Westport Reports Results for Third Quarter Ending December 31, 2004.VANCOUVER Vancouver, city, Canada Vancouver, city (1991 pop. 471,844), SW British Columbia, Canada, on Burrard Inlet of the Strait of Georgia, opposite Vancouver Island and just N of the Wash. border. , British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography -- Westport Westport, residential town (1990 pop. 24,407), Fairfield co., SW Conn., on Long Island Sound at the mouth of the Saugatuck River; settled 1645–50, inc. 1835. It serves as a popular residence for New York City commuters. Westport has a summer theater. Innovations Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :WPT WPT World Poker Tour WPT Waypoint WPT Wisconsin Public Television WPT Watson Poker Tour WPT Wonderlic Personnel Test WPT Wavelet Packet Transform WPT Wireless Power Transmission WPT Windfall Profit WPT Wireless Personal Terminal WPT Word Processing Technician ) today reported results for its third fiscal quarter ended December December: see month. 31, 2004 and provided an update on operations. Westport's consolidated net loss for the three months ended December 31, 2004 improved to $4.2 million ($0.06 loss per share) from $13.0 million ($0.20 loss per share) during the same period last year on consolidated revenues of $9.2 million and $7.9 million respectively. Loss per share improved by 33% from $0.09 loss per share in the previous quarter primarily because of improved product sales and gross margin. The stronger Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents reduced revenues by approximately 8% quarter over quarter, but also had the effect of reducing US dollar expenses and warranty liabilities, resulting in a net $0.4 million in foreign exchange gain in the quarter. For the quarter, cash used in operations before changes in non-cash working capital improved to $2.1 million, down from $7.6 million this quarter last year. Cummins This article is about the diesel engine manufacturer. For other uses, see Cummins (disambiguation). Cummins Inc. (NYSE: CMI) is a maker of diesel and natural gas engines whose corporate headquarters is located in Columbus, Indiana. Westport Inc. (CWI CWI - Centrum voor Wiskunde en Informatica ), contributed approximately $1.3 million this quarter and ended 2004, its first fiscal year under the new joint venture agreement, with a $0.1 million profit on shipments of 1295 units, up approximately 16% from the prior calendar year. Excluding CWI, Westport's cash used in operations before working capital was $3.4 million for the quarter. For the nine months ended December 31, 2004, consolidated cash used in operations before working capital, was $10.5 million. At the current rate of change in this measure, the company should end the year significantly better than its annual goal of $17.5 million. As at December 31, 2004, Westport's cash, 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 and 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 , net of accounts payable, totaled $22.8 million. "We are pleased with our steady and sustained success in developing our business and managing our path to profitability while continuing to advance our technology programs," said David Demers Demers is a surname, and may refer to:
Noun, pl make inroads into to start affecting or reducing: my gambling has made great inroads into my savings inroads npl to make inroads into [+ into new market opportunities, particularly in Asia." Business Programs Update Cummins Westport Inc. In the quarter, CWI announced that Renault Trucks Renault Trucks is a French truck manufacturer with its corporate headquarters at Saint-Priest near Lyon. Since 2001 it has been owned by Volvo Group. From its beginnings in 1978 to 2002, the company was called Renault Véhicules Industriels of France, part of the Volvo Volvo Cars is the luxury car maker using the Volvo Trademark. The Volvo Group is a Swedish supplier of commercial transport solutions providing products such as trucks, buses and construction equipment, drive systems for marine and industrial applications, aerospace group, Europe's largest and the world's second largest truck manufacturer, launched its two newest vehicles powered by CWI natural gas engines. Targeted for refuse collection, street cleaning, and urban delivery, the vehicles will be offered by Renault Re·nault , Jean Louis 1843-1918. French jurist who represented France at The Hague Conference of 1907. He shared the 1907 Nobel Peace Prize. through their extensive European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. distribution network. In late January January: see month. , shortly after the close of the quarter, CWI received its single largest order, for 450 engines, from CWI's leading Asian customer, Beijing Beijing (bā-jĭng) or Peking (pē-kĭng, pā–), city (1994 est. urban pop. 6,093,300; 1994 est. total pop. 7,240,700), capital of the People's Republic of China. It is in central Hebei prov. Public Transport Holdings Ltd (BPT BPT Bridgeport (Connecticut) BPT Best Practicable Control Technology BPT Best Practicable Control Technology Currently Available BPT BP Prudhoe Bay Royalty Trust (stock symbol) BPT Boston Playwrights' Theatre ). 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. Prime Minister Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. Martin took part in the announcement of the order in Beijing. With delivery of these engines BPT will be operating over 2600 natural gas buses powered by CWI engines. Hugh Hugh (pronunced hyuu) is a male given name. It is Germanic and means "Bright in Mind and Spirit" or "Thoughtful". It is related to the name Hugin( one of Odin's ravens, who represented Thought.) The following medieval rulers were named Hugh. Foden, CWI's President, commented, "I am proud of CWI's accomplishments this year and I am confident that I will be leaving CWI well positioned for global growth. Our financial results this year demonstrate the great potential of our uniquely scalable business venture." Guan guan: see curassow. Saw, who is currently General Manager for Cummins East Asia East Asia A region of Asia coextensive with the Far East. East Asian adj. & n. International Distributor Business in Beijing, has been appointed the new CWI President effective April 1. Westport Program Highlights In the quarter, Westport announced two very significant funding awards to advance its High Pressure Direct Injection (HPDI HPDI High Pressure Direct Injection ) program for heavy-duty heav·y-dut·y adj. Made to withstand hard use or wear. heavy-duty Adjective made to withstand hard wear, bad weather, etc. Adj. 1. truck engines: a US $1.5 million subcontract sub·con·tract n. A contract that assigns some of the obligations of a prior contract to another party. intr. & tr.v. sub·con·tract·ed, sub·con·tract·ing, sub·con·tracts with the U.S. Department of Energy's National Renewable Energy Laboratory The National Renewable Energy Laboratory (NREL), located in Golden, Colorado, as part of the U.S. Department of Energy, is the United States' primary laboratory for renewable energy and energy efficiency research and development. in October October: see month. , and a US $1.95 million grant from California's South Coast Air Quality Management District The South Coast Air Quality Management District (SCAQMD), formed in 1976, is the air pollution agency responsible mainly for regulating stationary sources of air pollution for most of Los Angeles, San Bernardino, Riverside County, and all of Orange county. (AQMD AQMD Air Quality Management District AQMD Action Quake Map Depot ) in December. In announcing the award, the AQMD cited Westport's HPDI technology as an important component in the district's efforts to achieve US air quality standards. Dr. Michael Gallagher Michael Gallagher is the name of several different people:
The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , said, "These new funding agreements Funding Agreement Illiquid insurance contracts that provide guaranteed principal repayment and interest payments for a predetermined period of time. Notes: Funding agreements are marketed to mutual fund companies and municipal reinvestments. , along with the Isuzu program funding announced in September, are major contributors to Westport's success in reducing its quarterly cash requirements by 72% compared to one year ago. We are continuing to validate To prove something to be sound or logical. Also to certify conformance to a standard. Contrast with "verify," which means to prove something to be correct. For example, data entry validity checking determines whether the data make sense (numbers fall within a range, numeric data the benefits and capabilities of direct injection natural gas trucks in real-world applications while building strategic relationships with customers, industry partners, and policy-makers. This strategy will allow us to enable the market for commercial products with reduced risk and greater certainty of success." Westport also continued to advance its hydrogen technology program in the quarter, announcing a new agreement with BMW BMW in full Bayerische Motoren Werke AG German automaker. Founded as an aircraft engine manufacturer in 1916, the company assumed the name Bayerische Motoren Werke and became known for its high-speed motorcycles in the 1920s. AG of Munich Germany for supply and development tasks of hydrogen-fueled injection components. In China, Westport signed a Memorandum of Understanding A Memorandum of Understanding (MoU) is a legal document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action and may not imply a legal commitment. with Beijing Sinogas Co. Ltd. and Qingdao Sino-Canada S&T Park Co. Ltd. to explore mutual opportunities to develop, market, and sell gaseous- fuelled vehicles and infrastructure solutions in China. Beijing Sinogas Co. Ltd. specializes in the construction of CNG/LNG stations and has registered subsidiaries in 15 Chinese cities. Qingdao Sino-Canada S&T Park Co. is an initiative between the National Research Council of Canada The National Research Council Canada (NRC) is Canada's leading organization for scientific research and development. History NRC was established in 1916, mainly to advise the government. Then, in the early 1930s, laboratories were built in Ottawa. and the Ministry of Science and Technology of China, which was established to facilitate R&D collaboration Working together on a project. See collaborative software. between the two countries. Phil Hodge, Westport's Vice President responsible for China opportunities, commented, "China has recognized the immediate opportunity to use natural gas in transportation applications to reduce urban air pollution and to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. its economy's growing
dependency dependencyIn international relations, a weak state dominated by or under the jurisdiction of a more powerful state but not formally annexed by it. Examples include American Samoa (U.S.) and Greenland (Denmark). on imported oil. We are encouraged by the interest in our technologies and we are in the process of building relationships to allow us to best exploit this opportunity and build shareholder value." Westport Innovations Inc. is the leading developer of technologies that allow engines to operate on clean-burning fuels such as natural gas, hydrogen, and hydrogen-enriched natural gas (HCNG). Westport has technology development alliances in place with Ford, MAN, BMW and Isuzu, and an ownership interest in Clean Energy, the largest provider of vehicular natural gas 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. . Cummins Westport Inc., Westport's joint venture with Cummins Inc., manufactures and sells the world's widest range of low-emissions alternative fuel engines for commercial transportation applications such as trucks and buses. Westport has scheduled a public conference call for Tuesday, February 1 at 8 am (Pacific Standard Time) to discuss the quarterly results. To access the conference call by telephone, please dial 1-800-936-9754 (North America) or 1-973-935-2048 (International). Alternatively, the webcast of the conference call can be accessed through the Westport web site at www.westport.com and selecting "Our Investors", and then selecting "Conference Calls & AGMs" from the top menu. Replays will be available in streaming audio A one-way audio transmission over a data network. It is widely used on the Web as well as company networks to play audio clips and Internet radio. Computers in home networks stream audio (mostly music) to digital media hubs connected to home theaters. on the same website shortly after the conclusion of the conference call. To view the financials and 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 , please point your browser browser Software that allows a computer user to find and view information on the Internet. The first text-based browser for the World Wide Web became available in 1991; Web use expanded rapidly after the release in 1993 of a browser called Mosaic, which used to the following link: www.westport.com/investor/financial.php. Note: This document contains 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. about Westport's business, operations, technology development or to the environment in which it operates, which are based on Westport's estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, or are beyond Westport's control. Consequently, readers should not place any undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Westport disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Consolidated Financial Statements
(Expressed in Canadian dollars)
WESTPORT INNOVATIONS INC.
For the three and nine months ended December 31, 2004 and 2003
WESTPORT INNOVATIONS INC.
Consolidated Balance Sheets
(Expressed in Canadian dollars)
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December 31, March 31,
2004 2004
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(Unaudited)
Assets
Current assets:
Cash and cash equivalents (note 3) $ 1,277,537 $ 2,105,161
Short-term investments 20,950,554 18,678,441
Accounts receivable (note 7) 6,287,315 5,073,384
Inventory (note 2(b)) 1,594,866 -
Prepaid expenses 596,399 532,848
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30,706,671 26,389,834
Long-term investments 12,206,286 12,206,286
Equipment, furniture,
and leasehold improvements 33,251,795 32,584,544
Accumulated amortization (25,977,786) (21,879,862)
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7,274,009 10,704,682
Intellectual property
and other intangible assets (note 6(c)) 4,865,586 3,314,160
Accumulated amortization (3,062,018) (2,466,310)
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1,803,568 847,850
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$ 51,990,534 $ 50,148,652
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and
accrued liabilities $ 5,732,146 $ 3,743,467
Demand instalment loan 2,491,228 3,206,755
Current portion of long-term
debt obligations 134,593 214,413
Current portion of warranty liability 3,862,974 3,814,163
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12,220,941 10,978,798
Long-term debt obligations 726,406 852,561
Deferred lease inducements (note 2(c)) 859,229 189,285
Warranty liability 2,677,378 4,059,744
Shareholders' equity:
Share capital:
Issued: 73,889,473 (2004 - 64,340,430)
common shares (note 4) 230,324,081 213,965,067
Other equity instruments (note 6) 4,996,875 3,007,665
Additional paid in capital
(notes 2(a) and 5) 2,576,344 91,770
Deficit (202,390,720) (182,996,238)
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35,506,580 34,068,264
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$ 51,990,534 $ 50,148,652
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Commitments and contingencies (note 6(c))
See accompanying notes to consolidated financial statements.
WESTPORT INNOVATIONS INC.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)
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Three months ended Nine months ended
December 31 December 31
------------------------------------------------------
2004 2003 2004 2003
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Product
revenue $ 7,030,516 $ 7,285,570 $ 17,129,110 $ 17,091,159
Parts
revenue 2,211,330 611,886 6,917,987 2,079,608
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9,241,846 7,897,456 24,047,097 19,170,767
Cost of
revenues and
expenses:
Cost of
revenues 5,692,734 5,296,710 16,422,731 12,907,057
Research and
development
(notes 6
and 7) 4,836,980 7,815,811 13,974,224 21,579,935
General and
administrative
(note 6) 966,307 1,072,025 3,941,621 3,670,083
Sales and
marketing
(note 6) 771,496 1,841,268 2,589,209 4,868,255
Foreign
exchange
gain (408,976) (355,053) (730,241) (1,189,364)
Amortization 1,578,002 1,730,145 4,802,605 5,101,524
Bank charges
and interest
on capital
leases 75,657 71,979 223,034 246,972
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13,512,200 17,472,885 41,223,183 47,184,462
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Loss
before
undernoted (4,270,354) (9,575,429) (17,176,086) (28,013,695)
Interest
and other
income 172,791 230,558 333,435 588,200
Restructuring
costs - (457,400) - (457,400)
Write
down of
equipment,
furniture, and
leasehold
improvements (58,678) (3,219,469) (58,678) (3,219,469)
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Loss for the
period (4,156,241) (13,021,740) (16,901,329) (31,102,364)
Deficit,
beginning of
period as
reported (198,234,479) (163,355,021) (182,996,238) (145,274,397)
Cumulative
adjustment
for change in
accounting
for
stock-based
compensation
(note 2) - - (2,493,153) -
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Deficit,
beginning of
period as
adjusted (198,234,479) (163,355,021) (185,489,391) (145,274,397)
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Deficit,
end of
period $(202,390,720) $(176,376,761) $(202,390,720)$(176,376,761)
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Basic and
diluted
loss per
share $ 0.06 $ 0.20 $ 0.25 $ 0.54
Weighted
average
common
shares
outstanding 73,888,504 63,856,453 67,891,683 57,325,646
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See accompanying notes to consolidated financial statements.
WESTPORT INNOVATIONS INC.
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
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Three months ended Nine months ended
December 31 December 31
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2004 2003 2004 2003
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash provided
by (used in):
Operations:
Loss for the
period $ (4,156,241) $ (13,021,740) $ (16,901,329)$ (31,102,364)
Items not
involving
cash:
Amortization 1,578,002 1,730,145 4,802,605 5,101,524
Stock-based
compensation
expense
(note
6(a)) 213,250 1,377 685,832 164,667
Lease
inducement
benefit
(expense) (84,537) 137,662 25,941 137,662
Write
down of
equipment,
furniture,
and
leasehold
improvements 58,678 3,219,469 58,678 3,219,469
Accretion
of TPC
warrants
(note
6(b)) 285,714 285,714 857,142 857,143
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(2,105,134) (7,647,373) (10,471,131) (21,621,899)
Change in
non-cash
operating
working
capital:
Accounts
receiv-
able (2,546,560) 2,559,147 (1,213,931) 4,230,313
Inventory (1,175,624) - (1,594,866) -
Prepaid
expenses
and other
current
assets 102,415 (18,800) (63,551) (214,522)
Accounts
payable
and
accrued
liabilities 1,558,705 503,675 1,988,679 (3,561,493)
Warranty
liability (1,045,622) 199,517 (1,333,555) (184,017)
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(5,211,820) (4,403,834) (12,688,355) (21,351,618)
Investments:
Purchase of
equipment,
furniture,
and
leasehold
improvements (64,712) (632,924) (283,902) (2,279,694)
Purchase of
short-term
investments,
net 5,456,681 5,946,630 (2,272,113) 2,014,359
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5,391,969 5,313,706 (2,556,015) (265,335)
Financing:
Issue of
common
shares,
net of
issuance
costs (34,188) (21,750) 15,248,248 22,056,047
Repayment
of demand
instalment
loan (238,509) (153,507) (715,527) (811,403)
Repayment of
long-term
debt
obligations (36,117) (44,206) (205,975) (289,723)
Leasehold
inducement,
net 90,000 - 90,000 -
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(218,814) (219,463) 14,416,746 20,954,921
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Increase
(decrease)
in cash
and cash
equivalents (38,665) 690,409 (827,624) (662,032)
Cash and
cash
equivalents,
beginning
of period 1,316,202 1,629,558 2,105,161 2,981,999
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Cash and
cash
equivalents,
end of
period $ 1,277,537 $ 2,319,967 $ 1,277,537 $ 2,319,967
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Supplementary
information
Interest
paid $ 57,402 $ 62,410 $ 153,060 $ 219,598
Non-cash
transactions:
Shares
issued on
exercise of
performance
share
units - 1,657,338 1,003,629 1,657,338
Shares to
be issued on
acquisition
of
intellectual
property
and other
intangible
assets
(note 6(c)) - - 1,551,426 -
Leasehold
improvements
acquired
through
leasehold
inducement 551,000 - 551,000 -
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See accompanying notes to consolidated financial statements.
WESTPORT INNOVATIONS INC.
Notes to Consolidated Financial Statements (unaudited)
(Expressed in Canadian dollars)
Three and nine months ended December 31, 2004 and 2003
1. Basis of presentation: The unaudited consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. as at December 31, 2004 and the unaudited consolidated statements of operations and deficit and cash flows for the three and nine months ended December 31, 2004 and 2003 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 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 for interim financial statements. The accompanying unaudited 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 do not include all information and footnote Text that appears at the bottom of a page that adds explanation. It is often used to give credit to the source of information. When accumulated and printed at the end of a document, they are called "endnotes." disclosures required under Canadian generally accepted accounting principles for annual financial statements. These financial statements have been prepared, except as disclosed in note 2(a), on a basis consistent with, and should be read in conjunction with, the consolidated financial statements and 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. for the fiscal year ended March 31, 2004. Certain comparative figures have been reclassified to conform with the basis of presentation adopted in the current year. These consolidated financial statements have been presented on a going concern basis, which assumes the realization of assets and the settlement of liabilities in the normal course of operations. To date, the Company has financed its operations primarily by equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. and margins on the sale of products and parts. If, the Company does not have sufficient funding from internal or external sources, it may be required to delay, reduce or eliminate certain research and development programs, and forego acquisition of certain equipment. The future operations of the Company are dependent upon its ability to produce, distribute and sell an economically viable product to attain profitable operations. In the opinion of management, all adjustments (consisting solely of normal recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. ) considered necessary for a fair presentation of the financial position, results of operations and cash flows as at December 31, 2004 and for all periods presented, have been included. 2. Accounting policies: a) Stock-based compensation: In November 2003, the Accounting Standards Board The role of the Accounting Standards Board (ASB) is to issue accounting standards in the United Kingdom. It is recognised for that purpose under the Companies Act 1985. It took over the task of setting accounting standards from the Accounting Standards Committee (ASC) in 1990. ("AcSB") amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. Handbook
This article is about reference works. For the subnotebook computer, see .
The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period. Effective for the Company's fiscal year beginning April 1, 2004, the Company adopted these amended recommendations of HB 3870. As permitted by HB 3870, the Company has retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adopted the fair value method of accounting for these awards without restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of prior periods. Adoption of amended HB 3870 resulted in an increase to the opening deficit and share capital as of April 1, 2004 of $2,493,153 and $67,753 respectively to reflect the cumulative effect of the change on prior periods with a corresponding increase in additional paid in capital of $2,425,400. Prior to adoption of amended HB 3870, the Company recognized stock based compensation for options granted to employees and directors using the intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. method which had resulted in no stock-based compensation expense related to such grants. b) Inventories: The Company's inventory consists of CWI engine products. Inventories are stated at the lower of cost, on a specific identification basis, or net realizable value Net realizable value (NRV) is a commonly used method of evaluating an asset's worth in the field of inventory accounting. NRV is part of GAAP rules that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. . c) Deferred lease inducements: The Company renegotiated its existing long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. lease agreements for its corporate offices and research facilities in 2004 and 2005 that included certain lease inducements that are accounted for in accordance with EIC-21 "Accounting for Lease Inducements by the Lessee One who rents real property or Personal Property from another. A lessee of land is a tenant. Cross-references Landlord and Tenant. lessee n. the person renting property under a written lease from the owner (lessor). ". These inducements included capital 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. and other costs funded 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. and periods with reduced rental payments. The lease inducement Inducement Electra incited brother, Orestes, to kill their mother and her lover. [Gk. Myth.: Zimmerman, 92; Gk. Lit.: Electra, Orestes] Hezekiah exhorts Judah to stand fast against Assyrians. [O.T. benefits are amortized on a straight-line basis over the term of the lease as a reduction to rental expense. Leasehold improvements acquired as part of the lease inducement are amortized over the term of the lease. 3. Cash and cash equivalents: A total of $676,118 in cash has been set aside as security for certain capital lease and other long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. obligations. This amount will be reduced as the principal amounts owing on these obligations are paid down. 4. Share capital: On September 10, 2004, the Company entered into a bought deal financing agreement with a syndicate Syndicate organized crime unit throughout major cities of the United States. [Am. Hist.: NCE, 2018] See : Gangsterism of investment dealers for 9,000,000 units consisting of 9,000,000 common shares and 4,500,000 common share purchase warrants (the "Warrants"). The units were priced at $1.80 per unit for gross proceeds of $16,200,000 and net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of $15,104,866, which is being used for research and development expenditures and general corporate purposes. On September 29, 2004, the financing successfully closed. Each Warrant entitles the holder to acquire, on or before March 29, 2006, one common share of the Company upon payment of $2.10 per share. 5. Share purchase options:
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Nine months ended Nine months ended
December 31, 2004 December 31, 2003
------------------------ ------------------------
Share Weighted Share Weighted
options average options average
exercise exercise
price price
--------------------------------------------------------------------
Outstanding,
beginning
of year 3,254,688 $ 3.93 3,811,909 $ 4.61
Granted 326,810 1.98 827,473 1.60
Exercised (74,694) (1.88) (37,837) (1.50)
Cancelled (1,022,230) (3.85) (1,113,299) (3.12)
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Outstanding,
end of
year 2,484,574 $ 3.80 3,488,246 $ 3.82
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--------------------------------------------------------------------
Exercisable,
end of
year 2,041,751 $ 4.15 2,875,748 $ 3.95
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Effective April 1, 2004, the Company recognizes stock-based compensation for employees using the fair value method (note 2(a)). The Company adopted this policy retroactively without restatement. Had compensation cost for the three and nine months ended December 31, 2003 for employee share options granted on or after April 1, 2002 been determined based on fair value at the grant dates of the share options and charged to operations over the vesting period of the options consistent with the recommendations in amended HB 3870, net loss and net loss per share for the three and nine months ended December 31, 2003 would be as follows:
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December 31, 2003
-----------------------------
Three months Nine months
--------------------------------------------------------------------
As reported:
Net loss $ 13,021,740 $ 31,102,364
Net loss per share
Basic and diluted $ 0.20 $ 0.54
Stock-based compensation $ 1,377 $ 164,667
--------------------------------------------------------------------
Pro-forma:
Net loss $ 13,078,167 $ 31,895,742
Net loss per share
Basic and diluted $ 0.20 $ 0.56
Stock-based compensation $ 57,804 $ 958,045
--------------------------------------------------------------------
--------------------------------------------------------------------
The fair value of options granted for purposes of stock-based compensation has been determined using the Black-Scholes option pricing formula using the following weighted average assumptions: expected dividend yield Expected dividend yield Total amount of dividends received during the life of a futures contract or total dividends received for holding a particular stock one year. See: Current yield. - nil%; expected stock price volatility - 68.40% (2003 - 93.43%); risk free interest rate - 3.49% (2003 - 3.14%); expected life of options - 4 years (2003 - 4 years). The average fair value of options granted for the three and nine months ended December 31, 2004 was $0.87 (2003 - $1.21) and $1.11 (2003 - $1.10). 6. Other equity instruments:
--------------------------------------------------------------------
December 31, March 31,
2004 2004
--------------------------------------------------------------------
(Unaudited)
Value assigned to performance
share units (a) $ 1,445,449 $ 1,864,808
Value assigned to TPC warrants (b) 2,000,000 1,142,857
Shares to be issued (c) 1,551,426 -
--------------------------------------------------------------------
$ 4,996,875 $ 3,007,665
--------------------------------------------------------------------
--------------------------------------------------------------------
a) Share units: Pursuant to the Company's 2003 Share Unit Plan (the "2003 Plan"), the Company may issue up to 2,500,000 common shares with each unit ("Unit") exercisable into one common share of the Company for no additional consideration. Any employee, contractor, director or executive officer of the Company who is selected by the Board of Directors of the Company is eligible to participate in the 2003 Plan. The Executive Plan sets out provisions where the Units will be granted to the Company's executive management if specific performance milestones are achieved as established by the Human Resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. and Compensation Committee in consultation with the Company's management. These performance milestones are focused on achievement of key cash management, profitability and revenue growth objectives. Each Unit vests 1/3 on the grant date and 1/3 on each anniversary thereafter for a period of two years. During the three and nine months ended December 31, 2004, nil and 1,197,728 Units have been granted by the Company. During the three and nine months ended December 31, 2003, nil and 78,225 Units were granted. During the three and nine months ended December 31, 2004, nil and 474,349 Units were exercised and as at December 31, 2004 there are 1,104,879 performance share units outstanding. The stock-based compensation associated with the 2003 Plan and the stock option plan (note 5), is included in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. as follows:
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Three months ended Nine months ended
December 31 December 31
----------------------------------------------------
2004 2003 2004 2003
--------------------------------------------------------------------
Research and
development $ 71,820 $ 1,377 $ 176,241 $ 30,878
General and
administrative 136,490 - 481,551 133,789
Sales and
marketing 4,940 - 28,040 -
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$ 213,250 $ 1,377 $ 685,832 $ 164,677
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--------------------------------------------------------------------
b) TPC (Transaction Processing Performance Council, San Francisco, CA, www.tpc.org) An organization devoted to benchmarking transaction processing systems. In order to derive the number of transactions that can be processed in a given time frame, TPC benchmarks measure the total performance of warrants: Under the terms of the agreement with Technology Partnerships Canada ("TPC"), warrants with a fair value of $4,000,000 based on the Black-Scholes pricing model will be issued on September 30, 2006. The value of the warrants is being recognized on a straight-line basis to September 30, 2006. For the three and nine months ended December 31, 2004, accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the totaling $285,714 (2003 - $285,714) and $857,142 (2003 - $857,143), respectively, has been included in research and development expenses. c) Shares to be issued: On July 3, 2002, the Company purchased substantially all of the assets of GVH GVH graft-versus-host. Entwicklungsgesellchaft fur Verbrennungsmotoren and Energietechnik mbH ("GVH"), of Dortmund, Germany. Additional consideration relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the GVH acquisition of up to Euros 3,850,886 (approximately $5,789,000) may be payable when three pre-defined milestones are achieved and announced. This contingent consideration was excluded from the purchase equation. Two of the three milestones relate to the issuance of patents regarding hot surface ignition ignition, apparatus for igniting a combustible mixture. The German engineer Nikolaus A. Otto, in his first gas engine, used flame ignition; another method was heating a metal tube to incandescence. . The third milestone relates to the Company entering into an agreement with an engine manufacturer to commercialize hot surface ignition technology. This contingent consideration will be paid for through the issuance of shares of the Company. The shares will be issued and priced only when the pre-defined milestones are achieved and not before July 3, 2006. If any milestone is achieved prior to July 3, 2006, the Company will accrue To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage. Acquired; falling due; made or executed; matured; occurred; received; vested; was created; was incurred. a corresponding amount to be paid as an increase to Intellectual Property, and as an increase to Shareholders' Equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. , classified as shares to be issued. In April 2004, one of the milestones was achieved and up to Euros 962,722 ($1,551,426 Canadian) worth of shares are currently issuable after July 3, 2006. This amount has been 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. as shares to be issued with a corresponding increase in intellectual property. 7. Research and development expenses: Research and development expenses are recorded net of program funding received or receivable. For the three and nine months ended December 31, 2004 and 2003, the following research and development expenses had been incurred and program funding received or receivable:
--------------------------------------------------------------------
Three months ended Nine months ended
December 31 December 31
--------------------------------------------------------
2004 2003 2004 2003
--------------------------------------------------------------------
Research and
development
expenses $ 5,674,637 $ 8,862,692 $ 17,888,721 $ 28,101,053
Program
funding (837,657) (1,046,881) (3,914,497) (6,521,118)
--------------------------------------------------------------------
Total
research and
development
expense $ 4,836,980 $ 7,815,811 $ 13,974,224 $ 21,579,935
--------------------------------------------------------------------
--------------------------------------------------------------------
In the three and nine months ended December 31, 2004, program funding is comprised mainly of funding from TPC, Sustainable Development Sustainable development is a socio-ecological process characterized by the fulfilment of human needs while maintaining the quality of the natural environment indefinitely. The linkage between environment and development was globally recognized in 1980, when the International Union Technology Canada, and National Renewable Energy Laboratory, which was used to fund research and demonstration projects including the adaptation of the Company's technology to diesel engines. In the three and nine month periods ended December 31, 2003, program funding is comprised mainly of funding from TPC which was used to fund research projects including the adaptation of the Company's technology to diesel engines. At December 31, 2004, $2,919,398 (March 31, 2004 - $2,508,874) of funding earned by the Company based on the terms of various funding agreements has not yet been received and is included in accounts receivable. 8. Investment in Cummins Westport Inc.: The consolidated financial statements include the Company's 100% share of the revenues, expenses, assets and liabilities of the joint venture, Cummins Westport Inc., as follows:
--------------------------------------------------------------------
December 31, March 31,
2004 2004
--------------------------------------------------------------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 182,011 $ 574
Accounts receivable 2,827,441 2,676,956
Inventory 1,594,866 -
Prepaid expenses and other
current assets 81,025 187,190
--------------------------------------------------------------------
$ 4,685,343 $ 2,864,720
--------------------------------------------------------------------
--------------------------------------------------------------------
Current liabilities:
Accounts payable and
accrued liabilities $ 3,589,026 $ 650,720
Current portion of
warranty liability 3,862,974 3,814,163
--------------------------------------------------------------------
$ 7,452,000 $ 4,464,883
--------------------------------------------------------------------
--------------------------------------------------------------------
Long-term liabilities:
Warranty liability $ 2,677,378 $ 4,059,744
--------------------------------------------------------------------
--------------------------------------------------------------------
Three months ended Nine months ended
December 31 December 31
--------------------------- --------------------------
2004 2003 2004 2003
--------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Product
revenue $ 6,835,492 $ 7,285,570 $ 16,439,620 $ 16,807,937
Parts
revenue 2,211,330 611,886 6,917,987 2,079,607
--------------------------------------------------------------------
9,046,822 7,897,456 23,357,607 18,887,544
Cost of
revenues and
expenses:
Cost of
revenue 5,497,710 5,296,710 15,734,902 12,569,591
Research and
development 1,385,372 5,159,312 5,087,341 16,218,032
General and
administrative 177,865 302,679 1,007,889 670,168
Sales and
marketing 672,000 1,593,509 2,494,437 3,806,575
--------------------------------------------------------------------
7,732,947 12,352,210 24,324,569 33,264,366
--------------------------------------------------------------------
Income (loss)
before
undernoted 1,313,875 (4,454,754) (966,962) (14,376,822)
Write down
of equipment,
furniture, and
leasehold
improvements - (2,631,045) - (2,631,045)
--------------------------------------------------------------------
Income (loss)
for the
period $ 1,313,875 $ (7,085,799) $ (966,962) $(17,007,867)
--------------------------------------------------------------------
--------------------------------------------------------------------
9. Segmented information: The Company currently operates in one operating segment which involves the research and development and related commercialization of engines and fuel systems operating on gaseous gas·e·ous adj. 1. Of, relating to, or existing as a gas. 2. Full of or containing gas; gassy. fuels. The majority of the Company's equipment, furniture and leasehold improvements are located in Canada. For the three and nine months ended December 31, 2004, 83% (2003 - 92%) and 69% (2003 - 89%) respectively of the Company's revenue was from sales in North America, 7% (2003 - 8%) and 16% (2003 - 10%) respectively from sales in China, and 10% (2003 - 0%) and 15% (2003 - 1%) respectively from the rest of the world. Westport Innovations Inc. (TSX:WPT) |
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