Borislav Tonev

TechPrecision Corp (OTCMKTS:TPCS) Bounces Off the Bottom

by Borislav Tonev June 6, 2014
49TPCS.pngWe last looked at TechPrecision Corp (OTCMKTS:TPCS, TPCS message board) five months ago and if you have a quick look through our article, you'll see that we praised the company for being one of the solid ventures on the OTC Markets. We also said, however, that a potential investment carried its risks and as you can see from the chart on the right, we were right.

In December TPCS was hovering about $1.20. During Tuesday's session it hit its 52-week low of $0.45. That's a pretty appalling performance from what is a relatively solid penny stock venture. The question is: "What caused it?".

Inconsistency seems to be the name of the game in the case of TPCS. We mentioned in our previous article that one of the company's main issues was the lack of a steady flow of revenues and profits. The 10-Q covering the fourth calendar quarter of 2013 appeared on February 13 and it showed that unfortunately, the problem is as persistent as ever.

Here's a summary of the most important figures:

  • cash: $3.7 million
  • current assets: $12.1 million
  • current liabilities: $11 million
  • quarterly revenues: $5.1 million
  • net loss: $757 thousand

The balance sheet certainly isn't as bad as the ones presented by other OTC companies, but it's by no means perfect. Things look particularly disappointing when you compare the results above with the ones recorded at the end of the corresponding quarter of last year. There's been a 29% drop in revenues year over year while the net loss has increased by a scary 30%.

As you can see, there isn't really that much to support the stock above the $1 per share mark at the moment. Still, are there any signs of improvement?

Yesterday, investors traded more than $560 thousand worth of TPCS shares and the reason for this seems to be, of all things, an 8-K form which was published shortly before the end of Wednesday's session. It informs us about a new credit facility and about a forbearance agreement with Santander Bank.

Investors seem to be pretty happy about the developments. Not only did they trade a large amount of shares, but they also helped TPCS gain an impressive 41%. Currently, the ticker stands at a little over $0.65 which means that the market cap should be hovering around the $14.5 million mark.

7TPCS_logo.jpgWe say "should be" because we're not sure what the number of issued and outstanding shares is. According to the latest 10-Q, holders of some Series A Preferred shares have recently decided to convert part of their holdings into common stock. The report also tells us that at the end of last year there were around 5.5 million common shares potentially issuable as a conversion of preferred stock. If they see the light of day, the effects on the ticker could be rather painful.

Even if TPCS manage to keep the dilution at bay, the uncertainty around the future business performance means that the stock might be in for another crash in case things don't go according to plan. That's why, carefully evaluating the dangers before putting your money on the line is absolutely essential.

Comments 1

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