I first conceived of FAFCO when I was an undergraduate at Dartmouth, talking with my high school friend, Dick Rhodes, who was an undergraduate at Stanford University. Our idea for a manufacturing business was to bring Silicon Valley technology to an enterprise that would “do good while doing well”. Forty-seven years later, that is still the mission of our solar manufacturing company located in Chico, CA.

When we incorporated in 1972, there was no solar industry whatever, no incorporated solar companies of any sort, no trade association, essentially nothing. We pioneered the solar thermal industry in the United States. Our initial focus was on solar pool heating because solar pool heating is a thermal application that's very efficient, uses solar energy when it's most available during the warm summer, provides its own circulation and provides its own storage. Sales grew very rapidly in the 1970s and through the 1980s. Solar pool heating remains foundational to our business today.

Starting in 1972, energy prices were extremely low, but then the energy crisis of 1973-1974 came along. Energy prices began to rise, and solar pool heating became very popular based on technology that FAFCO had developed to convert fossil fuels into polymers and then use the polymers to make solar collectors. They are low cost, highly efficient, and last longer than the copper panels that had been used before.

We entered the solar water heating market in the 1980’s, which grew quite rapidly until President Reagan changed our energy policy and abruptly cancelled all national solar incentives. The entire solar industry almost disappeared. FAFCO survived.

We had another surge in the 1990s when we adapted our polymer solar collectors for storage. You can think of our storage solution called IceStor (www.icestor.com) as a thermal battery that stores electricity in the form of ice. We put our polymer solar collectors into a large tank of water. Using surplus power at night, we freeze the water in the tank and the next day, when electricity is scarce and expensive, we use the ice to air condition buildings. Our thermal energy storage business in the US grew rapidly until deregulation decimated the US industry in the mid to late 1990s. Today, thermal energy storage is making a comeback in the US as storage is now recognized as essential to realizing the full potential of other renewable energy resources. Our Asian business, in countries with defined and consistent energy policies like China and Korea, continues to perform well.

Several years ago, it became clear that people around the world favored solar electric technology. It also became clear that lower natural gas prices in the US would negatively impact the growth of solar thermal. We decided to shift our focus and pursue a combined solar thermal and solar electric panel we started working on in the late 1990’s. That product, called CoolPV, has seen two years of exponential sales growth in the US.

In 2000, we bought land, built a 50K square foot building specialized in making polymer heat exchangers, and moved to Chico, California. We benefit substantially from our close relationship with CSU Chico, especially the engineering talent developed by the university.

CoolPV (www.coolpv.com) is an enhanced solar electric panel that generates electricity and heats water using the same panel on the same valuable solar roof space. Because CoolPV cools the solar electric module, it can increase the electrical output of the PV module by up to 20%. Including the thermal energy, CoolPV generates up to four times the power of PV alone and can convert 60% of the sun’s energy into usable power compared to just 20% for PV alone.

FAFCO’s approximate 200,000 solar swimming pool customers are an ideal place to start to sell CoolPV using our dealer-direct channel. There are several other large and attractive markets for CoolPV. These include solar water heating for homes and businesses and pre-heating water for commercial and industrial applications like laundromats and food processing plants around the world. A developing market for CoolPV involves its use with ground-sourced heat pumps to heat water and homes. In countries like Korea where we are establishing our first international licensee, CoolPV could play a significant role contributing to their energy independence.

We first combined solar thermal and electric into one panel in the 1990’s. The development was resumed with a US Navy contract in 2012. To date, we have invested approximately $2M to develop CoolPV. CoolPV is tested, certified, class A fire rated, and locally code compliant. It was introduced to the market in late 2015.

Since we have direct access to an estimated $221M US swimming pool market, it seemed like the best place to start. We began selling through our established dealer network to our existing 200K customers. We will start selling to our competitor’s 600K customers and the rest of the 5.1M solar eligible swimming pool owners soon.

CoolPV addresses two critical needs faced by all pool owners. An unheated pool is essentially and unused pool, and the cost to heat a pool using natural gas is several thousand dollars per year. CoolPV uses the sun’s energy to heat the pool for free. Pools also use a substantial amount of electric power to run the pool pump. Cooling the PV panels in CoolPV systems provides more electricity than standard PV alone. Finally, CoolPV provides the thermal and electrical energy with a single, aesthetically pleasing system that maximizes the energy production on a home’s most valuable roof space.

Swimming pools are just a start. 33% of the energy used in the US is directly consumed for heating water and spaces. Nine million water heaters are replaced in the US every year. There are many other commercial and industrial applications where CoolPV can be used to offset a significant portion of the energy we use in the US for heating fluids.

Our products are made in Chico, CA. Today, we sell to the US pool market using our dealer direct selling channel to access FAFCO’s 200K existing solar pool heating customers. There are an additional 600K solar pool heating systems that have been sold by our direct competitors. There are a total of 5.1M in-ground pools in the US, and we believe over half are eligible for solar heating systems like CoolPV. Starting in 2018 we intend to begin selling to the US military and global commercial CoolPV markets.

There are two paths for rapid growth. As regional markets develop, we intend to license our CoolPV assembly machines and provide the essential polymer heat exchangers to each licensee who will optimize CoolPV sales in their respective markets. We expect to sign an agreement with our first CoolPV licensee for Korea in April of this year. They plan to integrate CoolPV with ground source heat pumps and use the energy produced to heat water and homes.

Another option for growth would be an acquisition of FAFCO by a large PV manufacturing company. That would allow FAFCO to do what it does best – produce polymer heat exchangers. In turn, it would allow the large multinational PV company to do what it does best – manufacture, distribute, and sell PV modules worldwide. The benefits from an economy of scale standpoint are obvious.

For now, we are focused on growing FAFCO organically.

Using the following assumptions, a CoolPV system is actually less expensive today than the cost of two separate systems after the federal investment tax credit:

· 5kW PV system installed at $4.00/W
· Solar pool heating system installed for $7500
· 5kW CoolPV system installed at $5.75/W

View the full comparison here.

So you can see, there are instances right now where CoolPV is financially compelling. One of the best features of CoolPV is it uses off-the-shelf PV modules and thus, as PV prices continue to decline, FAFCO and its customers automatically benefit from falling costs. While the majority of the capital we raise will be used to build our sales team and provide working capital for our growth, part of the capital we are raising will be used to further reduce the non-PV module costs of CoolPV.

CoolPV has been very well received by our dealers and end-users. The performance of CoolPV has either met or exceeded expectations. Customers are satisfactorily saving energy and heating their pools as promised.

Our sales have grown exponentially from $57K in 2015 to $570K in 2016. We are all excited by the opportunity for CoolPV as we expand our sales efforts into the very large and growing $10B US solar electric market. We look forward to building our sales team. We plan to add sales to the military and / or commercial markets in 2018.

Freeman Ford has served as our chairman and a director since 1972. Mr. Ford served as an outside board member of HB Fuller for nearly thirty years, chaired the finance committee, and served on the audit committee. Mr. Ford was president of the Solar Energy Industry Trade association, holds a Master’s degree from Stanford Business School and graduated from Dartmouth College in 1963 before flying for the Navy in Viet Nam. He is married, has four children and ten grandchildren, and is a proud owner of a CoolPV system himself.

Bob Leckinger has served as our president since June 2008 and as CEO and a director since June 2016. Mr. Leckinger is a co-inventor of our new combined solar electric and solar heating product called CoolPV®. Prior to joining us, Mr. Leckinger was the vice president and general manager of Worthington Precision Metals and held several key management, engineering and operations positions with Hitco Carbon Composites and Pratt and Whitney, a division of United Technologies Corporation. Mr. Leckinger holds a BS in engineering from Purdue University, an MBA from Santa Clara University (Beta Gamma Sigma), and was certified in production and inventory management (CPIM) through APICS.

Phil DelNegro joined the our team in February of 2017
as vice president of sales and marketing. Prior to joining us, Mr. Del Negro
was the market director for American Solar Direct from June of 2016 until
February 2017. Before that, he served as vice president of sales and marketing
and residential director of sales for Heliopower from September 2014 until June
2016. In 2014, Mr. DelNegro served as a regional sales manager with Verengo Solar. Mr. DelNegro also served in an executive capacity with Suntrek Solar Industries, Specialty Pool Products, Leslie’s Poolmart and Blue Haven Pools & Spas. His diverse and thorough background has given Mr. DelNegro significant insight into the home improvement industry and familiarity with sales and marketing best practices both in the “backyard and the boardroom”. Mr. DelNegro holds a BSBA in Marketing from Western New England University and an MBA from the University of Phoenix with a concentration on e-Business.

Terra Ayers is a dynamic operations executive with
over eighteen years of progressive human resources, materials, lean
manufacturing and management experience. Ms. Ayers joined us in 2007 after
earning an MBA from California State University, Chico. She is currently our vice
president of operations. Before joining us, Ms. Ayers worked in procurement for
a large contract manufacturer and in human resources for two subsidiaries of
Johnson & Johnson. Her specialties include waste reduction, team building,
culture development, project management and community outreach.

Bruce McCaul has served as a Director since April 2013. Since December 1996, he has also served as the President of Oxigraf, Inc., a manufacturer of oxygen analyzers based on tunable diode laser spectroscopy. From 1987 to 1990, Mr. McCaul served as CEO of ILC Technology, a NASDAQ public company manufacturing lamps for lasers, medical fiberscopes, and spacecraft and silicon photodiodes for various applications. From 1970 to 1983, Mr. McCaul was the CEO of Molectron Corporation, a manufacturer of scientific tunable lasers, infrared detectors, and medical lasers. Mr. McCaul holds a B.S. from Yale, MBA from Harvard, and Ph.D. in physics from Stanford.

David Ford has served as a director since February 1999. Between 2005 and the present, he has served as Senior Managing Partner for Gartner Consulting, Technology & Strategic Practice, North America, where he focuses on go-to-market strategies for tier one technology vendors and runs the Global Market Diligence Practice.