Aqua-Pure Ventures Inc. Reports First Quarter 2013 Financial Results
Aqua-Pure Ventures Inc. Reports First Quarter 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 first quarter ended March 31, 2013. Late in the fourth quarter of 2012, Aqua-Pure implemented a strategy to diversify its business and expand its addressable market into profitable growth opportunities. During the Company's first quarter 2013, it has directed its resources in execution of this strategy:
- The Company focused on sourcing and nurturing opportunities in oil and liquids rich shale plays given the more attractive economics relative to dry gas plays. During the first quarter, Aqua-Pure secured an order from a large, independent oil and gas exploration company located in the oil rich Permian basin 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 the Permian in July 2013;
- Aqua-Pure successfully piloted and began to actively market a 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. A ROVER unit is currently being piloted by a major E&P producer in the Permian and is expected to begin to contribute to revenues at the end of May 2013; and,
- Aqua-Pure strengthened its balance sheet through its first financing completed outside of Canada and entirely with new investors. Heretofore, the Company has primarily been funded by related parties.
Aqua-Pure reported revenues for the three months ended March 31, 2013 of approximately $886,049 compared to $1.8 million for the same period of the previous year and $978,000 in the fourth quarter of 2012. The expected decrease in the year over year and sequential quarterly revenues was largely the result of the termination of operations with a small independent oilfield services company in the Eagle Ford due to weak flowback water delivery, well below contracted levels, that took place late in the fourth quarter of 2012. The Company's two NOMAD units that had been operating in the Eagle Ford have since been contracted by a larger, independent oil and gas operator in the Permian basin and are currently in the process of being relocated. These two NOMADs are expected to commence operations in the Permian Basin in July 2013. Revenues in the first quarter were also negatively impacted by the relocation of two Nomad units in the Barnet Shale to another site, which resulted in two and a half weeks of down-time as the units were demobilized and re-mobilized. Aqua-Pure anticipates a material increase in revenue during the remainder of 2013 from:
- Uninterrupted production from its two NOMAD units in the Barnett Shale area
- Increasing royalty and licensing revenue from three NOMAD units in operation in the Marcellus Shale region,
- The commencement of operations of two NOMAD units in the Permian Basin,
- Initial contracts for ROVER units.
The Company reported a comprehensive loss of $(1.1) million or $(0.01) per basic share for the three months ended March 31, 2013, which included a foreign exchange gain of $326,000. This compares to a comprehensive loss of $(1.7) million or $(0.04) per basic share for the same period in 2012, which included a foreign exchange loss of $(273,000), and $(2.3) million or $(0.02) per basic share for the fourth quarter 2012, which included foreign exchange loss of $(336,000). Aqua-Pure incurred a loss from operations of $(852,000) during the first quarter of 2013 versus a loss from operations of $(986,000) during the same period of the prior year and a loss from operations of $(1.4) million in the fourth quarter 2012. The decrease in operating losses reflects the early signs of success in the Company's diversification strategy, which has improved gross margins and lowered engineering and product development costs. These operational improvements were partially offset by higher selling, administrative and financing costs.
Aqua-Pure's gross profit on revenue totaled $247,000 in the first quarter 2013, yielding a gross margin of 28%. This compares to a 5% gross margin in first and fourth quarters of 2012. The improvement in the gross margin is due to implementing new operating procedures and protocols. The research and development of new operating procedures were expensed last year and the resulting efficiencies have impacted margins in 2013. The Company expects to achieve significantly higher gross margins as it continues expansion into the oil rich shale regions where market pricing is more advantageous and as supplemental revenue from higher margined oil recovery and brine treatment is realized.
Operating expenses for the three months ended March 31, 2013 totaled $1.1 million, virtually flat with the same period of 2012 and a decrease of approximately $216,000 compared to the fourth quarter of 2012. The significant decrease in operating expenses compared to the fourth quarter 2012 is predominately related to a 44% decrease in engineering and product development expenses associated with the ROVER development effort and the additional engineering support required to modify equipment and protocols for treating oil and liquids rich shale frac water, which were largely completed during 2012.
The Company incurred interest expense for the three months ended March 31, 2013 of $257,000 plus accretion of debentures of $107,000 compared to $213,000 in interest expense and $171,000 of accretion of debentures during the first quarter of 2012 and $255,000 in interest expense and $103,000 of accretion of debentures during the fourth quarter 2012. Overall financing costs (interest, debenture accretion, derivative value, cost of financing) increased year-over-year by approximately $119,000 and quarter-over-quarter by $125,000 due predominately to fees associated with the $2.15 million convertible debenture issued on March 5, 2013 that bears interest of 8% paid quarterly in cash. During 2012, the Company invested some of its cash in short term deposits while in the first quarter 2013, any surplus cash was used to pay down the bank indebtedness.
At March 31, 2013, the Company had cash and cash equivalents of $1.2 million, accounts receivable of $300,000 and inventory of $425,000. Total assets during the first quarter increased by $1.1 million to $18.4 million from year end 2012, due primarily to financing activity, which increased cash levels by $876,000 and lowered bank debt by $1.4 million. During March, the Company sold a US $2.15 million 3 year, 8 percent secured convertible debenture with a US $0.30 per share conversion rate. In conjunction with the financing, a total of 2.9 million warrants convertible into shares of the Company's common stock at US $0.40 per share were issued to investors. In addition, Aqua-Pure issued a subordinated secured promissory demand note to a company controlled by an officer and director of Aqua-Pure for an aggregate principal amount of US $600,000 bearing an annual interest rate of 5% per annum. Some of the proceeds of the note and debenture were used to offset the Company's higher interest line of credit. As such, Aqua-Pure reduced its revolving credit line to US $505,000 at a fixed interest rate of 9%. The Company believes more attractive terms may be available given the recent business traction and is actively exploring alternative credit opportunities. As of March 31, 2013, the Company's overall short term debt totaled approximately $6.8 million, a decrease of approximately $510,000 from year end 2012, and long term debt increased by $1.4 million to $8.2 million of which $7.6 million is held by a company controlled by an officer and director of Aqua-Pure.
On March 31, 2013, Aqua-Pure common stock outstanding totaled approximately 91.5 million shares, consistent with year-end 2012. Aqua-Pure's fully diluted shares on March 31, 2013 totaled approximately 114.6 million (inclusive of all options, warrants and convertible debt). This represents an increase of 10.6 million shares from year-end 2012 predominately reflecting the secured convertible debenture issued by the Company in March 2013.
"Aqua-Pure has demonstrated a long tradition in cost-effectively applying our patented technology to recycle contaminated frac flowback and produced water in the Barnett Shale. Now that we have proven our effectiveness under the extraordinary competitive pressures that existed prior to the recent environmental considerations that further supports our water treatment solution, we are prepared to tactically expand our geographic reach and product capability to address the varied shale formations across North America," commented Aqua-Pure's CEO, Jake Halldorson. "As the NOMAD is highly effective in dry gas and oil shale formations, we have successfully begun our move into the neighboring Permian Basin and anticipate additional installations in southwest Texas region during 2013. This move offers us both addressable market expansion and higher margin opportunities than are achievable in dry gas plays today. With the introduction of the ROVER, we have an even stronger opportunity for geographic reach as ROVER can successfully operate as a pre-treatment in all shale formations and carries even greater opportunities for margin expansion. I am encouraged with the market receptivity we are seeing and the growth in our opportunities."
For more information, please contact: firstname.lastname@example.org or:
Chief Financial Officer
Grannus Financial Advisors, Inc.
(403) 301 4123 ext 26
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.
Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the Company's future operations.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 March 31, 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.
|Cash and cash equivalents||$||1,237,073||$||361,455|
|Accounts and other receivables|
|Assets related to discontinued operations||130,776||217,244|
|Total current assets||2,228,919||1,436,227|
|Property, plant and equipment||16,161,211||15,869,384|
|Total non-current assets||16,214,785||15,938,844|
|Liabilities and Equity|
|Accounts payable and accrued liabilities||3,134,395||2,827,681|
|Current portion of deferred revenue||752,040||519,078|
|Current portion of long-term debt||6,328,449||5,458,119|
|Current portion of convertible debentures||-||-|
|Liabilities of discontinued operations||199,111||187,066|
|Total current liabilities||10,926,873||10,887,229|
|Total non-current liabilities||10,443,980||8,369,419|
|Equity (deficiency) attributable to equity holders of the parent|
|Equity portion of convertible debenture||1,323,227||1,323,227|
|Reserve - translation of foreign operations||(690,721||)||(1,006,592||)|
|Total equity (deficiency)||(2,927,149||)||(1,908,577||)|
|Total liabilities and equity (deficiency)||$||18,443,704||$||17,375,071|
AQUA-PURE VENTURES INC.
|Three Months Ended March 31,|
|Cost of sales||(639,368||)||(1,689,423||)|
|Selling, general and administrative||747,808||629,138|
|Engineering and product development||188,503||336,253|
|Foreign exchange loss (gain)||(9,735||)||282|
|Stock based compensation||41,483||(19,341||)|
|Loss before other income and financing costs||(851,956||)||(986,295||)|
|Write-off of assets||(850||)||(57,434||)|
|Income (loss) before financing costs||(852,806||)||(986,295||)|
|Accretion of debentures||107,251||170,669|
|Financing related issue costs||94,609||-|
|Loss on fair value of derivative||24,291||-|
|Net financing costs||481,228||361,782|
|Net loss from continuing operations||(1,334,034||)||(1,348,077||)|
|Income (loss) from discontinued operations||(41,892||)||(41,239||)|
|Other comprehensive loss|
Exchange gain (loss) on translation of foreign operations
|Loss per share:|
|Basic and diluted loss per share from continuing operations|
|Basic and diluted loss per share from discontinued operations|
Aqua-Pure Ventures Inc.
Karim Teja, 403-301-4123 ext 26
Chief Financial Officer
Grannus Financial Advisors, Inc.
Yvonne Zappulla, 212-681-4108
KEYWORDS: United States North America Canada Washington
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