Westinghouse Solar Inc (PINK:WEST) go Sunbathing

Solar energy is, no doubt, one of the best ways to get affordable, clean energy. It’s been a while since the technology was introduced and this means that the products that you need in order to take advantage of the sun’s rays are now cheaper, which makes us all extremely happy. As a consequence of this, however, companies that produce solar panels and similar components like Westinghouse Solar Inc (PINK:WEST) are struggling.

Nevertheless, we saw some positive movement from WEST on Wednesday and Thursday. The volume went through the roof along with the price. Friday, however, was a different story – while the volume was still high, WEST lost about a quarter of its price. We decided to check on them to see if we will find what caused the sudden drop.

Albeit not immediately apparent, the reason for the drop is quite simple: it’s the same thing that caused WEST‘s steady decline over the years – the fact that they are experiencing some huge losses. Unlike other ventures that we cover quite often, WEST is a fully operational company with technology that, in their words at least, is very clever. The problem seems to be the fact that they simply can’t produce it cheaply enough. The result of all this is found in their latest financial statement covering the third quarter of 2012. Here are the figures:

• cash: $56 thousand
• current assets: $2.6 million
• current liabilities: $5.6 million
• revenue: $838 thousand
• net loss: $2.2 million

A further investigations brings out doubts as to whether they will be able to recover at all. The main reason for this is the fact that with every quarter their revenues seem to be shrinking, while the losses are getting bigger. For example, the sales income generated during the same quarter in 2011 amounted to $3.3 million, while the comprehensive loss was $1.6 million. Still pretty appalling, but not as bad as 2012.

To battle the financial woes WEST had to borrow quite a lot of money which means that, right now, there are tens of convertible notes and new shares are being issued every other week to cover up for debt. If this trend continues, shareholders’ investments will all but vanish into thin air.

We should point out that the management team are looking for a way out of the mess, however. They apparently realized that they won’t be able to get the company back on its feet on their own and they announced that they have reached an agreement with an Australian renewable energy company called CBD Energy according to which WEST will be bought by CBD. The thing is, they proclaimed the merger way back in May 2012 and now, nearly 10 months later, there is still no information as to when and if the contract will be finally signed.

It’s a rule of thumb that if a company is working at a loss, it will sooner or later go down. And WEST seems to be going that way in much the same way as BioSolar Inc (PINK:BSRC) – another company that works in the field of solar energy, who although featured in promotional emails every now and then, can’t seem to stop the descend. That’s why, it’s wise to weight your risks carefully before making your final decision on WEST.