A Close Look At Vizconnect Inc (OTCMKTS:VIZC)

The year 2018 has been so far very busy for Vizconnect Inc (OTCMKTS:VIZC) in terms of trading volume. Market participants have exchanged more than 600 million shares some days, which represents the maximum amount of shares traded in the last four years. Vizconnect - Vizconnect Inc OTCMKTS:VIZC

This price action can be seen in the chart below:

4 years chart for VIZCThe increase in stock price was also remarkable. From the lows of $.0001, the stock spiked up to $.0010 in less than a 5-day period. The stock gains have already been significant, but that's just the tip of the iceberg. The upside is large, as the stock could increase to the $.0023 mark; the previous resistance touched in December 2018.However, on the downside, a close below the $.005 mark would be worrying, as the stock could retrace back to the $.001 mark. Taking into account the recent announcements by VIZC, we don't see downward moves very likely.This price action can be seen in the chart below: 10 days chart for VIZCHistory of VizConnectVizConnect, Inc. was founded under the laws of the State of Nevada on October 15, 2010. It helps clients around the world by providing first-class business development consulting. Its growing portfolio encompasses a robust and innovative array of services, which include real estate acquisition, equity building, debt restructuring, revenue generation, and asset acquirement through the issuance of Preferred Stock.As per facts presented in the company materials, VIZC has expanded into several territories creating a network of subsidiaries. In our view, VIZC wanted to cover the US markets besides other financial markets outside the US. Founding the subsidiaries in the client's jurisdiction is the way to go to offer services abroad.The group of entities also includes VizConnect LLC, a Massachusetts limited liability company, founded in 2011, which serves as a holding company. Additionally, on October 29, 2013, VIZC formed a majority-owned subsidiary to conduct business solely in Canada. The company owns 80% of the business in Canada. Non-controlling interest investors contributed with $100,000 into the subsidiary, which helps estimate the value of the business in Canada. A simple rule of three, taking into account the non-controlling interest, could be used to obtain an estimated value of the equity. Do it on your own!Increase in the number of authorized sharesIn addition, the most recent quarterly report shows that the company has made several changes in the number of authorized shares of common stock, and preferred stock. This number was increased to 5,000,000,000 and 50,000,000 respectively. Furthermore, the company reduced the par value per share of common and preferred stock from $0.001 to $0.00001 per share.Why would VizConnect increase the number of authorized shares?There are several reasons. First of all, increasing the number of authorized shares opens the door to the issue of new shares. In the case of VizConnect, there are 900,424,809 shares outstanding, which means that 4,099,575,191 shares could be issued right now. While taking into account the market price of each VizConnect share, such an equity transaction, could represent millions for the company, but it could not be beneficial for the stockholders, who would get diluted. This is a major risk that shareholders should factor in.Furthermore, an increase in the number of shares outstanding could mean that the company is preparing itself for a merger with another entity. Read the following text from investmentbank.com:

"Prior to an a reverse merger a company may find itself with too many issued and outstanding shares and not enough authorized shares to be able to do an alternative offering. According to a every company’s corporate charter there is only a set number of authorized shares allowed for the company. There are two ways of solving this in order to perform a reverse merger. One, the company could simply increase the number of authorized shares allowed for trading or (and this is the more common solution) the company could opt for a reverse stock split to true up the number of shares authorized." Source

Honestly, right now, a reverse merger is not likely, but we cannot forget this option, as it would mean millions for stockholders. Although other market participants claim that such a transaction could happen soon, but there is no reason to believe so. Check the following comment: Reverse Merger - Vizconnect Inc OTCMKTS:VIZCIn addition, the increase in the number of authorized shares could serve for issuing more shares to pay employees. Since the company has done it in this past, in our view, this practice is not likely, as it will not be sustainable in the future. Read the following:

"On May 20, 2015, the Company issued 1,200,000 shares of Common Stock to its board of directors converting $30,000 of Accrued Payroll." Source"On October 1, 2015, the Company issued 600,000,000 shares of Common Stock to its board of directors converting $6,000 of Accrued Payroll." Source

Is a Reverse Stock split coming?Reverse Stock splits are usually not appreciated by the market participants. It is an artificial way of increasing the share price, which usually harms shareholder value in the long term. New shareholders of this company will appreciate that a reverse stock split is not likely since the company executed one three years ago. It is beneficial for starters on this company:

"On September 24, 2015, the Company initiated a 1-for-2500 Reverse Stock split; every 2500 shares of issued and outstanding common stock were converted into one share of issued and outstanding common stock. If that number falls below 100, the share amount will be rounded up to 100. All share and per share amounts have been retroactively adjusted in the accompanying financial statements." Source

Volatility lovers will appreciate VIZCThere are 900,424,809 shares outstanding and a float of only 40,207,865 shares. This means that only 4.4% of the total outstanding shares are owned by the public. As a result, the order book of VIZC is expected to be quite empty, and market orders could create large market reactions in the stock price. Volatility - Vizconnect Inc OTCMKTS:VIZCWhile this fact increases the overall risk of market participants, some of our readers enjoy playing volatility games, so this information will be appreciated. Please keep in mind that stock gains can be very large, but loses can also be significant.ConclusionCurrently trading with a market cap of $0.9 million, VIZC is an exciting story among small caps. With a debt ratio above one, it is a sure bet that the market is expecting a new recapitalization plan to sustain future growth. It should be positive for debt holders as well as the management.Disclosure: We have no position in VIZC and have not been compensated for this article.Image courtesy of tec_estromberg via Flickr.