What happened to Rayton Solar and the investors of the last round?
Rayton Solar has filed a Doing Business As (DBA) for "Rayton." The two names are for the same entity, Rayton Solar Inc. The previous investors are current owners and maintain the shares which were purchased in our previous rounds.
What happened to solar?
Over the past few years there has been significant change in the solar industry. Factors such as low cost Chinese manufactured panels, and trade tariffs have made it difficult for solar companies such as Sun Edison, Solar World, Vivint, and Solar City to continue with their business. Management made the decision to create a diversification of Rayton’s product applications by switching our focus to GaAs wafers rather than solar cells alone. The underlying idea is to protect our shareholders and business from volatile market conditions. GaAs wafer production uses the same technology we have already developed and has applications in automotive, aerospace, 5G, LED, as well as solar industries. We believe this is a stronger approach to commercialization and yields the path of least resistance. Once we are in a revenue generating phase then we could be in a position to shift focus towards solar once again provided that the market conditions allow for it.
I have read negative articles online about the company. Why is this?
We are aware of certain articles but do not know the motives behind them. The articles may have been written for a number of reasons including misunderstanding of Rayton’s offering intent, competition, an attempt to go viral, or Rayton having a high profile spokesman. We have been fully transparent about the current stage of development of the company, our business plan, and financial condition, which is further documented in our audited financials which can be found on the SEC website. All of our Principals, Board of Directors, and greater than 20% shareholders are listed by name, and as part of the offering each has undergone a background check. You can verify this information on the SEC.gov website located here:
We have nothing to hide, and the claims of these anonymously written articles have not come true. Many companies experience negative feedback and since we have been in a non-revenue R&D phase it is easy for anyone online to say something negative about us. In order to protect and inform prospective investors, our filings include a thorough discussion of the risks of the investment which are easy to magnify in a negative op-ed. We have moved forward with our plan of operations, and we continue to maintain diligence on behalf of our shareholders in order to create value for the company.
What happened with the money from the last raise?
The funds from the last round were used to construct a state of the art particle accelerator which powers our proprietary process. We ran an engineering team to nail down our exact wafer production process and design the systems that will be used in the Beta Phase of operations. Additionally, we studied the industry and met with leading research institutions to find the product which offers Rayton the path of least resistance to a revenue generating phase.
What is the founder’s compensation?
As identified in our public filings, our CEO, Andrew Yakub, was due $150,000 in 2017, which was reduced to $125,000 in 2018. We believe this compensation is in line with where it should be for the time and effort required for the company. It should be noted that Andrew Yakub is fully invested in the success of the company, and has invested $255,000 into the company in the form of convertible notes, similar to what is being offered now.
If you were undercapitalized in the past, how will this raise change things?
We believe that with the proceeds from this round we will be able to successfully complete the Beta Operations phase which will give us the milestones needed for the revenue generating phases. However, additional capital will be required to reach the revenue generating phases after completion of our current Beta Operations phase.
How do I make returns and what is the time table for such return on investment?
This round is structured as a convertible note which pays 10% interest after Dec 2020 and converts to common stock with a 30% discount upon the triggering event. Once the note is converted to common stock you could potentially see a return after a liquidation event occurs for the company. This could be in the form of a buyout or IPO. You should consider this to be a long-term investment decision rather than a quick return. For instance, the timetable for Rayton to generate revenue is described in Phase I and Phase II in our plan and video. We estimate this to be 1 - 3 years following receiving sufficient additional funding for production capital and securing sales contracts.
How does this round make the investors money?
The notes convert once an additional $5M has been raised for the company in a qualified equity financing round. The valuation for this current round of investors is what the future valuation on that $5M round is, with a discount rate of 30% (i.e., if the future round is at a $30M valuation, these notes would convert into shares at a valuation of $21M). If by that future qualified equity financing round the value of the company exceeds $50M, then the notes would convert at a valuation of the lesser of $50M, or the future round valuation with the discount of 30%.
If we do not undertake a qualified equity financing round by the maturity date, then the note requires that investors be paid 10% interest on their notes, with the notes converting to common stock at the $50M valuation. We chose the 10% interest rate as it is a higher rate of return than what can be found in an S&P 500 Index Fund in order to compensate for the risk inherent in this investment.
Were you taking advantage of shareholders in the 2017 raise?
We never deceived or took advantage of anyone. At the time of our 2017 offering under Regulation A+, we believed that the valuation was in line with where it should be as a pre-revenue company with innovative technology that could dramatically impact the photovoltaic market. For instance, Solar City’s acquisition of Silevo in 2014 for $200 million influenced our valuation decision. We never obtained a third-party analysis to determine the valuation, it was always the belief of management. While we maintain that we can achieve our Regulation A+ valuation as a company, through this offering we would like to give any previous investors a chance to support us through a convertible note which converts at a 30% discount to a future valuation. This removes the risk associated with placing a valuation on the company at this early stage. We have pivoted as a company and entered a new industry at a new market time. We believe these new terms are appropriate for the pivot and market timing.
What about the selling security holders in the 2017 raise?
Rayton Solar closed an accredited investor round in 2016 for $2.8M. During the contemplation of our Regulation A+ raise the management decided to allow some of these investors to have the ability to liquidate some of their shares which were previously purchased. At this time it was still unclear of the distinction between a Regulation A+ offering and a public offering. In an initial public offering (IPO) it is common practice to allow earlier shareholders who took a greater risk by investing earlier into the company to liquidate their shares during the initial public offering. We decided to treat our Regulation A+ offering as what is common practice in an IPO and allow for this liquidation provided that the company raise sufficient funds first. We sought to ensure that new investors were fully aware of this, and disclosed the information regarding selling securityholders in bold and at the top of our offering circular.
During the regulation A+ raise in 2017, it became clear that the marketing cost of raising capital under this type of offering was greater than anticipated. As such, we decided it was not in the interest of the company to allow for previous shareholders to liquidate their holdings at that time. We ended the campaign before the triggering event of $7M was met, and there has to date been no liquidation by earlier shareholders. We intend to get the company to the point where an acquisition or IPO can occur for the company before shareholders are able to liquidate.
Is your technology toxic?
We do not believe that there are any unique environmental or health related concerns as a result of using GaAs wafers. Once produced, our wafers are safe to hold by hand. We will also be selling directly to other companies, so by the time a consumer interacts with a product with a GaAs wafer, that wafer would be fully enclosed in an electronic device.
Are there better, safer, cheaper approaches available?
Not that we are aware of.
Is 5G safe?
Yes, 5G is as safe as 4G and 3G.
Why don’t you answer social media and communicate with investors more?
We apologize that you have not been able to reach us, and this was not meant to be taken personally. We have over 4,000 shareholders and as a team of scientists and engineers, customer service is not something we were able to allocate a lot of resources towards. We have recently signed a social media management firm to assist us in this, and we hope that our digital presence will improve to keep our shareholders informed and up to date.
Why don’t you have a regular website?
We are in the process of building out a new website, and it will be online shortly. Thank you for your patience and understanding.
Why haven’t VC’s invested in you?
Conventional Venture Capital invests in certain industries, and over the past few years solar has not been one of them. Factors such as low cost Chinese manufactured panels, and trade tariffs have made it difficult for solar companies such as Sun Edison, Solar World, Vivint, and Solar City to conduct their business and this has made VCs steer clear of the solar industry. We believe that with Rayton’s pivot and new direction we will be able to approach institutional and strategic capital, and this is our goal. Once the milestones are accomplished in the Beta Phase of production, we believe we will be in a strong position to secure this type of capital.
Why haven’t you been acquired already?
It takes 5-10 years for this kind of technology company to reach maturity. We started in 2014, and we believe we are already 5 years into that 5-10 year maturity timeline.
Larger acquiring companies have high-volume production requirements and typically do not make an investment unless their production needs can be met. We believe that getting into Phase II will prove out the scalability to such companies. We believe that the milestones from the Beta Phase of operation will bring us much closer to this goal.
Why are you funding through crowd sourcing? Can you not get the money from anyone else?
It is true that conventional venture capital was not making solar investments over the past couple years. This is why we chose equity crowdfunding in 2016. The nature of our business requires a high amount of capital expenditure before commercial proof of concept can be met. The JOBS Act of 2012, which allowed for equity crowdfunding, was intended for companies like ours that require this growth capital before conventional funding can be obtained. We have used the proceeds from equity crowdfunding to construct a state of the art particle accelerator which powers our proprietary process. We ran an engineering team to nail down our exact wafer production process and design the systems that will be used in the Beta Phase of operations. Additionally, we studied the industry and met with leading research institutions to find the product which offers Rayton the path of least resistance to a revenue generating phase. We believe the JOBS Act has worked as intended, and are thrilled to be moving into a phase where conventional capital might be obtained for our company as we enter into future growth. We are thankful for the investors who believed in us, and are honored to have them on this journey with us. It has not been easy. We have stuck the course, and plan to continue to do so as we work for our investors.