DayStar Technologies Inc. has developed a thin-film copper-indium- gallium-selenide solar cell known as a CIGS solar cell for the direct conversion of sunlight into electricity. The company is developing a high- volume manufacturing process that it believes could result in solar electricity power production at commercially viable rates. DayStar Technologies Inc. has a market cap of $42.5 million; its shares were traded at around $1.27 with and P/S ratio of 708.9.
Highlight of Business Operations:Research and development expenses. Research and development expenses were $4,886,104 for the three months ended March 31, 2009 compared to $2,980,223 for the three months ended March 31, 2008, an increase of $1,905,881 or 64%. The increase is primarily due to the ramp up of development efforts for our monolithically integrated CIGS-on-glass modules and the manufacturing processes we will utilize for this product. Throughout the year in 2008, we hired several key individuals required for such development efforts and are currently in the process of constructing our initial manufacturing line in order to commercialize our products. As such, we experienced an increase in personnel-related costs during the first quarter of 2009 as compared with the same period in 2008, as well as an overall increase in operational expenses for materials and supplies in this area. Additionally, we experienced an increase of $157,484 in share-based compensation provided to research and development personnel.
Selling, general and administrative expenses. Selling, general and administrative expenses were $1,744,166 for the three months ended March 31, 2009 compared to $2,737,286 for the three months ended March 31, 2008, a decrease of $993,120 or 36%. The decrease in selling, general and administrative expenses was primarily due to a reduction in personnel costs during the first quarter of 2009 as compared with the same period in 2008, including a decrease of approximately $557,453 in share-based compensation provided to selling, general and administrative personnel.
Interest expense. Interest expense was $20,728 for the three months ended March 31, 2009 compared to $12,451 for the three months ended March 31, 2008, an increase of $8,277. The increase in interest expense was primarily due to the recording of interest on tenant improvements financed by the landlord in our Newark, CA facility, partially offset by a decrease in interest related to notes and capital leases payable.
(Loss) gain on derivative liabilities. The loss on derivative liabilities was $114,070 for the three months ended March 31, 2009 compared to a gain on derivative liabilities of $1,791,025 for the three months ended March 31, 2008. The warrants issued in 2006 in conjunction with a convertible note are considered derivative liabilities and are therefore required to be adjusted to fair value each quarter. A decrease in our stock price during the period results in a decrease in the warrant liability and a gain on derivative liabilities. Conversely, an increase in our stock price during the period would result in an increase in the warrant liability and a loss on derivative liabilities. During the three months ended March 31, 2009, our common stock price increased which caused an increase in the fair value of the warrant liability. This resulted in a loss on derivative liabilities of $114,070. Our stock price decreased during the three months ended March 31, 2008, which resulted in a gain on derivative liabilities of $1,791,025.
At March 31, 2009, our cash and cash equivalents totaled $6.5 million compared to $17.1 million at December 31, 2008. The decrease in cash was primarily due to the payment of our quarterly operating expenses, payment for certain equipment on order for our initial production line and continued development, as well as leasehold improvements completed in our initial manufacturing facility in Newark, California during the first quarter of 2009. We are in the development stage, and as such, have historically reported net losses, including net losses of $7.7 million and $4.5 million for the three months ended March 31, 2009 and 2008, respectively. We anticipate incurring losses in the future, as we complete the build-out of our initial module manufacturing line and enter commercialization of our products, invest in research and development, and incur associated administrative and operating costs. Our financial statements for the three months ended March 31, 2009 and for the year ended December 31, 2008 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As noted herein, as a result of our current liquidity, there is substantial doubt as to our ability to continue as a going concern.
Since our inception, we have incurred net losses, including net losses of $26.3 million and $36.1 million for the years ended December 31, 2008 and 2007, respectively, and $7.7 million for the first quarter ended March 31, 2009, and have incurred negative cash flows from operations. As a result of ongoing losses, we had an accumulated deficit of approximately $104.6 million as of March 31, 2009. We expect to continue to incur significant losses as we enter commercialization and expand our manufacturing capacity and may never achieve or maintain profitability. We expect to continue to make significant capital expenditures and anticipate that our expenses will increase to the extent we continue to develop our manufacturing technologies, build manufacturing lines, establish our sales and distribution network, implement internal systems and infrastructure and hire additional personnel.
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