30th Jun 2006 07:00
Enova Systems, Inc.29 June 2006 PART 2 OF 2 ENOVA SYSTEMS, INC. FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003 ENOVA SYSTEMS, INC. CONTENTS December 31, 2005-------------------------------------------------------------------------------- Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1 FINANCIAL STATEMENTS Balance Sheets 2-4 Statements of Operations 5 Statements of Stockholders' Equity 6 Statements of Cash Flows 7-8 Notes to Financial Statements 9-26 SELECTED QUARTERLY DATA (Unaudited) 27 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and StockholdersEnova Systems, Inc.Torrance, California We have audited the balance sheets of Enova Systems, Inc. as of December 31,2005 and 2004, and the related statements of operations, stockholders' equityand cash flows for each of the three years in the period ended December 31,2005. These financial statements are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on these financialstatements based on our audits. We conducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provided areasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, inall material respects, the financial position of Enova Systems, Inc. as ofDecember 31, 2005 and 2004, and the results of its operations and its cash flowsfor each of the three years in the period ended December 31, 2005, in conformitywith U.S. generally accepted accounting principles. SINGER LEWAK GREENBAUM & GOLDSTEIN LLP Los Angeles, CaliforniaMarch 9, 2006 F-1 ENOVA SYSTEMS, INC. BALANCE SHEETS December 31, 2005 and 2004-------------------------------------------------------------------------------- ASSETS 2005 2004 ----------- -----------Current assets Cash and cash equivalents $16,187,000 $ 1,575,000 Accounts receivable, net 2,173,000 522,000 Inventories and supplies, net 1,016,000 1,036,000 Prepaid expenses and other current assets 182,000 304,000 ----------- ----------- 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 190,000 296,000 ----------- -----------Total assets $21,973,000 $ 5,888,000 =========== =========== The accompanying notes are an integral part of these financial statements. F-2 ENOVA SYSTEMS, INC. BALANCE SHEETS December 31, 2005 and 2004-------------------------------------------------------------------------------- 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 obligations -- 6,000 ---------- ---------- Total current liabilities 1,935,000 1,066,000 Accrued interest payable 1,113,000 1,378,000 Notes payable, net of current portion 2,321,000 3,341,000 ---------- ---------- Total liabilities $5,369,000 $5,785,000 ---------- ---------- The accompanying notes are an integral part of these financial statements. F-3 ENOVA SYSTEMS, INC. BALANCE SHEETS December 31, 2005 and 2004-------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY (continued)
2005 2004 ------------- ------------- Stockholders' equity Series A convertible preferred stock - no par value 30,000,000 shares authorized 2,674,000 and 2,748,000 shares issued and outstanding Liquidating preference at $0.60 per share, aggregating $1,604,000 and $1,649,000 $ 1,679,000 $ 1,774,000 Series B convertible preferred stock - no par value 5,000,000 shares authorized 1,217,000 and 1,217,000 shares issued and outstanding Liquidating preference at $2 per share 2,434,000 2,434,000 Common Stock, no par value 750,000,000 shares authorized 14,783,000 and 9,228,000 shares issued and outstanding 109,323,000 90,465,000 Common stock subscribed 30,000 165,000 Stock notes receivable (1,176,000) (1,176,000) Additional paid-in capital 6,900,000 6,900,000 Accumulated deficit (102,586,000) (100,459,000) ------------- ------------- Total stockholders' equity 16,604,000 103,000 ------------- -------------Total liabilities and stockholders' equity $ 21,973,000 $ 5,888,000 ============= =============
The accompanying notes are an integral part of these financial statements. F-4
ENOVA SYSTEMS, INC. STATEMENTS OF OPERATIONS For the Years Ended December 31, 2005, 2004, and 2003----------------------------------------------------------------------------------------------------------- 2005 2004 2003 ------------ ------------ ------------ Net revenues Research and development contracts $ 1,555,000 $ 1,070,000 $ 1,889,000 Production 4,529,000 1,484,000 2,421,000 ------------ ------------ ------------ Total net revenues 6,084,000 2,554,000 4,310,000 ------------ ------------ ------------ Cost of revenues Research and development contracts 1,188,000 499,000 1,326,000 Production 4,813,000 1,627,000 1,978,000 Writedown Ford Think program inventory -- 113,000 -- ------------ ------------ ------------ Total cost of revenues 6,001,000 2,239,000 3,304,000 ------------ ------------ ------------Gross profit 83,000 315,000 1,006,000 ------------ ------------ ------------ Operating expenses Research and development 804,000 925,000 799,000 Asset impairment -- -- 200,000 Selling, general & administrative 2,870,000 2,325,000 2,919,000 ------------ ------------ ------------ Total operating expenses 3,674,000 3,250,000 3,918,000 ------------ ------------ ------------Other income and (expense) Interest and financing fees, net 13,000 (255,000) (234,000) Equity in losses of equity method investee (118,000) (192,000) (40,000) Debt extinguishment 1,011,000 -- -- Interest extinguishment 558,000 -- -- ------------ ------------ ------------ Total other income and (expense) 1,464,000 (447,000) (274,000) ------------ ------------ ------------Loss from operations (2,127,000) (3,382,000) (3,186,000) Net loss $ (2,127,000) $ (3,382,000) $ (3,186,000) ============ ============ ============ Basic loss and diluted loss per share $ (0.18) $ (0.38) $ (0.43) ============ ============ ============ Weighted-average number of shares outstanding 11,664,320 8,831,893 7,440,882 ============ ============ ============
The accompanying notes are an integral part of these financial statements. F-5
ENOVA SYSTEMS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY For the Years Ended December 31,------------------------------------------------------------------------------------------------------------------------ Convertible Preferred Stock Series A Series B Common Stock -------- -------- ------------ Shares Amount Shares Amount Shares Amount ------ ------ ------ ------ ------ ------ Balance, December 31, 2002 2,824,000 $ 1,842,000 1,217,000 $ 2,434,000 7,671,000 $ 84,026,000Conversion of Series A preferred stock (4,000) (5,000) -- 5,000Issuance of common stock for Cash 513,000 1,500,000 Issuance of subscribed common stock 22,000 100,000 Exercise of options 193,000 389,000 Stock option Services 8,000 34,000Net loss --------- ---------- --------- ---------- ---------- ------------Balance, December 31, 2003 2,820,000 $1,837,000 1,217,000 $2,434,000 8,407,000 $ 86,054,000 ========= ========== ========= ========== ========== ============Conversion of Series A preferred stock (73,000) (63,000) 2,000 63,000Issuance of common stock for Cash 613,000 3,450,000 Issuance of subscribed common stock 8,000 60,000 Exercise of options 188,000 783,000 Stock option conversions 7,000 39,000 Services 3,000 16,000Net loss --------- ---------- --------- ---------- ---------- ------------Balance, December 31, 2004 2,747,000 $1,774,000 1,217,000 $2,434,000 9,228,000 $ 90,465,000 ========= ========== ========= ========== ========== ============ Conversion of Series A preferred stock (73,000) (95,000) 1,000 95,000Issuance of common stock for Cash 5,473,000 18,361,000 Issuance of common stock for director services 56,000 293,000 Director bonus 25,000 109,000Subscribed Common StockNet loss --------- ---------- --------- ---------- ---------- ------------Balance, December 31, 2005 2,674,000 $1,679,000 1,217,000 $2,434,000 14,783,000 $109,323,000 ========= ========== ========= ========== ========== ============
Common Stock Stock Additional Subscribed Notes Paid-In Accumulated Shares Amount Receivable Capital Deficit Total ------ ------ ---------- ------- ------- ----- Balance, December 31, 2002 30,000 $ 130,000 $ (1,203,000) $6,949,000 $ (93,891,000) $ 287,000Conversion of Series A preferred stock --Issuance of common stock for Cash 1,500,000 Issuance of subscribed common stock (22,000) (100,000) -- Exercise of options 389,000 Stock option 82,000 82,000 Services 17,000 30,000 64,000Net loss (3,186,000) (3,186,000) ------ --------- ----------- ---------- ------------- -----------Balance, December 31, 2003 25,000 $ 60,000 $ (1,203,000) $7,031,000 $ (97,077,000) $ (864,000) ====== ========= =========== ========== ============= ===========Conversion of Series A preferred stock --Issuance of common stock for Cash 27,000 3,477,000 Issuance of subscribed common stock (25,000) (60,000) -- Exercise of options 783,000 Stock option conversions (39,000) -- Services 27,000 165,000 (92,000) 89,000Net loss (3,382,000) (3,382,000) ------ --------- ----------- ---------- ------------- -----------Balance, December 31, 2004 27,000 $ 165,000 $(1,176,000) $6,900,000 $(100,459,000) $ 103,000 ====== ========= =========== ========== ============= =========== Conversion of Series -- A preferred stock --Issuance of common stock for -- Cash 18,361,000 Issuance of common stock -- for director services (27,000) (165,000) 128,000 Director bonus 109,000Subscribed Common Stock 8,000 30,000 30,000Net loss (2,127,000) (2,127,000) ------ --------- ----------- ---------- ------------- -----------Balance, December 31, 2005 8,000 $ 30,000 $(1,176,000) $6,900,000 $(102,586,000) $16,604,000 ====== ========= =========== ========== ============= ===========
The accompanying notes are an integral part of these financial statements. F-6
ENOVA SYSTEMS, INC. STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2005, 2004, and 2003----------------------------------------------------------------------------------------------- 2005 2004 2003 ------------ ------------ ------------ Cash flows from operating activites Net loss $(2,127,000) $(3,382,000) $(3,186,000) Adjustments to reconcile net loss to net cash used by operating activitiesDebt extinguishment (1,011,000) -- --Interest extinguishment (558,000) -- -- Depreciation and amortization 304,000 376,000 351,000 Provision for asset impairment -- -- 200,000 Equity in losses of equity method investee 118,000 192,000 40,000 Issuance of common stock for services 158,000 89,000 34,000 Issuance of common stock for bonuses 109,000 -- -- (Increase) decrease in Accounts receivable (1,651,000) 281,000 457,000 Inventory and supplies 20,000 570,000 48,000 Note receivable - related party -- 8,000 24,000 Prepaid expenses and other current assets 122,000 (226,000) 29,000 Other assets (2,000) -- (14,000) Increase (decrease) in Accounts payable 1,330,000 (702,000) (424,000) Accrued expenses 290,000 (11,000) (112,000) Deferred revenues (392,000) 392,000 -- Accrued interest payable 293,000 256,000 234,000 ----------- ----------- -----------Net cash used by operating activities (2,997,000) (2,157,000) (2,319,000) ----------- ----------- ----------- Cash flows from investing activites Purchases of property and equipment $ (384,000) $ (174,000) $ (113,000) ----------- ----------- -----------Net cash used in investing activities (384,000) (174,000) (113,000) ----------- ----------- ----------- Cash flows from financing activites Net increase from line of credit $ -- $ 109,000 $ 106,000 Payment on notes payable and capital lease obligations (368,000) (33,000) (1,000) Proceeds from notes payable -- 40,000 -- Net Proceeds from sales of common stock 18,361,000 2,450,000 600,000 Proceeds from exercise of stock options -- 783,000 389,000 Payments on stock notes receivable -- 27,000 -- ----------- ----------- -----------Net cash provided by financing activities 17,993,000 3,376,000 1,094,000 ----------- ----------- -----------Net increase (decrease) in cash and cash equivalents 14,612,000 1,045,000 (1,338,000) =========== =========== =========== Cash and cash equivalents, beginning of year 1,575,000 530,000 1,868,000 ----------- ----------- -----------Cash and cash equivalents, end of year $16,187,000 $1,575,000 $ 530,000 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-7
2005 2004 2003 ----------- ----------- ---------- Interest paid $ 2,000 $ 10,000 $ 9,000 =========== =========== ===========Income taxes paid $ -- $ -- $ -- =========== =========== ===========Conversion of preferred stock to common stock $ 94,000 $ 63,000 $ (5,000) =========== =========== ===========Acquired investment under common stock purchase $ -- $ 1,000,000 $ 1,000,000 =========== =========== ===========Offering costs on common stock purchases $ -- $ 93,000 $ -- =========== =========== ===========Common Stock issued for purchase of options $ -- $ 39,000 $ -- =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-8 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 1 - Organization and Line of Business General ------- Enova Systems, Inc. (the "Company") is a California corporation that develops drive trains and related components for electric, hybrid electric, and fuel cell systems for mobile and stationary applications. The Company retains development and manufacturing rights to many of the technologies created, whether such research and development is internally or externally funded. The Company develops and sells components in the United States and Asia, and sells components in Europe. Liquidity --------- At December 31, 2005, the Company had a net working capital of approximately $17,623,000 as compared to $2,371,000 at December 31, 2004, representing an increase of $15,252,000. This increase is due primarily to capital raised in the third quarter of 2005, as described in Note 10. Stock Purchase Agreement ------------------------ The Company has entered into a joint venture agreement (the Agreement) with Hyundai Heavy Industries of Korea ("HHI") to create a joint venture corporation, Hyundai-Enova Innovative Technology Center (the "ITC") to be domiciled in Torrance, California. In conjunction with this Agreement, HHI and the Company entered into a stock purchase agreement in which HHI agreed to make a $3 million investment in the Company through the purchase of shares of the Company's authorized and unissued common stock pursuant to Regulation D of the Securities Act of 1933. This investment was made in two installments of $1.5 million each. The first installment was made in June 2003 upon incorporation of the ITC and in consideration for the issuance to HHI by the Company of 23,076,923 shares of common stock at $0.065 per share. Share amounts are reported before the effects of the reverse stock split, as described in Note 10. The second installment was made in September 2004 in consideration for the issuance to HHI by the Company of 11,335,315 shares of common stock at $0.1323 per share. Share amounts are reported before the effects of the reverse stock split, as described in Note 10. The Company invested $1 million of each installment into the ITC in consideration for the issuance to the Company of a 40% equity interest in the ITC (the balance of the installments, in the amount of $500,000 each, is to be retained by the Company). HHI acquired a 60% equity interest in ITC by investing $3 million in the ITC in two installments of $1.5 million each, to be made concurrently with the two installment payments to be paid by HHI for the Company's common stock. HHI and the Company have invested an aggregate of $5 million in the ITC. F-9 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 2- Summary of Significant Accounting Policies Contract Services Revenue and Cost Recognition ---------------------------------------------- The Company manufactures proprietary products and other products based on design specifications provided by its customers. Revenue from sales of products are generally recognized at the time title to the goods and the benefits and risks of ownership passes to the customer which is typically when products are shipped based on the terms of the customer purchase agreement. Revenue relating to long-term fixed price contracts is recognized using the percentage of completion method. Under the percentage of completion method, contract revenues and related costs are recognized based on the percentage that costs incurred to date bear to total estimated costs. Changes in job performance, estimated profitability and final contract settlements may result in revisions to cost and revenue, and are recognized in the period in which the revisions are determined. Contract costs include all direct materials, subcontract and labor costs and other indirect costs. General and administrative costs are charged to expense as incurred. At the time a loss on a contract becomes known, the entire amount of the estimated loss is accrued. The aggregate of costs incurred and estimated earnings recognized on uncompleted contracts in excess of related billings is shown as a current asset, and billings on uncompleted contracts in excess of costs incurred and estimated earnings is shown as a current liability. Comprehensive Income -------------------- The Company utilizes Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting comprehensive income and its components in a financial statement. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Examples of items to be included in comprehensive income, which are excluded from net income, include foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains and losses on available-for-sale securities. Comprehensive income is not presented in the Company's financial statements since the Company did not have any changes in equity from non-owner sources. Cash and Cash Equivalents ------------------------- Highly liquid investments with an original maturity of three months or less are considered cash equivalents. Accounts Receivable ------------------- Receivables are reported at net realizable value and are considered past due when payments have not been received for 90 days. In general, receivables are charged off as uncollectible upon exhausting all avenues of collection. Receivables older than 90 days totaled $209,000. F-10 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 2- Summary of Significant Accounting Polices (Continued) Allowance for Doubtful Accounts ------------------------------- The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. A considerable amount of judgment is required in assessing the ultimate realization of accounts receivable including the current credit-worthiness of each customer. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. As of December 31, 2005, the Company maintained a reserve for $266,000 of potentially doubtful accounts receivable. Bad debt expense totaled $267,000, $98,000, and $596,000 for the years ended December 31, 2005, 2004, and 2003 respectively. Inventories and Supplies ------------------------ Inventories and supplies are comprised of materials used in the design and development of electric, hybrid electric, and fuel cell drive systems, and other power and ongoing management and control components for production and ongoing development contracts, and is stated at the lower of cost (first-in, first-out) or market. In 2005, the Company charged off $376,000 for obsolete or slow moving inventory. Property and Equipment ---------------------- Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the sum of expected cash flows from use of the asset is less than its carrying value. Long-lived assets that management commits to sell or abandon are reported at the lower of carrying amount or fair value less cost to sell. Equity Method Investment ------------------------ Investment in joint venture (see Note 1) is accounted for by the equity method. Fair Value of Financial Instruments ----------------------------------- The carrying amount of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the short maturity of these instruments. The carrying value of all other financial instruments is representative of their fair values. The Company's short and long term debt may be substantially less than the carrying value since there is no readily ascertainable market for the debt given the financial position of the Company. Stock-Based Compensation ------------------------ SFAS No. 123, "Accounting for Stock-Based Compensation," establishes and encourages the use of the fair value based method of accounting for stock-based compensation arrangements under which compensation cost is determined using the fair value of stock-based compensation determined as of the date of grant and is recognized over the periods in which the F-11 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 2- Summary of Significant Accounting Polices (Continued) Stock Based Compensation (Continued) ------------------------------------ related services are rendered. The statement also permits companies to elect to continue using the current implicit value accounting method specified in Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," to account for stock-based compensation. SFAS No. 148 "Accounting for Stock-Based Compensation--Transition and Disclosure" amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has elected to use the intrinsic value based method and has disclosed the pro forma effect of using the fair value based method to account for its stock-based compensation. The Company has adopted only the disclosure provisions of SFAS No. 123. It applies APB Opinion No. 25 and related interpretations in accounting for its plans and does not recognize compensation expense for its stock-based compensation plans other than for restricted stock and options issued to outside third parties. For purposes of adjusted pro forma disclosures, the estimated fair value of the options is amortized to expense over the vesting period. If the Company had elected to recognize compensation expense based upon the fair value at the grant date for awards under this plan consistent with the methodology prescribed by SFAS No. 123, the Company's net loss and loss per share would be reduced to the pro forma amounts indicated below for the years ended December 31, 2005, 2004, and 2003. Per share amounts have been restated to illustrate the effects of the reverse stock split, as described in Note 10.
2005 2004 2003 ---- ---- ---- Loss applicable to common stockholders $(2,127,000) $(3,382,000) $(3,186,000) Compensation under APB Opinion 25 -- -- -- Stock-based employee compensation expense determined under fair value presentation for all options (222,000) (94,000) (315,000) ----------- ----------- -----------Pro forma net loss $(2,349,000) $(3,476,000) $(3,501,000) Basic and diluted loss per common share As reported $ (0.18) $ (0.38) $ (0.43) Pro forma $ (0.20) $ (0.39) $ (0.47)
F-12 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 2- Summary of Significant Accounting Polices (Continued) Stock Based Compensation (Continued) ------------------------------------ For purposes of computing the pro forma disclosures required by SFAS No. 123, the fair value of each option granted to employees and directors is estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions for the years ended December 31, 2005, 2004, and 2003: dividend yields of 0%, 0%, and 0%, respectively; expected volatility of 67%, 73%, and 88%, respectively; risk-free interest rates of 4%, 4%, and 4%, respectively; and expected lives of two, one, and three years, respectively. The weighted-average fair value of options granted during the year ended December 31, 2005 for which the exercise price equals the market price on the grant date was $.87, and the weighted-average exercise price was $4.35. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. Advertising Expense ------------------- The Company expenses all advertising costs, including direct response advertising, as they are incurred. Advertising expense for the years ended December 31, 2005, 2004, and 2003 was $9,000, $12,000, and $21,000, respectively. Research and Development ------------------------ Costs of researching and developing new technology or significantly altering existing technology is expensed as incurred. Income Taxes ------------ The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. F-13 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 2- Summary of Significant Accounting Policies (Continued) Loss Per Share -------------- The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive. The Company's common share equivalents consist of stock options. Estimates --------- The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Credit Risk ---------------------------- Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high credit, quality financial institutions. At times, such cash and cash equivalents may be in excess of the Federal Deposit Insurance Corporation insurance limit of $100,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. With respect to accounts receivable, the Company routinely assesses the financial strength of its customers and, as a consequence, believes that the receivable credit risk exposure is limited. Major Customers --------------- During the year ended December 31, 2005, the Company conducted business with five customers whose sales comprised 49%, 13%, 8%, 7% and 4% of total revenues. As of December 31, 2005, three customers accounted for 77%, 13%, and 8% of total accounts receivable. In addition, one of the Company's stockholders accounted for 13%, 10%, and 1% of total revenues during the years ended December 31, 2005, 2004, and 2003, respectively. This stockholder holds less than 5% of the total issued and outstanding common stock as of December 31, 2005. Demand deposits are placed with known, creditable financial institutions. F-14 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 2- Summary of Significant Accounting Policies (Continued) Recently Issued Pronouncements ------------------------------ In November 2004, the FASB issued SFAS No. 151,"Inventory Costs". SFAS No. 151 amends the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) under the guidance in ARB No. 43, Chapter 4, "Inventory Pricing". Paragraph 5 of ARB No. 43, Chapter 4, previously stated that ". . . under some circumstances, items such as idle facility expense, excessive spoilage, Recently Issued Pronouncements (Continued) ------------------------------------------ double freight, and rehandling costs may be so abnormal as to require treatment as current period charges. . . ." This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Management does not expect adoption of SFAS No. 151 to have a material impact, if any, on the Company's financial position or results of operations. In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets," an amendment to Opinion No. 29, "Accounting for Nonmonetary Transactions". SFAS No. 153 eliminates certain differences in the guidance in Opinion No. 29 as compared to the guidance contained in standards issued by the International Accounting Standards Board. The amendment to Opinion No. 29 eliminates the fair value exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. Such an exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in periods beginning after December 16, 2004. Management does not expect adoption of SFAS No. 153 to have a material impact, if any, on the Company's financial position or results of operations. In December 2004, the FASB issued SFAS No. 123(R),"Share-Based Payment". SFAS 123(R) amends SFAS No. 123, "Accounting for Stock-Based Compensation", and APB Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS No.123(R) requires that the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. SFAS No. 123(R) applies to all share-based payment transactions in which an entity acquires goods or services by issuing (or offering to issue) its shares, share options, or other equity instruments (except for those held by an ESOP) or by incurring liabilities (1) in amounts based (even in part) on the price of the company's shares or other equity instruments, or (2) that require (or may require) settlement by the issuance of a company's shares or other equity instruments. In April 2005, the Securities and Exchange Commission (SEC) deferred the effective date of SFAS 123R for SEC registrants to the first fiscal year beginning after December 15, 2005. Accordingly, we expect to implement the revised standard in the first quarter of 2006. Such implementation is prospective and is expected to have a material effect on the financial statements. F-15 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 2- Summary of Significant Accounting Policies (Continued) In March 2005, the FASB issued FIN 47, "Accounting for Conditional Asset Retirement Obligations - an Interpretation of FASB Statement No. 143, Accounting for Asset Retirement Obligations." This interpretation addresses the timing of liability recognition for legal obligations associated with the retirement of a tangible long-lived asset when the timing and/or method of settlement of the obligation are conditional on a future event. Recently Issued Pronouncements (Continued) ------------------------------------------ The interpretation requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability's fair value can be reasonably estimated. The adoption of this interpretation did not have any impact on our financial statements. In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3" (SFAS 154). This statement changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. APB No. 20 required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This statement requires retrospective application to prior period financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS 154 are effective for fiscal years beginning after December 15, 2005. As such we are required to adopt SFAS 154 starting January 1, 2006. We do not expect the adoption of this statement to have a material impact on our financial statements. In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments--an amendment of FASB Statements No. 133 and 140" ("SFAS 155"). This statement amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), and SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" and resolves issues addressed in SFAS 133 Implementation Issue No. D1, "Application of Statement 133 to Beneficial Interest in Securitized Financial Assets". The Company is required to apply SFAS 155 to all financial instruments acquired, issued or subject to a remeasurement event beginning January 1, 2007, although early adoption is permitted as of the beginning of an entity's fiscal year. The provisions of SFAS 155 are not expected to have an impact on the financial statements at adoption. F-16 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 3- Property and Equipment Property and equipment at December 31, 2005 and 2004 consisted of the following: 2005 2004 ---- ----Computers $ 296,000 $ 229,000Machinery and equipment 975,000 709,000Furniture and office equipment 242,000 192,000Demonstration vehicles and buses 324,000 461,000Equipment under capital lease obligations 94,000 94,000Leasehold improvements 70,000 68,000 ---------- ---------- 2,001,000 1,753,000Less accumulated depreciation and amortization 1,425,000 1,366,000 ---------- ---------- Total $ 576,000 $ 387,000 ========== ========== Depreciation and amortization expense was $304,000, $376,000, and $351,000 for the years ended December 31, 2005, 2004, and 2003, respectively. NOTE 4 - Equity Method Investment During the year ended December 31, 2004, the Company invested $1,000,000 of the proceeds received from a sale of common stock to HHI into a joint venture formed with HHI in 2003 (see Note 1). The Company's share of income and losses is 40% as stated in the agreement. During the year ended December 31, 2005, the Company recorded $118,000 as its proportionate share of losses in the joint venture. F-17 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- The following is the condensed financial position and results of operations of ITC, as of and for the year ended December 31, 2005: Financial position Current assets $4,105,000 Property and equipment, net 22,000 Liabilities (5,000) ---------- Equity $4,122,000 ========== Operations Net revenues $ 126,000 Expenses $ 423,000 ---------- Net loss $ (297,000) ========== Company's proportionate share of net loss $ (118,000) ========== NOTE 5- Other Assets During the year ended December 31, 2002, the Company incurred legal costs of $112,000 associated with two patents. These patents have been capitalized and are being amortized over their estimated useful lives. In June 2001, a strategic relationship with Ford Motor Company was entered into to develop and manufacture a high power, high voltage conversion module for Ford's fuel cell vehicle. Warrants were issued to Ford Motor Company in exchange for Ford's commitment to enter into a five-year agreement. The issuance of the warrants was recorded as a non-current asset (Value Participation Agreement) at its fair market value of $577,000, which was determined using the Black-Scholes option pricing model, and is being amortized on a straight-line basis over the life of the contract. The following table illustrates the types and carrying values of the Company's other assets: 2005 2004 ---- ---- Patents $ 93,000 $ 92,000 Valuation Participation Agreement 577,000 577,000 --------- --------- 670,000 669,000 Less accumulated amortization 481,000 373,000 --------- --------- Total $ 190,000 $ 296,000 ========= ========= F-18 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 6- Line of Credit The Company had available $250,000 revolving line of credit from a bank with interest payable monthly at 3.25%. The line of credit was secured by a $250,000 Certificate of Deposit. During 2005 the line of credit was paid in full, including all related interest obligations. NOTE 7- Deferred Revenues - Tomoe LTA Long-Term Contract The Company has entered into a development and production contract with Tomoe Electro-Mechanical Engineering and Manufacturing, Inc. for eight battery-electric locomotives for the Singapore Land Transport Authority for service vehicles for the Singapore Mass Rapid Transit Circle Line system for maintenance, repair, shunting and recovery of passenger trains. The contract commenced in August 2004 and completion of the contract will take approximately 15-18 months and was valued at approximately $3,022,000. The Company is recording revenues for this long-term, fixed price contract on the basis of the percentage-of-completion method. The contract contains several deliverables over its life and therefore the Company will divide these deliverables into separate units of accounting based on relative fair values. Revenue recognition criteria will be assessed separately for each separate unit of accounting. Revenues recorded for this contract were $2,928,000 and $68,000 as of December 31, 2005 and 2004, respectively. There is no deferred revenue relating to this contract as of December 31, 2005. NOTE 8- Notes Payable In December 2005, the Company was informed by the Credit Managers Association of California that $1,011,000 of principal and $447,000 accrued interest under the secured note payable had been disclaimed and extinguished by the beneficiaries of such principal amount. The Company has recognized a gain on the extinguishment of the principal and associated accrued interest of $1,458,000 in relation to this extinguishment. The Company evaluated this transaction under the guidance set forth in SFAS 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" and noted that the extinguishment of these liabilities was consistent with the guidance. In October 2005, the Company agreed to a settlement on an unsecured 10% note payable. In exchange for immediate payment of the full principal balance of $120,000, the beneficiary of the note agreed to forgive the entire accrued interest balance of $111,000. The Company has recognized a F-19 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 8- Notes Payable (Continued) gain on the extinguishment of the associated accrued interest. The Company evaluated this transaction under the guidance set forth in SFAS 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" and noted that the extinguishment of these liabilities was consistent with the guidance. Notes payable at December 31, consisted of the following:
2005 2004 ---- ---- Secured note payable to Credit Managers Association of California, bearing interest at prime plus 3% in 2005 and through maturity. Principal and unpaid interest due in April 2016. A sinking fund escrow is required to be funded with 10% of future equity financing, as defined in the agreement. $2,321,000 $3,332,000 Unsecured note payable, bearing interest at 10% per annum. -- 120,000 Secured note payable to a Coca Cola Enterprises in the original amount of $40,000, bearing interest at 5% per annum. Principal and unpaid interest due now. 40,000 40,000 Secured note payable to a financial institution in the original amount of $33,000, bearing interest at 8% per annum, payable in 36 equal monthly installments. 2,000 15,000 ---------- ---------- 2,363,000 3,507,000 Less current portion 42,000 166,000 ---------- ---------- Long-term portion $2,321,000 $3,341,000 ========== ==========
F-20 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- Future minimum principal payments of notes payable at December 31, 2005 consisted of the following: Year Ending December 31, ------------ 2006 $ 42,000 2007 -- 2008 -- 2009 -- 2010 -- Thereafter 2,321,000 ---------- Total $2,363,000 ========== NOTE 9- Commitments and Contingencies Leases ------ The Company leases its facilities under an operating lease agreement, which requires monthly payments of $13,700 and expires in February 2008. In addition, the Company rents manufacturing and office equipment under various capital lease agreements. Future minimum lease payments under these non-cancelable operating and capital lease obligations at December 31, 2005 were as follows: Year Ending Operating December 31, Leases ------------ ------ 2006 $166,000 2007 168,000 2008 28,000 -------- $362,000 ======== Rent expense was $259,000, $140,000, and $150,000 for the years ended December 31, 2005, 2004, and 2003, respectively. NOTE 10 - Stockholders' Equity Common Stock ------------ During the year ended December 31, 2005, the Company issued 5,473,000 shares of common stock for cash proceeds totaling $20,523,000. Total offering costs related to the issuance were $2,162,000. Of the total shares issued, 5,350,000 were sold through a placement agent to certain eligible investors outside the United States. 123,000 shares were issued through a private placement offering. In addition, the Company issued 81,000 shares of common stock to directors as compensation totaling $402,000. F-21 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 10 - Stockholders' Equity (Continued) During 2005, the Company effected a reverse stock split into a fraction thereof of 1/45th of a share of our outstanding common stock. In lieu of any fractional shares to which a holder of common stock would otherwise be entitled, we paid cash equal to (a) the average of the high-bid and low-asked per share prices of the common stock as reported on the NASDAQ electronic "Bulletin Board" on the effective date multiplied by (b) the number of shares of common stock held by such holder that would otherwise have been exchanged for such fractional share interest. As such, the number of issued and outstanding shares of common stock as of December 31, 2005 reflects the effects of the reverse-split. The number of shares of common stock authorized remains at 750,000,000. These are reflected in the financial statements as of December 31, 2005. Common Stock Subscribed ----------------------- At December 31, 2005, the Company was committed to issue 8,000 shares of common stock totaling $30,000 as compensation to its directors. Series A Preferred Stock ------------------------ Series A preferred stock is currently unregistered and convertible into common stock on a one-to-one basis at the election of the holder or automatically upon the occurrence of certain events including: sale of stock in an underwritten public offering; registration of the underlying conversion stock; or the merger, consolidation, or sale of more than 50% of the Company. Holders of Series A preferred stock have the same voting rights as common stockholders. The stock has a liquidation preference of $0.60 per share plus any accrued and unpaid dividends in the event of voluntary or involuntary liquidation of the Company. Dividends are non-cumulative and payable at the annual rate of $0.036 per share if, when, and as declared by, the Board of Directors. No dividends have been declared on the Series A preferred stock. Substantially all of the stock notes receivable stem from a Board of Directors plan for the sale of shares of Series A preferred stock in 1993 to certain officers and directors (Participants). In general, the Participants could purchase the preferred stock for a combination of cash, promissory notes payable to the Company, and conversion of debt and deferred compensation due to the Participants. All shares issued under this plan were pledged to the Company as security for the notes. The notes provided for interest at 8% per annum payable annually, with the full principal amount and any unpaid interest due on January 31, 1997. The notes remain outstanding. The likelihood of collecting the interest on these notes is remote; therefore, accrued interest has not been recorded since the fiscal year ended July 31, 1997. Series B Preferred Stock ------------------------ Series B preferred stock is currently unregistered and each share is convertible into shares of common stock on a two-for-one basis at the election of the holder or automatically upon the occurrence of certain events including: sale of stock in an underwritten public offering, if the offering results in net proceeds of $10,000,000, and the per share price of common stock is at least $2.00; and the merger, consolidation, or sale of common stock or sale of substantially all of the Company's assets in which gross proceeds received are at least $10,000,000. F-22 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 10 - Stockholders' Equity (Continued) The Series B preferred stock has certain liquidation and dividend rights prior and in preference to the rights of the common stock and Series A preferred stock. The stock has a liquidation preference of $2.00 per share together with an amount equal to, generally, $0.14 per share compounded annually at 7% per year from the filing date, less any dividends paid. Dividends on the Series B preferred stock are non-cumulative and payable at the annual rate of $0.14 per share if, when, and as declared by, the Board of Directors. No dividends have been declared on the Series B preferred stock. Stock Options and Warrants -------------------------- During 2004, the stockholders of the Company approved an increase of 20,000,000 shares for the 1996 Stock Option Plan (the "Plan") for incentive and non-statutory stock options during the period of the Plan, which expires in 2006. The Plan now reserves 65,000,000 shares under the plan. Options under the 1996 Plan expire over a period not to exceed ten years. Stock Options and Warrants (Continued) -------------------------------------- During the year ended December 31, 2005, the Company did not issue any shares of common stock from the exercise of options. During 2005, the Company adopted an executive compensation plan by granting options to the Company's executives options under our 1996 Stock Option Plan to purchase a total of 244,000 shares of common stock at an exercise price of $4.35 per share. These options will vest based on the Company achieving certain revenue milestones for the years ended December 31, 2005 and 2006. If such milestones are not met, the options with respect to those milestones will terminate. All of the granted options will remain in effect for a period of 10 years or until 90 days after the employment of the optionee terminates. For purposes of adjusted pro forma disclosures, the estimated fair value of the options is amortized to expense over the vesting period. As the measurement date for these option issuances have been deemed the respective vesting dates, the Company evaluated the impact of these stock option issuances using the grant date in the application of APB Opinion No. 25. As of the year ended December 31, 2005, the Company's executives had 122,000 options that have vested. During 2005 the Board granted other employees options to purchase a total of 66,000 shares of common stock at an exercise price of $4.35 which will vest in equal installments over 36 months. All of the granted options will remain in effect for a period of 10 years or until the employment of the optionee terminates. In Accordance with APB Opinion No. 25, there was no change recorded for these grants as the fair market value of the common stock approximated the per share exercise price of the respective options granted. F-23 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 10 - Stockholders' Equity (Continued) Stock Options and Warrants (Continued) -------------------------------------- The following summarizes common stock option activity. All prior year amounts have been restated to reflect the reverse stock split, discussed above:
1996 Plan 1993 Plan Other ------------------------ --------------------------- ------------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ ----- ------ ----- ------ ----- Outstanding, December 31, 2002 475,000 $ 4.95 157,000 $ 23.40 33,000 $76.50 Granted 222,000 $ 2.25 -- $ -- -- $ -- Exercised (192,000) $ 2.25 -- $ -- -- $ -- Forfeited (35,000) $ 4.95 (157,000) $ 23.40 (33,000) $76.50 ------- -------- ------- Outstanding, December 31, 2003 470,000 $ 5.40 -- $ -- -- $ -- Granted 44,000 $ 5.40 -- $ -- -- $ -- Exercised (243,000) $ 4.50 -- $ -- -- $ -- Forfeited (107,000) $ 5.40 -- $ -- -- $ -- ------- -------- ------- Outstanding, December 31, 2004 164,000 $ 5.40 -- $ -- -- $ -- Granted 310,000 $ 4.35 -- $ -- -- $ -- Exercised - $ - -- $ -- -- $ -- Forfeited (38,000) $ 7.64 -- $ -- -- $ -- ------- -------- ------- Outstanding, December 31, 2005 436,000 $ 4.46 -- $ -- -- $ -- ======= ======== ======= Exercisable, December 31, 2005 255,000 $ 5.06 -- $ -- -- $ -- ======= ====== ======== ======== ======= ======
F-24 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- NOTE 10 - Stockholders' Equity (Continued) The weighted-average remaining contractual life of the options outstanding at December 31 2005 was 7 years. The exercise prices of the options outstanding at December 31, 2005 ranged from $4.35 to $8.10. Options exercisable were 255,000, 143,000, and 464,000 at December 31, 2005, 2004 and 2003. Stock Options and Warrants (Continued) -------------------------------------- In 2005, the Company entered into a warrant agreement in conjunction with the stock purchase agreement to issue 123,000, post split, shares of common stock through a private placement offering. The warrant agreement grants the investor the right to purchase 25,000, post split, shares of our common stock at a price of $5.40 per share before June 2, 2006. The agreement with Ford Motor Company (see Note 5) included issuing warrants to Ford to purchase 4.6% of the fully diluted common stock of the Company over a 66 month period. The number of shares to be acquired will be adjusted from time to time for increases in the Company's fully diluted common stock. The vesting of these warrants is dependent upon Ford meeting specific purchase requirements. The fair value of the warrants granted to Ford were estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0%, expected volatility of 102%, risk-free interest rate of 4.76% and an expected life of the warrants of 66 months. Warrants issued and vested under this agreement totaled 2,500,000 at an exercise price of $0.29 per share during the year ended December 31, 2001. No warrants were vested under this program during 2005 and 2004. As of June 30, 2004, Ford is no longer eligible for further vesting of its warrants per the terms of the Value Participation Agreement. NOTE 11 - Income Taxes Significant components of the Company's deferred tax assets and liabilities F-25 ENOVA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2005-------------------------------------------------------------------------------- for federal and state income taxes as of December 31, 2005 and 2004 consisted of the following: 2005 2004 ---- ---- Deferred tax assets Federal tax loss carry-forward $33,135,000 $31,542,000 State tax loss carry-forward 1,154,000 893,000 Basis difference 1,610,000 1,610,000 Other, net (648,000) (96,000) ---------- ---------- 35,251,000 33,949,000 Less valuation allowance 35,251,000 33,949,000 ---------- ---------- Net deferred tax assets $ -- $ -- =========== =========== As of December 31 2005, the Company had net operating loss carry forwards for federal and state income tax purposes of approximately $97,455,000 and $13,059,000, respectively. The net operating loss carry forwards began expiring in 2003. NOTE 12 - Related Party Transactions During 2005, the Company purchased approximately $2,516,000 in components, materials and services from HHI. The outstanding balance owed to HHI at December 31, 2005 was approximately $1,317,000 NOTE 13- Employee Benefit Plan The Company has a 401(k) profit sharing plan covering substantially all employees. Eligible employees may elect to contribute a percentage of their annual compensation, as defined, to the plan. The Company may also elect to make discretionary contributions. For the years ended December 31, 2005, 2004, and 2003 the Company did not make any contributions to the plan. NOTE 14- Geographic Area Data The Company operates as a single reportable segment and attributes revenues to countries based upon the location of the entity originating the sale. Revenues by geographic area are as follows: 2005 2004 2003 ---- ---- ---- United States $ 971,000 $1,465,000 $2,672,000 Italy 152,000 30,000 213,000 Korea 758,000 258,000 297,000 Japan 3,038,000 176,000 146,000 China 234,000 256,000 -- Malaysia 91,000 -- 184,000 Ireland -- 166,000 -- Canada 120,000 -- 738,000 United Kingdom 720,000 203,000 60,000 ---------- ---------- ---------- Total $6,084,000 $2,554,000 $4,310,000 ========== ========== ========== F-26
ENOVA SYSTEMS, INC. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)--------------------------------------------------------------------------------------------------------------- March 31 June 30 2005 2004 2005 2004 ---- ---- ---- ---- Net revenues $ 692,000 $1,108,000 $1,322,000 $ 718,000 Cost of revenues 570,000 658,000 1,024,000 519,000 --------- --------- --------- ---------Gross Profit 122,000 450,000 298,000 199,000 --------- --------- --------- ---------Operating expenses Research and development 217,000 128,000 178,000 181,000 Selling, general & administrative 608,000 438,000 550,000 453,000 --------- --------- --------- --------- Total operating expenses 825,000 566,000 728,000 634,000 Other income and (expense) Interest and financing fees, net (69,000) (1,000) (72,000) (79,000) Equity in losses of equity method investee (40,000) (44,000) (26,000) (88,000) Debt extinguishment -- -- -- -- Interest extinguishment -- -- -- -- --------- --------- --------- --------- Total other income and (expense) (109,000) (45,000) (98,000) (167,000) --------- --------- --------- ---------Net Income / (Loss) $(812,000) $(161,000) $(528,000) $(602,000) ========= ========= ========= =========Basic loss and diluted loss per share $ (0.09) $ (0.02) $ (0.06) $ (0.07) ========= ========= ========= ========= Restated for effects of reverse stock split- see note 10 Weighted-average number of shares outstanding 9,238,000 8,325,000 9,263,000 8,519,000 ========= ========= ========= ========= September 30 December 31 2005 2004 2005 2004 ---- ---- ---- ---- Net revenues $ 857,000 $ 406,000 $3,213,000 $ 322,000 Cost of revenues 729,000 357,000 3,678,000 705,000 ---------- ----------- ---------- -----------Gross Profit 128,000 49,000 (465,000) (383,000) ---------- ----------- ---------- -----------Operating expenses Research and development 197,000 198,000 212,000 418,000 Selling, general & administrative 765,000 844,000 947,000 590,000 ---------- ----------- ---------- ----------- Total operating expenses 962,000 1,042,000 1,159,000 1,008,000 Other income and (expense) Interest and financing fees, net 59,000 (61,000) 95,000 (114,000) Equity in losses of equity method investee (7,000) (47,000) (45,000) (13,000) Debt extinguishment -- -- 1,011,000 -- Interest extinguishment -- -- 558,000 -- ---------- ----------- ---------- ----------- Total other income and (expense) 52,000 (108,000) 1,619,000 (127,000) ---------- ----------- ---------- -----------Net Income / (Loss) $ (782,000) $(1,101,000) $ (5,000) $(1,518,000) ========== =========== ========== ===========Basic loss and diluted loss per share $ (0.06) $ (0.13) $ (0.00) $ (0.17) ========== =========== ========== =========== Restated for effects of reverse stock split- see note 10 Weighted-average number of shares outstanding 13,373,000 8,665,000 11,664,000 8,832,000 ========== ========= ========== ===========
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