Solar EnerTech Announces Third Quarter of Fiscal Year 2010 Financial Results

MOUNTAIN VIEW, Calif., Aug. 16 /PRNewswire-Asia-FirstCall/ -- Solar EnerTech Corp. (OTC Bulletin Board: SOEN) (the "Company") today announced financial results for the third quarter of fiscal year 2010 which ended June 30, 2010.

    Third Quarter Highlights:
    -- Shipments increased 189% to 8.55MW as compared to 2.96MW in the third
       quarter in the prior year period.
    -- Revenue increased 61% to $16.4 million as compared to $10.1 million for
       the third quarter of the prior year.
    -- Gross profit increased 168% to $1.3 million as compared to $0.5 million
       in the third quarter in the prior year.

Total module shipments increased 189% to 8.55MW in the third fiscal quarter 2010 as compared to 2.96MW in the third fiscal quarter of the prior year. Revenue for the third fiscal quarter 2010 increased 61% to $16.4 million as compared to $10.1 million in the third fiscal quarter a year ago. Revenue for the third fiscal quarter 2010 was comprised of approximately $15.8 million in solar module sales, of which more than 95% were sold into Europe and Australia; $0.2 million of solar cell sales; and $0.4 million from the resale of raw materials. The increase in revenue was driven by strong organic growth from existing customers in a growing market and increased sales orders from new customers as a result of heightened efforts by the Company's sales and marketing team.

Gross profit for the third fiscal quarter 2010 increased to $1.3 million, as compared to $0.5 million for the third quarter a year ago. Gross margin for the third fiscal quarter 2010 was 8.0% as compared to 4.8% in the same prior year period. The improved gross margin was primarily due to the decrease in raw materials prices, specifically silicon wafer prices, and greater economy of scale generated from higher production volumes, which help offset the lower average selling prices relative to the comparable period last year.

The total operating expense for the third fiscal quarter of 2010 was $2.5 million, which included $0.7 million in non-cash stock compensation charges. Excluding the non-cash item, operating expense for the third fiscal 2010 quarter was $1.8 million, or 11% of total net sales. In comparison, the total operating expense for the third fiscal quarter of 2009 was $3.1 million, which included $1.5 million of non-cash stock compensation charges related to the hiring and retention of key executives and $36,000 of non-cash charges related to losses from the extinguishment of debt. Excluding both of these non-cash items, operating expense for the third quarter a year ago was $1.6 million, or 16% of total net sales.

Net loss for the third fiscal quarter 2010 was ($0.7) million, or ($0.004) per basic and diluted share, compared to a net loss of ($6.8) million, or ($0.08) per basic and diluted shares, for the same period in fiscal 2009. The net loss in the third quarter fiscal 2010 includes an impairment loss following the Company's write-off of its investment in 21-Century Silicon of $1.0 million.

Leo Shi Young, the Company's Chief Executive Officer, stated, "We experienced strong growth in demand for our modules during the quarter and production and shipments increased to levels that greatly utilized our production capacity. Therefore, although selling prices declined significantly, the decline in raw materials costs, together with the efficiencies gained from greater output at our facilities meant our overall gross margin improved significantly. Equally pleasing was the expansion of shipment volumes to both new and existing customers in Europe and the improved application of technology to our production processes to further lowering manufacturing unit costs."

Nine Month Results

Revenue for the nine months ended June 30, 2010, was $51.8 million compared to $19.6 million for the same period in fiscal 2009, an increase of 164%. Gross profit was $4.2 million compared to a loss of ($3.2) million for the nine months ended June 30, 2009. Total operating expenses were $26.1 million, or 50% of sales, compared to $10.0 million, or 51% of sales, for the same period last year, an increase of 161% mainly due to debt restructurings.

Net loss for the nine months ended June 30, 2010 was ($23.7) million, or ($0.18) per basic and diluted share compared to a net loss of ($16.1) million, or ($0.18) per basic and diluted shares, for the same period in fiscal 2009. The net loss in the nine months ended June 30, 2010 includes non-cash debt restructuring charges of $18.5 million and an impairment loss of $1.0 million on the Company's investment in 21-Century Silicon, both amounts are stated before tax. In the nine months ended June 30, 2009, the Company recorded a non-cash loss on debt extinguishment amounting to $0.5 million before tax.

Financial Position

As of June 30, 2010, the Company's assets included $2.7 million in cash, $13.5 million of accounts receivable, $0.3 million of prepayment primarily for purchase of raw materials, $5.0 million of inventories on hand and $0.6 million of VAT and other receivables. In addition, as of June 30, 2010, the Company's liabilities included $15.2 million of accounts payable, customer advance payments and accrued liabilities, $5.8 million of accounts payable and accrued liability from related parties and $0.7 million of short-term loans.

As of June 30, 2010, the Company recorded a $1.5 million liability for an outstanding series B-1convertible note. The note bears an interest of 6% per annum and is due on March 19, 2012.

About Solar EnerTech Corp.

Solar EnerTech is a photovoltaic solar energy cell manufacturing enterprise incorporated in the United States with its corporate office in Mountain View, California. The Company has established a sophisticated 67,107-square-foot manufacturing facility at Jinqiao Modern Technology Park in Shanghai, China. The Company currently has two 25MW solar cell production lines and a 50MW solar module production facility.

Solar EnerTech has also established a Joint R&D Lab at Shanghai University to develop higher efficiency cells and to put the results of that research to use in its manufacturing processes. Led by one of the industry's top scientists, the Company expects its R&D program to help bring Solar EnerTech to the forefront of advanced solar technology research and production. For additional information regarding the Company, please visit http://www.solarE-power.com .

Safe Harbor Statement

Statements contained in this press release, which are not historical facts, are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based largely on current expectations and are subject to a number of known and unknown risks, uncertainties and other factors beyond our control that could cause actual events and results to differ materially from these statements. These statements are not guarantees of future performance, and readers are cautioned not to place undue reliance on these forward-looking statements, which are relevant as of the date of the given press release and should not be relied upon as of any subsequent date. Solar EnerTech undertakes no obligation to update publicly any forward-looking statements.

                   (Unaudited Financial Statements Follow)


                             Solar EnerTech Corp.
               Unaudited Consolidated Statements of Operations

                        Three Months Ended June 30, Nine Months Ended June 30,
                            2010         2009           2010         2009


    Sales                $16,355,000  $10,143,000   $51,799,000   $19,639,000
    Cost of sales        (15,051,000)  (9,657,000)  (47,637,000)  (22,791,000)
         Gross profit
          (loss)           1,304,000      486,000     4,162,000    (3,152,000)

    Operating expenses:
    Selling, general and
     administrative        2,475,000    2,577,000     7,243,000     8,224,000
    Research and
     development              54,000      463,000       287,000     1,234,000
    Loss on debt
     extinguishment               --       36,000    18,549,000       527,000
       Total operating
        expenses           2,529,000    3,076,000    26,079,000     9,985,000

       Operating loss     (1,225,000)  (2,590,000)  (21,917,000)  (13,137,000)

    Other income
     (expense):
    Interest income            1,000        3,000         5,000        13,000
    Interest expense         (59,000)  (1,015,000)   (5,383,000)   (1,938,000)
    Gain (loss) on
     change in fair
     market value of
     compound embedded
     derivative              717,000     (238,000)    1,115,000       350,000
    Gain (loss) on
     change in fair
     market value of
     warrant liability     1,393,000   (3,158,000)    4,369,000    (1,415,000)
    Impairment loss on
     investment           (1,000,000)          --    (1,000,000)           --
    Other income
     (expense)              (485,000)     217,000      (929,000)        3,000
       Net loss            $(658,000) $(6,781,000) $(23,740,000) $(16,124,000)


    Net loss per share -
     basic                   $(0.004)      $(0.08)       $(0.18)       $(0.18)
    Net loss per share -
     diluted                 $(0.004)      $(0.08)       $(0.18)       $(0.18)

    Weighted average
     shares outstanding
     - basic             156,502,573   88,256,706   128,327,753    87,669,839
    Weighted average
     shares outstanding
     - diluted           156,502,573   88,256,706   128,327,753    87,669,839


                             Solar EnerTech Corp.
                         Consolidated Balance Sheets

                                              June 30, 2010 September 30, 2009
                                               (Unaudited)        (Audited)
    ASSETS
    Current assets:
    Cash and cash equivalents                   $2,662,000        $1,719,000
    Accounts receivable, net of allowance
     for doubtful account of $96,000
     and $96,000 at June 30, 2010 and
     September 30, 2009, respectively           13,544,000         7,395,000
    Advance payments and other                     347,000           799,000
    Inventories, net                             4,987,000         3,995,000
    Deferred financing costs, net of
     accumulated amortization                           --         1,250,000
    VAT receivable                                 422,000           334,000
    Other receivable                               173,000           408,000
    Total current assets                        22,135,000        15,900,000
    Property and equipment, net                  9,407,000        10,509,000
    Other assets                                   730,000                --
    Investment                                          --         1,000,000
    Deposits                                       101,000            87,000
    Total assets                               $32,373,000       $27,496,000

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Accounts payable                           $12,286,000        $5,794,000
    Customer advance payment                       420,000            27,000
    Accrued expenses                             2,474,000         1,088,000
    Accounts payable and accrued
     liabilities, related parties                5,773,000         5,646,000
    Short-term loans                               729,000                --
    Convertible notes, net of discount                  --         3,061,000
    Derivative liabilities                              --           178,000
    Total current liabilities                   21,682,000        15,794,000
    Convertible notes, net of discount           1,542,000                --
    Derivative liabilities                         562,000                --
    Warrant liabilities                          1,044,000         2,068,000
    Total liabilities                           24,830,000        17,862,000

    STOCKHOLDERS' EQUITY:
    Common stock - 400,000,000 shares
     authorized at $0.001 par value
     169,793,496 and 111,406,696 shares
     issued and outstanding at June 30,
     2010 and September 30, 2009,
     respectively                                  170,000           111,000
    Additional paid in capital                  96,881,000        75,389,000
    Other comprehensive income                   2,554,000         2,456,000
    Accumulated deficit                        (92,062,000)      (68,322,000)
    Total stockholders' equity                   7,543,000         9,634,000
    Total liabilities and stockholders'
     equity                                    $32,373,000       $27,496,000


    For more information, please contact:

     Solar EnerTech Corp.
     Phone: +86-21-6886-2220
     Web:   http://www.solarE-power.com/

     Mr. Mark Collinson, Partner
     CCG Investor Relations
     Phone: +1-310-954-1343
     Email: [email protected]
     Web:   http://www.ccgirasia.com

SOURCE Solar EnerTech Corp.