Kelso Technologies Inc. (“Kelso” or the “Company”), (TSX:KLS),
(NYSE MKT:KIQ) reports that it has released its audited financial
statements and Management Discussion and Analysis for the year
ended December 31, 2017.
The audited year end financial statements were
prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”). All amounts herein are expressed in
United States dollars (the Company’s functional currency) unless
otherwise indicated.
SUMMARY OF FINANCIAL PERFORMANCE
|
Year ended December 31, |
|
|
2017 |
|
|
2016 |
|
Revenues |
$ |
6,062,778 |
|
$ |
8,077,143 |
|
Gross
profit |
$ |
1,018,685 |
|
$ |
1,978,241 |
|
Gross
profit margin (after write down of inventories) |
|
16.8 |
% |
|
24.5 |
% |
Income tax (recovery) |
$ |
(150,296 |
) |
$ |
(989,186 |
) |
Net
loss for the year |
$ |
(5,015,911 |
) |
$ |
(2,465,592 |
) |
EBITDA (Loss) |
$ |
(4,608,683 |
) |
$ |
(3,055,743 |
) |
Net loss per share (basic and diluted) |
$ |
0.11 |
|
$ |
0.05 |
|
|
|
|
|
|
|
|
LIQUIDITY AND CAPITAL
RESOURCES
At December 31, 2017 the Company had cash on
deposit in the amount of $411,223, accounts receivable of $653,445,
prepaid expenses of $183,996 and inventory of $3,980,243 compared
to cash on deposit in the amount of $2,312,279, accounts receivable
of $637,845, prepaid expenses of $708,100, income tax receivable of
$753,223 and inventory of $5,206,129 at December 31, 2016.
The working capital position of the Company at
December 31, 2017 was $3,628,911 compared to $8,511,809 at December
31, 2016.
Net assets of the Company were $7,565,233 at
December 31, 2017 compared to $11,771,944 at December 31,
2016. At December 31, 2017 the Company had no interest
bearing long-term liabilities or debt.
OUTLOOK
Over the past three years our primary revenue
market (hazmat rail tank cars) continued to diminish to its low
point in 2017. This situation has had a heavy impact on our
sales performance and our ability to fund operations and
R&D. Key hazardous commodity businesses such as oil,
ethanol and chemicals that fuel demand for our products remained in
a cut back position which in turn has led to continued low demand
for Kelso’s specialized equipment for rail tank cars.
In North America industry analysts expect
average production rates between 12,000 and 20,000 new rail tank
cars annually for the next three years. Based on these
predictions Kelso expects to participate on approximately 5,000 to
6,000 rail tank cars annually. Depending on the makeup of
customers’ specifications for our PRV, VRV, one-bolt Manway and BOV
(affected by the status of our AAR approvals) sales can range from
$1,400 to $10,000 per tank car.
Long AAR approval processes continue to plague
our ability to improve sales with additional rail tank car
equipment. The Company still actively pursues AAR approvals
for key products including our ceramic ball BOV, pressure car PRV
and angle valve even though the AAR process can take more than two
years to finish. Final AAR approvals will depend on the
administration of our restrictive budgets and the challenges of
strict AAR testing requirements that are time consuming, risky and
contrary to our profit goals.
Management believes our rail tank car products
more than demonstrate they are “best available technology”
products. They are expected to continue to provide meaningful
revenue opportunities for many years to come. However, due to
the extreme cyclical nature of the rail tank car market and the
economic fallout of the current downturn a more diverse strategic
plan was initiated during 2017.
The key to reliable revenue growth in the future
is developing new products that can service multi-million dollar
marketplaces outside of the rail tank car industry.
Throughout 2017 Kelso reorganized its strategic direction and made
heavy investments in new products with the understanding that
profits, assuming that they develop as planned will provide
reliable financial growth in future periods. Our main
objective is to develop new products that do not require lengthy
regulatory approval processes and the design-production process to
sales and distribution results are expected to be much
quicker.
Product development has delivered an array of
new products for target markets including specialized truck tanker
equipment, rail wheel cleaning systems, fuel loading systems,
military applications, first responder emergency response kits and
automated safety suspension systems for motor vehicles being used
in rugged outback terrain applications that service both commercial
industry and leisure markets. Most products not requiring AAR
approvals are completed or nearing completion. They are
expected to begin generating cash flows in 2018.
Kelso has managed to survive the severe economic
setbacks over the past three years. Capital management has
been challenging due to diminished cash flows from poor
sales. Product development initiatives have been complex,
expensive and the timing of revenue streams has not been
predictable or guaranteed. Although many operational and
human resource expenses have been reduced management must assess
its capital needs carefully. We believe that the rail markets
have bottomed out. Cash flows from sales improved in the
fourth quarter of 2017 and continue to show improved momentum in
the first quarter of 2018.
Going forward our main goal is to dramatically
diminish the impact of economic downturns by decreasing our
dependence on specialized equipment for rail tank cars.
Management believes that through diversification the Company will
put itself in a better position to succeed with a wider range of
products and industries to service.
About Kelso Technologies
Kelso is an engineering product development
company that specializes in the design, production and distribution
of proprietary service equipment used in transportation
applications. Our reputation has been earned as a designer
and reliable supplier of unique high performance rail tank car
equipment that provides for the safe handling and containment of
hazardous and non-hazardous commodities during transport. All
Kelso products are specifically designed to provide economic and
operational advantages to customers while reducing the potential
effects of human error and environmental harm. The Company
offers specialized truck tanker equipment, rail wheel cleaning
systems, fuel loading systems, military applications, first
responder emergency response kits and high performance suspension
systems for motor vehicles being used in rugged outback
terrains.
For a more complete business and financial
profile of the Company, please view the Company's website at
www.kelsotech.com and public documents posted under the Company’s
profile on www.sedar.com in Canada and on EDGAR at www.sec.gov in
the United States.
On behalf of the Board of
Directors,
James R. Bond, CEO and President
Notice to Reader: References to
EBITDA refer to net earnings from continuing operations before
interest, taxes, amortization, unrealized foreign exchange and non
cash share-based expenses (Black Sholes option pricing
model). EBITDA is not an earnings measure recognized by IFRS
and does not have a standardized meaning prescribed by IFRS.
Management believes that EBITDA is an alternative measure in
evaluating the Company's business performance. Readers are
cautioned that EBITDA should not be construed as an alternative to
net income as determined under IFRS; nor as an indicator of
financial performance as determined by IFRS; nor a calculation of
cash flow from operating activities as determined under IFRS; nor
as a measure of liquidity and cash flow under IFRS. The
Company's method of calculating EBITDA may differ from methods used
by other issuers and, accordingly, the Company's EBITDA may not be
comparable to similar measures used by any other issuer.
Legal Notice Regarding Forward-Looking
Statements: This news release contains “forward-looking
statements” within the meaning of applicable securities
legislation. Forward-looking statements are indicated expectations
or intentions. Forward-looking statements in this news release
include that North America industry analysts expect average
production rates between 12,000 and 20,000 new rail tank cars
annually for the next three years; that based on these predictions
Kelso expects to participate on approximately 5,000 to 6,000 rail
tank cars annually; that depending on the makeup of
customers’ specifications for our PRV, VRV, one-bolt manway and BOV
(affected by the status of our AAR approvals) sales can range from
$1,400 to $10,000 per tank car; that long AAR approval processes
continue to plague our ability to improve sales with additional
rail tank car equipment; that final AAR approvals will depend on
the administration of our restrictive budgets and the challenges of
strict AAR testing requirements that are time consuming, risky and
contrary to our profit goals; that our rail tank car products
demonstrate they are “best available technology” products that they
are expected to continue to provide meaningful revenue
opportunities for many years to come; that due to the extreme
cyclical nature of the rail tank car market and the economic
fallout of the current downturn a more diverse strategic plan could
be more successful; that our future objective is to develop new
products that do not require lengthy regulatory approval processes
and the design-production process to sales and distribution results
are expected to be much quicker; that; that our new products not
requiring AAR approvals are completed or nearing completion and are
expected to begin generating cash flows in 2018; that cash flows
from sales improved in the fourth quarter of 2017 and continue to
show improved momentum in the first quarter of 2018 and fund
operations in the near term; and that management believes that
through diversification the Company will put itself in a better
position to succeed financially with a wider range of products and
industries to service. Although Kelso believes its
anticipated future results, performance or achievements expressed
or implied by the forward-looking statements and information are
based upon reasonable assumptions and expectations, they can give
no assurance that such expectations will prove to be correct.
The reader should not place undue reliance on forward-looking
statements and information as such statements and information
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of
Kelso to differ materially from anticipated future results,
performance or achievement expressed or implied by such
forward-looking statements and information, including without
limitation the risk that regulatory deadlines for compliance may be
delayed or cancelled; the Company’s products may not provide the
intended economic or operational advantages; or reduce the
potential effects of human error and environmental harm during the
transport of hazardous materials; or grow and sustain anticipated
revenue streams; PHMSA rules may not be finalized, orders may be
cancelled and competitors may enter the market with new product
offerings which could capture some of our market share; and our new
equipment offerings may not capture market share as well as
expected. Except as required by law, the Company does not
intend to update the forward-looking information and
forward-looking statements contained in this news release.
For further information, please contact:
James R. Bond, CEO and
President |
Richard Lee, Chief
Financial Officer |
Corporate Address: |
Email:
bond@kelsotech.com |
Email:
lee@kelsotech.com |
13966
- 18B AvenueSouth Surrey, BC V4A 8J1www.kelsotech.com |
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