When looking at a pump effort there are many factors to take into account. Disclaimers in emails are often designed with the specific idea of confusing the reader, and obscuring the nature of the deed.
The disclaimer in the latest, rather expensive, pump job on IDO Security, Inc. (OTC:IDOI) is a bit different. It clearly states that the people paying for the promotion are shareholders of IDOI and they intend to sell.
At least three newsletters touting IDOI have disclosed being compensated $800 thousand by a third party hired by shareholders of IDOI.
The same newsletters were previously used to inflate the price of MSTG. Since the first pump, MSTG has plummeted down 90%, destroying the investments of MSTG shareholders.
The sad part is a lot of people did not even read the disclaimer. At the end of the session IDOI closed up 45.68% at $0.539. Interestingly enough, yesterday IDOI issued a press release after the pump mails had been received.[BANNER]
Unlike many of the companies featured in paid promotions, IDOI has a product and has generated revenues. Does that mean it’s a good investment, though?
Here are some numbers which may help traders answer the question for themselves:
- $55 thousand in cash
- $358 thousand total current assets
- $16.8 million total current liabilities
Some may think IDOI is just starting out and the insignificant assets aren’t a big issue. Well, IDOI and its product has been around for more than 5 years. While in this time the company has managed to generate insignificant revenues, and has consistently recorded losses.
For Q1 of 2012 IDOI reported $204 thousand in revenues. Unfortunately, this still left them with a $363 thousand loss from operations. The bottom line was net income of approximately $1.5 million, however, that was due to a gain on extinguishment of debt which is a one time event and still leaves IDOI with millions in liabilities.
Yesterday’s press release said IDOI had installed more of its MagShoe devices in government offices in Israel. Just as every previous press release by the company, this one fails to say how many devices were installed and what were the financial details of the deal.
At this point there are few things that are clear: the results from 5 years of operations are insignificant revenues and millions of dollars in liabilities, the company has liquidity problems, and what may be perceived as most worrying – shareholders of the company have decided to pay at least $800 thousand for pump efforts with the intention to dump their shares at inflated prices.
