Menomonee Falls-based EnSync Inc. told regulators Tuesday it needs to find short-term financing or will have to cease operations and start insolvency proceedings.
The notice follows the departure of four more board members on Monday and uncertainty surrounding a sizable project the company was working on in Hawaii. Former chief executive officer Bradley Hansen stepped down from the board when he resigned his position in late January.
EnSync designs and builds renewable energy systems for commercial customers. The company had 64 employees as of June 30, 2018 with offices in Menomonee Falls, Madison, California, Hawaii and China. Its Wisconsin operations typically focus on design, software and prototyping.
It typically reaches power purchase agreements with a building owner or offtaker who agrees to purchase energy from the system. Since the systems require substantial investment to build, EnSync typically seeks to sell them to third-party investors and does not begin construction until a deal is in place.
According to Tuesday’s securities filing, the offtaker for a “sizeable” project in Hawaii sent the company a letter claiming to terminate its power purchase agreement. EnSync says the letter was without basis and has been retracted, but it also triggered a number of events.
Those events included problems completing the sale of the project to a third-party and delays or cancellations of equipment, stressing relationships with key suppliers. EnSync says it had ordered equipment ahead of time to be able to complete the project “according to the offtaker’s aggressive project timelines.”
EnSync also says those events have impacted its ability to secure financing, prompting it to disclose “a very short term need for additional financing which it has been actively pursuing.”
As recently as November, Hansen spoke glowingly on the company’s earnings call about the potential market for EnSync’s business. The company had increased revenue in the first quarter, narrowed its net loss and had 10 PPA projects in its backlog worth around $13.8 million.
But the company has run into problems in the last month. In mid-January, the company received a deficiency letter from the NYSE American, putting it at risk of being delisted because it stock price had been too low for too long.
Hansen then left the company on Jan. 23 and the company hired the restructuring advisory firm Novo Advisors. Sandeep Gupta, co-founder and managing partner of Novo, was installed as interim CEO and chief restructuring officer.
On Monday, four of the company’s directors stepped down from the board including chairman Paul Koeppe, Richard Abdoo, the former chairman and CEO of Wisconsin Energy Corp., Theodore Stern, a former executive at Westinghouse Electric Corp., and James Ozanne, an executive with experience in leasing, rental and consumer finance businesses.
Koeppe, Abdoo and Stern combine to own around 12 percent of EnSync’s stock, according to the company’s latest proxy filing. Melodius Investments Co. Ltd. owns the largest share of stock at 24.3 percent.
The departure of four board members, along with Hansen stepping down, appears to leave Gupta as the lone board member.
