CALGARY, April 30, 2019
/CNW/ - Acceleware® Ltd. ("Acceleware" or the "Company")
(TSX-V: AXE), a leading developer of radio frequency (RF) heating
technology to facilitate cost-effective and
environmentally-friendly extraction of heavy oil and bitumen, as
well as high-performance seismic imaging applications, today
announced its financial and operating results for the three months
and year ended December 31, 2018 (all
figures are in Canadian dollars unless otherwise noted). This news
release should be read in conjunction with the Company's audited
financial statements for the year ended December 31, 2018 and Management's Discussion and
Analysis ("MD&A") thereto, both of which are available on
Acceleware's website at www.acceleware.com or on SEDAR at
www.sedar.com.
Q4 2018 FINANCIAL SUMMARY AND OPERATING HIGHLIGHTS
During the fourth quarter of 2018, revenue increased
dramatically compared to the previous year. This increase is
primarily due to the provision of services under an agreement with
a Canadian affiliate of Advanced Micro Devices, Inc. ("AMD"). Under
the terms of the agreement, Acceleware received US$2.51 million in exchange for custom software
development, human resources and consulting services. During the
fourth quarter, the Company's custom software team transitioned to
become employees of AMD, and Acceleware fulfilled substantially all
of the consulting services that were contemplated under the
agreement. On a segmented basis, revenue in 2018 from the Company's
high-performance computing segment rose 290% to $4,274,877 from $1,095,414 recorded in 2017, largely attributable
to the AMD agreement. The Company's RF heating segment revenue fell
81% in 2018, to $42,484 from
$224,653 in 2017, with the decline
reflecting $250,000 of deferred and
unrecognized revenue in 2018, related to payments associated with
Acceleware's RF XL commercial-scale test project funding agreement
with a major Calgary-based oil
sands producer (the "Producer").
Acceleware's RF heating segment represents a key driver of
future growth, and the Company successfully ramped up investment in
research and development ("R&D") within this segment through
2018. R&D activities included engineering, design, prototyping
and testing work related to the Company's planned commercial-scale
test of its proprietary RF XL technology and the preparation of
additional patent applications.
During Q4 2018, the Company received its first milestone
payments under the recently completed contribution agreements with
Sustainable Development Technology Canada ("SDTC") and Emissions
Reduction Alberta ("ERA"). The agreements will provide a
total of $10 million in non-repayable
grants, and as at December 31, 2018,
the Company had received $1,157,843
from SDTC, and $438,813 from ERA.
This capital infusion enabled Acceleware to accelerate progress of
the commercial-scale pilot project to be completed with Prosper
Petroleum Ltd. at its Rigel property in northeast Alberta.
- Revenue generated in Q4 2018 totaled $3,533,026, 1200% higher than the $271,690 recognized during Q4 2017. The
year-over-year increase is largely driven by revenue from the AMD
agreement. Compared to $263,978
recorded in Q3 2018, revenue decreased 1238% in Q4 2018 as a result
of services revenue that was recognized under the AMD
agreement.
- Higher revenue and the funding from SDTC and ERA contributed to
a significant improvement in operating income and offset strategic
investments in RF heating R&D associated with the
commercial-scale test of RF XL. Operating income was $2,358,164 in Q4 2018 compared to an operating
loss of $794,475 in Q4 2017, and an
operating loss of $1,042,828 in Q3
2018. The R&D expenses incurred in Q4 2018 remain in line with
management's expectations and have positioned the Company to
aggressively advance its commercial-scale test which is expected to
commence heating late 2019.
- Total comprehensive income was $2,437,958 in Q4 2018 compared to a total
comprehensive loss of $745,937 in Q4
2017 and a loss of $1,051,292 in Q3
2018.
- Working capital improved as a result of the AMD agreement and
the SDTC and ERA funding. Working capital at December 31, 2018 was $2,051,577 compared to working capital of
$403,501 at December 31, 2017. The increase in working
capital reflects higher cash and cash equivalents of $3,225,126 compared to $781,315 at December 31,
2017. Acceleware's working capital and cash balance
indicates that the Company is financially well-positioned to
execute its commercial-scale test and continue to advance its
strategy.
YEAR ENDED DECEMBER 31, 2018
FINANCIAL SUMMARY
Acceleware's strong Q4 2018 results translate into significant
improvements in revenue and income for the year ended December 31, 2018 relative to the year ended
December 31, 2017.
- During the year ended December 31,
2018, the Company reported total revenue of $4,317,361, representing a 250% increase compared
to $1,320,067 for the year ended
December 31, 2017. The increase is a
direct result of work completed under the agreement with AMD.
Revenue recorded in 2018 would have been $1,040,513 absent the revenue associated with the
AMD agreement.
- Operating loss improved dramatically in 2018 to $164,186 compared to an operating loss of
$2,624,421 in 2017. The improvement
is a result of increased revenue and a modest increase in R&D
expense net of government funding.
- Total comprehensive loss for the year ended December 31, 2018 was $98,622, a significant increase over a total
comprehensive loss of $2,749,731 for
the year ended December 31,
2017.
RF HEATING BUSINESS SEGMENT
RF XL is Acceleware's patented and patent-pending RF heating
technology, designed to improve the extraction of heavy oil and
bitumen, and has the potential to save billions of dollars in oil
sands production costs. When applied, the technology is designed to
reduce both capital and operating costs, while offering significant
environmental benefits, including immediate greenhouse gas ("GHG")
emission reductions, a substantial decrease in land use, the
elimination of external water or solvent needs and no requirement
for tailings ponds. As an electrically-driven process,
Acceleware also believes that RF XL technology can provide a clear
pathway to zero-GHG production of heavy oil and oil sands and
provide optimal alignment with government goals to recognize
innovation as part of the solution in the Canada's overall emission reduction plans.
During the fourth quarter of 2018, the Company continued to
invest in RF heating R&D. Activities included engineering,
design, prototyping and testing work related to the Company's
planned commercial-scale test of RF XL, and the preparation of
additional patent applications. Acceleware is pleased with its
progress to date in 2018, and as a result of the milestones
realized, has successfully achieved the following:
- Completed phase one factory acceptance testing of one module of
a proprietary prototype RF generator with partner GE;
- Substantially completed design concepts for the drilling and
completion of the RF XL and production wells with the assistance of
Codeco-Vanoco Engineering Inc., and completed front-end engineering
design of surface facilities with partner Scovan Engineering;
- Started receiving milestone payments from both SDTC and ERA,
which will provide a total of $10
million in non-repayable grants, that can be applied to the
cost of the commercial-scale pilot with Prosper Petroleum Ltd. at
its Rigel property in northeast Alberta; and
- Received initial milestone payments from the Producer for the
commercial-scale RF XL pilot test. The Producer will provide
funding of up to $2 million toward
the RF XL pilot under the terms a project funding agreement with
Acceleware.
Loss from operations attributed to the RF heating segment in Q4
2018 increased 29% to $886,424
compared to $690,330 in Q4 2017, due
to the significant increase in G&A expenses including salaries
and legal fees. Operating loss for RF heating fell 8% in Q4 2018
compared to the loss of $1,013,330
recorded in Q3 2018 attributable to the higher R&D government
funding.
HIGH-PERFORMANCE COMPUTING BUSINESS SEGMENT
Acceleware's high-performance computing Business Segment helps
customers meet their oil and gas exploration needs with seismic
imaging software that provides the most accurate and advanced
imaging available for oil exploration in complex geological zones
and formations. This segment also includes electro-magnetic (EM)
simulation software. During the fourth quarter of 2018, the Company
discontinued software development services including porting,
acceleration assessments and mentoring that do not directly support
its seismic imaging and EM software products.
During the fourth quarter of 2018, the segment's revenue was
dominated by proceeds from the AMD agreement.
- Recognized high-performance computing revenue of $3,490,542, which was 1204% higher than the
$267,737 recognized during Q4 2017
due to revenue from the AMD agreement. Compared to the $263,978 recognized in the previous quarter,
high-performance computing revenue was 1222% higher.
- Operating income attributed to high-performance computing in Q4
2018 was $3,244,588, compared to a
loss of $108,097 in Q4 2017 due to
higher revenue and lower expenses, particularly R&D and cost of
revenue expenses. High-performance computing operating income also
increased substantially in Q4 2018 compared to the operating loss
of $29,498 recorded in Q3 2018.
OUTLOOK
In 2019, the Company will focus on pursuing revenue streams that
offer the highest margins, which includes seismic imaging and EM
software, as well as RF heating consulting services. As the Company
continues to develop its RF heating technology, new R&D
investments will be financed through a combination of internal cash
flow generated through the software business, existing funds and
external financing as may be required. Acceleware estimates the
cost to complete its RF XL commercial-scale pilot will range
between $16 and $20 million. With the $10
million of non-repayable funding from SDTC and ERA, the
Producer's $2 million in funding, and
the funds received from the AMD agreement, Acceleware has
successfully raised a total of over $15
million in non-dilutive capital financing. This non-dilutive
financing, combined with over $1
million in equity capital raised in 2018, afford the Company
a strong financial position to further advance the pilot.
ABOUT ACCELEWARE:
Acceleware (www.acceleware.com) is an innovator of clean-tech
oil and gas technologies comprised of two business units: Radio
Frequency (RF) Enhanced Oil Recovery and Seismic Imaging
Software.
Acceleware is developing RF XL and Modular RF, its patented and
patent-pending low-cost, low-carbon production technologies for
heavy oil and oil sands that are materially different from any
heavy oil recovery technique used today. They will use no water,
require no solvent, have a small physical footprint, can be
redeployed from site to site, and can be adapted to a multitude of
reservoir types, while expected to greatly reduce and eventually
eliminate production greenhouse gas emissions (GHGs). In shallow
oil sands implementations, no tailings ponds will be required.
Our seismic imaging software solutions are state of the art for
high fidelity imaging, providing the most accurate and advanced
imaging available for oil exploration in complex geologies.
Acceleware is a public company on Canada's TSX Venture Exchange under the
trading symbol "AXE".
NOTE REGARDING FORWARD-LOOKING INFORMATION AND OTHER
ADVISORIES
This news release contains
"forward-looking information" within the meaning of Canadian
securities legislation. Forward-looking information generally means
information about an issuer's business, capital, or operations that
are prospective in nature, and includes disclosure about the
issuer's prospective financial performance or financial
position.
The forward-looking information in this press release can be
identified by terms such as "believes", "estimates", "plans",
"potential", and "will", and includes information about
Acceleware's plans to focus on revenue streams that offer the
highest margins, the anticipated costs of the commercial-scale test
of RF XL, Acceleware's strategy to finance the RF XL technology,
and the anticipated benefits of the RF XL technology. Acceleware
assumes that the current timeline for the RF XL pilot is
achievable, that research and development effort including the
commercial-scale test plans will result in commercial-ready
products, and that future capital raising efforts will be
successful.
Actual results may vary from the forward-looking information
in this press release due to certain material
risk factors. These risk factors are described in detail in
Acceleware's continuous disclosure documents, which are filed on
SEDAR at www.sedar.com.
Acceleware assumes no obligation to update or revise the
forward-looking information in this press release,
unless it is required to do so under Canadian securities
legislation.
This news release does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities described in
this release in the United States.
The securities have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S.
Securities Act"), or any state securities laws and may not be
offered or sold within the United
States or to U.S. persons unless registered under the U.S.
Securities Act and applicable state securities laws or an exemption
from such registration is available.
DISCLAIMER
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE Acceleware Ltd.