Yesterday, High Performance Beverages Company (OTCMKTS:TBEV) filed an 8-K report, announcing the company had issued a $500 thousand convertible promissory note on October 17. The note has an interest rate of 1% per annum and a maturity period of six months.
Under the terms of conversion, the holder can convert the note into TBEV common stock shares 12 months after the issuance date. The note is convertible at a price equal to 56% of the lowest trading price on the market during the 5 trading days prior to the conversion date. These conditions make the debt toxic, as it makes for a high risk of dilution of TBEV stock.
Another red flag around High Performance Beverages Company is the notification of late filing NT 10-K received on Wednesday, as the company disclosed that its annual report will not be filed withing the 90 days pursuant to the end of the last quarter of the fiscal year.
Yesterday, Applied DNA Sciences, Inc. (OTCMKTS:APDN) announced via 8-K filing that the company will make a reverse stock split at a ratio between one-for-forty (1:40) and one-for-sixty (1:60). The exact ratio will be determined by the board of directors of APDN.
The certificate of amendment of APDN common stock reduced the authorized number of shares of the company’s common stock from 1,350,000,000 to 500,000,000 shares. At the effective time, every 60 shares of common stock issued and outstanding were automatically combined into one share of common stock issued and outstanding.
A reverse stock split impacts a company’s market trade significantly, as the share price automatically increases by a great deal. The venture’s performance is a key factor for the successful adaptation towards the higher market price, as Applied DNA Sciences will have to prove its potential as a developing company in order for investors to accept the higher value of APDN shares.
Searchlight Minerals, Corp. (OTCMKTS:SRCH) issued an 8-K report yesterday, announcing the company had sold an aggregate of $1,005,700 of securities in a private placement to certain investors. SRCH reportedly sold 5,028,500 units at a price per unit of $0.20.
Each unit consists of one share of SRCH common stock and one half of a common stock purchase warrant. Each full warrants entitles the holder to purchase one share of the company’s common stock at an exercise price of $0.30. Doing the math, this makes for a total of 7,542,750 shares of common stock to be issued for total proceeds of $1,508,550 from the sales of the units and exercise of the warrants.
With the current trading volume of SRCH stock, this raises the risk of dilution significantly. It should be noted that 4,395,000 of the units were sold to 16 investors, while the remaining 633,500 units were issued to 13 note holders for cancellation of debt in the aggregate of $126.7 thousand. Currently, the company has 135,768,318 O/S. Surveying the risks around an investment in Searchlight Minerals stock would be a wise decision at this point in time.
AnythingIT, Inc. (OTCMKTS:ANYI) entered into an agreement with notorious toxic financier Vista Capital Investments, LLC yesterday. As described in a form 8-K submitted by the company, ANYI agreed to issue a convertible promissory note in the principle amount of $250 thousand.
The terms of the agreement are not favorable to ANYI. The conversion price for each share is the lower of $0.01 or 60% of the lowest market price from the 25 trading days prior to the notice of conversion. Under these terms, the dilution which may occur to ANYI stock depends solely on the ticker’s movements up and down the charts.
While ANYI may prepay the note at any time during the 90 day period after the issuance date, the company must give a 10 day notice for the repayment to Vista Capital Investments, LLC and the sum is to be repaid at a 150% premium.
The risky deal that ANYI entered into calls for investors to do their thorough due diligence on the company before considering making an investment in its shares.
AccelPath, Inc. (OTCMKTS:ACLP) filed an 8-K yesterday, announcing the company’s decision to issue 1,525 shares of series J preferred stock valued at $1,000 which makes for $1,525,000. The shares have been issued to an entity called Village Tea Distributors, Inc. pursuant to a securities purchase agreement between the two companies.
ACLP will acquire 70% of the total common and preferred stock of Village Tea Distributions from its majority shareholders. This will make Village Tea Distributions a majority-owned subsidiary of AccelPath.
ACLP, as purchaser, made a decision that raises the risk of dilution of its common stock by issuing the series J preferred stock under the following conditions. The shares will be convertible at the holder’s option into shares of AccelPath’s common stock at a conversion price equal to 80% of the lowest closing market price of ACLP stock during the 30 trading days preceding the conversion date.
Such financings are known as a ”toxic financing”, as they make for an infinite dilution of the registrant’s common stock, with the rate of dilution depending solely on the market price of the company’s shares. Having this in mind, it may be wise to weigh out the risks before making an investment in ACLP stock.
On Friday, Amarantus Bioscience Holdings, Inc. (OTCMKTS:AMBS) filed an 8-K with the SEC to announce, among other things, its decision to increase the amount of the authorized common stock shares from 1 billion to 2 billion. Doubling the A/S count would imply that AMBS is looking to further issue shares for financing its ventures.
The company has indeed been in the habit of doing so. According to Amarantus Bioscience Holdings’ latest 10-Q for period ended June 30, 2014, AMBS has released a very high amount of shares fresh out of the press in only six weeks’ time between the end of the period and the submission of the report.
The shares issued between June 30 and August 15 amount to approximately 21.9 million. Of this amount, AMBS sold 8 million shares to LPC and issued an additional 216.1 thousand in commitment fees. 4.5 million shares were issued under the conversion of a debenture on July 9 and 8.3 million shares were granted under warrant exercise in the month of August. On July 1, AMBS paid dividends to Dominion Capital, LLC with the issuance of 866.2 thousand shares of common stock.
There may be reason for concern on AMBS’ stock with the elevated risk of dilution stemming from increased share issuance. Doing research on the company before making an investment may be the wisest decision.
Micronet Enertec Technologies, Inc. (NASDAQ:MICT) held a meeting of shareholders yesterday. Among other matters, which were put to a vote of shareholders, was the decision to do a reverse stock split, bringing the amount of authorized shares down from 100 million to 25 million shares of common stock. While this may bring the value of MICT‘s stock up, there is another side to the “story”, so to speak.
Another decision that was voted on at the meeting was an amendment in the company’s 2012 Stock Incentive Plan. Through a majority shareholder vote, it was approved of that MICT increases the number of shares of common stock available for issuance under this plan from 500 thousand to 750 thousand. The company’s total outstanding stock count is pretty low to give out that kind of compensation. According to the latest 10-Q filed by MICT, the venture has 5,831,246 in shares outstanding. With the company’s share price currently hovering around $3.50, the 500 thousand would make for $1,750,000 to be given through share issuance at the $3.50 mark. The increase to 750 thousand makes the compensation $2,625,000, or $500,000 more. Giving 750 thousand to employees changes the ownership of about 12.86% of the outstanding common stock as it stands at this point.
After the stock split occurs, an increase in the price of shares is to follow. Should that be proportionate to the change in the number of common stock, MICT would end up increasing the expenditure from these issuances by $2 million. Can and should a company afford to give out that much with just over $9 million currently in the bank and that amount of outstanding shares is a question that should be contemplated on.
Hello all of you Penny Stock Lovers. I am Ace Bogner from the South Side of Chicago, and on this site. I will tell you the latest about what I am trading and what I am up to.
I have been trading penny stocks for over 20 years. And have had some very big successes as well as failures in the past. On this site, I will share my thoughts about what I am getting into and what I am avoiding.
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