US Natural Gas Corp. (OTCMKTS:UNGS) Wants a Piece of the Marijuana Action
On October 15, 2013, US Natural Gas Corp. (OTCMKTS:UNGS) announced that their crude oil production has reached the “highest levels” at their Kentucky properties. Normally, such a press release would have caused quite a lot of stir around the market, but for some reason, in the case of UNGS, it didn’t.
Right now, more than six months later, we can see that investors didn’t really have that much to be excited about. The 2013 annual report came out about a month ago and it told us that the total revenues for last year amount to just $109 thousand. Indeed, there is a 22% jump year over year, but even so, the proceeds are nowhere near enough. As a result, UNGS finished 2013 with a $728 thousand net loss.
The rest of the balance sheet doesn’t look like much either. Here’s a summary of the most important figures:
- cash: $4,384
- current assets: $406 thousand
- current liabilities: $1.8 million
- accumulated deficit: $5 million
A closer look at the filing suggests that UNGS are indeed trying hard to make it into the oil and gas industry, but for some reason, progress is excruciatingly slow. Perhaps that’s why, on March 17, they decided that an expansion of operations is needed.
Like many other small cap enterprises, UNGS established a new wholly owned subsidiary which is supposed to help them enter the booming recreational and medical marijuana industry. On April 7, they issued another press release, telling us that the new daughter company is now in negotiations with an acquisition candidate. A letter of intent, the PR said, was supposed to be signed within the next 3-5 days.
On April 25, two weeks after the deadline, UNGS finally inked the LOI. The acquisition, along with a name change, is supposed to be completed within the next ninety days and if they do manage to close the deal, they will have a new subsidiary called Signifi Solutions Inc.
At the moment, there’s absolutely nothing to suggest that Signifi has anything to do with the marijuana industry. Their main line of products is called Spot Shops – automated kiosks which allow you to shop for all sorts of things quickly and easily. Investors around message boards, however, are speculating on the Medical section of Signifi’s website which is currently labeled “Coming Soon“.
Despite the uncertainties around the future, the market seems to be reacting rather positively towards UNGS‘ cannabis adventure. The initial press release dug the ticker out of the triple zero levels and yesterday, the LOI’s official announcement resulted in 5% gains and a dollar volume of around $376 thousand.
The future reports should tell us how well the new business is doing, but in the meantime, investors probably need to bear in mind that the share issuance during the second half of 2013 has been quite intense. UNGS effectuated a reverse split in August 2013 and immediately after it, they issued around 81 million shares at $0.00003 a piece “as payment towards a note” (proof found in Note L of the latest financial statement).
The O/S count grew from 285 million on September 30, 2013 to 530 million on March 26, 2014. With 2 billion shares authorized, there’s still plenty of room for further dilution and conversion of notes which is, we reckon, something you should definitely bear in mind while making your investment decision.
