BOSTON, Aug. 9, 2010 (GLOBE NEWSWIRE) -- Converted Organics Inc. (Nasdaq:COIN) today announced financial results for the second quarter ended June 30, 2010.
Second Quarter and Recent Highlights
- Second quarter revenue totaled $1.8 million, an increase of 84% over $1.0 million in the second quarter of 2009 and 112% over revenue of $0.9 million in the first quarter of 2010.
- Sales from the Company's Gonzales, California facility totaled $1.1 million, a 39% year-over-year increase from $0.8 million in the second quarter of 2009 and an 88% increase over $0.6 million in the first quarter of 2010.
- The Company achieved gross margin of 25% from its Gonzales, California facility in the second quarter of 2010, compared with a 16% gross margin for the first quarter of 2010 and negative gross margin from the facility in the second quarter of 2009 due to sales volumes not yet being high enough to cover all fixed production costs and higher than anticipated production and transportation costs.
- Revenue for the six months ended June 30, 2010 increased 81% to $2.7 million, compared with $1.5 million in the six months ended June 30, 2009.
- On July 6, 2010, entered into an agreement to acquire TerraSphere Systems LLC ("TerraSphere") in a stock transaction with a maximum estimated purchase price of $25.8 million.
- Completed reorganization and headcount reductions related to Boston, MA headquarters and Woodbridge, NJ manufacturing facility, that are expected to reduce expenses by $2.1 million annually.
"The first half of 2010 was a transitional period for Converted Organics, as we took steps toward our goal of building a vertically-integrated portfolio of green assets," said Edward J. Gildea, President of Converted Organics. "We are proud of the strong sales growth we achieved overall, as well as the significant operational improvements at our Gonzales facility, which generated gross margins of 25% during the second quarter. More important than these individual achievements is the strategic progress we have made recently, with our planned entry into the vertical farming market through the proposed acquisition of TerraSphere Systems LLC. We believe that vertical farming has tremendous growth potential for both food production and the development of plant-based pharmaceutical, neutraceutical and cosmeceutical compounds. We believe that TerraSphere's patented technology is among the most advanced in the industry, a belief that is supported by their partnerships and collaboration with the USDA and a number of private sector organizations. As we work toward completion of this acquisition, we are excited about the opportunities in this emerging industry and are confident in our ability to establish Converted Organics as an early leader in this nascent market."
Mr. Gildea continued, "Our recently announced reorganization and efforts to restructure $25.4 million of debt and other obligations related to our Woodbridge, NJ facility has the potential to reduce our cash requirements in 2011 by an additional $3.8 million over the $2.1 million associated with reduced operating expenses and better position the Company for business development and synergistic portfolio expansion into complementary markets. Although we have faced a variety of challenges in our efforts to grow Converted Organics' business, we have made a great deal of progress in a number of areas. We believe that the stage is set for future growth and look forward to sharing our progress as we begin achieving key strategic and operational milestones."
Conference Call Details
Management will conduct a conference call to discuss the second quarter results and other recent developments, Tuesday, August 10, 2010 at 9:00 a.m. EDT. Shareholders who wish to participate in the conference call may telephone (888) 428-7458 from the U.S. or (201) 604-5177 from international locations, approximately 15 minutes prior to the call. A digital replay will be available by telephone for two weeks and may be accessed by dialing (888) 632-8973, or (201) 499-0429 from international locations, using digital replay code 99818398(#). The call will also be available via a live webcast on the Converted Organics website at www.convertedorganics.com under the tab Investors and submenu Events & Presentations.
About Converted Organics Inc.
Converted Organics (Nasdaq:COIN) (www.convertedorganics.com), based in Boston, MA, is dedicated to producing high-quality, all-natural, organic soil amendment and fertilizer products through food waste recycling. The Company uses its proprietary High Temperature Liquid Composting (HTLC) system, a proven, state-of-the-art microbial digestion technology, to process various biodegradable food wastes into dry pellet and liquid concentrate organic fertilizers that help grow healthier food and improve environmental quality. Converted Organics sells and distributes its environmentally-friendly fertilizer products in the retail, professional turf management, and agribusiness markets.
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Forward-Looking Statements
This press release contains forward-looking statements that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. In some cases, you may identify forward-looking statements by words such as "may," "should," "plan," "intend," "potential," "continue," "believe," "expect," "predict," "anticipate" and "estimate," the negative of these words or other comparable words. Forward-looking statements include, the expected costs savings realized in the restructuring, the growth potential of vertical farming, the ability to complete the TerraSphere acquisition and the ability of the Company to be a leader in TerraSphere's market . These statements are only predictions. One should not place undue reliance on these forward-looking statements. The forward-looking statements are qualified by their terms and/or important factors, many of which are outside the Company's control, involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially from the statements made. The forward-looking statements are based on the Company's beliefs, assumptions and expectations of our future performance, taking into account information currently available to the Company. These beliefs, assumptions and expectations can change as a result of many possible events or factors, including those events and factors described in the "Risk Factors" section in the Company's most recently filed annual report on Form 10-K, as updated in the Company's quarterly reports on Form 10-Q filed since the annual report, not all of which are known to the Company. Neither the Company nor any other person assumes responsibility for the accuracy or completeness of these statements. The Company will update the information in this press release only to the extent required under applicable securities laws. If a change occurs, the Company's business, financial condition, liquidity and results of operations may vary materially from those expressed in the aforementioned forward-looking statements.
| CONVERTED ORGANICS INC. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| June 30, 2010 | December 31, 2009 | |
| (Unaudited) | (Audited) | |
| ASSETS | ||
| CURRENT ASSETS | ||
| Cash | $ 2,053,028 | $ 10,708,807 |
| Restricted cash | 583,393 | 583,393 |
| Accounts receivable, net | 1,071,195 | 140,657 |
| Inventories | 213,519 | 448,748 |
| Prepaid rent | 692,928 | 600,684 |
| Other prepaid expenses | 669,809 | 102,442 |
| Total current assets | 5,283,872 | 12,584,731 |
| Deposits | 815,390 | 780,686 |
| Restricted cash | 29,769 | 29,769 |
| Other assets | 500,000 | -- |
| Property and equipment, net | 18,068,637 | 18,626,910 |
| Construction-in-progress | 354,521 | 311,015 |
| Capitalized bond costs, net | 790,507 | 814,341 |
| Intangible assets, net | 1,851,615 | 1,995,619 |
| Total assets | $ 27,694,311 | $ 35,143,071 |
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | ||
| CURRENT LIABILITIES | ||
| Term notes payable - current | $ 1,777,468 | $ 2,274,413 |
| Accounts payable | 1,980,104 | 1,789,332 |
| Accrued compensation, officers, directors and consultants | 652,696 | 769,056 |
| Accrued legal and other expenses | 601,492 | 406,403 |
| Accrued interest | 598,588 | 618,526 |
| Convertible note payable | 198,447 | 355,164 |
| Capital lease obligations - current | 12,342 | 12,833 |
| Total current liabilities | 5,821,137 | 6,225,727 |
| Capital lease obligation, net of current portion | 22,464 | 27,742 |
| Term notes payable, net of current portion | 102,151 | 973,339 |
| Derivative liabilities | 2,096,109 | 1,626,742 |
| Convertible note payable, net of current portion | -- | 17,767 |
| Bonds payable | 17,500,000 | 17,500,000 |
| Total liabilities | 25,541,861 | 26,371,317 |
| COMMITMENTS AND CONTINGENCIES | -- | -- |
| OWNERS' EQUITY (DEFICIT) | ||
|
Preferred stock, $.0001 par value, authorized 10,000,000 shares; no shares issued and outstanding |
-- | -- |
|
Common stock, $.0001 par value, authorized 250,000,000 shares at June 30, 2010 and 75,000,000 shares at December 31, 2009 |
4,057 | 3,777 |
| Additional paid-in capital | 61,745,571 | 58,660,042 |
| Accumulated deficit | (59,597,178) | (49,892,065) |
| Total shareholders' equity | 2,152,450 | 8,771,754 |
| Total liabilities and shareholders' equity | $ 27,694,311 | $ 35,143,071 |
|
CONVERTED ORGANICS INC. CONSOLIDATED STATEMENTS OF OPERATIONS |
||||
| Three month periods ended | Six month periods ended | |||
| June 30, 2010 | June 30, 2009 | June 30, 2010 | June 30, 2009 | |
| Revenues | $ 1,825,607 | $ 992,364 | $ 2,685,433 | $ 1,484,203 |
| Cost of goods sold | 3,239,316 | 2,113,074 | 5,205,417 | 3,757,264 |
| Gross loss | (1,413,709) | (1,120,710) | (2,519,984) | (2,273,061) |
| Operating expenses | ||||
| General and administrative expenses | 2,489,216 | 2,502,643 | 6,578,717 | 4,175,661 |
| Research and development | 79,800 | 12,116 | 143,859 | 179,500 |
| Depreciation expense | 2,911 | 306,036 | 5,730 | 626,216 |
| Amortization of capitalized costs | 75,370 | 79,251 | 150,741 | 180,542 |
| Amortization of license | 8,549 | 4,125 | 17,097 | 8,250 |
| Loss from operations | (4,069,555) | (4,024,881) | (9,416,128) | (7,443,230) |
| Other income/(expenses) | ||||
| Interest income | 253 | 11,952 | 534 | 22,247 |
| Derivative gain/(loss) | 1,133,884 | 2,886,460 | (498,729) | 4,298,445 |
| Other income | 69 | 39,201 | 69 | 39,201 |
| Interest expense | (390,071) | (2,123,061) | (788,317) | (4,029,813) |
| 744,135 | 814,552 | (288,985) | 330,080 | |
| Loss before provision for income taxes | (3,325,420) | (3,210,329) | (9,705,113) | (7,113,150) |
| Provision for income taxes | -- | -- | -- | -- |
| Net loss | $ (3,325,420) | $ (3,210,329) | $ (9,705,113) | $ (7,113,150) |
| Net loss per share, basic and diluted | $ (0.08) | $ (0.20) | $ (0.25) | $(0.59) |
| Weighted average common shares outstanding | 39,930,049 | 15,937,329 | 38,902,816 | 11,985,904 |