VANCOUVER, BRITISH COLUMBIA, Apr. 28, 2010 (Marketwire) -- James R. Bond, CEO and President of the Company (TSX VENTURE:KLS) reports that the Company has released its second quarter results for the six months ended February 28, 2010.
The Company's net income for the six months ended February 28, 2010 was $189,588 against revenue of $27,711 compared to a loss of $327,958 against revenue of $214,991 the same period in 2009. A key factor in the gain for the period was the effect of the forgiveness of a large portion of debt by related parties and shareholders to reorganize the Company's financial health. Expenses for the six months ended February 28, 2010 are related to the operations, accounting, auditing, legal and other costs associated with the financing and reorganization of the Company's affairs.
Results for the six months ended February 28, 2010 are indicative of a junior engineering and development company with limited financial resources attempting to develop a full scale marketing platform and business infrastructure while attempting to access new capital financing for its transition from product development activities to full exploitation marketing plans.
At February 28, 2010, the Company had cash on deposit in the amount of $1,606; accounts receivable of $8,565, prepaid expenses of $4,700. Working capital deficiency was $457,600 which includes $235,981 due to related parties compared to a working capital deficiency of $905,898 which includes $601,437 due to related parties at February 28, 2009.
Based on the Company's financial position at February 28, 2010 the Company will require receipt of new equity funding through private placement, cash flow from operations and the collection of accounts receivable for cash flow funding sufficient to meet its near-term cash requirements to operate its production capability and distribution of products in the foreseeable future.
To improve its access to capital and pursuant to shareholders' approval at the Company's last Annual General Meeting on February 5, 2010 the Company is filing with the TSX Venture Exchange documentation to roll the Company's share capital back on a 1 new common share for 7 old common shares basis. The roll back will result in a new issued and outstanding common share position of 12,354,869 common shares and will reduce the number of existing share purchase warrants to 2,617,100 and exercise prices will be adjusted by the 1 to 7 roll back.
As part of the re-organization, the Company is arranging by way of a private placement up to $1,500,000 in new equity capital. The private placement consists of up to 15,000,000 units at $.10 per unit on a post roll back basis. Each unit will consist of one common share and one half share purchase warrant. Each whole share purchase warrant will entitle the holder to purchase one common share at $.18 per share for a period of 24 months from the date of issue.
The current recession has been the worst economic crippling that North America has seen since the Great Depression. The Association of American Railroads has reported that recent downturn in new tank car builds has been the worst since the 1983 recession. Through this recession, Kelso has been able to survive and execute sales strategies, albeit to a limited success. Sales projections were dramatically impacted by the recession and did not meet forecasts as anticipated. By December 2009, the market for new tank-car builds was reported to have dropped to 10% of its 2007 volume.
With the enforcement of US environmental regulations and the inevitable new tank-car build rebound that is forecast to begin in the third quarter of 2010, Kelso is confident that new tank-car builders, repair shops and retrofitters will resume ordering Kelso products for installation. Kelso continues to maintain its reputation as a valued supplier of pressure relief and inspection valves to the rail tank car sector. This has been an important accomplishment as Kelso looks forward to what appears to be a better outlook for Kelso's product market by third quarter of 2010 when the new tank car builds being commissioned are expected to begin to rebound.
For a more complete business and financial profile of the Company, management encourages interested parties to view the Company's documents posted on www.sedar.com.
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 Canadian securities legislation. Forward-looking statements are indicated expectations or intentions. Forward-looking statements in this news release include that Kelso looks forward to what appears to be a better outlook for Kelso's product market by third quarter of 2010 when the new tank car builds being commissioned are expected to begin to rebound. Kelso is to secure $1,500,000 in new equity, that the funds can allow us to commence marketing initiatives, secure additional proprietary rights, begin investor relations and allow Kelso to meet the solvency standards of vendor status with customers; and that the technological products of Kelso are beginning to generate meaningful purchase orders that may expand Kelso's commercial viability. The Company's products involve detailed proprietary and engineering knowledge and specific customer adoption criteria, hence factors that could cause actual results to be materially different include that we may be unsuccessful in raising any capital, we may not have sufficient capital to produce and deliver orders, orders that are placed may be cancelled, product may not perform as well as expected, markets may not develop as quickly as anticipated or at all or that the productive capacity of Kelso may not be large enough to handle market demand. Further, we are reliant on certain key employees and we may be unable to protect or defend our intellectual property. Investors are cautioned against placing undue reliance on forward-looking statements.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.