SIRC Analysis – Q3 2022 10Q

The SIRC 10Q is finally out after using up their full NT time, and I am very excited to write this one. Mostly good, but some bad… let’s get right to it!

Income Statement


Right away on the topline we’re seeing almost 5x from Q3 2021 which is staggering. But, while awesome news, this was to be expected. Versus prior quarter, however, we’re seeing an actual drop in revenue from 66m to 57m. Comparing subsequent quarters is not a great metric as it doesn’t factor in seasonality (which SIRC definitely has), but it is still a somewhat useful comparison.

For YTD, they are obviously crushing it with 150m in revenue for the first nine months. Incredible. It seems all but given that they will more than eclipse the original 200m in revenue goal for the year.

If we take a deeper dive into where the revenue growth is coming from, we see that it is primarily driven by their exploding commercial solar division. The commercial division had 42m in sales in the quarter versus, well, zero sales in Q3 2021. We saw roofing decline from 6.2m to 4.8m, while EV charging is still too early to tell. Lastly, residential was up to 10.3m from 6.7m, so fairly modest.

But it’s clear to say that commercial is clearly the driver of this company, and we should expect the bulk of the company’s revenue / earnings to come from this segment in the near-term. That being said, I have high hopes for EV charging in the longer term… it just looks like it hasn’t really gotten started yet.


Margins once again continue to stay high, though I think we’re finally seeing a bit of a “reversion to the mean”. For this quarter, we’re seeing an operating margin of around 13%, which is actually what I expect SIRC’s terminal operating margin to be when they are more mature. For the first nine months, however, we’ve seen an operating margin of 22% which is awesome. I am personally not expecting that to last, but boy I hope they stay around as long as possible.

Balance Sheet

On the assets side, I don’t want to get into this too much until I talk about cash flow below, but just know we’re still seeing the same story when it comes to SIRC’s assets. Namely, we’re still seeing a huge AR balance and not enough cash… oh the cash woes continue… but not to fret! We’ll get to that later.

From a liabilities perspective, I’ll leave a lot of that discussion to cash flow below as the company is still in mini-debt issuance mode to meet short term cash flow needs until they clear their AR. More there…

Cash Flow

As I alluded to above, the company is still not cash flow positive and we’re seeing a cash burn of around 5.6m for the year which is honestly not that bad on 150m in revenue. Now, that being said, and I could write four articles on this, let me rapid fire the situation:

  • AR is growing because revenue is recognized in contract stages based on certain milestones: signing contracts, work begins, etc.
  • Therefore, a lot of revenue is recognized that isn’t billed yet, it’s called “Work in Progress Receivables”. After they’re billed, they’re just called “Accounts Receivable”.
  • Because of this, AR has growth by 45m since December 31, 2021 and is currently at around 76m. So clearly, they are collecting some chunk of cash as that 76m receivable is far below the prior 12-18 months of revenue. It’s just not QUITE enough yet.
  • What this means is the company is having to issue short term debt, basically bridge loans, to tide them over until that AR rolls over and we start seeing positive cash flow.

Let’s elaborate on that last point…

Financing, Debt, and Dilution

I feel like I’ve talked about this ad nauseum, but just to recap. SIRC is having some big problems getting a large financer to loan them significant cash. Our first hope was Arbiter Bank and their big loan of 42m at a low interest rate. Well that didn’t happen (it’s even worse see below).

So next the company has worked on getting their regulatory filings in order and are fast tracking to NASDAQ (2023 is the year apparently). The hope is that once the company is on a better exchange and has a track record of SEC filings, we’ll see bigger financial institutions lining up to lend SIRC traditional corporate debt at a “not Tony Soprano” interest rate… we’ll also get to that.

So what did this 10Q tell us:


To help cover their cash needs and clean up their preferred share structure, we saw the following:

  • SIRC sold an investor 3.5m Series B Preferred Shares, worth 35m common shares, at an effective per share price of 0.17. That’s basically market price, so just ok.
    • These were subsequently converted into those 35m common shares.
    • These were theoretically used to cover cash flow deficits
  • The CEO converted 3.7m Series B Preferred Shares into 37m common shares. No harm no foul, those were always considered shares in my mind and you should have considered those too.
  • The company clarified that this was so they could use 37m common shares as collateral for a 10m bank loan to cover their (forecast) negative future cash flow.
    • The company is therefore alleging they will not need any more dilution for CASH FLOW COVERAGE (don’t come at me with your pitchforks if they dilute for an acquisition 😊)
  • 1.5m Series B Preferred Shares were converted for 15m shares for unrelated reasons. These need to go before the NASDAQ uplist anyways so I don’t care.
  • 45m common shares were returned and cancelled as a result of the Cornerstone lawsuit, great news as always but we basically already knew this.

So that’s the dilution front… it seems like the storm has passed…


This was probably the most unfortunate part of the 10Q (except for the lawsuit I mention below). The company seemed to be getting a tad needful (desperate is a bad word) for short term cash. Some oddness of their debt that I noticed:

  • They took out an 888k loan with 40% interest, payable WEEKLY, over 36 weeks. Don’t get me wrong, I love the company, but that’s a hilarious loan. They’re basically being charged a VIG of 0.94% a week… I’ll leave it at that before I get myself in trouble.
    • There was also a mini 160k loan for 52 weeks at 44%(!) interest paid weekly.
    • On the bright side, they aren’t toxic convertible notes like most garbage OTC companies would get. So kudos to SIRC for resisting that.
  • They needed a “bridge loan” from Brett Rosen. Brett is my guy and of course it doesn’t have “Richie Aprile” terms on his loans, but still not great to see that they need it.
  • They have 2.4m note outstanding with an investor and… the investor’s bank account got closed and they have no contact info on file… only on the OTC!
  • On the flipside, they lent Arbiter Bank 4.2m and it’s currently in default… yep. The company is demanding payment and they’re currently out that cash. So not only did they get no funding from Arbiter, they’re now also out 4.2m… yikes.
    • As an aside, they previously said it was a “deposit” in Arbiter’s accounts for the loan that never materialized. However, the 10Q said that they have sent a demand payment letter” to Arbiter. So something tells me they want their deposit back and can’t get it. But there may be more to it.

Now… the above sounds pretty bad… but I needed to say it. HOWEVER (before those pitchforks come back out), I think their financing will get a million times cleaner as they get closer to uplisting to NASDAQ. These will all just be funny anecdotes in a few years. But I can’t just ignore these as an amateur analyst.

Bottom Line

So I went into a lot up there on financing… let’s sum it up like this: they had to take out some goofy debt and some non-toxic dilution to weather the storm. They are now saying that dilution to meet current cash needs is over. Based on my math, and if the bank loan actually comes through, I agree with their assessment. But that 10m bank loan needs to happen.

Lawsuit Against… Pablo Diaz

I for some reason missed this when it first came out on Mediatek, but we get to finally see this in a filing. SIRC’s (I guess) former President Pablo Diaz is being sued by the company… I’ll quote verbatim below from the 10Q:

“SIRC v. Pablo Diaz Curiel – This is a pending lawsuit in the Superior Court of California, County of San Diego (Case No. 37-2022-00036984-CU-FR-CTL). SIRC initiated suit on September 15, 2022, alleging, among other things, that Diaz fraudulently induced SIRC into acquiring a 60% interest in USA Solar Networks LLC. SIRC obtained a temporary restraining order against Diaz preventing him from selling the 12 million shares of SIRC stock he received through the acquisition. SIRC intends to amend the complaint to seek damages related to the acquisition of the remaining 40% interest in USA Solar as well. In the suit, SIRC seeks rescission and/or monetary damages in excess of $40 million. The matter is still in the pleading stage.”

In short, he “fraudulently induced” SIRC into purchasing his company, USA Solar, which was about a $10m acquisition, mostly in shares. They are suing for 40m dollars and don’t want to let him sell any of his 12m shares.

Yowza… I swear I remember the CEO praising Pablo and all that he was doing in the past… sounds like USA Solar wasn’t all it was cracked up to be. My personal theory is Pablo as an employee wasn’t bad necessarily, and the acquisition was a way to bring him into the company. But the company itself was allegedly hot garbage and he allegedly lied about it, which is wrong (if found to be true, of course).

I’m not a lawyer and I don’t have detailed knowledge of the case, so I’m just speculating…either way this is not the best thing to see. I will leave my comments at that and I’m anxiously awaiting some more info from the company. I just hope he was not somehow extremely integral to all of the prior growth… but my gut tells me no and neither has past Discord posts from the company.

Miscellaneous Points

Two small tidbits I found in the report:

  • They put down a 250k deposit on a 13m land purchase… that’s a hefty land purchase! Could be an office / warehouse combo?
  • 11.2m is still owed to related parties (mostly past management), look for that to get paid off with high priority once large funding comes through.

Closing Thoughts on 10Q and Share Price

I know some of the above sounded sort of negative, and it should. But on the whole, I am more bullish than ever on SIRC’s future. Minus all of the short-term cash flow / debt issues, the company is making amazing progress. I would be very surprised if they did not uplist to the NASDAQ by early 2024. Couple that with their staggering growth and the tailwinds of a rapidly growing industry, this company is primed for a huge next couple of years.

My key upcoming catalysts for now are basically as follows in terms of importance:

  • Significant debt funding above $50m, at least.
  • The cancellation of all outstanding Series B Preferred Shares via buybacks and they retire the share class.
  • Continued exponential revenue growth into 2023, with revenue in excess of 300m
  • NASDQ uplist concrete filings / dates
  • Repayment of all “non-traditional” corporate debt
  • More detail on the Diaz lawsuit

In the short term though, I think the share price has really been dipping due to the dilution we all thought was over and they’re lack of funding. Again, this is all very temporary in my opinion and is actually providing with a great buying opportunity.

All in all, I’m heavily bullish still and am looking forward to more great things to come. Thanks for reading!


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