Cardinal Resources Inc (OTCMKTS:CDNL) Logs More Gains

Last Friday the stock of Cardinal Resources Inc (OTCMKTS:CDNL) continued to fly higher up the chart. When the closing bell put an end to the session the ticker was sitting over 12% in the green at $0.019. This means that in less than a month the stock has managed to move from around $0.004 to nearly 2 cents per share.

Investors have indeed been hyped about the stock and this can be easily seen on the chart. Unlike the typical scenario, though, the excitement was not caused by a boastful PR filled with grand promises. In fact, CDNL have not issued a single press release for nearly three months now. No, the reason for the amazing uptrend of the stock can be found in the latest filings of the company.

Despite having to extend the deadline of the Securities Purchase Agreement with the Chinese company Hangzhou Sky Valley Water Technology Co., Ltd. more than a couple of times on April 15 CDNL submitted an 8-K filing stating that they had received the first funding as part of the first tranche. Initially the deal was supposed to be executed in 2 tranches totaling $7.5 million but according to the latest amendments the first tranche has been broken down into three equal payments. In the following 8-K form, filed last Thursday, CDNL announced the approval by the company’s Board of Directors of a $500 thousand share repurchase program. The filing also revealed that the company has received $1,116,000 as part of the securities purchase agreement.

With the significant cash injection and the share buyback announcement it is no wonder that the stock soared even higher. However, getting too excited and overlooking the risks around the company may not be a wise decision. And CDNL is indeed surrounded by some rather serious red flags.

Let’s start with the OTC Pink Limited Information Sign that is still hanging over the OTCMarkets profile page of the company. It was put there because CDNL not only failed to submit their annual report for 2015 on time but they also missed the 15-day “grace” period that ended on April 14. Even now, over three weeks after that, there is still no sign of the report. This means that investors have no way of knowing just how bad the dilution of CDNL‘s common stock has become.

Keep in mind that at the end of September 30, 2015, the company had approximately $500 thousand in outstanding convertible notes that offer their holders the ability to turn them into common shares at discounts going from 25% all the way up to 50%. Between October 15, 2015, and January 14, 2016, 80 million shares were issued as a conversion of debentures and interest, which brought the number of outstanding shares to 216 million. Opening the Schedule 13G statement that was filed on April 11 shows that as of that date Tangiers Investment Group, LLC. owned over 51 million shares representing 10% of the outstanding shares of the company. This means that in less than three months CDNL had issued nearly 300 million fresh shares and that now they had an O/S of over 510 million.

Trading pennystocks is inherently extremely risky. It is always for the best to use caution and to do your own due diligence before putting any amount of money on the line.