In Ovation Hldgs In (OTCMKTS:INOH) Surges on Licensing Negotiations

In Ovation Hldgs In (OTCMKTS:INOH) changed the company name and ticker symbol, did 1 for 1,000 reverse split, and officially became a holding company in October 2013. They want to succeed by venturing in numerous industries and, apparently, they are confident that they can do it.

In January, for example, they said that although they haven’t registered any revenues as of yet, they plan to close 2014 with a positive bottom line. That’s a mightily ambitious statement, but unfortunately for INOH, investors didn’t seem too convinced.

On January 31, when the company published the aforementioned press release, the ticker was hovering around the $0.01 per share mark. On Monday, it closed the day with virtually no volume and a price of $0.0023.

Yesterday, however, the company made another announcement and this time, traders were more than willing to jump in. INOH said that they are about to license a sophisticated piece of technology for the early detection of lung cancer.

The press release hit the wire about fifteen minutes before the opening bell and Haywire Viral Marketing and Penny Stock Whispers (after receiving a total compensation of $3 thousand) decided to help spread the word around. As a result, we saw some intense trading.

INOH opened the day with a gap up and started climbing almost immediately. At one point, it reached an intraday high of $0.013, but then settled down and closed the session at $0.0084 (265% above its previous value). The stock also managed to rack up a dollar volume of nearly $2.4 million which means that a lot of people are putting a lot of hope in the company. But should they?

There are a couple of problems. As always, we’ll start with the financial statements. INOH‘s latest report covers the first calendar quarter of 2014 and the figures in it are not what you’d call encouraging. Here’s a summary of the most important financials as of March 31:

• current assets: $215
• current liabilities: $1.7 million
• NO revenue since inception
• quarterly net loss: $73 thousand

You don’t really need a room full of analysts to see that the company is in a pretty bad shape.

Then you have the share structure. Before the reverse split, INOH (then under the MEXP symbol) was a heavily diluted stock. The split helped a bit, but then, for reasons that are not very well explained, they issued billions of shares to the members of the management team. They apparently realized their mistake and most of the officers’ stock was returned and canceled.

Unfortunately, all the while, INOH converted quite a lot of debt. The latest disclosure statement tells us that during the quarter ended December 31, 2013, they issued 850 million shares under note conversion terms and between January and March, they printed a further 67.5 million.

The conversion rates were not disclosed, but we can see that there’s still plenty of notes waiting to be turned into common stock and more are being issued on a regular basis. As far as the financial statements are concerned, the company simply doesn’t have the money to pay them off with cash which means that the threat of dilution seems very real at the moment.

The chart on the right belongs to Medient Studios Inc (OTCMKTS:MDNT) and we reckon that it shows pretty definitively how bad the effects on the stock could be.