Outlook Resources Inc.

Outlook Resources Inc.

May 20, 2009 15:56 ET

Outlook Resources Inc. Signs Letter of Intent With ERTH Solutions Inc. and Announces Private Placement

TORONTO, ONTARIO--(Marketwire - May 20, 2009) - Outlook Resources Inc. ("Outlook" or the "Company") (TSX VENTURE:OLR) is pleased to announce that it has signed a letter of intent (the "LOI") with ERTH Solutions Inc. ("ESI") dated May 20, 2009 to acquire up to a 25% equity interest in ESI (the "25% Interest") from treasury on or before August 18, 2009 and the option to acquire the remaining interest in ESI from the shareholders of ESI subject to certain conditions. The LOI is conditional upon Outlook raising at least $400,000 and paying ESI US$150,000 to acquire an initial 5% interest in ESI (the "5% Interest") on or before June 8, 2009.

To fund the acquisition of the 5% Interest and to provide Outlook with further capital to fund the continued development of its existing arctic char aqua farming operations north of Winnipeg and to provide it with general working capital, Outlook is undertaking a private placement offering of up to 80,000,000 units of the Company at a price of $0.01 per unit, for gross proceeds of up to $800,000 (the "Offering"). Each unit (a "Unit") will consist of one common share of the Company and one share purchase warrant (each a "Warrant"). Each Warrant will entitle the holder to acquire an additional common share at the price of $0.05 per share for the first year and $0.10 per share for the second year following Closing. The Company will pay a finder's fee of up to 10% cash plus up to 10% Compensation Options for funds raised by an eligible finder. Each Compensation Option entitles the finder to purchase one common share of the Company at a price of $0.10 for twenty-four (24) months from Closing. Insiders of the Company may subscribe for up to a total of 10,000,000 Units for proceeds of up to $100,000. A first tranche of at least $400,000 is scheduled to close before the end of May. The Offering and the acquisition of the 25% Interest are subject to regulatory approval.

The insider private placements are exempt from the valuation and minority shareholder approval requirements of Multilateral Instrument 61-101 ("MI61-101") by virtue of the exemptions contain in section 5.5(a) and 5.7(1)(a) of MI 61-101 in that the fair market value of the consideration for the securities of the Company to be issued to insiders does not exceed 25% of its market capitalization.

ESI is a private US corporation owning proprietary, sustainable, organic fertilizer technology in the rapidly growing organic segment of the fertilizer market. Outlook has planned a staged acquisition of ESI. These steps are outlined in the LOI. This plan has four stages. Step 1, a private placement of up to $800,000 into Outlook to be used to continue developing Outlook's fish farm, to acquire 5% of ESI (for US$150,000) and to provide working capital for Outlook. Step 2, a private placement of $1,500,000 to be used to complete the current fish farming plan, for Outlook to acquire a further 20% interest in ESI (the "20% Interest") (25% in aggregate) for a further US$450,000 and to provide additional working capital for Outlook. Step 3, for Outlook to negotiate and agree upon the consideration for the acquisition of the remaining 75% of ESI from the shareholders of ESI for shares of Outlook (the "75% Option"), and finally in Step 4, for Outlook to raise $10,000,000 or more through a prospectus or private placement offering to provide the funds necessary to enter the sustainable organic fertilizer business.

The US$150,000 to be paid for the 5% Interest will be used by ESI for general working capital. The US$450,000 to be paid for the 20% Interest will be used by ESI to complete a small scale facility, put ESI into production of its dry fertilizer product and prove the commercial efficacy of the business of ESI. The exercise of the 75% Option will be conditional upon ESI satisfying the following milestones:

1. ESI has successfully operated its small scale facility, demonstrating key technology components and customer satisfaction;

2. ESI turning expressions of interest for product into firm orders;

3. ESI completing efficacy testing; and

4. ESI filing a patent application in the US;

failing which Outlook will have the right to either maintain its 25% Interest in ESI or convert it to an exclusive Canadian Licence of the ESI technology subject to payment of royalties acceptable to ESI.

With the proposed acquisition of an interest in ESI, Outlook will enter the high growth organic fertilizer market. Although ESI represents a stand alone business, the opportunity provides Outlook the potential to further utilize its existing fish farming assets. The focus of ESI is sustainable dry organic fertilizer products for lawn and garden and agricultural markets based on its proven technologies to produce organic fertilizer at equivalent price, equivalent performance and superior environmental advantages compared to chemical synthetic fertilizers. ESI plans to build plants to manufacture dry fertilizer worldwide of which the Outlook 160 acre fish farm site is a prime candidate. ESI has sales indications for the output from its first plant, a national distribution network in the US for its dry fertilizer products, has negotiated contracts for raw materials and has secured a site for its first full scale commercial plant located in Colorado.

Low capital costs and rapid plant build provide the potential to develop cash flow rapidly. The "organic fertilizer space" within the sustainable business environment makes the ESI business model attractive in today's market environment. ESI's business plan envisions multiple projects throughout North America and globally with significant revenues from a very small percentage of the organic fertilizer market potential projecting above average earnings.

Additionally, Outlook's fish farming waste can be used as valuable raw materials in ESI organic fertilizer formulations and the region has adequate supplies of other low cost materials used in the ESI products. Sustainable agriculture represents one of the most powerful tools available to society to manage carbon emissions.

Outlook acquired its arctic char aqua farm operation in 2004. Historically, the operation has lost money because it is not large enough to achieve economies of scale. However, management has concentrated on maximizing potential from the existing operations and plans modest incremental improvements to eliminate the current operating loss with a minimum of capital expenditures. Once the potential from the current operation has been fully realized, Outlook will evaluate further capital expansions. Enlarging the scale of the fish farm operation requires capital to provide the financial and human resources necessary to move it to targeted profitability. Outlook's aqua farm operation is part of the Company's strategy to pursue business opportunities in the Sustainable Bio Operations field.

Growing of fish and shellfish in Canadian waters is a US$1 billion industry with aquaculture accounting for one third and growth rates projected at 19% annually until 2015. Global production of arctic char is estimated at 3,500 tonnes annually with selling prices on the high end of the scale for cultivated fish. Iceland is the world's largest arctic char producer with Canadian arctic char farmers growing 300 metric tonnes annually. Outlook has current production of up to 30 tonnes per year with infrastructure in place to substantially increase production resulting in a tripling of sales revenues albeit with additional capital expenditures. The Outlook fish farming business has access to the growing Canadian, United States and European markets for fish protein. Outlook's fish farming business has the advantage of high quality cold ground source water and the ability to produce antibiotic free and organic products further increasing its selling price. Cultivated fish as a food source is increasingly important as population continues to grow and naturally occurring fish stocks are depleted.

ESI plans to build plants to manufacture dry formulas based on its proven technology to seize the opportunity for organic products in the fertilizer market worldwide. It has negotiated contracts for raw materials and will expand its current pilot plant operations to satisfy high customer demand while building its first commercial plant. ESI has also gained manufacturing cost experience from operating its dry pilot plant since 2007. By year four, the Company plans to have seven projects with significant combined revenues, high operating margin and cash flow consistent with high growth sustainable businesses. The ESI plan is to:

1. Enter the growing dry organic fertilizer home and garden market segment, with products based on its proven technology base and building on ESI established home and garden distribution channels. ESI projects modest market share with better than average margins in this segment.

2. Participate in the high growth organic segment of the mainstream fertilizer market for agricultural products, including golf course, turf, crops for animal feed and foodstuffs with dry organic fertilizers. These products are also based on proven technology and provide meaningful competitive advantages over competing organic plant fertilizers and amendments. Significantly, ESI's dry fertilizer is price competitive with synthetic/chemical fertilizers while meeting organic standards and providing substantial environmental advantages without sacrificing performance. ESI has separate distribution channels for its products based in part on its supplier relationships for the dry product line. Margins are lower in this sector but products are sold in larger quantities and most importantly offer substantial cost savings to the producers of organic crops and products compared to organic alternatives and equivalent performance and price compared to synthetic fertilizer products. Sales potential is high while market share targets are small and this sector represents the most growth potential for the business.

ESI's strategy for dry organic fertilizer is to convert renewable low value compost into high-value bagged and bulk organic fertilizers. It plans to build one plant in year 1 and six additional plants in years 2 to 4 capturing a small percentage of the large targeted organic fertilizer market. With sales indications in place, ESI projects being cash flow positive shortly after plant start up. Engineering of the first plant is complete and an upgrade of the existing pilot plant will result in modest but cash flow positive dry products sales after two months. The small scale facility will operate making dry organic fertilizer to satisfy the backlog of customer demand for the product. On a parallel track, the first commercial plant will be built for operation in less than 12 months. Demand is very high for the product.

ESI's proprietary technologies and know how provide a competitive advantage to its products by using in its products specialized micronutrients, microbes, and other natural additives already market proven. ESI products are more environmentally sound than chemical fertilizers, at competitive prices without compromising effectiveness. ESI products deliver essential nitrogen, phosphorus, potassium and other micronutrients in an efficient time release way while avoiding the nutrient run off problems associated with chemical fertilizers.

The organic fertilizer market is estimated at 5% of the total $40 billion dollar North American fertilizer market but is growing at three times the rate of the chemical fertilizer segment, close to 10% annually. The organic home and garden market segment was estimated at over $60 million in 2006 with growth outpacing the non-organic sector. In the home and garden sector, ESI' products offer consumers environmentally sound and safe alternatives to chemical fertilizers. In the agricultural sector, the high cost of crop production is the limiting factor in the conversion from non-organic to organic feeds and foods, not the demand for organic products. Nutrient cost and resulting yield is the most critical factor in growing organic crops and ESI' technology allows organic growers to substantially close the gap between the cost of producing organic foods compared to non-organic.

ESI's first plant is to be located in Colorado, close to the infrastructure already in place for its pilot plant operations. Currently, there is a substantial order backlog in the dry fertilizer home and garden sector to be filled. Additional plants are planned throughout the world and will move increasingly to service the organic foods and grain market. Global demand for organic foods has doubled in the last five years and exceeds US$22 billion annually with growth rates averaging 8% annually through 2010. Organic products are gaining favour across all income levels and are finding their way into retail stores from Whole Foods to Wal-Mart. Since organic foods require organic nutrients, organic fertilizer is a growth industry. Organic fertilizer production however is fragmented and in need of a manufacturing infrastructure. The Rodale Institute's recent report on sustainable agriculture concludes organic agricultural practices are the single most useful tool available today for carbon reduction, as 40% of atmospheric carbon comes from the current chemical synthetic agriculture methods.

The statements made in this press release include forward-looking statements that involve a number of risks and uncertainties. These statements relate to future events or future performance and reflect management's current expectations and assumptions. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, such as the economy, generally, the demand for the Company's products, the availability of funding, and the anticipated costs of construction and operation. These forward-looking statements are made as of the date hereof and Outlook does not assume any obligation to update or revise them to reflect new events or circumstances, except as required by law. Actual events or results could differ materially from the expectations and projections. The reader is cautioned not to place undue reliance on such forward-looking statements.

Neither TSX Venture Exchange 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.

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