Kelso Technologies Inc. (“Kelso” or the “Company”), (TSX: KLS),
(NYSE American: KIQ) reports that it has released its unaudited
interim consolidated financial statements and Management Discussion
and Analysis for the three and six months ended June 30, 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 June 30, |
Six months ended June 30, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Revenues |
$ |
2,535,235 |
|
$ |
1,433,663 |
|
$ |
5,047,113 |
|
$ |
2,996,980 |
|
Gross
profit |
$ |
1,038,455 |
|
$ |
325,821 |
|
$ |
1,927,684 |
|
$ |
1,025,755 |
|
Income tax expense (recovery) |
$ |
- |
|
$ |
17,856 |
|
$ |
(3,213 |
) |
$ |
17,856 |
|
Net
income (Loss) |
$ |
(162,911 |
) |
$ |
(897,513 |
) |
$ |
(442,054 |
) |
$ |
(1,423,009 |
) |
EBITDA (Loss) |
$ |
(88,334 |
) |
$ |
(830,291 |
) |
$ |
(321,386 |
) |
$ |
(1,320,090 |
) |
EPS
(basic and diluted) |
$ |
(0.00 |
) |
$ |
(0.02 |
) |
$ |
(0.01 |
) |
$ |
(0.03 |
) |
LIQUIDITY AND CAPITAL
RESOURCES
At June 30, 2018 the Company had cash on deposit
in the amount of $107,529, accounts receivable of $1,237,178,
prepaid expenses of $92,951 and inventory of $3,629,901 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
June 30, 2018 was $3,318.212 compared to $3,628,911 at December 31,
2017. Accounts receivable are collected within 30 days from
invoicing shipments giving Kelso $1,344,707 of available cash to
discharge liabilities of $1,040,061 recorded at June 30, 2018.
Net assets of the Company were $7,145,836 at
June 30, 2018 compared to $7,565,233 at December 31, 2017. At June
30, 2018 the Company had no interest bearing long-term liabilities
or debt.
OUTLOOK
Kelso has seen a consistent upside shift in rail
tank car production, retrofit and repair activity throughout 2018.
Since early 2017 we have implemented new business processes,
changed our corporate culture and revamped how we approach our
marketing and sales processes. The result is that sales growth and
business momentum is building. Management is encouraged that sales
and backlog purchase orders since June 30, 2018 have grown to
exceed $5,100,000 at the date of this report.
OEM and retrofit/repair activity that was
expected in 2015 before the collapse of oil prices is now occurring
in 2018. Crude oil, ethanol and chemicals are the key commodities
that are leading the way in this resurgence of market activity.
This stimulus has led rail tank car analysts to expect average
new-build production rates to grow to approximately 12,000 to
20,000 new rail tank cars annually for the next three years. Based
on these predictions Kelso expects to participate on approximately
6,000 to 8,000 rail tank cars annually.
A key dynamic for improved financial performance
is getting more of our tank car equipment portfolio adopted by the
hazardous materials shippers. Once this adoption trend can be
established we expect customers to begin to specify combinations of
our One-Bolt Manway, VRV and BOV along with our proven PRV. Our
long term goal is to improve tank car revenues from approximately
$1,400 per new or refitted tank car to in excess of $10,000 per
tank car.
The frustrating challenge for sales growth is
that full Association of American Railroads (AAR) regulatory
approvals are required for full commercial adoption. The AAR is
historically slow to respond to submitted applications for new
products and corresponding completed service trials. Although
customers have expressed considerable interest in our equipment
they maintain that they are either unable or reluctant to specify
any 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 near-term growth of our rail tank car
equipment revenues.
Currently we are awaiting final AAR approval for
our VRV which is in the final stages of full approval. Once
received, sales of VRV are expected to commence. There is no AAR
requirement for any company to service trial new technology, which
means we have to source volunteer companies to participate in
service trial programs. Kelso has successfully found these
technology partners and full service trials on our ceramic ball
BOV, high pressure PRV and angle valve are in process. This is a
clear indication that these products will be in demand once
approvals are completed.
The Company will continue to make 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 want to develop new
products that customers want and preferably do not require lengthy
regulatory approval processes. The goal is to shorten the elapsed
time from the design-production process to sales and distribution
activity, which goal is expected to be achieved.
This R&D process has delivered an array of
promising new products that include specialized truck tanker
equipment, rail wheel cleaning systems, fuel loading systems,
military applications, first responder emergency response kits and
an ASCS suspension system for motor vehicles being used in rugged
outback terrain applications.
Capital management remains challenging but
recent improvements in cash flows in 2018 have been adequate to
fund business activity. We continue to prioritize promising product
development initiatives to build future value propositions for
Kelso’s stakeholders, even though R&D projects are often
complex, expensive and the timing of revenue streams cannot be
predicted or guaranteed. Although many operational and human
resource expenses have been reduced, management must assess its
capital needs carefully. Management believes that for the time
being, the Company can continue operating without access to new
equity capital or debt. The Company remains free of interest
bearing long term debt.
The current improvement in the rail tank car
market and our diversified product program sets the Company in a
much better position to succeed financially over the longer term.
Paramount to our strategic plan is the eventual satisfaction of all
Kelso stakeholders with reliable growth of profitability, improved
financial health and market valuation.
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 Kelso has seen a consistent upside shift in rail tank
car production, retrofit and repair activity throughout 2018; that
management is encouraged that in addition to our year-to-date
revenues new sales and backlog purchase orders since June 30, 2018
have grown to exceed $5,100,000 at the date of this report; that
OEM and retrofit/repair activity has led rail tank car analysts to
expect average new-build production rates to grow to approximately
12,000 to 20,000 new rail tank cars annually for the next three
years; that based on these predictions Kelso expects to participate
on approximately 6,000 to 8,000 rail tank cars annually; that we
expect customers to begin to specify combinations of our One-Bolt
Manway, VRV and BOV along with our proven PRV; that our long term
goal is to improve tank car revenues from approximately $1,400 per
tank car to in excess of $10,000 per tank car; that we are awaiting
final AAR approval for our VRV which is in the final stages of full
approval and once received sales of VRV are expected to commence;
that we expect to shorten the elapsed time from the
design-production process to sales and distribution activity; that
full service trials on our ceramic ball BOV, high pressure PRV and
angle valve may be a clear indication that these products will be
in demand once approvals are completed; that the Company can
continue operating without access to new equity capital or debt;
and the current improvement in the rail tank car market and our
diversified product program sets the Company in a much better
position to succeed financially over the longer term. 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; AAR approvals 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 PresidentEmail:
bond@kelsotech.com |
Richard Lee, Chief Financial OfficerEmail:
lee@kelsotech.com |
Corporate Address:13966 - 18B AvenueSouth Surrey, BC V4A
8J1www.kelsotech.com |
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