Borislav Tonev

Thinspace Technology Inc (OTCMKTS:THNS) Wobbling After Annual Report

by Borislav Tonev April 6, 2015

Thinspace Technology Inc (OTCMKTS:THNS, THNS message board) managed to file its 2014 10-K on time, but, apparently, investors aren't sure what to think of it.

On March 30, just hours before the publishing of the report, the stock experienced a rather painful drop when it shaved about 15% off its value. Since then, it has managed to claw back some of the lost ground, but it still appears to be hesitant. On Thursday, for example, it added only 2% and it finished the short week just north of $0.10. So, investors are being careful. It's time to see why.

You'll notice one of the reasons as soon as you check out our database. The 10-K was accompanied by a relatively cheap promotion carried out by several newsletters. The people who have been around the stock for long enough know that a paid pump (albeit a cheap one) is never a good thing when it comes to THNS.

The stock first appeared under its current ticker symbol about a year ago and since then, we have received nearly 100 email alerts. Thanks to all the touting, THNS dropped from a high of $0.90 in March 2014 to its current levels.

So, the paid pump is certainly making some investors tread carefully and it must be said that the 10-K itself isn't particularly encouraging. Here's a summary of the most important figures:

  • cash: $136 thousand
  • current assets: $412 thousand
  • current liabilities: $15 million
  • yearly revenues: $6.2 million
  • yearly net loss: $8.3 million

The humongous amount of liabilities is, of course, the most obvious problem. According to the 10-K, about $2.6 million of them consist of convertible notes. The more recent toxic debt can be turned into common stock at 70% of the market price, but, as we mentioned numerous times in our previous articles, the older notes are convertible at much higher discounts. As a result, THNS' management team wrote on Page 12 of the annual report that “Our obligation to issue shares upon conversion of our convertible debt is essentially limitless."

This should give you a good enough idea of just how huge the toxic debt issue is, but in the interest of fairness, we should probably note that some people might still be hopeful. Their optimism is probably fueled by the relatively solid sales figure and the truly remarkable jump on a year-over-year basis.

Indeed, even the management team dedicated a full press release to telling everybody that during 2014, they managed to log more than three times the revenues from 2013. That's all well and good, but the people behind the company somehow forgot to mention one important fact.

If you open the Q3 report, you'll notice that during the first nine months of last year, THNS recorded about $5.7 million in revenues. As we mentioned already, the figure for the full year stands at a little over $6.2 million which means that during the fourth quarter, THNS registered just $566 thousand in sales. And that's a 63% drop on a quarter-over-quarter basis.

If the trend continues, some people might be scared into selling. The former note holders who received about 12.9 million shares as a conversion of $482 thousand worth of debt could be among them. And we probably don't need to tell you what will happen if a large amount of discounted stock hits the open market.

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