If you are the sort of person who is willing to invest in a promoted penny stock, checking through the historic performance under the pressure of the pumps is never a bad call. Right now, 007 Stock Chat
and their affiliated newsletter, PennySt0ckSpy
are touting NanoTech Entertainment, Inc. (OTCMKTS:NTEK
, NTEK message board
) for $20 thousand and that is why we decided to see if the behavior from the previous pumps suggests that NTEK can make it through unscathed.
A quick look at our database reveals that we have managed to intercept a total of three campaigns for them. There was one at the beginning of August 2012 and it was a complete flop. The pumpers were explaining in details that NTEK want to become the global gaming empire of the 21st century, but all that did was crush the ticker and within a couple of days, around 70% of the value was gone.
Then a couple of months later, in November 2012, NTEK came up with some exciting news about new appointments to their management team and the almost obligatory projections about future growth. This caused some excitement and, once again, some paid newsletters jumped on board. The history from August was bound to repeat itself and, sure enough, a couple of sessions obliterated nearly 70% of the value.
Then the pumpers kept quiet for some time and it would appear that NTEK managed to regain some of the investors' trust on their own. News of stock buyout and improvement in the quarterly reports gave the ticker a push in the right direction and even when the promotion from the end of March came in, its effects on the price were not as dramatic as the ones from the precious campaigns. So what are the odds now?
Well, it is true that some traders are putting quite a lot of hopes on NTEK and the performance from the last couple of months certainly suggests that they might be onto something. The figures in the financial reports are getting better and better with every quarter, as well. Here are the ones as found in the statement for the first three months of 2013:
- cash: $8 thousand
- current assets: $51 thousand
- current liabilities: $1.4 million
- quarterly revenues: $257 thousand
- quarterly net loss: $230 thousand
- accumulated deficit: $5.2 million
Sure, even at this point, the report looks rather dismal, but when you have in mind that the revenues for the fourth quarter of 2012 were less than $50 thousand, you can see that there is quite a lot of progress.
What's the price for all this, however? Well, it's quite steep. They have secured financing through convertible debentures and throughout the years, they were forced to issue quite a lot of stock in order to pay off some of the debt. This means that although they bought back around 219 million shares back in January, the outstanding capital is still quite substantial - 545 million. There are things to suggest that it might rise further.
Cash-wise, things have always been pretty dismal around NTEK and that's why they were forced to pay the wages with the issuance of stock. The quarterly report gives us a detailed history of the share issuance throughout the last couple of years and we found something peculiar.
According to the statement, one of NTEK's employees, Mr. David Foley received more than 60 million shares between March 2012 and February 2013. Some of them should still be restricted, but we can't help but wonder: "How come an employee like David Foley receives more than the current CEO of the company, Mr. Jeffrey Foley?".
Some of you might argue that David Foley is one of the founders and you might also say that his technical knowledge is what pushes the company forwards and that's a fair point. What disturbs us, however, is David Foley's past. We did a quick research on him and we found that he was once charged and later pled guilty to Conspiracy to Commit Mail and Wire Fraud and Conspiracy to Commit Bank Fraud. Whether this, coupled with the fact that he owns quite a lot of shares, will affect NTEK's stock performance in any way, shape or form is unknown, but we reckon that the paid pump running for them is a good enough reason to tread extremely carefully and weigh the risks before jumping in. Unless, of course, you want end up losing money which is always a possibility when the newsletters are involved. The people who jumped in on US Energy Initiatives Corp Inc (OTCMKTS:USEI) can confirm.