SLT.U Saltire Capital Ltd

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TORONTO, Nov. 12, 2024 /CNW/ - Saltire Capital, Ltd (TSX: SLT.U) (TSX: SLT.WT.U) ("Saltire" or the "Company"), today reported its interim financial results as at and for the three and nine months ended September 30, 2024.  The Company's unaudited condensed consolidated interim financial statements ("Interim Financial Statements") along with its management discussion and analysis have been filed on the System for Electronic Document Analysis and Retrieval Plus ("SEDAR+") and may be viewed by shareholders and interested parties under the Company's profile on SEDAR+ at www.sedarplus.ca. All references to "$" herein are to United States Dollars.

Qualifying Acquisition and Private Placement

Saltire (formerly FG Acquisition Corp., a special purpose acquisition company) successfully completed the acquisition of Strong/MDI Screen Systems, Inc. ("MDI") on September 25, 2024 (the "MDI Acquisition").  The MDI Acquisition, together with the launch of Saltire's new investment platform, including the launch of Saltire Partners Ltd., which acts as Saltire's manager (the "Manager") constituted Saltire's qualifying acquisition ("Qualifying Acquisition").  As consideration for the MDI Acquisition, Saltire issued to Strong Global Entertainment Inc., MDI's parent company and the vendor under the MDI Acquisition, 1,972,723 common shares ("Common Shares") in the capital of Saltire (valued at US$10 per share) and 900,000 series A preferred shares (with an aggregate $9 million initial redemption value) as well as approximately $0.8 million in cash (collectively, the "Acquisition Consideration").  Simultaneously with the completion of the Qualifying Acquisition, the Company also completed an offering of 433,559 Common Shares at a price of $10.00 per Common Share, for gross proceeds of approximately $4.3 million on a private placement basis (the "Private Placement").

Third Quarter 2024 Results

For the three months ended September 30, 2024, the Company reported net operating income of $1.1 million, compared to net operating income of $0.9 million for the three months ended September 30, 2023.  The improvement in net operating income was primarily attributable to gross margin improvements, slightly offset by an increase in operating expenses.

For the nine months ended September 30, 2024, Saltire reported net operating income of $2.4 million, compared to net operating income of $2.5 million for the nine months ended September 30, 2023.

The net loss for the three months and nine months ended September 30, 2024 was $43.9 million and $42.9 million, respectively, which includes $44.6 million listing expense pursuant to RTO accounting discussed below.  Adjusted net income (which is net loss adjusted to remove the listing expense) for the three months and nine months ended September 30, 2024 was $0.6 million and $1.7 million, respectively.  The Company reported net income of $0.6 million and $1.5 million for the three months and nine months ended September 30, 2023, respectively. "Adjusted net income" is a non-IFRS measure. See "Non-IFRS Measures" below.

Accounting for Qualifying Acquisition

In accordance with the applicable International Financial Reporting Standards ("IFRS"), the Qualifying Acquisition was treated as a reverse takeover ("RTO").  Under IFRS, MDI is the accounting acquirer and Saltire is the accounting acquiree in the Qualifying Acquisition. The Interim Financial Statements reflect the Qualifying Acquisition accordingly.

As MDI was deemed to be the acquirer for accounting purposes, its assets, liabilities and operations since incorporation are included in the Interim Financial Statements at their historical carrying values. Saltire's results of operations have been included from September 25, 2024, being the closing date of the MDI Acquisition.  The applicable IFRS accounting rules require that the Company recognize the difference between (A) the deemed value of the Common Shares outstanding prior to the Qualifying Acquisition and (B) the net liabilities of Saltire as of Qualifying Acquisition closing date deemed assumed by MDI in the reverse takeover as listing expenses in the Company's condensed consolidated interim statements of income (loss) and comprehensive income (loss).  The value of Saltire's Common Shares outstanding prior to the Qualifying Acquisition was approximately $28.8 million (being 2,877,955 shares at $10 per share), which is deemed as the consideration paid by MDI under RTO accounting rules ("Deemed Consideration").  Saltire's net liabilities assumed by MDI on closing of the Qualifying Acquisition were approximately $15.8 million ("Assumed Net Liabilities"), which included (among other items) approximately $11.1 million for non-cash warrant liabilities, and $4.3 million for the Private Placement proceeds received but reflected as a liability on Saltire's opening balance sheet for RTO accounting purposes (and subsequently recorded as common shares equity).  The difference between the Deemed Consideration and Assumed Net Liabilities of $44.6 million was reported as a listing expense (the "Listing Expense") in the condensed consolidated interim statements of income (loss) and comprehensive income (loss).  There is no net impact of the Listing Expense on the total consolidated shareholders' equity of the Company given the Acquisition Consideration recorded in the Interim Financial Statements.  The $11.1 million of warrant liabilities reflected in the Interim Financial Statements are non-cash in nature. Accordingly, over the term of the warrants this liability will either get converted to equity upon the exercise of warrants or get reduced to zero in the event the warrants expire without being exercised.

About Saltire

Saltire is a long-term capital partner that allocates capital to equity, debt and/or hybrid securities of high-quality private companies. Investments made by Saltire consist of meaningful and influential stakes in carefully selected private companies that the Manager believes are under-valued businesses with the potential to significantly improve fundamental value over the long-term. These businesses will generally have high barriers to entry, predictable revenue streams and cash flows and defensive characteristics. Although Saltire primarily allocates capital to private companies, Saltire may, in certain circumstances if the opportunity arises, also pursue opportunities with orphaned or value challenged small and micro-cap public companies. Saltire provides investors with access to private and control-level investments typically reserved for larger players, while maintaining liquidity.

Non-IFRS Measures

Adjusted net income is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. Rather, this measure is provided as additional information to complement the IFRS measures disclosed in the Interim Financial Statements by providing further understanding of Saltire's results of operations form management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS.

Adjusted net income is used to provide shareholders with supplemental measures of the Company's operating performance and thus highlight trends in the Company's business that may not otherwise be apparent when relying solely on IFRS measures.

Securities regulations require non-IFRS measures to be clearly defined and reconciled with their most directly comparable IFRS measure. Management believes that adjusted net income is a useful measure to assess the performance of the Company as it provides a more meaningful operating result by excluding the effects of expenses that are not reflective of underlying business performance and other one-time or non-recurring expenses.

Adjusted net income is equal to net income less the Listing Expense. The following table provides the reconciliation of net income to adjusted net income for the three and nine months ended September 30, 2024:

SOURCE Saltire Capital Ltd.