Borislav Tonev

Spiral Toys Inc (OTCBB:STOY) Wakes Up

by Borislav Tonev February 9, 2016

Spiral Toys Inc (OTCBB:STOY, STOY message board) spent the last few months experiencing next to no trading. The stock was slowly but surely sliding towards the bottom, but nobody seemed to care about it. About a week ago, however, some third parties decided that it's time to resuscitate it.

Around $20 thousand was set aside and some promotional outfits sent out about a dozen emails. A few of them, like Small Cap Street, decided that the best way to draw investors in is by saying that “according to recent press from the company”, STOY is about to be up-listed to NASDAQ. They then attached a link to a press release that is almost ten months old.

While the PR is anything but recent, it does say that STOY's plans involve a potential NASDAQ up-listing during the first few months of 2016. Right now, we can safely say that meeting this deadline will be a tall order.

For one, the national exchange has very strict rules on the minimum bid price for the stocks that can be listed there, and if STOY is to comply with these rules, it will either need to gain quite a lot of ground in an extremely short period of time, or it will need to undergo a rather huge reverse split. Thanks to the latest batch of emails, the ticker did managed to jump up by nearly 11% during yesterday's session, but even so, it still stopped at a hair under $0.35 which is way out of NASDAQ territory.

Once the share price is sorted out, the company will need to think about its financial situation. It must be said that the latest 10-Q does have its strong sides. Unfortunately, it's far from perfect:

  • cash: $770 thousand
  • current assets: $2.5 million
  • current liabilities: $1.6 million
  • quarterly revenues: $4.3 million
  • quarterly net loss: $187 thousand

The launch of CloudPets during Q2 of last year brought a significant increase in revenues for STOY, but once you check out the internet reviews of the toys and the corresponding apps, you'll see that a worrying number of them are extremely negative. In the 10-Q, the management team admit that they expect interest in the plush toys to decline and they say that they'll focus on other products. Whether they'll be more successful, and more importantly, whether they'll provide a greater profit margin is for time to tell.

On the whole, for the time being, all you can base your investment decision on is hype coming from the emails and crossed fingers. You should decide for yourself whether that's enough.

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