Nanalyze

Solar3D: Just Another Californian Solar Installer?

In past articles we’ve highlighted the dangers of over-the-counter (OTC) stocks, especially those that seem to attach themselves to up and coming disruptive technologies. Such companies need to be subjected to detailed scrutiny as the majority of OTC companies will lost investors’ money over time. Whether through intent or not, company management always seems to be well compensated regardless of the company’s success. In almost all cases, investors in OTC companies will walk away with worthless shares while company management will move on to their next venture taking their wealth accumulated throughout the process. One OTC company that has risen over +1500% in the past year is Solar3D (OTCMKTS:SLTD). Just in the last trading session, SLTD was up over +25%.

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About Solar3D
In July of 2010, an OTC company called MachineWalker changed their name to Solar3D (OTCMKTS:SLTD) and decided to pursue solar cell development. According to Solar3D, their “patent-pending 3-dimensional cell can produce 200% of the power output of conventional solar cells”. Solar3D then brought on a CEO and one other employee. The CEO was given an incentive package of an option to purchase up to 15,000,000 shares of the Company’s common stock for a period of seven years from the date of grant (July 2010), at a purchase price of $0.05 per share, and a yearly salary of $200,000 per year along with bonuses for certain company “market cap” targets being met, some of which he has achieved as well. In the 3 years following the name change, the two employees at Solar3D continued developing their technology along with increasing the outstanding number of shares significantly to help finance the operation. Without even a manufacturing prototype yet, the company then moved to acquire a solar installation company, Solar United Network or “SUNworks” in January of 2014.

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About SUNworks
SUNworks was founded in 2011 and is a small solar installation company with 42 employees. SUNworks’ saw second quarter sales in 2014 of $7.5 million with Q2 sales approaching the sales level of all of 2013. Sales for Q1 2014 were much lower as SUNworks’ total sales for the first half of 2014 came in at $9 million. According to Solar Power World, of the top 250 solar contractors in 2013, 25% were California based companies with SolarCity listed as the 2nd largest. Sunworks came in this list at #72 and at #34 of the 103 top California-based solar contractors in 2014. In January 2014, SUNworks was acquired by Solar3D, the terms of which are stated below:

The  purchase  price is  $2,794,500, $1,044,500 of which was paid in cash at the closing of the SPA and $1,750,000 of which is payable in  installments  over a period of five years after the closing.

The acquisition was financed through a loan of $1.25 million. A question to ask would be what synergies Solar3D can realize through their acquisition of SUNworks? Solar3D is focused on developing an advanced “3D solar cell” and SUNworks performs solar installations manufactured by solar equipment providers. If Solar3D has manufacturing capacity to install advanced solar cells at scale, then maybe the acquisition would make sense but otherwise there don’t seem to be any obvious synergies that would accelerate the development of Solar3D’s “3D solar cell technology”.

Solar3D’s $74 million Valuation
At a current market cap of $73 million, investors are placing bets on a 3D solar cell technology that is being developed and a solar installation company that is in a highly competitive market and does not seem to have any noticeable competitive advantages or barriers to entry. That solar installation component, SUNworks, was acquired for $2.8 million. Even if that purchase price represented a 90% discount, the valuation still would not exceed 50% of Solar3D’s current market cap. Would the 4 company owners who sold their shares have valued SUNworks at that steep of a discount? It doesn’t seem likely, but if we assume they did, this would value the “solar cell development” potential of Solar3D at around $46 million. This part of the business does not even have a manufacturing prototype yet. It represents two employees and “the services of several research consultants who are responsible for product development” which represented $907,000 in general and administrative costs and $107,000 in R&D costs in 2013. In the company’s last 10Q, Solar3D as a standalone company generated a loss of $4.8 million in the first 6 months of 2014 alone, while SUNworks as a standalone entity was actually profitable by $968,912. This resulted in the combined entity realizing a loss of $3.8 million for the first two quarters of 2014.

Solar3D (OTCMKTS:SLTD) is different from other OTC companies in that they actually seem to have acquired a legitimate business though the acquisition price  is completely detached from current valuations. They now have company leadership that were previous majority owners of the acquired company and who seem to be successful entrepreneurs. While the acquisition may have been an accomplishment for 2014, the number of shares for Solar3D increased by 40% significantly diluting existing shareholders. The new entity has a cash balance of $1.2 million. While it will be interesting to see the inner workings of a small Californian solar installation company, the share price seems to be well detached from the actual valuations making this a volatile OTC stock that may be interesting to speculate on, but not to invest in.

  • Ron Winton

    Here’s a new affordable, much higher efficiency bifacial solar technology that already being installed on rooftops. It’s called Hyper X 2.

    This advanced technology has been around for the past 6 years but it was always considered to be far too expensive to install. Now because of new technological advances Hyper X 2 Bifacial solar panels can be purchased at a much lower cost than many standard single sided solar panels.

    Instead of boxy looking 1 1/2 to 2 inch thick framed Gen 1 solar panels, these new higher performance Gen 2 solar panels are only 1/4 inch thin and are made with a stronger, see through, glass on glass, frameless, construction that allows sunlight to pass through and reflect off the roof’s surface, thus illuminating the backside of the double sided solar cells, producing additional power.

    A mere 10% boost in reflected light can raise this 340 watt solar panel’s output to 374 watts without taking up anymore roof space. New Hyper X 2 solar offers a better PTC to STC ratio “Real World” performance according to the California Energy Commission’s performance rating listings than over 100 of SunPower’s solar panel models.

    And they offer a very high 92.88% PTC to STC performance ratio. Hyper X 2 also offers a heat resistant -0.31%/degree C temperature coefficient for better performance in warm/hot climates. And when it comes to aesthetics, nothing even comes close to Hyper X 2’s glass on glass, see through, frameless construction.

    • CM

      1. to the author, retract and revise this low D&D article, because they have have a working prototype for a long time.

      2. the hyper x, 10% more? thats it? solar3d does twice the power in one day than any other panel. instead of your 374, we do double 680…..

      believe it…………..go do your D&D

      • Nanalyze

        Thank you for your comment. The article meant to refer to a “manufacturing” prototype which is required to commercialize the technology. The word “working” has been changed to “manufacturing”.

    • Nanalyze

      Thank you for your comment Ron. We’ll look to highlight Hyper X 2 in a future article.

  • Matt

    They have had a working prototype for a while now and also have a manufacturing ready prototype.

    • Nanalyze

      Thank you for your comment Matt. They do not have a manufacturing prototype according to their last SEC 10-K filing but promise one by the end of 2014. This same promise was made almost verbatim in 2013:

      We recently completed a working prototype of our proprietary three-dimensional solar cell technology. Our focus in 2013 will be on the commercialization of this new technology. We anticipate that three major milestones must be met in order to bring this technology to market.

      1.
      The development of a manufacturing prototype. We anticipate that we will develop a manufacturing prototype under the guidance of Dr. Changwan Son, our director of technology, in conjunction with a third party foundry, established specifically to help commercialize solar inventions such are ours. The development of this prototype is planned to include third party testing by a recognized testing organization within the solar industry.

      2.
      A pilot run of the manufacturing process for our new solar cell. We anticipate that the same foundry that develops the manufacturing prototype will conduct a pilot manufacturing run of several thousand units to prove that the process can be executed economically, and that the performance of our solar cell can be maintained in a mass production environment. Steps one and two are anticipated to be completed by the fourth quarter of 2013.

      3.
      Identify a manufacturing partner to help take our product to market. As opposed to other solar technology developers, Solar3D does not intend to build manufacturing facilities. Instead, we plan to rely on existing processes, equipment and facilities in other organizations to produce our final product for the marketplace. To do so, Solar3D intends to identify and contract with a solar cell or semiconductor manufacturer to mass-produce the Solar3D cell. We believe that these manufacturers will be able to use our device to increase the energy output of their existing products. We expect to earn revenue from licensing fees and by partnering or joint venturing with entities that seek to use our proprietary three-dimensional solar cell technology. We anticipate that we will identify our manufacturing partner by the fourth quarter of 2013.

      You can see those exact same statements made in their last 10-K with just the year changed to 2014. Let’s hope the next 10-K doesn’t repeat this with the dates changed to 2015.

  • Jay

    Understandable viewpoint. Unfortunately, it’s wrong. HINT: To understand where SLTD is going you have to take a close look at management…and then wait a week for Q3 earnings results. This is one of those rare companies that does what it says and can make an investor very rich over the long term. Formulas for measuring the worth of a company may serve MOST of the time…but you have to remember it’s just a formula. Use detailed scrutiny as discussed above…then make your decision.

    • Nanalyze

      Thank you for the comment Jay. Unfortunately every single OTC company has made the exact same claim below:

      This is one of those rare companies that does what it says and can make an investor very rich over the long term.

  • Doc Psionic

    Well, here is a link about their prototype.

    http://www.marketwatch.com/story/solar3d-third-generation-prototype-enters-testing-phase-2014-02-12

    Marketwatch, February. I’m not sure what search engine you use but maybe you ought to think about that some.

    • Nanalyze

      Thank you for the comment. The word “working” was mistakenly substituted for the word “manufacturing” in the article. This has been corrected.

  • Coming at it from an installer/integrator view, 3D’s effort to own installation co’s is a good move. Hopefully they’ll look in other markets than Ca. as time passes ….. We are leery of new modules often not because we don’t think they’ll last the distance, but that the Mfr. won’t be there if the warranty ever needs to be used. 3D can get a lot of product into use quickly and this will beef up their longevity. Obviously we are eagerly awaiting a 25% efficient module especially one that reaches max power earlier in the day and last longer in the evening. If the price per watt is competitive with what the makes we already use cost …. which are all tier one … then we will be pretty excited to get this module … whenever it comes out ! and will feel pretty good about 3D’s future as other installers try it out and it gains some market share. If the module works to spec … total quality … and with that performance for equal cost … these guys will make more $$ than Wrigley’s got gum.

  • steve

    I have read through most of these posts as well as most of the news on Solar3ds web site. I see nothing regarding any cell testing beyond self proclaimed increased efficiency and a patent application that was filed in February 2013. For the record, I am a long term holder of the stock, but I am losing interest as dilution occurs without any real or implied news on the cell end. I would love to here something real, and not just a reference to a former newswire from Solar3ds website of Facebook page to ease my mind. Thank you to the staff at Nanalyze to keep on top of these OTC companies.

    • Nanalyze

      Thank you for the comment Steve. We try to stay on top of all OTC companies that appear to have “disruptive technology” as we’ve found 99% end up going nowhere. Whether management has a malicious intent or not, investors need to be warned.

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