE FIRST HALF OF THE YEAR 2024 IN BRIEF

In January - September 2024, the net sales of Valoe Group, under the IFRS standards, were EUR about 0.2 million (in 2023 EUR 0.9 million). The EBITDA was about EUR -1.0 million (EUR -1.5 million), the EBIT was ca. EUR -1.7 million (EUR -2.4 million), and the profit for the period was ca. EUR -2.0 million (EUR -3.2 million). At the end of the reporting period, Valoe Group's equity ratio including capital loans was -47.6 per cent.
(-20.0 %).

The District Court of Pohjois-Savo decided on the commencement of the restructuring proceedings of Valoe Corporation on 22 January 2024.

Mr Pekka Jaatinen, Attorney, (”Administrator”) submitted his preliminary report in accordance with the Restructuring of Enterprises Act on 22 February 2024. At the end of the reporting period, on 24 June 2024, the Administrator filed a proposal for the restructuring programme for the company with the North Savo District Court. The objective of the restructuring programme is to restore the Company's business, maintain its competitiveness in its industry and restructure the Company's debts only to the extent necessary to achieve the Company's restructuring objective. Valoe disclosed the main content of the restructuring programme proposal on 24 June 2024. As per the date of this Report, the restructuring programme proposal has not yet been confirmed.

On 27 May 2024, Valoe disclosed that the company's Board of Directors had discovered that the company had negative equity and had filed a notice of the loss of share capital with the Finnish Trade Register.

Valoe does not have an auditor and thus the company's financial statements for 2023 have not been audited. Therefore, the agenda items related to the financial statements, the use of the loss for 2023, the dividend payment, and the discharge were not discussed at the Annual General Meeting. It was resolved to adjourn the Annual General Meeting and postpone the discussion of the items above-mentioned, as well as the decision on the remuneration and election of the auditor, to a follow-up meeting. The Board of Directors will convene a follow-up meeting at a date to be announced later.

In a challenging financial situation, the company has continued temporary layoffs throughout the reporting period.

Trading in the company's shares has been suspended since 5 December 2023, which continues as per the date of this Review.

THE MAIN EVENTS AFTER THE REPORTING PERIOD

In Valoe's restructuring proceedings, the deadline for submitting statements concerning the draft restructuring programme expired on 22 July 2024. However, the District Court of North Savo granted an extension to the deadline for submitting statements until 15 August 2024 in accordance with a request of a creditor. After the aforementioned extension period, the administrator will prepare the report on the claims and statements received under the Restructuring of Enterprises Act and, if necessary, propose changes to the draft restructuring programme.

At the end of July 2024, the company extended the subscription period of the Convertible Bond 1/2023 disclosed on 14 July 2023 until 30 September 2024. On 30 September 2024, the company extended the subscription period again until 31 December 2024.

In July 2024, Ilmarinen Mutual Pension Insurance Company filed a petition for Valoe's bankruptcy, which was withdrawn after Valoe paid its debt to Ilmarinen Mutual Pension Insurance Company.

Mr. Jose Basso, Senior Vice President for Valoe's solar cell business in Lithuania, has filed for the company's bankruptcy. The application relates to claims arising from an agreement between the Company and Mr. Basso, with the claim amount being approximately EUR 60,000. The claims are disputed and Valoe has opposed the application. The agreement between the parties has been terminated on 31 May 2024.

MANAGING DIRECTOR IIKKA SAVISALO'S REPORT 

Following a delay in the financing negotiations at the end of 2023, we commenced cutting operational costs sharply to reduce working capital needs. However, in December 2023, we had to file an application for restructuring. Our limited resources are now focused on serving the most promising client relationships. These include major accounts in the automotive industry and projects in the electronics and space industry. In the second quarter, Valoe delivered VIPV (vehicle-integrated Photovoltaics) prototypes to two prominent tier-1 suppliers. Both prototypes successfully met the targets set for the development phase.

Valoe also delivered prototypes of solar energy applications for portable electronics and constellation satellites. The customers included a major military and space company, as well as a prominent consumer electronics brand.

Despite the difficult financial situation, we managed to continue our operations and development work, focusing only on our key accounts. Nowadays, also the development activities have almost come to a halt.

We are actively negotiating with several domestic and foreign investors for financing solutions to support a restructuring program that will ensure the future of the company. However, these financing negotiations have taken longer than expected, which has increased the risk of suspending the restructuring proceedings.

VALOE'S FUTURE OUTLOOK

The delay in securing financing solutions casts a shadow over Valoe's future prospects, forcing the company to almost halt its operations for the time being. There is currently no certainty about the continuation of operations.

However, solar energy solutions for the automotive industry, electronics, and satellites require technology that significantly differs from conventional solar panels. This technology suits very well the company's capabilities. If a financing solution is secured, the company's strategy is clear: we will continue working with our key customers to bring products to the mass market. We believe that the first mass production agreements could be reached approximately in six months after securing financing.

We are currently negotiating several different financing options, some of which are very close to a resolution. However, if a financing solution is not found very soon, the restructuring proceedings may be interrupted, and the company could face bankruptcy.

MARKET GUIDANCE

Valoe will not disclose any market guidance for the financial year 2024 due to the restructuring proceedings.

FINANCIAL RESULT 

Valoe Group's cumulative net sales for the first half of 2024 were about EUR 0.1 million. The net sales decreased by about 82 per cent compared to the previous year. 

The following financials include Valoe Group's operations. The figures in brackets are comparison figures for the corresponding period in 2023 unless stated otherwise.  

April - June 2024:

- Valoe Group's net sales was to EUR 0.07 million (In 2023: EUR 0.5 million).
- EBITDA was EUR -0.5 million (EUR -0.6 million).
- Operating profit was EUR -0.9 million (EUR -1.1 million).
- Profit for the period was EUR -0.9 million (EUR -1.4 million).

January – June 2024:

- Valoe Group's net sales decreased to EUR 0.2 million (In 2023: EUR 0.9 million).
- EBITDA was EUR -1.0 million (EUR -1.5 million).
- Operating profit was EUR -1.7 million (EUR -2.4 million).
- The profit before taxes was EUR -2.0 million (EUR -3.2 million).
- Profit for the period was EUR -2.0 million (EUR -3.2 million).
- Undiluted earnings per share were EUR -0.65 (EUR -1.41).
- Diluted earnings per share were EUR -0.65 (EUR -1.41).

FINANCING

Cash flow from business operations before investments in January – June was EUR -0.6 million (EUR -2.0 million). Trade receivables at the end of the reporting period were EUR 0.1 million (EUR 0.4 million). Net financial items amounted to EUR 0.3 million (EUR 0.8 million). At the end of June, the equity ratio of Valoe Group was -82.6 per cent (-43.3 %) and equity per share was EUR -3.6 (EUR -2.9). The equity ratio including capital loans was -47.6 per cent (-20.0 %). At the end of the reporting period, the Group's liquid assets totalled EUR 0.01 million.

In July 2023, we issued a convertible bond of up to EUR 0.6 million. The Convertible Bond 1/2023 is a capital loan. On 15 August 2023, we first increased the maximum amount of the Convertible Bond 1/2023 to EUR 1.0 million, and then, on 3 November 2023, to EUR 3.0 million. At the end of the reporting period, on 21 December 2023, the subscription price of the Convertible Bond 1/2023 was reduced to EUR 0.74 and the subscription period was extended until 31 July 2024. At the end for September 2024, the subscription period has again been extended until 31 December 2024. The loan period shall commence on the payment date and expire on 30 June 2025. An annual interest of eight (8) percent shall be paid to the capital of the Convertible Bond. The promissory note holder of the Convertible Bond 1/2023 has the right to convert the promissory note into the shares of the company pursuant to the terms of the Convertible Bond 1/2023. The subscription price of one (1) share of the company shall be EUR 0.74 per share. The conversion period began on 1 December 2023 and expires on 30 June 2025.

RESEARCH & DEVELOPMENT AND INVESTMENTS

The Group's research and development costs amounted to EUR 1.1 million (EUR 1.8 million) during the reporting period.

Gross investments during January – June period amounted to EUR 7 thousand (EUR 1.2 million).

PERSONNEL

At the end of June 2024, the Group employed 42 (52) people, out of which 12 employees worked in Lithuania and the rest in Finland. During the reporting period, the Group's salaries and fees totalled EUR 0.6 million (EUR 1.1 million). 

SHARES AND SHAREHOLDERS 

At the end of the reporting period, Valoe's share capital amounted to EUR 80,000.00 and the number of shares was 3,116,630. The company has one series of shares, which confer equal rights in the company. On 30 June 2024 Valoe had 29,590 treasury shares. 

The company had a total of 16,859 shareholders at the end of June 2024, and 3.8 per cent of the shares were owned by foreigners. The ten largest shareholders held 31.8 per cent of the company's shares on 30 June 2024.

The largest shareholders on 28 June 2024

The members of the Board of Directors and the President and CEO, either directly or through companies under their control, held a total of 267,134 shares in the company on 30 June 2024, representing about 8.6 per cent of the company's shares. At the end of the period Iikka Savisalo, Valoe's Managing Director, either directly or through companies under his control, held a total of 187,918 shares in the company.

Trading in the Valoe's shares has been suspended since 5 December 2023.

SHARE ISSUE AUTHORIZATIONS IN FORCE

The company has a share issue authorization in force granted by the Annual General Meeting 2024 according to which The Board of Directors is authorized to decide on a share issue with and/or without payment, either in one or in several occasions, including right to resolve on option rights and other rights entitling to shares pursuant to the Chapter 10, Section 1 of the Finnish Companies Act so that the number of new shares could increase by a total maximum amount of 4,500,000 shares. The authorization does not exclude the Board's right to decide also on directed issue of shares or option rights and other special rights. The authorization may be used for important arrangements from the company's point of view e.g. to strengthen the capital structure, to finance investments, for acquisitions and business transactions or other business arrangements, or to expand ownership structure, or for other purposes resolved by the Board involving a weighty financial reason for issuing shares or option rights or special rights entitling to shares pursuant to the Chapter 10, Section 1 of the Finnish Companies Act. The authorization is in force until 30 June 2025.

RISKS AND UNCERTAINTIES

Valoe's most significant risk is securing the necessary financing and its sufficiency. Restructuring proceedings were commenced at Valoe on 22 January 2024. The Administrator's preliminary report concludes that the company's business has potential that can be rehabilitated through the restructuring proceedings. However, the company's restructuring proceedings will require finding a financing solution for the duration of the proceedings. In addition, the company should find a financing or ownership solution to secure its operating conditions for a longer period of time. The Board of Directors of Valoe Corporation has discovered that the company has negative equity and has filed a notice of the loss of share capital with the Finnish Trade Register on 27 May 2024. If the company fails to secure the necessary financing, the restructuring proceedings may have to be suspended, and the company may be declared bankrupt.

The Company's financial situation is critical and requires the rapid implementation of a sufficiently comprehensive financing solution. If a financing solution is not secured quickly enough, the restructuring process may be suspended, and the Company may be declared bankrupt.

The statements and projections in this Report and in Valoe's strategy are targeted to the future and based on the management's current estimates. Therefore, they involve risks and uncertainty by their nature and may be affected by changes in the general financial situation and in Valoe's and its customers' business environment.

In Mikkeli, 30 September 2024

Valoe Corporation
Board of Directors

Further information:
Iikka Savisalo, CEO
Tel. +358 40 521 6082, [email protected]