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By Boyan Angelov
Sep 01, 2014

Elray Resources, Inc. (ELRA) Slides Further Down The Charts

Elray Resources, Inc. (ELRA) shot up the charts three weeks ago after the company announced securing a stock purchase agreement with Longma Holdings Limited from Hong Kong. ELRA announced it would receive $300 thousand in cash as a result of the agreement.

The stock of ELRA spiked after this news came out, making for an increase of over 137% in price in a single session. This pushed the share price over the $0.01 mark. After a slight correction on the next day and a crash the day after, ELRA was back far away from the penny mark. A further sharp correction brought the ticker back to its previous level, until a report managed to get attention back around the company.ELRA_chart.png

ELRA issued an 8-K on August 14 in which the company described a number of recent events. The company reported that Virtual Technology Group, LLC, a holder of a $1,5 million convertible promissory note received from ELRA on January 23, 2014, has converted a total of $240 thousand of its note into a total amount of 41 million shares in the month of August.

Gold Globe Investments Limited, a holder of a $2,8 million convertible promissory note received from ELRA on January 23, 2014, was reported to have converted $225 thousand from its note into 18,4 million shares in August. ELRA also gave an update on its previously announced deal. The company reported issuing 10 million to Longma Holding Limited for proceeds of $300 thousand. The shares were issued at a price of $0.03 per share.

ELRA_logo.jpgWith the current price of ELRA's shares standing at under a penny, the agreement with Longma Holding Limited seems like a good deal. Despite that, however, checking in with ELRA's O/S count, we come to find out that roughly 50% of the company's outstanding shares have changed hands in the month of August alone. Having in mind that Virtual Technology Group, LLC, Gold Globe Investments Limited, and Longma Holding Limited are now all substantial shareholders, the trade of ELRA's stock is heavily dependent on these three entities' decisions.

It may not come as a surprise then, that the initial excitement from ELRA receiving a total of $765 thousand from equity financing wore off quickly, as it sunk in for investors that the company had entered into high risk agreements. A gradual decline brought ELRA's stock down to $0.0027 in Friday's session. It remains to be seen how the company will use its secured financing and whether it will develop its business well enough to prove it has the potential and stability a public company needs to have.

Looking at ELRA's latest financial disclosure, the 10-Q for the period ended June 30, 2014, the company did indeed need an improvement of its financials:

  • Cash: $99,6 thousand
  • Total current assets: $193 thousand
  • Total current liabilities: $9,7 million
  • Revenues: $45 thousand
  • Net loss: $1,5 million

ELRA had a limited amount of cash and asset to use for financing its operations. The company had incurred huge amounts of liabilities and net loss. The revenues the venture managed to generate in the period were far from impresssive.

The current state of ELRA's stock makes the company's shares a high risk investment. Before investing in a volatile stock, investors should do their due diligence on the company.

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