Neologic Animation Inc (PINK:NANI) Have Skeletons in their Closet
Stock Mister have been quite busy recently. We took the time to check our database and we saw that they have sent out a total of 23 emails in February alone. We knew that it was unlikely, but we were still hoping that they will finally bring out a solid and credible company which can really be trusted for a change. Needless to say, that didn’t happen and it probably won’t work for Neologic Animation Inc (PINK:NANI), either.
The first task of any research that we do is to find out what the company deals with and it turns out that right now, NANI are developing an eLearning system that is aimed at Chinese schools and, supposedly, it incorporates games and other activities that will make the experience of studying a whole lot more interesting. That wasn’t their primary aim when they were getting started, though. Like so many of the companies that we deal with, NANI began as a mineral exploration venture. Later, some acquisitions took place, the latest of which forced them to issue a staggering 100 million shares of common stock which, no doubt, made the shareholders quite grumpy.
Nevertheless, this is all in the past now and we must see how they are getting on with the educational program. A new press-release came out yesterday which states that they are now looking at expanding the market for their eLearning software beyond the boundaries of China. This sounds good, but if you are a frequent reader of our articles, you will probably know that we’re not too keen on believing in companies’ optimism alone. That’s why we opened their latest financial statement to see what’s what. The first thing that came to our mind was: “Shouldn’t they be focusing on getting the whole thing started before they ‘expand the market’?”. If you read through our recap of the most important financials, you will see exactly what we mean:
- total assets: $101 thousand in cash
- total liabilities: $230 thousand
- no revenue since inception
- net loss since inception: $67 thousand
It’s pretty obvious that they have not generated a single penny from their educational system but, considering the relatively moderate net loss, we’re starting to think that they have hardly been working on it at all. Furthermore, they say that during the last year, they have been busy with getting the company public and we’re not even sure if the studying platform is up, running and ready to be sold. Now, though, they are broadening their horizons? Sounds unlikely.
NANI also admit that they have no idea how they are going to raise the funds needed to follow their business plan over the next 12 months. According to the financial report, they will need a total of $1.1 million and, we reckon that they will probably issue quite a lot of shares and infuriate their shareholders even more.
We have an idea that might just work, though. They could borrow some money from the third parties that have been spending hundreds of thousands of dollars on paid pumps over the last nine months. That way, NANI will have some cash to work with and, as a bonus, their share price will behave in a much more subtle way. Our database alone has received a total of 74 emails since the first promotion started back in June 2012 when NANI‘s shares were traded at around $0.20. By contrast, the ticker closed yesterday’s session at just $0.015.
NANI are not the only ones who have suffered the effects of paid pumps. HOKUTOU HOLDINGS INT (PINK:HKTU), for example, got the same treatment by Stock Mister around February 24. As you can see from the chart on the right, they have lost a whopping 70% in no more than a couple of weeks.
These two examples show how risky promoted penny stocks can be, especially when they are still in the early stages of operations, where revenues and profits are nothing but an elusive dream. That’s why it’s important to weigh the risks carefully and perform your due diligence rather than putting your trust in paid newsletters.
