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 nine months ended September 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 Sept 30, |
Nine months ended Sept 30, |
|
|
2020 |
|
|
2019 |
|
2020 |
|
2019 |
Revenues |
$ |
1,586,206 |
|
$ |
5,596,031 |
$ |
9,754,172 |
$ |
15,247,490 |
Gross
profit |
$ |
600,754 |
|
$ |
2,576,579 |
$ |
4,298,760 |
$ |
7,029,643 |
Income
tax expense (recovery) |
$ |
(22,410) |
|
$ |
243,832 |
$ |
118,249 |
$ |
619,465 |
Net
income (Loss) |
$ |
(681,527) |
|
$ |
759,713 |
$ |
347,340 |
$ |
2,091,505 |
EBITDA |
$ |
(449,855) |
|
$ |
1,257,077 |
$ |
990,074 |
$ |
3,162,063 |
EPS
(loss) basic and diluted |
$ |
(0.01) |
|
$ |
0.01 |
$ |
0.01 |
$ |
0.04 |
LIQUIDITY AND CAPITAL
RESOURCES
At September 30, 2020 the Company had cash on
deposit in the amount of $2,306,234, accounts receivable of
$539,824, prepaid expenses of $302,544 and inventory of $5,997,266
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 an income tax recovery
of $30,205 at September 30, 2020 compared to income tax payable of
$71,341 at December 31, 2019.
The working capital position of the Company at
September 30, 2020 was $7,943,665 compared to $7,937,873 at
December 31, 2019. The majority of accounts receivable are
collected within 30 days from invoicing shipments giving Kelso
$539,824 of additional cash flow plus $2,306,234 of available cash
to discharge accounts payable and accrued liabilities of $1,202,203
on a timely basis subsequent to September 30, 2020.
Net assets of the Company improved to
$12,320,115 at September 30, 2020 compared to $11,845,275 at
December 31, 2019. The Company has no interest-bearing long-term
liabilities or debt at September 30, 2020.
OUTLOOK
COVID-19 has been a powerful economic setback in
2020 that is reshaping the current business dynamics affecting the
rail tank car industry. Financial performance for the first nine
months of 2020 was conducted at profitable levels but a 36% decline
in sales activity over 2019 defines the potential seriousness of an
unpredictable rail market in the COVID-19 pandemic.
Kelso falls within the exemptions for businesses
that provide essential products and workforces that carry out
critical manufacturing. Kelso has continued operations at its valve
assembly facility in Bonham, Texas. 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.
In the rail tank car industry technology changes
happen slowly and it takes time for stakeholders to adopt
innovative new technologies. We continue to broaden our new product
pipeline and during the current year the Company has received Field
Service Trial approvals from the AAR that now include our new
standard profile ceramic ball bottom outlet valve and top ball
valve along with our 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 our key customers.
We are optimistic that this may strengthen the probability of
longer term adoption by the rail industry.
Our 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. Our goal is to
spread our 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 an innovative developer of a new
generation of specialized wilderness response transportation
equipment. Products in our KXI™
WILDERTEC™ development program now include a
proprietary vehicle suspension system, ordinance trailers and other
specialty equipment.
Although the impact of COVID-19 has slowed
progress, the Company has completed the conversion of two vehicles
with the production prototype KXI suspension. This is a key step to
prepare the final “blueprint” for the first commercial offerings to
the marketplace. From here the Company plans to move into “pilot”
production operations. We will then scale our production capacity
as market demand develops. We are encouraged that the KXI
suspension could represent new multi-million dollar revenue
opportunities for Kelso.
During COVID-19 times we continue to deploy our
resources sensibly to maintain reasonable financial health and
liquidity. Our broader and new diverse specialized product mix is
moving out of R&D and targeted at new markets in both rail and
wilderness transportation. Our technology transformations should
allow us to survive in COVID-19 times while broadening our ability
to grow longer term profits in better times.
The Company’s working capital remained at a
healthy level of $7,943,665 at September 30, 2020. We have no
interest-bearing long-term debt to service and we continue to
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.
Returning to pre-pandemic business volumes is
expected to happen very slowly. Our post COVID-19 business
prospects are encouraging but we are living in very uncertain
times. No one will be unaffected by the uncertainties surrounding
the COVID-19 economy. There is a strong possibility of further
diminishment of our financial performance during 2020 due to the
pandemic although the depth of the downturn remains uncertain. We
feel that our debt free financial position, capital reserves,
manageable costs and continuing product sales should allow Kelso to
survive and 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.
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).
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 final AAR commercial approval processes for our
standard profile ceramic ball bottom outlet valve, pressure car
angle valve and pressure relief valve and top ball valve are
expected to take considerable time to complete however these new
products have been derived through co-engineering and testing
support from our key customers and we are optimistic that this may
strengthen the probability of longer term adoption by the rail
industry; that Kelso is working to become a leading innovator of a
new generation of specialized wilderness response transportation
equipment and the Company has moved into the final design stages;
that we are encouraged that the KXI suspension could represent new
multi-million dollar revenue opportunities for Kelso.; is moving to
prepare the final “blueprint” for the first commercial offerings to
the marketplace leading to plans to move into “pilot” production
operations; that we will then scale our production capacity as
market demand develops; that we are encouraged that the KXI
suspension could represent new multi-million dollar revenue
opportunities for Kelso; that our capital management allows us to
finance operations and R&D from our existing capital reserves
and sales of our products; that returning to pre-pandemic business
volumes is expected to happen slowly; that there may be further
diminishment of our financial performance during 2020 due to the
pandemic and the depth and length of the downturn remains
uncertain; and that our debt free financial position, capital
reserves, manageable costs and continuing product sales should
allow Kelso to survive and 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 our 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 our market share; and our new
equipment offerings may not capture market share as well as
expected and we may be unable to scale our 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 PresidentEmail: bond@kelsotech.com |
Richard Lee, Chief Financial OfficerEmail: lee@kelsotech.com |
Corporate Address:13966 - 18B Avenue South Surrey, BC V4A 8J1
www.kelsotech.com |
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