Kelso Technologies Inc. Financial Results for the Year Ended December 31, 2023
- Kelso Technologies Inc. released its audited financial statements for the year ended December 31, 2023.
- Revenues for 2023 were $10.8 million, slightly lower than the previous year.
- The company reported a net loss of $2.1 million for 2023.
- Working capital decreased to $5 million, and total assets dropped to $9.7 million.
- Kelso plans to obtain full AAR approvals for its rail products in 2024 to improve financial performance.
- The company experienced a net loss of $2.1 million for the year ended December 31, 2023.
- Working capital decreased to $5 million compared to the previous year.
- Total assets also decreased to $9.7 million for the same period.
Insights
Analyzing Kelso Technologies Inc.'s financial performance reveals a contraction in revenues and net income, with revenues slightly decreasing from $10,931,188 in 2022 to $10,819,916 in 2023 and net income widening its loss from $(1,355,417) to $(2,101,886) year-over-year. Notably, the gross profit margin has also seen a dip from 45% to 42%. These metrics suggest that the company is facing challenges in maintaining its profitability and revenue growth, which could be indicative of underlying operational issues or adverse market conditions. The decline in working capital from $7,000,568 to $5,026,580 further underscores potential liquidity constraints.
From an investor's perspective, the lack of long-term debt is a positive sign, implying that the company has not over-leveraged itself, which is a prudent financial strategy especially in uncertain economic times. However, the decrease in total assets from $12,147,143 to $9,703,271 and in net equity from $10,781,672 to $8,720,248 may raise concerns about the company's asset base and overall financial health. The Adjusted EBITDA loss, which the company uses as an alternative measure of operational performance, has deteriorated significantly from $(83,575) in 2022 to $(845,487) in 2023, indicating that the company's core operations are not generating sufficient profit.
The macroeconomic factors mentioned, including COVID-19, high interest rates, inflationary pressures and supply chain issues, have evidently impacted Kelso Technologies Inc.'s business operations. These external factors have contributed to the 'deep recession of business activities' in the rail tank car industry, which Kelso is a part of. The company's strategic focus on obtaining full AAR approvals for its rail pressure car products is a critical step towards potentially enhancing its financial performance. The successful approval could enable the company to significantly increase its revenue per tank car, which would be a substantial growth driver.
Furthermore, the company's diversification into the automotive industry with its Advanced Driver-Assistance System (ADAS) for wilderness applications represents an attempt to tap into new revenue streams. Kelso's entry into this emerging market, which is projected to reach $80 billion by 2030, could be a strategic move to hedge against the volatility in the rail industry. However, the success of this venture will depend on the company's ability to navigate regulatory approvals and effectively commercialize its ADAS technology.
The mention of the proprietary patent application for the Automated Traction Optimization Method for Vehicle Suspension Systems is a key development for Kelso Technologies Inc. Intellectual property rights can provide a competitive advantage and potential revenue through licensing or exclusivity in product offerings. However, the success of this legal protection strategy hinges on the company's ability to secure and enforce these patents, which can be a complex and time-consuming process.
Furthermore, the company's goal to obtain federal and regional compliance approvals for its ADAS technology by 2025 is an ambitious legal undertaking. Compliance with automotive regulations is critical for market access but can be a significant barrier to entry due to stringent safety and environmental standards. The company's ability to navigate this legal landscape will be pivotal in determining the success of its automotive innovations.
VANCOUVER, British Columbia and BONHAM, Texas, March 26, 2024 (GLOBE NEWSWIRE) -- 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 | |||||||||
| 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
The Company had income tax payable of
The working capital position of the Company as at December 31, 2023 was
Total assets of the Company were
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
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
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
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
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
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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