Good Evening,
I have received many emails on the current filings and what the future holds for your investment in LFBG.
I have read a series of filings including a PRE-14C. Which concerns me the most!!
However, Troy did file a 8-K on February 24 to explain his intentions and I for one, take Troy for his positive response in such a quick manner
First let me say that I respect Troy and the company. I see a great company with a wonderful business model. However, the increase to up the A/S to 10b from 5b is a concern that should have you take a second look on what the future holds.
The company did have a great 4th quarter with positive numbers, but maxed out the current O/S, thus the need to increase the A/S and this was partly done because the shareholders rejected the R/S and the company had to rescind the offer..With that said, the company had No choice, but to increase the A/S another 5b totaling 10b. Now this is a huge move..I for one, would have accepted a R/S rather than an increase in A/S...
From the Filing>>
"By increasing the total number of shares of common stock the Company is authorized to issue to ten billion (10,000,000,000) shares, par value $0.001, management believes that the Company will be postured to consummate a possible merger or acquisition of a suitable target as such situations present themselves, as well as better positioned to raise capital from the sale of our common stock in the future, although there are currently no plans to do so now."
The company gave a number of reasons for this move, of which one was to reincorporate to Nevada from Washington State because Washington didn't allow share buyback on companies with less than attractive revenue numbers..Yes, this has some merit, but more importantly, the move in my opinion was made to allow the company to increase their A/S to a staggering number of 10b. Washington, like many states would never allow such a blatant attempt to bloat a share structure so high, only to fall back on existing shareholders with the potential of dilution, that will only minimize your investment and in time, as the company moves many of these shares into the O/S column, thus diluting the pool and eventually making your investment absolutely worthless.
Notice, also the company mentioned their reason is for merger and acquisition..This may be so, but NO company or individual entity thinking to bring in monies with this type of share structure with a half a brain would except this. Anytime once a potential merger or acquisition is considered, the acquirer or merger candidate will first look at the share structure and make demands that the company reduce the share structure to a more attractive level. This will happen..
With all due respect to Troy. When he mentioned a shareback as one reason, the to move to Nevada, may be a valid issue, but to be honest and in my opinion, raising the A/S another 5b and than institute a back is probably not a practical one. Oh sure, an attempt to back back shares will never amount to any real quantity and as more and more shares move into the O/S column, the share price will reflect the true fair value..More on this in a moment.
Like many pinksheet companies that are in need of capital to expand, rely on what is known as a "Equity Financing Package" This simply means the sale of shares..The increase to raise the A/S another 5b is the company's sole reason and one that should have you pause for concern.
The company mentioned Modesa Enterprises, llc. as their money man..Many of you already know of such companies and the worst of the worst is Cornell Capital who is by far the top dilutor and does not gave a S%%T about shareholders, as long as they make money on the companies draw..Incidentally, Cornell Capital with it's abusive dumping has changed it's stripes into other entities to gave traders an obscure nontransparent, as to their true identity. I have no information on Modesa Enterprises, llc and that to me is suspect, but this is my opinion..However, if I don't know about the financier funding pinksheets, I become very suspect..Hopefully in this case we will get more information on who these folks are.
Many companies attach themselves to financiers and create what is known as a Equity credit line. The 8-K denoted this and makes it easier for the company rather than file SEC forms every time they want to unload. So they climb into bed with a financier on the total potential credit, like as stated in the 8-K for $10m. This isn't a partner, but simply a deep pocket money man that the company, at it's will, can take a draw on part of the total accepted credit line in intervals, again at the company's discretion..In turn, the financier gets millions of shares to unload at a higher price.
Let's go on to how with this will work..
Troy needs funds in the Spring or whenever, probably before Easter and going into a promotion...He tells the Financier that he would like to make a draw of lets say $100k.
He gives the Financier $100K worth of stock and the financier gives Troy (company $100k) and in return the financier gets 50 million shares lets say at .002..The company puts out a series of PRs and the price moves up and then the financier unloads his 50m shares at what he may perceive is a higher price than what he got his share for (in this case .002) and then the price starts it's decline, depending on the level of shares sold..The price may down back to around .002 and probably lower..Understand that there is now an additional 50million shares added into the O/S column..This is called diluting the pool and very bad for shareholders.
Now the company can put in rules on how the financier gets to resell his shares as to when and how. This yet has to be released, if ever..
So you ask? What is happening to my current investment which is down considerably..You are not alone and many folks are asking what will the future bring?
I have been trading pinksheet companies for years and I know the pitfalls and this may go against many of you that are fairly new to this very unregulated market..The longer you hold a pennystock that trades on the pinks, the more you will lose. All the years that I have witnessed in the pinks, I have not seen one company come out of the pinks that gave ROI to shareholders, Not one..In other words, 98% of pinksheet companies will eventually do not amount to anything.
Yes there are companies that have been trading in the pinks for years, but they all have had numerous R/S and still trade in the gutter. For LFBG to become an attractive shareholder investment, the company will have to bayback almost all of the shares they have in their coffers and have the share structure down to what they had when they started out.
Pinksheet companies are for trading not investing..I have written many articles on the strategies of trading the pinks and you may view them here.
Use this rule on what to expect.
Watch the Share Structure in the coming weeks and months..This will also reflect the share price..Remember, now that we have an ' Equity Financing Package ', don't assume that when you notice the share price going up is a time to buy, but better an indication that the financier may just unload a ton of shares, thus killing the run.
Currently the fair value for this company is based on $10m. Meaning that the current 5b O/S X .002 = $10m MC.
To have the price go to .01 on 5b O/S gives this issue a MC of $50m..Not realistic by any stretch..Yes, you say, well we did hit just under this before Christmas, but that run was based on solid Wal-Mart and other news, not fair value..Remember Fair Value, not aggressive runs. That is when you should take profits.
This post is to encourage debate, not a lot of name calling.
Have a good day
Varok
