Labor Smart, Inc. (OTC:LTNC) Pump Bursts on the Scene

As we cautioned, Labor Smart, Inc. (OTC:LTNC) got some hot action yesterday, as the pump that was launched for the company picked up and sent LTNC shares nearly 59% up in a single day. Volume was blown out of proportion as well, at 536 thousand shares, against an average of 33 thousand.

Promoters Awesome Penny Pick first touted LTNC over the extended weekend break, disclosing that they have been retained by a third party who will be compensating them. However the disclaimer makes no mention of the sum in question, as allegedly no compensation has been received yet, even though the promotion’s starting date is listed as February 16. The pump campaign is supposed to run for the duration of three weeks, again as per the disclaimer.

The previous promotion focused on the 2012 revenues of LTNC, that allegedly clocked at $7.1 million. After announcing that revenue for January alone was over $580 thousand, now the company has come up with more press hype, claiming that the next two weeks added another $570 thousand for a grand total of $1.15 million of revenue generated year-to-date. That looks like truly astonishing news, only it would have been much more impressive in the form of an official filing and not free-form press releases.

And the company’s official filings cast a slightly different light on things. The last available financial report from LTNC is a quarterly for the period ended September 2012. The numbers rundown from that is as follows:

• $0 cash
• $863 thousand in current liabilities
• $5 million revenue for the period Jan-Sep 2012
• $108 thousand net loss for the period Jan-Sep 2012

The company obviously had no difficulty chewing through revenues of $5 million to finally log a net loss exceeding a hundred thousand. Considering their completely cashless state as of their last report, their noticeable even if not overwhelming liabilities and their operations that so far ended up in loss, it may be a little difficult for traders to believe the company suddenly underwent some magical transformation that was not reflected in a material filing or in a press release and that transformation suddenly served up an incredible increase in revenues. If the PR hype was backed up by any filings at all, things would have been a lot different.

Additionally, in September 2012, LTNC issued a convertible to Evolution Capital, LLC for $130 thousand. The note is toxic, with no fixed conversion price and converts at a 50% discount of the three lowest trading prices over a ten-day period prior to conversion.

As an added curiosity, LTNC also seems to operate out of a quaint small residential house in Georgia, as per their registered principal executive offices address.

The promoters at Awesome Penny Pick previously ran other pumps that crashed once the promo emails stopped coming. In early February the pump on Great China Mania Holdings, Inc. (OTC:GMEC) ended and the stock slipped, then crashed harder.

Traders are advised to do their own due diligence and be very careful around pumped stocks that appear to experience lucrative runs, as more often than not the subsequent crashes bring stock price well below pre-pump levels.