Lucas Energy, Inc. (NYSE:LEI) Will Issue More Convertible Debt

[[tagnumber 0]]The share price of Lucas Energy, Inc. (NYSE:LEI) surged across the moving averages yesterday and today it looks like the stock could gain more. The company has made steps to improve its disastrous working capital gap recently, yet the new cash has come at the cost of high risk for severe shareholder dilution.[[tagnumber 1]] [[tagnumber 0]]LEI jumped 22.41% in the last trading ses[[tagnumber 3]]sion to close at $2.88 for a share. Yesterday‘s trading volume was only slightly higher than normally, yet the jump was huge enough to make technical indicators reverse and to provide for higher interest of traders today as well. The last close is near the upper Bollinger band and the technical signals could mean a breakout of the trading channel today.[[tagnumber 1]] [[tagnumber 0]]LEI is an oil and gas company which has insignificant operations and very low cash reverses. On the threat of delisting from the NYSE, this summer the company was forced to secure cas[[tagnumber 6]]h at extremely unfavorable terms that could soon send the stock into a lasting downtrend.[[tagnumber 1]] [[tagnumber 0]]In June, LEI sold part of its oil and gas interests in Karnes County, Texas, yet it retained the option to participate in potential drilling operations. With working capital deficit of over $9 million, the company was not able to make the payment required to exercise that option.[[tagnumber 1]] [[tagnumber 0]]The company entered into a Non–Revolving Line of Credit with Silver Start Oil Company in August under which LEI has the right to sell convertible promissory notes to the creditor each month for an aggregate amount of $2.4 million. Notes have been issued twice for far for a total of $400,000 and they are convertible into shares of common stock at $1.50 per share. If converted, the newly issued shares solely from the second note sold in October will represent 9.1% of LEI equity, meaning dilution for current shareholders.[[tagnumber 1]] [[tagnumber 0]]At the end of the second quarter, LEI had another $7 million of long–term debt outstanding that is due in the current quarter, implying the cash obtained from the new line of credit will most likely be used to repay old liabilities instead of developing the business.[[tagnumber 1]] [[tagnumber 14]] [[tagnumber 1]]