BlueScout Technologies Reports Third Quarter 2012 Financial Results

- Operating expenses down 77% for the quarter and 66% for the nine-month period -

CHANTILLY, VA, Nov. 29, 2012 /CNW/ - BlueScout TechnologiesTSXV: SCT, providers of the BlueScout OCS-210 for optimized wind energy generation, reported its financial results for the three- and nine-month periods ended September 30, 2012.  All figures are in U.S. dollars, unless otherwise stated.

Select Highlights

• A new signal processing sub-system design was completed. As opposed to the prior design, which was an evolution of a design targeted at aerospace applications, the all-new design started with a clean slate approach specifically addressing the requirements of the wind turbine industry. The foundation of the design is a fundamentally different signal processing algorithm, sharing no commonality of software, firmware or hardware with the prior design. The work combines a clean set of signal processing protocols, modern chipsets, and active system noise reduction to improve system sensitivity by five hundred percent and eliminate errors due to turbine blade blockage.
  
  
• The operational fleet has 34 units installed with another seven on backlog for installation. BlueScout products now have over 300,000 of operational field hours.
  
  
• Reduced operating expenses by 77% or $8.6M for the quarter compared to last year and reduced net loss for the quarter by $8.3M or $0.08 per share versus Q3 2011.
  
  
• Successfully rebranded under the name BlueScout Technologies, which included a new image, mission, vision, values, domain name, ticker symbol and fresh logo.
  
  
• Completed a special warrant offering for gross proceeds of CDN$3.1 million and a convertible debenture offering for CDN$1.2 million, for total gross proceeds of CDN$4.3 million.
  
  
• Continued its market expansion by entering into a trial program with EDP Renewables North America (EDPR NA) to demonstrate the performance improvement of two EDPR NA turbines under the operational control of the OCS-210 wind turbine control system.

Legal Updates

• As part of ongoing legal disputes, Optical Air Data Systems LLC (OADS) sent more than twenty subpoenas to key BlueScout customers and suppliers.
  
  
• The indemnification suit brought against BlueScout by Phil and Alisa Rogers was dismissed without prejudice by the Fairfax Circuit Court in Virginia in October. Following this dismissal the Rogers subsequently filed a substantially similar indemnification lawsuit in the same court.
  
  
• In the IP suit, a few days after a motion by OADS against BlueScout was denied at the magistrate level, subsequently another motion was introduced by OADS asking that the denial be re-evaluated by a district level judge.

Financial Performance

BlueScout recognized revenue of $50K for the quarter ended September 30, 2012, compared to $348K for the three-month period ended September 30, 2011.  The Company has $742K of deferred revenue and customer deposits recorded on its consolidated balance sheet at September 30, 2012 related to product shipments that have performance provisions that are expected to be recognized in future quarters.  On a nine-month basis, BlueScout recognized revenue of $510K for 2012 compared to $738K for the same period in 2011.

Operating expenses for Q3 2012 were $2.6M, down 77% from $11.2M for the corresponding period last year.   Excluding the non-cash items, litigation expense, one-time August 24 financing fees and one-time rebranding fees, operating expenses in Q3 2012 were $2.2M, down 23%, compared to $2.8M for Q3 2011.

For the nine-month period ended September 30, 2012, operating expenses were $7.4M, down 66% from $21.4M for FY2011.  Excluding the non-cash items, litigation expense, one-time August 24 financing fees and one-time rebranding fees, operating expenses were $6.0M, down 49% from $11.8M for the same period last year.   Selected operating expenses are detailed below:

Cost of sales for the three-month period ended September 30, 2012 was $598K compared to $527K for the same period last year.   On a nine-month basis, cost of sales was $1.2M compared to $1.6M for the same period in 2011.  Cost of sales include product inventory costs and all costs associated with the installation on, and integration with, wind turbines.

General and administrative expense for Q3 2012 was $196K, down 70% from $625K for Q3 2011.  The decrease is primarily due to reductions in travel related expenses and repairs and maintenance costs.   On a nine-month basis, general and administrative expense was $659K compared to $2.2M for the same period in 2011.  The 2011 expenses were predominantly related to travel and maintenance related to the Falcon 50 aircraft which the Company has not been affiliated with since October 22, 2011.

Sales and marketing expense for Q3 2012 was $101K compared to $15K for Q3 2011.  Sales and marketing expense includes expenses for trade shows, advertising, promotion and sales and marketing consulting costs.  The increase is primarily due to $64K of rebranding costs and $22K of expenses associated with trade shows during the quarter.

Professional fees totaled $1.6M for the three-month period ended September 30, 2012, up from $331K for the same period last year.  The increase in professional fees for the quarter is due to legal expenses, primarily related to litigation matters, and costs associated with the August 24 financing which totaled $572K.  Legal expense was $873K for the third quarter of 2012 versus $131K for the same period last year.   On a nine-month basis professional fees were $2.9M for 2012 ($1.7M related to litigation) and $1.0M for 2011.

Third quarter 2012 research and development expense was $77K compared to $384K for the same period last year.  On a nine-month basis, research and development expense was $257K compared to $3.7M for the same period in 2011. Research and development during 2012 has been centered on the transition to contract manufacturing and turbine integration.

BlueScout recorded a net loss for Q3 2012 of $2.6M or $0.02 per share, compared to a net loss of $10.9M or $0.10 per share for Q3 2011.  On a nine-month basis, BlueScout generated a net loss of $6.9M or $0.06 per share compared to a net loss of $20.7M or $0.22 per share for the same period of FY2011.

As of September 30, 2012, BlueScout had cash and cash equivalents of $2.1M and working capital of $3.4M, compared to cash and cash equivalents of $6.0 million and working capital of $6.2 million at December 31, 2011.

BlueScout has filed its financial statements for the three and nine month period ended September 30, 2012 and related Management's Discussion and Analysis (MD&A) with securities regulatory authorities.  BlueScout's financial statements, MD&A and related documents are available via SEDAR as well as through the Company's website, www.BlueScout.com.

Conference Call

BlueScout will hold a conference call on November 30, 2012 at 1:00 pm ET to discuss its third quarter 2012 financial results.

To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191.  Please connect approximately 15 minutes prior to the beginning of the call to ensure participation.  A question and answer session for analysts and institutional investors will follow management's presentation.

A live audio webcast of the conference call will be available at www.BlueScout.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web site for 30 days.

A taped rebroadcast will be available to listeners until 12 a.m. ET on Friday, December 7, 2012. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter passcode 72229223, followed by the number sign.

About BlueScout

BlueScout Technologies (TSXV: SCT) increases energy production and decreases operating costs by applying groundbreaking microgeographical wind flow sensing to turbine control systems that increases the effectiveness and availability of wind turbines. BlueScout combines precise, optically based wind forecasting with advanced predictive control architectures to ready the turbine for the imminent wind inflow changes - optimizing energy production and reducing the harmful effects of wind turbulence on the turbine. With extensive operating data on multiple wind turbine models, BlueScout is the leading, value-added innovator in wind turbine performance and optimization.

The team consists of experienced high-tech, R&D and manufacturing engineers, innovative entrepreneurs, and proven leaders. The BlueScout team has unique expertise and shares a firm commitment, as part of the wind power industry, to continuously improve the reliability of wind power generation through innovation. For more information, visit www.BlueScout.com.

Forward-Looking Information

This news release includes certain forward-looking statements within the meaning of Canadian securities laws. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results, performance, prospects and opportunities to differ materially from those expressed in such forward-looking statements. Forward-looking statements in this news release, include, but are not limited to, economic performance and future plans and objectives of BlueScout Technologies. Any number of important factors could cause actual results to differ materially from these forward-looking statements as well as future results. Although BlueScout believes that the assumptions and factors used in making the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this news release, and no assurance can be given that such events will occur in the disclosed timeframes or at all. BlueScout Technologies disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

BlueScout Technologies Ltd. Condensed Consolidated Interim Balance Sheets (Unaudited)
(Expressed in United States dollars)		Note		September 30, 2012 $		December 31, 2011 $
Assets
Current assets:
	Cash and cash equivalents			2,107,678		6,018,559
	Accounts receivable			207,502		167,705
	Inventory	5		2,810,965		1,830,350
	Prepaid expenses and other assets			168,484		352,002
				5,294,629		8,368,616
Non-current assets:
	Property and equipment			149,175		418,896
	Intangible assets			-		3,166
	Other assets			28,026		82,050
				177,201		504,112
Total assets				5,471,830		8,872,728
Liabilities and Equity
Current liabilities:
	Accounts payable and other liabilities			1,453,548		1,391,799
	Obligations under finance leases	7		14,461		62,707
	Warranty provision	8		137,500		93,750
	Due to related party	11		126,197		18,516
	Deferred revenue and customer deposits			202,000		552,800
				1,933,706		2,119,572
Non-current liabilities:
	Obligations under finance leases	7		-		7,620
	Special warrants liability	13		1,939,060		-
	Convertible debenture	14		878,244		-
	Option component of convertible debenture	14		106,489		-
	Deferred revenue			540,400		-
	Provision for indemnification agreement	8		2,000,000		2,000,000
	Warrant liability	12		15,218		249,329
	Due to related party	11		74,028		-
				5,553,439		2,256,949
Total liabilities				7,487,145		4,376,521
Commitments and contingencies		9,10
(Deficiency) Equity
	Capital stock	15		12,252		12,252
	Contributed surplus			56,884,327		56,521,284
	Deficit			(58,911,894)		(52,037,329)
Total (deficiency) equity				(2,015,315)		4,496,207
Total liabilities and (deficiency) equity				5,471,830		8,872,728

 

BlueScout Technologies Ltd. Condensed Consolidated Interim Statements of Loss and Comprehensive Loss (Unaudited)
				Three months ended				Nine months ended
(Expressed in United States dollars)		Note		September 30, 2012 $		September 30, 2011 $		September 30, 2012 $		September 30, 2011 $
Revenue				50,000		348,000		510,000		738,000
Expenses:
	Cost of sales	5		598,161		526,599		1,238,116		1,583,303
	Salaries and benefits	6		656,042		607,827		1,974,704		1,689,854
	General and administrative	7		195,607		624,967		659,348		2,209,469
	Inventory writedown	5		297,336		1,422,986		297,907		1,430,934
	Amortization of intangible assets			-		338,417		3,166		1,015,497
	Depreciation of property and equipment			94,867		153,107		296,229		471,223
	Sales and marketing	2		101,037		14,516		255,845		310,529
	Consulting fees	2		339,914		74,081		765,216		361,471
	Professional fees	2,6		1,553,905		343,079		2,940,552		1,010,578
	Professional engineering fees			-		102,108		229,333		582,839
	Research and development			76,850		384,243		257,365		3,724,826
	Finance costs	7		22,195		84,349		27,730		260,768
	Interest income			(365)		(2,711)		(799)		(4,824)
	Other income, net			-		(19,715)		-		(37,464)
	Impairment of property and equipment			-		2,486,799		-		2,486,799
	Impairment of intangible assets			-		4,968,369		-		4,968,369
	Gain on fair value of warrant liability	12		(25,880)		(965,614)		(274,232)		(713,728)
	Gain on fair value special warrants liability	13		(1,152,994)		-		(1,152,994)		-
	Gain on fair value option component of
	convertible debenture	14		(72,912)		-		(72,912)		-
	Gain on fair value deferred related party
	balance	11		(106,528)		-		(106,528)		-
	Loss of asset disposal			35,894		-		35,894
	Loss on foreign exchange			10,534		72,434		10,622		79,509
				2,623,665		11,215,841		7,384,565		21,429,952
Net loss and total comprehensive loss				(2,573,665)		(10,867,841)		(6,874,565)		(20,691,952)
Net loss and total comprehensive loss attributable to:
	Owners of the Company			(2,573,665)		(10,176,903)		(6,874,565)		(19,771,680)
	Non-controlling interest			-		(690,938)		-		(920,272)
				(2,573,665)		(10,867,841)		(6,874,565)		(20,691,952)
Net loss per share - basic and diluted				(0.02)		(0.10)		(0.06)		(0.22)
Weighted average number of common shares    outstanding				122,513,614		106,527,100		122,513,614		89,265,679

 

 

 

 

SOURCE: BlueScout Technologies

BlueScout Technologies, Inc.
John E. Green
CFO & Treasurer
[phone]
[email protected]

TMX Equicom
Philip Dale
Investor Relations
416-815-0700 ext. 253
[email protected]