Executive Summary

Revenue declined 4% year over year to $2.84M, while gross margin compressed to 8.5% due to product cost increases and a single-project cost overrun; adjusted EBITDA loss widened to $0.53M, and net loss was $0.79M ($0.02 diluted EPS) .
Segment mix shifted toward Environmental Technology Solutions (MV/SEM) with 81% YoY growth to $1.75M on project wins and media sales; Services fell 45% to $1.05M on lost routine maintenance at the largest customer .
Paragon’s CoronaLux advanced permitting in Southern California (SCAQMD preparing public notice for final, unrestricted permit) and continued US/UK/Texas initiatives, positioning for potential commercialization catalysts .
Liquidity remained tight (cash $0.14M) and management is considering asset sales in Services to strengthen the balance sheet and reallocate capital to higher-ROI businesses .

What Went Well and What Went Wrong

What Went Well

MV/SEM execution and pipeline: “MV engineering staff is currently engaged in 8 active projects…representing…approximately $4 million,” with $1.4M of H2SPlus purchase orders and high-margin BAM media sales (~$240K) in Q3 .
Strategic distribution and product expansion: Awarded exclusive AXTrap distributorship from Axens, opening a recurring, high-margin market to complement BAM and H2S solutions .
Regulatory progress at Paragon: SCAQMD preparing a public notice to issue a final, unrestricted permit; independent third-party testing “well below any District requirements,” underpinning commercialization prospects in CA .

What Went Wrong

Services contraction and customer loss: Industrial cleaning revenue down 60% and railcar cleaning down 25% YoY, largely due to loss of routine maintenance with the largest customer effective April 1, 2016 .
Margin pressure: Gross margin fell to 8.5% (from 22.7% YoY) primarily due to a $648.5K increase in product costs associated with higher product revenues and “unexpected cost overruns on one project” .
Continued GAAP losses and liquidity constraints: Net loss widened to $0.79M; cash declined to $0.14M, prompting active consideration of asset sales to address debt and an IRS obligation mentioned during Q&A .

Financial Results

Quarterly financials (sequential comparison)

Metric	Q1 2016	Q2 2016	Q3 2016
Revenues ($USD)	$3,504,500	$2,561,500	$2,836,500
Gross Profit Margin %	38.3%	17.5%	8.5%
Net Income - (IS) ($USD)	$129,400	($795,900)	($790,200)
EPS (basic & diluted) ($USD)	$0.00	($0.02)	($0.02)
Adjusted/Modified EBITDA ($USD)	$401,000 (incl. NCI)	($412,600) (incl. NCI)	($531,900) (incl. NCI)

Note: “Modified EBITDA” is a non-GAAP measure; see reconciliations in the 8-K exhibits .

Q3 year-over-year comparison

Metric	Q3 2015	Q3 2016
Revenues ($USD)	$2,968,200	$2,836,500
Gross Profit Margin %	22.7%	8.5%
Net Income - (IS) ($USD)	($536,800)	($790,200)
EPS (basic & diluted) ($USD)	($0.01)	($0.02)
Adjusted/Modified EBITDA ($USD)	($377,200) (incl. NCI)	($531,900) (incl. NCI)

Segment breakdown (Products/MV-SEM; Services/Industrial-Rail; Solid Waste/Paragon)

Segment Revenues ($USD)	Q1 2016	Q2 2016	Q3 2016
Products (MV/SEM)	$572,800	$1,132,600	$1,749,100
Services (Industrial & Railcar)	$2,860,100	$1,372,400	$1,045,400
Solid Waste (Paragon)	$71,600	$56,500	$42,000
Total Revenue	$3,504,500	$2,561,500	$2,836,500

KPIs and operating metrics

KPI	Q1 2016	Q2 2016	Q3 2016
Gross Profit ($USD)	$1.3M	$0.4M	$0.2M
Total Operating Expenses ($USD)	$3,423,000	$3,292,200	$3,573,900
Cash And Equivalents ($USD)	$662,800	$255,100	$142,300
Weighted Avg Shares (basic & diluted)	52,593,211	54,470,134	54,525,079

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Paragon California Permit	Ongoing (2016)	“Final Review Status” from SCAQMD (Q2)	SCAQMD preparing public notice for final, unrestricted permit (Q3)	Advanced
MV Technologies H2SPlus POs	Near term	$750,000 PO (Q2)	$1,400,000 new purchase orders (Q3)	Raised activity
Services (REGS/Tactical) Outlook	H2 2016–early 2017	Rebound expected in H2 (Q2 narrative)	Rebound “poised” next two quarters; contracts and backlog detailed (Q3)	Maintained qualitative
Capital Allocation/Asset Sales	Q3–Q1 2017	Evaluating sale of assets (Q2)	Actively entertaining offers; anticipate transaction by Q1 2017 (Q3)	Advanced

Note: No formal numerical guidance on revenue, margins, OpEx, tax, or segment totals was issued in Q3; commentary was qualitative .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q1)	Current Period (Q3 2016)	Trend
Regulatory/Permitting (Paragon)	Q2: SCAQMD “Final Review Status”; UK commissioning; Texas application planned . Q1: Florida operations/testing and CA rollout plan .	SCAQMD preparing public notice for final permit; Texas modification path; broader US/UK discussions .	Improving momentum, more concrete steps
Services diversification & rebound	Q1: New rail facility and chemical cleaning entry . Q2: Multiple Fortune 500 engagements; flaring capabilities .	New contracts, rail backlog, mobile cleaning opportunities; potential asset sale interest .	Building pipeline; restructuring optionality
MV H2SPlus & media	Q2: $750K PO; 10 landfills operational; AXTrap addition .	$1.4M POs; 14 landfills operational; BAM sales; SulfAx systems .	Strong order momentum and recurring media
Balance sheet/Capital	Q1: Cash $0.66M . Q2: Cash $0.26M .	Cash $0.14M; contemplating asset sale proceeds, debt restructuring, IRS obligation discussion .	Deteriorating liquidity; actions under review
International expansion	Q2: UK commissioning; Asia-Pacific relationships .	UK permit parameters in review; SE Asia partner; global inquiries .	Broadening footprint; regulatory sequencing

Management Commentary

“We experienced solid operating results in our environmental technology solutions division that essentially offset a muted quarter for our industrial and railcar cleaning services division…we believe REGS is now poised for a significant rebound in the next two quarters” — John Combs, CEO .
“We are particularly pleased with MV Technologies’ $1.4 million in new purchase orders for its H2SPlus Hydrogen Sulfide Removal System…positioning this unit for a record year” .
“We…are entertaining offers for the sale of certain assets within our services business…[to] strengthen our balance sheet…allocate capital to the businesses we believe will drive the greatest ROI” .
CFO overview: Net loss driven by 4% revenue decline and margin pressure from product cost increases and a single-project overrun; consideration of asset sale proceeds to address debt and IRS liability .

Q&A Highlights

Permitting independence and timelines: California approval does not formally affect other jurisdictions; Texas path is a modification of an existing incineration permit, expected to be measured in “months and quarters, and not years” .
Liability profile: Largest near-term obligations are convertible debt and an IRS obligation; asset sale proceeds could help address these .
Operational commitments: Railcar cleaning operations are low-capital with no significant deferred maintenance; favorable lease financing remains intact .
Asset sale interest: Tactical’s improved performance and industry dynamics have attracted buyers; management evaluating offers with shareholder interests in mind .

Estimates Context

S&P Global consensus EPS and revenue estimates for Q3 2016 were unavailable for SENR at the time of this analysis; as a result, we cannot quantify beats/misses versus Street expectations. Values retrieved from S&P Global were unavailable due to data access limits.
Given lack of formal coverage, near-term estimate revisions will likely hinge on CA permit finalization and MV order conversion progress .

Key Takeaways for Investors

Mix shift toward MV/SEM is positive; recurring high-margin media plus SulfAx/AXTrap broaden addressable markets and support more durable gross margin recovery once project execution normalizes .
Services pressure is cyclical and customer-specific; management cites new high-margin projects, railcar backlog, and mobile cleaning opportunities to underpin a rebound over the next two quarters, but execution is key .
Margin compression in Q3 was largely execution-related (single project overrun); watch Q4/Q1 gross margin progression for evidence of discipline and project controls improving .
Liquidity is constrained; asset sale(s) in Services could be a catalyst to de-lever, address IRS liabilities, and refocus capital on MV/SEM and Paragon commercialization .
Paragon’s CA permit is the major stock narrative driver; final issuance would validate technology, accelerate CA rollout (12–16 large systems targeted), and potentially unlock broader US/UK adoption .
Near-term trading: headline risk tied to permit timing and any asset sale announcements; medium term, thesis depends on MV order conversion, media recurring revenues, and Services stabilization .

Strategic Environmental & Energy Resources, Inc. (SENR)·Q3 2016 Earnings Summary