Polar Power Inc (POLA)

[southacresdave]

Right vs wrong:

The demand we always thought they'd have for their product is materializing for certain. In time, I could see it get to $100M/year. You can see the handwriting on the wall----they could get more US Tier 1 business (new NG generator will help), go after Tier 2 in US, international telecom will build, NG for commercial and residential, 50%+ chance at US Robotic mule + other military, etc...

What we've gotten wrong in analyzing this company (or me at least) is their ability to ramp up to meet that demand. Expenses are running far higher than I thought and margins are lower and all of it is taking longer than expected. I don't doubt they get to $15M/qtr going forward, but then this manufacturing facility is maxed out (at least on 1 shift/day and they have indicated it's tough to get employees for other shifts). How do they get to $20-25M/qtr?!? How much more capital will they need to raise to do it? I'm not against an equity raise, but only at a valuation above the IPO price for certain. Yet, even with more cash, how long would it take to get a new facility going & where do you put it to make sure it works for certain?

I don't doubt that money will be made going forward from current prices, but my hopes of a home run stock here have been diminished a bit by the reality that production and efficiency are the limiting factors here, not demand. Normally this would be a real positive, but the catch is that meeting that demand is harder than I calculated.