XS Financial Inc. (XSHLF)

[Alwaysbmikki]

Xtraction Services Reports Financial Results for the Year Ended 2019

Business WireApril 29, 2020

https://finance.yahoo.com/news/xtraction-services-reports-financial-results-115500276.html

CSE: XS) (OTCQB: XSHLF) a specialty finance company engaged in equipment leasing in the United States, announced today results for the year ending December 31, 2019 ("YE/19"). The Company’s audited year-end condensed Financial Statements ("FS") and Management Discussion & Analysis ("MDA") are available under the Company’s profile on www.sedar.com, and on the corporate website at www.xtractnow.com. All figures are expressed in United States dollars ($) unless otherwise stated.
David Kivitz, Chief Executive Officer of XS commented, "2019 was a work in progress as we streamlined costs and focused on cleaning up the balance sheet. We successfully transacted on a trade of non-essential equipment to acquire 13.4% of our outstanding shares, which also reduced operating expenses. Our team built out our equipment vendor partnerships and strengthened our customer pipeline. The completion of the reverse take-over of Caracara in September provided additional capital, which was deployed into several new leasing opportunities. Our efforts did not go unnoticed as we were able to forge a strategic partnership with KushCo, allowing both companies to continue their respective growth initiatives, while utilizing each of our strengths to support one another. As well, with KushCo taking a 19.9% ownership stake in the Company, our strategic partners along with insiders now control over 40% of the Company.
"There are very few specialty finance companies that provide equipment financing to cannabis and hemp companies, and fewer that do it well. This is not an easy industry to underwrite, given the varying regulations and technical knowledge that is required. With the accomplishments achieved over the past year, we are now in a strong position, poised for growth. XS has increased its share of larger, better established companies in its pipeline and we are excited with the prospects for the Company in 2020 and beyond."
YE/19 Financial Highlights:
Increased Revenues to $2.3 million at YE/19, compared to $0.15 million for the same period of the previous year ("YE/18").
Gross Loss Improved to $0.33 million compared to a gross loss of $1.0 million at YE/18.
Operating Expenses of $4.2 million compared to $3.6 million at YE/18.
Realized Loss of $6.9 million compared to a loss of $5.9 million at YE/18.
Cash on hand at YE/19 of $2.5 million (working capital of $1.8 million).
2019 Corporate Highlights:
Commenced Trading on the Canadian Securities Exchange ("CSE"): Successfully completed the reverse takeover transaction with Caracara Silver Inc., in September 2019, to list on the CSE under the symbol "XS".
New Vendors added to the Preferred Vendor Program: Continued to add new partners to the rapidly growing list of Original Equipment Manufacturers ("OEM") who offer the highest quality equipment and service across the equipment value chain.
Khrysos Industries, Inc. ("Khrysos") Equipment Trade: XS returned non-essential, spare equipment inventory to Khrysos, in exchange for their 13.4% equity ownership position in XS.
Halo Labs Inc. ("Halo") Sale-Leaseback Agreement: The Company signed a sale-leaseback agreement with Halo, a publicly traded leading cannabis extraction company that develops and manufactures quality cannabis oils and concentrates operating in California, Oregon, and Nevada.
Post-Year End Highlights:
OTCQB Listing & DTC Eligibility: Commenced trading on the OTCQB Venture Market under the symbol "XSHLF" in January 2020. Received approval for the book-entry delivery and depository services of Depository Trust Company in March 2019, which offers a more convenient trading experience for current and future investors in the United States.
New Leasing Agreement with Lehua Group USA, LLC ("Lehua"): Entered into a leasing agreement with this multi-state, licensed cannabis processor specializing in THC-infused beverages.
Acquired California Lenders License: The acquisition of the lender license allows XS to significantly expand its lending and financing capabilities in the State of California.
Partnership with KushCo Holdings Inc. ("KushCo"): Entered into a strategic partnership with this premier producer of ancillary products and services to the legal cannabis and CBD industries, with KushCo taking a 19.9% ownership position in XS.
Outlook
Xtraction Services continues to assess numerous leasing opportunities and intends to focus on pursuing those that align with its growth objectives, primarily in the United States. Target leasing opportunities will mainly consist of leases to businesses underpinned by recurring, predictable revenues, sound balance sheets, and experienced management teams.
Current Pipeline:
Currently have multiple signed term sheets and maintain a robust pipeline with approximately 40 leasing opportunities under review
Increase in leasing opportunities to higher quality, larger companies, who now have fewer options for raising capital
In light of the current environment, the Company believes accretive opportunities exist as many companies throughout the United States lack sufficient access to capital or are burdened with restrictive sources of capital, leading to excessive dilution. XS has become a recognized brand in the industry as evidenced by an increase in the quality and number of leads available. The Company remains committed to establishing strong customer relationships, which will provide better returns for shareholders and stakeholders alike.
Key Financial Results
Results of Operations
The Company has established key customer relationships, some of which became revenue-generating in 2018, with the remainder of its established customers generating revenue in 2019. Revenues increased by $2.1 million for YE/19 with annual revenues of $2.3 million compared to $0.15 million for YE/18. A portion of the revenue increase was due to the recognition of the present value of non-cancelable rentals associated with financing leases entered into in 2019, as well as the completion of a direct equipment sale.
New leases entered into in 2019 resulted in an increase in the cost of sales by $1.5 million over the previous year. Cost of sales for YE/19 of $2.6 million compared to $1.1 million for YE/18 were primarily attributable to equipment costs associated with financing leases entered into in 2019, the cost of equipment purchases for a direct equipment sale, and to a lesser degree, compensation and related expenses for personnel providing services to customers, as well as increased non-cash depreciation expense related to the servicing of equipment in 2019.
The Company realized a gross loss of $0.33 million for YE/19, compared to a loss of $1.0 million for YE/18. The Company anticipates further gross margin improvements due to the curtailment of excess equipment sales and new leasing activity.
Story continues