Allerayde SAB, INC. (OTCMKTS:ASAB) Sliding Some More

Allerayde SAB, INC. (OTCMKTS:ASAB)’s share price is on the decline once again. It did jump by about 19% last Friday when it reached $0.49 but it’s fair to say that since then, it’s all been pretty much downhill. Even yesterday, when technical problems with OTC Markets’ quotation system meant that the session was quite a bit shorter than usual, the ticker managed to slip by another 10% while shifting more than 362 thousand shares.

The pumpers, who, as we mentioned in our previous article, are carrying out a rather big promotional campaign say that short selling is to blame. While this may have played its role, there are some other hypotheses.

If you take a look at the company’s latest 10-Q, for example, you’ll see that back in April, more than 12 million shares of common stock were issued as a conversion of $95,597 worth of promissory notes. As you might have calculated already, the conversion price hovers around $0.007 per share which is a massive discount and we probably don’t need to tell you that even a small portion of this stock could wreak havoc in case it gets unleashed on the open market.

The fact that someone has plashed out around $535 thousand on thirty-six (and counting) emails to promote ASAB makes the scenario above all the more likely. Still, once the pumpers disappear, things should be better, right?

We’re not so sure. We mentioned in our previous article that ASAB‘s fundamentals are nothing short of a disaster. As of June 30, they had a negative working capital of more than $2.5 million, an accumulated deficit of $2.6 million and no cash. Michael Rhodes, the company CEO, announced in an interview for CEO Insider TV recently that they plan on putting their AAA Pen on the market within the next twelve months, but it’s easy to see that unless they secure some financing, they’ll have some serious trouble meeting the deadline. There are plenty of convertible notes outstanding as well, and if they get turned into common stock, they could cause some heavy dilution which is probably the last thing the shareholders want to see.

We’ve seen no news of fresh financing to improve the balance sheet and we somehow get the feeling that ASAB have a problem in setting their priorities straight. The only recent press release to come out of the company HQ is the one from Monday which informed us that they have retained a firm called Morningstar Corporate Communication, which should help them with investor relation services. Generally speaking, this isn’t such a bad thing, but we still reckon that there are some more immediate issues that need resolving. We mentioned the dreary balance sheet already and if you decide to look up the address of ASAB‘s principal office, you’ll see that it’s located in what appears to be a residential house in the picturesque town of Newark in Nottinghamshire, UK. Hardly the best place for the headquarters of a company boasting a market cap of more than $30 million.

In addition to announcing the contract with Morningstar, ASAB did something interesting and rarely seen in Pennyland. They said that they know about the promotional materials that are flying around and also tried to assure their shareholders that they have nothing to do with them. That’s probably the case, but even so, they can do little to stop the pump, which means that it still stands as a massive red flag worth considering in case you decide to trade ASAB.

As for a long term investment, they might just be able to get the ball rolling but it’s fair to say that, in light of the latest 10-Q, things aren’t looking too optimistic. Make sure you consider all the risks carefully before making your final decision.

Global Earth Energy Inc (OTCMKTS:GLER) is another ticker that drew in quite a lot of attention during yesterday’s short session. As we mentioned in our article, a press release announcing some fresh financing got investors all hyped up. Due to the outage, however, GLER only managed to add 13%. Pan Global Corp (OTCMKTS:PGLO), on the other hand, continued sliding and in just one and a half hours of trading, lost a further 14% ranking the ticker among some of the worst promotional disasters in recent months.