Destiny Resource Services Corp.
TSX : DSC

Destiny Resource Services Corp.

November 09, 2005 09:00 ET

Destiny Resource Services Corp. Announces Q3'05 Results; $0.20 Per Share Dividend Declaration; Appointment of Chief Safety Officer

CALGARY, ALBERTA--(CCNMatthews - Nov. 9, 2005) - Destiny Resource Services Corp. (TSX:DSC) announced today: (1) Q3'05 results; (2) the declaration of a dividend of $0.20 per share payable December 15, 2005 to shareholders of record December 5, 2005; and (3) the appointment of Joe Pilieci as Chief Safety Officer.

"Q3'05 continued the strong performance of Destiny in 2005." said Bruce Libin, Executive Chairman and Chief Executive Officer. "While the third quarter has traditionally been a good one for Destiny, we are especially proud of the 74% growth in revenue year over year and the 83% growth in income before income taxes, again year over year. Applying a tax provision to 2005, even if it is non-cash, still gives us a 25% increase in net income for the period compared to the same 3 months of 2004. (I will point out the decrease in the 3 month comparisons of earnings and EBITDA per share. Please remember we doubled the number of issued shares with the Q4'04 Rights Offering, the proceeds of which were used to eliminate term debt and permit the use of cash to pay dividends.) When the third quarter is added to the very strong first half of the year, we report meaningful increases in every category, as shown in our Financial Highlights table."



FINANCIAL HIGHLIGHTS

Three Months Ended Nine Months Ended
($000s, except per share September 30, September 30,
amounts) 2005 2004 Change 2005 2004 Change
(unaudited) $ $ % $ $ %
------------------------------------------------------------------------

Revenue 21,216 12,200 + 74 52,613 26,200 + 101
Net income for the
period 1,325 1,057 + 25 5,395 1,696 + 218
Per share - basic
and diluted 0.24 0.40 - 40 0.98 0.64 + 53
EBITDA (1) 2,533 1,454 + 74 7,534 2,824 + 167
Per share - basic
and diluted 0.46 0.55 - 16 1.36 1.07 + 27
Weighted average shares
outstanding for the
period(000s)
Basic (2) 5,554 2,636 + 111 5,522 2,636 + 109
Diluted (2) 5,567 2,636 + 111 5,528 2,636 + 110

Sept. 30, Dec. 31,
2005 2004 Change
As at $ $ %
------------------------------------------------------------------------
Working capital 2,351 2,801 - 16
Total assets 23,466 11,391 + 106
Shareholders' equity 10,989 7,845 + 40
Book value per share outstanding 1.97 1.49 + 32
------------------------------------------------------------------------
(1) "EBITDA" is a non GAAP measure which is used by management of
Destiny to assess the ability of the Company to generate cash flow,
before considering the effects of financing the business. EBITDA is
calculated from the consolidated statement of income as gross margin
less general and administrative expenses. This measure does not have
any standardized meaning prescribed by GAAP and may not be
comparable to similar measures presented by other companies.

(2) Based on the number of issued and outstanding shares as adjusted for
the April 1, 2005 20:1 share consolidation as described in note 4 to
the unaudited interim consolidated financial statements.


Mr. Libin continued with the balance of the Letter to Shareholders from the Q3'05 Report:

Dividend Declaration

"The strong 2005 results, a balance sheet with no term debt and the positive outlook we have for 2006 permit Destiny to follow its plan of using its cash generating capacity to pay dividends. Consistent with that, the Board of Directors has declared a dividend of $0.20 per common share on each of the 5,566,081 shares outstanding, payable December 15, 2005 to shareholders of record December 5, 2005. This will bring dividends for this year to $0.80 per share.

Chief Safety Officer; Executive Management Team

"I am pleased to announce the appointment of Joe Pilieci as Chief Safety Officer of Destiny. Joe's strong performance in building on the success of our Wolf Survey & Mapping division has earned him the right to the dual responsibilities of Vice-President, Survey Canada and Vice-President, Safety, Health & Environment. In addition to having full operational responsibility for Wolf Survey's Canadian business, Joe will have oversight responsibility for co-ordinating and synthesizing Destiny's safety programs. Destiny has an excellent safety record in the field, as evidenced by Wolf Survey & Mapping receiving a Work Safe Alberta 2004 Best Safety Performer Award "for exceptional performance in workplace health and safety". Our task now is to better co-ordinate and communicate Destiny's emphasis on safety and Destiny's record for safe operations. As a Company, we will log something around 1.25 million hours of work this year. It is one of our corporate goals to have every one of those hours be safe ones for our people, for the people with whom they work and for the environment of the areas in which we work."

"At the same time, I want to thank the other members of the Destiny Executive Management Team for their contribution and leadership to this fine year we are having and to our Company's planning and building for the future. Jim Holt, Vice-President, Drilling; Warren Plue, Vice-President, Survey USA; Steve Matthews, Vice-President, Kodiak Nav Solutions; Patrick Egli, Vice-President, Finance & Administration and Chief Financial Officer; Murray Leier, General Manager, Line Clearing; and Jim McLellan, Advanced Technology Manager. The experience and leadership of Destiny's Executive Management Team is an asset of which we, as shareholders, have right to be proud."

Outlook for 2005 and 2006

"High commodity prices drove oil and gas companies, appropriately so, to rush to get everything possible on production. This led, generally, to an emphasis on production spending and, over the past couple of years, not a pronounced increase in exploration spending. With the consensus view of a favourable commodity price environment for some time to come and with an eye to future production, the industry seems to be turning somewhat more to exploration activities, hence an increased demand for the services provided by Destiny. We see continued strength in our sector the balance of this year and at least for 2006. To the extent this means more advanced planning for seismic activities, we believe Destiny, as a favoured supplier for large scale programs, will benefit. We are always subject to the impact of adverse weather, of competition, of the geographic location and timing of programs and the million other things that affect our profitability every day. That said, we believe we are well positioned to participate in the increased exploration activity in the Western Canadian Sedimentary Basin, in the western United States and in the other areas in which we work."

"The quality services provided by Destiny, always in a safe and first class manner, are the work product of the dedicated men and women who, every day, deliver value, directly to our clients and indirectly to our shareholders. On behalf of the shareholders, I thank them for their efforts."

On behalf of the Board of Directors,

Bruce R. Libin, Q.C.

Executive Chairman and Chief Executive Officer


Destiny provides Seismic Front-End Services comprised of seismic survey and mapping (Wolf Survey & Mapping), seismic line clearing (Destiny Resources) and shot-hole drilling (Double R Drilling) to energy explorers and producers and to seismic acquisition companies. Destiny provides navigation, positioning and asset management technology to improve the productivity and safety of seismic operations through its Kodiak Nav Solutions division.



DESTINY RESOURCE SERVICES CORP.
CONSOLIDATED BALANCE SHEETS

September 30, December 31,
2005 2004
(Unaudited) $ $
------------------------------------------------------------------------
ASSETS (note 3)
Current
Cash --- 1,198,004
Accounts receivable 12,740,504 4,261,300
Inventory 789,301 561,888
Prepaid expenses 599,152 325,459
-----------------------------
14,128,957 6,346,651

Property and equipment (note 2) 9,336,972 5,044,266
-----------------------------
23,465,929 11,390,917
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness (note 3) 3,075,714 ---
Accounts payable and accrued liabilities 8,702,098 3,483,824
Income taxes payable --- 61,973
-----------------------------
11,777,812 3,545,797
-----------------------------

Future income taxes 699,000 ---
-----------------------------
Contingencies and commitments
(notes 3 and 9)

Shareholders' equity
Share capital (note 4) 8,279,435 7,198,140
Retained earnings 2,709,682 646,980
-----------------------------
10,989,117 7,845,120
-----------------------------
23,465,929 11,390,917
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the interim consolidated financial statements.


DESTINY RESOURCE SERVICES CORP.
CONSOLIDATED STATEMENTS OF
OPERATIONS AND RETAINED EARNINGS (DEFICIT)

Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
(unaudited) $ $ $ $
------------------------------------------------------------------------
Revenue 21,216,105 12,199,690 52,613,189 26,199,782
Direct expenses 17,168,242 10,488,001 41,987,835 22,533,608
-----------------------------------------------
Gross margin 4,047,863 1,711,689 10,625,354 3,666,174
Other expense (income)
General and
administrative 1,514,763 257,854 3,091,039 842,003
Amortization of
property
and equipment 569,481 293,392 1,432,195 932,225
Gain on disposal of
property and equipment (27,674) (20,602) (65,857) (35,579)
Interest 44,092 124,375 104,237 543,030
Other expense (income) 8,769 (524) (29,910) (5,800)
-----------------------------------------------
2,109,431 654,495 4,531,704 2,275,879
-----------------------------------------------
Income from continuing
operations before
income taxes 1,938,432 1,057,194 6,093,650 1,390,295
Income taxes
Current --- --- --- 26,500
Future 613,000 --- 699,000 ---
-----------------------------------------------
613,000 --- 699,000 26,500
-----------------------------------------------
Net income from
continuing operations 1,325,432 1,057,194 5,394,650 1,363,795
Income from discontinued
operations, net of
income taxes (note 7) --- --- --- 332,197
-----------------------------------------------
Net income for
the period 1,325,432 1,057,194 5,394,650 1,695,992
Retained earnings
(deficit), beginning
of period 2,497,168 (60,889) 646,980 (9,070,685)
Reduction of share
capital against
deficit (note 4) --- --- --- 8,370,998
Dividends (note 4) (1,112,918) --- (3,331,948) ---
------------------------------------------------------------------------
Retained earnings,
end of period 2,709,682 996,305 2,709,682 996,305
------------------------------------------------------------------------

Basic and diluted per
share amounts (note 6)
Net income for the period
from continuing
operations per common
share 0.24 0.40 0.98 0.52
Net income for the period
from discontinued
operations per common
share --- 0.00 --- 0.12
------------------------------------------------------------------------
Net income for the period
per common share 0.24 0.40 0.98 0.64
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the interim consolidated financial statements.


DESTINY RESOURCE SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
(unaudited) $ $ $ $
------------------------------------------------------------------------
CASH FLOWS PROVIDED BY (USED IN):

Operating activities:
Net income from
continuing operations 1,325,432 1,057,194 5,394,650 1,363,795
Items not involving cash:
Amortization of property
and equipment 569,481 293,392 1,432,195 932,225
Gain on disposal of
property and equipment (27,674) (20,602) (65,857) (35,579)
Future income taxes 613,000 --- 699,000 ---
Amortization of deferred
charges --- --- --- 45,000
-----------------------------------------------
2,480,239 1,329,984 7,459,988 2,305,441
Net change in non-cash
working capital related
to operating activities
(note 11) (85,415) (4,885,517) (3,824,009) (2,292,593)
-----------------------------------------------
2,394,824 (3,555,533) 3,635,979 12,848
-----------------------------------------------
Financing activities:
Increase (decrease) in
bank indebtedness (629,504) 2,415,657 3,075,714 (661,645)
Dividends paid (1,112,918) --- (3,331,948) ---
Costs related to 2004
Rights Offering --- --- (580) ---
Shares issued from
exercised options 114,300 --- 114,300 ---
Repayment of long-term
debt --- (409,461) --- (1,519,202)
Increase in long-term
debt --- --- --- 1,216,000
Repayment of debentures
(note 10) --- (1,026,000) --- (4,026,000)
-----------------------------------------------
(1,628,122) 980,196 (142,514) (4,990,847)
-----------------------------------------------
Investing activities:
Purchase of property
and equipment (849,248) (1,203,747) (4,855,468) (1,384,701)
Proceeds on sale of
property and equipment 82,546 42,380 163,999 568,255
Cash flow from
discontinued operations
(note 7) --- 521,286 --- 5,794,445
-----------------------------------------------
(766,702) (640,081) (4,691,469) 4,977,999
------------------------------------------------------------------------
Decrease in cash for
the period --- (3,215,418) (1,198,004) ---
Cash, beginning of period --- 3,215,148 1,198,004 ---
------------------------------------------------------------------------
Cash, end of period --- --- --- ---
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the interim consolidated financial statements.


MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

The following discussion and analysis of financial results for the three month and nine month periods ended September 30, 2005 ("Q3'05" and "2005 YTD") and September 30, 2004 ("Q3'04" and "2004 YTD") is based on information available until November 8, 2005 (unless otherwise noted) and upon the Company's consolidated interim financial statements for the periods presented, which were prepared in accordance with Canadian generally accepted accounting principles, and should be read in conjunction with the Company's consolidated financial statements and Annual Report for the prior fiscal year ended December 31, 2004.

Forward-looking Information

Statements in this Management's Discussion and Analysis relating to matters that are not historical facts are forward-looking statements. Such forward-looking statements involve known (see Business Risks section) and unknown risks and uncertainties which may cause the actual results, performances or achievements of the Company to be materially different from any future results implied by such forward-looking statements.

REVENUE

Revenue for Q3'05 was $21.2 million which increased by 74% from $12.2 million in Q3'04. On YTD basis, 2005 revenues increased by 101% from $26.2 million in 2004 to $52.6 million. 71% of total revenues for YTD 2005 were represented by one client. (See Working Capital) As commodity prices remain high, exploration is a growing focus within the industry, which in turn has translated into increased overall revenues for the Company. Revenues by quarter and year over year can be cyclical, and the current period reflects a significantly higher level of contract work performed than levels achieved in the past for the current quarter and the year. Overall, the Company believes it is gaining in market share in its business.

GROSS MARGIN

Gross margin for Q3'05 was approximately $4 million representing 19.1% of the current quarter's revenues compared to $1.7 million representing 14% of revenues over the same quarter last year. Gross margin for YTD 2005 was approximately $10.6 million representing 20.2% of revenues compared to $3.7 million representing 14% of revenues over the same period last year.

The increase in Q3 and YTD gross margin dollars is attributed to such factors as: the increase in overall revenues for Q3'05 and YTD 2005 over the same period last year, improved field efficiencies achieved through decreased use of subcontractors and rental equipment, and the result of the Company's past efforts to alter its cost structure so that variable costs currently make up a larger component of total direct costs than fixed costs.

GENERAL AND ADMINISTRATIVE ("G&A") EXPENSES

General and administrative expenses, which represent primarily the costs associated with the corporate head office and the lease of the Survey & Mapping division's shop and office, were approximately $1.5 million for Q3'05 compared to $0.3 million over the same period last year. YTD 2005 accruals for the profit sharing plans represented $1 million of this increase. Incentive accruals in 2004 were not booked until Q4.

The profit sharing plans have been instituted to align the Company's incentive compensation for key employees with the interests of shareholders. The plans, which replace bonuses and the grant of stock options, are intended to have the participating employees more focused on the Company's bottom line performance and to enable the Company to retain and attract operating and executive management in a competitive environment. Awards will be made one-half in cash and one-half in shares, to be purchased in the market.

AMORTIZATION OF PROPERTY AND EQUIPMENT

Amortization of property and equipment increased by $499,970 to $1,432,195 for 2005 YTD from $932,225 over the same period last year. For Q3'05 this amount was $569,481 compared to $293,392 for Q3'04. Amortization is dependant on the timing of additions to property and equipment. The major components of additions for the current year included; the acquisition of Kodiak assets of $2 million in Q1'05, and the investment in additional field operations equipment of approximately $0.8 million for Q3'05 and $3 million for Q1 and Q2'05 to service the increased needs of customers and to replace existing equipment at the end of its useful life. Disposals of property and equipment in 2005 resulted from normal course business activities with no specific noteworthy items.

INTEREST EXPENSE

Interest expense at $44,092 for Q3'05 and $104,237 for 2005 YTD were lower than the $124,375 for Q3'04 and $543,030 for 2004 YTD. Following the 2004 Rights Offering, as at the end of 2004 all long-term debt had been repaid by the Company, with 2005 interest reflecting only interest on the short-term bank operating facility. In addition to levels of debt that existed in 2004 (none in 2005), the debt that was in place in the early part of 2004 had higher ongoing fees, which are also reflected in 2004 interest expense.

INCOME TAXES

The Company did not have current taxes payable for the 2005 and 2004 Q3 and YTD periods, with minor "capital" taxes and expense related to an inactive subsidiary company recorded in 2004. The profitable operations in 2005 resulted in a draw-down of previously unrecorded future tax assets, and a resultant net future income tax expense of $699,000 was recorded for the 2005 YTD period. Future income tax expense recorded during the year was a $580,000 provision for Q1'05, a $494,000 recovery for Q2'05 and a $613,000 provision for Q3'05.



SUMMARY OF QUARTERLY RESULTS

A summary of operating results by quarter for the last 2 years is as
follows:

(in $000's, except
per share and # Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
of share amounts) 2005 2005 2005 2004 2004 2004 2004 2003
------------------------------------------------------------------------
Revenue:
Continuing
operations 21,216 14,793 16,604 7,430 12,200 1,204 12,796 5,819
------------------------------------------------------------------------
Discontinued
operations - - - - - - - 1,706
------------------------------------------------------------------------
Total 21,216 14,793 16,604 7,430 12,200 1,204 12,796 7,525
------------------------------------------------------------------------

Income (loss) from:
Continuing
operations 1,325 1,979 2,091 (421) 1,057 (1,437) 1,744 (1,030)
------------------------------------------------------------------------
Discontinued
operations - - - 72 - 332 - 52
------------------------------------------------------------------------
Total 1,325 1,979 2,091 (349) 1,057 (1,105) 1,744 (977)
------------------------------------------------------------------------


Net income (loss) per share (basic & diluted):
------------------------------------------------------------------------
Continuing
operations 0.24 0.36 0.38 (0.16) 0.40 (0.55) 0.66 (0.39)
------------------------------------------------------------------------
Discontinued
operations - - - 0.03 - 0.13 - 0.02
------------------------------------------------------------------------
Total 0.24 0.36 0.38 (0.13) 0.40 (0.42) 0.66 (0.37)
------------------------------------------------------------------------


Weighted average # of shares outstanding (000s):
------------------------------------------------------------------------
Basic 5,554 5,548 5,495 2,636 2,636 2,636 2,636 2,636
------------------------------------------------------------------------
Diluted 5,567 5,571 5,500 2,636 2,636 2,636 2,636 2,636
------------------------------------------------------------------------


The above noted Summary of Quarterly Results highlights the following:

1. The Company's business is seasonal with Q1 and Q3 traditionally being the two strongest quarters and Q2 and Q4 normally being the weakest quarters. The underlying causes of the seasonality are weather conditions, the Company being restricted from entering and conducting work in designated wildlife areas at certain times of the year, and the timing of customer capital spending programs.

2. The effect of the Company's now discontinued operations can be seen in the 2003 revenue and income (loss) amounts. Amounts in 2004 represent net shutdown recoveries relating to insurance and bad debts for these discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

Destiny's capital requirements consist primarily of working capital necessary to fund operations, capital expenditures related to the purchase and manufacture of operating equipment, payment of dividends, and capital to finance strategic acquisitions. Sources of funds available to meet these capital requirements include cash flow from operations, external lines of credit, equipment financing, term loans and access to equity markets.

During the 2005 YTD period, the Company increased its bank facility from $5 million to $10 million, with the ability to draw to $18 million during the months of June through September. In addition, the rate on the facility was reduced to prime plus 1%.

The Company believes that it has the capital resources and availability to meet its working capital, capital expenditure requirements, and to pay dividends in accordance with its dividend policy for 2005 and beyond.

WORKING CAPITAL

At September 30, 2005 net working capital was at $2.4 million compared to $2.8 million at December 31, 2004. Significant components that attributed to the 16% decline include: net YTD capital expenditures of $4.6 million incurred on the operating line, operating cash inflows of $7.5 million and the payment of YTD cash dividends of $3.3 million.

Approximately 94% of total accounts receivable of $12.7 million at September 30, 2005 (67% of $4.3 million at December 31, 2004) were represented by one client. Destiny provides services to this client both directly for the client's own account (for the development of seismic data for the client to sell) and for work for third party exploration and production companies, most of which are substantial oil companies and several of which specify Destiny as their sub-contractor of choice when contracting with Destiny's client. Approximately 96% of trade accounts receivable at September 30, 2005 was less than 60 days old (67% are less than 30 days old). Bad debt expenses for the Company's businesses have been negligible over the past three years.

PROPERTY AND EQUIPMENT

Property and equipment assets totaled approximately $9.3 million at the end of Q3'05, compared to $5.0 as at December 31, 2004 for a net increase of $4.3 million for the year. The acquisition of Kodiak assets, in January 2005, was $2.0 million. Remaining capital expenditures of $3.7 million were made for the investment of additional field equipment to allow operations to service expanding market demand for services and to replace existing equipment at the end of its useful life. YTD 2005 amortization was $1.4 million.

CONTRACTUAL OBLIGATIONS

Upon closing of the Right Offering in December 2004, Destiny repaid all remaining long-term debt, and its' only future contractual payment obligations are in the form of operating leases on premises and equipment. The Company has no hedging, capital leases or other "off balance sheet" contractual obligations.



------------------------------------------------------------------------
------------------------------------------------------------------------
Payments Due by Future Year
------------------------------------------------------------------------
------------------------------------------------------------------------
less than 2 - 3 4 - 5 After
total 1 year years years 5 years
------------------------------------------------------------------------
------------------------------------------------------------------------
Operating
Leases $ 2,385,753 $ 747,855 $ 999,625 $ 589,557 $ 48,715
------------------------------------------------------------------------


SHAREHOLDERS' EQUITY

Shareholders' equity increased from $7.8 million at the end of 2004 to almost $11 million at the end of Q3'05. The major components within this $3.1 million increase for Q3 2005 were: generated net income of $5.4 million dollars, disbursed cash dividends of $3.3 million, and the share consideration of $1 million issued on the acquisition of Kodiak assets.

As at November 8, 2005, the number of issued and outstanding common shares is 5,566,081 with 62,000 additional common shares reserved for potential future issuance pursuant to options outstanding under the Company's stock option plan.

NEW CANADIAN ACCOUNTING PRONOUNCEMENTS

The Canadian Institute of Chartered Accountants ("CICA") has issued a number of accounting pronouncements, some of which may impact the Company's reported results and financial position in future periods. See the 2004 Annual Report and the Q1'05 and Q2'05 interim reports.

BUSINESS RISKS

Destiny is subject to the risks and variables inherent in the oilfield services industry. Demand for the Company's products and services depend on the exploration, and to a lesser extent, development activities of energy companies. These activities are directly affected by factors such as oil and gas commodity prices, weather, changes in legislation, exchange rates, the general state of domestic and world economies, concerns regarding fuel surpluses or shortages, substitution through imports or alternative energy sources, changes to taxation or regulatory regimes and the broad sweep of international political risks such as war, civil unrest, nationalization and expropriation or confiscation, which are all beyond the control of the Company and cannot be accurately predicted. The oil market is influenced by global supply and demand considerations and by the supply management practices of OPEC. The natural gas market is primarily influenced by North American supply and demand and by the price of competing fuels.

The risks associated with external competition are minimized by concentrating Company activities in areas where it has demonstrated technical and operational advantages and by employing highly competent professional staff. Environmental and safety standards and regulations are continually becoming more stringent in this industry and Destiny is committed to maintaining its high standards. Destiny also mitigates business risks by establishing strategic alliances with reputable partners, developing new technologies and methodologies as well as investigating new business opportunities.

Given the Company's businesses are concentrated in the seismic services industry, the major business risk the Company faces is that revenues are subject to very wide seasonal and annual variations, all of which are beyond the ability of the Company to control while a meaningful proportion of the Company's costs are, at least in the short-term, fixed in nature. As a consequence, profits (losses) can vary widely from quarter to quarter and year to year. Destiny is also exposed to potential credit risk through its concentration of customers in the oil & gas exploration industry, and by its largest customer periodically accounting for a significant portion of Destiny's total revenues.

The risks inherent in the oilfield services industry impact the Company's ability to meet its financial covenants on its revolving, bank operating loan facility (of which $3.1 million was utilized at September 30, 2005). Accordingly, the Company may become in violation of its covenants on the bank facility, which might result in repayment being demanded.

OUTLOOK

Destiny believes that it has adequate working capital, cash flow from operations and access to capital to fund ongoing business requirements. Management believes the Company has a cost structure that has sufficient variability to adapt to the volatility of its industry. The Company has experienced management, at all levels of sales, operations and administration, who are motivated to achieve success in both the short- and long-term. The Company provides services principally in connection with the exploration for a commodity, natural gas, which is escalating in value and is plentiful in the areas in which the Company operates.

Destiny periodically encounters expansion opportunities to consider. These involve, in each case, the requirement for capital expenditures beyond the normal course for the Company. Destiny may pursue any or all of these opportunities, and others that may present themselves. In doing so the Company may incur term debt, issue equity, and retain cash that might otherwise be paid as dividends or any combination of the foregoing.


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