Yesterday the share price of Composite Technology Corp. (OTC:CPTCQ
, CPTCQ message board
) tanked dramatically as the company filed voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. In other words, CPTCQ is bankrupt and if for some investors the event has been anticipated, the extreme volume and the 3-year low suggest that for many others the news must have been a shock.
Under its new symbol, CPTCQ stock closed the market at $0.071 and with a 62.63% loss in the value from the previous day close. Trading volume was 12,51 million shares and during the day CPTCQ share price fell to $0.04, a sharp more down and a shocking break up of the previous trading channel.
Yesterday the company announced that it has filed for bankruptcy and will from now on run its operations as a "debtor-in-possession". The 8-K filing says also that at the beginning of the month some of the company's lenders have given a notice of default for some of CPTCQ debts and have requested that the company pays immediately obligations of $10.5 million in principal together with accrued interest and relevant fees.
As the outcome suggests, this couldn't have happened that easily. In the last two months Composite Technology used all available sources to get some cash and cover its most urgent capital needs. The company entered into two promissory note agreements to provide bridge loans for a total of $700,000, whereby the lenders received also 1.4 million warrants to purchase shares of CPTCQ stock at a price of $0.25 per share. The warrants may be exercised in a "cashless" manner unless registered for resale under an effective registration statement.
Before that, in February the company did not hesitate to borrow money even from its CFO, from its President and from two of its Directors. The total amount borrowed was $236,274, again as a bridge loan and these lenders also received warrants to purchase 472,548 shares of the company's common stock at $0.25 per share.
It looks like nothing could prevent the inevitable, which some investors probably anticipated already after CPTCQ filed its latest financial report. It showed that at the end of 2010 CPTCQ has current assets of $19.3 million against current liabilities of $52.8 million. The desired increase in the customer orders and respectively in the sales did not come over the years and for the year ended September 30, 2010 the company incurred a net loss of $19.8 million and had negative operating cash flow of $17.4 million. The accumulated deficit up to that date amounts for over $277 million.