Kelso Technologies Inc. (“Kelso” or the “Company”), (TSX: KLS)
reports that the Company has released the audited consolidated
financial statements and Management Discussion and Analysis for the
year ended December 31, 2023.
The audited year end 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 audited consolidated financial
statements and MD&A for the year ended December 31, 2023 were
approved by the Board of Directors on March 20, 2024.
SUMMARY OF FINANCIAL
PERFORMANCE
Year ended December 31 |
|
2023 |
|
|
2022 |
|
|
2021 |
|
Revenues |
$ |
10,819,916 |
|
$ |
10,931,188 |
|
$ |
7,425,707 |
|
Gross profit |
$ |
4,582,447 |
|
$ |
4,908,996 |
|
$ |
3,196,492 |
|
Gross profit margin |
|
42% |
|
|
45% |
|
|
43% |
|
Operating expenses |
$ |
5,878,723 |
|
$ |
6,126,992 |
|
$ |
6,254,981 |
|
Taxes |
$ |
170,475 |
|
$ |
166,031 |
|
$ |
172,639 |
|
Net income (loss) |
$ |
(2,101,886) |
|
$ |
(1,355,417) |
|
$ |
(2,758,567) |
|
Basic and diluted earnings (loss) per share |
$ |
(0.04) |
|
$ |
(0.02) |
|
$ |
(0.05) |
|
Non-cash recoveries and expenses |
$ |
1,085,924 |
|
$ |
1,271,842 |
|
$ |
549,612 |
|
Adjusted EBITDA (Loss) (1) |
$ |
(845,487) |
|
$ |
(83,575) |
|
$ |
(1,436,435) |
|
Liquidity and Capital Resources |
|
|
|
Working capital |
$ |
5,026,580 |
|
$ |
7,000,568 |
|
$ |
8,670,165 |
|
Cash |
$ |
1,433,838 |
|
$ |
2,712,446 |
|
$ |
3,377,464 |
|
Accounts receivable |
$ |
1,065,411 |
|
$ |
1,381,979 |
|
$ |
807,009 |
|
Net equity |
$ |
8,720,248 |
|
$ |
10,781,672 |
|
$ |
12,055,113 |
|
Total assets |
$ |
9,703,271 |
|
$ |
12,147,143 |
|
$ |
13,728,510 |
|
Common shares outstanding |
|
54,443,422 |
|
|
54,320,086 |
|
|
54,320,086 |
|
|
(1) Adjusted EBITDA for the year ended December 31, 2023, 2022
and 2021 has been calculated as follows: |
|
Year ended December 31 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
Net income (loss) |
$ |
(2,101,886) |
|
$ |
(1,355,417) |
|
$ |
(2,758,567) |
|
Unrealized foreign exchange loss (gain) |
$ |
1,154 |
|
$ |
(31,648) |
|
$ |
(26,409) |
|
Amortization |
$ |
785,505 |
|
$ |
1,044,222 |
|
$ |
1,573,091 |
|
Income taxes |
$ |
170,475 |
|
$ |
166,031 |
|
$ |
172,639 |
|
Gain on revaluation of derivative warrant liability |
$ |
(3,665) |
|
$ |
(263,446) |
|
$ |
(658,626) |
|
Gain on repurchase of RSU’s |
$ |
(40,785) |
|
$ |
(45,806) |
|
$ |
- |
|
Write down of inventory |
$ |
214,225 |
|
$ |
260,040 |
|
$ |
117,403 |
|
Gain (loss) on sale of property, plant and equipment |
$ |
- |
|
$ |
(20,602)- |
|
$ |
8,389 |
|
Share based expense |
$ |
129,490 |
|
$ |
163,051 |
|
$ |
133,645 |
|
Bad debt recovery |
$ |
- |
|
$ |
- |
|
$ |
2,000 |
|
Adjusted EBITDA (Loss) |
$ |
(845,487) |
|
$ |
(83,575) |
|
$ |
(1,436,435) |
|
|
Adjusted EBITDA (loss) represents net earnings
or loss for the year ended December 31, 2023 before interest, taxes
and tax recoveries, amortization, deferred income tax recovery,
unrealized foreign exchange losses, non-cash share-based expenses
(Black-Scholes option pricing model) and write-off of assets.
Adjusted EBITDA (loss) removes the effects of items that do not
reflect the Company’s underlying operating performance and are not
necessarily indicative of future operating results. Adjusted EBITDA
(loss) is not an earnings measure recognized by IFRS and does not
have a standardized meaning prescribed by IFRS. Management believes
that Adjusted EBITDA (loss) is an alternative measure in evaluating
the Company's operational performance and its ability to generate
cash to finance business operations.
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.
LIQUIDITY AND CAPITAL
RESOURCES
As at December 31, 2023 the Company had cash on
deposit in the amount of $1,433,838, accounts receivable of
$1,065,411 prepaid expenses of $134,349 and inventory of $3,376,005
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 $10,024 at
December 31, 2023 compared to $30,626 at December 31, 2022.
The working capital position of the Company as
at December 31, 2023 was $5,026,580 compared to $7,000,568 as at
December 31, 2022. Capital resources and operations are to be
expected to continue the Company’s ability to conduct ongoing
business as planned for the foreseeable future.
Total assets of the Company were $9,703,271 as
at December 31, 2023 compared to $12,147,143 as at December 31,
2022. Net assets of the Company were $8,720,248 as at December 31,
2023 compared to $10,781,672 as at December 31, 2022. The Company
had no interest-bearing long-term liabilities or debt as at
December 31, 2023 or December 31, 2022.
OUTLOOK
During Fiscal 2023, Kelso continued to
strengthen the portfolio of its rail products by closely monitoring
those products near completion of the required AAR service trial
period. The strategic focus is to obtain full AAR approvals in 2024
for our entire portfolio of rail pressure car products to better
grow our financial performance in a sustainable meaningful way.
This has been the Company’s core branding ambition over the past
fourteen years and it is now close to fruition in 2024.
Rail operations in our Bonham, Texas facilities
are effective and efficient productive systems that have been well
developed since April 2010. All functional elements of plant &
equipment, production planning & controls, labour &
staffing and product design/engineering are fully developed and
productive at above average contribution margins from sales. No
further material capital investments in rail operations are
anticipated for the foreseeable future.
Financial performance has fallen short of
original expectations with our 5 year average at $12,175,532 per
year. This has been due to many macroeconomic factors, far beyond
the control of the Company, that have created the current deep
recession of business activities in the rail tank car industry.
This includes the penalizing affects of COVID-19, high interest
rates, inflationary pressures, supply chain issues and lengthy AAR
approval processes. Despite the many challenges the Company has
survived and still believes that it can exploit its growing
competitive advantages in the rail industry. Our goal is to become
the primary, high quality valve supplier featuring its 100% “Made
in USA” product line fully servicing the rail tank car market.
Key to the development of the Company’s rail
revenue growth ambitions in 2024 is the full AAR approval of our
pressure car package. This package sells at a much higher tank car
unit value. It is expected to grow rail car revenue from an average
of $1,500 per tank car to over $10,000 per tank car. Our
specialized angle valves for the pressure car package have
completed their service trial and are in the final stages of the
full AAR approval process. The AAR approvals are the key milestone
to establish new revenue growth from rail related products. Our
goal is to fully service the needs of the pressure car market fleet
that that stands at approximately 86,000 tank cars. This provides a
significant financial growth opportunity to pursue while continuing
to obtain AAR approvals for the additional products in the R&D
pipeline.
Since mid 2021 the Company’s automotive
innovation development operations have been heavily engaged in
creating a unique fully automated “center-of-gravity” oriented
Advanced Driver-Assistance System (“ADAS”) designed specifically
for wilderness travel. In 2023 the Company confirmed that it had
created the first “field-tested” automated suspension-based ADAS
for emergency and commercial mission-critical wilderness
operations. Our ADAS technologies are specifically designed to
address the challenging issues of worker well being and safety as
well as ecological protection while delivering effective and
efficient operational advantages to wilderness operating
stakeholders. The innovation design objectives are to create
products that diminish the potentially dangerous effects of human
and technology error through the use of the Company’s proprietary
engineered solutions.
On September 12, 2023 the Company’s KXI
Wildertec™ Software Division filed the first stage proprietary
patent application for its Automated Traction Optimization Method
for Vehicle Suspension Systems (“Method”). The Patent Application
forms the Company’s initial proprietary claims and intellectual
foundation for its future KXI Wildertec™ technologies. This patent
application filing begins the Company’s comprehensive proprietary
protection program for additional protectable full automation ADAS
developments and firmly positions the Company’s artificial
intelligence intentions. The grant of the Canadian Patent on our
Method technologies will be a key cornerstone event for the
Company’s business development ambitions.
In the automotive industry, ADAS refers to
specialized automated technical features that are designed to
increase the safety of operating motor vehicles on existing
roadways. Current automotive industry design ambitions are to use
human-machine interfaces that can assist a driver’s ability to
react to dangers on established roads. Upon extensively field
testing the unique Method, Kelso’s intelligence supports that the
Company is the first enterprise to demonstrate a functional
automated suspension-specific ADAS for commercial wilderness
applications. This is a major technology development advantage for
the Company to grow future revenues from specialized automotive
markets.
Very little emphasis, if any, by the automotive
world has addressed ADAS requirements in wilderness operations. Our
strategic business objectives are to lead the way on ADAS for
no-road environments for emergency responders,
commercial/industrial stakeholders and humanitarian aide and
defense customers. Our business ambition is to participate in the
emerging global ADAS software market which is estimated to reach
the $80 billion mark by 2030 as reported by industry experts,
McKinsey & Company.
In February 2024 the Company established an
initial Phase-One Pilot production facility with additional leased
space at its current R&D facility in West Kelowna, BC, Canada.
This production facility is being designed and tooled to convert
multiple classes of heavy duty “host” vehicles with the Company’s
patents pending proprietary Method technologies. These vehicles are
designed to be sold to customers operating in extreme terrain
environments who have specified their custom user case requirements
utilizing our Method technologies.
The Method is now regulatory compliant for sales
to commercial wilderness operations including existing forestry
roads. The KXI equipped vehicle is compliant for operation on all
resource and private roads through an all-terrain vehicle insurance
policy. The ambition is to obtain the necessary federal and
regional compliance approvals to enable the technology to operate
on all roadways as early as 2025.
The low capital investment reflects the ease of
conversion of the “host” vehicle to the Method system in order to
minimize the costs of the final salable vehicle. Management is
currently developing longer-term scheduling logistics, supply chain
procurement systems, optimal inventory levels, labor and staffing
needs and product design enhancements, continuing R&D needs,
advancing engineering quality controls and general risk management
controls.
Once completed the Phase-One facility is
expected to have the potential to generate approximately $25
million of annual revenue currently expected to commence in early
2025. The facility houses R&D, Phase-One production and an on
site test track.
The Company will concentrate its production
resources on delivering safety enhancing technology solutions for
customers in, but not limited to, disaster response, wilderness
fire fighting, mobile medical treatment, evacuation and emergency
response, mining and exploration, energy transmission, civil
engineering projects, telecommunications and
geographic/environmental data systems.
In 2023, the Company made considerable progress
in its research and development to create new innovative products.
Timing of required regulatory approvals on new rail and automotive
products and corresponding revenue streams remains unpredictable
and cannot be guaranteed to be successful.
The Company feels it is on course for new value
creation as we look forward to new business success in both rail
and automotive markets. Management has determined a clear path for
the commercialization of our new products in order to provide
longer-term profitable revenue growth. With no interest-bearing
long-term debt to service and improved sales prospects from larger
diverse markets, Kelso can focus on the growth of its equity value
from financial performance generated from a wider range of new
proprietary products.
About Kelso Technologies
Kelso is a diverse engineering company that
specializes in the creation, production, sales and distribution of
proprietary products used in rail and automotive transportation.
The Company’s rail engineering business has been developed as a
designer and reliable domestic supplier of unique high-quality rail
tank car valves that provide for the safe handling and containment
of hazardous and non-hazardous commodities during rail transport.
The automotive division of the Company has created the first proven
automated suspension-based Advanced Driver Assistance System for
commercial mission-critical wilderness operations. All Kelso
products are specifically designed to address the challenging
issues of public safety, worker well being and potential
environmental harm while providing effective and efficient
operational advantages to customers. Kelso’s innovation objectives
are to create products that diminish the potential dangerous
effects of human and technology error through the use of the
Company’s portfolio of proprietary products.
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 SEDAR at www.sedarplus.ca 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
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 our new rail products can sell for much higher unit
values and are expected to grow our rail car revenue from an
average of $1,500 per tank car to over $10,000 per tank car once
AAR approvals are secured; that our specialized angle valves for
the pressure car market have completed their service trial and are
in the final stages of the full AAR approval process; that although
the rail industry is fully depressed there is still a bona fide
opportunity for Kelso to grow its revenues by being able to fully
service the repair, retrofit and requalification activities by
hazmat shippers with a broader range of “100% Made in the USA”
technologies; that the Company is now concentrating its resources
on developing KXI Wildertec Application Development Agreements for
various industrial applications; and that current working capital
and anticipated sales activity at above average contribution
margins for the remainder of 2023 are expected to protect the
Company’s ability to conduct ongoing business operations and
R&D initiatives 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 on the rail and automotive industries including high
interest rates, inflation and short supply chain issues may last
much longer than expected delaying R&D schedules and business
orders from customers; that the 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 KXI
Application Development Agreements may not be successful and
deliver 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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