January 12, 2012: We decided to take a look at Active Health Foods (AHFD), an issue that has been actively touted since Wednesday's close and only began trading on October 25, 2011. We didn't like what we found.
This is another one of those issues where just a few weeks ago, insiders owned every single share of stock. That means that this PnD campaign is designed to allow them to dump their stock into your lap, while relieving your pockets of cash. Let's take a look.
AHFD was incorporated in California on January 9, 2008. The company purports to produce energy bars, which seems to be a line of business we have seen in several PnD campaigns of late, most recently last month's disastrous Stakool (STKO) PnD. Dupes were difficult to find for that campaign, as penny players stayed away in droves. The stock is down 80% since that campaign began and bag holders who are trying to cut their losses are finding no takers for their stock. We don't think that things look any more promising for AFHD. Shares prices are similarly down 75% in the last month almost exactly paralleling STKO's performance.
Anyway, following the AHFD stock trail, company President Greg Manos was issued 900,000 shares upon incorporation, in lieu of service rendered and valued at $900. Mr. Manos ties his qualifications to running a public company to his "extensive" background as a department manager at a Ralphs Grocery store and as a sales manager for a beer distributor. He said this, not us. Seriously. It's in the S-1 filing.
8 days after incorporation, Shanais Pelka, a food scientist of sorts, was issued 100,000 shares for services rendered and valued at $100. On September 14, 2009, Manos issued himself another 20,000,000 shares, he valued at $20,000, again in lieu of services rendered. That same day, the company issues 1,750,000 shares to something called the Nevada Business Development Corporation, which is owned by Randall Brumbaugh. That issuance was supposedly in lieu of services rendered and expenses, whatever they were. So now the company has issued 22,750,000 shares and hasn't received a dime.
On February 8, 2010, AHFD files its initial S-1 registration statement with the intent to go public and offers 3,000,000 shares at 10 cents per share. Oops! Now at this point the company has lost $294,678 on revenues of $16,764 and has $2,642 in the bank. Still, all of a sudden Mr. Manos now owns almost $2.1 million in stock. Do you think that anybody would pay 2 million bucks for this company privately? Of course not. But we go forward.
It took exactly a year and several amendments to get the S-1 approved. It appears that the company's business in that year, was solely to go public, because it did not earn a dime in revenue and spent only $19,000. According to the company's quarterly financials, filed on August 11, 2011, for the quarter ended June 30, 2011, of the 3,000,000 shares offered 10 cents in the S-1, only 252,500 were purchased. This brings the total number of issued and outstanding shares to 23,002,500. Then guess what happened. Anybody? Anybody at all?
That's right! The ever predictable forward split of 100 for 1, to now bring the total number of shares issued and outstanding to 2,300,250,000. Then in a shell game, Greg Manos converted 1,490,000,000 of his shares into 50 million preferred shares, which he will use to maintain voting control after he dumps his stock into the public's lap. The issued and outstanding number of common shares, at this point in time, is now 810,250,000 shares of which Manos owns (for a brief time, we will assume) 510,000,000 shares.
Now in the latest financials, filed in November for the quarter ending on September 30, 2011, AHFD had reported having $3,970 in cash and $24,175 in inventory, presumably energy bars. It also reported owing $300K. And zero revenues over the last two years.
On October 24, 2011, the insiders still owned every single share of AHFD. On October 25th, trading began and we figure that the insiders have dumped about 1,000,000 of the 1,268,625 total share volume traded between then and yesterday. Astoundingly, between December 12 and 13, 311,000 shares traded and closed at about 50 cents. On those days, this nothing company, built on air, had a market cap of over $400,000,000. And that's not considering the 50,000,000 preferred shares convertible into at least 1,490,000,000 common shares that Greg Manos still owns. All for a company with zero revenues and under 4 grand in the bank.
On January 3, 2012, in a seemingly magnanimous, yet meaningless gesture, the company announced that it had retired 300 million shares of stock to bring the number of shares issued and outstanding to 500 million shares. Well somebody is suffering with the math, because, in our opinion, the retirement of 300 million shares would bring the number of shares down to 510,250,000, but oh well. We'll assume that the insiders came to an agreement amongst themselves as to who would give up what, but it all doesn't matter because they will all cash in big.
Yesterday, the stock closed at 12.8 cents, which means that Greg Manos, Shanais Pelka and Randall Brumbaugh, who gave up no cash for their stock, are collectively still worth at least $30 million, even after the retirement of the 300 million shares. You'd have to sell a lot of energy bars to justify that valuation. And remember those few fortunates that ponied up a total of $25,250 for the S-1 offering, just last June? Well their investment has paid off well as they are now worth $30 million as well. Not a bad return over 6 months, is it?
As for the stock bought on December 12 and 13 at up to 50 cents per share: those fools (sorry but there is no other way to look at it) who somehow became convinced that buying in advance of the promotion was a good idea, are already down 70%. With the stock now down to 12.8 cents, we don't see how the mid December buyers ever recover their money. Not with the bid whacking that's about to take place. You see, when you own all of that free stock, it doesn't matter what you get for it. Even at a penny a share, it still nets the insiders $5 million for doing absolutely nothing. And Manos still has all that preferred stock to convert.
Now the question is, who's gullible enough to let these schemers cash out?
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