10-Q: Graphene & Solar Technologies Reports Q3 2024 Results, Focuses on Solar Manufacturing and Water Harvesting

Graphene & Solar Technologies reported its Q3 2024 results, highlighting a continued net loss but also strategic moves in solar manufacturing and water harvesting technologies.

Summary

• Graphene & Solar Technologies (GSTX) reported a net loss of $418,139 for the quarter ended June 30, 2024, and a net loss of $1,163,601 for the nine-month period.
• The company's operating expenses were $304,825 for the quarter and $1,041,403 for the nine-month period.
• GSTX has a working capital deficit of $2,362,521 as of June 30, 2024.
• The company is focusing on reshoring solar manufacturing with a new subsidiary, The Quartz & Silicon Materials Company Ltd (QSM).
• QSM includes Ausquartz Group Holdings, Wafer Manufacturing Company, and Southern Silicon, aiming for an integrated silicon wafer supply chain.
• GSTX is also commercializing a water harvesting technology through its subsidiary Adaquo, with units capable of producing 30-50 liters of fresh water per day for domestic use and up to 50,000 liters for commercial use.
• The company has restructured its shareholding in US Thin-Film Corporation, now holding a 19% minority stake.
• GSTX issued 25,727,307 shares of common stock to board members, employees, and consultants during the quarter ended June 30, 2024.
• 14,677,307 new common shares were issued for settlement of related party and affiliated debt and liabilities totaling $2,003,187.
• The company sold US Thin-Films Corporation to a related party for $1,000, resulting in a gain of $1,646,819 recorded in Additional Paid-In Capital.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the company is pursuing promising opportunities in solar and water technologies, the significant financial losses, working capital deficit, and internal control weaknesses raise concerns. The reliance on related party transactions and the need for further capital raises also contribute to a negative sentiment.

Positives

• GSTX is actively pursuing opportunities in the growing solar market, aiming to establish local manufacturing of silicon wafers in the USA and Australia.
• The company is developing a water harvesting technology that addresses global water scarcity issues.
• GSTX has restructured its shareholding in US Thin-Film Corporation, potentially unlocking value from its thin film technology.
• The company is exploring opportunities in critical resource assets, rare earth mineral extraction, and green hydrogen production.

Negatives

• GSTX reported a significant net loss of $418,139 for the quarter ended June 30, 2024.
• The company has a substantial working capital deficit of $2,362,521.
• GSTX has incurred cumulative net losses of $69,538,679 since inception.
• The company's ability to raise new funds through debt or equity is uncertain.
• There are material weaknesses in the company's internal controls over financial reporting.
• The company has significant related party transactions and debt.

Risks

• The company's ability to continue as a going concern is dependent on raising additional capital.
• There is uncertainty regarding the company's ability to raise new funds through debt or equity markets.
• The company has material weaknesses in its internal control over financial reporting.
• The company is subject to risks associated with legal proceedings and claims.
• The company's success depends on the successful development and commercialization of its technologies.
• The company has significant related party transactions and debt which could pose a risk.

Future Outlook

GSTX plans to be the first company in production of American made silicon wafers during Q3/Q4 2025. The company is also focused on commercializing its water harvesting technology and exploring opportunities in critical resource assets and green energy.

Management Comments

• The core business of GSTX is manufacturing the materials and technologies for a greener more sustainable future.
• With a strong ESG focus the company is committed to establishing local manufacturing of tangible products for local markets.
• GSTX plans to be the first company in production of American made silicon wafers during Q3/Q4 2025.
• The company is continuing commercialization of a unique water harvesting technology utilizing modular, self-contained units that can be solar or grid powered, and deployed in urban and rural environments.
• GSTX management remain active in the graphene sector and believe that graphene has a commercial future.

Industry Context

The company is operating in the renewable energy sector, specifically solar and water, which are experiencing significant growth and investment. The solar market is growing strongly (>10% annual growth) and the company is aiming to capitalize on the trend of reshoring manufacturing. Water scarcity is a major global challenge, and the company's water harvesting technology addresses this need.

Comparison to Industry Standards

• The company's focus on reshoring solar manufacturing aligns with the trend of governments incentivizing local production, particularly in the USA and Australia.
• The company's water harvesting technology is unique and addresses a critical global need, differentiating it from traditional water treatment companies.
• The company's financial results are weak compared to established companies in the renewable energy sector, with significant losses and a working capital deficit.
• The company's reliance on related party transactions and debt is a concern compared to industry standards for corporate governance.
• The company's internal control weaknesses are a significant issue compared to industry best practices.

Corporate Governance

Related Party Transactions

• MI Labs Pty Ltd, controlled by CEO Jason May, provides management services for $25,000 monthly.
• CSA Liang Pty Ltd, controlled by director Andrew Liang, provides corporate advisor services for $5,000 monthly.
• Sativus Investments, controlled by COO Paul Saffron, provides management services for $20,000 monthly.
• Pagemark Limited, controlled by director David Halstead, entered into a convertible note agreement with the company.
• Allegro Investments Limited entered into a convertible note agreement with the company, sharing a director with GSTX.
• A liability due of $1,536,006 was settled with Mr. Jason May in exchange for 10,005,500 shares.
• US Thin-Films Corporation was sold to Thin Film Technologies Ltd., controlled by director David Halstead, for $1,000.
• A liability due of $200,997 was settled with Mr. Andrew Liang in exchange for 2,009,970 shares.

Stakeholder Impact

• Shareholders face the risk of further dilution due to potential capital raises.
• Employees may be impacted by the company's financial instability.
• Customers may benefit from the company's innovative technologies in solar and water.
• Suppliers may be affected by the company's financial challenges.
• Creditors face the risk of non-payment due to the company's financial difficulties.

Next Steps

• The company plans to commence production of American-made silicon wafers in Q3/Q4 2025.
• The company will continue commercialization of its water harvesting technology.
• The company will explore opportunities in critical resource assets, rare earth mineral extraction, and green hydrogen production.
• The company will seek to raise additional capital through debt and/or equity markets.

Key Dates

Keywords

solar manufacturing, water harvesting, silicon wafers, graphene, thin film technology, renewable energy, related party transactions, financial results, capital raise, working capital deficit