Kelso(KIQ) - 2024 Q4 - Annual Report

Patents and Innovations - The Company has obtained patents for its external Constant Force Spring Pressure Relief Valves and a One-bolt Manway System, Vacuum Relief Valve, and Bottom Outlet Valve[37]. - The Company invests in R&D activities focused on innovation, but returns on these investments are uncertain and may not yield immediate financial performance[39]. - The Company filed a proprietary patent application for its Automated Traction Optimization Method for Vehicle Suspension Systems on September 12, 2023[88]. - The K2AV valve, designed for LP-Gas and anhydrous ammonia applications, successfully completed field service trials in 2022[72]. - The KXI HD project aims to create a heavy-duty vehicle platform with advanced suspension control technology, targeting commercial market opportunities[76]. Financial Performance - The Company reported unaudited revenues of $2,613,554 for the quarter ended December 31, 2024, a decrease from$3,069,359 in the previous quarter ended December 31, 2023[68]. - The Company's net income (loss) for the quarter ended December 31, 2024 was ($3,014,118), compared to a loss of ($165,369) for the quarter ended December 31, 2023[69]. - Financial performance in 2023 fell short of expectations, with a 5-year average revenue of $12,175,532 per year, impacted by macroeconomic factors[84]. - The Company reported revenues of$10,819,916 for the year ended December 31, 2023, a decrease of 1% compared to $10,931,188 in 2022[116]. - The net loss for the year ended December 31, 2023, was$2,101,886, compared to a net loss of $1,355,417 in 2022[117]. - Revenues for the year ended December 31, 2024, were$10,680,468, down from $10,819,916 in 2023, representing a decline of approximately 1.3$4,622,297 for 2024, compared to a net loss of $2,101,886 in 2023[144]. - Total operational expenses increased to$9,079,476 in 2024 from $6,513,858 in 2023, primarily due to a one-time project impairment of$1,171,494 and higher legal costs of $621,364[153]. - Gross profit for 2024 was$4,693,632, with a gross profit margin of 44%, compared to 42% in 2023[144]. Working Capital and Financial Stability - The Company may face a working capital deficit despite having positive working capital, which could hinder its ability to develop new products and meet production schedules[44]. - As of December 31, 2022, the Company had working capital of $7,000,568, including cash deposits of$2,712,446 and accounts receivable of $1,381,979[81]. - The Company's working capital was$5,026,580 as of December 31, 2023, ensuring ongoing business operations and R&D initiatives[94]. - The company's working capital position decreased to $2,125,387 as of December 31, 2024, down from$5,026,580 in 2023[176]. - The company had no interest-bearing long-term liabilities or debt as of December 31, 2023, consistent with the previous year[181]. Market and Customer Dependency - The Company is highly dependent on four major tank car manufacturers, which provide a significant portion of its revenue[50]. - The Company may experience production capacity limitations if market demand exceeds projected levels, impacting its ability to generate revenue[53]. - The Company faces risks related to customer order cancellations, which could negatively impact its operations and revenue[49]. - The Company's market share in tank car production grew to approximately 47% in 2022 due to increased demand for American-made products[71]. - New tank car demand is projected to exceed 10,000 units in 2025 and 2026, alongside significant re-qualifications of existing tank cars[127]. Strategic Initiatives and Future Plans - The Company is focused on obtaining AAR approval for the K2AV in 2024 to enhance financial performance sustainably[82]. - The Company aims to complete AAR approvals for new products to enhance revenue streams from the tank car market, which includes approximately 86,000 tank cars[97]. - The Company established a Phase-One Pilot production facility to convert heavy-duty vehicles using its proprietary Method technologies[102]. - Management plans to continue investments in new product development to diversify the product mix and enhance future revenues[149]. - The company aims to diversify its revenue streams by developing non-rail products to mitigate the cyclical nature of the rail tank car market[182]. Compensation and Stock Options - Compensation for Frank Busch, the President and CEO, totaled $159,700 for Fiscal 2024, including a salary of$140,000 and other compensation[196]. - The Company has adopted a Stock Option Plan to provide an incentive program for key personnel, approved by shareholders on June 1, 2023[208]. - The maximum number of common shares reserved for issuance under the Stock Option Plan is 10% of the total issued and outstanding common shares[209]. - A total of 255,008 RSUs vested during Fiscal 2024, with 176,671 awarded to directors and officers of the Company[201]. - The RSU Plan aims to align the interests of participants with long-term shareholder interests by rewarding performance and motivating achievement of corporate objectives[216].