Published:
Electro Energy Reports First Quarter 2008 Results
Electro Energy Inc. (NASDAQ: EEEI), a leading
provider of advanced battery technologies and associated systems, today
announced results for the first quarter ended March 31, 2008.
Consolidated net revenue for the three months ended March 31, 2008 was
$762,336 compared with $799,681 for the same period of 2007.
Net revenue from services was $638,335 in the first quarter of 2008
compared with $721,703 in 2007. The decrease was a result of lower revenue
from several completed contracts partially offset by new research and
development contract awards from the Department of Defense and Department
of Energy for battery development for communications applications and high
and low temperature and thermal battery development and from Lockheed
Martin for lithium ion wafer cell battery development for the High Altitude
Air Ship. The service contract backlog as of March 31, 2008 was $1,908,000.
Net revenue from products for the 2008 first quarter was $124,001compared
with $77,978 for the same period of 2007 primarily as a result of sales of
smart battery products. The product order backlog was approximately
$2,592,000 as of March 31, 2008.
Consolidated gross loss for the first quarter of 2008 was $167,406, or
22.0% of total net revenue, compared with $225,103, or 28.2% of net revenue
in 2007. Gross loss from services in the first quarter of 2008 was
$132,579, or 20.8% of net service revenue, compared with $175,932, or 24.4%
of net service revenue in 2007. Gross loss from products was $34,827, or
28.1% of net product revenue, compared with $49,171, or 63.1% of net
product revenue, in 2007. The gross loss was primarily a result of the lack
of absorption of overhead costs.
Selling, general and administrative ("SG&A") expenses for the three months
ended March 31, 2008 were $1,975,951, or 259.2% of total net revenue,
compared with $1,635,337 or 204.5% of total net revenue in 2007, an
increase of $340,614 or 21%. The increase in SG&A was a result of $152,774
higher start-up costs associated with the Florida manufacturing facility
and $250,120 of licensing fees and related expenses for truck anti-idling
auxiliary power unit and certain smart battery system technologies.
Research and development ("R&D") expenses for the first quarter of 2008
were $258,126, or 33.9% of total net revenue, compared with $403,824, or
50.5% of total net revenue in 2007, a decrease of $145,698, or 36%. The
decrease in R&D expenses is the result of lower costs for advanced wafer
cell battery development with In-Q-Tel under a stock purchase agreement
completed in 2007 and lower costs related to plug-in hybrid vehicle
("PHEV") battery development.
Interest expense for the three months ended March 31, 2008 was $449,491
compared with $487,143 in 2007, a decrease of $37,652 or 8%. The decrease
in interest expense reflects the $110,000 late registration penalties
recorded in the 2007 related to the 8.5% Senior Secured Convertible Notes
redeemed on December 7, 2007, partially offset by an increase in the amount
of outstanding senior secured convertible notes at a higher coupon rate.
The amortization of deferred debt discount and deferred financing costs was
$896,552 and $101,196, respectively, in the first quarter of 2008 compared
with $76,478 and $87,107, respectively, in the first quarter of 2007 as a
result of the higher deferred debt discount and deferred financing costs
associated with the 10% Notes.
For the three months ended March 31, 2008, the net loss was $3,888,096, or
$0.14 per basic and diluted share, compared with $2,860,752, or $0.13 per
basic and diluted share in 2007. During the three months ended March 31,
2008, the Company recorded dividends of $165,693 on the Series B
Convertible Preferred Stock and the net loss available to common
stockholders for the first quarter of 2008 was $4,053,789 or $0.14 per
basic and diluted share compared with $2,860,752 or $0.13 per share in
2007.
Michael E. Reed, President and CEO of Electro Energy, said, "Our first
quarter revenue was weaker than the prior year. However, our order backlog
grew during this period as a result of the first phase of the $5 million
Kiowa helicopter battery order we previously announced. Shipments on the
Kiowa battery contract are expected to commence in the second quarter once
first article testing is completed. Additional Department of Defense and
Department of Energy funding of $3 million for R&D services have been
appropriated for FY2008 and we expect to finalize contracts and begin
generating revenue from these contracts in the second quarter of 2008."
"On May 5, 2008, we received UL certification for our model 18650AXA
rechargeable lithium ion cylindrical cell. The UL certification is
universally recognized by product manufacturers and consumers and readily
accepted by international certification bodies. This certification will
help us to establish market acceptance of our products as we commence high
volume manufacturing at our Florida plant to meet the growing worldwide
demand for 18650 cells. We recently received our first order for a military
application for our 18650 cells and have already received a follow on to
that initial order. We have begun aggressively marketing our manufacturing
capabilities and products. Although we are confident that the significant
interest in our products and manufacturing capabilities coupled with our UL
certification will result in a steady flow of customer orders, the timing
of customer commitments, order volume and delivery schedules will be
unpredictable until we have an established customer base and ongoing
relationships," Mr. Reed said.
Mr. Reed concluded, "As our business develops, we must continue to raise
additional capital. The amount of future financings will be directly
related to our success in generating product revenue for our 18650 cells.
We believe that our ongoing requirements to raise additional capital are
consistent with those of companies that are in a similar early stage of
development."
Conference Call
The Company will hold a conference call Friday, May 16, 2008 at 10 a.m.
Eastern Time. Interested participants should call (866) 541-8090 when
calling within the United States or (706) 758-0055 when calling
internationally. Please use passcode 47697570.
The playback of the conference will be available commencing two hours after
the completion of the call and will be available for 30 days. To listen to
the playback, please call (800) 642-1687 when calling within the United
States or (706) 645-9291 when calling internationally. Please use passcode
47697570. The call will also be webcast and will be available on the
Company's web site at www.electroenergyinc.com under the Investor Relations
section under News and Events.
About Electro Energy Inc.
Electro Energy Inc., headquartered in Danbury, Connecticut, was founded in
1992 to develop, manufacture and commercialize high-powered, rechargeable
bipolar wafer cell nickel-metal hydride batteries for use in a wide range
of applications. Its Colorado Springs operation is AS9100/ISO9001 certified
and supplies aerospace-grade high quality nickel cadmium batteries and
components for satellites, aircraft and other specialty applications. EEEI
is also developing high power lithium rechargeable batteries utilizing the
Company's proprietary bipolar wafer cell design. EEEI owns significant
manufacturing assets near Gainesville, Florida for rechargeable lithium ion
18650 cylindrical cells, the standard cell used in the electronics
industry. For further information, please visit www.electroenergyinc.com.
Certain statements in this news release may contain forward-looking
information within the meaning of Rule 175 under the Securities Act of 1933
and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to
the safe harbor created by those rules. All statements, other than
statements of fact, included in this release, including, without
limitation, statements regarding potential future plans and objectives of
the companies, are forward-looking statements that involve risks and
uncertainties. There can be no assurance that such statements will prove to
be accurate and actual results and future events could differ materially
from those anticipated in such statements. Factors that could cause actual
results to differ materially from those in the forward-looking statements
include, among other things, the following: general economic and business
conditions; competition; unexpected changes in technologies and
technological advances; ability to commercialize and manufacture products;
results of experimental studies; research and development activities;
changes in, or failure to comply with, governmental regulations; and the
ability to obtain adequate financing in the future. This information is
qualified in its entirety by cautionary statements and risk factors
disclosure contained in certain of Electro Energy Inc.'s Securities and
Exchange Commission filings available at http://www.sec.gov.
ELECTRO ENERGY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2008 2007
(UNAUDITED)
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,349,012 $ 5,751,382
Accounts receivable, net 438,027 291,152
Inventories 926,516 678,955
Prepaid expenses and other current assets 254,144 184,483
------------ ------------
Total current assets 4,967,699 6,905,972
------------ ------------
PROPERTY AND EQUIPMENT, Net 22,054,892 22,380,934
------------ ------------
OTHER ASSETS
Deferred financing costs 1,888,994 1,984,737
Security deposit 228,164 228,164
------------ ------------
Total other assets 2,117,158 2,212,901
------------ ------------
TOTAL ASSETS $ 29,139,749 $ 31,499,807
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 563,472 $ 467,867
Accrued expenses 918,539 630,389
Customer deposits 78,000 78,000
Current portion of capital lease 11,353 11,110
------------ ------------
Total Current Liabilities 1,571,364 1,187,366
------------ ------------
OTHER LIABILITIES
Secured convertible note, net of deferred debt
discount of $16,866,995 and $17,763,547,
respectively 1,133,005 236,453
Deferred rent, less current portion 595,702 551,358
Capital lease, less current portion 20,116 23,047
------------ ------------
Total Other Liabilities 1,748,823 810,858
------------ ------------
TOTAL LIABILITIES 3,320,187 1,998,224
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, 10,000
shares authorized;
Series A Convertible Preferred Stock, 160
outstanding ($160,000 liquidation preference) - -
Series B Convertible Preferred Stock, 5,401
outstanding ($1,485,275 liquidation preference) 5 5
Common stock, $0.001 par value, 250,000,000
shares authorized; 28,811,797 shares issued and
outstanding 28,812 28,812
Additional paid-in capital 65,246,665 64,918,395
Deferred lease costs, net (695,973) (739,471)
Accumulated deficit (38,759,947) (34,706,158)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 25,819,562 29,501,583
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,139,749 $ 31,499,807
============ ============
ELECTRO ENERGY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 and 2007
(UNAUDITED)
2008 2007
------------ ------------
NET REVENUE
Services $ 638,335 $ 721,703
Products 124,001 77,978
------------ ------------
TOTAL NET REVENUE 762,336 799,681
------------ ------------
COST OF REVENUE
Cost of services 770,914 897,635
Cost of products 158,828 127,149
------------ ------------
TOTAL COST OF REVENUE 929,742 1,024,784
------------ ------------
GROSS LOSS (167,406) (225,103)
------------ ------------
OPERATING EXPENSES
Selling, general and administrative (including
stock-based compensation of $170,003 and
$218,861 in 2008 and 2007, respectively) 1,975,951 1,635,337
Research and development 258,126 403,824
------------ ------------
TOTAL OPERATING EXPENSES 2,234,077 2,039,161
------------ ------------
OPERATING LOSS (2,401,483) (2,264,264)
------------ ------------
OTHER EXPENSE (INCOME)
Interest expense 449,491 487,143
Interest income (35,626) (54,240)
Amortization of deferred debt discount 101,196 87,107
Amortization of deferred financing costs 896,552 76,478
Loss on disposal of fixed assets 75,000 -
------------ ------------
TOTAL OTHER EXPENSE, NET 1,486,613 596,488
------------ ------------
NET LOSS $ (3,888,096) $ (2,860,752)
DIVIDENDS ON SERIES B PREFERRED STOCK 7,426 -
------------ ------------
DEEMED DIVIDEND ON SERIES B PREFERRED STOCK 158,267 -
------------ ------------
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (4,053,789) $ (2,860,752)
============ ============
NET LOSS PER SHARE - BASIC AND DILUTED $ (0.14) $ (0.13)
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 28,811,797 22,838,383
============ ============
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