NEW YORK, Nov. 1, 2017 /PRNewswire/ -- Iroquois Capital Management, LLC, (together with funds managed by it, "Iroquois"), one of the largest shareholders of Real Goods Solar, Inc. ("RGSE" or, the "Company") (NASDAQ: RGSE), today announced that it has delivered a letter to the Company's Board of Directors.
The full text of the letter follows:
November 1, 2017
Real Goods Solar, Inc.
110 16th Street
Denver, Colorado 80202
Attn: Board of Directors
Dear Board of Directors:
Iroquois Capital Management, LLC, together with its affiliates ("Iroquois Capital"), is currently one of Real Goods Solar, Inc.'s ("RGSE" or, the "Company") largest unaffiliated shareholders. We are deeply disappointed at your refusal to date to engage with us regarding our serious concerns, which include the Company's troubling financial performance and the lack of adequate shareholder representation on the Company's Board of Directors (the "Board").
While we recognize the recent stock price increase in response to a series of Company announcements, the stock price still remains nearly 50% off its 12-month high, and the Company has yet to address the issue of its consistent and severe underperformance despite its repeated promises of positive revenue and cash flow. No progress has been made on the Company's stated need to grow revenue 400% over the next two quarters as would be required in order to break even by the first quarter of 2018. In addition, the Company is projected to burn over $5 million in cash this quarter with basically flat revenue growth over the last six months. In the context of the Company's failed business model and ever-deteriorating performance, the recent announcements appear to be little more than window dressing.
We also continue to be dismayed by the Company's disenfranchisement of shareholders in the nomination and election of Board members. To us, the repeated adjournments of RGSE's 2017 annual meeting of shareholders ("Annual Meeting") due to a quorum failure demonstrate shareholders' dissatisfaction with the status quo. Unfortunately, our overtures seeking to establish a meaningful dialogue to work with you through this Annual Meeting impasse have been summarily rejected by the Board.
Given the Company's lack of transparency and refusal to engage with us, we hereby call on the Board to provide substantive responses to the following questions:
- How does the Company plan to grow revenue 400% by first quarter 2018 given its failure to grow revenue at all over the last six months?
- How is the Company expecting to have $4.5 million in cash at the end of the first quarter of 2018 when it only has $4.6 million in cash (including $1,000,000 in warrant exercises) at the end of the third quarter of 2017, and has burned $5 million in cash during that same quarter?
- How will the Company survive without very dilutive financing on the heels of management's failure to meet the Company's projections or expectations?
On July 17, 2017, the Company stated in a press release that it anticipates achieving $16 million in revenue and be cash flow positive by the first quarter of 2018 and still have a $4.5 million cash balance in the bank. In the second quarter of 2017, however, revenue declined 18%, and recently the Company announced that its third quarter 2017 revenue would increase 34%, back to slightly over $4 million. This basically puts RGSE back to where it was in July, when the Company indicated that it needed to grow revenue 400% over the following two quarters. We have seen nothing to indicate that this would happen.
Management predicted that the Company would be cash flow positive by the first quarter of 2018 with $4.5 million in cash on hand. But the Company has now announced that cash will be down by over $5 million in third quarter 2017 and that it will be left with $4.6 million. How is it possible that the Company will have enough money to even last the year, much less have $4.5 million in the first quarter of 2018 and be cash flow positive?
Although the Company noted in its press release on October 19, 2017 that it is "hitting on all cylinders during the first six months of…[its] revenue growth strategy," we believe this to be a farce and would hate to see what would happen if the Company did not hit on all cylinders.
Alan Fine, the Company's Chief Financial Officer, added that "consistent with the expectation we set, we are utilizing cash to build a business that will ultimately operate on a positive cash flow basis," but this could not be further from the truth. The Company spent $5 million last quarter with nearly flat revenue growth over the past six months when it had promised to grow revenue 400% in order to break even by the first quarter of 2018.
And this cash balance actually includes $1 million from the exercise of warrants, even though the Company projected a cash positive first quarter of 2018, with $16 million in revenue and $4.5 million in cash without any additional cash proceeds. Yet another example to illustrate how far away the Company is from its projections.
We remain focused on maximizing shareholder value through all available steps required in order to transform RGSE in to a strong industry participant with positive financial performance. We remain open to discussing ways to work constructively with the Company's management and the Board to effect appropriate governance principles and hold RGSE accountable to act in the best interests of its shareholders.
We hope and expect that the Board and management will consider seriously our constructive input and will act to protect shareholder interests by better communicating the Company's realistic strategy to meet its previous financial guidance or issue new guidance consistent with its fiduciary duties. If the Board remains unresponsive, we plan to pursue our rights as shareholders to seek Board change and reserve all rights to take any other actions that may be required to ensure that the best interests of shareholders are properly served.
/s/ Richard K. Abbe
Richard K. Abbe
Richard K. Abbe
Iroquois Master Fund Ltd.
SOURCE Iroquois Capital Management, LLC