AvWorks Aviation Corp (OTCMKTS:SPLI) Climbs Steadily After Merger News
AvWorks Aviation Corp (OTCMKTS:SPLI) spent a couple of years as a broker and supplier of parts for the aviation industry, but it’s clear that the business wasn’t exactly flourishing. The latest 10-Q shows us that as of September 2013, they had just $6 thousand in total assets, nearly $300 thousand in liabilities, no quarterly revenues and an accumulated deficit of $1.5 million.
Predictably, the stock wasn’t doing especially well. As you can see from our articles, the ticker became the target of several paid promotions that didn’t help, but the really big fall occurred when the business operations failed to impress investors. By mid-2013, SPLI was already a triple zero stock and it seemed like there was nothing that could get it out of these levels.
Over the last three weeks, however, we’ve seen some astonishing movement. SPLI fluctuated a lot at the end of January, but since the start of the new month, it has registered only two red sessions. The 33% surge from yesterday means that the ticker is now above the $0.02 per share mark for the first time since 2012. Volumes are picking up as well. Nearly 26 million shares changed hands during Thursday’s session resulting in a daily trade value of $556 thousand.
The reason for this is a press release that hit the wire on January 22 according to which SPLI have found a merger candidate and are in the process of changing their business plan. The company will acquire all the issued and outstanding shares of a privately-held entity called Vapor Group Inc. and will enter the electronic cigarette industry. The name will be changed, Vapor Group’s management team will take helm, and a reverse split will soon be effectuated.
The fresh business plan is certainly a welcome relief for SPLI‘s shareholders, but if you take a closer look, you’ll see that the news gets better and better. According to the press release, Vapor Group is a leader in the e-cig market and they have managed to generate millions of dollars in revenues for the calendar 2013. Shareholders can also be happy about the fact that there isn’t an active paid promotion that could hamper the stock’s progress and, on the whole, it looks like the merger is just what the company needed to get back on its feet.
There are, however, one or two things well worth considering.
The first one is the fact that we have yet to receive a confirmation about the closing of the acquisition. The press release states that the merger will “become effective as soon as practical“, but so far, we’ve not seen an 8-K confirming the completion of the deal.
We also have no idea what the financial situation of the new subsidiary is. As we mentioned in the first paragraph, the parent company is in quite a mess and although Vapor Group seems to be generating revenues, there can be no guarantees around the profitability and the balance sheet which, we reckon, is quite important.
There’s another thing you should probably keep in mind. As we mentioned, SPLI‘s management team will be completely overhauled and it seems that the people from Vapor Group have already taken the driver’s seat. The new CEO is called Dror Svorai and this is not the first penny stock he’s been involved with. He was once at the helm of a company called Hi Score Corp. (OTCMKTS:HSCO) – a triple-zero enterprise that got suspended by the SEC a couple of weeks ago due to questions regarding the accuracy of publicly available information about them. Mr. Svorai is also listed as the President, Secretary and Treasurer of Inelco Corp (OTCMKTS:INLC) f/k/a Onteco Corp. A year ago, INLC and Mr. Svorai were named as defendants in a legal complaint alleging them of, among other things, securities fraud.
Will this hamper SPLI‘s progress? We don’t know. Should you keep it in mind? It might not be a bad call.