Epstein InvestorIntel CEO Interview: Jeff Seibert, Seair Inc.
The following interview of CEO Jeff Seibert of Seair Inc. was conducted on Sept 18-19 by phone and email. Mr. Seibert joined Seair in February of this year. He had a 30-year career with Pall Corporation (“Pall”), recently as President of Pall’s Water Processing business which grew from zero to a large, multi-million dollar business under his leadership. Mr. Seibert was Pall’s global leader for large-scale water systems technology, addressing the purification requirements for surface, ground, seawater and wastewater sources. He directed the design, development, manufacturing and sales teams of process and water-related filtration and separation technologies serving applications for municipal, industrial, biopharmaceutical, medical and military customers. He has significant experience in the development, manufacturing and marketing of water treatment technologies in North America and overseas, including the development of strategic partnership arrangements and is a named inventor on 3 fluid clarification patents. He is a member of the American Water Works Association, the American Ground Water Association and the American Society of Mechanical Engineers.
Mr. Seibert, you joined Seair in February, please tell us about the company.
Seair Inc. (TSXV: SDS) is a Calgary-based cleantech company with proven and commercialized technologies for gas based water treatment. Seair’s proprietary, patented technology is able to diffuse gases into liquids more effectively, without chemicals and at lower cost. Our technology applications are extremely efficient, scalable, and require minimal maintenance as there are no moving parts. Seair is focused on building strategic partner relationships to further expand the applications of its water treatment technologies. Seair’s patented technologies can produce micron size bubbles, micro-bubbles, that are more efficient than other gas diffusion technologies because the diffused gases remain in solution for extended periods of time.
Seair applications include oil sands SAGD water solutions, frac and produced water treatment, industrial ponds treatment, mine dewatering/treatment, end-to-end sewage treatment, golf course irrigation / pond treatment and most recently, treatment of industrial wastewater.
Seair is rapidly moving to an asset-lite strategy please explain what that means.
Good question. This is something that shareholders and prospective investors need to understand. The prior management team tried to be vertically integrated by manufacturing equipment. This strategy was challenging for a small cap company. They struggled with working capital shortfalls. For the past year we’ve been transitioning to an asset-lite proprietary technology platform. That’s why we’ve been selling non-core legacy assets. Simply put, we own an enabling technology that helps customers operate more efficiently with lower costs and with a greener footprint. We call this a win-win-win approach. Our soon to be announced partners, our customers and Seair all benefit by deploying our unique technology solutions.
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Most important, Seair saves our customers money, in some cases a lot of money. Payback periods for customers can be as little as six months. That probably means we’re under-pricing our technology offerings, so we’re exploring ways to enhance margins with our new asset-lite paradigm. Taken together, a green technology, simpler and more efficient to use, no moving parts, (mitigating maintenance and repair) that save customers money = a compelling value proposition. A win-win-win proposition.
How do other gas diffusion technologies work, why is Seair’s better?
We are not reinventing the wheel, but we have a number of patents that make the wheel turn better. Many companies can infuse liquids with gas bubbles, the question is at what cost, harm to the environment and end result. For example, municipal systems around the world infuse bubbles into their waste streams. Our low-cost, low-energy systems are not only more effective, but also more green. Customers like being able to talk about being more green and they like saving money! An analogy might be helpful. If one drops a cube of ice into a glass of water, the ice cube may take several minutes to melt. However, if one chops that same ice cube up into thousands of pieces, the ice chips will melt much faster. Why, because there’s more surface area exposed to the water. That’s how our micro-bubbles work, they diffuse into liquids faster because they are smaller and have a higher surface area to volume ratio.
Please give readers a better understanding of why your technology is green?
That’s relatively easy to answer. We certainly are a green technology, especially compared to peers. As noted, we use considerably less energy in our patented processes. That already makes a big difference with regard to emissions. And of course, we don’t use any chemicals. Some competing technologies use more energy, including from fossil sources like diesel and natural gas, and also utilize chemicals, some of which are rather nasty.
What is the market opportunity for low-cost micro-bubbles?
Surprisingly large. Again, we are not a stand alone technology. We get spec’d into existing and new systems to make them better. We are a catalyst. The main market opportunities are in oil & gas, including frac water, municipal waste water systems and industrial uses. To be clear, there are many, many other market opportunities, but we have to focus on the best markets. These market opportunities are not just in the U.S., but around the globe. That’s another reason why we decided to become asset-lite. Building entire systems instead of just providing the technology solution dilutes are core technology. We can earn higher margins selling just our technology to more end users than by building out a systems with tanks, pumps, hoses, valves and motors that attach on to our core technology. The latter approach requires infrastructure, labor and overhead that our new approach does not.
If the technology is so robust, patented and been operating in the field, why is it taking so long for Seair to grow revenues?
That’s a great question. The prior approach adopted by the company was largely to provide waste water septic systems to remote mining camps in northern Canada. It wasn’t a bad plan, but it was a single niche market. As such, our technology was not showcased. Not many people happen to find themselves in remote parts of northern Canada. Until recently we simply did not have the financial resources, (working capital) a robust business model or an effective management team. 2014 is a transition year for Seair. I know companies use that, “transition” word for a lot of reasons. In our case, we truly are transitioning to a model that will allow us to address not just a niche market but wide ranging applications globally. The key is that we are partnering with a small handful of major companies, household names. We expect to be able to announce some of these partnerships in coming months.
Can you talk a bit more about the major companies that you might be partnering with?
As I mentioned, we’re talking to a handful of potential partners, not a lot, not all of which will be ready to go by year-end. We are well down the road with a few of them. We’re hopeful that our partnership strategy will pay dividends relatively soon. For example, we believe the visibility of our backlog for 2015 will be better than it has been in the past. A few prospective partners are including our technology in requests for proposals right now. In order for them to do that, they presumably are confident that our technology is useful, scalable and reliable. Our prospective partners have done, and continue to do, a great deal of due diligence on us and our technology. They’ve tested our technology to confirm the results that we’ve shown them.
You mentioned in your May, 2014 AGM presentation the possibility of reaching $10 million in revenues in 2015, why should investors be excited about that?
You’re right, $10 million in revenues is nothing to write home about. There’s probably upside to that figure. However, we’re being conservative because getting our partners geared up to sell our technology as part of their toolbox of solutions will take time. We want our technology to become a reliable tool that they pull from their toolbox frequently. Again, that will take time. Still, our goal in 2014 is to exit the year at cash flow break-even. And, $10 million in revenues next year would represent tremendous growth from approximately $2 million this year. We think our revenues can easily grow by over 100% annually for the next few years. Once our partners realize that they can win more business incorporating our technology, they will spec it into their designs more readily. That’s the win-win-win value proposition I mentioned earlier. Finally, investors should know that the margins on next year’s revenues should be strong.
Please give us a snapshot of Seair’s capital structure.
We recently raised 618k in converts with a conversion price of C$ 0.30/share and we have 2.5 million preferred shares that convert 1 for 1 into common stock. As of the end of August, total debt was C$6.12 million with an average conversion price of C$ 0.26/share. There are 19.3 million warrants with a strike price of C$0.40, (way out of the money) and 57.5 million shares outstanding. Fully diluted we have 102.8 million shares and a basic market cap of C$ 9 million. Fully diluted our market cap would be C$ 16.5 million, (based on C$ 0.16/share price on Sept 22nd) but there would be cash proceeds coming in from the exercise of warrants.
Are there any misconceptions about Seair that you would like to address?
I guess I would like to reiterate that 2014 is a transition year for us. I became CEO in February. We believe that current revenues and profitability are not representative of what to expect from 2015 on. I think a misconception that we’ve already touched upon is that large partners (soon to start being announced) do not move as fast as we would like. Several are testing our technologies, but it will take time. That’s why I call 2014 a transition year to an asset-lite model. I sincerely hope that investors will look forward at the prospects for 2015 and beyond and not backwards. We are a speculative company, but once we become cash flow break-even and then cash flow positive next year, the downside risk in our valuation should be somewhat limited.
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