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Oshawa Bio Conversion Inc. As detailed elsewhere, Oshawa Bio Conversion is part of Ontario Thermo TechT. This Model 4 plant will be located approximately 35 miles to the East of Toronto, Canada's largest city. It will be owned by Northwood Energy and Recycling. This plant will be 100% financed through non-recourse debt financing arranged jointly by Thermo TechT and Ontario Disposal, its partner in Ontario Thermo TechT.
Niagara Bio Conversion Inc. This plant is also part of the Ontario Thermo TechT package and will be located at the Power Grow site in Niagara Falls, Ontario. It will be constructed to 400 ton per day capacity with possibility to expand to 600 tons. Its location near the Fort Erie/Buffalo border crossing puts it in an ideal location to service the Niagara Region and the U.S. Niagara Frontier. It will be supplied with debt financing through the a non-recourse financing facility similar to that to be used for Oshawa Bio Conversion. In combination with Oshawa Bio, Hamilton Bio and Brampton Depack Center, Northwood and Power Grow, Niagara Bio Conversion will be part of an integrated package to provide full service waste management to Ontario's Golden Horseshoe region.
Halifax Bio Conversion. On January 15, 1998 the Nova Scotia Department of the Environment issued the "Industrial Approval Permit" for Halifax Bio Conversion Inc. This is the main environmental permit for this project and allows all other aspects of this project to proceed toward plant construction. Local authorities are working closely with the project team to ensure that each step of the project development is completed as efficiently as possible. The project development team is working to complete the securing of waste streams and to finalize other details necessary for construction to commence.
New England States. New England represents a major market for both biosolids and food wastes. Representatives of the Company have been working together with officials from one of the largest wastewater treatment firms in the United States to locate potential projects which can be jointly developed, starting in the state of Massachusetts.
Projects are being evaluated for Carver, Springfield, Martha's Vineyard and Fort Devens Massachusetts. Massachusetts and adjoining states offer a ready market for the superior Thermo MasterT Technology and will be a primary target area for Thermo MasterT Plant development.
Massachusetts Department of Environmental Protection. The Company is working to open the North Eastern United States for rapid plant construction. In support of this goal, the Company has been working with the Massachusets DEP to deepen their understanding of how the Thermo MasterT Process and Plant can benefit the environment through effective organic waste management. A presentation made in February regarding the Thermo MasterT Process as an environmentally sound solution for organic waste problems was very positive and well received. The Company left the meeting participants with one clear message which was that the Thermo MasterT Plant must enter any community as a technologically sound project but also as a welcome partner in the effective management of organic wastes.
Corinth Bio Conversion Inc. The Company is completing details of a settlement of the outstanding issues related to the Corinth Plant and the joint venture partner. This will free the Company to undertake the dismantling, relocation and marketing of the Model 1 Thermo MasterT Plant.
New York State. The area surrounding New York City is a major focus for the Company. The immense population and business base in the area makes this region a potential market for a number of Thermo MasterT Plants. The Company is working with a number of partners to develop this area and provide the financing packages needed to rapidly site plants.
Washington State. The Company is confident that Washington State represents a major opportunity for placement of Thermo MasterT Plants. Development activity is moving forward on individual opportunities for Seattle (King County), Olympia, Vancouver, Skagit County and in Yakima County Washington. Although the Skagit project is still progressing, the Company must give top construction priority to projects with the highest potential returns for shareholders. A large waste generator in the Seattle area has expressed interest in a joint venture for a Model 4 Thermo MasterT Plant which would solve its waste management needs and provide an opportunity to handle other wastes as a net revenue generator.
International. The Thermo MasterT Plant is developing more and more interest in the international market. Development of these markets will fall to the Company's international division, International Thermo TechT. The Company is looking at the best ways to move forward, but it is clear that every international project must be preceded by a thorough feasibility study. International Thermo TechT has tools in place to complete a full, in-depth feasibility study for any potential partner ready to commit US$50,000 to complete such a detailed study in support of a proposed project. This study will be conducted under the direction of Stothert Engineering, the Company's engineering consultant in this area. The study will determine, in detail, the amount, price, ownership and availability of waste streams, infrastructural, regulatory and political aspects of the market and the potential of the Thermo MasterT Plant. The fee will be applied to the project cost when plant construction goes ahead.
RESULTS OF OPERATIONS
Nine months ended January 31, 1998 and 1997
$1,594,630 improvement in profits before expenses was recorded by the Company. Profit before expenses of $1,033,175 was recorded for the nine months ended January 31, 1998 compared to a loss of $561,455 for the nine months ended January 31, 1997. $604,368 increase in revenue was achieved. $990,262 decrease in operating costs was recorded. This 37.5% decrease in operating costs is another milestone that the Company has met.
$2,091,248 improvement was recorded in net loss before non-cash, non-recurring and R&D costs. This was a result of reducing this item to $2,837,594 at January 31, 1998 from $4,928,842 a year earlier.
The Company's investment in engineering improvements has been significant. These designs, which have been guaranteed by Dick Engineering, will assure delivery of highly effective Thermo MasterT Plants for the Company's present and future business expansion. The expense has been largely absorbed in the current fiscal year. These changes have contributed to the profitable operation of Hamilton Bio Conversion and allowed the Company to undertake the expansion of that facility to three and a half times its original construction design of 200 tons per day. The Company is now ready and has committed to its construction program for new Thermo MasterT Plants, which began January 13, 1998 in Richmond, B.C.
$196,955 savings was recorded in selling, general and administrative cost. The saving was realized even though the Company continues to undertake a number of new ventures and has stepped up its marketing program in support of new plant establishment throughout North America and the World.
$38,016,215 in assets was recorded by the Company at January 31, 1998. $6,783,210 was the increase over assets of $31,233,005 at April 30, 1997. The increase in assets resulted from increased working capital and investments in the Thermo MasterT Process and Plants. Assets are projected to demonstrate strong growth as plant projects already in construction or about to commence, are completed over the first and second quarter of the next fiscal year. The expansion of Hamilton Bio Conversion, construction at Richmond and the Northwood and Power Grow acquisition through Ontario Thermo TechT will continue the strong trend of asset growth, in the fourth quarter of the current fiscal year.
The Company has no long term debt and is in an excellent position to expand its Thermo MasterT Plant development program which began in January with the construction start of Richmond Bio Conversion Inc.
Liquidity and Capital Resources
$3,231,606 working capital was reported at January 31, 1998. This compared to a $77,659 deficiency at January 31, 1997. $3,473,012 was the Company's cash position at the end of the third quarter.
The Company has received US$1,750,000 pursuant to a previous financing. Due to certain defaults by the purchaser, the Company has taken the position certain conversion provisions and registration rights are not effective.
The Company is in a strong position to employ cash and draw upon a US$26,000,000 convertible debenture to provide the equity portion of new plant projects. The Company intends to employ debt financing for at least 75% of each project. Performance of the Hamilton plant and assured waste supply streams have made it possible to enhance access appropriate debt financing facilities. The endorsement represented by the Ontario Disposal joint venture is a major step forward. The Company also intends to establish joint venture or similar arrangements with waste management industry participants in selected markets for financing, construction, and operation of Thermo MasterT Plants. Cash proceeds from joint venture agreements are expected to finance a portion of the cost associated with the construction of additional plants. The Company intends to enter into major financing arrangements for multiple projects and is currently in negotiations with several organizations capable of providing such debt financing packages.
PART 11
OTHER INFORMATION
Item 1. Legal Proceedings
The Company has been named as a defendant in two lawsuits commenced in British Columbia. In the opinion of management, the outcome of the lawsuits, now pending, would not be material to operations. Should any loss result from the resolution of these claims, such loss will be charged to operations in the year of resolution.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information |
