HPEV Inc. (OTCMKTS:WARM) Continues to Slide Down

HPEV Inc. (OTCMKTS:WARM) has been gradually descending for about a month now. It lost 12.75 % of its price during yesterday’s session and closed at $1.3, an otherwise considerable price for an OTC penny stock. The stock had reached its peak on April 9, when it was traded for $ 2.12, but since then WARM has been moving down.

At the beginning of the year the stock seemed to flourish and was heading up. This of course was assisted by a steady flow of press releases, informing of various favorable events, and investors were tempted to put money in the company. The publishing of their 10-K appears to be the turning point for WARM, and no wonder with figures like the following:

• total current assets – $477 thousand
• total current liabilities – $536 thousand
• no revenues since inception
• annual net loss – $3 million

Market cap of over $70 million for a company that has never generated any revenues looks like a bit of a stretch.

Another red flag, besides the obvious lack of income, is the pending litigation with Spirit Bear Limited. On December 14, 2012 the company and Spirit Bear had signed a securities purchase agreement for $500 thousand, giving Spirit Bear 200 Series A Preferred shares and warrants to purchase 2 million shares of the common stock. Each Preferred A share can be converted into 50 thousand common shares, which makes exactly $ 0.05 a piece. Furthermore, so far only 11 such shares have been converted and this means that at any time the OS can increase with 9.45 million. These are clear hints of highly probable dilution.

The situation isn’t rosy at all. Still, WARM had managed to secure financing. Lincoln Park Capital Fund, LLC (LPC) has entered into a securities purchase agreement that may provide the company with $10 million in equity financing. As usual LPC will be buying the shares at a discount.

WARM has been rather scarce on details what does it need the money for. According to the official website, the company offers 3 solutions – thermal dispersion, mobile electric power, and hybrid conversion, that it will probably develop. All of these are supposed to have a wide range of applications. But then again, if that technology is applicable to so many things, why hasn’t WARM profited from it?

Elite Pharmaceuticals Inc. (OTCBB:ELTP), another company with a recent financing agreement with Lincoln Park, also dropped in yesterday’s session. It lost 7 % of its price and at end of the day was traded for $0.40.