9th May 2006 07:02
Enova Systems, Inc.09 May 2006 ENOVA SYSTEMS ANNOUNCES RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2006 TORRANCE, CA, 9 May 2006 - Enova Systems, Inc. (OCTBB: ENOV and AIM: ENV andENVS), today announced its results for the first quarter ended March 31, 2006 HIGHLIGHTS FINANCIAL SUMMARY TABLE (US Dollars, in thousands, except per share data) For the quarter ended March 31, 2006 2005Revenue 309 692Gross profit (loss) (151) 122Operating expenses 1,249 825(Loss) form operations (1,400) (703)Other income (expense) 1,545 (109)Net income (loss) 145 (821) Basic and diluted net income $ 0.01 $ (0.09)(loss) per share Weighted-average number of 14,783,000 9,238,000shares outstanding Edwin Riddell, the Company's President and CEO said, "During the first quarterof 2006,we have continued to gain exposure in the marketplace, which we expectwill grow further with the advancements we are making in areas such as transitand school buses." "We have strengthened our management team with the addition of key personnel,such as Corinne Bertrand and John Dexter. Strengthening our management team is acrucial part of our growth, and we are already seeing benefits that willcertainly aid in the company's growth and success." REVIEW OF OPERATIONS We believe we are a leader in the development and production of proprietary,commercial digital power management systems for transportation vehicles andstationary power generation systems. Power management systems control andmonitor electric power in an automotive or commercial application such as anautomobile or a stand-alone power generator. Drive systems are comprised of anelectric motor, an electronics control unit and a gear unit which power anelectric vehicle. Hybrid systems, which are similar to pure electric drivesystems, contain an internal combustion engine in addition to the electricmotor, eliminating external recharging of the battery system. Our HybridPower(TM) hybrid electric drive system provides all the functionalityof an internal combustion engine powered vehicle. The HybridPower(TM) systemconsists of an enhanced electric motor and the electronic controls that regulatethe flow of electricity to and from the batteries at various voltages and powerto propel the vehicle. In addition to the motor and controller, the system mayinclude a gear reduction/differential unit which ensures the desired propulsionand performance. The system is designed to be installed as a "drop in," fullyintegrated turnkey fashion. Regardless of power source (battery, fuel cell, diesel generator or turbine) theHybridPower(TM) electric motor is designed to meet the customer's drive cyclerequirements. Our light-duty drive systems include: • 30kW, 60kW, 90kW all-electric drives • 90kW series-hybrid drive • any combination of these systems based on customer requirements. Our medium/heavy-duty electric drive systems include: • 120kW all-electric drive • 120/60kW peak series hybrid system • 240/60kW peak series hybrid system • 90kW peak mild, pre-transmission parallel hybrid system • 100kW peak post-transmission parallel hybrid systems • 100kW peak pre-transmission parallel hybrid system. Our drive systems, in conjunction with, internal combustion engines,microturbines, fuel cells, flywheels, and generators sets provide state of theart hybrid-electric propulsion systems. Hybrid vehicles are those that utilizean electric motor and batteries in conjunction with an internal combustionengine (ICE), whether piston or turbine. With a hybrid system, a small pistonor turbine engine - fueled by gasoline or diesel, CNG, methane, etc., in a tank- supplements the electric motor and battery. These systems are self-charging,in that the operating ICE recharges the battery. During the quarter ended March 31, 2006, we continued to develop and/or produceelectric and hybrid electric drive systems and components for such customers asFirst Auto Works of China, Ford Motor Company (Ford), Hyundai Motor Car, USMilitary, International Truck and Engine, IC Corp., Wright Bus, Tomoe of Japanand several other domestic and international vehicle and bus manufacturers. Wealso continue to advance our technologies and products for greater marketpenetration for 2006, and beyond. In addition, we continue to developindependently and in conjunction with the Hyundai-Enova Innovative TechnologyCenter (ITC) progress on several fronts to produce commercially availableheavy-duty, series and parallel hybrid drive systems In January of 2006, we delivered what we understand to be the, Nation's firstfunctional Hybrid Drive school bus to International Truck and Engine Corporation(International). This is in addition to the Post Transmission 120kW HybridDrive series truck that was delivered to International in November 2005. Boththe truck and bus are currently being evaluated at International's Fort WayneTechnical Center. International and IC Corporation claims to be a leadingmanufacturer of medium duty trucks and school buses, with approximately 40% ofthe medium duty truck build and approximately 60% of the school bus build inNorth America. WrightBus, one of the largest low-floor bus manufacturers in the United Kingdom,continues to purchase our diesel genset-powered, series hybrid drive systems fortheir medium and large bus applications. Six of our systems provided toWrightbus, have been integrated into six Hybrid Buses, which were introducedinto London's public bus fleet in early February 2006. On February 6, 2006, we confirmed that our components are currently being usedin thirty (30) Ford Focus Hydrogen Fuel Cell Vehicles being evaluated in three(3) countries. On February 28, 2006, we announced that we were working with and evaluatingHybrid Drive Systems for International Truck and Engine Corporation(International). We confirmed we have delivered a Post Transmission 120 kWHybrid Drive 4200 series Truck to International in November 2005. The deliveryof the truck is in addition to a Hybrid Drive School Bus that was delivered toIC Corp in January 2006. Additionally, in Japan, Tomoe Electro-Mechanical Engineering and Manufacturing,Inc. has entered into a development and production contract with us for eightbattery-electric locomotives for the Singapore Land Transport Authority (LTA)for service vehicles for the Seoul Mass Rapid Transit (SMRT) Circle Line systemfor maintenance, repair, shunting and recovery of passenger trains. Over thelast several years, we successfully integrated our HybridPower(TM) drive systemsinto Tomoe's heavy-duty Isuzu dump truck application, three passenger trams anda mine tunnel crawler. The hybrid drive train components were delivered in late2005 and early 2006 at Tomoe's Japan-based facilities. We believe that thislatest market penetration in Asia enhances not only our alliances with bothTomoe and HHI, but also advances our hybrid-electric technologies in highvoltage power management components. As part of this contract, we will developa high voltage charging system to enable the locomotive to receive a directbattery charge from the high voltage rail. We will continue to work with Tomoeto develop other commercial and industrial applications for our drive systemsincluding potential light rail applications. We also anticipate continuing our work with Tsinghua University of China, andtheir fuel cell bus development program. We believe that China intends to usehybrid-electric buses to shuttle athletes and guests at the 2008 Beijing SummerOlympics and the 2010 World's Expo in Shanghai and that it is seeking up to1,000 full-size hybrid-electric buses to support these global events. MTrans ofMalaysia has integrated two of our standard HybridPower 120kW drive system intoa hybrid 10-meter bus with a Capstone microturbine as its power source. Thisdrive system is currently on demonstration in Hong Kong, PRC. Also, HyundaiMotor Company continues to evaluate our convertors in their fuel cell hybridelectric vehicles and we expect to deliver an additional 16 units in 2006. RESEARCH AND DEVELOPMENT PROGRAMS We continue to pursue government and commercially sponsored development programsfor both ground and marine heavy-duty drive system applications. In 2006, we continued the integration of a fuel cell powered step-van similar tothe Hydrogenics program for HCATT and the U.S. Air Force. We intend to establishnew development programs with the Hawaii Center for Advanced TransportationTechnologies in mobile and marine applications as well as other state andfederal government agencies as funding becomes available. Our development contract with EDO Corporation of New York for the design andfabrication of a high voltage DC-DC power conversion system utilizing a Capstonemicroturbine as the primary power source for the U.S. Navy unmanned minesweeperproject also continues to progress during 2006. The electronics package willinclude our advanced power components including a new, enhanced 50V, 700A DC-DCpower converter, our Battery Care Unit and Hybrid Control Unit which will powerthe minesweeper's electromagnetic detection system. Our power management andconversion system will be used to provide on-board power to other accessories onthe platform. CORPORATE MATTERS On February 2, 2006, John Dexter joined us as Director of Planning andOperations. Mr. Dexter will be responsible for much of our operationalactivities as well as aiding in our resource and planning for its future growth.Mr. Dexter brings an extensive and impressive background to his position. He hasmore than 36 years of professional experience in Project Management and SystemsEngineering. Mr. Dexter's experience has focused on the development and deliveryof complex, innovative transportation projects with companies such as PortAuthority of New York/New Jersey, Transit Systems Management and SeattleMonorail Services. Mr. Dexter's resume also includes work with General Motors,United Technologies and Martin Marietta. Additionally, Mr. Dexter brings a vastknowledge in the development of processes and systems throughout all phases ofproject design, manufacturing and delivery. On April 3, 2006, Corinne Trott Bertrand, CPA joined us as Chief FinancialOfficer. Ms. Bertrand will be responsible for directing the overall plans ofthe accounting practices of the organization, as well as for overseeingtreasury, accounting, budget, tax, and audit activities. Additionally, herresponsibilities will include the oversight of the financial reporting functionand the implementation of internal controls. She has over twenty four (24)years of experience in the financial sector, both in the public accountingfield, and in private industry. We previously reported in our 2005 Annual Report on Form 10-K a materialweakness in internal control over inventory pricing, tracking, and the reserveanalysis. In response to the material weakness, we have conducted a full reviewof inventory processes and procedures. Furthermore, we have begun to instituteadditional control procedures and monitoring to assure the effectiveness of thecontrols surrounding the inventory processes. However, for the quarter endedMarch 31, 2006, management has concluded that the Company's disclosure controlsare not effective. Although management has begun the process of remediation, wecannot assure you that we will be successful in a timely manner, if at all. FINANCIAL REVIEW Net revenues for the three months ended March 31, 2006 were $309,000 as comparedto $692,000 for the corresponding period in 2005. Net production sales for thequarter ended March 31, 2006 decreased to $264,000 from $492,000 in the sameperiod in 2005. Research and development revenues decreased to $45,000 in thefirst quarter of 2006 from $200,000 during the same period in 2005. In thefirst quarter of 2006, our revenues derived mostly from production typecontracts with Hyundai Motor Corporation and the State of Hawaii. Additionally,we recognized additional revenues from our project with Wrightbus and Tomoe. Cost of revenues consists of component and material costs, direct labor costs,integration costs and overhead related to manufacturing our products. Productdevelopment costs incurred in the performance of engineering developmentcontracts for the U.S. Government and private companies are charged to cost ofsales for this contract revenue. Cost of revenues for the quarter ended March31, 2006 decreased $110,000, or 19%, from $570,000 for the same period in 2005.This decrease is primarily attributable to the decrease in sales for thequarter, although we are also experiencing a reduction in integration supportcosts. We anticipate there may be an increase in cost of sales for products dueto foreign exchange rate fluctuations of the U.S. dollar versus those currenciesof our primary manufacturers. Internal research, development and engineering expenses increased in the threemonths ended March 31, 2006 to $325,000 as compared with $217,000 in the sameperiod in 2005. We continue to develop several new products such as our posttransmission parallel hybrid drive system and enhancements to our dieselgenerator set which account for a majority of the increase. We continue toallocate increased resources to the development of our parallel hybrid drivesystems, upgraded proprietary control software, enhanced DC-DC converters andadvanced digital inverters and other power management firmware. Selling, general and administrative expenses increased $316,000 to $924,000 forthe three months ended March 31, 2006 from the previous year's comparableperiod. The increase is attributable to additional marketing, engineering andtechnical staff employed in the first quarter as well as increased expense dueto stricter regulatory oversight in conjunction with the Sarbanes-Oxley Act of2002. Management continues to implement cost reduction strategies in 2006 inits efforts to achieve profitability, although management cannot assure thatprofitability will be achieved. Interest income/expense decreased by $248,000 for the first quarter of 2006,down from the same period in 2005, and shown net as interest income. Theincrease is illustrated as the net effect of interest income earned on cash andcertificates of deposit, and regular interest expense recognized on theremaining debt outstanding. We earned net income of $145,000 in the first quarter of 2006 compared to a lossof $812,000 in the first quarter of 2005. The increase was attributableprimarily to the settlement of a portion of the debt outstanding to CMAC,resulting in a gain on settlement of $1,392,000. ENOVA SYSTEMS, INC. BALANCE SHEETS ASSETS As of As of March 31, 2006 December 31, 2005 (unaudited) Current assets Cash and cash equivalents $ 4,826,000 $ 16,187,000 Short term investment 10,000,000 - Accounts receivable, net 774,000 2,173,000 Inventories and supplies, net 1,014,000 1,016,000 Prepaid expenses and other current assets 274,000 182,000 Total current assets 16,888,000 19,558,000 Property and equipment, net 597,000 576,000Equity method investment 1,623,000 1,649,000Other assets 163,000 190,000Total assets $ 19,271,000 $ 21,973,000 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities Accounts payable $ 160,000 $ 1,396,000 Accrued payroll and related expense 207,000 195,000 Other accrued expenses 199,000 302,000 Current portion of notes payable 40,000 42,000 Total current liabilities 606,000 1,935,000 Accrued interest payable 634,000 1,113,000Notes payable, net of current portion 1,238,000 2,321,000 Total liabilities $ 2,478,000 $ 5,369,000 Commitments and contingenciesStockholders' equity (deficit) Series A convertible preferred stock - no par value 30,000,000 shares authorized 2,674,000 and 2,674,000 shares issued and outstanding Liquidating preference at $0.60 per share, aggregating $1,604,000 $ 1,679,000 $ 1,679,000 Series B convertible preferred stock - no par value 5,000,000 shares authorized 1,217,000 and 1,217,000 shares issued and outstanding Liquidating preference at $2 per share, aggregating $2,434,000 2,434,000 2,434,000 Common Stock, no par value 750,000,000 shares authorized 14,783,000 shares issued and outstanding 109,323,000 109,323,000 Common stock subscribed 60,000 30,000 Stock notes receivable (1,176,000) (1,176,000) Additional paid-in capital 6,914,000 6,900,000 Accumulated deficit (102,441,000) (102,586,000) Total stockholders' equity 16,793,000 16,604,000Total liabilities and stockholders' equity $ 19,271,000 $ 21,973,000 ENOVA SYSTEMS, INC. STATEMENTS OF OPERATIONS (Unaudited) For the Three Months Ended March 31, 2006 2005 Net revenues Research and development contracts $ 45,000 $ 200,000 Production 264,000 492,000 Total net revenues 309,000 692,000 Cost of revenues Research and development contracts 170,000 119,000 Production 290,000 451,000 Total cost of revenues 460,000 570,000Gross profit (loss) (151,000) 122,000 Operating expenses Research and development 325,000 217,000 Selling, general and administrative 924,000 608,000Loss from operations (1,400,000) (703,000) Other income (expense) Interest and other income (expense), net 179,000 (69,000) Equity in losses of equity method investee (26,000) (40,000) Debt extinguishment 920,000 - Interest extinguishment 472,000 - Total other income (expense) 1,545,000 (109,000) Net income (loss) $ 145,000 $(812,000) Basic earnings (loss) per share $ 0.01 $ (0.09)Diluted earnings (loss) per share $ 0.01 $ (0.09) Weighted-average number of shares outstanding 14,783,000 9,238,000 ENOVA SYSTEMS, INC. STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, 2006 2005 Cash flows from operating activities Net income / (loss) $ 145,000 $ (812,000) Adjustments to reconcile net income/(loss) to net cash used in operating activities Debt extinguishment (920,000) - Interest extinguishment (472,000) - Bad Debt Expense - 23,000 Depreciation and amortization 90,000 72,000 Equity in losses of equity method investee 26,000 40,000 Issuance of subscribed common stock for services 30,000 28,000 Stock based compensation expense 14,000 (Increase) decrease in Accounts receivable 1,399,000 (170,000) Inventory and supplies 2,000 (135,000) Prepaid expenses and other current assets (92,000) (60,000) Increase (decrease) in Accounts payable (1,236,000) 226,000 Accrued expenses (91,000) 61,000 Deferred revenues - (118,000) Accrued interest payable (7,000) 73,000Net cash used in operating activities (1,112,000) (772,000) Cash flows from investing activities Purchase of short term investments $(10,000,000) $ - Purchases of property and equipment (84,000) (46,000)Net cash used in investing activities (10,084,000) (46,000) Cash flows from financing activities Net payments on line of credit $ - $ (1,000) Payment on notes payable and capital lease obligations - (6,000) Payment to extinguish debt (165,000) -Net cash provided by (used in) financing activities (165,000) (7,000) Net increase (decrease) in cash and (11,361,000) (825,000) cash equivalents Cash and cash equivalents, beginning of period 16,187,000 1,575,000 Cash and cash equivalents, end of period $ 4,826,000 $ 750,000 Supplemental disclosure of cashflow information Interest paid $ - $ 3,000 Income taxes paid $ - $ - Supplemental schedule of non- cashinvesting and financing activities Conversion of preferred stock to common stock $ - $ 14,000 About Enova Systems, Inc. Enova Systems is a leading supplier of efficient, environmentally- friendlydigital power components and systems products. The Company's core competenciesare focused on the development and commercialization of power management andconversion systems for mobile and stationary applications. Enova applies unique'enabling technologies' in the areas of alternative energy propulsion systemsfor light and heavy-duty vehicles as well as power conditioning and managementsystems for distributed generation systems. The Company develops, designs andproduces drive systems and related components for electric, hybrid-electric, andfuel cell powered vehicles. For further information, contact Enova Systemsdirectly, or visit its Web site at http://www.enovasystems.com. This news release contains forward-looking statements relating to Enova Systemsand its products that are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminologysuch as "believe," "expect," "may," "will," "should," "could," "project,""plan," "seek," "intend," or "anticipate" or the negative thereof or comparableterminology and statements about industry trends and Enova's future performance,operations and products. These forward looking statements are subject to andqualified by certain risks and uncertainties. These and other risks anduncertainties are detailed from time to time in Enova Systems' periodic filingswith the Securities and Exchange Commission, including but not limited toEnova's annual report on Form 10-K for the year ended December 31, 2005. Thisforward-looking information should be considered only in connection with theaforementioned risk factors. Enova assumes no obligation to update such forward-looking statements. ENOVA SYSTEMS, Inc.19850 South Magellan DriveTorrance, CA 90502 310-527-2800Contact: Mike Staran, Vice President of Marketing This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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