$MEEC Negatives from 10K:
- most of the revenue is postponed to 2016
- company needs more money
- MACT court case in June
- Convertible notes with current principal balances of approximately $3,100,000 and $800,000 mature in 2015 and 2016, respectively.
The Company currently operates in a single market of mercury reduction in flue gas emissions from large coal-fired utility and industrial boilers. This market is primarily based on air pollution control regulations and enforcement of those regulations. Any significant change in these regulations would have a dramatic effect on the Company. Specifically, on December 16, 2011, the EPA published the Mercury and Air Toxic Standard. The final rule has a three year compliance schedule for most power plants. Litigation is pending which could defer implementation of mercury reduction regulation for years or indefinitely. The U.S. Court of Appeals for the District of Columbia Circuit ruled to uphold MATS in April of 2014. On November 2014 the U.S. Supreme Court agreed to hear state and industry challenges against MATS. Oral argument is scheduled for March 2015 and a decision is expected in June 2015.
We are under-capitalized and may not be able to raise sufficient capital to ensure our continuation as an on-going company.
The Company has a significant amount of convertible debt maturing in 2015 and 2016. This debt may have conversion prices that are above the stock price on the maturity date. The Company may need to repay these notes and currently, existing cash is not available to meet these obligations.
No assurances can be given that the Company can obtain sufficient working capital through business or financing activities to meet its debt obligations. Due to certain covenants with our senior lender, we are not able to use current cash on hand to pay current convertible note holders when these notes mature. Therefore, success in raising funds through an equity offering and/or negotiations with our note holders is crucial.
From April 21, 2014 to May 8, 2014, the Company sold securities to unaffiliated accredited investors totaling $1,050,260. The securities consist of units, where each unit consists of: (i) one share of common stock of the Issuer, par value $0.001 per share, and (ii) a warrant to purchase one shares of common stock of the Issuer at an exercise price of $1.10 per share. The price of each unit was $1.10 and 954,782 units were sold.
Liquidity and Capital Resources
Our principal source of liquidity is cash generated from financing activities. As of December 31, 2014, our cash and cash equivalents totaled $7,212,000. In March 2015, pursuant to an amendment of its Financing Agreement with AC Midwest, LLC, the Company repaid $3,000,000 of outstanding principal. The high volume product supply revenue that we expected to begin in 2015, but has been delayed until 2016 as a result of one year MATS compliance waivers granted by their state EPA on seven units under contract. Our anticipated cash needs for working capital and capital expenditures for the next twelve months are approximately $4.0 million. We have primarily relied upon financing activities to fund our operations. Although we anticipate significant revenues for the sale of capital equipment and products to be used in testing and commissioning work done by clients, no assurances can be given that the Company can obtain sufficient working capital through financing activities to meet its debt obligations. Due to certain covenants with our senior lender, we are not able to use current cash on hand to pay current convertible note holders as these notes mature. Convertible notes with current principal balances of approximately $3,100,000 and $800,000 mature in 2015 and 2016, respectively. Therefor, success in our fund raising efforts and negotiations with our note holders is crucial. We are actively seeking sources of additional financing in order to fund our debt repayment obligations and if extensions cannot be negotiated with our early investors who purchased convertible debt from the Company. Due to these efforts, we could dilute current shareholders and the dilution could be significant. Our current cash flow needs for general overhead, sales and operations is approximately $300,000 per month with additional funds often needed for demonstrations of our technology on potential customer units. With our expected gross margins on customer contracts, we anticipate we will be at break-even on a cash flow basis when our product revenues reach approximately $16 million annually. This break-even target is subject to achieving sales at that level with our expected gross margins, no assurance can be made that we will be able to achieve this target.
Convertible Promissory Notes Payable (page 39 of the 10K):
Total convertible notes payable before discount: $16,080,295
Less discounts*: (8,275,321)
Total convertible notes payable: $7,804,974
Less current portion*: $3,080,376
Convertible notes payable, net of current portion: $4,724,598
*discounts = money received from exercising Warrants.
*current portion = down payment of $3 mil of the $10 mil Note (16 March 2015).
As of December 31, 2014, schedule principal payments due on convertible notes payable are as follows:
Years ended Dec 31:
2015: $3,080,376
2016: $2,331,915
2017: $2,401,241
2018: $8,266,763
Total: $16,080,295
- From April 26, 2015 onwards $3,080,376 of outstanding principal on these notes is set to mature during 2015.
- From now until May 10, 2016 $463,354 is outstanding on other Notes.
- From now until June 30, 2016 $191,054 is outstanding on other Notes.
- From now until December 24, 2016 $1,705,000 is outstanding on other Notes.
- From August 14, 2015 principal amortization of the Note is to begin with the first quarter following the second year of the Note at the rate of 7.5% of the original principal amount per quarter and to continue each quarter thereafter, with all unpaid interest to be due at maturity. So, on August 14, 2015 the second year begins, which means that from Q3 onwards 7.5% of the principal amount per Q will have to be paid. $7,475,388 - 7.5%/Q = $560,654.
- most of the revenue is postponed to 2016
- company needs more money
- MACT court case in June
- Convertible notes with current principal balances of approximately $3,100,000 and $800,000 mature in 2015 and 2016, respectively.
The Company currently operates in a single market of mercury reduction in flue gas emissions from large coal-fired utility and industrial boilers. This market is primarily based on air pollution control regulations and enforcement of those regulations. Any significant change in these regulations would have a dramatic effect on the Company. Specifically, on December 16, 2011, the EPA published the Mercury and Air Toxic Standard. The final rule has a three year compliance schedule for most power plants. Litigation is pending which could defer implementation of mercury reduction regulation for years or indefinitely. The U.S. Court of Appeals for the District of Columbia Circuit ruled to uphold MATS in April of 2014. On November 2014 the U.S. Supreme Court agreed to hear state and industry challenges against MATS. Oral argument is scheduled for March 2015 and a decision is expected in June 2015.
We are under-capitalized and may not be able to raise sufficient capital to ensure our continuation as an on-going company.
The Company has a significant amount of convertible debt maturing in 2015 and 2016. This debt may have conversion prices that are above the stock price on the maturity date. The Company may need to repay these notes and currently, existing cash is not available to meet these obligations.
No assurances can be given that the Company can obtain sufficient working capital through business or financing activities to meet its debt obligations. Due to certain covenants with our senior lender, we are not able to use current cash on hand to pay current convertible note holders when these notes mature. Therefore, success in raising funds through an equity offering and/or negotiations with our note holders is crucial.
From April 21, 2014 to May 8, 2014, the Company sold securities to unaffiliated accredited investors totaling $1,050,260. The securities consist of units, where each unit consists of: (i) one share of common stock of the Issuer, par value $0.001 per share, and (ii) a warrant to purchase one shares of common stock of the Issuer at an exercise price of $1.10 per share. The price of each unit was $1.10 and 954,782 units were sold.
Liquidity and Capital Resources
Our principal source of liquidity is cash generated from financing activities. As of December 31, 2014, our cash and cash equivalents totaled $7,212,000. In March 2015, pursuant to an amendment of its Financing Agreement with AC Midwest, LLC, the Company repaid $3,000,000 of outstanding principal. The high volume product supply revenue that we expected to begin in 2015, but has been delayed until 2016 as a result of one year MATS compliance waivers granted by their state EPA on seven units under contract. Our anticipated cash needs for working capital and capital expenditures for the next twelve months are approximately $4.0 million. We have primarily relied upon financing activities to fund our operations. Although we anticipate significant revenues for the sale of capital equipment and products to be used in testing and commissioning work done by clients, no assurances can be given that the Company can obtain sufficient working capital through financing activities to meet its debt obligations. Due to certain covenants with our senior lender, we are not able to use current cash on hand to pay current convertible note holders as these notes mature. Convertible notes with current principal balances of approximately $3,100,000 and $800,000 mature in 2015 and 2016, respectively. Therefor, success in our fund raising efforts and negotiations with our note holders is crucial. We are actively seeking sources of additional financing in order to fund our debt repayment obligations and if extensions cannot be negotiated with our early investors who purchased convertible debt from the Company. Due to these efforts, we could dilute current shareholders and the dilution could be significant. Our current cash flow needs for general overhead, sales and operations is approximately $300,000 per month with additional funds often needed for demonstrations of our technology on potential customer units. With our expected gross margins on customer contracts, we anticipate we will be at break-even on a cash flow basis when our product revenues reach approximately $16 million annually. This break-even target is subject to achieving sales at that level with our expected gross margins, no assurance can be made that we will be able to achieve this target.
Convertible Promissory Notes Payable (page 39 of the 10K):
Total convertible notes payable before discount: $16,080,295
Less discounts*: (8,275,321)
Total convertible notes payable: $7,804,974
Less current portion*: $3,080,376
Convertible notes payable, net of current portion: $4,724,598
*discounts = money received from exercising Warrants.
*current portion = down payment of $3 mil of the $10 mil Note (16 March 2015).
As of December 31, 2014, schedule principal payments due on convertible notes payable are as follows:
Years ended Dec 31:
2015: $3,080,376
2016: $2,331,915
2017: $2,401,241
2018: $8,266,763
Total: $16,080,295
- From April 26, 2015 onwards $3,080,376 of outstanding principal on these notes is set to mature during 2015.
- From now until May 10, 2016 $463,354 is outstanding on other Notes.
- From now until June 30, 2016 $191,054 is outstanding on other Notes.
- From now until December 24, 2016 $1,705,000 is outstanding on other Notes.
- From August 14, 2015 principal amortization of the Note is to begin with the first quarter following the second year of the Note at the rate of 7.5% of the original principal amount per quarter and to continue each quarter thereafter, with all unpaid interest to be due at maturity. So, on August 14, 2015 the second year begins, which means that from Q3 onwards 7.5% of the principal amount per Q will have to be paid. $7,475,388 - 7.5%/Q = $560,654.
