Thermal Energy International Inc.
TSX VENTURE : TMG

Thermal Energy International Inc.

September 28, 2005 09:40 ET

Thermal Energy Reports Fiscal 2005 Results

OTTAWA, ONTARIO--(CCNMatthews - Sept. 28, 2005) - Thermal Energy International Inc. (TSX VENTURE:TMG) (www.thermalenergy.com) announces its financial results for the fiscal year ended May 31, 2005.

Sales for the year were $668,204, a decrease of 27.5% over sales of $922,510 a year earlier. The Company recorded a net loss of $1,421,589 ($0.03 per share) compared to a net loss of $1,117,276 ($0.03 per share) for fiscal 2004.

"These results were disappointing," said John R. Parker, Chairman of Thermal Energy's Board of Directors. "As the year progressed it became evident that significant changes were required both on the Board and in the executive ranks of the Company and we have aggressively undertaken those changes."



The changes include the appointments of:

- Tim Angus as President and CEO, a seasoned executive from a Fortune
100 Company (Johnson Controls LP) with significant industrial
sales and marketing experience;

- Several new experienced, outside directors to the Board;

- New qualified, experienced members of the executive management
team.


"We are very pleased with the direction of the Company, the efforts of the new management team, and the significant progress and new opportunities which have resulted from these and other changes in the four months since fiscal 2005 ended," said Mr. Parker. "Our visibility into the first and second quarters of fiscal 2006 indicates good revenue growth on the road to restoring Thermal Energy to profitability and becoming the Company shareholders expect and deserve. We look forward to reporting those results to our shareholders in the coming months."

This progress includes signing of two contracts for FLU-ACE® waste heat recovery systems worth more than $3 million, one for a major appliance manufacturers and the other, Thermal Energy's largest contract in the Company's history, is also a major breakthrough into the pulp and paper sector.

For complete financial statements with notes and management discussion and analysis please go to www.sedar.com or our website at www.thermalenergy.com.




CONSOLIDATED BALANCE SHEET


As at May 31
2005 2004
$ $
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ASSETS
Current assets
Cash 174,218 261,296
Short term investments (note 6) 800,263 -
Accounts receivable (note 7) 231,259 251,175
Contracts in progress 65,000 -
Prepaids and other assets 7,611 1,414
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1,278,351 513,885
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Loan receivable (note 10) - 2,000
Property, plant and equipment (note 11) 35,778 29,063
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1,314,129 544,948
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LIABILITIES, CAPITAL STOCK,
CONTRIBUTED SURPLUS AND DEFICIT
Current liabilities
Accounts payable 411,301 813,289
Accrued liabilities 318,450 146,785
Deferred revenue 474,000 103,200
Due to past President (note 9) 300,972 334,001
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1,504,723 1,397,275
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Capital stock, contributed surplus
and deficit
Capital stock (note 14) 12,625,487 10,856,803
Contributed surplus (note 14) 1,237,995 166,150
Deficit (14,054,076) (11,875,280)
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(190,594) (852,327)
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1,314,129 544,948
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The accompanying notes are an integral part of these consolidated
financial statements


CONSOLIDATED STATEMENT OF CASH FLOWS

Years ended May 31

2005 2004
$ $
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OPERATING ACTIVITIES
Net loss for the year (1,421,589) (1,177,276)
Add items not involving cash:
Financing fees earned by the past
President (note 9) - 64,593
Non-monetary compensation charge 397,673 49,500
Amortization of property,
plant and equipment 9,150 11,202
Amortization of patents and trademarks - 32,573
Impairment loss - 127,539
Changes in non-cash operating working
capital (note 5) 89,196 (92,361)
Changes in due to the past President
(note 5) (33,029) 138,488
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Net cash used in operating activities (958,599) (845,742)
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INVESTING ACTIVITIES
Additions to short term investments (800,263) -
Decrease in loan receivable 2,000 10,312
Additions to patents - (12,929)
Additions to plant and equipment (15,865) (7,120)
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Net cash used in investing activities (814,128) (9,737)
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FINANCING ACTIVITIES
Common shares issued (note 14) 1,736,849 1,059,311
Share issue expenses (51,200) (11,662)
Cash financing provided by the
past President - 23,000
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Net cash provided by financing
Activities 1,685,649 1,070,649
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Increase (decrease) in cash for the year (87,078) 215,170
Cash beginning of year 261,296 46,126
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Cash end of year 174,218 261,296
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Interest paid 11,832 34,743
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CONSOLIDATED OPERATIONS AND DEFICIT

Year ended May 31


2005 2004
$ $
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REVENUE
Sales 668,204 922,510
Cost of sales 485,474 719,676
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Gross profit 182,730 202,834
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Expenses
Administration 520,818 371,668
Financing fees - 64,593
Selling, marketing and
business development 574,034 618,054
Stock-based compensation expense
(note 3 and 15) 397,673 49,500
Legal fees 52,450 67,377
Audit fees 63,050 52,422
Insurance 105,694 102,277
Amortization of property, plant
and equipment 9,150 11,202
Patent and trademark maintenance 22,696 38,087
Research and development 2,550 4,311
Amortization of patents and trademarks
(note 3 and 12) - 32,573
Impairment loss (notes 3 and 12) - 127,539
Interest and bank charges 11,832 35,964
Foreign exchange loss (gain) (16,522) 10,649
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1,743,425 1,586,216
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(1,560,695) (1,383,382)
Other revenue (note 8) 87,906 206,106
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Loss before taxes (1,472,789) (1,177,276)
Future income tax recovery (note 16) 51,200 -
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Net loss (1,421,589) (1,177,276)
Deficit, beginning of year (11,875,280) (10,698,004)
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(13,296,869) (11,875,280)
Change in accounting policy (note 3) (757,207) -
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Deficit, end of year (14,054,076) (11,875,280)
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Net loss per share - basic
and diluted (0.03) (0.03)
Weighted average number of
common shares 54,826,526 42,676,061
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NOTE: This release may contain forward looking statements based on management's expectations, estimates and projections. Such statements including those about the Company's strategy for growth, product development, market position, expected expenditures and financial results are forward looking statements. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents which may be filed with the British Columbia Securities Commission, the Alberta Securities Commission, the Ontario Securities Commission, the TSX Venture Exchange, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which the Company does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw material, research and development of new products, including regulatory approval and market acceptance; and seasonality of sales in some products.

About Thermal Energy

Thermal Energy (TSX VENTURE:TMG) (www.thermalenergy.com) is an environmental and energy technology company established in 1986. Headquartered in Ottawa, Canada, TMG is a designer, developer, fabricator, and supplier of proprietary and patented environmental compliance (air) and energy conservation, renewable energy products and technology solutions. Thermal Energy is a fully accredited professional engineering firm, and offers advanced process and applications engineering services. FLU-ACE® and THERMALONOx™ are trademarks of Thermal Energy.

THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

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