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Electro Energy Reports First Quarter 2008 Results(Marketwire Via Acquire Media NewsEdge) DANBURY, CT, May 16 / MARKET WIRE/ -- 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 ============ ============ Contact: Michael E. Reed (203) 797-2699 or Timothy E. Coyne (203) 797-2699 Copyright ? 2008 Marketwire |