MILWAUKEE, Nov. 9, 2017 /PRNewswire/ -- EnSync, Inc. (NYSE
American: ESNC), dba EnSync Energy Systems ("EnSync
Energy"), a leading developer of innovative distributed
energy resources (DERs), today announced first quarter fiscal year
2018 financial results for the period ended September 30, 2017.
Recent Highlights
- Revenue during the first quarter of fiscal 2018 was
$2.4 million, with revenue largely
being contributed by 5 PPA projects;
- Gross margins improved to 12.5% during the first quarter
compared to (1.4%) in the year ago quarter, and gross margins of
5.5% in the immediately sequential quarter as the Company becomes
more efficient and profitable on its PPA construction and sales
efforts;
- Recently secured a follow-on purchase order from Schneider for
a high power version of our Matrix® Energy Management system;
- Construction continued during the quarter on 7 projects,
including Time Warner I and Time Warner II, Easter Seals, Hawaii
Pacific University, as well as three additional Commercial
and Industrial projects;
- A key multi-unit residential project has become commercially
operational;
- Entered the California market
with the Company's first PPA project for CAL FIRE's Firefighter Training Facility;
- Announced an expanded focus on the utility market segment
through the creation of a utility market vertical in the
company;
- The DER FlexTM Internet of Energy platform has been
deployed and is commercially operating at three sites; and
- Cash balance at the end of September
2017 was $9.1 million.
Management Discussion
"We're pleased with the progress made during the quarter as we
continue to develop and execute on multiple projects, improve
project margins, expand into the California market, and further develop our
agreement with Schneider Electric," commented Brad Hansen, CEO of EnSync Energy. "Our
commercialization strategy of selling custom designed distributed
energy resource systems is fundamentally solid with all components
of this strategy in place. We have outstanding project development
and sales capabilities, innovative and differentiated products like
the Matrix® Energy Management system and DER FlexTM, our
Internet of Energy platform, and an assortment of storage
alternatives that meet virtually any combination of applications
you would ever need to perform. Our products are modular in design,
enabling lower cost manufacturing, and rapid site construction and
commissioning, all key competitive advantages for us in the
marketplace."
"We are now executing four key market strategies: the Hawaiian
commercial and industrial (C&I) market where we have 16
projects that have been completed or are under construction; the
California market, in which we
successfully signed our first major power purchase agreement at the
California Department of Forestry and Fire Protection training
facility; our utility vertical, where we are formally engaged with
multiple customers such as Hawaiian Electric Company and ENMAX; and
our power electronics systems business with Schneider Electric
where we recently secured a follow-on purchase order for a high
voltage version of our Matrix® Energy Management system. Each of
the market areas have the potential to see dramatically increased
revenues and margins, and our prospects for future growth remain
very positive. We're also excited about other markets that have the
potential for entry and disruption, as more aspects of the economy
move towards energy storage with power electronics based
electrification, such as the residential and EV charge station
markets."
Mr. Hansen concluded, "We continue to benefit from our early
mover advantage in solar plus storage, a market which Greentech
Media expects to increase 10X over the next five years. This market
expansion continues to be driven by a shifting of the energy
production mix from carbon emitting sources to renewable sources,
and by increasingly favorable economics for solar energy, energy
storage, and combined solar plus storage systems. We expect key
long-term trends to continue to be supportive, with time of use
rates and demand charges becoming more widespread across the
utility landscape and net metering programs being eliminated or
reduced at the state level. These trends, coupled with our
innovative business model, should allow us to continue benefiting
from this rapid shift in the adoption for distributed energy
resources going forward."
Financial Results
Total revenue for the first quarter of fiscal 2018 was
$2.4 million compared to $7.7 million in the year ago period. Revenue
during the first quarter of fiscal 2018 quarter was largely derived
from PPA contracts in Hawaii that
are recognized on a percent of completion basis. In addition to the
PPA sales, revenue was also recognized from system sales of the
Company's Matrix® Energy Management system and DER
FlexTM platform. The year ago period saw the benefit of
a large grouping of PPAs sales to American Electric Power
subsidiary, AEP OnSite Partners.
Gross margins improved to 12.5% during the first quarter
compared to (1.4%) in the year ago quarter, and compares to gross
margins of 5.5% in the immediately preceding fourth quarter. The
improved gross margin compared to the year ago and most recent
sequential quarter is attributable to the elimination of numerous
non-recurring charges incurred in the year ago period as part of
entering the market with this new PPA business model, and further
efficiencies in the procurement, construction and sale process. The
Company's expectation is that gross profit margins on future PPA
sales should be between 10% and 20%.
Advanced Engineering and Development costs were $1.1 million during the first quarter of fiscal
2018, compared to $1.0 million in the
year ago period. Selling, General and Administrative expenses
totaled $2.6 million during each of
the first quarter of fiscal 2018 and 2017. Total Advanced
Engineering and Development costs and Selling, General and
Administrative expenses (excluding stock-based compensation of
$0.4 million and $0.3 million, respectively) was $3.3 million during each of the first quarter of
fiscal 2018 and 2017. The Company intends to hold at or below these
levels going forward.
Net loss attributable to common shareholders was $(4.0) million, or $(0.07) per basic and diluted share, for the
first quarter of fiscal 2018, compared to $(4.7) million, or $(0.10) per basic and diluted share, in the first
quarter of fiscal 2017.
Cash balance at September 30, 2017
was $9.1 million compared to
$11.8 million at June 30, 2017.
Estimated backlog value for PPA projects, components and systems
as of the date of this announcement is approximately $12.6 million.
Recent Policy Developments
"As our investors know, on November
2nd the House Committee on Ways and Means
released H.R. 1, the Tax Cuts and Jobs Act," commented
Fred Vaske, Chief Administrative
Officer of EnSync Energy. "We, along with many in the renewable
energy industry, have been focused on predicting how this proposed
tax reform might affect our business. The House plan details
substantial modifications to the tax code which would directly and
indirectly impact the valuation of PPA projects, including a
reduction of the corporate tax rate from 35 percent to 20 percent,
implementation of bonus depreciation of 100 percent through the end
of 2022, significant limitations on interest deductions and, longer
term, the elimination of the then 10 percent investment tax credit
for solar projects which begin construction after 2027."
"While the House plan is not final and is subject to change
during negotiation, tax reform has clearly been a priority on the
Republican agenda and this has been an anticipated development. Our
internal analysis earlier this year and updated for the current
proposal shows the direct impact of the proposed changes for our
DER project valuations as being largely neutral, with offsetting
impacts from lower tax rates and the immediate expensing of project
investments."
"Another very recent development was that the U.S. International
Trade Commission released on October
31 a set of recommendations on the Section 201 solar trade
case. The proposed remedies from the Commission are less severe for
the solar industry than was requested by the petitioners, Suniva
and SolarWorld, but are subject to a final decision by President
Trump, likely in January 2018." Mr.
Vaske concluded, "For both the Section 201 trade case as well as
the proposed tax reforms we will continue to monitor policy
developments in the coming weeks for their potential influence on
our business."
Conference Call Information
Date: Thursday, November 9,
2017
Time: 4:30 p.m. EST (3:30 p.m. CST)
Domestic participant dial in #: (877) 870-4263 or (412)
317-0790
Conference code #: 10114022
Please call the conference telephone number 5-10 minutes prior
to the start time. An operator will register your name and
organization.
Interested parties can also listen to a live internet webcast
available in the investor section of the Company's website at
www.ensync.com.
A teleconference replay of the call will be available at (877)
344-7529 or (412) 317-0088, confirmation code 10114022, through
November 16, 2017. A webcast replay
will be available in the investor section of the Company's website
at www.ensync.com for 90 days.
About EnSync Energy Systems
EnSync, Inc. (NYSE American: ESNC), dba EnSync Energy Systems
(EnSync Energy), is creating the future of electricity with
innovative distributed energy resource (DER) systems and internet
of energy (IOE) control platforms. EnSync Energy ensures the most
cost-effective and resilient electricity, delivered from an
electrical infrastructure that prioritizes the use of all available
resources, such as renewables, energy storage and the utility grid.
As project developer, EnSync Energy's distinctive engagement
methodology encompasses load analysis, system design consulting,
and technical and financial modeling to ensure energy systems are
sized and optimized to meet our customers' objectives for value and
performance. Proprietary direct current (DC) power control
hardware, energy management software, and extensive experience with
numerous energy storage technologies uniquely positions EnSync
Energy to deliver fully integrated systems that provide for
efficient design, procurement, commissioning, and ongoing
operation. EnSync Energy's IOE control platform adapts easily to
ever-changing generation and load variables, as well as changes in
utility prices and programs, ensuring the means to make or save
money behind-the-meter, while concurrently providing utilities the
opportunity to use DERs for an array of grid enhancing services. In
addition to direct system sales, EnSync Energy includes power
purchase agreements (PPAs) in its portfolio of offerings, which
enables electricity savings for customers and provides a stable
financial yield for investors. EnSync Energy is a global
corporation, with joint venture Meineng Energy in AnHui, China, and energy project development
subsidiary Holu Energy LLC in Hawaii, and DCfusion LLC, a power system
engineering and design, consultancy and policy firm. For more
information, visit www.ensync.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that are intended to be covered by the "safe harbor"
created by those sections. Forward-looking statements, which
are based on certain assumptions and describe our future plans,
strategies and expectations, can generally be identified by the use
of forward-looking terms such as "believe," "expect," "may,"
"will," "should," "could," "seek," "intend," "plan," "goal,"
"estimate," "anticipate" or other comparable terms. All
statements other than statements of historical facts included in
this press release regarding our strategies, prospects, financial
condition, operations, costs, plans and objectives are
forward-looking statements. Examples of forward-looking statements
include, among others, statements we make regarding project
completion timelines, our ability to monetize our PPA assets,
statements regarding the sufficiency of our capital resources,
expected operating losses, expected revenues, expected expenses and
our expectations concerning our business strategy, Forward-looking
statements are neither historical facts nor assurances of future
performance. Instead, they are based only on our current beliefs,
expectations and assumptions regarding the future of our business,
future plans and strategies, projections, anticipated events and
trends, the economy and other future conditions. Because
forward-looking statements relate to the future, they are subject
to inherent uncertainties, risks and changes in circumstances that
are difficult to predict and many of which are outside of our
control. Our actual results and financial condition may differ
materially from those indicated in the forward-looking statements.
Therefore, you should not rely on any of these forward-looking
statements. Important factors that could cause our actual results
and financial condition to differ materially from those indicated
in the forward-looking statements include, among others, the
following: our historical and anticipated future operation losses
and our ability to continue as a going concern; our ability to
raise the necessary capital to fund our operations and the risk of
dilution to shareholders from capital raising transactions; our
ability to successfully commercialize new products, including our
Matrix® Energy Management, DER FlexTM, DER
SupermoduleTM, and AgileTM Hybrid Storage
Systems; our ability to lower our costs and increase our margins;
our product, customer and geographic concentration, and lack of
revenue diversification; the length and variability of our sales
cycle; our dependence on governmental mandates and the availability
of rebates, tax credits and other economic incentives related to
alternative energy resources and the regulatory treatment of
third-party owned solar energy systems; and the other risks and
uncertainties described in the Risk Factors and in Management's
Discussion and Analysis of Financial Condition and Results of
Operations sections of our most recently filed Annual Report on
Form 10-K and our subsequently filed Quarterly Report(s) on Form
10-Q. We undertake no obligation to publicly update any
forward-looking statement, whether written or oral, that may be
made from time to time, whether as a result of new information,
future developments or otherwise.
Investor Relations Contact:
Lytham Partners,
LLC
Robert Blum, Joseph Diaz, or Joe Dorame
(602) 889-9700
EnSync Media Contact:
Michelle
Montague
(262) 735-5676
EnSync,
Inc.
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
Three months
ended September 30,
|
|
2017
|
|
2016
|
|
|
|
|
Revenues
|
$
2,362,048
|
|
$
7,656,561
|
|
|
|
|
Costs and
expenses
|
|
|
|
Cost of product
sales
|
2,066,910
|
|
7,766,143
|
Cost of engineering
and development
|
-
|
|
937,725
|
Advanced engineering
and development
|
1,107,344
|
|
1,001,328
|
Selling, general and
administrative
|
2,644,274
|
|
2,552,451
|
Depreciation and
amortization
|
97,392
|
|
154,357
|
Impairment of
long-lived assets
|
447,000
|
|
-
|
Total costs and
expenses
|
6,362,920
|
|
12,412,004
|
|
|
|
|
Loss from
operations
|
(4,000,872)
|
|
(4,755,443)
|
|
|
|
|
Other income
(expense)
|
|
|
|
Equity in gain (loss)
of investee company
|
(50,025)
|
|
23,655
|
Interest
income
|
7,133
|
|
11,358
|
Interest
expense
|
(11,258)
|
|
(12,997)
|
Other
income
|
69,998
|
|
8,432
|
Total other income
(expense)
|
15,848
|
|
30,448
|
|
|
|
|
Loss before benefit
for income taxes
|
(3,985,024)
|
|
(4,724,995)
|
|
|
|
|
Benefit for income
taxes
|
-
|
|
-
|
Net loss
|
(3,985,024)
|
|
(4,724,995)
|
Net loss attributable
to noncontrolling interest
|
93,230
|
|
82,273
|
Net loss
attributable to EnSync, Inc.
|
(3,891,794)
|
|
(4,642,722)
|
Preferred stock
dividend
|
(83,277)
|
|
(75,445)
|
Net loss
attributable to common shareholders
|
$
(3,975,071)
|
|
$
(4,718,167)
|
|
|
|
|
Net loss per
share
|
|
|
|
Basic and
diluted
|
$
(0.07)
|
|
$
(0.10)
|
|
|
|
|
Weighted average
shares - basic and diluted
|
55,550,492
|
|
47,753,604
|
EnSync,
Inc.
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
(Unaudited)
|
|
|
|
September
30, 2017
|
|
June 30,
2017
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
9,103,979
|
|
$
11,782,962
|
Accounts receivable,
net
|
204,656
|
|
469,906
|
Inventories,
net
|
2,342,562
|
|
2,482,013
|
Prepaid expenses and
other current assets
|
413,008
|
|
247,589
|
Note
receivable
|
168,164
|
|
171,140
|
Costs and estimated
earnings in excess of billings
|
592,191
|
|
87,318
|
Deferred customer
project costs
|
113,800
|
|
104,800
|
Project
assets
|
93,010
|
|
114,971
|
Total current
assets
|
13,031,370
|
|
15,460,699
|
Long-term
assets:
|
|
|
|
Property, plant and
equipment, net
|
2,902,104
|
|
3,446,253
|
Investment in investee
company
|
1,897,703
|
|
1,947,728
|
Goodwill
|
809,363
|
|
809,363
|
Right of use
assets-operating leases
|
130,747
|
|
150,214
|
Total
assets
|
$
18,771,287
|
|
$
21,814,257
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Current maturities of
long-term debt
|
$
641,908
|
|
$
726,256
|
Accounts
payable
|
1,491,125
|
|
487,185
|
Billings in excess of
costs and estimated earnings
|
125,347
|
|
456,950
|
Accrued
expenses
|
558,671
|
|
743,948
|
Customer
deposits
|
165,209
|
|
90,876
|
Accrued compensation
and benefits
|
318,938
|
|
396,890
|
Total current
liabilities
|
3,301,198
|
|
2,902,105
|
Long-term
liabilities:
|
|
|
|
Long-term debt, net of
current maturities
|
331,827
|
|
331,827
|
Deferred
revenue
|
422,638
|
|
422,638
|
Other long-term
liabilities
|
235,226
|
|
249,920
|
Total
liabilities
|
4,290,889
|
|
3,906,490
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Equity
|
|
|
|
Series B redeemable
convertible preferred stock ($0.01 par value,
|
|
|
|
$1,000 face value),
3,000 shares authorized and issued, 2,300 shares outstanding,
preference in liquidation of $5,714,363 and $5,631,086 as of
September 30, 2017 and June 30, 2017, respectively
|
23
|
|
23
|
Series C convertible
preferred stock ($0.01 par value, $1,000 face
|
|
|
|
value), 28,048 shares
authorized, issued, and outstanding, preference in liquidation of
$8,766,036 and $12,276,682 as of September 30, 2017 and June 30,
2017, respectively
|
280
|
|
280
|
Common stock ($0.01
par value), 300,000,000 authorized,
|
|
|
|
55,604,327 and
55,200,963 shares issued and outstanding as of September 30, 2017
and June 30, 2017, respectively
|
1,264,358
|
|
1,260,324
|
Additional paid-in
capital
|
142,373,350
|
|
141,822,317
|
Accumulated
deficit
|
(128,531,438)
|
|
(124,639,644)
|
Accumulated other
comprehensive loss
|
(1,583,946)
|
|
(1,584,578)
|
Total EnSync, Inc.
equity
|
13,522,627
|
|
16,858,722
|
Noncontrolling
interest
|
957,771
|
|
1,049,045
|
Total
equity
|
14,480,398
|
|
17,907,767
|
Total liabilities
and equity
|
$
18,771,287
|
|
$
21,814,257
|
EnSync,
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
Three months ended
September 30,
|
|
2017
|
|
2016
|
Cash flows from
operating activities
|
|
|
|
Net loss
|
$
(3,985,024)
|
|
$
(4,724,995)
|
Adjustments to
reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
Depreciation of
property, plant and equipment
|
97,392
|
|
156,464
|
Stock-based
compensation, net
|
435,608
|
|
272,653
|
Equity in (gain) loss
of investee company
|
50,025
|
|
(23,655)
|
Provision for
inventory reserve
|
54,928
|
|
140,690
|
Gain on sale of
property and equipment
|
(70,000)
|
|
(8,432)
|
Interest accreted on
note receivable
|
(3,024)
|
|
(3,024)
|
Impairment of
long-lived assets
|
447,000
|
|
-
|
Changes in assets and
liabilities
|
|
|
|
Accounts
receivable
|
265,250
|
|
(264,078)
|
Inventories
|
84,523
|
|
(68,035)
|
Prepaids and other
current assets
|
(165,413)
|
|
60,441
|
Costs and estimated
earnings in excess of billings
|
(504,873)
|
|
-
|
Deferred PPA project
costs
|
-
|
|
5,174,290
|
Deferred customer
project costs
|
(9,000)
|
|
304,229
|
Project
assets
|
21,961
|
|
516,017
|
Accounts
payable
|
1,003,940
|
|
(119,542)
|
Billings in excess of
costs and estimated earnings
|
(331,603)
|
|
-
|
Accrued
expenses
|
(180,747)
|
|
579,447
|
Customer
deposits
|
74,333
|
|
196,417
|
Accrued compensation
and benefits
|
(77,952)
|
|
66,895
|
Deferred
revenue
|
-
|
|
422,638
|
Other long-term
liabilities
|
-
|
|
137,983
|
Net cash provided
by (used in) operating activities
|
(2,792,676)
|
|
2,816,403
|
Cash flows from
investing activities
|
|
|
|
Expenditures for
property and equipment
|
-
|
|
(9,149)
|
Proceeds from sale of
property and equipment
|
70,000
|
|
9,754
|
Payments from note
receivable
|
6,000
|
|
-
|
Net cash provided
by investing activities
|
76,000
|
|
605
|
Cash flows from
financing activities
|
|
|
|
Repayments of long
term debt
|
(84,348)
|
|
(82,236)
|
Proceeds from issuance
of common stock
|
119,459
|
|
-
|
Contribution of
capital from noncontrolling interest
|
1,956
|
|
-
|
Net cash provided
by (used in) financing activities
|
37,067
|
|
(82,236)
|
Effect of exchange
rate changes on cash and cash equivalents
|
626
|
|
(683)
|
Net increase
(decrease) in cash and cash equivalents
|
(2,678,983)
|
|
2,734,089
|
Cash and cash
equivalents - beginning of period
|
11,782,962
|
|
17,189,089
|
|
|
|
|
Cash and cash
equivalents - end of period
|
$
9,103,979
|
|
$
19,923,178
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
Cash paid for
interest
|
$
11,452
|
|
$
10,520
|
Supplemental noncash
information:
|
|
|
|
Right of use asset
obtained in exchange for new operating lease
|
(19,467)
|
|
102,943
|
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