Thursday, March 24, 2016

What happens when my company stops filing financials?


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Often I have found myself  holding a ticker that is years behind in filings, and wondered what it meant, and what it would take to get back to normal.

I read the below post on IHUB from someone I respect a lot, "Mainesbest" from IHUB. We have borrowed some of his wisdom before, and upon reading his post I realized it could be a very good teaching tool.


Enjoy
Cheds

PS. I have provided links for some of the complicated terms he uses.


This post was in Early May, after a year or so of no financials from VPOR



* Begin post by Mainesbest

Repeatedly Dror Svorai has filed form 12b-25 on behalf of Vapor Group Inc., since announcing the issue of restatement confronting Vapor Group.

It’s clear that the 10-Q is allowed 45 days to complete and file whereas a 10-K is given 90 days from the closing of the company’s 12 month/annual period, in Vapor’s case 12/31/2015. Therefore, Automatic extensions of the applicable due dates for periodic reports (up to 5 calendar days for 10-Q reports and 15 calendar days for 10-K reports) are allowed in the event all or any portion of the report cannot be filed timely without unreasonable effort or expense.

As such a registrant (Dror/Vapor Group) must file Form 12b-25 no later than one day after the due date or 03/31/2016, unless such day falls on a weekend or holiday, of the form for which relief and an extension is being sought.

What is not being understood here is two-fold. First, why Vapor Group (Dror) is even bothering to file Form 12b-25 as was done for ALL of the previous 2015 10-Q financials and I expect will as well be done for the approaching 2015 annual due on/or before 03/31/2016. Why do this when clearly the restated financials fail to materialize.

The answer lies in the purpose for Dror filing the 12b-25, even though he may clearly know he will not meet the deadline being asserted in said form. That purpose is simply to stave off and/or buy time so as to not immediately incur and invite further delisting and/or a financial platform’s assigned warning symbols. Further, in retrospect of when Dror actually filed the 12b-25 Form with respect to the 2015 Restated financials yet to emerge one should question the timing and hence violations. But, wait, that requires understanding that this form IS NOT applicable to a company that is restating their financials AT ALL.

Should we gleam hope from the fact that by filing 12b-25 forms and 8-K’s that Dror and Vapor Group seeks to stay in line with SEC regulations? Given the real applicability of these forms such weight must be carefully considered. That said on I would be encouraged on a minimal level to accept that Dror is buying time for some reason and very well restatement of the financials and as such endeavoring to minimize what damage and attention this problem receives until remedied.

As to when and if SEC will address the non-restated financials of Vapor Group it is imperative to understand that SEC for all intent purposes has no established timeline in concrete for when restated financials (even according to company designation..i.e., (Non-Accelerated Filer) should be completed. This is because too many variables exist and each case is unique. However, Dror would be really stupid to think the SEC is not aware and monitoring, that continued failure to produce will not incur any repercussions much less that Anton & Chia are simply going to be a safe haven to hide behind while Dror slips Vapor Group into darkness (assuming that was his plan).

This is an expense process and has been made greater and more convoluted by the SEC findings concerning the accounting prowess and ethics of Terry L. Johnson. Irrespective of whether or not further periods beyond 2014 have been asserted there remains a critical problem for Anton & Chia to rely much less incorporate any of the audited work produced by Terry L. Johnson. So the real questions become: How pervasive is the restatement of Vapor Group’s financials as well as what the cost for same is and can Vapor Group fare up under same. To me I see a benefit to delaying the restatement and including the 2015 period in its entirety and as such I’m going to hold out a bit longer and watch this ticker. GLTY

* End Post


When I asked his permission to use his post for this blog, he posted this response.


* Begin Post

As always thank you for your generous response and NO I present no objections to your use of my comments.

I like so many here have to recognize that it is most certainly possible that Dror does intend to let this ticker slip into darkness. It is my sincere hope for the many that would stand to lose so very much that this is not the case.

Unfortunately the very instituted policies and regulations (SOX) designed to increase transparency and protect investors present as double edged sword to smaller companies.

One need only look at the precipitous drop in smaller accounting firms that followed the institution of the Sarbanes-Oxley Act. 50%+ went out of business. Add this to the ever changing landscape of accounting/auditing/record keeping procedures and one can easily see the minefield that both auditors and company officials walk through. The cost of operating and maintaining a reporting business to include but not limited to: Accounting, Auditing, Legal, D&O and E&O expenses are rising on the heels of legislation and making it more appealing to simply file Form 15 and slip into the abyss.

But fortunately going dark or private is not without it's drawbacks. Unfortunately, time is not a friend of a company when under a restatement. But, the goal here is to "Get it right as quickly as possible" not to simply get it done as quickly as possible only to end-up restating the restatement. As always...thanks and keep up the good work of keeping things balanced and informative.

* End Post


Thanks again Mainesbest!



***********************************
UPDATE
***********************************
$VPOR has now deregistred, and then filed financials

Here is a great post from YesWeCannibus explaining what it all means for us.




Ok here is what's going on from my perspective

Why the deregister and then file filings? 

It's all about rule 144! As an SEC reporting company, you cannot fall back on your filings and still issue shares for debt, S8 shares for employees or even RS if you wanted to. Apparently, something was funky with the 2014 and 2015 that the former CPA (PCAOB qualified, more on this) did the audit on. Who knows which party created the funkiness (Terry or VPOR), looking at the fins I have a guess, but ill keep that to myself since its speculation. So if you can't get Anton and Chia or whomever to audit you or if you keep providing bad information to them they won't sign off on them. What do you do? You need to issue shares! 

You do just like you would do if you purchased a dark shell, you deregister it and bring it back current according to OTC Pink Current rules which are. Last two years audited fins, but these audited fins only have to meet GAAP principles, not PCAOB- which means any CPA can do it. You also need to be up to date, hence Q1 being done. 

Now that your all caught up, you just wait for OTC to catch up and you are now ready to issue shares for debt, cannot issue S8 shares which can be free traded....unless wait for it....You upgrade back to the higher level OTC, which needs two years of audited fins. Think about it; we are in month seven of year one (2016). So he can take the next year and a half to figure out a new business plan, work off the debt and boom have a clean audit with a PCAOB auditor...and off to see the wizard. 

So what does this mean for trading? From a financial investment stance we have to look at the now and the possible future. So I'm clear I will not be buying any shares any time soon, but if I was too- 

Well there is (supposedly) 2MM in debt still to pay that would take 20BB shares to pay off at .0001. But the company after releasing fins actually is worth (being generous) 2.4 million 4X est 2016 Revs. Making .0006 its 1st level worth. Now we know this is the OTC so that number could easily quadruple with an OK PR, much less a great one. So 0014 to 0020 is not far fetched. Not because VPOR is a great company, but because the OTC loves any reason to create MOMO. Period! 

So what happened to the revenues? Here's what I believe you will be told..."Obama did it" EPA, USDA, SPCA and whoever messed up the whole Vape game and as a company we need to [ FILL IN BLANK]
Cheds


GREAT GREAT ARTICLE-- 


"Going Dark” - Voluntary Delisting and Deregistration under the Securities Exchange Act of 1934 - The Attractions of the “Dark Side”

https://www.dorsey.com/newsresources/publications/2009/03/going-dark--voluntary-delisting-and-deregistrati__


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    What happens when my company stops filing financials?
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    Oleh