Mr. Ken Rose reports

FORMATION FLUID ANNOUNCES PROFITABLE QUARTERLY RESULTS

Formation Fluid Management Inc. has released its consolidated financial results for the three months ended Sept. 30, 2014, and 2013, and had profitable operations for the three months ended Sept. 30, 2014.

First quarter 2014 key takeaways:

• Gross margin of 65 per cent;
• Cash position of over $2.4-million;
• Working capital of over $2.5-million;
• Shareholders' equity of over $6.3-million.

                         FINANCIAL SUMMARY
                                                    Three months ended Sept.
                                                                30,
                                                       2014            2013

Revenues                                     $    1,154,480  $    2,545,537
EBITDA                                       $      478,924  $    1,435,256
Diluted per share                            $         0.01  $         0.03
EBITDA as % of revenues                                  41%             56%
Funds from operations                        $      478,924  $    1,420,773
Diluted per share                            $         0.01  $         0.03
Net earnings                                 $      145,931  $    1,374,375
Basic per share                              $         0.00  $         0.04
Diluted per share                            $         0.00  $         0.03
Property and equipment additions
(disposals); net cash                        $      683,671  $      (18,150)

Business outlook

The company expects to see continued strong growth as a result of the following factors:

• Fabrication of an additional RO unit is complete pending commissioning, which now provides the company with two sets of equipment. Manufacturing is in progress of additional equipment including an emergency response unit.
• The successful completion of two major remediation projects has demonstrated the efficiency and robustness of the company's equipment, allowing FFT to offer clients the ability to clean saline spills, as well as produced and frack water returns to potable water standards.
• The industry's continued focus on contaminated water issues such as tailing ponds is providing the company with expanding market opportunities.
• An aggressive marketing program in Western Canada and the southern United States has resulted in strong and favourable inquiries from several major producers.
• The company's expanded shop facilities now include testing facilities, allowing the company to provide clients with complete engineering solutions for their water needs.

Financial results

During the quarter ended Sept. 30, 2014, the company generated $1,154,480 (2013: $2,545,537) in revenue from water filtration services and incurred field expenses of $400,739 (2013: $960,932) resulting in gross margin of $753,741 (2013: $1,584,605) or 65 per cent (2013: 62 per cent), and net income of $145,931, or nil per basic and diluted income per share (2013: $1,374,375; four cents per basic and three cents per diluted income per share). Earnings before interest, taxes, depreciation and amortization for 2014 were $208,870 (2013: $1,435,256). Field expenses consist of the direct costs associated with providing the water filtration services generating the company's revenues.

In the quarter ended Sept. 30, 2014, the company generated cash provided by operations of $706,110 (2013: $1,033,616). The company used net cash of $683,671 in 2014 for capital expenditures (2013: $(18,150)). The capital expenditures in first quarter of 2015 were incurred to commence construction of additional water-processing plants to meet expected customer demand.

The company's financing activities in the quarter ended Sept. 30, 2014, generated cash of $285,860 from a long-term bank loan agreement for the construction of capital equipment. In 2013, the company repaid short-term bank indebtedness of $70,499. Total cash inflows exceeded total cash outflows during the period ended Sept. 30, 2014, by $308,299 (2013: $981,267).

At Sept. 30, 2014, the company had cash of $2,441,755 and working capital of $2,567,384 (2013: cash of $981,267 and working capital of $513,159). Shareholders' equity at Sept. 30, 2014, was $6,381,131 (2013: $3,955,614).

The company's full financial statements and management's discussion and analysis are available on-line at SEDAR.

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