RNS Number:5677H
Turbo Power Systems Inc
13 November 2007
TURBO POWER SYSTEMS INC. ANNOUNCES ITS RESULTS FOR
THE THIRD QUARTER ENDED 30 SEPTEMBER 2007
Highlights
*Production and development income in the nine months ended 30 September
2007 increased by 92 percent to #8.1 million (2006: #4.2 million)
*Loss before tax in the nine months ended 30 September 2007 reduced by 7
percent to #4.8 million (2006: #5.2 million)
*Order received today from new US customer for a motor and drive evaluation
system - approx US$200k
*Production order for 75 high-speed motor and drive systems worth approx.
US$2.0 million for delivery during 2008 expected to be signed before end of
November
*New Chairman appointed to manage next phase of company's development and
initiate cost review in Q4
Michael Hunt CEO, said: "We continue to make good progress in winning new
contracts and growing our revenue. It has taken longer than we first envisaged
to reach the qualification stages in our aerospace contracts and therefore we
have had to incur extra cost throughout the second half of 2007. However,
significant progress has now been made and both programmes are now moving into
qualification testing."
Graham Thornton, Chairman, said: "In my short time as a director I have been
impressed with the Company's technologies and its range of potential
applications. The markets in which the company operates are growing, as are the
company's revenues. We will initiate a review in the fourth quarter to ensure
future costs are better aligned with these revenues."
For further information, please contact:
Turbo Power Systems Tel: +44 (0)20 8564 4460
Michael Hunt, Chief Executive Officer
Stephen Sadler, Chief Financial Officer
Company Website: www.turbopowersystems.com
Gavin Anderson (PR) Tel: +44 (0)20 7554 1400
Ken Cronin
Michael Turner
KBC Peel Hunt Tel: +44 (0)20 7418 8900
Oliver Scott
NOTES TO EDITORS
About Turbo Power Systems
Turbo Power Systems Inc (AIM:TPS.L). is a leading UK based designer and
manufacturer of innovative power solutions. The Group's products are all based
on its core technologies of power electronics and high speed motors and
generators and are sold into a number of market sectors including aerospace,
rail, and various industrial sectors. The Company's products provide improved
efficiency and reduced energy consumption compared to existing technologies.
Turbo Power System's existing customers include bluechip companies such as
Hamilton Sundstrand, Bombardier, The National Rail Equipment Company, Eaton
Aerospace and Lotus.
Forward looking statements
This news release contains forward-looking statements. Forward-looking
statements include statements concerning plans, objectives, goals, strategies,
future events, or performance, and underlying assumptions and other statements
that are other than statement of historical fact. These statements are subject
to uncertainties and risks including, but not limited to, the ability to meet
ongoing capital needs, product and service demand and acceptance, changes in
technology, economic conditions, the impact of competition, the need to protect
proprietary rights to technology, government regulation, and other risks defined
in this document and in statements filed from time to time with the applicable
securities regulatory authorities.
Notice of no auditor review of interim financial statements
Under Canadian National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an
auditor has not performed a review of the interim financial statements, they
must be accompanied by a notice indicating that the financial statements have
not been reviewed by an auditor.
The accompanying un-audited interim financial statements of the Company have
been prepared by and are the responsibility of the Company's management.
The Company's independent auditor has not performed a review of these financial
statements in accordance with standards established by the Canadian Institute of
Chartered Accountants for a review of interim financial statements by an
entity's auditor.
OPERATIONAL REVIEW
Business of the Company
Turbo Power Systems designs and manufactures innovative power solutions which
provide local, high quality, controllable electrical and motive power. The
Group's products can be tailored for use in a wide range of industries and
applications, but are all based on its core technologies of high speed
electrical machines and power electronics.
The Group's site at Heathrow is the Head Office for UK operations and the design
and manufacturing centre for Electrical Machines. The Group's site at Gateshead
is the design and manufacturing centre for Power Electronics.
Strategy
The Company's strategy is to build a high performance electric machines and
power electronics business which can demonstrate strong and sustainable growth
in all of its technology areas and is not dependent on any single market sector,
product or operating unit.
Our sales strategy is to focus on developing long term relationships with strong
partners in each of our target market sectors where our technology typically
forms part of a larger product supplied to the end customer.
We will combine the skills of our two sites to match the requirements of our
customers.
Review of operations
Our practical experience of operating in the new factory at Gateshead at full
production output during the third quarter has reinforced the initial positive
feedback from staff and customers. Manufacturing efficiency and production
margins are improving and are expected to continue to do so as the more
effective, lean manufacturing processes reduce build times and improve the
control of materials and labour.
Overall revenues continued to grow significantly with the year to date total up
by over 90% from the equivalent period in 2006. However, while our third quarter
EBITDA losses have improved over the second quarter they did not reduce to the
extent initially anticipated due to the resource required to complete key
technical milestones on the aerospace programmes, deferring planned development
income stage payments and increasing development costs.
Considerable progress has been made in addressing technical issues and plans
are now in hand to complete formal product qualification early in Q1 2008. The
core TPS technology is a very good fit for the sector and with the benefit of
the experience on these launch programmes and the investment we have made in
facilities, quality systems and engineering expertise, we remain confident that
we have the infrastructure and resources to effectively manage future projects.
During the quarter the power electronics division continued to generate the
major proportion of the revenues, however the receipt of a significant
order announced today,coupled with the order for 75 high-speed motor and drive
systems that is expected to be signed before the end of November, demonstrates
that the business at Heathrow can anticipate real growth in the commercial
acceptance of the high-speed electrical machines which are at the heart of the
core intellectual property held by the Company.
The signed contract announced today is a development order for US $200k from an
industrial equipment manufacturer in the United States for a motor drive system
to be used as a new technology "commercial evaluation" demonstrator.
The Company can also confirm that it is in final stage talks regarding the
launch order for 75 high-speed motor and drive systems worth US $2million that
falls within the Memorandum of Understanding signed in November 2005 with a
major international capital equipment manufacturer. This contract is expected to
be signed before the end of November 2007.
In the rail sector, the Company is focused on the two major development
programmes with Bombardier for power distribution systems for new subway cars
being supplied to the Chicago and Toronto Transit Authorities. Both systems will
be prototype tested during the early part of 2008 with production deliveries
scheduled to commence towards the end of the year, ramping up from 2009.
Outlook
Given the extra work on our aerospace programmes the company has incurred more
significant costs in the second half than were planned. However, these
engineering costs will fall significantly once the units are qualified.
Third quarter revenues were unusually high given high levels of shipments to
NREC and we would expect fourth quarter revenues to be at slightly lower levels.
The extended beta programme on our US Industrial motor and drive agreement, in
conjunction with slightly reduced projected rail revenues, means that we expect
2008 revenues to be below previous management expectations but still show
significant growth over 2007. The company is initiating a review in the near
term to ensure the cost base for 2008 is better matched to these revenues.
Customers and contracts in more detail
TPS designs and manufactures motor/generator and power electronics technology
across a range of sectors and applications but the Company's products all have
in common the aim to provide improved efficiency and reduced energy consumption
compared to existing technology.
1) Direct Drive Industrial High Speed Motors and Drives
The TPS direct drive technology is designed to provide significant performance
improvements and operating cost reductions for a wide range of industrial
compression and turbo-machinery applications. By eliminating the need for
mechanical gearboxes and conventional low speed motors and by operating more
efficiently across a wider range of load points, the customer's energy
requirements and costs can be reduced.
SKF
TPS continues to build up the early volumes of the high-speed motor and drive
systems for integration by SKF with their magnetic bearing technology into their
compressor product. The current expectation is that we will ramp up the volumes
to a running rate of approximately 50 systems per month within the next year.
US Industrial Motor and Drive Agreement
The recent review of Alpha unit testing at the customer's site has created a
positive platform for the next steps in the programme announced today:
*An order for the supply of 5 Beta reliability testing systems has been
received (at a value of approx US$220k) which will be used to carry out
extensive field reliability testing over a period of 9-12 months. In order
to maximize the effectiveness of the reliability testing programme the
customer is making a significant investment in a number of mobile
transportable systems which can be rapidly deployed at a number of
"friendly" sites, testing a broad combination of operational and ambient
temperature environments.
*The expected launch purchase order for 75 production systems is likely to be
signed before the end of November (at a value of approximately US$2M) and
will be deliverable between August and November 2008 subject to an initial
reliability demonstration milestone in May 2008. This will be the first
release against the Memorandum of Agreement previously announced with the
global capital equipment manufacturer, which provides for the purchase of
500 systems in the first two years of production.
In previous reports, initial production was expected to have commenced earlier,
however given the strategic importance to the customer of the new technology the
customer has now decided to extend the range and depth of the pre-production
release trials prior to the formal production launch.
New order for trial programme
TPS has received an order (approx. value US$200k) from a US industrial and
process gas company planning to test the use of high speed permanent magnet
motors, magnetic bearings, and related control and power electronics for turbo
machinery in air separation processes.
This opportunity is expected to lead to future production contracts subject to
successful systems trials and further widens the range of applications for the
TPS technology. The system being offered is based on existing TPS product
designs.
2) Specialist Motors and Drives
In addition to the long-term design investment that the Company has made in the
high speed electrical machine technology, the Company has accumulated
considerable expertise in motor and controller designs for aggressive and high
performance environments This expertise is now providing the basis for a new
range of products targeted at both the aerospace sector and the oil and gas
markets.
Aerospace
On both the aerospace programmes development costs have exceeded the level of
customer funded development income and in the case of Hamilton Sundstrand, which
was initiated by the customer as a late programme nearly a year after Eaton, the
cost overrun is expected to be significant.
Unit margins will be derived from the final design costs, and we are currently
in discussion with both companies to finalise these.
TPS continues to see the sector as an excellent fit to both its electronics and
electrical machines technologies and all new bids are now constructed to reflect
our "learning curve" experience on these initial launch programmes.
Eaton
Pump motor drive units for the new Boeing 787 at Safety of Flight standard have
been delivered to Aircraft One and Two in support of the Boeing flight test
programme.
A significant amount of pre-qualification testing has already completed
successfully. The timing of the final qualification program has been agreed with
Eaton and Boeing and will commence in November and be completed in early 2008.
Hamilton Sundstrand
The HS 787 Ram Fan motor drive programme, which was placed with TPS late on in
the 787 programme, has continued to require extra resource to complete the
prototype development testing of the hardware and software elements, and
additional engineering resources have been deployed to recover the situation.
Considerable progress has now been made and the Company is planning to complete
full qualification before the end of Q1 2008.
Artificial Lift Company (Oil and Gas)
Negotiations for a follow-up quantity of 7 motors are nearing conclusion.
Testing in Great Yarmouth with two existing motors is going well. ALC are now
operating the two motors on a 24/7 continuous basis. On successful completion of
the UK trials, six motor modules will be provided by TPS in support of the
operational oil field testing in North America in the first half of 2008, where
the systems will then undergo extended endurance testing under actual oil well
conditions. Production, which is dependent on successful reliability
demonstrations in North America, is expected to begin before the end of 2008.
3) Rail and Industrial Power Electronics
TPS designs and manufactures rugged power electronics products for both rail and
industrial applications, all of which require high reliability and availability
in operation.
Bombardier Transportation-Canada
Beijing
Production of the auxiliary power systems for the unmanned rail transit cars for
the Beijing airport subway extension is proceeding well, with all units expected
to be delivered by the end of 2008 as scheduled. TPS engineers have participated
in a number of commissioning trials in China in support of our customer
Bombardier. The Company is supplying 40 car sets with a contract value of
US$1.5M.
Chicago Transit Authority
The development programme is well underway, system mock up units have been
evaluated by the end customer, and functional prototypes will be available for
qualification testing in December. The Chicago (and Toronto) designs incorporate
a new generation of hardware and software microprocessor control system which
the Company is investing in as a common modular platform for all future rail
products. The base contract is valued at some US$14M including production,
spares and engineering services, with possible options for additional cars which
could increase the value to more than US$20M. Bombardier will be testing several
subway cars on CTA tracks during 2008, with production volumes planned to
commence at the end of 2008.
Toronto
Although placed some months later than CTA, the Toronto S1 programme has an
aggressive schedule and also has a target prototype qualification testing date
of the end of 2007. The initial production schedule for 2008 is 15 car sets,
with the rate ramping up into 2009. The contract for the initial quantity of 234
cars is expected to exceed US$8M, with the potential for further option
quantities to extend that to some US$14M.
National Rail Equipment Co.
NREC was once again the largest individual customer during the third quarter,
and TPS has increased the capacity within the manufacturing cell layout to
accommodate potential further increases in demand. In order to support the
expanding field population of NREC locomotives additional TPS field service
resources have been provided in North America, and a number of potential sites
for a possible US service and maintenance centre are currently under review.
As part of expanding it's range of low emissions shunting locomotives NREC has
contracted TPS to supply a variant of the existing traction electronics system
design for a six-axle version, and initial hardware is currently in manufacture.
NREC will remain the major customer for rail and traction equipment until the
Bombardier CTA and Toronto contracts enter production in the latter half of
2008. NREC marketing activities have extended to cover Europe and Australasia as
well as North America.
Toronto Transit Commission - H6 Subway Programme
Production continues to proceed smoothly, with contract completion scheduled for
early 2008.
PRC
Production demand from the customer for the pulsed laser power supply continues
to be maintained at good monthly levels, with a high level of customer
satisfaction in the equipment performance.
FINANCIAL PERFORMANCE
REVIEW OF NINE MONTHS TO 30 SEPTEMBER 2007
Overview
The first nine months of 2007 have seen continued production growth with
turnover increasing strongly quarter on quarter. Development income has
increased by 76% in the period as work continued on the aerospace programmes and
began on the Chicago and Toronto rail programmes. Improvements in production
efficiency and benefits from the new factory location have aided improving
production margins. However, on the aerospace programmes we have experienced the
dual effect of deferred milestone related development income and increasing
development costs. As a result third quarter, and consequently year to date,
EBITDA figures are worse than anticipated. Mitigating actions have been taken to
ensure milestones are met in the near term, allowing the release of the related
development income.
Turnover for the nine months of #7.1 million represents a 95% increase over the
first nine months of 2006 as more of our programmes have moved into production.
In particular, our contract with NREC for rail traction electronics has made a
much stronger contribution as a result of this customer's increased sales and
this programme was again our largest contributor to turnover in the third
quarter. We expect fourth quarter turnover to again be at good levels although
probably slightly lower than the third quarter. We have seen gross margins
increasing throughout the period and this effect has been accelerated in the
third quarter following our move into new premises in Gateshead.
Development income of #1.0 million includes receipts from Bombardier on the
Toronto, Chicago and Beijing programmes as well as receipts from Eaton and
Hamilton Sundstrand on the 787 programme.
Research and development costs of #3.9 million throughout the period comprise
continued work on our aerospace and major rail development programmes as well as
costs associated with a new microprocessor control system to be used for future
rail and aerospace business. Increased costs in the third quarter reflect
increased resource allocated to the aerospace programmes both in terms of
personnel and test house costs as the programmes move towards flight
qualification.
Administrative expenses for the nine months were #3.0 million. Included in this
figure in the second quarter are expenses related to the relocation of our
Gateshead factory totaling #0.2 million.
The loss before interest, tax, depreciation, amortisation and stock compensation
for the nine month period was (#3.6) million. Third quarter EBITDA of (#1.2)
million reflects in particular the increased net development cost associated
with the Eaton and Hamilton Sundstrand programmes.
Cash outflows before movements in working capital of #3.7 million for the nine
months included interest payments in January of #331,000 to convertible note
holders relating to the period 1 July 2006 to 31 December 2006. The following
convertible note interest payment, paid in July 2007, was significantly less at
#56,000 following the redemption of #9.36 million of the convertible notes in
late December 2006 and early January 2007. Also included in cash outflows before
movements in working capital are Gateshead relocation costs not capitalized of
#0.2 million.
Continuing production growth and the purchase of long lead time items led to
significant stock increases in the period of #1.0 million.
Tax credits received in the period of #312,000 comprise research and development
tax credit claims for the year to 31 December 2006.
Long term assets purchased of #0.6 million principally represent the investment
in fixed assets at the company's new production facilities in Gateshead. The
completion of the move allowed TPS to claim #250,000 of grant funding from the
development agency, One North East, and this amount was received in the third
quarter.
Movements in restricted funds of #147,000 represent net movements in performance
bond cash during the half year as certain performance bonds reached maturity
including the release of performance bond cash on the cancelled CLRV programme.
Net receipts from an institutional equity placing during the second quarter
contributed #3.8 million.
The overall decrease in cash during the period was #1.1 million leaving the
Company with an unrestricted cash balance of #5.6 million and further restricted
cash of #1.4 million at 30 June 2007.
Revenue
Production revenue in the nine months ended 30 September 2007 was #7.08 million
compared with #3.63 million in 2006 and comprised
2007 2006
#'000 #'000
Power electronics 6,855 3,459
Electrical machines 220 172
--------------
7,075 3,631
The Power Electronics division has again seen strong turnover growth. Output
volumes have grown significantly on the majority of production contracts and in
particular on National Railway Equipment Co which is the highest contributor to
revenues for the nine months.
Spares and service revenues were #0.3m for the nine months (2006: #0.8m).
In the Electrical Machines division revenue for the quarter related principally
to the SKF contract and initial units on the Industrial motor and drive
programme.
Development income
Development income in the nine months was #1.02 million compared with #0.58
million in 2006 and included receipts from Hamilton Sundstrand on the Boeing 787
Dreamliner programme, and initial incomes from Bombardier on both the Chicago
Transit and Toronto Transit programmes.
2007 2006
#'000 #'000
Development income 1,017 577
-------------
Production costs
The cost of product revenues in the nine months amounted to #5.32 million (2006:
#2.80 million) and reflects the growth in production revenue.
2007 2006
#'000 #'000
Power electronics 4,544 2,187
Electrical machines 776 615
--------------
5,320 2,802
--------------
Production costs include certain fixed facilities costs attributable to the
manufacturing operation.
Included in production costs for the nine months are stock compensation charges
on options awarded of #80,000 (2006: #34,000).
Research and product development
Research and product development expenditure in the nine months was #3.90
million compared with #2.61 million in 2006, and comprised
2007 2006
#'000 #'000
Research and product 3,902 2,660
development expenditure
Accrued R&D tax credits - (50)
-------------
Total expenditure 3,902 2,610
--------------
Product development costs increased in the nine months as development work
progressed on both the Eaton contract and the Hamilton Sundstrand contract for
the Boeing 787 Dreamliner and the Bombardier Chicago and Toronto Rail
programmes.
Included in research and product development expenditure for the nine months are
stock compensation charges on options awarded of #290,000 (2006: #188,000).
No R&D tax credits were accrued in the nine months as the majority of the
Group's development resource moved on to commercial programmes.
General and administrative
General and administrative costs of #3.03 million (2006: #2.38 million) consist
mainly of staff costs and facilities costs. Included in this category are
Gateshead move costs of #0.20 million which have not been capitalized. Also
included are stock compensation charges on options awarded of #170,000 (2006:
#151,000).
Amortisation
Amortisation was #0.66 million compared with #0.89 million in 2006. The
reduction reflects a number of assets becoming fully written down.
Interest income
Interest income for the nine months was #0.27 million compared with
#0.21 million in 2006.
Interest expense and finance charges
Interest expense and finance charges arise from the issue of convertible bonds
in July 2003 and March 2005, and the redemption of bonds and issue of shares in
January 2007, and comprised
2007 2006
#'000 #'000
Finance charges 118 66
Interest payable 87 420
Amortisation of deferred
finance charges - 121
Debt accretion 62 291
------------
267 898
Finance charges for the nine months were #118,000 (2006: #nil) and were made up
as below:
(S) During 2006 the company purchased U.S. dollar denominated currency
contracts covering expected dollar income from programmes scheduled for 2006 and
2007. The value of the option as at 30 September 2007 was #37,000, resulting in
a cost for the nine months of #7,000 (2006: #57,000).
(S) During the first half year the company redeemed 4,500,000 loan
notes, resulting in a net charge of #82,000 (2006: #nil).
(S) Charges related to the restricted cash movements and performance
bonds totaled #29,000 (2006: #9,000).
Convertible bonds are considered to be compound financial instruments, and the
liability component and the equity component must be presented separately, as
determined at initial recognition. The Company has valued the equity component
of these bonds using the residual value of equity component method, whereby the
liability component is valued first using current market rate for comparable
instruments, at the time of issuance. The difference between the proceeds of the
bonds issued and the fair value of the liability is assigned to the equity
component. The equity element of the March 2005 bond issue was estimated at
#1.11 million. The equity element of the 2003 bond issue was estimated at
#0.91 million. The carrying value of the debt element is increased over the term
of the debt and this accretion expense is charged to the profit and loss
account. During the nine months this charge amounted to #62,000 (2006:
#291,000).
CASH FLOWS FOR THE NINE MONTHS
Cash outflow from operating activities
Operating cash outflow before movements in working capital was #3.75 million for
the period (2006: #3.77 million). Included in this amount are interest payments
to convertible note holders of #0.38 million for the period 1 July 2006 to 30
June 2007 and Gateshead move costs of #197,000.
Movements in stocks, work in progress and debtors and creditors produced a net
cash outflow of #1.26 million during the period principally as a result of
increased stock requirements (2006: outflow of #0.22 million).
Tax credits
During the nine months the company received research and development tax credit
receipts of #0.31 million (2006: #0.12 million).
Investing activities
Purchases of long term tangible assets amounted to #0.60 million (2006: #0.12
million) and principally relate to the new Power Electronics facility in
Gateshead. Cash inflows related to movements in restricted funds of #0.15
million (2006: #nil) are the net result of the cancellation of performance bonds
previously provided of #250,000 and #515,000, and the creation of new bonds
totaling #615,000.
Cash flow from financing activities
Cash inflow from financing in the nine months of #3.80 million relates to net
receipts of #3.88 million from an institutional placing of #4.0 million (gross)
completed in June 2007, and the payment of final expenses of #7,000 in relation
to the fundraising in December 2006, when the Company completed a #6.0 million
(gross) financing agreement with institutional investors.
Overall cash flow for the nine months
Overall the cash outflow for the period was #1.09 million. This compares with a
cash outflow of #4.07 million in 2006.
BALANCE SHEET AS AT 30 SEPTEMBER 2007
The Company ended the period with an unrestricted cash balance of #5.58 million
compared with #6.67 million at 31 December 2006. Substantially all of the
Company's cash balances are denominated in Sterling.
In addition the Company had restricted cash amounts of #1.35 million relating to
performance bonds (2006: #1.50 million).
Long term assets excluding restricted cash have decreased from #3.69 million at
31 December 2006 to #3.16 million at 30 September 2007, after depreciation
charges of #0.66 million and additions in plant and equipment of #0.44.
Long term liabilities have decreased to #1.89 million at 30 September 2007
compared to #6.13 million at 31 December 2006, reflecting the reduction in Loan
Notes following the redemption of #4.5 million notes in January 2007.
Net working capital at 30 September 2007, excluding cash balances, was #1.89
million, compared with #0.85 million as at 31 December 2006.
As at 14 November 2007, the Company had 318,571,062 common shares issued and
115,000,000 A shares. As at that date there were 31,494,650 outstanding share
options and 10,500,000 outstanding warrants.
REVIEW OF THIRD QUARTER TO 30 SEPTEMBER 2007
Revenue
Production revenue in the quarter ended 30 September 2007 was #2.70 million
compared with #1.47 million in 2006 and comprised
2007 2006
#'000 #'000
Power electronics 2,616 1,380
Electrical machines 84 90
--------------
2,700 1,470
The Power Electronics division has again demonstrated strong turnover growth as
a result of increased volumes on established programmes.
Spares and service revenues were #0.10 million for the quarter (2006: #0.30m).
In the Electrical Machines division revenue for the quarter related principally
to the Industrial Motor and Drive contract.
Development income
Development income in the quarter was #0.65 million compared with #0.29 million
in 2006.
2007 2006
#'000 #'000
Development income 647 285
--------------
Production costs
The cost of product revenues in the quarter amounted to #1.91 million (2006:
#1.13 million) and reflects the growth in production revenue.
2007 2006
#'000 #'000
Power electronics 1,663 842
Electrical machines 249 288
---------------
1,912 1,130
Production costs include certain fixed facilities costs attributable to the
manufacturing operation.
Included in production costs for the quarter are stock compensation charges on
options awarded of #28,000 (2006: #18,000).
Research and product development
Research and product development expenditure in the quarter was #1.74 million
compared with #0.92 million in 2006, and comprised
2007 2006
#'000 #'000
Research and product 1,736 927
development expenditure
Accrued R&D tax credits - (10)
---------------
Total expenditure 1,736 917
Included in research and product development expenditure for the quarter are
stock compensation charges on options awarded of #97,000 (2006: #66,000).
No R&D tax credits were accrued in the quarter as the majority of the Group's
development resource moved on to commercial programmes.
General and administrative
General and administrative costs of #1.08 million (2006: #0.81 million) consist
mainly of staff costs and facilities costs. Included in this category are
Gateshead move costs of #0.20 million which have not been capitalized. Also
included are stock compensation charges on options awarded of #43,000 (2006:
#54,000).
Amortisation
Amortisation was #0.22 million compared with #0.23 million in 2006.
Interest income
Interest income for the three months was #0.11 million compared with
#0.06 million in 2006.
Interest expense and finance charges
Interest expense and finance charges arise from the issue of convertible bonds
in July 2003 and March 2005, and the redemption of bonds and issue of shares in
January 2007, and comprised
2007 2006
#'000 #'000
Finance charges 3 66
Interest payable 29 132
Amortisation of deferred - 40
finance charges
Debt accretion 10 97
------------
42 335
CASH FLOWS FOR THE THREE MONTHS
Cash outflow from operating activities
Operating cash outflow before movements in working capital was #1.19 million for
the period (2006: #1.37 million).
Movements in stocks, work in progress and debtors and creditors produced a net
cash outflow of #0.84 million during the period (2006: outflow of #0.26
million).
Investing activities
Purchases of long term tangible assets amounted to #0.12 million (2006: #0.15
million) and principally relate to the new Power Electronics facility in
Gateshead.
Cash flow from financing activities
Cash outflow from financing in the three months relates to settlement of final
fees from an institutional placing of #4,000,000 (gross) completed in June 2007.
Overall cash flow for the three months
Overall the cash outflow for the period was #2.11 million. This compares with a
cash outflow of #1.66 million in 2006.
TURBO POWER SYSTEMS INC.
CONSOLIDATED STATEMENTS OF NET LOSS, COMPREHENSIVE LOSS AND LOSS DEFICIT
UNAUDITED
Notes Nine months
ended 30
September
2007 2006
#'000 #'000
(unuadited) (unaudited)
Statement of Net Loss
Revenue 2,3 7,075 3,631
Development income 2 1,017 577
-------- --------
8,092 4,208
Expenses
Production costs 5,320 2,802
Research and product 4 3,902 2,610
development
General and 3,026 2,384
administrative
Amortisation 660 892
-------- --------
12,908 8,688
Loss before interest and
finance (4,816) (4,480)
charges
Interest income 269 206
Interest expense and
finance 5 (267) (898)
charges
Foreign exchange losses (7) (22)
-------- --------
(5) (714)
-------- --------
Net loss for the period (4,821) (5,194)
===== =====
Statement of
Comprehensive Loss
Net loss (4,821) (5,194)
Exchange adjustment on
consolidation (16) 59
-------- --------
Comprehensive Loss for (4,837) (5,135)
the period
===== =====
Statement of Loss Deficit
Loss deficit, beginning (53,636) (44,718)
of period
Net loss for the period (4,821) (5,194)
Adjustment on adoption of 1 (140) -
CICA3855
Equity adjustment on
issue of 11 (2,512) -
shares
-------- --------
Loss deficit, end of (61,109) (49,912)
period
===== =====
Loss per share - basic 7 (1.6) p (2.7) p
Loss per share - diluted 7 (1.6) p (2.7) p
TURBO POWER SYSTEMS INC.
CONSOLIDATED STATEMENTS OF NET LOSS
UNAUDITED
Notes Three months
ended 30
September
2007 2006
#'000 #'000
(unaudited) (unaudited)
Statement of Net Loss
Revenue 2,3 2,700 1,470
Development income 2 647 285
-------- --------
3,347 1,755
Expenses
Production costs 1,912 1,130
Research and product 4 1,736 917
development
General and 1,083 814
administrative
Amortisation 218 230
-------- --------
4,949 3,091
Loss before interest and
finance (1,602) (1,336)
charges
Interest income 106 59
Interest expense and
finance 5 (42) (335)
charges
Foreign exchange losses (20) (11)
-------- --------
44 (287)
-------- --------
Net loss for the period (1,558) (1,623)
===== =====
Statement of
Comprehensive Loss
Net loss (1,558) (1,623)
Exchange adjustment on
consolidation (108) (2)
-------- --------
Comprehensive loss for (1,666) (1,625)
the period
===== =====
Loss per share - basic 7 (0.5) p (0.8) p
Loss per share - diluted 7 (0.5) p (0.8) p
TURBO POWER SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
UNAUDITED
Notes As at 30 As at 31
September December
2007 2006
#'000 #'000
(unaudited) (unaudited)
Current assets
Cash and cash equivalents 5,579 6,669
Restricted cash 8 - 765
Trade and other 2,508 1,544
receivables
Stock and work in 2,248 1,230
progress
Prepayments 323 419
Tax recoverable 451 718
-------- --------
11,109 11,345
-------- --------
Long-term assets
Restricted cash 8 1,349 731
Prepayments 89 254
Investments 9 35 31
Intangible assets 9 55 77
Goodwill 9 820 820
Deferred finance charges 9 - 145
Tangible assets 9 2,159 2,361
-------- --------
4,507 4,419
-------- --------
15,616 15,764
===== =====
Liabilities and
shareholders' equity
Creditors: amounts
falling due within
one year
Trade and other payables 3,284 3,109
Deferred income 441 206
-------- --------
3,725 3,315
-------- --------
Creditors: amounts
falling due after
more than one year
Warranty provision 303 303
Convertible notes 1,591 5,827
-------- --------
1,894 6,130
-------- --------
Capital and reserves
Share capital and other
equity 10 71,190 60,023
instruments
Accumulated other
comprehensive (84) (68)
income
Loss deficit (61,109) (53,636)
---------- ----------
Shareholders' funds 9,997 6,319
--------- ---------
15,616 15,764
====== ======
TURBO POWER SYSTEMS INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
UNAUDITED
Common Share A Ordinary Other Accumulated Loss Total Equity
capital capital equity other deficit
income
#'000 #'000 #'000 #'000 #'000 #'000
Balance at 1
January 2006 44,753 - 2,144 (128) (44,718) 2,051
Loss for the
period (6,318) (6,318)
Exchange gain 60 60
Stock
compensation 511 511
Conversion to
shares 3,383 4,320 (674) (2,600) 4,429
Issue of shares 4,059 2,000 6,059
Expiry of
warrants 117 117
Fundraising
costs (393) (197) (590)
--------- --------- --------- --------- --------- ---------
Balance at 31
December 2006 51,919 6,123 1,981 (68) (53,636) 6,319
Loss for the
period (4,821) (4,821)
Exchange loss (16) (16)
Stock
compensation 540 540
Conversion to
shares 7,379 (638) (2,512) 4,229
Issue of shares 4,017 4,017
Fundraising
costs (131) (131)
Charge arising
on adoption of
CICA Section
3855 -
Financial
Instruments -
Recognition
and
Measurement (140) (140)
--------- --------- --------- --------- --------- ---------
Balance at 30
September 2007 55,805 13,502 1,883 (84) (61,109) 9,997
===== ===== ===== ===== ====== =====
TURBO POWER SYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Nine months
ended 30
September
Notes 2007 2006
#'000 #'000
(unaudited) (unaudited)
Net loss from operations (4,821) (5,194)
Amortisation 805 892
Accretion of debt 62 291
Stock compensation 540 373
charges
Foreign currency 7 -
instrument loss
Movement in net interest (340) (134)
accrual
--------- ---------
Cash outflow before (3,747) (3,772)
movements in
working capital
Decrease/(increase) in (436) (878)
debtors
Decrease/(increase) in (1,018) (524)
stock
Increase/(decrease) in 199 1,185
creditors
--------- ---------
Net cash outflow from operating activities
before tax (5,002) (3,989)
--------- ---------
Tax credits 312 121
--------- ---------
Net cash outflow from operating activities
after tax (4,690) (3,868)
--------- ---------
Investing activities
Purchase of long-term (596) (198)
assets
Capital grant received 250 -
Movement in restricted 147 -
funds
--------- ---------
Cash outflow from (199) (198)
investing activities
--------- ---------
Financing activities
Equity placing 11 4,001 -
Net expense from equity 11 (202) -
placing
--------- ---------
Cash inflow from 3,799 -
financing activities
--------- ---------
Increase/(decrease) in (1,090) (4,066)
cash in the period
====== ======
Cash and cash
equivalents:
Beginning of period 6,669 6,525
---------- ----------
End of period 5,579 2,459
====== ======
TURBO POWER SYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Three months
ended 30
September
Notes 2007 2006
#'000 #'000
(unaudited) (unaudited)
Net loss from operations (1,558) (1,623)
Amortisation 234 149
Accretion of debt 10 97
Stock compensation 168 138
charges
Foreign currency
instrument (9) -
loss/(gain)
Movement in net interest (33) (134)
accrual
--------- ---------
Cash outflow before (1,188) (1,373)
movements in
working capital
Decrease/(increase) in (352) (749)
debtors
Decrease/(increase) in (73) (110)
stock
Increase/(decrease) in (411) 602
creditors
--------- ---------
Net cash outflow from operating
activities before tax (2,024) (1,630)
--------- ---------
Tax credits - 121
--------- ---------
Net cash outflow from operating
activities after tax (2,024) (1,509)
--------- ---------
Investing activities
Purchase of long-term (123) (150)
assets
Capital grant received 250 -
Movement in restricted (208) -
funds
--------- ---------
Cash outflow from (81) (150)
investing activities
--------- ---------
Financing activities
Equity placing 11 - -
Net expense from equity 11 (6) -
placing
--------- ---------
Cash outflow from (6) -
financing activities
--------- ---------
Increase/(decrease) in
cash in the (2,111) (1,659)
period
====== ======
Cash and cash
equivalents:
Beginning of period 7,690 4,118
---------- ----------
End of period 5,579 2,459
====== ======
TURBO POWER SYSTEMS INC.
NINE MONTHS ENDED 30 SEPTEMBER 2007
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1 Basis of preparation
The consolidated financial statements of the Company have been prepared by
management in accordance with Canadian Generally Accepted Accounting
Principles (Canadian GAAP). The Company provides a reconciliation from
Canadian GAAP to International Financial Reporting Standards in Note 21 of the
Consolidated Financial Statements for the year ended 31 December 2006. The
preparation of the consolidated financial statements requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates. The consolidated financial statements include the
accounts of Turbo Power Systems Inc. ("the Company"), and the accounts of its
wholly owned subsidiary company Turbo Power Systems Limited (collectively "the
Group"). The significant accounting policies are consistent with prior years.
Certain comparative figures have been reclassified to conform to the financial
statement presentation adopted for 2007.
The Company's interim financial statements do not conform in all respects to
the requirements of Canadian GAAP for annual financial statements. The
Company's interim statements should be read in conjunction with the
consolidated financial statements of the Company for the year ended 31
December 2006. These interim financial statements are prepared in accordance
with the requirements of Canadian GAAP for interim financial statements as
recommended by CICA Handbook section 1751 "Interim Financial Statements".
These consolidated financial statements follow the same accounting policies
and methods of application as for the Company's 31 December 2006 financial
statements, except as described below:
Going concern
These consolidated financial statements have been prepared on a going concern
basis, which presumes that the Company will be able to realise its assets and
discharge its liabilities in the normal course of operations for the
foreseeable future. The Company has incurred cumulative losses including a
loss of #4.82 million for the nine month period ended 30 September 2007 and
has a cumulative deficit of #61.11 million as at 30 September 2007. The
Company's ability to continue as a going concern depends on its ability to
generate positive cash flow from operations or secure additional debt or
equity financing.
On January 1 the Company adopted new CICA accounting standards comprising CICA
Handbook Section 3855 "Financial Instruments - Recognition and Measurement",
Section 3861 "Financial Instruments - Disclosure and Presentation", Section
1530 "Comprehensive Income", and Section 3251, "Equity". As a result of
adopting these requirements, a new statement has been added to report
movements in Comprehensive Loss, after Net Loss, and consists of the gains and
losses from the translation of the Company's self-sustaining foreign
operations. Accumulated other income is presented as a separate section within
the Statement of Changes in Equity. In determining the fair value of financial
instruments, as required by Section 3855, the carrying value of the
Convertible debt was decreased by #140,000, and the net value of the Deferred
Finance Charges was offset against the Convertible debt balance, resulting in
the elimination of the deferred finance charge asset, and a reduction in the
Convertible debt balance of #145,000.
TURBO POWER SYSTEMS INC.
NINE MONTHS ENDED 30 SEPTEMBER 2007
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1 Basis of preparation (continued)
Derivative financial instruments are used by the Company to manage a
portion of its exposure to foreign exchange rate fluctuations. The Company
does not utilise derivative financial instruments for trading or
speculative purposes. The Company enters into foreign currency options
denominated in U.S. Dollars, to manage foreign exchange rate fluctuation
exposure on receipts from customers billed in U.S. Dollars. These
derivative contracts, not accounted for as hedges, are marked to market,
and any changes in the market value are recorded in income or expense when
the changes occur. The fair value of these instruments is recorded as
accounts receivable or payable.
Most of the Company's operations are conducted by its United Kingdom
subsidiaries in Sterling. All numbers reported in these financial
statements are stated in Sterling unless otherwise noted.
2 Segmental analysis
The Group's two reportable segments are the power electronics segment, which
is involved in the development and manufacture of electrical power supply and
control systems and the electrical machines segment, which is involved in the
development and commercialisation of high speed electrical machines.
Corporate charges relating to the financing of the group and other related
management activities are allocated between the two reportable segments.
The power electronics and electrical machines segments both operate in the
United Kingdom.
All amounts in Power Electrical Total
#'000 electronics machines
2007 2006 2007 2006 2007 2006
Nine months ended 30 September
Revenue 6,855 3,459 220 172 7,075 3,631
Development
income 1,017 577 - - 1,017 577
Interest income 134 103 135 103 269 206
Interest
expense (43) (210) (44) (210) (87) (420)
Amortisation (104) (104) (556) (788) (660) (892)
Net loss (1,182) (1,240) (3,639) (3,954) (4,821) (5,194)
Capital
expenditure 408 87 28 30 436 117
Three months ended 30 September
Revenue 2,616 1,380 84 90 2,700 1,470
Development
income 647 285 - - 647 285
Interest income 53 29 53 30 106 59
Interest
expense (15) (163) (14) (163) (29) (326)
Amortisation (34) (34) (184) (196) (218) (230)
Net loss (305) (261) (1,253) (1,362) (1,558) (1,623)
Capital
expenditure 114 48 9 6 123 54
TURBO POWER SYSTEMS INC.
NINE MONTHS ENDED 30 SEPTEMBER 2007
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
2 Segmental analysis (continued)
As at Sep 2007 Dec Sep Dec Sep Dec
2006 2007 2006 2007 2006
Total assets 6,372 3,868 9,244 11,896 15,616 15,764
Total liabilities 2,474 2,159 3,145 7,286 5,619 9,445
3 Significant Customers
During the nine month period ended 30 September 2007, 54% of the Company's
revenue was from two customers (2006: 41% from three customers). During the
three months to 30 September 2007, 59% of the Company's revenue was from two
customer (2006: 28% from two customers).
4 Research and product development
Research and product development expenditure incurred during the period
comprised:
Nine months ended Three months ended
30 September 30 September
2007 2006 2007 2006
#'000 #'000 #'000 #'000
Research and product 3,902 2,660 1,736 927
development cost
Accrued tax credits - (50) - (10)
-------- -------- -------- --------
Total expenditure 3,902 2,610 1,736 917
===== ===== ===== =====
Total accrued tax credits receivable at 30 September 2007 amounted to #180,000
(31 December 2006: #490,000).
5 Interest expense and finance charges
Nine months ended Three months ended
30 September 30 September
2007 2006 2007 2006
#'000 #'000 #'000 #'000
Finance charges 118 66 3 66
Interest payable 87 420 29 132
Amortisation of - 121 - 40
deferred finance
charges
Debt accretion 62 291 10 97
--------- --------- --------- ---------
267 898 42 335
====== ====== ====== ======
TURBO POWER SYSTEMS INC.
NINE MONTHS ENDED 30 SEPTEMBER 2007
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
6 Financial Instruments
Certain of the Company's business transactions occur in currencies other
than Sterling. The Company had a foreign exchange average rate option
contract in place during the nine months ended 30 September 2007, and
during the nine months ended 30 September 2006, to reduce exposure to
fluctuations in foreign exchange rates on remittances from customers
denominated in U.S. Dollars.
The Company holds an average rate option over $5.898million U.S. Dollars at
a strike rate of 2.00 U.S. Dollars which expires on 27 December 2007.
During the first nine months a loss of #7,000 was realised on this option
(2006: loss #57,000).
As at 30 September 2007 the unrealised gain from the contract included
within prepayments was #37,000 (2006: #23,000).
7 Loss per share
Loss per common share has been calculated using the weighted average number
of shares in issue during the relevant financial periods. The treasury
stock method was used in determining the weighted average number of shares
outstanding for each period.
The weighted average number of shares outstanding in the nine months was
292,753,630 (2006: 191,165,301). The loss for the nine months ended 30
September 2007 was #4,821,000 (2006: #5,194,000).The weighted average
number of shares outstanding in the three months ended 30 September 2007
was 318,571,062 (2006: 191,494,592). The loss for the three months ended 30
September 2007 was #1,558,000 (2006: #1,623,000)
Anti-dilutive potential securities outstanding not included in the loss per
common share calculation at 30 September 2007 total 171,902,983 (2006:
111,012,749)
8 Restricted cash
In 2004 the Company committed cash bonds in support of contracts placed by
the Toronto Transit Commission for the CLRV and H6 programmes. The
associated contracts required the bonds to remain in place until two years
after all equipment is delivered. According to the current contract
schedule that would result in the cash related to the H6 programme being
under the performance bond restriction until 2010.
In September 2005 the Company committed cash bonds of #250,000 in support
of a development contract. The contract required the bonds to remain in
place until completion of certain contract milestones. These milestones
were completed in January 2007 when the bond was cancelled and the cash
became unrestricted.
In March 2007 the CLRV contract was cancelled and the cash bond of #515,000
in respect of this programme was cancelled and the cash became
unrestricted.
During March 2007 the Company committed cash bonds totalling #410,000 in
support of contracts placed by Bombardier Transportation for the CTA and
TTC programmes. The associated contracts require the bonds to remain in
place until after development and the prototype equipment is delivered.
The Company has also provided a property lease guarantee bond which is held
in escrow and totals #231,000.
At 30 September 2007 cash subject to restrictions totalled #1,349,000
(December 2006: #1,496,000).
TURBO POWER SYSTEMS INC.
NINE MONTHS ENDED 30 SEPTEMBER 2007
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
9 Long - term assets
Cost Impairment Amortisation Net book value
#'000 #'000 #'000 #'000
At 30 September 2007:
Investments 108 73 - 35
Intangible assets 4,080 1,663 2,362 55
Goodwill 863 43 - 820
Tangible assets 8,780 - 6,621 2,159
-------- -------- -------- --------
Total long term assets 13,831 1,779 8,983 3,069
===== ===== ===== =====
At 31 December 2006:
Investments 104 73 - 31
Intangible assets 4,074 1,663 2,334 77
Goodwill 863 43 - 820
Deferred finance 474 - 329 145
Tangible assets 8,350 - 5,989 2,361
-------- -------- -------- --------
Total long term assets 13,865 1,779 8,652 3,434
===== ===== ===== =====
10 Share capital - issued
shares
Common A Ordinary
Number #'000 Number #'000
At 1 January 2006 190,510,259 44,753 - -
Conversion of 541,665 65 - -
convertible notes
Redemption of 32,450,000 3,435 31,250,000 4,320
convertible notes
Issue of common shares, 50,442,668 3,666 25,000,000 1,803
net of share issue
costs
--------------- -------- --------------- --------
At 31 December 2006 273,944,592 51,919 56,250,000 6,123
========= ===== ========= =====
Redemption of - - 58,750,000 7,379
convertible notes
Issue of common shares, 44,626,470 3,886 - -
net of share issue
costs
--------------- -------- --------------- --------
At 30 September 2007 318,571,062 55,805 115,000,000 13,502
========= ===== ========= =====
No options or warrants were exercised during the nine months ended 30 September
2007. On 7 June 2007 the Company completed a #4,000,000 placing agreement with
institutional investors for 44,450,000 Common shares of no par value in Turbo
Power Systems Inc., at a price of #0.09 per placing share.
TURBO POWER SYSTEMS INC.
NINE MONTHS ENDED 30 SEPTEMBER 2007
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
11 Financing
On 11 July 2003 the Company completed a #5,000,000 financing agreement
with institutional investors. The financing comprised unsecured
Convertible Notes and Warrants. The Convertible Notes have a term of five
years and bear interest at a rate of 3.5% per annum. They were convertible
into an aggregate of 25,000,000 Common Shares in Turbo Power Systems Inc.
at a conversion price of #0.20 per share. The Warrants had a term of three
years and were convertible into an aggregate of 3,500,000 Common Shares in
Turbo Power Systems Inc. at an exercise price of #0.15 per share, and
lapsed on 10 July 2006
On 11 March 2005 the Company completed a #8,000,000 (gross) financing
agreement with institutional investors. The financing comprised unsecured
Convertible Notes and Warrants. The Convertible Notes have a term of five
years plus one day and bear interest at a rate of 6.5% per annum. They are
convertible into an aggregate of 66,666,667 Common Shares in Turbo Power
Systems Inc. at a conversion price of #0.12 per share. The Warrants have a
term of five years and are convertible into an aggregate of 7,000,000
Common Shares in Turbo Power Systems Inc. at an exercise price of #0.15
per share.
On 28 December 2006 the Company completed a #6,000,000 (gross) financing
agreement with institutional investors. The financing comprised 50,000,000
Common Shares in the company and 25,000,000 A-Ordinary shares in Turbo Power
Systems Limited. The financing included the issue of 3,500,000 Warrants, having
a term of three years and being convertible into an aggregate of 3,500,000
Common Shares in Turbo Power Systems Inc. at an exercise price of #0.15 per
share. These warrants were issued on 6 January 2007 (see note 12).
On 28 December 2006, per an agreement reached with the holders of the
convertible notes, the Company redeemed #2,500,000 of the 2003 Convertible Loan
Notes and #2,360,000 of the 2005 Convertible Loan Notes at a redemption price of
#0.08. The redemption was dependant upon the Company's shares being approved for
trading on the AIM exchange which occurred on 28 December 2006.
A further #2,500,000 of the 2003 Convertible Loan Notes and #2,000,000 of the
2005 Convertible Loan Notes were redeemed in January 2007 at a redemption price
of #0.08.
The Company has incorporated the guidance provided by the CICA's Emerging Issue
Committee Abstract 96 "Accounting for the Early Extinguishment of Convertible
Securities Through (1) Early Redemption or Repurchase and (2) Induced Early
Conversion" (EIC96) in accounting for the early redemption of the convertible
notes. EIC96 provides guidance on the treatment of the fair value of the
conversion feature on the extinguishment of the convertible debenture.
Redemption of the convertible debentures in January 2007 resulted in an increase
in deficit of #82,000 and an increase in retained deficit of #2,512,000.
12 Stock options, warrants and
compensation expense
The number of options and warrants outstanding as at 30 September 2007, and the
movement during the nine months then ended, are as follows:
Options Warrants
Number Number
Outstanding at 1 January 2007 21,567,281 7,000,000
Cancelled (1,832,631) -
Issued 11,760,000 3,500,000
------------- ------------
Outstanding at 30 September 31,494,650 10,500,000
2007
======== =======
TURBO POWER SYSTEMS INC.
NINE MONTHS ENDED 30 SEPTEMBER 2007
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
12 Stock options, warrants and compensation expense (continued)
The stock based compensation expense for the nine month period ended 30
September 2007, included in Production costs was #80,000 (2006: #34,000), in
Research and product development was #290,000 (2006:#188,000), and in General
and administrative costs was #170,000 (2006: #151,000).
On 6 January 2007 the Company issued 3,500,000 warrants as part of its
financing agreement with institutional investors (see Note 11).
The fair value of the stock options is the estimated fair value at grant date.
The fair value is calculated using the Black-Scholes option-pricing model. In
calculating the fair values of the options granted during the quarter ended 31
March 2007 a dividend yield of Nil, expected volatility of 65%, a risk free
interest rate of 5.0% and an expected option life of 5 years have been
assumed, and for options granted during the quarter ended 30 June 2007 a
dividend yield of Nil, expected volatility of 75%, a risk free interest rate
of 5.0% and an expected option life of 5 years have been assumed. The fair
value of the stock options granted during the quarters ended 31 March 2007 and
30 June 2007 was #0.06 per share.
The Black-Scholes option-pricing model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of highly
subjective assumptions including the expected price volatility. The Company
uses expected volatility rates, which are based on historical volatility rates
trended into future years. Changes in the subjective input assumptions can
materially affect the fair value estimate, and therefore the existing models
do not necessarily provide a reliable single measure of the fair value of the
Company's stock options.
13 Contingent loss
The Company is currently working on two aerospace contracts which could
result in future losses. Since negotiations are ongoing on the contracts
in question a reliable estimate of any contingent liability can not be
made at this time and no amount has been accrued.
14 Selected quarterly information
The following table sets forth selected consolidated financial information
of the Company for the eight most recent quarters.
Revenue Net loss (Loss) per share UK
pence
#'000 #'000
December 2005 874 (1,249) (0.6)
March 2006 969 (1,859) (1.0)
June 2006 1,192 (1,712) (0.9)
September 2006 1,470 (1,624) (0.8)
December 2006 1,851 (1,124) (0.6)
March 2007 2,033 (1,387) (0.5)
June 2007 2,342 (1,876) (0.7)
September 2007 2,700 (1,558) (0.5)
This information is provided by RNS
The company news service from the London Stock Exchange
END
QRTGGBDBIUBGGRX
Turbo Power Systems (LSE:TPS)
Historical Stock Chart
From Jun 2024 to Jul 2024
Turbo Power Systems (LSE:TPS)
Historical Stock Chart
From Jul 2023 to Jul 2024
