WTF!? was the only reaction we could come up with yesterday when we saw that the penny stock of VLOV, Inc. (VLOV) suddenly went from $3.21 down to $0.51 before we started screaming about it on Twitter. Surely the filing of the Form 15 on August 6th to terminate having to report to the SEC was not a good sign, but to see a share structure with such a small float and net sales which grew from $4.7 million in 2004 to $94.5 million in 2012 suddenly collapse was a shocker to say the least. How can there be $29.9 million in cash and cash equivalents with net sales of $26.6 million which produced net income of $5.66 million, basic earnings per share of $2.13 and suddenly VLOV stock just falls off the face of the earth?
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VLOV Stock Quote
Market Cap: 2.27M
Wednesday Close: 0.86 ▼ -3.1200 (-78.39%)
Volume: 222,000
Dollar Volume: $248,688
Open: 3.21
High: 3.21
Low: 0.4767
Trades: 147
Authorized: 13,333,334
Issued and Outstanding: 2,637,753
14-Day Rel Strength: 26.70%
1st Resistance Point: 2.5544
1st Support Level: 0.00?
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The events which occurred this week with VLOV have been puzzling to say the least. Rather than expecting to soon see Q2 numbers with another expected increase in comparison to last year. For Q1, net sales increased by 75.5% from the same period in 2012, $26.61 million versus $15.16 million, respectively.
Just this January, 2013, a VLOV distributor began selling the Company’s apparel at Trinity Place Department Store’s flagship location at 61 Broadway in New York City.
Monday started with the Company terminating the effectiveness of the VLOV Inc. 2012 Stock Plan. It didn’t help either that Kevin K. Leung of the LKP Global Law, LLP firm was cc’d on the filing. Penny stocks tend to have a poor track record when found connected to LKP Global Law, LLP.
Tuesday was no better with the Form 15 “kiss of death” filing thus terminating or suspending the duty to file reports with the SEC. This in and of itself could have triggered the greatest short on the OTC this year.
But this all still doesn’t look right.
VLOV stock plunged to 0.4767 and then rebounded to $1 before settling down at 0.86. Trades of 150, 243 and 1,000 shares were among the last 10 trades of the day as many were thinking the plunge can’t be everlasting. Even if the 394,478 preferred shares which were outstanding as of March 31, 2013 with an aggregate liquidation preference of $1.13 million were converted into common shares of VLOV, the conversion is 1-for-0.1333, so it would only be another 52,584.
What looks to be the only significant threat was reported on the last Q filing which stated:
On April 19, 2013, a complaint was served on the Company’s agent for service of process in Nevada. The complaint was filed in the District Court for Clark County, Nevada, by ARC China Semper, LLC. The plaintiff purports to be an assignee of ARC Semper China Investments, Ltd. and ARC China Investment Funds, of their purported rights and obligations under the securities purchase agreement that the Company entered into in connection with the Preferred Shares Financing (the “SPA”). The complaint alleges that the Company breached the SPA by failing to timely (i) file a registration statement, (ii) have such registration statement declared effective and (iii) appoint a bilingual chief financial officer. The complaint seeks monetary damages, specific performance to appoint a bilingual chief financial officer, and reimbursement of costs and fees. Although the Company is unable to predict the final outcome of this litigation, the Company does not believe that such outcome will have a material effect on its consolidated financial condition, results of operations, or cash flows. As of March 31, 2013, the Company already made a provision of $987 for liquidated damages in connection with the Financings.
$987 couldn’t possibly have been the kiss of death for VLOV.
About VLOV Stock
VLOV, Inc. designs, markets and distributes apparel and related products targeted at 20-45 years old men under the “VLOV” brand in the People’s Republic of China.
Click here to view the SEC filings for VLOV.
Click here to view the website for VLOV.
Last 5 Trading Sessions:
| Date | Last | Change | Volume | |
| 08/07/13 | 0.8600 | -3.1200 | -78.39% | 222,000 |
| 08/06/13 | 3.9800 | +0.8300 | +26.35% | 1,000 |
| 08/05/13 | 3.1500 | -0.2500 | -7.35% | 5,300 |
| 08/02/13 | 3.4000 | unch | unch | 8,700 |
| 08/01/13 | 3.4000 | unch | unch | 10,700 |
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Bottom Line:
We screamed about the greatness VLOV had after looking at their operating results and seeing the share structure of the apparel company. It made Lot78 Inc (LOTE) look like a flea market vendor in comparison. Having VLOV on the list of penny stocks to watch prior to the open today will be of great benefit to all, even if you don’t get involved. The events which are due to transpire within the next hour are sure to educate many a novice as well as the most experienced traders.
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