Borislav Tonev

One World Holdings Inc (OTCMKTS:OWOO) Has Some Big News

by Borislav Tonev December 4, 2015

One World Holdings Inc (OTCMKTS:OWOO, OWOO message board) first popped up on investors' radars when it announced that its new line of dolls will be available in Walmart. That was back in June and although six months is an awful lot of time in Pennyland, the ticker is still hot. Of course, the performance hasn't really been stellar. There were more than a few fluctuations over the past half a year, but it's fair to say that liquidity hasn't really been a problem. By the looks of things, it is unlikely it will become one in the near future.

Yesterday, OWOO announced that their company will be merging with The Tonner Doll Company – a twenty-five year old enterprise that is headed by industry veteran Robert Tonner. This is not the first time Mr. Tonner and OWOO have worked together. Back in the summer he endorsed the company's dolls and at one point, he announced that he will be acquiring some shares. The fact that he is willing to take the business relationship further speaks volumes about OWOO's potential.

So does the revenue section of the latest 10-Q, by the way. The launch of the Tween Scene line of dolls gave OWOO's sales a massive boost and it resulted in $844 thousand in Q3 revenues – a massive 1,500% increase on a year-over-year basis. The interest from big retail chains means that at the end of the third quarter OWOO also had about $855 thousand in accounts receivable which, the 10-Q says, were collected in November.

So, at first glance at least, the merger between OWOO and the Tonner company seems to be a match made in heaven and not surprisingly, investors are treating it that way. Yesterday, in a matter of just six and a half hours, they traded more than 31 million shares of common stock and they pushed the ticker to a close of exactly $0.006 per share. That's about 11% in the green which is probably not what most people expected but volume was strong enough to suggest that OWOO might have the legs to climb higher in the coming days and weeks.

The more experienced among you are probably starting to get a bit worried right now because the whole thing sounds almost too good to be true and in Pennyland, this usually means that it's not good at all. Sure enough, once the excitement coming from the ballooning revenues subsides, you might spot a couple of issues.

The rest of the 10-Q for example, doesn't look all that fantastic. Here's a summary:

  • cash: $4 thousand
  • current assets: $1.1 million
  • current liabilities: $18.4 million
  • quarterly operating loss: $377 thousand

The share structure is also a cause for concern. Like many other OTC enterprises, OWOO too has a history of financing its operations through convertible debt instruments. During the first three quarters of the year alone, the company borrowed as much as $1.3 million under various debenture agreements and the report says that the fixed conversion rate on some of them is as low as $0.00025 per share. During the same period, OWOO also issued 232 million shares as a conversion of debt which brought the O/S count on November 19 to more than 403 million.

Subsequent to September 30, the company issued a further $156 thousand worth of debentures and yesterday, they said that in order to complete the merger with the Tonner Doll Company, they'll need to raise the authorized count from 500 million all the way to 1.6 billion.

Even the more solid OTC enterprises can suffer from the effects of convertible debt and the dilution it causes which is why ignoring the problem is not advisable.

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