Forterra Environmental Reports Third-Quarter 2009 Results

    
    -   Company continues to make progress in every aspect of its operations,
        however, financial results in 2009 remain below expectations
    -   Achieves further significant reductions in expenses
    -   Addition of new customers and loans from insiders providing required
        funding
    -   Appoints interim CFO
    -   Company expects growth in sales and profitability in 2010
    

PUSLINCH, ON, Nov. 30 /CNW/ - Forterra Environmental Corp. (TSXV: FTE), a manufacturer, marketer, and seller of premium organic soil-enrichment products based on worm castings, today announced its financial results for the 2009 third quarter and first nine months ended September 30, 2009. Financial results conform to Canadian generally accepted accounting principles (GAAP) and all currency amounts are in Canadian dollars.

"While our financial results for the 2009 third quarter and first nine months of the year are below our expectations, they are not indicative of the progress that we have made in every aspect of our operations. We are genuinely excited about how this progress is positioning us for increased sales and profitability in 2010," said Rick Denyes, president and chief operating officer.

"The key areas of progress include the following. We have developed, tested, and proven our proprietary process for producing consistent bedding substrate and feed mix for the breeding of our worms and their production to create consistent quality of our finished product. Our breeding program for red wiggler worms, after much trial and error, is now working very efficiently and we continue to increase our population, which now exceeds 26 million.

"We have successfully developed granulated, pelletized, and bridged worm castings product formulas. We also have successfully carried out numerous trials with potential customers in various market segments, including four franchises of a major national lawn-care company. Subsequent to the end of the third quarter, we signed two potentially very significant supply agreements, with a national supplier who will be listing three products using our worm castings and with Agriculture Technology Incorporation to which we expect to ship about 250 tons of worm castings by the end of this year," he continued.

"A colder than anticipated spring combined with the above-average rainfall through summer 2009 affected certain of our customers, causing delays in their blending operations, the elimination of certain applications, and the loss or at least deferral of some sales. This adversely affected Forterra's sales, earnings, and cash flow expectations for 2009. We also have found that the process of carrying out trials with potential new major customers and subsequently negotiating supply or sales agreements is considerably lengthier than we had anticipated," he said.

"As the result of the loss or deferral of sales through the first nine months of 2009, Forterra's sales and level of working capital are significantly below budget. We took steps to reduce our cash requirements in the near term, including postponing planned capital investments and reducing operating expenses. We also have been exploring options to raise additional funds.

"Despite these challenges, we believe that we have many reasons to be pleased with what we have been able to achieve and to be optimistic about the outlook for our business," Mr. Denyes said.

The company also reported that Ron Reed, who has served as Forterra's Chief Financial Officer on a part-time basis, has resigned to accept a full-time position with another company. John Gamble, a director and formerly Chair of the Board's Audit Committee, will serve as interim Chief Financial Officer. Mr. Gamble is President of York Simcoe Investments Inc., an investment consulting company, and is a director of several other companies.

Financial Highlights

Forterra continues to be considered a development-stage company for accounting purposes and, as such, the progress that the company is making is not fully reflected in the financial statements. As a development-stage company, its revenues are applied to reduce sales and marketing expenses.

Total sales were $41,410 for the 2009 third quarter, compared with $34,636 for the 2008 third quarter. These sales have been applied to reduce General and Administration (G&A) expenses. The company commenced production of vermicompost during 2008. Nine-month 2009 sales were $141,300, compared with $101,177 in the 2008 period. As a development-stage company, its revenues are applied to reduce G&A expenses.

G&A expenses consist primarily of costs related to modification, engineering and refinement of the manufacturing facilities, senior management salaries, occupancy costs, consulting, and professional legal and accounting services.

G&A expenses were $62,119 for the 2009 third quarter, down from $327,340 in the second quarter and compared with $465,362 for the 2008 third quarter. The decrease is attributable particularly to substantially lower salaries and wages and occupancy costs. The G&A expenses for the first nine months of 2009 amounted to $832,129, compared with $1,080,385 in the prior-year period. The improved expenses are attributable to the same factors that resulted in reduced third-quarter G&A compared with the 2008 period.

Salaries and wages totalled $101,417 in the 2009 third quarter and $346,038 during the first nine months of 2009, compared with $192,922 and $384,161 incurred in the same periods a year ago. The decreases relate to capitalizing production salaries to inventory in 2009. Salaries directly involved in the production of worm castings are being capitalized as part of inventory.

Occupancy expenses, consisting of the Puslinch facility, which is our active plant and head office, decreased to $45,427 in the 2009 third quarter from $138,076 a year ago. Management has reached an agreement on the termination of the Concord space and is in negotiations to terminate the Downsview location. For the first nine months of 2009, occupancy expenses amounted to $379,361, including the vacated facilities in Downsview and Concord for the first half of the year, compared with $288,246 in the 2008 period.

Sales and marketing expenses amounted to $11,171 for the third quarter in 2009, compared with $18,244 for the 2008 three-month period. Nine-month 2009 sales and marketing expenses were $110,986, compared with $55,602 a year earlier. Marketing expenses were increased in early 2009 due to the addition of new sales representatives and to costs relating to the establishment of marketing strategies and market research and reflecting the fact that 2008 was considerably lower due to decreases resulting in adjustments of marketing consulting services and the completion of web page development.

R&D expenditures were $37,898 for the 2009 third quarter and $90,377 for the first three quarters of the year, compared with $3,314 and $54,754 in the comparable 2008 periods. R&D expenditures relate primarily to the development of manufacturing equipment and research conducted in house in relation to the red wiggler worms required for the production process. The company also paid $10,000 in the 2009 second quarter to the University of Guelph for future studies on a specific basis.

After certain other expenses, including interest, depreciation and amortization, and stock-based compensation, the net loss was $152,162 ($0.01 per basic and diluted share) for the 2009 third quarter and $1,421,970 for first nine months ($0.02 per basic and diluted share) of 2009, compared with a net loss of $531,304 ($0.01 per basic and diluted share) and $1,417,282 ($0.02 per basic and diluted share) incurred in the respective periods of 2008.

Forterra continues to increase its population of red wiggler worms that are at the core of its operations. The company estimates that the worm population, which was approximately 18,000 pounds of worms at December 31, 2008 and approximately 24,000 pounds at July 31, 2009, was at about 26,000 pounds at the end of the 2009 third quarter. The current retail price for worms is US$30 per pound (resulting in an estimated value of US$780,000 for Forterra's worms population). As there are an estimated 1,000 worms per pound, this indicates a total population as at September 30, 2009 of about 26 million worms.

As at September 30, 2009, the company had negative working capital of $111,429, compared with December 31, 2008, when the Company had positive working capital of $298,421.

In the third quarter of 2009, certain of Forterra's directors loaned the company $150,000 in additional financing. In addition, subsequent to the end of the quarter, in November 2009, the company received a SRED (Scientific Research and Experimental Development) credit cash refund and applied it to reduce the amount payable on its outstanding debentures. Certain debentureholders waived their right to receive their portion of the SRED credit refund and reinvested this amount ($94,000) in Forterra. Other debentureholders are considering doing the same.

As previously reported, Forterra does not currently have sufficient resources to complete the commercialization of its products or to carry out its entire business strategy. Therefore, the company needs to raise additional capital to fund operations. Although Forterra believes that additional financing can be sourced, the company cannot be certain that any financing will be available when needed on acceptable terms or at all. Any additional equity financings will be dilutive to existing shareholders, and debt financing, if available, may require additional stock to be issued and/or involve restrictive covenants on the business.

The company believes that it will be able to secure sufficient working capital to fund its operations through 2009 and into 2010.

Discussions with current and potential customers indicate that they will be purchasing products during the balance of 2009 and in 2010 that will result in increased sales and cash flow for the company. In particular, subsequent to the end of the 2009 third quarter, the company announced agreements with two new and potentially major customers.

On October 1, 2009, Forterra announced that it had shipped 22 tons of worm castings to a national supplier. The customer initially will be listing three products using Forterra's worm castings for sales to the professional market across Canada. The development of this relationship followed months of product development and continued testing by the new customer of Forterra's worm castings and of blends of their products with the company's. Forterra has discussed a longer-term arrangement with the national supplier. Such an arrangement will depend on the market success of the products that are being sold with the company's worm castings. Forterra believes that in December 2009 it will make a second and possibly larger shipment of castings to this customer.

On October 26, 2009, Forterra announced that it had received a purchase order from Agriculture Technology Incorporated (ATI) under which the Company will ship approximately 250 tons of worm castings to ATI through the end of 2009. ATI said that after reviewing the agronomic benefits of the company's worm casting products, it feels that blending Forterra worm castings into ATI's Eco-Soil product line-up will distinguish its products from those of its competitors. ATI plans to position its Eco-Soil products as being premium, nutrient-rich, environmentally friendly compost material for landscaping, gardening, lawn care, and green houses. It stated that it expects that the inclusion of Forterra's worm castings will enhance the Eco-Soil line-up of products. ATI stated that it looks forward to working with Forterra on branding and further product research.

"During the past two years, Forterra has come a long way from a start-up operation that still had much to learn about every aspect of our business, including production and marketing, to a maturing company that now has proven and increasingly efficient manufacturing in an established cost-effective plant, a steadily growing list of customers, and a stable platform on which we can continue building our business," said Don Green, the company's chairman and chief executive officer.

"While we are continuing to focus on tightly managing our available capital and our costs, we also are investing for the future, working with our customers to develop plans and products and mutually beneficial opportunities for 2010 and beyond. We are expanding our production capacity to meet the anticipated demand for 2010 and are considering the timing for possibly adding a second manufacturing plant in the second half of next year," Mr. Green said.

About Forterra Environmental Corp.

Forterra manufactures, markets, and sells environmentally friendly soil enhancers, using worm castings, which boost fertility while restoring the soil with organic matter for sustainable, longer-term benefits, including stronger root growth, and drought and pest resistance. Forterra products contain only organic material. They are ideal for golf courses, sports fields, lawn care, parks, nurseries, orchards, and vineyards. Essentially, Forterra uses red wriggler worms to convert organic material into vermicompost or worm castings. Worm castings contain micronutrients, which are required for healthy plant development. Worm castings also contain microbes, which increase the rate at which plants take up available macronutrients and micronutrients. Further information is available on the company's website at www.forterra.com.

Forward-Looking Statements

This news release contains forward-looking statements based on current expectations. These forward-looking statements entail various risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Such statements are based on current expectations, are subject to a number of uncertainties and risks, and actual results may differ materially from those contained in such statements. These uncertainties and risks include, but are not limited to, availability of resources, competitive pressures, changes in market activity, the ability to sign contracts with customers, the development of markets for worm castings, its ability to breed and maintain a sufficiently large worm population, and regulatory requirements. Risks and uncertainties about Forterra's business are more fully discussed in the company's disclosure materials, including its annual information form and MD&A, filed with the securities regulatory authorities in Canada. Forterra assumes no obligation to update any forward-looking statement or to update the reasons why actual results could differ from such statements.

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

    
    FORTERRA ENVIRONMENTAL CORP.
    (Previously named "REWORKS Environmental Corp.")
    (A Development Stage Company)
    CONSOLIDATED BALANCE SHEETS
                                               Sept. 30, 2009  Dec. 31, 2008
                                                      $              $
    -------------------------------------------------------------------------

                                   ASSETS
    CURRENT ASSETS
      Cash and cash equivalents                        31,076        368,426
      Amounts receivable                              103,732        104,147
      Inventory                                       536,258        312,982
      Prepaid expenses and deposits                    88,229         76,515
                                                 ----------------------------
    TOTAL CURRENT ASSETS                              759,295        862,070
    PROPERTY AND EQUIPMENT                            487,820        432,686
    INTANGIBLE ASSETS                                       1              1
    GOODWILL                                           30,000         30,000
                                                 ----------------------------

    TOTAL ASSETS                                    1,277,116      1,324,757
                                                 ----------------------------
                                                 ----------------------------

                                 LIABILITIES

    CURRENT LIABILITIES
      Amounts payable and accrued liabilities         870,724        559,744
      Current portion of capital lease payable              -          3,905
                                                 ----------------------------
    TOTAL CURRENT LIABILITIES                         870,724        563,649
    LOANS PAYABLE                                     786,540              -
    LEASEHOLD INDUCEMENT                               57,400         90,534
                                                 ----------------------------
    TOTAL LIABILITIES                               1,714,664        654,183
                                                 ----------------------------

                            SHAREHOLDERS' EQUITY

    CAPITAL STOCK                                   9,782,954      8,668,601
    WARRANTS                                          411,398      1,367,716
    CONTRIBUTED SURPLUS                             1,130,591        960,745
    SHARES TO BE ISSUED                                     -         14,035
    (DEFICIT)                                     (11,762,492)   (10,340,523)
                                                 ----------------------------
    TOTAL SHAREHOLDERS' EQUITY                       (467,459)       670,574
                                                 ----------------------------

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      1,277,116      1,324,757
                                                 ----------------------------
                                                 ----------------------------



    FORTERRA ENVIRONMENTAL CORP.
    (Previously named "REWORKS Environmental Corp.")
    (A Development-Stage Company)
    CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

                               3 Months    3 Months    9 Months    9 Months
                                 ended       ended       ended       ended
                               September   September   September   September
                                30, 2009    30, 2008    30, 2009    30, 2008
                                   $           $           $           $
    -------------------------------------------------------------------------
    EXPENSES
      General and
       administrative             62,119     465,362     832,129   1,080,385
      Sales and marketing         11,171      18,245     110,986      55,603
      Research and
       development (net)          37,898       3,314      90,377      54,754
                             ------------------------------------------------
      Loss before other
       expenses                  111,188     486,921   1,033,492   1,190,742

    OTHER EXPENSES
      Stock-based compensation     5,696      27,223     169,846     184,327
      Amortization of property
       and equipment              15,564       5,034      46,692      15,102
      Interest and accretion
       on long-term debt          18,540           -     180,540           -
      Interest expense and
       foreign exchange gain       1,174      12,126      (8,600)     27,111
                             ------------------------------------------------

    NET LOSS FOR THE QUARTER     152,162     531,304   1,421,970   1,417,282

    DEFICIT, beginning
     of year                  11,610,330   8,985,025  10,340,523   8,099,046

                             ------------------------------------------------

    DEFICIT, end of quarter   11,762,492   9,516,329  11,762,492   9,516,329
                             ------------------------------------------------
                             ------------------------------------------------



    FORTERRA ENVIRONMENTAL CORP.
    (Previously named "REWORKS Environmental Corp.")
    (A Development-Stage Company)
    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                3 Months    3 Months    9 Months    9 Months
                                 ended       ended       ended       ended
                               September   September   September   September
                                30, 2009    30, 2008    30, 2009    30, 2008
                                   $           $           $           $
    -------------------------------------------------------------------------
    CASH FLOWS FROM OPERATING
     ACTIVITIES
    Net (loss) for the quarter  (152,162)   (531,303) (1,421,973) (1,417,282)
      Changes to income not
       involving cash:
      Amortization                15,564       5,037      46,692      15,105
      Accretion on long-term
       debt                            -       5,163     144,000      20,202
      Stock-based compensation     5,696      27,224     169,846     184,327
      Leasehold inducement       (19,135)      6,513     (33,135)     19,539
                             ------------------------------------------------
                                (150,036)   (487,366) (1,094,570) (1,178,109)
    Changes in non-cash
     working capital balances
      (Increase) in prepaid
       expenses and deposits       3,456     (36,005)    (11,714)    (23,324)
      (Increase) in amounts
       receivable                (41,840)       (594)        415     (16,034)
      (Increase) in inventory    (57,774)    (33,385)   (222,930)    (71,520)
      Increase (decrease) in
       amounts payables          126,359    (110,470)    307,077      58,679
                             ------------------------------------------------
    Net Changes in Working
     Capital                      30,201    (180,454)     72,848     (52,199)
                             ------------------------------------------------
    CASH FLOWS FROM FINANCING
     ACTIVITIES
      Repayment of loans
       payable                         -     (12,500)          -     (37,500)
      Loan received              168,540   1,821,573     786,197   2,131,573
                             ------------------------------------------------
    Cash flow from financing
     activities                  168,540   1,809,073     786,197   2,094,073
                             ------------------------------------------------
    CASH FLOWS FROM INVESTING
     ACTIVITIES
      Additions to property
       and equipment              (3,530)    (54,139)   (101,826)   (113,799)
                             ------------------------------------------------
    Increase in cash and
     cash equivalents             45,175   1,087,114    (337,350)    749,966
    Cash and cash equivalents,
     beginning of year           368,426       4,044     368,426     341,192
                             ------------------------------------------------
    Cash and cash equivalents,
     end of September            413,601   1,091,158      31,076   1,091,158
                             ------------------------------------------------
                             ------------------------------------------------
    CASH AND CASH
     EQUIVALENTS CONSIST OF:
      Cash                       413,601   1,091,158      31,076   1,091,158

                             ------------------------------------------------
      Cash equivalents
                                 413,601   1,091,158      31,076   1,091,158
                             ------------------------------------------------
                             ------------------------------------------------
    

%SEDAR: 00013128E

SOURCE FORTERRA ENVIRONMENTAL CORP.

For further information: For further information: Investor and Media Relations, Richard W. Wertheim, Wertheim + Company Inc., Email: wertheim@wertheim.ca, (416) 594-1600, (416) 518-8479 (cell)

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FORTERRA ENVIRONMENTAL CORP.

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