x min read

Virtual Ed Link Inc (OTCMKTS:VRED) Is A Turnaround Play

Virtual Ed Link Inc (OTCMKTS:VRED) Is A Turnaround Play
Written by
Jarrod Wesson
Published on
March 26, 2018
Copy URL
Share on LinkedIn
Share on Reddit
Share on Twitter/X
Share on Facebook

Virtual Ed Link Inc. (OTCMKTS:VRED) spiked up very recently after VRED released its financial statements, which included an unexpected amount of assets; $0.055 million. From the 52-week lows of $0.0002, the price increased to $0.0032 delivering double-digit returns to those market participants, who could very quickly read the announcement. That's not all. The jump was also accompanied by a large trading volume; more than 100 million shares some days. Have a look at the stock chart below: 1-month chart for VREDWhile VRED retraced back to the $0.0004 candle and seems like an outstanding buy-the-dip-opportunity, we need to warn our readers. The company has been labeled Caveat Emptor by the exchange, which means that so far market participants have made overwhelming returns, but the risk involved is quite high. In this article, we will provide further explanation of this symbol. We will also mention what are the options available to the company and how shareholders should deal with the shares.Business HistoryVirtual Ed Link, Inc. was founded in 1996 and is headquartered in Wilmington, Delaware. VRED is a consulting company in the educational industry. It aims at assisting educational institutions and firms to manage and market their online educational solutions.According to the last annual report, while VRED has operated as a consulting company from 2014, the company has executed many other activities before. From 1996 to 2003, it focused on investing in agricultural land and projects. Afterward, in 2004, VRED was involved in the real estate market for the next years before restructuring the business with the help of a former shareholder. Read the following text:

"Viyya Technologies Inc. forgave 452,741.25 in outstanding bills in order to help the company clear the debt off the books to be more attractive as an acquisition target. In addition, a total of $57,270 received by liquidation of intellectual property and other assets. As part of this effort to clear the books another $172,000 note held by a third party was forgiven and a third note totaling $3735 was settled leaving the company with a total of $200,000.00 in debt in a convertible note, and $368,211.42 in accrued payroll expenses." Source

Finally, in 2014, VRED concluded cleaning the books by borrowing another $0.26 million to settle all the accrued payroll expenses leaving the company with a debt of $0.46 million. Given the current state of the balance sheet, which we will assess later, in our opinion, the restructuring is over. It is now the moment for this name.Why is the past story important for us? - Accumulated DeficitAs a result of the previous activities, the company has accumulated a large deficit of $412,856. This is an interesting item, which represents a fabulous tax credit for VRED, but also for another company willing to merge with VRED. If the company or a buyer of VRED returns positive gross income, the amount of taxes to be paid will be lower. It is a clever accounting trick that many buoyant businesses look for and makes VRED very appealing.What made the share price rebound? - FinancialsThe reason is that the management released information about the financials of VRED. Many people in the market now believe that the company is working towards uploading all the necessary documents to stay transparent, so the share price increased. Even if the financial situation will not please everybody in the market, the corporate move is very positive.The most interesting in the annual report is the number of assets reported; $0.055 million in Goodwill. Though we could not read about the origin of these assets, yet we believe that it pleased market participants. Think about it. Nobody was expecting many assets standing on the balance sheet after the restructuring of the business in 2007, thus finding these assets was a beneficial surprise. The debt ratio is under one and the net income is negative, but, in our opinion, the company is in the right direction.Caveat EmptorEven after the efforts of VRED, the OTC Markets is still telling that shareholders need to execute large due diligence on this name before touching the shares. The exchange does it by placing a caveat emptor symbol in the profile of VRED.What's our take?While we understand the feelings of some market participants who made interesting returns, we are with the exchange. The company is seriously working to become compliant with regulators. It even hired an expensive law firm to get officially certified that VRED provides "adequate current public information concerning the Issuer’s securities and is available within the meaning of Rule 144(c)(2) under the Securities Act of 1933."ConclusionWith a market cap of $1.5 million, VRED could be an interesting name to follow this year. Please note that there are 3,783,147,467 shares outstanding and a float of only 724,000,000 shares. This means that the stock will exhibit a lot of volatility, which is usually an interesting feature for volatility players. To sum up, VRED is working in the right direction, thus we will stay tuned. The most interesting catalysts on this stock are the relations with the OTC Markets Exchange and the announcements about recapitalization transactions. This is what everybody is waiting for. Disclosure: We have no position in VRED and have not been compensated for this article.Image courtesy of Jack Wright via Flickr.

Discover Hidden Gems

Don't miss the next big opportunity. Subscribe for timely alerts on potential market movers.