Awesome Stocks With a New Pick – Magnolia Solar Corporation (OTC:MGLT)

MGLT.pngWhen we received the emails on Magnolia Solar Corporation (OTC:MGLT) from Awesome Stocks as well as the other newsletters owned by Tribeca Investments, we were rather puzzled. The reason for our confusion was the fact that not more than a couple of days ago, we received a number of alerts from numerous pumpers on Quantum Materials Corp (PINK:QTMM) – a company that is dealing with roughly the same technology as MGLT. And although Awesome Stocks said that the solar industry is extremely hot right now, QTMM didn’t really go anywhere and it disappointed quite a lot of people.

The same can be said about MGLT‘s previous pump in January. There was quite a lot of commotion created by many emails, but the ticker hardly moved and we thought that, after failing once, the pumpers wouldn’t be bothered to try again, especially if they are not compensated (which seems to be the case if Tribeca’s disclaimer is to be believed). But they did put in a new effort nevertheless and this time, the results are a bit different. The volume shot through the roof yesterday and the price soon followed as it went from the opening bid of $0.06 up to $0.09 or 114% up compared to Thursday’s close.

That’s quite a lot of movement for a free stock promotion especially when you bear in mind that there were no optimistic press releases or announcements to support the hype but the question on our mind is: “Where to now?”.

The similarities between MGLT and QTMM really are a lot. Both companies develop some sort of clever technology that will make solar and photovoltaic panels a lot more efficient than they are right now. Both companies claim to have established connections with government agencies which means that the future potential for revenue could turn out to be quite big. Unfortunately neither QTMM‘s quantum dots, nor MGLT‘s nanotechnology is quite ready yet. This means that it’s still very early to say with a reasonable degree of certainty if any of the companies will be able to make it.

Another thing that is quite similar between the two tickers is their financial reports. We can see that both companies have a huge working capital deficit, not much cash and an alarmingly big net loss. You can check out QTMM‘s financials in our article on them and the ones for MGLT are as follows:

  • cash: $135 thousand
  • current assets: $404 thousand
  • current liabilities: $2.7 million
  • yearly revenue: $648 thousand
  • yearly net loss: $926 thousand

Indeed, in MGLT‘s case there are some revenues, but they are derived from research and development contracts, which means that the product is still not ready to go into production. That’s why we mentioned that it’s still quite early to call it for sure.

9MGLT_logo.gifOne thing that does disturb us, though, is the debt. MGLT issued some notes back in 2009 and we can see that there were several amendments to the terms which resulted in extensions of the maturity dates and the altering of the all-so-important conversion features. While at the time of the issuance, the noteholders had the option of getting repaid with stock at a price of $1.25 per share, right now they can do that at just 90% of the average trading price for the last couple of days. Put simply, the conversion price is a lot smaller right now.

5GROC.pngAnd if this debt is converted and then sold, the value of MGLT‘s shares will drop dramatically, which, by the way, is exactly what happened to Awesome Stocks’ previous pick – Great Rock Dev Corp (PINK:GROC). GROC‘s pump started on April 22 and in just four trading sessions, they have wiped out more than 89% of their value. That is why you should be extremely careful when trading penny stocks especially when there is a promotional campaign running for them.

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