Replies to post #340 on Titan General Holdings, Inc.(fka TTGL)

[SevenTenEleven]

Good to be the king. These guys are building a small empire.

[The Rainmaker]

TTGL didn't sell all of Appco's real estate assets to deleverage the deal, they did it so Crivello and Marks could get rich on the real estate. They get 20% of profits on future sale of real estate assets and get to lease the properties back to TTGL in the mean time. TTGL pays their mortgae and Crivello/Marks make the profit on future sales.

Immediately after the closing of the acquisition by Titan of Appco on September 17, 2007, Appco and its wholly owned subsidiary, Appco-KY, Inc. (“Appco KY”) entered into a purchase and sale agreement with YA Landholdings, LLC and YA Landholdings 7, LLC (the “Real Estate Purchaser”) pursuant to which Appco and Appco-KY sold certain real property located in Kentucky, Tennessee and Virginia for a price of $15,000,000 in cash. The purchase price was utilized to fund a portion of the acquisition of Appco. Certain of these properties were then leased back to Appco by YA Landholdings, LLC, for a term of 20 years pursuant to the terms of a Land and Building Lease Agreement. Pursuant to the terms of a consultancy arrangement between the Real Estate Purchaser and Phoenix Investors LLC (“Phoenix”), Phoenix will be paid a consulting fee equal to 20% of the profit on any sale of the real estate purchased by the Real Estate Purchaser. Phoenix is owned jointly by David Marks, Chairman of Titan and Frank Crivello, a principal owner of Farwell Equity Partners, LLC which is a principal stockholder of Titan.


Here's what they told us
Titan Global Holdings Announces $15 Million Sale Leaseback Transaction of Appalachian Oil Company Real Estate

Simultaneous Sale of Appco Real Estate to Institutional Investor in Leaseback Transaction to Substantially De-leverage Company’s Appco Acquisition

Titan Global Holdings, Inc. (OTCBB:TTGL), a high-growth diversified holding company, announced today that in connection with its planned acquisition of Appalachian Oil Company, Inc. (“Appco”), Titan and an institutional investor (“Buyer”) reached an agreement in principal wherein the Buyer will pay $15 million for the 13 properties owned and operated by Appco and four properties owned by Appco but leased to third parties simultaneous with Titan’s acquisition of Appco.


“I have fully negotiated the agreements relating to the leaseback of Appco’s real estate,” said David Marks, Chairman of Titan Global Holdings. “In an effort to de-leverage the acquisition for Titan, I have structured a leaseback transaction with an institutional investor. I am pleased to report that the majority of all the documents relating to the leaseback and the $15 Million in cash necessary to complete the sale were placed into escrow yesterday.

David you left out the part where you and Frank get 20% of profits on future sales of the real estate.

[forgreen]

That does it. I won't say that it is not a legit commission, but it seems very excessive and of questionable judgment. That does at least two things:

1. It completely sabotages the stock's ability to rise. At $2.60 that is an instant double. In fact, if I were them I'd raise the $13M right now and sell the stock over the next 3 months for a 50% gain and book a $5M profit. How do you walk away from a $5M profit when you can sell for an average price of $1.95? You probably don't.

2. It further dilutes the value of existing shareholders by another 10M shares. Sure, it can produce $13M in cash for the company, but with the size of the deals they are slinging around I'm not sure they aren't shuffling around huge sums just to keep one step ahead of the next creditor in this acquisition roll-up strategy they are executing.

Clearly this management team is playing fast and loose with the share structure and they are probably doing it now that the stock is no longer sub-dollar when they can raise real cash selling stock.

But this looks like a dangerous gamble that their roll-up will generate revenues and earnings that service their growing mountain of debts. And I think that they are gambling can be seen by their looseness in announcing an uplist application when the stock was trading at half the normal required share price for a Nasdaq listing.

Maybe they were gambling these recent PRs would start spiking the price and maybe they gambled they could keep the note holders from their dilution held in place long enough to let the stock go up. But maybe these guys holding shares don't play ball and the balancing act unravels and the dilution bites them in the rear end before they can do their acrobatics to get the share price higher. That's what it sounds like right now.

[Big_Steve23]

That was worth it for APPCO