3rd Apr 2006 07:03
Enova Systems, Inc.03 April 2006 ENOVA SYSTEMS ANNOUNCES RESULTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005 TORRANCE, CA, 31 March 2006 - Enova Systems, Inc. (OTCBB: ENOV and AIM: ENV and ENVS), today announced its results for the fiscal year ended December 31, 2005 2005 HIGHLIGHTS - Revenue totalled $6.1 million in 2005 compared to $2.6 million in 2004 - Loss from operations $2.1 million compared to $3.4 million in 2004 - Admission to AIM Market of the London Stock Exchange raising net $18.0 million FINANCIAL SUMMARY TABLE (US Dollars, in thousands, except per share data) For the year to December 31 2005 2004 Revenue 6,084 2,554Gross Profit 83 315Other income (expenses) 1,464 (447)Loss from operations (2,127) (3,382)Net loss (2,127) (3,382) Basic and diluted net loss per share $(0.18) $(0.38) Weighted-average number of shares in issue 11,664,320 8,831,893 Edwin Riddell, the Company's President and CEO said, "During 2005, the Companyexperienced an increase in production revenues. We believe our development andmarket penetration initiatives are proving successful. By defining our marketfocus, the Company has been able to better identify potential opportunities." "We continue to pursue privately and governmental funded development programs.This allows us to increase our revenue base, form new alliances with major OEMsand participate in the latest trends in alternative fuel technologies. Theincrease in R&D revenues for the year ended December 31, 2005 is primarily dueto renewed customer requirements after a slow year in 2004." "The Company continues to receive greater recognition from both governmental andprivate industry with regards to both commercial and military application of itshybrid drive systems and fuel cell power management technologies. Although theCompany believes that current negotiations with several parties may result indevelopment and production contracts during 2006 and beyond, there are noassurances that such additional agreements will be realized." REVIEW OF OPERATIONS During 2005, the Company continued to advance its technologies and products forgreater market penetration for 2006 and beyond. 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. During the year ended December 31, 2005, we continued to develop and produceelectric and hybrid electric drive systems and components for First Auto Worksof China, Ford Motor Company (Ford), Hyundai Motor Car, US Military, Wright Busand Eneco of the United Kingdom, and Tomoe of Japan and several other domesticand international vehicle and bus manufacturers. We also were successful inintroducing our technology to companies such as Concurrent TechnologyCorporation (CTC), PUES (Tokyo Research and Development), Volvo/Mack andNavistar (International Truck and Engine, IC Corporation). The continuedrelationships, in addition to our newest customers helped Enova surpass, sinceEnova's inception, the manufacturing of its 900th system. Our various electricand hybrid-electric drive systems, power management and power conversion systemsare being used in applications including Class 8 trucks, train locomotives,transit buses and industrial vehicles as well as in non-transportationapplications such as fuel-cell management and power management systems,including the EDO minesweeper. Enova has furthered its development andproduction of systems for both mobile and stationary fuel cell powered systemswith major companies such as Ford and Hydrogenics, a fuel cell developer inCanada. For the year ended December 31, 2005, the following customers each accounted formore than ten percent (10%) of the Company's total revenues: Customer Percent Tomoe Electro Mechanical Engineering & Mfg. 49.3% Hyundai Motor Company 12.5% Medium and Heavy-Duty Drive Systems - Buses, Trucks, Vans and Other IndustrialVehicle Applications Enova's primary market focus centers on both series and parallel medium andheavy-duty drive systems for multiple vehicle and marine applications. Webelieve series-hybrid and parallel hybrid medium and heavy-duty drive systemsales offer Enova the greatest return on investment in both the short and longterm. Although this market sector has developed more slowly than anticipated,management believes that this area will see significant growth over the nextseveral years. As the Company penetrates more market areas, we are continuallyrefining and optimizing both our market strategy and our product line tomaintain our leading edge in power management and conversion systems for mobileapplications. In Japan, Tomoe Electro-Mechanical Engineering and Manufacturing, Inc. hasentered into a development and production contract with Enova 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, Enova successfully integrated its HybridPower (TM) drivesystems into Tomoe's heavy-duty Isuzu dump truck application, three passengertrams and a mine tunnel crawler. The hybrid drive train components weredelivered in late 2005 at Tomoe's Japan-based facilities. Enova anticipates thetotal contract to exceed US$3 million over the life of the contract. Thislatest market penetration in Asia enhances not only Enova's alliances with bothTomoe and HHI, but also advances Enova's hybrid-electric technologies in highvoltage power management components. As part of this contract, Enova willdevelop a high voltage charging system to enable the locomotive to receive adirect battery charge from the high voltage rail. Tomoe and Enova continue todevelop other commercial and industrial applications for our drive systemsincluding potential light rail applications. During the first quarter of 2005,Tomoe issued a purchase order for three post transmission parallel hybrid drivesystems for another train project in South Korea. In 2005, Enova Systems delivered a Post Transmission 80Kw Hybrid Drive 4200series truck to International Truck and Engine (International). This is inaddition to the delivery of the , as represented by IC Corporation, nation'sfirst functional Hybrid Drive school bus that was delivered to International inJanuary of 2006. Both the truck and bus are currently being evaluated atInternational's Fort Wayne Technical Center. International and IC Corporationclaims to be a leading manufacturer of medium duty trucks and school buses, withapproximately 40% of the medium duty truck build and approximately 60% of theschool bus build in North America. Additionally in 2005, Enova's Post Transmission system was also integrated intoa US Air Force "refueler" vehicle built by Volvo/Mack Truck Corporation. Enova,via Concurrent Technologies Corporation (CTC), also supplied its 120kW hybriddrive system to the US Air Force for a Fuel Cell Hybrid "TUG" vehicle. In 2005,First Auto Works (FAW) of China ordered an additional five HybridPower 120kWdrive systems. These units have been delivered. Additionally, FAW introducedits Hybrid City Bus, which is powered by Enova's 80kW Parallel Hybrid DriveSystem. FAW is China's largest vehicle manufacturer, producing in excess of900,000 vehicles annually. In 2005, we continued our work with Tsinghua University of China, and their fuelcell bus development program. China intends to use hybrid-electric buses toshuttle athletes and guests at the 2008 Beijing Summer Olympics and the 2010World's Expo in Shanghai. China is seeking up to 1,000 full-sizehybrid-electric buses to support these global events. 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. WrightBus ordered two additional 120kWdrive systems in 2005. Six of Enova's systems provided to Wrightbus, have beenintegrated into six Hybrid Buses, which are currently being evaluated inLondon's public bus fleet. Eneco of the United Kingdom, a vehicle integrator which utilizes Enova'sHybridPower 120kW drive systems in its hybrid bus applications, purchased 21120kW systems in 2005. EcoPower Technology of Italy continues to purchase components for its hybridelectric drive systems during 2005 for service and maintenance parts for itsfleet of buses powered by HybridPower(TM)120kw drive systems. Since our teamingwith EcoPower, we have sold 47 drive systems forming one of the largest fleetsof hybrid buses in the world. EcoPower is one of the largest integrators ofmedium size transit buses for the European shuttle bus market, with keycustomers in five Italian cities namely Turin, Genoa, Brescia, Ferrara andVicenza. MTrans of Malaysia has integrated two of our standard HybridPower 120kW drivesystem into a hybrid 10-meter bus with a Capstone microturbine as its powersource. This drive system is currently on demonstration in Hong Kong, PRC. Additionally, we are in discussions with other bus manufacturers and industrial,commercial and military vehicle manufacturers regarding the purchase of ourheavy-duty, high performance, 120kW and 240kW drive systems in 2005. There areno assurances, however, that these discussions will result in any sales of theHyrbidPower 240kW or 120kW drive systems. Light-Duty Drive Systems and Fuel Cell Technologies - Automobiles and Deliveryvehicles The High Voltage Energy Converter (HVEC) development program with Ford MotorCompany for their fuel cell vehicle was essentially completed in 2003. Thisconverter is a key component in Ford's Focus Fuel Cell Vehicle (FCV) whichutilizes the Ballard fuel cell system. It converts high voltage power from thefuel cell into a lower voltage for use by the drive system and electronicaccessories. Ford currently is evaluating thirty vehicles utilizing Enova'stechnology, throughout the United States, Canada, and Germany. Enova's fuelcell enabling components continue to be part of the proposed fleets of fuel cellvehicles being utilized by both Ford Motor Company - the Ford Focus FCV- andHyundai Motor Company - the Hyundai Tucson fuel cell hybrid electric vehicle -in response to the U.S. Department of Energy's solicitation, entitled"Controlled Hydrogen Fleet and Infrastructure Demonstration and ValidationProject." This government-funded project will last over five years, evaluatingthe economic and performance feasibility of fuel cell vehicles andinfrastructure across the U.S. In 2005, we delivered sixteen additionalconverters to Hyundai. Furthermore, an additional 16 units are scheduled fordelivery in 2006. The Company will continue to explore new applications for this versatiletechnology in both mobile and stationary systems. Research and Development Programs We continue to aggressively pursue government and commercially sponsoreddevelopment programs for both ground and marine heavy-duty drive systemapplications. 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 2005. The electronics package willinclude Enova's advanced power components including a new, enhanced 50V, 700ADC-DC power converter, our Battery Care Unit and Hybrid Control Unit which willpower the minesweeper's electromagnetic detection system. Our power managementand conversion system will be used to provide on-board power to otheraccessories on the platform. The all-electric Hyundai Santa Fe SUV demonstration project in Honolulu Hawaiiwas completed in 2005. Fast-charging capabilities and performance will be theprimary focus of this continued evaluation. This is a continuation of the Stateof Hawaii and Hyundai Motor Company's program for pure electric vehicleperformance. In the fourth quarter of 2004, Enova completed the design and integration of its120kw drive system with a Capstone microturbine into a MB4 tow tractor for theU.S. Air Force through a contract with the Volpe National Transportation SystemsCenter. The objectives of this program include the integration of microturbinetechnology into the hybrid electric tow tractor, field testing and evaluation ofthe benefits of microturbine technology in a hybrid electric vehicle,integration of grid-charging technology, DC-DC converter, and a data acquisitionsystem into an electric tow tractor, and validation of the technology effect onthe original system and performance. During 2004, the program generated$165,000 in revenues for Enova. There is a potential for other upgrades of thistype and we anticipate entering into more of these contracts in 2005 with theU.S. Air Force. There can be no assurances at this time, however, that suchcontracts will be realized. We also commenced a program with Hydrogenics to integrate a HybridPower 120kWhybrid drive system into a step-van for Purolator as a hydrogen fuel cell hybridvehicle. In integrating this new system, we utilized several new powermanagement systems including our dual 8kW inverter and our Mobile Fuel CellGenerator that utilizes our High Voltage Converters. This fuel cell vehicleapplication utilized a Hydrogenics 20kW fuel cell power generation moduleunderscoring our technologies ability to optimize fuel cell performance across arange of fuel cell products. The program is in its final stage of evaluation.As a result of this program, we have also commenced a similar fuel cell step vanconversion program for HCATT and the U.S. Air Force. In 2005, we commenced integration of a fuel cell powered step-van similar to theaforementioned Hydrogenics program for HCATT and the U.S. Air Force. We intend to establish new development programs with the Hawaii Center forAdvanced Transportation Technologies in mobile and marine applications as wellas other state and federal government agencies as funding becomes available. CORPORATE MATTERS During 2005, our recapitalization initiatives were successful. We entered intoan agreement with a placement agent relating to the sale of 5,300,000 new sharesof our common stock, after the 1 for 45 reverse stock split which took placeduring the year. We received approximately $18,000,000 of net proceeds from theoffering. The Company believes that we have the operating resources to continueour market penetration efforts. The reorganization of senior management continued in 2005. During the fourthquarter of 2005, both our Chief Financial Officer, Larry Lombard, and our ChiefOperating Officer, Edward Moore, resigned to seek other opportunities. Theirresignations were not the results of any disagreements with the Company. In thefirst quarter of 2006, we appointed John Dexter as our new Director ofOperations and Planning. In the absence of a financial executive at the end of2005, and to facilitate the year end financial reporting process, we have reliedon increased involvement from Edwin Riddell, Chief Executive Officer, as well asthe services of qualified Certified Public Accountants as managementconsultants. FINANCIAL REVIEW Net sales of $6,084,000 for the twelve months ended December 31, 2005 increasedby $3,530,000 or 138% from $2,554,000 during the same period in 2004. Theincrease in sales was a result of Enova's expanding research and developmentinitiatives with Hyundai Motor Company (HMC) as well as the productionassociated with the Tomoe Machinery contract. In 2005, sales attributable tothe Tomoe production contract were about $3,000,000. Additionally, salesrelated to the HMC development project were approximately $758,000. Cost of sales 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. During 2005, our trend of establishing newcustomers and strengthening current alliances with customers, such as Tomoe andMTrans in the heavy-duty drive system market continued. Our new customerscontinue to require additional integration and support services to customize,integrate and evaluate our products. We believe these costs to be initial,one-time costs for these customers and anticipate similar costs to be incurredwith respect to new customers as we gain additional market share. Customers whohave been using our products over one year do not incur these same type ofinitial costs. Cost of sales for the year ended December 31, 2005 increased3,762,000, or 168%, from $2,239,000 for the year ended December 31, 2004. Thisincrease is primarily attributable to the increase in sales for the year and thescrapping of $376,000 of raw materials that were no longer usable. Research and development expenses consist primarily of personnel, facilities,equipment and supplies for our research and development activities. Non-fundeddevelopment costs are reported as research and development expense. Research anddevelopment expense decreased in 2005 to $804,000 from $925,000 for the sameperiod in 2004, a decrease of $121,000 or 13%. During 2005, externally fundedresearch and development from partners such as FAW, Mack/Volvo, Hyundai, and theU.S. Government offset the costs of development for new products in the areas ofmobile and stationary power management and conversion thereby reducing the needfor internal funding. We believe that this trend is continuing. Programsincluded our new parallel hybrid drive systems, our diesel generation engine/motor system for our heavy-duty drive systems, and upgrades and improvements toour current power conversion and management components. Additionally, wecontinued to enhance our technologies to be more universally adaptable to therequirements of our current and prospective customers. By modifying oursoftware and firmware, we believe we should be able to provide a morecomprehensive, adaptive and effective solution to a larger base of customers andapplications. We will continue to research and develop new technologies andproducts, both internally and in conjunction with our alliance partners andother manufacturers as we deem beneficial to our global growth strategy. Selling, general and administrative expenses consist primarily of personnel andrelated costs of sales and marketing employees, consulting fees and expenses fortravel, trade shows and promotional activities and personnel and related costsfor general corporate functions, including finance, accounting, strategic andbusiness development, human resources and legal. Selling, general andadministrative expenses increased by $545,000 at 2005 from 2004 levels due toincreased headcount and the associated increases in wages, health and workerscompensation insurance, and taxes of approximately $279,000 and from a $266,000increase in the allowance for doubtful accounts. For the year ended December31, 2005, these expenses totaled $2,870,000 up from $2,325,000 for the similarperiod in 2004. This represents an 23 % increase in these expenses. We arecontinually reviewing operations to control overhead costs and increaseoperational efficiencies For the year ended December 31, 2005, interest and financing fees shifted to anet other income of $13,000 from a net expense of $255,000. The change is aresult of the Company's comparatively higher cash balance at 2005 and theassociated interest revenue as well as a $50,000 gain on a foreign currencytransaction in the United Kingdom. The comparatively higher cash balance was theresult of the equity offering that occurred in the third quarter of 2005. In 2005, we charged off approximately $376,000 of our inventory relating toobsolete and slow moving raw materials. We believe that the relatively slightfluctuation in the inventory balances compared to the increased sales volumeillustrates Enova's continuing efforts to monitor and control inventoryutilization. In December 2005, the Company was informed by the Credit Managers Association ofCalifornia that $1,011,000 of principal and $447,000 accrued interest under thesecured note payable had been disclaimed and extinguished by the beneficiariesof such principal amount. The extinguishment result from the resolution of asubstantially aged negotiation regarding consideration paid in settlement of theprincipal amount. The company has recognized a gain on the extinguishment ofthe principal and associated accrued interest. The Company evaluated thistransaction under the guidance set forth in SFAS 140 "Accounting for Transfersand Servicing of Financial Assets and Extinguishments of Liabilities" and notedthat the extinguishment of these liabilities were consistent with the guidance. In October 2005, the Company agreed to a settlement on the unsecured 10% notepayable. In exchange for immediate payment of the full principal balance of$120,000, the beneficiary of the note agreed to forgive the entire accruedinterest balance of $111,000. The company has recognized a gain on theextinguishment of the associated accrued interest. The Company evaluated thistransaction under the guidance set forth in SFAS 140 "Accounting for Transfersand Servicing of Financial Assets and Extinguishments of Liabilities" and notedthat the extinguishment of these liabilities were consistent with the guidance. BALANCE SHEETS US Dollars December 31, 2005 and 2004 ASSETS 2005 2004 Current assets Cash and cash equivalents $16,187,000 $1,575,000 Accounts receivable, net 2,173,000 552,000 Inventories and supplies, net 1,016,000 1,036,000 Prepaid expenses and other current 182,000 304,000 assets Total current assets 19,558,000 3,437,000 Property and equipment, net 576,000 387,000Equity method investment 1,649,000 1,768,000Other assets 190,000 296,000Total assets $21,973,000 $5,888,000 LIABILITIES AND STOCKHOLDERS' EQUITY 2005 2004 Current liabilities Accounts payable $1,396,000 $66,000 Deferred revenues - 392,000 Line of credit - 229,000 Accrued payroll and related expense 195,000 194,000 Other accrued expenses 302,000 13,000 Current portion of notes payable 42,000 166,000 Current portion of capital lease - 6,000 obligations Total current liabilities 1,935,000 1,066,000 Accrued interest payable 1,113,000 1,378,000Notes payable, net of current portion 2,321,000 3,341,000 Total liabilities $5,369,000 $5,785,000 STATEMENTS OF OPERATIONS For the Years Ended December 31, 2005 and 2004 US Dollars 2005 2004 Net revenues Research and development contracts $1,555,000 $1,070,000 Production 4,529,000 1,484,000 Total net revenues 6,084,000 2,554,000 Cost of revenues Research and development contracts 1,188,000 499,000 Production 4,813,000 1,627,000 Writedown Ford Think program - 113,000 inventory Total cost of revenues 6,001,000 2,239,000Gross profit 83,000 315,000 Operating expenses Research & development 804,000 925,000 Asset impairment - - Selling, general & administrative 2,870,000 2,325,000 Total operating expenses 3,674,000 3,250,000Other income and (expense) Interest and financing fees, net 13,000 (255,000) Equity in losses of equity method (118,000) investee (192,000) Debt extinguishment 1,011,000 - Interest extinguishment 558,000 - Total other income and (expense) 1,464,000 (447,000)Loss from operations (2,127,000) (3,382,000) Net loss $(2,127,000) $(3,382,000) Basic loss and diluted loss per share $(0.18) $ (0.38) Restated for effects of reverse stocksplit- see note 10 Weighted-average number of shares outstanding 11,664,320 8,831,893 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2005 and 2004 2005 2004 Cash flows from operating activites Net loss $ $ (2,127,000) (3,382,000) Adjustments to reconcile net loss to net cash used by operating activitiesDebt extinguishment (1,011,000) -Interest extinguishment (558,000) - Depreciation and amortization 376,000 304,000 Provision for asset impairment - - Equity in losses of equity method investee 118,000 192,000 Issuance of common stock for services 89,000 158,000 Issuance of common stock for bonuses 109,000 - (Increase) decrease in Accounts receivable (1,651,000) 281,000 Inventory and supplies 20,000 570,000 Note receivable - related party - 8,000 Prepaid expenses and other current 122,000 (226,000)assets Other assets (2,000) - Increase (decrease) in Accounts payable 1,330,000 (702,000) Accrued expenses 290,000 (11,000) Deferred revenues (392,000) 392,000 Accrued interest payable 293,000 256,000Net cash used by operating activities (2,997,000) (2,157,000) Cash flows from investing activites Purchases of property and equipment $ $ (384,000) (174,000)Net cash used in investing activities (384,000) (174,000) Cash flows from financing activites Net increase from line of credit $- $109,000 Payment on notes payable and capital lease obligations (368,000) (33,000) Proceeds from notes payable 40,000 - Net Proceeds from sales of common stock 18,361,000 2,450,000 Offering costs - - Proceeds from exercise of stock options 783,000 - Payments on stock notes receivable 27,000 -Net cash provided by financing activities 17,993,000 3,376,000 Net increase (decrease) in cash and 14,612,000 1,045,000 cash equivalents Cash and cash equivalents, beginning of year 1,575,000 530,000 Cash and cash equivalents, end of year $16,187,000 $1,575,000 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 90502310-527-3847Contact: 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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