SOURCE: Midwest Energy Emissions Corp.

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May 16, 2016 10:45 ET

Midwest Energy Emissions Corp. Reports Q1 2016 Financial Results

Q1 2016 Revenues Increase 1,286% to $3.4 Million; Drives Net Income of $0.9 Million

LEWIS CENTER, OH--(Marketwired - May 16, 2016) - Midwest Energy Emissions Corp. (OTCQB: MEEC) ("ME2C" or the "Company"), an emerging leader in mercury emissions control technology for the global coal-power industry, has announced its financial results for first quarter, which ended March 31, 2016.

First Quarter 2016 Financial Highlights

  • Total revenues increased 1,286% to $3.4 million compared to $243,000 in the same year-ago quarter.
  • Adjusted EBITDA grew to $16,000 compared to $(1.1) million in the same year-ago quarter.
  • Net income increased to $0.9 million, or $0.02 per diluted share, compared to a net loss of $6.6 million, or $(0.16) per diluted share, in the same year-ago quarter.

Financials Results
Total revenues in the first quarter of 2016 increased 1,286% to $3.4 million, compared to $243,000 in the same year-ago quarter. This growth was primarily due to our customers preparing for compliance with the Mercury and Air Toxics Standards (MATS) as their one year exemptions expired in April 2016. These efforts provided the Company with higher sales of proprietary materials as customers increased testing of their installed systems and built inventory. By the end of the first quarter of 2016, ME2C increased the number of electric generating units (EGU's) under contract to 19.

Adjusted EBITDA in the first quarter of 2016 totaled $16,000 compared to $(1.1) million in the same year-ago quarter. Net income in the first quarter of 2016 was $0.9 million, or $0.02 per diluted share, compared to a net loss of $6.6 million, or $(0.16) per diluted share, in the first quarter of 2015.

These improvements were primarily due to the aforementioned increase in revenues, as well improved gross margin, decreased interest expense and a gain on the change in value of warrant liability.

On March 31, 2016, the Company had cash and cash equivalents of $0.5 million compared to $1.1 million on December 31, 2015.

Management Commentary
"The momentum we established in 2015 has continued into the first quarter, evidenced by our significant increase in revenues as a result of our customers beginning to comply with MATS using our proprietary SEA™ Technology," said Richard MacPherson, President and CEO of ME2C. "Our mercury control program, along with strong industry tailwinds for mercury compliance have resulted in the most robust pipeline of potential customers in the Company's history, positioning us for continued revenue growth and cash flow generation."

"Looking towards the remainder of 2016, we are anticipating continued growth in our rapidly expanding customer base. In addition, the long-term agreements we currently have in place provide us with significant recurring revenues that will allow us to continue investing in R&D, introduce new products and services, and ultimately, increase shareholder value," MacPherson concluded.

About Midwest Energy Emissions Corp. (ME2C)
Midwest Energy Emissions Corp. (OTCQB: MEEC) delivers patented and proprietary solutions to the global coal-power industry to remove mercury from power plant emissions, providing performance guarantees, and leading-edge emissions services. The U.S. Environmental Protection Agency (EPA) MATS rule requires that all coal- and oil-fired power plants in the U.S., larger than 25 mega-watts, must remove roughly 90% of mercury from their emissions starting April 15, 2015. In June 2015, the U.S. Supreme Court remanded MATS back to the U.S. Court of Appeals for the D.C. Circuit for further review, but left the rule in place. The D.C. Circuit has since remanded the rule to the EPA for further consideration, but without vacatur, allowing MATS to remain in effect until the EPA issues a final finding. On April 14, 2016, the EPA issued a final supplemental finding upholding the rule and concluding that a cost analysis supports the MATS rule. ME2C expects legal challenges to the rule will continue. ME2C has developed patented technology and proprietary products that have been shown to achieve mercury removal levels compliant with MATS at a significantly lower cost and with less operational impact than currently used methods, while preserving the marketability of fly-ash for beneficial use. For more information, please visit www.midwestemissions.com.

Use of Non-GAAP Financial Measures
To provide investors with additional information regarding our financial results, this press release includes references to Adjusted EBITDA, a Non-GAAP financial measure. We view Adjusted EBITDA as an operating performance measure and, as such, we believe that the GAAP financial measure most directly comparable to it is net income (loss). We define Adjusted EBITDA as net income adjusted for income taxes, depreciation, amortization, stock based compensation, and other non-cash income and expenses. We believe that Adjusted EBITDA provides us an important measure of operating performance. Our use of Adjusted EBITDA has limitations as an analytical tool, and this measure should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP, as the excluded items may have significant effects on our operating results and financial condition. Additionally, our measure of Adjusted EBITDA may differ from other companies' measure of Adjusted EBITDA. When evaluating our performance, Adjusted EBITDA should be considered with other financial performance measures, including various cash flow metrics, net income and other GAAP results. In the future, we may disclose different non-GAAP financial measures in order to help our investors and others more meaningfully evaluate and compare our future results of operations to our previously reported results of operations.

Safe Harbor Statement
With the exception of historical information contained in this press release, content herein may contain "forward-looking statements" that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Investors are cautioned that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the statements made. Matters that may cause actual results to differ materially from those in the forward-looking statements include, among other factors, the gain or loss of a major customer, additional or new EPA regulations affecting coal-burning utilities, disruption in supply of materials, a significant change in general economic conditions in any of the regions where our customer utilities might experience significant changes in electric demand, a significant disruption in the supply of coal to our customer units, the loss of key management personnel, failure to obtain adequate working capital to execute the business plan and any major litigation regarding the Company. In addition, this release contains time-sensitive information that reflects management's best analysis only as of the date of this release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Further information concerning issues that could materially affect financial performance related to forward-looking statements contained in this release can be found in the Company's periodic filings with the Securities and Exchange Commission.

 
 
MIDWEST ENERGY EMISSIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2016 AND DECEMBER 31, 2015
(UNAUDITED)
         
         
    March 31, 2016 (Unaudited)   December 31, 2015
ASSETS        
Current assets                
  Cash and cash equivalents   $ 477,948     $ 1,083,280  
  Accounts receivable     1,369,356       1,150,602  
  Inventory     2,700,692       2,715,913  
  Prepaid expenses and other assets     135,798       161,813  
Total current assets     4,683,794       5,111,608  
                 
Property and equipment, net     1,933,574       1,243,450  
License, net     57,354       58,825  
Prepaid expenses and other assets     -       4,058  
Customer acquisition costs, net     1,004,737       897,428  
Total assets   $ 7,679,459     $ 7,315,369  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
                 
Current liabilities                
  Accounts payable and accrued expenses   $ 1,924,859     $ 1,235,162  
  Deferred revenue     2,140,200       2,281,760  
  Convertible notes payable     3,321,037       2,497,114  
  Current portion of equipment notes payable     27,928       20,979  
  Customer credits     936,500       936,500  
Total current liabilities     8,350,524       6,971,515  
                 
Convertible notes payable, net of discount     3,241,110       3,175,085  
Warrant liability     7,641,000       9,854,400  
Accrued interest     75,875       169,202  
Equipment notes payable     124,546       90,165  
Total liabilities     19,433,055       20,260,367  
                 
Stockholders' deficit                
  Preferred stock, $.001 par value: 2,000,000 shares authorized     -       -  
  Common stock; $.001 par value; 150,000,000 shares authorized;                
  47,358,618 shares issued and outstanding as of March 31, 2016                
  47,194,118 shares issued and outstanding as of December 31, 2015     47,359       47,194  
  Additional paid-in capital     25,290,959       25,008,016  
  Accumulated deficit     (37,091,914 )     (38,000,208 )
                 
Total stockholders' deficit     (11,753,596 )     (12,944,998 )
                 
Total liabilities and stockholders' deficit   $ 7,679,459     $ 7,315,369  
                 
                 
The accompanying notes are an integral part of these condensed consolidated financial statements.  
                 
 
MIDWEST ENERGY EMISSIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015
(UNAUDITED)
       
  For the Three Months Ended March 31, 2016 (Unaudited)   For the Three Months Ended March 31, 2015 (Unaudited)
               
Revenues $ 3,373,311     $ 243,344  
               
Costs and expenses:              
  Cost of goods sold   1,918,525       149,689  
  Operating expenses   564,662       347,170  
  License maintenance fees   75,000       75,000  
  Selling, general and administrative expenses   750,103       681,783  
  Depreciation and amortization   163,924       65,588  
  Professional fees   185,564       170,245  
               
Total costs and expenses   3,657,778       1,489,475  
               
Operating loss   (284,467 )     (1,246,131 )
               
Other income (expenses)              
  Interest expense   (2,073,144 )     (3,422,356 )
  Letter of credit fees   (42,667 )     -  
  Change in value of warrant liability   3,309,400       (1,878,550 )
  State income taxes   (828 )     (20,495 )
               
  Total other income (expenses)   1,192,761       (5,321,401 )
               
Net income (loss) $ 908,294     $ (6,567,532 )
               
               
               
Net income (loss) per common share - basic and diluted: $ 0.02     $ (0.16 )
               
Weighted average common shares outstanding   47,358,618       40,414,884  
               
               
The accompanying notes are an integral part of these condensed consolidated financial statements.  
 
 
MIDWEST ENERGY EMISSIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2016
(UNAUDITED)
                  Total
  Common Stock   Additional   Accumulated   Stockholders'
  Shares   Par Value   Paid-in Capital   (Deficit)   Deficit
                               
                               
Balance - December 31, 2015 47,194,118   $ 47,194   $ 25,008,016   $ (38,000,208 )   $ (12,944,998 )
                               
Stock issued for interest on notes payable 164,500     165     103,470     -       103,635  
                               
Issuance of stock options -     -     179,473     -       179,473  
                               
Net income (loss) for the period                   908,294       908,294  
                               
Balance - March 31, 2016 47,358,618   $ 47,359   $ 25,290,959   $ (37,091,914 )   $ (11,753,596 )
                               
                               
The accompanying notes are an integral part of these condensed consolidated financial statements.  
                               
   
MIDWEST ENERGY EMISSIONS CORP. AND SUBSIDIARIES   
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   
FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015   
(UNAUDITED)   
             
    For the Three Months Ended March 31, 2016 (Unaudited)   For the Three Months Ended March 31, 2015 (Unaudited)   December 17, 2008 (Inception) Through December 31, 2012
Cash flows from operating activities                        
Net income (loss)   $ 908,294     $ (6,567,532 )   $ (13,877,480 )
                         
Adjustments to reconcile net income (loss)  to net cash provided by (used in) operating activities:                        
  Stock based compensation     179,473       125,528       3,846,134  
  Amortization of license fees     1,471       1,471       23,529  
  Amortization of discount of notes payable     425,870       2,782,346       -  
  Amortization of debt issuance costs     167,510       169,664       -  
  Amortization of customer acquisition costs     80,916       49,117          
  Depreciation expense     81,537       15,000       428,641  
  (Gain) loss on the change in value of warrant liability     (3,309,400 )     1,878,550          
  Noncash debt issuance costs     1,096,000       -          
  PIK interest     231,001       535,690       (104,024 )
Change in assets and liabilities                        
  Increase in accounts receivable     (406,979 )     (827,394 )     (274,464 )
  Decrease (increase) in inventory     15,221       (1,291,453 )     (37,993 )
  Decrease (increase) in prepaid expenses and other assets     30,073       (13,447 )     (103,003 )
  Increase in accounts payable and accrued liabilities     760,410       70,070       783,442  
  Increase (decrease) in deferred revenue     (141,560 )     1,386,950          
    Net cash provided by (used in) operating activities     119,837       (1,685,440 )     (4,322,387 )
                         
Cash flows used in investing activities                        
  Purchase of property and equipment     (725,169 )     (512,717 )     (1,414,602 )
    Net cash used in investing activities     (725,169 )     (512,717 )     (1,503,452 )
                         
Cash flows from financing activities                        
  Payment of convertible promissory notes     -       (3,000,000 )     483,500  
    Net cash used in financing activities     -       (3,000,000 )     6,015,206  
                         
Net decrease in cash and cash equivalents     (605,332 )     (5,198,157 )     189,367  
                         
Cash and cash equivalents - beginning of period     1,083,280       7,212,114       -  
                         
Cash and cash equivalents - end of period   $ 477,948     $ 2,013,957     $ 189,367  
                         
                         
SUPPLEMENTAL CASH FLOW INFORMATION:                        
  Cash paid during the period for:                        
  Interest   $ 47,887     $ 256     $ 11,837  
                         
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS                        
  Equipment purchases included in accounts payable   $ -     $ 108,133     $ 112,000  
  Conversion of debt and accrued interest to equity   $ -     $ 42,684          
  Issuance of common stock as payment of interest on convertible notes payable   $ 103,635     $ 104,005          
  Conversion of accrued interest to debt   $ 65,567     $ 535,690     $ 112,000  
  Conversion of accounts receivable to customer acquisition costs   $ 188,225     $ -          
  Equipment purchases included in notes payable   $ 46,492     $ -          
                         
                         
The accompanying notes are an integral part of these condensed consolidated financial statements.          
                         
       
       
  Quarter Ended March 31,
  2016   2015
       
  (in thousands)
   
Net income (loss) $ 908     $ (6,568 )
               
  Non-GAAP adjustments:              
  Depreciation and amortization   164       66  
  Interest   2,073       3,422  
  State income taxes   1       20  
  Stock based compensation   179       126  
  Change in warrant liability   (3,309 )     1,879  
  Settlement charges   -       -  
  Debt conversion costs   -       -  
               
Adjusted EBITDA $ 16     $ (1,055 )
   

 

                 
                 
    Quarter Ended (Unaudited)
    3/31/2016   12/31/2015   9/30/2015   6/30/2015
                 
    (in thousands)
     
A Net income (loss) $ 908     $ (7,138 )   $ (1,155 )   $ 599  
                                 
  Non-GAAP adjustments:                              
B   Depreciation and amortization   164       123       103       99  
C   Interest   2,073       950       906       936  
D   State income taxes   1       5       8       8  
E   Stock based compensation   179       177       280       206  
F   Change in warrant liability   (3,309 )     4,655       (145 )     (3,195 )
G   Settlement charges   -       1,335       -       -  
H   Debt conversion costs   -       -       161       962  
                                 
  Adjusted EBITDA $ 16     $ 107     $ 158     $ (385 )

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