2015 Annual Report About STR

2015 Annual Report About STR STR manufactures encapsulants for the photovoltaic solar module industry. Our Photocap® encapsulants are of high quality due to our proprietary technology developed under contract to the predecessor to the U.S. Department of Energy in the late 1970s. Since pioneering this technology, we have the longest track record of field performance for solar encapsulants in the industry. For over 35 years, we have been advancing solar energy as a key renewable, safe and clean electricity source. We strive to be the best at what we do while maintaining the highest ethical standards. For more information about STR, please visit www.strsolar.com. STR-IQ Core Value System SAFETY The safety and well-being of our employees is our highest priority. TENACITY We pursue continuous improvement with persistent determination and view every challenge as an opportunity. RESPONSIBILITY We hold ourselves and each other accountable and strive to be a responsible corporate citizen of the communities in which we operate. INTEGRITY Integrity is at the core of everything we do, every product we make and every service we offer. QUALITY Quality is an integral part of every day and every job. FORWARD-LOOKING STATEMENTS This Annual Report may contain projections or other forward-looking statements regarding future events or the future financial performance of STR Holdings, Inc. We wish to caution you that these statements are only predictions and that the actual events or results may differ materially. We refer you to Forward-Looking Statements in section 7 of the Form 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operations. LETTER FROM THE CEO To my fellow shareholders, I’d like to begin by thanking you for your patience in waiting for our annual shareholders meeting and the publication of this 2015 annual report. We began the year with a vacant board seat left over from late 2015. We were very pleased to invite Julia Ju to fill that vacancy during the first quarter of 2016. Ms. Ju has invaluable experience in both upstream and downstream solar, having held several prominent positions in sales and executive leadership. Following two subsequent director resignations in mid-year 2016, we were also pleased to add Ocean Yuan and Dr. Gokalp Bayramoglu as independent directors. Mr. Yuan has extensive experience in solar, both in China and in the United States, where he has built his company, Grape Solar, into a leading on-line retailer of solar hardware. Dr. Bayramoglu, appointed in August of 2016, served as Director of Engineering for Apple, Inc., and in several other executive leadership posts in high-tech enterprises before earning his U.S. law degree and turning his attention to intellectual property law, which he currently practices through his law offices in the U.S., China and Turkey. The breadth of expertise brought to our board through the addition of these directors should complement the existing team and give us broader perspective on strategic considerations going forward. Looking back on 2015, we continued to face strong headwinds and complexities in China, where despite greatly improved product performance and the assistance of Zhenfa, our strategic partner, we have largely been unable to take significant market share. In June of 2016, we began the process of changing local management of our factory in China, installing new leadership in August of this year. Demand for our products in Western markets declined as module manufacturing continued to move offshore and Chinese module manufacturers took over some continental capacity. Despite disappointing sales of just under $30 million for the year, we were able to make significant progress in cost reduction, decreasing our gross loss from $5.2 million in 2014 to $1.8 million in 2015. Similarly, we were able to reduce our net loss from $23.6 million in 2014 to $9.5 million in 2015. While these year-on-year improvements were steps in the right direction, they left us short of our goal of returning the company to profitability by the end of 2015. Our primary focus throughout 2015 and well into 2016 was improving the performance of our China operation, leveraging the strength of Zhenfa within the Chinese solar industry to help grow sales and improve collections. Despite considerable effort on Zhenfa’s part to help STR, the competition in China remains firmly entrenched. The poor financial condition of much of the module manufacturing industry in China, particularly as it relates to cash flow, has also caused us to be substantially more selective in extending credit to customers and prospects, further hampering our ability to grow sales. At this point, we are targeting important new customers in China, North America and Europe while continuing to generate sales within these and other markets. These target customers include significant solar panel manufacturers, and earning their business could enable us to return to profitability. Alongside our efforts to bring our encapsulant business back to profitability, we are continuing to evaluate opportunities to broaden the scope of our product and services offering within the solar and plastics manufacturing verticals, where we have considerable expertise or where obvious synergies exist. Finally, where opportunities present, we will convert underutilized assets to cash, such as our real estate in Malaysia, currently in a sale process. In closing, I am excited about the new additions we’ve made to the board, and the management change in China as well. We plan to continue to aggressively pursue new business for our encapsulant products to reduce or eliminate our cash burn, while also pursuing new business opportunities to broaden our scope and improve the financial performance of the company for the benefit of all shareholders. Thanks for your continued confidence in STR Holdings, Inc. My team and I remain firmly committed to maximizing the value of your investment. Sincerely, Robert S. Yorgensen Chairman, President and Chief Executive Officer STR Holdings, Inc. STR Holdings, Inc. 2015 Financial Report UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number 001-34529 STR Holdings, Inc. (Exact name of registrant as specified in its charter) Delaware 27-1023344 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10 Water Street, Enfield, Connecticut 06082 (Address of principal executive offices) (Zip code) Registrant’s telephone number, including area code: (860) 272-4235 Securities registered pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Title of each class Common Stock $0.01 par value per share Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES NO Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES NO Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES NO Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES NO The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2015 was $9,457,070 based on the price of the last reported sale of $1.19 per share on the New York Stock Exchange on that date. On February 29, 2016, the registrant had 18,345,703 outstanding shares of Common Stock, $0.01 par value per share. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s Proxy Statement for the 2016 Annual Meeting of Stockholders, to be filed by the registrant on or prior to 120 days following the end of the registrant’s fiscal year ended December 31, 2015, are incorporated by reference into Part III of this Annual Report on Form 10-K. TABLE OF CONTENTS PART I ITEM 1.

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