FR-- Product sales revenues for the year ended September 30, 2011 increased 81% to $3,867,910 compared to $2,120,346 for 2010. Revenues for the three months ended September 30, 2011 were $1,004,425 compared to $737,968 in revenues for the same period in 2010. Product sales revenues were negatively impacted in Q3 and Q4 by a number of politically driven factors in the Ontario market which was core to the Company's strategy for 2011.-- The Company has successfully demonstrated market acceptance of its products, which are reporting 99.7% reliability. In Ontario, the company took a 15% share of its target market during the 1st half. In the US, it secured a 23 MW long term OEM supply contract, and is building relationships with several of the leading national distributors for US distribution in 2012, as a low cost alternative to micro-inverters.-- The Company is meeting its manufactured cost targets. Inverter product margins averaged 26% over the year in low volumes and will be above 36% at current market prices by the end of this year.-- The Company has materially reduced its fixed operating costs. Quarterly costs for Q1, 2012 are less than 50% of Q1, 2011 levels, with further efficiencies targeted for the first half 2012.-- During Q1, 2012 the Company expanded its product portfolio to include DC side peripherals which have the potential to materially increase revenues per sale on sales to system integrators.-- Core technology development is now complete. The base platform has been certified for grid connection in all the major European and North American markets. The completion of a downsized 3kW product later this year will enable customers to service a full array of system designs and nameplate capacities with very high granularity."We achieved all the main operational goals set for the Company in 2011 at this time last year," said Michael Carten, CEO of Sustainable Energy. "We are meeting our manufactured cost targets and averaging very respectable 26% average margins on the core inverter product. We have also cut fixed operating cost 50%, materially lowering our breakeven point.""We have been building distribution channels in the US market and we are gaining traction in that market with leading systems integrators. Power optimization products, especially micro-inverters, are quickly changing the solar landscape in the US, but encountering resistance on larger projects due to higher installed costs and concerns about long term serviceability. We are the beneficiary of this resistance since we deliver the same value propositions as micro-inverters but with the lower cost and easy serviceability of conventional inverters."We are especially excited about the grid -tie energy storage potential which may prove to be our greatest value creator," commented Carten. "We have a material efficiency advantage with grid-connected battery systems, as well as a patented control topology, which efficiently integrates batteries with solar PV to increase the value of solar to the power grid. According to IMS Research, more than 5% of all solar inverters shipped in 2015 will be equipped with energy storage - approximately 2.25 GW."2012 Priorities and OutlookSustainable Energy's two main priorities for 2012 are to build sales volumes in the Ontario and US markets that will take the Company to positive cash flow; and to build long term strategic partnerships that have the potential to unlock the Company's core technology value in solar PV and energy storage.-- In the US, the Company is gaining traction with national distributors and mid-market system aggregators by positioning the PARALEX inverter as a low-cost easily serviceable alternative to micro-inverters for residential and small commercial rooftop systems; and as a safer alternative for smaller ground based systems in agricultural, institutional and residential settings. The Company is also targeting one or more private label or OEM style partnerships with companies which have the ability to scale volumes for the PARALEX product. Based on market data from IMS Research, the Company estimates the U.S. addressable market for inverters in its market segments at 1.2 Gigawatts in calendar 2012; and growing to 1.9 Gigawatts in 2014 with more than 70% for systems between 10kW and 100kW. Assuming an average factory gate prices of US
.38 per watt, this represents an annual market value in the US alone of approximately US$450 million in 2012; and US$750 million in 2014.-- The Company is cautiously optimistic about the recovery of the Ontario micro-FIT market, which had stalled during Q3 and Q4 2011 due to political uncertainty about the future of the Program and grid connectivity issues in rural areas. The market is beginning to move slowly and is expected to pick up sharply following conclusion of a pricing review by the Government to reflect reduced PV module pricing expected in the current Quarter. The Company believes that the addressable market for its products in Ontario should range between 60 - 80 MW in 2012. It noted that there is significant potential on the upside when connectivity issues in rural areas are resolved since there is a 282 MW backlog of micro-FIT projects which are entitled to higher pre-review pricing.-- The Company is executing on its longer term strategy to lever its technology into strategic partnerships where its product advantage is value added to the partner's ability market position and/or technology enabling the partner to drive higher sales volumes. The Company's partnership with tenKsolar, a unique solar concentrator using patented reflector technology is the first of several such partnerships. The Company is optimistic about demand from tenKsolar which has a strong Asian partner and is gaining traction in the US and Europe. During 2012, the Company expects to enter into strategic partnerships which will enable a substantially lower cost and more reliable "AC module" for rooftops and building facades using crystalline or high efficiency thin film modules; as well as a low cost utility dispatchable "smart grid AC battery" which enables load shifting to increase the value of solar energy and allows utilities to balance local load fluctuations. Significantly, these developments use the current inverter platform putting the company on a business development path with no new product development needed.-- The Company warned that it is still very resource constrained due to the collapse of the Ontario market and its need to pay down legacy payables for component inventory committed to prior to the Ontario market collapse. Based on its conservative case demand forecasts, working capital needed to reach breakeven is relatively modest, but the Company will require a modest amount of additional capital which it is working to meet through increased sales and/or structured transactions. Doughty Hanson has invested $1 million out of a previously announced $1.5 million standby equity commitment.