CAP.L Regulatory News (CAP)

27 Jun 2006 07:00

Clean Air Power Limited27 June 2006 For Immediate Release 27 June 2006 Clean Air Power Limited ("Clean Air Power" or "the Company") Final Results and Update Clean Air Power Ltd (AIM:CAP) the developer of Dual-FuelTM combustion technologyfor heavy-duty diesel engines today reports the consolidated results for CleanAir Power Inc. its pre flotation predecessor for the 12 month period ended 31December 2005, which are broadly in line with expectations. Clean Air Power Ltd was incorporated in November 2005, prior to its admission tothe AIM market of the London Stock Exchange. Immediately prior to admission itacquired Clean Air Power Inc. as part of the group restructuring. These summary results, therefore, relate to Clean Air Power's pre-flotationpredecessor, Clean Air Power Inc. 2005 Highlights •Net Loss in line with expectations •Revenues $6.1m (2004 $8.0m) •Operating Loss $7.1m, (2004 $10.7m loss) •Net Loss $12.4m* (2004 $13.5m loss**) (* The 2005 loss includes one-off non cash refinancingcosts totalling $4.2m and reorganisation costs of £0.4m) (** 2004 loss includes $2.4m goodwill amortisation expense) 2006 Highlights to date •Successful IPO on AIM, raising gross proceeds of £10.6m •Commercial launch of the Genesis Dual-FuelTM system in May 2006 •First Genesis conversion sold to Warburtons bakery in June 2006 •Completion of our own Genesis Demonstration vehicle (DAF CF85) to support marketing efforts •New intellectual property granted in key commercial regions John Pettitt, Chief Executive of Clean Air Power said: "The successful IPO of Clean Air Power has been a major milestone in thedevelopment of the Company. The funds are being be used to develop and marketboth specific and generic Dual-FuelTM systems across key regions. "The drive for lower emissions and more cost effective transportation makes ourproducts a compelling proposition for many customers and we look forward todelivering new customer relationships and contracts over the coming year." For further details please contact Clean Air PowerJohn Pettitt, Chief Executive Tel: +44 (0) 1772 624499Peter Rowse, Finance Director Buchanan CommunicationsCharles Ryland/Ben Willey/Ben Romney Tel: +44 (0)20 7466 5000 2005 Financial Results The twelve months to 31 December 2005 represented a period of transition forClean Air Power in a number of respects. The original core product range reachedthe end of its life cycle, new management were appointed, and the Companyunderwent a significant financial restructuring. As a consequence of the end of the product life cycle, selling opportunities inthe UK and US were limited, thereby prompting the introduction of the Genesisproduct. Also, accounting for the financial and legal restructuring of the groupprior to admission on AIM significantly impacted the Company's net income. Sales for the period were $6.1m which generated an operating loss of $7.1m inline with expectations. The net income resulted in a loss of $12.4m, driven by non-cash and exceptionalcharges. A significant non-cash expense of $4.2m relating to the accountingtreatment of warrant interest and beneficial conversion were the main componentsof the interest charge of $5.0m. These warrants converted at admission inFebruary 2006 and the Company expects a further non-cash P&L charge in 2006 of$1.3m relating to this item. An exceptional charge for the legal reorganisation of the group amounted to$0.4m. A further exceptional reorganisation expense of around $0.3m is expectedin 2006 as the process is completed. Operational Review Dual FuelTM 'Genesis' Development Clean Air Power's patented Dual-FuelTM Technology allows a heavy duty dieseltruck engine to run on a combination of both diesel and natural gas, therebygenerating significant cost savings for the operator whilst considerablyreducing emissions and CO2. The original application of this technology in trucks was carried out inpartnership with a single engine manufacturer. This route to market providedcertain engineering benefits but meant that Clean Air Power was commerciallyrestricted to the markets and operators where this manufacturer had a presence. The 'Genesis' product was designed to address this commercial restriction. It isdesigned to be generic and adaptable to fit any Euro III engine therebyrendering a much wider market accessible to the Company. In May of 2006 the first 'Genesis' model was completed, ready for sale toWarburtons, the national bakery company. Warburtons, who have a large fleet ofheavy duty trucks, took delivery of the 'Genesis' truck in the first week ofJune 2006. Specific Fleet Developments Clean Air Power is also targeting major supermarkets, logistics companies, localauthorities and haulage firms for its 'Genesis' product. We believe these typesof organisation will appreciate the financial benefits of converting theirvehicles to gas whilst also understanding that they will be making a positiveenvironmental impact. The Company is in the process of converting a Mercedes Axor truck for Tesco.This project is ongoing and enjoys the support and cooperation of Tesco. Theprocess is proving challenging but we remain confident of reaching a solutionfor Tesco within the next two months. OEM Developments The 'Genesis' system has been specifically developed to be an after market retrofitted product which can be installed without the need for formal cooperation ofthe engine manufacturers. Our strategic aim is to work with an OEM to reach an agreement whereby the DualFuelTM technology would be licensed to them and developed further with theirfull cooperation. The Company is actively pursuing this route to market althoughwe recognise that we are in the early stages of this process. The strategy involves persuading the engine manufacturers to adopt ourtechnology with the aid of a combination of interested parties. Truck operators,environmental bodies and governments would all benefit from the widespreadadoption of our Dual FuelTM technology. By demonstrating the benefits of ourtechnology to these parties we expect to enlist their support thereby building acompelling proposition for the manufacturers. Australia We are excited by the potential opportunities in Australia. The market enjoysactive government support, with the benefits of a Clean Air Power product beingwell recognised within the industry. There are also plans to improve theavailability of natural gas by improving the country's gas infrastructure.Existing Dual-FuelTM operators are achieving significant savings and we are inactive discussions with some of Australia's largest fleet operators regardingtrials of our product. Intellectual Property Developments The Company holds 35 patents covering various aspects of its technology. During2006 two important new patents were granted relating to areas of technology theCompany believes will be useful as we develop our future product ranges. Thefirst covers the application of homogeneous charge compression ignition (HCCI)to the patented Dual-FuelTM system. HCCI is a significant technology that willbe used to reduce emissions from internal combustion engines in the future. The second, entitled "Gas-Fueled, Compression Ignition Engine with MaximizedPilot Ignition Intensity" covers Clean Air Power's MicropilotTM technology.Micropilot: the use of high-energy ultra-low quantities of diesel to ignite acharge of natural gas, has been demonstrated to dramatically reduce emissionsfrom Dual-FuelTM engines. This technology is an integral part of the solutionoffered by Clean Air Power to enable diesel engines to operate on clean naturalgas and meet the emissions and performance challenges of the next decade. Components Business Clean Air Power manufactures a number of the components included in the kitsthat are sold incorporating the Company's Dual-FuelTM Technology. The Company also sells these components for spark ignited gas engines, andcertain other applications. With sales mainly in Europe and the USA, strong margins and a customer baseincluding international OEMs this is an important supplement to the overallClean Air Power business. We expect to strengthen our sales force to developfurther opportunities for this area of our business. Our components sales generated revenue of $1.5m, around 24% of total revenue in2005. Emissions Reduction Business This area of our business provides solutions to very large stationary dieselengines such as those used in pumping stations. Our current market is mainly inthe US and we provide a service whereby the emissions from such installationsare reduced, usually in response to changes in local legislation. In 2005 revenue of $0.5m, around 8% of the total was generated by this businesssegment. In 2006, following a refocusing of the business, we have already agreeda contract for $1.2m. Outlook 2006 continues to be an exciting year for Clean Air Power. Since our admissionto AIM in February the Company's plans for increased commercialisation of itstechnology are progressing well. The Company is ideally placed to take advantage of two significant and highprofile global issues. Those issues being the increasing fossil fuel cost andgrowing concern over harmful emissions and CO2. The Clean Air Power Dual-FuelTMtechnology delivers a marked improvement in both of these areas and has beenproven on over 1,600 trucks worldwide. We are delighted to have completed and delivered our first Genesis conversion toWarburtons and are now working to develop different Genesis variants which willexpand our potential market further. We have recruited new staff to strengthen both the sales and engineering teamsas Clean Air Power drives forward to develop its commercial and technologicalexpertise. Clean Air Power, Inc. Consolidated Statements of Operations for the Year to 31st December 2005 Twelve-Month Twelve-Month Period Ended Period Ended December 31, December 31, 2005 2004 ____________________________ $'000 $'000Revenues:Sales $ 5,298 $ 7,392Contract and grant 767 72 ____________________________Total revenues 6,065 8,004 Costs and expenses:Cost of sales 4,337 7,063Research and product development 1,416 1,777Selling, general and administrative 7,409 9,819 ____________________________Total costs and expenses 13,162 18,659 ____________________________Loss from operations (7,097) (10,655) Other income (expense):Interest and other expense* (4,957) (472)Interest and other income 68 62Total other income (expense) Net loss from continuing operations (11,985) (11,065)) Reorganisation costs** (401) -Asset impairment charge*** 2,387 ____________________________Net loss $ (12,387) $ (13,452) ____________________________ * This includes a significant one off non-cash element - warrant interest andbeneficial conversion charges of $4.2m. These warrants were mainly issued in2005 as part of a refinancing of the company. The accounting treatment of thisexpense is in line with EITF 00-27 under US GAAP. ** Relates to the legal reorganisation of the Clean Air Power Group *** Relates to the write off of goodwill relating to the acquisition of HarrisInternational Sales Corp. which was purchased in 2002 Clean Air Power, Inc. Consolidated Balance Sheet as at Year to 31st December 2005 December December 31, 2005 31, 2004 $'000 $' 000 ____________________AssetsCurrent assets:Cash and cash equivalents $ 1,792 $ 1,875Cash and cash equivalents - restricted 210 165Accounts receivable, net 487 728Inventories, net 1,740 3,352Other current assets 2,050 440 ____________________Total current assets 6,279 6,560 Property and equipment, net 416 1,519 ____________________Total assets $ 6,695 $ 8,079 ____________________Liabilities and stockholders' deficitCurrent liabilities:Accounts payable $ 1,484 $ 2,100Accrued liabilities 3,432 3,193Current portion of notes payable 6,167 1,712 ____________________Total current liabilities 11,083 7,005Notes payable, net current portion 97 Commitments:Convertible preferred stock, $0.001 par value,1,107,660,000 shares authorized:Redeemable series A3 voting preferred stock 19,252Series A-4 non-voting preferred stock 2,031Redeemable series B-1 voting preferred stock 10,981Series B-2 Non-voting preferred stock 729 Redeemable Series C-1 Voting Preferred Stock, 784,425 4,020 6,155and 766,133 issued and outstanding at December 31,2005 and September 30, 2005, respectively; $8,040,356and $7,852,863 liquidation preference at December 31,2005 and September 30, 2005, respectivelySeries C-2 Non voting preferred stock 278Series D-1 Non-Voting Preferred Stock, net of issuance 1,999 -costs of $500,586 and $0 at December 31, 2005 andSeptember 30, 2005, respectively; 38,261,399 and noshares issued and outstanding at December 31, 2005 andSeptember 30, 2005, respectively; $5,000,000 and $0liquidation preference at December 31, 2005 andSeptember 30, 2005, respectively ____________________ 6,019 39,426 ____________________Stockholders' deficit:Voting common stock, $0.001 par value, 561,000,000 8 2shares authorized; 8,352,806 and 8,365,806 sharesissued and outstanding at December 31, 2005 andSeptember 30, 2005, respectivelyNon-voting common stock, $0.001 par value, 561,000,000 1shares authorized; 635,481 shares issued andoutstanding at December 31, 2005 and September 30,2005Treasury Stock, 13,000 shares and no shares at -December 31, 2005 and September 30, 2005, respectivelyAdditional paid-in capital 52,064 11,646Accumulated deficit (62,503) (50,116)Accumulated other comprehensive income 22 19 ____________________Total stockholders' deficit (10,408) (38,449) ____________________Total liabilities and stockholders' deficit $ 6,695 $ 8,079 ____________________ Clean Air Power, Inc. Consolidated Statements of Cash Flow for Year to 31st December 2005 Twelve Twelve Month Month Period Period Ended Ended December December 31, 2005 31, 2004 $'000 $'000 ____________________Operating activitiesNet loss $ (12,387) $ (13,452)Adjustments to reconcile net loss to net cash used inoperating activities:Depreciation 460 500Net gain on disposal of property and equipment (12)Interest expense in connection with preferred stock 4,211 333warrants and beneficial conversionStock compensation 10Write down of assets 2,387Changes in operating assets and liabilities:Accounts receivable 241 1,766Inventories 1,612 83Other assets 319 (373)Accounts payable (616) 197Accrued liabilities 395 (280) ____________________Net cash used in operating activities (5,776) (8,829) Investing activitiesNotes Receivable from officer 268Purchases of property and equipment (46) (162)Proceeds from the sale of property and equipment 26 2Cash and cash equivalents - restricted (45) (134) ____________________Net cash provided by (used in) investing activities (65) (26) Financing activities Proceeds from notes payable 4,622 1,000Payments on notes payable (326) (1,757)Deferred offering costs (540)Proceeds from equity financings, net of issuance costs 1,999 6,347Net cash provided by financing activities 5,755 5,590 Effect of exchange rate changes on cash 3 8 Net increase (decrease) in cash and cash equivalents (82) (3,257)Cash and cash equivalents at beginning of period 3,810 5,132 ____________________Cash and cash equivalents at end of period $ 3,728 $ 1,875 ====================Supplemental informationInterest paid $ 46 $ 115 ====================Conversion of debt and accrued interest to equity $ 169 $ 101 ====================Compound accrued interest into debt $ 227 ====================Deferred offering cost accrued $ 74 ==================== - The 2005 results are extracted from the audited consolidated financial statements of Clean Air Power Inc. prepared in US dollars under US GAAP. - These consolidated statements include the results of Clean Air Power Ltd, the UK subsidiary. - This report does not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985. - The company will issue consolidated interim financial statements for Clean Air Power Ltd (the entity listed on AIM) covering the first half of 2006 in due course. - In line with the dividend policy of Clean Air Power Ltd, Clean Air Power Inc does not intend to pay a dividend. This information is provided by RNS The company news service from the London Stock Exchange