Borislav Tonev

Red Giant Entertainment Inc (OTCMKTS:REDG) Sees Some PR Action

by Borislav Tonev July 6, 2015

Up until a couple of weeks ago, Red Giant Entertainment Inc (OTCMKTS:REDG, REDG message board) was sitting pretty much dead in the water. The ticker wasn't moving much and investors were rarely trading more than a couple of million shares per day which meant that the dollar volumes rarely exceeded $10 thousand. Then, a few press releases came out and they made things a little bit more interesting.

First, on June 19, the company announced that members of the management team will attend San Diego's Comic Con later this month. They said that they will give away some copies of their Giant-Size #1 line of comics and they announced that they are starting to sell the books in digital format as well. The comics feature YouTube star Mark “Markiplier” Fishbach and the management team expected that his fame will result in quite a lot of demand. Apparently, they were right.

A couple of days after the first announcement, they said that Giant-Size #0, another line of comics featuring Markiplier, will be getting the e-book treatment as well. REDG told us that the demand has been overwhelming and that people are asking for more and more content that features the YouTube celebrity. On June 26, comic book lovers were given another reason to go for REDG's offerings. The company said that 5% of the gross receivables accumulated between June 19 and July 12 will go to charity.

All in all, quite a lot of good news came out of REDG's headquarters in an extremely short period of time and, at least as far as the volumes are concerned, the stock was brought back to life. Sadly, it failed to make a consistent move in the right direction. Shortly after the first press release, REDG went up, but it quickly became apparent that passing the $0.0015 per share mark will be quite difficult. Some hesitation followed, and although it tried to climb again after the following press releases, it simply didn't have the momentum to do it. On Thursday, it dropped by about 9% and it finished the short week with a price of $0.001 per share.

So, the stock is not exactly consistent, but for those of you who have been following REDG  for long enough, this is not really news. The people who know the company well are also aware of its humongous financial difficulties. If you're not among REDG's followers, you might want to take a look at the latest 10-Q. It covers the quarter ended February 28 and it looks like this:

  • cash: $41,867
  • current assets: $48,857
  • current liabilities: $4,956,285
  • quarterly revenues: $1,481
  • quarterly net loss: $807,579

The statement is absolutely atrocious, but it's far from the only problem. The toxic debt that the company has picked up over the years is also playing a major role in the stock's appalling performance.

Between August 31, 2014 and February 28, 2015, the company issued exactly 418,538,643 shares of common stock in order to satisfy $185,510 worth of convertible notes, bringing the average conversion rate down to just $0.0004 per share. Rewind the tape a little further back, and you'll see that this is not the first time REDG has printed a massive number of discounted shares. Chances are, it won't be the last.

REDG defaulted on some of the convertible notes when the management team failed to file the latest 10-K on time. As a result, the company incurred $360 thousand in penalties and the people behind it say that they expect to cover these damages with the issuance of more than 1.8 billion shares (that's Billion, with a B).

Does this have anything to do with the fact that they raised the number of authorized shares from 3 billion to 6 billion a couple of months ago? We'll let you decide.

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