Stuart Energy Announces Results For Quarter Ended June 30, 2003.Energy Editors/Business Editors TORONTO--(BUSINESS WIRE)--Aug. 8, 2003 Stuart Energy Systems Corporation (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension : HHO HHO Hava Harp Okulu (Turkish Air Force Academy) HHO Hard HO (Handover) (telecommunications) HHO Hard Hand Off HHO Home and Home Office ) announced today its consolidated financial results for the first quarter ended June June: see month. 30, 2003. Total sales revenue for the quarter increased to $3.0 million, up 338% compared to the first quarter of fiscal 2003. Sales of Hydrogen Energy Station (HES) products, including vehicle fueling systems, remained strong, generating $1.3 million, while the Company's traditional industrial business continued to rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective with strong performance, due in part to expanded marketing relationships with the world's largest industrial gas companies. The net loss for the first quarter was $7.3 million or $0.26 per share compared to $6.5 million or $0.31 per share for the same quarter of fiscal 2003. Cost of product sales and service exceeded sales revenue by $223,000 in this quarter, an improvement compared to $1.1 million in the same quarter of last year due to increased revenues and improved margins on commercial projects. Net cash outflows were $10 million during the first quarter compared to $11.4 million in the same period a year ago. At June 30, 2003 the Company had cash, cash equivalents and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has on hand of $56.3 million. Cash outflows included $7.0 million to fund operations and capital expenditures, and $3.0 million to fund working capital mainly related to reducing accounts payable. "I am pleased to report that Stuart Energy achieved sales revenue growth for the third consecutive quarter," said Jon JON Jonah JON Jesus of Nazareth JON Job Order Number JON Johnston Island, US, Outlying Islands (Airport Code) Slangerup Slangerup is a town in Frederikssund municipality in Region Hovedstaden in the northern part of the island of Zealand (Sjælland) in eastern Denmark. The town of Slangerup The town was established by the Viking Slangir at the time of Harald Bluetooth. , President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Stuart Energy. "Based on a robust and expanding order book for our hydrogen products extending well into fiscal 2004, we believe we are on track to deliver on our corporate milestone of triple-digit revenue growth for this fiscal year. I am satisfied with our improved cash management during the quarter and I remain committed to achieving our challenging milestone of cutting cash burn in half this year compared to fiscal 2003, excluding the cost of acquiring Vandenborre Technologies last year." During the first quarter of fiscal 2004, Stuart Energy delivered HES systems to the cities of Amsterdam Amsterdam, city, Netherlands Amsterdam (ăm`stərdăm', Dutch ämstərdäm`), city (1994 pop. 724,096), constitutional capital and largest city of the Kingdom of the Netherlands, North Holland prov. and Barcelona Barcelona (bär'səlō`nə, Catalan bär'səlō`nə, Span. bär'thālō`nä), city (1990 pop. 4,738,354), capital of Barcelona prov. and chief city of Catalonia, NE Spain, on the Mediterranean Sea. for the Clean Urban Transport Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). (CUTE) hydrogen bus program, bringing its involvement
to a total of three of the four electrolytic e·lec·tro·lyt·icadj. 1. Of or relating to electrolysis. 2. Produced by electrolysis. 3. Of or relating to electrolytes. e·lec fueling stations in the CUTE program. This brings to 15 the number of HES fueling and power systems installed or on order in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Europe and Asia Pacific to date. After only four months since the integration of Stuart Energy and Vandenborre Technologies began, the first HES system incorporating technologies and expertise from both companies was shipped to a customer. This project successfully passed its factory acceptance test with the customer in attendance, and demonstrates the speed in which the integrated companies have aligned as one team to realize substantial technical and operational synergies. In June 2003, Vandenborre Technologies signed a development, marketing and sales agency agreement with Shell Hydrogen for a home fueler, which is being developed as part of Stuart Energy's Personal Energy Station (PES pes (pes) pl. pe´des [L.] 1. foot. 2. any footlike part. pes n. pl. pe·des 1. The foot. 2. ) product line. The PES is a small version of the commercial HES that is expected to redefine Verb 1. redefine - give a new or different definition to; "She redefined his duties" define, delimit, delimitate, delineate, specify - determine the essential quality of 2. how energy is sourced, produced and distributed on a personal basis. A fully-configured PES system consists of a small-scale small-scale adj. 1. Limited in scope or extent; modest: a small-scale plan. 2. Created on a small scale: hydrogen generator generator, in electricity, machine used to change mechanical energy into electrical energy. It operates on the principle of electromagnetic induction, discovered (1831) by Michael Faraday. , based on the Company's proprietary electrolysis electrolysis (ĭlĕktrŏl`əsĭs), passage of an electric current through a conducting solution or molten salt that is decomposed in the process. technology, which is integrated with hydrogen storage
Hydrogen storage is the main technological problem of a viable hydrogen economy. Some attention has been given to the role of hydrogen to provide grid energy storage for unpredictable energy sources, like , dispensing dispensing provision of drugs or medicines as set out properly on a lawful prescription. A prescription can only be filled, the drugs supplied, by a registered pharmacist, veterinarian, dentist or member of the medical profession. and power generation modules to enable home hydrogen fuel production and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. power generation. Like the HES, the PES generates zero on-site on-site adj. Done or located at the site, as of a particular activity: on-site monitoring of a production run; an on-site film shoot. emissions, and when connected to renewable sources of electricity, represents the ultimate emission-free pathway pathway /path·way/ (path´wa) 1. a course usually followed. 2. the nerve structures through which an impulse passes between groups of nerve cells or between the central nervous system and an organ or muscle. to hydrogen production Hydrogen production is commonly completed from hydrocarbon fossil fuels via a chemical path. Hydrogen may also be extracted from water via biological production in an algae bioreactor, or using electricity (by electrolysis) or heat (by thermolysis); these methods are presently not and energy applications. Conference Call A conference call to discuss the financial results for the first quarter ended June 30, 2003 will be held on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , August 8, 2003 at 10:00 am (EST EST electroshock therapy. EST abbr. electroshock therapy ). To access the conference call, participants may call 1-866-207-8482 five minutes prior to the start time. A simultaneous webcast can be accessed from the Stuart Energy website at www.stuartenergy.com which will require that Windows Media Player Digital jukebox software for Windows from Microsoft that plays a variety of audio, video and streaming formats including MP3, WMA, CD audio and MIDI. Starting with Version 6.2 in 1999, the Windows Media Rights Manager was added for securing copyrighted content. or Real Player be installed prior to the call. An archived webcast will be available for approximately three months at Stuart Energy's website. Please confirm your availability with Marc Koetzle at Stuart Energy, 905-282-7700 ext 6015 or mkoetzle@stuartenergy.com. This release includes forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which are based on certain assumptions and reflect management's current expectations as contemplated under the Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Some of these factors include: general global economic conditions; general industry and market conditions and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. ; uncertainty as to whether our strategies and business plans will yield the expected benefits; increasing competition; availability and cost of capital; the ability to identify, develop and achieve commercial success for new products, services and technologies; the level of expenditures necessary to maintain or improve the quality of products and services; changes in technology; changes in laws and regulations, including codes and standards, intellectual property rights, and tax matters; the uncertainties of the emerging hydrogen economy, including the hydrogen economy growing at a slower pace than is anticipated; our ability to secure and maintain strategic relationships; the availability of, and ability to retain, key personnel; and the failure of the Company to effectively integrate acquisitions. Additional factors are discussed in our materials filed with the securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities from time to time. We disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. MANAGEMENT'S DISCUSSION AND ANALYSIS Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial OF OPERATING RESULTS First Quarter (April 1, 2003 through June 30, 2003) Fiscal Year Ending March 31, 2004 This discussion and analysis covers our interim consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the three-month period ended June 30, 2003. As well, it provides an update to the discussion and analysis contained in our 2003 Annual Report. This discussion and analysis should be read in conjunction with the "Management's Discussion and Analysis" and the annual audited consolidated financial statements contained in our 2003 Annual Report. RESULTS FROM OPERATIONS Revenue Revenue in the first quarter increased by $2.4 million or 338% to $3.0 million, compared to $0.7 million in the first quarter of fiscal 2003. Product sales and service revenue for the first quarter of fiscal 2004 can be broken down as follows:
Q1 '04 Q1 '03 $ Change
--------------------------
Transportation and power applications $ 1,272 $24 $ 1,248
Industrial applications 1,433 401 1,032
After market sales and service 343 271 72
--------------------------
Total $ 3,048 $696 $ 2,352
The increase in revenue from transportation and power applications is primarily attributed to revenue generated from deliveries of HES systems for Clean Urban Transport Europe projects in both Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. and The Netherlands Netherlands (nĕth`ərləndz), Du. Nederland or Koninkrijk der Nederlanden, officially Kingdom of the Netherlands, constitutional monarchy (2005 est. pop. 16,407,000), 15,963 sq mi (41,344 sq km), NW Europe. generated by Vandenborre Technologies NV (Vandenborre). Revenue generated from industrial applications has increased 257% as compared with the first quarter of the previous fiscal year. This increase is attributed to an improvement in our key industrial markets and an improved product portfolio. As a result of the acquisition of Vandenborre in February February: see month. 2003, our technology portfolio now includes pressurized pres·sur·ize tr.v. pres·sur·ized, pres·sur·iz·ing, pres·sur·iz·es 1. To maintain normal air pressure in (an enclosure, as an aircraft or submarine). 2. alkaline alkaline /al·ka·line/ (al´kah-lin) (-lin) 1. having the reactions of an alkali. 2. having a pH greater than 7.0. al·ka·line adj. 1. electrolysis cell stack technology enhancing the competitiveness of our products and providing increased ability to meet customer needs. Cost of product sales and service Cost of product sales and service in the first quarter of fiscal 2004 was $3.3 million compared to $1.8 million during the first quarter of fiscal 2003. Cost of product sales and service exceeded sales revenue resulting in a direct loss on sales of $223,000 in this quarter compared to $1.1 million in the same quarter of last year. This improvement is reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of increased revenue during the first quarter of fiscal 2004 which offset additional fixed manufacturing costs as compared with the first quarter of the previous fiscal year. Research and product development During the first quarter of fiscal 2004, research and product development expenditures were $2.7 million, a decrease of $0.1 million or 4% compared to the same period of the previous year. This decrease is the result of a more focused approach to the Company's research and product development efforts. Since the first quarter of fiscal 2003, we have narrowed the scope of our research and product development efforts to meet specifically identified market requirements. As a greater percentage of our overall activities are commercial in nature, there was a corresponding decrease in the amount of overhead allocated to research and product development. General and administrative General and administrative expenditures for the first quarter of fiscal 2004 were $3.8 million compared to $2.1 million during the first quarter of fiscal 2003, an increase of $1.7 million or 79%. This increase is primarily due to an additional $1.8 million in general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. incurred as a result of the acquisition of Vandenborre and the resulting larger consolidated organization. Amortization The charge for amortization for the first quarter of fiscal 2004 was $1.6 million compared to $0.5 million during the first quarter of fiscal 2003. This increase reflects additional amortization charges taken on investments in equipment and leasehold improvements Leasehold Improvement Improvements on a leased asset that increase the value of the asset. Notes: A leasehold improvement is classified as an asset that must be depreciated over time. made in fiscal 2003. This increase also reflects additional amortization charges related to product technology, customer relationships, trademarks and trade names and proprietary software resulting from the acquisition of Vandenborre during the fourth quarter of fiscal 2003. Investment and other income Investment and other income earned during the first quarter of fiscal 2004 was $1.1 million compared to $0.1 million first quarter of fiscal 2003. Although average balances of cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments decreased as compared with the first quarter of the previous year, we experienced an increase in the market value of investments held as a result of a decrease in prevailing market interest rates during the first quarter of fiscal 2004. Net loss The net loss for the first quarter of fiscal 2004 was $7.3 million, an increase of $0.8 million or 13% as compared with the first quarter of the previous fiscal year. This increase is primarily the result of increased amortization and general and administrative costs offset by increased investment and other income noted above. CASH FLOWS Cash and cash equivalents and short-term investment balances were $56.3 million at June 30, 2003, a decrease of $10.0 million from $66.3 million at March 31, 2003. Compared to net cash outflows of $11.4 million during the quarter ended June 30, 2002, this represents a decrease of $1.4 million or 12%. As compared with the first quarter of fiscal 2003, the current quarter decrease in net cash outflows from operations of $0.7 million is primarily attributed to the previously noted increase in amortization charges included in the net loss for the quarter and increased cash inflows from improved accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying collections offset by increased outflows from payment of accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. primarily attributable to cash expenditures for previously accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. costs pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to equipment built and shipped in the fourth quarter of fiscal 2003 as well as funds expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. to improve the working capital of Vandenborre. Cash and cash equivalents from investing activities excluding movement in short-term investments represents net expenditures of $1.4 million for the quarter ended June 30, 2003. This compares to net expenditures of $2.1 million during the quarter ended June 30, 2002. This decrease is primarily the result of a decrease in expenditures on leasehold improvements and equipment as a result of the completion of the expansion of our manufacturing facilities, which began in the first quarter of fiscal 2003 and continued throughout the balance of the previous fiscal year. FINANCIAL CONDITION Cash and cash equivalents and short-term investments See discussion above for analysis of movement of cash and cash equivalents and short-term investments during the three months ended June 30, 2003. Accounts Receivable As compared to March 31, 2003, accounts receivable decreased by $2.6 million to $2.3 million at June 30, 2003. This decrease is primarily attributed to improved collection experience on orders that were shipped in the previous quarter and increased progress payments on equipment sold throughout the quarter as compared to the end of the fourth quarter of fiscal 2003. Inventories As compared with March 31, 2003, inventories have increased by $0.7 million to $9.4 million at June 30, 2003. This is primarily attributed to an increase in work in process as the company progressed on several projects scheduled for delivery in the second quarter. Capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) Capital assets at June 30, 2003 remained stable at $13.9 million as compared with March 31, 2003. This stability is the result of the additions of capital assets totalling $1.2 million offset by an equal amortization during the quarter. Investments in capital assets during the quarter were primarily for investments in demonstration equipment and fueling products on lease. Accounts payable and accrued liabilities As compared to March 31, 2003, accounts payable and accrued liabilities have decreased by $4.4 million to $10.7 million. This decrease is primarily attributable to cash expenditures for previously accrued costs pertaining to equipment built and shipped in the fourth quarter of fiscal 2003 as well as funds expended to pay off accounts payable and accrued liabilities of Vandenborre which arose prior to the acquisition. Customer deposits At June 30, 2003, customer deposits were $2.6 million compared to $3.0 million at March 31, 2003. This decrease reflects deliveries of equipment during the quarter offset by customer deposits received for current projects in progress as compared with March 31, 2003. BUSINESS RISKS Operating and financial risks and risk management strategies are detailed on pages 19 to 27 in the Management's Discussion and Analysis ("MD&A") included in the Company's 2003 Annual Report. ACCOUNTING STANDARDS IMPLEMENTED IN 2003 Effective April 1, 2003, the Company implemented the new Canadian New Canadian Noun Canad a recent immigrant to Canada Accounting Guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. 14 -"Disclosure of Guarantees" issued by the Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. . This guideline requires the Company to disclose significant information about guarantees it has provided without regard to the likelihood that the Company will have to make any payment under those guarantees. OUTLOOK During this past quarter, we have begun to integrate the Generac genset For the corporation, see Genset Corporation. A genset (short for "generator setup") is the term used for a self-contained and dedicated electrical generation system, usually portable or mounted on a vehicle such as a boat. module into our Hydrogen Energy Station for power applications, and we continue to advance on our plan with Cheung Kong Kong is the Danish word for king, but can also refer to the following:
STUART ENERGY SYSTEMS CORPORATION
Unaudited Consolidated Balance Sheets
June 30, 2003 and March 31, 2003
(in thousands of dollars)
June 30, March 31,
2003 2003
---------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $2,074 $2,988
Short-term investments 54,220 63,303
Accounts receivable 2,348 4,931
Income taxes receivable 66 138
Inventories 9,409 8,680
Prepaid expenses 419 380
Current portion of notes receivable 50 50
----------------------
68,586 80,470
Notes receivable 221 50
Capital assets 13,903 13,909
Intangible assets 17,691 18,510
Goodwill 10,820 11,097
Other 842 898
----------------------
$112,063 $124,934
----------------------
----------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $10,739 $15,160
Customer deposits 2,553 3,013
Income taxes payable - 8
----------------------
13,292 18,181
Shareholders' Equity:
Share capital 195,349 195,349
Cumulative foreign currency
translation adjustment (856) (155)
Deficit (95,722) (88,441)
----------------------
98,771 106,753
$112,063 $124, 934
----------------------
----------------------
(Signed) Jon Slangerup (Signed) Kelly T. Grindle
Director Director
STUART ENERGY SYSTEMS CORPORATION
Unaudited Consolidated Statements of Operations
Three Months ended June 30, 2003 and 2002
(in thousands of dollars except loss per share)
Three Months Ended
June 30
2003 2002
---------------------------------------------------------------------
Product sales and service revenue $ 3,048 $ 696
Cost of revenue and expenses:
Cost of product sales and service 3,271 1,822
Research and product development 2,688 2,807
General and administrative 3,786 2,111
Amortization 1,636 456
-----------------------------
11,381 7,196
Loss before undernoted (8,333) (6,500)
Investment and other income 1,055 56
-----------------------------
Loss before income taxes (7,278) (6,444)
-----------------------------
-----------------------------
Income taxes
Current 3 27
Future - -
-----------------------------
3 27
Net loss $ (7,281) $ (6,471)
-----------------------------
-----------------------------
Basic and diluted net loss per share $ (0.26) $ (0.31)
-----------------------------
-----------------------------
Weighted average number
of common shares outstanding 28,207,083 20,766,275
-----------------------------
-----------------------------
STUART ENERGY SYSTEMS CORPORATION
Unaudited Consolidated Statements of Deficit
Three Months ended June 30, 2003 and 2002
(in thousands of dollars)
Three Months Ended
June 30
2003 2002
---------------------------------------------------------------------
Deficit, beginning of the period $ (88,441) $ (54,384)
Net loss (7,281) (6,471)
------------------------------
Deficit, end of period $ (95,722) $ (60,855)
------------------------------
------------------------------
STUART ENERGY SYSTEMS CORPORATION
Unaudited Consolidated Statements of Cash Flows
Three Months ended June 30, 2003 and 2002
(in thousands of dollars)
Three Months Ended
June 30
2003 2002
---------------------------------------------------------------------
Cash provided by (used in):
Operations:
Loss for the period $ (7,281) $ (6,471)
Items not involving cash:
Amortization of capital assets 1,203 328
Amortization of intangible assets 377 61
Amortization of deferred
product development costs - 18
Amortization of deferred charge 56 49
Change in non-cash operating working capital (2,969) (3,308)
-----------------------
(8,614) (9,323)
Investments:
Decrease in short term investments 9,083 12,261
Purchase of capital assets (1,197) (1,915)
Patents (15) (210)
Funds received (advanced)
under notes receivable, net (171) 50
-----------------------
7,700 10,186
-----------------------
Increase (decrease) in cash
and cash equivalents $ (914) $ 863
Cash and cash equivalents,
beginning of period $ 2,988 $ 165
-----------------------
Cash and cash equivalents, end of period $ 2,074 $ 1,028
-----------------------
-----------------------
Supplemental Cash flow Information:
Interest paid $11 $17
Income taxes paid (recovered), net $(61) $61
STUART ENERGY SYSTEMS CORPORATION
Notes to the Unaudited Consolidated Financial Statements
Three months ended June 30, 2003, and 2002
(in thousands of dollars)
1. Significant Accounting Policies The notes to these interim consolidated financial statements have been prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting but do not contain all of the disclosures required by generally accepted accounting principles for annual financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended March 31, 2003 and the notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. . These interim consolidated financial statements follow the same accounting policies and methods of application as the consolidated financial statements for the year ended March 31, 2003, except as described in Note 4. 2. Share Capital As of June 30, 2003 there were 28,211,039 (March 31, 2003-28,173,359) shares outstanding. Stock Option Plan: Stock option transactions during the three-month periods ended June 30th are summarized as follows:
2003 2002
------------------------- -------------------------
Number Weighted Number Weighted
of Shares Average of Shares Average
Exercise Exercise
Price Price
------------------------- -------------------------
Outstanding,
beginning of
period 2,907,150 $5.48 2,908,480 $5.36
Granted 164,500 2.95 73,000 6.70
Exercised (37,680) 0.01 (30,760) 0.01
Cancelled (120,660) 6.22 - -
------------ ---------------
Outstanding,
end of period 2,913,310 $5.38 2,950,720 $5.46
------------ ---------------
Options exercisable,
end of period 1,627,970 $5.07 1,215,018 $4.90
------------ ---------------
The assumed exercise of these options would not have a dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). on loss per share thereby resulting in the same weighted average number of shares outstanding at June 30, 2003 being used for purposes of calculating the basic and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of figures. The Company uses the Black-Scholes option pricing model option pricing model A mathematical formula for determining the price at which an option should trade. The model expresses the value of an option as a function of the value of the underlying asset, length of time until maturity, exercise price, yields on to estimate the fair value at the date of grant for options granted subsequent to April 1, 2002. In the first quarter of fiscal 2004, 164,500 options with a weighted average fair value of $2.46 were granted and valued using the following weighted average assumptions;
June 30, 2003
--------------------------------------------------------------------
Risk free interest rate (%) 4.50%
Expected volatility (%) 86%
Expected life (in years) 5-10
Expected dividends nil
The pro forma impact of the compensation expense related to the fair
value of the stock options granted during the three months ended
June 30 would be as follows;
--------------------------------------------------------------------
(in thousands) June 30, 2003 June 30, 2002
--------------------------------------------------------------------
Loss attributable to common
shareholders - as reported $ (7,281) $ (6,471)
Stock-based compensation expense 202 47
Loss attributable to common
shareholders-pro forma $ (7,483) $ (6,518)
--------------------------------------------------------------------
Loss per share - as reported $ (0.26) $ (0.31)
Loss per share - pro forma $ (0.27) $ (0.31)
--------------------------------------------------------------------
Weighted average number of
shares outstanding 28,207,083 20,766,275
--------------------------------------------------------------------
3. Research and product development Research and development expenses are recorded net of program funding received or receivable. For the three months ended June 30, 2003 and 2002, the following research and development expenses had been incurred and program funding received or receivable:
Three Months Ended
June 30
2003 2002
--------------------------------------------------------------------
Research and product development expenses $ 2,688 $ 3,095
Research and product development funding - (288)
--------------------------------------------------------------------
Total research and product development expense $ 2,688 $ 2,807
--------------------------------------------------------------------
--------------------------------------------------------------------
4. Guarantees Effective April 1, 2003, the Company implemented Accounting Guideline 14 - "Disclosure of Guarantees," issued by the Canadian Institute of Chartered Accountants, which requires a guarantor guarantor n. a person or entity that agrees to be responsible for another's debt or performance under a contract, if the other fails to pay or perform. (See: guarantee) GUARANTOR, contracts. He who makes a guaranty. 2. to disclose in its notes to the consolidated financial statements significant information about guarantees it has provided. Under this guideline, a guarantee is defined as a contract or indemnification Indemnification Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgements resulting from agreement, which requires the Company to make payments (cash, financial instruments, other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. , the Company's own shares or the provision of services) to a third party contingent on Adj. 1. contingent on - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent upon, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent future events. These payments are contingent on either (i) changes in an underlying interest rate, security price, commodity price, foreign exchange rate or other variables that are related to an asset, liability or an equity security of the guaranteed party, (ii) the failure of another entity to perform under an obligating agreement or (iii) the failure of another party to pay its indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. when due (a "Guarantee"). The disclosures are required even when the likelihood of the guarantor having to make any payment under the Guarantee is remote. Standby standby Medtalk adjective Referring to the immediate availability of a certain specialist–anesthesiologist, surgeon, who can be deployed in a medical emergency. Cf Concurrent. Letters of Credit and Letters of Guarantee As at June 30, 2003, the Company has outstanding standby letters of credit and letters of guarantee issued by several financial institutions of $2,531,000 (March 31, 2003 - $3,123,000) which have various expiry dates expiry date expire n → date f d'expiration; (on label) → à utiliser avant ... expiry date expire n → Ablauftermin m extending through to January January: see month. , 2005. These instruments primarily relate to obligations in connection with the terms and conditions of the Company's sales contracts Sales Contract Contract between a seller and buyer for the sale of goods, services, or both. . The standby letters of credit and letters of guarantee may be drawn upon by the customer if the Company fails to perform its obligations under the sales contracts and the Company would be liable to the financial institution for the amount of the standby letter of credit Standby Letter of Credit A stipulation that states a letter of credit will be called back if the payer defaults. Notes: A letter of credit is typically used in international transactions. or letter of guarantee in the event that the instruments are drawn upon by the customer. Leased Premises The Company has outstanding letters of credit issued by a financial institution in the amount of $900,000 and $96,000 related to a lease agreement for premises. These letters of credit expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. in July, 2004 and November, 2011, respectively The letters of credit may be drawn upon by the lessor One who rents real property or Personal Property to another. A lessor of land is a landlord. Cross-references Landlord and Tenant. lessor n. the owner of real property who rents it to a lessee pursuant to a written lease. if the Company fails to pay amounts as they become due in connection with the lease agreement and the Company would be liable to the financial institution for the amount of the letter of credit in the event that the instruments are drawn upon by the lessor. Indemnification Provisions The Company from time to time enters into agreements in the normal course of its business, such as service arrangements and leases, and in connection with business or asset acquisitions or dispositions. These agreements by their nature may provide for indemnification of counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. . These indemnification provisions may be in connection with breach of representations and warranties and for future claims for certain liabilities. The terms of these indemnification provisions vary in duration and can extend for an unlimited period of time. Given the nature of these indemnification provisions, the Company is unable to reasonably estimate its total maximum potential liability as certain indemnification provisions do not provide for a maximum potential amount and the amounts are dependent on the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. Historically, the Company has not made any significant payments in connection with these indemnification provisions 5. Segment Information As a result of the acquisition of Vandenborre in February 2003, the Company now considers the Stuart Energy Group and the Vandenborre Group to be separate reportable operating segments. The Vandenborre Group operations encompass the operations of Vandenborre Technologies and the Stuart Energy Group operations encompass all other operations of the Company, including corporate activities.
June 30, 2003 Vandenborre Stuart Energy Total
Group Group
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Total revenue from
external customers $ 2,520 $ 528 $ 3,048
Segment loss (1,685) (5,593) (7,278)
Amortization of capital
assets and intangibles 612 1,024 1,636
Additions to capital assets 630 567 1,197
Segment assets 36,829 75,234 112,063
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Segment loss is defined as loss before income taxes.
Summarized product sales and service revenue by geographic region as
determined by location of the customers is as follows:
Three Months Ended
June 30
2003 2002
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China $ 677 $ -
India 1 401
Romania 490 -
Spain 1,199 -
Turkey 1 6
United States 121 122
Other 559 167
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$ 3,048 $ 696
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6. Comparative figures: Certain fiscal 2003 figures have been reclassified to conform with the method of financial statement presentation adopted in fiscal 2004. |
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