Press releases

ISE Limited Announces Unaudited Fourth Quarter and Full Year 2009 Financial Results

- 2009 Revenue Increased 128% over 2008 to $44.4 Million
- Annual Gross Margins Improved over 560 Basis Points
- State of Minnesota Department of Transportation Approves Options for Buses Powered by ISE

SAN DIEGO - (March 30, 2010) - ISE Limited (TSX: ISE), a leading developer, manufacturer and distributor of heavy duty hybrid-electric drive systems, today provided a summary of fourth quarter and fiscal year ended December 31, 2009 financial results. All dollar amounts in this press release are United States dollars unless otherwise indicated.

"Our significant revenue growth and gross margin improvement for the full year 2009 demonstrates our strengthening reputation as a leading developer, manufacturer and distributor of heavy duty hybrid-electric drive systems, in particular providing hybrid-electric and all-electric/zero emission technologies to transit agencies throughout North America," stated Rick Sander, CEO and President of ISE. "On February 23, 2010, we completed our initial public offering and began trading on the Toronto Stock Exchange. We continue to invest in our core technology of energy storage, power electronics and controls software to maintain our leadership position in hybrid-electric and all-electric/zero emission drive systems. We are also focused on our long-term strategy for growth, which is to pursue promising areas such as the energy storage market."

Recent Corporate Highlights

• Completed initial public offering raising gross proceeds of C$20.7 million and began trading on Toronto Stock Exchange on February 23rd.


• Powered 20 zero emission (fuel cell) hybrid buses for BC Transit that were deployed and in operation at the 2010 Winter Olympics in Vancouver in February 2010.


• Received 2010 CARB certification for ISE gasoline hybrid drive system in California. As the only commercial supplier of gasoline hybrid drive systems in the North American transit bus market, ISE is well positioned to capture additional demand from higher and more challenging government emissions standards.


• Fulfilled first production order of Santa Monica's "Big Blue Bus" program by supplying 15 gasoline hybrid systems that were installed into transit buses delivered to Santa Monica.


• Launched 50 diesel hybrid buses powered by ISE in Las Vegas with an agreement granting Las Vegas the option for purchasing an additional 100 hybrid buses powered by ISE's diesel hybrid system.


• SunLine Transit unveiled the second of its two zero emission (fuel cell) hybrid buses powered by ISE at its 3rd Annual State of Public Transit Luncheon on February 19th.


• The State of Minnesota Department of Transportation approved two of ISE's bus OEM customers to supply their chassis together with ISE's gasoline hybrid drive system as a qualified option under the terms of the recently released contract. This unique contract also allows any US transit agency to buy off this contract that allows for up to 1,000 bus purchases which may include ISE's gasoline hybrid drive systems.

"ISE's public listing comes at a time when the company is experiencing strong growth, as evidenced by the 128% increase in revenue and over 560 basis point improvement in gross margin from 2008 to 2009," stated David Morash, CFO and Treasurer of ISE. "We are excited to be the first U.S.-based, venture capital backed, clean-technology company listed on Toronto Stock Exchange. We believe it demonstrates not only the confidence behind our technology, but also the strength of the management team to execute on our strategy to provide value to the company and its shareholders."

Fourth Quarter 2009 Compared to Fourth Quarter 2008

• Revenue increased to $18.4 million in Q4 2009, an increase of 185% from $6.5 million in Q4 2008, due primarily to recognition of revenue from zero-emission (fuel cell) hybrid systems that carry a higher average selling price than gasoline hybrid systems.


• Based upon discussions with a key customer in March 2010, ISE recorded a $3.3 million retrofit liability accrual related to certain third party supplied parts placed into service in 2005 and 2006 that have been found to have unusually high failure rates. The retrofit accrual was recorded against cost of goods sold in Q4 2009. The charge is related to an inverter problem that was corrected in later models, but required replacement for existing customers.


• Gross profit, excluding the $3.3 million charge for retrofit costs, was approximately $1.3 million in Q4 2009, compared to a gross loss of $624,000 in Q4 2008.


• Operating expenses were $4.0 million in Q4 2009, compared to $3.5 million in Q4 2008.


• R&D was $1.2 million in Q4 2009, compared to $948,000 in Q4 2008, reflecting increased investment in energy storage and power electronics.


• Sales and marketing expenses were $837,000 in Q4 2009, compared to $648,000 in Q4 2008.


• G&A was $1.9 million in Q4 2009, compared to $1.9 million in Q4 2008.


• Net loss from operations was $6.0 million in Q4 2009, and excluding the $3.3 million charge for retrofit costs, it would have been $2.7 million in Q4 2009, compared to $4.1 million in Q4 2008.

Full Year 2009 Compared to Full Year 2008

• Revenue, including the aforementioned zero-emission hybrid systems, was $44.4 million in FY 2009, compared to $19.4 million in FY 2008.


• Gross loss was $1 million in FY 2009, representing an approximate 560 basis point improvement in gross margin percentage, compared to a gross loss of $10.9 million in FY 2008. Excluding the $3.3 million charge for retrofit costs in Q4 2009, gross profit would have been approximately $2.3 million in FY 2009, representing a gross margin percentage improvement of more than 600 basis points over FY 2008.


• Operating expenses were $14.5 million in FY 2009, compared to $13.8 million in FY 2008.
  
  
• R&D was $5.1 million in FY 2009, compared to $2.3 million in FY 2008, reflecting increased investment in energy storage and power electronics.
  
  
• Sales and marketing expenses were $2.7 million in FY 2009, compared to $2.3 million in FY 2008.
  G&A was $6.7 million in FY 2009, compared to $9.2 million in FY 2008.
  
  
• Net loss from operations was $15.5 million in FY 2009, and excluding the $3.3 million charge for retrofit costs, it would have been $12.2 million in FY 2009, compared to $24.7 million in FY 2008.

Liquidity & Capital Resources

On February 23, 2010, ISE Limited completed an IPO for total gross proceeds of C$20.7 million. The estimated net proceeds from the IPO after deducting legal, underwriting and accounting fees and expenses are approximately C$16 million. ISE used approximately C$6.5 million of the net proceeds to repay outstanding secured convertible promissory notes. The remaining net proceeds will be used to fund research and development activities, to purchase additional capital equipment and to expand our sales and marketing capabilities in North America and internationally.

Notwithstanding the amounts raised in the IPO, ISE's ability to continue as a going concern will be dependent upon ISE's ability to raise additional capital, either through public or private equity offerings, debt financings or other capital raising efforts before the end of ISE's current fiscal year. Until such time as ISE generates a sufficient amount of revenue and cash flow to fund its operations, if ever, ISE expects to finance its capital needs through additional capital raising efforts. ISE does not believe that its existing cash and cash equivalents, together with the net proceeds of the IPO, will be sufficient to meet ISE's anticipated cash needs for the next 12 months following the date of this press release, and will therefore need to raise additional capital before the end of ISE's current fiscal year. Accordingly, our independent auditors' report contained in our 2009 Financial Statements contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a "going concern." ISE is currently in discussions with financial institutions regarding a potential working capital credit facility. There can be no assurance that ISE will be able to successfully obtain a working capital credit facility on commercially reasonable terms, or at all.

Company Outlook
"ISE Limited has significant growth opportunities," stated Rick Sander. "According to Frost & Sullivan, the vehicle energy storage industry alone is expected to be a multi-billion dollar market by 2015. We also have opportunities in the transit bus market and other heavy duty high cycle applications. In the near-term as emission restrictions have created expensive requirements regarding diesel, we will be leveraging our position as the only provider of gasoline hybrid electric systems and the leader in fuel cell hybrid systems in the North American transit bus market. We will also continue to strive to enhance our strategic partnerships worldwide and invest in R&D to expand our intellectual property portfolio and to provide first-to-market innovative energy storage solutions for our OEM customers."

Morash added, "To meet our projected working capital needs, we are working with our commercial bank to evaluate opportunities. Additionally, we continually review other financing alternatives."

Morash further stated: "In 2009, we invested more heavily in energy storage and power electronics to meet the growing market demand for advanced heavy duty hybrid systems. While growth in the overall transit marketplace slowed in response to the delayed ARPA-E funding, the delay in the Transportation and Equity Act (TEA) and the lack of state and federal spending; we remain excited about market drivers such as changing emission standards, increased demand for fuel cost saving solutions, and escalating environmental concerns. In March of this year, President Obama signed the Hiring Incentives to Restore Employment Act (HIRE). This bill extends the authorization of TEA programs through December 31, 2010. Included in this bill is the transfer of $4.8 billion into mass transit, which is anticipated to resurrect stalled projects in the industry, including transit agency orders for domestic gasoline hybrid systems."

"We anticipate over a 50% unit growth in California sales of gasoline hybrid systems in 2010 compared to 2009. Long sales cycles in the industry result in lumpiness in our revenue from quarter to quarter; as illustrated in the second half of 2009 due to the 20 zero emissions bus order for BC Transit. These zero emission systems have a significantly higher average selling price than our other hybrid systems; therefore, we do not expect the second half 2010 revenue to match the roughly $35 million recorded in the second half 2009. However, we expect revenue for the first two quarters of 2010 to increase over the same periods in 2009. In total, we anticipate annual 2010 revenue to exceed full year 2009 with revenue weighted toward the second half of the year due to ordering patterns in the first half of 2010," concluded Morash.

Conference Call Access Instructions
ISE will host a conference call at 11:00 a.m. EDT on Tuesday, March 30, 2010, to discuss its financial results. To access the call in Canada (and the US) please dial 888-349-9617and for international calls dial 719-325-2393 approximately 10 minutes prior to the start of the conference. The conference ID is 3633734. The conference call will also be broadcast live over the Internet and available for replay for a period of 90 days at www.isecorp.com. In addition, a replay of the call will be available via telephone for two business days, beginning two hours after the call. To listen to the replay, in the U.S., please dial 888-203-1112 and internationally, 719-457-0820. Enter access code 3633734.

About ISE Limited
ISE Limited (www.isecorp.com) is a leading developer, manufacturer and distributor of heavy duty hybrid-electric drive systems based on our core proprietary technology, which is focused on three critical subsystems: energy storage, controls software and power electronics. ISE specializes in series hybrid-electric and all-electric/zero emission technologies, and offers industry-leading energy storage systems and hybrid system components. Over the past 10 years, ISE has sold over 300 hybrid-electric drive systems that have demonstrated reliability and performance in over 12 million miles of fleet operation.

Established in 1995, ISE is headquartered in San Diego, California. ISE's history of innovation and technological leadership has resulted in the design and development of systems and components that deliver superior operating performance. For more information visit www.isecorp.com.

Investor Contact:
Kirsten Chapman/Becky Herrick
Lippert/Heilshorn & Associates
+1 415-433-3777
bherrick@lhai.com

Company IR Contact:
David Morash
Chief Financial Officer
ISE Limited
+1 858-413-1724

Media Contact:
Carolyn Paynton
Mktg. & Comm. Mgr.
ISE Limited
+1 858-213-8613

Caution Regarding Forward-Looking Statements
This press release contains forward-looking statements. All statements other than statements of historical fact contained in this press release are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "project," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. Some of these factors are described in greater detail in the "Risk Factors" section of ISE's Prospectus dated February 11, 2010 filed on SEDAR, ISE's Annual Information Form for the year ended December 31, 2009 to be filed on SEDAR, and ISE's other filings with the Canadian securities regulatory authorities. These risks and uncertainties include, among others, risks associated with ISE's long and unpredictable sales cycle; risks associated with product liability and warranty claims and the safety of ISE's products; risks relating to ISE's need for additional capital; risks associated with variations in the size, type and timing of customer orders for ISE's products; risks associated with market acceptance and reliability of ISE's products; risks associated with entering into long-term contracts and contracts with governmental agencies; risks associated with the availability, level and terms of government subsidies and incentives; risks associated with customer concentration and ISE's dependence on a small number of suppliers and original equipment manufacturers ("OEMs"); risks associated with ISE's strategic relationships; risks associated with executing ISE's growth strategy in the United States and internationally and scaling up our manufacturing capacity; risks relating to the retention and recruitment of qualified personnel; risks resulting from competition with larger businesses with greater resources; risks associated with technological advancements in ISE's industry; and risks relating to the protection of ISE's intellectual property.

Although ISE believes that the expectations reflected in the forward-looking statements are reasonable, ISE cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, ISE does not intend to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this press release.

ISE and its logo are trademarks of ISE Limited. Other brand or product names are trademarks of their respective holders. Copyright © 2010 ISE Limited. All rights reserved.

Fourth Quarter and Full Year 2009 Financials (PDF)