SATC Satcon Technology Corp. (MM)

SatCon Technology Corporation� (NASDAQ CM: SATC), a developer and supplier of power management and system architecture solutions for the alternative energy and distributed power markets, today announced its operating results for the quarter ended June 30, 2007. �This has been a strong revenue growth quarter for SatCon,� said David Eisenhaure, President and Chief Executive Officer. �As we have been predicting for some time, the Photovoltaic Inverter market opportunity is experiencing rapid growth and we have been positioned well to take advantage of the technical strength of our products.� For the quarter our: Revenues increased 31% over last year to $11.7 million. Photovoltaic Inverters represented $3.8 million or over 30% of that total, a 70% increase over last year - highlighting our growth in this major market segment. Year to date our photovoltaic inverter revenues have more than doubled over last year to $7 million dollars. In addition to our revenue increases: Our backlog grew to a record $48 million at the end of the quarter, an 80% increase over last year. We have continued to deliver a positive sales order booking to revenue ratio for the last 9 quarters. As a result, we continue to project that we will have revenues of $50 million for the year with an expectation of over $30 million of revenue in the second half of 2007. This compares to our 2006 annual revenue of $34 million, an increase of over 47%. We also stated that we would need to find additional working capital to fund our growth. To that end, this July we: Executed a warrant conversion that raised $4.7 million, which improved our cash position and will allow us to fund the manufacture of photovoltaic inverters and other products that will bolster our increasing revenues. As we go forward we will continue to evaluate our capital needs to meet our revenue targets, but for the remainder of the year our current cash on hand and that generated from revenues should be sufficient to support our $50 million revenue projection for 2007. As we stated last quarter, we will need to raise additional funds to properly support our continued revenue growth. In addition, we said that with the increased revenue of $50 million for the year that our losses from operations would decline. Had we not incurred unanticipated losses from a couple of 5-year-old legacy products in the Power Systems group, our losses in fact would have dropped over last year. As we look forward to the second half of 2007, we anticipate that the trend in the reduction of our operating losses will continue. Revenues for the quarter ended June 30, 2007 were $11.7 million compared with $8.1 million in the second quarter of 2006, an increase of 31%. Revenues for the first six months totaled $20.1 million, a 27% increase over the $15.7 million in 2006. Revenues within the Power Systems Division in Canada increased by 59% to $5.2 million for the quarter compared to $3.3 million in the second quarter of 2006 for a total in the first six months of $8.8 million, a 58% increase over $5.6 million in 2006. In addition, the Applied Technology Division revenue recorded growth of over 42% to $1.8 million from $1.3 million for a total growth of over 62% to $3.6 million in 2007 from $2.2 million in 2006. Revenues in the Motors and Hybrid Electric Vehicle business was up 66% to $1.0 million compared to $0.6 million in 2006 with total increases of approximately $0.4 million from $1.4 to $1.8 million in 2007. This revenue growth reflects the results of the company�s effort to focus on products targeted at the alternative energy and distributed power markets. Operating Losses for the second Quarter of 2007 were $3.5 million, virtually equal to the same period of 2006 with a total six-month loss of $6.5 million compared to $6.7 million in 2006. However, included in the Q2 2007 losses are approximately $1.0 million of excess costs associated with older legacy products primarily in our Power Systems Division. In addition, we experienced increased labor costs as well as increased materials costs due to the availability of materials from our supplier base to meet increased demand for photovoltaic inverters and a strengthening of the Canadian dollar during the last quarter. The company continued to increase direct investment spending in R&D with a modest increase of $0.1M to $0.6M in Q1 2007 for a total of $1.3M for the first half of 2007, an increase from $0.2M in 2006, primarily to support the development of new photovoltaic products. These cost increases were partially offset by reduced SG&A expenses by $0. 3 million or 11% and $0.9 million or 13% for the first six months, primarily due to a decrease in corporate costs related to legal and other fees, reduced payroll and other overhead costs. About SatCon Technology Corporation SatCon Technology Corporation is a developer and manufacturer of electronics and motors for the Alternative Energy, Hybrid-Electric Vehicle, Grid Support, High Reliability Electronics and Advanced Power Technology markets. For further information, please visit the SatCon website at www.satcon.com. SATC-E Statements made in this document that are not historical facts or which apply prospectively are forward-looking statements that involve risks and uncertainties. These forward-looking statements are identified by the use of terms and phrases such as �will,� �believes,� �expects,� �plans,� �anticipates� and similar expressions. Investors should not rely on forward looking statements because they are subject to a variety of risks and uncertainties and other factors that could cause actual results to differ materially from the Company�s expectation. There can be no assurance that the company will continue to maintain this level of new orders or that it can successfully deliver the components and systems ordered. Additional information concerning risk factors is contained from time to time in the Company�s SEC filings. The Company expressly disclaims any obligation to update the information contained in this release. SATCON TECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEETS June 30, 2007 December 31, 2006 ASSETS (Unaudited) Current assets: Cash and cash equivalents $1,833,797 $7,190,827 Restricted cash and cash equivalents 84,000 84,000 Accounts receivable, net of allowance of $193,506 and $792,245 at June 30, 2007 and December 31, 2006, respectively 9,240,562 8,549,923 Unbilled contract costs and fees 311,743 267,247 Inventory 14,396,715 7,945,874 Prepaid expenses and other current assets 3,394,063 756,884 � Total current assets $29,260,880 $24,794,755 Property and equipment, net 2,891,034 2,783,900 Goodwill, net 704,362 704,362 Intangibles, net 990,883 1,224,488 Restricted cash 1,000,000 1,000,000 Other long-term assets 71,382 69,782 � Total assets $34,918,541 $30,577,287 � LIABILITIES AND STOCKHOLDERS' Deficit Current liabilities: Current portion of long-term debt $41,689 $123,219 Accounts payable 6,819,982 4,538,569 Accrued payroll and payroll related expenses 1,615,970 1,449,185 Other accrued expenses 3,157,051 2,405,447 Accrued restructuring costs - 1,200,326 Current portion of senior secured convertible notes 5,500,000 5,500,000 Current portion of warrant liability - 436,919 Deferred revenue 13,103,405 5,834,537 Total current liabilities $30,238,097 $21,488,202 Redeemable convertible Series B preferred stock (345 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively; face value $5,000 per share; liquidation preference $1,725,000) 1,725,000 1,725,000 Long-term senior secured convertible notes, net of current portion 4,259,446 7,240,482 Long-term warrant liability, net of current portion 2,542,489 2,483,634 Other long-term liabilities 105,643 108,049 Total liabilities 38,870,675 $33,045,367 � Commitments and contingencies (Note H) � Stockholders' deficit: Common stock; $0.01 par value, 100,000,000 shares authorized; 43,967,441 and 40,105,073 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively $439,675 $401,051 Additional paid-in capital 161,571,515 156,379,193 Accumulated deficit (166,112,865) (158,991,838) Accumulated other comprehensive loss 149,541 (256,486) Total stockholders' deficit $(3,952,134) $(2,468,080) Total liabilities and stockholders' deficit $34,918,541 $30,577,287 Three Months Ended Six Months Ended June 30, July 1, June 30, July 1, 2007 2006 2007 2006 Revenue: Product revenue $ 9,919,486 $ 6,852,666 $16,452,072 $13,513,223 Funded research and development and other revenue 1,774,666 1,250,491 � 3,559,845 2,196,772 � Total revenue $11,694,152 $ 8,103,157 � $20,011,917 $15,709,995 � Operating costs and expenses: Cost of product revenue 10,044,974 6,675,853 16,415,446 12,520,998 Research and development and other revenue expenses: Funded research and development and other revenue expenses 1,312,047 1,100,077 2,668,846 2,078,084 Unfunded research and development expenses 645,603 512,819 � 1,323,012 1,072,901 Total research and development and other revenue expenses $1,957,650 $ 1,612,896 $3,991,858 $ 3,150,985 Selling, general and administrative expenses 3,113,879 3,393,602 5,937,720 6,752,976 Amortization of intangibles 83,773 111,671 193,594 223,342 Gain on sale of assets held for sale � (189,960) � � (189,960) Total operating costs and expenses $15,200,276 $11,604,062 � $26,538,618 $22,458,341 � Operating loss $ (3,506,124) $ (3,500,905) $ (6,526,701) $ (6,748,346) Change in fair value of notes and warrants 385,035 � 584,628 � Other (loss) income (24,925) 42,535 (65,479) 63,371 Interest income 36,692 57,483 122,231 152,782 Interest expense (626,322) ( 85,568) � (1,235,706) (188,116) Net loss $ (3,735,644) $(3,486,455) � $ (7,121,027) $ (6,720,309) � Net loss attributable to common stockholders per weighted average share, basic and diluted $(0.09) $(0.09) � $(0.17) $(0.17) Weighted average number of common shares, basic and diluted 42,869,473 39,114,884 42,132,067 38,819,563