• Home
• Company
• Products
• Case studies
• Investors
• News

News

Press releases

•   2008
•   2007
•   2006
•   2005
•   2004

Events

•   U.S. Events

Solar in the News

Sign up to periodically receive news and information about Solar Integrated

Media contacts

Solar Integrated
Elaine Fugedy
Director of Marketing
Los Angeles, California, US
+1.323.231.0411

Pelham Public Relations
Chelsea Hayes / Robert Koh
London, UK
+44 207 743 6675

SOLAR INTEGRATED REPORTS 2007 FIRST HALF RESULTS

London, UK and Los Angeles, California, September 11, 2007 – Solar Integrated Technologies, Inc. (AIM:SIT.LN), a leading provider of building integrated photovoltaic (BIPV) roofing systems, announced today its unaudited financial results for the six months ended June 30, 2007 and highlights of recent corporate activities.  Unless otherwise noted, all amounts are reported in U.S. dollars and in accordance with U.S. GAAP.  This press release contains some non-GAAP financial information.

2007 First Half Financial Highlights

• Revenue up 27.5% to $19.8 million (2006 H1: $15.5 million)
• On a GAAP basis, gross margin of 12.8% (2006 H1: 7.5%)
• On a non-GAAP basis, gross margin was 17.0% after adjusting for (i) unabsorbed production and other costs, (ii) one European project involving the discounted sale of discontinued product, and (iii) one U.S. project involving the initial launch of a new product
• Excluding non-cash stock-based and warrant compensation, SG&A costs down $2.0 million or 20.4% to $7.8 million (2006 H1: $9.8 million)
• Non-cash stock-based and warrant compensation expense of $4.5 million, including $3.9 million for warrants granted to UPC Energy in December 2006
• Recovery of impaired receivable of $3.3 million
• Adjusted EBITDA improved 42.7% to ($4.7) million (2006 H1: ($8.2) million)
• On a GAAP basis, net loss of $12.2 million or $0.17 per share, which includes $3.5 million for non-cash fair value accounting of warrants and $4.5 million for non-cash stock-based and warrant compensation expense, partially offset by a $3.3 million recovery of an impaired receivable, when compared with net loss for 2006 H1 of $7.1 million or $0.20 per share

2007 First Half Operational Highlights

• Started second shift for manufacturing operations in May in response to strong order demand
• 27 solar projects completed in H1, representing 2.3 MW of installed solar systems
• Over 12 MW of installed solar systems since the Company’s inception, with over 130 reference sites
• Added Carrefour, Tesco, Unibail-Rodamco, UPC Solar and Westfield to customer list
• Expanded European sales in Germany, Spain and France and announced initial orders in Italy for 2 MW and initial order in Belgium
• Announced world’s largest BIPV solar roofing project for Tesco U.S. distribution centre under construction in Riverside, California; total project, including roofing, at $17.4 million
• $4.1 million sale of 2 Coca-Cola projects in Southern California marked first two projects with UPC Solar
• Launched Solar Carport as product offering, including completion of first installation

2007 Outlook

• Maintain 2007 revenue guidance in the range of $60 million to $80 million
• Maintain 2007 full year consolidated gross margin guidance in excess of 15%
• Revenue and gross margin contribution heavily weighted in 2007 H2

Commenting on the results, R. Randall MacEwen, President & CEO, said:
”We are pleased with our progress in the first half of 2007 on improving our financial performance and building our platform for sustainable profitability.  We are on track to meet our 2007 revenue and gross margin guidance.  We are expecting a solid back half, potentially approaching EBITDA positive, excluding non-cash stock-based and warrant compensation expense and change in the fair value of warrants.  We continue to focus on our controllables, and our cash management has improved significantly over the last year.  We are now building our order book for 2008 deliveries and are positioning the Company for profitability in 2008.

“With the level and quality of our sales activity, we doubled our manufacturing capacity by adding a second shift, and we plan to add a third shift later this year.  We continue to capture market share in the attractive commercial BIPV segment.”

The Company will host a conference call on Tuesday, September 11th, 2007 at 3:00 pm London time/10:00 am ET/7:00 am PT.  Investors and analysts can participate in the call by dialing +44 (0)208 974 7900 with access code 164169.

About Solar Integrated:
Solar Integrated Technologies, Inc. (SIT: AIM.LN) is a Los Angeles-based company that manufactures, designs and installs building integrated photovoltaic (BIPV) roofing systems for non-residential, low-slope rooftops.  We are a leader in the development of an innovative and proprietary BIPV roofing system that combines flexible thin-film solar modules with a single-ply roofing membrane for large-scale commercial and industrial applications.  Our BIPV roofing system enables our customers to transform a traditional rooftop into a value-generating asset.  Our customers include Carrefour, Coca-Cola Enterprises, Frito-Lay, Honeywell, ProLogis, San Diego Unified School District, Tesco, Toyota, Unibail-Rodamco, UPC Energy, UPC Solar, U.S. Air Force, U.S. GSA, U.S. Navy, Wal-Mart and Westfield.  For more information, please visit www.solarintegrated.com.

For more information, please contact:

Solar Integrated Investor Contacts:
Solar Integrated Technologies, Inc. Solar Integrated Technologies, Inc.
R. Randall MacEwen John M. Palumbo
President & Chief Executive Officer Chief Financial Officer
Los Angeles, California, USA Los Angeles, California, USA
+1.562.299.0136 +1.562.299.0121

Solar Integrated Nominated Adviser:
KBC Peel Hunt Ltd.
Julian Blunt or Oliver Stratton
London, UK
+44.20.7418.8900

Solar Integrated Media Contacts:
Gavin Anderson & Company
Ken Cronin or Deborah Walter
London, UK
+44.20.7554.1400

* * * * * * * * * * * * * * * * * * * * * * * * * * *

2007 First Half Financial Highlights

Consistent with prior periods, the Company expects to book a higher level of revenue and gross profit in 2007 H2 than in 2007 H1.  First half revenue is, and typically has been, lower than the second half revenue in large part as a result of the seasonality of the business, including the rainy season in Southern California, the winter season in Germany, and the budget and construction cycles of the Company’s target customers.  As the Company is involved in a construction project-based business, the Company may experience lumpiness from period to period.
Management reviews revenue and gross margin performance of the business in four market segments:

• Europe Solar:  The Company manufactures its BIPV roofing panels for projects in Europe where customers purchase the systems for installation by others.
• U.S. Direct Solar:  The Company manufactures and installs its BIPV roofing systems for projects in the United States where customers purchase the systems on a turnkey basis.
• U.S. Financed Solar:  The Company manufactures and installs its BIPV roofing systems for projects in the United States where the end customer prefers to purchase solar generated electricity under a long term power purchase agreement rather than purchase, own and operate the solar energy system directly.
• Roofing and Maintenance:  The Company installs and maintains for select clients energy-efficient roofing systems in Southern California.  The Company can install these roofing systems pre-wired for potential future solar retrofit.  The Company believes this strategy maintains and strengthens its customer relationships, positions the Company to capture additional business for its BIPV roofing systems, provides additional margin-generating revenue, and provides for smoothing of labor deployment.  The Company expects this market segment to decline as a percentage of revenue over time.

The Company’s revenue and gross margin performance for 2007 H1 and 2006 H1 for these four market segments are as follows.

Revenue & Gross Margin by Market Segment (in $000's)

Revenue for 2007 H1 was $19.8 million, up 27.5% from $15.6 million for 2006 H1.  On a GAAP basis, cost of sales for the first half of 2007 was $17.3 million and gross profit contribution was $2.5 million or 12.8% of sales.

In the second half of 2006, the Company slowed production and certain other business activities during its restructuring phase.  In connection with the remobilization and ramp-up of production in early 2007, we incurred $0.3 million of costs related to unabsorbed production and other costs which negatively impacted the Company’s gross margin in 2007 H1.

On a non-GAAP basis, gross margin was 17% after adjusting for (i) $0.3 million of costs related to unabsorbed production and other costs, (ii) a European project involving a one-time discounted sale of discontinued product, and (iii) the Company’s initial Solar Carport project.

In 2007 H1, revenue for the Europe Solar segment was $6.3 million, up 123.0% from $2.8 million in 2006 H1.  In 2007 H1, gross margin for the Europe Solar segment was 10.6%.  The gross margin performance for the Europe Solar segment was negatively impacted primarily as a result of a one-time discounted sale of discontinued product at a relatively low gross margin.  This project accounted for 15.2% of the Company’s consolidated revenue for 2007 H1 and 47.6% of the Europe Solar revenue for 2007 H1.  Adjusted to exclude this one-time sale, gross margin for Europe Solar for 2007 H1 was 14.6%, as compared to 14.5% for 2006 H1.  The Company expects to achieve higher gross margin for Europe Solar in 2007 H2 than in 2007 H1 due to a change in product mix, a change in geographic mix with a higher average selling price, and lower production costs.

In 2007 H1, revenue for the U.S. Direct Solar segment was $4.2 million, up 182.8% from $1.5 million in 2006 H1.  In 2007 H1, gross margin for the U.S. Direct Solar segment was 15.3%.  The gross margin performance for the U.S. Direct Solar segment was negatively impacted primarily as a result of higher than expected costs related to the launch of the Company’s Solar Carport product.  Adjusted to exclude this initial Solar Carport project, gross margin for U.S. Direct Solar for 2007 H1 was 20.3%, as compared to 17.5% for 2006 H1.  The Company expects to achieve higher gross margin for U.S. Direct Solar in 2007 H2 than in 2007 H1 due to lower production and project costs.

In 2007 H1, revenue for the U.S. Financed Solar segment was $4.1 million, down 52.6% from $8.6 million in 2006 H1.  In 2007 H1, gross margin for the U.S. Financed Solar segment was 20.0%, as compared to (0.8)% in 2006 H1.  This gross margin improvement is due to the Company’s restructured approach to this market segment, including its structured finance arrangements with UPC Solar.

In 2007 H1, revenue for the Roofing & Maintenance segment was $5.2 million, up 102.0% from $2.6 million in 2006 H1.  In 2007 H1, gross margin for the Roofing & Maintenance segment was 14.2%, as compared to 21.7% for 2006 H1.  The gross margin performance for the Roofing & Maintenance segment was negatively impacted primarily as a result of tightening market conditions and different product and services mix.

Selling, General and Administrative expenses for 2007 H1 were $12.3 million, including $4.5 million in non-cash stock-based and warrant compensation expense.  Excluding non-cash stock-based and warrant compensation, SG&A costs were down $2.0 million or 20.4% to $7.8 million in 2007 H1 from $9.8 million in 2006 H1.

In 2006, as a prudent accounting matter, the Company recorded an impairment of a $3.3 million receivable.  In the first half of 2007, the Company subsequently recovered the full amount of this receivable.

On a non-GAAP basis, after adjusting for (i) non-cash stock-based and warrant compensation, (ii) the non-cash change in the fair value of warrants, and (iii) the recovery of a previously impaired receivable, adjusted EBITDA improved 42.7% to ($4.7) million for 2007 H1 from ($8.2) million for 2006 H1.

On a GAAP basis, net loss for the first half of 2007 was $12.2 million, or $0.17 per share, which includes $3.5 million for non-cash fair value accounting of warrants and $4.5 million for non-cash stock-based and warrant compensation expense, partially offset by a $3.3 million recovery of an impaired receivable, when compared with net loss for 2006 H1 of $7.1 million or $0.20 per share.

Launch of Solar Carport

In 2007 H1, the Company launched its Solar Carport product offering.  The Solar Carport provides shaded parking for vehicles while generating clean solar power.  The Company also announced the completion of its first Solar Carport project – 152kW of solar power on carports covering 186 parking spots in Vacaville, California.

Robert W. Campbell, Executive Vice President, Sales & Marketing stated:  “We view the solar carport market as a logical extension of our product offering.  Our objective is to provide our customers with all of their integrated solar needs, whether on their roof, their parking lot or their adjacent land.  With additional commercial orders now in hand, we view the solar carport market as an exciting and complementary growth market for our light-weight product.”

The Company’s light-weight Solar Carport product is based on an aesthetically appealing architectural design.  Customers are able to increase their return on investment on their existing parking spaces while effectively providing a long-term hedge against the expected increase in peak utility rates.  The Company provides the customer with a turn-key, single point-of-contract for feasibility studies, design and engineering, contract management, entitlement/permit process guidance, construction, installation, financing options, system monitoring, and site maintenance.

Non-GAAP Measures:
To supplement the consolidated financial results prepared under U.S. GAAP, Solar Integrated uses non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude certain non-cash and other expenses.  Management does not consider these items in evaluating the core operational activities of the Company.  Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate the Company's current performance.  Given management's use of these non-GAAP measures, Solar Integrated believes these measures are important to investors in understanding the Company's current and future operating results as seen through the eyes of management.  In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in Solar Integrated’s core business across different time periods.  These non-GAAP measures are not in accordance with or an alternative for GAAP financial data and may be different from non-GAAP measures used by other companies.

Forward-Looking Statement:
This release includes forward-looking statements which are based on certain assumptions and reflect management’s current expectations as contemplated under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations.  Some of these factors include:  the availability and cost of capital; uncertainty as to whether our strategies, partnerships and business plans will yield the expected benefits; general global economic conditions; general industry and market conditions and growth rates; increasing competition; the ability to identify, develop and achieve commercial success for new products, services and technologies; changes in technology; changes in laws and regulations, including government incentive programs; intellectual property rights; our ability to secure and maintain strategic relationships, including key supply relationships; and the availability of, and our ability to retain, key personnel.  Additional factors are discussed in our public disclosure materials from time to time.  We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Consolidated Balance Sheets

ASSETS

 (U.S. Dollars) (in thousands)

The accompanying notes are an integral part of these statements.

Consolidated Balance Sheets

LIABILITIES AND SHAREHOLDERS’ EQUITY

(U.S. Dollars) (in thousands)

Consolidated Statements of Operations (Unaudited)
 (U.S. Dollars) (in thousands except per share data)

The accompanying notes are an integral part of these statements.

Consolidated Statement of Shareholders’ Equity

December 31, 2006 and June 30, 2007

(U.S. Dollars) (in thousands)

The accompanying notes are an integral part of these statements.

Consolidated Statement of Cash Flows

(U.S. Dollars) (in thousands)

The accompanying notes are an integral part of these statements.

Consolidated Statement of Cash Flows

(U.S. Dollars) (in thousands)

The accompanying notes are an integral part of these statements.

Notes to Consolidated Financial Statements (Unaudited)

(U.S. Dollars) June 30, 2007 and 2006

Note 1: Description of Business

Solar Integrated Technologies, Inc. (the “Company”) was established and incorporated in the State of Delaware in the United States of America on January 24, 2002.  The Company designs, manufactures and installs building-integrated photovoltaic, or BIPV, roofing systems for customers with non-residential buildings that have flat or low-slope rooftops.  The Company provides its customers with an integrated BIPV roofing solution that meets both their roofing and their onsite solar power generation requirements.  The Company is based in Los Angeles, California and maintains an office in Mainz, Germany.  The Company’s customers are primarily located in the United States and Europe.

Note 2: Basis of Presentation

The accompanying interim financial statements of Solar Integrated Technologies Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).  Accordingly, they do not include all the information and footnotes required by US GAAP for annual financial statements.  These interim results are presented in U.S. dollars, unless otherwise noted.

The interim financial statements as of June 30, 2007 and for the six-month periods ended June 30, 2007 and 2006 are unaudited.  In the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly in accordance with US GAAP the financial position, results of operations and cash flows for all periods presented have been made.  The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.

The interim financial statements follow the same accounting policies and methods of application as the financial statements for the year ended December 31, 2006 except as described below.  These interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s 2006 Annual Report.  Certain prior year amounts have been reclassified to conform with current period presentation.

Note 3: Restatement of June 30, 2006 Financial Statements

On May 3, 2007, the Company determined that its financial statements for the year ended December 31, 2005 required revision to reflect the accounting impact of (1) not recording a beneficial conversion feature present in the Company’s convertible notes issued in November 2005, and (2) the classification of certain warrants issued in connection with financing activities during 2005 as a component of stockholder’s equity when it should have been recorded as a liability. 
The warrants issued in connection with certain financing activities during 2005 include (1) a re-pricing provision in the event the Company issues common shares below the warrant strike price, (2) an anti-dilution provision in the event the Company issues additional shares, subject to certain customary exceptions.  The Company’s valuation of these warrants was revisited to reflect the fair value of these features.  The restated financial statements reflect the corrected valuation of these warrants and are correctly classified as liabilities.

The following tables (in thousands, except for per share data) summarizes the impact of the restatements of the relevant captions from the Company’s consolidated statement of operations for the six months ended June 30, 2006.  These tables contain only the changed balances and do not represent the complete statements of operations.

Note 4: New Accounting Pronouncements

In December 2006, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position on No. EITF 00-19-2, Accounting for Registration Payment Arrangements ("FSP EITF 00-19-2").  FSP EITF 00-19-2 provides that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement should be separately recognized and measured in accordance with Statement of Financial Accounting Standards ("FAS") No. 5, Accounting for Contingencies, which provides that loss contingencies should be recognized as liabilities if they are probable and reasonably estimable.  Subsequent to the adoption of FSP EITF 00-19-2, any changes in the carrying amount of the contingent liability will result in a gain or loss that will be recognized in the consolidated statement of operations in the period the changes occur.  The guidance in FSP EITF 00-19-2 is effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to the date of issuance of FSP EITF 00-19-2.  For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to the issuance of FSP EITF 00-19-2, this guidance is effective for our consolidated financial statements issued for the year beginning January 1, 2007, and interim periods within that year.

On January 1, 2007, we adopted the provisions of FSP EITF 00-19-2 to account for the registration payment arrangement associated with our convertible note private placement in November 2005.  As of January 1, 2007, management determined that it was probable that we would have a payment obligation under the November 2005 registration payment arrangement.  Therefore, the Company recorded a $2,130,000 cumulative effect of change in accounting principle adjustment to retained earnings as of January 1, 2007.

Note 5: Reconciliation of GAAP Net Loss to Non-GAAP Adjusted EBITDA

The above non-GAAP amounts have been adjusted to eliminate the impact of interest, taxes, depreciation, stock-based compensation, warrant compensation expense, the change in fair value of warrants, and the impairment loss recovery.  

The Company is presenting these measures because management uses this information in evaluating the results of operations and believes this information provides additional insight in understanding the Company’s business.  These measures should not be considered an alternative to the measurements required by GAAP.

Note 6: Long-Term Debt

Convertible Notes Due 2010

In November 2005, the Company completed a private placement of 6.5% convertible notes in the aggregate principal amount of $37.0 million due November 1, 2010 to a group of private investors.  Interest on the notes is payable semi-annually in cash on May 1st and November 1st of each year, beginning May 1, 2006.  The notes may be converted at any time prior to their maturity into shares of the Company’s common stock at the conversion price of $3.392 per share, subject to certain adjustments.  The conversion of all these notes would result in the issuance of 10,908,000 shares, subject to certain adjustments.

In the event a holder elects to convert its notes prior to November 1, 2008 or elects to convert its notes in connection with a fundamental change of control, such note holder will receive, within 30 days after such election to convert, in addition to the shares issuable upon conversion, a make-whole payment in cash equal to the present value of the remaining interest obligation on the notes from the date of such conversion through November 1, 2008, subject to certain adjustments.

On or after November 1, 2008, these convertible notes are redeemable by the Company at a redemption price equal to 100% of face value, plus accrued interest, if the closing sale price of the Company’s common stock listed on the Alternative Investment Market of the London Stock Exchange (AIM) has been at least 140% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period.  These convertible notes contain a put feature whereby the note holder can demand payment if the Company does not consummate a qualified U.S. public offering by November 1, 2008.

As the Company did not consummate a qualified U.S. public offering by May 1, 2007, under the terms of the convertible notes: (i) the interest rate on the notes increased from 6.5% to 8.5% per year effective as of May 1, 2007, and (ii) the note holders may require the Company to repurchase for cash, on November 1, 2008, all or a portion of their notes at a repurchase price equal to 100% of the face amount, plus accrued interest.

If a fundamental change of control occurs at any time prior to the maturity of these convertible notes, holders will have the right to require the Company to repurchase all or part of the outstanding convertible notes at a repurchase price equal to 100% of face value, plus accrued interest.  In addition, upon the occurrence of certain other change of control events, in certain circumstances holders may require the Company to repurchase these convertible notes at a premium to their face value.

In connection with the issuance of the notes, the Company has made certain customary covenants as well as certain covenants relating to the maintenance of its AIM listing, limitations on liens, limitations on investments in affiliates and limitations on the Company’s ability to incur certain additional indebtedness.

The holders of these convertible notes were granted certain registration rights for the shares of common stock issuable upon conversion of these convertible notes.  At date of issuance, the Company determined that a beneficial conversion feature existed as a result of the “make whole” interest feature.  The beneficial conversion feature was recorded as a debt discount with the corresponding credit to additional paid-in capital.  As of June 30, 2007, $5.9 million of the convertible notes have been converted into common stock leaving an outstanding principal amount of $31.1 million as of June 30, 2007.  The convertible notes are reflected net of the debt discount of $817,000 in 2005 and $585,000 in 2006.  The debt discount is being amortized through November 1, 2008, the date of the put feature.

Note 7: Credit Facility

In December 2005, the Company entered into a loan and security agreement with an affiliate of GE Energy Financial Services relating to an asset-based revolving line of credit for up to $20 million.  The credit facility bears interest at LIBOR plus 3.0% on the outstanding balance.  The term of the facility is for up to five years, with an initial 30-month term and a 30-month extension at the lender’s discretion upon satisfaction of certain conditions.  Borrowings under the credit facility are guaranteed by all of the Company’s major subsidiaries and are secured by a pledge of all of the Company’s assets, including the stock of the Company’s subsidiaries and the assets of the Company’s subsidiaries.  The Company is required to pay a commitment fee of 0.50% per annum on the unused portion of the credit facility, as well as customary letter of credit fees.

The credit facility contains customary financial and non-financial covenants, and customary events of default, including a provision that an event of default will exist if the Company defaults under the note purchase agreement governing the Company’s convertible notes due 2010 issued in November 2005.

As additional consideration for the credit facility, the Company granted GE Energy Financial Services five-year warrants to purchase up to 2,000,000 shares of the Company’s common stock at an exercise price of $3.392 per share, subject to certain adjustments.  The warrants vested immediately upon issue and have a term expiring on December 30, 2010.  In connection with these warrants, the Company also granted certain demand and piggyback registration rights.  The warrants also include certain put and call provisions.  Upon the occurrence of certain events (including a change of control, the failure of the Company to consummate a qualified U.S. initial public offering prior to November 1, 2008, the commitment termination date or an event of default under the credit facility), the warrant-holder has the right to require that the Company purchase (i) all or any part of the warrants issued to it for the difference between the market value for the underlying warrant shares at the time of the put and the aggregate warrant exercise price, (ii) any shares underlying the warrants, for the market price of the warrant shares at the time of the put, and (iii) any other of the Company’s securities then owned by the holder, for the market price of such securities at the time of the put.  At any time after January 1, 2010, if the Company shall have the right to redeem the 6.5% Convertible Notes, the Company shall also have the right to purchase all (but not less than all) of the warrants and/or the underlying warrant shares owned by the warrant-holder.

In February 2006, pursuant to an amendment to the Company’s loan and security agreement and a master agreement for standby letters of credit, the Company obtained a $3,000,000 standby letter of credit sub-facility as part of the $20 million credit facility.

In August 2006, pursuant to a waiver and amendment, the credit facility was amended to provide the Company with access to additional capital under the borrowing base eligibility criteria and to provide the Company with more flexibility relating to the facility’s financial covenants.  As partial consideration for GE Energy Financial Services agreeing to the waiver and amendment, the Company adjusted the strike price of the 2,000,000 warrants previously issued to GE Energy Financial Services to a strike price of $1.122 per share, subject to adjustment in certain circumstances.   The Company recorded an additional $861,000 in loan fees in connection with re-pricing and amortizing this amount over the remaining term of credit agreement.

In December 2006, pursuant to the placement and issuance of 33,333,000 share of common stock at $0.59 (£0.30) per share for aggregate gross proceeds of $19.5 million, and in accordance with the anti-dilution and re-pricing provisions of the 2,000,000 warrants previously issued to GE Energy Financial Services, the Company adjusted the strike price of the 2,000,000 warrants to $0.59 (£0.30) per share, subject to adjustment in certain circumstances, and the Company issued to GE Energy Financial Services an additional 617,000 warrants with a strike price of $0.59 (£0.30) per share, subject to adjustment in certain circumstances.
In April 2007, the standby letter of credit sub-facility was increased from $3,000,000 to $5,000,000.

Note 8: Related Party Transactions

In December 2006, one of the Company’s directors agreed, conditional upon any future sale of his holding of common shares of the Company, to direct the first use of net proceeds to satisfy a $3.3 million payable owed to the Company.  As a prudent accounting matter, the Company recorded an impairment charge for the entire amount of this receivable in 2006.  In May 2007, this obligation was satisfied in full.

In April 2007, the Company entered into a preferred supply and cooperation agreement with UPC Solar Management, LLC, a developer of solar energy projects in the United States.  Under the agreement, the Company will be the preferred supplier to UPC Solar Management, LLC of BIPV roofing systems and certain other thin film solar products, solar roofing installation services, and renewable energy management software systems for solar installations.  UPC Solar Management, LLC will be the Company’s preferred developer for solar energy projects in the United States where the end customer prefers to purchase solar generated electricity under a long term power purchase agreement rather than purchase, own and operate the solar energy system directly.  The Chairman of the board of directors of the Company, Brian E. Caffyn, is also the chairman and majority owner of UPC Solar Management, LLC, which is part of Mr. Caffyn’s UPC group of companies.  The terms of this related party transaction were reviewed and approved by the independent directors of the Company’s board of directors.

In May 2007, Solar Integrated announced that it had entered into a supply and cooperation agreement with UPC Energy Management.  Under the agreement, Solar Integrated is the preferred supplier to UPC Energy Management of BIPV roofing systems and certain other thin film solar products in Europe, the Middle East, North Africa and Asia.  UPC Energy Management is Solar Integrated’s preferred developer for solar energy projects in these territories where the end customer prefers to purchase solar generated electricity under a long term power purchase agreement or rent their rooftops rather than purchase, own and operate the solar energy system directly.  Brian E. Caffyn, the non-executive Chairman of the Company’s board of directors, and Nicholas A. Wrigley, a non-executive director of the Company, are part of a small group of owners of UPC Energy Management.  Mr. Caffyn is also the chairman of UPC Energy Management.  The terms of this related party transaction were reviewed and approved by the independent directors of the Company’s board of directors.