Aqua-Pure Venture Inc. Reports Second Quarter and First Half 2013 Financial Results
Aqua-Pure Venture Inc. Reports Second Quarter and First Half
2013 Financial Results
CALGARY, Alberta--(BUSINESS WIRE)-- Aqua-Pure Ventures Inc. ("Aqua-Pure" or the "Company") (TSXV: AQE), a premier recycler of oil field and shale gas wastewater, today reported financial results for its second quarter ended June 30, 2013. Since the beginning of the second quarter 2013, Aqua-Pure:
Secured its second order in the Permian basin from a large, independent oil and gas exploration company, Pioneer Natural Resources Company, to install two NOMAD units -- the Company's NOMAD is a patented, state-of-the-art, semi-mobile, cost effective evaporation process to treat water polluted with oilfield contaminants, returning distilled fresh water that can be reused on or near-site. The two NOMADS are expected to begin processing flowback water in mid second half of 2013.
Successfully piloted at the site of a major E&P producer in the Permian its second product, ROVER, a mobilized small footprint clarifier system technology designed for primary treatment of shale oil and gas flowback at or near the source, removing suspended solids and soluble organics from wastewater, and returning clean brine that can be blended for re-use. The self-contained system can treat up to 10,000 barrels of flowback and produced water per day, can be used across all shale formations, and can generate higher margins.
Secured an additional US $1.5 million from the sale of Convertible Debentures to international investors. The funds will be primarily used for the construction of additional "NOMAD" and "ROVER" units to address the growing demand for oil field and shale gas wastewater recycling.
Subsequent to quarter end, took additional steps to improve the Company's balance sheet. Hallmark Resources Ltd. ("Hallmark"), Aqua-Pure's controlling shareholder converted an existing demand loan in the principal amount of US $700,000 to a debenture on the same terms as the last offering. Hallmark also altered the terms of its $7.02 million convertible debenture such that (i) the debenture will mature on January 15, 2017 rather than November 12, 2014 and (ii) the interest rate shall be increased from 5% to 8% effective on November 13, 2014 for the remainder of the revised term of the debenture. In addition, Hallmark converted $3,000,000 principal of its 8% promissory notes that were due on demand into a term loan bearing 8% interest and maturing on January 15, 2017. Hallmark also agreed to not be repaid on its remaining promissory notes until the Company achieves positive EBIDTA.
Aqua-Pure reported second quarter 2013 revenues of $1.3 million compared to $1.9 million for the same period of the previous year and $886,000 for the first quarter of 2013. The expected decrease in the year-over-year revenues was predominantly the result of the termination of operations by the Company in the fourth quarter 2012 with a small, independent oilfield service company located in the Eagle Ford due to lower than contracted flowback levels. The Company's two NOMAD units that had been operating in the Eagle Ford have since been redeployed by a larger, independent oil and gas operator in the Permian basin, for which operations commenced in August 2013.
Revenues in the second quarter of the current year increased over the first quarter due to the relocation of two Nomad units to the Barnett Shale during the first quarter. These units have since been fully re-mobilized following a two week production interruption for transport and installation. Aqua-Pure anticipates a material increase in revenue during the remainder of 2013 as the four NOMAD units commence operations in the Permian Basin, and ROVER's commercial launch proves successful. The Company reported a comprehensive loss of $(545,000) or $(0.005) per basic share for the second quarter of 2013, which included a foreign currency exchange gain of $566,000. This compares to a comprehensive loss of $(732,000) million or $(0.008) per basic share for the same period in 2012, which included a foreign currency exchange gain of $319,000, and $(1.1) million or $(0.01) per basic share for the first quarter 2013, which included foreign currency exchange gain of $316,000. During the second quarter 2013, Aqua-Pure incurred a loss from operations, before financing costs, of $(576,000) during the second quarter of 2013 versus a loss from operations of $(727,000) during the same period of the prior year and a loss from operations of $(852,000) in the first quarter 2013. The decrease in operating losses reflects the success of the Company's diversification strategy designed to deliver improved gross margins, which increased to 37% during the second quarter 2013 from 29% during the comparable period in 2012 and 28% during the first quarter of 2013. The diversification strategy involved an expansion into the oil rich shale regions where market pricing is more advantageous and supplemental revenue from higher margined oil recovery and brine treatment exists. Aqua-Pure continues to anticipate improving gross margins as its strategy is further implemented.
Operating expenses during the second quarter of 2013 totaled $1.0 million, a decrease of approximately $220,000 or 17.5% over the second quarter of 2012, reflecting the conclusion of the prior year's development of the ROVER effort and the modification of equipment and protocols for treating oil and liquids rich shale frac water. Operating expenses decreased $57,000 when compared to the first quarter 2013 primarily due to a $110,000 reduction in administrative expenses partially offset by a $72,000 foreign currency exchange charge.
Interest expense for the three months ended June 30, 2013 totaled $275,000 plus accretion of debentures of $148,000 compared to $211,000 in interest expense and $87,000 of accretion of debentures during the second quarter of 2012 and $257,000 in interest expense and $107,000 of accretion of debentures during the first quarter 2013. Overall financing costs (interest, debenture accretion, derivative value, cost of financing) increased over the prior year second quarter by approximately $236,000 of which $112,000 was attributed to loss on derivative value, and increased over the first quarter 2013 by $53,000 primarily due to fees associated with the $2.15 million convertible debenture issued on March 5, 2013 that bears interest of 8% paid quarterly in cash.
For the six months ended June 30, 2013, Aqua-Pure reported revenues of $2.2 million, a 41% decrease compared to the same period in 2012, largely reflecting the removal of equipment from Eagle Ford that has since been recommissioned into the Permian. The Company reported a comprehensive loss for the six months ended June 30, 2013 totaling $(1.6) million or $(0.02) per basic share compared to $(2.4) million or $(0.03) per basic share for the same period in 2012.
At June 30, 2013, the Company reported cash and cash equivalents of $407,000, accounts receivable of $442,000 and inventory of $446,000. Total assets during the second quarter were consistent with the prior first quarter 2013 and increased by $970,000 to $18.3 million from year end 2012, due primarily to the effect of foreign currency changes on translation. On June 30, 2013, the Company's short-term and long-term debt totaled approximately $15.6 million - consistent with first quarter 2013 - of which $12.6 million is held by a company controlled by an officer and director of Aqua-Pure. Subsequent to quarter end, on August 8, 2013 Aqua-Pure issued US $2.2 million of 3-year, 8 percent senior secured convertible debentures with a US $0.30 per share conversion rate (the "Debentures"). Of the US$2.2 million raised in the sale of the Debentures, US $1.5 million was purchased by international investors and the remaining US $700,000 from the conversion of an existing demand loan held by Hallmark Resources Ltd., Aqua-Pure's controlling shareholder. In conjunction with the financing, a total of 2.2 million 2-year warrants, convertible into shares of the Company's common stock at US $0.45 per share were issued to investors. Aqua-Pure intends to use the net proceeds from the sale of the Debentures for the construction of additional "NOMAD" and "ROVER" units, which will be used to address the growing demand for oil field and shale gas wastewater recycling.
On June 30, 2013, Aqua-Pure common stock outstanding totaled approximately 91.5 million shares, consistent with year-end 2012. The Company's fully diluted shares totaled approximately 114.6 million inclusive of all options, warrants, and convertible debt, which upon the conversion of all options and warrants would generate approximately $3.7 million in additional working capital for the Company.
Aqua-Pure's CEO, Jake Halldorson commented, "Since 2004, our patented, cost-efficient equipment has proven to successfully recycle contaminated flowback water. I am particularly excited by our level of opportunity in the Permian Basin as we have received contracts for our equipment from large E&P operators, both of whom have indicated interest in adding additional NOMAD and ROVER equipment in the future. As of today, all our completed NOMADS have been contracted, and we are actively completing the manufacturing of additional NOMADs and ROVERs to satisfy growing demand."
For more information, please contact: info@aqua-pure.com or:
Karim Teja Chief Financial Officer (403) 301-4123 ext 26 | Yvonne Zappulla Grannus Financial Advisors, Inc. (212) 681-4108 |
About Aqua-Pure Ventures Inc.
Aqua-Pure (www.aqua-pure.com) is the premier recycler of industrial wastewater in North America. The Calgary-based oilfield engineering and services firm has developed and commercialized cutting-edge technology that transforms wastewater from a liability to an asset. Aqua-Pure's municipal and oil and gas wastewater services and technology solutions ensure environmental sustainability through the utilization of patented and proprietary technologies. The Corporation's common shares are listed on the TSX Venture Exchange under the trading symbol "AQE."
About Fountain Quail Water Management
Fountain Quail Water Management (www.fountainquail.com) provides low-cost, practical recycling alternatives for both shale gas and shale oil producers. The company is the global leader in recycling shale gas flowback and produced water into fresh water for re-use. Fountain Quail is wholly owned by Aqua-Pure Ventures Inc. and is based in Roanoke, Texas.
Forward-looking Statements:
Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the Company's future operations.Specifically, this release contains forward-looking statements respecting revenue and gross margin expectations for the balance of 2013. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future.Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them.These forward-looking statements reflect management's current views and are based on certain expectations, estimates and assumptions which may prove to be incorrect.A number of risks and uncertainties could cause our actual results to differ materially from those expressed or implied by the forward-looking statements, including: (1) a continued downturn in general economic conditions in North America and internationally, (2) the inherent uncertainties associated with the demand for oil and gas, (3) federal and local governmentregulations that affect the oil and gas drilling industries (4) the risk that the Company does not execute its business plan, (5) inability to finance operations and growth (6) inability to retain key management and employees, (7) ; an increase in the number of competitors with larger resources, and (8) other factors beyond the Company's control. These forward-looking statements are made as of the date of this news release and the Company intends to update such forward looking information in the Company's MD&A in the event that actual results differ materially from such forward-looking statements contained herein.Additional information about these and other assumptions, risks and uncertainties are set out in the "Risks and Uncertainties" section in the Company's MD&A filed with Canadian security regulators.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
*** Selected Financial Information Follows ***
Selected financial information for the three month periods ended June 30, 2013 is set out below. This information should be read in conjunction with the consolidated financial statements and the Company's management discussion and analysis available under the Company's profile on the Sedar website atwww.sedar.com
AQUA-PURE VENTURES INC.
CONSOLIDATED BALANCE SHEETS
(expressed in Canadian dollars)
June 30, 2013 | |||||||
Unaudited) | 31-Dec-12 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 407,043 | $ | 361,455 | |||
Accounts and other receivables | 442,081 | 344,481 | |||||
Inventories | 446,437 | 418,725 | |||||
Prepaid expenses | 134,601 | 94,322 | |||||
Assets related to discontinued operations | 118,664 | 217,244 | |||||
Total current assets | 1,548,826 | 1,436,227 | |||||
Non-current assets: | |||||||
Property, plant and equipment | 16,756,047 | 15,869,384 | |||||
Intangible assets | 37,687 | 69,460 | |||||
Total non-current assets | 16,793,734 | 15,938,844 | |||||
Total assets | $ | 18,342,562 | $ | 17,375,071 | |||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Bank indebtedness | $ | 215,619 | $ | 1,895,285 | |||
Accounts payable and accrued liabilities | 3,721,415 | 2,827,681 | |||||
Current portion of deferred revenue | 713,109 | 519,078 | |||||
Current portion of long-term debt | 6,403,634 | 5,458,119 | |||||
Liabilities of discontinued operations | 152,126 | 187,066 | |||||
Total current liabilities | 11,205,906 | 10,887,229 | |||||
Non-current liabilities: | |||||||
Deferred revenue | 1,380,796 | 1,563,770 | |||||
Long-term debt | 504,624 | 593,094 | |||||
Derivative liability | 857,544 | - | |||||
Convertible debentures | 7,836,621 | 6,239,555 | |||||
Total non-current liabilities | 10,579,585 | 8,369,419 | |||||
Total liabilities | 21,785,491 | 19,283,648 | |||||
Equity (deficiency) attributable to equity holders of the parent | |||||||
Share capital | 49,553,893 | 49,553,893 | |||||
Equity portion of convertible debenture | 1,323,227 | 1,323,227 | |||||
Contributed surplus | 7,777,893 | 7,707,443 | |||||
Reserve - translation of foreign operations | (124,480) | (1,006,592) | |||||
Deficit | (61,973,462) | (59,486,548) | |||||
Total equity (deficiency) | (3,442,929) | (1,908,577) | |||||
Total liabilities and equity (deficiency) | $ | 18,342,562 | $ | 17,375,071 | |||
AQUA-PURE VENTURES INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(expressed in Canadian dollars)
Three Months ended June 30 | Six Months ended June 30 | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Revenue | $ | 1,265,607 | $ | 1,863,163 | $ | 2,151,656 | $ | 3,645,905 | ||||
Cost of sales | (800,022) | (1,329,013) | (1,439,390) | (3,018,436) | ||||||||
Gross profit | 465,585 | 534,150 | 712,266 | 627,469 | ||||||||
Operating expenses | ||||||||||||
Selling, general and administrative | 637,851 | 527,579 | 1,385,659 | 1,156,716 | ||||||||
Engineering and product development | 170,251 | 512,970 | 358,754 | 849,223 | ||||||||
Amortization expense | 132,161 | 134,988 | 262,739 | 268,270 | ||||||||
Foreign exchange loss (gain) | 71,968 | 3,059 | 62,228 | 3,341 | ||||||||
Stock based compensation | 28,966 | 82,909 | 70,449 | 63,568 | ||||||||
Total operating expenses | 1,041,192 | 1,261,504 | 2,139,829 | 2,341,118 | ||||||||
Loss before other expenses and financing costs | (575,607) | (727,355) | (1,427,563) | (1,713,650) | ||||||||
Other expenses | ||||||||||||
Write-off of assets | - | - | (850) | - | ||||||||
Loss before financing costs | (575,607) | (727,355) | (1,428,413) | (1,713,650) | ||||||||
Financing costs | ||||||||||||
Interest income | (94) | (309) | (1,923) | (22,015) | ||||||||
Interest expense | 274,565 | 211,300 | 531,471 | 424,119 | ||||||||
Accretion of debentures | 147,886 | 87,212 | 255,137 | 257,881 | ||||||||
Financing related issue costs | - | - | 94,609 | - | ||||||||
Loss on fair value of derivative | 111,837 | - | 136,128 | - | ||||||||
Net financing costs | 534,194 | 298,203 | 1,015,422 | 659,985 | ||||||||
Net loss from continuing operations | (1,109,801) | (1,025,558) | (2,443,835) | (2,373,635) | ||||||||
Income (loss) from discontinued operations | (1,187) | (24,970) | (43,079) | (66,209) | ||||||||
Other comprehensive loss | ||||||||||||
Exchange gain (loss) on translation of foreign operations | 566,241 | 318,576 | 882,112 | 45,755 | ||||||||
Comprehensive income (loss) | $ | (544,747) | $ | (731,952) | $ | (1,604,802) | $ | (2,394,089) | ||||
Loss per share: | ||||||||||||
Basic and diluted loss per share from continuing operations | $ | (0.005) | $ | (0.008) | $ | (0.016) | $ | (0.025) | ||||
Basic and diluted loss per share from discontinue operations | $ | (0.000) | $ | (0.000) | $ | (0.000) | $ | (0.001) | ||||
Basic and diluted weighted average number of shares outstanding | 91,528,321 | 91,528,321 | 91,528,321 | 91,528,321 | ||||||||
Aqua-Pure Ventures Inc.
Karim Teja, (403) 301-4123 ext 26
Chief Financial Officer
or
Grannus Financial Advisors, Inc.
Yvonne Zappulla, (212) 681-4108
KEYWORDS: North America Canada
INDUSTRY KEYWORDS:
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