Thermal Energy Reports Financial Results for Fiscal 2007 - Company heads into FY 2008 with revenue backlog at $3 million setting up record year



    OTTAWA, Sept. 28 /CNW Telbec/ - Thermal Energy International Inc.
(TSX-V: TMG) (www.thermalenergy.com) today announced its fourth quarter and
year-end results for Fiscal Year 2007 for the period ending May 31, 2007.
    Thermal Energy recorded revenue of $821,024 for FY07, with a net loss for
the year of $2,443,265 ($0.03/share). Revenue for the fourth quarter was
$480,179, with a loss of $712,149 ($0.01/share). All figures are in Canadian
dollars. Full financial results are posted to SEDAR and are available on the
Company's web site.
    During Fiscal 2007, Thermal Energy signed contracts for approximately
$3.9 million in sales, with approximately $3 million in revenue to be
recognized in Fiscal 2008. The Company's pipeline of qualified sales prospects
had grown to more than $70 million by the end of the fiscal year. Management
continues to operate on an expected conversion rate of at least 7% to 10% of
the sales pipeline into contracts on an annual basis, which is in line with
conversion during FY2007 of the pipeline which at the end of Fiscal 2006 stood
at approximately $45 million.
    At the end of FY 2007, working capital stood $559,350, a significant
improvement compared to a capital deficiency of $414,337 at end of FY 2006.
Current assets increased by $1,247,160 to $2,063,551.
    "We were pleased to see a return to growth of revenues in the fourth
quarter which, except for delays of several months in the closing of our first
two major U.S. contracts with Global 500 customers, would have been
considerably higher," said President and CEO Tim Angus. "That being said, we
are entering Fiscal 2008 with a revenue backlog for the first time in our
history - and that already amounts to a record year for Thermal Energy."

    
    Highlights for the fourth quarter FY 2007 include:

    - Closing the Company's first institutional private placement for total
      gross proceeds of $1.3 million;

    - Completing patent filing for the new THERMALONOx(TM) process to remove
      nitrogen oxides from flue gas streams, with a 98%-plus success rate in
      lab tests;

    - Signing a THERMALONOx(TM) development agreement with South China
      University of Technology (SCUT);

    - The addition to the Board of Directors of William Crossland, whose
      experience include more than 18 years with the National Bank of
      Canada's Corporate and Investment Banking Group, most recently as
      Managing Director, Investment Banking.


    Highlights during the balance of FY 2007 include:

    - Receiving the first major order for GEM(R) steam traps in the U.S. from
      a Fortune 500 customer.

    - The $3.5 million acquisition of the award-winning DRY-REX(TM) low
      temperature biomass drying technology from Mabarex Inc. of Montreal;

    - Receiving a heat recovery and energy cost reduction contract valued at
      more than $1.4 million in the U.S. for a Global 500 food and beverage
      maker. This was Thermal Energy's first commercial U.S. contract;

    - Receiving a U.S. energy efficiency contract through for more than
      $2.5 million at a Global 500 company's industrial manufacturing
      facility;
    

    "During this past fiscal year we also undertook a number of strategic
initiatives to broaden our technology base and increase opportunities for
converting sales prospects into contracts," said Mr. Angus. "The first of
these was acquisition of the DRY-REX(TM) technology which we see becoming a
new flagship technology for Thermal Energy enabling our entry into the new and
exciting biomass and biofuel markets."
    "The other major initiative led by our Chief Operating Officer Denis
Forget, was the development of our THERMAL-AUD(TM) Alternative Utility
Delivery Program to provide customers the flexibility of benefiting from
energy savings outside the restrictive process of their corporate capital
expenditure cycles," said Mr. Angus.
    The THERMAL-AUD(TM) program led to Thermal Energy establishing its
wholly-owned energy services subsidiary ForEverGreen Energy Inc., which in
early Fiscal 2008 has already produced one energy services agreement worth up
to $3.75 million based on a FLU-ACE(R) waste heat recovery system and a Letter
of Intent expected to lead to another major energy services contract based on
a DRY-REX(TM) biomass drying system. Revenue anticipated from these projects
would be on top of the $3 million backlog to be recorded in FY2008.
    Thermal Energy management expects to continue to grow the pipeline of
qualified sales prospects in FY2008 and improve the conversion rate to booked
sales on the strength of a refocused sales team, a broader range of
complimentary technology and the new capacity to structure energy saving and
bioenergy projects outside of customers' capital budgeting process.
    "Thermal Energy enters Fiscal 2008 in a better fiscal position than at
any other time in its history and delivering on the strategic plan carefully
developed and put in place by our management team and Board of Directors over
the past two years," said Mr. Angus. "We look forward to continuing to provide
exciting news to our shareholders which will demonstrate continued growth in
the value of this company."

    NOTE: This press release may contain forward-looking statements relating
to, and among other things, based on management's expectations, estimates and
projections. Such statements including those about the Company's strategy for
growth, product development, market position, expected expenditures and
financial results are forward looking statements. These statements are not
guarantees of future performance and involve a number of risks, uncertainties
and assumptions. Many factors could cause results to differ materially from
those stated. The Company disclaims any obligation to publicly update or
revise any such statements.

    

    THERMAL ENERGY INTERNATIONAL INC.
    Incorporated under the Ontario Business Corporations Act


                         CONSOLIDATED BALANCE SHEETS

    As at May 31
                                                           2007         2006
                                                              $            $
    -------------------------------------------------------------------------

    ASSETS
    Current assets
    Cash                                                549,196       59,119
    Short term investments (note 4)                   1,020,880            -
    Accounts receivable (note 5)                        428,581      626,495
    Contracts in progress                                 4,000       89,000
    Prepaids and other assets                            60,894       41,777
    -------------------------------------------------------------------------
                                                      2,063,551      816,391
    Loans receivable (note 6)                                 -       55,500
    Property, plant and equipment (note 7)               67,612       59,539
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                      2,131,163      931,430
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LIABILITIES, CAPITAL STOCK, CONTRIBUTED SURPLUS AND DEFICIT
    Current liabilities
    Accounts payable                                    328,182      947,063
    Accrued liabilities                                 158,082      166,728
    Deferred revenue                                  1,000,000       99,000
    Due to past President (note 8)                       17,937       17,937
    -------------------------------------------------------------------------
                                                      1,504,201    1,230,728
    -------------------------------------------------------------------------

    Capital stock, contributed surplus and deficit
    Capital stock (note 9)                           17,459,549   14,462,279
    Contributed surplus (note 9)                      1,881,487    1,509,232
    Deficit                                         -18,714,074  -16,270,809
    -------------------------------------------------------------------------
                                                        626,962     -299,298
    -------------------------------------------------------------------------

                                                      2,131,163      931,430
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Contingency (note 17)



    THERMAL ENERGY INTERNATIONAL INC.

                     CONSOLIDATED OPERATIONS AND DEFICIT

    Year ended May 31
                                                           2007         2006
                                                              $            $
    -------------------------------------------------------------------------
    REVENUE
    Sales                                               821,024    2,845,341
    Cost of sales                                       874,515    2,972,156
    -------------------------------------------------------------------------
    Gross loss                                          -53,491     -126,815
    -------------------------------------------------------------------------

    Expenses
    Administration                                      880,331      841,737
    Selling, marketing and business development       1,266,359      883,461
    Legal fees                                           18,850      155,950
    Audit fees                                           77,500       68,797
    Insurance                                            78,498       82,166
    Amortization of property, plant and equipment        24,828       18,518
    Patent and trademark maintenance                     23,715       16,059
    Research and development                             99,875       89,880
    Interest and bank charges                            16,832        6,749
    Foreign exchange loss (gain)                         67,787       -3,851
    -------------------------------------------------------------------------
                                                      2,554,575    2,159,466
    -------------------------------------------------------------------------
                                                     -2,608,066   -2,286,281

    Other revenue (note 13)                               5,240      290,214
    Interest revenue                                        562       11,030
    Other costs (note 14)                               -36,001     -310,096
    -------------------------------------------------------------------------
    Loss before income taxes                         -2,638,265   -2,295,133
    Future income tax recovery (note 12)                195,000       78,400
    -------------------------------------------------------------------------
    Net loss                                         -2,443,265   -2,216,733
    Deficit, beginning of year                      -16,270,809  -14,054,076
    -------------------------------------------------------------------------
    Deficit, end of year                            -18,714,074  -16,270,809
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per share - basic and diluted               (0.031)      (0.033)
    Weighted average number of common shares         78,443,983   67,418,141
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    THERMAL ENERGY INTERNATIONAL INC

                    CONSOLIDATED STATEMENT OF CASH FLOWS

    Year ended May 31
                                                           2007         2006
                                                              $            $
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net loss for the year                            -2,443,265   -2,216,733
    Add items not involving cash:
      Stock-based compensation charge                   377,755      431,827
      Amortization of property, plant and equipment      24,828       18,518
      Future income taxes                              -195,000      -78,400
      Write-off of past President loan to acquire
       shares                                           151,500            -
      Non-monetary compensation charge                   13,031            -
      Debt settlement with past President                     -     -232,305
    Changes in non-cash operating working capital
      Accounts receivable                               197,914     -395,236
      Contracts in progress                              85,000      -24,000
      Prepaids and other assets                         -19,117      -34,166
      Accounts payable                                 -437,488      714,997
      Accrued liabilities                                -8,646     -151,722
      Deferred revenue                                  901,000     -375,000
      Due to the past President                               -      -50,730
    -------------------------------------------------------------------------
    Net cash used in operating activities            -1,352,488   -2,392,950
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    (Acquisition) disposal of short term investments -1,020,880      800,263
    Additions to property, plant and equipment          -32,901      -42,279
    (Increase) decrease in loan receivable               55,500      -55,500
    -------------------------------------------------------------------------
    Net cash used in investing activities              -998,281     702,484
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Common shares issued (note 9)                     2,840,846    1,575,367
    -------------------------------------------------------------------------
    Net cash provided by financing activities         2,840,846    1,575,367
    -------------------------------------------------------------------------

    Increase (decrease) in cash for the year            490,077     -115,099
    Cash, beginning of year                              59,119      174,218
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash, end of year                                   549,196       59,119
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Interest paid                                         3,242        1,928
    -------------------------------------------------------------------------
    Tax impact of renounced expenditures                195,000       78,400
    -------------------------------------------------------------------------
    Shareholder loans to acquire shares                   7,500      119,305
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of these consolidated
    financial statements.
    

    For complete audited financial statements with notes and management
discussion and analysis, please go to www.sedar.com or our website at
www.thermalenergy.com under "investors."

    About Thermal Energy

    Thermal Energy International Inc. is an innovative technology company
providing custom energy and emission reduction, and bioenergy solutions.
Headquartered in Ottawa, Canada, TEI is a designer, design build developer,
fabricator, owner, operator and supplier of proprietary and patented energy
conservation, renewable energy and environmental technology solutions. Thermal
Energy is a fully accredited professional engineering firm, and offers
advanced process and applications engineering services. The Company is a proud
member of the Chicago Climate Exchange (CCX). FLU-ACE(TM), Dry-Rex(TM),
THERMALONOx(TM) and THERMALOZOMAx(TM), THERMAL AUD(TM) are trademarks of
Thermal Energy International. GEM(R) is a trademark used under exclusive
license from Gardner Energy Management Ltd.
    For more information about Thermal Energy International Inc.
(TSX-V: TMG), visit our website at www.thermalenergy.com.

    THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT
    RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.





For further information:

For further information: Stuart McCarthy, Investor Relations and
Communications, (613) 723-6776 x 220, stuart.mccarthy@thermalenergy.com

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