Another Tenth of Solar3D Inc (OTCMKTS:SLTD)’s Value Disappears

Pennyland is full of companies that spend years looking for the right acquisition candidate in order to get their business off the ground. Solar3D Inc (OTCMKTS:SLTD) was one of them, and ten months ago they purchased 100% of the issued and outstanding stock of an entity called Solar United Network, Inc. We can safely say right now that they have succeeded, at least to some extent.

SLTD managed to register nearly $15 million in revenues during the first nine months of 2014 and they even logged an operating income during the second and third quarters. Not everything is going according to plan, but you have to agree that these sort of characteristics are a rarity in the financial statements of penny stock companies that cost less than $1 per share. What’s more, it would appear that SLTD don’t want to simply sweep the issues under the carpet. They want to sort things out and maybe even grow more.

The revenues registered during the third quarter were about 14% lower than the ones for Q2, and on September 30, SLTD were also forced to log a rather big net loss due to a change in the fair value of derivatives. Apparently, the management team reckons that they can strengthen the revenue stream and improve the profit margins by completing another acquisition. About a month ago, they announced that if everything goes according to plan, they should acquire the assets of a California-based solar systems provider called MD Energy LLC before the end of February 2015.

While nothing can be guaranteed as of right now, if the acquisition of MD Energy proves to be as successful as the one of Solar United Networks, SLTD might just turn out to be one of the more interesting stocks on the OTC Markets.

Judging by the posts around internet forums and social networks, investors are aware of this. Many people are excited about the company and can’t wait to see what the future subsidiary will bring.

Unfortunately, while there’s no shortage of enthusiasm, the stock performance is somewhat shaky. Red sessions have been predominant over the last month or so and every now and then, we see some rather painful double-digit haircuts. Yesterday, for example, SLTD lost more than 10% and it closed the session below the $0.17 per share mark for the first time since September 25. As we mentioned already, the majority of investors around the message boards don’t appear to be too bothered about the fall, but we’re pretty sure that the ones who were jumping in on November 10 (when SLTD briefly broke through the $0.30 mark) are probably quite worried at the moment.

Funnily enough, you don’t need to spend hours worth of research if you want to find what’s holding SLTD back. All you need to do, in fact, is take a closer look at the latest 10-Q.

If you scroll down to the Capital Stock section on Page 7, you’ll notice that during the first nine months of 2014, the company converted a total of $1,632,693 worth of principal amount and interest into 103,973,874 common shares. The newly printed stock has undoubtedly put enormous pressure on the ticker and it’s pretty clear that at the moment, SLTD is struggling to withstand it. At the same time, the fact that the average conversion rate stands at just under $0.016 per share means that the former creditors have had the opportunity to flood the open market with a huge amount of discounted shares and cash in on the hefty profits.

The burning question now is: “Is the dilution about to stop?”.

Judging by the 10-Q, this seems unlikely. There was plenty of convertible debt left on September 30 and in October, the company converted $138,940 of it into 10,687,671 shares of common stock (the conversion rate stands at just $0.013 per share).

If you’re an inexperienced investor, SLTD should show you that sometimes, it’s not all about the balance sheet and the solid revenues. We’re pretty sure that the people who have lost money on the stock over the last month or so are now aware of the dangers, and that they will probably be more careful in the future. And you should be too, at least until SLTD prove to us that they can give their printing press a rest.