The company recently filed a definitive 14 c to increase the common stock authorized from 7 million shares to 12 million shares. Reading briefly through its filings, I was a bit shocked that companies this tight and structured still are listed on the OTCBB when I am used to seeing usually 50 to 60 million shares issued and outstanding. The company had 6,805,116 shares outstanding and entitled to vote of which management and the President owned 50% collectively. It is clear if any continued financing or acquisitions were to occur, the authorized needed to be increased. It is not uncommon however for companies in this stage to forward split their stock, however, there have been no signs other than a mention of the word split by default in their proxy.
In April, the company registered 300,000 shares of S-8 for the purpose of hiring consultants. The more I read the filings, the more I speculate that there is the possibility of a structure change. Interestingly, the Q discusses debt financing and favourable terms, of which, the company has currently financed roughly $450,000 in cash at this point. I might be slightly off as I round up my numbers, but it is off by maybe $5k.
The Q also discusses that the technology has not been tested yet by third parties, and it requires a stage of such testing before market readiness. If the product is completed, I believe their rightfully could be a good word of mouth and social media marketing campaign with direct sales efforts to build this business as depicted in the filings.
In April, the firm announced the sale of $1,100,000 on the tail of another announcement of $1,000,000 in sales. As one of the single largest months, the company appears to be on the right track and it is no wonder financing has become a priority as well as share capitalization. The market for one client, Electric City Wind Power seems promising for continued business from a quote within their press release:
‘The 600 kilowatt wind power generation project agreement, along with the strategic partnership between Mass Megawatts and Electric City Wind Power, signify a turning point in wind power development here in the Commonwealth. Pennsylvania has a tremendously rich wind power resource stretching across the breadth of the state, with the potential of 38,000,000 Megawatt hours per year of clean electricity generation.’
‘Mass Megawatts fulfilled the two prerequisites that Electric City Wind Power had carved in stone, and that no other wind turbine provider could meet, which were that the equipment be economically competitive with fossil fuels and that it be low-profile in height, so as to be acceptable in communities across Pennsylvania that are not open to 200 to 400 foot towers. Municipalities that have enacted ordinances to keep the monster turbines out have reacted extremely favorable to the 65 foot high MAT units. Wind is as much of a natural resource as coal or natural gas, and many townships are not against harvesting it and bringing the financial gain to their people if it can be accomplished in a way that does not destroy their community’s view shed and quality of life.’
Apparently from the analysis of clients, Mass has a competitive differentiation by way of its Wind Turbine size. I have not seen the statistics related to the turbines, from my limited knowledge, generally height has more to do with the consistency of the wind and often the area’s are tested for optimal energy producing heights over a 24 month period. However, in concept, if a consistent wind flow is proven at these heights and construction of the wind parks are underway, I see both cost savings and near term benefits for the independent electricity providers that appear to be their target market. In total, the company is still in the development stage but seems to be gaining momentum within the sales and operations of the company. The increase in authorized common stock may be a signal of further financing and or acquisitions, of which both would add to the companies continued momentum in the market. From their first revenue in 2007, Army projects, and current client base, the company is moving in the right direction for growth.
The only caveat that appears to concern is that the company could choose any kind of financing at this point, since it has built the company on limited current funds. The idea of debt financing without a floor would be my only concern and something to carefully watch for. As long as the management decisions do not subject the shareholders to a convertible debenture and is able to raise equity within the firm, the company has a good looking future.
I believe a social media campaign would help this firm break-out to the independent power companies globally, in addition, a roadshow in the European Market, especially Germany who holds yearly events on Wind Energy, and is advised for favourable financing. The US market will be excellent for their primary source of contracts, however, I believe the financing in the US still remains toxic with a majority of the firms who call themselves Capital companies. There are of course exceptions to the rule, but I believe in the European markets, they tend to take equity positions. A US Capital firm would quickly identify the limited funds the company has operated on to date and likely try to take advantage of the situation with floorless financings and debt. I hope this firm makes the right decisions in their financing moving forward, and the successful increase in authorized will make this company an interesting deal to watch come August and September, which I add, is a great time to visit Europe!
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