Quantum Technologies Reports Fiscal 2011 Second Quarter Financial Results

Dec 10, 2010, 16:00 ET from Quantum Fuel Systems Technologies Worldwide, Inc.

IRVINE, Calif., Dec. 10, 2010 /PRNewswire-FirstCall/ -- Quantum Fuel Systems Technologies Worldwide, Inc. (Nasdaq: QTWW), a leader in the development and production of advanced propulsion systems, energy storage technologies, alternative fuel vehicles and applications including hybrid, plug-in hybrid, hydrogen, and alternative fuel vehicles and an emerging portfolio in the development and ownership of renewable energy farms, today reported results for the second quarter of fiscal 2011.  Conference call information is provided below.

Second Quarter and Six Month Operating Results

Revenues increased $1.2 million, or 44%, from $2.7 million in the second quarter of fiscal 2010 to $3.9 million in the second quarter of fiscal 2011, and increased $1.7 million, or 30%, from $5.7 million in the first six months of fiscal 2010 to $7.4 million in the first six months of fiscal 2011.  The increase in revenue for the second quarter and first six months of fiscal 2011 is primarily related to increased product sales, including initial Q-Drive™ hybrid drive product shipments to Fisker Automotive, and development program revenue related to this program.  The first half of fiscal 2011 includes the activities of the Company's wholly-owned subsidiary, Schneider Power Inc., which was acquired on April 16, 2010.  Schneider Power, reported as the Company's Renewable Energy segment, recognized $0.2 million of revenue during the second quarter of fiscal 2011 from energy sales and from construction management services.

Despite higher revenues, the Company's overall operating loss increased $0.3 million, from $4.6 million in the second quarter of fiscal 2010 to $4.9 million in the second quarter of fiscal 2011, and increased $0.3 million, from $9.2 million in the six months of fiscal 2010 to $9.5 million in the first six months of fiscal 2011.  The increase in operating losses was primarily due to higher general and administrative expenses related to the addition of the Renewable Energy operating segment.  

Overall revenue for the Electric Drive and Fuel Systems segment increased $1.1 million in the second quarter of fiscal 2011 compared to the prior year second quarter.  Product sales for this segment increased $0.3 million, from $0.4 million in the second quarter of fiscal 2010 to $0.7 million in the second quarter of 2011 due to product shipments to Fisker Automotive and increased shipments of high pressure fuel storage tanks for natural gas applications.  Contract revenue for the Electric Drive and Fuel Systems segment increased $0.8 million, from $2.2 million in the second quarter of fiscal 2010 to $3.0 million in the second quarter of fiscal 2011.  Contract revenue is derived primarily from system development and application engineering of our products under funded Fisker Automotive contracts, OEM contracts, aerospace programs and other funded contract work with the U.S. military and other government agencies.  Operating loss for the Electric Drive and Fuel Systems segment improved $0.6 million, from $2.8 million in the second quarter of fiscal 2010 to $2.2 million in the second quarter of fiscal 2011, and improved $0.6 million, from $4.8 million in the first six months of fiscal 2010 to $4.2 million in the first six months of fiscal 2011. The decreased losses were primarily due to the higher revenues during the current year periods.

Revenue for the Renewable Energy segment during the second quarter of fiscal 2011 included $0.1 million of revenue from energy sales related to its Providence Bay Wind Farm and $0.1 million of revenue from construction management services.  The Renewable Energy segment had $0.6 million of operating expenses during the second quarter of fiscal 2011. Included in operating costs were $0.1 million representing amortization of the intangible asset associated with the renewable energy project portfolio identified in connection with the acquisition.  Operating loss for the Renewable Energy segment was $0.4 million during the second quarter of fiscal 2011.  

Corporate segment expenses increased by $0.4 million in the second quarter of fiscal 2011 from $1.8 million in fiscal 2010 to $2.2 million in the second quarter of fiscal 2011, and increased by $0.1 million in the first six months of fiscal 2011 from $4.4 million in fiscal 2010 to $4.5 million in the first six months of fiscal 2011.  Corporate segment expenses reflect the general and administrative expenses that indirectly support the Company's ongoing Quantum Fuel Systems operating segment and anticipated future operating segments and consist primarily of personnel costs, share-based compensation costs, and related general and administrative costs for executive, finance, legal, human resources, investor relations and the board of directors.  The share-based compensation expense was $0.6 million and depreciation and amortization expense was $0.9 million for the first six months of fiscal 2011.  Cash used from operations during the second quarter of fiscal 2011 was $2.6 million.

The fiscal 2011 financial statements include fair value adjustments for the bifurcation of the derivative liabilities associated with the written put option contained within the lender commitment and the derivative liabilities associated with certain common stock purchase warrants.  Fair value adjustments of the derivative instruments, which represent non-cash unrealized gains or losses, amounted to a $4.1 million gain in the second quarter of fiscal 2011 compared to a loss of $34.9 million in the second quarter of fiscal 2010. The share price of our common stock represents the primary underlying variable that impacts the value of the derivative instruments. Additional factors include the volatility of the Company's stock price, the Company's credit rating, discount rates, and stated interest rates.  The loss in fiscal 2010 and the gain in fiscal 2011 were primarily attributable to the increase and then decrease, respectively, in the Company's share price during those periods.  Also reflected in the financial statements for the second quarter of fiscal 2010 is a loss on modification of derivative instruments of $2.6 million resulting from a modification to the $10.0 million lender commitment letter which set a fixed conversion price on the lender's put option.

The Company recognized $0.2 million of income in the six months ended October 31, 2010, representing the Company's equity share in earnings of its affiliate, Asola.

The Company reported a net loss of $1.5 million in the second quarter of fiscal 2011, compared to a net loss of $42.7 million in the second quarter of fiscal 2010.  The Company's net loss decreased from $54.9 million for the first six months of fiscal 2010 to $3.1 million in the first six months of fiscal 2011, primarily due to the large non-cash unrealized gain attributable to the change in the value of our derivative liabilities.

Alan P. Niedzwiecki, President and CEO, stated, "The Company's improved revenue base and operating performance within our Electric Drive and Fuel Systems segment is being driven by our development and production activities on the Fisker Karma program as well as other hybrid vehicle, natural gas vehicle and aerospace programs.  Mr. Niedzwiecki continued, "We are also excited about recent awards and preliminary contracts for renewable energy projects that have been progressing over the last few quarters."

Quantum Fuel Systems Technologies Worldwide, Inc.

Condensed Consolidated Statements of Operations (Unaudited)






Three Months Ended


Six Months Ended





October 31,


October 31,





2009


2010


2009


2010





(unaudited)


(unaudited)

Statements of Operations:




















Revenue:










Net product sales


$       424,766


$      835,004


$       612,157


$   1,479,074


Contract revenue


2,230,414


3,050,178


5,136,729


5,966,039














Total revenue


2,655,180


3,885,182


5,748,886


7,445,113












Costs and expenses:










Cost of product sales


594,933


878,440


861,543


1,437,640


Research and development


3,508,755


4,282,216


7,304,212


8,119,307


Selling, general and administrative


3,176,472


3,582,829


6,759,098


7,371,812














Total costs and expenses


7,280,160


8,743,485


14,924,853


16,928,759












Operating loss


(4,624,980)


(4,858,303)


(9,175,967)


(9,483,646)













Interest expense, net


(762,782)


(732,458)


(1,453,216)


(1,191,598)


Fair value adjustments of derivative instruments


(34,870,000)


4,070,000


(34,832,000)


7,482,000


Loss on modification of debt and derivative instruments


(2,570,000)


-


(9,539,000)


-


Loss on settlement of debt and derivative instruments, net


(207,152)


-


(401,371)


-


Equity in earnings of affiliates, net


379,000


74,720


487,000


145,955


Other income (expense), net


(15,981)


17,212


(20,466)


17,212












Loss from operations before income tax expense


(42,671,895)


(1,428,829)


(54,935,020)


(3,030,077)













Income tax expense


(1,000)


(25,963)


(2,041)


(39,330)












Net loss


$(42,672,895)


$ (1,454,792)


$(54,937,061)


$ (3,069,407)























Net loss per share - basic and diluted


$           (0.35)


$          (0.01)


$           (0.48)


$          (0.02)












Weighted average shares outstanding -










basic and diluted


121,890,999


187,799,269


113,326,834


184,082,954























Cash Flow Information:





















Depreciation and amortization


$       289,243


$      453,800


$       644,283


$      877,989


Net cash used in operating activities


(5,321,967)


(2,645,669)


(9,234,898)


(8,605,906)


Net cash used in investing activities


(335,831)


(128,549)


(524,023)


(1,372,312)


Net cash provided by financing activities


10,733,118


3,311,468


13,716,215


9,639,692





























April 30,


October 31,









2010


2010











(Unaudited)



Balance Sheet Information:





















Cash and cash equivalents




$   4,026,882


$    3,672,835




Working capital (deficit)




(11,176,576)


(23,753,202)




Total assets




73,018,127


75,590,489




Derivative instruments:











Current




12,547,000


8,306,000





Non-current




6,669,000


3,428,000




Long-term debt, less current portion




21,133,928


6,873,908




Total equity




24,002,934


29,704,263





Financial Results Call Scheduled:

Friday, December 10, 2010, 1:30 p.m. Pacific time (4:30 p.m. Eastern time)

Conference Call Number:  (706) 643-3625; Conference ID # 31174945

Participants should call this number 5 to 10 minutes prior to the starting time. An operator will check your name and organization and ask you to wait until the call begins.

For those of you unable to join us at this time, a playback of this call will be available via telephone approximately two hours after the call until December 17, 2010 at 6:00 a.m. Pacific time. The number for this service is (706) 645-9291. The call will also be available on the Company's Investor Relations web page:

http://www.qtww.com/about/investor_information/conference_calls/index.php.

For assistance, please call Elaine Lovre at (206) 315-8242.

About Quantum

Quantum Fuel Systems Technologies Worldwide, Inc., a fully integrated alternative energy company, is a leader in the development and production of advanced propulsion systems, energy storage technologies, and alternative fuel vehicles. Quantum's wholly owned subsidiary, Schneider Power Inc., complements Quantum's emerging renewable energy presence through the development and ownership of wind and solar farms.  Quantum's portfolio of technologies includes electronic controls, hybrid electric drive systems, hydrogen storage and metering systems, and alternative fuel technologies that enable fuel efficient, low emission hybrid, plug-in hybrid electric, fuel cell, and natural gas vehicles. Quantum's powertrain engineering, system integration, vehicle manufacturing, and assembly capabilities provide fast-to-market solutions to support the production of hybrid and plug-in hybrid, hydrogen-powered hybrid, fuel cell, alternative fuel, and specialty vehicles, as well as modular, transportable hydrogen refueling stations. Quantum's customer base includes automotive OEMs, dealer networks, fleets, aerospace industry, military and other government entities, and other strategic alliance partners.

More information can be found about Quantum's products and services at www.qtww.com.

Forward-Looking Statements

All statements included in this press release, other than statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended.  Forward-looking statements can generally be identified by words such as "may," "could," "will," "should," "assume," "expect," "anticipate," "plan," "intend," "believe," "predict," "estimate," "forecast," "outlook," "potential," or "continue," or the negative of these terms, and other comparable terminology.  Although we believe the expectations and intentions reflected in our forward-looking statements are reasonable, we cannot assure you that these expectations and intentions will prove to be correct. Examples of forward-looking statements contained in this release include, but are not limited to, statements regarding the number of purchase orders we expect to receive from Fisker Automotive and the value related thereto, the number of renewable energy projects that we expect to be commissioned and the timing thereof and the impact that a change in our derivative instruments will have on our financial statements.

Various risks and other factors including, but not limited to, whether Fisker Automotive is able to successfully launch its Fisker Karma vehicle program and the timing thereof, whether we will be able to meet our supply obligations to Fisker Automotive, whether our suppliers will be able to meet their supply obligations to us, whether we will be able to obtain the necessary permits and approvals and raise sufficient debt or equity capital to complete the development of our renewable energy projects, and those other risks and uncertainties identified in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended April 30, 2010 or included in our other public filings, could cause actual results, and actual events that occur, to differ materially from those contemplated by the forward looking statements.

Many of the risk factors are beyond our ability to control or predict.  You should not unduly rely on any of our forward-looking statements.  These statements are made only as of this press release.  Except as required by law, we are not obligated to publicly release any revisions to these forward-looking statements to reflect future events or developments.  All subsequent written and oral forward-looking statements attributable to us and persons acting on our behalf are qualified in their entirety by the cautionary statements contained herein or in our public filings.

For more information regarding Quantum, please contact:


Investor Relations


Brion D. Tanous

Principal, CleanTech IR, Inc.

Email:  btanous@cleantech-ir.com

(310) 541-6824


Dale Rasmussen

+1-206-315-8242

Email: drasmussen@qtww.com



SOURCE Quantum Fuel Systems Technologies Worldwide, Inc.



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