From page 6 of management discussion...
Throughout fiscal 2021 COVID-19 impacted numerous end users or E&P’s directly in that their office facilities and/or oilfields had limited access or were closed for extended periods of time. This impacted Wavefront in that Powerwave jobs could not be completed and thus, revenues not recognized. Additionally various end users or E&Ps were indirectly impacted by COVID-19 in that their supply chains (i.e., acid manufacturing and availability, coiled tubing and rig parts and availability, etc.) were and continue to be impacted, thereby also delaying Powerwave stimulation work and indirectly impacting Wavefront’s business.
Revenues for the fiscal year ended August 31, 2021 totalled $1,605,742, a decrease of $1,198,715 from that recorded for the comparative year ended August 31, 2020 of $2,804,457. Of the revenues for the reporting quarter, $1,471,554 relates to Powerwave stimulations, with $1,366,834 of those revenues being derived from the Middle East, with 93.9% of total revenues generated from Distributors. Costs of sale remained relatively constant at 4.7% (2020 – 4.3%); however, the Company was able to reduce its general and administrative, sales and marketing, amortization and depreciation, and research and development expenses by $170,359. During the year, the Company incurred an impairment expense of $59,976, a reduction of $156,103 from the comparative year’s expense of $216,079. Despite the reduction in revenues of $1,239,780, the Company was able to effectively manage its cash resources, as cash used in operating activities decreased by $25,579 to $455,546 (2020 - $481,125).
Revenues for the fiscal year and three months ended August 31, 2021 were not as anticipated and negatively impacted as end users and / or E&P customer companies experienced COVID-19 related oilfield shut downs, had limited access to oilfields due to social distancing and travel restrictions, or have had supply chains (i.e., chemical and acid manufacturing and availability, coiled tubing and rigs parts availability, etc.), which has impacted projects and revenue recognition and business operations. Despite the COVID-19 related issues, the Company, late in the fourth quarter 2021, was able to secure a new Texas-based E&P customer and was issued a well stimulation package for multiple wells with an approximate aggregate value of US $85,000. This same E&P customer also issued two additional well stimulation packages, late in the fourth quarter and subsequent to year end, for multiple wells with an approximate aggregate value of US $210,000. Although these well packages have yet to be completed due to the customer’s supply chain and COVID-19 related issues, the back log of well stimulations represent a significant growing backlog of revenues which, when earned, may represent in excess of a threefold increase in fiscal 2021 USA Powerwave revenues. Subject to continued quality of Powerwave service to these existing and new clients, the Company anticipates further awards of Powerwave well stimulation packages throughout fiscal 2022.
Subsequent to fiscal 2021, the Company was also able to add three Texas-based E&P customers, who provided well stimulation packages for multiple wells with an approximate aggregate value of US $330,000.
Additionally, and subsequent to the year ended August 31, 2021, the Company was able to secure a new GSA with a minimum guaranteed contract value of US $10 Million, over a five-year term. Wavefront will invoice the GSA client US $500,000 (“Quarterly Guaranteed Minimum”), or any prorated portion thereof, during each of the Company’s fiscal quarters over the term of the Agreement. Any Services work more than the Quarterly Guaranteed Minimum would be invoiced above the Quarterly Guaranteed Minimum and recognized as revenue using the percentage of completion method, which is based on the term of the tool rental and Services. Given the inability to recognize revenues related to a prior GSA, the Company will account for revenues related to the new GSA agreement on a cash basis.
The totality of the recent US based business development activities, with an approximate aggregate value of US $2,625,000, if and when the projects are completed and revenues are able to be recognized, would represent a significant increase over the current fiscal years total reported revenues of $1,156,677.