Kelso Technologies Inc. (“Kelso” or the “Company”), (TSX:
KLS), (NYSE American: KIQ) reports that it has released its
unaudited consolidated interim financial statements and Management
Discussion and Analysis for the three months ended March 31,
2020.
The unaudited consolidated interim 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 |
|
2020 |
|
|
2019 |
|
|
|
Revenues |
$ |
5,643,428 |
|
$ |
5,674,288 |
|
|
|
Gross profit |
$ |
2,602,326 |
|
$ |
2,744,935 |
|
|
|
Gross profit margin |
|
46% |
|
|
48% |
|
|
|
EBITDA |
$ |
1,404,488 |
|
$ |
1,537,704 |
|
|
|
EBITDA margin |
|
25% |
|
|
27% |
|
|
|
Non-cash expenses |
$ |
121,193 |
|
$ |
44,746 |
|
|
|
Taxes |
$ |
- |
|
$ |
402,054 |
|
|
|
Net income |
$ |
1,283,295 |
|
$ |
1,090,904 |
|
|
|
Basic earnings per share |
$ |
0.03 |
|
$ |
0.02 |
|
|
LIQUIDITY AND CAPITAL
RESOURCES
At March 31, 2020 the Company had cash on
deposit in the amount of $4,576,643, accounts receivable of
$2,901,000, prepaid expenses of $178,081 and inventory of
$4,289,112 compared to cash on deposit in the amount of $4,418,236,
accounts receivable of $1,824,563, prepaid expenses of $96,627 and
inventory of $3,394,192 at December 31, 2019.
The working capital position of the Company at
March 31, 2020 was $9,038,198 compared to $7,937,873 at December
31, 2019. The majority of accounts receivable are collected
within 30 days from invoicing shipments giving Kelso $2,901,000 of
additional cash flow plus $4,576,643 of available cash to discharge
accounts payable and accrued liabilities of $2,906,638 on a timely
basis subsequent to March 31, 2020. Income taxes payable in
the amount of $71,341 are due mid 2020.
Net assets of the Company improved to
$13,158,570 at March 31, 2020 compared to $11,845,275 at December
31, 2019. The Company had no interest-bearing long-term
liabilities or debt at March 31, 2020.
OUTLOOK
The results for the first quarter of 2020
demonstrated good sales results and earnings consistent with the
prior year. Business results in the first quarter occurred
before the COVID-19 pandemic became an unforeseen crisis to be
managed.
While certain government authorities in North
America have ordered the closure or minimization of all
non-essential business operations in regions where they operate,
Kelso falls within the exemptions for businesses that provide
essential products and workforces that carry out critical
manufacturing. Kelso therefore plans to continue operations
at its valve assembly facility in Bonham, Texas while being mindful
of the potential negative impacts of COVID-19 in terms of decreased
rail business activities and potential supply chain
interruptions.
The Company continues to be committed to the
health, welfare and safety of our employees, business partners and
communities where we operate. We are applying comprehensive
and rigorous hygiene policies and employee temperature monitoring
practices to ensure our personnel remain risk free. Travel is
restricted and our people that can work from home do so.
Management will maintain full adherence to all measures put in
place by applicable government authorities.
The Company’s working capital remained at a
healthy level of $9,038,198 at March 31, 2020. We have no
interest-bearing long term debt to service and we currently operate
without the need for new equity capital or credit facilities.
Our capital management allows us to finance operations and R&D
from our existing capital reserves and sales of our products.
With respect to our rail tank car product
development, long AAR approval processes continue to impede our
ability to improve sales with additional rail tank car
equipment. The Company has applications in process with the
AAR for our new ceramic ball bottom outlet valve, pressure car
pressure relief valve, ball valve, manway cover and angle valve
although final AAR approval processes take considerable time to
complete. These new products have been derived through
co-engineering support and testing support from our key customers
which may strengthen the probability of longer term adoption by the
rail industry.
Our non-rail product development initiatives
concentrate on a wider range of transportation technology products
that are designed to provide unique economic benefits and safe
operational advantages to commercial customers. Our goal is
to spread our business risk to diminish the severe negative impacts
of the historic down cycles in the rail industry.
The technology challenges regarding the safety
and access capabilities of emergency responders fighting wilderness
fires motivated Kelso to begin the development of a unique
wilderness vehicle suspension system. This innovative
equipment provides new rapid response “road-to-no-road and back”
capabilities regardless of weather, climate or the severity of the
terrain. Known as the KXI™ Suspension System (KXI) it is
based on thirty years of active wilderness research and
experience.
KXI is in the final design stages and moving
toward revenue generation. The Company is scheduled to
complete the conversion of two vehicles with the production
prototype KXI to prepare the final “blueprint” for the first
commercial offerings to the marketplace. The Company will
then move into “pilot” production operations where we will convert
and sell or lease 24 KXI equipped vehicles. We will then
scale our production capacity based on projected sales. These
potential markets for KXI are multi-million dollar revenue
opportunities for Kelso to pursue.
Our longer term business prospects remain good
but we are living in very challenging times. No one will be
unaffected by the uncertainties surrounding the COVID-19
economy. There will certainly be diminishment of our
financial performance during 2020 due to the pandemic although the
depth and length of the downturn remains uncertain. We have
evaluated the impact of several downside scenarios and feel that
our debt free financial position, capital reserves, manageable
costs and flexible business model will allow Kelso to maintain its
positive stature and exit the COVID-19 crisis with a strong
financial foundation.
About Kelso Technologies
Kelso is a diverse 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 quality rail tank car valve
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.
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) and
write off of assets. 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 the COVID-19 pandemic has become an unforeseen
crisis to be managed; that Kelso plans to continue operations at
its valve assembly facility in Bonham, Texas; that our capital
management allows us to finance operations and R&D from
existing capital reserves and sales of our products without the
need for new equity capital or credit facilities; that new rail
products have been derived through co-engineering support and
testing support from our key customers which may strengthen the
probability of longer term adoption by the rail industry; that
these potential markets for new products are multi-million dollar
revenue opportunities for Kelso to pursue; that we will move into
“pilot” production operations where we will convert and sell or
lease 24 KXI equipped vehicles; that we will scale our
production; that potential markets for KXI are multi-million dollar
revenue opportunities; and that there will certainly be
diminishment of our financial performance during 2020 due to
COVID-19 but with our current debt free financial position, capital
reserves and manageable costs Kelso can maintain its positive
stature and exit the COVID-19 crisis with a strong financial
foundation. 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 that the market for
KXI may not materialize as expected and we may not sell or lease 24
vehicles and may not need to scale production; that 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; our new
products may not receive AAR certification; 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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