Mr. Allen Lone reports

AUGUSTA ANNOUNCES RESULTS FOR THE FIRST QUARTER OF 2018 AND YEAR ENDING DECEMBER 31ST 2017 AND CORPORATE UPDATE

Augusta Industries Inc. has released its financial results for the year ended Dec. 31, 2017, and for three months ended March 31, 2018.

Summary for three months ended March 31, 2018

For the three months ending March 31, 2018, the corporation had revenues of $1.72-million as compared with $879,000 during the three months ending March 31, 2017.

Total profit from operations for the three months ending March 31, 2018, was $31,000 or a net profit of nil per share compared with a loss of $77,000 or nil per share for the three months ending March 31, 2017. Gross margins for the three months ending March 31, 2018, were 16 per cent compared with 23 per cent for the three months ending March 31, 2017, due to the change in mix between Macron and Fox-Tek sales during the period. The operating expenses in the three months ending March 31, 2018, was less at $244,000 compared with $277,000 for the same period in 2017. Stock-based compensation during the three months ending March 31, 2018, was $31,000 compared with $101,000 during the three months ending March 31, 2017.

Summary for year ended Dec. 31, 2017

For the year ended Dec. 31, 2017, the corporation had revenues of $2,556,000 compared with $4,596,000 during the year ended Dec. 31, 2016.

Total loss from operations for the year ended Dec. 31, 2017, was $666,000 or a net loss of nil per share compared with a profit of $7,000 or nil per share for the year ended Dec. 31, 2016. Gross margins for the year ended Dec. 31, 2017, were 21 per cent similar to 22 per cent for the year ended Dec. 31, 2016. The operating expenses in the year ended Dec. 31, 2017, were slightly higher at $1,209,000 compared with $1,019,000 for the same period in 2016. Stock-based compensation during the year ended Dec. 31, 2017, was $250,000 while there were no such expenses during the year ended Dec. 31, 2016.

The financial statements, notes to the financial statements and management's discussion and analysis for the year ended Dec. 31, 2017, and for three months ended March 31, 2018, are available on SEDAR.

Corporate update -- business development

Blockchain technology

The corporation has created a wholly owned subsidiary, Paragon Blockchain Inc., to commence the process of implementing blockchain technology. Paragon has entered into a memorandum of understanding with an undisclosed blockchain company (UBC) to advise and develop a new set of blockchain applications for the corporation. The UBC will act as technical adviser and initiate the process of developing a new set of blockchain applications that will integrate, among other things, artificial intelligence (AI) for the purpose of sorting critical procurement opportunities within U.S. government agencies for Marcon International Inc., Fox-Tek Canada Inc.

Blockchain technology has the potential to unlock substantial new opportunities capable of impacting the business of Marcon. Specifically, Marcon seeks to create an ecosystem in the supply chain management of clients to change the dynamics of the scoping and bidding process by providing vendors and subcontractors with AI data mining tools to pro-actively drive the process.

Blockchain technology is of critical importance to Fox-Tek as well particularly the expansion of its non-intrusive technology in the oil and gas industry, whose clients include many of the biggest companies in the world. Fox-Tek believes a common system of record connecting data collected for events is of paramount importance to clients. The corporation will create a platform that will allow for the analysis of data incorporating an auditing system built for regulatory and quality assurance oversight. The platform will implement a distributed blockchain ledger using smart contracts. These smart contracts provide customization of blockchain data.

Fox-Tek segment

Fox-Tek continues to support its independent sales agents and distributors primarily outside of North America with the intent of utilizing their local contacts and established relationships within the oil and gas industry to expedite the distribution of Fox-Tek's products in the local jurisdictions.

After a very successful first introductory trip to India, Fox-Tek has submitted a number of technical proposals and bids on a number of different projects based on the corporation's various technologies. One of the more interested oil companies has requested a bid for two large EFM (enterprise feedback management) systems to be placed on vessels within a refinery. The client has provided a sample plate for testing purposes that would lead to a custom design for that specific material. The corporation is also working on introducing the company's leak detection technology for long-distance applications in India.

The corporation has initiated talks with the Ontario Centres of Excellence (OCE) to supplement a number of high-quality personnel within the OCE. This includes having a postdoctorate fellow to come to the offices of the corporation and provide a full assessment on the company's data analysis techniques and to look at ways to better manage the company's large database of data.

Through OCE, Fox-Tek, along with the McMaster University's Centre of Opportunity, will be developing an innovative constant current source. This will be used across all of the corporation's EFM products, providing its existing and new clients with a better quality of analysis with the use of a high-precision constant current source. A full prototype demonstrator has been completed.

The corporation has been working to fulfill its obligations toward the engineering and field services to meet the requirements of the contract announced on July 10, 2017, with one of the corporation's largest and longest-standing clients in North America.

The corporation is still working closely with the Trans Africa pipeline project (TAP) to provide non-intrusive sensing equipment which will verify the integrity of the pipeline composite at key locations. In addition to the non-intrusive sensing equipment, Fox-Tek will provide optical-based sensing technology which would allow TAP to monitor the right-of-way zones from possible third party intrusions. The last update was that partial financing is completed and the site survey will be concluded for the desalination plant will be under way later in 2018.

The company is continuing with the qualification process with Petrobras to become a supplier of corrosion detection monitoring systems, optical strain/pressure/temperature sensors and leak detection technology.

The corporation is working with FiBos on two separate applications to monitor pressure in injectors. These injectors are critical to the plant operations since failures could lead to slowdowns or shutdowns of operations. A proof of concept was successfully completed and the company is current working phase 2.

Sales of EFM corrosion monitoring systems

The corporation has successfully completed three site surveys for one of its largest and longest-standing clients in North America and is negotiating a contract with the client to convert a competitor's technology to Fox-Tek's EFM technology.

The corporation continues to work closely with engineering firms and major oil and gas companies in the Middle East, England, in addition to all the major Canadian companies. There have been increased interest in the corporation's products from a number of overseas markets including India and the United Kingdom. The corporation entered into a contract in 2016 with a company in the U.K. for the supply of a custom built EFM system for a laboratory. This system was shipped out in the first quarter of 2017 and installed in the second quarter of 2017. The corporation is confident this could lead to future orders for more portable and mobile systems that could be used for periodic monitoring for less critical applications.

The corporation is also negotiating a contract for sale of another EFM unit to another of its clients.

DMAT platform

The corporation continues to enhance the DMAT platform (data management and analysis tool). Response from customers utilizing the DMAT service has been very positive. For DMAT, the revenue stream is guaranteed when a customer acquires the hardware. The corporation has successfully negotiated new contracts with several clients, for engineering services and data analysis, for the 2017 fiscal year and beyond.

Leak detection technology

Fox-Tek's leak detection technology has the potential of becoming a disrupting technology within the oil and gas sector due to its ability to detect minute amounts of volatile organic compounds present in hydrocarbon leaks. Due to the nature of the technology, it will likely have fewer false alerts unlike a number of competing technologies.

1. The corporation has received a contract for a system to detect oil on water in a drainage culvert.
2. The corporation has been invited to be part of an on-site technical review for the use of its technology to monitor leaks in a pipe, within a tank farm. A budgetary/technical proposal was provided to the client. The pipe is estimated to be about 500 metres long. A site survey will be conducted end of April followed by contract negotiations.
3. Fox-Tek has successfully completed a valuation of its leak detection technology by a large consortium consisting of a number of oil and gas companies.
4. Fox-Tek is working closely with CANMET on the development of a new sensor technology (RFID corrosion sensor) to be used as a way to determine the damage of time on pipeline coatings. A letter of interest was submitted pursuant to a government initiative and the company has been selected to participate in phase 2 -- LOI technical review.

The company has an additional five bids for a number of applications utilizing a number of its technologies (EFM, FBG and leak detection).

Marcon segment

Marcon provides procurement and support services to existing and new projects worldwide in the energy sector. Initially Marcon had focused on providing services in the energy sector but moved on to government contracts and government services. Marcon has two subsidiaries, Marcon USA and Marcon UK, to help enhance and support its logistic and sales operations. Over the years it has established a good reputation and has been a consistent performer for its clients in the government as well as the international oil and gas industry.

Marcon has built an impressive pipeline of quotes in 2018 along with increased bidding activity. The majority of the larger bids and quotes for Marcon are time consuming both in preparation of the bidding process and with the client and the end-users. Marcon has successfully signed numerous deals year to date and will continue to do so and update the public through periodic press releases. Backlog sales in Marcon for the period ending March 31, 2018, were $819,000.

About Augusta Industries Inc.

Through its wholly owned subsidiaries, Marcon International Inc. and FOX-TEK, Augusta Industries provides a variety of services and products to a number of clients.

Marcon is an industrial supply contractor servicing the energy sector and a number of United States government entities. Marcon's principal business is the sale and distribution of industrial parts and equipment.

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