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Press release from CNW Group

Seprotech Announces Second Quarter Fiscal 2011 Results

Tuesday, July 26, 2011

Seprotech Announces Second Quarter Fiscal 2011 Results14:23 EDT Tuesday, July 26, 2011OTTAWA, July 26, 2011 /CNW/ - Seprotech Systems Incorporated (TSX-V: SET; "Seprotech" or the "Company") announces the following unaudited results for the third quarter of fiscal 2011 with comparative unaudited results for the third quarter of fiscal 2010; and unaudited results for the nine months ended May 31, 2011, with comparative unaudited results for the nine months ended May 31, 2010. Three Months EndedMay 31     Nine Months EndedMay 31 20112010     20112010 $000$000     $000$000          Revenue6781,064     2,1973,750          Gross Margin159554     5831,660          Net Income (Loss)(508)21     (1,105)(73)          Loss per share(0.01)(0.00)     (0.02)(0.00)During the quarter ended May 31, 2011 the Company completed the correction of the customer over-billing problem previously disclosed, and turned attention to bidding for new contracts, of which the $14.0 million DND contract announced subsequent to quarter end was the most significant recent contract award won by the company. A further contract award of $435,000 for a water treatment plant at a B.C. mining site was also announced subsequent to quarter end.Revenues for the interim period ended May 31, 2011 were $678 compared with $1,064 for the prior interim period, a decline of $386 or 36%. Sales of military, automotive and industrial installations declined, from $951 in Q3 2010 to $597 (48%) in Q3 2011, and sales of rotating biological contactor ("RBC") units remained unchanged at $23 for the third quarter 2011. Parts and Service revenues decreased from $90 in Q3 2010 to $58 in Q3 2011 (36%). The decline in military business reflected a push to complete contract work during the third quarter of fiscal 2010, resulting in processing an extra unit compared to the 2011 quarter. RBC sales continued to reflect a nominal amount of activity, although the number of projects coming to the market for bids has been increasing. Gross margins for the interim period ended May 31 2011 were $159 or 23% compared with $534 or 50% during the same period in 2010, a 27% deterioration. This largely reflected some RBC legacy costs causing a negative margin on RBC sales, thereby distorting acceptable margin levels on military work and parts and service.Staffing levels had been maintained in anticipation of additional contracts, and in expectation of the over-billing problem being resolved more quickly than was the case, so operating expenses remained at relatively high levels, resulting in a net loss for the quarter of $508 compared with a net income of $21 for the same period in 2010. Operating costs for the quarter ended May 31, 2011 also reflected higher legal, audit and regulatory costs, all related to regaining regulatory compliance following the over-billing issue. Comparative 2010 data has been changed to reflect discontinued operations in 2010.Seprotech is a provider of pre-engineered water and wastewater treatment solutions to the municipal/land development, resource sector and military market place, including Reverse Osmosis water purification systems, ROTORDISK® biological sewage treatment package plants and CrystalBlue™ membrane-based water recycling 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.For further information: Mr. Ian Malone, CFO Tel: (613) 523-1641 Fax: (613) 731-0851