Opticom ASA – Results for Third Quarter 2002

 

 

Activities

During the period Opticom, through its operating subsidiary Thin Film Electronics (TFE), has focused its activities on the productization and licensing agreement for process and product development with Intel. TFE scientists have been working intensely to produce a number of project deliverables in accordance with the project programme. Certain work packages in the project have proven to be more time-consuming than originally planned and consequently the completion of certain deliverables have been delayed. Some activities have been rescheduled and a few design points have been redefined. However, no insurmountable problems have been identified, and TFE has made considerable progress during the quarter. Although the timing for some deliverables has slipped quarter on quarter, Opticom expects to make all deliverables within the programme schedule.

 

Work under the agreement is scheduled to last into 2003; it includes process and product development in order to establish a production process that could potentially be employed in industrial scale volume production. Intel and TFE will also design a dense polymer memory array that could be scaled up into a possible Intel 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 the field of polymer memory, particularly related to next-generation materials, designs and processes.

 

Opticom Group financial statements

[The financial statements are enclosed in a separate file. The statements and this report have been prepared in accordance with Norwegian Accounting Standard NRS 11. The statements and this report have not been subject to audit.]

 

TFE reported NOK 1.5 million revenue in the quarter, compared to NOK 3.4 million the prior quarter. The revenue originated from Intel for project deliveries and the lower revenue is directly related to a delay in making deliverables during Q2 2002. Revenue is recorded only upon delivery to Intel.

 

Operating costs were NOK 19.3 million in the quarter, slightly lower than the preceding quarter and the corresponding quarter of last year. Depreciation and write-down increased to NOK 16.3 million for the quarter, compared to NOK 15.9 million in the preceding quarter and NOK 12.5 million in Q3 2001. The increase in depreciation and write-down reflects the growth in TFE’s fixed assets during prior periods, in particular the Linköping facility and equipment acquired 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 10.5 million in the quarter, which is in line with Q1 but lower than Q2 and the average for 2001. A sizeable share of the research and development team is now working on the deliverables being paid for by Intel and this has resulted in lower amounts being capitalised. 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 are continuing at a lower level in 2002 because TFE is now itself capable of performing most of the tasks at hand in-house.

 

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 loss for Q3 2002 amounting to USD 1.4 million (under Norwegian accounting), and the year to date net loss is USD 1.1 million. However, Opticom enjoyed a net gain from the investment in FAST amounting to NOK 69.9 million year to date, largely because of Opticom’s gain on dilution from the private placement completed by FAST in the first quarter.

 

Net other financial items were positive NOK 1.6 million for the quarter, and 1.2 million positive year to date. While Opticom earns interest income on its net cash position, the TFE group to date has recorded NOK 6.5 million non-cash exchange losses on loans within the group denominated in foreign currency. Such accounting loss or gain occurs when the NOK appreciates or depreciates.

 

Most of the reported tax cost to date 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 the quarter was only NOK 1.4 million, which reflects the fact that the Linköping facility, a total investment amounting to about NOK 100 million, was completed in Q1 this year. Cash outflow was NOK 17.0 million in the quarter, slightly than the previous two quarters, because working capital improved. The cash position amounted to NOK 229.2 million at the end of the quarter. 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 74 employees – one person less than at year-end 2001.