Momentous Entertainment Group Inc (OTCMKTS:MMEG) is gaining strength on the announcement that it has set a closing date for a major acquisition, and that all points on the deal have been agreed and signed off. The news is a major step forward for the company, and markets are rewarding this fact with a flood of buy volume. Momentous is currently trading for $.0026, a 160% gain on its weekly open. Right now, this is a tiny company, but these gains could be the start of some real long term strength.

Here’s what underpins this potential.

Momentous is a media and marketing company that focuses on creating, producing, and distributing entertainment content across various media channels using direct response media marketing. The company spreads its content across a host of media formats, including feature film, television, radio, and Internet, as well as various forms of digital media for use in the home or on mobile devices.

Its current operations are pretty expansive, so we won’t go in to too much detail on what’s going on behind the curtain here (we think the acquisition is pivotal, anyway, and outweighs considerably all legacy operations) but here’s a quick snapshot. Momentous works on a number of reality television projects, targeting network TV distribution; it’s got an agreement in place that will see it deliver sports and movies through video on demand (VOD) through a social media platform called Poolworks (more on this shortly); and it’s got an adult contemporary music program in place, through which it is currently putting out Christian narrative material.

Anyway, as we say, that’s all secondary to the acquisition that will close in January. We mentioned Poolworks in the previous section – this is the entity that the company will acquire as part of the deal. The deal first hit press in November, when Momentous announced it had executed a binding agreement to acquire Poolworks Germany Ltd. Poolworks controls two social networks in Germany, branded as studiVZ and meinVZ. Combined, these networks have more than 10 million registered users and over 45 million page impressions per month, with a base comprised largely of German-speaking users in Germany, Switzerland and Austria.

The deal will see Momentous pay Poolworks $10 million in preferred stock, which obviously isn’t great for shareholders (since it’s going to create some dilution), but in our opinion, the company is getting the network cheap. Facebook Inc (NASDAQ:FB) is valued at around $200 per user. Microsoft Corporation (NASDAQ:MSFT) acquired LinkedIn at $248 per user. Momentous is getting Poolworks at $1 per user. Further, Facebook currently generates around $12 per user in annual revenues. If Momentous can monetize the Poolworks user base at even a fraction of Facebook, say 10% or $1.20 per user, it’s going to be generating in excess of $12 million in annual revenues. This is digital advertising revenues, an industry for which cost of revs is relatively low, so this sort of monetization could dramatically alter the market cap of Momentous near term. For reference, the company is currently valued at just shy of $700K, and that’s after the 160% gains seen this week.

So what are we looking at next?

We’d like to see a smooth run towards the close of this deal, and we don’t see any reason why this won’t happen. That said, there’s been a couple of delays so far (management stated previously that the company was looking to close out before the close of 2016), and any further delay will likely taper the current upside run.

Cash is practically none existent, and revenues are equally dismal, but investors are buying an exposure to the Poolworks monetization potential, not the legacy numbers.

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Disclosure: We have no position in MMEG and have not been compensated for this article.