SunWorks Inc (SUNWQ)

[Intotheblack]

SLTD *Updated 7/27/14* Q2 SOLAR3D ACCOUNTING101 REVIEW:

Continued dissection of Q-2:

1. Cash flow from operations in quarter 2 was $898,254, or 12% of revenue. We are probably at a run rate of $4m in annual cash flow at current revenues on the SUNworks side. Subtract any cash outlays from the Solar 3d development side and what is left is free cash flow the company can use for any purpose (acquisition?).

2. Full conversion of the notes look like it would add 177m shares of dilution, bringing us up to 476m shares outstanding. Since none have been issued since 2/11/14, it looks like we are finished with the financing notes, so the only dilution going forward would be an acquisition (which would hopefully be accretive to earnings) and normal grants and options to employees.

3. I am tightening my EOY PPS target to a range $.33-$.45 (original $.30-$.45). This is for the valuation of SUNworks only, so if the cell does look like it is going to market by EOY, I expect a much higher PPS on anticipation. I used $22m in revenue and a 10x revenue valuation averaged with a 50x profit valuation of 2014 estimated profit of $1,852,000 (to get the $.33PPS) and $4,100,000 profit run rate (to get the $.45PPS).

Source: Accounting101 Post#12786

Q2 - Items of interest from the 10-Q

1. SUNworks second quarter results were as follows (does not include any Solar 3d expenses):
Sales - $7,456,656
CGS - $5,438,473
Gross Profit - $2,018,183
Op Ex - $863,737
Net Profit - $1,147,860

2. Nice cash balance over $1.2M and shareholder deficit of almost ($800k) is well down from Dec 31st and should easily be in the positive by year end.

3. Cash flow from operations was $341,862 for the first six months, so the core business is cash flow positive. Companies can "tweak" this right before the end of the quarter by not paying bills and getting aggressive on collections, so we will need to see the next couple quarters to see the trend. I don't see any manipulation that is obvious for this quarter.

4. I noticed some contradictory language in the 10-Q. Section 1 of the notes "Basis of presentation" reads "The company does not generate significant revenue, and has negative cash flows from operations, which raises substantial doubt about the company's ability to continue as a going concern." However, section 2 "Summary of significant accounting policies", "Development stage activities and operations" reads "The Company has significant revenues, thereby eliminating the development stage as of December 31, 2013." And the financial statement of cash flows show positive cash flow from operations. They need to clean up the going concern statement.

5. I also don't think the statement of the need for a cash infusion is needed any more as first, Solar 3d is operationally cash flow positive even with the cell development costs included and second, there have been no convertible notes issued since the acquisition.

6. There was not a lot of dilution in Q2. The next two quarters should see the bulk of dilution from the acquisition hit the balance sheet. With no new notes being issued, once the dilution hits, it should be the end of it other than stock options and grants to employees and officers.

Source: Accounting101 Post#12699

(Q2 Accounting101 estimate dated 6/28/14)

Based on what we know about April and May, here is my updated outlook for Q2 results for SunWorks division (does not include any expenses related to the cell development):

REV $6,600,000
CGS $4,825,260
GP $1,774,740
OPX $ 750,000
INC $1,024,740

Over $1M pre-tax quarterly profit run rate. Not bad!

Source: Accounting101 Post#11316

SLTD profitable division SUNworks rapid growth story:

1. SUNworks revenue for 2013 was over $8.5m and they were profitable for 2013. SUNworks expects SIGNIFICANT top line and bottom line growth in 2014.
2. Jim Nelson, "we expect to build one of the fastest growing and most profitable companies in the solar systems market."
3. SUNworks new residential division had revenue "approaching" $1m per month in April.
4. By May 15th, "We are experiencing new sales over $1MM per month on the residential side of our business".
5. Year-over-year revenue grew 110% and Gross Profit grew 146% in Q1 2014 over Q1 2013.
6. After noting January revenue grew 300% over 2013, Jim Nelson said "We believe that this is indicative of the trend of our solar systems business this year".
7. Break even is roughly $2.8MM in quarterly revenue. April revenue was $1.5MM, so as long as SUNworks matches that in May they will surpass that threshold with ease.

SUNworks, by all accounts, will be approaching 1/8th the size of Solar City in revenue this year. However, Solar City is valued at 269x more than SUNworks (as measured by Market Cap), yet SUNworks is profitable and Solar City is NOT!

Source: Accounting101 Post#10301

My take on Q2 EARNINGS for SUNWorks division of Solar3D
(**Link only on this one as this did not copy and paste well**)
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=102651373

Source: Accounting101 Post#10258

Without knowing the story behind sltd and SUNworks, looking at the Q1 numbers would have anyone worried:

Total Assets: $4,213,326
Total Liabilities: $6,327,649
Total Equity: ($2,114,323)

Current Liabilities: $6,327,649
Current Assets: $1,646,126

Doesn't look like solar3d will be able to pay their bills, right? Well, looking deeper, $4,674,190 of their liabilities are non-cash. They are dilutive (there will be a cost, just not a need to pay out cash) to our ownership %'s, but a start up needs the cash more. Now, assuming the roughly 140m dilutive shares were issued and the liabilities extinguished and converted to equity - the Q1 numbers would have looked like this (this WILL happen by November 1st):

Total Assets: $4,213,326
Total Liabilities: $1,653,459
Total Equity: $2,559,867

Current Liabilities: $1,653,459
Current Assets: $1,646,126

And we add in the growth through SUNworks in the next quarters and as the notes are all converted, the balance sheet will begin to look a lot healthier as our ownership interest %'s decrease. SLTD's balance sheet starts to look a lot better and it will reflect on those junk websites where no person is actually looking at the story behind the numbers. Those who are in or are getting in BEFORE all the lagging indicators turn in our favor will be rewarded to some extent, hopefully a great extent.

Source: Accounting101 Post#9909

As a former corporate accountant, here are some explanations from the quarterly report:

1. The valuation of the patent at $23,161 are the legal fees and filing expenses. If the patent is issued, it remains an asset. If the patent is denied, the asset will be written off as an expense.

2. There is quite a bit of dilution lurking on the balance sheet under the liability labeled "Derivative liability". Since the terms of the conversion of the remaining notes issued upon acquisition of SUNworks have no max or min conversion ratio, sltd cannot provide an accurate full dilution estimate. Therefore, they book a liability on the balance sheet. A back of the book estimate from me has the additional issuance of shares at around 138 million ($3,956,192/(.057*50%). This is a very loose calculation so can be off by quite a bit. My point is this dilution will occur by end of October. This was disclosed as part of the purchase in January and is expected, but since the shares have not been issued as of yet since the notes are still outstanding, it is sitting there as a liability and not reflected in the diluted share count.

3. The "going concern" and "cash infusion" phrases are normal for any penny stock. I would be concerned if it wasn't in the 10-Q. That would be a sure sign of fraud. As a company which "will have significant revenues", as cash flow improves and equity turns positive, the "going concern" will go away.

4. With "significant revenues", the company also will be eliminating their "development stage" designation.

IMO, if we hit $15-$18m in revenue this year, @ 10x sales (market cap of $150m-$180m), depending on dilution, I believe we will be between $.30-$.45pps by EOY. This only reflects SUNworks and any good news on the solar cell front would be a bonus on top of that valuation.

Source: Accounting101 Post#9754


All of the above information has been compiled and sourced using posts solely from user "Accounting101". Minimal unrelated information has been redacted to create a cleaner appearance for ease of review.