Dynetek reports 2007 nine month and third quarter results and a revitalized Board of Directors



    CALGARY, Nov. 9 /CNW/ - Dynetek Industries Ltd. (TSX:DNK), a leader in
the design, manufacturing and marketing of proprietary fuel storage cylinders
and systems for compressed natural gas (CNG) and hydrogen, today reported
results for the three months and nine months ended September 30, 2007.

    
    Financial Highlights

    (tabular amounts in thousands of Canadian dollars, except share capital
     and per share data)
    (unaudited)
                                  Three months ended       Nine months ended
                                        September 30            September 30
                              -----------------------------------------------
                                    2007        2006        2007        2006


    Total Revenue                  9,836       8,664      28,481      26,306

    Net income (loss)               (412)       (311)     (2,554)       (244)
    Net income (loss) per
     common share (basic
     and fully diluted)            (0.02)      (0.02)      (0.12)      (0.01)
    EBITDA(1)                        375         317       2,061       1,703
    Cash flow (deficiency)
     from operations                 (12)     (2,144)        981        (822)
    -------------------------------------------------------------------------
    (1) EBITDA is a non-GAAP financial measure that is defined and discussed
        in the Non-GAAP Financial Measures section of the Management's
        Discussion and Analysis.
    

    Revenues for the nine months ended September 30, 2007 were a record of
$28.5 million. Third quarter cylinder and system sales were 2% higher than in
Q3 2006 and research and development revenue was 225% higher than in Q3 2006,
resulting in an overall revenue increase for the three months ended
September 30, 2007 of 13%. This highlights the importance of the
diversification of Dynetek's product and service offerings that allows the
Company to buffer market demand variations.
    The loss of ($2.6 million) for the nine months ended September 30, 2007
relates primarily to the impairment of the future tax asset previously
reported for Q2 2007 which is a one-time reduction of the future tax asset and
a non-cash item. The net loss for the three months ended September 30, 2007 is
$199,000, down from a $244,000 loss in Q3 2006.
    Christian Rasche, President and Chief Executive Officer, said the third
quarter revenues significantly surpassed amounts forecasted in the Q2 2007
report. "Our cylinder and system sales were higher than originally anticipated
as we were able to accommodate certain customers' unexpected immediate
requirements. In addition, our research and development revenues were higher
than the same period through 2006 as Dynetek successfully met all planned R&D
deliverables to the hydrogen fuel system development project for Daimler in
cooperation with Magna Steyr. Dynetek expects to see an increase in activities
for hydrogen powered vehicles."
    As indicated in our news release and interim report for Q1 and Q2 2007,
the reason for lower than expected cylinder and systems sales for the nine
months is a result of low tender activities by many European bus
manufacturers. "For this reason we expect that our European cylinder and
system sales in Q4 2007 will be lower than the levels achieved in Q4 2006.
Dynetek has undertaken measures to control spending and to increase activities
in other business areas to minimize the impact of the slower than expected
European market. The lower revenues for CNG cylinder and system sales will be
offset with higher revenue in Research and Development activities which
reflects the increasing activities in the hydrogen market," commented Mr.
Rasche. "We expect the activities in the European market to pick up by Q2
2008. Dynetek is very well positioned in the CNG market place where
opportunities will enable the Company to achieve the long-term goals of net
income and continued revenue growth."
    Dynetek also announces the appointment of John Bobenic and G. Howard
(Howie) Kroon to the Board of Directors.
    Mr. Bobenic is currently the President & CEO and a Director of Maxim
Power Corp., a TSX listed independent power producer. Mr. Bobenic is a
Chartered Accountant, an Executive MBA and has over 25 years of energy
industry experience. Mr. Bobenic is also a member of the Board of
Directors/Managers of the Independent Power Producers Society of Alberta
("IPPSA") and numerous affiliates of Maxim Power Corp. including Maxim Power
(USA) Inc., Maxim Power Europe BV, Comax France SAS, Milner Power Inc., Basin
Creek Holdco LLC, and Pawtucket Power Generation LLC. Mr. Bobenic has been
appointed to the Audit Committee of the Board of Dynetek and has agreed to
serve as Chairman of that committee.
    G. Howard (Howie) Kroon has nine years of manufacturing industry
experience in senior management positions. Howie is presently the President
and CEO of Palliser Lumber Sales Ltd. Mr. Kroon joined Palliser Lumber Sales
Ltd. in 1998 as the CFO, transitioned to COO during his tenure and was
appointed CEO in 2003. Prior to 1998 he was at an international accounting
firm where Howie was a senior manager in the areas of tax and advisory
services and obtained his chartered accountancy designation.
    With these appointments and the recent appointments of Tony Roberts and
Brad Turner announced in August, the revitalized Board of Directors of Dynetek
and Board Committees are now composed of:

    
        John Bobenick(1),(3)
        Howie Kroon(1),(2)
        Brad Turner(1),(3)
        Anthony Roberts(2)
        Robb Thompson(2),(3)
        Heinz Portmann
        Chris Rasche

    (1) Members of the Audit Committee
    (2) Members of the Compensation Committee
    (3) Members of the Corporate Governance Committee
    

    OPERATIONAL HIGHLIGHTS

    In the first nine months of 2007, Dynetek achieved total revenues of
$28.5 million compared to $26.3 million for the same period of 2006. Cylinder
and system sales for the nine months ended September 30, 2007 were
$23.6 million compared to $24.6 million for the same period of 2006. In the
third quarter of 2007, Dynetek achieved total revenues of $9.8 million (2006 -
$8.7 million) with cylinder and system sales of $8.5 million (2006 -
$8.3 million) and research and development revenue of $1.3 million (2006 -
$0.4 million). The Company recorded cash flow from operations of $1.0 million
for the nine months ended September 30, 2007, compared to cash flow deficiency
from operations of ($0.8) million for the same period of 2006. Cash flow
deficiency from operations for the three months ended September 30, 2007 was
($12,000) compared to cash flow deficiency from operations of ($2.1) million
for the same period of 2006. The Company continues to have positive EBITDA(1)
and reported $2.1 million for the nine months ended September 30, 2007 and
positive EBITDA(1) of $0.4 million for the three months ended September 30,
2007 representing the sixteenth consecutive quarter.
    Dynetek reported a loss of ($2.6) million for the nine months ended
September 30, 2007 and ($0.4) million for the three months ended September 30,
2007. The loss for the nine months ended September 30, 2007 is primarily the
result of the impairment of the future tax asset reported in Q2 2007, which
was directly affected by the deferral of tenders for the European bus markets
into 2008. The one-time reduction of the future income tax asset is a non-cash
item. The loss for the three months ended September 30, 2007 is primarily the
result of reduced contribution margins, due to changes in foreign exchange
rates and the timing differences between when raw materials are purchased and
when finished cylinders and systems are manufactured and sold.
    The Company continues to focus its compressed natural gas cylinder and
system sales in areas such as California and Europe. Dynetek's proprietary
technology provides advantages such as less weight, more compressed natural
gas on board and less operating costs, being the value proposition we offer
our customers that our competitors cannot provide. In the first nine months of
2007, Dynetek's European operations achieved cylinder and system sales of
$13.5 million (2006 - $15.0 million). For the quarter ended September 30,
2007, Dynetek's European operations achieved cylinder and system sales of
$4.6 million (2006 - $5.5 million). The cylinder and system sales from the
Canadian operations for the nine months ended September 30, 2007 were
$10.2 million (2006 - $9.6 million). Cylinder and system sales from the
Canadian operations for the quarter ended September 30, 2007 were $3.9 million
(2006 - $3.2 million).
    Dynetek's research and development team continues to focus its efforts on
compressed hydrogen and related storage requirements. During the first nine
months of 2007 the Company continued to work with 9 different OEMs, including
Ford, Hyundai, Daimler and Nissan, to design, manufacture and deliver the
hydrogen storage solution on 12 confidential development programs.
    In February of 2007 Dynetek accepted a purchase order representing
approximately $7 million (CAD) in compressed hydrogen system sales with Magna
Steyr, an operating unit of Magna International Inc. The purchase order
involves the development, certification and supply of 700bar compressed
hydrogen fuel storage systems, including related engineering, to Magna Steyr
in connection with Daimler's fuel cell program. At the end of September
Dynetek had delivered three storage systems for the project.
    In the third quarter of 2007 Dynetek delivered the Bulk Transport Systems
"BT450" Tube Trailer System to the Integrated Waste Hydrogen Utilization
Project ('IWHUP'). The BT450 utilize removable modules - also called
Powercubes - to transport hydrogen to various usage points along B.C's
Hydrogen Highway. One of the hurdles identified for the widespread adoption of
hydrogen as a motor vehicle fuel is the refueling infrastructure. These
modules are a key link between the hydrogen production and the various points
of use in the IWHUP. The BT450 is a further demonstration of how Dynetek's
"Instant Infrastructure(TM)" products can enable customers to refuel hydrogen
powered vehicles easily and cost effectively.
    On November 1, 2007 the Company announced that it had signed a MOU with
the William J. Clinton Foundation to supply hydrogen systems for Fuel Cell
Buses. The Clinton Climate Initiative (CCI) is a project of the William J.
Clinton Foundation. CCI will utilize the skills that the Clinton Foundation
has developed in worldwide mobilization to confront crises such as AIDS, to
help initiate programs that directly result in substantial reductions in
greenhouse gas emissions. The CCI's intent is to pool demand in the Large
Cities in a way that can accelerate the development of markets for efficient
and sustainable energy technologies and to simultaneously work with suppliers
to help reduce the cost of sustainable energy products that are of interest to
cities and thereby decrease economic impediments to wide adoption.

    (1) EBITDA is a non-GAAP financial measure that is defined and discussed
    in the Non-GAAP Financial Measures section of the Management's Discussion
    and Analysis.


    MANAGEMENT'S DISCUSSION AND ANALYSIS

    The following sets out management's discussion and analysis of our
financial position and results of operations for the three months and nine
months ended September 30, 2007 and 2006 and is based on information available
as at November 1, 2007. The interim management's discussion and analysis
(MD&A) updates our annual MD&A included in our 2006 Annual Report to
Shareholders, to which readers are referred. No update is provided where an
item is not material or where there has been no material change from the
discussion in our annual MD&A.

    Non-GAAP Financial Measures

    Dynetek Industries Ltd. ("the Company") reports its financial results in
accordance with generally accepted accounting principles (GAAP). It also
occasionally uses certain non-GAAP financial measures, such as EBITDA, working
capital and non-cash working capital. Dynetek defines EBITDA as earnings
before interest, taxes, stock based compensation, non-cash foreign exchange,
depreciation, and amortization. (Prior to Q3 2007, Dynetek defined EBITDA as
also being before impairment of other assets.) Dynetek defines working capital
as current assets less current liabilities. Dynetek defines non-cash working
capital as current assets less cash and current liabilities. These non-GAAP
financial measures are always clearly indicated. The Company believes that
non- GAAP financial measures provide investors and analysts with useful
information so that they can better understand the financial results and
perform a better analysis of the Company's growth and profitability potential.
Since non-GAAP financial measures do not have a standardized definition, they
may differ from the non-GAAP financial measures used by other companies. The
Company strongly encourages investors to review its financial statements and
other publicly filed reports in their entirety and not rely on a single
non-GAAP financial measure.

    
    Financial Highlights

    (tabular amounts in thousands of Canadian dollars, except share capital
     and per share data)
    (unaudited)
                                  Three months ended       Nine months ended
                                        September 30            September 30
                              -----------------------------------------------
                                    2007        2006        2007        2006
    Revenue

    Cylinder and system sales      8,481       8,275      23,641      24,598
    Research and development
     income                        1,322         376       4,499       1,638
    Investment and other
     income                           33          13         341          70
                              -----------------------------------------------
                                   9,836       8,664      28,481      26,306

    Net income (loss)               (412)       (311)     (2,554)       (244)
    Net income (loss) per
     common share (basic and
     fully diluted)                (0.02)      (0.02)      (0.12)      (0.01)
    EBITDA(1)                        375         317       2,061       1,703
    Capital expenditures              86       1,113         817       1,943
    Cash and cash equivalents        861       1,202         861       1,202
    Non-cash working
     capital(1)                   11,648      12,405      11,648      12,405
    Working capital(1)            12,510      13,607      12,510      13,607
    Cash flow (deficiency)
     from operations                 (12)     (2,144)        981        (822)
    Total assets                  42,065      47,108      42,065      47,108
    Long-term debt                 1,769       1,478       1,769       1,478
    Common shares
     outstanding              20,940,451  20,940,451  20,940,451  20,940,451
    Weighted average common
     shares outstanding       20,940,451  20,940,103  20,940,451  20,940,103
    -------------------------------------------------------------------------

    (1) EBITDA, working capital and non-cash working capital are non-GAAP
        financial measures that are defined and discussed in the Non-GAAP
        Financial Measures section of the Management's Discussion and
        Analysis.
    

    Cylinder and system sales for the nine months ended September 30, 2007
were $23.6 million, down 4% from $24.6 million for the same period of 2006.
Cylinder and system sales for the three months ended September 30, 2007 were
$8.5 million, up $0.2 million or 2% for the same period in 2006. In 2006
Dynetek achieved record cylinder and system sales growth. However, in 2007
Dynetek has been unable to maintain the same increases in growth due to the
reduction in tenders in the European Bus Market.

    Research and development income for the nine months ended September 30,
2007 was $4.5 million, up 181% or $2.9 million from the same period in 2006.
Research and development income for the third quarter of 2007 was
$1.3 million, up 225% or $0.9 million from the same period of 2006. The
primary reason for the increase in research and development income for both
the nine months and three months ended September 30, 2007 is the revenues
relating to the Magna Steyr purchase order involving the design, certification
and supply of 700bar compressed hydrogen fuel storage systems. During the
first nine months of 2007, Dynetek continued to be involved with Natural
Resources Canada (NRCan) and 9 different Original Equipment Manufacturers
(OEMs), including Ford, Hyundai, Daimler and Nissan, to design, manufacture
and deliver the hydrogen storage solution on 12 confidential development
programs. Revenues received from the OEMs regarding these projects are
recorded on billing milestones outlined in the contracts and, therefore,
timing differences occur between when costs are incurred and funding is
received. Non-repayable cost shared monies received from NRCan are recorded as
revenue in the period it is invoiced.

    Investment and other income for the nine months ended September 30, 2007
was $0.3 million, compared to $0.1 million for the same period in 2006. In the
third quarter of 2007, investment and other income was $33,000 compared to
$13,000 for the same period of 2006.

    Cost of goods sold was $19.0 million for the nine months ended
September 30, 2007 compared to $18.9 million for the same period in 2006. Cost
of goods sold was $6.6 million for the three months ended September 30, 2007
compared to $6.4 million for the same period in 2006. Corresponding
contribution margins for the nine months ended September 30, 2007 were
$4.6 million, or 19% of sales compared to $5.7 million, or 23% of sales for
the same period of 2006. Corresponding contribution margins for the three
months ended September 30, 2007 were $1.9 million, or 22% of sales compared to
$1.9 million, or 23% of sales for the same period of 2006. The margin
reduction for the nine months ended September 30, 2007 is due primarily to the
airfreight costs incurred in the first quarter and the reduced cylinder and
system sales volumes to cover fixed manufacturing costs. The margin reduction
for the three months ended September 30, 2007 is due to changes in the foreign
exchange rates and the timing differences between when raw materials are
purchased and when finished cylinders and systems are manufactured and sold.

    General and administrative expense was $2.9 million for the nine months
ended September 30, 2007 compared to $2.8 million for the same period of 2006.
General and administrative expense was $0.9 million for the three months ended
September 30, 2007, which is comparable to the same period of 2006. General
and administration expense as a percentage of revenue for the nine and three
months ended September 30, 2007 were comparable to the same periods of 2006 at
10%.

    Research and product development expense was $3.2 million for the nine
months ended September 30, 2007 compared to $1.6 million for the same period
in 2006. Research and product development expense was $1.4 million for the
quarter ended September 30, 2007 compared to $0.6 million for the same period
in 2006. The increase in expenses is reflective of the increase in revenue
resulting from the additional programs in the first nine months of 2007
compared to the same period of 2006. Research and development expense consists
of materials, labor and costs of benefits and overhead related to research and
development activity.
    The majority of Dynetek's research and development programs are co-funded
with major OEMs and government (NRCan). The funding from the OEMs for the
research and development programs is recorded as research and development
revenue based on billing milestones outlined in the contracts. This can result
in timing differences between when costs are incurred and funding is received.
The government funding is recorded either as research and development income
or loans. The cost shared monies received from NRCan, which is non-repayable,
are recorded as research and development revenue in the period it is invoiced
and the repayable government cost shared monies are recorded as a loan.

    Marketing expense was $1.3 million for the nine months ended
September 30, 2007, compared to $1.4 million for the same period of 2006.
Marketing expense was $0.5 million for the three months ended September 30,
2007, comparable to the same period of 2006. Marketing expense decreased to 4%
of revenue for the nine months ended September 30, 2007 compared to 5% for the
same period of 2006. Marketing expense was 6% of revenue for the three months
ended September 30, 2007, which is comparable to the same period of 2006.

    Interest Expense was $0.2 million for the nine months ended September 30,
2007, compared to $22,000 for the same period of 2006. Interest expense was
$58,000 for the three months ended September 30, 2007, compared to $22,000 for
the same period of 2006.

    Depreciation was $1.2 million for the nine months ended September 30,
2007, $0.1 million higher than the $1.1 million for the same period of 2006.
Depreciation was $0.4 million for the three months ended September 30, 2007,
which is comparable to the same period of 2006.

    Amortization was $0.7 million for the nine months ended September 30,
2007, which was $0.2 million higher than the same period of 2006. Amortization
was $0.3 million for the three months ended September 30, 2007, which is
$0.1 million higher than the same period of 2006. Items included in
amortization expense include process and development costs, patents and
deferred start-up costs for the European operation.

    Foreign exchange for nine months ended September 30, 2007 was a loss of
($0.1) million compared to a loss of ($0.2) million in the same period of
2006. Foreign exchange for three months ended September 30, 2007 was a loss of
($34,000) compared to a loss of ($6,000) for the same period of 2006.
Dynetek's Canadian operations invoices the majority of its revenue in US
dollars and the European operation invoices in Euros. The Company reports its
results in Canadian dollars but the revenues are generated in US dollars,
Euros and Canadian dollars. The foreign exchange loss in the first nine months
of 2007 and the third quarter of 2007 is a result of a weakening of the U.S.
dollar and the Euro against the Canadian dollar resulting in a negative impact
on the foreign denominated accounts receivable and cash when translating into
Canadian dollars for financial reporting purposes and the settlement of
accounts receivable transactions during the period.

    Stock based compensation for nine months ended September 30, 2007 was
$0.1 million compared to $0.2 million in the same period of 2006. Stock based
compensation for three months ended September 30, 2007 was $29,000 compared to
$54,000 for the same period of 2006. The reduction of stock based compensation
for the nine and three months ended September 30, 2007 is due to a reduction
in options issued.

    Future income tax for the first nine months of 2007 were ($2.4) million
compared to $nil for the same period of 2006. The future income taxes for the
three months ended September 30, 2007 was $nil which is comparable to same
period of 2006. During the second quarter of 2007 the Company considered the
future income tax asset impaired due to the deferral of sales for the European
bus markets into 2008 and reduced the future income tax asset value to $nil.
For tax purposes the non-capital losses that the future tax asset represents
are still available for use by the Company to reduce taxable income until 2010
and were not affected by the recorded impairment for book purposes.

    Net Loss for the nine months ended September 30, 2007 was ($2.6) million
or ($0.12) per common share compared to net loss of ($0.2) million or
($0.01) per common share for the comparable period of 2006. Net loss for the
three months ended September 30, 2007 was ($0.4) million or ($0.02) per common
share compared to ($0.3) million or ($0.02) per common share for the same
period of 2006. The net loss for nine months ended September 30, 2007 is
substantially the result of the impairment of the future income tax asset and
a decrease in contribution margin on cylinder and system sales, which is
partially offset by the positive margin on the research and development
projects. The net loss for the three months ended September 30, 2007 is the
result of reduced contribution margin.

    Summary of Quarterly Results

    The following table shows selected unaudited financial information for
the past eight quarters ending September 30, 2007. The information has been
obtained from our quarterly unaudited financial statements, which have been
prepared in accordance with Canadian GAAP and, in the opinion of management,
have been prepared using accounting policies consistent with the audited
financial statements and include all adjustments necessary for the fair
presentation of the results of the interim periods. We expect our operating
results to vary significantly from quarter to quarter and they should not be
relied upon to predict future information.

    
    (thousands of
     Canadian dollars           ---------------------------------------------
     except per share data)      Dec. 31  Mar. 31  June 30  Sept 30  Dec. 31
     (unaudited)                    2005     2006     2006     2006     2006
                                ---------------------------------------------

    Revenues
      Cylinder and system sales    5,858    8,233    8,090    8,275   11,334
      Research & development
       income                        603      618      644      376      771
      Investment & other income      317       19       38       13       14
                                ---------------------------------------------
                                   6,778    8,870    8,772    8,664   12,119
    Operating expenses
      Cost of goods sold           4,538    6,241    6,307    6,393    9,513
      Marketing & general
       and admin.                  1,548    1,331    1,384    1,387    1,802
      Research & product
       development                   461      478      515      567      650
                                ---------------------------------------------
                                   6,547    8,050    8,206    8,347   11,965
                                ---------------------------------------------
    Earnings before interest,
     taxes, stock based
     compensation non-cash
     foreign exchange,
     depreciation &
     amortization(1)                 231      820      566      317      154
                                ---------------------------------------------
    Interest                           -        -        -       22       62
    Taxes                              -        -        -        -      150
    Stock based compensation         105       48       51       54       56
    Foreign exchange (gain)
     loss                            258       70      146        6       75
    Depreciation & amortization      466      486      518      546    1,018
                                ---------------------------------------------
                                     829      604      715      628    1,361
                                ---------------------------------------------
    Net income (loss)               (598)     216     (149)    (311)  (1,207)
                                ---------------------------------------------
                                ---------------------------------------------

    Income (loss) per share
    Basic and fully diluted        (0.03)    0.01    (0.01)   (0.02)   (0.05)
                                ---------------------------------------------
                                ---------------------------------------------


    (thousands of
     Canadian dollars           ---------------------------
     except per share data)      Mar. 31  June 30  Sept 30
     (unaudited)                    2007     2007     2007
                                ---------------------------

    Revenues
      Cylinder and system sales    9,322    5,838    8,481
      Research & development
       income                        918    2,259    1,322
      Investment & other income      270       38       33
                                ---------------------------
                                  10,510    8,135    9,836
    Operating expenses
      Cost of goods sold           7,630    4,817    6,581
      Marketing & general
       and admin.                  1,312    1,350    1,489
      Research & product
       development                   658    1,184    1,391
                                ---------------------------
                                   9,600    7,351    9,461
                                ---------------------------
    Earnings before interest,
     taxes, stock based
     compensation non-cash
     foreign exchange,
     depreciation &
     amortization(1)                 910      784      375
                                ---------------------------
    Interest                          68       33       58
    Taxes                             80    2,275        -
    Stock based compensation          28       28       29
    Foreign exchange (gain)
     loss                             (1)     115       34
    Depreciation & amortization      568      642      666
                                ---------------------------
                                     743    3,093      787
                                ---------------------------
    Net income (loss)                167   (2,309)    (412)
                                ---------------------------
                                ---------------------------

    Income (loss) per share
    Basic and fully diluted         0.01    (0.11)   (0.02)
                                ---------------------------
                                ---------------------------

    (1) EBITDA is a non-GAAP financial measure that is defined and discussed
        in the Non-GAAP Financial Measures section of the Management's
        Discussion and Analysis.


    Intangible assets and deferred costs
    (thousands of Canadian dollars)
    (unaudited)
                                  Three months ended       Nine months ended
                                        September 30            September 30
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Patents                           51          23          67          45
    Certification costs              185         285         608         913
    Deferred Costs                    49          23         111          67
    -------------------------------------------------------------------------
                                     285         331         786       1,025
    -------------------------------------------------------------------------
    

    Intangible asset expenditures for the nine months ended September 30,
2007 were $0.8 million compared to $1.0 million for the same period of 2006.
Intangible asset expenditures for the three months ended September 30, 2007
were $0.3 million, which is comparable to the same period of 2006. The
additions for the three and nine months ended September 30, 2007 were due to
certification and patent costs incurred during the period. The Company will
invest in patents and costs associated with product certification in future
years to ensure protection of our intellectual property, developed products
and production processes.

    
    Capital Expenditures

    (thousands of Canadian dollars)
    (unaudited)
                                  Three months ended       Nine months ended
                                        September 30            September 30
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Building and leaseholds            -          15         186          38
    Manufacturing equipment           61         333       1,524         684
    Office furniture and other
     equipment                        39          40         142          59
    Computer hardware and
     software                          2          30          23          48
    Manufacturing equipment
     under construction              (16)        695      (1,058)      1,114
    -------------------------------------------------------------------------
                                      86       1,113         817       1,943
    -------------------------------------------------------------------------
    

    Capital expenditures for the nine months ended September 30, 2007 were
$0.8 million compared to $1.9 million for the same period in 2006. Capital
expenditures for the three months ended September 30, 2007 were $0.1 million
compared to $1.1 million for the same period in 2006. In the third quarter of
2007 Dynetek sold assets with a net book value of $21,000 for proceeds of
$30,000 resulting in a gain on sale of approximately $9,000.
    The Company's capital resource requirements consist of capital
expenditures to maintain and improve the existing production line.

    Financial Resources and Liquidity

    To date, the Company has met its liquidity needs through its working
capital position and operating bank line. Due to the unexpected deferral of
European bus tenders the Company is evaluating several alternative funding
arrangements including leveraging certain assets to meet its current liquidity
needs until the anticipated recovery of the European bus markets in Q2 2008.
    The Company's actual funding requirements and financing alternatives
could vary depending on a number of factors, including the increase or
decrease of the CNG system sales on a global basis, the progress of research
and development projects and the development of additional relationships with
strategic partners. Dynetek is continuing to control spending and to increase
activities in other areas to minimize the impact of the slower than expected
European Bus market.
    As at September 30, 2007 Dynetek had cash and cash equivalents of
$0.9 million, compared to $1.6 million at June 30, 2007, $1.4 million at
March 31, 2007 and $2.0 million at December 31, 2006. Dynetek was cash flow
positive from operations of $1.0 million for the nine months ended
September 30, 2007 and a cash flow deficiency from operations of ($12,000) for
the three months ended September 30, 2007. Dynetek's working capital(1) level
was $12.5 million at September 30, 2007, compared to $12.5 million at
March 31, 2007 and $12.1 million at December 31, 2006.
    Dynetek's investment in inventory decreased to $10.9 million at
September 30, 2007, from $11.9 million at December 31, 2006. Work-in-progress
inventory represented by confirmed orders decreased by $0.7 million from the
December 31, 2006 levels to $3.4 million. Raw material inventory decreased by
$0.2 million from the December 31, 2006 levels to $3.8 million. Finished goods
inventory decreased by $0.1 million to $3.7 million from the December 31, 2006
level of $3.8 million.
    At September 30, 2007 accounts receivable were $7.2 million, a reduction
of $1.0 million when compared to December 31, 2006. This decrease is a result
of the reduction of cylinder and system sales compared to the fourth quarter
of 2006. The Company seeks to manage the collection of receivables, the use of
its operating bank line and the payment of payables in a manner that working
capital levels will continue to fund ongoing operations. Accounts payable at
September 30, 2007 were $3.6 million, compared to $7.2 million as at
December 31, 2006. This decrease is representative of the decreases in
production compared to the fourth quarter of 2006. Deferred revenue at
September 30, 2007 was $1.0 million compared to $0.7 million at December 31,
2006. The increase is mainly due to an advance payment made by Magna Steyr in
connection with Daimler's fuel cell program.
    At September 30, 2007 the Company had drawn down $1.9 million of the
$5.0 million operating bank line with a major chartered bank.
    The long-term debt relates to repayable research and development funding
supplied by NRCan. These agreements allow Dynetek to retain the intellectual
property and to receive long-term funding. During the first nine months of
2007 the Company recorded $0.3 million of long-term debt relating to the
repayable research and development funding supplied by NRCan. The debt is
repayable only in the form of royalties based on specific related commercial
product sales and is interest free. The Company has $0.2 million to be repaid
in 2007.
    The Company believes that additional cost shared monies will continue to
be available from governments and OEMs for future research and development
projects.
    Dynetek continues to build on the strong strategic alliances with several
major OEMs whereby confidential joint funding has been obtained to develop
complete hydrogen fuel storage systems. Other research programs with strategic
partners, such as government bodies, who provide financial and technical
support, are also in place to explore other storage applications in the energy
marketplace.

    (1) Working capital is a non-GAAP financial measure that is defined and
    discussed in the Non-GAAP Financial Measures section of the Management's
    Discussion and Analysis

    Transactions with Related Parties

    For the nine months ended September 30, 2007, the Company purchased under
normal terms and conditions $3.5 million (2006 - $7.6 million) of material
used in the production of lightweight fuel storage systems from Mitsubishi
Rayon Corporation, a shareholder of the Company.

    
    Outstanding Share Data

    Issued and outstanding
                                                                      Dollar
                                                      Number of       Amount
                                                         Shares       ('000)

    Balance at December 31, 2006                     20,940,451       52,433
    -------------------------------------------------------------------------
    Balance at September 30, 2007                    20,940,451       52,433
    -------------------------------------------------------------------------


                                                   September 30  December 31
                                                           2007         2006
    -------------------------------------------------------------------------

    Securities convertible into common shares:
    Stock options                                     1,099,500    1,170,500
    Warrants                                            756,738      756,738
    -------------------------------------------------------------------------
    

    As at November 1, 2007, common shares outstanding were 20,940,451,
options outstanding were 1,099,500 and warrants outstanding were 756,738.

    CHANGES IN ACCOUNTING POLICIES

    As required by the Canadian Institute of Chartered Accountants ("CICA"),
on January 1, 2007, the Company adopted CICA Handbook section 1530,
Comprehensive Income; Section 3251, Equity; Section 3855, Financial
Instruments - Recognition and Measurement; Section 3861, Financial Instruments
- Disclosure and Presentation; Section 3865, Hedges; and Section 1506,
Accounting Changes. See Note 3 to the Consolidated Financial Statements for
further details.

    INTERNAL CONTROL OVER FINANCIAL REPORTING

    There were no changes in the Company's internal control over financial
reporting that occurred during the most recent interim period that materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

    OUTLOOK

    During the third quarter and months subsequent the Company has introduced
four new board members to the market place. All new board members bring past
experience and skill sets complementary to the current needs of the Company.
The Board's mandate will be to challenge and provide support to management as
it reviews, revises and sets a long term strategic plan to create ongoing
sustainable shareholder value.
    The Company will remain committed to continuing to grow its CNG revenue
stream globally through targeted marketing initiatives. The Company, along
with the Board, will review alternatives to growing the compressed gas revenue
stream, whether it is new joint ventures, new partners and customers,
licensing arrangements, new manufacturing techniques or additional product
offerings. The Company and the Board are committed to change where appropriate
to attain its goals of revenue growth and net income.
    Major economic and environmental factors contribute to continuing high-
growth in natural gas demand and related markets and hence a positive
intermediate and longer term outlook for Dynetek.

    
    -   The high growth rate in demand for natural gas stems from the
        comparative advantages of natural gas compared to diesel, gasoline
        and bio-fuels;
    -   Natural gas is cleaner with less toxic emissions than diesel or
        gasoline; and
    -   A growing natural gas infrastructure. Continuing investment in
        infrastructure is adding to the number of compressed natural gas
        refueling centers.
    

    The markets for our products are and will continue to be worldwide. At
the local level, customers include fleet-owners as well as OEM's. Dynetek will
continue to review its product portfolio to generate a larger market potential
to cover all market requirements.
    Dynetek expects to incur a loss in Q4 2007 and for the 2007 financial
year because of a temporary slowdown in the demand for its products,
specifically a postponement of public transit bus manufacturing in Europe.
Strong economic and environmental forces suggest Dynetek's growth will resume.
When this happens we look forward to profitability achieved through a long-
term strategic plan, supported by carefully selected capital investments to
achieve a high sales growth rate, higher contribution margins along with
ongoing rationalizing where appropriate throughout the organization.

    Additional information relating to Dynetek

    Additional information concerning Dynetek, including the Company's AIF,
is available on SEDAR at www.sedar.com.

    Dynetek Industries Ltd. is a leading international company engaged in the
design, manufacturing and marketing of fueling systems and high-pressure
components including valves and regulators. The key component of the storage
system is the DyneCell(R) cylinder, capable of storing high pressure gases
including compressed natural gas (CNG), hydrogen, and various industrial
gases. Dynetek's cylinder and fuel storage systems applications include but
are not limited to: the transportation industry, including passenger
automobiles, light and heavy-duty trucks, transit and school buses; the bulk
hauling of compressed gases; and stationary storage or ground storage
refueling applications.

    Forward looking statements

    In addition to historical information, this news release contains
forward- looking statements and should be read in conjunction with the
financial statements and related notes for the year ended December 31, 2006
and quarterly interim reports for 2007. Forward-looking statements are based
upon current assumptions, expectations and estimates that involve a number of
risks and uncertainties and actual results could differ materially from those
discussed in the forward-looking statements. Readers are encouraged to review
the section in the Management's Discussion and Analysis titled 'Principal
Risks and Uncertainties' for a discussion of factors that could affect
Dynetek's future operations and financial results. Forward-looking statements
are based upon management's assumptions, expectations and estimates at the
time the statements are made. Dynetek does not update forward-looking
statements should circumstances or management's assumptions, expectations or
estimates change, except where required by law.


    
    CONSOLIDATED BALANCE SHEETS
    (thousands of Canadian dollars)
    (unaudited)
                                                   September 30  December 31
                                                           2007         2006
    -------------------------------------------------------------------------

    ASSETS
    Current assets
      Cash and cash equivalents                             861        2,030
      Accounts receivable                                 7,169        8,246
      Inventory (note 4)                                 10,919       11,859
      Prepaids and other                                    230          696
    -------------------------------------------------------------------------
                                                         19,179       22,831

    Intangible assets and deferred costs                  5,992        5,917

    Capital assets                                       16,894       17,263

    Future income tax (note 9)                                -        2,355
    -------------------------------------------------------------------------

                                                         42,065       48,366
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
      Operating bank line                                 1,875        2,650
      Accounts payable and accrued liabilities            3,579        7,171
      Deferred revenue (note 2)                             964          720
      Current portion of long-term debt                     251          185
    -------------------------------------------------------------------------
                                                          6,669       10,726

    Long-term debt                                        1,518        1,293

    SHAREHOLDERS' EQUITY
      Share capital (note 5)                             52,433       52,433
      Contributed surplus (note 6)                        2,476        2,391
      Deficit                                           (21,031)     (18,477)
      Accumulated other comprehensive income                  -            -
    -------------------------------------------------------------------------
                                                         33,878       36,347

                                                         42,065       48,366
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to the unaudited interim consolidated financial
    statements



    CONSOLIDATED STATEMENTS OF NET INCOME (LOSS), COMPREHENSIVE INCOME (LOSS)
    AND DEFICIT
    (thousands of Canadian dollars except share capital and per share
     amounts)
    (unaudited)
                                  Three months ended       Nine months ended
                                        September 30            September 30
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    REVENUE
      Cylinder and system
       sales                       8,481       8,275      23,641      24,598
      Research and development
       income                      1,322         376       4,499       1,638
      Investment and other
       income                         33          13         341          70
    -------------------------------------------------------------------------
                                   9,836       8,664      28,481      26,306
    EXPENSES
      Cost of goods sold           6,581       6,393      19,028      18,941
      General and administrative     941         868       2,884       2,752
      Research and product
       development                 1,391         567       3,233       1,560
      Marketing                      548         519       1,267       1,350
      Interest expense                58          22         159          22
      Depreciation                   410         371       1,165       1,059
      Amortization of intangible
       assets and deferred costs     256         175         711         491
      Foreign exchange loss           34           6         148         222
      Stock based compensation
       (note 5)                       29          54          85         153
    -------------------------------------------------------------------------
                                  10,248       8,975      28,680      26,550
    -------------------------------------------------------------------------
    Net loss before income
     taxes                          (412)       (311)       (199)       (244)
    -------------------------------------------------------------------------

    PROVISION FOR TAXES
      Future income tax (note 9)       -           -      (2,355)          -
    -------------------------------------------------------------------------
                                       -           -      (2,355)          -
    -------------------------------------------------------------------------

    NET LOSS AND COMPREHENSIVE
     LOSS (note 3)                  (412)       (311)     (2,554)       (244)
    -------------------------------------------------------------------------

    Deficit, beginning
     of period                   (20,619)    (16,959)    (18,477)    (17,026)
    -------------------------------------------------------------------------
    DEFICIT, END OF PERIOD       (21,031)    (17,270)    (21,031)    (17,270)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Per Share Information
    Net income (loss) per
     share (basic and diluted)     (0.02)      (0.02)      (0.12)      (0.01)
    Weighted average number
     of common shares
     outstanding              20,940,451  20,940,103  20,940,451  20,940,103
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to the unaudited interim consolidated financial
    statements



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (thousands of Canadian dollars)
    (unaudited)
                                  Three months ended       Nine months ended
                                        September 30            September 30
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Cash flows provided by
     (used for) operating
     activities
    NET LOSS AND
     COMPREHENSIVE LOSS             (412)       (311)     (2,554)       (244)
    Items not involving cash
      Depreciation                   410         371       1,165       1,059
      Amortization of
       intangible assets
       and deferred costs            256         175         711         491
      Stock based compensation        29          54          85         153
      Future income tax                -           -       2,355           -
      Gain on sale of asset           (9)          -          (9)          -
      Unrealized foreign
       exchange loss (gain)          447          19         541         (88)
    -------------------------------------------------------------------------
                                     721         308       2,294       1,371
    Changes in non-cash
     working capital
      Accounts receivable         (1,780)     (1,347)      1,077        (854)
      Inventory                    2,988      (1,424)        940      (2,617)
      Prepaid expenses               172         108         466         385
      Accounts payable and
       accrued liabilities        (1,339)        226      (3,592)        812
      Deferred revenue              (318)          -         244           -
      Unrealized foreign
       exchange gain relating
       to non-cash working
       capital                      (456)        (15)       (448)         81
    -------------------------------------------------------------------------
    Cash flow (deficiency)
     from operations                 (12)     (2,144)        981        (822)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
      Additions to intangible
       assets and deferred
       costs                        (285)       (331)       (786)     (1,025)
      Additions to capital
       assets                        (86)     (1,113)       (817)     (1,943)
      Proceeds on disposal            30           -          30           -
    -------------------------------------------------------------------------
                                    (341)     (1,444)     (1,573)     (2,968)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
      Operating bank line           (395)      2,175        (775)      2,175
      Long-term debt                   -           -         291           -
      Exercise of options              -           -           -           1
    -------------------------------------------------------------------------
                                    (395)      2,175        (484)      2,176
    -------------------------------------------------------------------------

    Foreign exchange (gains)
     loss on cash held in a
     foreign currency                  9          (4)        (93)          7
    -------------------------------------------------------------------------
    Decrease in cash and cash
     equivalents                    (739)     (1,417)     (1,169)     (1,607)

    Cash and cash equivalents,
     beginning of period           1,600       2,619       2,030       2,809
    -------------------------------------------------------------------------

    Cash and cash equivalents,
     end of period                   861       1,202         861       1,202
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest income received during the nine month period ended September 30,
    2007 was $26,000 (2006 - $32,000) and the three month period ended
    September 30, 2007 was $11,000 (2006 - $7,000). Interest paid during the
    nine month period ended September 30, 2007 was $0.2 million (2006 -
    $22,000) and the three month period ended September 30, 2007 was $58,000
    (2006 - $22,000).

    See accompanying notes to the unaudited interim consolidated financial
    statements



    SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For the three and nine months ended September 30, 2007 and 2006 and as at
    September 30, 2007 and December 31, 2006
    (tabular amounts in thousands of Canadian dollars, except share capital
     amounts)
    (unaudited)

    1.  BASIS OF PRESENTATION

    The unaudited interim consolidated financial statements of Dynetek
    Industries Ltd. ("Dynetek" or "the Company") have been prepared by
    management in accordance with Canadian generally accepted accounting
    principles. The unaudited interim consolidated financial statements have
    been prepared following the same accounting policies and methods of
    computation as the most recent annual audited consolidated financial
    statements for the year ended December 31, 2006. The unaudited interim
    consolidated financial statements should be read in conjunction with the
    audited consolidated financial statements and the notes thereto in the
    Company's Annual Report for the year ended December 31, 2006.

    2.  SIGNIFICANT ACCOUNTING POLICIES

    a)  Revenue recognition

    Cylinder and system revenue is recognized when finished goods are shipped
    to the customer.

    Research and development revenue is generated by projects co-funded with
    the original equipment manufacturers (OEMs) and government agencies. This
    revenue is recognized when contractual deliverables and milestones are
    met. Timing differences can occur between when costs are incurred and
    when revenue is invoiced and earned. Customer billings for services not
    yet rendered or customer deposits are received and deferred and
    recognized as revenue when the services are rendered and finished goods
    are shipped to the customer. Any associated deferred revenue is included
    in current liabilities.

    b)  Research and development costs

    Research and development costs are expensed as incurred.

    3.  CHANGES IN ACCOUNTING POLICIES

    As required by the Canadian Institute of Chartered Accountants ("CICA"),
    on January 1, 2007, the Company adopted CICA Handbook section 1530,
    Comprehensive Income; Section 3251, Equity; Section 3855, Financial
    Instruments - Recognition and Measurement; Section 3861, Financial
    Instruments - Disclosure and Presentation; Section 3865, Hedges; and
    Section 1506, Accounting Changes.

    a)  Comprehensive Income and Equity

    Upon adoption of Section 1530, the Company revised its "Consolidated
    Statement of Operations and Deficit" to include the newly required
    Statement of Comprehensive Income by creating a "Consolidated Statement
    of Net Income, Comprehensive Income and Deficit", and added to the
    Consolidated Balance Sheet "Accumulated Other Comprehensive Income" as a
    component of Shareholders' Equity.

    b)  Financial Instruments

    i)     Financial assets and financial liabilities

    Under the new CICA standards, financial assets and financial liabilities
    are initially recognized at fair value and are subsequently accounted for
    based on their classification. The classification depends on the purpose
    for which the financial instruments were acquired and their
    characteristics. Except in very limited circumstances, the classification
    is not changed subsequent to initial recognition.

    The new CICA standards require that all financial assets be classified in
    one of the five categories; 1) loans and receivables, 2) assets held-to-
    maturity, 3) assets available-for-sale, 4) other financial liabilities,
    and 5) held-for-trading. Financial instruments classified as held-for-
    trading or available-for-sale items as a result of initially adopting
    this section are measured at fair value. Gains or losses on re-
    measurement of held-for-trading items are recognized as an adjustment to
    opening retained earnings, while gains and losses on re-measurement of
    available-for-sale items are recognized as an adjustment to opening
    Accumulated Other Comprehensive Income.

    Financial instruments that are classified as held-for-trading or
    available-for-sale are re-measured each reporting period at fair value
    with the resulting gain or loss recognized immediately in net income and
    other comprehensive income, respectively. All other financial instruments
    are accounted for at amortized cost with foreign exchange gains and
    losses recognized immediately in net income. The recognition,
    de-recognition and measurement policies followed in financial statements
    for periods prior to the adoption of this standard are not reversed and,
    therefore, those financial statements are not restated.

    ii)    Classification of financial instruments

    The Company has applied the following classifications to each of its
    significant categories of financial instruments outstanding as of
    January 1, 2007:

        Cash and cash equivalents           Designated as held-for-trading
        Accounts receivable                 Loans and receivables
        Accounts payable and accrued        Other liabilities
         liabilities
        Operating bank line                 Other liabilities
        Long-term debt                      Other liabilities

    iii)   Derivatives

    At September 30, 2007 and December 31, 2006 the Company had no
    derivatives.

    iv)    Embedded derivatives

    Derivatives embedded in other financial instruments or contracts are
    separated from their host contracts and accounted for as derivatives when
    their economic characteristics and risks are not closely related to those
    of the host contract; the terms of the embedded derivative are the same
    as those of a free standing derivative; and the combined instrument or
    contract is not measured at fair value, any changes in fair value
    recognized in the income statement. At September 30, 2007 and
    December 31, 2006 the Company had no embedded derivatives.

    v)     Determination of fair value

    The fair value of a financial instrument on initial recognition is the
    transaction price, which is the fair value of the consideration given or
    received. Subsequent to initial recognition, fair value is determined by
    using valuation techniques which refer to observable market data.

    vi)    Transaction Costs

    At September 30, 2007 and December 31, 2006 the Company had no
    transaction costs.

    c)  Hedge accounting

    Section 3865 specifies the criteria that must be satisfied in order for
    hedge accounting to be applied and the accounting for each of the
    permitted hedging strategies: fair value hedges and cash flow hedges.
    Hedge accounting is discontinued prospectively when the derivative no
    longer qualifies as an effective hedge, or the derivative is terminated
    or sold, or upon the sale or early termination of the hedged item. The
    Company did not have any hedging contracts outstanding as at
    September 30, 2007 and December 31, 2006.

    d)  Accounting Changes

    Effective January 1, 2007, the Company also adopted CICA section 1506,
    "Accounting Changes". Under this standard, voluntary changes to
    accounting policies are allowed only in situations where they provide
    financial statements users with more reliable and relevant information.
    Policy changes are applied retroactively unless it is impractical to
    determine the period or cumulative impact of the change. Corrections of
    prior period errors are retroactively applied to the financial statements
    while changes in accounting estimates are prospectively applied with the
    changes included in earnings. This section applies to all changes in
    policies and estimates or corrections of prior period errors in periods
    beginning on or after January 1, 2007.

    4.  INVENTORY

                                                   September 30  December 31
                                                           2007         2006
    -------------------------------------------------------------------------
    Raw materials                                         3,844        3,957
    Work-in-progress                                      3,385        4,126
    Finished goods                                        3,690        3,776
    -------------------------------------------------------------------------
                                                         10,919       11,859
    -------------------------------------------------------------------------

    5.  SHARE CAPITAL

    The issued and outstanding common shares of the Company along with
    securities convertible into common shares are as follows:

    Issued and outstanding:

                                                      Number of
                                                         Shares       Amount

    Balance at December 31, 2006                     20,940,451       52,433
    -------------------------------------------------------------------------
    Balance at September 30, 2007                    20,940,451       52,433
    -------------------------------------------------------------------------


                                                   September 30  December 31
                                                           2007         2006
    -------------------------------------------------------------------------

    Securities convertible into common shares:
    Stock options                                     1,099,500    1,170,500
    Warrants                                            756,738      756,738
    -------------------------------------------------------------------------

    The estimated fair value of the options used for accounting purposes has
    been determined using the Black Scholes option-pricing model with the
    following assumptions:

                                                           Nine months ended
                                                                September 30
    -------------------------------------------------------------------------
                                                           2007         2006

    Weighted average risk-free interest rate              4.48%         2.5%
    Weighted average expected life                      5 years      5 years
    Estimated volatility in the market price
     of the common shares                                   76%          80%
    Dividend yield                                           0%           0%


    The weighted average fair value per option was $1.06 for the nine months
    ended September 30, 2007 and $1.55 for the comparable period of 2006.

    During the first nine months of 2007, 61,000 (2006 - 48,000) options were
    issued to employees.

    6.  CONTRIBUTED SURPLUS

    The following table summarizes information about contributed surplus.

    Balance at December 31, 2006                                       2,391
    Stock based compensation expense                                      85
    -------------------------------------------------------------------------
    Balance at September 30, 2007                                      2,476
    -------------------------------------------------------------------------

    7.  TRANSACTIONS WITH RELATED PARTIES

    For the nine months ended September 30, 2007, the Company purchased under
    normal terms and conditions $3.5 million (2006 - $7.6 million) of
    material used in the production of lightweight fuel storage systems from
    Mitsubishi Rayon Corporation, a shareholder of the Company.

    8.  SEGMENTED INFORMATION

    The Company currently conducts business in one operating segment, which
    involves the manufacture and sale of lightweight fuel storage systems.
    The majority of the Company's operations and assets relating to
    commercial production were located in Canada at September 30, 2007.
    Revenues attributed to foreign countries are based on the location of the
    customer.

                                  Three months ended       Nine months ended
                                        September 30            September 30
                                    2007        2006        2007        2006

    Cylinder and system sales
      Canada                       1,090          97       2,048         272
      United States                1,602       2,389       5,303       3,536
      Japan                          688         312       1,782       1,188
      European Union               4,638       5,458      13,570      14,976
      Australia                        -          19           -       4,626
      Other                          463           -         938           -
    -------------------------------------------------------------------------
                                   8,481       8,275      23,641      24,598
    -------------------------------------------------------------------------

    9.  PROVISION FOR INCOME TAXES

    The future income tax asset represented non-capital loss carry forwards
    that the Company expected to utilize in future periods to offset current
    taxes payable. Based on the delays in orders received in the European bus
    market place, during the second quarter of 2007 the Company determined
    that, for financial statement purposes, the future income tax asset was
    impaired and has taken a full valuation allowance to reduce the value of
    the future income tax asset to $nil. The Company has $ 9.7 million of
    non-capital loss carry-forwards for income tax purposes.



    Corporate Information

    Board of Directors       Officers and Management    Bankers

    Heinz O. Portmann        Heinz O. Portmann          Bank of Nova Scotia
    Chairman of the Board    Chairman of the Board      Calgary, Alberta
    Dynetek Industries Ltd.
    Calgary, Alberta         Christian W. Rasche        Auditors
                             President and Chief        Deloitte & Touche LLP
    Robb D. Thompson(i)(v)   Executive Officer          Calgary, Canada
    Vice President Finance,
    and Chief Financial      Michael D. Portmann        Legal Counsel
    Officer                  Vice President and         Gowling Lafleur
    Berkana Energy Corp.     General Manager            Henderson LLP
    Calgary, Alberta                                    Calgary, Alberta
                             Ulrich Imhof
    Anthony Roberts(i)       Vice President,            Transfer Agent and
    Independent Business     Engineering                Registrar
    Person                                              CIBC Mellon Trust
    Lake Elsinore,           Karen Y. Minton            Company
    California, USA          Vice President Finance,    with offices in
                             and Chief Financial        Toronto, Montreal and
    Bradley W. Turner(*)(v)  Officer                    Calgary
    President and CEO
    Richards Oil & Gas                                  Stock Listing
    Limited                  Norman E. Hall             Toronto Stock
    Calgary, Alberta         Corporate Secretary        Exchange
                                                        Trading Symbol: DNK
    G. Howard Kroon(*)(i)
    President and CEO
    Palliser Lumber                                     Investor Relations
    Calgary, Alberta                                    To obtain additional
                             Corporate Head Office      information about
    John R. Bobenic(*)(v)    4410 - 46th Avenue SE      Dynetek or to be
    President and CEO        Calgary, Alberta, Canada   placed on our
    Maxim Power Corp         T2B 3N7                    mailing list for
    Calgary, Alberta         Tel (403) 720 0262         quarterly reports
                             Fax (403) 720 0263         please
    Christian W. Rasche      Web site: www.dynetek.com  contact either:
    President and Chief                                 Christian W. Rasche
    Executive Officer                                   Karen Minton
    Dynetek Industries Ltd.                             Dynetek Industries
    Ratingen, Germany                                   Ltd.
                                                        Investor Relations
                                                        4410 - 46th Avenue SE
                             Subsidiary                 Calgary, Alberta,
                             Dynetek Europe GmbH        Canada
                             Breitscheider Weg 117a     T2B 3N7
                             D-40885 Ratingen           Germany Tel
                             Germany                    +44 210230963 20
                             Tel +44 210230963 20       Calgary Tel
                             Fax +44 210230963 10       (403) 720 0262
                                                        Fax (403) 720 0263
                                                        Email:
                                                        invest@dynetek.com

    (*) Audit Committee member
    (i) Compensation Committee member
    (v) Corporate Governance Committee member
    

    %SEDAR: 00014127E




For further information:

For further information: Christian Rasche, President and Chief Executive
Officer; Karen Minton, Vice President Finance, and CFO, Dynetek Industries
Ltd., 4410 46th Avenue SE, Calgary, Alberta, T2B 3N7, Tel Calgary: (403)
720-0262, Tel Germany: + 44 2102 30963-20, Toll free: 1-888-396-3835, Fax
Calgary: (403) 720-0263, Fax Germany: +442102 30963-10, Web: www.dynetek.com

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