Cleantek Industries : Q2 2022 Management's Discussion & Analysis | MarketScreener

2022-08-20 00:09:37 By : Ms. Coral Chen

For the three and six months ended June 30, 2022 and 2021


August 18, 2022 - The following Management's Discussion and Analysis ("MD&A") of the financial condition and results of operations for Cleantek Industries Inc. ("Cleantek" or the "Company" which includes references to "we", "our", "us", "its"), (formerly Raise Production Inc. ("Raise")) is a review of the operations, current financial position and condition for the three and six months ended June 30, 2022 and June 30, 2021 and should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2022 ("Interim Financial Statements") and the audited consolidated financial statements for the years ended December 31, 2021 and 2020 ("Annual Financial Statements").

The condensed consolidated interim financial statements of Cleantek have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting , using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee. This MD&A and the unaudited condensed consolidated interim financial statements of Cleantek have been prepared by management and approved by the board of directors (the "Board") as of August 18, 2022.

Cleantek, headquartered in Calgary, Alberta, is an innovative provider of patented, clean technology solutions focused on reducing both cost and carbon intensity in the wastewater management and industrial lighting sectors across North America. Cleantek is a publicly traded company listed on the TSX Venture Exchange (the "TSXV") under the trading symbol CTEK.

This MD&A contains forward-looking statements and introduces financial measures which are not defined under IFRS aimed at helping the reader in making comparisons to metrics similarly disclosed by industry peers. Readers are cautioned that the MD&A should be read in conjunction with the Company's disclosure under "Non-IFRS Measurements" and "Forward-Looking Information" included at the end of this MD&A.

Cleantek is an environmental technology-based company that provides specialized and fully integrated wastewater treatment and disposal equipment along with turnkey sustainable lighting rental solutions. Cleantek leverages its patented technology and industry expertise to provide equipment to service a diverse range of clientele. Cleantek prioritizes people and the environment through our high-performance safety focused culture and our experienced technical professionals are committed to providing environmentally friendly cost-effective solutions to our clients.

On October 29, 2021 Cleantek completed a reverse takeover of Raise (the "RTO"), a TSXV listed company, pursuant to the terms of the arrangement agreement dated July 12, 2021 between Cleantek and Raise. This resulted in the amalgamated public company continuing under the name Cleantek Industries Inc. (TSXV: CTEK), which began trading on the TSXV on November 10, 2021.

Cleantek provides technology-based solutions for an increasingly demanding water treatment and disposal sector along with location lighting to provide safe working conditions for 24-hour operations. Cleantek provides its technology and services in some of the most active areas in Canada and the United States. Our environmental, safety and operational performance have enabled us to establish and maintain a blue- chip client base, including many exploration and production companies in North America.

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As the market continues its shift towards environmental, social and governance ("ESG") response initiatives and best practices, Cleantek intends to leverage its technology to capture additional market share through organic growth of its ZeroE wastewater treatment and vaporization service offering, along with a forecasted strong utilization of our sustainable lighting rental solutions.


per share amounts and percentages)

Net loss per share - basic and diluted ($)

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Cleantek's strategy focuses on delivering innovative and cost-effective solutions that reduce the carbon intensity as well as the capital and operating costs of industrial operations. By focusing on expanding the market awareness and adoption of its sustainable lighting solutions and wastewater treatment assets, Cleantek expects to experience increased utilization of these high-margin product lines in the near-term. This, combined with the expansion of our ZeroE System portfolio of waste energy powered, wastewater treatment and vaporization units across industrial and infrastructure projects throughout North America and globally, is expected to lead to a sustainable increase in revenue and corresponding profitability as the Company's asset base grows over time.

The Company's near-term strategy will continue to focus on:

The Company is uniquely positioned with the prospect to capture expansion in both ZeroE wastewater vaporization and sustainable lighting markets. Cleantek expects that wastewater and vaporization opportunities in the oil and gas, municipal grey water, and industrial wastewater industries and a growing awareness regarding the disadvantages and risks of downhole injection will continue to increase the demand for Cleantek's ZeroE products.

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Cleantek's revenue is generated primarily from the rental and service of sustainable lighting solutions, including HALO lighting systems and solar hybrid lighting towers, and ZeroE dehydration units, including mobile ZeroE dehydration units and a ZeroE production facility unit, based on fixed or agreed upon service contracts with its customers in the upstream and midstream segments of the energy industry as well as the commercial construction industry in western Canada and the United States.

Revenue for the three and six months ended June 30, 2022, increased to $3,125 and $6,272, respectively, compared to $1,945 and $4,402 for the same periods in 2021. General equipment utilization improved in 2022 compared to 2021 due to the recovery of market fundamentals in the energy sustainability sector as a result of strong commodity prices and an increase in drilling activities and rental rates. As a result, the Company's sustainable lighting solutions rental rates started to improve in the latter half of 2021 and into 2022 and equipment utilization, especially on the HALO products has also improved substantially. ZeroE dehydration revenue increased $154 and $175 for the three and six months ended June 30, 2022, compared to same periods in 2021, primarily due to increased mobile ZeroE dehydration revenue from the recovery in the market fundamentals and the expansion into the US market. Cleantek's operations in the first half 2021 were subject to the impacts of COVID-19 and a global oversupply of oil that caused a decline in commodity prices and drilling activity.

Direct operating expenses are comprised of direct operating costs, including salaries and wages and other labour costs; repairs and maintenance of equipment; transportation and mobilization costs of equipment to and from customers; and other direct operating expenses.

Direct operating expenses were $1,419 and $2,729 for the three and six months ended June 30, 2022, respectively, which increased compared to $1,023 and $2,051 for the same periods in 2021. Direct operating expenses increased in 2022 primarily as a result of increased equipment utilization and resulting revenue. The direct operating expenses as a percentage of revenue actually decreased in both the three and six months ended June 30, 2022 as a result of increased equipment utilization with minimal repair and maintenance expenses.

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CLEANTEK Industries Inc. published this content on 19 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 August 2022 02:33:02 UTC.