Cal-Bay International Inc (CBYI): From the SEC about Form 4/CBAY…...

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Friday, 10/12/2007 4:31:12 PM

Friday, October 12, 2007 4:31:12 PM

From the SEC about Form 4/CBAY…

Yesterday I spoke with a guy from the SEC. I asked him about buying back shares and the requirements associated with who should fill out a Form 4 and the requirements associated with buying and selling those shares. This is what he had to say.

He told me that any Officer or Director that buy shares in their own company must fill out a SEC Form 4 no later than 2 days after their purchases. (There was a spot where I read that they could have up to 10 days to do so somewhere too although that’s not what’s important.) He also told me that every person who owns more than 10% of a stock will be required to fill out a Form 4 too under the same rule for time frame.

For those Officers and Directors selling, the guy from the SEC said that they cannot sell any of these shares until after 6 months go by. A Form 4 must be filled out for selling shares too.

Now get this because this is where it gets surprisingly really good…

The guy from the SEC further told me that when those Officers and Directors directly related and associated with the company decide to sell, all profits made from them selling any of the Form 4 shares must go directly to the company to be filed with the company’s financials. Profits are considered Income so I think you can imagine what this would do for a company’s financials/EPS. I had to give the guy a few examples to make sure I was interpreting what he told me correctly.

Please understand the example below…

So, if a Form 4 is filed to sell those 1.9 billion shares of CBAY 6 months from now at let’s say .01 per share, it would equate to what’s indicated below:

1,900,000,000 x .01 = $19,000,000

Out of that $19 million, all profits must go directly back to the company to be reported within their financials. Again, Profits are considered Income. This means that Profits/Income from this example would equate to:

$19,000,000 - $330,000 = $18,670,000 as Profits/Income

Only the principle amount paid, $330,000, can go directly into the pockets of the CEO. The remaining $18,670,000 as Profits/Income must go directly back into the company. This is an awesome plan whether it was planned like this all along or not, especially when the profits are above any Equity determined from the Assets valuations.

Heck, so in reality, as long as the price goes up as anticipated 6 months from now, we as shareholders would hope for the new CEO to sell his share because we would know that we would have an instant injection of valuation added to CBAY’s financials.

The guy from the SEC told me that what he had explained to me for answering my questions is located in Section 16 of the Securities Exchange Act of 1934:
http://www.sec.gov/divisions/corpfin/34act/sect16.htm

I think he mentioned a couple of other references in which I did not exactly get. He said that the profits going back to the company is a rule and must be adhered to. He said it is referred to something called Short Swing Profits or Short Swing Transitions.

On the contrary though with the profits, he also told me that it works the opposite if the Officers and Directors sell shares for a loss versus for profits. I was half-way paying attention from my excitement while he was speaking on that topic so I didn’t ask for the details of how that would work. I just didn’t see any downside to where CBAY would be trading below levels to where the new CEO would have to sell those shares for a loss 6 months from now at a loss so I didn’t further inquire. I think the new CEO sees the same thing with CBAY which is why he spent $330,000 to buy 1.9 billion shares of CBAY.

To verify anything of what I was told, call the SEC number below:
http://www.sec.gov/contact/phones.htm
SEC Toll-Free Investor Information Service:
1-800-SEC-0330

v/r
Sterling

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