Active Health Foods Inc (OTCMKTS:AHFD) Kicked Back to Life
On April 20, Active Health Foods Inc (OTCMKTS:AHFD)’s management team announced that a new CEO is taking the helm and said that the company is bracing itself for a merger with an unnamed entity which, apparently, has ‘multiple revenue-producing operations.’ Investors appear to be pretty happy about the news.
In a matter of just two sessions, AHFD managed to run from the absolute bottom of $0.0001 per share all the way to $0.0008. Yesterday, it slipped and closed the day at $0.0007, but it also hit an intraday high of over $0.001 for the first time since March. What’s more, it logged a dollar volume of almost $380 thousand which goes to show that a lot of people are now paying attention. We can see why.
The previous CEO was called E. Robert Gates and it’s fair to say that his track record with OTC companies is not exactly spotless. We wrote about him eight months ago when he was still at the helm of First Colombia Gold Corp (OTCMKTS:FCGD) and the performance since then should give you an idea of how bad of an investment this has been. Dig a bit further, and you might stumble upon this document. On Page 23, you’ll see that a person by the name of E. Robert Gates was once involved with an entity called TrendMark Inc and while he was there, he ‘allegedly made a host of unsubstantiated […] claims‘ related to one of his weight-loss programs.
Still, Mr. Gates is now gone and AHFD is steered by a person called John Griffin. It’s fair to say that he has his work cut out for him. One of the first things he needs to do if he wants to make the company more appealing for investors is crack on with the 2014 10-K.
AHFD failed to publish the report on time and it received a fifteen-day extension period. That passed as well, but the report is still not out which means that the company profile is stamped with a Limited Information sign.
Hopefully, the 10-K will be out soon, but you shouldn’t expect too much from it in terms of results. The previous reports show that AHFD‘s business isn’t exactly flourishing. Here, for example is what the company recorded at the end of the third quarter of last year:
- cash: $214 (number NOT in thousands)
- total assets: $97,744
- current liabilities: $1,798,228
- quarterly revenues: $22,589
- quarterly net loss: $79,923
All in all, investors are now left with the hope that Mr. Griffin and the upcoming merger can drag AHFD out of the mud. Time will tell whether this will happen, but right now, they should probably ask themselves: How did it find itself there?
The former CEO’s previous business projects and the dismal operational results did play their role in the ticker’s drop into Triple-Zero land, but there was another problem that exerted even more pressure.
During the third quarter of last year alone, the company printed nearly 1.2 billion shares of common stock in order to satisfy an undisclosed amount of toxic debt. The 10-Q tells us that on September 30, there was about $300 thousand worth of convertible notes still outstanding and virtually all of it can be turned into stock at discounts that can reach 50%.
In addition to this, there was a settlement agreement with an entity called AGS Capital Group LLC and as a result, during Q3, AHFD issued more than 1.6 billion shares in order to satisfy some liabilities. The exact conversion rate is not disclosed in the 10-Q, but we do know that between September 3 and September 30, 232 million shares saw the light of day in order to satisfy just over $11 thousand worth of liabilities. This means that each one of these shares was valued at $0.00005 (yes, four zeros).
In December, the O/S count was sitting at almost 4.9 billion which meant that some drastic measures were needed in order to patch up the share structure. The management team decided that a 1 for 1,000 reverse split is the way to go which immediately brought the number of issued and outstanding shares down to just under 4.9 million.
Unfortunately, while we don’t have any up-to-date information on the current O/S count, the volumes from the last few days suggest that the dilution hasn’t stopped there. During yesterday’s session alone, investors traded more than 440 million shares.
