Leo Motors Inc. (OTCMKTS:LEOM) Logs Another Red Session

On Wednesday Leo Motors Inc. (OTCMKTS:LEOM) took a step back and closed 5.2% in the red at 36 cents per share. Yesterday the stock continued its downwards movement and this time the losses were bigger – 9.7% and a close at $0.325 per share. In the last couple of months LEOM were able to surge up the chart and for now they are managing to maintain the higher price ranges.

LEOM is far from the typical pennystock venture. Last year the company started generating revenues and as a whole its financial state is not that bad. The latest financial report covers the quarter ended June 30:

• $462 thousand cash
• $3.2 million total current assets
• $6 million total current liabilities
• $1.4 million revenues
• $1 million net loss

Although a revenue of over $1.4 million not something to scoff at it should be noted that the balance sheet definitely raises some concerns. There is a sizable working capital deficit while $1.7 million of the reported current assets consist of accounts receivable.

Despite these red flags the positive PRs published by LEOM have been enough to keep investors excited. After all, on August 6 they announced the signing of joint venture agreement with a Chinese company to develop, manufacture and sell electric cars, on August 18 they entered into a Memorandum of Understanding with LG Uplus Corporation  for the development of hardware and software protocols for connected Electric Vehicles and Electric Boats while this Monday they announced another Memorandum of Understanding that should expand their business into four more countries.

Getting too excited at the moment may not be the best decision though. Under the terms of the Joint Venture agreement LEOM will have to provide a cash contribution of approximately $32.5 million, sum that is far beyond the current resources of the company. Investors should also take into account the recent increase of the authorized shares which could be a sign for further dilution of the common stock. As we warned you in our previous article between April 30, 2014, and April 30, 2015, the O/S count nearly doubled from 80 million shares to 157 million shares.

Dealing with pennystocks is always risky. Before committing to any trades you should always do your own due diligence and LEOM is not an exception.