New Energy Technologies (NENE) Fails to Shine
Table of contents
In a previous article titled “Building Solar Cells with Oxford Photovoltaics” we discussed the 4.2 billion dollar potential market for windows that can generate power from the sun. One over-the-counter (OTC) company, New Energy Technologies (OTCMKTS:NENE), is focusing on the development of solar-powered windows. As mentioned before, OTC stocks require heavy due diligence given they are prone to lose investors’ money.
About New Energy Technologies
The Company consists of 2 Nevada incorporated entities; Kinetic Energy incorporated in 2008 and Sungen Energy incorporated in 2006. Kinetic is focused on harnessing the kinetic energy of moving vehicles and Sungen is focused on creating glass windows that can convert solar energy into electricity. In September 2007 the Company appointed Nicholas Cucinelli to President and CEO and he resigned a year later. 5 years later and the company has just four employees. With a current market cap of $46 million, the Company had assets of just $903 thousand 80% of which is their current cash on hand. With an accumulated deficit so far of $16 million, New Energy has never generated any revenues. The stock price has performed poorly over the past 5 years punctuated by the occasional spike as seen below:
R&D and Intellectual Property
Given the Company only has 4 employees they need to outsource their R&D which they do so through a number of research agreements with third-party entities. These third parties and the amounts paid to them can be seen in the below table:
As of August 2012, the Company had spent $1.1 million on R&D for their SolarWindow technology. As of July 2013, their intellectual property portfolio contained 21 patent filings with none granted. According to the latest 10-Q the Company will remain engaged in research and product development activities at least through January 2015. In comparison to the money spent on R&D research agreements to date, for the three fiscal years ending August 2012 the CEO, John Conklin, had received over $1.6 million in total compensation according to the 2012 10-K.
Marketing and Investor Relations
In the February 2011 10-Q, the Company provided itemized operating expenses from May 1998 until February 2011 after which they stopped providing such a breakdown. In this breakdown, it shows the company spent $3.3 million on “Marketing and Investor Relations”, more than twice the amount they spent in R&D over the same period and almost a third of total operating expenses. It is difficult to understand why a company with no commercial products needed to spend this much money on marketing and investor relations.
As of May 2013, the Company had $715 thousand in cash on hand. With the intent to continue their R&D until January of 2015, they will need to raise more capital. The last capital raised was the issuance of shares at .64 per share which is a significant discount to today’s price of $1.92.
Investors need to ask themselves, does a company with $903 thousand in total assets, 21 patent applications, 4 employees, no revenues and no commercial products, and that will most likely have to dilute shareholders further with another discounted equity offering, really merit a $46 million market cap based on today’s share price?