Electro Energy Inc. 
(NASDAQ: EEEI)
EricDavid & Sons Text Interview with Electro Energy Inc.
CEO Michael Reed 
 

Eric Davis & Sons (EDS): How does your bipolar nickel metal hydride (NiMH) battery work?  
 

Michael Reed (MR): EEEI’s patented technology (9 US and 11 foreign) utilizes a stack of anode, separator and cathode between metallic current collectors, sealed to prevent loss of electrolyte or gases, assembled into wafer cell with the surfaces of the current collectors accessible for electrical contact. The battery is made up of a stack of these wafer cells, similar to a deck of cards, to achieve the required battery voltage. There is no need for the tabs or small parts that are required for intercell connection in conventional cylindrical or prismatic cells to make the intercell connections in a bipolar wafer cell. The current path through the bipolar wafer cells and batteries is much shorter than through conventional batteries, resulting in lower resistance, reduced heating and improved electrical efficiency. The battery is controlled with voltage, temperature and pressure sensing to maximize performance. The design is very compatible with highly automated manufacturing processes to improve quality, reduce labor content and reduce cost. 

EDS: What are the advantages of your bipolar battery design when compared to the conventional design?  

MR: Our patented bipolar wafer cell technology provides a smaller, lighter, more powerful and less costly battery for large format applications.  

EDS: Tell us about your Super Nickel-cadmium (Ni-CD) batteries.  

MR: Electro Energy’s Super NiCd batteries provide very high power and reliability for the most demanding military applications such as starting the Cobra, Apache and Kiowa helicopters for the US Army. It is also used in aerospace and satellite applications that require proven high reliability for many years of service. 
 

EDS: What government/private companies do you currently have contracts with?  

MR: Sandia National Laboratory of the Department of Energy, US Air Force, US Army, Lockheed Martin and EaglePicher. 
 

EDS: You are currently extending your wafer cell technology to the Lithium-Ion battery which is very popular among consumer electronics and are sometimes considered superior to NiMH batteries because they do not suffer memory effect and have a low loss of charge when not in use. When will these new batteries be available and are there any new applications for them other then what you’re bipolar NiMH batteries are being used in?  

MR: We have acquired a high volume manufacturing plant in Gainesville, Florida to produce lithium ion batteries. Initially we will be producing an industry standard 18650 cell which will provide a short term revenue opportunity for the company to as much as $100 million. This same facility has excess electrode production capacity that can be utilized for bipolar wafer cell battery production. We are working with the US Army, US Air Force and Lockheed Martin on military applications for our advanced lithium ion wafer cell batteries. We expect our Gainesville facility, the only high volume manufacturing facility of its kind in North America, to be our high volume production facility. 

EDS: What do these new Lithium-Ion batteries mean for the future production of your bipolar NiMH batteries and your overall goals as a company?  

MR: We believe there will be different applications that will require both NiMH and Li-Ion chemistries. Both chemistries are environmentally friendly and will have differing value propositions for customers. Safety concerns for lithium ion chemistries will need to be fully addressed before it will be used in many large format applications.  

EDS: Are there any new breakthroughs you would like to share with us and what are your prospects for the future growth of the company?  

MR: In 2006 we acquired a major manufacturing facility in Gainesville, Florida. The facility was originally built by Energizer at a cost of over $100 million. We are completing the refurbishment of this facility and will be producing lithium ion batteries for military and commercial applications. We are in a facility start-up and product qualification phase that should be completed in 2007 Q4 with revenue contracts in 2008 Q1. The facility is outfitted to produce 18650 batteries which have a worldwide market of over 800 million cells per year and for which there is a current shortage. We hope to take advantage of this opportunity and then introduce our wafer cell batteries to large format applications. Initial focus will be on military applications as a foundation. We expect to expand into other markets such as automotive hybrid and plug-in hybrid vehicles, trucking auxiliary power, power hand tools, lawn and garden tolls and industrial and utility applications.   

EDS: How much cash is on hand and how do you plan on raising additional capital to finance your products?  

MR: At the end of Q3, September 30, we had about $1 million in cash including restricted cash earmarked for interest payments on the $9.9 million outstanding under our secured convertible debenture. We are in the market now to restructure our existing debt and to bring in additional capital to complete commercialization of products in our Gainesville, Florida facility. 

EDS: Last month you received a NASDAQ deficiency notice for not maintaining a $1.00 bid price required for continued listing. Do you feel them giving the Company 180 day to bring the share price above $1.00 again is in the cards? How do you expect to achieve this goal and will you request a hearing from NASDAQ asking for more time?  

MR: Our current share price has been heavily influenced by our debtholders selling stock we have delivered to them in lieu of cash payments for the $1.1 million principle repayment due on August 1, 2007 and our semiannual interest payment due September 30, 2007. These payments required a total of over 2.6 million shares. Our share price has been driven from about $1.25 to a low of $0.25 and is now recovering. We expect to return to well above $1 before the 180 day deadline.  

EDS: Your shares outstanding as of your last Q was under 25 million shares. Do you see any dilution of new shares from financing and if so how many shares will be outstanding? 

MR: Our debt terms required a principle repayment of $1.1 million on August 1 and a semiannual interest payment of about $ 0.4 million on September 30. To conserve cash we paid both these payment with over 2.6 million shares of EEEI stock taking our outstanding shares to over 26 million shares. It is likely that there will be some additional shares required for the restructuring of our existing debt and to complete our new financing. 

EDS: Last but not least, do you feel the shares are undervalued?  

MR: I believe our shares are significantly undervalued due to the selling pressure from our stock payment to the bondholders, uncertainty regarding our current financial restructuring efforts and the timing of revenue from our Gainesville facility. As we announce our progress in these areas in the near future, I believe our share price will begin trending to more a more appropriate valuation. 
 

Thanks for your time and we wish you and Electro Energy all the best now and in the future    

Interview conducted by Michael Weiss technology sector consultant for EricDavid and Sons, Inc. Mr. Weiss is majoring in computer science at Princeton.

 

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 interview, 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.

Please view the disclaimer for EEEI here