Thermal Energy Reports Record Q1 Revenues for FY2009



    $1M+ revenues, gross profit doubles, $15M financing, GEM acquisition
    completed and $6M+ cash position

    OTTAWA, Oct. 30 /CNW Telbec/ - Thermal Energy International Inc.
(TSX-V: TMG) (www.thermalenergy.com) is pleased to announce it achieved record
first quarter revenues for Fiscal Year 2009 for the period, ended August 31,
2009.
    Thermal Energy recorded revenues of $1,058,318 for Q1 and a gross profit
of $528,103, compared to revenues of $1,048,357 and a gross profit of $262,952
for the same period in the previous year.
    The company recorded a net loss of $616,086 ($0.004/share) compared to a
net loss of $417,895 ($0.005) share, largely due to increased selling, general
and administrative (SG&A) costs associated with increased sales and marketing
activities and the acquisition of Gardner Energy Management (GEM) Ltd. of
Bristol U.K., completed in the quarter. Full financial results are posted to
SEDAR and are available on the Company's web site. All amounts are in Canadian
dollars.
    The acquisition followed the successful completion of the Company's
largest financing with gross proceeds of $15 million. Working capital at the
end of Q1 stood at $6,273,565 compared to a working capital deficiency of
$2,093,061 at May 31, 2008. Current assets of $8,623,963 increased by
$6,943,934 from May 31, 2008, largely due the results of the financing.
    "Thermal Energy is in excellent position to ride through the current
global financial turmoil and in fact, we are in the strongest financial shape
in the Company's history," said President and CEO Tim Angus. "Customers
continue to tell us they are committed to moving forward with a number of
projects currently on the table and that energy costs are still a major
concern." The Company's visibility on this business development continues to
provide reasonable expectations of a return to strong quarterly growth in
Q3 this year, consistent with management's outlook at the end of FY2008.
    Thermal Energy's solutions both on a capital project basis and financed
through our THERMAL-AUD(TM) (Alternate Utility Delivery) Program remain
competitive and provide significant energy cost savings for customers with
energy prices even lower than they are today.

    
    Highlights during the first quarter include:

    - Signing an agreement in principle with a North American integrated
      paper company for the delivery of a green energy supply program worth
      in excess of $20M over eight years, using recovered waste heat at one
      of its facilities in the north eastern United States. The Company
      anticipates moving forward with this project in Q3;

    - Closing an oversubscribed brokered private placement of common shares
      with gross proceeds of $15,000,000 comprising 68,181,818 common shares
      at $0.22/share. The placement was subscribed by a number of the most
      recognized renewable energy and sustainability focused funds in
      Toronto, New York and London (U.K.);

    - Completing the acquisition of Gardner Energy Management Ltd. ("GEM") of
      Bristol, U.K. Under the terms of the transaction, the Corporation made
      a base payment of (pnds stlg)2.7 M (or CAD $5.4M) upon closing on July
      1, 2008. An additional payment of up to (pnds stlg)1.3 M British Pounds
      Sterling (or CAD $2.6M) may be made on an earn-out basis in a
      combination of cash and shares over a three-year period subject to
      defined future growth targets of the GEM(R) business unit.

    "We have now commenced cross-selling activities in Europe for Thermal
Energy's FLU-ACE(R) and DRY-REX(TM) solutions through the existing GEM(R)
sales networks and have received excellent early stage interest from a number
of existing GEM customers and potential new customers," said Mr. Angus.

                         Annual and Special Meeting

    The Annual and Special Meeting of shareholders will take place November 
25, 2008 at the Brookstreet Hotel, 525 Legget Drive, Ottawa (Kanata), Ontario,
at 9 a.m. Shareholders are asked to arrive ahead of time to complete
registration in order that the meeting can commence on time.
    

    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.

    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) and GEM(R) are
trademarks of Thermal Energy International.

    For more about Thermal Energy International Inc. (TSX-V: TMG), visit our
website at www.thermalenergy.com.

    There are accompanying notes which are an integral part of the following
consolidated financial statements. For complete audited financial statements
with those notes and Management's Discussion and Analysis, please go to
www.sedar.com or our website at www.thermalenergy.com under "investors."


    

    THERMAL ENERGY INTERNATIONAL INC.

    Incorporated under the Ontario Business Corporations Act

                         CONSOLIDATED BALANCE SHEETS

                                                     (Unaudited)
    As at                                                Aug 31       May 31
                                                           2008         2008
                                                              $            $
    -------------------------------------------------------------------------
    ASSETS
    Current assets
    Cash                                                347,882       84,717
    Short-term investments (note 5)                   6,139,530      552,773
    Accounts receivable (note 6)                      1,048,337      627,571
    Contracts in progress                               194,000      156,000
    Inventories                                         559,020            -
    Net investment in lease (note 8)                    237,841      227,034
    Prepaids and other assets                            97,353       31,934
    -------------------------------------------------------------------------
                                                      8,623,963    1,680,029
    Property, plant and equipment (note 7)              118,011       65,066
    Net investment in lease (note 8)                  1,885,235    1,948,906
    Goodwill (note 4)                                 4,804,213            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                     15,431,422    3,694,001
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LIABILITIES, CAPITAL STOCK, CONTRIBUTED SURPLUS
     AND DEFICIT
    Current liabilities
    Bank loans (note 9)                               1,054,962      908,667
    Accounts payable                                    808,732    2,001,801
    Accrued liabilities                                 468,767      459,777
    Deferred revenue                                          -      384,908
    Due to past President (note 10)                      17,937       17,937
    -------------------------------------------------------------------------
                                                      2,350,398    3,773,090
    -------------------------------------------------------------------------

    Non-controlling interest (note 4)                    11,721            -

    Capital stock, contributed surplus and deficit
    Capital stock (note 11)                          32,571,553   19,479,079
    Contributed surplus (note 11)                     2,252,018    1,528,414
    Deficit                                         -21,702,668  -21,086,582
    Accumulated other comprehensive loss                -28,158            -
    -------------------------------------------------------------------------
                                                     13,092,745      -79,089
    -------------------------------------------------------------------------
                                                     15,431,422    3,694,001
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contingency (note 18)
    The accompanying notes are an integral part of these consolidated
    financial statements

    On behalf of the Board


                    Tim Angus                 Oliver Toffoli
                    (signed)                  (signed)
                    President and C.E.O.      Chief Operating Officer & CFO


                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (Unaudited)

    Three months ended August 31
                                                           2008         2007
                                                              $            $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net loss                                           -616,086     -417,895
    Add items not involving cash:
      Stock-based compensation charge                   121,404      153,800
      Amortization of property, plant and equipment      11,691        7,693
      Non-monetary compensation charge                    6,692            -
    Changes in non-cash operating working capital
      Accounts receivable                               529,385      120,076
      Contracts in progress                             -38,000      -29,000
      Inventories                                        22,509            -
      Prepaids and other assets                         -10,798        1,453
      Accounts payable                               -1,570,813      468,741
      Accrued liabilities                              -244,670      -13,535
      Deferred revenue                                 -384,908     -469,553
      Non-controlling interest                            2,955            -
    -------------------------------------------------------------------------
    Net cash used in operating activities            -2,170,639     -178,220
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Acquisition of short-term investments            -5,586,757     -265,413
    Acquisition of Gardner Energy Management
     Limited                                         -5,411,245            -
    Additions to property, plant and equipment          -16,444      -24,681
    -------------------------------------------------------------------------
    Net cash used in investing activities           -11,014,446     -290,094
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Increase in bank loan                              -291,537            -
    Net investment in lease (note 8)                     63,671            -
    Common shares issued (note 11)                   14,900,400      140,500
    Financing fees                                   -1,223,226            -
    Decrease in loan receivable                               -       25,000
    -------------------------------------------------------------------------
    Net cash provided by financing activities        13,449,308      165,500
    -------------------------------------------------------------------------

    Effect of exchange rate fluctuations on cash
     and cash equivalents                                -1,058            -

    Increase (decrease) in cash for the year            263,165     -302,814
    Cash, beginning of period                            84,717      549,196
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash, end of period                                 347,882      246,382
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest paid                                        19,695        2,390
    -------------------------------------------------------------------------
    Shareholder loans to acquire shares                 147,600            -
    -------------------------------------------------------------------------
    Fair value of options exercised transferred
     to capital stock                                    34,000      107,017
    -------------------------------------------------------------------------
    Fair value of warrants issued for financing fees    636,200            -
    -------------------------------------------------------------------------


           CONSOLIDATED OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT
                                 (Unaudited)

    Three months ended Aug 31
                                                           2008         2007
                                                              $            $
    -------------------------------------------------------------------------
    REVENUE
    Sales                                             1,058,318    1,048,357
    Cost of sales                                       530,215      785,405
    -------------------------------------------------------------------------
    Gross profit                                        528,103      262,952
    -------------------------------------------------------------------------

    Expenses
    Administration                                      527,579      284,273
    Selling, marketing and business development         521,082      301,109
    Legal fees                                            9,585        5,097
    Audit fees                                           18,000       15,000
    Insurance                                            34,248       30,176
    Amortization of property, plant and equipment        11,691        7,693
    Patent and trademark maintenance                      2,810            -
    Research and development                             71,643       30,680
    Interest and bank charges                            30,894        2,897
    Foreign exchange loss                                33,312       18,507
    -------------------------------------------------------------------------
                                                      1,260,844      695,432
    -------------------------------------------------------------------------
    Loss before the following:                         -732,741     -432,480

    Interest revenue                                     34,021       14,675
    Finance revenue                                      85,052            -
    -------------------------------------------------------------------------
    Loss before non-controlling interest               -613,668     -417,895
    Non-controlling interest                              2,418            -
    -------------------------------------------------------------------------
    Net loss                                           -616,086     -417,895
    Comprehensive loss due to exchange translation
     adjustment of net investment in self-sustaining
     foreign operation                                   28,158            -
    -------------------------------------------------------------------------
    Net loss and other comprehensive loss              -644,244     -417,895
    Deficit, beginning of period                    -21,086,582  -18,714,074
    -------------------------------------------------------------------------
    Deficit, end of period                          -21,730,826  -19,131,969
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per share - basic and diluted               (0.004)      (0.005)
    Weighted average number of common shares        152,578,635   91,505,729
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of these consolidated
financial statements and Note 14 provides other information on earnings.

    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: Oliver Toffoli, Chief Financial Officer, (613)
723-6776 x 209; Stuart McCarthy, Director, Marketing & Communications, (613)
723-6776 x 220, (613) 762-4321 - cell, stuart.mccarthy@thermalenergy.com

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