Is WINDSTREAM TECHNOLOG (OTCMKTS:WSTI)’s Recovery Over?
On July 21 the stock of Windstream Technolog (OTCMKTS:WSTI) registered a new 52-week low of $0.0085. The fact that the ticker hit such record lows and the encouraging letter to the shareholders from the CEO of the company helped WSTI reverse its direction and for three consecutive sessions the stock enjoyed some impressive gains reaching a close at $0.023 on July 23. Last Friday, however, WSTI was dealt a heavy blow as the stock plunged right for the bottom of the chart.
The stock actually opened the session with a gap up at $0.0249 and moved even higher to $0.0258 but that was as far as the positive momentum could push it. Immediately after that WSTI began sinking like a stone closing the session with a loss of nearly 24% at $0.0175. Compared to its high from April the stock is currently sitting over 95% lower.
The chart performance of the company has been nothing short of a total disaster which could leave some investors rather puzzled. Unlike the majority of pennystocks WSTI is capable of generating respectable revenues finishing the first quarter of 2015 with sales of nearly $1 million. That result however far from enough to offset the rest of the numbers for the period:
• $193 thousand cash
• $4.7 million total current assets
• $10.2 million total current liabilities
• 969 thousand sales
• $987 thousand net loss
With a working capital deficit of approximately $5.5 million and an accumulated deficit of $28 million WSTI’s financial state is definitely a cause for alarm. The biggest red flag, however, is the massive amount of outstanding debt – nearly $3.5 million in convertible notes as of March 31. The resulting dilution has been simply crushing.
So far there have been three 8-K forms detailing the issuance of shares through the conversion of debt, and we strongly urge you to take a look at each of them, but for now let’s focus on the last one that was filed on July 24. According to it between July 17 and July 24 16.1 million shares were issued. 10.8 million of them had a conversion price of $0.00803, below the 52-week low of $0.0085. As a whole the outstanding shares of the company ballooned from 88.6 million as of March 31 to more than 196.2 million as of last Friday. In order words, the O/S count more than doubled in less than four months.
The company is trying to expand its operations opening its products for sale in the U.S. and recently signing an exclusive distribution agreement with Surland Technologies for the territory of Argentina. The manufacturing facility in India was also officially inaugurated at the start of June. The problem is that a lot more needs to be done before the negative effects of the millions of discounted shares that are being issued could be mitigated. And the issuances could continue for a quite a while. That is why even if you believe in the potential of WSTI’s products you should still use caution when approaching their stock.
