EDMONTON, Jan. 29 /CNW/ - Seair Inc. (SDS:TSX Venture Exchange) today
released its unaudited financial statements for the quarter ending November
Revenue for the quarter ending November 30, 2008 was $726,835, or 10%
lower than the corresponding quarter in fiscal 2007 and 9% lower than the
fourth quarter of fiscal 2008. Rental revenue from Septic's fleet of portable
wastewater treatment provided approximately 97% of total revenue. The 10%
revenue decrease was a result of reduced fleet deployment. Although September
2008 started relatively strong (compared to prior Septembers) the dramatic
economic downturn in autumn 2008 led to the deferral and/or reduction in
oilfield activity. Reduced activity led to fewer active camps which, in turn,
reduced the overall market size in the quarter for Septic's portable
wastewater treatment units. Oil patch activity in the quarter ending November
30, 2008 was even lower than the same quarter the year before, when
uncertainty over royalty revisions led to what was then considered low
The change in customer plans was very sudden. Companies with aggressive
winter plans were, in September, reserving large numbers of wastewater
treatment units. Many of these reservations were subsequently cancelled or
postponed, leaving Septic management little time to seek alternative
deployment of units. Customers are now suggesting that spring and summer could
be unusually busy, but Septic management is nevertheless seeking other markets
(i.e., non-oil and gas) for treatment unit deployment in case lingering
economic difficulties lead to continued depressed activity levels in the oil
Realized day rates on rentals of portable wastewater treatment units in
the first quarter were up slightly compared to the same quarter in fiscal
Much of Seair's business development work involves application of the
proprietary diffusion technology in areas other than portable wastewater
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.
Gross profit for the quarter ending November 30, 2008 was $491,700 (67%
of revenue) compared to $588,122 (73% of revenue) in the quarter ending
November 30, 2007 and $259,485 for the quarter ending August 31, 2008 (33% of
revenue). A certain portion of direct costs are essentially fixed in the
short-term, so the decrease in year-over-year gross profit percentage is due
to these fixed costs being spread over a slightly smaller revenue base.
No amortization of the portable wastewater treatment units is included in
direct costs (it is included in amortization expense).
Total operating expenses increased by $548,939 to $1,469,604 from fiscal
2007 to fiscal 2008. The largest contributors to this increase were:
Salaries and wages $ 183,979
Shop supplies 51,293
Travel and trade shows 46,732
Accretion of debenture issue costs 39,825
Professional fees 31,902
Research and development 15,141
Total year-over-year increase $ 548,939
Non-cash items (amortization and accretion of debenture issue costs) make
up $193,399, or approximately 35%, of the year-over-year increase.
Salaries and wages increased compared to the prior year primarily as a
result of personnel additions. A research and development department was
established in fiscal 2008 in order to advance Seair diffusion applications
outside of portable wastewater treatment. In addition, the administrative and
finance department was expanded to meet the expanding scope and complexity of
Septic normally uses seasonal layoffs during the summer slow period to
reduce payroll expense. In summer and fall 2008 most service personnel were
kept on the payroll to prepare wastewater treatment units for what was
expected to be a very busy fall and winter deployment. The sudden economic
downturn in autumn 2008 meant that unit deployment numbers were down
significantly from expectations in September and that Septic had more prepared
for deployment than necessary. This increased salary and wages, as well as
shop supply expense, without a corresponding increase in revenue.
In the second quarter of fiscal 2008 Seair modified the amortization
assumption for Septic's portable wastewater treatment units. These assets are
now amortized on a straight-line basis over 10 years whereas previously they
were amortized on a diminishing balance basis at rates of between 4% and 8%.
The 10 year straight-line basis for amortization has increased amortization
expense compared to the first quarter of fiscal 2008. Amortization expense
also increased as a result of the fleet size increase.
Travel and trade show expense increased for two reasons. The ballast
water treatment initiative (which has now been suspended, as discussed below),
involved considerable travel since it was being run out of Florida and the
prototypes were being tested at various locations. The accretion of debenture
issue costs are a result of the June 2007 financing. In addition, Seair is
emphasizing attendance and participation at technical oriented tradeshows in
the wastewater treatment sector. Seair personnel have presented papers in
order to enhance exposure and understanding of the company's unique
ozone-based solutions. The increased trade show presence is tied to research
and development activities (see following paragraph).
Research and development activities include projects within the municipal
wastewater treatment industry, testing of high concentration diffused ozone
treatments on various oil and gas sector water situations (e.g., produced
water and frac water) as well as the development and testing of a series of
prototypes for treatment of ballast water on ocean going vessels. The ballast
initiative led to successful testing of a 1/3 commercial scale treatment unit.
However, in light of prevailing economic conditions this project has now been
suspended and no costs are being incurred after November 30, 2008. Research
and development work continues on municipal wastewater treatment and oilfield
water treatment applications.
Professional fees increased as a result of third parties engaged to
assist in the ballast water treatment initiative. This project has been
indefinitely suspended and there are no continuing professional fees
associated with it.
Working capital at November 30, 2008 was negative $670,865, down from
$678,366 at August 31, 2008. Current liabilities include $707,920 for the
current portion of the convertible debentures even though the debentures do
not come due until June 2012. The first quarter is generally the low point of
Seair's working capital cycle, since costs are incurred prior to the revenues
(and cash inflows) from the winter busy season for Septic's portable
wastewater treatment units. Nevertheless, Seair is emphasizing cash
preservation and cost minimization to ensure working capital is sufficient
through difficult economic times.
Total capital expenditures for the quarter ending November 30, 2008 were
$277,423 (compared to $5,038,170 for the year ending August 31, 2008).
Virtually all capital expenditures related to increasing the number of
portable wastewater treatment units.
The complete financial statements are available at www.sedar.com.
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
firstname.lastname@example.org or visit the Seair website at www.seair.ca.
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
THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT
RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
For further information:
For further information: Harold Kinasewich, Seair Inc., T: (780)
477-7188, F: (780) 477-2523, E: email@example.com