Raser Technologies Announces First Quarter Update and Financial Results

PROVO, Utah--Raser Technologies, Inc. , an energy technology company, today announced financial results for the first quarter 2010, the period ended March 31, 2010.

Recent Highlights:

Announced that it completed installation of the bottom cycle project at its Thermo No. 1 plant in southern Utah ahead of schedule. Raser anticipates utilizing the bottom cycle process within the next few days;Ā the bottom cycle process re-directs a portion of the geothermal water coming out of the top cycle units and runs it through PureCycle units currently sitting idle allowing additional energy to be utilized from the geothermal water and converted to electricity.
Raser has also replaced 18 out of 50 recirculation pumps on the 50 PureCycle units with more efficient pumps, with full replacement of all pumps expected by the end of May 2010.Ā Utilizing the bottom cycle process and the replacement of the 50 recirculation pumps with more efficient pumps should enhance the overall output at the Thermo No. 1 plant to a range of 7-8.5 MW; $30 million of the grant proceeds the Thermo No. 1 plant received from the U.S. Treasury currently are in an escrow account, which will be used to fund obligations under the amended financing arrangements for the Thermo No. 1 plant. Final test scheduled to be completed by June 30, 2010.
Engaged a placement agent to monetize the remaining tax benefits from the Thermo No. 1 project with a new tax equity partner, replacing Merrill Lynch who was redeemed out of the project in December of 2009. The tax benefits result primarily from accelerated depreciation Raser is not in a position to fully utilize in the near term. These proceeds would be in addition to the $33 million the project received early this year as part of the U.S. Treasury grant program for the benefit of Raser.
Released a video update on its relationship with Hyundai Heavy Industries, a global leader in grid-electrical equipment and renewable energy generation equipment. The two companies recently completed meetings to further discussions for greater cooperation in the production of clean, renewable energy and manufacturing of plug-in electric vehicles.
Selected Barbour Well, Inc., of Henderson, Nevada to begin drilling in May 2010 on the Lightning Dock, New Mexico project; a drilling rig has been mobilized. The Lightning Dock resource, located in southwest New Mexico, is one of the most studied, undeveloped resources in the country. It is a shallow resource, with primary production expected from depths of less than 3,000 feet and at temperatures between 285 and 310 degrees Fahrenheit. Phase 1 is for 15MWā€™s and Raser has entered into a power purchase agreement with the Salt River Project.
Raised approximately $1.7 million gross proceeds through a Controlled Equity Offering^sm, or ā€œat-the-market,ā€??? program announced on April 8, 2010. Raser later terminated the offering on May 10, 2010.
Announced that it will hold the 2010 annual meeting of stockholders on June 9, 2010 for stockholders of record as of April 19, 2010. The meeting will be held at 2:30 p.m. at the Provo Marriott Hotel and Conference Center, 101 West 100 North, Provo, Utah.

First Quarter of 2010 Highlights

Selected as sole-source contractor under $1 million U.S. grant for geothermal study by Indonesia Power; awarded by U.S. Trade and Development Agency; study will assess the technical, economic, and financial feasibility of the geothermal resource, including the potential impact and opportunity the project will have for Raser and other U.S. suppliers in the Indonesian market.Ā The feasibility study began in April 2010 and covers a 100,000 acre concession, jointly owned by Raser and Indonesia Power.
Raser Chairman Kraig Higginson testified before the United States Senate Appropriations Subcommittee on Energy and Water Development, as part of testimony from industry leaders and the Department of Energy regarding the opportunities and challenges presented in increasing the number of electric vehicles in the light duty automotive sector.
Named Nicholas (Nick) Goodman Chief Executive Officer. Mr. Goodman has 15 years of extensive experience growing companies through project development and acquisition. He most recently served as Chief Executive Officer of TDX Power, an electric utility holding company and power generation project developer. Under his leadership, TDX Power grew from $3 million to over $60 million in annual recurring revenues.
John T. Perry was named Chief Financial Officer of Raser, effective March 22, 2010. Mr. Perry has more than 20 years of experience in the mining and metals industry.
Received $33 million renewable energy grant funded by the U.S. Treasury for Raserā€™s Thermo No. 1 geothermal power plant. The grant was provided by the U.S. Treasury Department under the Section 1603 renewable energy grant program created by the American Recovery and Reinvestment Act of 2009. Section 1603 grants cover approximately 30% of the total cost of the project and are available for projects started in 2010 and placed in service by 2014, for Raser this potentially includes Lightning Dock & Thermo 2 projects.
Reached an agreement with project financing partners to extend the final performance and completion test of the Thermo No. 1 project to June 30, 2010.Ā Output of the plant continues to increase as certain modifications are made. Raser recently recompleted four wells to reduce the inflow of water from the coolest formations and increase the average temperature of water entering the plant. Raser has also made changes to the plant generators to improve efficiency as well as other modifications to increase the overall output of the plant.
Sold $5 million of convertible preferred stock and issued warrants to acquire an additional $14 million in preferred stock to Fletcher International, Ltd., an affiliate of Fletcher Asset Management, Inc., in a transaction that closed on February 3, 2010. The financing is part of a broader strategic relationship between Raser and Fletcher.

ā€œWe had some significant accomplishments during the first quarter,ā€??? said Nick Goodman, Raser CEO. ā€œOnce the final performance test of Thermo No. 1 is complete, we expect the project to be cash flow positive. That is a good position to be in as we move on to our next geothermal project in New Mexico.ā€???

Financial Results

During the three months ended March 31, 2010, Raser reported revenue of approximately $1.0 million compared to $0 in the three months ended March 31, 2009. During the second quarter of 2009, Raser began selling electricity generated from its Thermo No. 1 plant to the City of Anaheim, California. During the first quarter of 2010, Raser generated approximately 11,543 MW hours of electricity, which was sold at a price of $79.56 per MW.

Cost of sales for the first quarter of 2010 were $2.0 million compared to $0 in the three months ended March 31, 2009. Gross margin was approximately $(1.0) million for the first quarter compared to gross margin of $0 during the same period in 2009.

Total operating expenses decreased to $4.0 million for the first quarter of 2010 compared to $5.3 million for the first quarter of 2009. Included in the operating expenses were:

General and administrative expenses were approximately $2.5 million during the first quarter of 2010 as compared to approximately $2.5 million for the first quarter of 2009. Equity-based non-cash employee and service provider compensation expense was approximately $0.4 million in the first quarter of 2010 compared to $0.6 million during the same period in 2009. Other employment related costs during the first quarter of 2010 increased by $0.2 million over first quarter of 2009 primarily reflecting executive search fees that were not incurred during the prior year.
Power project development expenses during the first quarter of 2010 totaled $1.3 million as compared to $2.1 million for the first quarter of 2009. During the first quarter of 2010, professional services decreased by approximately $0.4 million and employment related costs also decreased approximately $0.4 million due primarily to a difference in the classification of employment and direct consulting costs from power project development costs to cost of revenues beginning in the second quarter of 2009. The change in classification resulted from the Thermo No. 1 plant beginning operations in the second quarter of 2009. Equity based non-cash employee compensation associated with power project development employees and other operating costs for the three months ended March 31, 2010 remained relatively flat as compared to the first quarter of 2009.
Research and Development expense decreased from $658,000 in the three months ended March 31, 2009 to $257,000 for the three months ended March 31, 2010. Equity based non-cash employee compensation associated with research and development employees decreased by $0.2 million during the three months ended March 31, 2010 compared to the same period in 2009. This was due primarily to decreased headcount as a result of our decision to reduce the cash requirements associated with the research and development activities at our design center. Because we reduced employment levels at the design center, cash based employee compensation associated with research and development employees decreased $0.3 million during the three months ended March 31, 2010 from the first quarter of 2009. This decrease was partially offset by increased professional services of approximately $0.1 million during the three months ended March 31, 2010 compared to the same period in 2009 due primarily to additional consulting work relating to enhancements of our PHEV Hummer demonstration vehicle. The portion of engineering expenses relating to testing of materials remained relatively flat during the three months ended March 31, 2010 over the comparable 2009 period.

Non-controlling interest decreased by $1.0 million during the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The decrease resulted from the withdrawal of Merrill Lynch as Class A Member from the Thermo Subsidiary and the redemption of its interest in the Thermo Subsidiary in connection with amendments to the Thermo No. 1 financing arrangements in December 2009. As a result, we own 100% of the Thermo Subsidiary thereby eliminating the non-controlling interest.
During the first quarter of 2010, we sold 5,000 shares of our Series A-1 Cumulative Convertible Preferred Stock (the ā€œPreferred Stockā€???) and paid a dividend to the holder of the Preferred Stock in shares of our common stock on March 31, 2010 totaling $0.1 million. We also recorded a deemed dividend relating to the accretion of the discount of the Preferred Stock totaling $1.1 million. No Preferred Stock dividends or deemed dividends were recorded for the three months ended March 31, 2009.

In aggregate, non-cash, equity-based expenses and equity-based compensation totaled $0.6 million during the first quarter of 2010, a decrease of $0.6 million from $1.2 million in the first quarter of 2009.

Raserā€™s net loss applicable to common stockholders for the three months ended March 31, 2010 was $8.8 million, or $(0.11) per basic and diluted share (based on 79.6 million weighted-average shares outstanding) compared to a net loss of $6.7 million, or $(0.10) per basic and diluted share (based on 64.3 million weighted-average shares outstanding) for the three months ended March 31, 2009.

About Raser Technologies

Raser is an environmental energy technology company focused on geothermal power development and technology licensing. Raserā€™s Power Systems segment develops clean, renewable geothermal electric power plants with one operating plant in southern Utah and eight active and early stage projects in four western states: Utah, New Mexico, Nevada and Oregon, as well as a concession for 100,000 acres in Indonesia. Raserā€™s Transportation and Industrial segment focuses on extended-range plug-in-hybrid vehicle solutions using Raserā€™s award-winning Symetronā„¢ technology to improve the torque density and efficiency of the electric motors and drive systems used in electric and hybrid-electric vehicle powertrains and industrial applications. Further information on Raser may be found at: www.rasertech.com.

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RASER TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets
					Ā
	March 31, 2010				December 31, 2009
Assets
Current assets:
Cash and cash equivalents	$	2,698,758			$	41,782
Restricted cash		29,282,075				76,921
Federal grant receivable		----				32,990,089
Trade accounts and notes receivable, net		340,112				336,788
Restricted short-term marketable securities (held to maturity)		2,200,222				2,191,339
Prepaid expenses and short-term deposits		753,237				1,050,590
					Ā
Total current assets		35,274,404				36,687,509
Restricted cash		3,176,361				9,074,770
Land		1,811,063				1,811,063
Geothermal property, plant and equipment, net		82,125,530				80,433,597
Power project leases and prepaid delay rentals		6,696,085				6,530,946
Geothermal well field development-in-progress		939,052				885,586
Power project construction-in-progress		8,310,897				8,278,500
Equipment, net		537,961				606,421
Intangible assets, net		1,520,913				1,552,425
Deferred financing costs, net		6,551,126				6,928,593
Other assets	Ā	1,246,104	Ā		Ā	1,402,752	Ā
					Ā
Total assets	$	148,189,496	Ā		$	154,192,162	Ā
					Ā
Liabilities and Stockholdersā€™ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	10,825,351			$	16,677,632
15.00% senior secured note, net of discount of $746,570 and $1,232,846, respectively		19,253,430				18,767,154
Unsecured line of credit, net of discount of $13,163 and $33,399, respectively		5,244,390				5,528,553
Short-term portion of long-term notes		3,054,339				1,937,290
Accounts payable and accrued liabilities	Ā	200,000	Ā		Ā	200,000	Ā
					Ā
Total current liabilities		38,577,510				43,110,629
Asset retirement obligation		2,799,823				2,749,342
Long-term 7.00% senior secured note (non-recourse), net of discounts of $4,363,809 and $4,469,481, respectively		24,624,349				24,772,966
Long-term 8.00% convertible senior notes		55,000,000				55,000,000
Warrant liabilities	Ā	15,578,361	Ā		Ā	11,724,219	Ā
					Ā
Total liabilities	Ā	136,580,043	Ā		Ā	137,357,156	Ā
					Ā
Contingencies and commitments, (Notes B, C, D)
Preferred Stock, $0.1 par value, 5,000,000 shares authorized
Series A-1 cumulative convertible preferred stock, 5,000 shares authorized, issued and outstanding, net of discount of $2,396,857; liquidation preference of $5,000,000		2,603,143				ā€”
					Ā
Stockholdersā€™ equity:
Common stock, $.01 par value, 250,000,000 shares authorized, 79,873,315 and 79,266,927 shares issued and outstanding, respectively		798,733				792,669
Additional paid in capital		126,731,102				125,757,611
Accumulated deficit	Ā	(118,523,525	)		Ā	(109,715,274	)
					Ā
Total stockholdersā€™ equity	Ā	9,006,310	Ā		Ā	16,835,006	Ā
					Ā
Total liabilities and stockholdersā€™ equity	$	148,189,496	Ā		$	154,192,162	Ā

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RASER TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Operations
		Ā				Ā
			Three months ended March 31,
			2010			Ā	2009
Revenue			$	1,012,125			$	ā€”
Cost of revenue
Direct costs				1,377,642				ā€”
Depreciation and amortization			Ā	613,472	Ā	Ā	Ā	ā€”	Ā
							Ā
Gross margin			Ā	(978,989	)	Ā	Ā	ā€”	Ā
							Ā
Operating expenses
General and administrative				2,452,078				2,505,422
Power project development				1,252,499				2,113,340
Research and development			Ā	256,970	Ā	Ā	Ā	657,728	Ā
							Ā
Total operating expenses			Ā	3,961,547	Ā	Ā	Ā	5,276,490	Ā
							Ā
Operating loss				(4,940,536	)			(5,276,490	)
Interest income				20,405				62,379
Interest expense				(3,034,208	)			(1,415,618	)
Gain (loss) on derivative instruments				583,858				(942,839	)
Other			Ā	(244,531	)	Ā	Ā	(131,412	)
							Ā
Loss before income taxes				(7,615,012	)			(7,703,980	)
Tax benefit (expense)			Ā	ā€”	Ā	Ā	Ā	ā€”	Ā
							Ā
Net loss			Ā	(7,615,012	)		Ā	(7,703,980	)
Preferred dividend				(65,305	)			ā€”
Deemed dividend - accretion of discount of Series A-1 cumulative convertible preferred stock				(1,127,933	)			ā€”
Non-controlling interest in the Thermo No. 1 subsidiary			Ā	ā€”	Ā	Ā	Ā	1,030,571	Ā
							Ā
Net loss applicable to common stockholders			$	(8,808,250	)	Ā	$	(6,673,409	)
							Ā
Loss per common share-basic and diluted			$	(0.11	)	Ā	$	(0.10	)
							Ā
Weighted average common shares-basic and diluted			Ā	79,567,000	Ā	Ā	Ā	64,349,000	Ā