SOURCE: Electro Energy Inc.

April 02, 2007 16:00 ET

Electro Energy Reports 21% Increase in 2006 Annual Revenue

DANBURY, CT -- (MARKET WIRE) -- April 2, 2007 -- Electro Energy Inc. (NASDAQ: EEEI), a developer and manufacturer of advanced rechargeable batteries, today announced results for the year ended December 31, 2006. Consolidated total net revenue for 2006 was $4,666,737, a 21% increase compared with $3,861,650 for 2005. The increase in revenue was a result of the resumption of sales to EaglePicher after its emergence from bankruptcy in August, 2006 and increased battery shipments to the U.S. military.

The consolidated gross profit for 2006 was $105,991 or 2.3% of total net revenue compared with a consolidated gross loss of $(753,667) or (19.5)% in 2005. The improvement to gross profit was mainly a result of the revenue mix shift to products with higher gross profit and improved manufacturing overhead cost absorption resulting from higher product volume.

The net loss for the year ended December 31, 2006 was $(5,961,713) or $(0.28) per share compared with $(3,290,680) or $(0.23) per share in 2005. The net loss increased due to higher selling, general and administrative ("SG&A"), research and development ("R&D") and interest expense.

SG&A increased $1,988,837, primarily as a result of $1,287,848 of start-up operation costs at the newly acquired Gainesville, Florida manufacturing facility and an increase of $780,642 in non-cash, stock-based compensation expense as required by the latest accounting standards. R&D expenses increased $284,863 due to product development for use of the company's bipolar batteries for hybrid electric vehicles (HEV) and plug-in hybrid vehicles (PHEV), and for bipolar lithium ion batteries for advanced military applications. Interest expense for 2006 increased by $1,071,731, as a result of the issuance of 8.5% senior secured convertible notes in April, 2006 in connection with the acquisition of the Florida facility.

The Company ended the year with $6.3 million cash and cash equivalents, $2.5 million of which is restricted for payment of debt obligations over the next five quarters, compared to $0.6 million at the end of fiscal 2005.

"During 2006, we took important steps to further develop and begin to commercialize our advanced proprietary technologies. We are refurbishing and upgrading our Florida facility to position Electro Energy as a major supplier of advanced rechargeable batteries to domestic markets. We have demonstrated our technology in Hybrid Electric and Plug-in Hybrid Electric Vehicles at leading industry conferences and in Washington, DC and expect to establish the Company in these emerging growth markets. Discussions with major vehicle OEMs are in progress," said Michael E. Reed, CEO of Electro Energy. "Over the past eleven months, there has been a high level of interest in the manufacturing capabilities in our Gainesville facility. In addition, we continue to see opportunities for our innovative advanced battery technologies among governmental agencies such as the DOD and DOE as reflected by funding commitments for the further development of our bipolar wafer-cell Nickel Metal Hydride (NiMH) and Lithium-ion (Li-ion) batteries. As a result of these and other initiatives, we believe that Electro Energy is well positioned to generate significant revenue growth in 2007."

Some of the highlights of fiscal 2006 included:

Acquisition of Gainesville, Florida manufacturing assets for lithium-ion and nickel based rechargeable cells and batteries. The Company has begun the refurbishment and start-up of the high-volume manufacturing facility to meet the domestic demand from military, transportation, consumer product and utility markets.

Issued Senior Secured Convertible Notes to finance the commercialization plans. The Company issued $11 million of senior secured convertible notes to finance the further development of its proprietary bipolar battery design and advanced battery chemistry and to refurbish and startup the Florida facility.

Department of Energy (DOE) Contract. The Company received a $1 million contract from the U.S. Department of Energy Sandia National Laboratories to develop and demonstrate large-scale battery systems for utility type applications, including back-up power and energy storage, peak shaving and power conditioning systems. Electro Energy will develop bipolar NiMH battery modules and demonstrate complete systems in on-site customer applications to improve security and reliability of electricity supply.

Receipt of Order from Leading Supplier of nickel hydrogen (NiH2) cells and batteries that power space satellites. The Company received an order from EaglePicher Technologies, valued in excess of $410,000, for nickel sintered plaque, a key component of EaglePicher's nickel hydrogen batteries for satellite applications.

Contract award from the U.S. Army Communications and Electronics Command (CECOM), in Fort Monmouth, N.J. The $850,000 contract is to develop BB2590-type Li-ion rechargeable batteries. Each EEEI battery will have over 50% greater than currently available batteries of the same size. This high-volume configuration will address numerous Army communications needs.

Congressional Funding For Development of Advanced Military Applications. The Company received an earmark for $1 million from the 2007 budget of the U.S. Department of Defense (DOD) for continued development of its bipolar wafer-cell NiMH battery for advanced military aircraft applications.

Conference Call

The Company will hold a conference call today at 4:30 p.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 pass code 4528739.

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 pass code 4528739. 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 nickel-metal hydride batteries for use in a wide range of applications. Its Colorado Springs operation 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 bi-polar design. In 2006, the Company acquired significant manufacturing assets near Gainesville, Fla., to accelerate commercialization of its battery technology. 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
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                     FOR THE YEARS ENDED DECEMBER 31,

                                                    2006         2005
                                                ------------  ------------
Net Revenue
   Services                                     $  2,724,028  $  2,981,063
   Products                                        1,942,709       880,587
                                                ------------  ------------
      Total Net Revenue                            4,666,737     3,861,650
                                                ------------  ------------

Cost of Revenue
   Service                                         2,914,288     3,131,848
   Product                                         1,646,458     1,483,469
                                                ------------  ------------
      Total Cost of Revenue                        4,560,746     4,615,317
                                                ------------  ------------

      Gross Profit (Loss)                            105,991      (753,667)

Operating Expenses
   Selling, General and Administrative Expenses
    (including non-cash compensation of
    $986,003 and $205,361 for the years ended
    December 31, 2006 and 2005, respectively)      3,855,315     1,866,478
   Research and Development                          972,977       688,114
                                                ------------  ------------
      Total Operating Expenses                     4,828,292     2,554,592
                                                ------------  ------------

      Operating Loss                              (4,722,301)   (3,308,259)
                                                ------------  ------------

Other Expense (Income)
   Interest Expense                                1,093,744        22,013
   Interest and Dividend Income                     (239,261)      (39,592)
   Amortization of deferred debt discount            256,152             -
   Amortization of deferred financing costs          228,777             -
   Forgiveness of debt                              (100,000)            -
                                                ------------  ------------
      Total Other Expense (Income)                 1,239,412       (17,579)
                                                ------------  ------------

      Net Loss                                  $ (5,961,713) $ (3,290,680)
                                                ============  ============

      Net Loss per Share - Basic and Diluted    $      (0.28) $      (0.23)
                                                ============  ============

      Weighted Average Common Shares
      Outstanding - Basic and Diluted             21,030,376    14,565,542
                                                ============  ============


                 ELECTRO ENERGY INC. AND SUBSIDIARIES
                  CONSOLIDATED BALANCE SHEETS FOR THE
                       YEARS ENDED DECEMBER 31,



                                                    2006          2005
                                                ------------  ------------
                              ASSETS
Current Assets
Cash and cash equivalents                       $  3,789,780  $    591,664
Current portion of restricted cash                 1,935,000             -
Accounts recevable, net of allowance for
 doubtful accounts  of $0 and $5,652 at
 December 31, 2006 and 2005, respectively            877,792       666,317
Inventories                                          308,727       344,450
Prepaid expenses and other current assets            216,588       519,546
                                                ------------  ------------
    Total Current Assets                           7,127,887     2,121,977
                                                ------------  ------------

Property and equipment, net of accumulated
 depreciation                                     22,670,713     1,374,622
                                                ------------  ------------

Other Assets
Restricted cash, less current portion                629,021             -
Deferred financing costs                             994,075             -
Security deposits                                    228,164         8,471
                                                ------------  ------------
          Total Other Assets                       1,851,260         8,471
                                                ------------  ------------

  Total Assets                                  $ 31,649,860  $  3,505,070
                                                ============  ============

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Current maturities of long term debt            $     61,193  $    205,214
Current portion of senior secured convertible
 notes, net of deferred debt discount of
 $359,489                                            640,511             -
Accounts payable and accrued expenses                992,014       487,968
Current portion of capital lease                      10,187             -
                                                ------------  ------------
  Total Current Liabilities                        1,703,905       693,182
                                                ------------  ------------

Other Liabilities
Long term debt, less current maturities                    -        61,193
Senior secured convertible notes, net of
 current portion and  deferred debt discount of
 $898,669                                          9,101,332             -
Deferred rent, less current portion                  305,111        58,620
Capital lease, less current portion                   34,157             -
                                                ------------  ------------
  Total Other Liabilities                          9,440,600       119,813
                                                ------------  ------------

  Total Liabilities                               11,144,505       812,995

Commitments and Contingencies

Stockholders' Equity
Preferred stock, $0.0001 par value, 10,000
 shares authorized;
  Series A preferred stock, 5,600 shares
   designated; 5,501 shares issued, 160 and 180
   outstanding at December 31, 2006 and 2005,
   respectively; $160,000 and $180,000
   liquidation preference
   at December 31, 2006 and 2005, respectively             -             -
Common stock, $0.01 par value, 50,000,000
 shares authorized; 22,583,127 and 16,599,719
 shares outstanding at December 31, 2006 and
 2005, respectively
                                                      22,583        16,600
Additional paid in capital                        37,995,646    13,781,153
Deferred contract costs                               (2,333)      (27,807)
Deferred lease costs, net of amortization           (913,464)            -
Deferred compensation expense                              -      (442,507)
Accumulated deficit                              (16,597,077)  (10,635,364)
                                                ------------  ------------
   Total Stockholders' Equity                     20,505,355     2,692,075
                                                ------------  ------------

   Total Liabilites and Stockholders' Equity    $ 31,649,860  $  3,505,070
                                                ============  ============

Contact Information

  • Contact:
    Michael Wachs
    CEOcast, Inc. for Electro Energy
    (212) 732-4300