Borislav Tonev

Firemans Contractors Inc. (OTCMKTS:FRCN) Surges Once More

by Borislav Tonev April 28, 2014
5FRCN.pngBack in February, Firemans Contractors Inc. (OTCMKTS:FRCN, FRCN message board) issued a couple of press releases and it seems that they were enough to dig the ticker out of the triple-zero levels. The first one was issued on February 20 and it stated that FRCN have retained the services of an IR veteran called John Pentony. The second one hit the wire a couple of days later and it told us that a "leading small cap research company" called Grass Roots Research and Distribution, Inc. has put together a report on FRCN.

The report is forty-three pages long, it's full of bright projections about the future, and it puts a price target of $0.007 per share on the ticker. You can have a good look through it and decide for yourself whether Grass Roots' predictions are actually going to turn into a reality, but you should probably bear in mind that they didn't write their report for free. The fine print at the bottom of the document states that FRCN has paid a total of $11,500 for the research and dissemination of the information.

You should also have in mind that FRCN isn't the first ticker to be featured in a Grass Roots report. Back in 2010, Deltron Inc (OTCMKTS:DTRO) (which was then traded at around $0.04 per share) went through the same treatment. The research firm said that it could potentially reach $0.62 per share, but the three-year chart shows that they have been a bit too optimistic.

Despite all this, Grass Roots' report on FRCN, along with a few other optimistic press releases, have prevented the stock from going back down to the triple zeros. Although the performance isn't really the definition of "consistent", the ticker managed to close last week's trading with a 44% jump and a dollar volume of around $546 thousand. The price currently stands at $0.0026 per share which results in a market cap of over $1.3 million. The question is: "Will FRCN continue going up?".

The market cap doesn't sound terrifying, but it doesn't correspond to the figures found in the latest 10-Q either. Here's what FRCN had at the end of last year:

  • cash: $28 thousand
  • current assets: $91 thousand
  • current liabilities: $1.3 million
  • quarterly revenues: $176 thousand
  • quarterly net loss: $140 thousand

On the bright side, the net loss is shrinking, but there are some obvious problems like the horrific working capital deficit and the year over year decline in revenues. The press releases that have come out over the last few weeks suggest that things are improving at the moment, but unfortunately, only the figures in the future financial statements can give us definitive proof of the company's progress. In the meantime, shareholders and potential investors have another thing to worry about.

FRCN_logo.pngIt can be found in the Common Stock section (page F-15) of the latest 10-Q which tells us that between October and December 2013, FRCN converted $99,460 worth of notes into more than 283 million shares (the average conversion rate comes in at under $0.0004 per share). Scroll further down to the Subsequent Events section (page F-16), and you'll see that during January and February FRCN turned a further $49 thousand worth of debt into around 209 million shares (the average conversion rate hovers around $0.0002 per share).

Did Grass Roots take the dilution into consideration when they were putting their report together? We don't know. Should you consider it while making your investment decision? We reckon that it might not be a bad call.

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