Georgi Kamburov

Seratosa Inc (OTCMKTS:STOA) Rises To New Heights

by Georgi Kamburov May 29, 2015

The stock of Seratosa Inc (OTCMKTS:STOA, STOA message board) continued to surge up the chart during yesterday's trading. The ticker reached a high of the day of $0.0032 and although such prices couldn't be maintained for long it still closed with a gain of over 35% at $0.0023. With over 67 million shares changing hands investors’ interest in the company remained strong. As a whole just for the last three sessions the company has added 155% to its share price.

Is such a rapid appreciation warranted though? The red flags that surround STOA are far from negligible. The company doesn’t have a corporate website or even a logo as we told you in our previous article. More importantly, however, the latest quarterly report revealed that at the end of March the company had:

• ZERO cash
• $690 thousand total assets
• $913 thousand total liabilities
• $480 thousand revenues
• $9375 net loss

Not only did the reported revenues decrease by nearly 40% compared to the same period last year but STOA actually incurred cost of goods sold of $475 thousand. This means that the company finished the quarter with a gross profit of just $5000.

At the same time thanks to the convertible notes STOA issued to Asher, Magna and KBM Worldwide, which are some of the most notorious toxic funders that operate in the world of pennystocks, the common stock of the company has been severely diluted. From 46 million outstanding shares reported at the end of December 2014 STOA passed 300 million outstanding shares as of March 31.

Not everything is so bleak though as Seratosa did make a couple of positive steps recently. First, in an 8-K form filed on April 23 the company announced that all of the Asher and Magna notes have been converted while an agreement has been reached to retire the KBM notes. Then another 8-K filed this Monday revealed that STOA acquired $750 thousand in fresh funds by selling a strategic stake of 51% of the company’s common stock. The shares issued under this financing will have restricted period.

In a PR published after the end of yesterday’s trading STOA announced that they have signed a definitive acquisition agreement with a Singapore based Mobile Applications company, Technoprenuers Resource Centre Private Limited, (“TRC”). According to the PR for its fiscal year ending December 31, 2014, TRC had audited revenues of SGD15.7 million and net income after tax of SGD3.5 million. Such numbers are definitely impressive but when dealing with pennystocks using caution is always for the best. Under the terms of the acquisition STOA will have to issue $36 million worth of new shares. in other words, at the current share price nearly 16 billion shares will have to be printed. The transaction is expected to close within the next ten trading days. 

The new PR could push the stock even higher and will more than likely keep the market's attention on the company for at least the next several trading days. The volatility of the stock and the numerous red flags, however, should not be underestimated in the slightest. Do your own due diligence and adjust your trades accordingly. 

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