STL Marketing Group (OTCMKTS:STLK) Blasts Off for No Apparent Reason

STLK.pngIn July 2013, STL Marketing Group (OTCMKTS:STLK) filed their Form 10 with the SEC and shortly after, the stock was transferred over to the OTCQB tier. Unfortunately, it failed to remain there for long and it was recently relegated back to the Pink levels. The reason?

In May, OTC Markets placed a $0.01 minimum bid price on OTCQB stocks and at the moment STLK is simply not able to comply with the new rules. Is this about to change, though?

On Friday, STLK jumped up by a whopping 323% and finished the week with a share price of $0.0055 and a daily dollar volume of around $555 thousand. The ticker should have no problems breaking through the $0.01 barrier if the trend continues. But will it?

Apparently, some people believe that a huge run is imminent, but before you get too excited, you might want to have a look through a few things.

For one, Friday’s surge doesn’t seem to be caused by anything immediately obvious. There’s no promotion, the latest press release is now twelve days old, and the figures in the latest report are not exactly inspiring. Here’s what STLK recorded on March 31:

  • cash: $2,603
  • current assets: $126 thousand
  • current liabilities: $3.8 million
  • NO revenue since inception
  • net loss since inception: $2.4 million

As you can see, financially speaking, the company is not exactly thriving, but it should be noted that they appear to be doing something about it.

At the end of May they said that they have signed a Letter of Intent with a company called Call Management Products (CMP). According to the agreement STLK will offer CMP’s products in various overseas markets which should bring in some revenues. All the while, they will be doing everything they can to finalize the Power Purchase Agreement (PPA) with a Costa Rican utility company which, they say, will help them take their main business off the ground.

The thing is, not everything with the said agreement is going according to plan. STLK started talking about it back in December 2012. In March 2013, they issued a press release and said that there’s been a “slight delay“. The “slight delay” then became more substantial and in their Q3 report, they announced that the PPA should be signed by the end of 2013. For reasons that are not very clear, the inking of the agreement was postponed once more and according to the latest 10-Q, STLK plan to finalize it before the end of 2014. Will that happen? Or will it be delayed once more?

We’ll leave it up to you to weigh the odds. But while you’re at it, you might want to consider one more potential problem.

It can be found in Note 7 (page F- 14 ) of the Q1 report. If you have a good look through it, you’ll see that there’s a lot of convertible debt waiting to be turned into common stock at some scary discounts. How scary?

There are notes that can be turned into shares at a rate that equals “10% of the average of the lowest three closing prices during the 20 trading days immediately preceding conversion“. Speaking of which, some of the notes might have been converted already. According to the company profile on the OTC Markets, STLK‘s float on May 20 stood at around 60 million shares. On Friday, investors traded more than 133 million shares.

Theoretically speaking, it is possible for the daily volume to exceed the float, but it is an extremely rare occurrence. This, we reckon, is something you should definitely keep in mind while making your final decision.

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