MILWAUKEE, Feb. 13, 2018 /PRNewswire/ -- EnSync, Inc. (NYSE
American: ESNC), dba EnSync Energy Systems ("EnSync
Energy"), a leading developer of innovative distributed
energy resources (DERs), today announced second quarter fiscal year
2018 financial results for the period ended December 31, 2017.
Recent Highlights
- Revenue during the second quarter of fiscal 2018 increased by
179% to $4.8 million compared to
$1.7 million in the year ago period,
with revenue largely being contributed by 8 power purchase
agreement ("PPA") projects;
- Gross margins improved to 24.2% during the second quarter
compared to 0.3% in the year ago quarter, and gross margins of
12.5% in the immediately preceding quarter as the Company becomes
more efficient and profitable on its PPA construction and sales
efforts;
- Closed the largest single sale in company history, a PPA for a
large multi-residential property on Oahu;
- Completed commissioning of Time Warner project at a key data
center site on the island of Hawaii and commenced operation of two
additional projects on the island of Oahu;
- Signed PPAs for three additional Hawaii projects including a PPA with the
Polynesian Cultural Center, a top tourist attraction in
Hawaii, operated by the
Brigham Young University Hawaii
campus;
- Received a purchase order for a Micro-Utility system that will
ship to East Africa, the first
order for EnSync on the continent;
- Shipped a repeat order Matrix Energy Management system to
Schneider Electric;
- Sold our Menomonee Falls
building for net proceeds of $1.7
million; and
- Signed a Partnership Agreement with Lower Electric LLC for
rapid entry into the high growth Illinois renewables market.
Management Discussion
"We are now solidly engaged in driving sales across several
different markets," commented, Brad
Hansen, CEO of EnSync Energy. "Specifically, we continue to
make progress in our commercial and industrial ("C&I") markets
in Hawaii and California, where we have 13 PPA projects in
our backlog in various stages of execution. We recently sold the
single largest C&I PPA project in EnSync Energy's history and
have a number of others in our pipeline. In addition to our C&I
opportunities, we are advancing our focus on the independent
utility market where we recently announced an order for a
micro-utility system in East
Africa, and announced today's partnership with Lower
Electric which is expected to enable us to enter the evolving
Illinois market later this year.
Finally, we are maintaining our focus on power electronic system
sales where we continue to ship systems to Schneider Electric.
Each of these market areas have the potential to dramatically
increase Company revenues and margins, and our prospects for future
growth remain very positive."
"We continue to perform well on selling and constructing PPA
projects. Our gross margins in the second quarter of 24.2% were
above our stated expectations of 10% to 20% as we enhanced
efficiencies in the procurement, construction and sale process.
Given the success we have had, we're now confident enough in our
execution to adjust the gross margin target range to 15% to 25%
going forward."
"Overall, we're extremely happy with our performance in the
second quarter which is arguably the best operating quarterly
performance in the Company's history. Our products and execution
are yielding great results which we'll look to build upon going
forward. With the success we have achieved with our existing
markets, and now with new markets, partners, products and services
being regularly announced, we feel it's a very exciting time at
EnSync," Hansen concluded.
Financial Results
Total revenue for the second quarter of fiscal 2018 was
$4.8 million compared to $1.7 million in the year ago period. Revenue
during the second 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.
Gross margins improved to 24.2% during the second quarter
compared to 0.3% in the year ago quarter, and compares to gross
margins of 12.5% in the immediately preceding first quarter. The
improved gross margin 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. In particular, the margin improvement was primarily driven
by lower procurement costs on certain PPA projects in the final
stages of construction and favorable margin on a PPA project sold
in the second quarter. The Company's expectation is that gross
profit margins on future PPA sales should be between 15% and
25%.
Advanced Engineering and Development costs were $1.2 million during the second quarter of fiscal
2018, compared to $1.1 million in the
year ago period. Selling, General and Administrative expenses
decreased to $2.4 million during the
second quarter of fiscal 2018 compared to $3.0 million in the year ago period due to
decreases in legal expenses and stock-based compensation. Total
Advanced Engineering and Development costs and Selling, General and
Administrative expenses (excluding stock-based compensation of
$0.2 million and $0.8 million, respectively) was $3.4 million during the second quarter of fiscal
2018 compared to $3.3 million in the
second quarter of fiscal 2017. The Company intends to hold at or
below these levels going forward.
Net loss attributable to common shareholders was $(2.6) million, or $(0.05) per basic and diluted share, for the
second quarter of fiscal 2018, compared to $(4.4) million, or $(0.09) per basic and diluted share, in the
second quarter of fiscal 2017.
Cash balance at December 31, 2017
was $5.9 million compared to
$9.1 million at September 30, 2017.
Estimated backlog value for PPA projects, components and systems
as of the date of this announcement is approximately $11.4 million.
Conference Call Information
Date: Tuesday, February 13,
2018
Time: 4:30 p.m. ET (3:30 p.m. CT)
Domestic participant dial in #: (877) 283-0524 or (412)
317-5232
Conference code #: 10116984
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 10116984, through
February 20, 2018. 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.
Media Relations Contact:
Antenna
Shreema Mehta
ensync@antennagroup.com
(646) 416-9853
EnSync Energy Media Contact:
Michelle Montague
mmontague@ensync.com
(262) 735-5676
Investor Relations Contact:
Lytham Partners, LLC
Robert Blum, Joseph Diaz, or Joe Dorame
(602) 889-9700
esnc@lythampartners.com
EnSync,
Inc.
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three months
ended December 31,
|
|
Six months
ended December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Revenues
|
$
4,846,707
|
|
$
1,736,569
|
|
$
7,208,755
|
|
$
9,393,130
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
Cost of product
sales
|
3,672,506
|
|
1,731,558
|
|
5,739,416
|
|
9,497,701
|
Cost of engineering
and development
|
-
|
|
-
|
|
-
|
|
937,725
|
Advanced engineering
and development
|
1,178,584
|
|
1,077,140
|
|
2,285,928
|
|
2,078,468
|
Selling, general and
administrative
|
2,435,077
|
|
3,035,704
|
|
5,079,351
|
|
5,588,155
|
Depreciation and
amortization
|
86,018
|
|
201,712
|
|
183,410
|
|
356,069
|
Impairment of
long-lived assets
|
-
|
|
-
|
|
447,000
|
|
-
|
Total costs and
expenses
|
7,372,185
|
|
6,046,114
|
|
13,735,105
|
|
18,458,118
|
|
|
|
|
|
|
|
|
Loss from
operations
|
(2,525,478)
|
|
(4,309,545)
|
|
(6,526,350)
|
|
(9,064,988)
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
Equity in loss of
investee company
|
(88,438)
|
|
(25,387)
|
|
(138,463)
|
|
(1,732)
|
Interest
income
|
6,862
|
|
11,269
|
|
13,995
|
|
22,627
|
Interest
expense
|
(10,917)
|
|
(13,107)
|
|
(22,175)
|
|
(26,104)
|
Other
income
|
6,527
|
|
-
|
|
76,525
|
|
8,432
|
Total other income
(expense)
|
(85,966)
|
|
(27,225)
|
|
(70,118)
|
|
3,223
|
|
|
|
|
|
|
|
|
Loss before benefit
for income taxes
|
(2,611,444)
|
|
(4,336,770)
|
|
(6,596,468)
|
|
(9,061,765)
|
|
|
|
|
|
|
|
|
Benefit for income
taxes
|
-
|
|
-
|
|
-
|
|
-
|
Net loss
|
(2,611,444)
|
|
(4,336,770)
|
|
(6,596,468)
|
|
(9,061,765)
|
Net loss attributable
to noncontrolling interest
|
75,761
|
|
60,065
|
|
168,991
|
|
142,338
|
Net loss
attributable to EnSync, Inc.
|
(2,535,683)
|
|
(4,276,705)
|
|
(6,427,477)
|
|
(8,919,427)
|
Preferred stock
dividend
|
(85,359)
|
|
(77,331)
|
|
(168,636)
|
|
(152,776)
|
Net loss
attributable to common shareholders
|
$
(2,621,042)
|
|
$
(4,354,036)
|
|
$
(6,596,113)
|
|
$
(9,072,203)
|
|
|
|
|
|
|
|
|
Net loss per
share
|
|
|
|
|
|
|
|
Basic and
diluted
|
$
(0.05)
|
|
$
(0.09)
|
|
$
(0.12)
|
|
$
(0.19)
|
|
|
|
|
|
|
|
|
Weighted average
shares - basic and diluted
|
55,854,270
|
|
47,849,343
|
|
55,702,381
|
|
47,801,474
|
EnSync,
Inc.
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
(Unaudited)
|
|
|
|
December
31,
2017
|
|
June 30,
2017
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
5,871,135
|
|
$
11,782,962
|
Accounts receivable,
net
|
416,830
|
|
469,906
|
Inventories,
net
|
1,566,273
|
|
2,482,013
|
Costs and estimated
earnings in excess of billings
|
2,299,876
|
|
87,318
|
Prepaid expenses and
other current assets
|
849,338
|
|
630,998
|
Total current
assets
|
11,003,452
|
|
15,453,197
|
Long-term
assets:
|
|
|
|
Property, plant and
equipment, net
|
2,830,849
|
|
3,446,253
|
Investment in
investee company
|
1,809,265
|
|
1,947,728
|
Goodwill
|
809,363
|
|
809,363
|
Right of use
assets-operating leases
|
1,170,793
|
|
150,214
|
Other
assets
|
93,862
|
|
7,502
|
Total
assets
|
$
17,717,584
|
|
$
21,814,257
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Current maturities of
long-term debt
|
$
556,950
|
|
$
726,256
|
Accounts
payable
|
1,884,332
|
|
487,185
|
Billings in excess of
costs and estimated earnings
|
50,888
|
|
456,950
|
Accrued
expenses
|
1,341,678
|
|
1,231,714
|
Total current
liabilities
|
3,833,848
|
|
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
|
1,156,124
|
|
249,920
|
Total
liabilities
|
5,744,437
|
|
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 $5,799,722 and
$5,631,086
|
|
|
|
as of December 31,
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
$6,173,422 and $12,276,682 as of December 31, 2017
|
|
|
|
and June 30, 2017,
respectively
|
280
|
|
280
|
Common stock ($0.01
par value),300,000,000 authorized,
|
|
|
|
56,061,961 and
55,200,963 shares issued and outstanding as of
|
|
|
|
December 31, 2017 and
June 30, 2017, respectively
|
1,268,934
|
|
1,260,324
|
Additional paid-in
capital
|
142,473,190
|
|
141,822,317
|
Accumulated
deficit
|
(131,067,121)
|
|
(124,639,644)
|
Accumulated other
comprehensive loss
|
(1,584,169)
|
|
(1,584,578)
|
Total EnSync, Inc.
equity
|
11,091,137
|
|
16,858,722
|
Noncontrolling
interest
|
882,010
|
|
1,049,045
|
Total
equity
|
11,973,147
|
|
17,907,767
|
Total liabilities
and equity
|
$
17,717,584
|
|
$
21,814,257
|
EnSync,
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
Six months ended
December 31,
|
|
2017
|
|
2016
|
Cash flows from
operating activities
|
|
|
|
Net loss
|
$
(6,596,468)
|
|
$
(9,061,765)
|
Adjustments to
reconcile net loss to net cash provided by
|
|
|
|
(used in) operating
activities:
|
|
|
|
Depreciation of
property, plant and equipment
|
180,080
|
|
290,132
|
Amortization of
customer intangible assets
|
3,330
|
|
68,044
|
Stock-based
compensation, net
|
601,472
|
|
1,055,105
|
Equity in loss of
investee company
|
138,463
|
|
1,732
|
Provision for
inventory reserve
|
57,988
|
|
181,197
|
Gain on sale of
property and equipment
|
(76,521)
|
|
(8,432)
|
Interest accreted on
note receivable
|
(6,049)
|
|
(6,049)
|
Impairment of
long-lived assets
|
447,000
|
|
-
|
Changes in assets and
liabilities
|
|
|
|
Accounts
receivable
|
53,076
|
|
(203,639)
|
Inventories
|
857,752
|
|
(150,332)
|
Costs and estimated
earnings in excess of billings
|
(2,212,558)
|
|
-
|
Prepaids and other
current assets
|
(227,821)
|
|
1,785,328
|
Deferred PPA project
costs
|
-
|
|
5,690,307
|
Other
assets
|
(86,360)
|
|
-
|
Accounts
payable
|
1,397,147
|
|
112
|
Billings in excess of
costs and estimated earnings
|
(406,062)
|
|
-
|
Accrued
expenses
|
(4,897)
|
|
271,467
|
Deferred
revenue
|
-
|
|
422,638
|
Other long-term
liabilities
|
-
|
|
137,983
|
Net cash provided
by (used in) operating activities
|
(5,880,428)
|
|
473,828
|
Cash flows from
investing activities
|
|
|
|
Expenditures for
property and equipment
|
(16,169)
|
|
(9,149)
|
Proceeds from sale of
property and equipment
|
81,500
|
|
9,754
|
Payments from note
receivable
|
12,000
|
|
-
|
Net cash provided
by investing activities
|
77,331
|
|
605
|
Cash flows from
financing activities
|
|
|
|
Repayments of long
term debt
|
(169,306)
|
|
(165,083)
|
Proceeds from
issuance of common stock
|
96,674
|
|
-
|
Proceeds from the
exercise of stock options
|
-
|
|
68,400
|
Payments of tax
withholding related to stock-based compensation
|
(38,663)
|
|
-
|
Contribution of
capital from noncontrolling interest
|
1,956
|
|
-
|
Net cash used in
financing activities
|
(109,339)
|
|
(96,683)
|
Effect of exchange
rate changes on cash and cash equivalents
|
609
|
|
(568)
|
Net increase
(decrease) in cash and cash equivalents
|
(5,911,827)
|
|
377,182
|
Cash and cash
equivalents - beginning of period
|
11,782,962
|
|
17,189,089
|
|
|
|
|
Cash and cash
equivalents - end of period
|
$
5,871,135
|
|
$
17,566,271
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
Cash paid for
interest
|
$
22,543
|
|
$
26,332
|
Supplemental noncash
information:
|
|
|
|
Right of use asset
obtained in exchange for new operating lease
|
1,020,579
|
|
102,943
|
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SOURCE EnSync, Inc.