At the start of the year all sorts of pennystocks decided to jump on the marijuana bandwagon, ditched their old businesses (if they had any in the first place) and joined the emerging industry. Still, a couple of companies refused to follow the pattern and instead turned towards another hot market at the time – the virtual cryptocurrencies. Microelectronics Technology Co. (OTCMKTS:MELY) was one of them and on February 18 announced that they are in negotiations for the acquisition of a digital currency mining company.
Initially the market ignored the news completely and MELY continued to slowly drift towards the bottom of the chart dropping down to a new 52-week low of $0.0005 on April 1. Just two days later though everything changed and MELY skyrocketed by the massive 262% reaching $0.0029 on the absolute record number of 727 million traded shares. Although since then the stock has been able to keep most of the gains investors still show a reluctance to put their trust in it. Yesterday MELY crashed by more than 16% and slid back down to $0.0026.
The company has announced a rather ambitious plan for the creation of a 100 server bitcoin mining pool but there are some serious concerns about their ability to do so. First of all this Tuesday was supposed to be the end of the beta testing period of the first three servers of the mining pool but there still hasn’t been an official confirmation.
According to the plan MELY have the intention of adding ten new servers every two weeks so there are still quite a few months before they reach the planned 100 servers. Meanwhile the quarterly report filed last week revealed that the company is in an extremely dire financial state. At the end of March MELY had exactly:
- $378 cash!!!
- $7064 total current assets
- $652 thousand total current liabilities
- $5167 revenue
- $541 thousand net loss
With numbers such as these it becomes painfully obvious that the company is relying solely on its common shares in order to finance its operations. Still, the amount of dilution that has been taking place is staggering. At the start of the year the number of outstanding shares was around 258 million while just for the first three months of 2014 another 463 million shares were issued as conversion of debt. But that is not all – from April 1 to May 2 another 324 million shares saw the light of day again as a conversion of debt. MELY may be trading at a rather cheap price ranges but those shares had a conversion price ranging from $0.0002 to 0.0003.
With a lot more convertible notes still outstanding it is unlikely that the dilution will stop anytime soon. Especially when you take into account that back in March MELY increased their authorized shares to 2.5 billion but just two days ago they filed for yet another increase to 7.5 billion authorized shares.
Even if you are a bitcoin enthusiast the huge red flags around MELY demand the use of caution before attempting any trades with their stock.
Yesterday the stock of Tranzbyte Corp. (OTCMKTS:ERBB) suffered a correction after it fell down by 11% and closed the session at $0.031. Triton Distribution Systems Inc’s second day of trading under their new name and ticker Green Cures Inc. (OTCMKTS:GRCU
) was marked by a severe crash with the stock wiping close to 25% of its value and sliding back down to $0.024.