As of right now, Greenfield Farms Food Inc (OTCMKTS:GRAS) seems to be just another one-day wonder on the OTC Markets. The company issued a press release on Monday about some debt restructuring and the market’s reaction was absolutely explosive. More than 664 million shares changed hands while the price jumped up by a whopping 116%. Yesterday, however, GRAS slipped and fell, wiping out nearly 27% of its market cap in just six and a half hours. Hardly the perfect performance, but what seems to be the reason for it?
The company hasn’t been particularly successful in the past. They tried to make a name for themselves by marketing and selling their Grassfed Beef products, but the latest 10-Q shows that they failed rather spectacularly. In fact, as of September 30, 2013, GRAS had:
- cash: $52
- current assets: $9,324
- current liabilities: $440 thousand
- no quarterly revenues
- quarterly net loss: $49 thousand
Even if you take the debt restructuring into consideration, you’ll see that the company’s financial situation is not exactly rosy. But let’s not forget that the figures above don’t reflect the operations of Carmela’s Pizzeria. The 2013 10-K which should come out any moment now will give us a better understanding of where GRAS is heading. While we’re waiting for it, we might as well touch upon some other problems that have been (and might still be) plaguing the company.
Monday’s press release states that Asher Enterprises is no longer a note holder at GRAS which is definitely a good thing. As you probably know, Asher has something of a reputation for providing small cap companies with toxic debt and many people hold the opinion that it was toxic financiers that brought Cereplast Inc (OTCMKTS:CERPQ) (a relatively solid, ex-NASDAQ venture) to its knees.
Now though, GRAS tell us that they have freed themselves from the horrific convertible notes and that they will be looking at other sources of financing in the future. Sounds good, but investors and shareholders should stop and ask themselves: “Will this prove to be too little, too late?“.
The facts at the moment don’t sound too encouraging. The latest 10-Q tells us that during the nine months ended September 30, 2013, GRAS issued a whopping 604 million shares as a conversion of just $154 thousand worth of debt (the conversion rate comes in at around $0.0002 per share). In October, they apparently realized that they had gotten a bit carried away with the printing an effectuated a 1,000 for 1 reverse split. As a result, the O/S count on October 31, 2013 stood at just under 9.5 million. An 8-K informs us that by December 18, it had grown to 87 million while the OTC Markets’ website states that on March 4 there were nearly 370 million shares issued and outstanding. As we mentioned yesterday, Monday’s colossal trading volume suggests that some more stock might have seen the light of day over the last couple of weeks.
At this point, we reckon that it’s appropriate to take a moment and write a few words about the stock promoters and their research skills. A few minutes after the start of Monday’s session, a pump newsletter called Stock Situation Room (who pocketed $4 thousand) sent us an alert on GRAS and said that the company “has a tiny float of only 9.34Mil shares“. As you can see, this is clearly not the case.
This goes to show that basing your investment decision on alerts found in your inbox is never a good call. Doing your own research is essential, and if you decide to check out some details around GRAS, you’ll see that the people currently running the company are involved with other penny stocks like Fastfunds Financial Corporation (OTCMKTS:FFFC), Quture International Inc (OTCMKTS:QUTR), Alumifuel Power Corp (OTCMKTS:AFPW), and Debut Broadcasting Corporation, Inc. (OTCMKTS:DBTB).