SEAIR RELEASES FIRST QUARTER RESULTS
Edmonton, Alberta, January 31, 2008. Seair Inc. (SDS:TSX Venture Exchange) today released its unaudited financial statements for the quarter ending November 30, 2008.
Revenue for the quarter ending November 30, 2007 was $809,626, or 13% higher than in the corresponding quarter in fiscal 2007 and 154% higher than the immediately preceding quarter. Rental revenue from Seair's wholly-owned subsidiary Seair Septic Inc.'s ("Septic") portable waste water treatment units provided over 90% of total revenue in the quarter. The revenue increase relative to fiscal 2007 is a result of Seair's expanded fleet of portable waste water treatment units. However, the impact of the larger fleet is partially offset by decreased rental day rates for the portable waste water treatment business. Thus far, fiscal 2008 day rates are approximately 25% lower than the rates realized in fiscal 2007.
Presently, all of Septic's customers come from the western Canadian oil and gas industry. More particularly, Septic's revenue generally comes from units deployed at remote oil and gas drilling sites. Drilling activity in western Canada is concentrated during the winter months and effectively ceases during spring break-up when drilling equipment is prohibited from using roads while the roads dry up from the spring thaw. Drilling rig activity levels in fiscal 2008 are considerably lower than in prior years and several Septic customers have postponed or cancelled planned projects. Nevertheless, since the start of the winter drilling season in mid-November, Septic's unit deployment rate has stayed above 80%, including all newly manufactured units. Septic reduced the pace of fleet expansion to match customer demand. As of the date of this document, Septic's fleet size is 85 units, compared to 63 units available at August 31, 2007. Any manufacturing capacity generated by reducing the pace of fleet expansion has been consumed by manufacturing diffusion systems for applications outside of portable waste water treatment.
The outflow from Septic's portable treatment units meets and exceeds the surface discharge standards in place in all jurisdictions the units are deployed. Stricter enforcement and possible tightening of surface discharge standards will favourably impact Septic's market share. In addition, Septic has established a number of strategic relationships in order to introduce Seair's technology and processes as a waste treatment alternative for larger and more permanent camps. Septic's goal is to shift a significant portion of the fleet to year-round utilization by targeting these permanent and semi-permanent camps as well as non-oil and gas camp situations such as forestry and mining.
Seair continues to conduct business development activities in a variety of end-use applications other than portable waste water treatment. Priority markets include municipal water and waste treatment, golf course soil and water treatment, food processing and aeration pond treatment at pulp and paper mills and similar manufacturing facilities. The municipal treatment and aeration pond applications are being handled directly by Seair whereas the golf course and food processing initiatives are generally being addressed through third party distributors.
Complete turnkey municipal water and waste treatment uses essentially the same technologies and processes as used in Septic's portable units, although on a much larger scale. In addition, Seair's products can be used at various stages of existing conventional municipal waste water treatment to increase the effectiveness of the overall process. Research and development studies are underway to prove the effectiveness and economic viability of Seair's various means to augment conventional municipal systems. However, penetrating the municipal treatment market, either with full Seair systems or selectively enhancing existing conventional treatment plants, will require additional third party verification of the sustained effectiveness and unique capabilities of Seair's solutions.
Aeration pond applications involve larger-scale Seair diffusion towers to increase the dissolved oxygen level in large industrial-use ponds. The objective is to displace large inefficient blowers with Seair units that achieve superior end results with reduced operating costs, including energy consumption and maintenance. The large Seair diffusion towers are currently being field tested at a commercial pulp and paper mill in British Columbia.
Seair's golf course solutions have been successfully implemented at a number of courses throughout western Canada. The next stage of growth in this segment is to target the larger year-round U.S. markets, particularly in areas where chronic water shortages dictate that effluent be the primary source of irrigation water. A distributor network is being established in these target markets and Seair has designed and manufactured a golf-course specific diffusion product.
Gross profit for the quarter ending November 30, 2007 was $588,122 (73% of revenue) compared to $477,251 (66% of revenue) in the year ending November 30, 2006. The portable waste water treatment rental model provides Seair with strong gross profit percentages, although amortization of the rental units is not included in cost of sales (it is included in amortization expense).
Total operating expenses increased by $570,698 to $920,665 from fiscal 2007 to fiscal 2008. The largest contributors to this increase were salaries and benefits (increase of $83,776), interest and bank charges (increase of $200,474) and professional fees (increase of $113,880).
The increase in salaries and benefits was attributable to increased headcount as Seair expands to accommodate its growing and diversifying business, compensation adjustments to ensure quality personnel are retained in the highly competitive Alberta labour market and retention of otherwise seasonal personnel to test and prep new portable waste water treatment units being received from the manufacturing facility.
Interest and bank charges have increased as a result of interest owing to convertible debenture holders. The debentures bear interest at 8% per annum, resulting in $200,000 of interest expense per quarter.
Professional fees include $40,000 of deferred convertible debenture issue costs and $25,000 of accrued audit fees. There were no corresponding items in the first quarter of fiscal 2007.
Research and development costs of $56,951 (nil in fiscal 2007) pertain to the establishment of a research department primarily focused on municipal waste water treatment solutions. Several studies are presently underway in conjunction with the Edmonton Waste Management Centre of Excellence.
Net loss for the quarter ending November 30, 2007 was $331,721.
Working capital at November 30, 2007 was $6,205,348, down from $7,090,428 at August 31, 2007 and up from $25,282 at November 30, 2006. On June 20, 2007 Seair closed a $10 million convertible debenture financing. The resulting strengthened working capital will enable Seair to systematically build market position in selected industries, optimize margins and terms of business and aggressively pursue new opportunities when warranted. The decrease in working capital from August 31, 2007 to November 30, 2007 is a result of capital expenditures from the expansion of Septic's fleet of portable waste water treatment units.
Inventory increased by $1,930,957 to $2,148,871 from August 31, 2007 to November 30, 2007. The increase was due work in progress on portable waste water treatment units being manufactured as well as construction of diffusion units for resale to non-oil and gas related customers.
Total capital expenditures for the quarter ending November 30, 2007 were $659,117 (compared to $872,078 for the quarter ending November 30, 2006), virtually all of which was related to increasing the number of portable waste water treatment units. Additional capital expenditures are anticipated as fleet expansion continues. A substantial portion of the increase in inventory will ultimately be reflected as capital additions when manufacture of the related portable waste water treatment units is completed.
The complete financial statements are available at www.sedar.com.
About Seair
Seair is a leading developer of patent protected diffusion and sterilization technologies which allow for the efficient diffusion of gases into a liquid, thereby facilitating numerous applications in a wide variety of industries including wastewater 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 email such request to seair@telus.net or visit the Seair website 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 or future events. Such statements are subject to a number of risks, uncertainties and assumptions. Actual results and events may vary.
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