Dominovas Energy Corp (OTCMKTS:DNRG) is Still Hot
Can a penny stock run from less than $0.01 per share all the way to more than $0.20 in a matter of two sessions? Of course it can. Everything is possible in Pennyland. But is there any penny stock out there that actually deserves to make a jump as incredible as this? Well, Dominovas Energy Corp (OTCMKTS:DNRG) did it last week, so we might as well take a look into the company and see if this really is a zero to hero success story or whether the hype is getting a bit too much.
The first signs are not particularly encouraging. After reaching more than $0.21 on June 25, the ticker slipped and fell hard stopping at $0.08 just two days later. Wiping out more than 60% of the market cap in a matter of two sessions is probably not the sign of consistency everyone is looking for, but it must be said that many investors are not deterred by the drop. DNRG bounced on Tuesday and after another 18% added yesterday, it stopped at $0.11 on a dollar volume of over $1 million.
This is still a far cry from the peak reached last week, but investors are still very much interested. And truth be told, they might have one or two reasons to be excited. The explosion from June 25 was caused by DNRG‘s acceptance as a private sector partner in the Power Africa program which is run by the US Government. Curiously enough, the company announced this through an 8-K form way back in May, but for some reason, the management team initially decided not to report the news through a press release and it went by unnoticed.
Several other announcements remained overlooked as well. At the beginning of last month, DNRG said that they have signed a couple of multi-megawatt agreements with the Democratic Republic of the Congo and promised that the contracts will bring more than $100 million in “guaranteed revenues”. As you might have read already, DNRG also have a partnership with one of Delphi Automotive PLC (NYSE:DLPH)’s subsidiaries.
All good news, and although the press releases were ignored at first, the tremendous volumes from the last few days show that people are now definitely paying attention. So, plenty of you might think that from now on, the sky is the limit. On the face of it, things do seem to look good, but, as is often the case in the strange and fascinating world of penny stocks, there might be a few issues.
Take Power Africa’s website, for example. DNRG‘s name is now present in the list of the private sector partners and there are a few words about the company. The text says that as part of the commitment, Dominovas intends to, among other things, “mobilize close to US $1 billion of investment capital for energy projects over the next five years”. Considering the financial statements, this might be a tall order because DNRG had absolutely no cash at the end of February and the only assets consisted of prepaid expenses. The company did manage to close a securities purchase agreement according to which Kodiak Capital Group LLC is supposed to purchase up to $3 million worth of DNRG shares at a 20% discount, but you have to agree that the difference between $3 million and close to $1 billion is quite substantial.
Of course, if DNRG manage to get the promised $100 million in revenues going soon enough, they might just be onto something. According to their own estimations, however, the RUBICON(TM) won’t be installed until the fourth quarter of 2016. That is an awful lot of time in Pennyland.
And before we leave you to think about all the risks, we would like to draw your attention to what is a seemingly minor discrepancy in DNRG‘s SEC filings. As we mentioned in some of our previous articles, as part of the commitment to invest up to $3 million, Kodiak Capital also received a $165 thousand convertible note which can be turned into common stock at a 50% discount. The latest 10-Q as well as some recent registration statements say that the conversion can take place “at any time up to April 28, 2015”. Yet, an S-1 Form from February 19 actually contain the text of the convertible note (Exhibit 10.10) and it says that the note holder is entitled to convert the debt at “any time after April 28th, 2015”.
These sort of tiny discrepancies could sometimes make a huge difference.