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 six months ended June 30, 2023.
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.
The Company’s unaudited consolidated financial
statements and MD&A for the six months ended June 30, 2023 were
approved by the Board of Directors on August 09, 2023.
SUMMARY OF FINANCIAL
PERFORMANCE
Six months ended June 30, |
|
2023 |
|
|
|
2022 |
|
|
Revenues |
$ |
4,612,420 |
|
|
$ |
5,833,347 |
|
|
Gross profit |
$ |
1,879,122 |
|
|
$ |
2,701,955 |
|
|
Gross profit margin |
|
41 |
% |
|
|
46 |
% |
|
Adjusted EBITDA (loss) |
$ |
(1,140,131 |
) |
|
$ |
283,482 |
|
|
Non-cash expenses |
$ |
602,267 |
|
|
$ |
821,165 |
|
|
Taxes |
$ |
91,398 |
|
|
$ |
35,900 |
|
|
Net income (loss) |
$ |
(1,833,796 |
) |
|
$ |
(573,579 |
) |
|
Basic earnings (loss) per share |
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
Three months ended June 30, |
|
|
Revenues |
$ |
2,152,462 |
|
|
$ |
2,869,496 |
|
|
Gross profit |
$ |
792,554 |
|
|
$ |
1,273,561 |
|
|
Gross profit margin |
|
37 |
% |
|
|
44 |
% |
|
Adjusted EBITDA (loss) |
$ |
(608,513 |
) |
|
$ |
75,606 |
|
|
Net Income (loss) |
$ |
(1,047,119 |
) |
|
$ |
(519,443 |
) |
|
|
LIQUIDITY AND CAPITAL
RESOURCES
As at June 30, 2023 the Company had cash on
deposit in the amount of $1,777,525, accounts receivable of
$949,319 prepaid expenses of $162,891 and inventory of $3,721,672
compared to cash on deposit in the amount of $2,712,446, accounts
receivable of $1,381,979, prepaid expenses of $92,768 and inventory
of $4,144,196 as at December 31, 2022.
The Company had income tax payable of $22,524 at
June 30, 2023 compared to $30,626 at December 31, 2022.
The working capital position of the Company as
at June 30, 2023 was $5,448,575 compared to $7,000,568 as at
December 31, 2022. The Company’s gross profit margins declined due
to the distribution of a new varied product mix and general
economic conditions. Capital resources and operations are expected
to continue the Company’s ability to conduct ongoing business as
planned for the foreseeable future.
Net assets of the Company were $8,947,876 as at
June 30, 2023 compared to $10,781,672 as at December 31, 2022. The
Company had no interest-bearing long-term liabilities or debt as at
June 30, 2023 or December 31, 2022.
OUTLOOK
During the first half of 2023 the owners and
shippers that utilize rail tank cars continue to cautiously
consider the timing and investment in new tank car equipment and/or
the re-qualification of their existing rail tank car fleets.
Industry experts anticipate that new car production will track
replacement demand for the 438,000 tank car fleet estimated to be
in the range of 7,000 – 10,000 new cars per year. Rail tank car
re-qualifications activities will be in the range of 40,000 –
50,000 cars per year for the next several years.
Rail tank car activity requiring Kelso
components has remained mostly unchanged based on general economic
recoveries and manufacturing supply chain disruptions that may
require an increase in rail tank car transportation solutions.
Traditional foreign supply chains in the rail tank car industry
have become unreliable. The Company’s “100% American-Made”
reputation and a new distribution agreement with a third party
producer of rail tank equipment give the Company additional
competitive capabilities. The Company’s proven ability to service
customer orders even during the most challenging of times have
improved Kelso’s reputation and brand recognition as a reliable
go-to primary supplier.
Rail industry projections indicate that the rail
tank car market is in a period of modest fleet growth in rail tank
car utilization. Industry analysts predict new tank car volume rate
at approximately 7,000 to 10,000 tank cars in 2023. For the first
half of 2023 approximately 4,100 new rail tank cars were produced
and delivered.
Management believes that there are significant
opportunities to grow from the introduction of new innovative
products in both the rail and automotive industries that are
emerging from our R&D activities. The Company continues to
research, develop and engineer promising new transportation related
equipment. In the heavily regulated transportation industries, the
Company’s R&D projects are complex, time consuming and
expensive. The primary purpose of our R&D investments is to
advance and elevate the probability of future financial successes
from a larger and more diverse product line.
Several new rail products currently in AAR
service field trials continue to progress well during the first and
second quarters of 2023. The Company anticipates regulatory
progress in 2023 that can lead to new revenue sources when full
approval and early AAR vetted conditional sales to qualified
customers are permitted.
The KXI HD prototype vehicle has been
completed and initial testing activities are above expectations.
All mechanical and hydraulic components are proven technologies
that are sourced from well-established OEM suppliers and
stakeholders. Component designs have been scaled from existing uses
in military and commercial applications to fit the specifications
of KXI HD. The prototype vehicle has been commissioned with
the Company’s proprietary encryption protected Road-To-No-Road™
wilderness driver assistance software which encompasses our
trademarks PreciseRide™ and AdaptiveGrip™. The commissioned
prototype vehicle is currently going through extensive software and
engineering commissioning and integrity testing in preparation for
Canadian Motor Vehicle Safety Standards compliance testing.
Once KXI HD has its commercial design
specifications completed the final design will have to attain full
proprietary rights and compliance with the Canadian Motor Vehicle
Safety Standards (CMVSS). Successful completion of the CMVSS
requirements should allow the Company to meet the Federal Motor
Vehicle Safety Standards (FMVSS) in the United States including the
majority of compliance requirements for each Canadian province and
each American state. This is expected to provide the Company with a
National Safety Mark awarded as a final stage manufacturer which is
a key prerequisite for enabling full scale marketing initiatives
and initial commercial sales in 2024.
Timing of regulatory approvals on new rail and
automotive products and corresponding revenue streams remains
unpredictable and cannot be guaranteed to be successful. Management
continues to assess the Company’s research and development
discoveries, new product viability, budget restrictions and market
potential of all R&D programs. Management adjusts R&D plans
based on testing results as part of the Company’s R&D risk
management program. Despite the many challenges created by the
COVID-19 recession, historic inflation rates and compromised supply
chain issues, Management remains bullish on the longer term
potential of the Company’s new product developments.
The Company deploys capital resources sensibly
to maintain financial health and liquidity. The Company’s working
capital was $5,448,575 as at June 30, 2023. Current working capital
and anticipated sales activity for the remainder of 2023 is
expected to protect the Company’s ability to conduct ongoing
business operations and R&D initiatives for the foreseeable
future. With no interest-bearing long-term debt to service and
improved sales prospects from a larger product portfolio, Kelso can
continue to focus on longer term financial performance generated
from a wider range of proprietary products on behalf of the
shareholders of Kelso.
About Kelso Technologies
Kelso is a diverse product development company
that specializes in the design, engineering, 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
Adjusted EBITDA refer to net earnings from continuing operations
before interest, taxes, amortization, unrealized foreign exchange
and non cash share-based expenses (Black Scholes option pricing
model) and write-off of assets. Adjusted EBITDA is not an earnings
measure recognized by IFRS and does not have a standardized meaning
prescribed by IFRS. Management believes that Adjusted EBITDA is an
alternative measure in evaluating the Company's business
performance. Readers are cautioned that Adjusted 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 Adjusted EBITDA may
differ from methods used by other issuers and, accordingly, the
Company's Adjusted 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 owners and shippers that use rail tank cars continue
to cautiously commit to investment in new rail tank car equipment;
that industry experts anticipate that new car production will track
replacement demand for the 438,000 tank car fleet and be in the
range of 7,000 – 10,000 cars per year; that rail tank car
re-qualifications will be in the range of 40,000 – 50,000 cars per
year for the next several years; that the Company’s reliable “100%
American-Made” reputation and proven reliable service record for
customer orders even during the most challenging of times has
improved Kelso’s reputation; that market share is approximately
half of the rail tank car market volume; that the anticipated
upswing in new build and retrofit activity for rail tank cars
combined with a growing number of certified Kelso products are
expected to provide longer-term financial growth opportunities from
rail operations; that Management remains bullish on the potential
of all new product developments in both the rail and automotive
industries that are emerging from the Company’s R&D activities;
the KXI Heavy-Duty suspension prototype has been completed
including featuring the Company’s proprietary encryption protected
Road-To-No-Road™ wilderness driver assistance software, the KXI HD
prototype is going through extensive engineering integrity testing
for Canadian Motor Vehicle Safety Standards compliance – a
prerequisite for a full scale market introduction in 2024; and that
current working capital is expected to protect the Company’s
ability to conduct ongoing business operations for the foreseeable
future. Although Kelso believes the Company’s 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 risk that
the longer-term effects of COVID-19 including inflation and short
supply chain issues may last much longer than expected delaying
R&D schedules and business orders from OEM customers; that our
development of new products may proceed slower than expected, cost
more or may not result in a salable product; that tank car
producers may produce or retrofit fewer than cars than expected and
even if they meet expectations, they may not purchase the Company’s
products for their tank cars; capital resources may not be adequate
enough to fund future operations as intended; that regulatory
compliance including Canadian Motor Vehicle Safety Standards may be
delayed or cancelled; that the Company’s products may not provide
the intended economic or operational advantages to end users; that
market introduction of KXI in 2024 may not grow and sustain
anticipated revenue streams; that the Company’s new rail and
automotive products may not receive regulatory certification; that
customer orders may not develop or be cancelled; that competitors
may enter the market with new product offerings which could capture
some of the Company’s market share; that a new product idea under
research and development may be dropped if ongoing product testing
and market research reveal engineering and economic issues that
render a new product concept infeasible; and that the Company’s 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 Avenue South Surrey, BC V4A 8J1 www.kelsotech.com |
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