Eurocan Holdings Ltd (OTCBB:EURC) Starts Moving

Like many other OTC companies, Eurocan Holdings Ltd (OTCBB:EURC) started off with the idea of conducting their business online and like many other OTC companies, they used words and phrases like “state-of-the-art” in the description of their strategy.

Unlike other OTC ventures, however, EURC did manage to get the ball rolling and they generated some revenues. Unfortunately, the latest 10-Q shows that things were not going quite according to plan a couple of months ago. Here’s what the company recorded on June 30:

• cash: $17 thousand
• total assets: $168 thousand
• total liabilities: $298 thousand
• quarterly revenues: $7 thousand (55% down year over year)
• quarterly net loss: $13 thousand

So the online media and advertising business failed to get them off the ground and last month, they decided that pressing on won’t bring any value to the shareholders. On October 20, they entered into an agreement and a plan of merger with a company called Eastside Distilling LLC and just eleven days later, they completed the transaction.

This means that EURC is no longer dealing with online marketing. It’s now in the business of selling high-quality alcoholic beverages.

The market didn’t really react to the merger at first, but yesterday, EURC registered a relatively active session. More than 1 million shares changed hands which means that the dollar volume at the end of the day stood at nearly $460 thousand. So, apparently, some people like the new business plan and are eager to jump in before anybody else finds out about it. Or do they?

While the dollar volume isn’t too bad, the ticker remained pretty much stationary throughout the day. The number of trades is also quite small (according to Quotemedia, only 64 transactions took place) and most of the stock changed hands in rather big blocks of shares.

Whoever bought yesterday should be aware of the fact that EURC still hasn’t published the financial statement of Eastside Distilling which means that we don’t know what the surviving entity’s situation is. There have been no press releases as well and we reckon that the uncertainty should be something you need to consider carefully before jumping in.

Another thing you mustn’t forget is the threat of a paid promotion. EURC went through a reverse merger and as the SEC has said in the past, these sort of transactions are often followed by all sorts of shady practices that end up burning investors to a crisp.

Of course, a reverse merger on its own doesn’t mean that EURC will necessarily fail to succeed with its new business plan and it also doesn’t mean that a paid pump is about to follow. Having gone through the SEC filings, however, we can see that there are some people who won’t mind a bit of liquidity and price action.

If you take a look at the registration statement filed when EURC was going public, you’ll see that a couple of years ago, 100% of the company’s issued and outstanding stock (12,710,000 shares) was held by the people listed on Page 12 of the document. As the S-1 tells us, these people wanted to sell 8 million shares to the general public at $0.01 a piece. There’s no way of knowing who exactly owns the aforementioned 8 million shares at the moment, but the Plan of Merger tells us that they are still outstanding.

If the owners of these shares start selling at the current prices, things could turn ugly in a matter of minutes.