14th Nov 2008 07:00
14 November 2008
TURBO POWER SYSTEMS INC. ANNOUNCES ITS RESULTS FOR
THE NINE MONTHS AND QUARTER ENDED 30 SEPTEMBER 2008
Highlights
Production and development income in the quarter of £1.8 million (2007: £3.3 million)
Operating loss before financial charges of £1.7 million in the quarter (2007: £1.6 million)
Development spend reducing as programmes transition into production.
Operating Cash outflow reduced from £2.48m in Q2 to £1.53m in Q3 (a reduction of 38%).
Completion of the Qualification Testing of the equipment for the Eaton programme and the signing of the transition agreement with Hamilton Sundstrand has significantly reduced exposure to additional unplanned aerospace costs going forward.
Paul Summers, CEO, said:
"Although development spend for the quarter has continued at a high level this has been steadily reducing as the quarter has progressed. Engineering and/or production units have been shipped on several major programmes which (coupled with stabilised supplier payments) has provided the business with improved cashflow during later part of the quarter. The delivery of engineering and production units is anticipated to continue into Q4 which should result in an increasing cash balance during the remainder of the year.
The completion of the development phases of several contracts and reduced development spend on Hamilton Sundstrand (as a result of the transition agreement) is anticipated to further reduce the overall development spend in Q4.
The cost savings implemented earlier in the year are starting to have an effect and, coupled with further cost savings being implemented during Q4 should position the business to be able to demonstrate better results during 2009.
There continues to be a high level of interest from new and existing customers in the products TPS supplies despite the current economic climate and we are in detailed discussions with several of our customers for follow-on production orders."
For further information, please contact:
|
Turbo Power Systems Tel: +44 (0)20 8564 4460 |
|
Paul Summers, Chief Executive Officer |
|
Richard Bayliss, Finance Director |
|
Company Website: www.turbopowersystems.com |
|
Gavin Anderson (PR) Tel: +44 (0)20 7554 1400 |
|
Ken Cronin |
|
Michael Turner |
|
KBC Peel Hunt Ltd Tel: +44 (0)20 7418 8900 |
|
Oliver Scott |
|
Nicolas Marren |
NOTES TO EDITORS
About Turbo Power Systems
Turbo Power Systems Inc (TSX:TPS.TU AIM:TPS.L). is a leading UK based designer and manufacturer of innovative power solutions. The Group's products are all based on its core technologies of power electronics and high speed motors and generators and are sold into a number of market sectors including aerospace, rail, and various industrial sectors. The Company's products provide improved efficiency and reduced energy consumption compared to existing technologies.
Turbo Power System's existing customers include bluechip companies such as Bombardier, The National Rail Equipment Company, Eaton Aerospace and Lotus.
Forward looking statements
This press release contains forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, or performance, and underlying assumptions and other statements that are other than statement of historical fact. These statements are subject to uncertainties and risks including, but not limited to, the ability to meet ongoing capital needs, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition, the need to protect proprietary rights to technology, government regulation, and other risks defined in this document and in statements filed from time to time with the applicable securities regulatory authorities.
Definition of Non-GAAP financial measures
EBITDA is calculated as the net loss for the period less financial interest income and charges, foreign exchange gains and losses, tax charges and receipts, depreciation, amortisation, and stock compensation charges. The Company believes that EBITDA is useful supplemental information as it provides an indication of the operational results generated by its business activities prior to taking into account how those activities are financed and taxed and also prior to taking into consideration asset amortisation. EBITDA is not a recognised measure under GAAP and, accordingly, should not be construed as an alternative to operating income or net loss determined in accordance with GAAP as an indicator of financial performance or of liquidity and cash flows. EBITDA does not take into account the impact of working capital changes, capital expenditures and other sources and uses of cash which are disclosed in the consolidated statement of cash flows. The Company's method of calculating EBITDA may differ from other issuers and may not be comparable to similar measures provided by other companies.
Notice of no auditor review of interim financial statements
Under Canadian National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying un-audited interim financial statements of the Company have been prepared by and are the responsibility of the Company's management.
The Company's independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor.
CHAIRMAN'S STATEMENT
This quarter's results reflect greater control of costs in the business that will be a sound base for the rest of 2008 and going in to 2009. Successful delivery of new products into production, and continual improvement in levels of after market service, will enable us to build strategic relationships with a number of key customers. Over all, the business is being managed for improving margins and growth.
OPERATIONAL REVIEW
This MD&A has been prepared as at 14 November 2008.
Business of the Company
Turbo Power Systems
Designs and manufactures high-speed permanent magnet based motors and generators for industrial, transport, power generation and military applications, where technical performance, energy efficiency and power density requirements cannot be met by conventional technology.
Designs and manufactures power electronics products which include variable frequency drives and inverters, which combine with our electrical machines to create an integrated solution, and a range of rugged power conversion products for rail and industrial applications.
Q3 2008 Summary
Development activities during the quarter have been reducing as contracts enter their final phases of engineering test and production deliveries begin
The completion of the Qualification Testing of the equipment for the Eaton programme and the signing of the transition agreement with Hamilton Sundstrand has significantly reduced the vulnerability of the business to additional unplanned aerospace costs going forward.
The two major rail programmes (CTA & Toronto) have both moved into the final phases of their development with engineering units being delivered on both programmes.
Activity at the Heathrow Electrical Machines Division has increased with :
Commencement of the delivery of the 75 Industrial Motor and Drive units
Further deliveries of the ALC Motors
Delivery of the US Gas Electrical Machine and Drive
Delivery of the Electrical Machine and Drive for the European Research organization.
Cash outflow has stabilized during the later part of the quarter.
Discussion have commenced with several of our customers for follow-on orders.
High Speed Electrical Machines
The optimal size range for electrical machines based on the Company's permanent magnet technology is between 15kW and 2MW.
Markets
The key markets for the Motor derivatives are:
HVAC and Refrigeration
Air and Gas Compression
Turbo-Machinery
Aerospace - Actuators, Pumps, Fans
Ship Propulsion
Rail Traction Motors
The key markets for Generator derivatives are:
Distributed Generation (Gas Turbines)
Micro-Generation
Vehicle based auxiliary power generation
Flywheel systems
Customers and Contracts
1MW high-speed generator for a US Defence Contractor
The Design has been reviewed with the customer and material procurement has commenced. The unit is anticipated to complete in Q4 with follow-on orders being discussed for delivery in 2009.
Industrial motor and drive agreement
Delivery of the 75 units commenced in the quarter.
Discussions have commenced regarding follow-on orders for delivery in 2009 and beyond. The framework agreement anticipates sales of 500 systems over the first two years of production, and incorporates a manufacturing agreement with an initial term of 5 years.
US Process Gas Customer
This order for a high speed electrical machine and variable frequency drive is for a development project from a North American Industrial and Process Gas Company. The system has been successfully delivered. The products utilize our own permanent magnet and inverter technologies giving a high performance and high efficiency solution.
Once the customer has completed its systems development phase it is anticipated that further systems will be purchased during the course of 2009.
European Programme
This order from a European Research Organization, acting on behalf of a major international manufacturing company, was for a high speed electrical machine and variable frequency drive. The equipment has been delivered and discussions on follow on orders and for this and other size ranges are ongoing.
SKF
Extended reliability trials on the 35kW -70,000 rpm high speed motor and drive system have now completed satisfactorily. However, there has been a delay in the customer's programme and discussions are currently underway with SKF regarding the timing and quantity of the likely production volumes.
ALC
Further units have been delivered in the period in preparation for shipment to North America for full systems level operational evaluation by ALC's customer. This is expected to be completed in early 2009.
High Performance Power Electronics
TPS designs and manufactures rugged power electronics products for rail, industrial and transport applications, all of which require high reliability and availability in operation.
Markets
The key markets for the electronics products are:
Auxiliary Power Conversion for Rail and Light Transit
Variable Frequency Drives to complement HSEMs
Motor Drives for aerospace application
Industrial Pulsed Power Supplies
Grid Connected Inverters
Customers and Contracts
Bombardier Transportation-Canada ("BT")
BT- Chicago Transit Authority
The initial engineering units have now been built and delivered to our customer. Modifications to address previously identified technical issues are being incorporated into production units which are anticipated to be fully qualified by the end of 2008 and delivered in Q1 2009.
The Chicago (and Toronto) designs incorporate a new generation of hardware and software microprocessor control system which the Company is investing in as a common modular platform for all future rail products.
The base CTA contract is valued at some US$14 million including production, spares and engineering services, which with possible options for additional cars, could increase the value to in excess of US$20 million.
BT- Toronto
The first 11 units have been delivered and work is underway on the next delivery scheduled for Q1 2009.
The contract for the initial quantity of 234 cars is expected to exceed US$8 million, with the potential for further option quantities to extend that to some US$14 million.
Other Rail Products
PT3000
Regular small orders for the PT3000 At-Seat power supply, currently in operation with many UK operators including Virgin and National Express, continue to be received, however there are a number of UK rolling stock refurbishment programmes currently under review where the potential quantities of PT3000s are considerably larger.
Catering Converters
The order received at the end of Q2 for catering converters for Bombardier UK's TurboStar fleet of passenger has completed its design phase and manufacturing is anticipated to commence at the end of Q4.
PRC Industrial Lasers
TPS continues to see strong ongoing demand from PRC Lasers who have now standardized on the TPS high voltage power supply for their complete range of industrial lasers. Recently TPS has developed a new "higher power" derivative which is now undergoing testing. Discussions are underway regarding production orders for the next generation of this equipment.
Aerospace
FINANCIAL PERFORMANCE
Overview of the nine months ended 30 September 2008
Total revenues in the nine months of £5.85 million were 28% lower than the equivalent period in 2007 (2007: £8.09 million), primarily due to a reduction in production volume on rail programmes. During the first half year our major rail production programmes reached completion, but delays in final qualification on our current rail development programmes has resulted in a low production volume, particularly in the second half of Quarter 2 and throughout Quarter 3. Development costs fell in Quarter 3 as most programmes are now in final customer qualification stages, and our expenditure has reduced accordingly.
Administrative costs have decreased over the nine months as the impact of our cost review programmes takes effect and offsets the increased operating charges related to the new Gateshead facility that became operational during the second quarter of 2007.
The group's loss before interest, tax, depreciation, amortisation and stock compensation for the nine months increased to £5.6 million (2007: £3.5 million) as a result of high development expenditure and low production output, but has fallen in Quarter 3 to £1.5 million from £2.2 million in Quarter 2 of 2008.
Operating cash outflows before tax increased to £5.9 million (2007: £5.0 million) reflecting the increased development expenditure and reduced income, but were significantly reduced in Quarter 3 at £1.5 million from £2.5 million in Quarter 2.
The Company finished the nine months with an unrestricted cash balance of £1.3 million and held further cash of £1.3 million associated with performance bonds.
On 19 June 2008 the Company completed a £3,000,000 gross financing agreement with institutional investors. The financing comprised secured Convertible Notes and Warrants. The Convertible Notes bear interest at 15% per annum and are convertible into an aggregate of 75,000,000 of either Common Shares in Turbo Power Systems Inc. or A-Ordinary shares in Turbo Power Systems Limited at an exercise price of £0.04 per share. The Convertible Notes are issuable upon drawdown of the loan, of which £1,500,000 were issued on 19 June 2008. The loan is repayable over three years by way of regular quarterly repayments, commencing March 2009. The Warrants have a term of ten years and are convertible into an aggregate of 12,857,142 of either Common Shares in Turbo Power Systems Inc. or A-Ordinary shares in Turbo Power Systems Limited at an exercise price of £0.035 per share.
On 15 August 2008 the Company amended the terms of the loan agreement in order to facilitate a further drawdown of £1.5 million. The new terms provide that if at any time, including once the Loan Note has been fully repaid, there is a change in control of TPS, or its subsidiaries or substantially all of its assets, the Loan Note Holders will be entitled to receive a risk premium, calculated according to the enterprise value ascribed to the Company under the transaction before deducting any balance of the Loan Notes and/or interest outstanding. This risk premium will be equal to an initial payment of £1.5m plus 75% of the next £6m of enterprise value and 50% of the remainder.
Other than the debt financing detailed above, the Company has had no transactions with related parties and there are no further proposed transactions to disclose.
The Critical Accounting Estimates included within these statements are assessed on an unchanged basis from that disclosed in the Company's Financial Statements for the year ended 31 December 2007.
These consolidated financial statements have been prepared on a going concern basis, which presumes that the Company will be able to realise its assets and discharge its liabilities in the normal course of operations for the foreseeable future. The Company has incurred cumulative losses including a loss of £6.41 million for the nine months ended 30 September 2008 and has a cumulative deficit of £69.09 million as at 30 September 2008. The Company's ability to continue as a going concern depends on its ability to generate positive cash flow from operations or secure additional debt or equity financing.
Nine months ended 30 September 2008
Production Revenue
Production revenue in the nine months ended 30 September 2008 was £4.92 million compared with £7.08 million in 2007 and comprised
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Power electronics |
4,423 |
6,855 |
|
Electrical machines |
496 |
220 |
|
|
_____ |
_____ |
|
|
4,919 |
7,075 |
|
|
_____ |
_____ |
The Power electronics division has seen a reduction in production volume as contracts on Bombardier Beijing, London Underground and Toronto Transit H6 rail programmes completed. Sales volumes on the NREC programme were lower during 2008 compared to the same period in 2007 which had experienced a higher than normal demand rate.
Spares and service revenues within the Power electronics division were £0.53 million for the nine months (2007: £0.31 million).
In the Electrical machines division revenue was primarily from the Industrial Motor and Drive customer.
Development income
Development income in the nine months was £0.93 million compared with £1.02 million in 2007 and was primarily related to the high speed generator contract.
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
|
|
|
|
Development income |
932 |
1,017 |
|
|
_____ |
_____ |
Production costs
The cost of production revenues in the nine months amounted to £3.98 million (2007: £5.32 million).
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Power electronics |
3,568 |
4,544 |
|
Electrical machines |
413 |
776 |
|
|
_____ |
_____ |
|
|
3,981 |
5,320 |
|
_____ |
_____ |
Production costs include certain fixed facilities costs attributable to the manufacturing operation.
Included in production costs for the nine months are stock compensation charges on options awarded of £0.04 million (2007: £0.08 million).
Research and product development
Research and product development expenditure in the nine months was £4.42 million compared with £3.90 million in 2007, and comprised
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
|
||
|
Research and product development expenditure |
4,518 |
3,902 |
|
Accrued R&D tax credits |
(94) |
- |
|
_____ |
_____ |
|
|
Total expenditure |
4,424 |
3,902 |
|
_____ |
_____ |
R&D expenditure in the nine months was greater than that incurred in 2007 as a result of the commencement of the high speed generator development programme and higher investment into the Hamilton Sundstrand Ram Fan Controller programme than in the previous year.
Included in research and product development expenditure for the nine months are stock compensation charges on options awarded of £0.03 million (2007: £0.29 million).
General and administrative
General and administrative costs of £3.13 million (2007: £3.02 million) consist mainly of staff costs and facilities costs, which have increased following the relocation of the Gateshead operation to larger facilities. Also included are stock compensation charges on options awarded of £0.04 million (2007: £0.17 million).
Amortisation
Amortisation was £0.50 million compared with £0.66 million in 2007. The reduction reflects a number of assets becoming fully amortised.
Interest income
Interest income for the nine months was £0.08 million compared with £0.27 million in 2007 reflecting a lower average cash balance.
Interest expense and finance charges
Interest expenses arise from the issue of convertible notes in July 2003, March 2005, June and August 2008 and comprise
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Interest |
217 |
87 |
|
Accretion of debt |
45 |
62 |
|
|
_____ |
_____ |
|
|
262 |
149 |
|
|
_____ |
_____ |
Convertible notes are considered to be compound financial instruments, and the liability component and the equity component must be presented separately, as determined at initial recognition. The Company has valued the equity component of these bonds using the residual value of equity component method, whereby the liability component is valued first using current market rate for comparable instruments, at the time of issuance. The difference between the proceeds of the notes issued and the fair value of the liability is assigned to the equity component. The debt component of the 19 June and 15 August 2008 note issue was estimated at £2.39 million ( £2.64 million less finance costs of £0.25 million). The March 2005 note issue was estimated at £1.11 million. The equity element of the 2003 note issue was estimated at £0.91 million. The carrying value of the debt element is increased over the term of the debt and this accretion expense is charged to the profit and loss account. During the nine months this charge amounted to £0.05 million (2007: £0.06 million).
Finance charges for the nine months were £0.11 million (2007: £0.12 million) and were principally the operational charges for maintenance of the Company's banking and performance bond facilities. During 2007 the Company recorded a charge of £0.08 million within finance charges related to the redemption of Convertible Loan Notes.
During the nine months the Company recorded a fair value adjustment charge of £0.01 million (2007: gain of £0.01 million) against the investment in Altek Power Corporation.
Cash flows for the nine months
Cash outflow from operating activities
Operating cash outflow before movements in working capital was £5.57 million for the nine months (2007: £3.75 million), as a result of higher incurred costs on development programmes and reduced production output in 2008.
Movements in stocks, work in progress and debtors and creditors resulted in a net cash outflow of £0.32 million during the nine months (2007: outflow of £1.26 million).
Tax credits
During the nine months the company received research and development tax credits of £0.04 million (2007: £0.31 million).
Investing activities
Purchases of long term tangible assets amounted to £0.16 million (2007: £0.60 million) and relate to production equipment and leasehold property improvements.
Cash flow from financing activities
Cash inflow from financing in 2008 of £3.00 million during the nine months relates to net funds of £1.50 million received from the issue of loan notes in June 2008 and a further £1.50 million in August 2008, when the Company completed a £3.00 million (gross) financing agreement with institutional investors. Cash outflow related to costs of financing amounting to £0.25 million will be incurred in Quarter 4 of 2008. These costs are included in the book value of the debt at 30 September 2008, and are expensed to the Consolidated Statements of Loss using the effective interest method.
Cash inflow from financing in 2007 of £3.80 million during the nine months relates to net funds received from the issue of shares in June 2007, when the Company completed a £4.00 million (gross) financing agreement with institutional investors. The financing comprised placing of Common Shares in Turbo Power Systems Inc.
Overall cash outflow for the nine months
Overall the cash outflow for the period was £2.97 million. This compares with a cash outflow of £1.09 million in 2007. Cash outflow was significant due to the reduction in production volumes invoiced and collected, increased software development costs on the Hamilton Sundstrand programme and a reduction in the credit terms made available by suppliers to the Company.
Summary of quarterly results
The following table sets forth selected quarterly consolidated financial information of the Company for the last eight quarters;
|
All amounts in £'000 |
Revenue |
Research and product development |
General and administrative |
Net loss |
Loss per share |
|
December 2006 |
1,851 |
714 |
735 |
(1,123) |
(0.6) |
|
March 2007 |
2,033 |
1,015 |
841 |
(1,403) |
(0.5) |
|
June 2007 |
2,342 |
1,151 |
1,102 |
(1,768) |
(0.6) |
|
September 2007 |
2,700 |
1,736 |
1,083 |
(1,666) |
(0.5) |
|
December 2007 |
2,750 |
1,580 |
831 |
(1,578) |
(0.5) |
|
March 2008 |
1,962 |
1,591 |
1,059 |
(2,287) |
(0.7) |
|
June 2008 |
1,711 |
1,470 |
1,049 |
(2,276) |
(0.7) |
|
September 2008 |
1,246 |
1,363 |
1,025 |
(1,849) |
(0.6) |
Quarterly revenue has decreased during 2008 reflecting the completion of several rail contracts and the reduction in demand from National Rail Equipment Company. Research and development expenditure has increased reflecting development activities on the new Bombardier Chicago and Toronto rail programmes, continuing development on the Eaton and Hamilton Sundstrand Boeing 787 contracts and the commencement of development on the High Speed Generator contract, but is reducing each quarter during 2008. General and administrative costs increased as the Gateshead facility relocated to larger premises in quarter two of 2007.
Diluted earnings per share figures have not been provided as the loss in each period would be anti-dilutive.
Review of the quarter ended 30 September 2008
Production revenue
Production revenue in the quarter ended 30 September 2008 was £1.25 million compared with £2.70 million in 2007 and comprised
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Power electronics |
860 |
2,616 |
|
Electrical machines |
386 |
84 |
|
|
_____ |
_____ |
|
|
1,246 |
2,700 |
|
|
_____ |
_____ |
Revenues from the Power electronics division decreased as production contracts on Bombardier Beijing, London Underground and Toronto Transit H6 rail programmes completed. Sales volumes on the NREC programme were lower during 2008 compared to the same period in 2007 which experienced a higher than normal demand rate.
Revenue in the Electrical machines division relates primarily to the Industrial Motor and Drive contract.
Development income
Development income in the quarter was £0.55 million compared with £0.65 million in 2007, and was principally related to the new High Speed Generator contract.
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Development income |
545 |
647 |
|
_____ |
_____ |
Production costs
The cost of production revenues in the quarter amounted to £0.95 million (2007 : £1.91 million).
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Power electronics |
831 |
1,663 |
|
Electrical machines |
117 |
249 |
|
|
_____ |
_____ |
|
|
948 |
1,912 |
|
|
_____ |
_____ |
Production costs include certain facilities costs attributable to the manufacturing operation.
Included in production costs for the three months are stock compensation charges on options awarded of £nil (2007: £0.03 million).
Research and product development
Research and product development expenditure in the quarter was £1.36 million compared with £1.74 million in 2007, and comprised
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
|
||
|
Research and product development expenditure |
1,413 |
1,736 |
|
|
||
|
Accrued R&D tax credits |
(50) |
- |
|
|
_____ |
_____ |
|
Total expenditure |
1,363 |
1,736 |
|
|
_____ |
_____ |
Included in research and product development costs for the three months are stock compensation charges on options awarded of £0.03 million (2007: £0.10 million).
General and administrative
General and administrative costs in the quarter of £1.03 million (2007: £1.08 million) consist mainly of staff costs, facilities costs and the costs associated with the Company's public listings. Included in general and administrative costs for the quarter are stock compensation charges of £0.05 million (2007: £0.04 million).
Amortisation
Amortisation was £0.16 million compared with £0.22 million in 2007.
Interest income
Interest income in the quarter was £0.02 million compared with £0.11 million in 2007, as a result of lower maintained cash balances.
Interest expense and finance charges
Interest expenses arise from the issue of convertible bonds in July 2003, March 2005 and June and August 2008 and comprise
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Interest payable |
159 |
29 |
|
Accretion of debt |
15 |
10 |
|
|
_____ |
_____ |
|
|
174 |
39 |
|
|
_____ |
_____ |
Cash flows for the quarter ended 30 September 2008
Cash outflow from operating activities
Operating cash outflow before movements in working capital was £1.46 million for the quarter (2007: £1.19 million).
Movements in stocks, work in progress, and debtors and creditors produced a net cash outflow of £0.07 million during the quarter (2007: outflow of £0.84 million).
Tax credits
During the quarter the company received no research and development tax credits (2007: £nil).
Investing activities
Cash outflows from capital investments in the quarter were £0.01 million compared with £0.12 million in 2007.
Cash flow from financing activities
Cash inflow from financing in 2008 of £1.50 million during the quarter relates to net funds received from the issue of loan notes in August 2008, when the Company completed a £3.00 million (gross) financing agreement with institutional investors. Costs of financing amounting to £0.25 million will be incurred in Quarter 4 of 2008.
Cash outflow from financing in 2007 of £0.01 million during the quarter relates to financing costs related to the issue of shares in June 2007, when the Company completed a £4.00 million (gross) financing agreement with institutional investors. The financing comprised placing of Common Shares in Turbo Power Systems Inc.
Overall cash outflow for the period
Overall the cash outflow during the quarter was £0.08 million. This compares with an overall cash outflow of £2.11 million for the third quarter of 2007.
Balance sheet as at 30 September 2008
The Company ended the period with an unrestricted cash balance of £1.27 million compared with £4.24 million at 31 December 2007. Substantially all of the Company's cash balances are denominated in Sterling.
In addition the Company had restricted cash amounts of £1.32 million relating to performance bonds entered into as part of contracts with the Toronto Transit Commission and Bombardier (2007: £1.36 million).
Long term assets excluding restricted cash have decreased from £3.00 million at 31 December 2007 to £2.65 million at 30 September 2008, after depreciation charges of £0.50 million.
Long term liabilities have increased to £4.41 million at 30 September 2008 compared to £1.81 million at 31 December 2007, reflecting the increase in Loan Notes following the loan financing completed in June and August 2008.
Net working capital at 30 September 2008, excluding cash balances, was £1.62 million, compared with £1.62 million as at 31 December 2007.
As at 30 September 2008, the Company had 318,571,062 common shares issued and outstanding and 115,000,000 A ordinary shares issued and outstanding. As at that date there were 24,046,050 outstanding share options and 23,357,142 outstanding warrants.
|
Contractual Obligations £'000 at 30 September 2008 |
Payments Due by Period |
||||
|
Total |
Less than 1 year |
1 - 3 years |
4 - 5 years |
After 5 years |
|
|
Convertible notes |
4,789 |
4,789 |
- |
- |
|
|
Operating leases |
4,601 |
519 |
1,583 |
858 |
1,641 |
|
Total contractual obligations |
9,390 |
519 |
6,372 |
858 |
1,641 |
Liquidity
Cash, cash equivalents and short-term investments at 30 September 2008 were £1.27 million, compared with £4.26 million at 31 December 2007.
Restricted cash at 30 September 2008 was £1.32 million, compared with £1.36 million at 31 December 2007.
The Company incurred a loss in the nine months of £6.41 million and has a cumulative deficit of £69.09 million. The Company's ability to continue as a going concern depends on its ability to generate positive cash flows from operations or secure additional debt or equity financing.
There have been no significant changes to the US Dollar options held by the Company, and the Company has not changed its approach to Currency risk and Interest rate risk management from that disclosed in the annual statements at 31 December 2007.
Convertible bonds
On 11 March 2005 the Company completed a £8.00 million (gross) financing agreement with institutional investors. The financing comprised Convertible Notes and Warrants. The Convertible Notes have a term of five years plus one day and bear interest at a rate of 6.5% per annum. They are convertible into an aggregate of 66,666,667 Common Shares in Turbo Power Systems Inc. at a conversion price of £0.12 per share. The Convertible notes are unsecured. The Warrants have a term of five years and are convertible into an aggregate of 7,000,000 Common Shares in Turbo Power Systems Inc. at an exercise price of £0.15 per share. On 28 December 2006 2,360,000 Convertible Notes were redeemed. On 6 January 2007 a further 2,000,000 Convertible Notes were redeemed. At 31 December 2007 there were 1,789,000 Convertible Notes outstanding.
On 11 July 2003, the Company completed a £5.00 million financing agreement with Island Investment (Securities) Ltd. and Argun Investments Limited. The financing comprised Convertible Notes and Warrants. The Convertible Notes have a term of five years, bear an annual interest rate of 3.5% and are convertible into an aggregate of 25 million Common Shares of Turbo Power Systems Inc. at a conversion price of £0.20 per share. The Warrants had a term of three years and were convertible into an aggregate of 3.5 million Common Shares of Turbo Power Systems Inc. at an exercise price of £0.15 per share. These warrants expired on 11 July 2007. On 28 December 2006 2,500,000 Convertible Notes were redeemed. The remaining 2,500,000 Convertible Notes were redeemed on 6 January 2007.
On 19 June 2008 the Company completed a £3,000,000 (gross) financing agreement with institutional investors. The financing comprised secured Convertible Notes and Warrants. The Convertible Notes bear interest at 15% per annum and are convertible into an aggregate of 75,000,000 of either Common Shares in Turbo Power Systems Inc. or A-Ordinary shares in Turbo Power Systems Limited at an exercise price of £0.04 per share. The Convertible Notes are issuable upon drawdown of the loan, of which £1,500,000 were issued on 19 June 2008. The original loan agreement provided for repayment over three years by way of regular quarterly repayments, commencing March 2009.
On 15 August 2008 the Company amended the terms of the 19 June 2008 loan agreement in order to permit a second drawdown of £1,500,000. The new terms result in all interest and capital repayments being deferred until maturity in June 2011, and provide that if at any time, including once the Loan Note has been fully repaid, there is a change in control of TPS, or its subsidiaries or substantially all of its assets, the Loan Note Holders will be entitled to receive a risk premium, calculated according to the enterprise value ascribed to the Company, under the transaction after deducting any balance of the Loan Notes and/or interest outstanding. This risk premium will be equal to an initial payment of £1.5m plus 75% of the next £6m of enterprise value and 50% of the remainder.
The Warrants have a term of ten years and are convertible into an aggregate of 12,857,142 of either Common Shares in Turbo Power Systems Inc. or A-Ordinary shares in Turbo Power Systems Limited at an exercise price of £0.035 per share.
Financial instruments
There has been no change in the classifications adopted by the Company regarding its financial instruments and full analysis is provided in the Company's financial statements for the year ended 31 December 2007.
CHANGES IN ACCOUNTING POLICY AND RECENT ACCOUNTING PRONOUNCEMENTS
(i) Changes in accounting policy
On January 1 2008 the Company adopted the new recommendations of Canadian Institute of Chartered Accountants (CICA) Handbook Section 1535, Capital Disclosures. This new handbook section establishes disclosure requirements about an entity's capital and how it is managed. It requires the disclosure of information about an entity's objectives, policies and processes for managing capital.
On January 1 2008 the Company adopted the new recommendations of CICA Handbook Section 3862 Financial Instruments - Disclosures and Section 3863 Financial Instruments - Presentation which replaces Section 3861 Financial Instruments - Disclosure and Presentation, revising and enhancing disclosure requirements while carrying forward its presentation requirements. Section 3862 requires entities to provide disclosures in their financial statements that enable users to evaluate the significance of financial instruments on the entity's financial position and its performance and the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and how the entity manages those risks. Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the classification of financial instruments, from the perspective of the issuer, between liabilities and equities, the classification of related interest, dividends, losses and gains, and circumstances in which financial assets and financial liabilities are offset. These new sections place increased emphasis on disclosure about the nature and extent of risks arising from financial instruments and how the entity manages those risks.
The adoption of these standards has resulted in increased note disclosures in the Company's consolidated financial statements.
On January 1 2008 the Company adopted the new recommendations of CICA Handbook Section 3031, Inventories, which requires inventory to be measured at the lower of cost or net realisable value and provides guidance on the methodology used to assign costs to inventory, it disallows the use of the last-in first-out inventory costing methodology and requires that, when circumstances which previously caused inventories to be written down below cost no longer exist, the amount of the write down is to be reversed. The adoption of this standard has not affected the Company's existing policies.
(ii) Recent accounting pronouncements
New or updated CICA Handbook sections that have been issued but are not yet effective, and have a potential implication for the Company, are as follows:
Section 3064 Goodwill and Intangible Assets
In February 2008 the CICA issued Handbook Section 3064 Goodwill and Intangible Assets, effective for interim and annual financial statements relating to fiscal years beginning on or after October 1 2008. Section 3064, which replaces Section 3062 Goodwill and Other Intangible Assets, and Section 3450 Research and Development Costs, establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. This new standard is effective for the Company's fiscal year commencing January 1 2009. The Company is currently assessing the impact of the new standard.
Harmonizing Of Canadian and International Standards
In February 2008, the Accounting Standards Board of the CICA confirmed its strategic plan which will abandon Canadian GAAP and affect a complete convergence to the International Financial Reporting Standards. These new standards will be effective for the Company's interim financial statements commencing January 1, 2011. The Company is closely monitoring changes arising from this convergence.
Internal Control over Financial Reporting
The management of the Company are responsible for establishing and maintaining adequate internal controls over financial reporting within the Company to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with Canadian GAAP. Further to the evaluation conducted at 31 December 2007, management has concluded that following the departure of Stephen Sadler, CFO, the Company faces an increased risk as a result of limited resources and a lack of segregation in duties within the finance department. The Company will look to recruit a replacement CFO and to further expand its current knowledgebase, together with utilization of external experts, in order to minimize this risk. The Company does not consider that this weakness in control environment has resulted in any material misstatements in the financial statements.
Copies of Quarterly Results
Copies of the quarterly results are available from the Company's office at Unit 3 Summit Centre, Hatch Lane, West Drayton, Middlesex, UB7 0LJ, United Kingdom or available to view from the Company's website at www.turbopowersystems.com
|
TURBO POWER SYSTEMS INC. |
|||||
|
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS |
|||||
|
UNAUDITED |
|||||
|
Notes |
Quarter ended 30 September |
Nine months ended 30 Sept |
||||||||
|
2008 |
2007 |
2008 |
2007 |
|||||||
|
£'000 |
£'000 |
£'000 |
£'000 |
|||||||
|
restated |
restated |
|||||||||
|
(note 1) |
(note 1) |
|||||||||
|
Revenue |
2,3 |
1,246 |
2,700 |
4,919 |
7,075 |
|||||
|
Development income |
2,3 |
545 -------- |
647 -------- |
932 -------- |
1,017 -------- |
|||||
|
1,791 |
3,347 |
5,851 |
8,092 |
|||||||
|
Expenses |
||||||||||
|
Production costs |
948 |
1,912 |
3,981 |
5,320 |
||||||
|
Research and product development |
5 |
1,363 |
1,736 |
4,424 |
3,902 |
|||||
|
General and administrative |
1,025 |
1,083 |
3,132 |
3,026 |
||||||
|
Amortisation |
161 -------- |
218 -------- |
496 -------- |
660 -------- |
||||||
|
3,497 |
4,949 |
12,033 |
12,908 |
|||||||
|
Loss before extraordinary items, interest, finance charges and foreign exchange |
(1,706) |
(1,602) |
(6,182) |
(4,816) |
||||||
|
Interest income |
18 |
106 |
83 |
269 |
||||||
|
Interest expense |
6 |
(174) |
(39) |
(262) |
(149) |
|||||
|
Finance charge |
(70) |
(3) |
(112) |
(118) |
||||||
|
Foreign exchange gain/(loss) |
83 -------- |
(128) -------- |
61 -------- |
(23) -------- |
||||||
|
(143) |
(64) |
(230) |
(21) |
|||||||
|
-------- |
-------- |
-------- |
-------- |
|||||||
|
Net loss and Comprehensive loss |
(1,849) ===== |
(1,666) ===== |
(6,412) ===== |
(4,837) ===== |
||||||
|
Loss per share - basic |
8 |
(0.6) p |
(0.5)p |
(2.0) p |
(1.6) p |
|||||
|
Loss per share - diluted |
8 |
(0.6) p |
(0.5)p |
(2.0) p |
(1.6) p |
|||||
|
Weighted average number of shares outstanding |
318,571,062 |
318,571,062 |
318,571,062 |
292,753,630 |
||||||
|
TURBO POWER SYSTEMS INC. |
|||||||
|
CONSOLIDATED BALANCE SHEETS |
|||||||
|
UNAUDITED |
|||||||
|
Notes |
As at 30 September |
As at 31 December |
|||||
|
2008 |
2007 |
||||||
|
£'000 |
£'000 |
||||||
|
Current assets |
|||||||
|
Cash and cash equivalents |
1,265 |
4,235 |
|||||
|
Restricted cash |
7 |
440 |
- |
||||
|
Trade and other receivables |
2,065 |
2,871 |
|||||
|
Stock and work in progress |
2,808 |
2,376 |
|||||
|
Prepayments |
456 |
422 |
|||||
|
R&D tax credits receivable |
262 -------- |
208 -------- |
|||||
|
7,296 -------- |
10,112 -------- |
||||||
|
Long-term assets |
|||||||
|
Restricted cash |
7 |
879 |
1,362 |
||||
|
Investments |
12 |
25 |
|||||
|
Intangible assets |
9 |
22 |
47 |
||||
|
Goodwill |
9 |
820 |
820 |
||||
|
Property, plant and equipment |
9 |
1,798 -------- |
2,106 -------- |
||||
|
10,827 ===== |
14,472 ===== |
||||||
|
Liabilities and shareholders' equity |
|||||||
|
Creditors: amounts falling due within one year |
|||||||
|
Trade and other payables |
3,605 |
3,700 |
|||||
|
Deferred income |
365 -------- |
555 -------- |
|||||
|
3,970 -------- |
4,255 -------- |
||||||
|
Creditors: amounts falling due after more than one year |
|||||||
|
Warranty provision |
151 |
151 |
|||||
|
Convertible notes |
4,254 -------- |
1,661 -------- |
|||||
|
4,405 -------- |
1,812 -------- |
||||||
|
Capital and reserves |
|||||||
|
Common share capital |
10 |
55,804 |
55,804 |
||||
|
Class A Ordinary share capital |
10 |
13,310 |
13,310 |
||||
|
Contributed surplus |
2,423 |
1,964 |
|||||
|
Deficit |
(69,085) ---------- |
(62,673) ---------- |
|||||
|
Shareholders' funds |
2,452 --------- |
8,405 --------- |
|||||
|
10,827 ====== |
14,472 ====== |
||||||
|
TURBO POWER SYSTEMS INC. |
|||||
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AND DEFICIT |
|||||
|
UNAUDITED |
|||||
|
|
|
|
|
|
||||||
|
|
|
Common Share capital
|
A Ordinary capital
|
Contributed surplus
|
Accumulated other income
|
Deficit
|
Total Equity
|
|||
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|||
|
|
|
|
|
|
(restated)
|
(restated)
|
|
|||
|
|
|
|
|
|
(note 1)
|
(note 1)
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
|
Balance at 1 January 2007
as previously stated
|
51,919
|
6,123
|
1,981
|
(68)
|
(53,636)
|
6,319
|
|||
|
|
Prior year adjustment (note1)
|
|
|
|
68
|
(68)
|
-
|
|||
|
|
|
---------
|
---------
|
---------
|
---------
|
---------
|
---------
|
|||
|
|
Balance at 1 January 2007 as restated
|
51,919
|
6,123
|
1,981
|
-
|
(53,704)
|
6,319
|
|||
|
|
Net loss
|
|
|
|
|
(6,415)
|
(6,415)
|
|||
|
|
Stock compensation
|
|
|
699
|
|
|
699
|
|||
|
|
Conversion to shares
|
|
7,187
|
(716)
|
|
(2,414)
|
4,057
|
|||
|
|
Issue of shares
|
4,017
|
|
|
|
|
4,017
|
|||
|
|
Share issue costs
|
(132)
|
|
|
|
|
(132)
|
|||
|
|
Transitional adjustment
|
|
|
|
|
(140)
|
(140)
|
|||
|
|
|
---------
|
---------
|
---------
|
---------
|
---------
|
---------
|
|||
|
|
Balance at 31 December 2007
|
55,804
|
13,310
|
1,964
|
-
|
(62,673)
|
8,405
|
|||
|
|
Net loss
|
|
|
|
|
(6,412)
|
(6,412)
|
|||
|
|
Stock compensation
|
|
|
106
|
|
|
106
|
|||
|
|
Issue of warrants (note 11)
|
|
|
296
|
|
|
296
|
|||
|
|
Contributed surplus on issue of loan notes
|
|
|
57
|
|
|
57
|
|||
|
|
|
---------
|
---------
|
---------
|
---------
|
---------
|
---------
|
|||
|
|
Balance at 30 September 2008
|
55,804
=====
|
13,310
=====
|
2,423
=====
|
-
=====
|
(69,085)
======
|
2,452
=====
|
|||
|
TURBO POWER SYSTEMS INC. |
||||||
|
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||
|
UNAUDITED |
||||||
|
Quarter ended 30 September |
Nine months ended 30 Sept |
||||||||||
|
|
2008 |
2007 |
2008 |
2007 |
|||||||
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||||
|
restated |
restated |
||||||||||
|
(note 1) |
(note 1) |
||||||||||
|
Net loss from operations |
(1,849) |
(1,666) |
(6,412) |
(4,837) |
|||||||
|
Amortisation |
161 |
234 |
496 |
805 |
|||||||
|
Accretion of debt |
15 |
10 |
45 |
62 |
|||||||
|
Adjustment to fair value of investment |
6 |
13 |
|||||||||
|
Stock compensation charges |
25 |
168 |
106 |
540 |
|||||||
|
Foreign currency instrument loss |
- |
(9) |
- |
7 |
|||||||
|
Unrealised foreign exchange (gain)/loss |
83 |
108 |
61 |
16 |
|||||||
|
Movement in net interest accrual |
98 |
(33) |
126 |
(340) |
|||||||
|
--------- |
--------- |
--------- |
--------- |
||||||||
|
Cash outflow before movements in |
(1,461) |
(1,188) |
(5,565) |
(3,747) |
|||||||
|
working capital |
|||||||||||
|
Decrease/(increase) in debtors |
(39) |
(352) |
718 |
(436) |
|||||||
|
Decrease/(increase) in stock |
(173) |
(73) |
(432) |
(1,018) |
|||||||
|
Increase/(decrease) in creditors |
146 |
(411) |
(610) |
199 |
|||||||
|
--------- |
--------- |
--------- |
--------- |
||||||||
|
Net cash outflow from operating activities before tax |
(1,527) --------- |
(2,024) --------- |
(5,889) --------- |
(5,002) --------- |
|||||||
|
Tax credits |
- |
- |
39 |
312 |
|||||||
|
--------- |
--------- |
--------- |
--------- |
||||||||
|
Net cash outflow from operating activities after tax |
(1,527) |
(2,024) |
(5,850) |
(4,690) |
|||||||
|
--------- |
--------- |
--------- |
--------- |
||||||||
|
Investing activities |
|||||||||||
|
Purchase of property, plant and equipment |
(10) |
(123) |
(163) |
(596) |
|||||||
|
Grant income |
- |
250 |
- |
250 |
|||||||
|
Movement in restricted funds |
(39) |
(208) |
43 |
147 |
|||||||
|
--------- |
--------- |
--------- |
--------- |
||||||||
|
Cash outflow from investing activities |
(49) --------- |
(81) --------- |
(120) --------- |
(199) --------- |
|||||||
|
Financing activities |
|||||||||||
|
Net proceeds from financing |
1,500 |
(6) |
3,000 |
3,799 |
|||||||
|
--------- |
--------- |
--------- |
--------- |
||||||||
|
Cash inflow/(outflow) from financing activities |
1,500 --------- |
(6) --------- |
3,000 --------- |
3,799 --------- |
|||||||
|
Increase/(decrease) in cash in the period |
(76) ====== |
(2,111) ====== |
(2,970) ====== |
(1,090) ====== |
|||||||
|
Cash and cash equivalents: |
|||||||||||
|
Beginning of period |
1,341 ---------- |
7,690 ---------- |
4,235 ---------- |
6,669 ---------- |
|||||||
|
End of period |
1,265 ====== |
5,579 ====== |
1,265 ====== |
5,579 ====== |
|||||||
|
Supplemental cash flow information |
|||||||||||
|
Cash paid for interest |
56 |
110 |
112 |
425 |
|||||||
|
Cash received as interest |
18 |
106 |
83 |
269 |
|||||||
|
Convertible note issue costs of £250,000 are included within accounts payable at 30 September 2008 |
|||||||||||
|
TURBO POWER SYSTEMS INC. |
|||||||||
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|||||||||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|||||||||
|
UNAUDITED |
|||||||||
|
1 |
Basis of preparation |
||||||||
|
The consolidated financial statements of the Company have been prepared by management in accordance with Canadian Generally Accepted Accounting Principles. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements have, in management's opinion, been properly prepared using careful judgement with reasonable limits of materiality and within the framework of the significant accounting policies summarised in the Company's financial statements for the year ended 31 December 2007, and the subsequent changes in accounting policies as detailed below. Certain comparative amounts have been reclassified to conform to the financial statement presentation adopted for 2008. The Company's interim financial statements do not conform in all respects to the requirements of Canadian GAAP for annual financial statements. The Company's interim statements should be read in conjunction with the consolidated financial statements of the Company for the year ended 31 December 2007. Derivative financial instruments are used by the Company to manage a portion of its exposure to foreign exchange rate fluctuations. The Company does not utilise derivative financial instruments for trading or speculative purposes. The Company enters into foreign currency options denominated in U.S. Dollars, to manage foreign exchange rate fluctuation exposure on receipts from customers billed in U.S. Dollars. These derivative contracts, not accounted for as hedges, are marked to market, and any changes in the market value are recorded in income or expense when the changes occur. The fair value of these instruments is recorded as accounts receivable or payable. The Company's functional and reporting currency is Pound Sterling. Going concern These consolidated financial statements have been prepared on a going concern basis, which presumes that the Company will be able to realise its assets and discharge its liabilities in the normal course of operations for the foreseeable future. The Company has incurred cumulative losses including a loss of £1.85 million for the quarter ended 30 September 2008 and has a cumulative deficit of £69.09 million as at 30 September 2008. The Company's ability to continue as a going concern depends on its ability to generate positive cash flow from operations or secure additional debt or equity financing. Prior period adjustment The Company has previously translated the operations of the Canadian parent company using the current rate method. During the fourth quarter of 2007 it was identified that the functional currency of the Canadian holding company is Sterling, and as such the translation of the transactions should not have been recorded under the current rate method. Accordingly a correction has been made with retrospective restatement of the 2007 comparative financial statements. The foreign exchange differences arising on consolidation have been reclassified and taken to the income statement. This has resulted in a prior year adjustment to cancel the Currency Adjustment Reserve and increase the loss brought forward at 1 January 2007 in retained earnings by £68,000. The Consolidated Statements of Loss and Comprehensive Loss, the Consolidated Statement of Changes in Equity, and the Consolidated Statements of Cash Flows, together with the Segmental Analysis and Loss per Share notes have been restated for 2007 to take account of the decrease in reported net loss of £92,000 for the nine months, and the change to opening equity reserves. |
|||||||||
|
TURBO POWER SYSTEMS INC. |
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
UNAUDITED |
|
2 |
Changes in accounting policies and recent accounting pronouncements |
|
(i) Changes in accounting policies |
|
|
On January 1 2008 the Company adopted the new recommendations of Canadian Institute of Chartered Accountants (CICA) Handbook Section 1535, Capital Disclosures. This new handbook section establishes disclosure requirements about an entity's capital and how it is managed. It requires the disclosure of information about an entity's objectives, policies and processes for managing capital. |
|
On January 1 2008 the Company adopted the new recommendations of CICA Handbook Section 3862 Financial Instruments - Disclosures and Section 3863 Financial Instruments - Presentation which replaces Section 3861 Financial Instruments - Disclosure and Presentation, revising and enhancing disclosure requirements while carrying forward its presentation requirements. Section 3862 requires entities to provide disclosures in their financial statements that enable users to evaluate the significance of financial instruments on the entity's financial position and its performance and the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and how the entity manages those risks. Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the classification of financial instruments, from the perspective of the issuer, between liabilities and equities, the classification of related interest, dividends, losses and gains, and circumstances in which financial assets and financial liabilities are offset. These new sections place increased emphasis on disclosure about the nature and extent of risks arising from financial instruments and how the entity manages those risks. The adoption of these standards has resulted in increased note disclosures in the Company's consolidated financial statements. On January 1 2008 the Company adopted the new recommendations of CICA Handbook Section 3031, Inventories, which requires inventory to be measured at the lower of cost or net realisable value and provides guidance on the methodology used to assign costs to inventory, it disallows the use of the last-in first-out inventory costing methodology and requires that, when circumstances which previously caused inventories to be written down below cost no longer exist, the amount of the write down is to be reversed. The adoption of this standard has not affected the Company's existing policies. |
|
|
(ii) Recent accounting pronouncements |
|
|
In February 2008 the CICA issued Handbook Section 3064 Goodwill and Intangible Assets, effective for interim and annual financial statements relating to fiscal years beginning on or after October 1 2008. Section 3064, which replaces Section 3062 Goodwill and Other Intangible Assets, and Section 3450 Research and Development Costs, establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. This new standard is effective for the Company's fiscal year commencing January 1 2009. The Company is assessing the impact of this new standard on its consolidated financial statements. In February 2008, the Accounting Standards Board of the CICA confirmed its strategic plan which will abandon Canadian GAAP and affect a complete convergence to the International Financial Reporting Standards. These new standards will be effective for the Company's interim financial statements commencing January 1, 2011. The Company is closely monitoring changes arising from this convergence. |
|
TURBO POWER SYSTEMS INC. |
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
UNAUDITED |
|
3 |
Segmental analysis |
||||
|
The Group's two reportable segments are the power electronics segment, which is involved in the development and manufacture of electrical power supply and control systems and the electrical machines segment, which is involved in the development and commercialisation of high speed electrical machines. Corporate charges relating to the financing of the group and other related management activities are allocated between the two reportable segments. The power electronics and electrical machines segments both operate in the United Kingdom. |
|||||
|
All amounts in £'000 |
Power electronics |
Electrical machines |
Total |
|||||||
|
2008 |
2007 |
2008 |
2007 |
2008 |
2007 |
|||||
|
Nine months ended 30 September |
||||||||||
|
Revenue |
4,423 |
6,855 |
496 |
220 |
4,919 |
7,075 |
||||
|
Development income |
304 |
1,017 |
628 |
- |
932 |
1,017 |
||||
|
Amortisation |
(142) |
(104) |
(354) |
(556) |
(496) |
(660) |
||||
|
Interest income |
42 |
134 |
41 |
135 |
83 |
269 |
||||
|
Interest expense |
(131) |
(74) |
(131) |
(75) |
(262) |
(149) |
||||
|
Net loss |
(4,073) |
(1,190) |
(2,339) |
(3,647) |
(6,412) |
(4,837) |
||||
|
Capital expenditure |
138 |
408 |
25 |
28 |
163 |
436 |
||||
|
Quarter ended 30 September |
||||||||||
|
Revenue |
860 |
2,616 |
386 |
84 |
1,246 |
2,700 |
||||
|
Development income |
218 |
647 |
327 |
- |
545 |
647 |
||||
|
Amortisation |
(47) |
(34) |
(114) |
(184) |
(161) |
(218) |
||||
|
Interest income |
10 |
53 |
8 |
53 |
18 |
106 |
||||
|
Interest expense |
(87) |
(20) |
(87) |
(19) |
(174) |
(39) |
||||
|
Net loss |
(1,306) |
(359) |
(543) |
(1,307) |
(1,849) |
(1,666) |
||||
|
Capital expenditure |
10 |
114 |
- |
9 |
10 |
123 |
||||
|
As at 30 September 2008/31 December 2007 |
||||||||||
|
Capital assets |
584 |
588 |
1,214 |
1,518 |
1,798 |
2,106 |
||||
|
Goodwill |
820 |
820 |
- |
0 |
820 |
820 |
||||
|
Total assets |
4,995 |
6,800 |
5,832 |
7,672 |
10,827 |
14,472 |
||||
|
Total liabilities |
4,578 |
3,523 |
3,797 |
2,544 |
8,375 |
6,067 |
||||
|
Total income £'000 |
Nine months ended 30 September |
Quarter ended 30 September |
||||
|
2008 |
2007 |
2008 |
2007 |
|||
|
UK |
877 |
1,539 |
395 |
682 |
||
|
USA |
3,614 |
4,605 |
1,202 |
1,766 |
||
|
Canada |
1,189 |
1,554 |
84 |
712 |
||
|
Rest of world |
171 --------- |
394 --------- |
110 --------- |
187 --------- |
||
|
5,851 ====== |
8,092 ====== |
1,791 ====== |
3,347 ====== |
|||
|
TURBO POWER SYSTEMS INC. |
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
UNAUDITED |
|
4 |
Significant Customers |
||||
|
During the nine months ended 30 September 2008, 50% of the Company's sales were derived from three customers (2007: 54% from two customers). During the quarter ended 30 September 2008, 42% of the Company's sales were derived from three customers (2007: 59% from two customers). |
|||||
|
5
|
Research and product development
|
|
|
|
||||
|
|
Research and product development expenditure incurred during the period comprised:
|
|||||||
|
|
|
Nine months ended 30 September
|
|
Quarter ended 30 September
|
||||
|
|
|
2008
|
2007
|
|
2008
|
2007
|
||
|
|
|
£’000
|
£’000
|
|
£’000
|
£’000
|
||
|
|
|
|
|
|
|
|
||
|
|
Research and product development cost
|
4,518
|
3,902
|
|
1,413
|
1,736
|
||
|
|
Accrued tax credits
|
(94)
|
-
|
|
(50)
|
-
|
||
|
|
|
--------
|
--------
|
|
--------
|
--------
|
||
|
|
|
4,424
|
3,902
|
|
1,363
|
1,736
|
||
|
|
|
=====
|
=====
|
|
=====
|
=====
|
||
|
|
Total accrued tax credits receivable at 30 September 2008 amounted to £262,000 (31 December 2007: £208,000).
|
|||||||
|
6 |
Interest expense |
|||||
|
Nine months ended 30 September |
Quarter ended 30 September |
|||||
|
2008 |
2007 |
2008 |
2007 |
|||
|
£'000 |
£'000 |
£'000 |
£'000 |
|||
|
Interest |
217 |
87 |
159 |
29 |
||
|
Accretion of debt |
45 |
62 |
15 |
10 |
||
|
--------- |
--------- |
--------- |
--------- |
|||
|
262 ====== |
149 ====== |
174 ====== |
39 ====== |
|||
|
TURBO POWER SYSTEMS INC. |
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
UNAUDITED |
|
7 |
Financial instruments |
|
The following is a summary of the accounting classifications the Company has elected to apply to each of its significant categories of financial instruments outstanding as at 30 September 2008: Cash and cash equivalents: held for trading Restricted cash: held for trading Trade receivables: loans and receivables Investments: held for trading Trade payables: other financial liabilities Convertible notes: other financial liabilities Currency option contracts: held for trading Transaction costs incurred in arranging loan financing are deferred against the loan creditor balance, and expensed to the statement of loss and comprehensive loss over the life of the loan using the effective interest method. |
|
Interest rate and currency of cash balances Floating rate financial assets of £2,584,000 at 30 September 2008 (31 December 2007: £5,597,000) comprised Sterling interest bearing bank accounts, money market deposits and cash funds including restricted cash. Fixed rate financial assets at 30 September 2008 amounted to £12,000 (31 December 2007: £25,000) and comprised an investment in a convertible debenture. At 30 September 2008, the increase or decrease in net earnings for each 1% change in interest rates on net financial assets was approximately £26,000 per annum (31 December 2007: £55,000). |
||||||||||||||||||||||||||||||||||||
|
Currency exposure The Group's currency exposure, being those exposures arising from transactions, the net currency gains and losses from which will be recognised in the profit and loss account, is shown below.
The Company utilises US Dollar forward option agreements to reduce exposure to adverse fluctuations in foreign exchange rates. Included in net loss for the nine months ended 30 September 2008 is approximately £60,000 of foreign exchange gain resulting from the translation of the financial statements of Turbo Power Systems Inc. (2007: loss of £11,000). The rates used to translate the assets and liabilities as at 30 September 2008 was USD $1.818:£1 and CDN $1.887:£1 (30 September 2007 USD $:£2.048 and CDN $:£2.033). |
|
TURBO POWER SYSTEMS INC. |
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
UNAUDITED |
|
7 |
Financial instruments (continued) |
|
Derivative financial instruments Certain of the Company's business transactions occur in currencies other than Sterling. The Company entered into foreign exchange average rate option contracts during the twelve months ended 31 December 2007 to reduce exposure to fluctuations in foreign exchange rates on remittances from customers denominated in U.S. Dollars. During the nine months no gain or loss was realized on these options (2007: loss of £7,000). As at 30 September 2008 there was no unrealised gain from the contracts included within prepayments (2007: £37,000). The Company records unrealised gains or losses arising from these contracts in the statement of loss and comprehensive loss. |
|
|
Maturity of financial liabilities The maturity of the Group's borrowings at 30 September 2008 and 31December 2007 comprised: 2008 2007 £'000 £'000 Convertible notes due 11 March, 2010 1,789 1,789 Convertible notes due 30 June, 2011 3,000 - ------- ------- 4,789 1,789 ==== ====
At 30 September 2008, the Group's borrowings were at fixed rates of 6.5% (2010 notes) and 15.0% (2011 notes). The fair value of the loans at 30 September 2008 was £4,484,000 ( 31 December 2007: £1,661,000 ) |
|
|
Restricted cash In 2004 the Company committed cash bonds in support of contracts placed by the Toronto Transit Commission for the CLRV and H6 programmes. The associated contracts required the bonds to remain in place until two years after all equipment is delivered. According to the current contract schedule that would result in the cash related to the H6 programme of £559,000 being under the performance bond restriction until 2010. During March 2007 the Company committed cash bonds totalling USD$800,000 in support of contracts placed by Bombardier Transportation for the CTA and TTC programmes. The associated contracts require the bonds to remain in place until after development and the prototype equipment is delivered, which is expected to occur during Q1 2009. The Company has also provided a property lease guarantee bond which is held in escrow and totals £320,000.
At 30 September 2008 cash subject to restrictions totalled £1,319,000 (December 2007: £1,362,000). |
|
TURBO POWER SYSTEMS INC. |
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
UNAUDITED |
|
7 |
Financial instruments (continued) |
|
Credit risks
As seen below, the Company, in the normal course of business, is exposed to credit risk from its global customers. The accounts receivable are subject to normal industry risks in each geographical region in which the Company operates. The Company attempts to manage these risks by dealing with creditworthy, large well-established customers; however, due to the limited number of potential customers in each market this is not always possible. In these cases the Company reduces its exposure by obtaining up-front payments from the end customer prior to delivery of goods. Significant debtors at 30 September 2008 comprised £671,000 due from three customers, representing 37% of the outstanding balance (2007: £1,404,000 due from three customers, representing 56% of the outstanding balance). Consequently, the Company has concentrations of credit risk with respect to its accounts receivable. Total accounts receivable of £1,790,000 are due as follows: Not past due £ 1,362,000
Past due for over one day but not more that 30 days £ 232,000
Past due for over 30 days but not more than 60 days £ 86,000
Past due for over 60 days £ 110,000
Allowance for doubtful accounts £ nil
At 30 September 2008 and 31 December 2007 the allowance for doubtful accounts was £nil. |
|
|
Determination of fair value The fair value of a financial instrument is the amount of consideration that would be agreed upon in an arm's length transaction between knowledgeable, willing parties who are under no compulsion to act. The fair value of a financial instrument on initial recognition is the transaction price, which is the fair value of the consideration given or received. Subsequent to initial recognition, the fair values of financial instruments that are quoted in active markets are based on bid prices for financial assets held and offer prices for financial liabilities. When independent prices are not available, fair values are determined by using valuation techniques which refer to observable market data. These include comparisons with similar instruments where market observable prices exist, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. For certain derivatives, fair values may be determined in whole or in part from valuation techniques using non-observable market data or transaction prices. A number of factors such as bid-offer spread, credit profile and model uncertainty are taken into account, as appropriate, when values are calculated using valuation techniques. The fair value of short term financial assets and liabilities, including cash and cash equivalents, restricted cash, trade and other receivables, and trade and other payables as presented in the consolidated balance sheets approximate their carrying value due to the short term period to maturity of these financial instruments. |
|
TURBO POWER SYSTEMS INC. |
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
UNAUDITED |
|
8 |
Loss per share |
|||||
|
Loss per common share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The treasury stock method was used in determining the weighted average number of shares outstanding for each period. The weighted average number of shares outstanding in the quarter and nine months ended 30 September 2008 was 318,571,062 (2007: 318,571,062 for the quarter, 292,753,630 for the nine months). The loss for the quarter ended 30 September 2008 was £1,849,000 (2007: £1,666,000). Anti-dilutive potential securities outstanding not included in the loss per common share calculation at 30 September 2008 total 252,311,525 (2007: 171,902,983). |
||||||
|
9 |
Long - term assets |
||||
|
Cost |
Impairment |
Amortisation |
Net book value |
||
|
£'000 |
£'000 |
£'000 |
£'000 |
||
|
At 30 September 2008: |
|||||
|
Intangible assets |
4,078 |
1,663 |
2,393 |
22 |
|
|
Goodwill |
863 |
43 |
- |
820 |
|
|
Property, plant and equipment |
8,946 |
- |
7,148 |
1,798 |
|
|
-------- |
-------- |
-------- |
-------- |
||
|
Total long term assets |
13,887 ===== |
1,706 ===== |
9,541 ===== |
2,640 ===== |
|
|
At 31 December 2007: |
|||||
|
Intangible assets |
4,078 |
1,663 |
2,368 |
47 |
|
|
Goodwill |
863 |
43 |
- |
820 |
|
|
Property, plant and equipment |
8,782 |
- |
6,676 |
2,106 |
|
|
-------- |
-------- |
-------- |
-------- |
||
|
Total long term assets |
13,723 ===== |
1,706 ===== |
9,044 ===== |
2,973 ===== |
|
|
10 |
Share capital - issued shares |
|||||
|
Common |
A Ordinary |
|||||
|
Number |
£'000 |
Number |
£'000 |
|||
|
At 1 January 2007 |
273,944,592 |
51,919 |
56,250,000 |
6,123 |
||
|
Redemption of convertible notes |
- |
- |
58,750,000 |
7,187 |
||
|
Share based compensation |
176,470 |
17 |
- |
- |
||
|
Shares issued, net of share issue costs |
44,450,000 --------------- |
3,868 -------- |
- --------------- |
- -------- |
||
|
At 31 December 2007 and 30 September 2008 |
318,571,062 ========= |
55,804 ===== |
115,000,000 ========= |
13,310 ===== |
||
|
No options or warrants were exercised during the nine months ended 30 September 2008. |
|
TURBO POWER SYSTEMS INC. |
||
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
||
|
UNAUDITED |
||
|
11 |
Financing |
|
On 11 July 2003 the Company completed a £5,000,000 financing agreement with institutional investors. The financing comprised unsecured Convertible Notes and Warrants. The Convertible Notes have a term of five years and bear interest at a rate of 3.5% per annum. They were convertible into an aggregate of 25,000,000 Common Shares in Turbo Power Systems Inc. at a conversion price of £0.20 per share. The Warrants had a term of three years and were convertible into an aggregate of 3,500,000 Common Shares in Turbo Power Systems Inc. at an exercise price of £0.15 per share, and lapsed on 10 July 2006. |
|
|
On 11 March 2005 the Company completed a £8,000,000 (gross) financing agreement with institutional investors. The financing comprised unsecured Convertible Notes and Warrants. The Convertible Notes have a term of five years plus one day and bear interest at a rate of 6.5% per annum. They are convertible into an aggregate of 66,666,667 Common Shares in Turbo Power Systems Inc. at a conversion price of £0.12 per share. The Warrants have a term of five years and are convertible into an aggregate of 7,000,000 Common Shares in Turbo Power Systems Inc. at an exercise price of £0.15 per share. |
|
On 28 December 2006 the Company completed a £6,000,000 (gross) financing agreement with institutional investors. The financing comprised 50,000,000 Common Shares in the company and 25,000,000 A-Ordinary shares in Turbo Power Systems Limited. The financing included the issue of 3,500,000 Warrants, having a term of three years and being convertible into an aggregate of 3,500,000 Common Shares in Turbo Power Systems Inc. at an exercise price of £0.15 per share. These warrants were issued on 6 January 2007 (see note 12). On 28 December 2006, per an agreement reached with the holders of the convertible notes, the Company redeemed £2,500,000 of the 2003 Convertible Loan Notes and £2,360,000 of the 2005 Convertible Loan Notes at a redemption price of £0.08. The redemption was dependant upon the Company's shares being approved for trading on the AIM exchange which occurred on 28 December 2006. |
|
|
A further £2,500,000 of the 2003 Convertible Loan Notes and £2,000,000 of the 2005 Convertible Loan Notes were redeemed in January 2007 at a redemption price of £0.08. The Company has incorporated the guidance provided by the CICA's Emerging Issue Committee Abstract 96 "Accounting for the Early Extinguishment of Convertible Securities Through (1) Early Redemption or Repurchase and (2) Induced Early Conversion" (EIC96) in accounting for the early redemption of the convertible notes. EIC96 provides guidance on the treatment of the fair value of the conversion feature on the extinguishment of the convertible debenture. Redemption of the convertible debentures in January 2007 resulted in an increase in deficit of £82,000 (2006: £73,000) and an increase in retained deficit of £2,512,000 (2006: £2,600,000). |
|
|
On 19 June 2008 the Company completed a £3,000,000 (gross) financing agreement with institutional investors. The financing comprised secured Convertible Notes and Warrants. The Convertible Notes bear interest at 15% per annum and are convertible into an aggregate of 75,000,000 of either Common Shares in Turbo Power Systems Inc. or A-Ordinary shares in Turbo Power Systems Limited at an exercise price of £0.04 per share. The Convertible Notes are issuable upon drawdown of the loan, of which £1,500,000 were issued on 19 June 2008. The original loan agreement provided for repayment over three years by way of regular quarterly repayments, commencing March 2009. |
|
TURBO POWER SYSTEMS INC. |
|||
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|||
|
UNAUDITED |
|||
|
11 |
Financing (continued) |
|
On 15 August 2008 the Company amended the terms of the 19 June 2008 loan agreement in order to permit a second drawdown of £1,500,000. The new terms result in all interest and capital repayments being deferred until maturity in June 2011, and provide that if at any time, including once the Loan Note has been fully repaid, there is a change in control of TPS, or its subsidiaries or substantially all of its assets, the Loan Note Holders will be entitled to receive a risk premium, calculated according to the enterprise value ascribed to the Company, under the transaction after deducting any balance of the Loan Notes and/or interest outstanding. This risk premium will be equal to an initial payment of £1.5m plus 75% of the next £6m of enterprise value and 50% of the remainder. |
|
|
The Warrants have a term of ten years and are convertible into an aggregate of 12,857,142 of either Common Shares in Turbo Power Systems Inc. or A-Ordinary shares in Turbo Power Systems Limited at an exercise price of £0.035 per share. |
|
|
In accounting for the Convertible loan notes issued for £3,000,000 the Company has valued the debt and equity components by assigning the proceeds based on the fair values of the principal repayments, interest payments and the warrants issued compared to the proceeds. The warrants have been valued using the Black-Scholes method ( see note 12 ), and have a value of £236,000. The debt component has been valued at £2,648,000 and the conversion feature has been valued at £57,000. Transaction costs of £250,000 have been deferred against the current loan balance and will be expensed over the life of the loan using the effective interest method. The Convertible Notes are secured over the assets of the Company. |
|
12 |
Stock options, warrants and compensation expense |
|||||||
|
The number of options and warrants outstanding as at 30 September 2008, and the movement during the nine months then ended, are as follows: |
||||||||
|
Options |
Warrants |
|||||||
|
Number |
Number |
|||||||
|
Outstanding at 1 January 2008 |
30,847,250 |
10,500,000 |
||||||
|
Issued |
4,600,000 |
12,857,142 |
||||||
|
Cancelled |
(11,401,200) |
- |
||||||
|
------------- |
------------ |
|||||||
|
Outstanding at 30 September 2008 |
24,046,050 ======== |
23,357,142 ======= |
||||||
|
On 9 July 2008 the Company issued certain directors with an aggregate of 4,600,000 stock options with an exercise price of 3.8p per share, which vest over a 1 to 3 year period, and may only be exercised once the Company share price has been not less than 12p per share for the seven consecutive trading days prior to giving notice of exercise. The fair value of the warrants is calculated using the Black-Scholes option-pricing model. A dividend yield of Nil, expected volatility of 75%, a risk free interest rate of 5% and an expected life of 10 years have been assumed. The fair value of the options issued during the quarter ended 30 September 2008 was £0.02 per option. |
|
TURBO POWER SYSTEMS INC. |
|||
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|||
|
UNAUDITED |
|||
|
12 |
Stock options, warrants and compensation expense (continued) |
|
The stock based compensation expense for the nine months ended 30 September 2008, included in Production costs was £35,000 (2007: £80,000), in Research and product development was £32,000 (2007: £290,000), and in General and administrative costs was £39,000 (2007: charge of £170,000). On 19 June 2008 the Company issued 12,857,142 warrants as part of its financing agreement with institutional investors (note 11). The fair value of the warrants is calculated using the Black-Scholes option-pricing model. A dividend yield of Nil, expected volatility of 75%, a risk free interest rate of 6% and an expected life of 10 years have been assumed. The fair value of the warrants issued during the quarter ended 30 June 2008 was £0.03 per warrant. |
|
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions including the expected price volatility. The Company uses expected volatility rates, which are based on historical volatility rates trended into future years. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company's stock options. |
|
13 |
Capital management |
|
The Company defines capital that it manages as the aggregate of its cash and cash equivalents, short term investments and equity comprising share capital, contributed surplus and deficit. Its objectives when managing capital are to ensure that the Company will continue as a going concern, so that it can provide services to its customers and returns to its shareholders. The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its Board of Directors, will make changes to its capital structure as deemed appropriate under the specific circumstances. The Company is not subject to any externally imposed capital requirements and the Company's overall strategy with respect to management of capital remains unchanged from the year ended 31 December 2007. |
|
14 |
Contingent liability |
|
On 19 June 2008 the Company completed a £3,000,000 (gross) financing agreement with institutional investors (note 11). The revised terms agreed on 15 August 2008, to permit a second drawdown of funds, include a risk premium amount payable to the participant investors on a 'change of control' event of the Company. The amount payable is calculated as a percentage of the total enterprise value ascribed at the time of sale, and cannot be estimated at this time. Accordingly no provision has been made in the accounts. |
|
TURBO POWER SYSTEMS INC. |
|||
|
NINE MONTHS ENDED 30 SEPTEMBER 2008 |
|||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|||
|
UNAUDITED |
|||
|
15 |
Related party transactions |
|
On 19 June 2008 the Company completed a £3,000,000 (gross) financing agreement with institutional investors (note 11). £1,000,000 of this agreement has been placed with Impax Asset Management Limited, which currently holds 14.35% of the issued share capital of the Company. A further £1,000,000 has been placed with Gartmore Investment Limited, which currently holds 11.85% of the issued share capital of the Company. Both investors are considered to be insiders pursuant to Canadian securities law. |
|
16 |
Post balance sheet event |
|
On 10 October 2008 the Company announced that it had concluded an agreement to transition the Boeing 787 Ram Fan Controller engineering design and know-how back to Hamilton Sundstrand Corporation, after which the existing contract will be terminated. This agreement removes the potential exposure of the Company to additional development expenditure and cash outflows, and eliminates the future contingent loss on the contract previously reported. |
|
17
|
Selected quarterly information
|
|
|
|
|
|
|
The following table sets forth selected consolidated financial information of the Company for the eight most recent quarters.
|
||||
|
|
|
Revenue
£’000
|
Net loss
£’000
|
(Loss) per share UK pence
|
|
|
|
|
|
|
|
|
|
December 2006
|
|
1,851
|
(1,123)
|
(0.6)
|
|
|
March 2007
|
|
2,033
|
(1,403)
|
(0.5)
|
|
|
June 2007
|
|
2,342
|
(1,768)
|
(0.6)
|
|
|
September 2007
|
|
2,700
|
(1,666)
|
(0.5)
|
|
|
December 2007
|
|
2,750
|
(1,578)
|
(0.5)
|
|
|
March 2008
|
|
1,962
|
(2,287)
|
(0.7)
|
|
|
June 2008
|
|
1,711
|
(2,276)
|
(0.7)
|
|
|
September 2008
|
|
1,246
|
(1,849)
|
(0.6)
|
|
Related Shares:
TPS.L