Green Innovations Ltd. (OTC:GNIN) Clashes with Reality

23GNIN_chart.pngLast Friday, Green Innovations Ltd. (OTC:GNIN) closed down a third session in a row. GNIN dropped another 13.66% to $1.58 per share. The trouble started on March 13 when the company filed its 10-K.

As pointed out in my previous article, the torrent of press releases issued by the company has built up a lot of expectations. The information provided in the annual report of GNIN showed some numbers that do not look as good as expected.

As of December 31, 2012, GNIN reported:

  • $45,743 in cash
  • $313,921 in total current assets
  • $292,393 in total current liabilities
  • $232,955 in revenue
  • $1,201,985 in net loss

The huge net loss is primarily a result of stock-based compensation in the amount of $965,521. While that is not necessarily too bad, there is another number which may raise some concerns. The gross profit from the $233 thousand in revenues amounted to just $22 thousand – less than 10%.

One of the recent announcements of GNIN was about a reduction of transportation costs. This could improve the margin, but at this point it’s not clear what the exact effect would be, as there is no indication of what portion of the cost of goods sold is comprised by transport expenses.

That alone wouldn’t be a huge problem for a company traded on the OTC. However, there are other concerns about GNIN. Mainly, the fact that the company has been pumped through paid newsletters.

Traders may want to consider that the amount disclosed as payment for a tout report giving an inflated price target for GNIN was 2.6 millio Euros. More than what the company ever had. They may also want to ask themselves why would anyone pay so much to pump the price of GNIN?

If you cannot come up with an answer, it would be a good idea to do some research on how pump schemes work with penny stocks. The disclaimer of the same tout report also stated that the pumpers had been paid for e period of one month, and that period ended last Friday.

Unless there is some new development with these or other pumpers, GNIN will be left to fend for itself, and so far things don’t look too rosy.

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