Kelso Technologies Inc. (“Kelso” or the “Company”), (TSX: KLS),
(NYSE American: KIQ) reports that the Company has released the
unaudited interim consolidated financial statements and Management
Discussion and Analysis for the three and six months ended June 30,
2020.
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, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
2019 |
Revenues |
$ |
2,524,538 |
|
$ |
3,977,170 |
|
$ |
8,167,966 |
$ |
9,651,459 |
Gross profit |
$ |
1,095,680 |
|
$ |
1,708,129 |
|
$ |
3,698,006 |
$ |
4,453,064 |
Income tax expense (recovery) |
$ |
140,659 |
|
$ |
(26,421 |
) |
$ |
140,659 |
$ |
375,633 |
Net income (Loss) |
$ |
(254,428 |
) |
$ |
240,887 |
|
$ |
1,028,867 |
$ |
1,331,791 |
EBITDA |
$ |
35,441 |
|
$ |
367,282 |
|
$ |
1,439,928 |
$ |
1,904,986 |
EPS (loss)- basic and diluted |
$ |
(0.01 |
) |
$ |
0.01 |
|
$ |
0.02 |
$ |
0.03 |
LIQUIDITY AND CAPITAL
RESOURCES
At June 30, 2020 the Company had cash on deposit
in the amount of $3,374,304, accounts receivable of $1,401,036,
prepaid expenses of $327,937 and inventory of $5,030,404 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 Company has accrued income tax payable of
$213,209 at June 30, 2020 compared to an income tax payable of
$71,341 at December 31, 2019.
The working capital position of the Company at
June 30, 2020 was $8,706,347 compared to $7,937,873 at December 31,
2019. The majority of accounts receivable are collected within 30
days from invoicing shipments giving Kelso $1,401,036 of additional
cash flow plus $3,374,304 of available cash to discharge accounts
payable and accrued liabilities of $1,427,334 on a timely basis
subsequent to June 30, 2020. Income taxes payable in the amount of
$213,209 are due mid 2021.
Net assets of the Company improved to
$12,904,142 at June 30, 2020 compared to $11,845,275 at December
31, 2019. The Company has no interest-bearing long-term liabilities
or debt at June 30, 2020.
OUTLOOK
The COVID-19 pandemic has been a powerful
economic setback that is reshaping the dynamics of the rail tank
car industry. The Company’s results for the first six months of
2020 maintained profitable levels but declines in the second
quarter define the potential unpredictable uncertainties
surrounding the effects of COVID-19 that must be managed
carefully.
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 the
Company’s valve assembly facility in Bonham, Texas.
The Company continues to be committed to the
health, welfare and safety of the Company’s employees, business
partners and communities where the Company operates. The Company is
applying comprehensive and rigorous hygiene policies and employee
temperature monitoring practices to ensure Kelso’s personnel remain
risk free. Travel is restricted and employees that can work from
home do so. Management continues to maintain full adherence to all
measures put in place by applicable government authorities.
With respect to the Company’s rail tank car
product development, in the second quarter the Company received
Field Service Trial approvals from the AAR that now include Kelso’s
new standard profile ceramic ball bottom outlet valve and top ball
valve along with the Company’s pressure car pressure relief valve
and angle valve. Final AAR commercial approval processes take
considerable time to complete however these new products have been
derived through co-engineering and testing support from the
Company’s key customers which may strengthen the probability of
longer-term adoption by the rail industry.
The Company’s non-rail product development
initiatives concentrate on a promising range of transportation
technology products that are designed to provide unique economic
benefits and safe operational advantages to commercial customers.
Kelso’s goal is to spread business risk to diminish the severe
negative impacts of the historic down cycles in the rail
industry.
Kelso through its wholly owned subsidiary KIQ X
Industries is working to become a leading developer of a new
generation of specialized wilderness response transportation
equipment. Products in KXI™ WILDERTEC™ development program
now include a proprietary vehicle suspension system, ordinance
trailers, non-penetrable body panels, custom tires and other
specialty equipment. The Company is now in the final design stages
and moving toward revenue generation in 2020.
The Company is completing the conversion of two
vehicles with the production prototype KXI suspension. This will
prepare the final “blueprint” for the first commercial offerings to
the marketplace. The Company will then move into “pilot” production
operations where the Company will convert and sell 24 KXI equipped
vehicles. The Company will then scale the production capacity based
on projected sales. The initial development plans for KXI will be
distribution to the Company’s development partners in Canada that
operate in environmentally sensitive terrain before moving into the
USA and other world markets. These potential markets are new
multi-million-dollar revenue opportunities for Kelso that should
add positively to consolidated financial performance.
During COVID-19 times the Company continues to
deploy resources sensibly to maintain reasonable financial health
and liquidity. Kelso’s broader and new diverse specialized product
mix is moving out of R&D and targeted at new markets in both
rail and wilderness transportation. The Company’s technology
transformations should allow Kelso to grow conservatively in
COVID-19 times while broadening the Company’s ability to grow
longer term profits in better times.
The Company’s working capital remained at a
healthy level of $8,604,662 at June 30, 2020. The Company has no
interest-bearing long-term debt to service and currently operates
without the need for new equity capital or credit facilities. The
Company’s capital management allows Kelso to finance operations and
R&D from existing capital reserves and product sales.
Returning to pre-pandemic business volumes is
expected to happen slowly. No one will be unaffected by the
uncertainties surrounding the COVID-19 economy. There may be
further diminishment of the Company’s financial performance during
2020 due to the pandemic and the depth and length of the downturn
remains uncertain. The Company feels that the debt free financial
position, capital reserves, manageable costs and continuing product
sales should allow Kelso to maintain its positive stature with the
objective of exiting the COVID-19 crisis in a healthy financial
position.
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.
The Company’s 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
noncash 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 the Company plans to continue operations at its valve
assembly facility in Bonham, Texas; that the final AAR commercial
approval processes for the Company’s top ball valve and bottom
outlet valve are expected to take considerable time to complete
however these new products may strengthen the probability of longer
term adoption by the rail industry; that Kelso is working to become
a leading developer of a new generation of specialized wilderness
response transportation equipment and the Company has moved into
the final design stages and toward revenue generation in 2020; that
the Company is completing the conversion of two vehicles with the
production prototype KXI suspension where this will become
the final “blueprint” for the first commercial offerings to the
marketplace to allow Kelso to move into “pilot” production
operations where we will convert and sell 24 KXI equipped vehicles;
that the Company can scale the Company’s production capacity based
on projected sales; that the initial development plans for KXI will
be distribution to the Company’s development partners in Canada
that operate in environmentally sensitive terrain before moving
into the USA and other world markets; that these potential markets
are new multi-million dollar revenue opportunities for Kelso that
should add positively to consolidated financial performance; that
the Company’s broader and new diverse specialized product mix is
moving out of R&D and targeted at new markets in both rail and
wilderness transportation; that the Company’s technology
transformations should allow us to grow conservatively in COVID-19
times while broadening the Company’s ability to grow longer term
profits in better times; that the Company’s capital management
allows us to finance operations and R&D from the Company’s
existing capital reserves and sales of the Company’s products; that
returning to pre-pandemic business volumes is expected to happen
slowly; that there may be further diminishment of the Company’s
financial performance during 2020 due to the pandemic and the depth
and length of the downturn remains uncertain; that the Company’s
debt free financial position, capital reserves, manageable costs
and continuing product sales should allow Kelso to maintain its
positive stature with the objective of exiting the COVID-19 crisis
in a healthy financial position. 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 the potential effects on financial
performance due to the COVID-19 pandemic may be more severe than
expected; supply chain interruptions for out new products could
delay production capabilities; 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
transportation operations; or the Company’s products may not grow
or 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 the
Company’s market share; and the Company’s new equipment offerings
may not capture market share as well as expected and we may be
unable to scale the Company’s KXI production profitably. 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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