CoroWare Inc (OTCMKTS:COWI) Tries to Break the Fall

5COWI.pngYou don’t need to be an experienced analyst to know that CoroWare Inc (OTCMKTS:COWI)’s stock performance over the last year or so has been absolutely horrific. All you need is, in fact, a quick look at the chart on the right. But what’s the reason for the devastating drop?

There could be a couple of factors. For one, the ticker underwent a rather big paid pump back in January 2013. Touting came from two of the most infamous outfits – The Stock Psycho and Darth Trader who pocketed $400 thousand for their efforts and although the initial hype did result in a small surge, the drop that followed was much more painful. So much so, in fact, that between February 2013 and January 2014, COWI registered virtually no active sessions.

In the meantime, the company filed some financial reports and they showed that COWI isn’t exactly the “undervalued Microsoft partner” that the pumpers talked about. Here’s a summary of the most important figures as found in the 10-Q covering the third quarter of 2013:

  • no cash
  • current assets: $243 thousand
  • current liabilities: $33.1 million
  • quarterly revenues: $274 thousand
  • quarterly net loss: $2.7 million

Indeed, there are some revenues and there’s even a 22% increase in sales year over year, but there’s no getting away from the fact that the lack of cash, the colossal debt, and the horrific net loss are a serious threat to the company’s future.

And in case you’re wondering why we’re giving you figures that are now nearly seven months old, it is because COWI are still not able to publish the 2013 10-K. They said on April 16 that they’re working hard on getting it up, but despite this, a day later, the ticker was moved to the Limited Information tier. And that’s not even the biggest problem.

The dilution that the shareholders have had to deal with is absolutely devastating. Page 19 of the latest 10-Q tells us that during the nine months ended September 30, 2013 COWI issued more than 4 billion shares as a conversion of around $250 thousand worth of debt. This results in an average conversion of around $0.00006 per share and means that back in November, there were 4.4 billion shares issued and outstanding.

The management team decided that it’s finally time to do something about the problem and in January, they effectuated a 1 for 200 reverse split which resulted in an O/S count of around 22 million. This, however, was three and a half months ago.

More than 1.2 billion shares changed hands during yesterday’s session and although it is theoretically possible for the daily volume to exceed the float, it is extremely unlikely. What’s more, according to the company profile on the OTC Markets’ website, the O/S count stood at nearly 3.4 billion on April 17.

85DRMC.pngThe long-awaited 10-K will give us more information on what the company is doing to get itself out of the financial mess and it will probably answer the questions around the share structure as well. In the meantime, you might want to bear in mind that sudden volume spikes such as the one seen yesterday rarely result in a consistent run towards the higher end of the charts. Definitive Mattress Company f/k/a Crescent Hill Capital Corp (OTCMKTS:DRMC)’s shareholders (whose stock plummeted by as much as 61% yesterday) know that all too well.

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