RGS Energy Completes Realignment of Solar Division and Announces Capital Raise for Commercialization of Next Generation POWERHOUSE™ 3.0
POWERHOUSE™ 3.0 is a next-generation, innovative and visually stunning solar shingle system using technology developed by
POWERHOUSE™ is ideally-suited for homeowners looking to replace their roofs, whether because of age or damage. It is also an ideal solution for newly constructed homes that must meet certain efficiency standards, such as California’s 2017 Title 24 regulations. RGS estimates the addressable market for its product in the U.S. alone is approximately 7 million homes each year.
“Since securing our exclusive worldwide license for POWERHOUSE™ last October, our belief in the size of the market opportunity and potential for substantially growing shareholder value has strengthened,” said RGS Energy CEO,
In the same way RGS spearheaded the emergence of the solar industry in the late 1970s, RGS plans to lead again with POWERHOUSE™. The realignment is a timely strategic shift in the company’s primary focus from traditional residential solar — an increasingly commoditized and competitive business — to a new emerging market with POWERHOUSE™, a unique, value-add solar solution. RGS will continue to serve its traditional solar markets.
The strategic realignment has scaled back the company’s residential solar homeowner business. While RGS has made progress in growing solar sales and backlog, growth has not met initial company expectations. The realignment reduced the number of outside sales personnel. RGS plans to maintain the areas of core competencies meeting expectations, such as its e-sales call center and commercial sales organization.
“For us, POWERHOUSE™ not only represents a significant change in product mix, but also how we go to market,” said Lacey. “We can now leverage more cost effective and operationally efficient business-to-business sales channels. Further, with its advanced, patented intellectual property and lower manufacturing costs than prior generations, POWERHOUSE™ 3.0 will be a major market differentiator for RGS, creating favorable high competitive barriers to entry that we’ve never enjoyed with our traditional solar business.”
The company does not believe the costs to implement the operational realignment will be material to its operations or financial condition.
Capital Raise to Commercialize POWERHOUSE™
“Our hope is with this press release, we successfully connect the dots for our shareholders, from our business prospects and strategies to our expectations for increased shareholder value,” said Lacey. “We first have to raise the necessary additional capital to commercialize POWERHOUSE™ 3.0 to be in a position to realize future profits from this new product. Yes, that includes the issuance of additional shares, now and in the future upon conversion of convertible notes and exercise of common stock warrants. We believe the ultimate outcome will be accretion of shareholder value from this offering. We have included financial tables to demonstrate mathematically why we believe accretion will occur. We, of course, recognize it will take several years to enjoy a desirable share of the addressable market for POWERHOUSE™; however, the more capital we have, the faster we can pursue market share.”
RGS has entered into agreements with institutional investors for up to a
Assuming receipt of the full
|Market share of addressable market:||One Quarter of
|One Half of
|POWERHOUSE™ annual revenue||$||250,000,000||$||500,000,000||$||1,000,000,000|
|Hypothetical gross profit percentage||20||%||20||%||20||%|
|POWERHOUSE™ gross profit||50,000,000||100,000,000||200,000,000|
|POWERHOUSE™ segment expenses (5% of revenue)||(12,500,000||)||(25,000,000||)||(50,000,000||)|
|POWERHOUSE™ license fee (2.5% of revenue)||(6,250,000||)||(12,500,000||)||(25,000,000||)|
|Contribution from Residential & Sunetric segments||0||0||0|
|Corporate segment expenses (current run rate)||(8,000,000||)||(8,000,000||)||(8,000,000||)|
|Taxes @ 25%||(5,812,500||)||(13,625,000||)||(29,250,000||)|
|Hypothetical net income||$||17,437,500||$||40,875,000||$||87,750,000|
|Hypothetical Fully Diluted Shares Outstanding:|
|Shares outstanding today||10,351,845||10,351,845||10,351,845|
|Approximate outstanding common stock warrants issued prior to today||7,494,381||7,494,381||7,494,381|
|Estimated shares to be issued under new convertible notes at initial conversion price and exercise price||19,300,000||19,300,000||19,300,000|
|Employee stock options||1,352,536||1,352,536||1,352,536|
|Fully diluted shares outstanding||38,498,762||38,498,762||38,498,762|
|Hypothetical Maximum Cash from exercise of common stock warrants:|
|Potential maximum cash resulting from the future exercise of warrants issued before today||$||19,200,000|
|Potential maximum cash resulting from the exercise of warrants issued today||11,200,000|
|Potential maximum cash resulting from the future exercise of all warrants outstanding today||$||30,400,000|
The tables above are not a forecast or a projection but a mathematical demonstration of financial information arising from different future hypothetical levels of market penetration of the annual reroof market and ultimate Class A shares issued from the convertible debt offering:
- The POWERHOUSE™ gross profit percentage and operating expense percentage are hypothetical; however, RGS believes the percentages are achievable.
- The demonstration assumes no operating contribution from the company’s Residential and Sunetric segments, however its corporate segment expenses continue to be incurred.
- The hypothetical maximum cash from exercise of common stock warrants is the mathematical result of the number of warrant shares times the respective exercise price per share. The hypothetical results are premised upon an increase in the future trading value of the company’s stock resulting in the exercise of common stock warrants. Further, it assumes all investors elect cash exercises (not cashless exercised) and warrant exercise prices are not reduced or reset to a lower amount. The majority of common stock warrants have exercise prices at or below
Terms of Capital Raise
RGS Energy has entered into purchase agreements with institutional investors under which the company will sell, subject to customary closing conditions, (i)
RGS will receive
The terms of the transaction, including the terms of the notes and the warrants, are described in the Current Report on Form 8-K filed by RGS Energy today.
“Our objective with the capital raise was of course to become fully funded for commercialization of POWERHOUSE™, but also to select the financing vehicle that minimizes dilution,” said RGS Energy’s CFO,
RGS Energy 2017 Annual Report on Form 10-K and Year End Conference Call
RGS Energy will file its Annual Report on Form 10-K for the year ended
Toll-free dial-in number: 1-866-548-4713
International dial-in number: 1-323-794-2093
Conference ID: 1389696
The conference call will be webcast live and available for replay via the investor relations section of the company's website at RGSEnergy.com.
Please call the conference telephone number five minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact CMA at 1-949-432-7566.
A replay of the call will be available after
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 1389696
About RGS Energy
RGS Energy (Nasdaq:RGSE) is America’s
For more information, visit RGSEnergy.com and RGSPOWERHOUSE.com, on
RGS Energy is the company’s registered trade name. RGS Energy files periodic and other reports with the
POWERHOUSE™ is a trademark of
Forward-Looking Statements and Cautionary Statements
This press release by
Forward-looking statements and hypothetical examples should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all. Forward looking statements and hypothetical examples are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements and hypothetical examples. Therefore, the Company cautions you against relying on any of these forward-looking statements or forward-looking hypothetical examples.
Key risks and uncertainties that may cause a change in any forward-looking statement or that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include: RGS Energy’s ability to successfully and timely commercialize POWERHOUSE™ 3.0; the ability to obtain requisite UL certification of POWERHOUSE™ 3.0; the adequacy of, and access to, capital necessary to commercialize POWERHOUSE™ 3.0; RGS Energy’s ability to satisfy the conditions and our obligations under the POWERHOUSE™ 3.0 license agreement; RGS Energy’s ability to manage supply chain in order to have production levels and pricing of the POWERHOUSE™ 3.0 shingles to be competitive; cost and availability of raw materials; the ability of RGS Energy to successfully expand its operations and employees and realize profitable revenue growth from the sale and installation of POWERHOUSE™ 3.0, and to the extent, anticipated; the potential impact of the announcement of RGS Energy’s expansion into the POWERHOUSE™ 3.0 business with employees, suppliers, customers and competitors; RGS Energy’s ability to successfully and timely expand its POWERHOUSE™ 3.0 business outside of
You should read the section entitled “Risk Factors” in our 2016 Annual Report on Form 10-K, as amended, in our Quarterly Report on Form 10-Q/A for the quarter ended
This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities.
Investor Relations Contact:
Managing Partner, CMA