Financial Performance - Revenues for the year ended December 31, 2022, were $10,931,188, an increase of 47.5% compared to $7,425,707 in 2021[38]. - Gross profit for 2022 was $4,908,996, up from $3,196,492 in 2021, reflecting a gross margin improvement[38]. - The net loss for 2022 was $(1,355,417), a reduction in loss compared to $(2,758,567) in 2021[38]. - The Company's unaudited revenues over the last eight quarters ranged from $1,220,487 to $2,963,851, with the latest quarter ending December 31, 2022, reporting $2,389,477[77]. - The Company's unaudited net income (loss) over the last eight quarters showed consistent losses, with the latest quarter ending December 31, 2022, reporting a loss of $(420,316)[78]. - The Company reported a net loss of $1,355,417 ($0.02 per share) for 2022, an improvement from a net loss of $2,758,567 ($0.05 per share) in 2021[200]. - Total operational expenses decreased by 2% to $6,126,992 in 2022, compared to $6,254,981 in 2021, aligning with management's strategic plans[202]. Assets and Equity - As of December 31, 2022, total assets were $12,147,143, down from $13,728,510 in 2021[38]. - Shareholders' equity decreased to $10,781,672 in 2022 from $12,055,113 in 2021[38]. - The Company's working capital was $7,000,568 as of December 31, 2022, which includes $4,144,196 in inventories for future deliveries[134]. - Cash reserves at the end of 2022 were $2,712,446, a decrease from $3,377,464 in 2021, while working capital was $7,000,568[193]. - The Company's working capital position decreased to $7,000,568 as of December 31, 2022, from $8,670,165 as of December 31, 2021, a decline of about 19.2%[227]. - Net assets decreased to $10,781,672 as of December 31, 2022, from $12,055,113 as of December 31, 2021, indicating a reduction of approximately 10.6%[228]. - The Company had no interest-bearing long-term liabilities or debt as of December 31, 2022, consistent with the previous year[228]. Working Capital and Funding - The company has a positive working capital of $7,000,568 as of December 31, 2022, but may face working capital deficits in the future[50]. - The Company plans to generate necessary capital resources through product sales, but faces risks if unable to do so[223]. - The Company has previously raised funds through private placements and the exercise of options, but future success is not guaranteed[225]. - The working capital position in 2021 was bolstered by a private equity placement of 7,000,000 units at CAD $0.91 per unit[227]. Research and Development - The company is engaged in R&D for new products, focusing on rail/road tank cars and automotive suspension technology, with uncertain returns on investment[49]. - The Company has obtained patents for key products, but faces risks related to intellectual property and regulatory qualifications[45][47]. - Research and development costs for new products, including the KXI Suspension System, were $1,068,708 in 2022, down from $1,697,497 in 2021[204]. - The Company has engaged automotive engineers to shift R&D focus towards heavy-duty vehicle platforms, representing a larger commercial market opportunity[163]. Market and Operational Risks - The impact of COVID-19 continues to be monitored, with potential risks to operations and revenue generation in 2023[43]. - There is a risk of parts and raw materials shortages, which could negatively impact business development and revenues[60]. - The Company may face production capacity constraints if market demand exceeds projections, potentially affecting customer retention and revenue generation[61]. - Management acknowledges potential risks that could impact future performance, including product development delays and market adoption challenges[224]. Customer Dependency and Sales - The Company is dependent on three major OEM customers, which represent a significant portion of its revenue, and the loss of any of these customers could materially impact operations[58]. - In 2022, the Company experienced a 47% increase in sales compared to 2021, with total OEM production output of 9,812 rail tank cars, of which the Company provided 4,609 valves (47%) for new tank car production[99]. - The Company provided 4,609 valves (47%) for new tank car production and 2,445 valves for retrofit and repair activity in 2022[152]. - New tank car demand is projected to reach 10,650 tank cars in 2023, with significant retrofits planned for 135,000 tank cars delivered between 2012 and 2017[156]. Product Development and Innovations - The K2AV, a new 2" angle valve, is expected to generate multi-million-dollar revenues as it is specified by oil refiners for use in approximately 85,000 pressure tank cars[102][103]. - The KXI HD prototype vehicle is anticipated to be completed in 2023, utilizing advanced hydraulic mechatronic technologies and proprietary software for enhanced performance in wilderness applications[109][112]. - The KXI HD project aims to create a new suspension control technology to improve vehicle performance in challenging environments, with initial testing expected to begin in 2023[108][117]. - The Company has received approvals for new products, including the KTBV and K2AV valves, which are currently undergoing commercial field service trials[85][86]. - The Company aims to diversify its business risks by accessing non-rail markets to mitigate the impacts of cyclical downturns in the rail industry[137]. - The KXI HD technology aims to improve traction and balance, reducing ecological impact and fuel consumption during operations[166]. Insurance and Liability - The Company maintains commercial general liability insurance for claims up to $4,000,000 in aggregate and $1,000,000 per incident, but there is a risk that coverage may not be sufficient for future claims[63]. Workforce and Management - The Company employs 38 individuals as of December 31, 2022, down from 45 in the previous year, with a focus on retaining skilled personnel in production and management[179]. - Management continues to focus on cost-cutting measures and improving operational efficiency to support future growth initiatives[195].
Kelso(KIQ) - 2022 Q4 - Annual Report