Emergent Health Corp (EMGE)

[trader59]

Here's a tip on how to do due diligence on these OTC companies that claim they're going to make everyone holding stock rich when a company elects to inhabit them and gift the shareholders with a business for nothing (or very little), something that no legitimate company would do. First, ignore all the fluffy hype that the company publishes about all the great deals and the chorus of stock pumpers tweetering about how great everything looks. Then, read through the financial reports for a few things:

What does the balance sheet look like? Does it look like something that a legitimate business would want to take over?
Was restricted stock issued a year ago that is now unrestricted or that has nearly met the 1 year period required prior to resale?
Are there convertible notes left that gives a discount to the creditors?
Are there convertible preferred stock series that have also met their restriction period (which starts when the preferred stock was acquired, if the period is met, the common stock would be free trading after conversion)?

Here's a link - https://www.otcmarkets.com/otcapi/company/financial-report/389219/content

The balance sheet is on page 19, and shows $76k in cash, $560k in total assets, and $2.6M in liabilities. So they're $2M upside down as of their last report, and they were losing money every quarter. No legitimate business is going to take that over.

Stock issuances begin on page 6, the ones that are coming off restriction show on page 8, which shows 83M shares are eligible to come off restriction in February. There's another 50M that are showing restricted on OTC Markets that aren't held by insiders, likely the holders just haven't taken the action to remove the restriction. There was about that many shares issued under the Reg A exemption to convertible note holders that I think should have had the 1 year restriction, but are listed as unrestricted in the table. It should also be noted that over the last year, the O/S went from 260M to 426M (page 1)

The convertible notes are listed on page 9, $764k of notes that can convert. $500k requires the company to issue a Reg A offering, and there are none active. The other $264k converts at a 25% discount to the PPS. At today's pps, that would be 280M shares.

Convertible preferred stock is Series B and Series C. Series B converts into 20 shares of common stock for each share, Series C converts at 100 shares of common stock for each share. Here's the kicker: Conversions were allowed to start in January of 2024 for the Series C convertible stock. There are 20.5M shares of Series B outstanding, convertible into 410M common shares, and 5.6M shares of Series C outstanding, convertible into 560M common shares. Large holders of this stock are listed on page 12, some are insiders, some are not, and this is the OTC...

There is also a pending reverse split already enacted by the board and awaiting FINRA. The board met the deadline, and if FINRA has an issue with it, it's likely they're suspicious and you should be, too.

In summary, look to see if the deal makes sense for a legitimate business (it doesn't) and if there's anyone with gobs of stock to sell (there is).