It started in November, when OBCI put out a press release touting a "profit jump" of over $1 million on a sales increase of just $1.8m year over year for the quarter.
The stock tripled in a day.
Strangely, the word "receivables" never appears in the press release or the numbers cited. Yet the 10-Q shows an eye-popping increase in receivables of from 2.0 million to over $5.5 million, only half of which can be attributed to the much discussed inventory drawdown. Of more concern, cash is down consistently all year, now to a paltry $91,000.
On January 10, the company issued an 8-K promising more shipments to Walmart. Is this a great research find by savvy traders, or a setup by the company? Why no press release? Stocklemon suggests that Walmart (NYSE:WMT) had to approve, and they wouldn't allow it.
Meanwhile, as frenzied daytraders drive the stock towards $6, maybe they ought to look who's really going to profit from a juicy new price: CEO Peter G Dornau. Dornau provided a "revolving credit facility" to the company of $1.5 million, for which he receives 1 million warrants at about a dollar, and the right to convert the entire debt to shares at a buck. This could grant him 2.5 million shares - a $10 million dollar payday on a 1.5 million dollar loan!
Notice he converted in the same press release with the alleged inflated earnings.
It will take 15 quarters of profits equal to the "great quarter" of September just to pay off this bonanza!
With a fresh stack of "Form 4's" filed last night, and a two week old S-8 registration, yesterday's party begins to smell carefully orchestrated, rather than a spontaneous celebration of a small company that made it bigtime.
I eagerly await Wal-Mart's comment.
Cautious investing to all.