In June, 2013, the Company subscribed for 500,000 shares of a newly incorporated entity in exchange for $0.2 million in cash and a portion of its well data library that was transferred to the new entity with a fair value of $0.3 million for a total investment of $0.5 million. Concurrently, two private companies (dealing at arm's length with the Company) subscribed for 1 million shares for $1 million in cash. As a result each company became a 1/3 shareholder of the new entity. Immediately thereafter, the Company granted a software license to the new entity for $1.2 million. The Company recognized $0.8 million of revenue on this transaction after eliminating the Company's share in the new entity. The new entity has granted each shareholder a data licence for $250,000 per annum payable on a monthly basis. As a result of the non-monetary contribution made by the Company, an accounting loss on disposal of $1 million was recognized for the difference between the net book value and fair value of the assets contributed.
During the first six months of 2013, the Company completed a 3D seismic participation survey, covering an area of approximately 93 square kilometers.
Mr. Stephen Popadynetz, CEO commented: "Divestco returned to positive working capital in Q2 2013 through the restructuring of its debt, commitment to cost control and realizing the value of its assets. Despite a weak industry in the first half of 2013, our seismic inventory sales and software sales in the first six months of 2013 remained strong. As well, despite the softness in our Services group as we entered 2013, we are seeing increased activity levels which should result in improved results going forward. Our efforts to expand into international markets are expected to result in increased revenue in 2013. Additionally, our Software group is rapidly developing new products which are about to hit the marketplace and we believe will lead to significant growth later this year. With all of these positive growth catalysts, we remain optimistic that Divestco will continue to strengthen its balance sheet."
The Company's condensed consolidated interim financial statements have been prepared in accordance with IFRS. Certain measures in this document do not have any standardized meaning as prescribed by IFRS and are considered additional GAAP measures. While these measures may not be comparable to similar measures presented by other issuers, they are described and presented in this MD&A to provide shareholders and potential investors with additional information regarding the Company's results, liquidity, and its ability to generate funds to finance its operations. These measures include:
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
Divestco uses EBITDA as a key measure to evaluate the performance of its segments and divisions as well as the Company overall, with the closest IFRS measure being net income or loss. EBITDA is a measure commonly reported and widely used by investors as indicators of the Company's operating performance and ability to incur and service debt, and as a valuation metric. The Company believes EBITDA assists investors in comparing the Company's performance on a consistent basis without regard to financing decisions and depreciation and amortization, which are non-cash in nature and can vary significantly depending upon accounting methods or non-operating factors such as historical cost.
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