TTRIF Year end results - Sep 27 1998
Thermo Tech Technologies Inc TTRIF
Shares issued 59,926,057
Monday Sep 28 1998 News Release
Mr. Rene Branconnier reports
1998 fiscal year revenues increased to $3,284,542, or 31 per cent over revenue of $2,504,093 for the year ended April 30, 1997. A primary source of this revenue was the Hamilton Bio Conversion plant which returned a net profit of $904,419. Hamilton Bio exceeded projected profits. It did so while undergoing upgrading to Thermo Master Mark II plant design standards and modifications to increase processing capacity to 400 tons per day. Subsequent to its July 30 official opening as a Thermo Master Mark II plant, Hamilton has been rapidly building up its daily throughput to its 400 ton capacity.
In 1998, commencement of construction on new plants has been a major feature with the completion of the Hamilton Mark II conversion, Richmond Bio Conversion Inc. and the addition of a second 400 ton per day facility to the Hamilton Bio Conversion complex. This increased level of activity caused selling, general and administrative expenses to increase. With the major amount of increased activity aimed at future business and revenue generation, these selling, general and administrative costs increased in the past fiscal year to $6,985,767 from $5,881,059 in the fiscal year ended April 30, 1997. A significant amount of the increase took place in the fourth quarter.
Relocation of the company's head offices to Langley incurred a significant cost, totalling $270,000. Significant use of legal firms has increased professional fees by $350,000. Decline of the Canadian dollar also contributed significantly to selling, general and administrative expenses.
The aggressive, action based position that the company has taken in building its business over the past year generated costs but has seen assets increase $17,033,532 or 56 per cent, to $48,266,537 at April 30, 1998, with long term debt of $1,196,135, compared to $204,114 at April 30, 1997. The company has been rigorous in writing down any asset to conservatively reflect its future value to the company. The key to the major increase in activity is the delivery of plans for the Thermo Master Mark II plant. With these, the company has been able to commit to new plant projects, including, Hamilton, Richmond, Oshawa and Niagara, as well as other projects which are discussed in the project update section of this release.
The net loss for the year ended April 30, 1998 was $8,247,218 before non-cash and non-recurring items. Non-cash items included depreciation and amortization of $3,236,743 and goodwill writedown of $836,097. Non-recurring items include re-engineering costs of $1,433,644 for the Hamilton plant. These re-engineering costs form part of the cost involved in the development and achievement of the Thermo Master Mark II plant design. Research and development expenditures of $842,202 contributed to the development of the Thermo Master Mark II plant as well.
Total operating costs for the fiscal year ended April 30, 1998 were $11,951,324, despite increased activity and compare favourably with the comparable costs of $9,110,920 recorded for the year ended April 30, 1997.
STATEMENT OF LOSS
Year ended April 30
1998 1997
Tipping fee,
end product
and put or
pay revenue $ 3,284,542 $ 2,504,093
Plant opera-
tion costs (3,166,566) (3,402,026)
Amortization (2,936,743) (2,508,747)
------------ ------------
Earnings (loss)
before
expenses (2,818,767) (3,406,680)
------------ ------------
Operating
expenses
Selling,
general and
admin expenses 6,985,767 5,881,059
Professional
fees 1,553,614 668,586
Re-engineering
and maintenance
expense 1,433,644 1,412,460
Writeoff of
goodwill 836,097 -
Amortization
of licences 300,000 300,000
Research and
development 842,202 848,815
------------ ------------
11,951,324 9,110,920
------------ ------------
Earnings
(loss) from
operations (14,770,091) (12,517,600)
Other earnings
(expenses)
Interest
and other 197,333 105,819
Gain (loss)
on sale of
assets (23,146) 307,608
------------ ------------
Total other
expense 174,187 413,427
------------ ------------
Net earnings
(loss) $(14,595,904) $(12,104,173)
============ ============
Earnings
(loss) per
share (26 cents) (50 cents)
Corporate Development
The company has put together its top ten list of major accomplishments:
1. Hamilton Bio Conversion returns net profit of $904,419 and exceeds its projected performance for the year ended April 30, 1998.
2. Miracle Feeds of Canada agrees to long term end product purchase agreements for the Oshawa and Niagara Bio Conversion plants, providing a positive indication of the marketability of the end products.
3. Dick Engineering Inc. finalizes and delivers the entire design package for the Thermo Master Mark II plants.
4. A new patent entitled Process for Thermophilic, Aerobic Fermentation of Organic Waste was issued by the United States Patent and Trademark Office as U.S. Patent No. 5,810,903. This patent is the basis of the Thermo Master Mark II process. Filings have also been made in the Canadian Patent Office and through the Patent Co-operation Treaty for international protection.
5. Thermo Tech builds its management team with addition of Wayne Hansen (CFO), Dr. Owen Anderson (director and vice-president), Ross Lewis (marketing and engineering) and Jim Coull (vice-president of marketing, U.S. Thermo Tech).
6. The company enters joint venture in Ontario Thermo Tech and acquires a 50 per cent interest in Northwood Recycling and Energy Inc. and Power Grow Systems Inc., thus developing an integrated waste management business, adding increased revenues and assets. Ontario Thermo Tech to build two more Thermo Master Mark II plants. A major management group led by Harvey Ambrose delivers an effective business, including administrative and management services for the company's entire Ontario operations.
7. Hamilton Bio Conversion opens the company's first Series 400 Thermo Master Mark II plant on July 30, 1998.
8. Construction of Richmond Bio Conversion Inc. Series 400 Thermo Master Mark II plant started with the grand opening to be held Oct. 30, 1998.
9. Hamilton Bio Conversion launches construction of a second 400 ton per day facility for processing of biosolids, with completion of construction in October.
10. Oshawa and Niagara Bio Conversion Thermo Master Mark II plants completing pre-construction preparation and scheduled to be the next two Thermo Master Mark II plants to commence construction.
The company sees these specific accomplishments as major milestones. Profitable operating of Hamilton Bio Conversion is an important accomplishment in itself but even more importantly, it has proven the financial model the company has developed for its plant businesses. The Thermo Master Mark II plant is a major success of engineering.
The new U.S. patent is particularly important as it protects the entire comprehensive process including raw material preparation, aeration, mixing, fermentation, separation and drying. The Thermo Master Mark II process has patent protection until August of 2016. The inventors have retained ownership of the invention pending completion of corporate planning by the company, and will assign rights for the new patent and any additional patents to the company in accordance with the approved structure and at no cost to the company.
Update on Projects and Programs
Following is a brief update and expansion on some of the accomplishments in the top ten list as well as other matters of importance to shareholders.
Thermo Master Mark II
A major milestone was the delivery by Dick Engineering of final designs for the Thermo Master Mark II plant. These were delivered in January and signed off in March, enabling the company to construct plants. Delivery of drawings was the culmination of a thorough process of engineering review, modification, assessment and design. The proprietary technology of the Thermo Master Mark II plant extends to the proprietary designs for fermenters and equipment, process flow information, engineering specifications and drawings as well as operating, maintenance and safety manuals which make it possible to apply the Thermo Master Mark II process on a commercial basis.
Ontario Thermo Tech
A 50/50 joint venture was concluded under the name Ontario Thermo Tech. The partner in this joint venture is Courtice Auto Wreckers, doing business as Ontario Disposal. Courtice Auto Wreckers is owned by Harvey Ambrose who is a successful businessman with more than 35 years experience in the Ontario waste industry. He is joined by Todd Dupuis, with his extensive background in construction and management of co-generation and waste recycling and management facilities. Mike Dennis has joined after 12 years as senior environmental officer with the Ontario Ministry of the Environment and Energy, left to join Ontario Thermo Tech and become part of this integrated waste management business.
Ontario Thermo Tech owns Northwood Recycling and Energy Inc. and Power Grow Systems Inc. The company's 50 per cent interest in these businesses has brought revenues from waste transfer and recycling services, which is anticipated to expand over the coming years as disposal options in the Golden Horseshoe region of Ontario are reduced. The Brock Road West landfill near the Northwood site has recently closed and Toronto's main landfill (Keels Valley) is scheduled to close within the next two to three years, leaving the comprehensive services of Ontario Thermo Tech of increasing importance as time goes on. Each of Northwood and Power Grow will build and operate a Series 400 Thermo Master Mark II plant.
Thermo Tech Management Builds for the Future
To ensure that it can fully capitalize on its investment and in preparing for its business future, the company has searched out and attracted highly experienced and talented individuals.
The following people have been welcomed to the Thermo Tech management team:
Wayne Hansen has joined the company as CFO. Mr. Hansen was managing partner in the Vancouver office of BDO Dunwoody from 1986 to 1996. He has extensive experience in U.S. and international markets. His knowledge and experience will assist the company with its plans to place Thermo Master Mark II plants throughout the North American and world markets.
Dr. Owen Anderson joined the company as vice-president and is a member of the board of directors. He specializes in government liaison on behalf of the company. Dr. Anderson has served on many boards, including the Vancouver Board of Trade and has been a senior adviser to provincial and federal leaders. Dr. Anderson was formerly a partner with BDO Dunwoody.
Ross Lewis has joined the company to provide marketing and engineering services, based on his extensive experience in marketing and delivering turnkey plant systems to domestic and international clients. Mr. Lewis brings over 25 years of experience in engineering design and construction and for the last 10 years has been president of Stothert Engineering. Mr. Lewis and Stothert have been associated with the company since 1989 as independent contractors, when Mr. Lewis participated in the early stages of the design concepts for the original Thermo Master plant.
Jim Coull has joined the company as vice-president, marketing and development for the New England states. Mr. Coull brings more than 36 years of experience in the construction industries with special emphasis on technological industries. He has served on many environmental commissions and has recently been appointed to a five year term as vice-chairman of the Massachusetts Port Authority, the body that oversees air and sea traffic in the Boston region.
Plant Construction
Immediately upon receiving and accepting its new design package for the Thermo Master Mark II plant, the company began to start construction projects. Final aspects of the Hamilton conversion to Mark II standard began, authority was given to move forward with construction at Hamilton and to construct the second processing unit at Hamilton Bio Conversion for biosolids processing. In anticipation of construction approval, the company began site preparation in January for the Richmond Bio Conversion plant. Upon completion of the site preloading and receipt of complete construction drawings, construction of the Richmond Series 400 Thermo Master Mark II plant began.
The company is working with its Ontario Thermo Tech partners to launch off the construction projects for two Thermo Master Mark II plants for Oshawa and Niagara Bio Conversion. Oshawa is anticipated to commence construction first, with Niagara Bio Conversion starting shortly after on a staggered construction to schedule to take better advantage of specialized trades and services.
Other projects, including the recommissioning and re-activation of Corinth and establishment of an integrated wastewater and organic recycling facility at Carver Massachusetts, are now under development and preparation. With the plants in service or due to come into service shortly, the company will have operating capacity of 1,200 tons per day which will expand shortly thereafter to 2,000 tons per day, expandable to 2,600-3,000 tons per day. The company has projected an average daily revenue of $65 per ton of used capacity at each facility.
Private Placement
The company has completed a private placement resulting in the issuance of a total of 22,000,000 shares at 37.5 cents (U.S.) per share. The proceeds were applied to the offering to payments to Courtice Auto Wreckers with respect to construction management services for the Hamilton Thermo Master Mark II plants and the Richmond Bio Thermo Master Mark II plant, to operating services for the Hamilton Thermo Master Mark II plant, the Brampton Bio de-packaging facility and Northwood and Power Grow transfer stations. The company has also paid for the provision of long term gas supply contracts at favourable rates for the company's Thermo Master Mark II plants, for debt financing facilitation fees and for general corporate purposes.
Equity Financing Enables Transition
The company's only source of financing to date has been equity. Funds raised in equity offerings were used to prove to the industry that all engineering deficiencies were corrected, thereby making the long term waste supply contracts necessary for debt financing available.
Management believes this has now been achieved. A positive aspect of this unavoidable dilution is the company now having assets of $48,266,537 and just $1,196,135 in long term debt.
Plant Update
Hamilton Bio Conversion
At April 30, 1998 Hamilton Bio Conversion posted a profit from operations before amortization and depreciation, of $2,301,613 and a net profit of $904,419. This performance was achieved while the plant was involved in an active upgrading program to bring it to Thermo Master Mark II plant status. Hamilton completed its upgrade and expansion program and held an opening ceremony on July 30, 1998 to introduce shareholders and investors to the Thermo Master Mark II plant.
Hamilton is sited on four acres of land and is also constructing a second 400 ton facility, expected to come on stream in late 1998 to process biosolids.
During the year, the company re-acquired the minority interest of the partner in Hamilton Bio Conversion, Paletta International Corp., making Hamilton a wholly owned subsidiary of Thermo Tech Waste Systems Inc.
Since its opening as a Series 400 Thermo Master Mark II plant, Hamilton has been ramping its production up and is currently ahead of projected throughputs.
Brampton Depackaging
Brampton Bio Conversion was changed over to a full service depack centre during the fiscal year. It provides secure, certified destruction services to name-brand food manufacturers who wish to see their out of date or off specification products destroyed in a secure fashion while also seeing that they are recycled rather than simply going to disposal. Brampton can offer all of this with video surveillance, certificates of destruction and the ability to recycle not only the containers but the contents as well. Brampton depackages, slurries and densifies incoming waste before shipping it to Hamilton Bio Conversion where it goes through the patented Thermo Master Mark II process to be converted to a registered animal feed product.
Richmond Bio Conversion Inc.
Richmond Bio commenced construction site preparation in January. Upon receipt of the finalized construction drawings in March, erection of the Thermo Master Mark II plant began. Construction is well advanced with the main structure complete, the odor combuster and most major equipment in place. The company experienced delays on major equipment but has worked closely with the suppliers to minimize the impact. Richmond Bio Conversion is holding its opening ceremonies in conjunction with the annual meeting of shareholders on Oct. 30, 1998.
Richmond Bio Conversion is on the boundary between Vancouver and Richmond, just 10 minutes from Vancouver International Airport. Due to its proximity to the airport, and the corporate head office in Langley, it is an ideal showcase plant for marketing the Thermo Master Mark II plant to the Asia Pacific Region.
The plant is in the most populated and active part of the Greater Vancouver Regional District and a large supply of waste materials. It is in the heart of a market where over 300,000 tons per year of waste is shipped almost 200 miles to landfill at costs exceeding $65/ton.
Oshawa Bio Conversion
Site preparation at Oshawa has commenced. The anticipated slight delay in commencement of construction at Niagara Bio will ensure best use of specialized trades and services required for some aspects of construction. Oshawa Bio Conversion is to be owned and operated by Northwood Recycling and Energy Inc., which is in turn owned by Ontario Thermo Tech, the company's 50/50 joint venture with Ontario Disposal. It is sited at the Northwood facility in Oshawa, Ontario. Oshawa Bio will be a Series 400 Thermo Master Mark II plant, expandable to 600 tons per day as waste resources increase. Northwood, itself is currently permitted to handle 800 tons per day of waste.
Niagara Bio Conversion Inc.
Niagara Bio is to be owned and operated by Power Grow Systems Inc., which is in turn owned by Ontario Thermo Tech, giving the company a 50 per cent interest through its Ontario Thermo Tech joint venture. Power Grow is currently permitted to have up to 100,000 tons of waste on site at any time and will be able to ensure the steady flow of raw material to Niagara Bio as well as other Thermo Master facilities in Hamilton. The site is just 15 minutes from the Fort Erie/Buffalo crossing and Power Grow is the only transfer station in Canada permitted to receive waste from the United States. Construction of Niagara Bio Conversion is anticipated to follow shortly behind Oshawa Bio Conversion to take advantage of certain economies of contracting that can be achieved while building two plants simultaneously. Niagara Bio is scheduled to commence construction of its Series 400 Thermo Master Mark II plant during the Fall of 1998. As with Oshawa, Niagara will also be expandable to 600 tons per day.
Power Grow and Northwood Transfer Stations
Volume at the two transfer stations continues to increase. It is anticipated that profits from these two modern facilities will increase steadily throughout the year.
Carver Massachusetts
The company announced its offer to purchase a wastewater treatment facility and associated land (30 acres) for $14.5-million (U.S.), subject to various conditions. The Carver facility is a permitted operating treatment facility, which upon acquisition will contribute revenue. A Thermo Master Mark II plant is planned for the site, creating another integrated waste handling/recycling business and providing both an ideal showcase for the Thermo Master Mark II plant in the eastern United States, and also a demonstration facility that will show the effectiveness of siting a plant with dedicated wastewater treatment facilities. The offer is contingent in part on completion of suitable arrangements for debt financing for the entire project, which is currently being pursued.
Carver is close to Massachusetts' cranberry, fishing and food depackaging industries. Environmental permitting is currently in place for the sewage treatment pant. Completion of the acquisition is also contingent upon receipt of environmental permits for the Series 400 Thermo Master Mark II plant and standard title due diligence.
Corinth, New York
The company, through its subsidiary, Corinth Bio Conversion Inc., constructed and operated a prototype Thermo Master II plant, with capacity to 125 tons per day. Corinth Bio opened in 1994 and operated for over one year as the company's demonstration plant. Discovery of engineering deficiencies caused the company to cease operations.
Prior to upgrading and reactivation of the Corinth plant, the company made a careful review of the business prospects of continuing operations in that location. Although strong consideration was given to relocating, upon review the company determined to seek a viable operating agreement for the plant in its current location. The Corinth plant will be converted to a Series 200 Thermo Master Mark II plant, with current operating design standards to process bio-solids on a long term contract basis.
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