Activities
Since Opticom and its operating subsidiary Thin Film Electronics (TFE) signed the productization and licensing agreement for process and product development with Intel, TFE scientists have been working intensely to produce the deliverables in accordance with the project schedule. The work under the agreement is scheduled to last into 2003, and includes process development in order to establish a production process that can be employed in industrial scale volume production, and the design of a commercially viable product. A small TFE team is located at Intel’s Hillsboro, Oregon facility, working side-by-side with Intel’s project team. The group is supported and supplemented from TFEs facilities in Linköping, Sweden and Albuquerque, New Mexico.
While the Intel project is TFEs top priority, the company continues its efforts into basic research in its field, particularly related to next-generation materials, designs and processes. These activities takes place at the head office in Oslo as well as the other two facilities. Certain tasks are contracted to various research institutions, chiefly in Sweden, USA and Japan.
Opticom group financial statements
Starting with this report, Opticom provides in addition to the interim reporting format in accordance with the requirements of Oslo Børs a shedule with complete quarterly numbers for last year and current year.
TFE reported NOK 3.4 million revenue in the quarter, compared to NOK 4.2 million the prior quarter. The revenue originated from Intel for project deliveries according to the productization and licensing agreement for process and product development. Revenue is recorded only upon delivery to Intel, and is expected to increase in the second half.
Operating costs were NOK 22.3 million in the quarter, in line with the preceding quarter, and the corresponding quarter of last year. Depreciation and write-down increased to NOK 15.9 million for the quarter, compared to NOK 14.6 million in the preceding quarter and NOK 8.7 million in Q2 2001. This increase reflects the growth in TFE’s fixed assets over the period, in particular the Linköping facility and equipment in 2001 and Q1 2002.
The company capitalises direct external and internal research and development expenses that are directed at creating new knowledge to become part of the company’s intellectual property, while the cost of the deliverables for which revenue is recognised, is expensed. Capitalisation of the internal research and development effort is shown as a cost reduction, and amounted to NOK 12.1 million in the quarter, which is in line with prior quarter, but lower than average for 2001. This decrease in 2002 reflects that a sizable share of the research and development organisation is now working on the deliverables being paid for by Intel. Research and development purchased externally is added directly to the balance sheet, and does not flow through the profit and loss statement. The external purchases of research and development were low also in Q2 2002, because TFE is now itself capable of performing most of the tasks at hand in-house. This may vary over time, depending on volume and type of issues being pursued.
The results from Opticom’s Internet technology associate Fast Search & Transfer (FAST) are published by FAST. The result in FAST has no cash effect for Opticom. FAST reported a net profit for 1H 2002 amounting to USD 314 thousand (under Norwegian accounting, including a post-reporting correction to Q1 2002). The net gain to Opticom from the investment in FAST was NOK 72.8 million in 1H 2002. Of this, NOK 0.8 million is Opticom’s share of FAST’s net profit in the year to date, while the rest is largely Opticom’s gain on dilution from the private placement completed by FAST in first quarter.
Net other financial items was negative NOK 1.4 million. This includes NOK 5.5 million non-cash exchange losses on loans within the TFE group denominated in foreign currency. Such accounting gain/loss occurs when foreign currencies appreciate/depreciate.
Most of the reported tax cost is estimated deferred tax from the gain on dilution in FAST. Such tax will only become payable in the event that Opticom sells FAST shares, for which there is no prospect.
The investment in tangible assets in Q2 2002 was only NOK 2.6 million, which reflects that the the Linköping facility amounting to about NOK 100 million was completed in Q1 2002. Going forward, investments are expected to remain at a comparatively low – maintenance – level, with occasional peaks upon aquisition of additional equipment needed for the Intel project or to pursue other assignments.
Cash outflow was NOK 28.3 million in the quarter, in line with expected on-going level. The cash position amounted to NOK 246.2 million at the end of Q2 2002. This is adequate for the planned investments and operations. The group has no financial debt, and does not need or intend to raise such debt.
At the end of the quarter, the group had 75 employees – unchanged since year-end 2001. The number is expected to remain stable at this level.
