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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Protonex Regs | LSE:PTX | London | Ordinary Share | USD0.005 (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% | 23.00 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number : 4485F
Protonex Technology Corporation
13 January 2010
FOR IMMEDIATE RELEASE
13 January 2010
PROTONEX TECHNOLOGY CORPORATION
("Protonex" or "the Company")
Preliminary Results For The Year Ended 30 September 2009 (Unaudited)
DATELINE: SOUTHBOROUGH, MA; Protonex Technology Corporation (LSE: AIM: PTX and
PTXU) ("Protonex" or "the Company"), a leading provider of advanced fuel cell
power systems today announces its preliminary results for the fiscal year ended
30 September 2009.
2009 HIGHLIGHTS
* Significant progress in moving PEM and SOFC fuel cell platforms towards initial
commercial and military products.
* Established partnership with Cummins Power Generation, a global leader in power
generation and distribution, to jointly promote the M250-B product into the
recreational vehicle (RV) market.
* Demonstrated M250-B product at RV trade shows in the US. OEM evaluations and
beta trials underway in H2 2009; general availability expected in H2 calendar
year 2010.
* Significant progress towards completion of 22 M250-CX fuel cell systems for
evaluation programme with the US Army; delivery of units expected in Q1calendar
2010. Competing for significant follow on programme funds.
* BPM and SPM power managers launched as complete products in September 2009.
Currently undergoing testing and evaluation by the U.S. Military in the US, Iraq
and Afghanistan.
* Strong and ongoing support from U.S. Military with over $46 million* in
programme value as of 30 September 2009 from the US Air Force, Army, Navy,
SOCOM, DARPA, DOE, NASA.
* Awarded up to $3.3 million contract in March 2009 by US Department of Defense to
develop a high-performance UAV system for emerging AECV platform.
* Received $1.44 million in additional funding from the U.S. Naval Research
Laboratory (NRL) and Air Force Research Lab (AFRL) to extend capabilities of
high performance fuel cell systems for UAVs.
* Awarded contracts of $2.0 million in September 2009 and $1.48 million in January
2009 from US Army for further liquid-fuelled SOFC system development.
* Revenues of $7.1 million for the year ended 30 September 2009 (2008: $7.8
million), reflecting delays in H1 of new military programmes caused by change in
US Administration and a general delay in the release of military contracts.
* David Ierardi hired as VP Operations in May 2009 adding very strong
manufacturing and operations background.
*Programme value includes contracts awarded to Mesoscopic Devices before
acquisition in April 2007.
Post period end highlights
* Small Unmanned Aerial Vehicle (UAV) completed record 23-hour flight using
Protonex fuel cell power system, extending flight duration by as much as seven
times compared to advanced batteries.
* Dr. Caine Finnerty promoted to Vice President of SOFC Development in December
2009, following appointment as Director of SOFC Systems Development in July
2009. Now assuming operating responsibility for the Company's solid oxide fuel
cell group in Colorado.
Commenting on the results, Scott Pearson, Chief Executive of Protonex Technology
Corporation said: "We are very happy with the progress made by the Company
during a year in which we finalised several core technologies and launched the
first of a sequence of important products. With the economy beginning to pull
out of recession, along with the rising global shift towards finding cleaner
alternative energy solutions, our expectations remain high as we begin producing
and selling our first commercial and military fuel cell power products in 2010."
+-------------------------------------------------+--------------------------------------+
| Enquiries | |
+-------------------------------------------------+--------------------------------------+
| Protonex Technology Corporation | Tel: +1 508 490 9960 |
+-------------------------------------------------+--------------------------------------+
| Scott Pearson, Chief Executive Officer | |
+-------------------------------------------------+--------------------------------------+
| Margaret Dorsheimer, Director of Marketing | |
+-------------------------------------------------+--------------------------------------+
| | |
+-------------------------------------------------+--------------------------------------+
| Redleaf Communications Limited | Tel: +44 (0)20 7566 6700 |
+-------------------------------------------------+--------------------------------------+
| Press and Investor Relations | protonex@redleafpr.com |
+-------------------------------------------------+--------------------------------------+
| Paul Dulieu | |
+-------------------------------------------------+--------------------------------------+
| Mike Ward | |
+-------------------------------------------------+--------------------------------------+
| | |
+-------------------------------------------------+--------------------------------------+
| Piper Jaffray Ltd. | Tel: +44 (0)20 3142 8700 |
+-------------------------------------------------+--------------------------------------+
| Nominated Adviser | |
+-------------------------------------------------+--------------------------------------+
| Michael Covington | |
+-------------------------------------------------+--------------------------------------+
| Rupert Winckler | |
+-------------------------------------------------+--------------------------------------+
Notes to Editors
About Protonex Technology Corporation
www.protonex.com
Protonex Technology Corporation develops and manufactures compact, lightweight
and high- performance fuel cell systems for portable power applications in the
100 to 1000-watt range. The Company's fuel cell systems are designed to meet the
needs of military, commercial and consumer customers for off-grid applications
underserved by existing technologies by providing customizable, stand-alone
portable power solutions and systems that may be hybridized with existing power
technologies. The Company is based in Southborough, Massachusetts.
This document contains statements that are, or may be deemed to be,
forward-looking statements, including, without limitation, statements containing
the words "believes", "anticipates", "intends", "plans", "estimates", "aims,"
"expects", or, in each case, their negative or other variations or comparable
terminology or by discussions of strategy plans, objectives, goals, future
events or intentions. These forward-looking statements include all matters that
are not historical facts. They appear in a number of places throughout this
document and include statements regarding the Company's intentions, beliefs or
current expectations concerning, amongst other things, results of operations,
financial condition, liquidity, prospects, growth, strategies and the industries
in which the Company operates. Such forward-looking statements involve unknown
risks, uncertainties and other factors which may cause the actual results,
financial condition, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Factors
that might cause such a difference include, but are not limited to those
discussed in part ii, part iii, part iv and part vi of the Company's AIM
Admission document dated 27 June 2006. A copy of this document is posted on the
Company's website or may be obtained by contacting the Company at +1 508 490
9960. Given these uncertainties, investors are cautioned not to place undue
reliance on such forward-looking statements. Subject to any legal and regulatory
requirements, the Company disclaims any obligation to update any such
forward-looking statements in this document to reflect future events or
developments.
Letter from Chairman and from Chief Executive
2009 was another successful year for Protonex Technology Corporation and we are
pleased to present the 2009 Preliminary Results.
We are very happy with the progress made by the Company during a year in which
we finalised several core technologies and launched the first of a sequence of
important products. With the economy beginning to pull out of recession, along
with the rising global emphasis on clean technologies and the need for new
alternative energy solutions, we expect to begin producing and selling our first
commercial and military fuel cell power products in calendar year 2010.
Power and energy continue to present major challenges and opportunities in
today's emerging world. This is true not only at the utility end of the spectrum
but also at the portable end where Protonex operates. There are large and
valuable market opportunities for innovative power products which can provide
better solutions, in both operational and economic terms, to small or portable
applications where batteries and internal combustion generators fail to provide
acceptable performance. Batteries have a high power density profile so they can
manage brief current peaks but cannot supply power over long periods due to
their low energy density. As a result, batteries need to be continuously
replaced or recharged, making them an inefficient source of portable or long
duration power. Generators produce harmful emissions, are noisy, and are often
not suitable for lower to medium power needs. Protonex fuel cell power solutions
remove these barriers and can offer compelling benefits by providing clean,
quiet, efficient, and cost-effective power systems that run on environmentally
friendly fuels. Opportunities in this portable power segment range from leisure
and alternative energy applications to the ultra-high performance missions of
the world's leading military and government agencies.
Strategy and Products
Protonex' strategy has remained consistent over the years - to deliver a set of
compelling and environmentally favorable fuel cell products to a scalable set of
commercial, consumer, and military applications. We recognise, particularly in
today's challenging economic conditions, that being high performance and "green"
in and of itself may not be enough to support a meaningful growth strategy.
Therefore, Protonex is also strongly focused on cost reductions at the
technology and component levels which will allow its products to be competitive
on price with incumbent technologies when produced in similar annual volumes.
During the year ended 30 September 2009, Protonex made significant progress on
all fronts as it finalised several core technologies and launched the first of a
sequence of important products.
Protonex launched its first military power products - the SPM and BPM power
managers - in September 2009. The power manager products are being evaluated by
several branches of the US military with units currently being utilised in Iraq
and Afghanistan. In its 2010 fiscal year, the Company is planning two additional
product launches, the M250-CX for the US Military and the M250-B for
recreational vehicles and marine markets. Following these products in 2011 and
beyond are additional planned product introductions based on the Company's UAV
and SOFC technologies.
On the government programme side, in its second half of 2009, the Company
reported a significant increase in government contract revenues over the first
half as the new US Administration took office and new contracts again began to
flow to Protonex. Also, since many of the new programmes are for 12 months or
more, the Company has a strong backlog of programme revenue for fiscal 2010.
Partners
As Protonex moves to market-ready products, it is better positioned to attract
and recruit additional strategic partners that will assist the Company in
growing its business. Protonex' unique combination of PEM (proton exchange
membrane) and SOFC (solid oxide fuel cell) systems is emerging as a critical
advantage for the Company and its partners, allowing them to offer multi-fuel
capabilities and to target a broader set of addressable markets. In 2009,
Protonex established a key partnership with Cummins Onan, a global leader in
power generation and distribution, to cooperate in the marketing of the M250-B
system into the recreational vehicle (RV) market. As part of the agreement,
Cummins and Protonex plan to jointly conduct rigorous field testing of the
Protonex M250-B fuel cell power system within RVs and Cummins will provide
Protonex with certain marketing assistance at trade shows and other related
events. In addition, Cummins is in the process of becoming a certified installer
of Protonex fuel cell systems developed for RVs. The resulting testing,
certification and promotional efforts are expected to facilitate the delivery of
Protonex fuel cell power solutions to the RV market.
Protonex is currently engaging in many other discussions with leading companies
and more partnerships are expected in 2010 and beyond.
People
Since listing on the AIM market in July 2006, Protonex has had a very seasoned
and complete set of Directors and management. In 2009, the Company further
enhanced its management capabilities with two key additions:
* Caine Finnerty was hired in July 2009 as Director of SOFC Systems Development
and in December was promoted to Vice President of SOFC Development, assuming
operating responsibility for the Company's solid oxide fuel cell group in
Colorado. Dr. Finnerty, a world expert in solid oxide fuel cells, provides
Protonex over 17 years of education and experience with analytical chemistry and
SOFC development and has played a key role in the development and implementation
of micro tubular technology worldwide. Most recently, Dr. Finnerty was a
founding member of Nanodynamics Energy, Inc. and its Chief Technology Officer.
While at Nanodynamics, he built a multinational team of engineers and scientists
and led this group to develop an industry leading SOFC technology, and
successfully integrated that technology into portable SOFC systems operating on
various fuels that have been tested and operated globally.
* David Ierardi joined the Company's executive team in May 2009 as Vice President
of Operations. Mr. Ierardi provides Protonex over 25 years of global operations
and manufacturing experience with specific capabilities in new product
introduction, logistics, supply chain management, quality, cost reduction, and
contract manufacturing selection and management. Prior to joining Protonex, Mr.
Ierardi held senior level positions at RSA - the security division of EMC, Telco
Systems, Integral Access and Lucent Technologies and has set-up manufacturing
operations in multiple locations in the United States, Europe and Asia.
While at Protonex, Mr. Ierardi has been instrumental in the recent completion of
the Company's Enterprise Resource Planning (ERP) system installation.
Protonex maintains a strong and highly experienced team of scientists,
engineers, sales, marketing, and business management staff who share a
dedication and commitment to the Company's core technologies and products. All
full time employees have stock options and a vested interest in the business.
Financial Review
Revenues for the fiscal year ended 30 September 2009 totalled $7.10 million, a
decrease of 10% over the comparative period in 2008. Approximately 100% of the
revenue during the period was associated with US Government sponsored
development contracts. In comparison, revenues during the fiscal year ended 30
September 2008 were $7.85 million, of which $7.68 million were revenues from US
Government sponsored development contracts. The reduction in revenue from the
prior period was primarily due to the change in US Administration and a general
delay in the release of military contracts in the first half of fiscal year
2009. Our intention moving forward is to shift substantially toward product
revenues which are expected to bring higher operating margins to the Company
than are available from government funded development contracts.
As the Company has continued to grow and invest in its future business,
operating expenses have increased 4% to $19.91 million for the year ended 30
September 2009 (2008: $19.21 million). The increase in operating expenses was
planned and was primarily the result of the expansion in the size of the
technical and manufacturing operations, increased spending on product
development, marketing programmes, and higher depreciation expenses.
Interest income for the year ended 30 September 2009 decreased to $0.07 million
(2008: $0.76 million). This decrease was primarily the result of lower cash
balances and lower interest rates due to lower short-term market rates and a
decision by the Company to shift its short-term investments to a highly secure
US Treasury money market fund in December 2007.
The net loss for the fiscal year ended 30 September 2009 was $12.95 million
(2008: $10.86 million).
The Company's balance sheet remains satisfactory with $12.47 million in cash and
cash equivalents at 30 September 2009. The net cash used in operating activities
during the year ended 30 September 2009 was $11.10 million (2008: $8.93
million). Cash outflows attributable to capital expenditures totalled $0.75
million during the year ended 30 September 2009 (2008: $0.65 million). The
overall net cash outflows for the year ended 30 September 2009 of $11.84 million
compared with $9.57 million of net cash outflows for the year ended 30 September
2008.
Outlook
Protonex is tightly focused on developing and launching a series of advanced
fuel cell products that deliver strong value propositions to a set of targeted
commercial, consumer and military markets in 2010 and 2011. The Company's major
objectives for its 2010 fiscal year are:
* Power Managers - Aggressively market and sell BPM and SPM products. Continue to
support evaluations with US Military agencies and secure low to medium volume
orders.
* M250-B - With the assistance of Cummins, launch this product into the leisure
segments and start shipping low volume quantities in 2010.
* M250-CX - Win and execute on a major Phase 3 programme for this emerging
product. This programme should include between 100 and 200 units for field
trials and early deployment.
* UAV - Complete the ongoing productisation of the AECV platform for the US
Department of Defense and target first system sales at end of 2010. Engage
several new UAV system partners in additional product commercialisation efforts.
* SOFC - Complete a beta level design in 2010 that will enable a first product
launch to a set of commercial markets in 2011.
* Strategic Partnerships - Formalise additional strategic relationships with
market-leading OEMs, integrators and "go to market" partners.
* Government Contracts - Capture a continuing stream of government contracts that
will fully or partially support the development and launch of the aforementioned
military and commercial products.
* Financing - Secure additional financing to allow the current rate of business
development expenditure to continue into 2011/2012.
We thank our shareholders and customers for their ongoing support and we look
forward to reporting on our progress throughout the 2010 fiscal year.
Harry Fitzgibbons
Chairman
13 January 2010
Scott A. Pearson
Chief Executive Officer
13 January 2010
Current Public Information
Exact Name of issuer as specified in its charter:
Protonex Technology Corporation.
State/country of incorporation:
State of Delaware, United States of America.
Address of principal executive offices:
153 Northboro Road, Southborough, MA, USA 01772.
Title and class of securities:
Common Stock $0.005 per share par value.
Number of shares outstanding as of 31 December 2009:
64,987,144.
Transfer agent:
Computershare Investor Services (Channel Islands) Limited, Ordnance House, 31
Pier Road, St Helier, Jersey, JE4 8PW, Channel Islands.
Nature of business:
Protonex is a leading provider of advanced fuel cell power solutions for
sub-kilowatt portable, remote and mobile applications. Based on patented proton
exchange membrane (PEM) and solid oxide (SOFC) fuel cell design and
manufacturing technology, these power systems are among the industry's smallest,
lightest and highest performing fuel cell systems for portable power
applications.
Protonex was incorporated and privately funded by four founders in 2000 to
develop a proprietary PEM stack design and manufacturing process. From its
inception until October 2003, Protonex was primarily funded by its founders and
several key managers of the Company, in addition to commercial and government
contracts. Protonex has funded its subsequent growth through two rounds of
venture capital financings and two placings on the AIM market of the London
Stock Exchange (July 2006 and April 2007). Since the first venture capital
financing, the Company has expanded its business focus from providing just fuel
cell stacks to complete fuel cell power systems.
In April 2007, Protonex acquired Mesoscopic Devices, a leading SOFC technology,
fuel reforming and desulfurisation systems company. The Company is building on
the technical and market synergies that exist between the two businesses to
strengthen its position as a leading provider in the portable fuel cell
industry. Headquartered near Boston, Massachusetts, with a development facility
near Denver, Colorado, Protonex had approximately 95 employees as of 30 November
2009.
Protonex is well positioned to deliver high-performance, low-cost fuel cell
products to military and commercial customers. With a wide range of technical
expertise and an expanding intellectual property portfolio that covers PEM, SOFC
and fuel reforming technology, the Company is also able to offer a variety of
fuelling options, including hydrogen, chemical hydride, methanol, propane,
gasoline, diesel, and other higher hydrocarbons and renewable fuels.
Nature of products and services offered:
Protonex targets both military and commercial markets. The military opportunity
includes high energy-density power sources which enable digitisation of the
battlefield, providing potential power solutions to electronic devices such as
radios, communication systems, night vision equipment, global positioning
systems, laser range finders and target designators, digital communication
systems, intelligence gathering sensors, and small unmanned vehicles.
Non-military, commercial and consumer opportunities include: portable generators
for off-grid and emergency power; power sources and battery chargers for
portable electronic equipment; auxiliary power units for applications such as
boats, RVs, and vehicles; backup systems for electronic equipment and
communication networks; and propulsion power for wheelchairs and electric
motorbikes.
Protonex is currently developing three product lines for end-user customers:
Military Series products for military customers, Professional Series products
for professional and consumer customers, and Commercial Series backup power
products for telecommunications and network providers. These products offer
customers the benefits of fuel cell technology, including reduced noise, lower
emissions, and extended runtimes at reduced size and weight, without requiring
access to hydrogen or other specialty fuel sources.
While any of Protonex' power solutions can run on direct hydrogen, military and
professional products contain fuelling subsystems that allow the systems to run
on common organic fuels, such as methanol, propane and diesel. Because fuel
cells process fuels electrochemically rather than burning them, running fuel
cell systems on carbon-based fuels still retains the environmental benefits
associated with fuel cells and other alternative power sources.
Protonex is also developing a series of customisable fuel cell power products
for OEM customers in industrial and commercial markets. These products include
the core power generation system of Protonex' packaged end-user solutions, and
may be integrated by OEMs with existing technologies and products.
Nature and extent of facilities:
Protonex currently has two facilities that house its operations. The first
facility, which functions as its principal offices and headquarters, is in
Southborough, Massachusetts. This 31,294 square foot facility is leased and
houses all of the major functions of the Company including general management,
research and development, product engineering, manufacturing, sales, marketing,
and customer service. The majority of the footprint of this facility is
dedicated to product engineering and manufacturing.
The second facility is located in Broomfield, Colorado, just outside of Denver.
This 11,970 square foot facility is also leased and dedicated to the Company's
SOFC technology development and the infrastructure components required to
support these development efforts.
While Protonex plans to conduct pilot and low-volume manufacturing of its
products at its Southborough facility, it intends to outsource any medium to
high-volume manufacturing to qualified contract manufacturing firms. This will
allow the Company to avoid the capital expense of building out complete
factories and to take advantage of the expertise possessed by these world-class
manufacturing partners.
Protonex Technology Corporation (A Development Stage Company)
Consolidated Balance Sheets (Unaudited)
+---+-----------------------------------------+----+--------------+-----+--------------+
| | 30 | 30 |
| | September 2009 | September 2008 |
+---------------------------------------------+-------------------+--------------------+
| Assets |
+--------------------------------------------------------------------------------------+
| Current assets: |
+--------------------------------------------------------------------------------------+
| | Cash and cash equivalents | $ | 12,466,256 | $ | 24,303,508 |
+---+-----------------------------------------+----+--------------+-----+--------------+
| | Accounts receivable, net of allowance | 714,470 | 1,212,748 |
| | for doubtful accounts of $24,855 and | | |
| | $27,355 at 30 September 2009 and 2008, | | |
| | respectively | | |
+---+-----------------------------------------+-------------------+--------------------+
| | Accounts receivable, unbilled | 1,338,375 | 290,485 |
+---+-----------------------------------------+-------------------+--------------------+
| | Inventory, net | 482,073 | 409,553 |
+---+-----------------------------------------+-------------------+--------------------+
| | Prepaid expenses and other current | 298,130 | 320,876 |
| | assets | | |
+---+-----------------------------------------+-------------------+--------------------+
| Total current assets | 15,299,304 | 26,537,170 |
+---------------------------------------------+-------------------+--------------------+
| | Property and equipment, net of | 1,794,872 | 1,762,237 |
| | accumulated depreciation and | | |
| | amortisation of $1,575,791 and $873,215 | | |
| | at 30 September 2009 and 2008, | | |
| | respectively | | |
+---+-----------------------------------------+-------------------+--------------------+
| | Goodwill | 7,816,990 | 7,816,990 |
+---+-----------------------------------------+-------------------+--------------------+
| | Intangible assets, net of accumulated | 384,767 | 494,700 |
| | amortisation of $274,233 and | | |
| | $164,300 at 30 September 2009 and 2008, | | |
| | respectively | | |
+---+-----------------------------------------+-------------------+--------------------+
| | Other assets | 52,880 | 52,880 |
+---+-----------------------------------------+-------------------+--------------------+
| Total assets | $ | 25,348,813 | $ | 36,663,977 |
+---------------------------------------------+----+--------------+-----+--------------+
| Liabilities and stockholders' equity |
+--------------------------------------------------------------------------------------+
| Current liabilities: |
+--------------------------------------------------------------------------------------+
| | Accounts payable (includes related | $ | 704,150 | $ | 650,144 |
| | party payables of $3,606 and $36,959 at | | | | |
| | 30 September 2009 and 2008, | | | | |
| | respectively) | | | | |
+---+-----------------------------------------+----+--------------+-----+--------------+
| | Accrued expenses | 1,197,137 | 1,012,616 |
+---+-----------------------------------------+-------------------+--------------------+
| | Deferred revenue | 100,517 | 108,150 |
+---+-----------------------------------------+-------------------+--------------------+
| Total current liabilities | 2,001,804 | 1,770,910 |
+---------------------------------------------+-------------------+--------------------+
| | Deferred tax liability | 493,707 | 296,070 |
+---+-----------------------------------------+-------------------+--------------------+
| Total liabilities | 2,495,511 | 2,066,980 |
+---------------------------------------------+-------------------+--------------------+
| Commitments and contingencies |
+--------------------------------------------------------------------------------------+
| Stockholders' equity: |
+--------------------------------------------------------------------------------------+
| | Common stock, $0.005 par value; | 319,833 | 319,342 |
| | 85,000,000 shares | | |
| | authorised; 63,966,546 and 63,868,366 | | |
| | shares issued and outstanding | | |
+---+-----------------------------------------+-------------------+--------------------+
| | Additional paid-in capital | 66,133,781 | 64,929,209 |
+---+-----------------------------------------+-------------------+--------------------+
| | Deficit accumulated during the | (43,600,312) | (30,651,554) |
| | development stage | | |
+---+-----------------------------------------+-------------------+--------------------+
| Total stockholders' equity | 22,853,302 | 34,596,997 |
+---------------------------------------------+-------------------+--------------------+
| Total liabilities and stockholders' equity | $ | 25,348,813 | $ | 36,663,977 |
+---+-----------------------------------------+----+--------------+-----+--------------+
See the accompanying notes to the preliminary announcement.
Protonex Technology Corporation (A Development Stage Company)
Consolidated Statements of Operations (Unaudited)
+-----------+---------------------------+---+-------------------+-----------+-----------+-----------+--------------+-----------------+-----------------------+
| | Year ended | Year ended | Period from |
+ + + +-----------------------------------------+
| | | | 6 October 2000 (inception) to |
+---------------------------------------+-----------------------+--------------------------------------------------+-----------------------------------------+
| | 30 September 2009 | 30 September | 30 September 2009 |
| | | 2008 | |
+---------------------------------------+-----------------------+--------------------------------------------------+-----------------------------------------+
| Revenues: | | | | | | | |
+-----------+---------------------------+---+-------------------+-----------------------------------+--------------+-----------------+-----------------------+
| | Third-party revenues | $ | 7,101,443 | $ | 7,845,254 | $ | 26,029,919 |
+-----------+---------------------------+---+-------------------+-----------------------------------+--------------+-----------------+-----------------------+
| | Related-party revenues | - | 6,200 | 313,200 |
+-----------+---------------------------+-----------------------+--------------------------------------------------+-----------------------------------------+
| | Total revenues | 7,101,443 | 7,851,454 | 26,343,119 |
+-----------+---------------------------+-----------------------+--------------------------------------------------+-----------------------------------------+
| Operating expenses: |
+------------------------------------------------------------------------------------------------------------------------------------------------------------+
| | Research and development | 14,185,750 | 13,858,515 | 48,183,496 |
+-----------+---------------------------+-----------------------+--------------------------------------------------+-----------------------------------------+
| | In-process research and | - | - | 1,852,000 |
| | development | | | |
+-----------+---------------------------+-----------------------+--------------------------------------------------+-----------------------------------------+
| | Sales and marketing | 1,233,780 | 1,026,968 | 4,398,143 |
+-----------+---------------------------+-----------------------+--------------------------------------------------+-----------------------------------------+
| | General and | 4,492,828 | 4,326,895 | 17,798,596 |
| | administrative | | | |
+-----------+---------------------------+-----------------------+--------------------------------------------------+-----------------------------------------+
| | Total operating expenses | 19,912,358 | 19,212,378 | 72,232,235 |
+-----------+---------------------------+-----------------------+--------------------------------------------------+-----------------------------------------+
| Loss from operations | (12,810,915) | (11,360,924) | (45,889,116) |
+---------------------------------------+-----------------------+--------------------------------------------------+-----------------------------------------+
| Other income: |
+------------------------------------------------------------------------------------------------------------------------------------------------------------+
| | Interest income | 65,764 | 757,709 | 2,811,479 |
+-----------+---------------------------+-----------------------------------+--------------------------------------+-----------------------------------------+
| | Interest expense | (4,772) | - | (48,669) |
+-----------+---------------------------+-----------------------------------+--------------------------------------+-----------------------------------------+
| | Miscellaneous income | 802 | (59,689) | 25,359 |
| | (loss) | | | |
+-----------+---------------------------+-----------------------------------+--------------------------------------+-----------------------------------------+
| | Total other income, net | 61,794 | 698,020 | 2,788,169 |
+-----------+---------------------------+-----------------------------------+--------------------------------------+-----------------------------------------+
| Loss before provision for | (12,749,121) | (10,662,904) | (43,100,947) |
| income taxes | | | |
+---------------------------------------+-----------------------------------+--------------------------------------+-----------------------------------------+
| Provision for income taxes | (199,637) | (199,717) | (499,365) |
+---------------------------------------+-----------------------------------+--------------------------------------+-----------------------------------------+
| Net loss | $ | (12,948,758) | $ | (10,862,621) | $ | (43,600,312) |
+---------------------------------------+---+-------------------------------+-----------------------+--------------+-----------------+-----------------------+
| Basic and diluted net loss |
+------------------------------------------------------------------------------------------------------------------------------------------------------------+
| per common share | $ | (0.20) | $ | (0.17) | |
+---------------------------------------+---+-------------------------------+-----------------------+--------------+-----------------------------------------+
| Weighted average common shares outstanding: |
+------------------------------------------------------------------------------------------------------------------------------------------------------------+
| | Basic and diluted | 63,846,878 | 63,510,323 | | |
+-----------+---------------------------+---+-------------------+-----------+-----------+-----------+--------------+-----------------+-----------------------+
See the accompanying notes to the preliminary announcement.
Protonex Technology Corporation (A Development Stage Company)
Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)
Period from 6 October 2000 (inception) to 30 September 2009
See the accompanying notes to the preliminary announcement.
Protonex Technology Corporation (A Development Stage Company)
Consolidated Statements of Cash Flows (Unaudited)
+-------------------------------------------+----+---------------+-----+---------------+---+---------------+
| | Year ended 30 | Year ended 30 | Period from 6 |
| | September 2009 | September 2008 | October 2000 |
| | | | (inception) to |
| | | | 30 September |
| | | | 2009 |
+-------------------------------------------+--------------------+---------------------+-------------------+
| | | |
+----------------------------------------------------------------+---------------------+-------------------+
| Cash flows from operating activities: |
+----------------------------------------------------------------------------------------------------------+
| Net loss | $ | (12,948,758) | $ | (10,862,621) | $ | (43,600,312) |
| | | | | | | |
+-------------------------------------------+----+---------------+-----+---------------+---+---------------+
| Reconciliation of net loss to net cash used in operating activities: |
+----------------------------------------------------------------------------------------------------------+
| In-process research and development | - | - | 1,852,000 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Depreciation and amortisation of property | 712,272 | 479,731 | 1,652,421 |
| and equipment | | | |
+------------------------------------------------+---------------+---------------------+-------------------+
| Amoritisation of intangible assets | 109,933 | 111,300 | 277,566 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Non-cash expense for services | - | - | 4,080 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Loss on disposal of fixed assets | 1,666 | 46,023 | 83,587 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Loss on impairment of intangible assets | - | 13,667 | 13,667 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Non-cash interest expense | - | - | 38,269 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Deferred tax provision | 197,637 | 199,261 | 493,707 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Stock-based compensation | 1,194,619 | 1,154,335 | 3,735,599 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Changes in assets and liabilities, net of acquisitions: |
+----------------------------------------------------------------------------------------------------------+
| Accounts receivable, net | (549,612) | (197,929) | (1,306,268) |
+------------------------------------------------+---------------+---------------------+-------------------+
| Inventory, net | (72,520) | (146,738) | (469,852) |
+------------------------------------------------+---------------+---------------------+-------------------+
| Prepaid expenses and other current assets | 22,746 | 119,933 | (260,370) |
+------------------------------------------------+---------------+---------------------+-------------------+
| Other assets | - | 874 | (45,325) |
+------------------------------------------------+---------------+---------------------+-------------------+
| Accounts payable | 54,006 | (171,079) | 509,142 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Accrued expenses | 184,521 | 240,141 | 1,009,482 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Deferred revenue | (7,633) | 84,897 | 100,517 |
+------------------------------------------------+---------------+---------------------+-------------------+
| Net cash used in operating activities | (11,101,123) | (8,928,205) | (35,912,090) |
+------------------------------------------------+---------------+---------------------+-------------------+
| Cash flows from investing activities: |
+----------------------------------------------------------------------------------------------------------+
| Cash paid for acquisition of Mesoscopic, net | - | (477,645) | (3,399,946) |
| of cash acquired | | | |
+------------------------------------------------+---------------+---------------------+-------------------+
| Cash held in escrow | - | 477,645 | (22,355) |
+------------------------------------------------+---------------+---------------------+-------------------+
| Additions to property and equipment | (746,573) | (651,148) | (3,453,037) |
+------------------------------------------------+---------------+---------------------+-------------------+
| Net cash used in investing activities | (746,573) | (651,148) | (6,875,338) |
+-------------------------------------------+----+---------------+-----+---------------+---+---------------+
See the accompanying notes to the preliminary announcement.
Protonex Technology Corporation (A Development Stage Company)
Consolidated Statements of Cash Flows continued (Unaudited)
+-------------------------------------------+----+---+----+----------+----+-------------+---+--------------+
| | Year ended 30 | Year ended 30 | Period from 6 |
| | September 2009 | September 2008 | October 2000 |
| | | | (inception) to |
| | | | 30 September |
| | | | 2009 |
+-------------------------------------------+------------------------+------------------+------------------+
| Cash flows from financing activities: |
+----------------------------------------------------------------------------------------------------------+
| Proceeds from notes | - | - | 350,000 |
+----------------------------------------------------+---------------+------------------+------------------+
| Proceeds from Series B Convertible Preferred Stock, |
+----------------------------------------------------------------------------------------------------------+
| net of issuance costs | - | - | 3,437,341 |
+----------------------------------------------------+---------------+------------------+------------------+
| Proceeds from Series C Convertible Preferred Stock, |
+----------------------------------------------------------------------------------------------------------+
| net of issuance costs | - | - | 10,927,837 |
+----------------------------------------------------+---------------+------------------+------------------+
| Proceeds from Series A Convertible Preferred Stock, |
+----------------------------------------------------------------------------------------------------------+
| net of issuance costs | - | - | 169,200 |
+---------------------------------------------------------+----------+------------------+------------------+
| Proceeds from sale of common stock and stock option | 10,444 | 8,339 | 205,718 |
| exercises | | | |
+---------------------------------------------------------+----------+------------------+------------------+
| Proceeds from Initial Public Offering on AIM, net of | - | - | 13,649,823 |
| issuance costs | | | |
+---------------------------------------------------------+----------+------------------+------------------+
| Proceeds from Secondary Public Offering on AIM, |
+----------------------------------------------------------------------------------------------------------+
| net of issuance costs | - | - | 26,517,375 |
+----------------------------------------------------+---------------+------------------+------------------+
| Common stock repurchased | - | - | (3,610) |
+----------------------------------------------------+---------------+------------------+------------------+
| Net cash provided by financing activities | 10,444 | 8,339 | 55,253,684 |
+----------------------------------------------------+---------------+------------------+------------------+
| Net increase/(decrease) in cash and cash | (11,837,252) | (9,571,014) | 12,466,256 |
| equivalents | | | |
+----------------------------------------------------+---------------+------------------+------------------+
| Cash and cash equivalents, beginning of period | 24,303,508 | 33,874,522 | - |
+----------------------------------------------------+---------------+------------------+------------------+
| Cash and cash equivalents, end of period | $ | 12,466,256 | $ | 24,303,508 | $ | 12,466,256 |
| | | | | | | |
+------------------------------------------------+---+---------------+----+-------------+---+--------------+
| Supplemental cash flow information: |
+----------------------------------------------------------------------------------------------------------+
| Cash paid for: |
+----------------------------------------------------------------------------------------------------------+
| Interest | $ | - | $ | - | $ | 5,628 |
| | | | | | | |
+------------------------------------------------+---+---------------+----+-------------+---+--------------+
| Income taxes | $ | 2,373 | $ | 456 | $ | 6,031 |
| | | | | | | |
+------------------------------------------------+---+---------------+----+-------------+---+--------------+
| Supplemental disclosure of non-cash financing transactions: |
+----------------------------------------------------------------------------------------------------------+
| Conversion of accrued expense into shares |
+----------------------------------------------------------------------------------------------------------+
| of common stock | $ | - | $ | - | $ | 3,072 |
| | | | | | | |
+------------------------------------------------+---+---------------+----+-------------+---+--------------+
| Conversion of debt and interest into |
+----------------------------------------------------------------------------------------------------------+
| Series B Convertible Preferred Stock | $ | - | $ | - | $ | 388,269 |
| | | | | | | |
+------------------------------------------------+---+---------------+----+-------------+---+--------------+
| Conversion of Convertible Preferred Stock |
+----------------------------------------------------------------------------------------------------------+
| upon reorganisation and admission to AIM | $ | - | $ | - | $ | 14,922,647 |
| | | | | | | |
+------------------------------------------------+---+---------------+----+-------------+---+--------------+
| Supplemental disclosure of acquisition: |
+----------------------------------------------------------------------------------------------------------+
| On 1 April 2007, Protonex acquired Mesoscopic Devices, LLC |
+----------------------------------------------------------------------------------------------------------+
| Accounts receivable | $ | - | $ | (29,496) | $ | 739,436 |
| | | | | | | |
+------------------------------------------------+---+---------------+----+-------------+---+--------------+
| Inventories | - | - | 12,221 |
+------------------------------------------------+-------------------+------------------+------------------+
| Property, plant and equipment | - | - | 77,844 |
+------------------------------------------------+-------------------+------------------+------------------+
| Other assets | - | - | 45,315 |
+------------------------------------------------+-------------------+------------------+------------------+
| Intangible assets | - | - | 2,528,000 |
+------------------------------------------------+-------------------+------------------+------------------+
| Goodwill | - | 500,000 | 7,316,990 |
+------------------------------------------------+-------------------+------------------+------------------+
| Accounts payable and accrued expenses | - | 7,141 | (375,522) |
+------------------------------------------------+-------------------+------------------+------------------+
| Cash paid for Mesoscopic Devices, LLC, including cash |
+----------------------------------------------------------------------------------------------------------+
| released from escrow and net of cash | - | | (477,645) | | (2,922,301) |
| acquired | | | | | |
+------------------------------------------------+-------------------+----+-------------+---+--------------+
| Fair value of common stock issued | $ | - | $ | - | $ | 7,421,983 |
| | | | | | | |
+-------------------------------------------+----+---+----+----------+----+-------------+---+--------------+
See the accompanying notes to the preliminary announcement.
Notes to the Preliminary Announcement
Note 1 - Organisation and Basis of Presentation
Organisation
Protonex Technology Corporation (the "Company") was incorporated in October
2000, and performs engineering and development on fuel cell technology under
cost sharing, cost-reimbursement (cost-type), fixed price and cost plus
contracts. In addition, the Company assembles and sells prototype products on a
limited basis. Since inception, the Company has been considered to be in the
development stage as it has devoted substantially all of its efforts to
developing its products, raising capital and recruiting personnel. Although the
Company is progressing toward the launching of its first consumer and military
product offerings, as of 30 September 2009 the development of its product
offerings had not reached this stage. The Company expects to incur losses as it
continues to participate in government cost share programmes to further certain
technology or product development initiatives with key customers or agencies and
invests in cost reduction and commercialisation initiatives. The Company's
primary market during the development stage has been government agencies of the
United States of America. The Company is headquartered in Southborough,
Massachusetts.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in a
manner consistent with generally accepted accounting principles as set forth by
the United States of America Financial Accounting Standards Board ("U.S. GAAP").
The information in this preliminary announcement does not constitute the
Company's Annual Report and Accounts for 2009.
The financial information for the year ended 30 September 2008 is derived from
the Annual Report and Accounts for that year which have been published and filed
with the AIM Exchange. The Independent Auditors have reported on those accounts;
their report was unqualified, and did not draw attention to any matters by way
of emphasis. The Annual Report and Accounts for the year ended 30 September
2009, on which the Independent Auditors have not yet reported, will be finalised
on the basis of the financial information presented by the Directors in this
preliminary announcement and will be published and filed with the AIM Exchange
in due course.
The financial information set out herein does not constitute the Company's
Annual Report and Accounts for 2009. The Annual Report and Accounts for the year
ended 30 September 2008 have been filed. The Annual Report and Accounts for the
year ended 30 September 2009 will be filed in due course.
The Company is subject to a number of risks similar to those of other
development stage companies, including risks related to: its dependence on key
individuals; its ability to develop and market commercially usable products; and
its ability to obtain the substantial additional financing necessary to
adequately fund the development, commercialisation and marketing of its
products.
These consolidated financial statements have also been prepared on a going
concern basis. As such, they anticipate the realisation of assets and the
liquidation of liabilities in the normal course of business. The Company
incurred net losses of $12,948,758 and $10,862,621 for the years ended 30
September 2009 and 2008, respectively, and had an accumulated deficit of
$43,600,312 as of 30 September 2009. The Company has funded these losses
principally through equity financings.
Reclassifications
Certain prior year amounts have been reclassified in order to conform to the
current year's presentation.
Recently Issued Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 168, "The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles, a replacement of FASB Statement No. 162". This statement modifies
the U.S. GAAP hierarchy by establishing only two levels of U.S. GAAP,
authoritative and nonauthoritative accounting literature. Effective July 2009,
the FASB Accounting Standards Codification ("ASC"), also known collectively as
the "Codification", is considered the single source of authoritative US
accounting and reporting standards, except for additional authoritative rules
and interpretive releases issued by the SEC. Nonauthoritative guidance and
literature would include, among other things, FASB Concepts Statements, American
Institute of Certified Public Accountants Issue Papers and Technical Practice
Aids and accounting textbooks. The Codification was developed to organise U.S.
GAAP pronouncements by topic so that users can more easily access authoritative
accounting guidance. It is organised by topic, subtopic, section, and paragraph,
each of which is identified by a numerical designation. All accounting
references have been updated, and therefore SFAS references have been replaced
with ASC references.
Note 2 - Summary of Significant Accounting Policies
A summary of the accounting policies consistently applied in the financial
statements follows:
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires
the Company 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 revenues and
expenses during the reporting period. The Company bases its estimates and
judgments on historical experience and on various other factors that are
considered reasonable under the circumstances. Actual results could differ
materially from these estimates.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Protonex Technology, LLC. All material intercompany
transactions and balances have been eliminated in consolidation.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, including cash and
cash equivalents, accounts receivable, accounts payable, and accrued liabilities
approximate their fair values due to the short-term nature of these instruments.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Similarly, all money
market accounts are considered cash equivalents.
The Company maintains its cash in bank deposit accounts, which, at times, may
exceed federally insured limits, and in high quality, short-term, highly liquid
investment securities. At 30 September 2009, $12,117,395 of cash and cash
equivalents exceeded federally insured limits, but was maintained in a money
market fund that invests primarily in U.S. Treasury Bills. The Company has not
experienced any losses in such accounts and does not believe it is exposed to
any significant credit risk on cash.
Accounts Receivable
Accounts receivable are stated at the amount management expects to collect from
outstanding balances. The Company reviews accounts receivable on a monthly basis
to determine if any receivables will potentially be uncollectible. Management
provides for probable uncollectible amounts through a charge to operations and a
credit to a valuation allowance based on its assessment. Based on experience,
the Company does not record a reserve against the receivables from the
agencies/groups of the United States Government. As of 30 September 2009 and
2008, 88% and 64%, respectively, of accounts receivable were from government
agencies.
Inventories and Related Allowance for Obsolete and Excess Inventory
Inventories consist primarily of raw materials and are recorded at the lower of
cost or net realisable value. Cost is determined on a first-in, first-out basis.
Reserves are recorded for slow moving, obsolete, non-sellable or unusable items
and amounted to $525,703 and $320,497 at 30 September 2009 and 2008,
respectively.
Property and Equipment
Property and equipment are recorded at cost and are depreciated using the
straight-line method over their expected useful lives. Construction in progress
represents fixed assets not yet placed in service, that at completion are
transferred to the appropriate fixed asset category and depreciated on a
straight-line basis over estimated useful lives of three - five years or
remaining lease terms.
The current useful lives are:
+---------------------------+--------------------------------------------------------------+
| Furniture, fixtures and | five years |
| equipment | |
+---------------------------+--------------------------------------------------------------+
| Computer hardware and | three - five years |
| software | |
+---------------------------+--------------------------------------------------------------+
| Leasehold improvements | lesser of useful life or remaining lease term |
+---------------------------+--------------------------------------------------------------+
Goodwill
The Company reviews the valuation of goodwill in accordance with FASB ASC Topic
350, "Intangibles - Goodwill and Other" ("ASC 350"). Under the provisions of ASC
350, goodwill is required to be tested for impairment annually, in lieu of being
amortised, using a fair value approach at the reporting unit level. Furthermore,
goodwill is required to be tested for impairment on an interim basis if an event
or circumstance indicates that it is more likely than not an impairment loss has
been incurred. In accordance with ASC 350, goodwill will be tested for
impairment on an annual basis as of 1 April, and between annual tests if
indicators of potential impairment exist. An impairment loss shall be recognised
to the extent that the carrying amount of goodwill exceeds its implied fair
value. Impairment losses shall be recognised in operations. The Company operates
in one reporting unit. The Company's valuation methodology for assessing
impairment requires management to make judgments and assumptions based on
historical experience and projections of future operating performance. If these
assumptions differ materially from future results, the Company may record
impairment charges in the future. As of 30 September 2009, the Company
determined that no impairment exists.
Impairment of Long-Lived Tangible and Intangible Assets
The Company examines on a periodic basis the carrying value of our long-lived
tangible and intangible assets to determine whether there are any impairment
losses. If indicators of impairment were present with respect to long-lived
tangible and intangible assets used in operations and undiscounted future cash
flows were not expected to be sufficient to recover the assets' carrying amount,
an impairment loss would be charged to expense in the period the impairment is
identified based on the fair value of the asset less any costs of disposal. The
Company believes no impairment exists as of 30 September 2009.
Revenue Recognition and Deferred Revenues
Revenues from cost sharing, cost-reimbursement (cost-type), fixed price and cost
plus contracts with various government groups and agencies are recognised when
the related costs are incurred and related services are performed. Contract
costs primarily include direct labour, consultants, sub-contractors, research
and development materials, and other specific administrative costs related to
the project. Deferred revenue represents amounts received in advance of services
being performed and delivery of products.
Revenue from sales of prototype units is recognised upon the shipment of the
units to the customer provided evidence of an arrangement exists, the fee is
fixed and determinable and collectibility of the related receivable is probable.
Revenues from research and development contracts are recognised proportionally
as costs are incurred and compared to the estimated total research and
development costs for each contract. In many cases, the Company is reimbursed
only a portion of the costs incurred or to be incurred on the contract. Revenues
from government funded research, development and demonstration programmes are
generally multi-year, cost reimbursement and/or cost-shared type contracts or
cooperative agreements. The Company is reimbursed for reasonable and allocable
costs up to the reimbursement limits set by the contract agreements.
For the fiscal years ended 30 September 2009 and 2008, the Company had
government sponsored contract revenues of $7,078,601 and $7,676,939 which
represented approximately 100% and 98%, respectively, of total revenues.
Income Taxes
Deferred income taxes have been recorded to recognise the estimated future tax
consequences attributable to the cumulative temporary differences between
financial statement and tax bases of assets and liabilities.
Deferred income tax assets and liabilities are computed for those differences
that have a future tax consequence using currently enacted laws and rates that
apply to periods in which they are expected to affect taxable income. Income tax
expense is the current tax payable or refundable for the period plus or minus
the net change in deferred tax asset and liability accounts. Valuation
allowances are established, if necessary, to reduce a net deferred tax asset to
the amount that will more likely than not be realised.
Research and Development Expense
Costs incurred in connection with research and development activities are
expensed as incurred. These costs consist of direct and indirect costs
associated with specific projects as well as fees paid to various third-party
entities that perform certain research on behalf of the Company. Total research
and development expenses for the years ended 30 September 2009 and 2008 were
$14,185,750 and $13,858,515, respectively.
Stock-Based Compensation
The Company has one stock-based employee compensation plan. On 1 October 2005,
the Company adopted the fair value recognition provisions now codified as FASB
ASC Topic 718, "Stock Compensation" ("ASC 718"), using the prospective
transition method. Under this transition method, stock-based compensation cost
was recognised in the financial statements for all share-based payments granted
after 1 October 2005. Under the fair value recognition provisions of ASC 718,
stock-based compensation cost is measured at the grant date based on the value
of the award and is recognised as expense over the service period.
The following table presents share-based compensation expenses included in the
Company's Consolidated Statements of Operations:
+-----------------------------------------------------------------+---+------------+---+------------+
| | Year ended | Year ended |
| | 30 | 30 |
| | September | September |
| | 2009 | 2008 |
+-----------------------------------------------------------------+----------------+----------------+
| Research and development | $ | 668,268 | $ | 611,943 |
+-----------------------------------------------------------------+---+------------+---+------------+
| Sales and marketing | 95,347 | 82,485 |
+---------------------------------------------------------------------+------------+----------------+
| General and administrative | 431,004 | 459,907 |
| | | |
+---------------------------------------------------------------------+------------+----------------+
| Total share-based compensation expense | $ | 1,194,619 | $ | 1,154,335 |
+-----------------------------------------------------------------+---+------------+---+------------+
Included in the 2009 compensation costs above is $26,916 related to the
completion of an offer to exchange certain stock options issued under the 2003
Stock Incentive Plan
At 30 September 2009, there is $775,028 of future compensation cost to be
recognised in future periods on outstanding options. That cost is expected to be
recognised over a weighted-average period of 2.84 years.
ASC 718 requires the benefits of tax deductions in excess of the compensation
cost recognised for those options to be classified as financing cash inflows
rather than operating cash inflows, on a prospective basis. The Company has
fully reserved for any deferred tax benefits due to the uncertainty of future
operating results and its ability to utilise the future tax benefit. As such,
the classification as financing cash flows and the effect of adopting ASC 718
had no effect on the Company's Consolidated Statements of Cash Flows.
The fair value of each stock option was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for the years ended 30 September 2009 and 2008:
+-------------------------------------------------------------+--------------+--------------+
| | Year ended | Year ended |
| | 30 September | 30 |
| | 2009 | September |
| | | 2008 |
+-------------------------------------------------------------+--------------+--------------+
| Expected volatility | 83.0% - | 72.0% - |
| | 94.0% | 73.0% |
+-------------------------------------------------------------+--------------+--------------+
| Expected dividend yield | 0.0% | 0.0% |
+-------------------------------------------------------------+--------------+--------------+
| Expected risk-free interest rate | 1.79% - | 2.56% - |
| | 2.92% | 4.14% |
+-------------------------------------------------------------+--------------+--------------+
| Expected term of options | 4.79 - 5.86 | 3.73 - |
| | years | 5.86 years |
+-------------------------------------------------------------+--------------+--------------+
| Maximum contractual term | 10 years | 10 years |
+-------------------------------------------------------------+--------------+--------------+
| Estimated forfeitures | 10.6% | 10.5% - |
| | | 12.8% |
+-------------------------------------------------------------+--------------+--------------+
Stock Price
All stock options issued from 1 October 2005 through 2 July 2006 were valued
based on an independent valuation study of the Company performed for the Board.
All options issued subsequent to 2 July 2006 were valued based on the publicly
traded market price of the stock.
Expected Volatility
Due to having minimal publicly traded experience of its stock, the Company
utilised an expected volatility based on publicly available information as to
the volatility of comparable traded companies in similar industries, development
stage and size.
Expected Dividend Yield
The Company does not intend to pay dividends on its common stock for the
foreseeable future and, accordingly, uses a dividend yield of zero in the
Black-Scholes pricing model.
Expected Risk-Free Interest Rate
The risk-free interest rates for stock options are based on the U.S. Treasury
yield curve in effect at the time of grant for maturities similar to the
expected holding period of the stock options.
Expected Term
The expected term of stock options granted is generally based on historical data
and represents the period of time that the stock options granted are expected to
be outstanding. The Company has had very limited stock option exercise
experience to date, making the Company's determination of the "expected term"
judgmental. Accordingly, the Company has based the expected term on publicly
available information for companies in similar industries, development stage and
size.
Estimated Forfeitures
The Company has estimated employee stock option forfeitures as required under
ASC 718 for two groups of stock options: (a) immediately vested options and (b)
all others and is based on the Company's limited experience. Estimated
forfeitures are adjusted to actual forfeiture experience.
Net Loss per Share
Basic net loss per share is computed by dividing net loss by weighted-average
common shares outstanding during the year. All common stock equivalents ("CSEs")
were anti-dilutive for the years ended 30 September 2009 and 2008. Incremental
common shares as a result of CSEs were not included in the denominator of the
diluted earnings per share calculation due to their anti-dilutive nature.
Segment Reporting
In accordance with the provisions of FASB ASC Topic 280 "Segment Reporting", the
Company has determined that it has only one operating segment. Additionally, all
long-lived assets of the Company are located in the United States of America.
Fair Value Measurements
On October 1, 2008, the Company adopted the provisions now codified as FASB ASC
Topic 820, "Fair Value Measurements and Disclosures" ("ASC 820"), for fair value
measurements of financial assets and financial liabilities and for fair value
measurements of nonfinancial items that are recognised or disclosed at fair
value in the financial statements on a recurring basis. ASC 820 defines fair
value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. ASC 820 also establishes a framework for measuring fair value
and expands disclosures about fair value measurements.
In February 2008, the FASB issued updated guidance related to fair value
measurements, which is included in the Codification in ASC 820-10-55, Fair Value
Measurements and Disclosures - Overall - Implementation Guidance and
Illustrations. The updated guidance delays the effective date of ASC 820 until
fiscal years beginning after 15 November 2008 for all nonfinancial assets and
nonfinancial liabilities that are recognised or disclosed at fair value in the
financial statements on a non-recurring basis.
On 1 October 2009, the Company will be required to apply the provisions of ASC
820 to fair value measurements of nonfinancial assets and nonfinancial
liabilities that are recognised or disclosed at fair value in the financial
statements on a nonrecurring basis. The Company is in the process of evaluating
the impact, if any, of applying these provisions on the financial statements.
Subsequent Events
In May 2009, the FASB issued guidance now codified as FASB ASC Topic 855,
"Subsequent Events". This guidance sets forth (i) the period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements, (ii) the circumstances under which an entity should
recognise events or transactions occurring after the balance sheet date in its
financial statements, and (iii) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. ASC No. 855
is effective for interim and annual periods ending after 15 June 2009. The
Company adopted ASC No. 855 in the year ending 30 September 2009. The adoption
of ASC No. 855 did not have any impact on the Company's financial position,
results of operations or cash flows. The Company evaluated all events or
transactions that occurred after 30 September 2009 through 13 January 2010, the
date the Company issued this preliminary announcement. During this period, the
Company did not have any material recognisable subsequent events.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2007, the FASB issued updated guidance related to business
combinations, which is included in the codification in FASB ASC Topic 805,
"Business Combinations" ("ASC 805"). ASC 805 changes the accounting for business
combinations including the measurement of acquirer shares issued in
consideration for a business combination, the recognition of contingent
consideration, the accounting for pre-acquisition gain and loss contingencies,
the recognition of capitalised in-process research and development, the
accounting for acquisition-related restructuring cost accruals, the treatment of
acquisition related transaction costs and the recognition of changes in the
acquirer's income tax valuation allowance. ASC 805 is effective for fiscal years
beginning after December 15, 2008, with early adoption prohibited. Although the
adoption of ASC 805 will not have any impact on our current consolidated
financial statements, we expect that it will affect the accounting treatment of
future acquisitions, if any, that we may consummate.
In April 2009, the FASB issued FASB Staff Position ("FSP") FAS 107-1 and APB
28-1, Interim Disclosures about Fair Value of Financial Instruments, now
referred to as ASC 825-10. ASC 825-10 requires disclosures about fair value of
financial instruments for interim reporting periods as well as in annual
financial statements. ASC 825-10 also requires those disclosures in summarised
financial information at interim reporting periods. ASC 825-10 was effective for
interim periods ending after 15 June 2009 and only requires additional
disclosure, thus the adoption will not impact the consolidated results of
operations, financial condition or cash flows.
In April 2008, the FASB issued FSP FAS142-3, Determination of the Useful Life of
Intangible Assets, now referred to as ASC 350-30-65-1. It amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognised intangible asset under SFAS 142,
Goodwill and Intangible Assets, now referred to as ASC 350. ASC 350-30-65-1 is
effective for fiscal years beginning after 15 December 2008 and may not be
adopted early. The Company is currently evaluating the impact of adopting ASC
350-30-65-1 on the consolidated financial statements.
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue
Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition) ("ASU
2009-13") and ASU 2009-14, Certain Arrangements That Include Software Elements,
(amendments to FASB ASC Topic 985, Software) ("ASU 2009-14"). ASU 2009-13
requires entities to allocate revenue in an arrangement using estimated selling
prices of the delivered goods and services based on a selling price hierarchy.
The amendments eliminate the residual method of revenue allocation and require
revenue to be allocated using the relative selling price method. ASU 2009-14
removes tangible products from the scope of software revenue guidance and
provides guidance on determining whether software deliverables in an arrangement
that includes a tangible product are covered by the scope of the software
revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective
basis for revenue arrangements entered into or materially modified in fiscal
years beginning on or after 15 June 2010, with early adoption permitted. The
Company does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a
material impact on the Company's consolidated results of operations or financial
condition.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR ZMGMMNZFGGZM
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