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Certified Organics’ Result Better Than Forecast

1 March 2002

Statement made by Dr Earl Stevens, Managing Director,
Certified Organics Limited

Natural biological products manufacturer and marketer, Certified Organics, reported an audited operating loss of $1.2 million for the financial year ending 31 December, 2001, a result $685,000 better than forecast in the Information Memorandum dated August 2001.

The result reflects three and half months of operation as Certified Organics Limited and the balance of the year (eight and half months) as AQL Holdings Limited, with its associated acquisition, regulatory and capital raising costs.

A self imposed decision to withhold commercialisation of our patented organic weed control product, Organic Inteceptor ™, until all regulatory consents have been received resulted in only limited marketing, and revenue during the financial year was $71,000, compared to a forecast of $588,000.

It was through prudent cost controls, and deferring planned expenditure on additional staff, marketing and promotion, that we achieved a better than forecast result.

The decision to hold back marketing the product was a hard one to make, especially as overseas and local interest has intensified as awareness of its capabilities have become better know. However, it was felt to be in the company’s best interests if our initial product launch was seamless across New Zealand and Australia, and across the home and agricultural product range.

As a consequence, our focus has been on development, assembling toxicology data, conducting field trials, progressing regulatory approvals and creating a comprehensive New Zealand distribution network.

We have achieved many critical milestones in the development of the company, and are well advanced to achieving the regulatory consents required by New Zealand and Australian authorities.

Our concentrate Organic Interceptor™ has registration from the Pesticides Board in New Zealand and we are now awaiting only one regulatory consent from the Environmental Risk Agency Board ( ERMA), before we can market our home range here. Approval is expected in May.

Comprehensive and successful field trials in conjunction with AgResearch have been completed on Organic Interceptor™ for agriculture and horticulture use, and we will be submitting our application for approval to ERMA and the Agricultural Compounds and Veterinary Medicines Board later in March. Approval is expected by mid year.

In Australia we already have home and garden approval for Organic Interceptor™ and will be submitting an application for approval of the new premixed range during March. Approval should be obtained by mid year.

Commercial field trials of Organic Interceptor™ in four Australian states have just been completed with good results. Our application for commercial approval will be submitted in April with final approval expected late this year.

The work we have carried out over the first five months of operation has been to international (OECD and EPA) standard. This should shorten the time for the regulatory approval process for the Organic Interceptor™ range in Europe and the USA.

Our marketing is now out of phase with the timing outlined in the Information Memorandum, and our focus is now on the 2002 summer selling season in Australia and New Zealand, and the Northern Hemisphere’s 2003 summer selling season.

While the delay had minimal impact on our 2001 result, in the current financial year (to 31 December 2002) we are likely to record revenues of approximately $2 million and an operating deficit in the order of $1.5 million (including goodwill writeoff of $0.5 million), rather than the modest surplus originally forecast.

In other developments, we have exchanged a letter of intent with Gainex Vivace International Ltd of Holland to form a joint venture company in Europe and contracted BioDiscovery NZ Ltd to explore the fungicide and pesticide capabilities of the pine extracts that are the basis of our patented Organic Interceptor™ herbicide.

At year end the Company had cash reserves of $671,000 and total borrowings of $75,000.

The private share placement approved by shareholders on 31 August 2001 raised $2.2 million (after deducting equity raising expenses of $201,000), against a forecast of $2.8 million.

The Company will continue to nurture its cash reserves while it works through all the necessary regulatory consents required before full marketing of its home care and commercial ranges can commence.


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