HIGH PEFROMANCE (OTCMKTS:TBEV) Scares Investors With New Reverse Split
Back in February High Performance Beverages Co (OTCMKTS:TBEV) decided to implement a 1-for-10 reverse split. As a result the outstanding shares of the company shrunk from around 2.1 billion to 212 million. Now, a little over seven months later another reverse split has been approved. This time it is much bigger at a ratio of 1-for-100. What could cause a company to do two reverse splits in less than a year?
The answer is quite simple – rampant dilution of the common stock. Three months after the February split TBEV‘s outstanding shares had grown back to 2.2 billion while the Schedule 14C statement filed for the new split revealed that as of October 30 the O/S had already reached 4.3 billion shares. Investors are fearing a repeat of the same story and yesterday TBEV crashed by more than 14% and closed at $0.0006. The daily volume for the session of 586 million shares was 5.5 times higher than the monthly average.
Despite the serious risks TBEV is still enjoying some support and their stock managed to move up from an intraday low of just $0.0002. The company did announce several extremely important developments recently. Back in September TBEV launched their line of sports beverages both through the company’s website and through Amazon. At the start of October they announced that the units available for sale on Amazon were sold out in just 48 hours.
Last month TBEV were able to strengthen their financial position announcing a $5 million equity line from the private equity group GHS Capital LLC. The entire sum will be provided to the company over the course of 2 years while for now TBEV have received $450 thousand in the form a promissory note. Even that sum is more than significant for the company because at the end of April they were left with just:
• $308 thousand cash and total assets!!!
• $4.1 million total liabilities
• ZERO revenue
• $283 thousand operating loss
Although TBEV have stated that no convertible debt has been issued this year at the end of the period covered by the report they still had approximately $2.2 million in outstanding convertible notes and $1.5 million in derivative liability. Investors should have been able to see what amount of the debt was still left as of July 31 when TBEV fiscal year ended but the company has still not filed its annual report. In a notification of late filing submitted on October 29 the company stated that it will try to complete the report “no later than five days after its original due date” but even now it is still missing.
TBEV have indeed moved forward with their business plans and the new financing could help them fund their operations for quite a while. Even if you believe in their potential jumping in without doing your own due diligence remains extremely dangerous. The new reverse split, the possibility of even more shares to be issued as a conversion of debt, and the effect the annual report could have on the share price must all be taken into account before putting any money on the line.
