EUROSITE POWER INC. - FORM 8-K - EX-99.01 - EXHIBIT 99.01 - November 15, 2016

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8-K - 8-K - EUROSITE POWER INC.eusp20161110earnings8-k.htm


eusplogo.jpg EuroSite Power Inc.
45 First Avenue, Waltham, MA 024                             t: +1 781.522.6000 f: +1 781.522.6050
info@eurositepower.co.uk
www.eurositepower.co.uk

Investor Contact:                              Media Contact:
Ariel F. Babcock, CFA                          Paul Hamblyn
+1 781.466.6413                              +44 792.085.9540
ariel.babcock@eurositepower.co.uk                      paul.hamblyn@eurositepower.co.uk


EuroSite Power Inc. Reports Third Quarter 2016 Financial Performance

Margin improvement demonstrates strong execution on cost control initiatives while investing for growth

WALTHAM. Mass - November 10, 2016 - EuroSite Power Inc. (OTCQX: EUSP, the "Company"), an On-Site Utility solutions provider, offering clean electricity, heat, hot water and cooling solutions to healthcare, hospitality, housing and leisure centers in the United Kingdom (UK) and Europe, reported total revenues of $459,114 for the third quarter of 2016, compared to $421,991 for the same period in 2015, an increase of 8.8%. Gross margin excluding depreciation improved by over 19 percentage points compared with second quarter of 2015, to a strong 32.8%.

Overall gross margin grew by 19.3 percentage points to 8.5% for third quarter of 2016, a significant improvement over the (10.8)% overall gross margin reported last year. Notably, third quarter gross margins benefited from strong reductions in maintenance expense as well as lower fuel expense as a percent of total revenue. GAAP diluted loss per share (EPS) was $0.01 for the third quarter of 2016, in line with prior year results.

EuroSite Power’s Managing Director Paul Hamblyn commented, "The significant improvement in our adjusted gross margins alongside improved overall gross margin demonstrates the value of the cost control initiatives put in place at the end of last year to drive our company toward profitability. Although the fluctuations in the value of the British pound do impact our financial statements in currency translation, the underlying core UK business continued its strong revenue growth and margin performance during the quarter."
One new installation was commissioned in the period bringing total operational systems at quarter end to 32, compared to just 28 operational systems at September 30, 2015, with a total installed capacity of 3,509 kW and long term total contract value of operational systems of approximately GBP£57.2 million on a local currency basis, or $74.2 million. Total systems under contract (both operating and in backlog) at quarter end was 39; totaling 4,498 kW of capacity for a combined lifetime contract value of approximately GBP£70.3 million on a local currency basis, or $91.2 million.
Speaking about the results, Chief Executive Officer Dr. Elias Samaras noted, "These are exciting times at EuroSite Power, via a series of transactions executed over the last several months we are now a fully independent company. As such, the third quarter was about investing for growth. We have the in-house maintenance, gas purchase arrangement, and project financing agreements as well as an improved balance




sheet. This has positioned the Company to actively pursue larger projects as well as acquisitions alongside geographic expansion. While these projects take time to develop, I am confident we have the pieces in place to deliver strong growth for shareholders going forward."
Mr. Hamblyn, added, “Operationally we continued to execute on several of management’s key initiatives during the third quarter. The significant reduction in fuel expense enjoyed in the second quarter carried through to the third quarter, again helping improve margins. Similarly, we continue to reap the benefits of bringing maintenance service in-house, generating ongoing improvement in gross profit as we take over maintenance of the TEDOM units as their warranty periods end. During the quarter we brought a further site into operational service at The Dome leisure center and began construction at the prestigious Celtic Manor Resort. Significantly, The Dome is the first operational system financed by our agreement with Societe Generale and represents our largest single system to date. In total, we now have customers enjoying the benefit of savings generated by our clean power systems at a total of 15 leisure centers in the UK. Notably, Haverhill Leisure Centre, among the first to adopt our On-Site Utility solution, recently reinvested the savings we have provided into a new Gym and refurbished Power Room - an excellent demonstration of the value we generate for customers."

Major Highlights:

Financial

•
Energy revenue increased by 12.0% to $459,114 for the third quarter of 2016, compared to $410,055 for the third quarter of 2015. On a local currency basis, energy revenue was GBP£349,615 for Q3 2016, 30.6% growth over GBP£267,703 in energy revenue for Q3 2015.
•
Total revenue for the third quarter of 2016 grew by 8.8% to $459,114 compared to $421,991 for the third quarter of 2015. On a local currency basis, total revenue grew 28.4% to GBP£349,615, up from GBP£272,287 in Q3 2015.
•
Gross margin, excluding depreciation, improved to 32.8% for the third quarter of 2016, versus 13.5% for the third quarter of 2015. Overall gross margin improved to 8.5% for the third quarter of 2016, compared to (10.8)% for the third quarter of 2015.
•
Total revenue value of all contracted On-Site Utility energy agreements as of September 30, 2016 was approximately $91.2 million using various market assumptions and estimates made by management, compared to $103.3 million as of September 30, 2015. Note that the change in value of our contracted agreements includes the significant adverse impact of the decline in the British pound in the interim period, masking the growth in contracted revenue. On a local currency basis, total revenue value of all contracted On-Site Utility energy agreements at the end of the most recent quarter was GBP£70.33 million compared to GBP£63.2 million on September 30, 2015.
•
In August of 2016, the Company appointed a new Director to the Board, Mr. Stelios Zavvos, who was also named Chairman of the Audit Committee.


Sales and Operations

•
Total energy production for the third quarter of 2016 of 7.5 million kWh exceeds total generation for the prior comparable period by 2.1 million kWh, a 37.7% improvement over third quarter of 2015. Energy production primarily benefited from improved utilization rates as well as the operation of additional systems.




•
Total operational systems at September 30, 2016 was 32 with a total installed capacity of 3,509 kW, this favorably compares with just 28 systems totaling 2,753 kW of installed capacity at September 30, 2015.
•
The current contracted project backlog is 7 systems for a total of 989 kW in capacity. This compares with September 30, 2015 contracted project backlog of 8 systems for a total of 1,014 kW in capacity.
•
Operating expenses were higher as the Company continued to invest in additional personnel and marketing activities. General and Administrative expense includes an approximately $109,000 adverse swing related to the impact of currency exchange rate fluctuations caused by the fall in the value of the British pound in the period.


EuroSite Power will host a conference call and webcast today at 10:00 a.m. Eastern Time to discuss the quarterly financial results in more detail. To listen to the audio portion, dial toll free (844) 492-3726 within the U.S., toll free (855) 669-9657 from Canada, or +1 (412) 542-4187 from other international locations. Participants should ask to be joined to the EuroSite Power earnings call. We suggest participants begin dialing at least 10 minutes prior to the scheduled starting time. Alternately, to register for and listen to the live webcast, please go to http://investors.eurositepower.co.uk/EuroSite-Power-Inc-Third-Quarter-2016-Earnings-Conference-Call.

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 use Replay Access Code 10094776.


About EuroSite Power
EuroSite Power Inc. is committed to providing institutional, commercial and small industrial facilities with clean, reliable power, cooling, heat and hot water at lower costs than charged by conventional energy suppliers - without any capital or start-up costs to the energy user - through On-Site Utility energy solutions. For more information about our unique efficient power solutions please visit www.eurositepower.co.uk and follow us on Twitter and LinkedIn.


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, including its annual report on Form 10-K for the fiscal year ended December 31, 2015. 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.





EUROSITE POWER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 

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

 
 

Cash and cash equivalents
$
4,597,780

 
$
587,819

Accounts receivable
216,845

 
303,782

 UK energy tax incentives receivable
—

 
369,485

Value added and other tax receivable
29,338

 
(5,297
)
Inventory
192,133

 
137,093

Other current assets
79,423

 
57,152

Total current assets
5,115,519

 
1,450,034

Property and equipment, net
7,992,328

 
7,516,262

Other assets, long-term
9,883

 
11,004

TOTAL ASSETS
$
13,117,730

 
$
8,977,300

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
206,618

 
$
313,293

Due to related party
57,988

 
98,979

Accrued expenses and other current liabilities
226,906

 
286,814

Note payable - bank, short-term
69,933

 
—

Total current liabilities
561,445

 
699,086

Long-term liabilities:
 
 
 
Convertible debentures
—

 
1,585,264

Convertible debentures due to related parties
308,026

 
951,158

Note payable - bank
279,732

 
—

Note payable - related party
—

 
2,000,000

Total liabilities
1,149,203

 
5,235,508

Commitments and contingencies
 
 
 
Stockholders’ equity:
 

 
 

Common stock, $0.001 par value; 100,000,000 shares authorized; 82,265,056 and 65,747,100 issued and outstanding at September 30, 2016 and December 31, 2015, respectively.
82,265

 
65,747

Additional paid-in capital
22,116,857

 
12,224,064

Accumulated deficit
(10,230,595
)
 
(8,548,019
)
Total stockholders' equity
11,968,527

 
3,741,792

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
13,117,730

 
$
8,977,300







EUROSITE POWER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 

 
 
Three Months Ended
 
September 30,
2016
 
September 30,
2015
 
 
 
 
Revenues
 
 
 
Energy revenues
$
459,114

 
$
410,055

Turnkey & other revenues
—

 
11,936

 
459,114

 
421,991

Cost of sales
 

 
 

Fuel, maintenance and installation
308,511

 
365,097

Depreciation expense
111,761

 
102,485

 
420,272

 
467,582

Gross profit (loss)
38,842

 
(45,591
)
 
 
 
 
Operating expenses
 

 
 

General and administrative
379,286

 
194,053

Selling
127,917

 
122,826

Engineering
110,593

 
87,853

 
617,796

 
404,732

Loss from operations
(578,954
)
 
(450,323
)
Other income (expense)
 

 
 

Interest income
6,167

 
965

Interest expense, net of debt premium amortization
(10,039
)
 
(8,599
)
Debt conversion expense
—

 
—

 
(3,872
)
 
(7,634
)
 
 
 
 
Loss before income taxes
(582,826
)
 
(457,957
)
Provision (benefit) for income taxes
—

 
—

Net loss
$
(582,826
)
 
$
(457,957
)
 
 
 
 
Net loss per share - basic and diluted
$
(0.01
)
 
$
(0.01
)
Weighted-average shares outstanding - basic and diluted
82,265,056

 
65,747,100






EUROSITE POWER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 

 
 
Nine Months Ended
 
September 30,
2016
 
September 30,
2015
 
 
 
 
Revenues
 
 
 
Energy revenues
$
1,784,844

 
$
1,473,307

Turnkey & other revenues
1,739

 
39,711

 
1,786,583

 
1,513,018

Cost of sales
 

 
 

Fuel, maintenance and installation
1,160,274

 
1,192,276

Depreciation expense
341,482

 
289,621

 
1,501,756

 
1,481,897

Gross profit
284,827

 
31,121

 
 
 
 
Operating expenses
 

 
 

General and administrative
1,011,546

 
627,798

Selling
421,251

 
359,298

Engineering
289,089

 
162,008

 
1,721,886

 
1,149,104

Loss from operations
(1,437,059
)
 
(1,117,983
)
Other income (expense)
 

 
 

Interest income
9,606

 
5,277

Interest and other expenses
(30,341
)
 
(32,625
)
Debt conversion expense
(224,782
)
 
—

 
(245,517
)
 
(27,348
)
 
 
 
 
Loss before income taxes
(1,682,576
)
 
(1,145,331
)
Benefit for income taxes
—

 
2,188

Net loss
$
(1,682,576
)
 
$
(1,143,143
)
 
 
 
 
Net loss per share - basic and diluted
$
(0.02
)
 
$
(0.02
)
Weighted-average shares outstanding - basic and diluted
73,605,329

 
65,747,100







EUROSITE POWER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

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

 
 

Net loss
$
(1,682,576
)
 
$
(1,143,143
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 

Depreciation
347,066

 
291,465

Non-cash debt conversion and interest expense
235,782

 
—

Amortization of convertible debt premium
(44,132
)
 
(72,216
)
Stock-based compensation
243,175

 
57,217

Changes in operating assets and liabilities
 

 
 

(Increase) decrease in:
 

 
 

   Accounts receivable
86,937

 
(51,605
)
   UK energy tax incentives receivable
369,485

 
636,661

   Value added and other tax receivable
(34,635
)
 
3,025

   Inventory
(55,040
)
 
(10,058
)
   Prepaid and other current assets
(22,271
)
 
(27,289
)
   Other assets, long-term
1,121

 
1,440

Increase (decrease) in:
 

 
 

   Accounts payable
(106,675
)
 
178,702

   Due to related party
(40,991
)
 
—

   Accrued expenses and other current liabilities
(59,908
)
 
132,352

Net cash used in operating activities
(762,662
)
 
(3,449
)
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Purchases of property and equipment
(823,132
)
 
(1,571,533
)
Net cash used in investing activities
(823,132
)
 
(1,571,533
)
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Payment on note payable - related party
(2,000,000
)
 
(1,000,000
)
Proceeds from sale of common stock, net of costs
7,246,090

 
—

Proceeds from loan payable - bank
349,665

 
—

Net cash provided by (used in) financing activities
5,595,755

 
(1,000,000
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
4,009,961

 
(2,574,982
)
Cash and cash equivalents, beginning of the period
587,819

 
3,776,852

Cash and cash equivalents, end of the period
$
4,597,780

 
$
1,201,870

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Taxes paid
$
—

 
$
—

Interest paid
$
72,764

 
$
—

Common Stock exchanged for convertibles debentures, non-cash
$
2,184,264

 
$
—




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