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Midwest Energy Emissions Corp. Reports Second Quarter 2017 Financial Results

Q2 2017 Revenues of $7.9 Million Drive Adjusted EBITDA of $1.3 Million

/EINPresswire.com/ -- LEWIS CENTER, OH--(Marketwired - August 21, 2017) - Midwest Energy Emissions Corp. (OTCQB: MEEC) ("ME2C" or the "Company"), a leader in mercury emissions control in North America, has provided its financial results for the second quarter ended June 30, 2017.

 
Second Quarter 2017 Results
    Q2 2017   Q2 2016   CHANGE (%)
Revenues   $7.9 million   $9.4 million   (16)%
Operating Income (Loss)   $0.6 million   $0.4 million   50%
GAAP Net Income (Loss)   $0.7 million   ($8.2) million   N/A%
Adjusted EBITDA (non-GAAP)1   $1.3 million   $1.1 million   18%
Shares Outstanding (F/D)   94.9 million   108.5 million   (13)%
  1. We define Adjusted EBITDA (a non-GAAP financial measure) as net income adjusted for interest and financing fees, income taxes, depreciation, amortization, stock based compensation and other non-cash income and expenses. Please see "Use of Non-GAAP Financial Measures" below.

Management Commentary
"We're pleased to see our product sales-the recurring revenue component in our model-increase in the second quarter of 2017, despite lower overall revenue due to a $2.4 million one-time equipment installation in the second quarter of 2016," said Richard MacPherson, President and CEO of ME2C. "Most importantly, we increased profitability and ended the quarter with net income, while continuing to drive our business forward with a number of key initiatives.

"As previously noted, we've also continued to experience a slower than expected closing rate of new, long term contracts as a result of our competitors lowering their overall cost of product, which has created a more competitive landscape and hesitations in disrupting long term legacy contracts already in place. We've also optimized our clients' fleets beyond what was expected to get into compliance in many cases, and therefore, are experiencing decreased sales due to our technology's success. Due to these factors, we now expect revenues for the full year 2017 of at least $26.0 million. That being said, we continue to adapt as a young technology driven company and strongly believe that these temporary challenges are not reflective of our continued bullish outlook to the future.

MacPherson, continued: "We've continued to work with our robust sales pipeline, which includes dozens of EGUs across the U.S. and Canada that continues to grow. To that end, we recently secured a contract renewal with one of our largest customers that is expected to generate at least $25 million over the three year term. Also, in April we secured a contract renewal with another existing client, valued at over $5.0 million over the next two years. These new contracts serve as a strong testament to our success in helping customers overcome challenging mercury control conditions, while creating operational and economic efficiencies at the plant level. As we move throughout the remainder of the year, we look forward to securing additional contracts with our current clients, as well as potential customers in our pipeline throughout the U.S. and internationally."

"In April, we acquired patents from the Energy & Environmental Research Center Foundation that cover our proprietary two part process for mercury control. On that note, we remain focused on leveraging our IP portfolio and converting opportunities into long-term, recurring revenue contracts, while reducing unnecessary costs and maintaining a profitable business. This acquisition of our patents is also noteworthy given we no longer need to pay a royalty, and when combined with several reductions of unnecessary costs, should help improve profitability and drive shareholder value over the long term."

Corporate Update
On August 21, 2017, the Company announced a contract renewal with one of its largest customers to continue providing ME2C's proprietary Sorbent Enhancement Additive (SEA™) Technology. This contract is expected to generate in excess of $25.0 million in revenue over the three year term in product sales and consulting services.

In April 2017, ME2C secured a contract renewal valued at over $5.0 million in the aggregate over the next two years from a current utility customer in the Midwest region of the United States. The customer has been utilizing ME2C's proprietary Sorbent Enhancement Additive (SEA™) Technology since 2015 to achieve and remain in full compliance with Mercury and Air Toxic Standards (MATS).

In April 2017, the Company acquired in entirety all of the patents related to mercury control from the Energy & Environmental Research Center Foundation (EERCF), located in Grand Forks, North Dakota for $2.5 million and 925,000 shares of common stock. The technology was originally developed at the University of North Dakota Energy & Environmental Research Center. The Company has identified in excess of 150 EGU's throughout North America that are currently utilizing a two-part process for mercury control.

Earlier in 2017, the Company introduced a new product focused on preventing scrubber reemission events in coal-fired power utilities with wet scrubbers. This product continued to be tested at several large coal-burning power facilities, and has consistently proven to reduce mercury reemission from wet flue gas desulfurization systems, achieving greater than 95% mercury control, resulting in stack mercury emissions well below MATS compliance limits. ME2C is moving forward aggressively with this product, as there are over 150 opportunities across the nation being targeted.

ME2C currently has dozens of potential customer EGU's under consideration in varying stages of testing, demonstration and contract negotiation. These opportunities exist not only in the U.S. and Canada, but other international locations that the company is actively pursuing.

Second Quarter 2017 Financial Results
Total revenues in the second quarter of 2017 were $7.9 million compared to $9.4 million in the second quarter of 2016. This decrease is primarily due to a $2.4 million one-time equipment installation that occurred in the second quarter of 2016 that did not re-occur in the second quarter of 2017. Product sales increased 4% to $7.1 million in the second quarter of 2017, compared to $6.9 million in the second quarter of 2016.

Operating income in the second quarter of 2017 was $0.6 million, compared to an operating income of $0.4 million in the second quarter of 2016. This increase was primarily due to the increase in product sales over the same quarter last year.

Net income in the second quarter of 2017 was $671,000, or $0.01 per diluted share, compared to a net loss of $8.2 million, or ($0.17) per diluted share, in the second quarter of 2016. The improved net income for the second quarter of 2017 was primarily due to the increase in operating income as a result of the increased product sales, as well as a gain on the change in value of the Company's warrant liability.

Adjusted EBITDA in the second quarter of 2017 was $1.3 million, compared to $1.1 million in the same year-ago quarter. This improvement was primarily due to the increase in operating income as a result of the increased product sales.

On June 30, 2017, the Company had cash and cash equivalents of $1.7 million, compared to $4.4 million on March 31, 2017.

Full Year 2017 Revenue Guidance
For the full year ending December 31, 2017, the Company has adjusted guidance and now expects revenues of at least $26.0 million, compared to revenue of $32.3 million for the full year ended December 31, 2016. This guidance is based on a slower than expected closing of new business, current power demand forecasts and plant projections from secured contracts.

Conference Call and Webcast
Management will host a conference call today, August 21, 2017 at 4:00 p.m. Eastern time to discuss ME2C's second quarter 2017 results, provide a corporate update, and conclude with a Q&A from participants. To participate, please use the following information:

Date: Monday, August 21, 2017
Time: 4:00 p.m. Eastern time
U.S. Dial-in: 1-888-352-6793
International Dial-in: 1-719-325-4870
Conference ID: 3532999
Webcast: http://public.viavid.com/index.php?id=125759

Please dial in at least 10 minutes before the start of the call to ensure timely participation.
A playback of the call will be available through September 21, 2017. To listen, call 1-844-512-2921 within the United States or 1-412-317-6671 when calling internationally. Please use the replay pin number 3532999.

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 remove roughly 90% of mercury from their emissions starting April 15, 2015. 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.

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. Forward-looking statements are generally identified by using words such as "anticipate," "believe," "plan," "expect," "intend," "will," and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. 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, change in environmental regulations, disruption in supply of materials, capacity factor fluctuations of power plant operations and power demands, 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, availability of capital 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.

Use of Non-GAAP Financial Measures
To supplement our consolidated financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we consider and are including herein 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 interest and financing fees, 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 because it allows management, investors, debtholders and others to evaluate and compare ongoing operating results from period to period by removing the impact of our asset base, any asset disposals or impairments, stock based compensation and other non-cash income and expense items associated with our reliance on issuing equity-linked debt securities to fund our working capital.

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.

We prepare and publicly release quarterly unaudited financial statements prepared in accordance with GAAP. The following table shows our reconciliation of Net Income to Adjusted EBITDA for the quarters and six months ended June 30, 2017 and 2016, respectively:

             
    Quarter Ended June 30,     Six Months Ended June 30,  
    2017     2016     2017     2016  
    (In thousands)     (In thousands)  
                         
Net income (loss)   $ 671     $ (8,243 )   $ (774 )   $ (7,335 )
                                 
Non-GAAP adjustments:                                
  Depreciation and amortization     322       229       624       393  
  Interest and letter of credit fees     606       1,094       1,206       3,309  
  Income taxes     6       3       6       4  
  Stock based compensation     282       404       1,237       583  
  Change in warrant liability     (655 )     7,566       (863 )     4,257  
  Settlement charges     61       -       -       -  
  Debt conversion costs     -       -       -       -  
                                 
Adjusted EBITDA   $ 1,293     $ 1,053     $ 1,436     $ 1,211  
                                 

We are including below our unaudited reconciliation of Net Income to Adjusted EBITDA on a quarterly basis for the quarters ended June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016:

       
    Quarter Ended (Unaudited)  
    6/30/2017     3/31/2017     12/31/2016     9/30/2016  
    (In thousands)  
                         
Net income (loss)   $ 671     $ (1,445 )   $ (246 )   $ (9,302 )
                                 
Non-GAAP adjustments:                                
  Depreciation and amortization     322       302       271       249  
  Interest and letter of credit fees     606       600       896       1,034  
  Income taxes     6       -       (497 )     20  
  Stock based compensation     282       955       191       385  
  Change in warrant liability     (655 )     (208 )     439       9,985  
  Gain on debt restructing     -       -       (407 )        
  Settlement charges     61       -       -       -  
                                 
Adjusted EBITDA   $ 1,293     $ 204     $ 647     $ 2,371  
                                 
   
MIDWEST ENERGY EMISSIONS CORP AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
JUNE 30, 2017 AND DECEMBER 31, 2016  
(UNAUDITED)  
             
             
    June 30, 2017
(Unaudited)
    December 31,
2016
 
ASSETS                
Current assets                
  Cash and cash equivalents   $ 1,690,701     $ 7,751,557  
  Accounts receivable     4,208,414       3,553,096  
  Inventory     909,057       609,072  
  Prepaid expenses and other assets     196,158       199,495  
Total current assets     7,004,330       12,113,220  
                 
Property and equipment, net     2,890,270       2,569,354  
Deferred tax asset     500,000       500,000  
Patents, net     3,034,472       -  
Patent rights, net     -       52,945  
Customer acquisition costs, net     421,389       642,203  
Total assets   $ 13,850,461     $ 15,877,722  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
                 
Current liabilities                
  Accounts payable and accrued expenses   $ 2,174,868     $ 4,363,553  
  Current portion of notes payable     2,250,000       1,500,000  
  Current portion of equipment notes payable     59,132       39,499  
  Customer credits     551,750       590,206  
Total current liabilities     5,035,750       6,493,258  
                 
Notes payable, net of discount and issuance costs     10,739,222       11,678,669  
Convertible notes payable, net of discount and issuance costs     1,253,300       1,142,154  
Warrant liability     219,000       1,313,000  
Accrued interest     77,500       78,750  
Equipment notes payable     198,268       143,135  
Total liabilities     17,523,040       20,848,966  
                 
Stockholders' deficit                
  Preferred stock, $.001 par value: 2,000,000 shares authorized     -       -  
  Common stock; $.001 par value; 150,000,000 shares authorized; 75,246,113 shares issued and outstanding as of June 30, 2017; 73,509,663 shares issued and outstanding as of December 31, 2016     75,246       73,510  
  Additional paid-in capital     51,909,207       49,838,469  
  Accumulated deficit     (55,657,032 )     (54,883,223 )
                 
Total stockholders' deficit     (3,672,579 )     (4,971,244 )
                 
Total liabilities and stockholders' deficit   $ 13,850,461     $ 15,877,722  
                 
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 AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016  
(UNAUDITED)  
                         
                         
    For the Three
Months Ended
June 30, 2017
    For the Three
Months Ended
June 30, 2016
    For the six
Months Ended
June 30, 2017
    For the Six
Months Ended
June 30, 2016
 
                                 
Revenues                                
  Product sales     7,112,722       6,872,168       12,396,956       9,709,797  
  Equipment sales     776,946       2,391,485       784,106       2,555,885  
  Demonstrations and consulting services     41,500       128,556       177,500       499,838  
                                 
  Total revenues:     7,931,168       9,392,209       13,358,562       12,765,520  
                                 
Costs and expenses:                                
  Cost of sales     4,995,776       7,304,197       8,781,697       9,791,816  
  Selling, general and administrative expenses     2,313,357       1,671,210       5,007,641       2,842,196  
                                 
  Total costs and expenses     7,309,133       8,975,407       13,789,338       12,634,012  
                                   
  Operating income (loss)     622,035       416,802       (430,776 )     131,508  
                                 
Other (expense) income                                
  Interest expense     (544,918 )     (1,032,949 )     (1,085,393 )     (3,106,093 )
  Letter of credit fees     (60,667 )     (60,666 )     (120,667 )     (103,333 )
  Change in value of warrant liability     655,023       (7,566,000 )     863,023       (4,256,600 )
                                   
  Total other (expense) income     49,438       (8,659,615 )     (343,037 )     (7,466,026 )
                                 
Net income (loss)   $ 671,473     $ (8,242,813 )   $ (773,813 )   $ (7,334,518 )
                                 
                                 
Net income (loss) per common share - basic and diluted:   $ 0.01     $ (0.17 )   $ (0.01 )   $ (0.15 )
                                 
Weighted average common shares outstanding     74,493,909       47,358,618       74,051,228       47,358,618  
                                 
The accompanying notes are an integral part of these condensed consolidated financial statements.  
   

Company Contact:
Richard MacPherson
Chief Executive Officer
Midwest Energy Emissions Corp.
Main: 614-505-6115
rmacpherson@midwestemissions.com

Investor Relations Contact:
Greg Falesnik
Managing Director
MZ Group - MZ North America
Main: 949-385-6449
greg.falesnik@mzgroup.us
www.mzgroup.us

Distribution channels: Energy, Environment, Mining