Midwest Energy Emissions Corp. Reports Third Quarter 2017 Financial Results
Q3 2017 Revenues of $8.4 Million Drive Net Income of $0.9 Million
LEWIS CENTER, OH -- (Marketwired) -- 11/20/17 -- Midwest Energy Emissions Corp. (OTCQB: MEEC) ("ME2C" or the "Company"), a leader in mercury emissions control in North America, has provided its financial results for the third quarter ended September 30, 2017.
| Third Quarter 2017 Results | |||
| Q3 2017 | Q3 2016 | CHANGE (%) | |
| Revenues | $8.4 million | $11.8 million | (29%) |
| Operating Income (Loss) | $1.0 million | $1.7 million | (41%) |
| GAAP Net Income (Loss) | $0.9 million | ($9.3) million | N/A |
| Adjusted EBITDA (non-GAAP)1 | $1.6 million | $2.3 million | (30%) |
| Shares Outstanding (F/D) | 76.2 million | 47.9 million | 59% |
| 1) | We define Adjusted EBITDA (a non-GAAP financial measure) as net income adjusted for income taxes, depreciation, amortization, stock based compensation and other non-cash income and expenses. Please see "Use of Non-GAAP Financial Measures" below. |
Management Commentary
"We've continued to make progress, evidenced by the recently announced signing of our first international customer in Canada," said Richard MacPherson, President and CEO of ME2C. "We view international opportunities as the 'next frontier' in mercury control. Entering the Canadian market represents a significant milestone for the company and showcases the value of our total solution approach to mercury capture, both in the U.S. and abroad. As part of our international efforts, we also presented at an environmental conference in Poland, which has translated to several potential opportunities with large, multinational corporations throughout Europe and Asia."
MacPherson, continued: "In additional to our business development efforts, we've also made some operational enhancements with upgrades to our distribution facility in Texas. These upgrades have expanded our product mix for customers, helping them to operate more efficiently, and ultimately, more profitably.
"For the remainder of the year, we remain focused on executing upon our key initiatives, which consist of leveraging our total solution approach to mercury capture to earn new customers throughout North America, further penetrating existing customer fleets, and growing our geographic footprint in the U.S., Canada, and other key international markets."
Corporate Update
As a result of the Company's international sales efforts, in October the Company secured its first contract in Canada. This initial purchase order, valued at approximately $700,000, will include the installation of the Company's proprietary Sorbent Enhancement Additive (SEA™) Technology servicing the front end of four new electric generating units (EGUs). The Company expects further geographic expansion to help smooth out seasonal fluctuations that are typically experienced as a result of varying power demands.
In August, the Company announced a contract renewal with one of its largest customers to continue providing ME2C's SEA™ Technology. Due to unexpected changes relating to this customer undergoing a major reorganization -- which includes shuttering of a number of units, as well as a potential acquisition underway that would provide them with a number of new EGU's -- the contract is now expected to generate less than the previously announced $25.0 million in revenue from product sales and consulting services over a three-year term. The Company expects to have a better understanding of this contract by the end of the second quarter of 2018.
ME2C currently holds over 40 patents related to mercury control throughout North America, China and Europe, which were acquired for $2.5 million and 925,000 shares of common stock earlier in 2017 from the Energy & Environmental Research Center Foundation (EERCF).
The Company's product focused on preventing scrubber reemission events in coal-fired power utilities with wet scrubbers continues to be tested at several large coal-burning power facilities. During these tests, the technology has consistently proven to reduce mercury reemission from wet flue gas desulfurization systems, achieving greater than 95% mercury control, resulting in stack mercury emissions well below MATS compliance limits.
Third Quarter 2017 Financial Results
Total revenues in the third quarter of 2017 were $8.4 million compared to $11.8 million in the third quarter of 2016. This decrease is primarily due to optimization efforts undertaken over the past year with our customers as well as lower capacity factors seen at some customer sites resulting in decreased product needed to keep our customers in MATS compliance.
Operating income in the third quarter of 2017 was $1.0 million, compared to an operating income of $1.7 million in the third quarter of 2016. This decrease was primarily due to the lower product sales over the same quarter last year.
Net income in the third quarter of 2017 was $0.9 million, or $0.01 per diluted share, compared to a net loss of $9.3 million, or ($0.19) per diluted share, in the third quarter of 2016. The improved net income for the third quarter of 2017 was primarily due to the gain recorded in 2017 compared to the loss recorded in 2016 on the change in value of warrant liability, together with the decrease in interest expense, partially offset by a decrease in operating income for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.
Adjusted EBITDA in the third quarter of 2017 was $1.6 million, compared to $2.3 million in the same year-ago quarter.
On September 30, 2017, the Company had cash and cash equivalents of $2.4 million, compared to $1.7 million on June 30, 2017.
Full Year 2017 Revenue Guidance
For the full year ending December 31, 2017, the Company is reiterating its revenue guidance of at least $26.0 million, compared to revenue of $32.3 million for the full year ended December 31, 2016. This guidance is based on current power demand forecasts and plant projections from secured contracts.
Conference Call and Webcast
Management will host a conference call today, November 20, 2017 at 5:00 p.m. Eastern standard time to discuss ME2C's third quarter 2017 results, provide a corporate update, and conclude with a Q&A from participants. To participate, please use the following information:
| Date: Monday, November 20, 2017 |
| Time: 5:00 p.m. Eastern standard time |
| U.S. Dial-in: 1-877-591-4953 |
| International Dial-in: 1-719-325-4760 |
| Conference ID: 9062225 |
| Webcast: http://public.viavid.com/index.php?id=126943 |
Please dial in at least 10 minutes before the start of the call to ensure timely participation.
A playback of the call will be available through December 20, 2017. To listen, call 1-844-512-2921 within the United States or 1-412-317-6671 when calling internationally. Please use the replay pin number 9062225.
About Midwest Energy Emissions Corp. (ME2C)
Midwest Energy Emissions Corp. (OTCQB: MEEC) delivers patented and proprietary solutions to the global coal-power industry to remove mercury from power plant emissions, providing performance guarantees, and leading-edge emissions services. The U.S. Environmental Protection Agency (EPA) MATS rule requires that all coal- and oil-fired power plants in the U.S., larger than 25 mega-watts remove roughly 90% of mercury from their emissions starting April 15, 2015. ME2C has developed patented technology and proprietary products that have been shown to achieve mercury removal levels compliant with MATS at a significantly lower cost and with less operational impact than currently used methods, while preserving the marketability of fly-ash for beneficial use. For more information, please visit www.midwestemissions.com.
Safe Harbor Statement
With the exception of historical information contained in this press release, content herein may contain "forward-looking statements" that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identified by using words such as "anticipate," "believe," "plan," "expect," "intend," "will," and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Investors are cautioned that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the statements made. Matters that may cause actual results to differ materially from those in the forward-looking statements include, among other factors, the gain or loss of a major customer, change in environmental regulations, disruption in supply of materials, capacity factor fluctuations of power plant operations and power demands, a significant change in general economic conditions in any of the regions where our customer utilities might experience significant changes in electric demand, a significant disruption in the supply of coal to our customer units, the loss of key management personnel, availability of capital and any major litigation regarding the Company. In addition, this release contains time-sensitive information that reflects management's best analysis only as of the date of this release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Further information concerning issues that could materially affect financial performance related to forward-looking statements contained in this release can be found in the Company's periodic filings with the Securities and Exchange Commission.
Use of Non-GAAP Financial Measures
To supplement our consolidated financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we consider and are including herein Adjusted EBITDA, a Non-GAAP financial measure. We view Adjusted EBITDA as an operating performance measure and, as such, we believe that the GAAP financial measure most directly comparable to it is net income (loss). We define Adjusted EBITDA as net income adjusted for interest and financing fees, income taxes, depreciation, amortization, stock based compensation, and other non-cash income and expenses. We believe that Adjusted EBITDA provides us an important measure of operating performance because it allows management, investors, debtholders and others to evaluate and compare ongoing operating results from period to period by removing the impact of our asset base, any asset disposals or impairments, stock based compensation and other non-cash income and expense items associated with our reliance on issuing equity-linked debt securities to fund our working capital.
Our use of Adjusted EBITDA has limitations as an analytical tool, and this measure should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP, as the excluded items may have significant effects on our operating results and financial condition. Additionally, our measure of Adjusted EBITDA may differ from other companies' measure of Adjusted EBITDA. When evaluating our performance, Adjusted EBITDA should be considered with other financial performance measures, including various cash flow metrics, net income and other GAAP results. In the future, we may disclose different non-GAAP financial measures in order to help our investors and others more meaningfully evaluate and compare our future results of operations to our previously reported results of operations.
We prepare and publicly release quarterly unaudited financial statements prepared in accordance with GAAP. The following table shows our reconciliation of Net Income to Adjusted EBITDA for the quarters and nine months ended September 30, 2017 and 2016, respectively:
| Quarter Ended September 30, | Nine Months Ended September 30, | ||||
| 2017 | 2016 | 2017 | 2016 | ||
| (In thousands) | (In thousands) | ||||
| Net income (loss) | $ 869 | $ (9,302) | $ 95 | $ (16,637) | |
| Non-GAAP adjustments: | |||||
| Depreciation and amortization | 327 | 249 | 951 | 642 | |
| Interest and letter of credit fees | 595 | 973 | 1,801 | 4,079 | |
| Income taxes | 15 | 20 | 21 | 24 | |
| Stock based compensation | 201 | 385 | 1,438 | 968 | |
| Change in warrant liability | (56) | 9,985 | (919) | 14,242 | |
| Settlement gains and losses | (379) | - | (318) | - | |
| Adjusted EBITDA | $ 1,572 | $ 2,310 | $ 3,069 | $ 3,318 | |
We are including below our unaudited reconciliation of Net Income to Adjusted EBITDA on a quarterly basis for the quarters ended September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016:
| Quarter Ended (Unaudited) | ||||||||
| 9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | |||||
| (In thousands) | ||||||||
| Net income (loss) | $ 869 | $ 671 | $ (1,445) | $ (246) | ||||
| Non-GAAP adjustments: | ||||||||
| Depreciation and amortization | 327 | 322 | 302 | 271 | ||||
| Interest and letter of credit fees | 595 | 606 | 600 | 896 | ||||
| Income taxes | 15 | 6 | - | (497) | ||||
| Stock based compensation | 201 | 282 | 955 | 191 | ||||
| Change in warrant liability | (56) | (655) | (208) | 439 | ||||
| Gain on debt restructing | - | - | - | (407) | ||||
| Settlement gains and losses | (379) | 61 | - | - | ||||
| Adjusted EBITDA | $ 1,572 | $ 1,293 | $ 204 | $ 647 | ||||
| MIDWEST ENERGY EMISSIONS CORP AND SUBSIDIARIES | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| SEPTEMBER 30, 2017 AND DECEMBER 31, 2016 | ||||||
| (UNAUDITED) | ||||||
|
September 30, 2017 (Unaudited) |
December 31, 2016 |
|||||
| ASSETS | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ 2,363,728 | $ 7,751,557 | ||||
| Accounts receivable | 4,083,478 | 3,553,096 | ||||
| Inventory | 805,576 | 609,072 | ||||
| Prepaid expenses and other assets | 174,822 | 199,495 | ||||
| Total current assets | 7,427,604 | 12,113,220 | ||||
| Property and equipment, net | 2,772,078 | 2,569,354 | ||||
| Deferred tax asset | 500,000 | 500,000 | ||||
| Intellectual Property/Patents, net | 2,985,162 | 52,945 | ||||
| Customer acquisition costs, net | 334,591 | 642,203 | ||||
| Total assets | $ 14,019,435 | $ 15,877,722 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued expenses | $ 2,039,911 | $ 4,363,553 | ||||
| Current portion of notes payable | 2,375,000 | 1,500,000 | ||||
| Current portion of equipment notes payable | 60,467 | 39,499 | ||||
| Customer credits | 167,000 | 590,206 | ||||
| Total current liabilities | 4,642,378 | 6,493,258 | ||||
| Notes payable, net of discount and issuance costs | 10,271,604 | 11,678,669 | ||||
| Convertible notes payable, net of discount and issuance costs | 1,323,146 | 1,142,154 | ||||
| Warrant liability | 163,000 | 1,313,000 | ||||
| Accrued interest | 38,750 | 78,750 | ||||
| Equipment notes payable | 183,048 | 143,135 | ||||
| Total liabilities | 16,621,926 | 20,848,966 | ||||
| Stockholders' deficit | ||||||
| Preferred stock, $.001 par value: 2,000,000 shares authorized | - | - | ||||
| Common stock; $.001 par value; 150,000,000 shares authorized; | ||||||
| 76,246,113 shares issued and outstanding as of September 30, 2017 | ||||||
| 73,509,663 shares issued and outstanding as of December 31, 2016 | 76,246 | 73,510 | ||||
| Additional paid-in capital | 52,109,076 | 49,838,469 | ||||
| Accumulated deficit | (54,787,813 | ) | (54,883,223 | ) | ||
| Total stockholders' deficit | (2,602,491 | ) | (4,971,244 | ) | ||
| Total liabilities and stockholders' deficit | $ 14,019,435 | $ 15,877,722 | ||||
| The accompanying notes are an integral part of these condensed consolidated financial statements. | ||||||
| MIDWEST ENERGY EMISSIONS CORP AND SUBSIDIARIES | |||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
| FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 | |||||||||
| (UNAUDITED) | |||||||||
| For the Three Months Ended September 30, 2017 | For the Three Months Ended September 30, 2016 | For the Nine Months Ended September 30, 2017 | For the Nine Months Ended September 30, 2016 | ||||||
| Revenues | |||||||||
| Product sales | 8,075,510 | 11,453,152 | 20,472,465 | 21,162,950 | |||||
| Equipment sales | 2,975 | 143,166 | 787,081 | 2,699,051 | |||||
| Demonstrations and consulting services | 369,482 | 175,100 | 546,982 | 674,938 | |||||
| Total revenues: | 8,447,967 | 11,771,418 | 21,806,528 | 24,536,939 | |||||
| Costs and expenses: | |||||||||
| Cost of sales | 5,509,204 | 7,821,028 | 14,290,902 | 17,612,843 | |||||
| Selling, general and administrative expenses | 1,910,020 | 2,233,410 | 6,856,558 | 5,075,607 | |||||
| Total costs and expenses | 7,419,224 | 10,054,438 | 21,147,460 | 22,688,450 | |||||
| Operating income | 1,028,743 | 1,716,980 | 659,068 | 1,848,489 | |||||
| Other (expense) income | |||||||||
| Interest expense | (541,855 | ) | (972,930 | ) | (1,627,248 | ) | (4,079,022 | ) | |
| Letter of credit fees | (52,667 | ) | (61,333 | ) | (173,333 | ) | (164,667 | ) | |
| Change in value of warrant liability | 56,000 | (9,984,541 | ) | 919,023 | (14,241,141 | ) | |||
| Gain on legal settlements | 379,000 | - | 317,900 | - | |||||
| Total other (expense) income | (159,522 | ) | (11,018,804 | ) | (563,658 | ) | (18,484,830 | ) | |
| Net income (loss) | $ 869,221 | $ (9,301,824 | ) | $ 95,410 | $ (16,636,341 | ) | |||
| Net income (loss) per common share - basic and diluted: | $ 0.01 | $ (0.19 | ) | $ 0.00 | $ (0.35 | ) | |||
| Weighted average common shares outstanding | 75,865,678 | 47,918,064 | 74,662,691 | 47,546,461 | |||||
| The accompanying notes are an integral part of these condensed consolidated financial statements. | |||||||||
Company Contact:
Richard MacPherson
Chief Executive Officer
Midwest Energy Emissions Corp.
Main: 614-505-6115
rmacpherson@midwestemissions.com
Investor Relations Contact:
Greg Falesnik
Managing Director
MZ Group - MZ North America
Main: 949-385-6449
greg.falesnik@mzgroup.us
www.mzgroup.us
Source: Midwest Energy Emissions Corp.
Released November 20, 2017