Latteno Food Corp (PINK:LATF) Get Everyone Excited Once Again

If you are managing a small cap company and you are looking to find a new business opportunity for your venture than look no further than the medical marijuana sector. It’s extremely hot right now and hundreds of companies are having a go at it. Back in January Latteno Food Corp (PINK:LATF) announced that they have chosen the same exact path and it would seem that shortly after that, the interest in their stock has gone up immensely.

Along with the news about the new field of operations, they also told us that they have closed the acquisition of a company called GTG, Inc. and they were quick to file an annual report that contained the consolidated assets, liabilities and revenues of the new wholly owned subsidiary. A few days later, however, some eagle-eyed investors spotted that it looks remarkably similar to the annual report filed by another publicly traded company that has absolutely nothing to do with LATF – Health Sciences Group, Inc. (PINK:HESG). If you take the time to have a look through the two reports, you will find that the “Notes to Financial Statements” chapter in LATF‘s filing is directly copied from the one that HESG have published and it represents businesses that LATF have never been involved in.

The new management team was informed about the discrepancies and they admitted that it was an honest mistake. Shortly after that, a new annual report was published and this time, LATF say that it’s the real deal. Still, it’s rather confusing. Page 7 of the new disclosure, for example, claims that LATF are expecting to reach profitability in 2011 when, in fact, the report should have represented what happened to the company during 2012.

All in all, LATF‘s management team seems to be pretty negligent when it comes to handling documents and disclosing information. And speaking of negligence, we can see much the same thing in the press releases. As we mentioned, the January PR informed us about the acquisition of a new company that has generated about $2 million in revenue during 2012… that’s about it. There is no information on what the new subsidiary does and the only entity that we could find on the Internet that goes by the name of GTG, Inc. is a precision machining shop in Massachusetts. There are no clues to suggest that they are actually owned by LATF, however.

The same goes for the press release that came out a few days later about a different acquisition – the one of Green Cannabis Collective, Inc. Again, we see no details of the actual operations of the new daughter company and, more worryingly, there is absolutely no information about the terms of the deal i.e. we don’t know how much LATF paid for the two subsidiaries. It’s safe to say that the management team will need to work on their communication with the shareholders since, to the casual observer at least, it would appear that they’re keeping their cards too close to their chest.

Still, some of you would argue that, as long as they’re making money, providing accurate information is not that important. And if you are one of those people, you would be happy to know that LATF seem to be on the right track. The consolidated financial statement reveals that the GTG, Inc. (whatever they do) have indeed generated over $2 million in sales for the last twelve months, and when the line is drawn, there is even a small net profit. Sure, $80 thousand is not that much, but at least it shows a positive cash flow, which is not something you see every day with small cap ventures.

These optimistic figures sparked the investors’ interest even further and on February 28, LATF scored a massive 337% gain. It was very short lived, however, and in a matter of couple of weeks they fell from $0.17 to just $0.05. The paid newsletters tried to get the ticker off the ground at the end of March, but they failed miserably.

Yesterday’s news about an expected stock dividend, however, did give a new lease of life into the ticker and LATF gained a respectable 50% in just 8 hours of trading. Only time will tell if they’ll manage to hold on to it, however. Regardless of that, they will certainly need to do something about the information flow.