TRUE DRINKS HOLDINGS (OTCMKTS:TRUU) Moves Higher
For the past two sessions the stock of TRUE DRINKS HOLDINGS (OTCMKTS:TRUU) has been soaring up the chart. Yesterday the stock spiked to a high of 40 cents per share and although such prices couldn’t be maintained for long it still closed the session with a gain of over 24% at $0.28. Even more impressive was the interest shown by investor – while TRUU has been flying mostly under the radar with daily volumes rarely surpassing 100 thousand shares yesterday’s traded volume reached over 691 thousand shares.
Unfortunately exactly like the July 7 session when TRUU once more surged up the chart on uncharacteristic volume there was nothing supporting yesterday’s positive performance. The last PR filed by the company came on July 24 and although TRUU announced an agreement with Capitol Beverage Sales for the distribution of their AquaBall Naturally Flavored Water in the Minneapolis – St. Paul area on that day they closed with a loss of 4.5%.
It is true that the company lacks some of the more glaring problems that are usually associated with pennystock ventures but that doesn’t mean they are a safe choice for an investment. The quarterly report covering the first three months of the year showed that as of March 31 TRUU had:
• $48,803 cash
• $2.7 million total current assets
• $5 million total current liabilities
• $765 thousand sales
• $2.2 million net loss
The company was able to raise a significant amount of funds through a series of private placement transactions. Between February and May TRUU received $7 million by selling Series C preferred shares. The company used a sizable portion of the capital to repay some of its outstanding debt. The financial report for the second quarter that is supposed to be filed by mid-August will reveal just how much has the balance sheet changed.
The Series C preferred shares have a conversion feature and can be turned into common shares resulting in a massive dilution of the common stock. According to the latest S-1/A statement 54.7 million shares are issuable upon conversion of the Series C shares. This is more than the 53.7 million outstanding shares the company had as of July 6, 2015. Another 19.1 million shares can see the light of day if the warrants issued as part of the private placement get exercised. And with the recently increased authorized shares – from 120 million to 200 million, there is plenty of room to accommodate the conversions.
TRUU are continuing to expand the distribution of their AquaBall product and this could result in even bigger revenues but the red flags around them should not be underestimated. Do your own due diligence before committing to any trades involving the stock.
