Real Goods Solar, Inc. (NASDAQ:RGSE) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 04:30 pm ET


Real Goods Solar, Inc. (NASDAQ:RGSE) Q3 2018 Earnings Conference Call Transcript


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Dennis Lacey

the 2018 convertible note offerings be gone? We have gone to considerable lengths to update our shareholders on the overhang, which is the number of shares that convertible note holders can request we issued to them to convert their notes. The amount of the overhang has been shown in the financial models we have been issuing as a component of the potential future diluted shares outstanding. Further on our company website under Investor Relations, we have been updating the number of shares outstanding, so that you can calculate the overhang.

As of the end of today, the overhang from the 2018 convertible notes is now down to approximately 12 million shares. It is our belief that at the rate the note holders have been converting debt to equity, the overhang will be gone shortly. And as the selling pressure abates, we believe it creates a situation where our stock price can rise.

We've also been asked, do we plan to do a reverse stock split? No, we do not.

Somewhat related to this, we are also asked, will you be in compliance with the NASDAQ requirement for minimum shareholders' equity? As you can see in yesterday's press release, our shareholders' equity as of September 30 was approximately $7 million, which is in excess of the requirement of $2.5 million. One of the tables on the press release shows that we have recorded an increase in shareholders' equity from October 1 through November 2 of $4.2 million from the non-cash derivative accounting for our 2018 convertible notes and conversion of those notes into shares of RGS stock.

On top of that increase in equity, Q4 to date, we expect to record another $4.5 million from the non-cash accounting of derivatives. Basically, the note accounting is very complex, but to simplify, the issuance of the 2018 convertible notes caused us to book non-cash losses upfront that will simply reverse in future periods, creating increases to shareholders' equity in those periods, which are coming now.

We are also frequently asked, are you taking deposits for POWERHOUSE-written reservations? No, we have not been doing that. Although other companies take money from customers for a product not available to fund their operations, we have never been comfortable with that as a business strategy. Our plan all along has been that once we receive the UL certification, we'll begin to accept purchase orders from roofers and homebuilders (ph) and we'll require deposit with each purchase order. We are open for business now with POWERHOUSE and expect to receive purchase orders, ship products and record revenue.

Related to that last question, we have also been asked, do we expect cancellations of the written reservations? We don't expect roofers to cancel written reservations, but could not say that could not happen. Regardless, now that we have announced product certification, we believe that we will have more customer interest, not less. And point of fact, we announced last Friday we have $126 million of reservations. And then this Monday