Quantum Technologies Reports 2012 Third Quarter Financial Results

      Quantum Technologies Reports 2012 Third Quarter Financial Results

PR Newswire

LAKE FOREST, Calif., Nov. 8, 2012

LAKE FOREST, Calif., Nov. 8, 2012 /PRNewswire/ --Quantum Fuel Systems
Technologies Worldwide, Inc. (Nasdaq: QTWW), a global leader in alternative
fuel systems and clean propulsion technologies for automotive applications,
including natural gas, hybrid/electric and hydrogen systems, today reported
its results for the third quarter of 2012. Conference call information is
provided below.

Financial Presentation

During the third quarter of 2012, we committed to a formal plan to sell our
wholly owned subsidiary, Schneider Power Inc. (Schneider Power) and initiated
steps to locate a buyer. Schneider Power, an operator and developer of wind
farms, represents the entire operations of our Renewable Energy business
segment. As a result of our intent to sell the business, the historical
activities and balances of the Renewable Energy business segment are reported
as discontinued operations held for sale in the accompanying condensed
consolidated financial information presented herein.

2012 Third Quarter and Nine Months Operating Results

For the third quarter of 2012, consolidated revenues from continuing
operations decreased $4.5 million, or 44%, from $10.3 million in the third
quarter of 2011, to $5.8 million in the third quarter of 2012, and decreased
$7.0 million, or 29%, from $24.1 million in the first nine months of 2011, to
$17.1 million in the first nine months of 2012. The decrease in revenue is due
to lower contract revenues recognized in 2012, partially offset by increased
product shipments related to compressed natural gas (CNG) fuel storage
systems.

Our consolidated operating loss from continuing operations for the third
quarter increased $0.8 million, or 33%, from $2.4 million in the third quarter
of 2011, to $3.2 million in the third quarter of 2012, and our consolidated
operating loss for the first nine months of 2012 increased $4.3 million, or
49%, from $8.8 million in 2011, to $13.1 million in 2012.

The $3.2 million operating loss from continuing operations for the third
quarter of 2012 represents an improvement of $2.7 million from the operating
loss of $5.9 million from continuing operations recognized for the second
quarter of 2012, primarily as a result of severance charges taken in the
previous quarter that did not occur in the current quarter in addition to
lower executive and corporate administrative costs.

Electric Drive & Fuel Systems Segment

Product revenue for our Electric Drive & Fuel Systems segment for the third
quarter of 2012 decreased $2.5 million, or 37%, from $6.7 million in the third
quarter of 2011, to $4.2 million in the third quarter of 2012, and for the
first nine months of 2012 increased $0.7 million, or 6%, from $11.2 million in
2011 to $11.9 million in 2012.

Although product revenues from our light-weight CNG fuel storage tanks and
systems increased by $1.8 million, or 92%, during the third quarter of 2012
and increased $5.0 million, or 133%, over the first nine months of 2012 as
compared to similar periods in the prior year, these improvements were offset
by a reduction in product sales of component shipments to Fisker Automotive in
the current year as compared to similar periods in the prior year.

Product revenues generated for CNG fuel storage systems in the third quarter
of 2012 of $3.8 million were $1.1 million higher than product revenues from
CNG fuel storage systems realized in the second quarter of 2012.

During the first nine months of 2012, we received $14.2 million in new
purchase orders for our CNG fuel storage tanks, as compared to $4.3 million of
new purchase orders received during the first nine months of 2011,
representing a 230% increase in the current year period.

As a result of the significant increase in new purchase orders for our CNG
storage systems and our expectations for continued growth, we have implemented
a plan to expand tank manufacturing capacity. The planned capacity expansion,
anticipated to be completed in 2013, is designed to double our current
production capacity by setting up state-of-the art manufacturing lines at a
60,000 sq. ft. building adjacent to our existing 30,000 sq. ft. factory in
Lake Forest, California. The scheduled expansion is expected to provide
additional capacity starting in the first quarter of calendar 2013 with
continued incremental capacity coming on-line throughout the first six months
of calendar 2013.

In connection with the planned expansion, we closed on a $3.25 million capital
lease financing arrangement, the proceeds of which will be used to fund the
purchase of new equipment related to the planned expansion.

Contract revenue decreased $2.0 million, or 56%, from $3.6 million in the
third quarter of 2011 to $1.6 million in the third quarter of 2012, and
decreased $7.7 million, or 60%, from $12.9 million in the first nine months of
2011 to $5.2 million in the first nine months of 2012. Contract revenue is
derived primarily from system development, application engineering and
qualification testing of our products and systems under funded contracts with
OEMs and other customers. The higher contract revenue in 2011 was mainly due
to the level of pre-production engineering services that we provided to Fisker
Automotive during the first nine months of 2011 prior to and just after its
launch of the Fisker Karma vehicle late in calendar 2011. Although we
continue to provide engineering services to Fisker Automotive under an
existing contract to develop advanced features for the Fisker Karma vehicle,
the levels of activity in 2012 have significantly declined compared to those
in 2011.

This segment had an operating loss of $1.5 million and $5.3 million in the
third quarter and first nine months of 2012, respectively, compared to an
operating income of $0.8 million and $0.9 million in the third quarter and
first nine months of 2011, respectively.

The decline in operating income for this segment was partially due to an
increase in expenses associated with our internally funded engineering
programs. The expense for these programs increased $0.7 million in the third
quarter of 2012, or 44%, from $1.6 million in the third quarter of 2011, to
$2.3 in the third quarter of 2012, and increased $2.7 million in the first
nine months of 2012, or 66%, from $4.1 million in 2011, to $6.8 million in
2012. Our internally funded research effort includes hybrid control
strategies and proprietary software designed to precisely control hybrid
propulsion and vehicle performance along with CNG and hydrogen storage,
injection and regulation programs. The increase during the 2012 periods was
primarily due to increased engineering activities related to our F-150 PHEV
program. 

Corporate Segment

Corporate expenses decreased $1.5 million, or 47%, from $3.2 million in the
third quarter of 2011 to $1.7 million in the third quarter of 2012, and
decreased $1.9 million, or 20%, from $9.7 million in the first nine months of
2011 to $7.8 million in the first nine months of 2012.

The decrease in corporate expenses in the third quarter of the current year is
partially attributable to lower executive wages and benefits along with other
cost-cutting initiatives implemented in 2012 and partially attributable to an
impairment charge of $0.9 million recognized in the prior year period that did
not reoccur in the current year period. The decrease in the nine month period
of the current year is mainly attributable to a decrease in impairment
charges, discussed further below, from $2.6 million in the 2011 period to $1.5
million in the 2012 period.

Included in the nine month period in 2012 are charges consisting of (i) a net
charge of $1.0 million associated with separation agreements executed in
connection with the May 10, 2012 resignations of our former President and
Chief Executive Officer and our former Executive Chairman of the Board, which
primarily represents the sum of post-employment scheduled cash payments of
$1.4 million to the former executives, as partially offset by the reversal of
unvested stock-based awards forfeited and cancelled benefits as a result of
their resignations and (ii) a charge of $0.5 million for the impairment of
solar related assets recognized at June 30, 2012. Included in the prior year
nine month period are charges consisting of (i) a charge of $1.7 million
recognized as of June 30, 2011 in connection with our sublease of a 60,000 sq
ft facility located in Lake Forest, California and (ii) a charge of $0.9
million as of July 31, 2011 related to impairment of solar related assets.

Renewable Energy Segment – held for sale

The net loss from the operations of the Renewable Energy segment, classified
as discontinued operations held for sale, net of taxes, was $0.4 million in
third quarter of 2012 and $1.7 million for the first nine months of 2012,
respectively, as compared to $0.7 million in third quarter of 2011 and $3.2
million for the first nine months of 2011, respectively.

The net loss reported for discontinued operations held for sale included the
recognition of $0.8 million of revenue from energy sales in the first nine
months of 2012 as compared to $0.2 million for the first nine months of 2011.
Energy sales in 2012 include activities of the 10.0 megawatt Zephyr Wind Farm
(Zephyr), which Schneider Power acquired on April20, 2012. Zephyr began
generating revenues under its power purchase agreement beginning on its
official commercial operation date of May15, 2012. The net loss reported for
discontinued operations held for sale also included operating expenses of $1.4
million for the first nine months of 2012 as compared to $3.1 million for the
first nine months of 2011. Included in operating costs in the prior year nine
month period was a $1.0 million impairment charge due to the abandonment of
the Spring Bay Wind Farm construction project in January 2011. The operating
loss for the first nine months of 2011 and the first nine months of 2012 also
includes amortization expense of intangibles of $0.4 million and $0.1 million,
respectively. Effective upon the August 9, 2012 reclassification of the
assets of this segment as held for sale, the recognition of depreciation and
amortization on long-lived assets ceased.

Non-Reporting Segment Results

Interest Expense.  Interest expense, net of interest income, amounted to $0.8
million in both the three month periods ended September30, 2011 and 2012, and
amounted to $4.4 million in the nine months ended September 30, 2012 as
compared to $2.1 million in the nine months ended September 30, 2011.

Fair Value Adjustments of Derivative Instruments. Our consolidated financial
statements include fair value adjustments for the bifurcation of the
derivative liabilities associated with embedded features contained within
certain debt obligations and warrant contracts. Fair value adjustments of
derivative instruments, which represent non-cash unrealized gains or losses,
amounted to a net gain of less than $0.1 million in the third quarter of 2012
as compared to a net gain of $2.5 million in the third quarter of 2011, and
amounted to a gain of $0.1 million in the first nine months of 2012 as
compared to a net gain of $6.6 million for the first nine months in 2011.

Gain or Loss on Modification of Debt and Derivative Instruments. We recognized
a gain of $0.3 million and $0.6 million for the three and nine months ended
September30, 2012, respectively, in connection with the exchange of certain
existing convertible notes with new nonconvertible bridge notes in June and
July of 2012. In the three and nine months ended September 30, 2011, we
recognized $2.6 million and $4.1 million, respectively, in losses associated
with three debt modifications.

Gain (Loss) on Settlement of Debt and Derivative Instruments. During the
period from February 13, 2012 through March 9, 2012, wesettled a total of
$1.3 million of principal due under a promissory note we refer to as "the
Consent Fee Term Note" by the issuance of shares of our common stock. As a
result of the in-kind debt settlements, we recognized a net charge of $0.1
million in the first nine months of 2012, which represented the difference
between the fair values of the shares issued and the debt settled. During the
first nine months of 2011, we recognized a net loss of $1.3 million primarily
attributed to settlements of debt and derivative instruments with shares of
our common stock.

Impairment of Investment in and Advances to Affiliates. Our affiliate, Asola,
has experienced recurring losses in the first nine months of calendar 2012 and
declining year-over-year revenues. In addition, European-based solar
manufacturers continue to experience significant competition from
Chinese-based manufacturers that is eroding opportunities for Asola to remain
competitive or be a viable enterprise without a significant restructuring of
its operations. These continuing trends along with other indicators that
emerged during the third quarter of 2012 indicated that a potential
"other-than-temporary" decline in value may have occurred. As a result, we
performed an assessment as of September 30, 2012 of the recoverability of our
prepayments to and our investments in and advances to Asola. Based on our
assessment, we (i) recognized an estimated impairment charge of $5.0 million
as of September 30, 2012, representing the entire remaining carrying balance
of our investment in and advances to Asola, and (ii) determined that no
impairment was necessary with respect to cumulative solar cell prepayments
that we have provided to Asola to date, which have a carrying value of $3.9
million at September 30, 2012. 

Equity in Losses of Affiliates. During the three and nine months ended
September30, 2012, we recognized losses of $0.4 million and $0.8 million,
respectively, and during the three and nine months ended September30, 2011,
we recognized losses of $0.2 million and $0.9 million, respectively,
representing the net equity in earnings or losses of our affiliates that we
account for under the equity method of accounting. The activity in the periods
presented is substantially all associated with our equity share of the
operating losses of Asola.

Consolidated Net Loss

Our consolidated net loss for the third quarter of 2012 was $9.4 million,
compared to a net loss of $3.9 million in the third quarter of 2011, and our
consolidated net loss for the first nine months of 2012 was $24.3 million,
compared to a net loss of $13.5 million for the first nine months of 2011.

Brian Olson, President and Chief Executive Officer, stated, "We continue to
see positive developments and trends within our natural gas business,
including revenue growth, strong product margins, product innovation and
development, and tank production capacity expansion. We are pleased we were
able to secure equipment financing to provide for our expansion which will
initially double our production capacity." Olson continued, "Although there
are challenges in the business that we need to work through, I believe we are
taking appropriate actions that will make a meaningful and positive difference
to the future of this Company."

Quantum Fuel Systems Technologies Worldwide, Inc.
Condensed Consolidated Financial Information
                     Three Months Ended            Nine Months Ended
                     September 30,                 September 30,
                     2011 (1)       2012           2011 (1)       2012
                     (Unaudited)                   (Unaudited)
Statements of
Operations:
Revenue:
 Net product sales  $             $             $             $ 
                     6,724,244     4,215,006     11,184,490    11,923,508
 Contract revenue    3,529,741      1,556,749      12,908,851     5,169,430
      Total revenue 10,253,985     5,771,755      24,093,341     17,092,938
Costs and expenses:
 Cost of product     4,667,721      2,957,154      7,753,901      8,746,208
 sales
 Research and        3,828,607      3,270,365      12,338,493     10,610,440
 development
 Selling, general    3,260,342      2,733,940      11,904,286     10,369,398
 and administrative
 Impairment of
 long-lived          900,000        -              900,000        495,016
 operating assets
      Total costs    12,656,670     8,961,459      32,896,680     30,221,062
      and expenses
Operating loss      (2,402,685)    (3,189,704)    (8,803,339)    (13,128,124)
 Interest expense,   (797,424)      (765,151)      (2,055,473)    (4,390,900)
 net
 Fair value
 adjustments of      2,501,000      8,000          6,590,000      134,000
 derivative
 instruments, net
 Gain (loss) on
 modification of     (2,550,583)    301,458        (4,063,942)    649,786
 debt and derivative
 instruments, net
 Gain (loss) on
 settlement of debt  262,000        -              (1,273,351)    (95,450)
 and derivative
 instruments, net
 Impairment of
 investment in and   (58,572)       (4,963,035)    (58,572)       (4,963,035)
 advances to
 affiliates
 Equity in losses of (160,346)      (422,567)      (946,772)      (772,453)
 affiliates, net
 Other               -              -              -              26,467
Loss from operations (3,206,610)    (9,030,999)    (10,611,449)   (22,539,709)
before income taxes
 Income tax benefit  -              -              334,445        (3,200)
 (expense)
Loss from continuing $              $              $              $
operations           (3,206,610)   (9,030,999)   (10,277,004)  (22,542,909)
Loss from
discontinued         (682,925)      (375,960)      (3,174,082)    (1,745,181)
operations, net of
taxes
Net loss             $              $              $              $
attributable to      (3,889,535)   (9,406,959)   (13,451,086)  (24,288,090)
stockholders
Per share data -
basic and diluted:
 Loss from           $         $         $        $     
 continuing          (0.20)         (0.19)         (0.80)         (0.54)
 operations
 Loss from
 discontinued        (0.04)         (0.01)         (0.25)         (0.04)
 operations
Net loss             $         $         $        $     
attributable to      (0.25)         (0.20)         (1.05)         (0.58)
stockholders
Weighted average
shares outstanding -
 basic and diluted   15,758,701     47,812,856     12,820,316     41,565,419
Cash Flow
Information (2):
 Depreciation,
 amortization and
 impairment of       1,299,764      328,894        3,141,818      1,593,892
 long-lived
 operating assets
 Net cash used in
 operating           (2,202,813)    (3,515,754)    (11,134,775)   (11,161,654)
 activities
 Net cash provided
 by (used in)        (474,567)      (465,814)      16,159         (4,564,748)
 investing
 activities
 Net cash provided
 by financing        702,174        755,574        11,987,986     14,477,967
 activities
      The 2011 three and nine month periods are
 (1)  shown for comparative purposes and have
      been prepared on a pro forma and unaudited
      basis and include certain estimates.
 (2)  The cash flow information includes
      Schneider Power for all periods presented.
                     December 31,   September 30,
                     2011           2012
                     (Audited)      (Unaudited)
Balance Sheet
Information:
 Continuing
 Operations:
      Cash and cash  $             $ 
      equivalents    3,723,128     2,298,708
      Working        $              $
      capital        (1,878,737)   (2,965,231)
      (deficit)
      Total assets   $ 40,590,078  $ 31,778,580
      Derivative
      instruments:
      Current        $           $   
                     953,000        826,000
      Non-current    543,000        273,000
      Total          $             $ 
                     1,496,000     1,099,000
      Debt
      obligations,
      current &
      non-current:
      Principal &
      accrued        $ 11,458,819  $ 10,572,379
      interest
      Debt discounts (4,033,591)    (1,892,822)
      Total          $             $ 
                     7,425,228     8,679,557
 Discontinued
 Operations:
      Cash and cash  $          $   
      equivalents    75,053         250,055
      Total assets   $             $ 33,864,568
                     5,846,671
      Total          $             $ 27,192,672
      liabilities    2,332,608
 Total stockholders' $ 25,573,412  $ 19,791,817
 equity
 Shares issued and
 outstanding:
      Preferred
      stock; $0.001  -              -
      par value
      Series B
      common stock;  49,998         49,998
      $0.02 par
      value
      Common stock;
      $0.02 par      26,617,369     47,761,119
      value
      Total          26,667,367     47,811,117



Financial Results Call Scheduled:

Thursday, November 8^th at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time).

Conference call number: 706-679-1155, Conference ID # 58185709. An operator
will request your name and organization.

For those of you unable to join us for the earnings call, a playback of the
call will be available via telephone approximately two hours after the call
untilNovember 15th, 2012 at 11:59 p.m. Pacific Time. The number for this
service is: 855-859-2056.

The call will also be available on the Company's Investor Relations web page
approximately two hours after the call at:
http://www.qtww.com/about/investor_information/conference_calls/index.php

For assistance, please call Bonnie Poyer at 949-399-4536.

About Quantum:

Quantum Fuel Systems Technologies Worldwide, Inc. is a leader in the
development and production of advanced vehicle propulsion systems, fuel
storage technologies, and alternative fuel vehicles. Quantum's portfolio of
technologies includes electronic and software controls, hybrid electric drive
systems, natural gas and hydrogen storage and metering systems and other
alternative fuel technologies and solutions that enable fuel efficient, low
emission, natural gas, hybrid, plug-in hybrid electric and fuel cell vehicles.

Quantum's powertrain engineering, system integration, vehicle manufacturing,
and assembly capabilities provide fast-to-market solutions to support the
production of natural gas, hybrid and plug-in hybrid, hydrogen-powered hybrid,
fuel cell, and specialty vehicles. Quantum's customer base includes automotive
OEMs, fleets, aerospace industry, military and other governmental agencies,
and other strategic alliance partners. Quantum's wholly owned subsidiary,
Schneider Power Inc., and affiliate, Asola Solarpower GmbH, complement
Quantum's alternative and renewable energy presence through the development
and ownership of wind and solar farms, and the manufacture of high efficiency
solar modules for traditional and automotive applications.

Quantum is headquartered in Lake Forest, California, and has operations and
affiliations in the USA, Canada, Germany and India.

Forward Looking Statements:

This press release contains forward looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements included
in this report, other than those that are historical, are forward-looking
statements and 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.
Various risks and other factors could cause actual results, and actual events
that occur, to differ materially from those contemplated by the forward
looking statements. Examples of forward-looking statements contained in this
release include our plans to continue expansion of our CNG production capacity
and our expectations of when we will sell Schneider Power and when we will
realize the benefits of our cost reduction initiatives and the amount of such
benefits so realized. Risk factors include our ability to secure materials and
manufacture tanks to meet demand, our customer's ability to market the natural
gas vehicles, the continued availability of low cost shale gas, the decision
by fleet managers on whether to purchase natural gas trucks, whether we can
effectively implement our planned cost reduction initiatives and whether we
will realize the expected benefits of such cost reduction initiatives. The
Company undertakes no obligation to update the information in this press
release to reflect events or circumstances after the date hereof or to reflect
the occurrence of anticipated or unanticipated events.

More information can be found about the products and services of Quantum at
http://www.qtww.com/ or you may contact:

Brion D. Tanous
Principal, CleanTech IR, Inc.
Email: btanous@cleantech-ir.com
310-541-6824

©2012 Quantum Fuel Systems Technologies Worldwide, Inc.
Advanced Technology Center
25242 Arctic Ocean Drive, Lake Forest, CA 92630
Phone 949-399-4500 Fax 949-399-4600

SOURCE Quantum Fuel Systems Technologies Worldwide, Inc.

Website: http://www.qtww.com