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FITX's Bill Chaaban Loses Count


August 22, 2014:  It appears that Creative Nutrition's (FITX) bombastic CEO and President, Bill Chaaban has run out of fingers and toes. Or perhaps his abacus is broken. Whatever the situation he better invest in a 99 cent solar calculator, and fast, because he could be putting his shareholders in harms way.

The problem revolves around the company's latest quarterly financials, filed August 19 for the period ending June 30, 2014.  See if you can see it here.

FITX Quarterly Report for period ending June 30, 2014
<click to enlarge>
In case you don't see it, FITX has revealed that it has 3,542,969,548 shares issued and outstanding, even though only 3,499,000,000 have been authorized BY THE SHAREHOLDERS.  Yes, we know that Chaaban and his cohorts own the majority of shares and that they could vote to increase the authorized number in an instant, but they haven't and the extra 43,969,548 shares have been ILLEGALLY issued. And that's just to June 30th.  Who knows how many more shares have been issued since then and consumed by the lemmings eager to jump off the cliff for Chaaban, who has already sold well over $3 million of his own shares. Don't forget about the oodles of debt--some perhaps actual, others concocted-- that will be eventually converted into stock. The printing presses appearing to be running day and night over at FITX, churning out certificates to replace the shares that insiders have already dumped onto the street.

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Oh, and then there's the 1,000,000 shares of preferred stock, 500,000 of which are owned by Chaaban, that can be converted in to 5 billion more shares of common stock. Let's not forget about those.

We considered the possibility that perhaps the disclosed number of authorized shares was a mistake. Perhaps the Board/majority shareholders really did vote to increase the authorized number of shares and the new number was neglected to replace the old figures, cut and pasted from a previous report. So we turned to the Nevada Secretary of State and found this:

FITX Corporate Registry
It turns out that the the number of authorized shares, as noted on the corporate registry, is greater than the 3,499,000,000 number indicated on the quarterly report, but only by 1,000,000.

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So what are the possible consequences? Well considering the blatant lack of oversight by the regulators these days, perhaps nothing will happen. Or any number of actions are possible:
(1) If the SEC ever wakes up from its current nap, and considering the penchant it had last spring for suspending trading in these marijuana schemes, it could certainly issue a "Whoa Nelly" on trading of FITX. And it should.
(2) The Nevada Secretary of State could put the corporation into default which would obligate, but not necessarily commit, the SEC to suspend trading for that reason alone. And it should.
(3) A shareholder could file a lawsuit, perhaps derivatively, seeking to act on behalf of all shareholders and take over the Board of Directors of FITX for the purposes of oversight and conducting a forensic audit on the activities of the company. That, of course, is a highly unlikely scenario.
(4) Criminal charges against the Board could be levied; also highly unlikely.
Whatever the end game, Chabaan's disregard for the shareholders and proper procedure is evident here. Considering that massive losses to shareholders who are holding for the long term are inevitable, it is amazing to us that anybody would endorse this ill conceived scheme.