Will Minerco Resources Inc (OTCMKTS:MINE) Drop Below $0.001?
On Monday Minerco Resources Inc (OTCMTKS:MINE) submitted a Schedule 14C filing informing its shareholders that a 1-for-100 reverse split has been approved. The news caused investors to flee form the stock and as a result it crashed by more than 44%. Yesterday MINE continued to lose positions wiping another 13% and closing at $0.0013. During the session the stock didn’t fall below $0.0011 but will it manage to do so tomorrow?
Inherently a reverse split isn’t a bad thing. It will decrease MINE‘s bloated outstanding share count from 3.46 billion to the more manageable 34.6 million. At the same time the company will reduce its authorized amount from 3.5 billion to 250 million. If MINE manage to sustain their post-split share price investors won’t suffer any losses. The problem is that there is no indication that the company will be able to do so.
Since the start of the year MINE‘s stock has been in constant decline. After yesterday’s close the ticker is down by nearly 90% compared to its high of around $0.012 from January. The financial results do not inspire much confidence, either. According to the latest quarterly report as of April 30 MINE had:
• $99 thousand cash
• $1.68 million total current assets
• $5.1 million total current liabilities
• $614 thousand revenues
• $748 thousand net loss
The company had a working capital deficit of over $3.4 million and an accumulated deficit of close to $27 million. Although for a pennystock revenues of over $600 thousand are extremely rare it should be noted that MINE registered costs of good sold of $737 thousand, which means that they finished the period with a gross loss of $123 thousand.
The potential dilution following the reverse split is another huge cause fo concern. As of April 30 MINE had $69 thousand in convertible debt and $161 thousand in derivative liabilities. In June the company boosted its cash reserves by $250 thousand but it did this by selling a new convertible note that can be turned into common shares at a 50% discount from the lowest day during the preceding 20 days before conversion.
The risks surrounding MINE are enormous. Do your own due diligence and never invest unaffordable sums of money.
