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Absolutely true. If you want audited fins, invest in a fully reporting company. Otherwise, don't bitch about it. Alternate Reporting pinks need not hire auditors, and have no incentive to spring for one unless they're getting ready to uplist. There is simply no reason to expect that they would.
That said, the fact that they aren't audited or required to file regular/current reports with the SEC is not a license for them to repeatedly proffer bullshit PRs, nor to ignore the requirement to report material updates (ie, the failure of whatever was projected in an annual/quarterly report or PR to materialize) in a timely fashion when they become available.
Some current shareholders may not care about the lack of transparency or the Company's failure to adhere to OTC Markets reporting standards...that's fine. However, many of those potential investors who 'do their DD before investing' most certainly do. A few disgruntled shareholders airing dirty laundry on a message board is not the thing scaring potential investors away...it's the Company's pitiful revs, its record of failing to deliver on its lofty promises, and its repeated failure to honor its obligations to be forthright and provide timely updates, even in the absence of SEC reporting requirements and/or audited financials.
To restate an observation I have previously made, under no circumstance should it ever be required of shareholders to email a publicly traded company with their questions about material events; this stuff needs to be reported publicly, and when it occurs - not several months after the fact.
I have no direct knowledge of, nor do I make any accusations that the company or its management is running any sort of scam. I've worked with plenty that were over the years, and their MO is generally to make a fabulous PR, then solicit one or more convertible notes, diluting the hell out of their shareholders, before quietly announcing that the proposed event was dead. Clearly, that is not the case here. I have no clue what their motivation is to act in this way. If I were to speculate, It seems like this is more a case of overly optimistic management getting out over its skis time and time again, and being too embarrassed to issue a correction when things go sideways.
The fact that even current shareholders with a vested interest in seeing SHMN succeed are predisposed to believe that the Company's announcements are BS perfectly illustrates why the PPS is in the shitter and there is no material volume or movement, even after supposedly good news is published.
I'm stepping into the wayback machine. This was outlined in some of the company's filings, but the attachments to the forms 14-D/A aren't available in OTC's disclosure service, and MSLP's investor relations pages are long gone. Google found a related opinion here: musclepharm-corp-v-white-winston, tho it only offers a summary of the case without the full detail of the complaint.
In short, one of WW's many actions against MSLP/Drex was a derivative action stating that in 2017 the BOD breached its fiduciary duty by refusing to consider an offer that WW made to purchase $18MM of MSLP stock (enough to buy Drex's position out) on the condition that the management team get the boot.
There were questions of fact as to how valid that offer was, etc., but the gist is that WW could have bought Drex out, but Drex wouldn't allow the BOD to consider it.
Drex could have let WW buy out his position and walked away with WW buying out his original investment and subsequent (converted) loans, not to mention his interest and salary all tucked neatly in his pocket. All he had to do was admit that someone else needed to run the show.
Instead, his ego wouldn't let him give way and he'll lose pretty much everything but the cash he actively pocketed. He'll also continue to face a pissed off WW:
"“White Winston D&O Claims” means the estate’s causes of action (and
associated rights to director and officer insurance) against directors and
officers for breaches of their fiduciary duties of loyalty, care, and good faith
that arose on or before December 31, 2018."
That's the problem with this company and its current management...investors shouldn't have to be *asking* them to disclose material information - they should be disclosing it voluntarily (and one would think, should be happy to do so).
As it stands, PPS doesn't move when the make an announcement because management's track record of disclosure sucks. They announce pie in the sky good news (including fantastic earnings projections), then fail to issue a correction when things change. Later on, the annual or quarterly comes out and the projected money's not there. Instead of issuing a detailed explanation, the Company moves on to the next pie in the sky.
If these guys truly want to move the needle, they need to be transparent and communicative: Disclose who owns the 51 shares of pref (which equates to 25% of the voting power of the company). Give regular and frequent status updates on the facility, the investors, the new products, the pipeline. Maybe explain why we never saw the Brainwise revenue projections appear on the balance sheet (if you shipped a container, there should be *something* in the books).
I know that "this is the way that Pinks operate", and that "pinks all suck right now", but if management wants to see SHMN rise above the rest of the crappy pinks (or at least rise above the 000s), they need to act like a real company, and not another stinky pink.
I'll reply here in hopes that the company sees it, or someone forwards this to them:
Important Notes under Section 9(B):
I did not.
I stand corrected...
Don't disagree with anything in your post, aside from:
This is true. I did not [then], nor did I [ever] intend to own any stock while representing them, because it would create a conflict of interest that would prevent me from adequately doing my job.
Then the company informed me that it would not be able to pay any of the past due invoices.
I terminated my representation, and converted the past due balance to shares.
[edits added in brackets for clarity]
Myth/HL,
I appreciate your kind words. Honestly, I'm not even that mad at CT - he's pissed, and has reason to be...he's just lashing out at the wrong person.
I've debated killing my account several times in recent months. The time has come. With this ticker trading so low, I no longer need to watch PPS in real time, as there is no feasible opportunity for me to free up and sell my holdings (or at least, do so with any immediacy). If PPS goes over a penny, I may jump back in, but until then it's just (as I've said) Groundhog Day.
Believe it or not, the other ticker I was involved in is in even worse shape - it just BK'd.
I really do wish you luck (I feel like we're all gonna need it).
MP - I just don't see this as plausible. Truthfully, it appears to me that management is simply continuing their history of bumbling along without any strategic plans (malfeasant or otherwise) for the company or its shareholders. Moreover, I can't find any sort of upside for them to tank PPS given what little we do know...
Since most broker dealers (even those who historically have worked exclusively in OTC) refuse to deal in sub penny stocks, anyone holding restricted securities is almost certainly stuck until PPS rises above a $.01.
The company has a number of family/friends types with convertible notes who failed to convert when PPS hit rock bottom a few years back, or indeed while it was rising shortly thereafter. It makes no sense to drive PPS down to convert now, as the converted restricted shares would be essentially unsellable in today's marketplace (unless they were confident in an imminent rise above $.01).
The company itself is not in a position to benefit from a low PPS. Barring a miracle and profound change of direction, there is neither the cash nor the inclination to engage in the often hyped, never realized buyback. That ship sailed, ran aground, and will almost certainly not be refloated. With that off the table, there is no scenario I can think of where a low PPS is beneficial to the company itself.
The only insider with any holdings (Swahti) apparently went on a post-peak selling binge recently after holding for what, a decade? Otherwise, there has been no reportable insider action. Further, the balance sheet doesn't seem to reflect insiders with especially deep pockets...while I could be way off base, I can't imagine a scenario where the company begins actively manipulating PPS to facilitate additional insider acquisitions.
And finally, having been involved in this ticker for years, I have yet to see anything that would indicate a level of sophistication associated with any sort of active shorting campaign or other situation where insiders would benefit from a decline in PPS.
Maybe I'll be proven wrong, but I just don't see an organized initiative to drive the share price down...I think management are just incompetent.
Lots of action here. While I've long ago written off the few shares I didn't liquidate before the BK, it's still amusing to watch the battle between WW (who thinks there's maybe still some there there) and Empery (who clearly just wants to fire sale the remainder of the company)
https://cases.stretto.com/musclepharm/court-docket/#search
The statutory requirements may vary by state; I believe NV only require that the BOD or Officers may call a special meeting.
Beyond that, each company may create additional shareholders' rights within the bylaws - I don't believe that any such rights (beyond the statutory requirements) exist for SHMN.
There are many instances of derivative actions, although most that I can think of arise when an officer has engaged in self dealing to the detriment of the shareholders.
Often times, 'rules' like this only create a basis for legal action by the aggrieved party. There may be laws, regulations, or case law that establish the right for a party to sue, but do not necessarily grant the government the right to enforce them directly (think about something like libel).
I suspect that in this case, to the extent there is any sort of enforcement mechanism for the state, it would be limited to something like refusing to allow the company to renew it's incorporation. In reality, most states' divisions of corporations/Secretaries of State don't have much (if any) of an enforcement arm.
I may be wrong, but i'm pretty sure that the Secretary of State wouldn't do much here...it would be up to the shareholders to file a derivative action (lawsuit) against the company to secure a court order forcing the meeting.
I'm curious where this 5% to force a vote concept comes from...I'm a little hazy on some of the details of Nevada's public corporations laws (NRS 78 et seq), but I don't recall seeing this set forth therein (and my 60 second scan of the statute doesn't show it either); it's not in the bylaws either.
In any event, this would likely not need to be a single shareholder with 5% of the issued and outstanding; cumulative voting is generally allowed.
we need experts working *for* SHMN.
Nah...just me, trying to anticipate other questions.
At some point, a trustee has an obligation to act in the beneficiaries' best interests (unless the trust agreement directs otherwise). They're not as static as most folks may presume.
Moreover, often times, family/living trusts (my own included) name the grantor as the initial trustee...In my case, while I as grantor may have established the family trust to direct allocation of assets to my wife and/or daughter after I die, I (as both grantor and initial trustee) hold the reigns until that time, and can direct the trust accordingly. If, as long as I live and am the trustee of my trust, I have faith in my investments, I'll stay the course. Otherwise, I'm free (as trustee) to exercise the trust's position as any individual shareholder might. This holds to successor trustees as well.
In other words, no trustee is going to throw a bunch of cash into a friend's/in-law's company and stand aside as they mismanage that investment into the ground.
Further, even if the trustee role has moved on to someone else (professional or family member), they will generally have a legal obligation (again, unless expressly disclaimed in the trust document) to manage the assets of the trust in a manner benefiting the beneficiary. Absent insider information, that has clearly not been the case here.
Just addressing prior speculation that they may be driving the company's actions and acknowledging that any change in their holdings will be reflected in an attorney letter
You have more faith than I do in the company's ability (both financial and operational execution) to pull off a plan like this.
I could care less where they are from as well, rather I was trying to point out (in response to the question as to why I though Shah was still the one behind the scenes) that the style of writing seems to indicate the PRs, Tweets, etc. were penned by someone from India (like Shah) rather than someone born and raised in the States (like Barron).
Myth
Looking at their disclosure on OTC, I see the BHAT investment occurring sometime in 2011 (scroll down to the bottom of the opinion letter where control persons are identified):
https://www.otcmarkets.com/otcapi/company/financial-report/60435/content
As far as a pressure campaign, I'm thinking one of two things: 1) Given the timing, the size, and what I assume to be the nature of the sale (these were unregistered securities, so it was not an open market acquisition), I would assume that the Bhat family or its trustee is somehow related to Shah - friend or family. They might be able to exact some sort of in-person pressure. Barring that, they hold a significant number of shares. Knowing that there are several people on this board who likewise have substantial holdings, organized outreach by a group of shareholders collectively representing XX% of the outstanding shares *should* hold some sway.
And for Shah, It's admittedly conjecture, but I think it's well based in reality:
1) If you look at the company's balance sheets, you see a lot of *old* loans dating back to Shah's leadership, presumably from family/friends. These loans have never matured or been called, have never accrued any interest, and in some cases have apparently been extended in perpetuity. Common sense says this doesn't happen unless there is still some sort of personal relationship there.
2) When the SEC came a'knockin, Shah passed his position on to his wife - hardly a third party transition. Shortly thereafter (and if I had to guess, due to having the intrafamily succession shenanigans called by the authorities), Barron, who this board has already documented was a familiar of Shah, if not an outright friend, was named CEO.
3) Shah continues to declare himself an employee of SOHM on his Linkedin - his title is "operations".
4) I have worked with Indian Americans (and aspiring citizens), and India based offshore employees and contractors throughout my career. While there may be some confirmation bias, the vast majority of SOHM's tweets/PRs/etc. read to me like they were written by someone who speaks English as a second language, and by an Indian national in particular.
Catching up on the board a bit - sorry for responding to an old post.
There are a couple of items here worth addressing. Due to the company's ongoing lack of disclosure, I don't think anyone on this board knows one way or the other who (if anyone) is providing funds. What we do know is that the Bhat Family Trust is the single largest shareholder of record; holdings that were presumably obtained through a not insignificant cash infusion at some point. As best I can tell, they're stuck with restricted shares at present and as such, probably can't liquidate until PPS rises over a penny. While they've been content to sit on those shares for years, one would think that the current OTC landscape (ie, broker dealers not touching sub penny stock) would, at the very least, make them take some steps to increase PPS - either by operating behind the scenes as MD suspects, or a willingness to participate in an organized pressure campaign should someone (maybe ChartTracker?) put something together.
As for the Baron/Shah relationship, I think MD nailed it. Whether or not Bhat is behind Shah, Shah certainly appears to be behind Baron.
Well I guess that answers it:
I think what Myth is saying (and in any event, what *I* am saying) is that 6-8 more weeks of the same bullshit before the 2022 annual is pointless.
I'll set an alert on on the ticker, and stop checking in daily. I'm tired of getting my hopes up only to be disappointed by these clowns making the same pointless, valueless claims. Until I (and evidently the market more generally) see hard evidence in the form of a real executed contract and/or fins that reflect the expense of the facility or the revenue derived from one of the various vaporware announcements, this thing is going to continue to bounce between zero volume and moderate trading with no ultimate change in PPS. They have no credibility, and no ability to publish a statement that anyone takes seriously.
I truly wish I understood what was behind it. They're not moving the needle on share price or volume in a way that supports dumping - average dollar volume can't be much over $2k over the last month. They're not doing shit for their shareholders. They're not actively selling new shares. They just keep making and breaking promises...
*sigh*
nothingburger.
Their CEO has left the proverbial building
The proverbial building (that is, their production facilities) is likewise gone, and their manufacturing relationships are (as best I can tell) all shot to hell
Their assets, including any inventory, are being auctioned off
Yet somehow, someone keeps posting workouts and promotional bullshit like they're a going concern.
I don't get it.
Just in case we didn't see it when you posted the same thing two days ago?
There's no *good* reason for it; my guess is simple error/laziness. Only the Company or whomever prepared the fins could explain
They would be issued restricted, but if the holder can successfully argue that tacking applies to the issue date of the pre-conversion pref, the holding period would begin upon the original issue date to Shah (again, I have no clue of how this would play out). If this is the case, and if there is a broker dealer out there willing to work with sub pennies (and I don’t know if any who would do so at present), the converted shares could immediately be sold.
Reporting/non-reporting impacts only the holding period for rule 144 (1 year vs. 6 mos; assuming the company is current); it isn’t a yes/no determinant as to whether the shares can be sold. Even if a non-reporting company is not current, restricted shares could conceivably be sold via a broader 4a(1) exemption, which generally requires a two year holding period.
Technically, the pref should be either treated as a gift or ordinary income (depending upon the basis for the grant) with a FMV basis when initially conveyed. As the pref shares are not liquid, this basis would be par value.
However, if one argued that the pref shares were valueless until converted, then there would be no immediate income, and instead the basis would be established as FMV at the point of conversion. I doubt the IRS would agree with this approach, but I've seen something similar used/argued when restricted shares are issued and PPS drops before they can be sold.
You're probably (almost certainly) right.
I agree. Just responding to an earlier hypothetical question.
honestly, there is no reason for the company to act with such utter disregard for PPS (and by extension, its shareholders) aside from laziness or a failure to understand their fiduciary duty.
Yup. As I read the formula (one pref share can be converted into an equalivalent percentage of the outstanding), the 51 pref shares could be converted into a maximum of 803,543,968 common shares. However, there are only 424,423,593 authorized but unissued common shares remaining. Still worth a few bucks, even in the trips.
I am uncertain how tacking would work for purposes of Rule 144; any converted shares would be issued as restricted (because there are no unrestricted shares in treasury), but I suspect they could tack back to the original issue date of the pref shares with no additional holding period.
I don't see the company doing a buy-back any time soon...no pennies in the coffer.
Just a (incredibly speculative) thought as to why, and one subject to some creative interpretations of tax law. If we're talking about an insider holding the 51 pref shares, one could argue that they have no value upon issuance (for tax purposes), and only become income once converted. If this is the case, it benefits her to drive PPS down as low as possible upon conversion, even if the ratio is fixed.
She'd likely want to hold for over a year to get cap gains treatment, but she could use the proceeds from liquidation to pay for the ordinary income rates if need be.
Of course, even this runs into some issues...the company doesn't have enough shares in treasury to convert the issued pref into common.
Yup...yet another 'Groundhog Day' tweet - same pattern we've seen numerous times over the last few years: minimal style, no substance, nothing to entice trading/investment.
Myth was right - they need an external IR firm to help them avoid making nothingburger statements like this, and to focus on PRs/Tweets/carrier pigeon messages that have some substance. Sometimes (often?) it's better to say nothing than to rush a message out prematurely, or to put out pointless fluff.