From one thread potatoe to another:
The 10QSB filed on 9/16/96 poses lots of problems for this company which reinforces my belief that this is a trading opportunity only and not worthy of long term investment. Taking advantage of quick price pops in the stock would seem the only way to make any money - for now.
Looking at the 10QSB, the first thing that jumps out is the doubling of shares over the past year. A careful reading shows a company with absolutely no revenues other than those acquired through private stock placements. More about that later.
The only recent revenues have been $20K from selling distribution rights for Israel, Egypt and Jordan. Okay, so it's a startup operation and not much more revenue could be expected. Remember, however, that it is revenue which drives stock prices over the long haul.
The "burn rate" of this company is presently about $103K a month for general and administrative purposes. In the most recent quarter, all overhead ran $386K a month. It is easy to see why a company with no income and that kind of overhead must find operating funds from somewhere. There is only one way. Issue more and more shares. That is precisely what this company has done - some of the deals appear to be pretty shaky too. Others are a necessary part of doing business. For instance they issued 4-million shares at 5-cents per share to LBI Group for consulting work for a 12-month period. Good enough.
The problem areas would seem to be in the Regulation S deals they are getting involved with. There were 21.5 million shares issued to Acumen (a Bahamian company) at 10-cents each. The price was eventually reduced to 5-cents each after selling and transfer problems developed.
Then there were 25-million shares at 5-cents each issued to an unnamed private investor to resell. Some of the buyers have demanded - and received - their money back for their purchase of these shares. Apprently, they don't think they were worth even 5-cents. Of course, they were, undoubtedly, restricted shares but the restrictions for resale were not spelled out in the document.
Apparently, there was also some confusion on the part of some on this thread about the $15-million financing deal announced earlier this month. That money is not for the company directly to build their machines. It is strictly lease financing for distributors and others wishing to lease the machines. This was Forrest Financial Corp.
We are still dealing with the potential reverse split as of the date of this filing (September 19, 1996.) After it happens, it is expected there will only be 6-million shares outstanding. For that to happen, the reverse split will be at about a 1:15 ratio. Edward Kelley will be given 1.5-million of those shares for his contributions to this company.
Finally, there is lots of litigation pending. The most dangerous of these (in addition to the CFV deal previously talked about here) is the long list of companies and people litigating again Tasty for misappropriation of trade secrets, unfair competition, conversion and conspiracy. Seems the whole world is claiming that nothing about Tasty Fries is an original idea.
So. These are the reasons we have seen the share price tanking over the past few months. Can the company survive? Realistically, it looks very doubtful. But stranger things have happened. Here is a company with a good product that will probably get to market and has the possibility of being a huge success. Whether or not Tasty Fries gets to share in the success is the question.
Back to my original assessment. This is a great stock to trade and take advantage of small price pops. DO NOT bet your mortgage money on it.
The very best of luck to all the shareholders out there wishing and hoping - of which I am one.
Al |
