Seprotech updates status of previously reported delay in filing of 2010 annual financial statements and first quarter 2011 interim financial statements

OTTAWA, Feb. 9 /CNW/ - Seprotech Systems Incorporated (TSX-V: SET; "Seprotech" or the "Company") is issuing this press release as a default status report in accordance with National Policy 12-203.

In its press release on December 17, 2010, (the "Default Notice"), the Company announced that it would not be able to file its audited financial statements for the year ended August 31, 2010 (the "Annual Financial Statements") and its related MD&A and CEO and CFO certificates (collectively, the "Annual Required Filings") by December 29, 2010 as required under securities laws.

By its further press release and related material change report issued and filed on December 29, 2010 (the "First Default Status Report"), the Company reported a material change relating to an overstatement of revenues as reported in its financial statements for the quarters ended November 30, 2009, February 28, 2010, May 31, 2010 and possibly for the year ended August 31, 2009, in an undetermined material amount.

The Company applied for, and on January 4, 2011 received from its principal regulator, the Ontario Securities Commission (the "OSC") a temporary Management Cease Trade Order (the "MCTO") under Part 4 of National Policy 12-203.  On January 17, 2011 the OSC issued a permanent MCTO by virtue of which neither the former CEO nor the CFO is permitted, directly or indirectly, to trade in or acquire securities of the Company until two full business days following the receipt by the OSC of all the outstanding filings.

In its default status report of January 26th, 2011 (the "Third Default Status report") the Company also reported that it would not be able to file its interim financial statements for the quarter ended November 30, 2010 and related MD&A and CEO and CFO certificates before the prescribed date of January 31, 2011. 

The following is an update of material changes to the information set out in the Default Notice and the First, Second and Third Default Status Reports.

As previously reported, on December 17, 2010 the Company notified its customer, the Department of National Defence, Canada (the "DND") of material billing discrepancies under its contract with the Company. It was further reported that DND had agreed in principle that the over-billing would be corrected through applying a credit on future work under the contract and that it was anticipated that the credit will be fully utilized by applying it to work currently committed.  On January 20, 2011 the Company provided a further detailed response to specific questions from DND to confirm the Company's estimate of the amount of the over-billing. A further exchange of correspondence and information has taken place, and substantial agreement has now been reached with respect to the amount of the over-billing, the final amount of which is not expected to exceed $300,000.  One minor aspect of the materials provided to DND remains under review with a response expected within the next week. However, until the precise amount of the overbilling is confirmed by DND, and accepted by the Company's auditors, the Company is not in a position to finalize quantification and/or allocation of the over-billing to the appropriate historical fiscal quarters thereby enabling completion of the audit of its Annual Financial Statements and subsequent filing of its Annual Required Filings as well as its first quarter 2011 filings. However, we have been able to determine that no material amounts related to the over-billing will be attributable to other than the fiscal year ended August 31, 2010. Finalization of this process is expected to further delay the filing of the Annual Required Filings until March 31, 2011, and the first quarter 2011 filings to April 30, 2011.

The Company confirms that:

(i) there has been no failure by the Company in fulfilling its stated intentions with respect to satisfying the provisions of the alternative information guidelines set out in NP 12-203;

(ii) there has not been any other anticipated or specified default by the Company under NP 12- 203; and

(iii) there is no other material information concerning the affairs of the Company that has not been generally disclosed.

The Company will continue to satisfy the provisions of the alternative information guidelines under NP 12-203 by issuing bi-weekly default status reports in the form of news releases so long as it remains in default of the filing requirements set out above.

Seprotech is a provider of pre-engineered water and wastewater treatment plants to the land development, resource sector and military market place, including CrystalBlue™ membrane-based water recycling systems and the ROTORDISK® wastewater treatment systems.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. The TSX Venture Exchange has neither approved nor disapproved of the information contained herein. Some of the statements in this press release, including those relating to the Company's strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates" or similar expressions, are forward-looking statements within the meaning of securities laws. Forward-looking statements include, without limitation, the information concerning possible or assumed future results of operations of the Company. These statements are not historical facts but instead represent only the Company's expectations, estimates and projections regarding future events. The Company does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events, except as required by law.

SOURCE Seprotech Systems Incorporated

For further information:

Mr. Matthew Anderson, Investor Relations
Tel: (613) 523-1641
Fax: (613) 731-0851

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