American Diversified Holdings Corp.(PINK:ADHC) has been flying up over the past couple of days. Yesterday, the stock hit a 
phenomenal gain by soaring 130% and trading over 88 million shares on the market.
According to the records, there is only one reasonable explanation on the gain – the expected news by ADHC. In fact, the news has just come out, though it looks like investors have heard something in advance and the massive trade has begun earlier.
Today, ADHC reported that its acquisition target Rebel Networks has signed a Strategic alliance with Citrix Systems. In anticipation of closing the acquisition, ADHC has agreed to a broad strategic agreement with Rebel Networks authorizing ADHC to seek out further technology alliances, new acquisition candidates and relations with clients.
As ADHC has not released any other announcements on its activities these days, apparently the news from today has influenced the stock price as soon as the rumors spread out among traders. The current up move suggests even a bigger gain for ADHC, unless something breaks it up.
Actually, the unexpected massive trade has been well-known to ADHC. At the beginning of April, the stock had another gain due to promotions. Yet, at that time the company released a piece of news regarding the current acquisition, which is quite similar to the news from today.
The previous announcement stated that ADHC has obtained financing to complete a merger of the company Rebel Networks and the transaction was to be completed “before the end of May, 2011”, while the news from today suggested that Rebel Networks is still an acquisition target of ADHC, meaning that the acquisition is not completed yet. The question is, will it be completed by end-May or the old promise will be broken? Considering the latest 10-Q report of the company, keeping the promise won’t be easy at all.[BANNER]
According to the 10-Q, as of January 31 this year ADHC had no sales, while its expenses have notably increased. Historically, the company has financed its operations primarily through cash generated from the sale of its stock and loans. However, its working capital and stockholders’ deficiency has already exceeded $1 million.
Judging by the results, ADHC is out of cash and its continuation depends upon additional capital or profitable operations. However, any additional financing will result in dilution to existing shareholders, or it may result in the loss of their entire investment. Then, how exactly the company plans to complete its target acquisition?
