Minerco Resources Inc (OTCMKTS:MINE) Aims for $0.02 Again
Minerco Resources Inc (OTCMKTS:MINE) has been on a roller coaster of a ride over the last few months. As you can see from the chart on the right, the ticker was deep in the sub-penny levels at the beginning of March and the tiny trading volumes suggested that few people were paying attention to it.
Then, it made a rather impressive run and on March 31, it even touched the $0.04 per share barrier. People were excited and were hoping to see MINE continue its run, but instead of going further up, the ticker plummeted and in a matter of a few sessions, it dropped from over $0.03 to under $0.02 per share. At one point, it even threatened to slide back to the sub-penny levels, but fortunately for the people invested in MINE, it managed to hang on and after a 32% jump on Friday, it’s now standing at $0.019.
There’s a lot of speculation around the reason for the hectic price movement. Pinpointing the culprit is nigh on impossible, but there’s no getting away from the fact that, once you have a quick look through MINE‘s latest 10-Q, you’ll spot a few problems. Let’s start with the figures the company recorded on January 31:
- cash: $24 thousand
- current assets: $40 thousand
- current liabilities: $2.8 million
- quarterly revenue: $5,147
- quarterly operating expenses: $469 thousand
It is true that the revenue generation started recently and the sales figures in the future reports will probably look a lot better, but if MINE are to succeed, they’ll need to work hard on achieving a positive bottom line. If profitability doesn’t come soon, the working capital deficit could grow and this could spell disaster for the shareholders.
And since we mentioned the shareholders, we should probably note that they have an even bigger problem on their hands – dilution. In the six months between September 2013 and March 2014, MINE issued a whopping 735 million common shares. The subsequent events section of the statement tells us that between February 3 and March 18 alone, the company printed more than 322 million shares. As you might imagine, the majority of the stock was issued as a conversion of debt and there are some things to suggest that many more shares might see the light of day in the coming months.
The 10-Q tells us that on January 31, there was around $435 thousand worth of convertible notes (excluding the ones issued to related parties) and when you scroll down to the “Notes Outstanding” section, you’ll see that most of the debt can be turned into common stock at a tasty discount.
In the interest of fairness, we should also note that the management team seems to be working hard on sorting some of the issues. They recently announced that they have secured a $2 million credit line, which, as far as the press releases and official filings are concerned, is not convertible into shares. They also said that they’re going to meet with their creditors and discuss ways of dealing with the heavy dilution. Will this be enough to stabilize the company’s balance sheet and its stock?
Nobody can say for sure, but despite the uncertainty, MINE is getting a lot of support from various people like the now-infamous Wolf of Weed Street. Taking his advice with a grain of salt might not be a bad call sometimes. As we wrote a week ago, the same person alerted investors about Fusion Pharm Inc (OTCMKTS:FSPM) just hours before the stock got suspended by the SEC due to questions regarding the information contained in the company’s financial statements.
This, of course, doesn’t mean that MINE is about to follow in FSPM‘s footsteps, but it still shows that doing your own due diligence and weighing the risks for yourself before putting your money on the line is absolutely essential.