Black Stallion Oil and Gas Inc (OTCMKTS:BLKG) Hedging Its Bets

Black Stallion Oil and Gas Inc (OTCMKTS:BLKG), an energy based business that is trying to expand into new industries and seek new opportunities, announced a new Letter of Intent ("LOI") with Active Lab International, Inc on August 9, 2017. In our opinion, the new agreement represents a business transition that will bring new revenues and help the company diversify its operational risk. Obviously, the market reacted well to the news, as the amount of shares exchanged after the announcement was very significant. More than 150 million shares changed hands. Have a look at it:

BLKG

BLKG

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Business - The company decided to enter into distribution of various products of Active LabThe following was said about BLKG's activities in our previous piece named "Black Stallion Oil & Gas Inc (OTCMKTS:BLKG) Has Potential But Questions Remain.":"This company is trying to profit from “America’s abundant shale oil and gas resources” by developing assets in the Alberta Basin Bakken in northwest Montana." SourceWe also included detailed description of the oil and gas lease agreements signed by BLKG in order to develop assets in Montana. Read the previous report for more information. In this piece, we will focus on the new goals announced by the company. In our opinion, given that the oil price is not continuing its upwards trend and has stopped around $50, the company has decided to look for other high growth opportunities.

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On August 9, 2017, the company announced an LOI signed with Active Lab International, Inc. to enter into a licensing and distribution agreement for various products of Active Lab. Black Stallion will work as "the marketing and sales platforms, as well as various administrative functions" for Active Lab.What products will be commercialized? CitrusDefence™, which are products for household and personal care, and the cognizant enhancer Synapset™. Synapset™ can be acquired in Canada, where Canada's Health Services has accepted its distribution. According to the research results, "Synapset™ has shown positive attributes with regards to Attention Deficit Disorder ("ADD") and Attention Deficit Hyperactivity Disorder." The CEO of BLKG, Ira Morris, explained the new step in the following terms:"We are pleased that we could come to terms with Active Lab and set the stage for further growth, diversification, and expansion. We are particularly excited to work with an established company that already has an established Internet footprint, with companies like Amazon. Our future will follow this strategic planning whereas the partner, like Active Lab, will receive a royalty for the licensing and distribution." SourcePositive net asset per shareThe following are the financial statements given to the market. Please note that the company has almost doubled its amount of total assets in the last three years. The information was provided by Yahoo Finance.

Period Ending (All numbers in thousands)12/31/201612/31/201512/31/2014Current AssetsCash And Cash Equivalents-0.21624.11Short Term Investments---Net Receivables41.65426.168-Inventory---Other Current Assets118.7882.4582.458Total Current Assets160.44128.84226.568Long Term Investments---Property Plant and Equipment---Goodwill---Intangible Assets1.1583.4755.792Accumulated Amortization---Other Assets850850550Deferred Long Term Asset Charges---Total Assets1,011.599882.317582.36SourceOn the liability side , we found that the company has no long term debt. Also, the amount of liabilities is less than the the amount of total assets. Have a look:

Accounts Payable97.13412.8559.85Short/Current Long Term Debt521.406-1.079Other Current Liabilities0.276-550Total Current Liabilities618.81612.855560.929Long Term Debt---Other Liabilities---Deferred Long Term Liability Charges---Minority Interest---Negative Goodwill---Total Liabilities618.81612.855560.929SourceAmount of total outstanding shares and convertible securitiesIn the last 10-Q reported by the company, which was published on March 31, 2017, we obtained information regarding the amount of shares outstanding."Common stock, $0.0001 par value 6,000,000,000 authorized 249,879,538 shares issued and outstanding at March 31, 2017 145,163,921 shares issued and outstanding at December 31, 2016" SourceIn addition, the company sold convertible promissory note and warrants. The readers interested in calculating the fully diluted shares can consult these securities in the 10-Q. The following information is from Investopedia:

"Fully diluted shares are the total number of shares that would be outstanding if all possible sources of conversion, such as convertible bonds and stock options, are exercised. This number of shares is important for a company’s earnings per share (EPS) calculation, because using fully diluted shares increases the number of shares used in the EPS calculation and reduces the dollars earned per share of common stock." Source

Case Scenario and ConclusionWe see two different scenarios depending on the behavior of the oil price:

• The crude oil price increases: If OPEC is finally able to cut production so that the supply of crude oil decreases, the crude oil price would raise. In this case, BLKG's share price may increase because the company owns agreement to develop oil assets in Montana in the US.
• The crude oil price remains close to $50 or decreases: We believe that BLKG would be able to obtain revenues from the distribution agreement with Active Lab International, Inc. The distribution of products for Active Lab is a different industry, thus the company will be able to obtain revenues from another activity, which is uncorrelated to the crude oil price.

In conclusion, BLKG is trying to make a business transition. The company may be helping an already established company in the Healthcare sector. We believe that the new strategic direction is smart and will help sustain the future company's revenues. Additionally, if the crude oil commences to increase again, the company will benefit from its lease agreements. To sum up, be alert on this company, as the signed document is only an LOI. If the company is able to sign a definitive agreement with Active Lab International, Inc., the market may push up the share price more.We will be updating our subscribers as soon as we know more. For the latest updates on BLKG, sign up below!Be sure to check out our coverage on BLKG!Image courtesy of Lionel Roubeyrie via FlickrDisclosure: We have no position in BLKG and have not been compensated for this article.