Eco-Shift Power Corp (OTCBB:ECOP) Gets Some Attention
A year and a half ago, the company that we now know as Eco-Shift Power Corp (OTCBB:ECOP) was called SimplePons Inc and it was trying to develop a mobile coupon subscription system. Things weren’t going particularly well.
The SEC filings tell us that as of December 31, 2013, the company (then traded under the QPON symbol) had less than $2 thousand in cash, just $120 thousand in yearly revenues, and a 2012 net loss of around $2.5 million.
Not surprisingly, in February 2013, they decided to change the business plan. A reverse merger took place and SimplePons became a manufacturer and seller of high-efficiency industrial lighting solutions. The name was officially changed in November, the new ticker was assigned, and a 50-for-1 reverse split was effectuated.
Over the last couple of months we’ve seen some press releases announcing partnerships, letters of intent, and funding agreements which all suggest that ECOP, with its new business plan, is now in a much better shape. On Friday, the ticker finally managed to grab investors’ attention. It jumped up by 16% and closed the day at $0.56 per share while logging a dollar volume of around $653 thousand. If the trend continues, it might go even further up in the coming days, but will it manage to keep the gains in the longer run?
The press releases certainly sound optimistic enough, but if you take a look through the 2013 10-K, you’ll spot some problems. Here’s a summary of the most important figures found in the balance sheet:
- cash on hand: $107 thousand
- current assets: $698 thousand
- current liabilities: $1.9 million
- 2013 revenues: $1.3 million
- 2013 net loss: $2.9 million
It’s clear that the limited cash reserves could turn out to be an issue, but with the news of the recent financing agreements, they might just be able to weather the difficulties. The 21% year over year decline in revenues, however, could pose a more serious threat in the future. There is one more thing to consider.
The 10-Q covering the third quarter of 2013 came out on November 19 and it showed us that immediately prior to the reverse split, the O/S count was hovering around 400 million. As you might have calculated already, the split brought it down to around 8 million. As you can see from the 10-K, however, just four months later, the number of issued and outstanding shares was closing in on the 53 million mark.
What’s more, a large portion of the stock saw the light of day at a hefty discount. During the forth quarter of 2013, for example, ECOP converted a $63 thousand note (originally issued to Asher Enterprises) into around 12.6 million common shares (the conversion rate stands at around $0.005 per share).
We probably don’t need to tell you that if these shares were to hit the open market, they will put enormous pressure on the ticker. That’s why, considering all the risks carefully might not be a bad call.
