Reverse Mergers & Low Float Plays

[Potse]

LNBY($1.71)...increased position......

30M outstanding
331K unrestricted
56K DTC

I purchased some shares of the LNBY shell in late April at 40 cents. The sale of the control block (a little under 29.4M shares) was completed on April 23. I believe there are around 400-600K legacy shares (of which about 205K are owned by the previous owner and her husband). As with any reverse merger the quality of the RM target and final structure of the deal will be crucial. But the risk/reward looked pretty interesting to me. If the final legacy share count does turn out to be around this 400-600K level, then I think LNBY has a fairly decent chance of seeing prices at $3 or higher.

The reverse merger target appears to be Xinsheng New Media, and it seems to be fully-intent on reaching a listing on the Nasdaq by the end of 2026. Apparently it is already working with a company that has assisted other Chinese companies in getting Nasdaq listings. Xinsheng is heavily involved in live e-commerce education and talent, involved in things like movie/TV series production (with an emphasis on short-form kind of content that can gain popularity quickly and generate revenue on social media platforms), edge AI robots, etc.

I have been increasing my position in LNBY since I made the above post. Bought more shares in the .93 to $1.5433 range, with some nice blocks down around that $1 - $1.10 area. Current cost basis on my position is under 75 cents per share. Although LNBY did reach on low volume the kind of price area I was initially anticipating, I think the setup here is so interesting that I am willing to roll the dice and look for higher prices.

LNBY basically checks the boxes on some of the things that have worked very well for investors in the kind of OTC environment we have seen relatively recently. It is a stock that has recent/current catalysts and is still pretty much off the radar screens of most investors, it is a stock with China/Asia connections, and it has a low DTC number at the moment. Given how difficult it can be to accumulate LNBY, there is some definite explosive capability in this stock if buying interest increases.

At this point I am not really sure whether the entire company of Xinsheng New Media is going to be the RM target and new business direction, or perhaps just part(s) of it. That is often the problem with a lot of these China/Asian reverse mergers. Sometimes all of the due diligence points in a specific direction but when everything gets finalized you don't get exactly what you were expecting. That kind of thing can be pretty annoying/frustrating. I haven't been able to access the Xinsheng website for awhile and its main Douyin account appears to have been taken down or can no longer be accessed by search. From time to time I still run across some things on Douyin or Google searches that make me remain bullish on the stock.

Based on this paragraph/catalyst in the quarterly filing from mid-August, it is currently my belief that at a minimum LNBY will be involved in the artificial intelligence aspects of Xinsheng (software and edge AI robots). Perhaps worth noting: When the artificial intelligence division of Xinsheng held an introductory/presentation type of event back in December, apparently representatives from 5 major banks in China attended that event.

On July 17, 2024, the Company established a wholly owned subsidiary, Zhejiang Toumi Holding Co., Ltd. (“Zhejiang Toumi”) in Hangzhou City, Zhejiang Province, China. Zhejiang Toumi’s business scope covers technical consulting, technology development, software development, electronic product sales, enterprise consulting management and other fields. The Company plans to launch live software service business thought its subsidiary, Zhejiang Toumi, starting in August of this year, and preparations are currently underway.