02 Sep Halberd Corp (HALB) – late Friday surge
The late day surge by Halberd Corp (HALB) was mentioned in our chatroom on Friday just before the close. Our experienced traders didn't seem to impressed with HALB, but after reading that other stock research websites are speculating that Friday's late day surge may be front loading being done for a paid promotion I decided to spend a little time building a research report for our subscribers.
The sudden unusual trading was kicked off with a 1,071,250 volume trade at 3:43:11 pm that was recorded as a sell.
Following that big sell 15 small blocks over the next 15 minutes ranging from 1,000 shares to 20,000 shares (all nice round numbers and all recorded as buys) quickly brought the bid up from $.058 to $.11.
5 more even blocked trades over the last 3 minutes pushed the bid up even further to $.13 at the close.
Maybe whoever sold those 1,071,250 shares was using some of the money they made from the trade to manipulate the share price up to draw attention and speculation to the stock.
If it wasn't for that huge 1,071,250 volume trade I would be more inclined to think that the price action could be front loading for a paid promotion. But at this point I'm not so sure.
Important information about HALB
Prior to going public, the Halbert shell was known as SellMyBusiness.com Inc. SellMyBusiness.com Inc was founded by Mark Lundquist and John C. Maddux in 2007 (registered in Michigan).
On January 28, 2009, the Halberd Corp entity was acquired and merged into the SellMyBusiness.com Inc shell.
Just prior to the merger, 228 shares of SellMyBusiness.com Inc stock was sold to 39 different shareholders at a price of $500/share. When the merger with Halberd Corp occurred, those 228 shares were forward split 2000:1 becoming 456,000 shares of HALB stock at $.25/share.
John Maddox who was given 6,500 founder shares at no cost now owned 13,000,000 shares of HALB
Mark Lundquist who was given 2,000 founder shares at no cost now owned 4,000,000 shares of HALB
As part of the merger, some old SellMyBusiness.com Inc debts were converted into HALB stock and some insiders were given shares for consulting services and others through private placements.
Craig Camp - 636,000 shares
Joe Lutheran - 508,000 shares
Thomas Nardone - 508,000 shares
Dewey Steffen - 1,064,000 shares
Dimitri & Patty Vasilos - 500,000 shares
Michael Marcum - 572,000 shares
Vincent Floyd - 1,018,000 shares
Leland Thomas - 2,796,000 shares
Nicholas Cocco - 1,000,000 shares
On July 8, 2009, three months after gaining public trading status, HALB filed a new S-1 to register 5,725,000 shares to be distributed as follows:
1) Anslow & Jaclin 62,500 shares per month for the next 16 months for legal services for a total of 1,000,000 shares
2) Toxic financier, Dutchess Private Equities (Michael Novielli and Douglas H. Leighton) would get 2,000,000 shares towards a toxic debt financing agreement to offer up to $25,000,000 worth of toxic financing to the HALB shell
3) Nicholas Cocco would get another 1,000,000 shares towards his consulting agreement that pays him $7,500/month
4) Awecomm Technologies LLC (Janet Nawocki) would get 804,000 shares
5) Issuers Capital Advisors, LLC (Gregg Linn) would get 456,000 shares
6) Marx Layne, Inc (Michael Szudarek) would get 395,000 share
7) John Maddox, Mark Lundquist, Leland Thomas, Bruce Nyberg, Lizabeth Ardisana, and Michael Burns would get 10,000 shares each
That would bring the outstanding share count up to 31,783,000 shares
HALB ended up withdrawing their S-1 filing (meaning none of those shares were issued), not doing any more quarterly financial reports with the SEC, and eventually voluntarily terminating their registration and becoming a non-reporting SEC company.
By this time Henry Liguori who had a background in aviation became the CEO and the focus of the company was changed from online services to drone technology (unmanned aircrafts). See their website here.
Henry Liguroi was previously the CEO of and a major shareholder in Wavelit Inc (now known as CN Dragon Corp - DRGN) and the CEO of China Teletech Limited which was bought by China Teletech Holding (CNCT) in April of 2012.
Things get really strange
After HALB stopped reporting to the SEC and started hiding on the unregulated OTC market the filings suddenly got very sloppy and material information started getting hidden from the shareholders.
According to the first Initial Company Information and Disclosure Statement as of February 4, 2011, the share structure had changed drastically. There were now 26,368,000 shares outstanding
All previous officers/directors except for Mark Lundquist were now out of the picture
Henry Liguori has somehow acquired 20,084,263 restricted shares
Mark Lundquist still owned 3,949,891 restricted shares
2,618,125 restricted shares were owned by other insiders
3,120,430 outstanding shares were free trading
According to the unregulated OTC filings some time between April 30, 2012 and May 22, 2012, the outstanding share count grew by 26,679,864 shares to 53,047,864 shares with no explanation as to why. 23,999,910 of those shares were added to the float bringing the total number of free trading shares up to 27,120,430.
This was probably due to the conversion of some of the huge debt Notes that HALB had accumulated over its 3 year existence.
The last quarterly report for the period ending April 30, 2012 showed $2,250,688 in liabilities including $1,918,208 in debt Notes. $285,475 was listed as convertible debt Notes ready to be turned into free trading discounted stock at any time. Those numbers were a sharp increase from what was listed in the last SEC filing which showed $525,876 in liabilities and only $84,027 in debt Notes. The existing $55,000 in convertible debt Notes at the time that HABL stopped reporting to the SEC had a conversion ratio of 25% below the market price. There is no telling at what rate the hundreds of thousands of dollars of new debt Notes are now convertible.
Between April 30 and May 22 the HALB stock price was trading around $.035/share meaning those shares would have been issued at a price of around $.026/share assuming the 25% discount ratio was still in play. Could those convertible debt Note holders now be preparing to try to maximize their profits on those shares?
If the OTC filings can be trusted, HALB's business plan has been improving each quarter since they stopped doing SEC filings. Over the 3 months ending April 30, 2012, HALB actual made enough money through sales ($137,794) to cover all of their operating expenses ($43,181) for total profits of $94,613 during that 3 month period. HALB still carries an overall operating loss of $1,242,737 plus the $2,250,688 in liabilities already listed in this post. When you look at how little money HALB claims to spend on operations it really makes you wonder why they are adding so much debt to the books. What is all that borrow money going for? Maybe it just exists for future insider enrichment?
The attorney filing the attorney letter for the HALB OTC filings was Michael J Scaglione. Michael J. Scaglione acts as the Secretary for Marine Explorations Inc (MEXP). Robert Stevens who was a key player in the disastrous APS promotion - Vision Plasma Systems Inc (VLNX) was a major shareholder in MEXP. See our VLNX report for more details.
Michael J. Scaglione was fired as legal counsel for Freedom Environmental Services Inc (FRDM) on April 4, 2012 for issuing a letter threatening a lawsuit again the company auditor without the company's knowledge and for not disclosing to FRDM that his partner, Michael Darren Bonn, had been indefinitely suspended by the Florida state bar in October of 2011. See this 8K for more details.
In the last few weeks the company has been making some mysterious changes to their outstanding share count on the OTC website.
On August 17, 2012 they updated the Outstanding share count to 84,391,864 shares outstanding (an increase of 31,344,000 shares - no disclosure on whether they are restricted or free trading but since the float wasn't updated they were probably free trading)
On August 24, 2012 yet another increase occurred to the outstanding share count according to the OTC website. The outstanding share count once again grew this time by 203,846,153 shares. Once again the float was not updated so we do not know if the 203,846,153 shares issued were restricted or free trading though I would guess they were free trading.
That means potentially 235,190,153 more free trading shares were issued just in the last month alone. Add that to the 24,000,000+ free trading shares issued in April and that's a heck of a lot of shares that are potentially waiting to crush the HALB share price.
But the strangest part of all is that HALB has not filed with the Nevada SOS to increase their authorized share count. It officially still sits at 120,000,000 authorized shares.
Very very shady stuff going on.
I'm still not absolutely sure what to think about the late afternoon surge on Friday. Three possibilities seem most likely.
#1) It is just a set-up by debt Note holders owning 24,000,000 - 260,000,000 cheap free trading shares to draw attention to the stock to help support the future dumping of a big chunk of those shares
-if this is the case then things could get really ugly really fast starting on Tuesday
#2) It could be a sign of a pending paid promotion about to start
-if this is the case then I am sure that it is debt Note holders looking to dump those 24,000,000 - 260,000,000 cheap free trading shares and then the success of the paid promotion would depend on what promoter is used - things could still get really ugly fast
#3) It could be nothing at all. HALB has had similar spikes in the past (though not quite this drastic) and they were almost always followed by relatively dead trading days and price drops.
The key with HALB isn't the seed shareholders or original SellMyBusiness.com Inc shareholders. It is the debt Note holders and how those debt Notes are handled. HALB might be seeing positive steps in their business operations, but they are not big enough steps to get HALB out of debt (assuming the debt doesn't just exist for insider enrichment) and so how often those debt Notes are converted into free trading shares and how quickly those free trading shares are dumped will ultimately determine the value of the HALB stock.
The recent shady changes to the outstanding share count on the OTC website plus all the mysterious debt Notes added to the books since becoming non reporting is probably enough for most people to justify sitting this one out and watching from the side lines.