Formcap Corp (OTCMKTS:FRMC) Breaks Yet Another 52-Week High

Back in September 2012, Formcap Corp (OTCMKTS:FRMC)’s situation was anything but rosy. The company had no leases to work on, just $136 in cash and nearly $800 thousand in current liabilities. The management team had to work fast and come up with a way of dragging FRMC out of the mess. They did.

On October 1, 2012, they effectuated a one-for-fifty reverse split which meant that they can issue shares and satisfy part of the debt. No sooner said than done. As we mentioned in our previous articles, they managed to pay off no less than $425 thousand worth of liabilities during the first half of 2013 which means that their financial statement now looks a lot better than it did a year ago.

It’s still by no means perfect, but the more optimistic among you will probably argue that with the prospects on the Cowley County properties looking so good, this is about to change as well. We will see if this is indeed the case, but while we’re waiting for a definitive answer, we want to draw your attention to some of the details surrounding the stock split from October 2012.

They come courtesy of the latest 10-Q which informs us that immediately prior to the split, FRMC had a little over 100 million shares outstanding. As you might have calculated already, this number shrunk to just over 2 million after the split was approved by the FINRA.

Open the latest report, however, and you’ll see that less than three weeks ago, the number of issued and outstanding shares of FRMC‘s common stock was a whopping 92 million. This means that the aforementioned debt was converted into nearly 90 million shares and, because of the lack of revenues, this leads to some absolutely catastrophic dilution.

Once again, the more positive traders will say that the share count won’t matter very soon because FRMC will start making money in the very near future and, truth be told, the performance from the last month or so suggests that quite a lot of investors are convinced that the company is indeed going to weather all the difficulties. Yesterday, the stock registered yet another green session, it reached a 52-week high of $0.96 and closed the day at $0.90. All this while shifting nearly 390 thousand shares and racking up a dollar volume of more than $340 thousand.

It seems that investors’ attitude towards the ticker is indeed positive, but, once again, there’s very little to convince us that success is within reach. For one, deadlines for the start of the drilling process on the Cowley County properties are missing. We last heard from the management team two weeks ago when they announced that they are continuing their due diligence, said that drilling for each and every well will cost about $500 thousand, and informed us that they need to make a few more payments totaling $300 thousand before exploration can begin.

As you can see in the latest financial report, they had next to no assets as of September 30 which means that some further debt or equity financing will be needed and, if history is to be believed, this will only lead to more dilution.

And let’s not forget that the 90 million shares that got issued during the first half of 2013 were valued at less than half a cent per share and at the current price, the former creditors are presented with a truly amazing opportunity for a profit. If they decide to take advantage of it, the price will plummet and will leave a lot of retail investors bitterly disappointed.

Speaking of which, Sollensys Corp. (OTCMKTS:SOLS) is another penny stock that experienced a rather unexplainable climb over the last couple of months. It managed to break through the $0.01 per share mark and ran all the way to $0.035. Over the last couple of sessions, however, it experienced an absolutely devastating drop. Yesterday, it managed to annihilate almost a third of its value while shifting more than 1.8 million shares. There can be no guarantees that FRMC will follow in SOLS‘ footsteps, but we still reckon that taking note of the chart on the right while making your investment decision is a good call.