National Energy Services Inc (OTCMKTS:NESV) Surges On
On Friday National Energy Services Inc (OTCMKTS:NESV) made another impressive jump up the chart. The stock managed to add just below 50% to its value closing at $0.034. This is not the first time the ticker has soared upwards in the last couple of sessions. Holding on to the gains though has proven to be problematic. Will this time be any different?
Unlike the majority of the pennystock ventures out there NESV is not only generating revenues but the sums it is reporting are in the millions. According to the latest financial report the company finished the second quarter of the year with:
• $96 thousand cash
• $1.85 million total current assets
• $11.3 million total current liabilities
• $ 2.5 million revenues
• $3.9 million net loss
As we said $2.5 million in quarterly revenues is an achievement many OTC companies can only dream about. For NESV, however, things are quite different. Compared to the same period in 2014 their revenues have fallen by more than 40%. Not to mention that the cost of revenue for the quarter was actually bigger than the revenue itself causing NESV to report a gross loss of $89 thousand.
The limited cash reserves forced the company to look for more external sources of funds and in July it sold a $10 thousand convertible note followed by a $250 thousand note in August. As of June 30 NESV already had $870 thousand in current convertible debt. While some of the outstanding notes have fixed conversion prices many others offer their holders the opportunity to turn them into shares at discounts ranging from 30% to 40%. Usually this means only one thing – dilution.
After performing a massive 1-for-200 reverse split at the end of last year NESV‘s outstanding shares were reduced to a little over 4 million. Just four sessions ago the daily volume for the stock was actually bigger than that with investors trading more than 5 million shares. A Form 4 filed on September 21 stated that 3 million shares are 10% of the total outstanding shares meaning that back then NESV had O/S of 30 million shares. With the authorized shares increased from 75 million to 150 million back in July there is a lot of room for even more conversions to take place.
With all of this in mind you might be wondering why exactly are investors so excited about the stock? The answer can be found in the annual report filed by the company in April. In it NESV announced that they have signed a letter of intent for the acquisition of a Texas-based oil field maintenance company and its affiliates. After months and months of silence on September 21 the company finally issued an update on the state of the LOI. Apparently because of the size of the deal the due diligence process has taken six months to be done. The PR stated that although the agreement has moved to the closing stages investors should keep in mind that the transaction has not been completed.
With investors expecting more PRs to be issued soon many may be jumping into the stock in anticipation. For now though nobody knows when the next announcement will come. The red flags around NESV should not be underestimated in the slightest and trades should be attempted only after doing extensive research.
