ProSep Inc.

ProSep Inc.

November 12, 2008 23:59 ET

ProSep reports third quarter 2008 financial results

MONTREAL, Nov. 12 - ProSep Inc. (TSX: PRP), dedicated to providing
process solutions to the oil and gas industry, today announced its financial
results for the three and nine-month periods ended September 30, 2008. All
amounts are reported in Canadian dollars unless otherwise stated.



Selected Highlights

- Revenues increased by 42% and totalled $36.8 million for the nine-
month period ended September 30, 2008 compared with revenues of
$25.9 million for the corresponding period of 2007.
- EBITDA(*) for the third quarter was $1.3 million, the second
consecutive quarter of positive performance.
- Signed $11 million in new contracts during the quarter. Current
sales backlog stands at $27 million.
- Appointed David Laidley, Chairman Emeritus of Deloitte & Touche LLP,
to the Company's Board of Directors.
- Named Patrice Daignault as Chief Financial Officer and Corporate
Secretary effective September 2nd.
- Signed customer agreements to supply processing, treatment and
separation solutions for use by leading energy companies, including
BP Exploration Alaska, Petronas, ENI S.pA., Ingaip D.O.O., and
PEMEX.
- Obtained ISO 9001:2000 Certification for South East Asian
operations.
- Received Deloitte Technology Green 15 Award in recognition of the
quality of its process solutions for upstream oil and gas companies.


"ProSep has undergone a significant turnaround over the past 12 months,"
said Jacques L. Drouin, President and CEO of ProSep Inc. "The successful
integration of Pure Group into our operations has enabled us to expand our
product offerings and increase our sales backlog. We are now well structured
and operationally profitable and are well on our way to becoming a leading
provider of process solutions to the oil and gas industry."

As announced previously, the Company acquired Pure Group AS in October,
2007. Management believes that any comparisons with periods prior to the
acquisition may not be meaningful.

Financial Results

For the nine-month period ended September 30, 2008 ProSep reported
revenues of $36.8 million an increase of 42% from $25.9 million generated
during the corresponding nine-month period of 2007. For the third quarter of
2008 revenues were $12.5 million. The Company recognizes revenues on a
percentage of completion basis and operates in an industry that typically has
long sales and production cycles. As a result, quarterly sales variations are
to be expected and may not be an indication of a longer-term trend.

Gross margin was $4.4 million or 35% of revenues for the third quarter
and $11.5 million, or 31% of revenues for the nine-month period ended
September 30, 2008. In third quarter of 2008, margins improved by
approximately 10% sequentially over the second quarter of 2008. The margin
improvement was positively impacted by the reversal of a warranty provision of
$1.3 million out of the total $2.6 million provision taken during the second
half of fiscal 2007 relating to the delivery of the seven TORRTM water
treatment systems sold to SK Engineering & Construction.

EBITDA for the third quarter of 2008 was $1.3 million, compared to EBITDA
of $1.4 million for the preceding second quarter of 2008. EBITDA for the first
nine months of 2008 was $2.2 million compared to negative EBITDA of $5.5
million for the same period of 2007.

Sales and marketing expenses were $490,000 for the three-month period and
$1.5 million for the nine-month period ended September 30, 2008. The majority
of these expenses relate to salaries, marketing, promotional and travel
activities.

Research and development expenses were $350,000 for the three-month
period and $900,000 for the nine-month period ended September 30, 2008. These
expenses consist mostly of salaries and are dedicated to expanding the
Company's proprietary product offering.

General and administrative ("G&A") expenses were $2.3 million or 18% of
sales for the three-month period and $6.9 million or 19% of sales for the
nine-month period ended September 30, 2008. The majority of these expenses
relate to salaries, including benefits and option costs, and professional
fees, which include regulatory fees, legal fees, accounting and audit fees,
investor and public relation fees and consulting fees, and office
infrastructure related expenses.

The Company reported net income of $1.8 million or $0.03 per share for
the third quarter of 2008 compared with a net loss of $3.0 million or ($0.07)
per share for the three-month period ending September 30, 2007. Net income for
the three-month period ended September 30, 2008 was positively impacted by the
reversal of a $1.3 million warranty provision and an unrealized foreign
exchange gain of $1.9 million, most of which is a consequence of the Norwegian
division's balance sheet conversion. For the nine-month period ended September
30, 2008, ProSep reported a net loss of $1.7 million or ($0.03) per share
compared with a net loss of $7.9 million for the nine-month period ending
September 30, 2007 or ($0.17) per share. Year-to-date, a total foreign
exchange gain of $0.5 million was recognized.

At September 30, 2008, ProSep held cash and cash equivalents of $5.9
million.

"While international oil and gas prices have dropped recently, we have
not experienced any softening of demand for our process solutions," said Mr.
Drouin. "Given our sales backlog, customer commitments to CAPEX spending, and
our current pipeline of opportunities, our prospects for growth for the
balance of the year and into 2009 remain encouraging. Nonetheless, we believe
that the current financial crisis and overall weakening of the global economic
conditions as well as further declines in the price of oil may have an adverse
impact on future results."

ProSep will file its consolidated financial statements for the third
quarter 2008 and related management discussion and analysis with securities
regulatory authorities within the applicable timelines. The material will be
available through SEDAR at www.sedar.com and the Company's website,
www.prosepinc.com

Conference Call and Webcast Details

ProSep will host a conference call on Thursday, November 13 at 8:30 a.m.
(ET) to discuss its third quarter 2008 financial results. To access the
conference call by telephone, dial 416-644-3425 or 1-800-731-5319. Please
connect approximately 15 minutes prior to the beginning of the call to ensure
participation.

A live audio webcast of the conference call will be available at
www.newswire.ca Please connect at least 15 minutes prior to the conference
call to ensure adequate time for any software download that may be required to
join the webcast. The webcast will be archived at www.prosepinc.com for 30
days.



(*)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 may contain forward-looking statements, including
statements regarding the business and anticipated financial performance of
ProSep Inc. These statements are subject to a number of risks and
uncertainties that may cause actual results to differ materially from those
contemplated by the forward-looking statements. Some of the factors that could
cause such differences include but are not limited to legislative or
regulatory developments, competition, technological change, changes in
government and economic policy, inflation and general economic conditions in
geographic areas where ProSep Inc. operates. These and other factors should be
considered carefully and undue reliance should not be placed on the
forward-looking statements. ProSep Inc. does not undertake to update any
forward-looking statements.



ProSep Inc.
(Formerly TORR Canada Inc.)
Consolidated statements of income (loss) and comprehensive income (loss)
For the three-month and nine-month periods
ended September 30, 2008 and 2007
(Unaudited)

Three months ended Nine months ended
September 30 September 30
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------

$ $ $ $

Revenue 12,547,837 102,405 36,805,714 25,918,818
Cost of goods sold 8,095,717 142,019 25,291,329 28,136,205
-------------------------------------------------------------------------
Gross margin 4,452,120 (39,614) 11,514,385 (2,217,387)
-------------------------------------------------------------------------

Expenses

Sales and
marketing 491,551 238,159 1,481,606 976,240
Research and
development 353,922 85,396 921,705 255,303
General and
administrative 2,292,863 665,677 6,861,454 2,069,890
-------------------------------------------------------------------------
3,138,336 989,232 9,264,765 3,301,433
-------------------------------------------------------------------------
1,313,784 (1,028,846) 2,249,620 (5,518,820)

Decrease in fair
value of investment
in ABCP - 1,620,000 450,000 1,620,000
Financial charges (1,311,358) 313,323 1,213,864 392,135
Amortization 359,685 100,756 1,100,826 323,118
-------------------------------------------------------------------------
Income (loss) before
income taxes 2,265,457 (3,062,925) (515,070) (7,854,073)
-------------------------------------------------------------------------

Current tax provision 474,769 - 1,244,796 -
Future tax recovery (56,856) - (107,474) -
-------------------------------------------------------------------------
Income taxes 417,913 - 1,137,322 -
-------------------------------------------------------------------------
Net income (loss) and
comprehensive income
(loss) 1,847,544 (3,062,925) (1,652,392) (7,854,073)
-------------------------------------------------------------------------


Weighted average
number of shares
(basic) 62,556,566 46,719,695 62,556,566 46,706,448
Weighted average
number of shares
(diluted) 73,867,677 N/A N/A N/A
Basic and diluted
earnings (loss) per
share 0.03 (0.07) (0.03) (0.17)



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

September 30 December 31
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
$ $
Assets
Current assets
Cash and cash equivalents 5,943,086 8,662,634
Restricted cash 1,066,334 1,055,846
Receivables 20,087,167 11,299,053
Deferred contract costs - 66,048
Inventories 722,956 615,430
Prepaid expenses 934,514 418,222
Derivative financial instruments 156,000 12,450
-------------------------------------------------------------------------
28,910,057 22,129,683


Long-term investment 6,750,000 7,200,000
Property and equipment 1,991,360 2,093,671
Goodwill 20,407,126 20,407,126
Intangible assets 8,021,721 8,530,759
Future tax assets 77,118 72,596
-------------------------------------------------------------------------
66,157,382 60,433,835
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities

Current liabilities
Bank credit facilities 10,896,156 10,602,541
Accounts payable and accrued liabilities 18,419,935 15,765,232
Deferred revenue 520,683 349,515
Current portion of long term debt 2,145,326 1,660,518
-------------------------------------------------------------------------
31,982,100 28,377,806


Interest payable 651,493 651,493
Long-term debt 13,024,636 11,178,087
Future tax liabilities 1,059,840 1,162,791
Pension obligation 424,050 391,650
-------------------------------------------------------------------------
47,142,119 41,761,827
-------------------------------------------------------------------------


Shareholders' equity

Share capital 55,144,398 55,144,398
Contributed surplus 12,383,276 10,132,726
Deficit (48,512,411) (46,605,116)
-------------------------------------------------------------------------
19,015,263 18,672,008
-------------------------------------------------------------------------
66,157,382 60,433,835
-------------------------------------------------------------------------



ProSep Inc.
(Formerly TORR Canada Inc.)
Consolidated statements of cash flows
For the three-month and nine-month periods
ended September 30, 2008 and 2007
(Unaudited)

Three months ended Nine months ended
September 30 September 30
-------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------
$ $ $ $
Operating activities

Net income (loss) and
comprehensive income
(loss) 1,847,544 (3,062,925) (1,652,392) (7,854,073)
Items not affecting
cash
Stock-based
compensation 83,719 149,818 338,438 480,379
Amortization of
property &
equipment 190,009 73,569 591,796 241,556
Amortization of
intangible assets 169,676 27,187 509,030 81,562
Amortization of
financing related
costs - 70,583 - 211,749
Accreted interest 133,208 133,291 272,387 370,821
Accrued interest on
long term investment - 753 - (140,604)
Decrease in fair
value of investment
in ABCP - 1,620,000 450,000 1,620,000
Periodic pension cost 10,783 - 32,399 -
Future income taxes 56,856 - (107,474) -
Change in fair value
of derivative
financial
instruments (179,571) 103,550 (143,550) (83,450)
Unrealized exchange
gain (1,498,444) - (176,338) -
-------------------------------------------------------------------------
813,780 (884,174) 114,296 (5,072,060)
-------------------------------------------------------------------------

Changes in non-cash
operating working
capital items (5,805,382) 569,198 (6,060,331) 270,242
-------------------------------------------------------------------------
(4,991,602) (314,976) (5,946,035) (4,801,818)
-------------------------------------------------------------------------

Investing activities

Acquisition of
property and
equipment (195,116) (11,027) (489,864) (374,492)
Investment - (6,667,035) - (6,667,035)
Deferred costs - (526,698) - (1,089,307)
-------------------------------------------------------------------------
(195,116) (7,204,760) (489,864) (8,130,834)
-------------------------------------------------------------------------

Financing activities

Change in bank
indebtedness - - - (4,002,129)
Increase in long term
debt - - 4,762,473 -
Share issue cost - - (141,777) -
Reimbursement of
long-term debt (6,409) (547) (904,345) (1,705)
Issuance of share
capital - 16,250 - 17,917
-------------------------------------------------------------------------
(6,409) 15,703 3,716,351 (3,985,917)
-------------------------------------------------------------------------

Effect of exchange
rate on cash and
cash equivalents (43,790) - 93,744 -
Decrease in cash and
cash equivalents (5,263,049) (7,504,033) (2,813,292) (16,918,569)
Cash and cash
equivalents,
beginning of period 11,249,925 16,507,702 8,662,634 25,922,238
-------------------------------------------------------------------------
Cash and cash
equivalents, end of
period 5,943,086 9,003,669 5,943,086 9,003,669
-------------------------------------------------------------------------


%SEDAR: 00009317EF

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