DayStar Technologies, Inc. (DSTI)

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DayStar Technologies, Inc. (DSTI)

Q2 2008 Earnings Call Transcript

August 6, 2008 5:00 pm ET

Executives

Alexis Pascal – IR, Stapleton Communications Inc.

Stephen DeLuca – CEO

Bill Steckel – CFO

Analysts

Colin Rusch – Broadpoint Capital

Jonathan Hoopes – ThinkPanmure

Adam Krop – Ardour Capital

Patrick Forkin – Tejas Securities

Presentation

Operator

Good evening and welcome to the DayStar second quarter 2008 earnings conference call. All lines have been placed on a listen-only mode throughout the duration of today's conference. Today's conference is being recorded. If you do have any objections, you may disconnect at this time. I would now like to turn the call over to Alexis Pascal. Thank you. You may begin.

Alexis Pascal

Thank you and welcome, everyone, to the DayStar second quarter 2008 financial results conference call. Speakers today will be Dr. Stephen DeLuca, the company's CEO, and the company's CFO, William Steckel.

Before we begin I would like to remind you that some of the comments we will make on this call are forward-looking including without limitations statements regarding expectations of further technological development, as well as timing and ability to scale to production capacity and complete the build-out of a production facility. These statements are only predictions based on assumptions that are believed to be reasonable at the time they are made and are subject to significant risks and uncertainty. You should not rely on these forward-looking statements as representing our views in the future, and we undertake no obligation to publicly update or revise these statements. Our actual results may differ materially and adversely from any projections and forward-looking statements discussed on this call. Our annual report on Form 10K-SB and other forms on file with the SEC identify important risk factors and uncertainties that you should consider and that may affect whether our forward-looking statements prove to be correct.

I will now turn the call over to Dr. Stephen DeLuca. Steve?

Stephen DeLuca

Thanks, Alexis, and thanks, all of you, for joining us today. With me today is our CFO, Bill Steckel. Bill will be making the presentation of our financial disclosures, but before that let me remind you that on our update call last month we said that we expected to begin depositing CIGS in Big Baby. I'm happy to report that we started work with the first CIGS deposition last week, and we are now working on refining the deposition parameters to give us a long term stable process. After Bill's presentation I'll give you a recap of our operational progress to date and set out the milestones for the next quarter.

Now let me turn it over to Bill.

Bill Steckel

Thank you, Steve. I would also like to thank everyone for joining us on today's call. I'm very excited to add my strategic financial leadership to the company and to be a part of the DayStar team. I will review our financial results for the second quarter before turning the call back over to Steve. I encourage all shareholders to review the details of our operations and financial condition that will be disclosed on Form 10Q which we expect to file with the SEC this week. Now let's review our results for the second quarter.

We incurred $3.9 million in research and development expenses during the quarter, an increase of $1.2 million or 46% compared to the second quarter of 2007. The increase reflects the continued ramp of personnel costs and other spending for the development of our CIGS-on-glass modules and the manufacturing processes we will utilize in our new factory. The higher costs were primarily due to the addition of key technical personnel, consumable tools and supplies, and share-based compensation expense.

Selling, general and administrative expenses in the second quarter were $2.1 million, an increase of $300,000 or 17% compared with the same quarter last year. This increase was primarily due to personnel costs to support our progress toward commercialization of our CIGS-on-glass modules. Total other income and expense was a loss of $574,000 compared with a loss of $1 million incurred in the second quarter of last year. Interest income increased by $198,000 due to the higher cash balances from our secondary offering in Q4 of last year, and we no longer incurred amortization of note discount and financing costs, which was an expense of $267,000 last year. Our loss on derivative liabilities was $803,000, a slight increase compared with $750,000 in Q2 of '07. Our net loss in the second quarter of 2008 was $7.3 million or a loss of $0.22 per share. This compares with a net loss of $6.4 million or a loss of $0.42 per share in the second quarter of 2007. The per share loss was calculated on the weighted average common shares outstanding of 33.1 million this year compared with 15 million last year, reflecting our Q4 '07 secondary offering. The increased loss mainly reflects higher research and development expenses for our CIGS-on-glass module and manufacturing process development.

Now turning to the balance sheet, we had $47.9 million in cash, cash equivalents and short-term investments at June 30, 2008, compared with $56.3 million at the end of the first quarter. We continue to invest all of our excess cash in treasury instruments. We had total liabilities of $5.8 million and total stockholders’ equity of $56 million at the end of the second quarter of 2008. During the second quarter, we spent net cash of approximately $3.8 million for operating expenses, a modest decline compared with the first quarter of this year. We invested $4.5 million in capital expenditures in the second quarter in accordance with our stated plan to ramp toward commercial production. This compares with $1 million invested in the first quarter of 2008. In total our cash usage in the quarter was $8.4 million compared with cash usage of $5.1 million in the first quarter. Again this increased usage of cash is in line with our stated operational objectives. As we anticipated our commitments for capital expenditures increased significantly. As of August 4, we have outstanding purchase orders for approximately $15.6 million in production equipment. We have commenced the fit-up of our new manufacturing facility in Newark, California, and we expect to begin receiving production machinery in September. As we have reported previously, we anticipate the proceeds from our equity offering in 2007 coupled with some additional funding will be sufficient for our operations, the fit-up of the new factory, and our initial manufacturing line. We are actively evaluating appropriate financing alternatives. That completes my review of the financial information for the second quarter.

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