July 28 , 2006
SEAIR REPORTS FURTHER REVENUE AND GROSS PROFIT GROWTH FOR QUARTER ENDING MAY 31, 2006
Edmonton, Alberta, July 28, 2006. SEAIR Inc. (SDS:TSX Venture Exchange) announces
the release of its unaudited interim financial statements for the 3 months ending May 31,
2006.
Seair’s consolidated sales and financial performance is summarized as follows:
| Quarter Ending | 9 Months Ending | |||||
| 31-May-06 | 31-May-05 | Change | 31-May-06 | 31-May-05 | Change | |
| Revenue | $169,694 | $17,413 | 875% | $389,456 | $84,845 | 359% |
| Gross Profit | $154,266 | $12,619 | 1122% | $285,401 | $26,539 | 975% |
| Net Loss | (7,196) | (116,758) | -94% | (39,142) | (396,127) | -90% |
| Basic Loss per share | (0.00) | (0.01) | (0.00) | (0.02) | ||
Harold Kinasewich, Seair President and CEO, notes “Our financial results clearly
demonstrate that Seair, through its acquisition of Seair Septic, has emerged with a strong and
sustainable business model. We look forward to even stronger results this fall when the new
Seair diffusion-enhanced portable sewage treatment plants come into use with our current
customers.”
Third quarter revenue of $169,694 was $152,281, or 875% higher than the corresponding
quarter in fiscal 2005. Most of this revenue increase is attributable to Septic’s sewage plant
rental income stream. Septic’s revenues are seasonal due to negligible western Canadian
oilfield camp activity during the summer. The seasonal cycle picks up significantly in the fall
and, accordingly, Seair is spending the time from May 2006 to fall 2006 to retrofit Seair
diffusion technology into as many existing Septic sewage treatment plants as possible. Once
all existing plants are retrofitted, Seair will build additional units to service anticipated
growth needs. In addition, Seair will continue to provide diffusion systems to customers in
other industries as required by Seair’s partners and distributors.
With the Septic acquisition Seair has a solid revenue foundation upon which to build the
business. Nevertheless, must cautiously manage its financial resources due to the seasonality
of Septic’s revenues and the need to invest considerable working capital in retrofitting
existing Septic systems and building new systems in anticipation of increased demand.
Sequentially, revenue increased $41,611, or 32%, from the quarter ending February 28, 2006.
No revenue is recognized on the Seair diffusion component of Septic’s plants until such time
that the unit is purchased or leased by the end-user. Seair had over $350,000 of sales to
Septic in the quarter, the booking of which will only take place when the finished Septic units
are placed with arms-length customers.
Seair’s gross profit of $154,266 for the quarter ending May 31, 2006 was a 1122% increase
over the same quarter in fiscal 2005. This increase is attributable to overall gains in sales as
well as an increase in the gross profit percentage from 72% of revenue to 91% of revenue.
The gross margin rate was unusually high since revenue in the quarter ending May 31, 2006
was primarily rental income from existing Septic units. Going forward the revenue mix will
include both rentals as well as recognition of costs to retrofit existing units and manufacture
new Seair-diffusion enabled treatment plants. This should serve to reduce gross margin rates
closer to 70%.
Gross profit increased $96,407 (or 167%) from the quarter ending February 28, 2006. Again,
this is attributable to the additional revenue streams acquired via Septic in May 2006.
Operating expenditures totaled $161,464 for the quarter ending May 31, 2006 versus
$129,377 for the quarter ending May 31, 2005. This $32,087, or 25%, increase is directly
attributable to maintaining Septic operations subsequent to the May 2006 acquisition. This
26% operating cost increase must be assessed in the context of a 1122% increase in gross
margin. Seair, including Septic, continues to focus on cost containment. Nevertheless,
whereas Seair prior to the Septic acquisition was essentially in market development mode,
Septic is in active sales mode. Accordingly, direct sales costs are and will continue to be
higher than previously the case with Seair. For example, the $9,805 increase in meals and
entertainment stems from direct sales activities.
Notwithstanding the shift to direct Septic sales, current staffing levels remain low relative to
historical Seair levels. At present Seair’s focus is on retrofitting current Septic systems to
incorporate Seair’s diffusion technologies. Once all existing systems have been converted it
is anticipated that additional personnel, particularly in the sales area, will be required to fully
exploit the sewage treatment potential of the Seair Septic solution.
Office and shop costs increased $27,568 (or 523%) from the quarter ending February 28,
2006 as a result of focused efforts to convert as many existing Septic systems to the Seair
diffusion redesign as quickly as possible. The benefits from this investment are expected to
be realized once the fall 2006 oil patch activities resume.
Professional fees increased by $2,370 from the prior quarter as a result of legal and related
fees incurred in connection with the Septic acquisition. However, professional fees have
declined significantly from the prior year (decrease of $21,989, or 62%) as Seair has a greater
in-house capacity to handle matters previously relegated to third parties. Moreover, the
closure of Seair’s Calgary office has reduced costs, including professional fees.
The $7,198 net loss for the quarter ending May 31, 2006 is a $109,560 improvement over the loss for the quarter ending May 31, 2005 (or 127% better than the prior year). As noted the improvement stems from revenue and gross margin increases as well as continued reductions to operating expenses. Similarly, the sequential quarterly improvement of $36,632 is due to the above noted factors. Looking forward, the seasonality of Septic’s business may
negatively impact fourth quarter profit trends but this is expected to be more than offset by
the pick-up of the portable sewage treatment business once oilfield activity resumes in the
fall.
Further details with respect to SEAIR’s third quarter 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. SEAIR provides diffusion-enhanced
portable wastewater treatment plants through its subsidiary, Seair Septic.
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
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.
THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY
FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
