AccelPath Inc (OTCMKTS:ACLP) Skyrockets on Acquisition News
A little over a year ago, AccelPath Inc (OTCMKTS:ACLP) announced their intentions to acquire a company called Energy Innovative Products. The management team said back then that they’re extremely excited about the transaction because it will give them the opportunity to diversify their business plan. Unfortunately, while the acquisition did result in a bit more interest from investors, it did little to stabilize ACLP‘s financial situation.
The latest 10-K is here to prove the point. Here’s what the company recorded during the twelve months ended June 30:
- cash: $26 thousand
- current assets: $28 thousand
- current liabilities: $2.7 million
- yearly revenues: $216 thousand
- yearly net loss: $2.5 million
Once you take a closer look at the 10-K, you’ll see that the revenues (which, by the way, have experienced a 35% drop year over year) are coming from government contracts that have nothing to do with Energy Innovative Products. All in all, the acquisition from October 2013 was probably not the best move for ACLP and, not surprisingly, a few weeks ago, the two entities decided to unwind the agreement.
Immediately after that, however, ACLP found another acquisition candidate. It’s called Village Tea Company Distribution and about forty minutes before yesterday’s opening bell, a press release informed us that the transaction has been completed. The question on everyone’s mind is: “Will the new daughter company be more successful than the old one?”.
Judging by ACLP‘s truly explosive performance yesterday, there’s no shortage of people who reckon that the answer is a definitive “yes”. The ticker managed to gain a whopping 128% in a matter of just six and a half hours and it finished the day at $0.0016 per share on a dollar volume of around $300 thousand.
Truth be told, there are some things to suggest that Village Tea is a solid company. There are a few videos around the internet about the premium tea seller and its CEO, Martin Ekechukwu, and having gone through them, we can certainly see that there is a market for their products. Investors certainly have the right to be excited, but aren’t they overlooking something?
Evaluating the risks of a potential investment is something strictly individual. When you see a dilution as astronomical as the one shown by ACLP, however, you must pay close attention. Let’s go through the SEC filings and see what has happened to the O/S count over the last few months or so.
The 10-Q covering the first calendar quarter of 2014 shows that on May 2, there were around 1.3 billion shares issued and outstanding. On July 9, this number was already sitting at 4.7 billion. At that point, a reverse split seemed inevitable and on September 4, ACLP reduced the O/S count by a factor of 250.
Immediately after the split, there were about 19 million shares issued and outstanding, but unfortunately, the printing press wasn’t about to be given a rest. The latest financial report got published on September 29 and it showed us that back then, the O/S count stood at a little over 22 million. How much is it now?
We can’t know for sure. Chances are, however, that it’s much more than 22 million because during yesterday’s session alone, investors traded more than 207 million shares. As you probably know, it’s not impossible for the daily volume to exceed the float. Doing it by a factor of ten, however, is bordering on the absurd. That’s why, carefully evaluating the risks is absolutely essential.
