Is XsunX Being Manipulated? (XSNX)

Mar.16.06 | About: XsunX, Inc. (XSNX)

I've received a number of comments about XsunX (XSNX), all from the same person. I decided to look into them. They are working on transparent solar cells, have a weird history, and a weird structure. The only technological information I can find on them is all paid advertising (from IPODesktop and others) masquerading as research.

Each of their press releases are misleading. They offer one key statement, and then go on about intentions. For example, the latest one has the phrase "...has begun the construction of a mass production system...". That seems to imply, and is likely intended to give the impression, that commercialization and mass production is around the corner. But all that it really says is that they broke ground on a new building or something. They made some statements in 2004 about technological developments (4% conversion efficiency), but nothing technological since then. By the way, what they claim to mean by "4% efficiency" is "4...Watts of direct current...per square foot of PowerGlass film" [here, page 5], which is not the definition of efficiency, which is always a measure of power out versus power in.

I've looked through their entire web site, and their entire FY 2005 report. A few things become clear. They are nowhere near having a product, have never generated any revenue, and don't know when they will. They provide no detail on their technology other than links to patents, which they have licensed. Otherwise it's almost all marketing. They are a single person company, with a single office, rented for $750/month. Any actual research or other development work could only be performed at, with whom they have a tight relationship (patent licensing -- President of one is Chairman of the other). They claim 15 "technologists and support staff" [here, page 14] available to them, but show no salary or other costs associated with them. They do have $0.5M in R&D expenditures for Fiscal Year 2005, but don't detail what that bought.

They cut a $5-10M deal with an early stage investment fund, such that that fund basically owns them, and needs the shares to stay above $0.38.

As of 30 Sept 2005 they were thinking "that their workforce is likely to increase to 8". That means 7 new hires, with 3 of those in admin, and 4 in marketing and sales. Since they don't have anything to sell, that means 4 in marketing.

A Google blogsearch on them returns 274 hits, with nearly every one based on one of their press releases, or at a disreputable site sponsored by a PR agency, or a stock quote reference, or otherwise either suspect or without depth. A general Google search on them returns 85,700 hits, most of similar quality.

About the only legitimizer they have going for them is that they won an award in 2005 from The World Technology Network (WTN), which is sort of half-way between the Nobel committee and a PR firm. For instance, they put out newsletters comprised of information written by their members - that's PR. Corporations can influence their possible membership by sponsorship. I learned a while ago from a business advisor (although I never paid him for the advice), that if you want someone to come to your function, offer them an award. With that in mind, everyone involved in the WTN may be there either through sponsorship or awards bribery. On the other hand, they have a list of first rate names of members, which if they really are all active participants lend the organization quite a bit of legitimacy. So, is the WTN a PR firm, or a true science validator, and how did XsunX get their endorsement? As near as I can figure, they were an exhibitor at the 2005 conference, which automatically makes them a member and eligible for votes for 2005, which they then won. And it's possible that they bought their way in.

So, if they are as small and illegitimate as their SEC filing indicates, they have no business getting a big award, unless that awards agency didn't do their homework, or isn't really all that respectable, or just flubbed it. Or they are a really great investment, and I'm just missing it. Even then, they are only story, since they have no products or revenue. And stories are not businesses.

So, I think they've got nothing, they hoodwinked the WTN, they hired all those promised PR people and they are doing a damn fine job, because XSNX has moved absurdly, from about a dime, to $2.25, just like (or better than) the private investors need them too. The money is at Cornell Capital, the technology is at MVSystems, and XsunX is just a guy. He's probably a really nice guy.

XSNX 1-yr chart:

From what I read in their SEC filing, they are a perfectly fine development stage company. They are small and just struggling like any small company to get along, and I don't mean to kick them. I don't think they are a fraud. They are a perfectly fine penny stock, provided they have no exposure. But they are not a legitimate investment in the leagues of STP or even SunPower. It looks to me like the stock is being manipulated. Playing in manipulated penny shares with no products is just not our game. Avoid.

[Note: I realize that by even talking about these guys I've fed into the PR machine (even bad PR is better than nothing), but I made the mistake of mentioning them once earlier, only in the context of stating that I won't talk about them, and now I feel the need to correct that. This is the best I can do.]

« Any opinions expressed on the Seeking Alpha sites are those of the individual authors and do not necessarily represent the opinion of Seeking Alpha or its management. »