Enova Systems Announces Interim Results for the Nine Months Ended September 30, 2005
TORRANCE, Calif.--Nov. 1, 20055, 2005--Enova Systems, Inc. (OTCBB:ENOV) (AIM:ENV) (AIM:ENVS), today announced interim results for the nine months ended September 30, 2005.
Financial Summary Table (Unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Net revenues $ 857 $ 406 $ 2,871 $ 2,232
Gross profit 128 49 549 698
Operating loss (782) (1,101) (2,123) (1,864)
--------- --------- --------- ---------
Net loss (782) (1,101) (2,123) (1,864)
========= ========= ========= =========
Basic and diluted net loss
per common share (0.06) (0.01) (0.20) (0.01)
========= ========= ========= =========
Basic and diluted weighted
average common shares
outstanding 13,373 8,665 10,628 8,665
========= ========= ========= =========
Edwin Riddell, the Company's President and CEO said, "We continue to increase our revenues as compared to similar periods in 2004 by generating sales for our HybridPower drive systems and development services. We believe the fourth quarter will generate sufficient sales, particularly from the Tomoe LTA Singapore Train program, for the Company to achieve approximately $6.0M in revenues for the year."
Mr. Riddell continued, "the funding from UK institutional investors has given Enova a solid foundation from which we intend to continue to expand our technology, products and customer bases. During the third quarter of 2005, Enova continued to develop and enhance its product line including our post and pre-transmission parallel hybrid drive systems and our new high-voltage 240kW drive system. Our drive systems are being introduced in the United Kingdom with WrightBus, South Korea for Hyundai Motor Company and the Seoul Metro Rapid Transit with Tomoedenki; the U.S. Air Force with FcTec and HCATT; and other customers worldwide. We continue to attract new business, most notably with a North American truck manufacturer. These production and pre-production programs are advancing rapidly, which we believe will lead to increased volumes in 2006 and beyond."
Net revenues for the three and nine month periods ending September 30, 2005 were $857,000 and $2,871,000, respectively, as compared with $406,000 and $2,232,000 for the corresponding periods in 2004, an increase of 111% and 29% respectively. Net production revenues for the quarter ended September 30, 2005 increased 113% to $402,000 from $189,000 for the same period in 2004. Net R&D revenues for the quarter ended September 30, 2005 increased 110% to $455,000 from $217,000 for the quarter ended September 30, 2004. The increase in production revenues is primarily the result of delivery of drive systems to our customers as discussed earlier. Our sources of revenue for the third quarter of 2005 came equally from product sales and development contracts; however for the nine months ended September 30, 2005, product sales continue to account for a majority of revenues. Product sales as a percentage of total revenues were 47% for the three months ended September 30, 2005, and 60% of total revenues for the nine months ended therein, with sales of our HybridPower 120kW drive systems accounting for a majority of our product sales. We believe this trend will continue for the foreseeable future as more current and prospective customers purchase additional drive systems for their production vehicles. We will continue to seek out and contract for new development programs with both our current partners such as WrightBus, Eneco, EPT, FAW, Tomoe, Hyundai and our other U.S., Asian and European alliance partners, as well as with new alliances with other vehicle manufacturers and energy companies to enhance our technology and our product offerings. Research and development revenues for the third quarter of 2005 are a result of development programs and engineering services for the HMC fuel cell bus and various HCATT programs.
Cost of revenues consists of component and material costs, direct labor costs, integration costs and overhead related to manufacturing our products. Product development costs incurred in the performance of engineering development contracts for the U.S. Government and private companies are charged to cost of sales for this contract revenue. Cost of revenues for the quarter ended September 30, 2005 increased $372,000 to $729,000 from $357,000 for the same period in 2004. For the nine months ending September 30, 2005, there was an increase in cost of revenues to $2,322,000 from $1,534,000 for the same nine-month period in 2004. These increases are primarily attributable to the increase in sales for the quarter and nine-months, as well as additional support costs for some of our new product lines. We anticipate there may be additional increases in cost of sales for products in 2005 due to foreign exchange rate fluctuations of the U.S. dollar versus those currencies of our primary manufacturer. We anticipate this to be offset by a reduction in costs associated with manufacturing our products due to increasing purchases, thereby improving our gross margins.
Internal research, development and engineering expenses remained constant for the three months ended September 30, 2005 at $197,000 as compared with $198,000 in the same period in 2004. For the nine months ended September 30, 2005, such expenses increased 17% to $592,000 from $507,000 in 2004. As the market for heavy-duty hybrid vehicles continues to evolve and grow, we have increased allocating engineering resources to the development and enhancement of our new parallel hybrid drive systems, our series hybrid system, upgrading proprietary control software, higher power DC-DC converters and advancing our digital inverters and other power management firmware.
Selling, general and administrative expenses decreased to $765,000 from $844,000, or 9%, for the three months ended September 30, 2005 from the previous year's comparable period. For the nine months ended September 30, 2005, these expenses increased from $1,823,000 to $1,924,000 or 6%. The decrease for quarter ended September 30, 2005 was due to lesser professional fees as such were primarily for the U.K. offering and AIM listing and were charged directly against equity rather than expensed. The increase for the nine months is attributable to additional marketing, engineering and technical staff employed in the first half of 2005 as well as increased expense due to stricter regulatory oversight in conjunction with the Sarbanes-Oxley Act of 2002 and our efforts to attract additional capital funding. Management continues to implement cost reduction strategies in 2005 in its efforts to achieve profitability, although management cannot assure that profitability will be achieved.
Net interest and other income/expense remained increased by approximately 200% from a net expense of $61,000 in the third quarter of 2004 to a net income of $59,000 in the third quarter of 2005 as interest income from the capital raise began to be realized. For the nine months ended September 30, 2005, net interest and other income/expense was $83,000 compared to $98,000 for the same period in 2004.
We incurred a loss from continuing operations of $782,000 in the third quarter of 2005 compared to a loss of $1,101,000 in the third quarter of 2004, which represents a 29% reduction in loss. For the nine months ending September 30, 2005, the loss increased from $1,864,000 to $2,123,000 or a 14% increase. The increase was attributable to several factors including higher comparative costs of revenue due to the type of products sold in the first half of 2005 as compared to 2004, higher support costs in the third quarter of 2005, increased internal development efforts and higher general operating costs due to factors noted above. By increasing sales revenues while maintaining cost management strategies currently in effect, we believe we will be able to reduce our annual loss from operations as compared with prior years' results; however, management cannot assure that these results will be achieved.
The previous table, description and the condensed financial statements should be read in conjunction with the Risk Factors and other information contained in the Company's Forms 10-Q for the periods ended March 31, June 30, and September 30, 2005 and the 2004 Annual Report on Form 10-K, as amended.
CURRENT TRADING
Since September 30, 2005, we continue to add to our customer base, including Hyundai Motor Company of Korea; FAW China, Wright Bus and Eneco of the United Kingdom, Tsinghua University of China, MTrans of Malaysia, Tomoe of Japan; Ford Motor Company, and several other domestic and international vehicle and bus manufacturers. A new program, New York Sanitation, is to commence in the fourth quarter of 2005 as well as continuing programs with a major North American truck customer; the U.S. Air Force and the State of Hawaii-HCATT. Most recently, we have received an initial order from Tokyo R&D for our HybridPower drive system. We anticipate these programs to commence in the fourth quarter of 2005, however, at this time, there are no assurances that such additional contracts will be consummated.
STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
Except for the historical information contained herein, the matters discussed in this press release include forward-looking statements or information. All statements, other than statements of historical fact, including, without limitation, those with respect to the Company's objectives, plans and strategies set forth herein and those preceded by or that include the words "believes," "expects," "targets," "intends," "anticipates," "plans," or similar expressions, are forward-looking statements. Although the Company believes that such forward-looking statements are reasonable, it can give no assurance that the Company's expectations are, or will be, correct. These forward-looking statements involve risks and uncertainties and are based on current management's expectations and we are not obligated to update this information. Many factors could cause actual results and events to differ significantly from the results anticipated by us and described in these forward looking statements including, but not limited to, those risks noted above and other risks detailed from time to time in the Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and in its other SEC reports and statements.
The financial data set forth below should be read in conjunction with the Financial Statements and other disclosures contained in the Company's 2004 Annual Report on Form 10-K, as amended and Forms 10-Q for the periods ended March 31, June 30, and September 30, 2005.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
--------- -------- -------- -------
Net revenues $ 857 $ 406 $ 2,871 $ 2,232
Cost of revenues 729 357 2,322 1,534
--------- -------- -------- -------
Gross profit 128 49 549 698
Operating Expenses:
Research and development 197 198 592 507
Selling, general and
Administrative 765 844 1,924 1,823
Interest and other income
(expense), net (59) 61 83 98
Equity in losses 7 47 73 134
--------- -------- -------- -------
Total operating expenses 910 1,150 2,672 2,562
--------- -------- -------- -------
Operating loss (782) (1,101) (2,123) (1,864)
--------- -------- -------- -------
Net loss before income taxes (782) (1,101) (2,123) (1,864)
Income taxes - - - -
--------- -------- -------- -------
Net loss (782) (1,101) (2,123) (1,864)
========= ======== ======== =======
Basic and diluted net loss per
common share (0.06) (0.01) (0.20) (0.01)
========= ======== ======== =======
Basic and diluted weighted
average common shares outstanding 13,373 8,665 10,628 8,665
========= ======== ======== =======
CONDENSED BALANCE SHEETS
(in thousands)
September December September
30, 31, 30,
2005 2004 2004
----------- --------- -----------
(Unaudited) (Audited) (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,665 $ 1,575 $ 2,243
Accounts receivable, net 879 522 500
Inventory and supplies, net 1,271 1,036 1,314
Prepaid expenses and other current
assets 340 304 330
--------- ------- ---------
Total current assets 20,155 3,437 4,387
PROPERTY AND EQUIPMENT, NET 543 387 432
EQUITY METHOD INVESTMENT 1,695 1,768 825
OTHER ASSETS 217 296 323
--------- ------- ---------
TOTAL ASSETS 22,610 5,888 5,967
========= ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 576 66 337
Deferred revenues 127 392 262
Line of credit - 229 229
Other current liabilities 222 207 208
Current portion of notes/lease
payables 166 172 184
--------- ------- ---------
Total current liabilities 1,091 1,066 1,220
--------- ------- ---------
Accrued interest payable 1,609 1,378 1,311
Long term liabilities 3,332 3,341 3,338
--------- ------- ---------
Total liabilities 6,032 5,785 5,869
--------- ------- ---------
TOTAL STOCKHOLDERS' EQUITY 16,578 103 98
--------- ------- ---------
LIABILITIES AND STOCKHOLDERS'
EQUITY 22,610 5,888 5,967
========= ======= =========
STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
September 30, September 30,
2005 2004
----------- -----------
Cash flows from operating activities
Net loss $ (2,123) $ (1,864)
Adjustments to reconcile net loss
to net cash used by operating
activities
Depreciation and amortization 79 268
Equity in losses of equity method
investee 73 135
Issuance of common stock for services 237 66
(Increase) decrease in
Accounts receivable (357) 303
Inventory and supplies (235) 292
Prepaid expenses and other current
assets (36) (244)
Increase (decrease) in
Accounts payable 511 (431)
Accrued expenses 15 (10)
Deferred revenues (265) 262
Accrued interest payable 231 189
----------- -----------
Net cash used by operating activities (1,870) (1,034)
----------- -----------
Cash flows from investing activities
Purchases of property and equipment (155) (138)
----------- -----------
Net cash used in investing activities (155) (138)
----------- -----------
Cash flows from financing activities
Borrowings (repayments) on line of
credit (229) 109
Proceeds (repayment) on notes payable
and capital lease obligations (17) 16
Net proceeds from sale of common stock 18,361 2,760
----------- -----------
Net cash provided by (used in) financing
activities 18,115 2,885
----------- -----------
Net increase (decrease) in cash and
cash equivalents 16,090 1,713
Cash and cash equivalents, beginning
of period 1,575 530
----------- -----------
Cash and cash equivalents, end of
period 17,665 2,243
Supplemental disclosure of cash
flow information
Interest paid 5 4
=========== ===========
Income taxes paid - -
=========== ===========
Supplemental schedule of non-cash investing
and financing activities
Conversion of preferred stock to common
stock 40 64
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