Pineapple Energy Inc. (“Pineapple” or the “Company”), a leading
provider of sustainable solar energy and back-up power to
households and small businesses, today reported financial results
for the quarter ended March 31, 2022. Dollar amounts in this
release have been rounded to the nearest thousands.
“We are thrilled to report to shareholders for the first time as
a publicly traded company,” said Kyle Udseth, Pineapple Energy’s
Chief Executive Officer. “We completed the merger with
Communications Systems, Inc. (“CSI”) near the end of Q1, launching
as an operating public company poised to execute our strategy. As
we drive toward continued growth and operational improvements in
the Hawaii Energy Connection (“HEC”) and E-Gear businesses and
build our Pineapple and Sungevity brands, we are hard at work
evaluating additional acquisition opportunities.”
Udseth continued, “We believe the U.S. is in the early innings
of the energy transition, and our launch as a public company
positions Pineapple to pursue significant opportunities in
residential solar, battery storage, electric vehicle charging, and
consumer energy services broadly. The total addressable market is
substantial, and residential solar is still in low single digits
penetration rates in most geographies. We expect demand for solar
to rise, as retail power prices are driven higher by inflating fuel
prices, volatility from adverse weather, and the ever-greater
capital investment required to maintain the current grid.”
Pineapple Chief Financial Officer Mark Fandrich added, “While
GAAP results are not meaningful due to closing the merger
transaction, as well as the acquisition of HEC and E-Gear, three
days before the end of the quarter, a pro forma comparison shows
solid momentum in our current business. Overall pro forma revenue,
which includes legacy CSI, HEC and E-Gear activity, grew 24%. More
importantly, solar-specific pro-forma revenue in Hawaii grew 39%,
reinforcing our confidence in the growth opportunity there.”
Udseth concluded, “Oahu’s expanded Battery Bonus Program is
emerging as a demand driver on the island. HEC deployed 1.3
megawatt-hours of battery storage in the quarter, with a high
proportion falling under the Battery Bonus Program. The program is
driving substantial gains in top-of-funnel leads, with web traffic
up 26% sequentially and 85% of those users being first-time
visitors. Additionally, as of March 31, 2022, Pineapple had $9.7
million of cash and cash equivalents, including restricted cash,
and working capital of $11.5 million, which included $4.9 million
of legacy CSI working capital. We expect that this gives us a long
runway and means capital raises or other financings will be for the
purpose of additional acquisitions, and not driven by a need to
raise operating funds over the next twelve months.”
First Quarter 2022 GAAP Results
Because Pineapple Energy LLC is the “accounting acquirer” in its
merger with Communications Systems, Inc., the financial statements
reflect the historical operating results of Pineapple Energy LLC
prior to the merger and the consolidated results of Pineapple
Energy LLC, Communications Systems Inc., Hawaii Energy Connection
LLC, and E-Gear LLC following the closing date of the merger on
March 28, 2022.
Below, all figures are for the first quarter of 2022 unless
noted otherwise. All comparisons are with the first quarter of 2021
unless noted otherwise. Note that there was neither revenue nor
gross profit in the first quarter of 2021.
Sales were $319,000, consisting of $232,000 from the Solar
segment, primarily from residential solar sales by HEC and E-Gear,
and $87,000 from the IT Solutions & Services segment, which is
expected to be sold as provided under the terms of the merger
agreement.
Gross profit of $95,000 consisted of $66,000 generated from the
Solar segment and $29,000 from the IT Solutions & Services
segment.
Operating expenses of $1,623,000 included selling, general and
administrative expenses, amortization expense and transaction
costs. Operating expenses increased 114.4% primarily due to an
increase of $800,000 of transaction costs related to the CSI merger
and HEC/E-Gear asset acquisition. In addition, $78,000 of selling,
general, and administrative costs were attributable to the acquired
businesses.
Operating loss of $1,528,000 was greater than the operating loss
of $757,000 in the first quarter of 2021.
Net loss of $1,884,000 or $(0.58) per diluted share was greater
than the net loss of $1,068,000 or $(0.35) per diluted share in the
first quarter of 2021.
Pineapple’s balance sheet as of March 31, 2022, reflects the
financial position of the post-merger combined companies. Cash,
cash equivalents, and restricted cash was $9.7 million and working
capital was $11.5 million, which included $4.9 million of legacy
CSI working capital.
First Quarter 2022 Pro Forma Results
To facilitate analysis of the Company’s operating business,
below is an unaudited pro forma presentation of results as if the
Company had completed the CSI merger and the HEC/E-Gear asset
acquisition as of January 1, 2021.
|
Three Months Ended March 31 |
|
|
2022 |
|
|
|
2021 |
|
Net
revenue |
$ |
5,525,000 |
|
|
$ |
4,463,000 |
|
Net loss |
|
(2,556,000 |
) |
|
|
(3,164,000 |
) |
EBITDA* |
|
(1,146,000 |
) |
|
|
(1,713,000 |
) |
*EBITDA is a non-GAAP financial measure. See “Non-GAAP Financial
Measures” and the reconciliations in this release for further
information.
The unaudited pro forma financial information above is not
necessarily indicative of consolidated results of operations of the
combined business had the acquisition occurred at the beginning of
the respective period, nor is it necessarily indicative of future
results of operations of the combined company. The above unaudited
pro forma results are not adjusted for the level of corporate
overhead costs needed to support the go-forward strategy and
instead include a higher cost structure based on operating legacy
businesses and the structure in place while carrying out plans to
complete the CSI merger transaction. The unaudited pro forma
financial information above includes adjustments to add
amortization expense for intangible assets totaling $531,000 and
$537,000 and excludes transaction costs totaling $2,699,000 and
$1,041,000 for the three months ended March 31, 2022 and 2021,
respectively. Additionally, the HEC business is seasonal with Q3
and Q4 historically being the strongest quarters.
Status of Contingent Value Rights
The balance sheet at March 31, 2022 includes a CVR liability of
$18.3 million (approximately $7.50 per share for CSI legacy
shareholders) derived from a valuation analysis of the expected
market value of the legacy IT Services & Support segment, the
expected value for the sale of the corporate headquarters, which is
currently under contract to sell, and legacy CSI restricted cash.
This is an estimate only and the actual CVR liability will change
based on market factors and an updated valuation analysis each
quarter. If the headquarters building sale closes in June, an
initial CVR distribution, net of required reserves under the CSI
merger agreement, could happen as early as July 30, 2022.
About Pineapple Energy
Pineapple is focused on growing leading local and regional
solar, storage, and energy services companies nationwide. Our
vision is to power the energy transition through grass-roots growth
of solar electricity paired with battery storage. Our portfolio of
brands (Hawaii Energy Connection, E-Gear, Sungevity, and Horizon
Solar Power) provide homeowners and small businesses with an
end-to-end product offering spanning solar, battery storage, and
grid services.
Forward Looking Statements
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding future financial
performance, future growth, and future acquisitions. These
statements are based on Pineapple Energy’s current expectations or
beliefs and are subject to uncertainty and changes in
circumstances. Actual results may vary materially from those
expressed or implied by the statements here due to changes in
economic, business, competitive or regulatory factors, and other
risks and uncertainties, set forth in the company’s filings with
the Securities and Exchange Commission. The forward-looking
statements in this press release speak only as of the date of this
press release. Pineapple Energy does not undertake any obligation
to update or revise these forward-looking statements for any
reason, except as required by law.
PINEAPPLE ENERGY INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
ASSETS |
|
March 31 |
|
December 31 |
|
2022 |
|
|
2021 |
|
CURRENT ASSETS: |
|
|
|
|
|
Cash and cash equivalents |
$ |
5,750,143 |
|
|
$ |
18,966 |
|
Restricted cash |
|
3,969,096 |
|
|
|
— |
|
Investments |
|
786,787 |
|
|
|
— |
|
Trade accounts receivable, less allowance for |
|
|
|
|
|
doubtful accounts of $59,000 and $0, respectively |
|
2,804,070 |
|
|
|
— |
|
Inventories, net |
|
1,625,666 |
|
|
|
— |
|
Prepaid income taxes |
|
3,374 |
|
|
|
— |
|
Other current assets |
|
960,688 |
|
|
|
— |
|
Current assets held for sale |
|
6,566,855 |
|
|
|
— |
|
TOTAL CURRENT ASSETS |
|
22,466,679 |
|
|
|
18,966 |
|
PROPERTY, PLANT AND EQUIPMENT,
net |
|
298,895 |
|
|
|
— |
|
OTHER ASSETS: |
|
|
|
|
|
Investments |
|
2,302,395 |
|
|
|
— |
|
Goodwill |
|
15,776,014 |
|
|
|
— |
|
Operating lease right of use asset |
|
127,902 |
|
|
|
— |
|
Intangible assets, net |
|
18,778,947 |
|
|
|
2,780,270 |
|
Other assets, net |
|
41,139 |
|
|
|
— |
|
TOTAL OTHER ASSETS |
|
37,026,397 |
|
|
|
2,780,270 |
|
TOTAL ASSETS |
$ |
59,791,971 |
|
|
$ |
2,799,236 |
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
CURRENT LIABILITIES: |
|
|
|
|
|
Accounts payable |
$ |
2,922,795 |
|
|
$ |
2,233,371 |
|
Accrued compensation and benefits |
|
797,473 |
|
|
|
307,828 |
|
Operating lease liability |
|
93,721 |
|
|
|
— |
|
Other accrued liabilities |
|
8,904 |
|
|
|
— |
|
Working capital note payable |
|
— |
|
|
|
350,000 |
|
Dividends payable |
|
506,212 |
|
|
|
— |
|
Deferred revenue |
|
114,277 |
|
|
|
— |
|
Contingent value rights |
|
6,566,855 |
|
|
|
— |
|
TOTAL CURRENT LIABILITIES |
|
11,010,237 |
|
|
|
2,891,199 |
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
Loan payable and related interest |
|
974,460 |
|
|
|
6,194,931 |
|
Related party payables |
|
— |
|
|
|
2,350,000 |
|
Operating lease liability |
|
39,122 |
|
|
|
— |
|
Deferred revenue |
|
68,729 |
|
|
|
— |
|
Contingent consideration |
|
4,684,000 |
|
|
|
— |
|
Contingent value rights |
|
11,710,375 |
|
|
|
— |
|
TOTAL LONG-TERM LIABILITIES |
|
17,476,686 |
|
|
|
8,544,931 |
|
STOCKHOLDERS' EQUITY |
|
|
|
|
|
Convertible preferred stock, par value $1.00 per share; 3,000,000
shares authorized; 32,000 and 0 shares issued and outstanding,
respectively |
|
32,000 |
|
|
|
— |
|
Common stock, par value $0.05 per share; 37,500,000 shares
authorized; |
|
|
|
|
|
7,435,586 and 3,074,998 shares issued and
outstanding, respectively |
|
371,779 |
|
|
|
153,750 |
|
Additional paid-in capital |
|
41,538,864 |
|
|
|
(53,750 |
) |
Accumulated deficit |
|
(10,620,528 |
) |
|
|
(8,736,894 |
) |
Accumulated other comprehensive loss |
|
(17,067 |
) |
|
|
— |
|
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) |
|
31,305,048 |
|
|
|
(8,636,894 |
) |
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY |
$ |
59,791,971 |
|
|
$ |
2,799,236 |
|
|
|
|
|
|
|
PINEAPPLE ENERGY INC. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS |
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended March 31 |
|
2022 |
|
|
2021 |
|
Sales |
$ |
318,800 |
|
|
$ |
— |
|
Cost of sales |
|
223,668 |
|
|
|
— |
|
Gross profit |
|
95,132 |
|
|
|
— |
|
Operating expenses: |
|
|
|
|
|
Selling, general and administrative expenses |
|
297,272 |
|
|
|
231,227 |
|
Amortization expense |
|
357,463 |
|
|
|
357,324 |
|
Transaction costs |
|
968,505 |
|
|
|
168,445 |
|
Total operating expenses |
|
1,623,240 |
|
|
|
756,996 |
|
Operating loss |
|
(1,528,108 |
) |
|
|
(756,996 |
) |
Other expenses: |
|
|
|
|
|
Investment and other income (expense) |
|
(5,144 |
) |
|
|
— |
|
Interest and other expense |
|
(350,382 |
) |
|
|
(311,413 |
) |
Other expense, net |
|
(355,526 |
) |
|
|
(311,413 |
) |
Operating loss before income
taxes |
|
(1,883,634 |
) |
|
|
(1,068,409 |
) |
Income tax expense |
|
— |
|
|
|
— |
|
Net loss |
|
(1,883,634 |
) |
|
|
(1,068,409 |
) |
|
|
|
|
|
|
Other comprehensive loss, net
of tax: |
|
|
|
|
|
Unrealized loss on available-for-sale securities |
|
(17,067 |
) |
|
|
— |
|
Total other comprehensive
loss |
|
(17,067 |
) |
|
|
— |
|
Comprehensive loss |
$ |
(1,900,701 |
) |
|
$ |
(1,068,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per share: |
$ |
(0.58 |
) |
|
$ |
(0.35 |
) |
Diluted net loss per
share: |
$ |
(0.58 |
) |
|
$ |
(0.35 |
) |
|
|
|
|
|
|
Weighted Average Basic Shares
Outstanding |
|
3,231,461 |
|
|
|
3,074,998 |
|
Weighted Average Dilutive
Shares Outstanding |
|
3,231,461 |
|
|
|
3,074,998 |
|
|
|
|
|
|
|
PINEAPPLE ENERGY INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended March 31 |
|
2022 |
|
|
2021 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
Net loss |
$ |
(1,883,634 |
) |
|
$ |
(1,068,409 |
) |
Adjustments to reconcile net
loss to |
|
|
|
|
|
net cash used in operating
activities: |
|
|
|
|
|
Depreciation and amortization |
|
358,582 |
|
|
|
357,324 |
|
Interest and accretion expense |
|
336,405 |
|
|
|
313,369 |
|
Changes in assets and liabilities: |
|
|
|
|
|
Trade accounts receivable |
|
(90,753 |
) |
|
|
— |
|
Inventories |
|
85,164 |
|
|
|
— |
|
Other assets, net |
|
292,141 |
|
|
|
— |
|
Accounts payable |
|
(2,532,508 |
) |
|
|
116,423 |
|
Accrued compensation and benefits |
|
(503,595 |
) |
|
|
62,196 |
|
Other accrued liabilities |
|
(47,367 |
) |
|
|
— |
|
Accrued interest |
|
(1,056,876 |
) |
|
|
— |
|
Net cash used in operating activities |
|
(5,042,441 |
) |
|
|
(219,097 |
) |
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
Capital expenditures |
|
(245 |
) |
|
|
— |
|
Acquisition of business, net
of cash acquired |
|
(10,256,865 |
) |
|
|
— |
|
Proceeds from the sale of
property, plant and equipment held for sale |
|
— |
|
|
|
344,918 |
|
Proceeds from the sale of
investments |
|
49,194 |
|
|
|
— |
|
Net cash (used in) provided by investing activities |
|
(10,207,916 |
) |
|
|
344,918 |
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
Borrowings against working
capital note payable |
|
150,000 |
|
|
|
50,000 |
|
Payments against loan payable
principal |
|
(4,500,000 |
) |
|
|
— |
|
Payments related to equity
issuance costs |
|
(2,699,370 |
) |
|
|
— |
|
Proceeds from the issuance of
preferred stock upon closing of private placement |
|
32,000,000 |
|
|
|
— |
|
Net cash provided by financing activities |
|
24,950,630 |
|
|
|
50,000 |
|
NET INCREASE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH |
|
9,700,273 |
|
|
|
175,821 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT BEGINNING OF PERIOD |
|
18,966 |
|
|
|
— |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT END OF PERIOD |
$ |
9,719,239 |
|
|
$ |
175,821 |
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION: |
|
|
|
|
|
Interest paid |
$ |
1,070,853 |
|
|
$ |
542 |
|
NONCASH FINANCING AND
INVESTING ACTIVITIES: |
|
|
|
|
|
Issuance of common stock for
conversion of related party payables |
|
2,350,000 |
|
|
|
— |
|
Issuance of common stock for
conversion of working capital note payable |
|
500,000 |
|
|
|
— |
|
Issuance of common stock for
the acquisition of HEC and E-Gear |
|
12,781,234 |
|
|
|
— |
|
Effect of reverse
capitalization |
|
1,594,779 |
|
|
|
— |
|
Operating right of use assets
obtained in exchange for lease obligations |
|
127,902 |
|
|
|
— |
|
|
|
|
|
|
|
Non-GAAP Financial Measures
This press release includes non-GAAP financial measures that
differ from financial measures calculated in accordance with U.S.
generally accepted accounting principles (“GAAP”).
EBITDA is a non-GAAP financial measure provided in this release,
and is net loss, on a pro forma basis calculated in accordance with
GAAP, adjusted for pro forma interest, income taxes, depreciation
and amortization, as detailed in the reconciliations presented
below in this press release.
These non-GAAP financial measures are presented because the
Company believes they are useful indicators of its operating
performance. Management uses these measures principally as measures
of the Company’s operating performance and for planning purposes,
including the preparation of the Company’s annual operating plan
and financial projections. The Company believes these measures are
useful to investors as supplemental information and because they
are frequently used by analysts, investors and other interested
parties to evaluate companies in its industry. The Company also
believes these non-GAAP financial measures are useful to its
management and investors as a measure of comparative operating
performance from period to period.
The non-GAAP financial measures presented in this release should
not be considered as an alternative to, or superior to, their
respective GAAP financial measures, as measures of financial
performance or cash flows from operations as a measure of
liquidity, or any other performance measure derived in accordance
with GAAP, and they should not be construed to imply that the
Company’s future results will be unaffected by unusual or
non-recurring items. In addition, these measures do not reflect
certain cash requirements such as tax payments, debt service
requirements, capital expenditures and certain other cash costs
that may recur in the future. EBITDA contains certain other
limitations, including the failure to reflect our cash
expenditures, cash requirements for working capital needs and cash
costs to replace assets being depreciated and amortized. In
evaluating non-GAAP financial measures, you should be aware that in
the future the Company may incur expenses that are the same as or
similar to some of the adjustments in this presentation. The
Company’s presentation of non-GAAP financial measures should not be
construed to imply that its future results will be unaffected by
any such adjustments. Management compensates for these limitations
by primarily relying on the Company’s GAAP results in addition to
using non-GAAP financial measures on a supplemental basis. The
Company’s definition of these non-GAAP financial measures is not
necessarily comparable to other similarly titled captions of other
companies due to different methods of calculation.
Reconciliation of Non-GAAP to GAAP Financial
Information
Reconciliation of Pro Forma Net Loss to Pro Forma EBITDA:
|
Three Months Ended March 31, |
|
|
2022 |
|
|
|
2021 |
|
Pro Forma Net
Loss |
$ |
(2,556,000 |
) |
|
$ |
(3,164,000 |
) |
Interest expense |
|
350,000 |
|
|
|
314,000 |
|
Interest income |
|
(2,000 |
) |
|
|
(6,000 |
) |
Depreciation |
|
36,000 |
|
|
|
117,000 |
|
Amortization |
|
1,026,000 |
|
|
|
1,026,000 |
|
Pro Forma
EBITDA |
$ |
(1,146,000 |
) |
|
$ |
(1,713,000 |
) |
Contacts:
Pineapple EnergyMark FandrichChief Financial
Officer+1 (952) 582-6416mark.fandrich@pineappleenergy.com
The Blueshirt GroupGary Dvorchak, CFAManaging
Director+1 (323) 240-5796gary@blueshirtgroup.com
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