Mr. James Bond reports

KELSO TECHNOLOGIES INC. FINANCIAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2023

Kelso Technologies Inc. has released its unaudited consolidated interim financial statements and management's discussion and analysis for the three months ended March 31, 2023.

The unaudited consolidated interim financial statements were prepared in accordance with international financial reporting standards as issued by the International Accounting Standards Board (IASB). All amounts herein are expressed in U.S. dollars (the company's functional currency) unless otherwise indicated.

The company's unaudited consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2023, were approved by the board of directors on May 10, 2023.

Liquidity and capital resources

As at March 31, 2023, the company had cash on deposit in the amount of $2,613,852, accounts receivable of $1,018,212, prepaid expenses of $170,799 and inventory of $4,084,472 compared with cash on deposit in the amount of $2,712,446, accounts receivable of $1,381,979, prepaid expenses of $92,768 and inventory of $4,144,196 compared as at Dec. 31, 2022.

The company had income tax payable of $43,126 at March 31, 2023, compared with $30,626 at Dec. 31, 2022.

The working capital position of the company as at March 31, 2023, was $6,365,196 compared with $7,000,568 as at Dec. 31, 2022. Capital resources and operations are to be expected to protect the company's ability to conduct continuing business as planned for the foreseeable future.

Net assets of the company were $9,994,995 as at March 31, 2023, compared with $10,781,672 as at Dec. 31, 2022. The company had no interest-bearing long-term liabilities or debt as at March 31, 2023, or Dec. 31, 2022.

Outlook

During the first quarter of 2023, the owners and shippers that utilize rail tank cars continue to cautiously commit to investment in new tank car equipment and/or the requalification of their existing rail tank car fleets. Industry experts anticipate that new car production will track replacement demand for the 438,000 tank car fleet and be in the range of 7,000 to 10,000 cars per year. Rail tank car requalifications will be in the range of 40,000 to 50,000 cars per year for the next several years.

Rail tank car activity requiring Kelso components has remained mostly unchanged based on general economic recoveries and manufacturing supply chain disruptions that may require an increase in rail tank car transportation solutions. Traditional foreign supply chains in the rail tank car industry have become unreliable. The company's 100-per-cent-American-made reputation and its proven ability to service customer orders even during the most challenging of times have improved Kelso's reputation and brand recognition.

Industry projections indicate that the rail tank car market is entering a period of modest fleet growth coupled with growth in rail tank car utilization. Industry analysts predict new tank car demand at approximately 9,200 tank cars in 2023. The addition of new customers and the anticipated build of new tank cars and requalification activities are expected to provide modest financial growth from rail operations.

Management believes that there are significant opportunities to grow from the introduction of new innovative products in both the rail and automotive industries that are emerging from research and development activities. The company continues to research, develop and engineer promising new transportation-related equipment. In the heavily regulated transportation industries, the company's R&D projects are complex, time-consuming and expensive. The primary purpose of R&D investments is to advance and elevate the probability of future financial successes from a larger and more diverse product line.

Several new rail products currently in AAR service field trials continue to progress well during the first quarter of 2023. The company anticipates regulatory progress in 2023 that can lead to new revenue sources when full approval and early AAR vetted conditional sales to qualified customers are permitted.

The KXI HD prototype vehicle has been completed, and initial testing activities are above expectations. All mechanical and hydraulic components are proven technologies that are sourced from well-established original equipment manufacturer suppliers and stakeholders. Component designs have been scaled from existing uses in military and commercial applications to fit the specifications of KXI HD. The prototype vehicle has been commissioned with the company's proprietary encryption protected road-to-no-road wilderness driver assistance software, which encompasses its trademarks PreciseRide and AdaptiveGrip. The commissioned prototype vehicle is currently going through extensive software and engineering commissioning and integrity testing in preparation for Canadian motor vehicle safety standard compliance testing.

Once KXI HD has its commercial design specifications completed, the final design will have to attain full compliance with the Canadian Motor Vehicle Safety Standards (CMVSS). Successful completion of the CMVSS requirements should allow the company to meet the Federal Motor Vehicle Safety Standards (FMVSS) in the United States including the majority of compliance requirements for each Canadian province and each American state. This is expected to provide the company with a national safety mark awarded as a final stage manufacturer, which is a key prerequisite for enabling full-scale marketing initiatives and initial commercial sales in late 2023 and 2024.

Timing of regulatory approvals on new rail and automotive products and corresponding revenue streams remain unpredictable and cannot be guaranteed to be successful. Management continues to assess the company's research and development discoveries, new product viability, budget restrictions, and market potential of all R&D programs. Management adjusts R&D plans based on testing results as part of the company's R&D risk management program. Despite the many challenges imposed by the COVID-19 recession, historic inflation rates and compromised supply chain issues, management remains bullish on the potential of the company's new product developments.

The company deploys capital resources sensibly to maintain financial health and liquidity. The company's working capital was $6,365,196 as at March 31, 2023. Current working capital and anticipated sales activity for 2023 is expected to protect the company's ability to conduct continuing business operations and R&D initiatives for the foreseeable future. With no interest-bearing long-term debt to service and improved sales prospects from a larger product portfolio, Kelso can continue to focus on longer-term financial performance on behalf of the shareholders of Kelso.

About Kelso Technologies Inc.

Kelso is a diverse product development company that specializes in the design, engineering, production and distribution of proprietary service equipment used in transportation applications. The company's reputation has been earned as a designer and reliable supplier of unique high-quality rail tank car valve equipment that provides for the safe handling and containment of hazardous and non-hazardous commodities during transport. All Kelso products are specifically designed to provide economic and operational advantages to customers while reducing the potential effects of human error and environmental harm.

For a more complete business and financial profile of the company, please view the company's website and public documents posted under the company's profile on SEDAR in Canada and on EDGAR in the United States.

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