Leo Motors Inc. (OTCMKTS:LEOM) Stamps on the Throttle
Up until the beginning of April, Leo Motors Inc. (OTCMKTS:LEOM) was going pretty much nowhere. The ticker was stuck to the $0.07 per share mark and there wasn’t enough volume to propel it any higher.
Then, LEOM issued a press release and everything changed. On April 6, the company said that they have acquired a stake in not one, not two, but three operating automotive businesses. The deal means that LEOM now owns 50% in Leo Motors Factory I, Leo Motors Factory II, and Erum Motors – three revenue producing companies that repair and trade high-end luxury cars. The management team said that the acquisitions have been made ‘under very favorable terms’ and a quick look at the 8-K which was filed a few hours later reveals that they weren’t exaggerating. The filing says that LEOM closed the deal by paying a total of 300 million KRW which translates into about $273 thousand.
Investors seem pretty happy about the news. LEOM was in no hurry at the beginning, but over the last week or so, it has been gaining quite a lot of speed. The last red session was registered on May 5 and since then, the price has gone up by about 120%. Yesterday’s closing bell stopped LEOM at $0.23 per share on a dollar volume of about $155 thousand.
More and more people are now following the stock and more and more people believe that LEOM will make them rich. But will this happen?
If you are a retail investor, you might want to consider a few things. The management team said in the press releases that the repair shops acquired in April are revenue-generating entities, but we still don’t know what their financial situation is. We do know, however, that LEOM wasn’t in a particularly healthy shape at the end of last year. Here’s what the 10-K tells us:
- cash: $217 thousand
- current assets: $1.4 million
- current liabilities: $4.3 million
- yearly revenues: $693 thousand
- yearly net loss: $4.5 million
This was the first year of revenue generation for LEOM and in light of this, the sales figure isn’t that bad. The rest of the report, however, is somewhat underwhelming.
There’s quite a lot of dilution as well. The number of issued and outstanding shares grew from less than 68 million at the end of December 2013 to more than 138 million a year later. According to the company profile at the OTC Markets, it’s now sitting at around 157 million.
All in all, there’s no shortage of risks associated with a potential investment and you need to think about them really hard before putting your money on the line. Some people, however, are having it much easier.
Asher Enterprises, for example, received a grand total of 4,965,990 shares of common stock as a conversion of $138,514 worth of debt last year which brings the conversion rate down to less than $0.03 per share. Thanks to the increased liquidity from the last couple of days, Asher (which, in case you’re new to the world of penny stocks, is a well-known and not very reputable financing provider) can unleash a rather large amount of stock on the open market. Unfortunately, as a side effect, the share price might suffer.
