Activity surrounding POWRtec International Corp. (OTCBB: POWT) has been massive on Thursday as the energy monitoring company has seen volume top the 43 million mark by mid-day with shares climbing as much as 150% despite producing no news. The obvious catalyst for this activity has been a promotional campaign that has indicated that POWT is primed to capitalize on the growing market for smart meters and their role in creating “in more efficient use of resources, smaller energy bills and enormous benefits to the environment.”
Without question the smart meter industry is picking up steam as more and more countries adopt energy policies that reduce waste and cut carbon emissions while appliance manufacturers commit to producing products that are smart-grid compatible. The question is, will POWT be the one to really benefit from these opportunities? While shares have jumped from a low of 0.0450 on Wednesday to a high of 0.1600 on Thursday the company remains in a significant hole, carrying a net loss of $8 million since inception.
Making matters worse for POWT is the fact they haven’t generated any revenue, according to their most recent quarterly report “The Company had no revenues in the three month and nine month periods ending September 30, 2011 and 2010 as our only customer has not ordered any meters since late 2009 due to a slowing in meter deployment.” Just how bad is POWT’s financial situation? They owe approximately $139,000 of back rent, legal, and court costs as of December 31, 2010 due to a judgment obtained by a former landlord for unpaid rent. In fact, they are now using “free generic executive office space on a month-to-month basis. The space is being provided to us by an unrelated business associate of our sole officer and director. It is our belief that the space is adequate for our immediate needs.”
This doesn’t exactly sound like a solid foundation for an industry leader in the smart meter market.
POWT has been busy sharing with investors information regarding the rise in smart grid development and the initiatives put in place by world governments to adopt practices that support the implementation of smart grids. Additionally, POWT has highlighted several appliance manufacturers’ commitment to make all their products smart-grid compliant by 2015. While that is certainly welcomed news, judging by POWT’s financial condition that may be too far off in the future.
Again, it should be pointed out that smart energy meters are certainly becoming a focus as they “allow consumers to control the energy usage within their households and allow the utility companies to measure usage and avoid overcapacity.” The problem for POWT is they haven’t done enough to truly solidify themselves as a player in the market. Up to this point they have relied on one major customer and they stopped doing business with POWT in 2009. As pointed out in their quarterly report “As of September 30, 2011, current liabilities exceeded current assets by approximately $3.0 million and total liabilities exceeded total assets by approximately $3.1 million.”
The only source of financing for POWT has been through the sale of securities and the sudden spike in trading volume on Thursday should come as no shock to investors. Last month POWT announced they had retained the services of PacificWave Partners to provide investment banking services in an attempt to obtain additional funding for the company, expand the functionality of their smart meters and to aggressively seek out additional clients all over the world. While this is certainly ambitious that doesn’t mean it’s going to be a reality.
Grant Jasmin, CEO of POWRtec, commented about the deal with PacificWave, “We are in the process of seeking additional funding in order to introduce our smart meters to new markets. PacificWave Partners has a track record of locating funding for innovative technology companies such as ours. We are very excited about this opportunity as it may provide us with the necessary funding to follow up on our plan for rolling out our smart meters to new markets around the world.”
Their first step into these new markets will apparently be Norway where they have recently “located space for its first office.” POWT didn’t say anything about signing a lease or giving a firm date for moving in, only saying they plan to move in early 2012. If their past renting history is any indication of what’s to come then this plan could run into some problems.
Just last month shares of POWT were trading at a 52-week low of 0.0245 and they have miraculously climbed above the 0.160 mark on what? Distributing press releases about trends in the smart energy meter market? Until POWT proves themselves capable of actually securing a customer and stemming their losses investors should take note of their status as a going concern.