Solomon Technologies, Inc. Reports Financial Results for the Quarter Ended March 31, 2007
TARPON SPRINGS, Fla., May 16, 2007 -- Solomon Technologies, Inc. (BULLETIN BOARD: SOLM) , a developer and manufacturer of high-efficiency regenerative electric power drive systems as well as high- voltage, high-power direct current power supplies and power supply systems, today announced its operating results for the quarter ended March 31, 2007. The Company filed its Form 10-QSB with the Securities Exchange Commission on May 15, 2007.
Revenue for the quarter ended March 31, 2007 was $1.4 million, an increase of $1.4 million compared with $0.005 million for the quarter ended March 31, 2006. Revenues in the Company's Power Electronics Division contributed all of the growth as a direct result of the acquisition of Technipower LLC, which closed August 17, 2006. Revenue in the Motive Power Division was $0.03 million compared with $0.005 million in 2006. This revenue shift reflects the Company's effort to focus on building critical mass of revenue and profitability through product diversification into Power Electronics as a complement to its Motive Power products and technology.
Gross profit for the quarter ended March 31, 2007 was $0.65 million, up dramatically compared with the gross profit of $0.003 million for the quarter ended March 31, 2006. Net cash used by operating activities was ($0.47) million for the quarter ended March 31, 2007 compared with ($0.19) million used in the quarter ended March 31, 2006.
The Technipower acquisition is having a significant positive impact on the 2007 financial statements and the investment the Company is making in new product and market development is resulting in solid sales growth. Order backlog at March 31, 2007 was at an all-time high of approximately $3 million, up from $2.5 million at December 31, 2006.
"The growth in order backlog for our Power Electronics Division is particularly encouraging given that 48% of the backlog now consists of new products developed within the past 24 months. Our strategy is taking shape - and the segmented results provide some early evidence that we will orient our business decisions towards adding incremental revenue on an accretive basis," commented Gary Brandt, Chief Executive Officer. "Our financial results reveal the profitability inherent in the Power Electronics division and give us confidence that the investment we are making in new product development will contribute to improved profitability."
Operating loss for the quarter ended March 31, 2007 was ($0.85) million compared with an operating loss of ($1.1) million for the same period in 2006. The increased gross profit was partially offset by the increased operating expenses associated with both financing activities and the Technipower acquisition. The Company has increased its investment in R&D, on an annualized basis, by over $1.0 million. These R&D investments are being made to drive the strategic shift in the Power Electronics business towards industrial high-voltage, high-power electrical energy conversion devices to accelerate future revenue growth. These initiatives are expected not only to drive revenue growth in Power Electronics but also to benefit the Motive Power division as it targets new markets.
Loss applicable to common stockholders for the quarter ended March 31, 2007 was ($5.7) million, or ($0.16) per share, compared with ($7.6) million, or ($0.43) per share, for the same period in 2005. Major contributors to the reduction in loss applicable to common stockholders for the first quarter (as compared with 2006) were non-cash charges of $5.6 million related to the extinguishment of debt in the prior year which were somewhat offset by the non-cash interest expenses incurred in first quarter 2007 related primarily to the Debentures described below.
Available cash balance at March 31, 2007 was $1,106,014. The Power Electronics Division experienced positive cash flow of approximately $0.1 million during the first quarter, which was more than offset by the corporate costs, combined with the costs associated with the Motive Power Division.
On January 17, 2007, the Company sold an aggregate of $5,350,000 principal amount of Variable Rate Self-Liquidating Senior Secured Convertible Debentures due March 17, 2008. The Company used approximately $3,350,000 of the net proceeds of the Debentures to redeem 2,873,492 shares of Series C preferred stock, approximately $768,250 of the net proceeds to pay down a promissory note and other obligations and retained approximately $1,018,000 of the net proceeds as working capital.
In December 2006, the Company entered into a letter of intent to acquire Deltron, Inc., a North Wales, Pennsylvania based manufacturer of power supplies and related equipment with manufacturing operations in Reynosa, Mexico. Deltron provides precision linear and switching power supplies and power supply systems for applications where power density and functionality are critical. Management currently anticipates that the acquisition will close during the second quarter of 2007.
In December 2006 the Company signed a financing term sheet for a credit facility to be used exclusively for acquisitions. The term sheet contemplates a facility of up to $10 million on a standby basis secured by the acquired assets and guaranteed by the Company. The Company intends to use the facility to strike more quickly at unique smaller acquisition opportunities that are consistent with its growth plans.
"We have taken steps to establish a strong platform from which we expect to add revenue on an accretive basis," said Gary Brandt. "With one acquisition pending and others contemplated, we are committed to building a business which not only addresses the growing market demand for high-efficiency power electronics and energy conversion devices, but also delivers positive financial returns. In order to put the Company in a position to consistently achieve positive cash flows we are working to establish a critical mass within our Power Electronics business which is expected to provide sufficient cash flow to support our investment in Motive Power products and related technologies."
CONFERENCE CALL SCHEDULED
The Company has scheduled a conference call with investors on Friday, May 18, 2007 at 9:00 AM Eastern Daylight Savings Time, to discuss the Company's financial results for the year first quarter ended March 31, 2007.
Gary G. Brandt, Chief Executive Officer will be joined on the call by Gary Laskowski, Chairman of the Company's Board of Directors, Michael D'Amelio, Director and Secretary of the Company and Sam Occhipinti, Chief Financial Officer to review the Company's financial and operational highlights.
Interested parties should call 1-800-819-9193 (US and Canada) or 1-913-981-4911 (International) five minutes in advance to participate. The call will also be open to all interested investors through a live audio Web broadcast accessible at the Solomon Technologies, Inc. corporate website, www.solomontechnologies.com. For those unable to listen to the live broadcast, the call will be archived on the above-mentioned site.
Information about Solomon Technologies, Inc.:
Solomon Technologies, Inc., through its Motive Power and Power Electronics divisions, develops, licenses, manufactures and sells precision electric power drive systems, including those utilizing its patented Electric Wheel(TM), Electric Transaxle(TM) and hybrid and regenerative technologies as well as direct current power supplies and power supply systems requiring high levels of reliability and ruggedness for defense, aerospace, marine, commercial, automotive, 'hybrid-electric' and 'all-electric' vehicle applications.
FORWARD LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The statements regarding Solomon Technologies, Inc. in this release that are not historical in nature, particularly those that utilize the terminology such as "may," "will," "should," "likely," "expects," "anticipates," "estimates," "believes," or "plans," or comparable terminology, are forward-looking statements based on current expectations about future events, which management has derived from the information currently available to it. It is possible that the assumptions made by management for purposes of such statements may not materialize. Actual results may differ materially from those projected or implied in any forward-looking statements. Important factors known to management that could cause forward-looking statements to turn out to be incorrect are identified and discussed from time to time in the company's filings with the Securities and Exchange Commission. The forward- looking statements contained in this release speak only as of the date hereof, and the company undertakes no obligation to correct or update any forward- looking statements, whether as a result of new information, future events or otherwise.
PART I FINANCIAL INFORMATION
Item 1 . Financial Statements
Solomon Technologies, Inc.
Condensed Consolidated Balance Sheet
March 31, 2007
(Unaudited)
Assets
Current assets
Cash $1,106,014
Accounts receivable, net 870,306
Inventories 1,462,112
Due from related parties 22,826
Deferred debt costs 139,754
Prepaid expenses and other current assets 124,292
3,725,304
Noncurrent assets
Property and equipment, net 116,407
Goodwill 2,873,576
Intangible assets 1,823,868
4,813,851
$8,539,155
Liabilities and Deficiency in Assets
Current liabilities
Revolving note payable to bank $950,000
Accounts payable 823,085
Accrued compensation 2,466,182
Other accrued expenses 608,357
Capital lease obligations 6,972
Notes payable 187,000
Notes payable to related parties 1,837,085
Convertible debentures payable 2,889,458
9,768,139
Deficiency in Assets
Common stock, par value $0.001 per
share; authorized 100,000,000 shares;
36,089,533 issued and outstanding 36,089
Additional paid-in capital 43,237,742
Accumulated deficit (44,502,815)
(1,228,984)
$8,539,155
Solomon Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
2007 2006
As Restated
Net sales $ 1,431,597 $5,365
Cost of goods sold 779,287 2,569
Gross profit 652,310 2,796
Operating expenses:
Selling, general and administrative 1,251,938 1,098,755
Research and development 253,664 -
1,505,602 1,098,755
Operating loss (853,292) (1,095,959)
Other expenses
Interest expense (3,444,608) (727,965)
Loss on extinguishment of redeemable
preferred stock and other debt - (5,667,569)
(3,444,608) (6,395,534)
Net loss (4,297,900) (7,491,493)
Preferred stock dividends (1,413,031) (60,000)
Loss applicable to common stockholders $(5,710,931) $(7,551,493)
Basic and diluted net loss per
common share $(0.16) $(0.43)
Weighted average common shares
outstanding - basic and diluted 35,465,709 17,740,475
Solomon Technologies, Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
2007 2006
As Restated
Operating activities
Net loss $(4,297,900) $(7,491,493)
Adjustments to reconcile net loss to
cash used by operations
Loss on extinguishment of redeemable
preferred stock and other debt - 5,667,569
Stock based compensation to
employees and directors 204,629 -
Common stock and warrants issued for
services 156,765 394,399
Accretion, dividends, and amortization of
debt costs included in interest expense 3,182,328 698,257
Depreciation 10,328 1,824
Amortization 98,581 20,692
Change in operating assets and liabilities
Accounts receivable 6,135 -
Inventories (32,863) 2,569
Prepaid expenses and other current
assets (101,515) -
Accounts payable and accrued expenses 301,834 515,237
Net cash used by operating activities (471,678) (190,946)
Investing Activities
Purchase of equipment (21,533) (1,962)
Net cash used by investing activities (21,533) (1,962)
Financing Activities
Proceeds from issuance of notes payable to
related parties - 197,000
Repayments of notes payable to related
parties (40,000) -
Proceeds from revolving note payable 200,000 -
Proceeds from issuance of converible
promissory notes 5,135,913 -
Repayments of notes payable (526,150) -
Redemption of preferred stock (3,350,020) -
Proceeds from Rule 16B 32,950 -
Repayments from related parties 52,489 -
Repayment of capital lease obligations (3,734) -
Net cash provided by financing
activities 1,501,448 197,000
Change in cash 1,008,237 4,092
Cash at beginning of period 97,777 3,693
Cash at end of period $1,106,014 $7,785