Call with CEO Jim Nelson
I reached out to Jim Nelson with some questions and concerns last week and he offered to schedule a call directly with me to address my note. He passed along his mobile number and I spoke with him directly. He is located in Santa Barbara. If anyone would like his email or phone, let me know and I can pass it along. It seemed a bit remiss to post it online.
My first observation is that it must be a small firm who's CEO reaches out and gives me a mobile number, although not surprising given this is a development stage company. I was pleased with the level of responsiveness and the time he gave me.
QUESTION 1
What is the state of commercialization of their PV (Photovoltaic) technology? When do they expect to take it to market? Summarized Response: In October they completed their "final" prototype at a lab at UCSB (University of California at Santa Barbara). This final prototype combines all the lessons learned from past prototypes. They should be ready to take it to manufacturing for a pilot run within 1st half of 2014.
QUESTION 2
If you’re about to go to manufacturing, have you lined up a manufacturing partner? Summarized Response: We were in discussions with Solyndra in Fremont (California) but they went bankrupt and most assets were sold to a firm in Albany, NY. We originally were set to do a production run at their Rochester, NY facility but they've been too slow to work through negotiations. There’s a lot of issues surrounding the government funding of the Solyndra’s assets before they went bankrupt. Because of their issues, we're now working with a manufacturer in Singapore.
QUESTION 3
What is the state of your patent protection? Your filings and news releases indicate domestic (US) filings in July 2010 and international filings in September 2013. Summarized Response: Those are both correct, we have patents for this technology here in the US. We haven't filed in all countries internationally, just in Geneva.
QUESTION 4
I'm not overly familiar with patent processes, but are patent numbers issued? Summarized Response: Yes, if you look in our news releases the patent number is in one of those. Actually, I think it's the patent application number.
QUESTION 5
Can you help me understand the employment relationships for Dr. Son and Nadir Dagli? Are they contractors or employees given that they’re also associated with the university? Are you licensing their designs or is the Intellectual Property being created the assets of the company? Summarized Response: It's the companies IP, we don't license the designs from them. Dr. Son works full time for us and is an employee of Solar 3D. He lectures occasionally on contract for the university. Nadir is our Chief Scientific Advisor and he's on contract with us to help us with functional verification of designs and prototyping. He's a full time employee at the university. We’re also using contractors in product development and manufacturing functions.
QUESTION 6
I noticed in one of the recent filings the company leases roughly 500 sq. feet of space. That's not a lot of room for R&D or lab space. Where does your development occur? Summarized Response: The great thing about Santa Barbara, besides having the greatest weather in the world, is that the university over develops their lab facilities and allows private companies and small businesses to lease it out by the hour. So we take advantage of that. We recently moved our office from Goleta to Santa Barbara to be closer to these lab facilities.
QUESTION 7
So what’s the approach to taking this to market? Is there a specific course you have charted? Summarized Response: We’re open to all possibilities right now. We’ll have our prototype near the 1st of the year, and a manufacturing run by the end of the first half of next year. We may license it to other manufacturers or suppliers that wish to use our panels in their product. We could approach a joint venture with the right type of company, or we may be open to being acquired, under appropriate terms of course.
At this point I didn’t want to wear out my time with him, so I thanked for his time and closed the conversation, but asked if he’d be open to additional conversation over email or phone if the need arose. He was very receptive to that and said he’d be accessible.
My Independent Observations
I’m not licensed advisor or accredited investor, so take my thoughts as mine alone and not advice. Question 2 explains all the concerns about the Rochester location. Their talks with Solyndra and then the bankruptcy of that partner help explain the timelines too. I like the fact that they’ve achieved patent protection both domestically and internationally. It shows they’re serious about this and open the door to sale of their IP as an asset if for some reason it can’t be manufactured. My interest in this firm is a personal infatuation with solar, wind and hydro and I was turned onto this stock by a few local electrical engineering buddies that were talking about the increase in efficiency a technology like this will provide while at a recent open house for a home with a large solar panel array installed. I was disappointed when I found out this was a penny stock because it made me think there was an issue with it, but my thoughts now are that it’s this low because they are development stage and have debt…which is understandable that they’re working off borrowed capital to develop the product and bring it to market. I’m going to dig through their most recent 10-K and 8-K filings before I add more to my position. Hopefully others will too and can share their observations with me as I’m no expert in corporate finance.
-B
