Will Studio One Media, Inc. (OTCMKTS:SOMD) Sink To New 52-week Lows?
At the end of April Studio One Media, Inc. (OTCMKTS:SOMD) began surging up the chart culminating in a high of over 90 cents in mid-May. The truly impressive performance was sparked by a single PR – ON Semiconductor Corp. (NASDAQ:ON) announced the release of their BelaSigna 300 AM digital signal processing chip. Embedded in the chip is the AfterMaster technology of AfterMaster HD Audio Labs, Inc., a subsidiary of SOMD. It is not an everyday occurrence for a NASDAQ-listed company to get involved with a pennystock venture and investors certainly had a reason to be excited.
If you take a look at the chart of SOMD‘s stock, however, you will see that immediately after hitting the highs from May the ticker began sinking lower and lower down the chart the downtrend is still ongoing. On Friday SOMD crashed by 16.6% and closed at $0.4 per share, precariously close to the current 52-week low of $0.38.
The reason for the change in sentiment could be the fact that ON Semiconductor will rollout the first AfterMaster encoded chip in Spring 2016. The financials of the company also fail to inspire much confidence. The latest financial report covers the quarter ended March 31 and according to it at the end of the period SOMD had:
• cash: $402 thousand
• current assets: $476 thousand
• current liabilities: $6.6 million
• quarterly revenues: $223 thousand
• quarterly net loss: $1 million
While the generated revenues for the quarter were actually bigger than the revenues reported for the entire fiscal year ended June 30, 2014, the losses incurred by the company had remained significant. SOMD had a massive working capital deficit of $6.2 million and a net loss for the nine months ended March 31 of over $5.7 million. Furthermore, according to the 8-K filing submitted last Friday the independent certifying accountant, Sadler Gibb & Associates, LLC, of SOMD notified that company that the last 3 quarterly reports cannot be relied upon because of an undisclosed derivative liability of $389,970.
The company’s annual report should be completed by the end of the month and if it shows an even better picture it could at least help SOMD stabilize. The report will also show how many new shares has the company sold recently and at what price. This information is extremely important because SOMD have been funding their operations primarily through the sale of equity and convertible debt. At the end of March over $831 thousand in non-related party convertible notes were outstanding. The recently increased authorized shares – from 100 million to 250 million, may have spurred some of the note holders to convert them into common shares.
Even if you believe in the potential of SOMD‘s technology you should still use caution when dealing with their stock. Take into account all of the various red flags and adjust your trades accordingly.
