DD Support Board and Research Team

[nodummy]

RACK - Paradigm Capital Holdings LLC (Michael Lichtenstein) received their stock as part of a consulting agreement signed on 11/25/11 and filed on 1/13/12

http://www.sec.gov/Archives/edgar/data/1476638/000114420412002427/v245406_ex10-18.htm

For consulting services they received $100,000 up front and warrants to purchase up to 2,000,000 shares at $.66/share

"This Consulting Services Agreement ("Agreement"), dated as of November 25, 2011, is made by and between Paradigm Capital Holdings LLC (“PCH”), whose address is 1200 Federal Highway, Suite 200, Boca Raton, FL 33432 and, Rackwise, Inc., a Nevada corporation (the “Company”), having its principal place of business at 101 California St. Suite 2450, San Francisco, CA 94111.

The Company agrees upon the execution of this Agreement to pay Consultant a one-time cash fee (the “Cash Fee”) of $100,000

The Company agrees upon the execution of this Agreement to issue and deliver to Consultant warrants (the “Warrants”), in the Form of Exhibit A hereto, to purchase up to 2,000,000 shares of the Company’s Common Stock (the “Warrant Shares”) during the seven year period from November 25, 2011 through and including November 24, 2018 at an exercise price of $.66 per share. The Warrant Shares will be subject to piggback registration rights at the Company’s discretion. To the extent the Warrant shares are not registered, the Warrants may be exercised on a cashless basis."

Obviously at least 1,843,000 of those 2,000,000 share warrants were exercised. At a price of $.66/share that would have cost Paradigm Capital Holdings $1,216,380. If they can sell all of their stock at $1.50/share then that would be $2,764,500. If they paid $1,500,000 for the promo minus the $100,000 they received up front that would only leave profits of $148,120. In my opinion, they are gambling on share prices closer to $2.00/share. At $2.00/share they could sell those 1,843,000 shares for $3,686,000 which would leave $1,069,620 in profits after the $100,000 up front payment and paying for the warrants and the promotion (assuming they really paid $1,500,000 for the promo as advertised).


Paradigm Capital Holdings may not be the only ones looking to sell shares during the paid promotion. Maybe they even split the cost of the promotion with others?

In November of 2011, a private placement took place in which 20,311,251 shares entered the market at a price of $.25/share. We aren't told who purchased those shares.

"In November 2011, we completed a private placement offering of units of our securities at a price of $0.25 per unit. We sold an aggregate of 20,311,251 units of our securities for gross proceeds of $5,077,811, which included the conversion of the $2,275,000 principal amount, plus accrued interest, of outstanding bridge notes. In connection with the offering, we paid the placement agent in the offering aggregate commissions of $153,000 and issued to the placement agent warrants to purchase an aggregate of 612,000 shares of our common stock, and incurred other offering costs of approximately $186,000. "


That's a lot of shareholders looking to make a hefty profit off of shares they paid relatively little for compared to the current trading price of RACK.


As always with expensive promos, the people paying for the promos are banking on other investors holding longer than them. If this is a stock you are willing to gamble on, be smart and don't be tricked into holding too long. Realize that the dump is inevitable and trade accordingly.