Financial Results:
During the three months ended March 31, 2009, Raser recognized no revenue and no cost of sales compared to revenue and cost of sales totaling around $0.1 million during the same period in 2008. During the first quarter of 2008, the company completed the ARINC subcontract, which began in October 2006.
Raser management was successful in efforts to reduce operating expenses and to shift certain expenses from cash to equity during the first quarter, positioning the company to accelerate profitability as its initiatives begin to produce revenue. Total operating expenses decreased 6.0% to $5.3 million for the first quarter of 2009 compared to $5.6 million for the first quarter of 2008.
Included in the operating expenses were:
General and administrative expenses decreased to around $2.5 million during the first quarter of 2009 from around $2.8 million for the first quarter of 2008. The decrease was primarily due to a $0.5 million reduction in professional services expenses, partially offset by an increase in equity-based non-cash employee and service provider compensation expense, which increased to $0.6 million in the first quarter of 2009 compared to $0.5 million in same the period of 2008. Equity-based non-cash compensation expense was higher during the first quarter of 2009 due to the vesting of a larger number of executive option grants.
Power project development expenses during the first quarter of 2009 totaled $2.1 million as compared to $1.8 million for the first quarter of 2008. This increase was primarily due to employment related costs of around $0.4 million resulting from increased employment levels to execute the company’s business plan. Equity-based non-cash employee and contractor compensation for the first quarter of 2009 increased $0.2 million over the first quarter of 2008 as a result of stock option grants to new employees and stock grants to a consultant on the company’s Lightning Dock project. During the three months ended March 31, 2009, professional services relating to geological engineering consulting associated with the construction of the Thermo No. 1 geothermal power plant decreased $0.6 million from the first quarter of 2008 primarily resulting from completing certain phases of the construction during the prior year.
Research and Development expense decreased from $1.0 million in the three months ended March 31, 2008 to $0.7 million for the three months ended March 31, 2009.
Non-controlling interest includes the portion of the net loss allocated to a third party that owns a non-controlling interest in Raser’s Thermo Subsidiary. For the first quarter of 2009, the total was $1.0 million. In addition to the net loss allocation, the figure reflects the correction of an error from prior periods as well as the accrual of certain liquidation preferences contained in the company’s agreement with the non-controlling third party. Previously, this was presented in the company’s financial statements as minority interest.
In aggregate, non-cash, equity-based expenses and equity-based compensation totaled $1.2 million during the first quarter of 2009 and $0.8 million in the first quarter of 2008.
The company’s net loss applicable to common stockholders was $6.7 million, or $(0.10) per basic and diluted share (based on 64.4 million shares) compared to a net loss of $5.4 million, or $(0.10) per basic and diluted share (based on 56.0 million shares) in the year-ago quarter.
As previously announced, subsequent to the first quarter Raser restructured its purchase agreements with subsidiaries of United Technologies Corp., obtaining a return of $7.3 million that had previously been deposited in connection with orders of PureCycle power systems. The company is permitted to use the deposit return to facilitate payment for certain work necessary to complete the Hatch Plant. To date, Raser has received $3.3 million of the $7.3 million from this restructured agreement and this will be reflected on its balance sheet as of June 30, 2009. The balance available under the deposit refund combined with the remaining amount available under Raser’s line of credit totals around $8.0 million. In addition, the company has around $17.5 million in restricted cash to cover certain construction costs at the Thermo No. 1 project, fund reserve accounts, and to cover convertible note coupon payments.
Symetron Updates:
Raser also made progress in advancing its Symetron electromagnetic motor and generator technology during the quarter, including:
Unveiling the Hummer H3 demonstration vehicle, powered by Raser’s plug-in hybrid E-REV (Extended-Range Electric Vehicle) at the 2009 SAE International World Congress in Detroit. Raser and its development partner FEV Inc. introduced Raser’s E-REV power train, similar in function to the Chevy Volt but designed for use in a variety of larger full-sized SUVs and light trucks. The demonstration vehicle is designed to achieve 100 mpg.
James Spellman, vice president, of transportation for Raser, commented, “The company’s initiatives with FEV Inc. surrounding the company’s Symetron technology represent the forefront of plug-in-hybrid technology and the company expect to expand the company’s leadership role in this important technological area.”
Brent M. Cook, Raser’s chief executive officer, commented, “Despite the extraordinary challenges of the last quarter and prior year, the Raser Technologies team began to see the benefits of our ‘Well to Wheels’ strategy during the first quarter of 2009. We are now delivering clean, renewable power from our Hatch geothermal power plant to the City of Anaheim as part of our 20-year power purchase agreement and we began recognizing geothermal-related revenue early in the second quarter. We developed, constructed, and put this plant into service in record time and built a tremendous base of working knowledge which will benefit our team as we exploit additional geothermal resources and bring more plants online in the future. In addition, we publicly unveiled our revolutionary, electric Hummer H3 garnering widespread media acclaim.”
Cook continued, “Our initial geothermal revenue will appear during the company’s second fiscal quarter. We are in active discussions with utilities working toward finalizing power purchase agreements for other projects, including potential arrangements the company believe could provide pre-payment for power thus providing funds for future power plant construction. In addition, we believe the increased focus on green power in today’s political climate could facilitate potential joint ventures and other opportunities, and we continue to explore these opportunities in order to accelerate the company’s progress and create shareholder value.”
Cook concluded, “The company anticipate being at or near full capacity at the company’s Thermo No. 1 plant early in the third quarter, generating as much as 14 MW on a gross basis. As the company move forward during 2009, Raser is well-positioned to develop a substantial and expanding portfolio of geothermal resources to provide power to several of the Western States. We continue to add to the company’s vast resource holdings and believe we have the largest portfolio of undeveloped geothermal resources in the United States. We expect to leverage the expertise we have built through the company’s experience and successes with the Thermo No. 1 project to help us to accelerate the company’s construction and well field development efforts on subsequent projects.”
