WINALTA EMERGES FROM CCAA PROTECTION AS OILFIELD SERVICE COMPANY

CALGARY, Oct. 22 /CNW/ - Winalta Inc. (TSX-V - "WTA.A") ("Winalta" or the "Company") is pleased to announce that further to its press releases of April 26, September 24 and October 14, 2010, the Company has now received court and creditor approval for its Plan of Arrangement (the "Plan") pursuant to the Companies' Creditors Arrangement Act (Canada) (the "CCAA") pursuant to an Order granted on October 22, 2010 by the Court of Queen's Bench of Alberta, Judicial Centre of Edmonton (the "Court") and a vote by the affected secured creditors of the Company held on October 14, 2010, as required by the Court.  Winalta, together with its subsidiary companies Winalta Carriers Inc., Winalta Oilfield Rentals Inc. and Baywood Property Management Inc. will now be amalgamated to form Winalta Inc. ("New Winalta") and will emerge from CCAA protection to begin focused operations on their oilfield services business. New Winalta will not have any material subsidiaries.

New Winalta will continue to trade on the TSX Venture Exchange under the symbol: WTA.A. New Winalta's head office is located at #4 26302 Township Road, Acheson Alberta, T7X 5A3 with its registered office located at 120, 110 Quarry Park Blvd. SE Calgary, Alberta T2C 3G3.

History

Winalta Inc. had been operating as an integrated company with three main operating divisions, Homes, Industrial, and Manufacturing. The Homes Division sold CSA approved homes via retail centers, communities and supply arrangements. The Industrial Division leased portable industrial accommodations and provided construction services that included excavating, aggregate trucking and paving. The Manufacturing Division built CSA approved homes and portable industrial accommodations from facilities near Spruce Grove, Alberta.

In March of 2010, Winalta's principal lender, HSBC Bank of Canada ("HSBC"), made a demand for payment of approximately $46 million of indebtedness owing by Winalta and its subsidiaries to HSBC under various loans and guarantees.

Following review by the Board of Directors of Winalta and in consultation with advisors, Winalta elected to seek protection under the CCAA as its then current cash in hand would not allow it to meet its obligations. CCAA protection stayed creditors and others from enforcing rights against Winalta and afforded it the opportunity to restructure its financial affairs.

While under CCAA protection, Winalta Inc.'s Board of Directors maintained its usual role and its management remained responsible for the day-to-day operations of Winalta under the supervision of Deloitte & Touche Inc., who was the Court-appointed Monitor, and who was responsible for reviewing Winalta's ongoing operations, assisting with the development and filing of the Plan, liaising with creditors and other stakeholders and reporting to the Court. The Board of Directors and management of Winalta was primarily responsible for formulating the Plan for restructuring Winalta's affairs.

Court Approved Dispositions

While under CCAA protection, the Court approved a number of arm's length asset dispositions, the proceeds from which were utilized to satisfy in part, the debt owed to HSBC and other secured creditors.

  • the sale of Winalta's Acheson manufacturing plant and land for cash consideration of $12.3 million on September 21, 2010.
  • the sale of 29 homes and lots plus 3 vacant lots in Sylvan Lake, Alberta for cash consideration of $3,825,000 on July 6, 2010.
  • the unconditional sale of Winalta's North Battleford Facility for cash consideration of $2,400,000 to be received October 29, 2010.
  • the sale of Winalta's Jutland Ridge Property for cash consideration of $2,100,000 on October 13, 2010.
  • the sale of three Drayton Valley gravel pit leases for cash consideration of $1,600,000 on October 15, 2010.
  • the sale of 118 acres of residential property in Estevan, Saskatchewan for cash consideration of $1,600,000 on July 30, 2010.
  • the sale of 6.13 acres of highway commercial property in Grande Prairie, Alberta for cash consideration of $1,440,000 on May 31, 2010.
  • the sale of Winalta's Drayton Valley lands for cash consideration of $1,000,000 on September 1, 2010.
  • the sale of a shop located in Drayton Valley, Alberta for cash consideration of $700,000 on September 14, 2010.
  • the sale of Winalta's Bruderheim lands for cash consideration of $600,000 on September 1, 2010.

As a result of the above Court ordered dispositions, Winalta was able to apply an aggregate of approximately $27,500,000 towards repayment outstanding bank debt.

In addition to Court approved asset dispositions, Winalta was successful in completing the sale of 83 homes from its inventory for approximately $9.5 million in proceeds. These proceeds were used to fund day to day operations, pay professional fees related to the CCAA process and to further reduce bank debt.

The Court has additionally granted Winalta an Order relieving it of its obligation to hold an annual meeting of its shareholders within the time prescribed by the Business Corporations Act (Alberta) until such time as the Court orders the annual meeting of Winalta's shareholders to be called.

Support from Majority Shareholder

Artie Kos, President and CEO of Winalta and majority shareholder of Winalta on several occasions was asked by Winalta's primary lender and the Monitor to provide cash injections and or security to Winalta to allow it to continue through the CCAA process. Since April 26, 2010, Artie Kos, through Kos Corp. Investments Inc. and certain of its subsidiaries, has provided the following support to Winalta:

  • In July of 2010 committed to provide up to $2 million in additional financing in the event that financing could not be found to pay out HSBC
  • In September of 2010 provided $3 million in trust to the Monitor to secure an extension to the forbearance agreement with HSBC and allow for Winalta to submit its Plan of Arrangement
  • In September and October of 2010 paid $95,000 for appraisals, upfront fees, financial advisory services and other fees that Winalta was not granted permission by the Monitor to pay
  • In October of 2010 provided $300,000 in trust to secure term financing as Winalta was not granted permission by the Monitor to provide the security
  • Has made available certain guarantees which may or may not be called upon as the company exits CCAA

New Winalta

New Winalta rents, delivers, installs, provides maintenance and dismantlement services for modular camp units, sleepers, well site trailers and portable power, water and waste treatment system rentals to the oil and gas, construction, mining and forest industries in British Columbia, Alberta, Saskatchewan and Manitoba. It is the intention of New Winalta going forward to have new units manufactured by third party established vendors. New Winalta is on the approved vendors list of all of Western Canada's largest oil and gas industry participants and has one of the best safety records in the industry and is a proud member of Enform - the health, safety and training arm of the petroleum industry.

Historically, wellsites are rented without long term contracts while the camp business can see companies commit under a contractual arrangement depending on the size of and the duration that the camp is required. New Winalta's camps are much smaller and focused on the drilling industry and as such the contracts are often for a much shorter period of time.

The Company presently has 3 signed agreements with major oil and gas companies in Western Canada and currently has commitments for its entire fleet of camps and wellsites for the 2010/2011 winter drilling season.

Our Industry

The industry is characterized by the rental of modular structures for use as workforce accommodation and temporary workspace required for the oil and gas, construction, mining and forest industries and to provide related services including transportation, installation, dismantling, repair and maintenance of modular structures including both portable power, water and waste treatment facilities. Modular structures are supplied for drill camps, completion camps, free standing sleepers, geologist/engineer quarters and staff quarters. The demand, pricing and terms for modular structures is highly dependent on the level of industry activity for Canadian resource companies. The level of activity is influenced by several factors: commodity prices, the cost of exploring for and developing resources, available infrastructure capacity, and the ability of project oriented resource companies to raise equity capital and debt financing. The modular structure market is highly competitive with both regional suppliers and large multi-national companies in the industry.

Management estimates that there are approximately 3,000 wellsites available for rental services in the WCSB area that the Company presently services. This amount would effectively service the 800 drilling rigs, which is the industry available rig count at this time. Based on this data, management believes that a key measurement of success in this business is the multiplier relationship between the overall drilling rig utilization in the WCSB and the utilization of the Company's modular structures. Since inception, the Company has enjoyed an average utilization multiplier from fiscal 2007 to 2009 of 1.93, projected at 1.3 for the 2010 fiscal year despite the very slow start to the 2009/10 winter drilling season and projected at 1.6 for 2011. It is management's view that based on internal industry data that these multipliers would be in the top quartile of the industry.

Stated Business Objectives

New Winalta expects to use its available working capital for general working capital purposes. New Winalta's immediate short-term objectives will be to:

      (a) Replace its existing bridge financing;
  (b) Grow revenues through existing contacts; and
  (c) Build additional wellsites and camps.

New Winalta's long-term objectives will be to:

     (a) Continue to identify and address key profitable growth opportunities; and
  (b) Deliver a return on capital to shareholders.

Available Funds and Use of Proceeds

As part of New Winalta's plan for exiting from CCAA, new financing has been obtained to replace the existing financing. The tables below indicate the use of the new financing and its allocation. Winalta will have approximately $364,000 in working capital upon exiting from CCAA, after taking into account the balance of the new financing after deduction of the expenditures set forth below and combining it with existing cash balances and with the working capital balances that were in place prior to the new financing. The Pro Forma Financials (Schedule A) provide additional details of the composition of the working capital.

New debt issued 16,900,000
Fees and deposits withheld      408,500
Net cash provided by financing 16,491,500
   
Cash provided by financing will be used as follows:
 
Retirement of debt secured by Oilfield Rentals Equipment           13,977,156
Settlement of Liabilities subject to compromise   1,454,807
Elimination of HSBC Oilfield Line of Credit     862,433
Contribution of Cash to be used for general purposes      197,104
Total 16,491,500

Share Capital

New Winalta currently has 35,672,079 common shares outstanding. As at July 31, 2010 Winalta had 637,500 stock options outstanding. These options have an exercise price of $0.49 to $0.50 and expire April 2014 and August 2014 respectively.

Winalta's Board of Directors on October 19, 2010 approved the grant of 2,275,000 stock options to Management, Directors and other insiders. These stock options are to be granted and priced based on a 5 day volume weighted average trading price of the Common Shares following the issuance of this press release.   The approved stock options have been allocated as follows:

Officers     
  Artie Kos President and CEO   300,000
  David Hopley Chief Financial Officer   300,000
  Austin Fraser Senior Vice President   300,000
  Ron Ford VP Oilfield   300,000
  Randy Hayden VP Oilfield Marketing   300,000
Directors      
  Mel Benson Director   200,000
  Blair Goertzen Director   200,000
  Bradley R Munro Director   200,000
         
Employees who are not Officers   175,000
         
    Total Options   2,275,000

All options expire 5 years from date of grant.

Pro Forma Capitalization

The following table sets forth the consolidated capitalization of the Corporation as at October 31, 2009 and at July 31, 2010 both before and after giving effect to the CCAA restructuring including the Court ordered dispositions of non-core assets.

Designation As at July 31,
2010
As at July 31,
2010 after giving
effect to the Plan
     
Bank debt (1) $46,186,985 $17,749,362
Common Shares $48,233,759
(35,672,079
Common Shares
outstanding)
$48,233,759
(35,672,079
Common Shares
outstanding)

(1) Bank debt consists of bank indebtedness combined with the current portion of long term debt and the long term debt

New Credit Facilities

Bridge Financing

On October 13, 2010, New Winalta signed a commitment letter with Century Services Inc. for a bridge financing facility in the aggregate amount of $15 million. These funds will be used to retire existing term financing secured by assets of Winalta Inc. The principal terms of the bridge financing include:

  • $15 million facility to be funded on October 29, 2010
  • Secured by specific assets with an appraised value in excess of $30 million
  • 2 year term, no payout penalty after month 3
  • 21% annual interest payable monthly, interest only payments for first 3 months
  • Principal payments commence in February 2011 at a 10 year amortization

Operating Credit Facility

On October 5, 2010, New Winalta signed a commitment letter with Alberta Treasury Branches  for an operating facility with a limit of $5 million. The operating line will be used to fund ongoing operations and to pay out unsecured creditors as part of the Company's Plan of Arrangement. The principal terms of the operating facility include:

  • $5 million facility to be funded on October 29, 2010
  • Secured by accounts receivable and general security agreement (GSA)
  • Initial 6 month term renewable annually thereafter
  • Interest Prime + 2%
  • Margining based on 75% of accounts receivable in good standing

The Credit Facility contains a number of provisions that serve to limit the amount of debt New Winalta is permitted to incur. The key maintenance covenant is with respect to New Winalta's debt to capitalization ratio. Maintenance covenants are important as they are ongoing conditions that must be satisfied to provide continued access to the Credit Facility.

Under the Credit Facility, the total debt to tangible net worth covenant requires that New Winalta does not exceed a ratio 2.0 : 1 calculated monthly. The covenant is calculated based on the definition provided by the lender. 

Unsecured Term Financing

An additional $1.9 million in term financing has been provided by several arm's length private lenders. These funds will be used to retire existing term financing and supplement the operating facility. The principal terms of the unsecured term financing include:

  • $1.9 million facility to be funded on October 29, 2010
  • Unsecured
  • 2 year term, no payout penalty after 1 year
  • 12% annual interest payable monthly, interest only payments for first 12 months

Principal Shareholder

Artie Kos, through Kos Corp. Investments Ltd. and certain of its subsidiaries, directly holds 17,070,813 and indirectly holds an additional 1,300,000 for a total common shares held of 18,370,813 representing 51.5% of the total common shares outstanding.

Management and Board of Directors

Management

Artie T. Kos - Chairman & Chief Executive Officer
Artie Kos, in 1983 started Kos Corp Oilfield Hauling a company he grew into one of North America's largest privately owned oilfield transportation firms. In the spring of 2006, Mr. Kos sold his interest in the oilfield transportation business, and founded the privately owned investment company; Kos Corp. Investments Ltd. Kos Corp. is involved in real estate and strategic acquisitions. The largest acquisition to date has been the purchase of a majority shareholding in Winalta Inc. Mr. Kos was then named President and CEO of Winalta in January 2007. In April 2009, Mr. Kos stepped down as President and CEO and took position as Chairman on the Board of Directors. In April 2010 the company restructured and Mr. Kos was re-appointed President and CEO.

David Hopley - Chief Financial Officer
David Hopley is a member of the Certified Management Accountants of Alberta and a member of Financial Executives International (FEI) Edmonton Chapter and has served on their Board of Directors. Prior to joining Winalta Inc., Mr. Hopley was a Regional Controller with Jayman Homes Builders. Most notably, David spent eight years with Corporate Express as Regional Controller and VP, leading accounting and financial reporting terms and overseeing the design and implementation of internal financial controls and processes. Mr. Hopley has also been involved in divestitures and acquisitions as well as consolidating regional operations with international experience in manufacturing and distribution operations.


Austin Fraser - Senior Vice President and Corporate Secretary
Austin graduated in 2006 from Dalhousie University with an undergraduate degree in management and an MBA in finance and marketing. Mr. Fraser joined Kos Corp. Investments Ltd. in 2006 as manager of corporate development to provide analysis on business opportunities, prepare financial models, and assist in presentations on the company's transactions. He was hired by Winalta Inc. in 2007 and in 2008 was promoted to vice-president of corporate development. In 2010 the company restructured and Mr. Fraser stepped into the role of Vice President, Winalta Homes; responsible for overseeing operations for sales, manufacturing and corporate restructuring. Mr. Fraser took on the responsibility of divesting of Homes and Construction business as part of the CCAA process and was promoted to Senior Vice President of Winalta Inc. upon completion of the sale of Winalta's Homes business.

Ron Ford - Vice President, Operations
Ron began his career in the oilfield service sector in 1976 working various entry level assignments in the well servicing industry. Ron then spent 21 years working in various capacities with Nabors Drilling working his way through Floorhand to Rig Manager. After spending a year as Drilling Foreman for Anderson Exploration, Ron returned to Nabors in 2001 as a Field Superintendent. In 2004, Ron was promoted to Canadian Operations manager responsible for the day to day operation of 82 drilling rigs. Ron joined Oilfield in January 2007 and has been instrumental in building the rental division. Ron's deep understanding and ties to the drilling industry provides the Company with quick access to the key decision makers in the industry.

Randy Hayden - Vice President, Marketing
Randy began his oilfield service career in 1978 with Westburn Drilling. In 1983 Randy joined Precision Drilling and became a Rig Manager in 1985 a position he held until 1997. Thereafter Randy held several roles with the culmination of a senior position in Sales and Marketing, which he held until early 2007 when he joined the Company as Vice President, Marketing. Randy's deep ties to the drilling community provides the Company with quick access to the key decision makers at many of the leading oil and gas producing companies and drilling service providers.

Board of Directors

J. Blair Goertzen 
J. Blair Goertzen is President and Chief Executive Officer of Enerflex Ltd. He joined the company in August 2003 as executive vice-president and chief operating officer and, in April 2005, assumed his present position. Between September 1999 and May 2003, Mr. Goertzen was president of IPEC Ltd. and then executive vice-president of Flint Energy Services. From 1989 to 1999 Mr. Goertzen served as vice-president of Enserv Corporation, a company acquired by Precision Drilling Corp. He subsequently became senior vice-president of Precision Corp. Mr. Goertzen joined the board as part of a board restructuring in 2007.

Brad R. Munro
Bradley R. Munro, President and CEO of Bittercreek Capital Corp, a private investment and advisory firm. Munro holds a Bachelor of Commerce Degree from the University of Saskatchewan and has extensive experience in corporate finance and investment in the oil and gas and other industries. Mr. Munro spent 19 years as Vice President, Investments for a significant Canadian based venture capital firm. Mr. Munro currently serves as a director for Secure Energy Services, Galleon Energy Inc., 49 North Resource Fund as well as Winalta Inc. Mr. Munro was the lead director and Chair of the Independent Committee on the privatization of CCS Income Trust. Mr. Munro has served on the board of a number of both private and public companies involved in both oil and gas production and oil and gas services. Mr Munro joined the board of directors in June 2008.

Mel E. Benson 
Mel E. Benson is president of Mel E. Benson Management Services Inc. an international consulting firm working in various countries with a focus on negotiations. He is also part owner of Tenax Energy Inc and Kanatex Energy Inc. Mr. Benson has been a director of Suncor Energy since 2000, serving on the compensation committee and chairing the environment, health and safety committee. He has also served on the audit committee. Mr. Benson retired from Exxon International and Imperial Oil Canada in 2000 after a long career as operations manager and senior member of project management based in Houston, Texas. Earlier in his career, Mr. Benson worked for a federal government secretary of state, and as an instructor of Native studies at Grant MacEwan College in Edmonton. Mr. Benson is an active member of several charitable organizations. He is a past director of STARS, and past chairman of the Pembina Producers Association. He was recently appointed by Alberta's education minister to the board of governors of NAIT (Northern Alberta Institute of Technology). He was also appointed, through a cabinet Order-In-Council, to an advisory board on economic development. Mr. Benson is a director of Hull Family Services. He received the 2003 National Aboriginal Achievement Award for Business, and has been honoured with many other community awards. Mr. Benson joined the board of directors in 2007.

Artie Kos - See Above

SUMMARY PRO FORMA FINANCIAL INFORMATION OF THE RESULTING COMPANY

The amounts set forth in the following table have been taken from the unaudited pro forma consolidated balance sheet and income statement of New Winalta that are attached to this Press Release as Schedule A (the "Pro Forma Statements"). The Pro Forma Statements have been prepared by compiling the unaudited financial statements for the nine-month period ended July 31, 2010.

The Pro Forma Statements reflect the impact of the CCAA restructuring including the Court ordered dispositions on non-core assets. The table set forth below contains summary unaudited pro forma information and readers should review the more detailed Pro Forma Statements and accompanying notes attached as Schedule A to this Press Release.

 
Nine months
ended
July 31, 2010
Pro-forma
Adjustments
Pro Forma
Consolidated
Revenues $ 29,508,177    $ 19,652,988 $  9,855,189    
Cost of Goods Sold $ 28,416,402 $ 23,480,346 $  4,936,056
Operating Expenses $ 24,831,461   $ 18,057,918 $  6,773,543   
Income (Loss) Before Income Taxes   $(23,739,686)  $(21,885,276) $ (1,845,410)      
Net income (loss) $(23,739,686)        $(21,885,276) $ (1,854,410)   

Auditors and Transfer Agent

Winalta's Auditors are PriceWaterhouseCoopers LLP and Computershare Trust Company is Winalta's Transfer Agent.

Forward-Looking Information Disclaimer

Certain statements included in this news release constitute "forward-looking information" within the meaning of applicable securities legislation, including the timing of completion of transactions related to the Company's emergence from CCAA protection, the projected multiplier relationship between the overall drilling rig utilization in the WCSB and the utilization of the Company's modular structures in the upcoming drilling season and the business objectives of the Company as it emerges from CCAA protection. Such forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Winalta to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information.

Specifically, some of the material risks include the  implementation of the Plan exiting from CCAA protection, the ability to generate cash from operations and maintain adequate cash-on-hand, the ability to obtain alternative or replacement financing to replace the bridge financing in restructuring the Company's indebtedness, and the Company's ability to attract and retain customers.

The Company continually monitors and evaluates these risk factors and takes action to minimize them. However, as many of these risks are outside of Company control, it is impossible to completely mitigate these risks. Readers are accordingly cautioned not to place undue reliance on forward-looking statements contained herein.

The forward-looking information contained in this news release represents the expectations of Winalta as at October 22, 2010 and, accordingly, is subject to change after such date. However, Winalta expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law.

Neither the TSX Venture Exchange nor its Regulation Services Provide (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


SCHEDULE A

Unaudited Pro Forma Consolidated Balance Sheet
As at July 31, 2010

Unaudited Pro Forma Consolidated Statement of Earnings
For the nine months ended July 31, 2010
And the year ended October 31, 2009

Pro Forma Consolidated Statement of Operations and  Comprehensive Loss
(Unaudited)


For the Nine Months Ended July 31, 2010
 
Winalta Inc
Pro Forma Adjustments
Notes
Pro Forma Winalta Inc
 
 
REVENUE 29,508,177 19,652,988 2(b) 9,855,189
 
COST OF GOODS SOLD 28,416,402 23,480,346 2(b) 4,936,056
 
GROSS PROFIT 1,091,775 (3,827,358)   4,919,133
 
EXPENSES
   General and administrative 6,328,073 4,468,126 2(b) 1,859,947
   Depreciation and amortization 5,575,969 2,364,226 2(b) 3,211,743
   Interest expense 2,726,757 2,094,509 2(b) 632,248
   Restructuring Costs 709,322 (362,000)   2(b) 1,071,322
   Loss on disposal and impairment of assets 9,491,340 9,493,057 2(b) (1,717)
  
              24,831,461  18,057,918   6,773,543
 
LOSS BEFORE INCOME TAXES (23,739,686) (21,885,276)   (1,854,410)
 
INCOME TAXES           -  
NET LOSS AND COMPREHENSIVE LOSS (23,739,686) (21,885,276)   (1,854,410)
 
Basic and diluted loss per share (0.67) (0.61)   (0.05)
Basic and diluted weighted average number of common shares 35,672,079 35,672,079   35,672,079

Pro Forma Consolidated Balance Sheets

(Unaudited)


As At July 31, 2010   Winalta Inc Pro Forma Adjustments Notes Pro Forma
Winalta Inc
ASSETS          
  CURRENT          
    Cash and equivalents   1,504,884 1,292,820 2(a) 212,064
    Accounts receivable   5,592,232 3,868,674 2(a) 1,723,558
    Inventory   6,799,830 6,799,830 2(a) -  
    Prepaid expenses and deposits   1,146,033 554,493 2(a) 591,540
                  15,042,979               12,515,817                   2,527,162
           
  PROPERTY, PLANT & EQUIPMENT                 42,027,388 13,360,253 2(a) 28,667,135
  LAND HELD FOR AND UNDER DEVELOPMENT   9,138,836 9,138,836 2(a)                                -  
                66,254,203 35,059,906   31,194,297
           
LIABILITIES          
  CURRENT          
     Bank indebtedness   20,505,109 20,505,109 2(a) -
     Accounts payable and accrued liabilities   1,172,906 969,889 2(a) 203,017
     Customer deposits   1,381,958 1,381,958 2(a) -
     Income taxes payable   2,450,909 2,258,281 2(a) 192,628
     Current portion of long-term debt   25,681,876 23,914,985 2(a) 1,760,891
     Shareholder loan   1,000,000 1,000,000 2(a) -
                  52,192,758               50,030,223                 2,162,536
           
  DEFERRED GAIN ON SALE LEASEBACK                   1,444,926                                -     1,444,926
 
  LONG-TERM DEBT
  - (15,988,471) 2(a) 15,988,471
  LIABILITIES SUBJECT TO COMPROMISE                 5,820,273 5,820,273 2(a) -
    7,265,199                 (10,168,198)                 17,433,397
           
SHAREHOLDERS' EQUITY          
  SHARE CAPITAL                 48,233,759                                -                 48,233,759
  CONTRIBUTED SURPLUS                   1,542,569                                -                   1,542,569
  (DEFICIT) RETAINED EARNINGS               (42,980,082)               (4,802,119) 2(a)             (38,177,964)
                  6,796,246               (4,802,119)   11,598,364
                66,254,203 35,059,960   31,194,297

Pro Forma Consolidated Statement of Operations and  Comprehensive Loss
(Unaudited)


For the Year Ended October 31, 2009   Winalta Inc Pro Forma Adjustments Notes Pro Forma
Winalta Inc
           
REVENUE   48,709,298 38,351,343 2(b) 10,357,955
           
COST OF GOODS SOLD   43,688,668 39,491,172 2(b) 4,197,496
           
GROSS PROFIT                   5,020,630                (1,139,829)                   6,160,459
           
EXPENSES          
     General and administrative   14,983,533 12,432,504 2(b) 2,551,029
     Depreciation and amortization   8,860,765 4,227,797 2(b) 4,632,968
     Interest expense   4,228,516 3,070,854 2(b) 1,157,662
     Restructuring Costs   - (362,000) 2(b) 362,000
     Loss on disposal and impairment of assets   8,752,015 6,581,679 2(b) 2,170,336
                  36,824,829               25,950,836                 10,873,993
           
LOSS BEFORE INCOME TAXES               (31,804,199)             (27,090,665)                  (4,713,534)
           
INCOME TAXES                  (4,728,131)                (2,792,130) 2(b)                (1,936,001)
NET LOSS AND COMPREHENSIVE LOSS               (27,076,068)             (24,298,535)                  (2,777,533)
               
Basic and diluted loss per share                    (0.76)                   (0.68)                     (0.08)
Basic and diluted weighted average number of common shares             35,672,079           35,672,079             35,672,079

WINALTA INC.


Notes to the Pro Forma Consolidated Financial Statements
(Unaudited)


1. BASIS OF PRESENTATION

The accompanying unaudited pro forma consolidated balance sheet of Winalta Inc. ("Winalta") as at October 31, 2009 and the unaudited pro forma consolidated statement of operations for the nine months ended July 31, 2010 ("the pro forma statements") have been prepared to reflect the disposition of the non surviving entities of Winalta.

The pro forma statements have been prepared based on information derived from, and should be read in conjunction with Winalta's annual audited financial statements as at October 31, 2009 and the unaudited quarterly financial statements for the period ended July 31, 2010.

The pro forma statements have been prepared by the management of Winalta in accordance with Canadian generally accepted accounting principles. The unaudited pro forma consolidated balance sheet gives effect to the assumed transactions and assumptions described in Note 2 as if they occurred at the date of the balance sheet. The unaudited pro forma statement of operations and comprehensive loss for the nine month period ended July 31, 2010 gives effect to the assumed transactions and assumptions described in Note 2 as if they occurred on October 31, 2009. The pro forma statements may not be indicative of the results that actually would have occurred if the events reflected herein had been in effect on the dates indicated or of the results that may be obtained in the future.

Accounting policies used in the preparation of the pro forma statements are consistent with those used in the audited financial statements of Winalta as at and for the year ended October 31, 2009.

2. PRO FORMA UNAUDITED BALANCE SHEET AND STATEMENT OF OPERATIONS TRANSACTIONS

The unaudited pro forma consolidated balance sheet and statement of operations gives effect to the following assumptions, transactions and adjustments as if they occurred on October 31, 2009:

The site built home business of the Company was discontinued during the second quarter of 2009 and the Construction business was discontinued in the second quarter of 2010. The Homes sales, community development and manufacturing businesses were discontinued in the third quarter of 2010. The discontinued operations were evaluated by management and the decision was made to actively market and dispose of these operations. In the second quarter of 2010 the decision was made to dispose of the construction division assets through various auctions. The sale of these assets has been completed. In the third quarter of 2010 the decision was made to sell the manufacturing facility and liquidate the remaining inventory of homes, lots and land held for development. The sale of substantially all of these assets is expected to be completed by October 2010. The total loss on these assets amounts to $9.4 million and has been included in "Loss on disposal and impairment of assets" in the statements of operations and comprehensive loss, and as further described below. The losses and impairments recorded are based on the best information available as of the statement dates and in some circumstances are estimates for sales that have not closed. The losses on these transactions may be subject to material change based on future events.

(a) Balance Sheet Transactions

As a result of the discontinuance of the above noted divisions, the following balance sheet items relating to the discontinued divisions have been removed from the pro forma balance sheet effective July 31, 2010.  In addition the impact of the new financing described in note 2(c) have been reflected as if the financing had been obtained as of July 31, 2010.

As At July 31, 2010        
    Assets and
liabilities of
discontinued
operations
Impact of
New Debt
Issuance 2(c)
Total
ASSETS        
  CURRENT        
     Cash and equivalents   1,489,924 (197,104) 1,292,820
     Accounts receivable   3,868,674 - 3,868,674
     Inventory   6,799,830 - 6,799,830
     Prepaid expenses and deposits   600,993 (46,500) 544,493
    12,759,421 (243,604) 12,515,817
         
  PROPERTY, PLANT & EQUIPMENT   13,360,253 - 13,360,253
  LAND HELD FOR AND UNDER  
  DEVELOPMENT
  9,138,836 - 9,138,836
    35,303,510 (243,604) 35,059,906
         
LIABILITIES        
  CURRENT        
     Bank indebtedness   19,642,676 862,433 20,505,109
     Accounts payable and accrued liabilities   969,889 - 969,889
     Customer deposits   1,381,958 - 1,381,958
     Income taxes payable   2,258,281 - 2,258,281
     Current portion of long-term debt   10,849,358 13,065,627 23,914,985
     Shareholder loan   1,000,000 - 1,000,000
          36,102,163       13,928,060       50,030,223
         
  LONG TERM DEBT   - (15,988,471) (15,988,471)
  LIABILITIES SUBJECT TO COMPROMISE   4,365,466 1,454,807 5,802,119
                    4,365,466                 (14,183,664)                 (10,168,198)
         
SHAREHOLDERS' EQUITY        
  (DEFICIT) RETAINED EARNINGS   (5,164,119) 362,000 (4,802,119)
    35,303,510 (243,604) 35,059,906
 

(b) Statement of Operations Transactions

As a result of the discontinuance of the above noted divisions, the following statement of operations items relating to the discontinued divisions are removed and the costs of obtaining financing as described in note 2(c) are added to the pro forma statement of operations and comprehensive loss for the nine months ended July 31, 2010 and the year ended October 31, 2009.

Nine months ended July 31, 2010   Construction Homes Manufacturing and Sales Debt Issuance 2(c) Total
Revenue           2,917,301           16,735,687 - 19,652,988
Cost of goods sold   2,951,282           20,529,064 - 23,480,345
Gross profit            (33,981)            (3,793,377) - (3,827,358)
           
Expenses          
   General and administive          2,174,701             2,293,425 -    4,468,126
   Interest expense             234,387             2,129,839 -    2,364,226
   Depreciation and amortization             731,375             1,363,134 -    2,094,509
   Restructuring Costs   - - (362,000)      (362,000)
   Loss on disposal and impairment of assets~          5,674,238             3,818,819 -    9,493,057
    8,814,701             9,605,217 (362,000) 18,057,918
                     
Net loss before taxes       (8,848,682)          (13,398,594) 362,000 (21,885,276)
Income taxes (recovery)                         -                          - -                  -
Net loss       (8,848,682)          (13,398,594) 362,000 (21,885,276)




Year ended October 31, 2010   Construction Homes Manufacturing and Sales Debt Issuance 2(c) Total
Revenue          16,950,010         21,401,333 - 38,351,343
Cost of goods sold         14,593,484         24,897,688 - 39,491,172
Gross profit   2,356,526          (3,496,355) -   (1,139,829)
           
Expenses          
   General and administive   2,659,503             9,773,001 - 12,432,504
   Depreciation and amortization   3,146,044             1,081,753 - 4,227,797
   Interest expense   746,495             2,324,359 - 3,070,854
   Restructuring Costs   - - (362,000)      (362,000)
   Loss on disposal and impairment of assets   5,068,167             1,513,512 -    6,581,679
    11,620,209            14,692,627 (362,000) (25,950,836)
           
Net loss before taxes   (9,263,683)          (18,188,982) 362,000 (27,090,665)
Income taxes (recovery)           (942,182)            (1,849,948) -   (2,792,130)
Net loss        (8,321,501)          (16,339,034) 362,000 (24,298,535)

(c) Debt Issuance

As part of The Company's plan to exit CCAA, existing term financing secured by specific Oilfield Rental assets is being replaced with new financing.  In order to secure the required company The Company has agreed to pay loan application fees totaling $362,000 to the lenders.  These funds will be withheld at the funding of the loans.  In addition an amount equal to 3 months interest payments on one of the facilities, totaling $46,500, will be held in trust as a security deposit and will be applied against the final 3 months of the term of the facility.  These funds will also be withheld at the funding of the loans.

The cash provided by the new financing agreements will be as follows;

New debt issued                                       16,900,000
Fees and deposits withheld                                             408,500
Net cash available                                       16,491,500

Cash provided by financing will be used as follows;

Retirement of debt secured by Oilfield Rentals Equipment   13,977,156
Settlement of Liabilities subject to compromise      1,454,807
Elimination of HSBC Oilfield Line of Credit         862,433
Contribution of Cash to be used for general purposes         197,104
Total   16,491,500
     

%SEDAR: 00005154E

For further information:

Artie Kos, President and Chief Executive Officer
Phone: (780) 960-6900
Fax: (780) 962-9523

Austin Fraser, Senior Vice President
Phone: (780) 960-6900
Fax: (780) 962-9523