Leo Motors Inc. (OTCMKTS:LEOM) Is Still Surging
Leo Motors Inc. (OTCMKTS:LEOM) found its feet in July’s very last trading session and has been climbing the charts aggressively ever since then, adding almost 50% to its market value in just seven days of trading.
By all accounts, it seems that the company’s current ascent is driven by the investors’ enthusiasm that was caused by LEOM‘s latest 8-K. On Jul. 31, it announced that LEOM had “entered into a joint venture company agreement … with Fushun Jinyuan Technology Machinery Manufacturing Co., Ltd. to establish a joint venture in China”. As per the agreement, LEOM is to will receive 10% of the joint venture’s gross profit for ten years as a technology transfer fee.
Since the joint venture is “expected to supply 30,000 electric vehicles”, according to Mr. Si Guicheng, the chairman of Jinyuan, this hinted that there’s going to be quite a bit of cash coming LEOM‘s way. So where’s the catch?
Well, perceptive and diligent investors that have seen the report will have also noted that it contained something that the press release announcing it failed to mention – the fact that “The Company [LEOM] will invest in Senyuan Leo through a cash contribution of … approximately $32.5 million”.
And this is where the avalanche of problems starts building momentum.
One look at LEOM‘s latest financial report determines that as of March 31, 2015 the company had just:
- Cash and cash equivalents – $466 thousand
- Total Current Assets – $2.2 million
- Total Current Liabilities – $4.5 million
- Quarterly Revenues – $42 thousand
- Quarterly Net loss – $595 thousand
Since that time, the company has issued a couple of promissory notes, the most notable of which afforded it approximately $447,275 worth of toxic debt that converts at “85% of the average trading price of the Common Stock for the 30 days immediately preceding the date of conversion”.
So, if it has not spent a lot of money on operations and expenses in these last three months, LEOM may have a bit over a million dollars on hand at the moment. This being the case, how can it afford to invest thirty two times that amount in a foreign joint venture?
True, the company has recently upped its authorized shares by 100 million, up to a total of 300 million, but even if its shares outstanding reach that high, it does not look likely that LEOM will be able to gather that kind of cash.
Long story short – LEOM‘s situation is not as peachy as it may appear. Boastful words are now pushing the ticker forward and upward – but its filings tell another tale entirely. Investors would do well to pay attention to that side of the matter as well, or else they will risk stumbling into one of the many pitfalls that surround the company.
