Bennett Environmental Inc.
TSX : BEV

Bennett Environmental Inc.

November 12, 2007 16:05 ET

Bennett Announces Q3 2007

OAKVILLE, ONTARIO--(Marketwire - Nov. 12, 2007) - Bennett Environmental Inc. (TSX:BEV) today announced its financial and operating results for the third quarter of 2007.

Bennett Environmental recorded a loss of $2.7 million or $0.10 per share in the third quarter of 2007, compared to a loss of $4.5 million or $0.21 per share in the third quarter of 2006. Sales for the third quarter of 2007 were $1.9 million compared to $1.3 million for the same period a year earlier. Sales decreased by $3.4 million over the second quarter of 2007 and net loss was increased by $0.8 million.

In discussing the third quarter results, Jack Shaw, President and CEO of the Company, noted that it is necessary to look beyond the quarter to develop a perspective on the Company's operations. "Our desire to operate our plants efficiently, to process only when we have sufficient material on hand, leads to the accumulation of materials in one period which are not finally processed until the subsequent period. Such is the case with the third quarter of this year when materials were accumulated that will not show up in revenue until the fourth quarter."

The following table discloses certain financial data for the eight most recently completed quarters, expressed in Canadian dollars (millions) (except per share data - basic and diluted):



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2007 2006 2005
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Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
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Net Sales 1.9 5.3 1.7 2.5 1.3 2.7 4.5 8.8
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Net (Loss)
Earnings (2.7) (1.9) (2.7) (18.6) (4.5) (1.8) (2.1) (20.2)
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(Loss) Earnings
per share - basic
and diluted (0.10) (0.07) (0.11) (0.86) (0.21) (0.08) (0.10) (0.94)
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At the end of the third quarter of 2007 the Company had cash and cash equivalents of $3.7 million and working capital of $0.7 million.

Mr. Christopher Wallace, Chairman of Bennett Environmental Inc., noted that within the management discussion and analysis ("MD&A") management has made the statement "Certain conditions and events exist that cast substantial doubt on the Company's ability to continue as a going concern." Mr. Wallace made the following comments on this. "Our management, in keeping with good corporate governance and consistent with appropriate disclosure requirements, has included this statement in the MD&A since the third quarter 2006. The statement acknowledges that there are circumstances under which the Company would not have the necessary liquidity required to continue operations. Bennett's recent history of losses and consequent erosion of liquidity requires that we explicitly make that statement. Our management is implementing those strategies they believe will best address these liquidity concerns, and if these strategies are achieved management believes that it will have sufficient cash and working capital to fund operations beyond the third quarter of 2008."

In reviewing administration and business development costs incurred in 2007, in excess of $800,000 are professional fees associated with events that took place in 2003, 2004 and 2005. In commenting on this, Mr. Wallace observed "It is unfortunate that our resources are being consumed by matters that do not contribute to the Company's future success. The Company is making every effort to bring these matters to closure, to allow all of our resources to be focused on the future instead of being mired in the past."

This press release should be read in conjunction with the Company's unaudited interim consolidated comparative financial statements for the nine months ended September 30, 2007 and 2006 and the Company's audited consolidated comparative financial statements and management's discussion and analysis for the years ended December 31, 2006 and 2005. Additional information related to the Company, including its Annual Information Form and Management Information Circular and Proxy form is available on SEDAR at www.sedar.com.

Forward Looking Statements

Certain statements contained in this press release and in certain documents incorporated by reference into this press release constitute forward-looking statements. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and "confident" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. BEI believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in, or incorporated by reference into, this press release should not be unduly relied upon. These statements speak only as of the date of this press release. BEI undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

About Bennett Environmental Inc.

Bennett Environmental Inc. is a North American leader in high temperature treatment services for the treatment of contaminated soil and has provided thermal solutions to contamination problems throughout Canada and the U.S. Bennett Environmental's technology provides for the safe, economical and permanent solution to contaminated soil. Independent testing has consistently proven that the technology operates well within the most stringent criteria in North America. For information, please visit the Bennett Environmental website at: www.bennettenv.com.



BENNETT ENVIRONMENTAL INC.
Interim Consolidated Balance Sheets
(Expressed in Canadian dollars)
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September 30, December 31,
2007 2006
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(Unaudited)

Assets
Current assets:
Cash and cash equivalents $ 3,652,421 $ 2,870,358
Restricted cash 712,309 55,742
Amounts receivable 2,397,192 1,591,164
Income taxes receivable - 2,401,077
Current portion of long-term
receivables (note 5) 85,733 271,731
Inventory 87,799 222,737
Deferred transportation costs 1,047,786 20,006
Prepaid expenses and other 679,048 963,095
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8,662,288 8,395,910

Long-term receivables (note 5) 5,079,611 5,163,611

Property, plant and equipment 18,841,213 20,825,768

Other assets 3,772,329 3,907,009
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$ 36,355,441 $ 38,292,298
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Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued liabilities $ 5,832,952 $ 5,395,998
Income taxes payable 808,796 -
Deferred revenue 656,498 753,771
Current portion of long-term
liabilities (note 6) 652,387 638,805
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7,950,633 6,788,574

Future income tax liability 40,043 32,708
Long-term liabilities (note 6) 634,553 634,553
Deferred gain 126,415 210,415

Shareholders' equity:
Share capital (note 7) 71,733,963 68,081,496
Contributed surplus 3,988,425 3,857,427
Share purchase warrants (note 8) 429,056 -
Deficit (48,547,647) (41,312,875)
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27,603,797 30,626,048

Future operations (note 1)
Related party transactions (note 11)
Contingencies (note 12)

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$ 36,355,441 $ 38,292,298
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See accompanying notes to interim consolidated financial statements.



BENNETT ENVIRONMENTAL INC.
Interim Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)

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Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
---------------------------------------------------------------------------
(Unaudited) (Unaudited)

Sales $ 1,886,738 $ 1,299,510 $ 8,890,868 $ 8,532,397

Expenses:
Operating costs 2,093,838 1,605,197 7,841,078 7,031,402
Administration
and business
development 1,577,633 3,065,448 6,084,022 8,152,347
Amortization 778,767 897,828 2,323,619 2,139,137
Foreign exchange 237,102 (10,835) 334,240 422,022
Interest 34,104 73,264 73,383 100,059
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4,721,444 5,630,902 16,656,342 17,844,967
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Loss before the
undernoted (2,834,706) (4,331,392) (7,765,474) (9,312,570)

Gain on investment 75,000 - 108,249 -

Other income,
including interest 108,697 190,650 429,788 417,363
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Loss before income
taxes (2,651,009) (4,140,742) (7,227,437) (8,895,207)

Income taxes
(recovery):
Current - (408,519) - (1,176,355)
Future - 781,023 7,335 719,953
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- 372,504 7,335 (456,402)
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Loss for the
period (2,651,009) (4,513,246) (7,234,772) (8,438,805)

Deficit, beginning
of period (45,896,638) (18,206,878) (41,312,875) (14,281,319)

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Deficit, end of
period $ (48,547,647) $ (22,720,124) $ (48,547,647) $ (22,720,124)
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Loss per share:
(note 9)
Basic and
diluted $ (0.10) $ (0.21) $ (0.28) $ (0.39)
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See accompanying notes to interim consolidated financial statements.



BENNETT ENVIRONMENTAL INC.
Interim Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)

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Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
(Unaudited) (Unaudited)
Cash provided
by (used in):
Operations:
Loss for the
period $ (2,651,009) $ (4,513,246) $ (7,234,772) $ (8,438,805)
Items not
involving cash:
Amortization 778,767 897,828 2,323,619 2,139,137
Stock-based
compensation 10,297 595,840 294,539 1,079,522
Gain on disposal of
property, plant
and equipment (40,936) (51,000) (82,721) (51,000)
Gain on sale of
investment
(note 11(e)) (75,000) - (108,249) -
Future income
taxes - 781,023 7,335 719,953
Increase in cash
surrender value of
life insurance - (72,579) - (94,548)
Accretion expense - (269) - 6,865
Accrued interest on
long-term receivables - (5,075) - (12,367)
Change in non-cash
operating working capital:
Amounts receivable 244,305 1,431,921 (806,028) 8,928,917
Deferred
transportation
costs (717,233) (193,111) (1,027,780) 289,705
Prepaid expenses
and other 88,880 187,800 284,046 41,498
Inventory 85,294 (227,779) 134,938 (227,779)
Accounts payable
and accrued
liabilities (562,859) (1,171,768) 436,947 (3,085,987)
Income taxes
receivable/
payable 258,799 (330,813) 3,209,873 (1,265,969)
Deferred revenue 33,629 129,119 (97,273) (787,701)
Severance payable - 442,967 280,977 442,967
Severance payments - (178,669) (267,395) (795,873)
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(2,547,066) (2,277,811) (2,651,944) (1,111,465)

Financing:
Repayments of long-term
liabilities - - - (300,000)
Issuance of share
capital, net of
share issue costs - - 3,917,982 83,813
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- - 3,917,982 (216,187)

Investments:
Change in
restricted cash 46,904 (1,341) (656,567) 1,296,264
Decrease in
note receivable 44,887 44,962 269,998 114,962
Proceeds on disposal
of investment - - 33,250 -
Proceeds on disposal of
property, plant and
equipment 750 9,000 1,750 9,000
Purchase of property,
plant and equipment (47,523) (62,717) (132,406) (251,048)
Increase in license,
permits and other assets - 770,615 - (2,181,785)
Acquisition of
Trans-Cycle
Industries, Ltd. - (32,887) - (2,264,037)
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45,018 727,632 (483,975) (3,276,644)
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Increase (decrease) in
cash and cash
equivalents (2,502,048) (1,550,179) 782,063 (4,604,296)
Cash and cash
equivalents,
beginning of period 6,154,469 4,790,404 2,870,358 7,844,521
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Cash and cash
equivalents,
end of period $ 3,652,421 $ 3,240,225 $ 3,652,421 $ 3,240,225
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Supplemental cash flow
information:
Interest paid $ 22,545 $ 61,191 $ 30,098 $ 69,697
Income taxes paid 864 - 74,734 -
Income taxes
received - 77,518 - 313,679
Income tax refund 259,663 - 3,492,264 -
Reclassification
from amounts
receivable to
long-term receivables - 5,037,611 - 5,037,611

See accompanying notes to interim consolidated financial statements.


BENNETT ENVIRONMENTAL INC.

Notes to Interim Consolidated Financial Statements

(Expressed in Canadian dollars)

Three months and nine months ended September 30, 2007 and 2006

(Unaudited)
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1. Future operations:

These interim consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and satisfy its liabilities in the normal course of business. During the three months ended September 30, 2007, the Company incurred a loss of $2,651,009, and cashflows from operations for the three months ended September 30, 2007 were negative. The Company has an accumulated deficit of $48,547,647 at September 30, 2007. There is substantial doubt about the ability of the Company to continue as a going concern. The Company temporarily closed the Recupere Sol Inc. ("RSI") facility in Quebec on November 4, 2006 in order to build up production volumes. On April 30, 2007, the Company reopened the RSI facility temporarily, and continued production through to June 23, 2007. The facility remained closed for the period from June 24, 2007 through to September 17, 2007. The facility reopened on September 18, 2007. The Company also closed the Material Resource Recovery Inc. ("MRR") facility in Cornwall for the period from July 13, 2007 through to September 3, 2007 and reopened September 4, 2007. Both facilities currently remain open as the backlog of production has reached levels to support efficient operations.

Continued operations depend on the Company's ability to generate future profitable operations, to obtain sufficient financing to fund future operations and, ultimately, to generate positive cash flows from operating activities. This includes being able to secure sufficient sales volumes at profitable sales prices. During 2006 and 2007, management has undertaken certain initiatives to reduce operating and administration and business development costs. On March 1, 2007 the Company completed a rights offering to subscribe for common shares which provided net proceeds of $3,911,132 to fund operations.

The ability of the Company to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities as they become due is dependent on the successful completion of the actions taken or planned, some of which are described above, which management believes will mitigate the adverse financial conditions faced by the Company. There is uncertainty as to whether or not these objectives will be achieved. With the proceeds from the rights offering and if the Company's strategies are achieved, management believes that the Company will have sufficient cash and working capital to fund operations beyond the third quarter of 2008.

The interim consolidated financial statements do not reflect adjustments that would be necessary, if the going concern assumption was not appropriate. If the going concern basis was not appropriate for these financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, the reported revenue and expenses and the balance sheet classifications used.

2. Basis of presentation:

These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial statements and accordingly, do not include all disclosures required for annual financial statements. These consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements except as disclosed herein. In the opinion of management, all adjustments, including reclassifications and normal recurring adjustments necessary to present fairly the financial position, results of operations and retained earnings and cash flows at September 30, 2007 and for all periods presented, have been made. Interim results are not necessarily indicative of the results for a full year.

These interim consolidated financial statements should be read in conjunction with the December 31, 2006 annual financial statements and notes thereto included in the 2006 Annual Report.

3. Revenue recognition:

The Company provides highly specialized treatment of contaminated materials. In some cases, the Company is also engaged to remove and transport the contaminated materials to its facilities for processing and disposal. The Company recognizes revenue for these activities using the proportional performance method when all of the following criteria are met:

(i) remediation activities are completed for each batch of material or waste stream being treated;

(ii) the Company has confirmed that the contaminants have been destroyed in accordance with the contract terms; and

(iii) collection is reasonably assured.

For those contracts whereby the Company is engaged to transport the contaminated material from the customer's site to its facilities, the transportation costs incurred are deferred until the materials have been treated and the Company has determined that the contaminants have been destroyed in accordance with the contract terms. All other processing costs are expensed as incurred.

Revenue from long-term fixed price soil remediation contracts is recognized using the percentage of completion method, based on the ratio of costs incurred to date over estimated total costs. This method is used because management considers costs to be the best available measure of performance on these contracts. Contract costs include all direct material and wages and related benefits. Revenue related to unpriced change orders under the percentage of completion method is recognized to the extent of the costs incurred, if the amount is probable of collection. If it is probable that the contract will be adjusted by an amount that exceeds the costs attributable to the change order and the amount of the excess can be reliably estimated, revenue in excess of the costs attributable to unpriced change orders is recorded when realization is assured beyond a reasonable doubt.

The Company records revenue relating to claims to the extent of costs incurred and only when it is probable that the claim will result in additional contract revenue and the amount can be reasonably estimated. Claims are amounts in excess of the agreed upon contract price that the Company seeks to collect from its customers for customer-caused delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price, or other causes or unanticipated additional costs.

4. Change in accounting policy:

On January 1, 2007, the Company adopted CICA Handbook Sections 1530, "Comprehensive Income", Section 3251, "Equity", Section 3855, "Financial Instruments - Recognition and Measurement", Section 3861, "Financial Instruments - Disclosure and Presentation" and Section 3865, "Hedges". Section 1530 establishes standards for reporting and presenting comprehensive income, which is defined as the change in equity from transactions and other events from non-owner sources. Other comprehensive income refers to items recognized in comprehensive income that are excluded from net income calculated in accordance with generally accepted accounting principles.

Section 3861 establishes standards for presentation of financial instruments and non-financial derivatives, and identifies the information that should be disclosed about them. Section 3865 describes when and how hedge accounting can be applied as well as the disclosure requirements. Hedge accounting enables the recording of gains, losses, revenues and expenses from derivative financial instruments in the same period as for those related to the hedged item.

Section 3855 prescribes when a financial asset, financial liability or non-financial derivative is to be recognized on the balance sheet and at what amount, requiring fair value or cost-based measures under different circumstances. Under Section 3855, financial instruments must be classified into one of these five categories: held-for-trading, held-to-maturity, loans and receivables, available-for-sale financial assets and other financial liabilities. All financial instruments, including derivatives, are measured on the balance sheet at fair value except for loans and receivables, held-to-maturity investments and other financial liabilities which are measured at amortized cost. Subsequent measurement and changes in fair value will depend on their initial classification, as follows: held-for-trading financial assets are measured at fair value and changes in fair value are recognized in net earnings; available-for-sale financial instruments are measured at fair value with changes in fair value recorded in other comprehensive income until the investment is derecognized or impaired at which time the amounts would be recorded in net earnings.

Under adoption of these new standards, the Company designated its cash equivalents and restricted cash as held-for-trading, which is measured at fair value. Amounts receivable and long-term receivables are classified as loans and receivables, which are measured at amortized cost. Accounts payable and accrued liabilities and long-term liabilities are classified as other financial liabilities, which are measured at amortized cost.

The adoption of this new standard resulted in no impact to the financial statements. For all periods presented, comprehensive income is the same as loss for the period.



BENNETT ENVIRONMENTAL INC.
Notes to Interim Consolidated Financial Statements (continued)
(Expressed in Canadian dollars, except per share amounts)

Three months and nine months ended September 30, 2007 and 2006 (Unaudited)

5. Long-term receivables:

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Long-term amount Promissory Note
receivable(i) note receivable(ii) Total
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Balance, December
31, 2006 $ 5,037,611 $ 215,821 $ 181,910 $ 5,435,342
Received - (94,395) - (94,395)
Accrued interest - 6,307 2,274 8,581
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Balance, September
30, 2007 5,037,611 127,733 184,184 5,349,528

Less allowance for
doubtful amount(i) - - (184,184) (184,184)
Less current portion - (85,733) - (85,733)

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Long-term receivables $ 5,037,611 $ 42,000 $ - $ 5,079,611
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(i) See note 4(b) to the 2006 annual audited financial statements.

(ii) During the three month period ended March 31, 2007, the Company
assessed the net realizable value of the note receivable and determined
that the carrying value was greater than the estimated net realizable
value. As a result, the Company recorded an allowance of $184,184 and a
corresponding amount was recorded as an Administration and Business
Development cost during the period.


6. Long-term liabilities:

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Tenure Severance
agreement payable Total
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Balance, December 31, 2006 $ 715,636 $ 557,722 $ 1,273,358

Additional(i) - 280,977 280,977
Paid - (267,395) (267,395)
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715,636 571,304 1,286,940
Less current portion (81,083) (571,304) (652,387)

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Balance, September 30, 2007 $ 634,553 $ - $ 634,553
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(i) During the three month period ended June 30, 2007, an executive
was terminated resulting in a severance obligation according to their
employment contract. This obligation has been recorded as an
administrative and business development cost of the period.

7. Share capital:

(a) Issued share capital of the Company is as follows:

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Number of
common
shares Amount
---------------------------------------------------------------------------

Total issued shares, December 31, 2006 21,614,940 $ 68,153,375
Exercise of rights offering(i) - 163,541
Common shares issued on exercise of rights(i) 2,151,855 1,613,891
Shares issued for cash(i) 3,251,880 2,438,910
Share issue costs(ii) - (563,875)
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Total issued shares September 30, 2007 27,018,675 71,805,842
Shares repurchased in 2004 and held
in treasury (11,500) (71,879)

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Balance, September 30, 2007 27,007,175 $ 71,733,963
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(i) Rights Offering:

On March 1, 2007, the Company completed a rights offering for additional
common shares of the Company. Under the terms of the rights offering, each
common shareholder was issued one transferable right for each common share
held on February 1, 2007. Each four rights held plus $0.75 entitled the
rights holder to subscribe for one common share. The fair value of the
rights was determined using the Black Scholes model based on the following
assumptions: expected life of one month, volatility of 59%, risk-free
interest rate of 3.97% and a dividend yield of 0%. The fair value of the
rights was determined to be $410,684 and was recorded as a separate
component of shareholders' equity and a reduction to contributed surplus
when the rights were granted.

On March 1, 2007, 8,670,420 rights were exercised resulting in the
issuance of 2,151,855 shares for cash consideration of $1,613,891 and the
fair value of the rights exercised of $163,541 were transferred to share
capital. The remaining rights expired and the fair value of the expired
rights was transferred to contributed surplus. An additional 3,251,880
shares were purchased by a shareholder in accordance with a stand-by
commitment for cash consideration of $2,438,910. As compensation for
entering into the stand-by commitment, the shareholder was issued
1,080,000 warrants (note 8).

(ii) Share issuance costs:

Share issuance costs of $134,819 settled in cash and $429,056 being the
fair value of the share purchase warrants were recorded as a reduction of
share capital.

(b) Stock option activity for the nine months ended September 30, 2007 is
as follows:

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Weighted
average
Options exercise price
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Outstanding, December 31, 2006 2,129,000 $ 3.19
Cancelled/expired (1,118,000) 3.61

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Outstanding, September 30, 2007 1,011,000 $ 2.72
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The following table summarizes information relating to outstanding options
as at September 30, 2007:

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Range of Number of
exercise prices options
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$ 0.67 - $ 1.73 800,000
$ 3.18 - $ 3.27 36,000
$ 4.20 - $ 4.92 80,000
$ 14.29 - $22.05 95,000
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1,011,000
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No stock options were issued during the nine months ended September 30,
2007.

8. Share purchase warrants:

On March 1, 2007, in conjunction with the rights offering, the Company
issued 1,080,000 share purchase warrants to a shareholder (note 7(i)). The
share purchase warrants are exchangeable into common shares of the Company
at the holder's option on a one-for-one basis, at any time between March
1, 2008 and March 1, 2010. The first 540,000 warrants have an exercise
price of $0.77 and the next 540,000 have an exercise price of $0.87. The
fair value of the warrants issued was determined using the Black Scholes
model based on the following assumptions: expected warrant life of 3
years, volatility of 82%, risk-free interest rate of 3.98% and a dividend
yield of 0%. The fair value of the warrants of $429,056 was recorded as a
reduction of share capital as share issuance costs and as a separate
component of shareholders' equity.

9. Loss per share:

The reconciliation of the loss for the year and weighted average number of
common shares used to calculate basic and diluted loss per share is as
follows:

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Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
---------------------------------------------------------------------------

Loss for the
period $ (2,651,009) $ (4,513,246) $ (7,234,772) $ (8,438,805)
Loss per share
basic and
diluted $ (0.10) $ (0.21) $ (0.28) $ (0.39)
Weighted average
number of shares
- basic and
diluted 27,007,175 21,603,440 25,819,541 21,600,033
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Options aggregating 1,011,000 (2006 - 1,534,000) and warrants aggregating
1,080,000 (2006 - nil) have not been included in the computation of
diluted loss per share as they are considered anti-dilutive.

10. Segmented information:

(a) Geographic information:

The Company operates and manages its business in a single reporting
operating segment, the business of remediating contaminated soil and other
waste materials. All significant capital assets are located in Canada. The
table below summarizes sales by country:

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Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
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Sales by country:
Customers domiciled
in the United States $ 993,912 $ 310,703 $ 4,882,946 $ 2,201,341
Customers domiciled
in Canada 892,826 988,807 4,007,922 6,331,056

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$ 1,886,738 $ 1,299,510 $ 8,890,868 $ 8,532,397
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(b) Economic dependence and major customers:

The table below summarizes revenue from two major customers for the three
and nine months ended September 30, 2007 and 2006:

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Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
---------------------------------------------------------------------------

Sales to major customers:
Customer A 34% 14% 50% 16%
Customer B 13% 10% 6% 14%

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47% 24% 56% 30%
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(c) Concentration of credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily amounts receivable. As at September 30, 2007, two customers represented 53% and 12%, respectively, of amounts receivable (December 31, 2006 - 23% and 13%, respectively).

Management is of the opinion that any risk of loss due to bad debts is significantly reduced due to the financial strength of its customers. The Company performs ongoing credit evaluations of its customers' financial condition and requires letters of credit or other guarantees whenever deemed necessary.

11. Related party transactions:

The transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties:

(a) During the nine months ended September 30, 2007 and 2006, the Company expensed legal fees of $nil and $127,364 respectively (three months ended September 30, 2007 and 2006 - $nil and $71,902 respectively) to two legal firms of which two former directors are associated.

(b) During the nine months ended September 30, 2007 and 2006, the Company paid consulting fees of $nil and $166,667, respectively (three months September 30, 2007 and 2006 - $nil and $62,500, respectively), to a company owned by a former director and officer of the Company.

(c) During the nine months ended September 30, 2007 and 2006, the Company paid tenure payments of $nil and $52,125, respectively (three months ended September 30, 2007 and 2006 - $nil and $17,375, respectively), to a former director and officer of the Company.

(d) During the nine months ended September 30, 2007, the Company issued warrants (note 8) to a shareholder that is represented by one member of the Board of Directors.

(e) In April, 2005, the Company sold its 50% investment in Eco-Bois to a related party for $250,000 comprising cash of $175,000 and land of $75,000. A gain of $175,000 was previously recognized in the three months ended June 30, 2005. The land portion has now been recorded as title was legally transferred on September 5, 2007. As a result, an additional gain on sale of $75,000 has been recorded as at September 30, 2007.

12. Contingencies:

No additional significant developments have occurred relating to the contingencies described in note 17 to the 2006 annual audited financial statements, except as noted below:

(a) During 2005, the Company was served with a claim in the amount of $5,000,000 by a consultant claiming breach of contract. As a result of arbitration, the Company was required to pay $45,000 to settle part of the claim. The Company also accrued an additional $100,000 in its financial statements in respect of bonus and commission entitlements under the claim, as its best estimate of potential loss. These amounts have been accrued in the 2005 consolidated financial statements. This decision was appealed by the consultant and during the period the ruling was reversed. The court found that the Company was liable for the full 36 months of the contract, or $360,000. An additional $315,000 was accrued and expensed to administration and business development costs at June 30, 2007 as a result of this judgment.

(b) During the quarter ended June 30, 2007, the Company was served with a claim by a former CEO claiming recovery of fines and costs paid pertaining to Ontario Securities Commission ("OSC") matters. The former CEO maintains that he acted appropriately and that the Company is required to indemnify him for the $300,000 paid by him to the OSC, plus $100,000 in punitive damages. The Company believes that the former CEO acted inappropriately as demonstrated by the OSC censure regarding this matter. The Company believes the claim is without merit and will vigorously defend the claim.

13. Recently issued accounting policies:

Inventories

In June 2007, the CICA issued Section 3031, "Inventories". This new standard is effective for our interim and annual financial statements beginning January 1, 2008. Under this standard, inventory is required to be measured at the lower of cost and net realizable value and distribution costs necessary to bring inventory to a present location and condition can be capitalized. In addition previous write-downs of inventories must be reversed if the circumstances that created the write-down no longer exist or if there is clear evidence of an increase in value because of changed economic circumstances. The Company is currently determining the impact that these changes in accounting policy will have on the consolidated financial statements.

Financial Instruments Disclosures

CICA Handbook Section 3862, "Financial Instruments - Disclosures", increases the disclosures currently required that will enable users to evaluate the significance of financial instruments for an entity's financial position and performance, including disclosures about fair value. In addition, disclosure is required of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about liquidity risk and market risk. The quantitative disclosures must also include a sensitivity analysis for each type of market risk to which an entity is exposed, showing how net income and other comprehensive income would have been affected by reasonably possible changes in the relevant risk variable. This standard is effective for the Company for interim and annual financial statements beginning on January 1, 2008. The Company has not yet determined the impact of the adoption of this change on the disclosure in its financial statements.

Financial Instruments Presentation

CICA Handbook Section 3863, "Financial Instruments - Presentation", replaces the existing requirements on presentation of financial instruments which have been carried forward unchanged to this new section. This standard is effective for the Company for interim and annual financial statements beginning January 1, 2008. The Company does not expect the adoption of this standard to have a material impact on presentation in its financial statements.

Contact Information

  • Bennett Environmental Inc.
    Jack Shaw
    (905) 339-1540
    or
    Bennett Environmental Inc.
    Fred Cranston
    (905) 339-1540
    Website: www.bennettenv.com