CALGARY, Nov. 28, 2018 /CNW/ - Acceleware® Ltd.
("Acceleware" or the "Company") (TSX-V: AXE), a leading developer
of radio frequency (RF) heating technology to facilitate
cost-effective and environmentally-friendly extraction of heavy oil
and bitumen, as well as high-performance seismic imaging
applications, today announced its financial and operating results
for the three and nine months ended September 30, 2018 (all figures are in Canadian
dollars unless otherwise noted). This news release should be read
in conjunction with the Company's unaudited condensed interim
financial statements for the three and nine months ended
September 30, 2018 and Management's
Discussion and Analysis ("MD&A") thereto, and the audited
consolidated financial statements for the year ended December 31, 2017 and the MD&A thereto. The
above documents are available on Acceleware's website at
www.acceleware.com or on SEDAR at www.sedar.com.
Q3 2018 FINANCIAL SUMMARY AND OPERATING HIGHLIGHTS
During the third quarter, Acceleware's revenue increased by 11%
compared to the third quarter of 2017, led by the software and
services segment. Given the RF heating segment represents a key
driver of future growth, Acceleware has ramped up investment in
research and development (R&D) within this segment through the
first nine months of 2018. R&D activities included engineering,
design and prototyping work related to the Company's planned
commercial-scale test of its proprietary RF XL technology and the
preparation of additional patent applications.
During Q3 2018, the Company completed contribution agreements,
which provided a total of $10 million
in non-repayable grants, with both Sustainable Development
Technology Canada (SDTC) and Emissions Reduction Alberta (ERA).
This capital infusion enabled Acceleware to commence the
construction of the commercial-scale pilot with Prosper Petroleum
Ltd. at its Rigel property in northeast Alberta.
- Revenue generated was $263,978 in
Q3 2018, 11% higher than the $237,576
recognized during Q3 2017. The year-over-year increase is primarily
due to a 420% increase in custom software consulting revenue.
Compared to $350,098 recorded in Q2
2018, revenue decreased 25% in Q3 2018 primarily as a result of
lower consulting revenue associated with High Performance Computing
(HPC) training and lower seismic software maintenance revenue.
- Strategic investments in RF heating R&D associated with the
commercial-scale test of RF XL contributed to an operating loss
that was 55% higher in Q3 2018 at $1,042,828 compared to $674,274 in Q3 2017, and 62% higher than the loss
of $645,643 recorded in Q2 2018. The
R&D expenses incurred to date remain in line with management's
expectations and have positioned the Company to aggressively
advance its commercial-scale test which is expected to commence
heating in 2019.
- Total comprehensive loss for Q3 2018 was $1,051,292, 15% higher than the total
comprehensive loss of $913,738
recorded in Q3 2017, again driven by the higher investments into
Acceleware's RF heating R&D. The total comprehensive loss
increased 63% compared to Q2 2018 which totaled $645,911.
- Working capital deficit at September 30,
2018 was $679,294 compared to
a working capital surplus of $403,501
at December 31, 2017. The decrease in
working capital reflects lower cash and cash equivalents of
$279,276 compared to $781,315 at December 31,
2017 owing to the expanded R&D investments to date in
2018. However, subsequent to the quarter end, Acceleware's working
capital deficit and cash balance significantly improved as a result
of the project financing agreements noted below, and the Company is
financially well-positioned to execute its commercial-scale
test.
NINE MONTHS ENDED SEPTEMBER 30,
2018 FINANCIAL SUMMARY
Although Acceleware posted strong year-over-year results for Q2
and Q3 2018 compared to the same periods in 2017, a weaker Q1 2018
contributed to lower revenue in the nine months ended September 30, 2018 relative to the nine months
ended September 30, 2017.
- Revenue was 25% lower in the nine months ended September 30, 2018 at $784,335 due to lower RF heating revenue,
compared to $1,084,377 recorded in
the nine months ended September 30,
2017. This decline was partially due to the Company having
sold data from a field test of RF XL in the first nine months of
2017, coupled with lower seismic software product revenue and lower
software maintenance revenue in 2018 relative to 2017.
- Operating loss rose 38% to $2,522,350 in the nine months ended September 30, 2018 from $1,829,946 recorded in the nine months ended
September 30, 2017 due to lower
revenue, higher R&D expense and higher G&A expense related
to share-based compensation, including stock options.
- Total comprehensive loss was $2,536,580 in the nine months ended September 30, 2018, an increase of 27% compared
to a loss of $2,003,794 recorded in
the nine months ended September 30,
2017.
RF HEATING BUSINESS SEGMENT
RF XL is Acceleware's patented and patent-pending RF heating
technology, designed to improve the extraction of heavy oil and
bitumen, which has the potential to save billions of dollars in oil
sands production costs. When applied, the technology has the
potential to reduce both capital and operating costs, while
offering significant environmental benefits, including immediate
greenhouse gas ("GHG") emission reductions, a substantial decrease
in land use, the elimination of external water or solvent needs and
no requirement for tailings ponds. As an electrically-driven
process, Acceleware also believes that RF XL technology can provide
a clear pathway to zero-GHG production of heavy oil and oil sands
and provide optimal alignment with government goals to recognize
innovation as part of the solution in the province's overall
emission reduction plans.
During the third quarter of 2018, the Company continued to
invest in RF heating R&D. Activities included engineering,
design and prototyping work related to the Company's planned
commercial-scale test of RF XL, and the preparation of additional
patent applications. Acceleware is pleased with its progress to
date in 2018, and as a result of the milestones achieved, currently
has:
- Commenced manufacturing and testing of the prototype RF
generator with partner GE;
- Advanced the design concepts for the drilling and completion of
the RF XL and production wells, and continued its work on the
design of surface facilities;
- Completed contribution agreements with both SDTC and ERA
providing a total of $10 million in
non-repayable grants, allowing for the commencement of the
commercial-scale pilot with Prosper Petroleum Ltd. at its Rigel
property in northeast Alberta;
- Solidified financing for the RF XL pilot by way of entering
into a consulting agreement with Advanced Micro Devices, Inc.
(AMD). Over the next four months, the Company will receive total
cash compensation of US$2.51 million
from AMD in exchange for custom software engineering resources and
consulting services. As part of the consulting agreement,
Acceleware's custom software development team will transition to
become AMD employees and the Company will also provide certain
consulting services to AMD; and
- Secured investment from a major Calgary-based oil sands producer (the
"Producer") for the commercial-scale RF XL pilot test. The Producer
will provide funding of up to $2
million toward the RF XL pilot under the terms of a project
funding agreement with Acceleware.
Loss from operations attributed to the RF heating segment in Q3
2018 increased 88% to $1,013,330
compared to $558,538 in Q3 2017, due
to the significant increase in R&D expense. Operating loss for
RF heating was also 61% higher in Q3 2018 compared to the loss of
$628,420 recorded in Q2 2018
attributable to the higher R&D expenses.
SOFTWARE AND SERVICES BUSINESS SEGMENT
Acceleware's Software and Services Business Segment helps
customers meet their oil and gas exploration needs with seismic
imaging software that provides the most accurate and advanced
imaging available for oil exploration in complex geological zones
and formations. This segment also includes electro-magnetic (EM)
simulation software and software development services including
porting, acceleration assessments and mentoring.
During the third quarter of 2018, the Company experienced
increased demand for products and services in both oil and gas and
non-oil and gas verticals.
- Recognized software and services revenue of $263,978 was 22% higher than the $216,876 recognized during Q3 2017 due to higher
consulting services revenue for oil and gas customers. Compared to
the $350,978 recognized in the
previous quarter, software and services revenue were 25% lower
reflecting lower seismic product revenue and lower HPC training
revenue.
- Operating loss attributed to software and services in Q3 2018
was 78% lower at $29,498, compared to
a loss of $136,436 in Q3 2017 due to
higher revenue and a lower cost of revenue. Software and services
operating loss increased in Q3 2018 compared to the operating loss
of $17,223 recorded in Q2 2018
attributable to lower revenue.
OUTLOOK
Through the balance of 2018, the Company will focus on pursuing
revenue streams that offer the highest margins – seismic imaging
and EM software, and RF heating consulting services. As the Company
continues to develop its RF heating technology, new research and
development investments will be financed through a combination of
internal cash flow from the software business, existing financing
and external financing as may be required. Acceleware estimates the
cost to complete its RF XL commercial-scale pilot will range
between $16 to $20 million. With the $10
million in non-repayable funding from SDTC and ERA, the
Producer's $2 million in funding, the
AMD agreement plus other funds, Acceleware has successfully raised
a total of over $15 million in
non-dilutive capital financing to date, affording the Company a
strong financial position to further advance the pilot.
ABOUT ACCELEWARE:
Acceleware (www.acceleware.com) is an innovator of clean-tech
oil and gas technologies comprised of two business units: Radio
Frequency (RF) Enhanced Oil Recovery and Seismic Imaging
Software.
Acceleware is developing RF XL and Modular RF, its patented and
patent-pending low-cost, low-carbon production technologies for
heavy oil and oil sands that are materially different from any
heavy oil recovery technique used today. They will use no water,
require no solvent, have a small physical footprint, can be
redeployed from site to site, and can be adapted to a multitude of
reservoir types, while expected to greatly reduce and eventually
eliminate production greenhouse gas emissions (GHGs). In shallow
oil sands implementations, no tailings ponds will be required.
Our seismic imaging software solutions are state of the art for
high fidelity imaging, providing the most accurate and advanced
imaging available for oil exploration in complex geologies.
Acceleware is a public company on Canada's TSX Venture Exchange under the
trading symbol "AXE".
NOTE REGARDING FORWARD-LOOKING INFORMATION AND OTHER
ADVISORIES
This news release contains "forward-looking
information" within the meaning of Canadian securities legislation.
Forward-looking information generally means information about an
issuer's business, capital, or operations that are prospective in
nature, and includes disclosure about the issuer's prospective
financial performance or financial position.
The forward-looking information in this press release can be
identified by terms such as "believes", "estimates", "plans",
"potential", and "will", and includes information about
Acceleware's plans to focus on revenue streams that offer the
highest margins, the anticipated costs of the commercial-scale test
of RF XL, Acceleware's strategy to finance the RF XL technology,
and the anticipated benefits of the RF XL technology. Acceleware
assumes that the current timeline for the RF XL pilot is
achievable, that research and development effort including the
commercial-scale test plans will result in commercial-ready
products, and that future capital raising efforts will be
successful.
Actual results may vary from the forward-looking information
in this press release due to certain material risk
factors. These risk factors are described in detail in Acceleware's
continuous disclosure documents, which are filed on SEDAR at
www.sedar.com.
Acceleware assumes no obligation to update or revise the
forward-looking information in this press release,
unless it is required to do so under Canadian securities
legislation.
This news release does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities described in
this release in the United States.
The securities have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S.
Securities Act"), or any state securities laws and may not be
offered or sold within the United
States or to U.S. persons unless registered under the U.S.
Securities Act and applicable state securities laws or an exemption
from such registration is available.
DISCLAIMER
Neither the 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.
SOURCE Acceleware Ltd.