Forterra Environmental Reports Second-Quarter 2009 Results
PUSLINCH, ON, Aug. 31, 2009 (Canada NewsWire via COMTEX News Network) --
<<
- Financial results continue to be adversely affected by unseasonably
cool and wet weather conditions resulting in deferred or lost sales
opportunities
- Achieves significant reduction in expenses
- Informed in late July 2009, in writing that a new customer expects to
place initial orders for deliveries beginning in September 2009 for
between $375,000 and $500,000 of worm castings
- Trials with other potential regional and national customers continue
- Receives favorable indications from several institutional investors
that they are prepared to participate in an equity-based financing to
be completed in September
>>
ForterraEnvironmental Corp. (TSXV: FTE), a manufacturer, marketer, and sellerof premium organic soil-enrichment products based on worm castings,today announced its financial results for the 2009 second quarter andfirst six months ended June 30, 2009. Financial results conform toCanadian generally accepted accounting principles (GAAP) and allcurrency amounts are in Canadian dollars.
"When we reported our2009 first-quarter results on May 29, 2009, we noted that our businesswas being adversely affected by the unseasonably cool and wet weatherconditions that were causing certain of our customers to delay theirblending operations and therefore their purchasing from Forterra," saidRick Denyes, president and chief operating officer.
"Unfortunately,those conditions persisted through the second quarter and even into thesummer months resulting in further deferrals and even the outright lossof expected sales. As the result of the significantly lower-than-budgetsales and the company's larger-than-anticipated loss, Forterra's cashflow and working capital were well below budget in the first half ofthe year. As reported, we have taken steps to reduce our cashrequirements in the near term, including postponing certain plannedcapital investments and reducing operating expenses. All of this isreflected in our financial results for the second quarter and firsthalf of this year," Mr. Denyes said.
"What is not reflected inthe financial statements for the first half of this year is theprogress in building our business that Forterra made during the secondquarter and particularly in the first two months of the third quarter.Working with our board of directors and a consultant, we furtherdeveloped business plans, including ideas to further strengthen ourbrand for both wholesale and retail marketing and sales. We continue tobe excited about the longer-term opportunities for Forterra's growthand its ability to create shareholder value," he continued.
"Negotiationswith major new customers have proceeded well and we expect that we willbe receiving significant purchase orders that will generate additionalsales and cash flow in 2009 and 2010. In particular, in late July 2009,one of these expected new customers informed Forterra in writing thatit expects to place initial orders for deliveries beginning inSeptember 2009 for between $375,000 and $500,000 of Forterra's wormcastings. We expect to receive the first purchase order from themwithin the next few weeks. Trials with other potential regional andnational customers are continuing and have proceeded very well and wecontinue to expect that this will lead to additional salesopportunities for Forterra in 2010 and future years.
"We alsohave been exploring options to raise additional funds and have met withvarious institutional investors and others. We have received favorableindications from several of these institutional investors that they areprepared to participate in an equity-based financing to be completed inSeptember 2009," Mr. Denyes said.
Financial Highlights
Forterracontinues to be considered a development-stage company for accountingpurposes and, as such, the progress that the company is making is notfully reflected in the financial statements. As a development-stagecompany, its revenues are applied to reduce sales and marketingexpenses.
Total sales were $77,771 for the 2009 second quarterversus $55,688 for the 2008 second quarter. These sales have beenapplied to reduce General and Administration (G&A) expenses. Thecompany commenced production of vermicompost during 2008. Six-month2009 sales were $99,890, compared with $66,541 in the first half of2008. As a development-stage company, its revenues are applied toreduce G&A expenses.
G&A expenses consist primarily ofcosts related to modification, engineering and refinement of themanufacturing facilities, senior management salaries, occupancy costs,consulting, and professional legal and accounting services.
G&Aexpenses were $327,340 for the second quarter of 2009 versus $301,012for the 2008 second quarter, and were down 26.1% from the 2009first-quarter level of $442,770. The increase is directly related tooccupancy costs relating to maintaining three facilities. First-half2009 G&A expenses amounted to $770,110, compared with $615,023 inthe prior-year period.
Salaries and wages totalled $115,310 inthe 2009 second quarter and $244,621 during the first six months of2009, compared with $118,944 and $265,217 incurred in the same periodsa year ago. The slight decreases relate capitalizing productionsalaries to inventory in 2009. Salaries directly involved in theproduction of worm castings are being capitalized as part of inventory.
Occupancy expenses, consisting of the Puslinch facility, whichis our active plant and head office, our vacated plant in Downsview,Ontario, and our vacated office in Concord, Ontario, increased to$333,934 in the first six months of 2009 from $191,951 in the sameperiod of 2009. The increase for 2009 second quarter was to $164,381versus $96,353 for the same period a year ago. Management has reachedan agreement on the termination of the Concord space and is innegotiations to terminate the Downsview location.
Marketingexpenses amounted to $82,819 for the second quarter in 2009 versus$3,005 for the 2008 three-month period. Marketing expenses wereincreased in early 2009 due the addition of new sales representativesand to costs relating to the establishment of marketing strategies andmarket research and reflecting the fact that 2008 was considerablylower due to decreases resulting in adjustments of marketing consultingservices and the completion of web page development. First-half 2009sales and marketing expenses were $99,815, compared with $37,358 a yearearlier.
Research and Development expenditures were $42,012 forthe 2009 second quarter and $52,479 for the first half of the year,compared with $36,367 and $51,440 in the comparable 2008 periods. Theseamounts consist of researchers' salaries and lab test fees. The companyalso paid $10,000 in the 2009 second quarter to the University ofGuelph for future studies on a specific basis.
After certainother expenses, including interest, depreciation and amortization, andstock-based compensation, the net loss was $561,618 ($0.01 per basicand diluted share) for the 2009 second quarter and $1,269,809 for firstsix months ($0.02 per basic and diluted share) of 2009, compared with anet loss of $434,794 ($0.01 per basic and diluted share) and $885,979($0.02 per basic and diluted share) incurred in the respective periodsof 2008.
Forterra continues to increase its population of redwiggler worms that are at the core of its operations. The companyestimates that the worm population has grown to approximately more than18,000 pounds of worms at December 31, 2008 and approximately more than24,000 pounds at July 31, 2009. The current retail price for worms isUS$30 per pound (resulting in an estimated value of US$720,000 forForterra's worms population). As there are an estimated 1,000 worms perpound, this indicates a total population as at July 31, 2009 of about24 million worms.
As at June 30, 2009, the company had negativeworking capital of $126,404 compared with December 31, 2008 whenForterra had positive working capital of $298,421.
Aspreviously reported, Forterra does not currently have sufficientresources to complete the commercialization of its products or to carryout its entire business strategy. Therefore, the company needs to raiseadditional capital to fund operations. Although Forterra believes thatadditional financing can be sourced, the company cannot be certain thatany financing will be available when needed on acceptable terms or atall. Any additional equity financings will be dilutive to existingshareholders, and debt financing, if available, may require additionalstock to be issued and/or involve restrictive covenants on thebusiness.
As at the end of August 2009, the company believesthat it will be able to secure sufficient working capital to fund itsoperations through 2009 and into 2010. It has received favorableindication from certain institutional investors that they are preparedto participate in an equity-based financing to be completed inSeptember 2009. As well, several of the company's directors have statedtheir willingness to participate in a bridge financing of up to$160,000, if required.
In addition, discussions with currentand potential customers indicate that they will be purchasing productsduring the balance of 2009 that will result in significantly increasedsales and cash flow for the company. In particular, in late July 2009,one of its expected new customers informed the company in writing thatit expects to place initial orders for deliveries beginning inSeptember 2009 for between $375,000 and $500,000 of Forterra's wormcastings.
"It has been a difficult and challenging time forForterra and its shareholders, however, we remain confident in theprospects for our business," said Don Green, the company's chairman andchief executive officer.
"As we make progress in our effort tosecure additional funds for working capital and for financing thegrowth of our business, as well as in receiving contracts and purchaseorders, we look forward to issuing news releases announcing these. Inthe first eight months of 2009, Forterra has successfully moved intoour new manufacturing plant in Puslinch and proven our productionprocess; substantially ramped up the output of our products and thepopulation of worms that are at the heart of our business; secured anumber of significant long-term customers and worked with several othermajor organizations that should be major buyers of our products formany years to come; and developed a more detailed business plan forgrowing our brand and sales and profits in the future," Mr. Green said.
About Forterra Environmental Corp.
Forterra manufactures,markets, and sells environmentally friendly soil enhancers, using wormcastings, which boost fertility while restoring the soil with organicmatter for sustainable, longer-term benefits, including stronger rootgrowth, and drought and pest resistance. Forterra products contain onlyorganic material. They are ideal for golf courses, sports fields, lawncare, parks, nurseries, orchards, and vineyards. Essentially, Forterrauses red wriggler worms to convert organic material into vermicompostor worm castings. Worm castings contain micronutrients, which arerequired for healthy plant development. Worm castings also containmicrobes, which increase the rate at which plants take up availablemacronutrients and micronutrients. Further information is available onthe company's website at www.forterra.com.
Forward-Looking Statements
Thisnews release contains forward-looking statements based on currentexpectations. These forward-looking statements entail various risks anduncertainties that could cause actual results to differ materially fromthose reflected in these forward-looking statements. Such statementsare based on current expectations, are subject to a number ofuncertainties and risks, and actual results may differ materially fromthose contained in such statements. These uncertainties and risksinclude, but are not limited to, availability of resources, competitivepressures, changes in market activity, the ability to sign contractswith customers, the development of markets for worm castings, itsability to breed and maintain a sufficiently large worm population, andregulatory requirements. Risks and uncertainties about Forterra'sbusiness are more fully discussed in the company's disclosurematerials, including its annual information form and MD&A, filedwith the securities regulatory authorities in Canada. Forterra assumesno obligation to update any forward-looking statement or to update thereasons why actual results could differ from such statements.
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Neither the TSX Venture Exchange Inc. nor its Regulation Services
Provider (as that term is defined in the policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of this
release.
FORTERRA ENVIRONMENTAL CORP.
(Previously named "REWORKS Environmental Corp.")
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
As at June 30,
Jun. 30, Dec. 31,
2009 2008
$ $
-------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents (14,097) 368,426
Amounts receivable 61,892 104,147
Inventory (Note 10) 478,483 312,982
Prepaid expenses and deposits 91,685 76,515
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TOTAL CURRENT ASSETS 617,963 862,070
PROPERTY AND EQUIPMENT (Note 5) 499,854 432,686
INTANGIBLE ASSETS (Note 6) 1 1
GOODWILL (Note 14) 30,000 30,000
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TOTAL ASSETS 1,147,818 1,324,757
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---------------------------
LIABILITIES
CURRENT LIABILITIES
Amounts payable and accrued liabilities
(Note 7) 744,367 559,744
Current portion of capital lease payable
(Note 9) - 3,905
---------------------------
TOTAL CURRENT LIABILITIES 744,367 563,649
LOANS PAYABLE (Note 8) 618,000 -
LEASEHOLD INDUCEMENT 76,534 90,534
---------------------------
TOTAL LIABILITIES 1,438,901 654,183
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SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 11(b)) 9,782,954 8,668,601
WARRANTS (Note 11(c)) 411,398 1,367,716
CONTRIBUTED SURPLUS (Note 11(e)) 1,124,895 960,745
SHARES TO BE ISSUED (Note 7) - 14,035
(DEFICIT) (11,610,330) (10,340,523)
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TOTAL SHAREHOLDERS' EQUITY (291,083) 670,574
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,147,818 1,324,757
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FORTERRA ENVIRONMENTAL CORP.
(Previously named "REWORKS Environmental Corp.")
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
JUNE 30, 2009
3 Months 3 Months 6 Months 6 Months
ended ended ended ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
$ $ $ $
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EXPENSES
General and
administrative
(Note 7) 327,240 301,012 770,010 615,023
Sales and marketing 82,819 3,005 99,815 37,358
Research and
development (net) 42,012 36,467 52,479 51,440
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Loss before other
expenses 452,072 340,484 922,305 703,821
OTHER EXPENSES
Stock-based
compensation 79,125 77,699 164,150 157,105
Amortization of
property and
equipment 15,564 5,033 31,128 10,068
Interest and
accretion on
long-term debt 18,000 162,000 -
Interest expense
and foreign
exchange gain (3,143) 11,578 (9,774) 14,985
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NET LOSS FOR THE
QUARTER 561,618 434,794 1,269,809 885,979
DEFICIT, beginning
of year 11,048,712 8,550,231 10,340,523 8,099,046
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DEFICIT, end of
quarter 11,610,330 8,985,025 11,610,330 8,985,025
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FORTERRA ENVIRONMENTAL CORP.
(Previously named "REWORKS Environmental Corp.")
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
3 Months 3 Months 6 Months 6 Months
ended ended ended ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
$ $ $ $
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CASH FLOWS FROM
OPERATING ACTIVITIES
Net (loss) for the
quarter (561,618) (434,794) (1,269,809) (885,979)
Changes to income
not involving cash:
Amortization 15,564 5,033 31,128 10,068
Accretion on
long-term debt - 15,038 144,000 15,038
Stock-based
compensation 79,125 77,696 164,150 157,103
Leasehold
inducement (21,134) 6,513 (14,000) 13,026
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(488,063) (330,515) (944,531) (690,744)
Changes in non-cash
working capital
balances
(Increase) in
prepaid expenses
and deposits (13,824) - (15,170) 12,681
(Increase) in
amounts receivable (20,928) (47,953) 42,255 (15,439)
(Increase) in
inventory (101,713) (19,574) (165,156) (38,135)
Increase (decrease)
in amounts
payables 117,931 158,530 180,718 169,149
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Net Changes in
Working Capital (18,534) (239,512) 42,647 (562,488)
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CASH FLOWS FROM
FINANCING ACTIVITIES
Repayment of
loans payable - (12,500) - (25,000)
Loan received 17,657 290,000 617,657 310,000
-------------------------------------------------------
Cash flow from
financing activities 17,657 277,500 617,657 285,000
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CASH FLOWS FROM
INVESTING ACTIVITIES
Additions to property
and equipment (35,037) (11,368) (98,296) (59,660)
-------------------------------------------------------
Increase in cash and
cash equivalents (523,977) 26,620 (382,523) (337,148)
Cash and cash
equivalents, beginning
of year 368,426 (22,576) 368,426 341,192
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Cash and cash
equivalents, end of
June (155,551) 4,044 (14,097) 4,044
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CASH AND CASH
EQUIVALENTS CONSIST
OF:
Cash (155,551) 4,044 (14,097) 4,044
Cash equivalents
-------------------------------------------------------
(155,551) 4,044 (14,097) 4,044
-------------------------------------------------------
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%SEDAR: 00013128E
SOURCE: Forterra Environmental Corp.
Investorand Media Relations, Richard W. Wertheim, Wertheim + Company Inc.,Email: wertheim@wertheim.ca, (416) 594-1600, (416) 518-8479 (cell)
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