(FCEL) Share Value Falls 27% Amid Disappointing 4Q Results

On Mar. 6, xG Technology Inc. (NASDAQ: XGTI) share volume skyrocketed, with 6,350,258 shares changing hands, more than eight times its three-month average volume of 770,391shares.

At the same time, XGTI’s share value closed at $3.65, down $1.33, or 27%, from its closing price of $4.98 the previous day, with both the high volume and share value loss fueled by xG Technology’s Mar. 6 fourth-quarter 2013 results.

Review of Results

On a reported basis, spectrum access solutions company’s total fourth quarter 2013 revenues were $373,000 compared to $0.0 revenue in the fourth quarter of 2012. The components of fourth quarter revenue were $323,000 from sales of equipment and $50,000 from engineering and consulting services agreement.

On a pro forma basis, assuming the recognition of $480,000 of deferred revenue in the quarter, total fourth quarter 2013 revenues were $853,000 compared to $0.0 revenue in the fourth quarter of 2012. The components of fourth quarter revenue were $778,000 from sales of equipment and $75,000 from engineering and consulting services agreement. Gross margin in the quarter was 53%.

Pro forma operating loss was $2.6 million compared to operating loss of $4.2 million in the fourth quarter of 2012. This decreased loss is attributable to the recording of cost of components and personnel associated with the recording of revenue and higher depreciation and amortization costs as the Company began to amortize capitalized costs as they became available for sale, offset by lower general and administrative, development, and stock based compensation expenses in the quarter relative to last year.

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Pro forma net loss was $3.6 million, or $(0.23) per share compared to $4.7 million, or $(0.78) per share in the fourth quarter of 2012. Included in this operating loss was $0.3 million in expenses associated with our November follow-on offering. Weighted average number of shares outstanding for the quarter ended December 31, 2013 was 15.394 million compared to 6.04 million for the quarter ended December 31, 2012.

On a reported basis, total 2013 revenues were $406,000 compared to $0.0 million in 2012. The components of 2013 revenue were $323,000 from sales of equipment and $83,000 from an engineering services agreement.

Net Loss Up

On a pro forma basis, assuming the recognition of $480,000 of deferred revenue in the quarter, total 2013 revenues were $886,000 compared to $0.0 million in 2012. The components of 2013 revenue were $778,000 from sales of equipment and $108,000 from an engineering services agreement.

Pro forma 2013 operating loss was $13.7 million compared to operating loss of $13.0 million in 2012. This increased loss is attributable to the abovementioned recording of cost of components and personnel, higher development costs associated with the readying of products for sale, higher amortization and depreciation as mentioned above, and higher general and administrating and stock based compensation costs.

Pro forma 2013 net loss was $27.3 million, or $(2.84) per share, compared to net loss of $13.8 million, or $(2.29) per share for 2012. The 2013 net loss includes non-cash expense of $10.1 million.

Weighted average number of shares outstanding for the year ended December 31, 2013 was 9.598 million compared to 6.03 million for the year ended December 31, 2012.

xG ended fourth quarter 2013 with $5.5 million in cash, up from $271,000 at December 31, 2012.

Analysts’ consensus

Feltl & Co., the one analyst firm covering XGTI, recommends a “buy.”

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Completion of South Korean Fuel-Cell Park

Meanwhile, FuelCell Energy Inc. (NASDAQ: FCEL) share volume also soared with 49,253,816 shares change hands, more than five times three-month average volume of 9.700,000 shares.

Update on Asian Market

This upsurge in volume comes about two weeks after the Danbury-Conn. fuel-cell maker’s announced a series of updates about its Asian market. They include the completion of the world’s largest fuel cell park in South Korea, the sale of 3.7 megawatts of fuel cell modules to POSCO Energy in the first quarter of 2014 to meet increasing demand and a 19.6 megawatt fuel cell park to be constructed in Seoul City, South Korea.

The Gyeonggi Green Energy fuel cell park, located in Hwasung City, South Korea, is fully operational. The largest fuel cell park in the world, the facility consists of 21 FuelCell Energy DFC3000 power plants, rated at 2.8 megawatts each, requiring only about 5.1 acres of land for 59 megawatts of new and renewable power. The fuel cell park provides continuous base load electricity to the South Korean electric grid and usable high quality heat for a district heating system. POSCO Energy commenced construction on this project in November 2012 and finished in only 13 months, illustrating the ability to rapidly construct multi-megawatt fuel cell installations that enhance grid resiliency.

“The scale of this installation is contributing to the power and heating needs of an urban population and generating the electricity in a highly efficient and ultra-low emission profile that supports our National renewable portfolio standard,” said Tae-Ho Lee, chief executive at Gyeonggi Green Energy.

In order to meet the accelerating market demand in Asia, FuelCell Energy sold two 1.4 megawatt and three 300 kilowatt fuel cell modules to POSCO Energy during the first quarter of 2014. These modules are in addition to the monthly fuel cell kit shipments under an existing 122 megawatt order that was signed in October 2012.

Potential Influx of $26 million

On Jan. 23, the Danbury-Conn. fuel-cell maker’s announced a public offering of 22 million shares of its common stock at a price of $1.25 a share. The net proceeds from the sale of the shares, after deducting the underwriters’ discounts and other expenses are estimated to be $26 million. FuelCell has also granted the underwriters a 30-day option to purchase up to an additional 3.3 million shares of common stock offered in the public offering to cover over-allotments, if any, which would result in additional gross proceeds of about $4.1 million if exercised in full.

FuelCell said it plans to use the infusion of 26 million for project development, project finance, working capital support and general corporate purposes.

Fruition of Dominion Deal

FuelCell’s public offering came only a few weeks after it announced the completion of its 14.9 megawatt fuel-cell park on schedule for Dominion. The project is located on a remediated brownfield site in an industrial area of Bridgeport, Conn., using only about 1.5 acres of land to provide the renewable power.

Renewable energy slow to yield profits

While both these events are positive news for FuelCell, the unpleasant reality that’s being ignored in their releases is the fact that renewable energy companies have barely broke even, never mind turn significant profits. The fuel-cell industry’s total gross sales in 2012 were $120.6 million, while its costs were 120.2 million, according to the Dept. of Energy.

Analysts’ consensus

Of the four analysts covering FuelCell’s stock, three of them recommend “a strong buy” on the stock, while one recommends a “hold.”

On Mar 6, FCEL share price closed at $2.99, down 14 cents from its closing price of $3.13 the previous day.

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Ceres Inc. Public Offering to Generate $20 Million

Finally, Ceres Inc. (NASDAQ: CERE) share volume surged, with 2.8 million shares changing hands, more than five times its three-month average of 502,511 shares.

Pricing of Public Offering

The high volume is being fueled in part by the Thousand Oaks, Calif.-based biotechnology company’s Mar. 4 announcement that the pricing of an underwritten public offering of 20,000,000 shares of common stock will have a public offering price of $1.00 per share.

Ceres also granted the underwriters a 45-day option to purchase up to 3,000,000 additional shares of common stock to cover over-allotments, if any. Ceres expects to receive approximately $20 million in gross proceeds, before deducting underwriting discounts and commissions and offering expenses payable by the company. Ceres intends to use the net proceeds from this offering for general corporate purposes, including working capital.

The offering is expected to close on or about Mar. 10, 2014, subject to the satisfaction of customary closing conditions. Aegis Capital Corp is acting as sole book-running manager for the offering. Trout Capital LLC acted as financial advisor to Ceres.

Ceres sells seeds that produce renewable biomass feedstocks that can enable the large-scale replacement of petroleum and other fossil fuels.

On Mar 6, CERE share price closed at $1.05, up 3 cents from its closing price of $1.02 the previous day.

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