Lithium Exploration Group, Inc. (OTCMKTS:LEXG) Tries To Bounce From 52 Week Low
Since the last time we took a look at Lithium Exploration Group, Inc. (OTCMKTS:LEXG), the company has had very little luck. With the exception of a few green sessions around Oct. 8 and the surge that it experienced from Oct 22 to Oct. 27 the company’s been crashing almost non stop for the last month. Yesterday was the culmination of its slide, as stock prices reached a new 52 week low of $0.0024.
Although the company started this week’s final session with a notable gap up and has recovered somewhat, with a 16% gain since the opening bell, LEXG‘s situation still seems pretty grim. Still, it is not as horrible as it could have been, especially given the horrifying facts that any due diligence reveals on the company. LEXG‘s latest financial report – a 10-K – hit the web about two weeks ago and was full of huge red flags:
- Annual revenue – $35 thousand
- Total current assets – $138 thousand
- Total current liabilities – $3.4 million
- Net Loss – $7.7 million
- Accumulated deficite since inception – $40.8 million
What’s even more off-putting than the 40 million in accumulated deficite, is the fact that the company has reported $2,832,989 under “Derivative liability – convertible promissory notes”. Unsurprisingly, that debt is being converted into shares at alarming paces and drowning investors in toxic dilution.
Just to put into perspective, consider this – as of March 31, 2014, LEXG had 163 million common shares issued and outstanding. The 10-K that hit the web on Oct 14, 2014 clearly stated that as of “October 8, 2014, the list of stockholders for our shares of common stock showed 15 registered stockholders and 398,972,192 shares of common stock outstanding”.
Fast forward 8 days and we see that as of Oct 16, 2014 that number has grown all the way up to 432,775,221 SO.
And if that horrible dilution wasn’t enough to dissuade investors, the fact that a vote has passed to both increase authorized shares and approve a reverse split is indicative of the company’s desperation. As explained by CEO Alex Walsh, the increase in the authorized share count is absolutely necessary if the company is to clear some debt without trying to sell its already meager assets.
On the other hand, a reverse split would be necessary in order to get LEXG back on the investor’s radar.
It goes without saying that both of these moves are harmful to investor value in and of themselves, however their combination could obliterate it outright. That is why investors are advised to think very very very carefully before committing to LEXG stock.
