It is called a toxic financing agreement for a reason.
Assuming LFBG is willing to file an S-1 which would be heavily scrutinized by the SEC and assuming the SEC doesn't pick up on all the insider enrichment going on with this company using super cheap warrants, rich compensation agreements, and consulting fees and professional fees being paid to entities controlled by the insiders of this company through the issuance of discounted shares and eventually approves the S-1 filing a few months from now how do you think the toxic agreement will work?
It works like this. Southridge Partners will be able to purchase discounted free trading common shares from LFBG in tranches (a little bit at a time). Southridge Partners will then immediately sell those shares into the market for a profit. It is dilution in its purest sense, but it is worse than dilution because the shares are being issued to Southridge at a discount so that Southridge can be guaranteed to make a profit even as the share price drops from all the dumping. That means that much much more than $10,000,000 worth of stock will get dumped into the open market.
Southridge will be able to keep getting issued tranche after tranche of free trading discounted shares up to $10,000,000 worth.
Southridge gets their shares at 92% of the average of the two lowest closing BID prices from the 5 previous trading days. That is not the two lowest closing prices. It is the two lowest closing BID prices.
Using the past 5 trading days as an example this is how it would work:
Each of the last 5 trading days had a closing bid price of $.0001/share
So to determine the price that Southridge would have to pay for their shares you'd take $.0001/share X .92 (92%) = $.000092/share.
So Southridge would be getting their shares at less than half of the market price.
That means that Southridge would be getting $21,739,130 worth of stock for $10,000,000 then dumping those shares into the market killing the share price.
Assuming that LFBG does do an S-1 filing and that filing does eventually get approved it will still be months down the road before the approval happens and Southridge is able to start purchasing discounted shares to dump. By that time the 1:500 reverse split will already have been executed.
Best case scenario the 1:500 reverse split will adjust the LFBG share price up to $.02/share - $.05/share.
Even if Southridge Partners managed to get all their shares at an average of $.01/share it would take 1,000,000,000 shares to equal $10,000,000. Where do you think the share price will be after 1,000,000,000 free trading shares are dumped into the market? Probably in the triple zereos again.
Now somebody that watched LFBG issue almost 10,000,000,000 shares while achieving very very little besides paying insiders millions of dollars in warrants, consulting and professional fees, and stock compensation yet still believes in LFBG will say well it's okay if 1,000,000,000 plus shares are dumped into the market because we'll have $10,000,000 and that $10,000,000 will help turn this company around with new games which will bring in more revenues. Sorry that isn't going to happen. If you have gone through the filings and seen how this company has operated over its history you'll see that the $10,000,000 will get gobbled up to further enrich insiders and pay off old expenses and nothing will be left to make LFBG any better of an investment for its shareholders. In my opinion, shareholders here are nothing to LFBG and its insiders but a means for enrichment.
From the filings:
Consulting and Professional fees from April 1, 2009 - March 31, 2010 = $9,193,481 Consulting and Professional fees from April 1, 2010 - March 31, 2011 = $1,918,430
Total costs and expenses from April 1, 2009 - March 31, 2010 = $16,062,558 Total costs and expenses from April 1, 2010 - March 31, 2011 = $6,905,425
Accounts payable and accrued expenses from April 1, 2009 - March 31, 2010 = $1,687,939 Accounts payable and accrued expenses from April 1, 2009 - March 31, 2011 = $1,597,350
Payroll liabilities from April 1, 2009 - March 31, 2010 = $270,705 Payroll liabilities from April 1, 2010 - March 31, 2011 = $326,294
Total losses from April 1, 2009 - March 31, 2011 = $21,327,855 Total losses from April 1, 2010 - March 31, 2011 = $5,487,843
Just in the 3 months from March 31, 2011 - June 30, 2011 LFBG lost $1,150,025
LFBG has an accumulated deficit of $72,020,194
So do you really believe that $10,000,000 will turn this company around?
In the last 6 months LFBG diluted over 3.9 billion shares pushing the outstanding share count up to 9,279,729,778 on October 4, 2011. How has that turned out for you? On March 31, 2011 LFBG was trading at $.0012/share now it is barely above $.0001/share.
After reading the filings I am comfortable with saying that I doubt that LFBG was ever set up to succeed. It looks to me that it was set up to enrich the insiders. That $10,000,000 would find its way into their pockets not yours.
LFBG issues billions of shares through warrants at $.000059/shares to insiders.
LFBG issues billions of shares at discounted prices to entities controlled by company insiders for consulting and developmental fees.
LFBG issues billions of shares to its insiders for professional fees and compensation.
It is because of the way that LFBG is being used as an obvious insider enrichment scam that I don't think that LFBG will ever file an S-1 regardless of how badly the company insiders want to be able to get that $10,000,000 into their own pockets. If they are selfish enough to file one then I will be shocked if it ever gets approved.
$10,000,000 financing agreement getting approved by the SEC or not, judging by the history of the LFBG shell the insiders of this company will still continue to enrich themselves after the 1:500 reverse split and wipe out yet another group of shareholders by driving the share price back down to $.0001/share again through dilution.
Personally, I don't expect to see the $10,000,000 financing agreement ever get executed which is the best case scenario for shareholders here.
And why is LFBG still using an attorney with a history of issuing false legal opinions to illegally remove the legends from otherwise restricted shares?
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