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EX-31.2 - EXHIBIT 31.2 - EUROSITE POWER INC.eusp-20160331exx312.htm
EX-31.1 - EXHIBIT 31.1 - EUROSITE POWER INC.eusp-20160331exx311.htm
EX-32.1 - EXHIBIT 32.1 - EUROSITE POWER INC.eusp-20160331exx321.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016

or
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 000-54484
EUROSITE POWER INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
27-5250881
(State or Other Jurisdiction of Incorporation or Organization)
(IRS Employer Identification No.)
 
 
45 First Avenue
 
Waltham, Massachusetts
02451
(Address of principal Executive Offices)
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (781) 522-6000
____________________________________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non –accelerated filer o
Smaller reporting company x
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
Title of each class
 
Outstanding at May 13, 2016
Common Stock, $0.001 par value
 
65,747,100





EUROSITE POWER INC.


QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2016

TABLE OF CONTENTS
 
References in this Form 10-Q to “we”, “us”, “our”, the “Company” and “EuroSite Power” refer to EuroSite Power Inc. and its consolidated subsidiaries, unless otherwise noted.

2


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

EUROSITE POWER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
March 31,
2016
 
December 31,
2015
ASSETS
 
 
 
Current assets:
 

 
 

Cash and cash equivalents
$
438,942

 
$
587,819

Accounts receivable
371,916

 
303,782

 UK energy tax incentives receivable

 
369,485

Value added and other tax receivable
26,756

 
(5,297
)
Inventory
202,894

 
137,093

Other current assets
41,143

 
57,152

Total current assets
1,081,651

 
1,450,034

Property and equipment, net
7,612,831

 
7,516,262

Other assets, long-term
9,564

 
11,004

TOTAL ASSETS
$
8,704,046

 
$
8,977,300

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
371,824

 
$
313,293

Due to related party
180,624

 
98,979

Accrued expenses and other current liabilities
270,565

 
286,814

Total current liabilities
823,013

 
699,086

Long-term liabilities:
 
 
 
Convertible debentures
1,570,219

 
1,585,264

Convertible debentures due to related parties
942,131

 
951,158

Note payable - related party
2,000,000

 
2,000,000

Total liabilities
5,335,363

 
5,235,508

Commitments and contingencies (Note 5)


 


Stockholders’ equity:
 

 
 

Common stock, $0.001 par value; 100,000,000 shares authorized; 65,747,100 issued and outstanding at March 31, 2016 and December 31, 2015
65,747

 
65,747

Additional paid-in capital
12,242,416

 
12,224,064

Accumulated deficit
(8,939,480
)
 
(8,548,019
)
Total stockholders' equity
3,368,683

 
3,741,792

 
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
8,704,046

 
$
8,977,300


See Notes to Condensed Consolidated Financial Statements (Unaudited)

3


EUROSITE POWER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended
 
March 31,
2016
 
March 31,
2015
 
 
 
 
Revenues
 
 
 
Energy revenues
$
685,716

 
$
530,648

Turnkey & other revenues
1,316

 
17,406

 
687,032

 
548,054

Cost of sales
 

 
 

Fuel, maintenance and installation
431,397

 
414,972

Depreciation expense
112,995

 
90,392

 
544,392

 
505,364

Gross profit
142,640

 
42,690

 
 
 
 
Operating expenses
 

 
 

General and administrative
300,092

 
303,340

Selling
132,929

 
129,449

Engineering
88,490

 
30,718

 
521,511

 
463,507

Loss from operations
(378,871
)
 
(420,817
)
Other income (expense)
 

 
 

Interest and other income
126

 
2,697

Interest expense
(12,716
)
 
(12,277
)
 
(12,590
)
 
(9,580
)
 
 
 
 
Loss before income taxes
(391,461
)
 
(430,397
)
Provision (benefit) for income taxes

 

Net loss
$
(391,461
)
 
$
(430,397
)
 
 
 
 
Net loss per share - basic and diluted
$
(0.01
)
 
$
(0.01
)
Weighted-average shares outstanding - basic and diluted
65,747,100

 
65,747,100

 
See Notes to Condensed Consolidated Financial Statements (Unaudited)

4




EUROSITE POWER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended
 
March 31,
2016
 
March 31,
2015
 
 
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net loss
$
(391,461
)
 
$
(430,397
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 

 
 

Depreciation
114,884

 
90,987

Amortization of convertible debt premium
(24,072
)
 
(24,072
)
Stock-based compensation
18,352

 
30,863

Changes in operating assets and liabilities
 

 
 

(Increase) decrease in:
 

 
 

   Accounts receivable
(68,134
)
 
(35,022
)
   UK energy tax incentives receivable
369,485

 

   Value added and other tax receivable
(32,053
)
 
80,547

   Inventory
(65,801
)
 
(4,131
)
   Prepaid and other current assets
16,009

 
(1,832
)
   Other assets, long-term
1,440

 
1,440

Increase (decrease) in:
 

 
 

   Accounts payable
58,531

 
87,727

   Due to related party
81,645

 
12,963

   Accrued expenses and other current liabilities
(16,249
)
 
(17,871
)
Net cash provided by (used in) operating activities
62,576

 
(208,798
)
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Purchases of property and equipment
(211,453
)
 
(547,171
)
Net cash used in investing activities
(211,453
)
 
(547,171
)
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Payment on note payable - related party

 
(1,000,000
)
Net cash used in financing activities

 
(1,000,000
)
 
 
 
 
Net decrease in cash and cash equivalents
(148,877
)
 
(1,755,969
)
Cash and cash equivalents, beginning of the period
587,819

 
3,776,852

Cash and cash equivalents, end of the period
$
438,942

 
$
2,020,883

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Taxes paid
$

 
$
6,750

Interest paid
$

 
$

 
See Notes to Condensed Consolidated Financial Statements (Unaudited)

5


EUROSITE POWER INC.


Notes to Unaudited Condensed Consolidated Financial Statements for the period ending March 31, 2016.

Note 1. Description of Business and Basis of Presentation
 
Description of Business
 
EuroSite Power Inc., (the "Company", we, our, or us), distributes, owns and operates clean, on-site energy systems that produce electricity, hot water and heat and cooling in the United Kingdom. We provide comprehensive power purchase style thermal and power generation solutions to our customers. These solutions include equipment installation as well as operation and ongoing maintenance under multi-year service agreements at no upfront cost to the customer. We own and operate the equipment that we install at customers' facilities and sell the energy produced by these systems to the customers on a long-term contractual basis at prices guaranteed to the customer to be below conventional utility rates. We call this business the EuroSite Power “On-Site Utility” model.
 
The Company was incorporated as a Delaware corporation on July 9, 2010 as a subsidiary of American DG Energy Inc., or American DG Energy. On September 17, 2010, the Company registered EuroSite Power Limited as a wholly-owned subsidiary with the Registrar of Companies for England and Wales to introduce the American DG Energy business model to the United Kingdom and the European market, although as of March 31, 2016, we operated in the United Kingdom only.

The Company has experienced total net losses since inception of approximately $8.9 million. For the foreseeable future, the Company expects to experience continuing operating losses and negative cash flows from operations as its management executes its current business plan. The Company believes that its existing resources, including cash and cash equivalents, future cash flow from operations, its ability to control certain costs, including those related to general and administrative expenses, the project financing arrangements, the line of credit available from its CEO, and the use of capital from American DG Energy, will be sufficient to meet the working capital requirements of its existing business for the foreseeable future; however, as the Company continues to grow its business by adding more energy systems, the cash requirements will increase.

The Company is engaged in continual fundraising efforts, primarily for the installation of energy systems. On May 10, 2016, the Company announced a private placement of up to $10 million at $0.575 per share of its common stock. As of the day of the announcement, various accredited investors had subscribed to $7.25 million of the available private placement shares. The Company plans to use these funds to first pay off its debt to its Chairman, of $2,000,000, with the balance to be used to fund operations and growth. Closing has been set for May 30, 2016.

Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016.

The condensed consolidated balance sheet at December 31, 2015 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, or the Annual Report.

There have been no significant changes in accounting principles, practices or inherent estimates from those reported in the Annual Report.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary EuroSite Power Limited, a United Kingdom registered company.

The Company’s operations are comprised of one business segment. The Company’s business is to sell energy in the form of electricity, heat, hot water and cooling to its customers under long-term sales agreements.

6


EUROSITE POWER INC.


Note 2. Loss Per Common Share
 
The Company computes basic loss per share by dividing net loss for the period by the weighted-average number of shares of Common Stock outstanding during the period. The Company computes its diluted earnings per common share using the treasury stock method. For purposes of calculating diluted earnings per share, the Company considers its shares issuable in connection with stock options, warrants and debentures to be dilutive Common Stock equivalents when the exercise price is less than the average fair market value of the Company’s Common Stock for the period. For the three months ended March 31, 2016, the Company excluded 11,210,000 potentially dilutive shares resulting from stock options, warrants and convertible debentures. For the three months ended March 31, 2015, the Company excluded 11,305,000 potentially dilutive shares resulting from stock options, warrants and convertible debentures. All shares issuable for both periods were anti-dilutive as a result of the reported net loss.

Note 3. Income Taxes

The provision (benefit) for income taxes in the accompanying consolidated statements of operations for the three months ended March 31, 2016 and 2015 differs from that which would be expected by applying the federal and foreign statutory tax rate primarily due to losses for which no benefit is recognized.
 
Note 4. Related Parties
 
American DG Energy, Tecogen and Ilios, are affiliated companies by virtue of common ownership and common leadership.

The Company purchases some of its energy equipment from American DG Energy, its parent. American DG Energy purchases energy equipment primarily from Tecogen, an affiliate of the Company, which manufactures natural gas, engine-driven commercial and industrial cooling and cogeneration systems, and from Ilios Inc., or Ilios, a majority-owned subsidiary of Tecogen which is developing a line of ultra-high efficiency heating products, such as a high efficiency water heater, for commercial and industrial applications utilizing advanced thermodynamic principles.
 
Elias Samaras is the Company's Chief Executive Officer, President, and a member of the board of directors. He is also a member of the board of directors of American DG Energy. His Company salary is $1.00 per year, exclusive of option awards. On average, Dr. Samaras spends approximately 60% of his business time on the affairs of the Company, but such amount varies widely depending on the needs of the business and is expected to increase as the business of the Company develops.

John N. Hatsopoulos is the chairman of the Company's board of directors and is also the Co-Chief Executive Officer of American DG Energy and Tecogen. He is also a member of the board of directors of Tecogen. His Company salary is $1.00 per year. On average, Mr. Hatsopoulos spends approximately 20% of his business time on the affairs of the Company, but such amount varies widely depending on the needs of the business and is expected to increase as the business of the Company develops.

Bonnie J. Brown is the Chief Financial Officer, treasurer and secretary of the Company and American DG Energy. Her salary is paid by American DG Energy; however a portion was reimbursed by the Company according to the requirements of the business. On average, Ms. Brown spends approximately 25% of her business time on the affairs of the Company, but such amount varies widely depending on the needs of the business.

Gabriel J. Parmese, was the Chief Financial Officer, treasurer and secretary of the Company and American DG Energy until August 12, 2015. His salary was paid by American DG Energy; however a portion was reimbursed by the Company according to the requirements of the business. On average, Mr. Parmese spent approximately 15% of his business time on the affairs of the Company, but such amount varied widely depending on the needs of the business.

During the first quarter of 2015, the Company prepaid $1,000,000 of a related party note according to the terms of the agreement, leaving an outstanding balance of $2,000,000.

On July 7, 2015, the Company entered into a Revolving Line of Credit Agreement, (or the "Agreement"), with Elias Samaras, who is the Company's Chief Executive Officer, President, and a member of the board of directors. Under the terms of the Agreement, Dr. Samaras has agreed to lend the Company up to an aggregate of $1 million, at the written request of the Company. Any amounts borrowed by the Company pursuant to the Agreement will bear interest at 6% per year. Interest is due and payable quarterly in arrears. The term of the Agreement is from July 7, 2015 to June 30, 2017. Repayment of the

7


EUROSITE POWER INC.


principal amount borrowed pursuant to the Agreement will be due on June 30, 2017. Prepayment of any amounts due under the Agreement may be made at any time without penalty. As of March 31, 2016, no amounts have been drawn on this line.

The Company’s headquarters are located in Waltham, Massachusetts and consist of 3,282 square feet of office and storage space used by our parent, American DG Energy and leased from Tecogen. American DG Energy is not currently charging the Company for utilizing its share of office space in the United States since it believes it is insignificant. The amount due to Tecogen as of March 31, 2016 was $180,624 for service contracts on our sites.

Note 5. Commitments and Contingencies

The Company has certain commitments through its agreements with Tecogen, Ilios, and other related parties. See Note 4 "Related Parties" for more detail.    

Note 6. Subsequent Events


On May 12, 2016, the Company announced a private placement of $7.25 million at $0.575 per share of its common stock. As of the day of announcement, various accredited investors had subscribed to $7.25 million of the private placement. The Company plans to use these funds to first pay off its debt to its Chairman, of $2,000,000, with the balance to be used to fund operations and growth. Closing has been set for June 8, 2016.

The Company has evaluated subsequent events through the date of this filing and determined that no other subsequent events occurred that would require recognition in the consolidated financial statements or disclosure in the notes thereto.
     

8


EUROSITE POWER INC.


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements
 
Forward-looking statements are made throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements include, among other things, statements regarding our current and future cash requirements, our expectations regarding suppliers of cogeneration units, and statements regarding potential financing activities in the future. While the Company may elect to update forward-looking statements in the future, it specifically disclaims any obligation to do so, even if the Company’s estimates change. Readers should not rely on those forward-looking statements as representing the Company’s views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q, or the Quarterly Report. There are a number of important factors that could cause the actual results of the Company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading “Risk Factors” in this Quarterly Report and those included in the Company's Annual Report.

Overview

The Company distributes, owns and operates clean, on-site energy systems that produce electricity, hot water, heat and cooling in the United Kingdom. The Company derives sales from selling energy in the form of electricity, heat, hot water and cooling to its customers under long-term energy sales agreements (with a typical term of 10 to 15 years). The energy systems are owned by the Company and are installed in our customers' buildings. Each month we obtain readings from our energy meters to determine the amount of energy produced for each customer. We multiply these readings by the appropriate published price of energy (electricity, natural gas or oil) from our customers' local energy utility, to derive the value of our monthly energy sale, less the applicable negotiated discount. Our revenues per customer on a monthly basis may vary based on the amount of energy produced by our energy systems and the published price of energy (electricity, natural gas or oil) from our customers' local energy utility that month. The Company adds revenue streams as new energy systems are deployed and become operational.

The profitability of our business model is highly dependent on the functionality of our energy equipment, the price of electricity, the demand for electricity, and to a lesser extent, the price of natural gas. Increase in demand for electricity tends to cause prices to rise. Higher electricity prices increase the Company’s revenue and liquidity. Lower natural gas prices decrease operational cost. The Company does not have a primary source of natural gas or a principal supplier. The Company buys its natural gas from its customers and its customers' contracts with various local suppliers of natural gas. The Company does not hedge or lock in local natural gas prices, therefore, it is exposed to some natural gas cost risk. In addition, an uncertainty in the Company’s business model exists where the pricing model of electricity and natural gas in Europe differs from the pricing model in the United States. To mitigate the risk of low electrical rates, the Company pursues energy system projects in areas with higher electrical rates.

The Company is engaged in continual fundraising efforts. The primary purpose of these efforts is to raise capital for the installation of energy systems. Generally, fundraising causes liquidity to increase. When the Company spends these funds to add new energy systems, its liquidity decreases and its capital expenditures increase. Generally, when the Company’s new energy systems begin producing energy, the Company’s revenue increases.

There is an ongoing consideration of how to access and lower the cost of capital. The Company regularly assesses the cost and availability of debt capital, preferred stock, convertible debentures, private equity financing, and public common stock offerings. The effect these fundraising efforts have on the business will depend on the type of fundraising. Generally, debt and convertible debenture financing will increase interest expense. Generally, convertible debentures, private equity, and public equity have the potential to dilute shareholder’s earnings per share. To date, the Company has largely financed its growth through the private placements of convertible debt and equity. During the first quarter of 2016, the Company signed two project financing agreements which will provide funding for projects going forward.

On May 10, 2016, the Company announced a private placement of up to $10 million at $0.575 per share of its common stock. As of the day of the announcement, investors had subscribed to $7.25 million of the available private placement shares. The Company plans to use these funds to first pay off its debt to its Chairman, of $2,000,000, with the balance to be used to fund operations and growth. Closing has been set for May 30, 2016.



9


EUROSITE POWER INC.


First Quarter 2016 Compared to First Quarter 2015
 
Revenues
 
Revenues in the first quarter of 2016 were $687,032 compared to $548,054 for the same period in 2015, an increase of $138,978 or 25.4%. The revenues increased primarily due to new sites and more sites being fully operational for a longer period of time in the first quarter of 2016 as compared to the first quarter of 2015. At March 31, 2016, we had 30 systems operational compared to 25 systems as of March 31, 2015.

Cost of Sales
 
Cost of sales, including depreciation expense, in the first quarter of 2016 was $544,392 compared to $505,364 for the same period in 2015. The increase is primarily attributable to an increase in the number of installed operating systems.

 Gross Profit

Gross profit in the first quarter of 2016 was $142,640, compared to $42,690 for the same period in 2015. Gross margin in the first quarter of 2016 was 20.8% compared to 7.8% for the first quarter of 2015. The principal reason for the increase in profitability was the decrease in maintenance costs as well as lower gas prices.

Operating Expenses
 
General and administrative expenses were $300,092 in the first quarter of 2016, compared to $303,340 for the same period in 2015, a decrease of $3,248 or 1.1%. The decrease in general and administrative expenses was primarily due to a reduction of stock compensation expense.

Selling expenses were $132,929 in the first quarter of 2016, compared to $129,449 for the same period in 2015, an increase of $3,480 or 2.7%. The increase was primarily due to the addition of a new salesperson as well as increased advertising expenses.
 
Engineering expenses were $88,490 in the first quarter of 2016, compared to $30,718 for the same period in 2015. The increase in expense of $57,772, or 188.1%, was due to higher payroll for new engineering staff, consulting and travel expenses.
 
Other Income (Expense)
 
Interest and other income was $126 in the first quarter of 2016, compared to $2,697 for the same period in 2015, which is interest on our cash balance. The decrease in interest income is due to the lower cash balance for the first quarter of 2016 as compared to the first quarter of 2015. Interest and other expense was $12,716 in the first quarter of 2016, compared to income of $12,277 for the same period in 2015.

Net Loss
 
Net loss was $391,461 in the first quarter of 2016, compared to a net loss of $430,397 for the same period in 2015, an improvement of 9.0% from the prior year. This smaller net loss is due to improved gross profit.

Liquidity and Capital Resources
 
Consolidated working capital was $258,638 as of March 31, 2016, compared to $750,948 at December 31, 2015. Included in working capital were cash and cash equivalents of $438,942 as of March 31, 2016, compared to $587,819 at December 31, 2015. The decrease in working capital was primarily a result of $211,453 in capital expenditures and an increases in accounts payable of $58,531 and amounts due to related parties of $81,645.
 
Cash used in operating activities was $62,576 in the first three months of 2016. Cash was provided by operating activities due to the receipt of the UK tax energy incentives of $369,485, offset by a net loss of $391,461.
 
The primary investing activities of the Company’s operations included the purchase of equipment. During the three months ended March 31, 2016, the Company used $211,453 for purchases of equipment.


10


EUROSITE POWER INC.


From time-to-time, the Company has relied and may continue to rely on John Hatsopoulos, the Company's Chairman of the Board of Directors, Elias Samaras, the Company's CEO, project financing facilities, or its parent company, American DG Energy, for resources.
    
The Company owns the energy-producing equipment at the customer’s site; therefore, the business is capital intensive. The Company believes that its existing resources, including cash and cash equivalents, future cash flow from operations, its ability to control certain costs, including those related to general and administrative expenses, the project financing arrangements and the line of credit available from its CEO will be sufficient to meet the working capital requirements of its existing business for the foreseeable future; however, as the Company continues to grow its business by adding more energy systems, the cash requirements will increase. The Company may need to raise additional capital.

On May 12, 2016, in a private placement of its common stock, the Company raised $7.25 million at $0.575 per share from various accredited investors. The Company plans to use these funds to first pay off its debt to its Chairman, of $2,000,000, with the balance to be used to fund operations and growth. Closing has been set for June 8, 2016.

Our ability to continue to access capital could be impacted by various factors including general market conditions and the continuing slowdown in the economy, interest rates, the perception of our potential future earnings and cash distributions, any unwillingness on the part of lenders to make loans to us and any deterioration in the financial position of lenders that might make them unable to meet their obligations to us. If these conditions continue and we cannot raise funds through a public or private debt financing, or an equity offering, our ability to grow our business may be negatively affected, and the Company may need to suspend any new installation of energy systems and significantly reduce its operating costs until market conditions improve.

Significant Accounting Policies and Critical Estimates
 
The Company's significant accounting policies are discussed in “Note 1 - Description of Business and Summary of Significant Accounting Policies” to its Consolidated Financial Statements which are incorporated in the Company's Annual Report filed with the Securities and Exchange Commission, or the SEC. The accounting policies and estimates that can have a significant impact upon the operating results, financial position and footnote disclosures of the Company are described in “Note 1 - Description of Business and Basis of Presentation” to the Consolidated Financial Statements described above.

Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements, including any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

Emerging Growth Company
 
We are and we will remain an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, until the earliest to occur of (i) the last day of the fiscal year during which our total annual gross revenues equal or exceed $1 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of our initial public offering, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt, or (iv) the date on which we are deemed a large accelerated filer under the Securities Exchange Act of 1934, as amended.

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or Securities Act, for complying with new or revised accounting standards. However, we chose to “opt out” of any extended transition period, and as a result we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.


11


EUROSITE POWER INC.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures
 
Management’s evaluation of disclosure controls and procedures:
 
Based on our management’s evaluation (with the participation of our principal executive officer and our principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including our principal executive officer and our acting principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting:

Remediation steps were taken in the first quarter of 2016 regarding the impairment assessment process providing a step by step approach in identifying events or changes in circumstances that would require an impairment test of its long-lived assets, estimating the future cash flows related to those long-lived assets and estimating the fair value of those long-lived assets, as required.
    

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EUROSITE POWER INC.


PART II – OTHER INFORMATION

Item 1A. Risk Factors
 
In addition to the other information set forth in this report, you should carefully consider the factors discussed under “Risk Factors” in our most recent Annual Report. The risks discussed in our Annual Report could materially affect our business, financial condition and future results. The risks described in our Annual Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.

Because the Company relies on its parent company, American DG Energy Inc., you should also carefully read American DG Energy's most recent Annual Report on Form 10-K and its most recent Quarterly Report on Form 10-Q, each as filed with the Securities and Exchange Commission.
 


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EUROSITE POWER INC.


Item 6. Exhibits
 
Exhibit
 
 
Number
 
Description of Exhibit
 
 
 
3.1
Certificate of Incorporation, as amended and restated February 17, 2012 (incorporated by reference to Exhibit 3.2 to the Company’s Form 10, as amended, originally filed with the SEC on August 16, 2011).
 
 
 
3.2
Bylaws as amended and restated January 27, 2012 (incorporated by reference to Exhibit 3.4 to the Company’s Form 10, as amended, originally filed with the SEC on August 16, 2011).
 
 
 
4.1
Registration Rights Agreement among the Company and each of the holders of the Company’s 4% Senior Convertible Notes due 2018, dated as of April 15, 2014 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K originally filed with the SEC on April 21, 2014).
 
 
 
10.1
Revolving Line of Credit Agreement between the Company and Elias Samaras, dated as of June 30, 2015 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on July 9, 2015).
 
 
 
10.2
Amended and Restated Promissory Note due 2019 by the Company to John Hatsopoulos, dated December 30, 2014 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on January 2, 2015).
 
 
 
10.3
Convertible Note Amendment Agreement, dated October 3, 2014, among the Company, American DG Energy, John N. Hatsopoulos, and certain investors (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on October 6, 2014).
 
 
 
10.4
Form of Convertible Note Conversion Agreement (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed with the SEC on October 6, 2014).
 
 
 
10.5
Convertible Note Noteholder's Agreement among the Company, American DG Energy and the convertible note holders of the Company’s 4% Senior Convertible Notes due 2015, dated June 14, 2013 (incorporated by reference to exhibit 10.2 of the Company’s Current Report on Form 8-K originally filed with the SEC on June 18, 2013).
 
 
 
10.6
Project financing agreement, the Master Assignment of Receivables Agreement, between the Company and Societe Generale Equipment Finance Limited dated as of March 3, 2016 (incorporated by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on March 9, 2016)
 
 
 
10.7
Project financing agreement, the Master Assignment Agreement, between the Company and Macquarie Equipment Finance Limited dated as March 24, 2016 (incorporated by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on March 30, 2016)
 
 
 
10.8
Project financing agreement, the Finance Programme Agreement, between the Company and Macquarie Equipment Finance Limited dated as March 24, 2016 (incorporated by reference to Exhibit 10.2 to the Company Current Report on Form 8-K filed with the SEC on March 30, 2016)
 
 
 
31.1*
Rule 13a-14(a) Certification of Chief Accounting Officer
 
 
 
31.2*
Rule 13a-14(a) Certification of Chief Executive Officer
 
 
 
32.1**
Section 1350 Certifications of Principal Executive Officer and Chief Accounting Officer
 
 
 

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EUROSITE POWER INC.


101.1*
The following materials from the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2016, are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements, tagged as blocks of text and in detail.

* Filed herewith
** Furnished herewith

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EUROSITE POWER INC.


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
EUROSITE POWER INC.
 
 
 
By: /s/ ELIAS SAMARAS
 
Chief Executive Officer
 
(Principal Executive Officer)
 
Date: May 16, 2016
 
 
 
By: /s/ BONNIE J. BROWN
 
Chief Financial Officer
 
(Principal Finance Officer)
 
Date: May 16, 2016
 

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