14.1.2003: H Power Reports Results for 2003 Second Quarter
During the quarter the Company announced it entered into a merger agreement with Plug Power, Inc. whereby Plug Power would acquire H Power in a stock-for-stock exchange valued at approximately $50.7 million. The acquisition is expected to close in the first quarter of 2003.
Under the terms of the merger agreement, unanimously approved by the Board of Directors of each company, the exchange ratio is estimated to be .89 of a share of Plug Power for each H Power share. The exchange ratio will vary within upper and lower bounds of 10% in the event that the value of Plug Power common stock during a defined pre-closing period varies by more than 10% from $5.88 per share. In addition, the value to be paid will vary depending on the amount of H Power"s cash, assets and liabilities at the closing date.
Since the merger consideration to be received by H Power"s stockholders will depend in part upon the remaining net cash at the effective date of the merger, the Company focused its efforts on restructuring and consolidating its operations with the objective of preserving cash. During the quarter the Company took actions to begin reducing its work force of 184 employees as of November 30, 2002 by at least 100 employees by the end of February 2003. During the quarter the Company substantially reduced the rate of production of products, although it continued to deliver products to specific customers under existing purchase orders. The Company plans on closing its New Jersey facilities by July 2003 and consolidating these operations in its North Carolina facility. The Company also substantially reduced its research and development activities. While these restructuring activities are aimed at preserving cash, the Company is at the same time preserving its operational structure in case the merger is not consummated. In December, pursuant to the merger agreement, the Company retained an outside firm to act as chief restructuring officer. In connection with the planned merger with Plug Power, the Company entered into a termination agreement with ECO. This agreement provided for the termination of all prior agreements with ECO if and when the closing of the merger occurs. The Company will pay ECO a termination fee of $2,115,000 in addition to payments due to ECO pursuant to prior agreements.
For the second quarter ended November 30, 2002, total revenue was $ 0.7 million, versus $0.8 million for the three months ended November 30, 2001. Approximately 96% of the revenues in the quarter were derived from product sales. The net loss for the quarter was ($9.4) million, or ($0.87) per share, versus a net loss of ($6.6) million, or ($0.61) per share, in the year ago period. Weighted average basic and diluted shares outstanding for the second quarters of fiscal 2003 and 2002 were approximately 10.8 million in both periods, and reflect the effect of the Company"s previously announced 1-for-5 reverse stock split. During the quarter the Company incurred expenses totaling $966,000 for accounting, legal and investment banking fees related to the merger with Plug Power Inc. In addition, the Company recorded a charge of $198,000 to reduce the net book value of the excess office, computer and manufacturing equipment in its New Jersey facility to its net realizable value as these assets will be disposed of. Further, inventory related to the discontinued RCU4500 product line was written down to its net realizable value resulting in a charge of $188,000 in the second quarter.
The Company will host a conference call at 11:00 AM (EDT) January 13, 2003 to discuss the fiscal 2003 second quarter operating results and other corporate developments. Investors can access the conference call via a live webcast on the Company"s website at www.hpower.com. A replay of the call will be archived on that website for a one-week period.
About H Power Corp.
H Power Corp. is a leading fuel cell manufacturing and development company, which has designed PEM fuel cell systems to provide electricity for a wide range of stationary and portable applications. The Company recently launched the commercial version of the EPAC500, a 500-watt, fuel cell-based power source, and has developed pre-commercial stationary fuel cell products. For additional information, please visit our website at www.hpower.com.
Certain expectations and projections regarding the future performance of H Power discussed in this news release are forward-looking and are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These expectations are based on currently available competitive, financial and economic data along with the Company"s operating plans and are subject to future events and uncertainties. Management cautions the reader that the following factors, amongst others, may cause H Power"s plans to differ or results to vary significantly from those expected, including the impact of its restructuring plan, the termination of its agreements with ECO, competition, technology development, pricing, market demand and marketplace acceptance, and other risks set forth from time to time in H Power"s filings with the Securities and Exchange Commission, including, but not limited to the risks set forth in H Power"s Annual Report on Form 10-K and in Plug Power"s Registration Statement on Form S-4 containing a joint proxy statement/prospectus. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN IMPORTANT INFORMATION. H Power, its directors and certain of its executive officers may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and officers of H Power and their ownership of H Power Common Stock is set forth in H Power"s proxy statement for its 2002 annual meeting of stockholders as well as the Registration Statement on Form S-4. Investors will be able to obtain these documents free of charge at the SEC"s website, (http:/ /www.sec.gov) These documents may also be obtained free of charge by directing a request to the H Power contact listed at the beginning of this news release. H Power undertakes no obligation to publicly release the results of any revisions to forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The events highlighted herein should not be assumed to be items that could affect the future performance of the Company.
H Power Corp. and Subsidiary
Consolidated Statement of Operations
Three Months Ended
November 30, November 30,
Products $625,215 $717,749
Contracts 26,631 76,778
Total revenues 651,846 794,527
Costs of revenues - products 1,382,063 899,374
Costs of revenues - contracts 578,740 19,000
Research and development 4,677,832 4,694,183
Selling, general and
administrative 2,442,208 2,049,486
Other costs 1,163,849 370,366
Total operating expenses 10,244,692 8,032,409
Loss from operations (9,592,846) (7,237,882)
Interest income and other
income, net 218,741 681,549
Net loss $(9,374,105) $(6,556,333)
Loss per share attributable to
common stockholders, basic and
diluted $ (0.87) $ (0.61)
Weighted average shares
basic and diluted 10,776,566 10,770,566
Comprehensive loss $(9,339,263) $(6,515,011)
H Power Corp. and Subsidiary
Consolidated Balance Sheet
November 30, May 31,
Cash and cash equivalents $36,745,518 $41,678,324
Short-term investments 8,060,421 18,079,617
net of allowance for
doubtful accounts 960,206 1,316,828
Unbilled receivables 12,287 58,333
Inventories, net 1,852,326 2,098,421
Tax credit receivable 76,433 174,418
Prepaid expenses and
other current assets 951,932 762,828
Total current assets 48,659,123 64,168,769
Plant and equipment, net 8,184,072 8,800,313
Patents, net of accumulated amortization 416,655 368,370
Restricted cash 50,000 50,000
Other assets 248,101 364,167
Total assets $57,557,951 $73,751,619
LIABILITIES AND STOCKHOLDERS" EQUITY
Current maturities of long-term debt $133,418 $136,765
Accounts payable 1,953,196 1,492,720
Accrued expenses 1,698,052 1,659,251
Deferred revenue 406,024 601,163
Total current liabilities 4,190,690 3,889,899
Long-term debt 118,916 124,525
Total liabilities 4,309,606 4,014,424
Commitments and contingencies
Common stock--$.001 par value;
30,000,0000 shares authorized
at November 30, 2002 and May 31, 2002;
10,776,566 shares issued and outstanding
at November 30, 2002 and May 31, 2002 10,777 10,777
Additional paid-in capital 164,813,111 164,813,111
Accumulated deficit (111,179,074) (94,813,464)
Accumulated other comprehensive loss (396,469) (273,229)
Total stockholders" equity 53,248,345 69,737,195
Total liabilities and
stockholders" equity $57,557,951 $73,751,619
H Power Corp.
Eric Boyriven, Paul Johnson
Press: Jason Rando