American Heritage International Inc (OTCBB:AHII
, AHII message board
) closed Friday's session with around 2% in gains and a dollar volume of $774 thousand. That may not sound like much, but it means that currently, the stock is hovering above $1.40 per share resulting in a market cap just shy of $140 million. With that in mind, you're probably thinking that AHII is a solid enterprise with some substantial revenue figures in the latest 10-Q. That's not strictly the case.
Up until August 2013, AHII went by the name Cumberland Hills Ltd. The ticker symbol was different and so was the business plan. Cumberland were trying to make a name for themselves by buying raw paper products and reselling them to recycling companies. They managed to register some revenues from this business, but profitability was nothing but a distant dream and so, six months ago, they decided to try a different strategy.
An acquisition of some intellectual property was completed, the name and ticker symbol were changed, a stock split was effectuated, a new management team took the helm, and AHII officially entered the electronic cigarette industry.
Nobody seemed to care during the first few months, but in December, the stock started a surprisingly steady climb towards the higher end of the charts. It went from $0.45 per share all the way to more than $1 in a matter of a month and a half and although it logs red sessions every now and then, its behavior is incredibly consistent. The question is: "Will the steady performance continue?".
The PR department is certainly making all the right noises. Ten announcements have been made over the last two months and most of them inform us about numerous new retail locations (both in and outside the US) where you can find AHII's e-cigs. On Thursday, they told us that they are sponsoring one of the participants in a major off-road race which should bring the company a lot of exposure. You can see that, at least at first glance, things are looking good. Dig a bit further, however, and you'll spot a few problems.
If you open the latest financial report you'll see that AHII failed to log any revenues during the third quarter of 2013. You'll also find a rather sorry-looking balance sheet. Here's a summary of the most important figures:
- cash: $13 thousand
- total assets: $63 thousand
- total liabilities: $76 thousand
- quarterly net loss: $46 thousand
If the press releases are to be believed, AHII should have some revenues in the future financial statements, but we're not convinced that this alone is enough to justify the rather big market cap. Speaking of the market cap, we should note that $140 million seems like a bit of a stretch for a company that uses a residential house as the location of its principal offices.
AHII's credibility also isn't helped by the fact that the company CEO, Anthony Sarvucci, is at the helm of another enterprise called Pacific Oil Co. f/k/a/ Kat Racing, Inc. (OTCMKTS:POIL) - a limited information penny stock that has just $820 in assets. POIL has been in the paid promoters' sights for the last month or so and that brings us on to AHII's biggest problem - it's being pumped as well.
A special landing page has been set up and, as you might imagine, it's full of bright projections. It also features a video which, for some reason, mentions companies like Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Google Inc (NASDAQ:GOOG).The fine print at the bottom of the page reads that an entity called Rui Long International Inc. "has paid or expects to pay upwards of one million, three hundred sixty-seven thousand and four hundred dollars as a total production budget". Future Money Trends (who received $15 thousand for their efforts) and Penny Stocks Forever (who disclose no compensation) are also spreading the word around and it's clear that the artificial hype is starting to work.
Bear in mind, however, that the people who paid more than $1 million for the pump will probably try to get their investments back. Will they succeed? Only time will tell.
Carefully evaluating all the risks and doing a lot of due diligence is absolutely essential.