MYCELX TECHNOLOGIES CORPORATION (AIM: MYX)
2014 Preliminary Results
MYCELX Technologies Corporation (the “Company”), the clean water technology and engineering
company providing patented solutions to the Oil and Gas industry and other commercial industrial
markets worldwide, announces its preliminary unaudited results for the year ended 31 December 2014.
Financial
Gross profit margin remained strong at 52.3% (2013: 56.9%)
Revenue of $13.6 million (2013: $21.4 million)
Adjusted EBITDA of negative $4.1 million (2013: $2.3 million)
Cash flows used in operations decreased 64% to $1.2 million (2013: $3.3 million)
Equity capital raise of $12.4 million
Net cash at year end of $8.4 million
Lines of credit extended from $5.0 million to $10.5 million
Operational
Successful high profile enhanced oil recovery (EOR) trials in the Middle East and India building on
successful trials in North America and Europe
Opened an additional warehouse location in Houston to stage equipment for the Gulf of Mexico,
onshore produced water projects and South America
Opened an additional location in the Jebel Ali Free Zone in Dubai to move equipment cost effectively
around the region
Investment of $4.1 million in equipment available for fast-to-market lease program, with units now
in strategically positioned regions
New Contracts
Qatar: Turnaround project contract with integrated petrochemical plant for Q1 2015
Saudi Arabia: Sale of process water treatment system for integrated petrochemical plant installed in
Q1 2015
Gulf of Mexico: Fourth sale of produced water treatment system to global integrated oil company
installed in Q3 2014
India: Third sale to Oil and Natural Gas Corporation of India (ONGC) for process water reuse
Kuwait: Two short term contracts with petrochemical plant to treat process water completed in
2014
Contract Extensions
Saudi Arabia: Three lease and service contract extensions with SABIC for process water treatment
systems
Post period end events
Qatar: Successfully completed turnaround project with integrated petrochemical plant
Saudi Arabia: Signed contract and successfully completed turnaround project for existing customer
Gulf of Mexico: New contract for produced water treatment with independent oil and gas producer
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Americas: Signed Master Purchase Agreement with global oil field services company
Canada: Successful pilot trial with major independent oil and gas producer
India: Successful pilot with major independent oil and gas producer
Outlook
2015 is off to a good start
Operational challenges at a key customer’s plant have been addressed and the water treatment
process has returned to normal operations
Expense reduction implemented resulting in 10% cost savings for 2015
Growing industry adoption of the Company’s technology, however oil price volatility and market
dislocation will likely affect timing of project awards
Commenting on these results, Connie Mixon, CEO, said:
“The Company faced several challenges in 2014 that adversely affected revenues due to unexpected
operational interruptions at major customer facilities and the deferral of several projects.
However, the Company moved forward on several fronts, importantly a successful capital raise was
completed, which will enable the Company to prudently deploy working capital to support targeted
opportunities and continue forward in a measured way with its business strategy and plans.
In reference to the three major projects the Company expected to execute in 2014, the smaller of the three
projects was successfully completed in Q1 2015 meeting revenue expectations. The Company is still in
discussions related to the other two projects and they remain active prospects in our advanced pipeline.
Against the backdrop of oil price volatility in 2015, forecasting timing of contract awards and revenue
recognition will remain difficult. The Company remains focused on its core commercial regions where
effective water treatment is critical to customers’ ongoing operations, uptake of the fast-to-market lease
program is progressing, and niche applications in the U.S that offer better performance and lower cost-to-
treat for producers seeking to control costs.
Overall, the Company continues to see growing industry adoption of its technology and wherever oil and
gas production and petrochemical processing occurs, water is present and must be effectively treated. This
is what the Company does best and where we will continue to move forward.”
For further information please contact:
MYCELX Technologies Corporation
Connie Mixon, CEO
Mark Clark, CFO
Tel: 1 888 306 6843
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Numis Securities Limited
Corporate Finance
John Prior
Paul Gillam
Corporate Broking
James Black
Ben Stoop
Bell Pottinger
Nick Lambert
Henry Lerwill
Tel: 44 20 7260 1000
Tel: 44 20 3772 2500
Chairman’s and Chief Executive Officer’s Statement
Introduction
In 2014, the Company’s expected revenues were adversely impacted by unforeseen operational
interruptions at one of its major customers and an annual turnaround project that was moved to Q1 2015.
Projects in which the Company expected to receive notification or begin execution in Q3 and Q4 were
delayed past year end but remain active prospects. Collectively, these events resulted in a significant
revenue shortfall in 2014.
The Company moved forward on several fronts, importantly a successful capital raise was completed,
which will enable the Company to prudently deploy working capital to support targeted opportunities and
continue forward in a measured way with its business strategy and plans. Key to the Company’s plans is
the deployment of the fast-to-market equipment the Company funded in 2014 which has now been
positioned strategically in regions where the Company is currently active with client references. Also
important to the Company’s progress are the successful trials in which the Company engaged during the
year providing further confirmation of the superior performance of the MYCELX® systems versus
alternative systems.
Overall, the Company continues to see growing industry adoption of its technology, but accurate
forecasting of large project award timing and hence revenue recognition remains difficult, whilst oil price
volatility and ensuing uncertainty affects the industry. Nonetheless, wherever oil and gas production and
petrochemical processing occurs, water is present and must be effectively treated for sustainable
operation. This is what the Company does best and where we will continue to move forward with the
entire team’s focus.
Operational Review
MIDDLE EAST
In the Middle East, the Company received two contract extensions from its largest customer for
equipment leases currently in downstream services and a third system, which was installed at another
plant in late 2013, became operational. In addition, a contract was won with a new petrochemical plant
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in Saudi Arabia and a successful installation completed in Q1 2015, the Company’s fifth process water
treatment system in the Jubail Industrial City I complex.
The Company secured a new lease from a state owned petrochemical company which was followed by an
additional lease later in the year. While the lease was successful and within revenue expectations, the
lease later in 2014 was performed on a shortened timeframe and did not produce the revenue the
Company expected. The Company secured two additional turnaround projects, one post period, which
have been successfully completed in Q1 2015 and are within our revenue expectations.
During the year, the Company completed a trial in the Middle East for EOR produced water building on
other successful EOR installations for customers operating in North America and Europe. The capability
and commercial opportunity in treating water associated with EOR operations cannot be overstated. For
producers around the world, EOR is one of the predominant processes for high level extraction in older
fields which have substantial amounts of oil remaining in the ground. We expect to build on these
successes with further opportunities and sales in this lucrative application.
INDIA
The Company received its third contract from ONGC for a system to treat process water to stringent
discharge requirements. The Company also began a trial with a major independent oil company treating
produced water during EOR operations.
AMERICAS
Leveraging the Company’s successes in water reuse applications globally, the Company deployed
resources to actively pursue niche applications in the onshore produced water market in the US. These
projects are a faster path to recurring media sales and complement large project timelines. Post-period,
the Company signed a Master Purchase Agreement with a global oil field services company to pursue
projects where the strengths of both companies result in lower cost-to-treat advantages. In the lower oil
price environment, producers are actively pursuing operating cost reductions. The joint offering plays well
into the new paradigm.
A general manager with extensive water management experience joined to lead the Americas team in
Houston. Warehouse space was added to accommodate lease equipment staging for the onshore and
offshore initiative in the Americas.
Financial Review
Due to customer operational interruptions and project delays, total revenue decreased by 36.4% to $13.6
million for 2014, compared to $21.4 million for 2013. Revenues from equipment sales and leases
decreased by 35.0% to $5.0 million for 2014 (2013: $7.7 million). Recurring revenues from consumable
filtration media and service decreased by 37.2% to $8.6 million (2013: $13.7 million) due to operational
disruptions at one large customer and a decrease in fourth quarter media sales to legacy customers. Gross
profit margin decreased slightly in 2014 to 52.3% (2013: 56.9%) due to a lower margin on a short term
turnaround project late in the year.
Total operating expenses for 2014 were $12.4 million (2013: $10.7 million). The largest component of
operating expenses was selling, general and administrative (SG&A) expenses. The Company’s continued
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commitment to invest in warehousing infrastructure in Houston and Dubai and equipment related to the
leasing business resulted in an increase in SG&A expenses. Included was an increase in equipment and
facility maintenance and shipping of $693,000 as well as an increase in rent, utilities and supplies of
$316,000. Also included in SG&A was an increase in travel expenses of $229,000, an increase in insurance
and consulting fees of $192,000 and bank fees of $86,000 incurred as a result of the expanded lines of
credit.
The Company recorded a loss before tax of $5.5 million in 2014, compared to income before tax of $1.3
million in 2013. Basic loss per share was 44 cents, compared to basic earnings per share of four cents for
the previous year.
The Company raised $12.4 million in new equity capital from investors in the UK and the US during Q4.
The funds will be used for investment in working capital and future expansion when the Company’s core
market improves or in support of signed contracts.
The Company ended the period with $11.8 million of cash and cash equivalents including restricted
cash, compared to $4.2 million in total at 31 December 2013. Cash used in operations decreased 64% to
$1.2 million, compared to $3.3 million used in 2013. The Company’s primary use of cash in 2014 was
related to continued investment in the fast-to-market lease fleet. The $5 million line of credit
established in 2013 was increased to $10 million in early 2014 and $2.9 million had been drawn on the
line as of 31 December 2014. The Company also obtained a $500,000 line of credit with the holder of
the note secured by property and a building. At 31 December 2014, the full $500,000 had been drawn
from this facility resulting in net cash for the Company of $8.4 million at year end.
Outlook
The Board of Directors and the Company are very cognizant of the challenges the Company faces in 2015
and beyond. We believe long term success and building a global brand is achieved by engaging in large
scale projects as well as smaller scale, fast-to-market opportunities that are additive to cash flow and
bridge longer lead-time projects. Turnaround projects that have approved budgets and US onshore
applications that provide diversification and alliances through master purchase agreements are examples
of the type of projects we will target in 2015.
The current year has started out well and the Company is pleased to report that the operational challenges
at one of its key customer’s plant have been addressed and the water treatment process has returned to
normal operations. The pipeline for capital equipment sales remains strong but customers are slow to
commit due to oil price volatility. As a result, predicting the timing of capital sales and revenue recognition
continues to be difficult. Utilising the equipment from previous leases, the Company is well positioned for
turnaround projects which are short term, maintenance-driven and provide opportunity for quick media
usage and lease revenue streams. They are best addressed with modular, readily available equipment.
The successful 2015 turnaround projects are an example of the Company’s ability to deploy quickly and
be responsive to customer needs. The Company is ideally suited for these projects because of the flexible
and effective way in which the Company’s media is deployed as well as the small footprint and ease of
operation.
The Company has already taken the necessary actions to reduce operating expenses by 10% for 2015. The
plan is constantly monitored to ensure specific measures are taken in the event of a revenue shortfall or
contract delay during the year. In considering what areas expense reduction would be achieved,
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engineering and business development will remain protected from further reduction of expense. The
Company will be prudent stewards of its cash and any additional equipment purchased will be supported
by a contract.
At its core, the Company is a technology company. As such, the Company will continue to innovate and
commercialize next generation technology to achieve treatment results not currently found in the market
today. The oil and gas and petrochemical industries continue to integrate MYCELX® technology into their
critical, real-time processes which confirms its adoption to achieve sustainable water treatment for years
to come. The Board of Directors and Company management are committed to ensuring MYCELX®
technology reaches its full potential as the global industry standard.
Tim Eggar
Chairman
20 March 2015
Connie Mixon
Chief Executive Officer
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MYCELX TECHNOLOGIES CORPORATION
Statements of Operations
(USD, in thousands, except share data)
For the Year Ended 31 December
Revenue
Cost of goods sold
Gross profit
Operating expenses:
Research and development
Selling, general and administrative
Depreciation and amortisation
2014
(unaudited)
2013
(audited)
$ 13,581
6,482
7,099
$ 21,379
9,205
12,174
443
11,473
519
479
9,864
340
Total operating expenses
12,435
10,683
Operating (loss) income
(5,336)
1,491
Other expense
Loss on disposal of equipment
Interest expense
(Loss) income before income taxes
Provision for income taxes
(2)
(209)
(5,547)
(373)
(90)
(87)
1,314
(749)
Net (loss) income
$ (5,920)
$ 565
(Loss) earnings per share-basic
$ (0.44)
$ 0.04
(Loss) earnings per share-diluted
$ (0.44)
$ 0.04
Shares used to compute basic (loss) income per share
13,574,809
13,097,911
Shares used to compute diluted (loss) income per share
13,574,809
14,316,603
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MYCELX TECHNOLOGIES CORPORATION
Balance Sheets
(USD, in thousands, except share data)
31 December:
ASSETS
Current Assets
Cash and cash equivalents
Restricted cash
Accounts receivable - net
Unbilled accounts receivable
Inventory - net
Prepaid expenses
Deferred tax asset
Other assets
Total Current Assets
Property and equipment - net
Intangible assets - net
2014
(unaudited)
2013
(audited)
$ 11,289
500
2,610
91
4,980
528
50
140
20,188
$ 3,664
500
7,431
1,430
3,142
218
36
94
16,515
12,386
756
10,542
574
Total Assets
$ 33,330
$ 27,631
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable
Payroll and accrued expenses
Deferred revenue
Capital lease obligations - current
Lines of credit
Note payable - current
Warrant liability
Other current liabilities
$ 1,201
873
282
5
3,427
78
63
234
$ 1,680
1,356
15
4
2,820
74
383
46
Total Current Liabilities
6,163
6,378
Note payable – long term
Capital lease obligations – long-term
Deferred tax liability – long-term
2,088
5
50
2,165
4
36
Total Liabilities
8,306
8,583
8
Stockholders' Equity
Common stock, $0.025 par value, 100,000,000
shares authorised, 18,552,803 and 13,257,734
shares issued and outstanding at 31 December
2014 and 2013, respectively
Additional paid-in capital
Accumulated deficit
Stock subscription receivable
464
332
39,820
(15,025)
(235)
27,821
(9,105)
-
Total Stockholders' Equity
25,024
19,048
Total Liabilities and Stockholders' Equity
$ 33,330
$ 27,631
MYCELX TECHNOLOGIES CORPORATION
Statements of Stockholders' Equity
(USD, in thousands)
Additional
Stock
Common Stock
Shares
$
Paid-in
Capital
$
Accumulated
Subscription
Deficit
$
Receivable
$
Total
$
Balances at 31 December 2012 (audited)
12,923
324
25,799
(9,670)
Exercise of stock options and issuance of shares
Exercise of stock warrants and issuance of shares
Stock-based compensation expense
Net income for the period
Balances at 31 December 2013 (audited)
Issuance of common stock, net of offering costs
Stock-based compensation expense
Net loss for the period
171
164
-
-
13,258
5,295
-
-
4
4
-
-
332
132
-
-
606
369
1,047
-
27,821
11,654
345
-
-
-
-
565
(9,105)
-
-
(5,920)
-
-
-
-
-
16,453
610
373
1,047
565
-
19,048
(235)
11,551
-
-
345
(5,920)
Balances at 31 December 2014 (unaudited)
18,553
464
39,820
(15,025)
(235)
25,024
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MYCELX TECHNOLOGIES CORPORATION
Statements of Cash Flows
(USD, in thousands)
For the Year Ended 31 December:
Cash flow from operating activities
Net (loss) income
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Depreciation and amortisation
Loss from disposition of equipment
Stock compensation
Non-cash change in warrant liability
Change in operating assets and liabilities:
Accounts receivable
Unbilled accounts receivable
Inventory - net
Prepaid expenses
Other assets
Accounts payable
Payroll and accrued expenses
Deferred revenue
Other current liabilities
Net cash used in operating activities
Cash flow from investing activities
Payments for purchases of property and equipment
Proceeds from sale of property and equipment
Payments for purchases of intangible assets
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from stock issuance
Payments on capital lease obligations
Payments on notes payable
Advances from notes payable
Increase in restricted cash
Payments on lines of credit
Advances on lines of credit
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
2014
(unaudited)
2013
(audited)
(5,920)
565
1,222
2
345
(320)
4,821
1,339
(1,838)
(310)
(46)
(479)
(483)
267
188
(1,212)
(3,024)
-
(219)
(3,243)
11,551
(5)
(73)
-
-
(1,593)
2,200
12,080
7,625
3,664
11,289
857
90
1,047
383
(5,254)
(981)
(178)
77
35
(121)
521
(300)
(17)
(3,276)
(7,629)
19
(139)
(7,749)
983
(12)
(47)
2,286
(400)
-
2,820
5,630
(5,395)
9,059
3,664
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Supplemental disclosures of cash flow information:
Cash payments for interest
Cash payments for income taxes
Property and equipment remaining in accounts payable and other current liabilities
Purchase of property and equipment under capital leases
191
445
28
7
87
638
137
6
Management considered the effect of exchange rate changes on cash and cash equivalents held or due
in foreign currency and deemed it immaterial to the statement of cash flows.
NOTES TO THE FINANCIAL STATEMENTS
Note 1 - Annual Report
The financial information set out in this document does not constitute the Company’s statutory accounts
for 2013 or 2014. This information has been prepared using recognition and measurement principles of
Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). The financial
information as of and for the year ended 31 December 2013 is audited and the auditor’s report is
unqualified.
The results for 2014 are unaudited. Statutory accounts for the year ended 31 December 2014 will be
finalized based on the financial information in this announcement and the Company does not believe
there will be any material differences between statutory accounts and the financial information in this
announcement.
Forward Looking Statements
This release contains certain statements that are or may be "forward-looking statements". These
statements typically contain words such as "intends", "expects", "anticipates", "estimates" and words of
similar import. All the statements other than statements of historical facts included in this announcement,
including, without limitation, those regarding the Company's financial position, business strategy, plans
and objectives of management for future operations (including development plans and objectives relating
to the Company’s products and services) are forward-looking statements. By their nature, forward-looking
statements involve risk and uncertainty because they relate to events and depend on circumstances that
will occur in the future and therefore undue reliance should not be placed on such forward-looking
statements. There are a number of factors that could cause the actual results, performance or
achievements of the Company to be materially different from future results, performance or
achievements expressed or
implied by such forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding the Company’s present and future business
strategies and the environment in which the Company will operate in the future and such assumptions
may or may not prove to be correct. Forward-looking statements speak only as at the date they are made.
Neither the Company nor any other person undertakes any obligation (other than, in the case of the
Company, pursuant to the AIM Rules for Companies) to update publicly any of the information contained
in this announcement, including any forward-looking statements, in the light of new information, change
in circumstances or future events.
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