Videolocity International, Inc. (PINK:VCTY) lost 10% on Tuesday, correcting from recent share price gains which were secured after the company announced the buyer for their subsidiary Avtar Singh Construction.
As disclosed in the latest PR, Avtar will be bought for $4.8 million by Evader, Inc. The takeover will be executed through a complex transaction, involving 800 million shares in security escrow from Evader and some special financing, which was not disclosed in detail.
In other news, Videolocity stated they are considering a merger with a Chinese company Hubei Xinzheng Hydroelectric Development Limited. The name of the company was disclosed on Tuesday, as a response to rising public pressure to reveal the candidate for a possible Hydro merger.[BANNER]
Videolocity currently holds $12.3 million market cap. The business retains a documented tangible net worth of over $7 million. There is, however, no distinction of which part of those assets belongs to subsidiaries. The company doesn’t file financial reports with the SEC.
For the last quarter ended September 30, 2010, Videolocity generated $4.45 million in sales and booked net profits on a solid 36% margin. Various expenditures however require constant additional fund raising, to keep the cash flow positive. The company’s outstanding stock amount is currently near the authorized share count.
Considering the price offered for Avtar, the company will be selling a very large portion of their business, thus without the merger investors could potentially be hurt, as VCTY’s ability to preserve liquid assets is limited.
