I know sellers will look at this as another sign that WPCS is going in the wrong direction but it is not what you think. In reading the 10K, the reason WPCS posted negative shareholder equity is because they had to take a write off of goodwill for Australia and had to mark to market the warrants that have not yet been exercised by the bondholders. These are non cash charges that don't effect the working capital of the company.
However, it drops them below the required $2.5 million shareholder equity requirement for the NASDAQ listing. The good news is that they will get 6 months to regain compliance and if the bondholders convert their debt and exercise their warrants, WPCS will be back over the $2.5 million in shareholder equity. I would imagine if a merger is being considered, the bondholders would have to convert their debt to equity so that they can become owners of the new combined company.
Another good sign this week is that some bondholders converted $600k of debt to equity which gives WPCS needed cash. I can't believe that a bondholder would convert debt to equity if they felt the company is going nowhere. Why would you? This move just confirms my belief that something is up.
So WPCS really does have positive book value if you take away these mandatory non cash accounting charges and own companies that are generating positive EBITDA. It may not be enough to get the stock price moving on its own but combine that with a possible as they say shareholder value proposition and you could have a stock that is trading three times what it is trading today. That is worth waiting for as long as something is announced soon.
A note to WPCS directors. What are you guys doing? Investors need to know what the plan is going to be. You have been stating this shareholder value proposition for several months. Time is running out. Investors are losing interest. Start making it happen.
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