Investors Return To DRONE AVIATION HOLDI (OTCMKTS:DRNE)
Since late-March the stock of Drone Aviation Holdi (OTCMKTS:DRNE) has been forming a rather depressing chart. Not only did it drop from around $0.40 per share but it actually registered a new 52-week low of $0.21 just two sessions ago. The company did publish two encouraging PRs – on April 7 they received an order for aerostat related equipment to support Blimp in a Box systems owned and operated by the U.S. Army while on May 5 came the announcement that the specialized defense contractor Troll Systems has ordered a set of WASP aerostat systems, but both of the press releases had minimal impact on the performance of the stock.
Yesterday, however, investors suddenly rushed towards the stock and managed to shift over 1.3 million shares by the end of the session surpassing the monthly average for the stock by more than 3 times. The buying pressure was enough to push DRNE nearly 15% in the green to a close at $0.264. If you are wondering what caused the sudden resurgence in investors’ confidence in the stock you won’t find the answer among the official PRs of the company. Instead you will have to open the 8-K form that was filed yesterday. In it DRNE revealed that none other than CNN is “leveraging Drone Aviation’s tethered drone technology to explore using drones as part of its global newsgathering operations.”
The company needed that kind of a boost to get investors excited because so far the results from their operations have been rather underwhelming. The recently filed annual report showed that at the end of 2014 DRNE had:
• $1.37 million cash
• $1.49 million total current assets
• $176 million total current liabilities
• $858 thousand annual revenues
• $2.1 million net loss
Although when compared to most other pennystock companies DRNE’s balance sheet looks solid when put side by side with their results for 2013 nearly all of the financials show signs of deterioration. The revenues remained nearly at the same level increasing by just 1%. At the same time the company managed to turn a net profit of around $30 thousand into a net loss of over $2.1 million.
An even bigger issue that investors have to take into consideration however is the dilution of the common stock. After the April 30, 2014, redomestication of the company DRNE had less than 4 million outstanding shares. By the end of the year that number had reached 37 million outstanding shares. The majority of the newly issued shares, around 19.8 million to be precise, came into existence as a conversion of preferred A shares. The conversions haven’t stopped and between January 1 and March 26 another 86,300 convertible preferred A shares were tuned into 8,630,000 million common shares.
If the recent announcements mean that DRNE’s operations are expanding resulting in better revenue generation the company could be able to offset the effects of the massive conversions of preferred shares. Still, sitting close to its 52-week low the stock is more than likely going to remain rather volatile for now. That is why it is for the best to do your own due diligence before committing to any trades involving the ticker.
