Virtual Piggy, Inc. (OTCBB:VPIG)’s Q2 Results Fail To Impress Investors

It’s that time of the year when most of the OTC companies are due to publish their financial reports for the period between March and June. Typically, when the new information comes out, erratic stock movements are often observed. Usually the numbers contained in the financial statements decide where the stock is going next and in Pennyland, where volatility is always a factor, the behavior can be especially violent. Virtual Piggy, Inc. (OTCBB:VPIG)’s 10-Q came out last Friday and before we delve into the details, we’ll summarize the most important figures found in it:

• cash: $8.2 million
• current assets: $8.4 million
• current liabilities: $664 thousand
• revenue: $58
• quarterly net loss: $3.3 million

As is often the case, there are some good news and some bad news. Let’s start with the positive things. Unlike most of the small cap ventures that we deal with around these pages, VPIG have never been strapped for cash and during the second quarter of 2013 they have managed to fill up the bank account even further. The current liabilities have been reduced and, on the whole, they are one of the few penny stock ventures that can brag about a good-looking balance sheet.

We read in the report that VPIG now have agreements with a total of 115 merchants, 19 partners and 36 gift card providers. According to the previous quarterly report, the number of agreements was a lot smaller and back then, they weren’t ready with the gift card concept just yet. We also read in the filing that VPIG‘s European branch is now fully operational.

If we close the 10-Q and check out the rest of the developments around the company we’ll see that a steady stream of press releases over the last month or so has informed us that more and more contracts are being signed and more and more partners are jumping on board. A new video commercial featuring movie and TV actress, Sela Ward has hit the Internet, and she seems genuinely impressed with the Virtual Piggy money management system. VPIG are even giving you the chance to win some movie tickets, which, if nothing else, should raise some awareness around the general public.

That’s the good news taken care of, so what about the negative sides of the new report? Well, if you thought that the revenue figure from above is a typo, you might want to check out the 10-Q and see for yourself that it’s not. They really did manage to generate no more than $58 in proceeds despite the fact that the system is fully up and running and people seem to be using it already. What’s more (not that $30 make that much of a difference), we are seeing a decrease in revenues quarter over quarter and VPIG really need to think about yielding more money from their payment system.

They also need to think about cutting down on expenses since when you compare the reports for the first and the second quarters, you will see that the net loss has increased by around 26% and if that trend continues, VPIG might burn through their copious amounts of cash sooner than everyone is expecting.

Investors are probably aware of all this and most likely this is the reason for the 4% drop from yesterday. The slide was not that dramatic and we’re pretty sure that the long-term shareholders are hoping that it’s just a hiccup, but the increased volume suggests that a lot of people were influenced by the numbers in the 10-Q.

A definite plus side is the fact that VPIG are still managing to stay out of paid promotion, especially considering the fact that they do seem to have an interesting business plan. Xumanii, Inc. f/k/a Medora Corp (OTCMKTS:XUII) and Cereplast Inc (OTCMKTS:CERP), for example, also have some interesting ideas (in theory, at least) but the constant pressure exerted by the pumpers has made for some horrific stock performance. While the dangers for VPIG are not that immediate, we still recommend that you keep all the positive and negative sides in mind and consider the risks carefully before making any investment decisions.