EDMONTON, Jan. 29 /CNW/ -- Seair Inc. ("Seair" or the "Company")(SDS:TSX Venture Exchange) today released its unaudited financial statements for the quarter ending November 30, 2009. Full financial statements are available at www.sedar.com.
Revenue for the quarter ending November 30, 2009 was $1,141,130, or 58% higher than the first quarter of fiscal 2008. Historically, rental revenue from Seair's fleet of portable wastewater treatment has provided the majority of revenue. However, in the most recent quarter Seair's fleet only contributed about 20% of total revenue. The main revenue source was the sale of diffusion equipment, specifically groundwater treatment units to an oil sands operation and progress on the wastewater treatment plant being built for Wolf Creek Golf Resort.
Seair's initial customer for oil sands groundwater treatment is renting units as well as having purchased six systems thus far. All of the units will be operating through the winter to assess the cold weather suitability. Should the units prove to be successful through the winter, there is potential for deployment of many more units to meet the customer's overall requirement. Moreover, with the solution now commercialized Seair will be marketing to other surface mining operations with similar needs.
The Wolf Creek wastewater treatment plant is Seair's first complete turnkey facility for a residential community. The plant will use essentially the same technologies and processes as Seair's portable units, although on a much larger scale. The Wolf Creek plant is expected to be completed in spring 2010. Seair's total revenue from this project is estimated to be around $1.1 million and approximately $0.7 million has been recognized to November 30, 2009. The completed plant is expected to be Seair's reference site in pursuing similar opportunities in other residential communities.
The groundwater treatment and turnkey wastewater treatment plants are new revenue streams for Seair. Other applications in municipal wastewater treatment, such as the sewage oxygenation system operating in Airdrie, Alberta, are also approaching commercialization.
Portable wastewater treatment unit rentals for the quarter ending November 30, 2009 were approximately $200,000, which is well below historical levels. The industry continues to struggle due to low overall oil and gas exploration levels. The negative revenue impact of low industry activity is compounded by at least one of Seair's competitors cutting their rental rates to what Septic management view as unsustainable levels. Seair management have opted to not match the low rates offered by this distressed competitor as doing so would likely result in a cash loss on every rental. Instead, Seair is focused on long-term relationships that are beneficial to customer and supplier. An eventual rebound in the western Canadian oil and gas sector, coupled with the current rationalization of the market, should lead to recovery of Seair's rental business. In the meantime Seair is discussing selling a limited number of portable wastewater treatment units to customers with long-term projects better suited to plant ownership than short-term rental. Winter months are the traditional busy period for Seair's rental fleet but the weak market condition and low rates available from one competitor suggest a substantial portion of the fleet may remain idle this winter. Should these condition persist management is looking at retrofitting a portion of the fleet to facilitate treatment of industrial wastewater including H(2)S removal, and on-site frac/produced water treatment.
Gross profit for the quarter ending November 30, 2009 was $717,260 (63% of revenue) compared to $487,726 (67% of revenue) in the quarter ending November 30, 2008. This $229,534 increase in gross profit (47% higher than fiscal 2008) is due to the overall revenue increase. The gross profit percentage is down slightly from the prior year because the margins earned on recently completed portions of the Wolf Creek wastewater treatment plant are lower than those normally realized via Septic's rentals. Gross profit percentage will increase on the remainder of the Wolf Creek project but will still fall below Seair's historical percentages. The Wolf Creek installation is the first of its kind and will serve as the reference site for similar projects in the future. Reduced overall margins were required as an inducement to win this initial project.
Total operating expenses decreased by $461,856 to $1,007,748 (31% decrease) from fiscal 2009 to fiscal 2010. The largest net contributors to this decrease were:
Professional fees $ 115,158 65% decrease
Amortization of equipment held for rental 98,599 57% decrease
Salaries and benefits 73,234 16% decrease
Shop supplies 58,213 66% decrease
Travel and tradeshows 50,473 72% decrease
Compliance and investor relations 24,396 90% decrease
Advertising and promotion 22,375 86% decrease
Other smaller items (aggregate) 19,408
Total year-over-year decrease $ 461,856
Professional fees and contract services are down as a result of scaling back and termination of projects that do not have strong prospects for near-term revenues. In particular, mothballing the ballast water treatment project in December 2008 significantly reduced costs.
Amortization of equipment held for rental or resale, or essentially the Septic fleet, was changed from a declining balance basis to a usage basis. The low fleet deployment rate results in decreased amortization.
Salaries and wages decreased compared to the prior year and the prior quarter as a result of headcount reductions. The Company reduced the number of head office and field personnel in response to the general economic downturn and the service team was not increased as is usually done in the fall in anticipation of the busy Septic winter season. Total Seair headcount is presently about 15, including casual labourers.
Shop supplies normally increase materially in the fall as the Septic fleet is prepared for winter deployment. Poor market condition and the likelihood that a significant portion of the fleet will be idle in fiscal 2010 resulted in a scale-back of unit preparation work.
Mothballing of marginal projects, such as ballast water treatment resulted in reduced travel and tradeshow expenses. In general Seair is focused on projects geographically close to our facilities so that we can quickly respond to issues and opportunities. Distant markets, such as Australia, are being served by distributors with established presence in those locations.
Compliance and investor relations declined in the wake of overall poor stock market conditions. As the market rebounds, and Seair's stock price in particular, compliance and investor relations spending is expected to increase closer to historical levels.
Advertising and promotion expense decreased because Seair is placing greater emphasis on face-to-face activities with potential customers in our local target markets. Regular meetings and presentations to oil sands companies, engineers, municipalities and pulp and paper companies constitute the heart of Seair's current advertising and promotional activities. Advertising costs also declined in conjunction with the decrease in trade show activity.
Research and development work continues on municipal wastewater treatment and oilfield water treatment applications. Seair has applied for and been granted federal government funding for specific research and development initiatives. This funding will serve to reduce the net R&D cost to Seair for future periods while allowing the Company to continue a very active project agenda.
Although most revenue is earned in Canadian dollars, a significant portion of equipment purchases sourced from third parties is denominated in U.S. dollars. Seair does not presently hedge its foreign currency positions, receivables or obligations but is reviewing this strategy as the scope of business increases outside of Canada.
Net loss for the quarter ending November 30, 2009 was $265,302, a $721,590 improvement over the same quarter in fiscal 2009.
The complete Seair unaudited financial statements and associated Management Discussion and Analysis can be viewed 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 liquids, thereby facilitating numerous applications in a wide variety of industries, including wastewater treatment, pulp and paper production, 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 supersaturated solution. The major difference between Seair's and others' 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.
Seair Inc. is proud to have been selected as one of the "2008 TSX Venture 50", a ranking of the top 10 public venture capital companies in 5 industry sectors listed on the TSX Venture Exchange.
Parties interested in obtaining further information or receiving news releases and corporate documents from Seair may email such requests to firstname.lastname@example.org or visit the Seair website at www.seair.ca.
This news release contains forward-looking statements relating to the future operations of the Seair Inc. and other statements that are not historical facts. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expects" and similar expressions. Any statements that are contained in this news release that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements are subject to important risks, uncertainties and assumptions. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Seair Inc. As a result, we cannot guarantee that any forward-looking statement will materialize and the reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
The forward-looking statements contained in this news release are made as of the date of this news release, and Seair Inc. does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by Canadian securities law.
Neither the 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.