A little-known data processing and application developer last week purchased a bankrupt auto parts remanufacturer.
That combination may seem like an odd deal, but it was a big deal for shareholders of the data processing firm, Cash Technologies Inc. Its shares soared more than 200 percent on Wednesday, the day after the deal was announced.
Granted, big swings aren’t unusual for penny stocks, but Cash Tech is traded on the American Stock Exchange and such a one-day price surge is fairly rare for a stock of its standing. The shares, which closed at 16 cents on Tuesday, soared to 50 cents on Wednesday before settling back to 39 cents on Thursday.
What turbocharged the stock was the announcement that the downtown Los Angeles company agreed to buy the assets of Champion Parts Inc. out of bankruptcy court for just under $3 million.
Champion, of Hope, Ark., was founded in the 1930s and remanufactures fuel systems mainly carburetors. It is a well-known brand in its field, but it is not the same company as Champion Spark Plug Co.
Cash Tech appraised the company’s assets at about $12 million. It has a history with Champion; Cash Tech sold a majority of the assets belonging to one of its subsidiaries, Tomco Auto Products, to Champion in 2004 for just under $11 million.
But Champion was forced to file bankruptcy in October after it defaulted on the loan it used to buy Tomco from Cash Tech.
In November, Cash Tech wrote off $8 million it was still owed from that deal. That put it out of compliance with Amex. But after announcing the acquisition of Champion last week, Cash Tech said its plan to regain compliance with the exchange has gotten preliminary approval. That let shareholders exhale.
To facilitate the turnaround, Cash Tech is bringing back Champion’s former chief executive, Jerry Bragiel, who quit after the bankrupcy was announced, according to Joe Wingate, an appraiser for PNC Business Credit Inc., Champion’s creditor.
Wingate did not want to talk further, and calls to Champion and Cash Tech were not returned.
Cash Tech said in a statement that the deal for the assets gives it the ability to gain business using the Champion name, products, staff, facilities and national retail distribution network without assuming any of its liabilities.
“I’m delighted that we have been able to turn the problem created by the Champion bankruptcy into an opportunity to substantially increase shareholder equity and other fundamentals,” Cash Tech’s Chief Executive Bruce Korman said in a statement.
“While Champion’s core business produced profitability for nearly 10 years we believe that its nationally recognized brand name and retail presence are perhaps its greatest assets.”
However, Cash Tech has reported a loss in seven straight quarters. In its latest quarter that ended Feb. 29, it reported a meager $40,400 in revenues accompanied with a net loss of $574,000.
