Real Goods Solar, Inc.

Real Goods Solar, Inc. (the “Company” or “RGS”) is in the solar energy systems business. RGS is the exclusive worldwide manufacturer and distributor of the POWERHOUSE™ in-roof solar shingle, an aesthetically pleasing solar shingle system. The POWERHOUSE™ in-roof solar shingle uses technology developed by The Dow Chemical Company (“Dow”). While Dow holds all applicable patents, RGS has licensed the exclusive domestic and international rights to commercialize POWERHOUSE™ and has the rights and obligations to maintain and prosecute the patents and invest in research and development to achieve future technological advances in productivity and output efficiency. Additionally, RGS is a solar energy engineering, procurement and construction (“EPC”) firm serving residential and small commercial customers in the state of Hawaii and small commercial customers in the northeast section of the United States. To these customers, RGS offers turnkey services, including design, procurement, permitting, build-out, grid connection, financing referrals and warranty and customer satisfaction activities.

The Company has historically incurred a cash outflow from its operations as revenue has not been at a level for profitable operations. As discussed above, a key component of our revenue growth strategy is the sale of our POWERHOUSE™ 3.0 in-roof solar shingle. The Company obtained UL certification for POWERHOUSE™ at the close of 2018, and only recently began the nationwide commercialization of POWERHOUSE™ 3.0. As of September 30, 2019, the Company had a backlog of $7.7 million which it expects will result in cash inflows from operations in future periods. To improve the Company’s financial condition and to further its commercialization of POWERHOUSE™ 3.0, it is seeking additional capital with a subscription Rights Offering.  In the event the Company does not receive any capital with the Rights Offering and its future cash inflows from POWERHOUSE™ 3.0 are not sufficient to cover operating expenses, the Company would evaluate (i) further cost-reduction measures, (ii) sale of assets not associated with POWERHOUSE™, (iii) debt financing, (iv) public or private offerings of its Class A common stock, and (v) capital from Class A common stock warrant exercises by reducing the exercise price of Class A common stock warrants to induce conversion. No assurances can be given the Company will be successful with its plans to grow revenue for profitable operations.

On September 30, 2019, the Company filed an offering statement on Form 1-A with the Securities and Exchange Commission (“SEC”) under Regulation A for a subscription Rights Offering (“Rights Offering”). Under the Rights Offering, RGS will distribute to each holder of its Class A common stockholders and each holder of outstanding warrants to purchase Class A common stock, ten non-transferable subscription rights, each allowing the holder to purchase one share of Series 1 non-convertible preferred stock for $10 per share for each one share of Class A common stock owned or purchasable under such warrants as of a to-be-determined record date. Each share of the preferred stock will be entitled to a dividend representing a 12% yield on the purchase price, payable quarterly, in cash or in additional shares of Series 1 preferred stock, at the Company’s option, and have 100 votes on all matters submitted to a vote of the holders of Class A common stock. The Form 1-A offering circular covers an offering of up to $20,000,000 of Series 1 preferred stock. The Company intends to use the proceeds for commercialization of its POWERHOUSE™ solar shingle and general corporate purposes. The Company intends the Series 1 preferred stock to be qualified to trade in the over-the-counter market and to be quoted on the OTCQX marketplace operated by the OTC Markets Group. On October 30, 2019, November 7, 2019 and November 12, 2019, the Company filed amendments to the Form 1-A to address SEC comments and make updates. 

We have historically incurred a cash outflow from its operations as revenue has not been at a level for profitable operations. As discussed above, a key component of our revenue growth strategy is the sale of our POWERHOUSE™ 3.0 in-roof solar shingle. We obtained UL certification for POWERHOUSE™ at the close of 2018, and only recently began the nationwide commercialization of POWERHOUSE™ 3.0. As of September 30, 2019, we had a backlog of $7.7 million which we expect will result in cash inflows from operations in future periods. To improve our financial condition and to further commercialization of POWERHOUSE™ 3.0, we are seeking additional capital with a subscription Rights Offering.  In the event we do not receive any capital with the Rights Offering and our future cash inflows from POWERHOUSE™ 3.0 are not sufficient to cover operating expenses, we would evaluate (i) further cost-reduction measures, (ii) sale of assets not associated with POWERHOUSE™, (iii) debt financing, (iv) public or private offerings of its Class A common stock, and (v) capital from Class A common stock warrant exercises by reducing the exercise price of Class A common stock warrants to induce conversion. No assurances can be given the Company will be successful with its plans to grow revenue for profitable operations.

The Series 1 preferred stock we plan to issue in our planned rights offering will have a liquidation preference of $10.00 per share, equal to its purchase price. In the event of our bankruptcy, liquidation or winding up, we would be obligated first to pay all of our liabilities, thereafter, this liquidation preference, and only thereafter any remaining amounts to holders of our Class A common stock. In the event of our bankruptcy, liquidation or winding up, there can be no assurance that there would be sufficient assets available for us to make any such payments. Any liquidation, winding up or dissolution of the company or of any of its wholly or partially owned subsidiaries would have a material adverse effect on holders of the Series 1 preferred stock and Class A common stock.

In addition, except as required by law, each holder of shares of Series 1 preferred stock will be entitled to 100 votes for each share of Series 1 preferred stock held as of the applicable record date as though each share of Series 1 preferred stock were 100 shares of our Class A common stock. As a result, depending on how many shares of Series 1 preferred stock we will issue in our planned rights offering, if any, holders of shares of Series 1 preferred stock may be able to outvote holders of shares of Class A common stock.