Labor Smart Inc (OTCMKTS:LTNC) Makes Another Push for Double Zeroes
In yesterday’s session Labor Smart Inc (OTCMKTS:LTNC) managed to clamber to a 60% green close. The stock is now almost out of triple zero territory, stopping at $0.0008 by the closing bell. Volume remained heavy, at 361 million shares changing hands over the course of the session.
LTNC is a pink sheet that recently purchased a stake in OTC enterprise The Staffing Group Ltd (OTCMKTS:TSGLE). The E appended after the ticker happens to indicate delinquency in SEC filings. The Staffing Group’s Q3 report is still missing, but that did not stop LTNC CEO from spending company resourced to invest in TSGLE. In fact, he has such a firm belief in The Staffing Group that he even issued an open letter to its CEO, discussing “synergies” and “leveraging experience”. Whether the best partner for this sort of thing is a SEC-delinquent filer is an entirely different matter.
The desire for “synergies” is completely understandable, though, as LTNC is not doing particularly well on its own. Here is the company’s last published balance sheet as of Sep 25, 2015:
- $127 thousand in cash
- $8.4 million in current liabilities
- $5.7 million in quarterly revenues
- $560 thousand in net loss
The net loss figure is relatively contained and LTNC is doing seven-digit quarterly revenues. Why then was the stock scraping the bottom of the barrel, logging zero-volume days? A big part of the answer lies in the company’s convertible debt and the way it’s structured. The same quarterly report contains 11 pages listing convertibles and the conditions they were signed under. The important part is that all convertible debt LTNC took on over the past two years converts at discounts ranging from 40% to 42%.
The major issue that is holding LTNC back is dilution. The company went from 55 million outstanding shares in Nov 2014 to 6.6 BILLION OS in Nov 2015. The percentile representation of this is dilution of 11,000%.