OSL Holdings Inc. (OTCMKTS:OSLH) Explodes on News and Pump
Late in the evening on Tuesday we received a round of emails touting the stock of OSL Holdings Inc. (OTCMKTS:OSLH) sent by some of the affiliates of Micro-Cap Consultants LLC. The involved pump outfits were Penny Stock Circle, Stock Market Quote and 1-2-3 Stock Alerts and they disclosed a compensation of $15 thousand for a 1 day awareness campaign.
The wave of email alerts was certain to attract some attention towards the stock but yesterday the company itself issued a PR that put investors into a state of real buying frenzy. Throughout the session nearly 13 million shares got traded while the previous session saw less than 900 thousand. The average volume for OSLH sits even lower at 366 thousand traded shares. The relentless buying pushed the stock to an intraday high of $0.048 and although such prices couldn’t be supported it still closed with a gain of nearly 170% at $0.035.
In the press article OSLH announced that they had acquired Go Green Hydroponics, a hydroponics, indoor gardening and cultivation supply retailer. The store is expected to reach around $3 million in revenues for fiscal 2014. Despite the impressive revenues the acquisition was valued at $1.8 million, sum that is far beyond the reach of OSL Holdings. That is why we weren’t surprised to see that the funds were provided through a debt financing transaction. Unfortunately the PR didn’t contain any details about this deal and so far an 8-k form covering the financing has not been submitted.
You will see why we are so concerned about the company issuing even more debt when you open the latest financial report which covers the quarter ending May 31. Back then the company had:
- $9910 thousand cash
- $59 thousand total current assets
- $2.1 million total current liabilities
- ZERO revenues
- $4 million net loss
In addition to these grim numbers the company has also been putting its shareholders through some devastating levels of dilution.
Back in January 2013 OSLH performed a massive 1-for-1000 reverse split but a year later, as of January 21, the number of outstanding shares had reached 152 million. Nine months later and the company had managed to double that amount because according to this 8-K form filed on September 30 the outstanding shares were now more than 300 million.
In order to boost its cash reserves in July OSLH sold a $525 thousand secured convertible promissory note to Typenex Co-Investment, LLC that coupled with the debt financing for the Go Green acquisition means that the issuance of shares may not be ending any time soon.
Despite the numerous red flags many investors are comparing yesterday’s surge to the one posted by the stock back in March when it spiked above $0.275 per share. The climb was rather short-lived though and since then the company has been constantly sliding down the chart and this Monday reached a low of just 1 cent per share. How long will the excitement last this time? Do your own due diligence, weigh all the risks around the stock and decide on appropriate time horizons for your investment in order to minimize the chances of any unpleasant surprises.
