Sunset Island Group Inc (SIGO)

[Alan Brochstein]

SIGO lies about how much capital it will need and what it will do to the share structure.

The company currently has only 12K of grow space but talks about taking it to 152K feet (on the way to a lot more).

The company issued a press release last week: http://www.otcmarkets.com/stock/SIGO/news/Sunset-Island-Group-Provides-Clarity-On-Expansion-Plans?id=168069&b=y

The CEO says:

We now have three options. 1. Continue to operate within the confines of our current 22K square feet. 2. Expand to an already pre-determined minimum of 152K square feet, or 3. Swing for the fences and expand quickly in phases to a total of 750,000K square feet. For us, option number one is off the table. It would be unfair to our operations team and unfair to our shareholders. Option number two is already in the works.

We currently have 22K square feet of space and to expand to the pre-determined minimum of 152K square feet, we will need to raise approximately $1,560,000.00 in expansion dollars. Using the same or similar results to the first tranche, that would require us to add a little under 2,000,000 additional shares to the outstanding share count. So to expand to 152K square feet that will generate approximately $200.00 annually per square foot of grow space, we project the need to have approximately 6,267,000 shares outstanding and no more than 7,000,000.

This is highly misleading, as the increase in shares discussed totally omits other securities sold. The CEO says:

The particulars of the S-1 and how it will work, how we execute the strategy, the long term preferred share conversion, etc. are all irrelevant at this point. Again, we ask that you trust that we are doing what is in the best interest of the company and shareholders.

They are not "irrelevant" and only a fool would "trust" this guy or any unproven CEO on the OTC, especially one tied to Joseph Wade.

The company has still not explained the last $340K - there has been no SEC filing to describe the other security. The company sold 400K shares at $0.10 but raised $300K through the sale of something described here:

http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=12247593

Q3. How do you explain to shareholders an S-1 Registration where shares can be bought for ten cents?

A. The answers to these three questions are closely linked. The company currently occupies approximately 22,000 square feet. The company has been offered up to 750,000 square feet by our existing landlord. For the first phase of expansion, we plan to lease a minimum of a combined 152,000 square feet, however the Company is still in discussions with the landlord about the entire 750,000 square feet. The Company has stated that it would be interested in the entire space only if we could access it in phases that matched our ability to distribute and sell the product. As far as the S-1 Registration is concerned, although the shares are set at a fixed price, the company is not obligated to sell all of the shares. If we did so, theoretically, $2,000,000 would be raised, but to expand to 750,000 square feet, that would require $8,000,000 to $10,000,000 in operating capital. Therefore, in order to maximize the use of the S-1, the initial investors who will be purchasing shares from the S-1 have agreed to invest additional capital in a designated class of preferred shares that will become a long term investment in the company with no voting rights, conversion rights and with restrictions. With that in mind, the number of shares that may be sold from the S-1 is yet to be determined. Regardless, the S-1 is in place for expansion only. How we manage that process is directly related to the square footage that will be secured as part of the expansion and the number of shares added to the outstanding.

Without this info, no one knows what they own. Common shareholders are behind preferred shareholders. Common shareholders here have no voting rights either. It is outrageous that management is raising capital without explaining the details of these other securities.

I also question the $13 per sq. ft. that the management says will get them to the 152K sq. ft. That is way below what others report. I guess for the ditchweed this company purports to sell ($1000 per lb.) its possible, lol