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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Polyfuel Regs | LSE:PYF | London | Ordinary Share | COM SHS USD0.001 (REG S) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 3.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:1969T
PolyFuel Inc.
28 April 2008
28 April 2008
POLYFUEL, INC.
YEAR END RESULTS
12 MONTHS ENDED 31 DECEMBER 2007
PolyFuel, Inc. (AIM: PYF) ("PolyFuel" or the "Company"), a world leader in the
development of engineered membranes for portable fuel cell applications, today
announces its preliminary results for the year ended 31 December 2007.
Highlights
Financial
* Secured reinstatement of $1.98 Million in funding under the DOE
sponsored R&D programme;
* Secured $2 Million ATP award from NIST for the development of a new,
ultra-low crossover membrane;
* Generated revenues of $1.4 Million, the majority of which are from the
above mentioned DOE programme, up from $0.2 Million in 2006;
* Net loss for the year was $8.5 Million, down from $9.7 Million in 2006;
* Reduced overall expenditure levels to significantly lower the Company's
cash burn rate; 2008 cash burn rate has averaged approximately $600,000 per
month through March and the Company expects its average cash burn rate to be
in the $600,000 - $650,000 range going forward; and
* Finished 2007 with $13.7 Million in cash and short term investments.
Customer
* PolyFuel continued to build its direct membrane customer base,
increasing the number of direct customers from 18 at the end of 2006 to 24
at the end of 2007;
* Shipments of membranes to customers and channel partners increased
almost threefold over 2006 on a square meter basis; and
* PolyFuel has continued to increase its market share of known prototype
portable fuel cell design wins to 44% in 2007 (vs. approximately 30% in
2006).
Operational
* Successfully completed rigorous vendor qualification audit with Johnson
Matthey Fuel Cells ("JMFC");
* Extended the capability of PolyFuel's continuous roll-to-roll hot
bondable manufacturing process to include the new, thinner 20-micron
membrane material;
* A second of the Company's core membrane technology patents was issued in
the US in 2007, and 4 new patent applications were filed;
* Announced the achievement of the highest power density of any Direct
Methanol Fuel Cell (DMFC) stack; and
* Completed the first 3 milestones of PolyFuel's 5 milestone programme to
develop a reference design for a fuel cell power supply that can surpass the
energy density of lithium-ion battery technology.
Developments since 31 December 2007
* Achieved the 4th milestone in the Company's 5-step programme to develop
a reference design for a fuel cell power supply that can surpass the energy
density of lithium-ion battery technology.
* In partnership with the University of North Florida, secured $2 million
in funding from the US Army's Communications and Electronics Research,
Development and Engineering Command (CERDEC) for the ruggedisation of a
prototype fuel cell power supply for a notebook PC.
Jim Balcom, Chief Executive Officer, commented:
"PolyFuel made significant advances in Direct Methanol Fuel Cell development
during 2007, building our direct membrane customer base and increasing our
market share of prototype portable fuel cell design wins.
"Our focus on engineering support services has enabled us to achieve several
critical milestones toward fundamentally solving the water management problem
that has been an issue for portable fuel cell developers for nearly a decade. We
are now focused on completing the final challenging stage in our five-step
development programme to create a reference design for the world's first fuel
cell power module for notebook PCs that is designed to outperform Lithium-ion
battery packs.
"With market demand continuing to grow for longer runtime portable power
sources, we believe PolyFuel is positioned to be the leader in providing the
industry with the products, tools and designs to commercialise portable fuel
cell technology."
For further information please contact:
PolyFuel, Inc Tel: +1 650 429 4646
Jim Balcom, Chief Executive Officer
Hogarth Partnership Tel: +44 (0) 20 7357 9477
Nick Denton mobile: 07770 272 083
Sarah MacLeod mobile: 07747 602 739
Ian Payne mobile: 07956 258 239
Collins Stewart Tel: +44 (0) 20 7523 8350
Mark Connelly
About PolyFuel
PolyFuel (www.polyfuel.com) is a world leader in engineered membranes that
provide significantly improved performance in direct methanol fuel cells
("DMFCs") and hydrogen fuel cells, particularly for portable electronic and
automotive applications. The state of the art of fuel cells is essentially that
of the membrane, and PolyFuel's best in class, hydrocarbon-based membranes,
enable a new generation of fuel cells that for the first time can deliver on the
long-awaited promise of clean, long-running, and cost-effective portable power.
PolyFuel was spun out of SRI International (formerly the Stanford Research
Institute) in 1999, after 14 years of applied membrane research. The company is
based in Mountain View, California, and is publicly listed on the AIM stock
exchange in London.
Chairman and Chief Executive's Review
2007 was a challenging year for the portable fuel cell industry as, contrary to
our prior expectations and several fuel cell developers' public statements, no
test market activities were conducted by portable fuel cell system developers.
During the year, the world's leading fuel cell developers continued in their
efforts to reach the commercial benchmark of Lithium-ion ("Li-ion") battery
energy density. Their progress so far has been held back by technology
challenges, principally an inability to engineer the technology into a
consumer-acceptable form which outperforms incumbent battery technology in terms
of size, weight and runtime.
In the meantime, advances in portable device technology combined with improved
wireless network capability continue to drive up the power consumption and usage
pattern of consumer portable devices. Consumers continue to demand longer
runtimes, driving the so called "runtime gap" even wider. Furthermore, battery
safety recalls and newly introduced travel safety limitations are placing
additional pressure on conventional battery technology and further restricting
the ability of rechargeable battery technology to address the growing market
demand for longer, "unplugged" run times.
During the year, we continued to advance our strategy of "Building Bridges to
Commercialisation", described in last year's annual report. To accomplish this,
we are supporting our customers in three principal ways:
*Directly through the provision of our expanding line of hydrocarbon
membrane products to portable fuel cell system developers;
*Indirectly through channel partners, such as Johnson Matthey Fuels Cells
Limited (JMFC), that provide value-added fuel cell system components to
their customers; and
*Through the provision of engineering support services to enable customers
to optimise the design and performance of portable fuel cell systems and
components.
The benefits of this "three bridges" approach include flexibility in meeting the
changing needs of our customer base, as well as diversification in terms of
potential revenue streams. All three paths are designed to lead to the end goal
of positioning PolyFuel as a leading supplier of hydrocarbon membrane materials
in volume to the fuel cell industry.
We made good progress on the first two bridges during the course of 2007. We
continued to build our direct membrane customer base, increasing the number of
direct customers from 18 at the end of 2006 to 24 at the end of 2007. We also
advanced our relationship with our first channel partner, Johnson Matthey Fuel
Cells (JMFC), last year, with the successful completion of a rigorous vendor
qualification audit. During 2007 JMFC delivered numerous value-added fuel cell
components, incorporating PolyFuel's membranes, to its various fuel cell
customers for evaluation testing.
Shipments of membranes to customers and channel partners increased almost
threefold over 2006 and we have continued to increase PolyFuel's market share of
known prototype portable fuel cell design wins to 44% in 2007 (vs. approximately
30% in 2006).
Notwithstanding the progress described above, no test market activities were
conducted by portable fuel cell system developers in 2007. From our perspective,
the primary impediment appears to be that many of the fuel cell system
prototypes are still too large to be integrated with the portable electronic
devices themselves. This is where our engineering support services have a role,
the "third bridge" of our three bridge strategy. Our integrated team of membrane
scientists and system engineers are focused specifically on solving this issue.
As a result of PolyFuel's progress with building our channel partner
relationships (the "second bridge"), we were able to divert resources away from
pure research and development of catalyst coated membrane products and focus
more on providing engineering support services to optimise the design and
performance of portable fuel cell systems and components for customers.
One of the key activities undertaken during the year as part of this engineering
support services approach was a significant programme to develop a reference
design for a fuel cell power module for a notebook PC that could outperform
Lithium-ion battery packs.
During 2007, we completed the first 3 stages of the 5-milestone programme. The
first milestone of the programme was to develop a conceptual design for such a
system, and identify the membrane and membrane electrode assembly (MEA)
properties that were required to support it. The second milestone was to
engineer a revolutionary new membrane that had a high level of water
permeability but a low level of methanol diffusivity - usually
mutually-exclusive attributes. The third milestone was to design a new MEA that
could recycle much of the water that is created in a fuel cell back to and
through the newly engineered membrane.
In February 2008, we announced the achievement of the fourth milestone, after we
had operated several "proof of concept" fuel cells incorporating the
newly-engineered membrane and MEA for hundreds of hours in complete water
balance using the conceptual system design target operating conditions. This is
a significant step toward solving the fundamental problem of water management in
a fuel cell for portable electronic devices, and will enable a substantial
simplification in fuel cell system design, eliminating certain components and
hence achieving a further reduction in system size, weight and cost.
The team is now working hard on achieving the fifth challenging milestone, which
involves incorporating the advancements described above into a functioning
prototype of a fuel cell power module and integrating it with a
commercially-available notebook computer.
Together, these advances should enable a fuel cell to surpass the performance of
the ubiquitous lithium-ion battery in terms of size, weight and runtime. The
smaller design is expected to be of particular appeal to notebook computer
manufacturers, and their battery suppliers, who wish to provide consumers with
continuous, non-stop use of their mobile PCs without resorting to external power
connections or unwieldy spare batteries.
PolyFuel intends to work with battery and notebook PC OEMs to seek to introduce
the fuel cell system into this high growth, 100+ million unit per year market
through providing a complete reference design. Research shows that the runtime
remains one of the uppermost issues for intensive laptop users. The reference
design approach has been successfully used to advance new product introductions
in the technology industry for decades, with Intel acting as a pioneer of the
concept.
We intend to license this reference design technology to our membrane customers
as well as to MEA manufacturing partners, such as JMFC. The reference design
package will include guidance for fuel cell system manufacturers on how to
design a compact, high-efficiency fuel cell stack, various fuel cell system
components and the overall system architecture necessary to produce a power
supply that can outperform Li-ion batteries. We have no intention of becoming a
fuel cell system manufacturer ourselves, but rather will focus on providing
system expertise while fulfilling expected demand for both our new and existing
families of membrane products.
Further evidencing PolyFuel's status as a world-leading fuel cell development
company, we successfully secured government funding in the form of the following
programmes:
* Reinstatement of $1.98 Million in funding from the US Department of
Energy (DOE) for a prototype fuel cell power supply for a notebook PC;
* $2 Million Advanced Technology Programme (ATP) award from the US
National Institute of Standards and Technology (NIST) for the development of
a new, ultra-low crossover membrane; and
* In concert with the University of North Florida and University of
Florida, we secured a $2 Million appropriation from the US Army for the
development of a ruggedised fuel cell power supply for military laptop
applications.
Refocusing our resources away from pure research and development of catalyst
coated membrane products and onto providing more engineering support services in
July 2007 allowed us to reduce our overall expenditure levels. As a result of
these measures, and with the government funding described above, we have
significantly lowered our projected cash requirements.
During the year we continued to expand our intellectual property portfolio
through issuance of 2 US patents, including a composition of matter patent on a
core membrane material, and the filing of a number of new patent applications in
connection with membrane research and reference design development. The total
number of issued and pending patents now stands at 25.
We also continued to develop our manufacturing capabilities during the period.
In response to growing customer demand for the product, we extended the
capability of our continuous roll-to-roll hot bondable manufacturing process to
include our new, thinner 20-micron membrane material.
In February 2008 we welcomed Thomas Caldwell as our interim Chief Financial
Officer, replacing Mark Campion, who resigned to take up a similar position at a
non-competing private technology company based in southern California. Tom is
very well qualified for the role, having earned an MBA degree from the
University of Chicago and a Chartered Financial Analyst (CFA) designation, and
being a native of Silicon Valley in northern California with extensive
experience in both private and public technology companies.
Also, in April 2008, Board member Graham Titcombe, whose current term expires in
July, informed the Board of his decision not to stand for re-election. Graham
has made an outstanding contribution to our Company during the past 3 years
since PolyFuel's admission to AIM. We thank him for the leadership and
dedication that he has provided.
PolyFuel has a strong team of industry-leading fuel cell engineers and
scientists, and highly experienced business development and administrative
staff. We would like to thank the team for their continued commitment and
dedication to making fuel cell technology a commercial reality. With market
demand continuing to grow for longer runtime portable power sources, we firmly
believe PolyFuel is positioned to be the leader in providing the industry with
the products, tools and designs necessary to commercialize portable fuel cell
technology.
Robert Jecmen Jim Balcom
Non-Executive Chairman President and CEO
28 April 2008 28 April 2008
PolyFuel, Inc.
(A development stage enterprise)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Period from
27 January 1999
(Inception) to
Year Ended 31 December 31 December
-------- -------- -------- ---------
2007 2006 2005 2007
U.S.$ U.S.$ U.S.$ U.S.$
Revenues 1,391,247 184,600 1,040,347 3,461,055
-------- -------- -------- ---------
Costs and operating expenses
Research and development 5,665,354 5,582,924 4,944,800 35,300,000
General and
administrative 5,099,380 5,433,608 4,315,669 29,809,607
-------- -------- -------- ---------
Total expenses 10,764,734 11,016,532 9,260,469 65,109,607
-------- -------- -------- ---------
Loss from operations (9,373,487) (10,831,932) (8,220,122) (61,648,552)
Other income
(expense), net (4,688) (12,865) 889 (34,115)
Interest income 921,176 1,230,979 396,027 3,112,295
Interest expense (635) (59,863) (119,819) (1,591,326)
-------- -------- -------- ---------
Net loss (8,457,634) (9,673,681) (7,943,025) (60,161,698)
======== ======== ======== =========
Net loss attributable
to common stockholders (8,457,634) (9,673,681) (9,054,609) (47,946,585)
======== ======== ======== =========
Net loss per share
Basic (0.15) (0.17) (0.41)
-------- -------- --------
(0.15) (0.17) (0.41)
-------- -------- --------
Weighted average number
of shares used
in net loss per share
calculations
Basic 57,368,049 56,154,107 22,305,981
-------- -------- --------
Diluted 57,368,049 56,154,107 22,305,981
-------- -------- --------
PolyFuel, Inc.
(A development stage enterprise)
UNAUDITED CONSOLIDATED BALANCE SHEETS
31 December
--------- -------- --------
2007 2006 2005
U.S.$ U.S.$ U.S.$
Assets
Current assets
Cash and cash equivalents 7,126,685 15,177,509 13,378,449
Short-term investments 6,576,170 6,654,886 1,097,931
Accounts receivable 134,511 35,434 30,800
Inventories 114,192 88,806 --
Prepaid expenses and other
current assets 330,392 357,435 358,650
--------- -------- --------
Total current assets 14,281,950 22,314,070 14,865,830
Property and equipment, net 337,039 460,405 615,764
Other assets 195,300 195,300 82,599
--------- -------- --------
Total assets 14,814,289 22,969,775 15,564,193
========= ======== ========
Liabilities and
Stockholders' Equity
Current liabilities
Accounts payable and
accrued expenses 922,629 1,162,994 845,371
Current portion of finance
facility and capital lease
obligations -- -- 464,136
Deferred revenue 1,336 115,475 --
--------- -------- --------
Total current liabilities 923,965 1,278,469 1,309,507
Finance facility and capital
lease obligations, net of --------- -------- --------
current portion -- -- 36,597
--------- -------- --------
Total liabilities 923,965 1,278,469 1,346,104
--------- -------- --------
Stockholders' equity
Common stock: US$0.001 par
value; 100,000,000,
100,000,000 and 70,000,000
shares authorised at
31 December 2007, 2006 and
2005, respectively;
57,436,388, 57,282,839 and
44,550,093 shares issued and
outstanding at 31 December
2007, 2006 and 2005,
respectively 57,436 57,283 44,550
Additional paid-in capital 59,272,722 58,616,546 41,483,238
Accumulated other
comprehensive income 1,180 857 --
Deficit accumulated during
development stage (45,441,014) (36,983,380) (27,309,699)
--------- -------- --------
Total stockholders' equity 13,890,324 21,691,306 14,218,089
--------- -------- --------
Total liabilities and
stockholders' equity 14,814,289 22,969,775 15,564,193
========= ======== ========
PolyFuel, Inc.
(A development stage enterprise)
UNAUDITED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS'EQUITY (DEFICIT)
Deficit
Notes Accumulated Accumulated Total
Additional Receivable Other During the Stockholders'
Paid-in from Comprehensive Development Equity
Common Stock Capital Stockholders Income Stage (Deficit)
Shares U.S.$ U.S.$ U.S.$ U.S.$ U.S.$ U.S.$
Issuance of common
stock for cash at
US$25 per share
in January 1999 4 -- 100 -- -- -- 100
Net loss -- -- -- -- -- (59,926) (59,926)
-------------------- -------- -------- -------- -------- -------- -------- --------
Balances at 31
December 1999 4 -- 100 -- -- (59,926) (59,826)
Issuance of common
stock for in-process
research and development
and notes payable in
October 2000 9,120 9 205,191 -- -- -- 205,200
Net loss -- -- -- -- -- (4,316,346) (4,316,346)
-------------------- -------- -------- -------- -------- -------- -------- --------
Balances at 31
December 2000 9,124 9 205,291 -- -- (4,376,272) (4,170,972)
Issuance of warrants
with credit line and
lease line in May and
July 2001 -- -- 93,986 -- -- -- 93,986
Exercise of common
stock options at
US$22.50 per share
for cash and notes
receivable in May and
December 2001 5,707 6 128,394 (127,116) -- -- 1,284
Stock based
compensation
expense -- -- 5,954 -- -- -- 5,954
Interest accrued on
notes receivable -- -- -- (4,907) -- -- (4,907)
Net loss -- -- -- -- -- (4,839,193) (4,839,193)
-------------------- -------- -------- -------- -------- -------- -------- --------
Balances at 31
December 2001 14,831 15 433,625 (132,023) -- (9,215,465) (8,913,848)
Issuance of warrants
with lease line in
June 2002 -- -- 45,175 -- -- -- 45,175
Exercise of common stock
options at US$22.50 per
share for cash 64 -- 1,438 -- -- -- 1,438
Stock based compensation
expense -- -- 23,207 -- -- -- 23,207
Cancellation of notes
receivable -- -- -- 44,438 -- -- 44,438
Interest accrued on
notes receivable -- -- -- (3,131) -- -- (3,131)
Repurchase of common
stock at US$4.50 per
share for notes
receivable (2,224) (2) (10,008) 10,010 -- -- --
Net loss -- -- -- -- -- (7,017,090) (7,017,090)
-------------------- -------- -------- -------- -------- -------- -------- --------
Balances at 31
December 2002 12,671 13 493,437 (80,706) -- (16,232,555) (15,819,811)
Issuance of warrants
with consulting
agreement in August and
December 2003 -- -- 44,571 -- -- -- 44,571
Issuance of
warrants with
finance facility in
September 2003 -- -- 44,944 -- -- -- 44,944
Exercise of common
stock options at
US$22.50 and
US$4.50 per
share for cash 1,467 1 7,733 -- -- -- 7,734
Cancellation of notes
receivable -- -- -- 34,469 -- -- 34,469
Interest accrued on
notes receivable -- -- -- (6,384) -- -- (6,384)
Repurchase of common
stock at US$4.50 per
share for notes
receivable (1,067) (1) (4,799) 4,800 -- -- --
Net loss -- -- -- -- -- (8,887,814) (8,887,814)
-------------------- -------- -------- -------- -------- -------- -------- --------
Balances at 31
December 2003 13,071 13 585,886 (47,821) -- (25,120,369) (24,582,291)
Conversion of Series
A1, A2 and B redeemable
convertible preferred
stock in common stock and
Series AA redeemable
convertible preferred
stock upon
recapitalisation 83,988 84 6,022,301 -- -- 14,720,684 20,743,069
Repurchase of common
stock at US$22.50
per share for notes
receivable (1,891) (2) (186) 47,821 -- -- 47,633
Issuance of warrants with
finance facility in
May 2004 -- -- 174,150 -- -- -- 174,150
Issuance of warrants with
bridge loans in February
and April 2004 -- -- 533,957 -- -- -- 533,957
Exercise of common stock
options at US$0.10 per
share for cash 2,833 3 280 -- -- -- 283
Net loss -- -- -- -- -- (8,966,989) (8,966,989)
-------------------- -------- -------- -------- -------- -------- -------- --------
Balances at 31
December 2004 98,001 98 7,316,388 -- -- (19,366,674) (12,050,188)
Issuance of warrants with
consulting agreement in
May 2005 -- -- 69,618 -- -- -- 69,618
Conversion of Series
AA and BB redeemable
convertible preferred
stock into common stock
upon admission
to AIM 28,655,645 28,656 22,608,911 -- -- -- 22,637,567
Issuance of common
stock and Series A
Warrants for cash
at US$0.90 per unit
in connection with
initial public
offering in July 2005,
net of issuance costs
of US$2,767,027 15,686,276 15,686 11,217,287 -- -- -- 11,232,973
Issuance of common
stock options to
financial advisor
in connection
with AIM Listing -- -- 242,568 -- -- -- 242,568
Stock-based compensation
expense -- -- 16,726 -- -- -- 16,726
Exercise of common
stock options at
US$0.90 and US$0.10 per
share for cash 110,171 110 11,740 -- -- -- 11,850
Net loss -- -- -- -- (7,943,025) (7,943,025)
-------------------- -------- -------- -------- -------- -------- -------- --------
Balances at 31
December 2005 44,550,093 44,550 41,483,238 -- -- (27,309,699) 14,218,089
Issuance of common
stock for cash at
US$1.4052 per
share in connection
with follow-on
offering in January
2006, net of
issuance costs
of US$816,653 12,500,000 12,500 16,736,850 -- -- -- 16,749,350
Stock-based
compensation
expense -- -- 373,417 -- -- -- 373,417
Comprehensive income
- change in
unrealised gain on
available-for-
sale investments -- -- -- -- 857 -- 857
Exercise of common
stock options at
US$0.10 per
share for cash 232,746 233 23,041 -- -- -- 23,274
Net loss -- -- -- -- (9,673,681) (9,673,681)
-------------------- -------- -------- -------- -------- -------- -------- --------
Balances at 31
December 2006 57,282,839 57,283 58,616,546 -- 857 (36,983,380) 21,691,306
Stock-based
compensation expense -- -- 640,975 -- -- -- 640,975
Comprehensive income
- change in unrealised
gain on available-for-
sale investments -- -- -- -- 323 -- 323
Exercise of common
stock options at
US$0.10 per share
for cash 153,549 153 15,201 -- -- -- 15,354
Net loss -- -- -- -- (8,457,634) (8,457,634)
-------------------- -------- -------- -------- -------- -------- -------- --------
Balances at 31
December 2007 57,436,388 57,436 59,272,722 - 1,180 (45,441,014) 13,890,324
==================== ======== ======== ======== ======== ======== ======== ========
PolyFuel, Inc.
(A development stage enterprise)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from
27 January 1999
(Inception) to
Year Ended 31 December 31 December
------- -------- -------- --------
2007 2006 2005 2007
U.S.$ U.S.$ U.S.$ U.S.$
Cash flows from
operating activities
Net loss (8,457,634) (9,673,681) (7,943,025) (60,161,698)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortisation 221,863 338,217 709,594 3,158,594
Purchased research
and development -- -- -- 3,825,984
Stock-based expense -
non-employees -- 16,726 45,887
Stock-based employee
compensation expense 640,975 373,417 -- 1,014,392
Loss (Gain) on sale
of equipment 4,058 -- -- (112,667)
Non-cash expense
related to notes
receivable
from stockholders -- -- -- 112,118
Non-cash expense
related to issuance
of warrants -- -- 69,618 1,006,401
Non-cash interest
expense related to
bridge loans -- -- -- 34,980
Changes in assets and
liabilities:
Accounts receivable (99,077) (4,634) 7,128 (134,511)
Inventories (25,386) (88,806) (114,192)
Prepaid expenses and
other current assets 27,043 1,215 18,818 (330,392)
Other assets -- (112,701) 40,801 (195,300)
Accounts payable and
accrued expenses (240,366) 317,623 (32,218) 1,145,659
Deferred revenue (114,139) 115,475 -- 1,336
------- -------- -------- --------
Net cash used in
operating activities (8,042,661) (8,733,875) (7,112,558) (50,703,407)
------- -------- -------- --------
Cash flows from
investing activities
Purchases of
available for sale
investments (6,083,465) (8,620,502) (2,373,789) (23,222,673)
Maturities and sales
of available for sale
investments 6,162,503 3,064,404 5,151,591 16,647,682
Proceeds from sale of
property and equipment 255 -- - 140,980
Purchase of property
and equipment (102,810) (182,858) (42,559) (3,523,946)
------- -------- -------- --------
Net cash provided by
(used in) investing
activities (23,517) (5,738,956) 2,735,243 (9,957,957)
------- -------- -------- --------
Cash flows from
financing activities
Proceeds from
issuance of common stock 15,354 16,772,624 11,487,391 28,286,208
Proceeds from issuance
of redeemable convertible
preferred stock, net -- -- -- 37,097,656
Proceeds from lease
line and finance facility -- -- -- 2,545,612
Repayment of lease line
and finance facility -- (500,733) (779,034) (2,545,612)
Proceeds from issuance
of notes payable
and bridge loans -- -- -- 2,404,185
------- -------- -------- --------
Net cash provided by
financing activities 15,354 16,271,891 10,708,357 67,788,049
------- -------- -------- --------
------- -------- -------- --------
Net increase (decrease)
in cash and cash ------- -------- -------- --------
equivalents (8,050,824) 1,799,060 6,331,042 7,126,685
Cash and cash
equivalents at
beginning of period 15,177,509 13,378,449 7,047,407 --
------- -------- -------- --------
Cash and cash
equivalents at end
of period 7,126,685 15,177,509 13,378,449 7,126,685
======= ======== ======== ========
Supplemental disclosure
of non-cash investing
and financing activities
Issuance of common and
redeemable convertible
preferred stock for
in-process research and
development and notes
payable -- -- -- 4,153,200
Issuance of warrants in
connection with finance
facilities and consulting
arrangements -- -- 69,618 1,006,901
Repurchase of common
stock for notes receivable -- -- -- 62,631
Cancellation of notes
receivable -- -- -- 78,907
Conversion of redeemable
convertible preferred stock
upon recapitalisation
and admission to AIM -- -- 22,637,567 43,380,636
Issuance of common
stock options in connection
with AIM Listing -- 242,568 242,568
POLYFUEL, INC.
(A development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - The Company
Description of Business
PolyFuel, Inc. ("PolyFuel" or the "Company"), was incorporated in Delaware on 27
January 1999. The Company is a spin-off from SRI International, Inc. (formerly
the Stanford Research Institute) and was established primarily for the purpose
of developing portable fuel cell technology. Since inception, the Company has
been deemed to be in the development stage as it has devoted substantially all
of its efforts to developing its product, raising capital and recruiting
personnel. The Company is headquartered in Mountain View, California and is
publicly listed on the London Stock Exchange Alternative Investment Market
("AIM"), also known as the "AIM Market".
Principles of Consolidation
The accompanying financial statements have been prepared on a consolidated basis
and, accordingly, reflect the financial position and results of operations of
both PolyFuel, Inc. and its wholly owned Canadian subsidiary, PolyFuel, Ltd. All
intercompany account balances have been eliminated in consolidation.
Basis of Presentation and Continuance of Operations
The accompanying consolidated financial statements have been prepared by the
Company on a going concern basis in accordance with accounting principles
generally accepted in the United States of America. As such, the statements
anticipate the realisation of assets and the liquidation of liabilities in the
normal course of business. Notwithstanding this fact, the Company has incurred
losses and negative cash flow from operations for every fiscal period since its
inception. For the year ended 31 December 2007, the Company incurred a net loss
of approximately US$8.5 million and negative cash flows from operations of
US$8.0 million. In the event the Company is not successful in generating profits
and positive cash flow from operations in future periods, it will be dependent
upon additional financing to support its continuing operations. While the
Company has been successful in completing numerous rounds of public and private
equity financing, totaling approximately US$67.8 million (net of issuance costs)
through 31 December 2007, no assurances can be given that additional financing
will be available, in which case, the Company's ability to achieve its business
objectives will be adversely affected. The accompanying consolidated financial
statements do not include any adjustments that might result from such adverse
outcomes.
NOTE 2 - Significant Accounting Policies
Use of Estimates
The preparation of financial information in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates, judgments and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities at the date of the financial statements and
for the period then ended. Actual results could differ from these estimates.
Revenue Recognition
The Company's revenue is derived primarily from government grants and the sale
of products to its customers to support testing, evaluation and the development
of prototype devices. With respect to product sales, the Company generally
recognises revenue upon shipment if (i) a signed arrangement exists, (ii) the
fee is fixed and determinable and (iii) collection of the resulting receivable
is reasonably assured. Revenue from government grants is recorded as earned,
generally in the period in which the underlying costs are incurred.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and cash invested in short-term
securities which have remaining maturities of less than 90 days at the time of
purchase. Cash and cash equivalents are carried at cost which approximates fair
market value. At 31 December 2007, 2006 and 2005, cash and cash equivalents
included US$7,126,685, US$15,177,509, and US$13,378,449, respectively, of
commercial paper, money market funds and U.S. Government Agency Securities
Investments
The Company has classified all investments as available-for-sale. Such
investments are recorded at fair market value and unrealised gains and losses,
if material, are recorded as a separate component of stockholders' equity
(deficit) until realised. Realised gains and losses on sales of all such
securities are reported in the statement of operations.
The carrying amount of the Company's available-for-sale investments approximated
their estimated fair value at 31 December 2007, 2006 and 2005, and consisted of
the following:
31 December
------------------------------------------
2007 2006 2005
U.S.$ U.S.$ U.S.$
Corporate notes 5,500,700 2,406,053 497,663
U.S. Government Agency Securities 1,075,470 4,248,833 600,268
-------- -------- ---------
6,576,170 6,654,886 1,097,931
======== ======== =========
The estimated fair value of available-for-sale investments at 31 December 2007,
2006 and 2005, by contractual maturity, were as follows:
31 December
------------------------------------------
2007 2006 2005
U.S.$ U.S.$ U.S.$
Less than one year 6,075,700 6,155,356 1,097,931
Between one and two years 500,470 499,530 --
-------- -------- ---------
6,576,170 6,654,886 1,097,931
======== ======== =========
Foreign Currency Translation
The functional currency of the Company's Canadian subsidiary is the U.S. dollar.
Assets and liabilities are remeasured at the period-ending or historical rates,
as appropriate, while revenues and expenses are remeasured at average monthly
rates. Currency transaction gains and losses are recognised in current
operations and have been insignificant for all periods presented.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to a concentration of
credit risk consist of cash, cash equivalents, short-term investments and
accounts receivable. The Company deposits its cash and cash equivalents with
three financial institutions.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and
amortisation. Depreciation is computed using the straight-line method over the
shorter of the estimated useful life of the respective assets, generally three
to five years, or, in the case of leasehold improvements, the shorter of the
useful life of the assets or the lease term. Maintenance and repairs are charged
to expense as incurred. When assets are retired or otherwise disposed of, the
cost and the accumulated depreciation and amortisation are removed from the
accounts and any resulting gain or loss is reflected in the consolidated
statement of operations in the period realised.
Impairment of Long-Lived Assets
In accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, the Company reviews long-lived assets, including property and equipment,
for impairment on an annual basis and whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. In the event of impairment, the loss to be recognised would be
measured based on the excess carrying value of the asset over the asset's fair
value.
Income Taxes
The Company accounts for income taxes in accordance with the liability method
whereby deferred tax assets and liabilities are recognised for the future tax
consequences attributable to differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
bases. Such deferred tax assets and liabilities are measured using current tax
laws and the enacted tax rates expected to apply in the years in which these
differences are expected to be recovered or settled. A valuation allowance is
provided when it is more likely than not that some portion of a deferred tax
asset will not be realised.
Effective 1 January 2007, the Company adopted the provisions of FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109" ("FIN No. 48"). FIN No. 48 clarifies
the accounting for uncertainty in income taxes by prescribing the recognition
threshold a tax position is required to meet before being recognised in the
financial statements. It also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. See footnote 9 for further details of the impact of
adoption.
Comprehensive Loss
Comprehensive loss consists of net loss and other comprehensive income (loss),
which includes certain changes in equity that are excluded from net loss.
Specifically, unrealised losses on investments are included in accumulated other
comprehensive loss in the stockholder's equity section of the accompanying
Consolidated Financial Statements. Comprehensive loss for the periods presented
consisted of the following:
Year ended 31 December
--------------------------------------------
2007 2006 2005
U.S.$ U.S.$ U.S.$
Net loss (8,457,634) (9,673,681) (7,943,025)
Change in unrealised gain on
investments 323 857 --
-------- -------- --------
(8,457,311) (9,672,824) (7,943,025)
======== ======== ========
As of 31 December 2007, 2006 and 2005, accumulated other comprehensive income
represented unrealised gains on investments of US$1,180 US$ 857 and US$ nil,
respectively.
Accounting for Stock-Based Compensation
Effective 1 January 2006, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123R, Share Based Payment ("SFAS No. 123R"),
which requires the measurement and recognition of compensation expense for all
share-based payment awards made to employees and directors based on the
estimated fair market value of the underlying instruments. Accordingly,
stock-based compensation cost is measured at grant date, based upon the fair
value of the award, and is generally recognised as expense on a straight line
basis over the requisite employee service period.
The Company adopted SFAS No. 123R using the modified prospective transition
method, which requires the application of the standard as of 1 January 2006.
Accordingly, the Company's Consolidated Financial Statements as of and for the
year ended 31 December 2006 and 2007 reflect the impact of SFAS No. 123R. In
accordance with the modified prospective transition method, the Company's
Consolidated Financial Statements for prior periods have not been restated.
Prior to the adoption of SFAS No. 123R, the Company accounted for stock-based
employee compensation arrangements in accordance with the provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB No. 25"), and related interpretations. Under APB No. 25,
compensation expense was recorded for options issued to employees in fixed
amounts and with fixed exercise prices to the extent that such exercise prices
were less than the fair market value of the Company's common stock on the date
of grant. The Company also followed the disclosure provisions of SFAS No. 123,
Accounting for Stock Based Compensation ("SFAS No. 123"), as amended by SFAS No.
148, Accounting for Stock-Based Compensation - Transition and Disclosure.
The Company accounts for equity instruments issued to non-employees in
accordance with SFAS No. 123, Emerging Issues Task Force Issue No. 96-18,
Accounting for Equity Instruments That are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling Goods or Services and Financial
Accounting Standards Board Interpretation No. 28, Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans. Accordingly,
as these equity instruments vest, the Company will be required to remeasure the
fair value of the equity instrument at each reporting period prior to vesting
and finally at the vesting date of the equity instruments.
Loss per Share
Basic loss per share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted net loss per share is computed by giving effect to all
potentially dilutive common stock equivalents, including preferred stock, stock
options and warrants. For the years ended 31 December 2007, 2006 and 2005,
options to purchase 8,891,885, 7,847,516 and 6,292,200 shares of common stock;
and warrants to purchase 502,978, 8,350,139 and 8,350,517 shares of common
stock, respectively, were excluded from the computation of diluted loss per
share as the effect would be antidilutive.
The following table sets forth the computation of basic and diluted net loss
attributable to common stockholders per share:
Years Ended 31 December
------------------------
2007 2006 2005
U.S.$ U.S.$ U.S.$
Numerator
Net loss (8,457,634) (9,673,681) (7,943,025)
Cumulative dividends on
preferred stock -- -- (1,111,584)
-------- -------- ---------
Net loss attributable to
common stockholders (8,457,634) (9,673,681) (9,054,609)
======== ======== =========
Denominator
Basic and diluted weighted average
common shares outstanding 57,368,049 56,154,107 22,305,981
========== ========== ==========
Net loss per share
Basic (0.15) (0.17) (0.41)
======== ======== =========
Diluted (0.15) (0.17) (0.41)
======== ======== =========
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 provides guidance for using fair value to measure
assets and liabilities. It also responds to investors' requests for expanded
information about the extent to which companies measure assets and liabilities
at fair value, the information used to measure fair value, and the effect of
fair value measurements on earnings. SFAS 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value, and does
not expand the use of fair value in any new circumstances. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007. The Company does not believe that the adoption of SFAS No.
157 will have any material effect upon its consolidated results of operations
and financial condition.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities ("SFAS 159") . SFAS 159 permits
companies to choose to measure certain financial instruments and certain other
items at fair value. The standard requires that unrealized gains and losses on
items for which the fair value option has been elected be reported in earnings.
SFAS 159 is effective for the Company beginning in the first quarter of fiscal
year 2008, although earlier adoption is permitted. The Company is currently
evaluating the impact that SFAS 159 will have on its consolidated financial
statements.
NOTE 3 - Subsequent Events
In February, 2008, the Company entered into a new five year lease for its
Canadian operations which has total future minimum payments due under
noncancellable operating lease facilities of US$32,101, US$48,151, US$49,435,
US$51,361 and US$69,337 for the years ending 31 December 2008, 2009, 2010, 2011
and thereafter, respectively.
In March 2008, the Company in concert with the University of North Florida and
University of Florida, secured a $2 million appropriation from the US Army for
the development of a ruggedized Direct Methanol Fuel Cell power supply for
military laptop applications.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BRGDSXGDGGIR
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