On May 11, 2017, we published our last piece on 1PM Industries Inc (OTCMKTS:OPMZ), wherein we mentioned that the company should be followed closely. That piece was called “There’s A Lot To Like With 1PM Industries Inc. (OTCMKTS:OPMZ)”. We were not wrong. The share price has been creeping higher on very strong volume. More than 400 million shares were exchanged some days. Have a look at September’s price action:
Several news items were released in a short period of time, but the most significant was that the company gained a new client, which operates in the television production industry. Additionally, the company released that additional cannabis companies in California had contacted OPMZ. This is quite good, as a new deal will bring new know-how as well as assets and may make the share price increase. In this article, we will provide all the details.
Let’s review the background of the company briefly. 1PM was founded in Colorado in 1990. Besides changing the name several times, the company has gone through mergers, acquisitions, and changes of control. The following is the list of corporate events:
- On July 15, 2004, the name was changed to Torrent Energy Corp.
- On June 5, 2014, a merger was executed with Embarr Farms, Inc.
- On February 19, 2015, the name was changed from Torrent Energy Corp. to 1PM Industries.
- On February 23, 2017, the company acquired 100% of Novus Group, LLC.
What’s the business model?
1PM provides consultancy services to private companies that are interested in transforming from a private company to a public company. Start-up phase companies are incubated and then merged into a public company through a reverse merger.
The following are the most significant announcements. On June 14, 2017, the annual report was released. In that document, we appreciated very much the increase in the amount of total assets that the company showed on the new balance sheet. As of February 28, 2017, OPMZ reported approximately $12.6 million assets, while only showing $1 million in total liabilities. If we take into account the total outstanding shares, which is 888,722,319, the book value per share is $0.013, while the current market price value is $0.0007 a share.
How did the company obtain such a large increase in the amount of assets?
The most significant asset in the balance sheet is marketable securities;$12,196,847. We found the following information regarding these assets in the annual report:
“In January 2016, the FASB issued a new standard related to certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Most prominent among the changes in the standard is the requirement for changes in the fair value of our equity investments, with certain exceptions, to be recognized through net income rather than other comprehensive income (“OCI”). We have early adopted this standard, which resulted in an unrealized gain on marketable securities of $12,196,847, being recognized in net income.” Source: 10-K
Another interesting announcement was made on July 18, 2017. The company decided to stop providing seed capital for clients to “ensure the ability to book all revenue as top line revenue vs other income”. We appreciated the decision, as it seems that the company will only accept collecting 9.9% of a company’s equity on the front end of each project. 9.9% is a high investment return that we like given the market conditions under which the company operates.
Finally, the filings that made the share price jump in September were the following.
On September 6, 2017, the company released that a new client, operating on reality television programs, had been retained. Additionally, it was noted that OPMZ will be paid in a combination of cash and equity.
On September 8, 2017, OPMZ noted that a new company had asked about the company’s services. The most significant was that the new client was interested in the company’s experience of transforming private cannabis companies into publicly traded entities. In the same press release, it was noted that company’s offices completed a reverse merger for a client that successfully moved from the OTC to NYSE in 2014.
Currently trading with a market cap of approximately $0.62 million, OPMZ is making some big moves that, we think, could capture the attention of other clients willing to become public companies. We understand the recent share price moves and the increase in the trading volume, as the news released in September were good.
However, we believe that the market did not make a proper assessment of the book value per share. We believe that according to this financial stats, the market is still undervaluing the company.
Therefore, there’s the potential for shares of OPMZ to move higher.
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Disclosure: We have no position in OPMZ and have not been compensated for this article.