Kelso Technologies Inc. (“Kelso” or the “Company”), (TSX:KLS),
(NYSE American:KIQ) reports that it has released its unaudited
interim financial statements and Management Discussion and Analysis
for the three months ended March 31, 2018.
The unaudited interim consolidated 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
|
Three months ended March
31, |
|
|
2018 |
|
|
2017 |
|
Revenues |
$ |
2,511,878 |
|
$ |
1,563,317 |
|
Gross
profit |
$ |
889,229 |
|
$ |
699,934 |
|
Gross
profit margin (after write down of inventories) |
|
35 |
% |
|
45 |
% |
Income tax (recovery) |
$ |
(3,213 |
) |
$ |
- |
|
Net
loss for the quarter |
$ |
(279,143 |
) |
$ |
(525,496 |
) |
EBITDA (Loss) |
$ |
(233,024 |
) |
$ |
(489,799 |
) |
Net loss per share (basic and diluted) |
$ |
(0.01 |
) |
$ |
0.01 |
|
LIQUIDITY AND CAPITAL
RESOURCES
At March 31, 2018 the Company had cash on
deposit in the amount of $503,710, accounts receivable of $873,227,
prepaid expenses of $95,366 and inventory of $3,463,877 compared to
cash on deposit in the amount of $411,223, accounts receivable of
$653,445, prepaid expenses of $183,966 and inventory of $3,980,243
at December 31, 2017.
The working capital position of the Company at
March 31, 2018 was $3,406,617 compared to $3,628,911 at December
31, 2017.
Net assets of the Company were $7,288,590 at
March 31, 2018 compared to $7,565,233 at December 31, 2017.
At March 31, 2018 the Company had no interest bearing long-term
liabilities or debt.
OUTLOOK
After a prolonged recession in the rail tank
industry Kelso is beginning to see an upswing in business activity
in 2018. According to industry sources Canadian crude by rail
exports are likely to grow from 2017 levels of 150,000 barrels per
day to an implied 250,000 barrels per day in 2018 and rising to
approximately 590,000 barrels per day in 2019. There is a lot
of scheduled production capability growing in Alberta and limited
ways to transport it as pipelines are at full capacity.
Political battles over new pipeline construction continue in Canada
and new pipeline transmission capability may be a long way from
utilization. This situation is expected to drive healthier
rail tank car market opportunities for Kelso over the next several
years.
This stimulus in crude oil has rail tank car
analysts expecting average production rates to settle 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 7,000 rail tank cars
annually. A key business dynamic is getting more pieces of
Kelso’s tank car equipment adopted by the hazmat shippers.
Once this adoption trend can be established and customers begin to
specify our PRV with the One-Bolt Manway, VRV or BOV, sales can
range from approximately $1,400 to in excess of $10,000 per tank
car.
Although Kelso has been able to quantify and
demonstrate the effectiveness and economic rewards of our products
there is still a key regulatory challenge to having customers
specify multiple products on each rail tank car. AAR
approvals continue to be a serious barrier for customer confidence
and adoption. The AAR is historically slow to respond to
submitted applications for new products and corresponding completed
service trials. Although customers have expressed their
interest in our technologies they are reluctant to specify and use
products that are under field service trial until full AAR
approvals are received. This is beyond our control and is the
primary challenge for the future growth of our rail tank car
equipment revenues.
In addition to our rail tank car business Kelso
continues to diversify our longer term strategic direction.
The Company continues to make key investments in new products with
the understanding that profits, assuming that they develop as
planned, can provide reliable future financial growth from multiple
transportation markets. The key focus of our product
development strategy is that we develop new products that do not
require lengthy regulatory approval processes, hence the elapsed
time from the design-production process to sales and distribution
activity is expected to be shortened.
This strategic plan has successfully delivered
an array of new products for new target markets that include
specialized truck tanker equipment, rail wheel cleaning systems,
fuel loading systems, military applications, first responder
emergency response kits and ASCS suspension systems for motor
vehicles being used in rugged outback terrain applications.
Most new products not requiring AAR approvals are completed or
nearing completion.
Capital management has been challenging due to
diminished cash flows from poor sales over the past three
years. 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. The recent improvement in sales
performance has allowed the Company to continue operations without
access to additional external capital at this time. The
Company still remains free of long term debt.
Our main goal is to generate revenues from new
marketplaces while continuing to improve sales performance from our
proven rail tank car equipment. The primary focus is to
reduce our risk exposure to future economic downturns in rail tank
car markets decreasing our total dependence on revenues from
specialized rail tank car equipment. Management believes that
through its diversified strategic program the Company can put
itself in a much better position to succeed financially in the
future.
ANNUAL GENERAL MEETING
The annual general meeting of the shareholders
of the Company will be held at the Fairmont Hotel Vancouver,
900 West Georgia Street, Vancouver, B.C. on Thursday, June 7,
2018, at 10:00 a.m. (PDT).
About Kelso Technologies
Kelso is an engineering product development
company that specializes in the development, production and
distribution of proprietary service equipment used in
transportation applications. Our reputation has been earned
as a developer and reliable supplier of unique high performance
rail tank car equipment for the handling and containment of
hazardous and non-hazardous commodities during transport. All
Kelso products are developed with emphasis on economic and
operational advantages to customers while mitigating the impact of
human error and environmental release. The Company offers
specialized truck tanker equipment, rail wheel cleaning systems,
fuel loading systems, military applications, first responder
emergency response kits and 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 after a prolonged recession in the rail tank industry
Kelso is beginning to see an upswing in business activity in 2018;
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 7,000 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 in excess of $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 the key focus of our product development strategy is that we
develop new products that do not require lengthy regulatory
approval processes, hence the elapsed time from the
design-production process to sales and distribution activity is
expected to be shortened; that most new products not requiring AAR
approvals are completed or nearing completion; that the recent
improvement in sales performance has allowed the Company to
continue operations without access to additional external capital
at this time; that management believes that through its diversified
strategic program the Company can put itself in a much better
position to succeed financially in the future. 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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