United American Petroleum Corp (OTCMKTS:UAPC) Explodes After Q3 Results

United American Petroleum Corp (OTCMKTS:UAPC) published the 10-Q covering the period ended September 30, 2014 about an hour before Wednesday’s closing bell. It’s pretty clear from the chart that investors liked what they saw.

UAPC finished November 19’s session with 40% in gains which is impressive enough. It is nothing however, compared to what happened yesterday. In a matter of six and a half hours, investors traded more than 200 million shares while the ticker blasted through the $0.001 per share mark and gained a total of 128%. Currently, UAPC is sitting at $0.0015 per share.

At this point, you’re probably eager to check out the figures in the 10-Q and see what got investors so excited. Here they are:

  • cash: $357 thousand
  • current assets: $563 thousand
  • current liabilities: $1.2 million
  • quarterly revenues: $188 thousand
  • quarterly net loss: $134 thousand

The $714 thousand in working capital deficit and the negative bottom line are obvious problems, but it would appear that investors are not too bothered about the issues. They seem to be extremely happy with the 68% jump in revenues and the 56% drop in net loss on a year-over-year basis.

So, UAPC is a working entity in the oil and gas industry and its showing some signs of growth. People are eager to jump in while the stock is still affordable which sounds logical enough. But we were wondering: Why is UAPC still stuck deep in the sub-penny levels?

Once you do some research, you’ll see that there are a few credibility issues. The address of their corporate headquarters, for example, is offered as a virtual office and it’s also used by a delinquent and thinly traded OTC company called iVoiceIdeas Inc (OTCBB:IVOD).

Then there’s the UAPC‘s stock itself. It was promoted for a budget of $700 thousand in April 2012 when Andy Carpenter (the person responsible for the pump on Imogo Mobile Technologies Corp (OTCMKTS:IMTC)) said that the ticker “could turn $7,500 into $136,875”. Back then, UAPC was traded at $1.25 per share which means that $7,500 was enough to buy 6,000 shares of common stock. Right now, 6,000 UAPC shares cost exactly $9 on the open market (that’s right, nine dollars).

While all these things should certainly warrant some extra caution, there is one more problem that can exert even more pressure on UAPC. Let’s get back to the 10-Q and see what it is.

If you scroll down to Page 17 and read through the Unregistered Sales of Equity Securities and Use of Proceeds section, you’ll see that between January 7 and September 30, UAPC printed a total of 173,376,067 shares of common stock as a conversion of some notes. The conversion rates? Well, they range from $0.0017 to $0.0005 per share which means that there are probably people who can release a huge amount of cheap stock on the open market and cash in on the profits.

As of September 30, there was still some convertible debt outstanding and the fact that during yesterday’s session, the trading volume almost matched the total O/S count means that we won’t be too surprised if the notes have been converted already.

Carefully thinking through all the risks before making your next move is extremely important.

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