CMG Holdings Group Inc (OTCMKTS:CMGO) Fancies its Chances
A couple of years ago, CMG Holdings Group Inc (OTCMKTS:CMGO) was in not too bad a shape. During the twelve months ended December 2012, for example, it logged more than $8 million in revenues and about $2.2 million in net income. Right now, things are a little bit different.
Although the profits disappeared in 2014, the company was still registering some healthy revenues. In Q1 of 2015, however, the sales experienced a steep drop which resulted in the following figures recorded on March 31:
- cash: $7,023
- current assets: $15,423
- current liabilities: $1,516,463
- quarterly revenues: $41,690
- quarterly net loss: $217,519
In case you’re wondering, the revenue drop on a year-over-year basis amounts to a whopping 97.3% and the management team said in the 10-Q that this is due to some legal issues and the lack of financial resources arising from them. The said legal issues, by the way, are the reason for today’s article on CMGO.
Last year, the management team noticed that the profits generated by XA The Experiential Agency, Inc, one of CMGO‘s subsidiaries, have all but disappeared and they decided to investigate. After sniffing around for a while, they found out that some of the company’s former officers and staff might have something to do with it. The current management team reckon that their ex-colleagues have set up and elaborate scheme to steal some of XA’s physical assets, clients lists, and business. A legal complaint was filed in September 2014, but investors didn’t react to it at all. Yesterday, however, they saw an amended complaint and they suddenly fell in love with CMGO.
In a matter of six and a half hours, they traded more than 155 million shares and they pushed the ticker to an intraday high of $0.0049 and a close of $0.0021 per share – exactly 50% above the value at the end of Wednesday’s session.
This would suggest that a lot of people reckon that CMGO will win the lawsuit, or, at the very least, reach a favorable settlement. But why are they so confident?
Well, as we mentioned already, the company has been relatively successful in many of its previous endeavors, so investors are probably hoping that CMGO can pull it off this time as well. As always, however, the uncertainty is inherent in penny stocks running on lawsuit news and, to top it all off, there are one or two things that could make you think twice.
CMGO is currently headed by Glenn B. Laken and if you take the time to do some research, you’ll see that a person by the same exact name was once the majority shareholder in a company called FinancialWeb.com, Inc (previously traded under the FWEB stock symbol). The Glenn B. Laken in question (who, like CMGO, was based in Chicago, Illinois at the time) was charged with securities fraud and he pleaded guilty. Ironically enough, FinancialWeb.com was in the business of uncovering what they called “stinky stocks”.
Sadly, there’s no way of knowing whether the Glenn B. Laken that is currently at the helm of CMGO is the same as the Glenn B. Laken that brought FWEB to its knees, but even if you decide that the two individuals have nothing in common (apart from the name), you should still read through CMGO‘s latest 10-Q. In there, you’ll see that at the end of Q1, the company had $319 thousand worth of notes and debentures that can be turned into common stock at discounts ranging from 25% to 30%. This is just one of the risks you need to consider before putting your money on the line.