PowerCold Reports Results for 2005
Monday April 17, 9:50 pm ET
SAN ANTONIO--(BUSINESS WIRE)--April 17, 2006--PowerCold Corporation (OTCBB:PWCL - News) announced today financial results for 2005. Included in the financial results are the effects of discontinued operations associated with PowerCold ComfortAir Solutions, Inc. and the continuing operations of the PowerCold Corporation.
On December 31, 2005, PowerCold Corporation disposed of its interest in its wholly owned subsidiary PowerCold ComfortAir Solutions, Inc. The company was sold to Comfort Air Solutions, Inc., a corporation formed by the employees of PowerCold ComfortAir Solutions, Inc. Included in the transaction was a technology and trademark license agreement granted to Comfort Air Solutions, Inc. that will provide royalty revenue for PowerCold Corporation.
Effective January 1, 2006, two of PowerCold Corporation's wholly owned subsidiaries, PowerCold Products, Inc. and PowerCold International, Ltd., have been terminated and the assets transferred to PowerCold Corporation. PowerCold Technology, LLC, which holds title to all the intellectual property and licensing rights of the Company, will remain a wholly owned subsidiary of PowerCold Corporation.
The operating results of PowerCold ComfortAir Solutions, Inc., which was disposed of during the year ended December 31, 2005, are included in discontinued operations. Assets and liabilities of PowerCold ComfortAir Solutions, Inc. have been restated as net assets and liabilities from discontinued operations for the years ended December 31, 2005, and 2004. The Company's financial results of prior periods have been reclassified to reflect the discontinued operations. The following are the condensed results of the discontinued segments for December 31, 2004: Revenue of $8,579,584 with a Net Loss of $2,591,148; and for December 31, 2005: Revenue of $3,450,267 with a Net Loss of $377,387.
Total revenue restated to reflect discontinued operations for the year ended December 31, 2005, increased 31% to $667,377 from $511,159 for the prior year ended December 31, 2004. The Company's revenues from continuing operations were primarily attributable to sales of Company-manufactured equipment only. Nauticon® product sales accounted for 80% of 2005 revenue restated. Operating Loss for the year ended December 31, 2005, increased to $2,367,405, 108% increase from a prior year operating loss of $1,140,853. The Total Cost of Revenues increased by $94,359 to 98% of revenue as compared to 110% of revenue for the comparable period in 2004. In 2005 warranty was $228,614, an increase of 3.0% from the prior year due to product improvements and design refinements. The continued high warranty expense is due to product improvements and design refinements from new product introductions in late 2004 and early 2005 and has abated with corrective action. Direct labor and material increased 53% in 2005 as a percentage of equipment revenue compared to 26% for 2004, as the result of increased training expense and new work procedures implemented for plastic tubing. Improved efficiency in the manufacturing process is expected over time with a resulting reduction in direct labor, material cost and equipment expense.
Operating Losses from continuing operations increased $296,175 from the prior year period, which included charges of $405,013 for R&D expense for the year for new product development work on plastic heat exchange products. Sales and marketing expenses increased $89,412, which included increases in travel and shows expenses in the development of new business. General and Administration expense increased $840,347 due to excessive operating overheads and salaries. Depreciation and amortization increased by 13.1% to $112,947 as the result of the investment by the company in computer hardware, new financial software and R&D test equipment during 2005. Margins in future periods should greatly improve and overheard expense will be reduced approximately 50%, as the Company eliminated its dependence on low margin bid spec contract business with the sale of PowerCold ComfortAir Solutions and the discontinuance of its operations.
PowerCold® plans to capitalize upon the last three years of innovative plastic applications development for the HVAC industry and concentrate on producing and marketing its high gross margin proprietary plastic products. The Company expects substantial product growth and higher gross profit margins by focusing its production and marketing efforts on OEM companies, including licensing its technology.
On January 9, 2006, the Company engaged Flagstone Securities to provide advisory and financial services and to secure various funding sources to support the monetary needs and growth of the Company. Flagstone Securities, LLC is a boutique investment bank headquartered in St. Louis, Missouri, with additional offices in New York, Los Angeles and Geneva.
PowerCold Corporation designs, develops and markets unique HVAC products and systems for commercial use. The Company derives its revenues from two principal product line applications. The first is a line of proprietary energy efficient products, including evaporative condensers, heat exchange systems and fluid coolers for the HVAC and refrigeration industry. The second is a proprietary four pipe integrated piping system for large commercial buildings that reduces power costs by up to 50% for air conditioning and refrigeration systems and provides a clean comfort air environment.
Shareholders will soon be notified of the Company's 2006 Annual Meeting of Shareholders. Go to http://www.powercold.com/pub/ShareholderLetter11May2006.pdf
to view the Company's Shareholder Letter, which focuses on the Company's proprietary product technology.
PowerCold® and Nauticon® are registered trademarks of PowerCold Corporation.
Forward-Looking Information: The statements in this news release contain forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve certain risks, assumptions and uncertainties, including the inability to generate and secure the necessary product sale, or the lack of acceptance of the company's products by its customers. In each case actual results may differ materially from such forward-looking statements. The company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results (expressed or modified) will not be realized.
Sandra Thiessen, 303-694-4363
PR Financial Marketing
Jim Blackman, 713-398-4694 (Investor Relations)
Source: PowerCold Corporation