VGS Seismic Canada Inc. Announces Financial Results to September 30, 2008

VGS Seismic Canada Inc. ("VGS" or "the Company") (TSX VENTURE:VGS) is pleased to
announce results of operations for the three and nine month periods ended
September 30, 2008.


At September 30, 2008 VGS had grown its seismic data library to 5,020 square
kilometres of 3-D seismic data and 5,041 linear kilometres of 2-D seismic data
with a total capital cost of $75.4 million. 


VGS contracted a small 2D shoot at the end of June 2008. Fieldwork was completed
and data was delivered to the processor in August 2008.


VGS had a loss of $3.3 million ($0.11 per share basic and fully diluted) from
revenues of $1.6 million for the three months ended September 30, 2008 compared
to a loss of $3.4 million ($0.11 per share basic and fully diluted) from gross
revenues of $0.8 million for the three months ended September 30, 2007. The most
significant expense contributing to the current period loss was amortization of
$3.0 million. Additionally, during the three-month period ended September 30,
2008 the Company incurred non-recurring net restructuring costs of $0.3 million
as a result of the departure of three members of senior management. The
year-to-date loss at September 30, 2008 is $7.7 million ($0.25 per share basic
and fully diluted) compared to $5.0 million ($0.16 per share basic and fully
diluted) for the nine months ended September 30, 2007, with the most significant
difference being amortization of $12.0 million for the current year-to-date
compared with $5.9 million for the same period in 2007. The increased
amortization is largely the result of a $3.6 million initial charge representing
35% of the cost of a survey completed in the first quarter of 2008. 




                            Three         Three          Nine          Nine
                           months        months        months        months
                            ended         ended         ended         ended
                        September     September     September     September
                         30, 2008      30, 2007      30, 2008      30, 2007
                                $             $             $             $
Data acquisition
 revenue                  235,359             -     4,669,424             -
License sales
 revenue                1,282,962       781,447     3,659,628     6,718,229
License sales - non
 monetary
exchange                   81,873             -       867,873             -
Brokerage and other
 revenue                   43,070        17,445       159,292       233,018
                      ------------------------------------------------------
                        1,643,264       798,892     9,356,217     6,951,247
Non-recurring
 restructuring costs      280,677             -       280,677             -
Other operating
 expenses                 808,240     1,025,713     2,565,885     3,293,701
                      ------------------------------------------------------
EBITDA (Non-GAAP
 measure)                 554,347      (226,821)    6,509,655     3,657,546

Interest on debt          372,053       434,389     1,076,281     1,235,751

Accretion of
convertible
 debentures
 & deferred costs         429,811       431,409     1,178,773     1,241,856
                      ------------------------------------------------------
                         (247,517)   (1,092,619)    4,254,601     1,179,939
Amortization            3,011,831     2,008,970    11,995,134     5,903,517
                       (3,259,348)   (3,101,589)   (7,740,533)   (4,723,578)
Current income taxes          909       258,609           909       258,609
                      ------------------------------------------------------

Loss for the period    (3,260,257)   (3,360,198)   (7,741,442)   (4,982,187)
                      ------------------------------------------------------
Loss per share
 Basic & diluted     $      (0.11) $      (0.11) $      (0.25) $      (0.16)
Total shares
 outstanding           30,979,771    30,979,771    30,979,771    30,979,771
Cash EBITDA
 (Non-GAAP measure)       237,115      (226,821)      972,358     3,657,546


Cash EBITDA is calculated as follows:

                            Three         Three          Nine          Nine
                           months        months        months        months
                            ended         ended         ended         ended
                        September     September     September     September
                         30, 2008      30, 2007      30, 2008      30, 2007
                                $             $             $             $
Earnings (loss) before
 interest, taxes,
 depreciation and
 amortization             554,347      (226,821)    6,509,655     3,657,546
Less:
Non-monetary exchange
 revenue                  (81,873)            -      (867,873)            -
Acquisition revenue      (235,359)            -    (4,669,424)            -
                      ------------------------------------------------------
Cash EBITDA               237,115      (226,821)      972,358     3,657,546
                      ------------------------------------------------------



Data acquisition revenue recognized in the quarter was $235,259 related to a 2D
project completed in August 2008, compared to nil in the third quarter of 2007.
VGS also completed a large 3D acquisition project in Q1, 2008. Previously, data
acquisition revenue was deferred until the data was released from its
proprietary period and available for sale to the industry. In late 2007, the
Company prospectively adopted a policy of recognizing this revenue on a
percentage of completion basis, and charging the initial amortization on the
data in the month that the survey is completed. This policy change resulted in
$4.7 million in acquisition revenue being recognized in the first nine months of
2008, compared to nil acquisition revenue in the first nine months of the prior
year. For the quarter ended September 30, 2008, VGS had cash license sales of
$1.3 million compared to $0.8 million for Q3, 2007. Cash license sales 2008
year-to-date were $3.7 million compared to $6.7 million a year ago. VGS believes
this decrease in sales revenue is attributable to weak natural gas prices and a
general reduction in gas exploration in the first quarter of 2008, in areas
where VGS owns data. Cash EBITDA was higher in Q3 2008 than the comparable
quarter of 2007 due to both higher sales and lower operating costs in 2008 as
VGS continued its efforts to reduce operating expenses. Year-to-date cash EBITDA
is lower in the nine months ended September 30, 2008 than the comparable period
for 2007 due to weak license sales in the first quarter of 2008. However,
despite a softening of natural gas prices in the fall of 2008 and the negative
general economic climate, management believes that there is continued interest
in exploration of gas prone areas particularly in North Eastern British
Columbia. Brokerage and other income is $43,070 for the quarter compared to
$17,445 in the same quarter last year, and year-to-date brokerage revenue is
down 31.6%. This decrease is due to the fact that one large sale contributed the
majority of brokerage revenue in the second quarter of 2007, and no similar
transaction was completed in Q2 of 2008. 


Amortization for the third quarter of 2008 is $3.0 million, compared to $2.0
million for the same quarter in 2007. This 50% increase is due to an increase to
both the size and cost of the data library from the prior year.


Despite an increase in the net debt outstanding, interest, accretion on
long-term debt and deferred financing costs has decreased from $784,004 in Q3
2007 to $778,213 in Q3 2008, and from $2,369,841 year-to-date 2007 to $2,214,754
year-to-date 2008. This is as a result of the extension of the maturity date
providing a longer period over which to accrete the debentures and deferred
financing costs, a reduction in the "ticking fee" paid on funds available but
not yet drawn, a change in Canada Revenue Agency policy removing the requirement
to withhold income tax on interest paid to non-residents effective January 1,
2008 and the fact that $3.0 million of the additional debt was drawn on
September 30, 2008. The total long-term debt has increased by $8 million since
December 31, 2007, proceeds of which were used to pay for data purchase and
creation opportunities committed to in 2007. Interest on the convertible
debenture is 9.5 per cent plus all applicable withholding taxes, payable
semi-annually at February 15 and August 15. The debentures have no early
repayment option and are convertible at the option of the debenture holder only,
at any time up to maturity on February 16, 2010.


General and administrative expenses for third quarter of 2008 are $540,728
reflecting a 16.6% reduction from $648,306 incurred in Q3 2007, and a 12.7%
reduction year-to-date, as a result of management's focus on cost efficiencies.
Commission rates vary depending on whether the source of the referral is
external brokers or internal sales staff and whether the related revenue is
license sales or data acquisition revenue. Commissions on data acquisition
revenue are incurred at time that the acquisition project is committed; hence
commission expense on acquisition revenue is generally incurred in advance of
the revenue recognition. Q3 2008 commissions are reduced from Q3 2007 by 9.2%
and 2008 year-to-date commissions are reduced by 38% from 2007, due to the
reduction in 2008 license sales revenue and the 2007 accrual of commissions on
acquisition revenue recognised in the first half of 2008. Consulting and
professional fees are 28.6% lower than Q3 of 2007 and 43.3% lower for the nine
months ended September 30, 2008 compared to the same period in 2007 due to
management focus on reducing discretionary spending and the ongoing experience
of VGS staff allowing more analysis and review to be completed ""in-house".
During Q3 2008, the President and Chief Executive Officer resigned and the Chief
Operating Officer and Vice-President of Operations departed from the Company.
Related severance costs net of stock based compensation and bonus provision
recoveries amounted to $280,677 and are considered to be non-recurring. A
Director with considerable experience in the industry served as interim
President and CEO until the new President and CEO assumed his duties on October
20, 2008. The duties of the Chief Operating Officer and Vice-President of
Operations were assumed by other members of senior management.


Non-GAAP Measures

The terms working capital, EBITDA, and cash EBITDA are not measures that have
any standardized meaning prescribed by Canadian GAAP and are considered non-GAAP
measures. Therefore, these measures may not be comparable to similar measures
presented by other issuers. Accordingly, these measures have been described and
presented in this press release to provide shareholders and potential investors
with additional information regarding the Company's financial position, results,
liquidity, and its ability to generate future cash flows.


These non-GAAP measures are calculated as follows: working capital is defined as
current assets less current liabilities; EBITDA is used to describe earnings
before any deduction for interest, taxes, depreciation and amortization; and
cash EBITDA is defined as EBITDA less data acquisition revenue and non-monetary
exchange (NME) revenue. NME revenue is generated when license to data owned by
the Company is granted in exchange for delivery of title to data owned by the
customer, and no cash changes hands.


Cash EBITDA is an important metric for VGS because in some periods, there can be
large portions of acquisitions and NME revenue, which are non-cash. Cash EBITDA
is an accurate measure of cash license sales against cash operating costs. 




Balance Sheets (Unaudited) (See note 1 - Going concern)


                                                       As at          As at
                                                September 30,   December 31,
                                                        2008           2007
                                                           $              $
Assets

Current assets
Cash and cash equivalents                          1,883,475          8,946
Accounts receivable                                1,937,389      6,568,093
Prepaid expenses and deposits                         41,888         64,094
                                               -----------------------------
                                                   3,862,752      6,641,133
Seismic data libraries                            39,852,411     39,145,800

Property and equipment                             1,861,767      1,927,507
                                               -----------------------------
                                                  45,576,930     47,714,440
                                               -----------------------------
                                               -----------------------------

Liabilities

Current liabilities
Bank indebtedness                                  1,036,584      1,024,218
Accounts payable and accrued liabilities           4,271,871      5,249,524
GST payable                                           22,458        367,006
Deferred revenue                                           -      2,230,303
Income taxes payable                                     909         62,250
                                               -----------------------------
                                                   5,331,822      8,933,301
Convertible debentures                            15,099,083      7,560,266
                                               -----------------------------
                                                  20,430,905     16,493,567
                                               -----------------------------
Shareholders' Equity

Share capital                                     20,276,468     20,276,468

Contributed surplus                                  356,334        330,035

Warrants                                             692,427        692,088

Equity portion of convertible debentures           5,258,159      3,618,203

Retained earnings (deficit)                       (1,437,363)     6,304,079
                                               -----------------------------

                                                  24,146,025     31,220,873
                                               -----------------------------

                                                  45,576,930     47,714,440
                                               -----------------------------
                                               -----------------------------

Statements of Operations, Comprehensive Loss and Retained Earnings (deficit)
for the periods ended September 30 (Unaudited) (See note 1 - Going concern)

                             Three months ended           Nine months ended
                                   September 30,               September 30,

                             2008          2007          2008          2007
                                $             $             $             $
Revenue                 1,643,264       798,892     9,356,217     6,951,247
                       -----------------------------------------------------
Expenses
Interest on short-term
 debt                      23,651        81,794        40,300       107,766
General and
 administrative           540,728       648,306     1,834,703     2,100,981
Sales commissions         113,623       125,222       294,633       474,489
Consulting and
 professional fees        138,944       194,723       339,180       598,291
Stock-based
 compensation              (1,276)       19,125        36,883        43,545
Advertising and
 promotion                 16,221        38,337        60,486        76,395
Restructuring costs       280,677             -       280,677             -
                       -----------------------------------------------------

                        1,112,568     1,107,507     2,886,862     3,401,467
                       -----------------------------------------------------

                          530,696      (308,615)    6,469,355     3,549,780

Amortization            3,011,831     2,008,970    11,995,134     5,903,517
                       -----------------------------------------------------

                       (2,481,135)   (2,317,585)   (5,525,779)   (2,353,737)

Interest on long-term
 debt                     348,402       352,595     1,035,981     1,127,985
Accretion of
 convertible
 debentures               375,927       331,338     1,017,122       941,647
Accretion of deferred
 financing costs           53,884       100,071       161,651       300,209
                       -----------------------------------------------------

Loss before income
 taxes                 (3,259,348)   (3,101,589)   (7,740,533)   (4,723,578)

Current income taxes          909       258,609           909       258,609
                       -----------------------------------------------------

Loss and comprehensive
 loss for the period   (3,260,257)   (3,360,198)   (7,741,442)   (4,982,187)

Retained earnings -
 Beginning of period    1,822,894     4,133,324     6,304,079     5,755,313
                       -----------------------------------------------------
Retained earnings
 (deficit) - End of
 period                (1,437,363)      773,126    (1,437,363)      773,126
                       -----------------------------------------------------
                       -----------------------------------------------------

Loss per share
Basic and diluted           (0.11)        (0.11)        (0.25)        (0.16)


Statements of Cash Flows for the periods ended September 30 (Unaudited)
(See note 1 - Going concern)


                             Three months ended           Nine months ended
                                   September 30,               September 30,
                         ---------------------------------------------------
                             2008          2007          2008          2007
                                $             $             $             $
Cash provided by (used
 in)

Operating activities
Loss and comprehensive
 loss for the period   (3,260,257)   (3,360,198)   (7,741,442)   (4,982,187)
Items not affecting
 cash
 Amortization of
  seismic database
  libraries             2,981,510     1,975,994    11,902,182     5,802,408
 Amortization of
  property and
  equipment                30,321        32,976        92,952       101,109
 Accretion of deferred
  financing costs          53,884       100,071       161,651       300,209
 Stock-based
  compensation             (1,276)       19,125        36,883        43,545
 Stock-based
  compensation recovered
  in restructuring        (10,245)            -       (10,245)            -
 Accretion of
  convertible debentures  375,927       331,338     1,017,122       941,647
                         ---------------------------------------------------
                          169,864      (900,694)    5,459,103     2,206,731

Net change in non-cash
 working capital items
 Accounts receivable      476,981     1,105,154     4,630,705     1,315,444
 Due from related party         -             -             -        40,000
 GST payable              (34,771)      (10,590)     (344,548)      168,430
 Prepaid expenses and
  deposits                 35,431        18,059        22,206       (21,793)
 Accounts payable and
  accrued liabilities  (1,395,331)     (708,243)     (977,653)      637,404
 Income tax payable           909        87,422       (61,342)       50,422
 Deferred revenue         (81,873)      (14,683)   (2,230,303)    4,067,147
                       -----------------------------------------------------
                         (828,790)     (423,575)    6,498,168     8,463,785
                       -----------------------------------------------------

Financing activities
Change in short-term
 financing                      -             -             -     3,000,000
Bank indebtedness         103,690       959,612        12,367     1,047,407
Repayment of office
 condominium mortgage           -             -             -      (300,229)
Issue of convertible
 debentures             3,000,000             -     8,000,000             -
                       -----------------------------------------------------

                        3,103,690       959,612     8,012,367     3,747,178

Investing activities
Purchase of property
 and equipment            (11,996)       (3,905)      (27,213)      (33,780)
Additions to seismic
 data libraries          (379,529)     (176,119)  (12,608,793)  (12,710,385)
Change in non-cash
 working capital                -      (363,488)            -         1,877
                       -----------------------------------------------------

                         (391,525)     (543,512)  (12,636,006)  (12,742,288)
                       -----------------------------------------------------

Increase (decrease) in
 cash and cash
 equivalents            1,883,375        (7,475)    1,874,529      (531,325)

Cash and cash
 equivalents -
 Beginning
 of period                    100        16,984         8,946       540,834
Cash and cash
 equivalents - End of
 period                 1,883,475         9,509     1,883,475         9,509
                       -----------------------------------------------------
                       -----------------------------------------------------

Cash paid for
Interest                  971,439       646,936     1,631,116     1,456,766
Taxes paid                      -       171,187        60,565       208,187
Seismic license sold
 in exchange for data
 ownership                 81,873             -       831,873             -



Note to Financial Statements

September 30, 2008

1. Going concern

These financial statements have been prepared on a going concern basis which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. The commitment by the lender to provide additional
debenture financing terminated on September 30, 2008 and accordingly the
Company's ability to continue as a going concern is dependent upon its ability
to generate cash from data license sales and/or raise additional debt or equity
financing. No assurance can be given at this time as to whether the Company will
achieve these objectives. There is therefore a risk regarding the Company's
ability to continue as a going concern and the appropriateness of the use of
generally accepted accounting principles applicable to a going concern. These
financial statements do not reflect adjustments related to the recoverability
and classification of recorded asset amounts or the amounts and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern. These adjustments may be material.


Outlook

Accessing existing seismic data is a means for exploration and production
companies to mitigate the risk of drilling unsuccessful wells. Therefore, as
long as it is economical for companies to explore for oil and gas, VGS expects
there will be a market for seismic data. The Company does acknowledge that lower
commodity prices typically lead to explorers and producers having less capital
to spend on the products provided by VGS. The first quarter of 2008 was a
difficult one for VGS, as license sale revenues were well below expectations,
and while sales improved in the second and third quarters, the year-to-date
results are not generating sufficient funds for VGS to grow its data library. It
is the Company's desire to continue to grow the seismic library by creating new
data and purchasing pre-existing data in areas where license sales are expected
to be strong. Until VGS can generate sufficient cash flow internally to
participate in more seismic acquisition projects, it is management's intent to
attempt to grow the database by leveraging off the data the Company currently
owns. As always, the availability of external capital at acceptable terms, in
conjunction with the Company's ability to generate cash flow internally, will be
the most important factors in determining the rate at which VGS will add to its
library.


Forward-Looking Information

Certain information contained in this press release, including information and
statements which may contain words such as "could", "plans", "should",
"anticipates", "expects", "believes", "will", "forecasts", "budget", "projects",
"estimates", "potential" and similar expressions and statements relating to
matters that are not historical facts are forward-looking information including,
but not limited to, information related to future: seismic surveys, data sales,
revenue, cash-flow, seismic annuity streams, expenditures, drilling activity
levels, oil and gas prices and demand, expansion and other development trends of
the oil and gas industry; business strategy, expansion and growth of VGS's
business and operations, including VGS's market share and other such matters.
This forward-looking information is based on certain material factors,
assumptions and analyses made by VGS in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results, performance or achievements will
conform with VGS's conclusions, forecasts, projections, expectations and
predictions expressed or implied by the forward-looking information in this
press release is subject to known and unknown risks and uncertainties which
could cause actual results to differ materially from VGS's conclusions,
forecasts, projections, expectations and predictions expressed or implied by the
forward-looking information in this press release, including: fluctuations in
the price and demand for oil and gas; fluctuations in the level of oil and gas
exploration and development activities; fluctuations in the demand for VGS's
services; the ability of VGS to raise capital and to meet its debt service
requirements; the ability of VGS's clients to raise capital for seismic data and
surveys; the ability of VGS to secure participants to conduct seismic surveys;
the existence of competitors;

 technological changes and developments in the oil and gas industry; the effects
of weather conditions on operations and facilities; the seasonal impact on
conducting seismic surveys; the ability of VGS to participate financially in
large seismic surveys due to increases in costs of conducting such seismic
surveys; the ability of VGS to protect its proprietary rights to the seismic
data; the existence of operating risks inherent in VGS's services; the lack of
availability of qualified personnel or management; VGS's dependence on qualified
seismic acquisition contractors to conduct seismic surveys; general economic,
market or business conditions, including stock market volatility; changes in
laws or regulations, including taxation and environmental regulations; other
unforeseen conditions which could impact the use of services supplied by VGS and
those risks and uncertainties described in VGS's continuous disclosure filings,
including those referred to in the Management's Discussion and Analysis of VGS
for the most recently completed financial year end, which may be found on SEDAR
at www.sedar.com. If any of the above risks or uncertainties materialize, or if
the material factors, assumptions and analyses applied by VGS are incorrect,
actual results may vary materially from those expected in the forward looking
information in this press release.


Consequently, all of the forward-looking information contained in this press
release is qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by VGS, as
expressed or implied by the forward-looking information, will be realized or,
even if substantially realized, that actual results or developments will have
the expected consequences to, or effects on, VGS or its business operations.
Except as required by law, VGS assumes no obligation to update publicly any such
forward-looking information, whether as a result of new information, future
events or otherwise. Readers should not place undue reliance on forward-looking
information.


Based in Calgary, Alberta, VGS Seismic Canada Inc. identifies, creates and
markets digital seismic data for licensing to oil and natural gas exploration
companies. To date, the Corporation's growing data library is concentrated in
British Columbia, Southern Alberta and Eastern Saskatchewan. VGS shares trade on
the TSX Venture Exchange under the symbol VGS.