AMERICAN DG ENERGY INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 16, 2016

Attached files

file filename
8-K - 8-K - AMERICAN DG ENERGY INCadge-081516q2earningsrelea.htm


American DG Energy Inc.
45 First Avenue, Waltham, MA 02451
t: +1 781.522.6000 f: +1 781.522.6050
info@americandg.com www.americandg.com    FOR IMMEDIATE RELEASE

Investor Contact:                        Media Contact:
John N. Hatsopoulos                        Bonnie Brown
American DG Energy Inc                    American DG Energy Inc    
781.622.1120                            781.522.6020
john.hatsopoulos@americandg.com                bonnie.brown@americandg.com


 American DG Energy Reports Second Quarter 2016 Financial Performance
ADGE's North American operations achieve EBITDA Cash Inflow for Q2 and full year 2016

WALTHAM, Mass. - August 11, 2016 - American DG Energy Inc. (NYSE MKT: ADGE, the "Company"), an On-Site Utility provider offering clean electricity, heat, hot water and cooling solutions to hospitality, healthcare, housing and fitness facilities, reported total revenues of $2,112,148 for the second quarter of 2016, compared to $2,087,127 for the same period in 2015. GAAP diluted earnings per share (EPS) were $0.06 for the second quarter of 2016 versus the $0.02 loss reported in the comparable prior year quarter. GAAP EPS benefited from a one-time gain on the deconsolidation of former European subsidiary EuroSite Power Inc.

Speaking about the deconsolidation, Co-Chief Executive Officer Benjamin Locke noted, “It was imperative that American DG take steps to ameliorate the substantial debt burden on our balance sheet. The exchange of EuroSite Power shares for elimination of convertible debt was necessary to ensure the continued viability of the Company. EuroSite is on sound footing and executing well on their growth strategy, we are confident our former European subsidiary will thrive as a fully independent entity. There are a number of differences between the operating and market environments in the US, UK and EU; this corporate separation will allow both companies to focus on their individual territories and deploy business strategies as appropriate. We wish the team at EuroSite Power the best of luck as we take our place as enthusiastic long-term shareholders.”

Reflecting the Company's ongoing efforts to optimize its On-Site Utility business, gross margin excluding depreciation improved in second quarter of 2016 to 38.1% versus 34.5% for the same period in 2015, representing 10.4% growth in adjusted gross margin. In addition, the Company delivered a cash flow positive quarter in US operations on a non-GAAP EBITDA basis, with an inflow of $81,058 for the quarter ended June 30, 2016 as compared to outflows of $149,573 in the comparable prior year period.

Chief Financial Officer Bonnie Brown observed, “The team has been laser focused on cost cutting, operational efficiencies, and improvement in fleet performance metrics. These efforts are now producing meaningful results when North American operations are taken on a stand-alone basis. We fully expect these investments to put the company on a path to profitability, achieving non-GAAP EBITDA cash inflow of $38,378 for the year to date period is just the first step.”

Mr. Locke added, “For the second straight quarter our US operations materially reduced operating expenses; year-to-date the Company has delivered over $680,000 in operating expense reductions from management’s implementation of lean practices. Similarly, the Sites Initiative continues to drive fleet




improvement. Improved efficiencies in the US fleet resulted in a 6% reduction in fuel costs, offsetting increased gas rates. On the revenue side, improved metering now allows us to accurately invoice customers for demand usage, generating 65% growth in demand-related billing over the prior year period. Additionally, electric utility rates saw an increase in the period of over 7%, although small, if sustained, this uptick is a good thing for future energy sales.”


Major Highlights:
 
Consolidated Financial Results

•
Our revenues increased to $2,112,148 for the second quarter of 2016 compared to $2,087,127 for the same period in 2015, an increase of $25,021 or 1.2%.
•
Due to our efforts to improve operations and efficiencies, selling expenses have decreased to $177,647 for the second quarter of 2016 compared to $308,428 for the same period in 2015, a 42.4%improvement.
•
Overall operating expenses have decreased to $1,136,069 for the second quarter of 2016 versus $1,168,872 for the same period in 2015, a 2.8% improvement, generating an expense reduction of $32,803.
•
Adjusted gross margin excluding depreciation improved by 10.4%, hitting 38.1% for second quarter of 2016 versus 34.5% for the same period in 2015. Gross margin for the second quarter of 2016 was 11.0% compared with 9.6% in 2015, reflecting the adverse impact of depreciation expense which was only partially offset by reductions in fuel, maintenance and installation related expense.
•
A one-time non-operating, predominantly non-cash gain of $3,887,098 was recognized as a result of the deconsolidation with EuroSite at the end of the quarter.

•
American DG Energy (US operations) successes:
◦
As a result of our focused efforts to improve fleet operations, non-GAAP EBITDA cash flows for US operations improved by $230,631, reaching a positive "inflow" of $81,058 in the second quarter of 2016, versus an "outflow" of $149,573 for the same period in 2015.
◦
Overall operating expenses decreased to $553,490 for the second quarter of 2016 versus $888,008 for the same period in 2015, a 37.7% improvement, generating an expense reduction of $334,518. Operating expenses benefited not only from reductions in employee headcount but also from reduced travel expense, consulting fees and rent expense.
◦
Gross margin excluding depreciation improved to 39.7% for the second quarter of 2016 compared to 38.1% for the same period in 2015, a gross margin improvement of 1.6%.
◦
In May 2016 American DG initiated a series of transactions that eliminated $9.3 million in convertible debentures ($8.5 million net of prepaid interest) in exchange for approximately 14.72 million shares in EuroSite Power (OTCQX: EUSP). These transactions significantly improved the Company's balance sheet by cutting outstanding convertible debt in half and substantially eliminated the risk of potential shareholder dilution that may have resulted from a debt to equity conversation of these securities.
◦
On August 10, 2016 American DG announced a series of transactions that will result in a reduction of convertible debt outstanding to $3.4 million with zero coupon due May 2018;




eliminate 1.02 million in outstanding warrants expiring October 2017; and will reduce the Company's stake in EuroSite Power Inc. to just 2.03% (approximately 1.7 million shares). These transactions are expected to be completed in the fourth quarter of this year and are likely to significantly improve the Company's balance sheet and prevent substantial potential shareholder dilution.

•
EuroSite Power Inc. subsidiary successes:
◦
Total revenue increased by 18.0% to $640,437 for the second quarter of 2016, compared to $542,973 for the second quarter of 2015. On a local currency basis, total revenue was GBP£446,718 for Q2 2016, 26% growth over GBP£354,514 in revenue for Q2 2015.
◦
Energy revenue grew by 20.2% to $640,014 compared to $532,604 for the prior comparable period.  On a local currency basis, energy revenue grew 28.4% to GBP£446,423, up from GBP£347,744 in Q2 2015.
◦
Gross margin, excluding depreciation, improved to 34.4% versus 24.1% in Q2 2015. Overall gross margin improved by 9.8 percentage points to 16.1% for the period, compared to a 6.3% for the prior year period.
◦
Total revenue value of all contracted On-Site Utility energy agreements as of June 30, 2016 was approximately $102.12 million using various market assumptions and estimates made by management, compared to $101.1 million at June 30, 2015. On a local currency basis, total revenue value of all contracted On-Site Utility energy agreements at the end of the most recent quarter was GBP£70.3 million compared to GBP£59.7 million on June 30, 2015.
◦
In May EuroSite Power raised, via private placement of its common stock, $7.25 million at $0.575 per share. The funds were used first to pay down $2 million in debt outstanding with the remainder devoted to supporting operations and growth initiatives.
◦
On June 30, 2016 the Company further strengthened the balance sheet via substantial reduction in outstanding convertible debt. In total 3,909,260 common shares were issued at $0.54 per share in exchange for $2.1 million in senior notes. Following the conversion just $300,000 in 4% senior convertible debt, due June 2017, remains outstanding.
.

US Operations

•
Improved efficiencies in the US resulted in a 6% reduction of fuel costs for our fleet.
•
Throughout 2016 the Company has been implementing a program to upgrade our electrical metering such that we can accurately measure the CHP system’s benefit in reducing site peak electrical demand. By measuring this portion of site savings accurately, the company is eligible to collect revenue proportional to this savings. With only one third of the sites upgraded, the company was able to increase second quarter revenue attributed to demand savings year-to-year three fold ($27k to $78k).
•
Overall energy production (thermal and electrical) decreased 12%. Overall electrical production increased by 4% as the entire shortfall is attributable reduced thermal production. The reduced thermal production occurred in April, which was unusually warm.
•
Overall we increased electrical production of the ADGE developed sites by 12% in the second quarter of 2016 compared to the same period in 2015.




•
Year-over-year electric rates used as the basis for customer invoicing increased on average 7.4% making the electricity produced by our systems that much more valuable. Gas prices, on the other hand, increased by 7.9%. This likewise increases the value of our thermal energy proportionally but with negative offset relative to our fuel costs. Overall the shift in utility prices is beneficial to the Company’s profitability.

•
Revenue for the quarter was attributable to the following core markets:
Fitness
23
%
Hospitality
31
%
Housing
15
%
Education
12
%
Healthcare
12
%
Other
7
%
Total
100
%


•
The revenue was distributed by energy type as is outlined in the following table:
Electricity
58
%
Thermal
32
%
Cooling
10
%
Total
100
%
    
•
In total, as of June 30, 2016, we operated 123 systems totaling 8,623kW of installed capacity with a total approximate lifetime contract value of $268,400,000 million.
•
We have a backlog of 20 systems totaling 2,295kW of installed capacity, on a consolidated basis, as of June 30, 2016.


American DG Energy will hold its earnings conference call today, August 11, 2016 at 11:30 a.m. Eastern Time. To listen, call (866) 364-3819 within the U.S., (855) 669-9657 from Canada, or (412) 902-4209 from other international locations. Participants should reference American DG Energy to access the call. We suggest you begin dialing at least 10 minutes before the scheduled starting time. Alternately, to register for and listen to the live webcast, please go to http://investors.americandg.com/webcast.

The earnings conference call will be recorded and available for playback one hour after the end of the call through Thursday August 18, 2016. To listen to the playback, call (877) 344-7529 within the U.S. (855) 669-9658 from Canada, or +1 (412) 317-0088 from other international locations and reference Replay Access Code 10090416. Following the call, the webcast will be archived for 30 days.

About American DG Energy
American DG Energy supplies low-cost energy to its customers through distributed power generating systems. We are committed to providing institutional, commercial and small industrial facilities with clean, reliable power, cooling, heat and hot water at lower costs than charged by local utilities - without any capital or start-up costs to the energy user - through our On-Site Utility energy solutions. American DG Energy is headquartered in Waltham, Massachusetts. Learn more about how American DG Energy reduces energy costs at www.americandg.com or follow us on Facebook and Twitter.

 




FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. Important factors could cause actual results to differ materially from those indicated by such forward-looking statements, as disclosed on the Company's website and in Securities and Exchange Commission filings. This press release does not constitute an offer to buy or sell securities by the Company, its subsidiaries or any associated party and is meant purely for informational purposes. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.




AMERICAN DG ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,
2016
 
December 31,
2015
ASSETS
 
 
 
Current assets:
 

 
 

Cash and cash equivalents
$
3,164,151

 
$
5,587,528

Accounts receivable, net
819,621

 
937,706

Unbilled revenue
14,410

 
12,468

Due from related party
71,832

 
99,548

Inventory
857,050

 
1,112,853

Prepaid and other current assets
448,265

 
752,397

Total current assets
5,375,329

 
8,502,500

Property and equipment, net
17,924,686

 
25,467,049

Investment in EuroSite
6,434,676

 
—

Other assets, long-term
21,359

 
52,829

TOTAL ASSETS
$
29,756,050

 
$
34,022,378

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
265,816

 
$
575,248

Accrued expenses and other current liabilities
241,840

 
544,624

Due to related party
378,851

 
1,171,863

Total current liabilities
886,507

 
2,291,735

Long-term liabilities:
 

 
 

Convertible debentures
—

 
1,585,264

Convertible debentures due related parties
8,708,960

 
17,030,070

Note payable - related party
—

 
2,000,000

Total liabilities
9,595,467

 
22,907,069

Commitments and contingencies (Note 9)
 
 
 
Stockholders' equity:
 

 
 

American DG Energy Inc. stockholders’ equity:
 

 
 

Common stock, $0.001 par value; 100,000,000 shares authorized; 50,684,095 issued and outstanding at June 30, 2016 and December 31, 2015, respectively
50,684

 
50,684

Additional paid-in capital
58,745,113

 
49,641,620

Accumulated deficit
(38,699,249
)
 
(40,622,774
)
Total American DG Energy Inc. stockholders’ equity
20,096,548

 
9,069,530

Noncontrolling interest
64,035

 
2,045,779

Total stockholders' equity
20,160,583

 
11,115,309

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
29,756,050

 
$
34,022,378







AMERICAN DG ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)  
 
 
Three Months Ended
 
June 30,
2016
 
June 30,
2015
Revenues
 
 
 
Energy revenues
$
1,973,377

 
$
1,871,110

Turnkey & other revenues
138,771

 
216,017

 
2,112,148

 
2,087,127

Cost of sales
 

 
 

Fuel, maintenance and installation
1,307,448

 
1,367,484

Depreciation expense
572,411

 
519,858

 
1,879,859

 
1,887,342

Gross profit
232,289

 
199,785

Operating expenses
 

 
 

General and administrative
723,595

 
645,367

Selling
177,647

 
308,428

Engineering
234,827

 
215,077

 
1,136,069

 
1,168,872

Loss from operations
(903,780
)
 
(969,087
)
 
 
 
 
Other income (expense), net
 

 
 

Interest and other income
8,385

 
168,167

Interest expense
(264,843
)
 
(317,650
)
Debt conversion expense
(224,782
)
 
—

Gain on deconsolidation
$3,887,098
 
—

    Change in fair value of warrant liability
—

 
81

 
3,405,858

 
(149,402
)
 
 
 
 
Income (loss) before provision for income taxes
2,502,078

 
(1,118,489
)
Provision for income taxes
6,139

 
2,187

Consolidated net income (loss)
2,508,217

 
(1,116,302
)
(Income) loss attributable to the noncontrolling interest
516,503

 
(59,759
)
Net income (loss) attributable to American DG Energy Inc.
$
3,024,720

 
$
(1,176,061
)
 
 
 
 
Net income (loss) per share - basic and diluted
$
0.06

 
$
(0.02
)
Weighted average shares outstanding - basic and diluted
50,684,095

 
50,655,021

 
 
 
 
Non-GAAP financial disclosure
 
 
 
Loss from operations
$(903,780)
 
$(969,087)
Depreciation & other non-cash expense
$582,227
 
$532,672
Stock based compensation
$139,886
 
$130,430
Adjusted EBITDA
$(181,667)
 
$(305,985)
Grants from rebates
—

 
668,859

Total EBITDA cash flows *
$(181,667)
 
$362,874
* EBITDA (cash outflows), for the second quarter of 2016 were "Inflows" of $81,058 for American DG Energy in North America and this was offset by cash "Outflows" of $262,725 for EuroSite Power.




AMERICAN DG ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)  
 
 
Six Months Ended
 
June 30,
2016
 
June 30,
2015
Revenues
 
 
 
Energy revenues
$
4,023,378

 
$
4,261,457

Turnkey & other revenues
290,251

 
333,410

 
4,313,629

 
4,594,867

Cost of sales
 

 
 

Fuel, maintenance and installation
2,790,106

 
3,095,137

Depreciation expense
1,123,487

 
1,028,315

 
3,913,593

 
4,123,452

Gross profit
400,036

 
471,415

Operating expenses
 

 
 

General and administrative
1,401,325

 
1,506,429

Selling
331,100

 
649,121

Engineering
484,319

 
385,447

 
2,216,744

 
2,540,997

Loss from operations
(1,816,708
)
 
(2,069,582
)
 
 
 
 
Other income (expense), net
 

 
 

Interest and other income
21,226

 
186,433

Interest expense
(601,891
)
 
(630,106
)
Debt conversion expense
(224,782
)
 
—

Gain on deconsolidation
$3,887,098
 
$0
Change in fair value of warrant liability
—

 
6,479

 
3,081,651

 
(437,194
)
 
 
 
 
Income (loss) before provision for income taxes
1,264,943

 
(2,506,776
)
Provision for income taxes
(60,288
)
 
(5,168
)
Consolidated net income (loss)
1,204,655

 
(2,511,944
)
(Income) loss attributable to the noncontrolling interest
718,870

 
123,449

Net income (loss) attributable to American DG Energy Inc.
$
1,923,525

 
$
(2,388,495
)
 
 
 
 
Net loss per share - basic and diluted
$
0.04

 
$
(0.05
)
Weighted average shares outstanding - basic and diluted
50,684,095

 
50,695,201

 
 
 
 
Non-GAAP financial disclosure
 
 
 
Loss from operations
$(1,816,708)
 
$(2,069,582)
Depreciation & other non-cash expense
$1,146,186
 
$1,052,173
Stock based compensation
$200,541
 
$280,889
Adjusted EBITDA
$(469,981)
 
$(736,520)
Grants from rebates
354,745

 
668,859

Total EBITDA cash flows *
$(115,236)
 
$(67,661)
* EBITDA (cash outflows) for the first six months of 2016, were "Inflows" of $38,378 for American DG Energy in North America offset by "Outflows" of $153,614 for EuroSite Power.




AMERICAN DG ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended
 
June 30, 2016
 
June 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net income (loss) attributable to American DG Energy, Inc.
$1,923,525
 
$
(2,388,495
)
Loss attributable to noncontrolling interest
(718,870
)
 
(123,449
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 

 
 

Depreciation
1,146,186

 
1,052,173

Gain attributable to distribution of nonmonetary assets to noncontrolling interest
—

 
(157,870
)
Gain on deconsolidation of subsidiary
(3,887,098
)
 
—

Amortization of deferred financing costs
23,346

 
11,637

Amortization of convertible debt premium
(41,123
)
 
(48,144
)
Decrease in fair value of warrant liability
—

 
(6,479
)
Non-cash interest expense
522,044

 
582,348

Stock-based compensation
200,541

 
280,889

Non-cash debt conversion expense
224,782

 
—

Changes in operating assets and liabilities:
 

 
 

(Increase) decrease in:
 

 
 

Accounts receivable and unbilled revenue
(135,385
)
 
79,981

Due from related party
27,716

 
(2,485
)
Inventory
66,679

 
93,415

Prepaid and other current assets
276,079

 
322,700

Increase (decrease) in:
 

 
 

Accounts payable
(53,732
)
 
(54,250
)
Accrued expenses and other current liabilities
(49,658
)
 
13,537

Due to related party
(793,012
)
 
372,945

Other long-term liabilities
—

 
(2,227
)
Net cash provided by (used in) operating activities
(1,267,980
)
 
26,226

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Purchases of property and equipment
(1,231,826
)
 
(2,295,568
)
Proceeds from sale of property and equipment
10,250

 
—

Partial purchase of non-controlling interest
—

 
(100,000
)
Cash balance lost through deconsolidation
(5,127,424
)
 
—

Net cash used in investing activities
(6,349,000
)
 
(2,395,568
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Proceeds from sale of subsidiary common stock, net of cost
7,246,090

 
—

Purchases of common stock, net of costs
—

 
(148,510
)
Payment on related party note payable
(2,000,000
)
 
(1,000,000
)
Distributions to noncontrolling interest
(52,487
)
 
(135,582
)
Net cash provided by (used in) financing activities
5,193,603

 
(1,284,092
)
 
 
 
 
Net decrease in cash and cash equivalents
(2,423,377
)
 
(3,653,434
)
Cash and cash equivalents, beginning of the period
5,587,528

 
11,825,915

Cash and cash equivalents, end of the period
$
3,164,151

 
$
8,172,481

Supplemental disclosures of cash flows information:
 

 
 

Cash paid during the period for:
 

 
 

Interest
$
66,764

 
$
90,871

Income taxes
$
77,498

 
$
35,838

Non-cash investing and financing activities:
 

 
 

Distribution of nonmonetary assets
$
—

 
$
340,069

Conversion of convertible debentures to common stock
$
2,184,264

 
$
—

Conversion of convertible debentures to subsidiary common stock
$
7,910,164

 
$
—






AMERICAN DG ENERGY INC. (North America Only)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Non-GAAP-Unaudited)  

 
Three Months Ended
 
June 30,
2016
 
June 30,
2015
Revenues
 
 
 
Energy revenues
$
1,333,363

 
$
1,338,506

Turnkey & other revenues
138,348

 
205,648

 
1,471,711

 
1,544,154

Cost of sales
 
 
 
Fuel, maintenance and installation
887,082

 
955,277

Depreciation expense
455,685

 
423,115

 
1,342,767

 
1,378,392

Gross profit
128,944

 
165,762

Operating expenses
 
 
 
General and administrative
391,427

 
514,962

Selling
17,242

 
201,405

Engineering
144,821

 
171,641

 
553,490

 
888,008

Loss from operations
(424,546
)
 
(722,246
)
 
 
 
 
Other income (expense), net
 
 
 
Interest and other income
5,072

 
166,553

Interest expense
(257,257
)
 
(305,901
)
Gain on deconsolidation
3,887,098

 
—

    Change in fair value of warrant liability
—

 
81

 
3,634,913

 
(139,267
)
Income (loss) before provision for income taxes
3,210,367

 
(861,513
)
Provision for income taxes
6,139

 
4,375

Consolidated net income (loss)
3,216,506

 
(857,138
)
(Income) loss attributable to the noncontrolling interest
(91,301
)
 
(21,160
)
Net income (loss) attributable to American DG Energy Inc.
$
3,125,205

 
$
(878,298
)
 
 
 
 
Non-GAAP financial disclosure
 
 
 
Loss from operations
$
(424,546
)
 
$
(722,246
)
Depreciation & other non-cash expense
463,656

 
435,328

Stock based compensation
41,948

 
105,147

Adjusted EBITDA
81,058

 
(181,771
)
Grants from rebates and incentives (reduction in basis of property)
—

 
32,198

Total EBITDA cash inflows (outflows)
$
81,058

 
$
(149,573
)



AMERICAN DG ENERGY INC Reports