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|
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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|
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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.