Demand Response Energy Management Technology

– First Half 2010 Revenue of $13.5 Million an
Increase of 54% over Prior Year –
– Launched GridConnect, Integrated Demand Response
Technology Platform -
– Company Updates Annual 2010 Guidance: Raises Revenue to
Grow between 40% and 45% over 2009 and Reiterates
Positive Annual 2010 Non-GAAP Adjusted EBITDA –

EnergyConnect Group, Inc. (OTCBB: ECNG - News), a leading provider of smart grid demand response services and technologies, reported results for its second quarter and six-months ended July 3, 2010.

Kevin Evans, EnergyConnect’s president and CEO, said, “We are pleased with our continuing progress and the performance of our capacity portfolio. In the second quarter of 2010, we generated revenue of $6.4 million, driving year-to-date revenue growth to 54%. We are also very encouraged by the positive response from PJM and our customers with GridConnect.”

Second Quarter Financial Results
Revenue for the second quarter of 2010 was $6.4 million, compared to $7.5 million in the second quarter of 2009, which included $3.3 million of capacity transactions. There were no capacity transactions in the second quarter of 2010. Net loss for the second quarter 2010 was $1.1 million, or $(0.01) per share, compared to net income of $601,000, or $0.01 per diluted share in the second quarter 2009. Non-GAAP Adjusted EBITDA loss was $559,000, compared to Non-GAAP Adjusted EBITDA income of $1.3 million in the second quarter 2009.

Six Months Ended June 30, 2010 Financial Results
For the first half of 2010, revenue was $13.5 million, which includes $6.6 million in capacity transactions, compared to $8.7 million for the first half of 2009, which included $4.1 million in capacity transactions. Net income for the first half of 2010 was $992,000, or $0.01 per diluted share, compared to net loss of $1.5 million, or $(0.02) per share in the first half of 2009. Non-GAAP Adjusted EBITDA income was $2.0 million, compared to Non-GAAP Adjusted EBITDA loss of $482,000 for the first half of 2009.

Company Outlook
Andrew Warner, EnergyConnect’s CFO, said, “The business results for the first half were on track with our expectations. Given those results, combined with positive market conditions, we now expect annual revenue growth of between 40% and 45% over last year, up from prior guidance of between 35% and 40% growth. We remain confident in our goal to deliver positive Non-GAAP Adjusted EBITDA for 2010.”

Discussion of Non-GAAP Financial Measures
The company intends to utilize a number of different financial measures, both GAAP and Non-GAAP, in analyzing and assessing the overall business performance, for making operating decisions and for forecasting and planning future periods. The company considers the use of Non-GAAP financial measures helpful in assessing the current financial performance and prospects for the future. While the company intends to use Non-GAAP financial measures as a tool to enhance the understanding of certain aspects of the financial performance, the company does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, the company believes that disclosing Non-GAAP financial measures provides useful supplemental data that, while not a substitute for GAAP financial measures, allows for further transparency in the review of the financial and operational performance.

The company believes that Non-GAAP Adjusted EBITDA is used by investors and analysts as an alternative to GAAP measures when evaluating the performance in comparison to other companies. In order to fully assess the financial operating results, the company believes that Non-GAAP Adjusted EBITDA will be an appropriate measure of evaluating the operating performance, because it eliminates the effects of financing and accounting decisions. This measure is also significant to institutional lenders, and is considered an important internal benchmark of the performance.  The company intends to use Non-GAAP Adjusted EBITDA to measure the performance against internal performance targets, which are based on Non-GAAP Adjusted EBITDA. In addition, the company intends to further exclude stock-based compensation and other non-cash charges in calculating Non-GAAP Adjusted EBITDA. The company believes excluding stock-based compensation and other non-cash charges, allows for greater transparency in the review of the financial and operational performance.

Conference Call
A link to the recording of the earnings conference call and webcast with investor presentation is provided through the Investors section of the EnergyConnect website: http://www.energyconnectinc.com/investors/financials/.

A telephone replay will be available for two business days by dialing 877-870-5176 or 858-384-5517, and entering Account # 3055 and Conference ID #353062. A replay will also be available at the web address above for 90 days.

Forward-Looking Statements
This press release includes statements that may constitute “forward-looking” statements. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause or contribute to such differences that include, but are not limited to, competitive factors, the success of new products in the marketplace, dependence upon third party vendors, and the ability to obtain financing. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.

About EnergyConnect
EnergyConnect delivers industry leading Demand Response technologies and services to commercial, institutional and industrial consumers enabling them to manage their use of electricity in response to market prices or regional power shortages. EnergyConnect’s GridConnect technology platform provides a scalable, cost-effective, clean technology to enhance the grid’s efficiency and reliability. For more information about this leading edge technology or about investor relations, visit: http://www.energyconnectinc.com/.

– Tables Follow –

For More Information:

Company Contact:
Andrew Warner, CFO
EnergyConnect, Inc.
408.898.4592
AWarner@energyconnectinc.com

Investor Relations:
Timothy Dien, Lippert / Heilshorn & Associates, Inc.
415.433.3777 tdien@lhai.com

ENERGYCONNECT GROUP, INC.
CONSOLIDATED BALANCE SHEET
($ )
		July 3, 2010			January 2, 2010
		(unaudited)
Cash	$	538,944		$	1,062,306
Certificates of deposit		33,400			100,200
Accounts receivable, net		11,636,155			6,811,495
Other current assets		120,249			137,042
Total current assets		12,328,748			8,111,043
Intangibles, net		1,279,228			1,398,761
Other long term assets		351,762			265,120
Total assets	$	13,959,738		$	9,774,924
Accounts payable and accrued expenses	$	7,935,674		$	7,508,561
Other current liabilities		469,564			324,886
Total current liabilities		8,405,238			7,833,447
Note payable, net of discount		3,642,626			1,912,937
Total liabilities		12,047,864			9,746,384
Shareholders equity		1,911,874			28,250
Total liabilities and shareholders equity	$	13,959,738		$	9,774,924

Click here for the complete details, including Consolidated Statement of Operations and Reconciliation of GAAP Net Income (loss) to Non-GAAP Adjusted EBITDA.