In response to a member of his Inner Circle, Pat McKeough looks at a penny stock seeking to market a new technology for solar cell coatings. SolarWindow Technologies has created a large working prototype of its spray-on technology. Still, it has yet to report any revenue, and bringing that solar panel to market may take more money than the company can raise.

Q: Pat: Could you give me your thoughts on SolarWindow Technologies? Thanks.

A: SOLARWINDOW TECHNOLOGIES (symbol WNDW on the U.S. over-the-counter bulletin board; www.solarwindow.com) believes it has developed a commercially viable method for spraying see-through electricity-generating solar cell coatings onto glass surfaces.

The company says it has successfully scaled up its technology from a single solar cell—only one-quarter the size of a grain of rice—to a working array of solar cells that form a one-foot-by-one-foot working prototype.

To date, SolarWindow has reported no revenue, and it used up $595,189 of cash in the three months ended November 30, 2015. Of that, it spent $441,694 on promotion and administration and $148,922 on research. As of November 30, 2015, the company held cash of just $169,057 and had $3.4 million of long-term debt (owed to shareholders in the company and mostly convertible into common shares).

SolarWindow faces many major challenges. For one, it’s far from certain whether it will be able to develop a commercial version of its spray-on technology; thin-film solar technology, and its variations, have eluded major solar power companies around the world.

As well, SolarWindow has just five employees right now, and it must find either a way to raise the funds it needs to keep operating or a major partner to buy the technology it has produced so far. Above all, it needs a great deal of growth to justify its current market capitalization of $84.9 million or anything higher.

We don’t recommend SolarWindow Technologies

Inner Circle recommendation: SELL

The ‘Over-the-Counter’ Market:

Companies trading on the U.S. over-the-counter market are said to trade on the “pink sheets,” a holdover from the days when the quotes for these stocks were printed on pink paper. Today, OTC Markets Group (formerly Pink OTC Markets Inc.), a private company, is the main provider of pricing and financial information for the over-the-counter (OTC) securities markets.

OTC Markets Group operates a centralized information network that includes services for market makers, issuers, brokers and OTC investors. This information aims to make OTC trading more efficient and improve access to capital for OTC issuers.

Companies that trade on the pink sheets usually don’t have sufficient market caps or enough shareholders to meet most stock exchanges’ minimum criteria.

Most legitimate companies with substantial growth potential will want to leave the over-the-counter market as quickly as possible and move their stock to the major markets, where financing is more available and less expensive.

For a recent report on another penny stock that is trying to get new equipment on the market, read SQI Diagnostics seeks customers for its disease detection technology.

For our view on how to avoid the pitfalls of penny stocks, read What all penny stocks have in common.