Mr. D. Brad Paterson reports

WAVEFRONT ANNOUNCES THIRD QUARTER 2014 FINANCIAL RESULTS

Wavefront Technology Solutions Inc. has released its financial results for the third quarter ended May 31, 2014.

Wavefront's business operates in a market where there is increasing demand to bring economically beneficial solutions to exploration and production (E&P) companies to maximize oil and gas productivity. Central to Wavefront's broad portfolio of technologies is its fluid-delivery process, Powerwave.

Wavefront is uniquely positioned to capitalize on significant growth opportunities. By leveraging Powerwave across multiple oil industry applications including EOR (enhanced oil recovery), well stimulation and drilling, among other applications, Wavefront is seeking to minimize technology risk and accelerate commercialization timelines. Alberta Energy's recently announced reduced royalty program, aimed at boosting oil production from EOR projects, is expected to encourage producers to re-enter previously produced fields to draw out more of the original oil in place(1), and may enhance producer economics and thus have a positive effect on Powerwave demand.

Third quarter revenues were affected by the client timing for the installation of international Powerwave mature field revitalization projects, which include: an approximate $1.25-million (U.S.) contract with Petrobras, an approximate $353,500 (U.S.) contract with Pan American Energy and an approximate $1,337,700 (U.S.) contract with Ecopetrol. It is anticipated that commencement of these international Powerwave mature field revitalization projects worth $2,941,200 (U.S.) in contracts will commence in late summer 2014.

Basic and diluted net loss, before non-cash impairment loss, for the nine months ended May 31, 2014, was $2,866,714 (3.5 cents per share), a decrease of $466,787 from the comparative period in 2013 of $3,333,501 (four cents per share). Basic and diluted net loss, including the non-cash impairment loss, for the nine months ended May 31, 2014, was $4,205,298 (5.1 cents per share), compared with $3,333,502 (four cents per share) in 2013.

Financial highlights for the three months ended May 31, 2014, include:

• Basic and diluted net loss, before the non-cash impairment loss, for the three months ended May 31, 2014, was $937,657 (1.1 cents per share), a decrease of $30,398 from the comparative period in 2013 of $968,055 (1.2 cents per share). Basic and diluted net loss, including the non-cash impairment loss, for the three months ended May 31, 2014, was $2,276,241 (2.7 cents per share), compared with $968,055 (1.2 cents per share) in 2013.
• Cash used in operating activities(2) was $587,066, compared with $423,039 for the comparative period. Management believes that over time, the funds used in operations should decrease as revenue grows and as it focuses expenditures on nearer-term revenues. Wavefront continues to strive toward sustainability while endeavouring to accelerate revenue growth in its core focus marketing regions.
• Total revenues were $1,499,056, an increase of $252,008 (20 per cent) over second quarter revenues of $1,247,048, but a decrease of $159,965 over the comparative revenues of 2013 of $1,659,021.
• Revenues attributed only to Powerwave single-well stimulations were $882,010, an increase of $74,967 over revenues in the comparative period of $807,043. (For the nine months ended May 31, 2014, Powerwave revenues related to single-well stimulations totalled $1,965,685, an increase of $451,416 or 29.8 per cent compared with $1,514,269 in the comparative period.)
• Costs of sales were $460,075 or 30.7 per cent of revenues, compared with $298,162 or 18 per cent of revenues in the comparative period. The increase in costs of sales of $161,912 relates to a prior-period adoption of a field incentive and commission program designed at enhancing sales.
• During the third quarter, the company undertook impairment testing of its goodwill and the associated assets of the tubing pump and bailers cash-generating unit (CGU) to which the company's goodwill is solely attributed. As at May 31, 2014, the company's market capitalization was below the carrying value of its net assets, which represents a potential impairment indicator. Moreover, the impairment testing was required as tubing pump and bailers CGU's financial performance was weaker than expected as a result of the higher heavy oil price differential in prior periods, which affected drilling(3) and thus affected the tubing pump and bailers CGU.

Based on the results of management's impairment testing, the company recorded a non-cash impairment loss of $1,338,584, which is included as a line item of the condensed consolidated interim statements of net loss and comprehensive loss. Since the resulting impairment loss from the tubing pump and bailers CGU exceeded the goodwill allocated to the CGU, the company was required to allocate the additional impairment to certain other assets of the tubing pump and bailers CGU. As the goodwill had a carrying value of $1,222,217, the company applied the additional impairment amounts to the tubing pump and bailers CGU's property, plant and equipment in the amount of $116,367.

The non-cash impairment charge does not have an effect on the company's cash flows from operating activities and will not have an effect on the tubing pump and bailers CGU's future operations as WTI-WCS (West Texas Intermediate-Western Canadian Select) differentials return to prior levels. The company assessed impairment indicators for the Powerwave, performance drilling and Primawave CGUs and concluded no additional impairment indicators were present at May 31, 2014, and as such, the determination of the recoverable amount for the Powerwave, Primawave and performance drilling CGUs was not required.

• Total current assets decreased by $1,927,205 to $11,824,408 from the prior year-end. Of the net decrease, $2,341,665 relates to a reduction of cash resource, of which $1,925,154 was used to finance operations, $347,456 was used for the acquisition of additional Powerwave tools and equipment, and $84,351 relates to the acquisition of intellectual property licences and patents, less proceeds on disposition of property, plant and equipment of $15,296. Offsetting the reduction in cash resources were increases in trade and other receivables of $227,473 and prepaid expenses of $178,754, related to accruals related to international Powerwave mature field revitalization projects.

Notes:

1. "Enhanced Oil Recovery Plan Offers Royalty Relief," by Dan Healing, Calgary Herald, July 28, 2014;
2. Cash flow used in operating activities is a measure of the total cash generated from the company's operations and is calculated by adding back amortization, share-based payments and other non-cash items to net income and then adjusting for changes in working capital. Cash flow used in operating activities is a component of the IFRS (international financial reporting standards) consolidated statement of cash flows;
3. TD Economics, "Drilling Down on Crude Oil Price Differentials," March 14, 2013, page 3;
4. Bloomberg and USB estimates -- for calendar 2016, a differential of $16.50 (U.S.) per barrel; and $15.50 (U.S.) per barrel for 2018.

The above financial highlights should be read in conjunction with the audited consolidated financial statements and management's discussion and analysis of results for Wavefront for the third quarter ended May 31, 2014, which were filed on SEDAR on July 29, 2014.

We seek Safe Harbor.