AMERICAN DG ENERGY INC - FORM 8-K - EX-99.01 - EXHIBIT 99.01 - November 16, 2016

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8-K - 8-K - AMERICAN DG ENERGY INCadge-1120168xkq3earningsre.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:                        
John N. Hatsopoulos                        
American DG Energy Inc.                    
781.622.1120                            
john.hatsopoulos@americandg.com                


 American DG Energy Reports Third Quarter 2016 Financial Performance
Delivers positive non-GAAP EBITDA cash flow of $288,334 for the quarter

WALTHAM, Mass. - November 14, 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 $1,580,863 for the third quarter of 2016, compared to $1,534,553 for the same period in 2015. GAAP diluted earnings per share (EPS) were a loss of $0.01 for the third quarter of 2016 versus the $0.02 loss reported in the comparable prior year quarter.

Speaking about recent company developments, Co-Chief Executive Officer Benjamin Locke noted, “Management has taken a number of steps over the past several quarters to secure the future of the company, culminating in the recently announced planned merger with longtime affiliate Tecogen Inc. Our sites improvement initiative, cost-reduction efforts, near-elimination of debt outstanding, and deconsolidation with European subsidiary EuroSite Power all cleared the slate for a new beginning for the Company and the team at American DG deserves congratulations for their tireless efforts over the past 18-plus months.”

Reflecting the Company's ongoing efforts to optimize its On-Site Utility business, gross margin excluding depreciation improved in third quarter of 2016 to 51.0% versus 45.4% for the same period in 2015, representing 12.3% growth in adjusted gross margin.

In addition, the Company delivered a cash flow positive quarter in core operations on a non-GAAP EBITDA basis, with an inflow of $288,334 for the quarter ended September 30, 2016 as compared to outflows of $51,067 in the comparable prior year period. Likewise, the Company achieved positive non-GAAP EBITDA cash flow for the year-to-date period ended September 30, 2016, with an inflow of $326,713 as compared to a $(364,404) outflow in the prior year comparable period.

Chief Financial Officer Bonnie Brown observed, “The previously announced series of transactions to significantly reduce our debt burden and minimize potential shareholder dilution were fully completed as of third quarter end, resulting in a number of non-operating items on our financial statements including a gain on extinguishment of debt which was partially offset by a loss from discontinued operations. Going forward, our investment in EuroSite Power will be marked to market and fluctuations in value will be accounted for in Other Comprehensive Income.”








Major Highlights:

Consolidated Financial Results

•
Our revenues increased to $1,580,863 for the third quarter of 2016 compared to $1,534,553 for the same period in 2015, an increase of $46,310 or 3.0%.
•
Overall operating expenses have decreased to $567,086 for the third quarter of 2016 versus $732,593 for the same period in 2015, a 22.6% improvement, generating an expense reduction of $165,507. Operating expenses benefited not only from reductions in employee headcount but also from reduced travel expense, consulting fees, and rent expense.
•
Adjusted gross margin excluding depreciation improved by 12.3%, hitting 51.0% for third quarter of 2016 versus 45.4% for the same period in 2015. Gross margin for the third quarter of 2016 was 22.3% compared with 18.2% in 2015, reflecting the ongoing benefit from reductions in fuel, maintenance, and installation related expense.
•
As a result of our focused efforts to improve fleet operations, non-GAAP EBITDA cash flows improved by $339,401, reaching a positive "inflow" of $288,334 for the third quarter of 2016, versus an "outflow" of $51,067 for the same period in 2015.
•
Loss from operations was $(214,849) in the third quarter, a substantial reduction from the $(454,023) loss reported in third quarter 2015.
•
On September 30, 2016, American DG completed a series of transactions that resulted in a reduction of convertible debt outstanding to $3.4 million with zero coupon due May 2018; eliminated 1.02 million in outstanding warrants expiring October 2017; and reduced the Company's stake in EuroSite Power Inc. to 2.03% (approximately 1.7 million shares). These transactions significantly improved the Company's balance sheet and have prevented substantial potential shareholder dilution.
•
The reduction in ownership of EuroSite Power Inc. to just 2.03% resulted in accounting for our investment in EuroSite as discontinued operations. As such, its balance sheets and operations have been deconsolidated and collapsed into single categorical lines in the attached financial statements.
.
Operations

•
Improved efficiencies resulted in a 3% 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 third quarter revenue attributed to demand savings year-to-year more than threefold ($19k to $72k). We expect further site upgrade work to bring similar additional revenues.
•
Electrical production in the period increased by 5.5% year-on-year. However, overall energy production (thermal and electrical) decreased 5.6% compared to third quarter 2015, with the entire shortfall attributable reduced thermal and A/C production.
•
Year-over-year electric rates used as the basis for customer invoicing decreased on average 1.8%. Gas prices, on the other hand, increased by 5.1%. This likewise increases the value of our thermal energy proportionally but with negative offset relative to our fuel costs.





•
Revenue for the quarter was attributable to the following core markets:
Fitness
21
%
Hospitality
5
%
Housing
3
%
Education
32
%
Healthcare
17
%
Other
22
%
Total
100
%


•
The revenue was distributed by energy type as is outlined in the following table:
Electricity
37
%
Thermal
26
%
Cooling
37
%
Total
100
%
    
•
In total, as of September 30, 2016, we operated 92 systems totaling 5,445kW of installed capacity with a total approximate lifetime contract value of $203 million.
•
We have a backlog of 13 systems totaling 975kW of installed capacity, on a consolidated basis, as of September 30, 2016.


American DG Energy will hold its earnings conference call today, November 14, 2016 at 1:00 p.m. Eastern Time. To listen, dial (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, November 17, 2016. To listen to the playback, dial (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 10094791. 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

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

 
 

Cash and cash equivalents
$
3,187,634

 
$
4,999,709

Accounts receivable, net
748,080

 
633,924

Unbilled revenue
14,147

 
12,468

Due from related party
80,380

 
99,548

Inventory
850,535

 
975,760

Current assets of discontinued operations
—

 
1,450,034

Prepaid and other current assets
436,642

 
331,057

Total current assets
5,317,418

 
8,502,500

Property and equipment, net
17,677,724

 
17,950,787

Long-term assets of discontinued operations
—

 
7,527,266

Investment securities
645,539

 
—

Other assets, long-term
11,446

 
41,825

TOTAL ASSETS
$
23,652,127

 
$
34,022,378

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
171,525

 
$
162,976

Accrued expenses and other current liabilities
238,795

 
257,810

Due to related party
376,145

 
1,171,863

Current liabilities of discontinued operations
—

 
699,086

Total current liabilities
786,465

 
2,291,735

Long-term liabilities:
 

 
 

Convertible debentures due related parties
3,005,369

 
16,078,912

Long-term liabilities of discontinued operations
—

 
4,536,422

Total liabilities
3,791,834

 
22,907,069

Commitments and contingencies
 
 
 
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 September 30, 2016 and December 31, 2015, respectively
50,684

 
50,684

Accumulated other comprehensive income-investment securities
21,040

 
—

Additional paid-in capital
58,782,893

 
49,641,620

Accumulated deficit
(39,063,160
)
 
(40,622,774
)
Total American DG Energy Inc. stockholders’ equity
19,791,457

 
9,069,530

Noncontrolling interest of discontinued operations
—

 
1,944,236

Noncontrolling interest
68,836

 
101,543

Total stockholders' equity
19,860,293

 
11,115,309

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
23,652,127

 
$
34,022,378







AMERICAN DG ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)  
 
 
Three Months Ended
 
September 30,
2016
 
September 30,
2015
Revenues
 
 
 
Energy revenues
$
1,393,009

 
$
1,340,627

Turnkey & other revenues
187,854

 
193,926

 
1,580,863

 
1,534,553

Cost of sales
 

 
 

Fuel, maintenance and installation
774,161

 
837,192

Depreciation expense
454,465

 
418,791

 
1,228,626

 
1,255,983

Gross profit
352,237

 
278,570

Operating expenses
 

 
 

General and administrative
401,140

 
364,768

Selling
1,418

 
127,966

Engineering
164,528

 
239,859

 
567,086

 
732,593

Loss from operations
(214,849
)
 
(454,023
)
 
 
 
 
Other income (expense), net
 

 
 

Interest and other income
1,915

 
5,676

Interest expense
(177,756
)
 
(311,738
)
Gain on extinguishment of debt
182,887

 
—

    Change in fair value of warrant liability
—

 
299

 
7,046

 
(305,763
)
 
 
 
 
Income (loss) from continuing operations before provision for income taxes
(207,803
)
 
(759,786
)
Provision for income taxes
—

 
(8,797
)
Income (loss) from continuing operations
(207,803
)
 
(768,583
)
Income attributable to the noncontrolling interest
(36,602
)
 
(29,491
)
Net income (loss) attributable to American DG Energy Inc. from continuing operations
$
(244,405
)
 
$
(798,074
)
Loss from discontinued operations
(119,506
)
 
(220,559
)
Net loss attributable to American DG Energy Inc.
(363,911
)
 
(1,018,633
)
Other comprehensive income - Unrealized gain on securities
21,040

 
—

Comprehensive income (loss)
$
(342,871
)
 
$
(1,018,633
)
 
 
 
 
Net income (loss) per share - basic and diluted
$
(0.01
)
 
$
(0.02
)
Weighted average shares outstanding - basic and diluted
50,684,095

 
50,684,095

 
 
 
 
Non-GAAP financial disclosure
 
 
 
Loss from operations
$
(214,849
)
 
$
(454,023
)
Depreciation
465,403

 
431,103

Stock based compensation
37,780

 
(28,147
)
Adjusted EBITDA cash inflows (outflows)
$
288,334

 
$
(51,067
)




AMERICAN DG ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)  
 
 
Nine Months Ended
 
September 30,
2016
 
September 30,
2015
Revenues
 
 
 
Energy revenues
$
4,090,657

 
$
4,538,832

Turnkey & other revenues
476,366

 
499,561

 
4,567,023

 
5,038,393

Cost of sales
 

 
 

Fuel, maintenance and installation
2,712,504

 
3,105,150

Depreciation expense
1,348,231

 
1,259,970

 
4,060,735

 
4,365,120

Gross profit
506,288

 
673,273

Operating expenses
 

 
 

General and administrative
1,170,205

 
1,437,452

Selling
39,184

 
540,615

Engineering
470,351

 
551,151

 
1,679,740

 
2,529,218

Loss from operations
(1,173,452
)
 
(1,855,945
)
 
 
 
 
Other income (expense), net
 

 
 

Interest and other income
19,702

 
187,797

Interest expense
(759,344
)
 
(917,818
)
Gain on extinguishment of debt
182,887

 
—

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

 
6,778

 
3,330,343

 
(723,243
)
 
 
 
 
Income (loss) from continuing operations before provision for income taxes
2,156,891

 
(2,579,188
)
Provision for income taxes
(60,288
)
 
(16,153
)
Income (loss) from continuing operations
2,096,603

 
(2,595,341
)
Income attributable to the noncontrolling interest
(51,581
)
 
(75,021
)
Net income (loss) attributable to American DG Energy Inc. from continuing operations
$
2,045,022

 
$
(2,670,362
)
Loss from discontinued operations
(485,408
)
 
(736,766
)
Net income (loss) attributable to American DG Energy Inc.
1,559,614

 
(3,407,128
)
Other comprehensive income - Unrealized gain on securities
21,040

 
—

Comprehensive income (loss)
$
1,580,654

 
$
(3,407,128
)
 
 
 
 
Net income (loss) per share - basic and diluted
$
0.03

 
$
(0.07
)
Weighted average shares outstanding - basic and diluted
50,684,095

 
50,687,355

 
 
 
 
Non-GAAP financial disclosure
 
 
 
Loss from operations
$
(1,173,452
)
 
$
(1,855,945
)
Depreciation
1,378,134

 
1,294,945

Stock based compensation
122,031

 
196,596

Adjusted EBITDA cash inflows (outflows)
$
326,713

 
$
(364,404
)





AMERICAN DG ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Nine Months Ended
 
September 30, 2016
 
September 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net income (loss) attributable to American DG Energy, Inc.
$
1,559,614

 
$
(3,407,128
)
Income attributable to noncontrolling interest
51,581

 
75,021

Adjustments to reconcile net income (loss) to net cash used in operating activities:
 

 
 

Depreciation
1,378,134

 
1,294,945

Gain attributable to distribution of nonmonetary assets to noncontrolling interest
—

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

Gain on extinguishment of debt
(182,887
)
 
—

Loss from discontinued operations
485,408

 
736,766

Amortization of deferred financing costs
30,379

 
40,096

Decrease in fair value of warrant liability
—

 
(6,778
)
Non-cash interest expense
703,333

 
230,668

Stock-based compensation
122,031

 
196,596

Changes in operating assets and liabilities:
 

 
 

(Increase) decrease in:
 

 
 

Accounts receivable and unbilled revenue
(115,835
)
 
162,962

Due from related party
19,168

 
(13,378
)
Inventory
125,225

 
75,888

Prepaid and other current assets
(105,585
)
 
294,920

Increase (decrease) in:
 

 
 

Accounts payable
8,549

 
(26,566
)
Accrued expenses and other current liabilities
(19,013
)
 
(83,690
)
Due to related party
(795,718
)
 
355,267

Other long-term liabilities
—

 
(2,227
)
Net cash used in operating activities
(622,714
)
 
(234,508
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Purchases of property and equipment
(1,115,323
)
 
(1,740,919
)
Proceeds from sale of property and equipment
10,250

 
—

Partial purchase of non-controlling interest
—

 
(100,000
)
Net cash used in investing activities
(1,105,073
)
 
(1,840,919
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Purchases of common stock, net of costs
—

 
(152,377
)
Distributions to noncontrolling interest
(84,288
)
 
(186,856
)
Net cash used in financing activities
(84,288
)
 
(339,233
)
 
 
 
 
Net decrease in cash and cash equivalents
(1,812,075
)
 
(2,414,660
)
Cash and cash equivalents, beginning of the period
4,999,709

 
8,049,063

Cash and cash equivalents, end of the period
$
3,187,634

 
$
5,634,403

Supplemental disclosures of cash flows information:
 

 
 

Cash paid during the period for:
 

 
 

Interest
$
—

 
$
—

Income taxes
$
77,441

 
$
42,644

Non-cash investing and financing activities:
 

 
 

Distribution of nonmonetary assets
$
—

 
$
340,069

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

 
$
—

Settlement of convertible debentures with common stock of subsidiary
$
13,783,721

 
$
—




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