December 23, 2005
16:05 EST Friday, December 23, 2005
FSC / Press Release
SEAIR ANNOUNCES RESULTS FOR YEAR ENDING AUGUST 31, 2005
Edmonton, Alberta CANADA, December 23, 2005 /FSC/ - Seair Inc. (SDS - TSX Venture), announces the release of its audited financial statements for the year ending August 31, 2005.
Seair's consolidated sales and financial performance is summarized as follows:
| Q4 2005 | Q4 2004 | Change | 2005 | 2004 | Change | |
| Revenue | $ (7,803) | $ 101,698 | -108% | $ 77,042 | $406,670 | -81% |
| Gross Profit | $ 8,432 | $ 70,412 | -88% | $ 34,791 | $ 224,009 | -84% |
| Net Loss | (213,651) | (181,174) | 18% | (612,853) | (740,877) | -17% |
| Basic Loss per share | (0.01) | (0.01) | 0% | (0.04) | (0.05) | -20% |
Harold Kinasewich, Seair President and CEO, comments "we believe we have made great progress in the last year as we focused Seair's efforts on a limited number of high potential target markets. Seair now has strong partners in our primary markets and we look forward to mutually benefiting from their market development and sales initiatives. The recent sales to the City of Calgary, 2 animal enhancement units to the United Arab Emirates and 4 units to industrial camps in western Canada give us good momentum early in fiscal 2006."
Fiscal 2005 revenue of $77,042 was 81% lower than fiscal 2004. For much of fiscal 2004 Seair employed a business model emphasizing direct sales to end customers. However in fiscal 2005 Seair determined that the direct model was unsustainable as the Company did not have the end-user industry expertise, nor the financial or human resources to build initial sales into a meaningful market share. As a result Seair shifted to a collaborative business model where third parties, acting as distributors, partners or similar forms of arrangement, assumed responsibility for end sales and first line customer support. Seair believes this collaborative model will facilitate Seair gaining strong market share in a number of targeted industries. That said, shifting responsibility for sales to third parties significantly reduces Seair's ability to influence the pace at which specific opportunities are pursued. Seair's fiscal 2005 revenues were down from prior years as the Company's distributors were primarily focused on market development activities rather than specific sales.
Seair's primary target markets include wastewater treatment, animal enhancement and golf course irrigation, pond water remediation and soil treatment. Considerable investment in industry specific independent testing and results verification is required to gain credibility and acceptance in the target industries. Seair continues to make those testing investments in its target markets. The Company now has independent representatives in each of these target industries.
Although revenues for the year ending August 31, 2005 were lower than the prior year, the loss in the prior year was substantially larger. This is a direct result of Seair's efforts to preserve financial resources through cost cutting and other efficiencies while markets are being developed in conjunction with sales and distribution partners.
Operating expenditures totaled $647,644 for the year ending August 31, 2005 versus $964,886 for the year ending August 31, 2004. This $317,242, or 33%, decline is primarily a result of reduced personnel costs. Current staffing levels are below those existing for much of fiscal 2004. In addition, management personnel costs decreased as a result of voluntary reductions in compensation rates. Seair's priority is to preserve financial resources until revenue levels justify increased spending.
Product testing and trade show costs stem from Seair's post-research phase marketing initiatives. The costs have decreased significantly ($34,915 in fiscal 2005 compared to $97,372 in fiscal 2004). While initial testing and trade show strategies were intended to create general awareness, Seair has narrowed its testing focus to align with the overall prioritization of target markets. Recent testing has been directed at specific industries and specific customers for purposes of proving Seair's applicability and results in particular sales opportunities. Positive results from these tests and demonstrations, which can be completed at virtually no cost to Seair, will significantly advance current opportunities through Seair's sales cycle.
Bad debts declined from $75,461 in fiscal 2004 to $26,950 in fiscal 2005. Fiscal 2004 bad debts included instances where resellers to the greenhouse industry were unable to integrate Seair's products into their traditional product lines and, accordingly, withdrew as resellers. In spite of the substantial year-over-year decline, bad debts remain a significant issue for Seair. The Company must continue to attempt to balance aggressive market penetration with tolerable receivable default risk.
Consulting fees, compliance and investor relations fees and professional fees all declined from fiscal 2004 to fiscal 2005. Seair has, to the maximum extent possible, brought in-house the functions formerly served by third parties. In addition, the Company's Calgary office has been closed to reduce costs.
Quarter Ending August 31, 2005
In the quarter ending August 31, 2005 Seair reversed a sale booked previously in the year in the amount of $39,403. As a result of this adjustment, revenue for the fourth quarter was negative $7,803. If not for this adjustment from a prior quarter, the fourth quarter revenue would have been $31,600, or 69% lower than the same quarter in the prior year. Revenue levels will continue to fluctuate significantly until Seair and its sales and distribution partners advance from the market development phase to closing greater numbers of specific sales opportunities.
Gross profit exceeded revenue in the quarter ending August 31, 2005 as a result of reclassification to operating expenses of amounts previously reported as "other production costs" in cost of sales and the above-noted adjustment to revenue. After adjusting for this reclassification the gross profit percentage in the quarter was consistent with Seair's target of approximately 60% to 70%. Actual reported gross profit rates may continue to fluctuate significantly until Seair's overall revenue levels increase. At low sales levels unusual items can significantly impact the gross profit percentage.
Operating expenditures totaled $222,083 for the quarter ending August 31, 2005 versus $240,448 for the quarter ending August 31, 2004. This $18,365 decline in operating expenditures, an 8% reduction, is attributable to Seair's continued emphasis on cost containment while market development activities are conducted in conjunction with the Company's sales and distribution partners. Total personnel related costs, excluding stock-based compensation, in the quarter were $69,163 (versus $69,754 for the quarter ending May 31, 2005 and $79,190 for the quarter ending August 31, 2004). Seair continues to minimize personnel costs without compromising design, production, delivery and installation capabilities. Staffing, and therefore personnel costs, will need to increase when Seair's revenues begin to ramp-up.
The year over year quarterly loss increased $43,615, or 26%. However, if the impact of the fourth quarter reversal of previously booked revenue is excluded, the year-over-year quarterly loss declined modestly in spite of lowered revenues.
Working capital at August 31, 2005 was $15,540 down from $476,397 at August 31, 2004 and down $119,212 from working capital of $134,852 at May 31, 2005.
Further details with respect to SEAIR's year-end results, including the complete financial statements, will be available at www.sedar.com.
About SEAIR
SEAIR is a leading developer of proprietary diffusion and sterilization technologies. These patent-pending technologies allow for the efficient diffusion of gases into a liquid, thereby facilitating numerous applications in a wide variety of industries, including waste water treatment, pulp and paper, food processing, aquaculture, agriculture/horticulture, sterilization, golf course irrigation and pond treatment, animal enhancement and oil and gas. SEAIR's primary focus is developing and selling equipment that diffuses gases, such as oxygen, ozone or carbon dioxide, into a liquid, resulting in a supersaturate solution. The major difference between SEAIR and other diffusion technologies is SEAIR's ability to achieve extremely small bubble size, which in turn allows for the mass transfer of gas to fluid. The result is a stable condition where gases remain in solution for extended periods of time, leading to increased productivity and lower operating costs.
Parties interested in obtaining further information or receiving news releases and corporate documents from SEAIR may e-mail such request to seair@telus.net visit our SEAIR web site at: www.seair.ca .
FOR FURTHER INFORMATION PLEASE CONTACT:
Harold Kinasewich
SEAIR Inc.
T: 780 477 7188
F: 780 477 6622
E: seair@telus.net
9554 Yellowhead Trail
Edmonton, Alberta
T5G 0W4
This news release may contain certain forward-looking statements that reflect the current views and/or expectations of SEAIR INC. with respect to its performance, business and future events. Such statements are subject to a number of risks, uncertainties and assumptions. Actual results and events may vary.
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