Besides my PhD in Chemistry I have a Masters in Accounting.
I have done corporate taxes for 26 years and here is what the 10Q discloses.
Firstly, today's sell off had nothing to do with a P&D.
It was the result of the Convertible debt holders of AXCG selling their common shares that were issued to them on Feb. 25, 2013.
Since the signed agreement entitled the note holders to liquidate their $500K after 270 days in one or two trading periods they took full advantage here since their cost basis was set at .0015 PPS at maturity.
After AXCG's wonderful news last night at 10:47 pm est, it was a perfect setup for the convertible note holders to double their money at today's .003 PPS.
Not bad for the lenders to double their money in just one year.
The convertible note holders were still listed in this 10Q since they still held their common shares as of the end of March 31, 2104.
How do we know this?
I direct everyone's attention to the 10Q for the first 1/4 2014 under the expenses.
It is not illegal per IRS rule that a company claim their entire years interest expense in one quarter.
As stated in this 10Q, AXCG claimed interest expense of $669,942 vs $7,489 for the same period one year ago.
It would be physically impossible for that interest expense to be 1/4 of 2014's interest expense. Otherwise AXCG would be looking at $670k X 4 = $2.7 million interest for the year.
Pretty unrealistic wouldn't you agree since AXCG's total debt is just shy of $3 mill.
I believe, have no proof mind you, that AXCG was well aware of the convertible debt holders' intentions of liquidating their common shares. Keep in mind, the convertible debt holders were legally entitled to do so since they waited the required 270 days from the 2/25/13 origination date.
AXCG made the decision to disclose this interest expense all at once to get bragging rights later that they will be debt free sooner.
Now let's take a look at the loss reported for this 1st quarter.
The total loss reported was ($619,181).
Obviously the interest expense was the cause since the total quarterly loss was actually less than the interest expense.
If we spread the $670k interest expense over this year we are looking at a quarterly expense of $670k/4= $168k.
That translates into a $502k swing to the positive in calculation the actual quarterly loss.
So the 1st quarter loss is not ($619,181) but rather ($117,181).
Companies are required to file quarterly reports for income tax purposes but to really understand a company's fiscal health; it is best comparing annual reports.
I'm not influencing anyone here but based on AXCG's exponential growth it is only a matter of time when that ($117k) quarterly loss is turned into a huge profit which is why I believe AXCG consciously chose to get this ugly interest figure out of the way to pave the way for blue sky's ahead.
Every company borrows money to establish themselves, I believe AXCG has done a great job and their $3mill debt will be gone sooner than later.
I'll take the $92k revenue for Q1 over last years dismal $3k every day and twice on Sunday.
I apologize for the lengthy post but for all you longs I hope it was time well spent.
AXCG
