ProSep Inc.

ProSep Inc.

August 13, 2008 23:59 ET

ProSep reports second quarter 2008 financial results

MONTREAL, Aug. 13 - ProSep Inc. (TSX: PRP), dedicated to providing
process solutions to the oil and gas industry, today announced its financial
results for the three and six month periods ended June 30, 2008. All amounts
are reported in Canadian dollars unless otherwise stated.



Highlights of the Second Quarter

- Revenues were $15.1 million, up 61% from $9.4 in the second quarter
of 2007.
- EBITDA(*) was $1.4 million, marking the Company's first-ever quarter
of positive performance.
- Net loss was $162,000 compared to a net loss of $2.9 million in the
second quarter of 2007.
- Signed customer agreements valued at $24 million (US) to supply
processing, treatment and separation equipment for use by the Kuwait
Oil Company, Occidental of Elk Hills Inc., and Hudson Hope Gas Ltd.
- Completed a $5.1 million private placement financing.
- Following shareholder approval, changed company name to ProSep Inc.,
and began trading under the symbol PRP on the Toronto Stock Exchange.

Highlights Subsequent to Quarter End

- Named Patrice Daignault as Chief Financial Officer and Corporate
Secretary effective September 2, 2008.
- Appointed David Laidley, Chairman Emeritus of Deloitte & Touche LLP,
to the Company's board of directors.
- Signed customer agreements valued at approximately $10 million to
supply process and separation equipment to be used by leading oil and
gas companies, including BP Exploration Alaska and Petronas.


"Our second quarter results demonstrate that our strategy to reorganize
the company along three geographic business units, implement focused global
sales, diversify our product mix and reduce costs is delivering results," said
Jacques L. Drouin, President and CEO, ProSep Inc. "Consistent with our plan,
we improved our EBITDA performance, increased our revenue backlog, grew our
customer base while reducing our expenses over the first quarter. In
particular, generating EBITDA of $1.4 million is a significant milestone as it
represents our first-ever quarter of positive performance."

Financial Results

Consolidated revenues for the second quarter ended June 30, 2008 were
$15.1 million, up 61% from $9.4 million in the second quarter of 2007. The
growth is attributable to higher sales of the Company's traditional products
that focus on the separation of gas, oil and water during upstream production
activities. For the six month period ended June 30, 2008, ProSep's
consolidated revenues were $24.3 million compared to $25.8 million generated
in the first six months of 2007 when the Company, operating as TORR Canada,
made a significant, single sale of its proprietary, water-treatment
technology.

Gross profit for the second quarter of 2008 was $4.4 million or 29% of
revenues compared to a loss of $1.6 million in the second quarter of 2007. For
the six months ended June 30, 2008, ProSep's gross profit was $7.1 million or
29% of revenues, compared to a loss of $2.2 million in the first six months of
2007.

EBITDA for the second quarter of 2008 was $1.4 million, compared to an
EBITDA loss of $2.6 million in the second quarter of 2007. For the six months
ended June 30, 2008, EBITDA was $935,836 compared to an EBITDA loss of
$4.5 million for the same period of 2007.

Sales and marketing expenses for the second quarter of 2008 were
$429,000, up 26% from $341,000 in the second quarter of 2007. The majority of
those expenses are related to salaries, travel expenses and professional fees
paid to sales and marketing experts in Houston, Montreal and Norway. For the
six months ended June 30, 2008, sales and marketing expenses were $990,000, up
from $738,000 for the same period in 2007. The increase in sales and marketing
expenses is the result of expanded operations resulting from the acquisition
of Pure Group As in October, 2007.

Research and development costs in the second quarter of 2008 were
$265,000 compared with $49,000 in the second quarter of 2007. For the six
months ended June 30, 2008, total research and development costs were $568,000
up from $170,000 for the same period in 2007. The increase in research and
development costs is also due to the expanded operations.

General and administrative expenses, which include salaries, professional
fees and offices infrastructure, were $2.3 million for the second quarter of
2008 compared with $640,000 for the second quarter of 2007. For the six months
ended June 2008, general and administrative expenses totalled $4.6 million
compared with $1.4 million for the six months ended June 2007. The growth in
general and administrative expenses is also attributable to the expanded
operations.

The net loss for the second quarter of 2008 was $162,000 compared with a
net loss of $2.9 million in the second quarter of 2007. For the six months
ended June 30, 2008, the net loss was $3.5 million compared with a net loss of
$4.8 million for the same period in 2007.

As at June 30, 2008, ProSep held cash and cash equivalents of
$11.2 million.

ProSep will host a conference call to discuss its second quarter 2008
financial results on August 14 at 8:30 a.m. ET. The conference call will also
be webcast live at www.newswire.ca and archived for 90 days at
www.prospepinc.com.

(*) Earnings before interest, taxes, depreciation and amortization
(EBITDA) is a non-GAAP measure and the Company defines it as earnings
or loss from operations excluding depreciation and amortization,
financial charges and income taxes.

About ProSep Inc.

ProSep Inc., formerly known as TORR Canada Inc., is dedicated to
providing process solutions to the oil and gas industry. ProSep designs,
develops, manufactures and commercializes technologies to separate oil, water
and gas generated by oil and gas production. For more information, please
visit www.prosepinc.com.

Caution concerning forward-looking statements

This press release contains forward-looking statements. Such statements
inherently involve numerous risks and uncertainties. Actual future results may
differ from the anticipated results expressed in the forward-looking
statements contained in this press release and ProSep does not undertake to
update this information. Investors are cautioned against placing undue
importance on forward-looking information contained herein and should consult
the final short form prospectus and the documents incorporated by reference
therein, which contain a more exhaustive analysis of risks and uncertainties
connected to ProSep's business.



ProSep Inc.
(Formerly TORR Canada Inc.)
Consolidated statements of (loss) and comprehensive (loss)
For the three-month and six-month periods
ended June 30, 2008 and 2007
(Unaudited)
Three months ended Six months ended
June 30 June 30
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------

$ $ $ $

Revenue 15,140,834 9,401,716 24,257,877 25,816,413
Cost of goods sold 10,731,125 10,996,252 17,195,612 27,994,186
-------------------------------------------------------------------------
Gross margin 4,409,709 (1,594,536) 7,062,265 (2,177,773)
-------------------------------------------------------------------------

Expenses

Sales and marketing 428,991 341,632 990,055 738,081
Research and
development 264,578 49,467 567,783 169,907
General and
administrative 2,339,243 640,592 4,568,591 1,404,213
-------------------------------------------------------------------------
3,032,812 1,031,691 6,126,429 2,312,201
-------------------------------------------------------------------------
1,376,897 (2,626,227) 935,836 (4,489,974)

Decrease in fair
value of investment
in ABCP - - 450,000 -
Financial charges 566,352 196,827 2,525,222 78,812
Amortization 377,284 105,008 741,141 222,362
-------------------------------------------------------------------------
Income (loss) before
income taxes 433,261 (2,928,062) (2,780,527) (4,791,148)
-------------------------------------------------------------------------

Current tax provision 564,859 - 770,027 -
Future tax provision
(recovery) 30,524 - (50,618) -
-------------------------------------------------------------------------
Income taxes 595,383 - 719,409 -
-------------------------------------------------------------------------
Net (loss) and
comprehensive (loss) (162,122) (2,928,062) (3,499,936) (4,791,148)
-------------------------------------------------------------------------


Weighted average
number of shares 62,556,566 46,700,673 62,556,566 46,698,509
Basic and diluted
(loss) per share (0.00) (0.06) (0.06) (0.10)
--------------------------------------------------
--------------------------------------------------



ProSep Inc.
(Formerly TORR Canada Inc.)
Consolidated balance sheets
As at June 30, 2008 and December 31, 2007
(Unaudited)
Audited
June 30 December 31
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
$ $

Assets

Current assets
Cash and cash equivalents 11,249,925 8,662,634
Restricted cash 1,063,142 1,055,846
Receivables 15,848,854 11,299,053
Deferred contract costs 70,034 66,048
Inventories 449,904 615,430
Prepaid expenses 662,278 418,222
Derivative financial instruments - 12,450
-------------------------------------------------------------------------
29,344,137 22,129,683

Long-term investment 6,750,000 7,200,000
Property and equipment 1,986,252 2,093,671
Goodwill 20,407,126 20,407,126
Intangible assets 8,191,400 8,530,759
Future tax assets 69,198 72,596
-------------------------------------------------------------------------
66,748,113 60,433,835
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities

Current liabilities
Bank credit facilities 11,161,027 10,602,541
Accounts payable and accrued liabilities 20,021,902 15,765,232
Deferred revenue 430,907 349,515
Derivative financial instruments 23,571 -
Current portion of long term debt 2,075,206 1,660,518
-------------------------------------------------------------------------
33,712,613 28,377,806

Interest payable 651,493 651,493
Long-term debt 13,777,965 11,178,087
Future tax liabilities 1,108,776 1,162,791
Pension obligation 413,266 391,650
-------------------------------------------------------------------------
49,664,113 41,761,827
-------------------------------------------------------------------------

Shareholders' equity

Share capital 55,144,398 55,144,398
Contributed surplus 12,299,557 10,132,726
Deficit (50,359,955) (46,605,116)
-------------------------------------------------------------------------
17,084,000 18,672,008
-------------------------------------------------------------------------
66,748,113 60,433,835
-------------------------------------------------------------------------
-------------------------------------------------------------------------



ProSep Inc.
(Formerly TORR Canada Inc.)
Consolidated statements of cash flows
For the three-month and six-month periods
ended June 30, 2008 and 2007
(Unaudited)
Three months ended Six months ended
June 30 June 30
----------------------------------------------------
2008 2007 2008 2007
----------------------------------------------------
$ $ $ $

Operating activities

Net loss and
comprehensive loss (162,122) (2,928,062) (3,499,936) (4,791,148)
Items not affecting
cash
Stock-based
compensation 118,722 155,518 254,719 330,561
Amortization of
property &
equipment 207,606 77,820 401,787 167,987
Amortization of
intangible assets 169,678 27,188 339,354 54,375
Amortization of
financing related
costs - 70,583 - 141,166
Accreted interest 77,448 123,746 139,179 237,530
Accrued interest on
long term
investment - (163,786) - (141,357)
Decrease in fair
value of investment
in ABCP - - 450,000 -
Periodic pension
cost 12,400 - 21,616 -
Future income taxes 30,524 - (50,618) -
Change in fair value
of derivative
financial
instruments (203,977) (161,150) 36,021 (187,000)
Unrealized exchange
(gain) loss (162,608) - 1,322,106 -
-------------------------------------------------------------------------
87,671 (2,798,143) (585,772) (4,187,886)
-------------------------------------------------------------------------

Changes in non-cash
operating working
capital items (43,091) 2,683,520 (254,949) (298,956)
-------------------------------------------------------------------------
44,580 (114,623) (840,721) (4,486,842)
-------------------------------------------------------------------------

Investing activities

Acquisition of
property &
equipment (242,283) (101,034) (294,748) (363,465)
Deferred costs - (562,609) - (562,609)
-------------------------------------------------------------------------
(242,283) (663,643) (294,748) (926,074)
-------------------------------------------------------------------------

Financing activities

Change in bank
indebtedness - (5,113,242) - (4,002,129)
Increase in long term
debt 4,762,473 4,762,473
Share issue cost (141,777) (141,777)
Reimbursement of
long-term debt (893,609) (586) (897,936) (1,158)
Issuance of share
capital - - - 1,667
-------------------------------------------------------------------------
3,727,087 (5,113,828) 3,722,760 (4,001,620)
-------------------------------------------------------------------------

Effect of exchange
rate on cash and
cash equivalents 28,715 - 137,534 -
Increase (decrease)
in cash and cash
equivalents 3,500,669 (5,892,094) 2,449,757 (9,414,536)
Cash and cash
equivalents,
beginning of period 7,720,541 22,399,796 8,662,634 25,922,238
-------------------------------------------------------------------------
Cash and cash
equivalents, end of
period 11,249,925 16,507,702 11,249,925 16,507,702
-------------------------------------------------------------------------
-------------------------------------------------------------------------


%SEDAR: 00009317EF

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