Sack Lunch Productions Inc (OTCMKTS:SAKL) Plummets Down The Chart
The negative sentiment towards Sack Lunch Productions Inc (OTCMKTS:SAKL)’s stock reached disastrous proportions during yesterday’s trading. In the span of a single session the company suffered a devastating drop of nearly 44% to a close at 5 cents per share. After spending several months climbing up the chart and reaching 15 cents in early June SAKL are now back down to their price levels from February.
The depressing performance could initially seem rather strange. After all, SAKL are not only generating revenues in the millions, the company has a guidance of $18 million in revenues for 2016, but they are showing solid year-over-year growth finishing the first quarter of the year with 43% increase in gross revenue. For April the company reported total sales over all corporate and franchised events of $1.8 million followed by $1.945 million in total sales for May.
Investors should note, however, that the ticket sales will be recorded as realized revenue when the corresponding events have been held. Between March 12 and June 22 SAKL have completed 56 events with another 93 scheduled to be held by November 19.
Despite the growing revenues the financials of the company remain far from encouraging. As of March 31, 2016, SAKL had:
• $797 thousand cash
• $3.7 million total current assets
• $7.97 million total current liabilities
• $1.3 million total revenue
• $1.56 million net loss
Compared to the same period in 2015 both the loss from operations and the net loss incurred by the company have increased by more than three times.
Another serious red flag that could explain the rapid downfall of the stock in the past couple of weeks is the issuance of millions of underpriced shares through the conversion of preferred shares. Back in January SAKL had to issue over 4.6 million shares at $0.045 as a conversion of 41,565 Series C preferred shares. In March 11,776 Series C shares were turned into 3.54 million shares. The conversions continued and in April and May another 8.1 million shares were issued. Due to the fact that each share of preferred C stock can be converted into $5 worth of common stock the severe drop down the chart could make the dilution even worse.
As we warned you in our previous article SAKL is often touted by paid pumps. The last alert email for the company was sent on June 28 by the newsletter Winston Small Cap who disclosed receiving a compensation of $9,903.
After wiping such a huge chunk of its value in such a short time SAKL could bounce. Announcing its financial results for the second quarter of the year could also help the company recover at least some of its losses. The red flags must not be underestimated, though, and any trades must be preceded by thorough due diligence.