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,
"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
"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,"
The company also reported that
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
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
Salaries and wages totalled
Occupancy expenses, consisting of the Puslinch facility, which is our active plant and head office, decreased to
Sales and marketing expenses amounted to
R&D expenditures were
After certain other expenses, including interest, depreciation and amortization, and stock-based compensation, the net loss was
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
As at
In the third quarter of 2009, certain of Forterra's directors loaned the company
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
On
"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
"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,"
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
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
For further information: Investor and Media Relations, Richard W. Wertheim, Wertheim + Company Inc., Email: [email protected], (416) 594-1600, (416) 518-8479 (cell)
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