Borislav Tonev

Directview Holdings Inc (OTCMKTS:DIRV) Fights Its Way Out of Sub-Penny Land

by Borislav Tonev May 4, 2015

On April 13, Directview Holdings Inc (OTCMKTS:DIRV, DIRV message board) announced their intentions to enter the wearable camera business, and as it turns out, their timing was absolutely spot-on. In December, when Ferguson, Missouri was ravaged by social unrest, President Obama said that all police officers should wear body cameras. The riots then subsided and people gradually forgot about the plan, but a couple of weeks ago, just days after DIRV's announcement, a new wave of violence flooded the streets of Baltimore after a 25-year-old African American called Freddie Gray passed away in police custody.

This means that President Obama's idea is grabbing headlines once again and it also makes for a hype and speculation-friendly environment around penny stocks like DIRV. The results are pretty obvious.

DIRV experienced some increased volumes last week, and after the management team announced a partnership with xG Technology Inc (NASDAQ:XGTI), it really took off. On Friday, the ticker gained a massive 159% and it managed to escape the sub-penny levels for the first time in a while. It closed the week with a price of $0.014 per share and a dollar volume of over $370 thousand.

An impressive jump, no doubt, and we're pretty sure that some investors are quite happy about it. Others, particularly the ones who have followed the stock for long enough, however, might be a bit worried.

Last year, in another curiously timed move, DIRV announced that they will offer their security services to players in the cannabis industry. This, as you might have guessed already, happened slap bang in the middle of the so-called 'green rush' which took many OTC tickers to unimaginable heights. Needless to say, DIRV found itself smashing through 52-week highs on a daily basis, but at one point, the hype subsided and the stock crashed.

A couple of months ago, the management team executed a 1 for 30 reverse split which all but squished retail shareholders, and DIRV slid down to a low of just $0.00157 on March 26.

Investors are now hoping that the new wearable cameras will have more impact on the company's financial situation because, as you can see from the 2014 10-K, the venture into the marijuana business didn't really do much to improve the balance sheet and the bottom line. Here's what DIRV recorded on December 31:

  • cash: $13 thousand
  • current assets: $75 thousand
  • current liabilities: $4.7 million
  • yearly revenue: $511 thousand
  • yearly net loss: $1.2 million

Indeed, the revenues have more than doubled on a year-over-year basis, but even so, they are still far from enough to offset the colossal expenses. The huge working capital deficit and the modest cash reserves, on the other hand, are putting additional pressure on the stock.

Speaking of which, there's quite a lot of toxic debt as well. In some cases the conversion rate stands at $0.0001, and a few recent 8-K forms tell us that DIRV is issuing more and more notes which can be turned into stock at discounts that could reach 45%.

Make sure you bear this in mind while you're waiting for DIRV's wearable cameras which, by the way, won't be out for another few months.

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