Saturday, August 13, 2016

Scalping, swinging and channel trading for beer money

What is channel trading and what is the difference between a SWING trade and a SCALP trade?

Buy and hold is not a strategy for the OTCBB, given that people take profit and enter/exit plays at different levels it is very important to proftect your portfolio and take profit.

What is Swing Trading?

"This technique was first described by George Douglas Tylor (George Douglas Taylor) in The Taylor Trading Technique, as a technique aimed at gaining profits from natural 3-5 day cycles of the market. Strategy "swing - trading" (born swing-trading) takes as its basis the cyclic dynamics of prices, go beyond the timeframe. In an era of global market liquidity swing trader can find excellent opportunities for transactions in different time frames - as a 5-minute charts and position trade for weeks. Swing - trading became popular in the early 1900s. It is based on the technical methodology for determining the duration of the previous market swing in relation to the overall technical structure of the market and predict the next swing. One major advantage of this trend in the trade is that the active speculator can profit no matter which direction to the market. But it is also important to know when this "right game" to see profit and look for the "true trend." Know the "right game" - is to know first buy or sell, or hold to go. Transactions are based on "objective points", which are just the high and low of the previous day. Movement between these two points determines the "true trend.""
Scalping: Small Quick Profits Can Add Up

"Scalping is a trading style specializing in taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires a trader to have a strict exit strategy because one large loss could eliminate the many small gains that the trader has worked to obtain. Having the right tools, such as a live feed, a direct-access broker and the stamina to place many trades is required for this strategy to be successful."

What is channel trading?

Think about how things go up and down, and why:

MMs want to create volume so they can make their commission, and an important concept to keep in mind is that there is usually a lot of volume near the top of channel, and near the bottom of channel.

Once you have been trading for a while, and you have followed one ticker, you can get the sense of what I mean. This channel may take a couple months but its clear.  Its oversold, bottom feeders come in and drive it up, runs and news hits, peaks out and gets beaten back down. Rinse and repeat.

This ticker clearly is in a channel, and you can see especially with the Price by Volume indicator at left (the red and gray bars) that most of the volume is from .0021 to .0028. This is currently trading in a very nice, predictable and profitable trading channel.

What do people mean when they talk about "Beer Money" or "Lunch Money"?

This one is a classic:

This is a pretty simple concept. The above poster is attempting to persuade you to hold rather than sell, even though you are up 2-3 ticks and potentially 20-30%.

Or, they are describing a trader who presumably bought at .0005 and sold at .0007  Can you imagine that? Who would be foolish enough to do that???

In reality, how much money is "Beer Money?"  

Ok, lets do a thought exercise.

Assuming an initial buy of  $750 plus 6.95 commission $756.95 at .0005 you get 1.5 Million shares.
You then sell them all at .0007 for $1050 minus 6.95 commission, = $1043.05

You started with $756.95 and turned it into $1043.05 for a $286.10 profit. That is some serious beer money

People always complain about 1 and 2 tick flippers, when in reality  they are making $100-$300 per trade. That's some serious beer money. More like cognac money?

Smart "Beer Money" traders never regret it, because they have protected their portfolio.


Here are some of the common lines you will hear from a pumper, or someone who is overly enthusiastic. Most of the time its pure BS and they just want you to hold your shares so they can sell higher and dump on you.  Often times when a ticker is being loaded it is very very quiet, and when it is being dumped you will hear all the pumping in the world. For example, OTC Knight on IHUB is one of the worst -

Some of the BS pumper lines I hate:

"Anything under .01 is a buy". - Okay Mr Pumper, if this is true and the ticker is currently trading at .0023, why are you not constantly slapping the ask instead of telling us how great a value it is? Its important to remember that a ticker is only worth its value in relation to its:
 POSITION IN THE CHANNEL - Top of channel it sucks, bottom of channel I love it.

"Grab cheapies before news hits" - First of all, the term "cheapies" is pretty damn annoying, but beyond that you need to remember that companies release news so that debt holders can SELL INTO RETAIL BUYING PRESSURE.

Remember, -- You are not the only one waiting for news, VFIN VNDM BMAK CFGN and all those jerks are also waiting.

"Im not selling anything under .01" - When in reality this BS pumper has several limit sell orders in and he is probably selling right now while you are slapping.

"Moves on Air" -  This is true, but usually describes a ticker with a huge gap and no liquidity. Its moving on air because there is no volume base for you to analyze and determine proper entry.

"MM's playing games" - MM's dont play games, they create volume, dump and accumulate shares. The only ones playing games are pump and dump artists.

"To the moon" - No explanation needed. because we are smart traders and take profit, and do not hold hoping we make it to the moon.

"Better buy now because you might miss the run" -  This is the worst reason in the world to buy. There is always another ticker to play, and who cares if you miss the run. OTC is hot, go find a better ticker and quietly load it.

Basher Posts:

"this is going to no bid"  - Worst offender in the world is a guy on IHUB named PSTATS. A shameless trader/basher who claims every ticker is going to .0001 and he is bidding there. The reality is each ticker trades in a channel, and while some are going to .0001/no bid, most others will test and bounce off support levels.

"this is the biggest scam on the OTC" - Dumb bashers dont realize that the biggest and worst scams on the OTC are also often the most liquid and profitable plays, but we wont tell them :)

Cheds Breakdown: 

I hope everyone enjoyed this article, the most important thing to remember is that most tickers trade in a channel and taking profit is lesson #1


Saturday, July 16, 2016

Trader psychology - #OTCBB Polls: Results and analysis -

I really enjoy doing these polls, its a good way to gauge trader mentality and start a conversation with other OTC thinkers. In this article, I will report the results of my polls and give you some of my thoughts about the topics they explore.

Poll 1 Part A:

This one is fun, who is your favorite MM to hate? As expected most people select VFIN. The trader mentality is very interesting. The simple name VFIN strikes fear into peoples heart, but many do not know other MM's can be just as deadly, especially CDEL. for me CDEL is deadly because he appears to be retail but is often a wolf in sheeps clothing.

CFGN is the new VFIN, so watch out for that guy....

Poll 1 Part B:

I threw in CSTI as a decoy, as CSTI is not an MM to fear. VERT is a badass and will play AX, and is usually found in tickers over a penny, but also occasionally down in the subs.

CFGN is the new VFIN, complete buzz kill. As of right now, many traders do not know this is a Mal MM, so they are trading blind.

VNDM is interesting, I almost always assume VNDM is retail, but my guess is VNDM is 50% retail and 50% Mal.   Your only cue is the block size

Poll 2:

I just want to know who answered "14c"! Those are usually the kiss of death (think AS increase, RS).

The audience got this one right in my opinion. The most explosive filing is an 8k, this can be a merger, debt pay-off, acquisition, pretty much anything. The reason why its so good is that it is a legit filing, a material event, and can not have misleading or false information. Press releases can be full of BS fluff, but an 8k is meat and potatoes

Poll 3:

July 4th -- I will admit that I fell into the all of the above category

Poll 4:

This one is interesting. I remember in my early OTC days I would hear this all the time. I remember encountering it first on the run up with FITX, climbing its way up to ten cents (.10)

It turns out this is false, this is just a line used by pumpers. They know that if you have your sell orders really high, you would be clogging the ask and they themselves can sell into buying pressure, and when it dries up you will be stuck holding the bag.

Poll 5:

For me, my favorite price range is the .0020 to .0030. The reason why I like it is that the play has usually fallen very far down, and at this point is beginning to stabilize. If things go wrong, you have enough space to bail before it gets to trips. If you start out on a play at  .0010, its very easy to get trapped and each tick down from that point represents a significant loss.

In general, I almost never play a ticker less than .0010, but there are for sure exceptions.

Poll 6:

This one was fun to do. Every has their own idea of the "biggest scam on OTC', or "biggest POS of all time". For me it has to be MTVX since I lost 6 figures there, but having been a casual observer of both VPCO and TBEV, they are pretty big "turds" as well, to borrow a common term.

I know I am leaving out many many plays here. Feel free to let me know which ones I am forgetting!

Poll 7:

Which of these is the greatest sin in terms of trading malpractice? Very hard question to answer. I think it really depends on your trading style. I know some very very solid traders who do not use L2 at all and focus on the macro setup, and I know some very very solid traders who swear by L2 and can read all the subtle cues that are given.

For me personally? I think it has to be a combination of L2 and chart. Often my mistakes come when I buy no where near a 52W low, and am too fast to enter and do not have a good sense of L2, which MM is the ax and the structure of the trading channel.

Poll 8:

Fun one to do. The other 3 traders on this list I respect a lot, and look up to. FPS and RSP have very legit premium services, and I feel that they are my elders, teachers and I am tbh not on their level yet. Beard has his premium chat and is lightyears beyond me in his ability to read L2 among other talents.

Poll 9:

This is a big one -- OTCBB is a bit like survivor, you have to make alliances, you vote people off the island, ,but in the end its you against everyone else -- Or so it seems.

Having been in many many chatrooms, learning about all types of hustlers up and down the food chain, for me personally I have found that it works best to keep a tight tight circle of trusted and talented traders around you. Trust is built up over time, and its important to remember people are greedy and selfish in human nature, so be cautious when you are dealing with them.

That being said, there are some great teachers out there that you can trust, and I try to be one myself to newer traders who are starting out.

Poll 10:

I think this is a question almost all traders who use TA think about, especially the new ones starting out. The real answer is that it boils down to size. From my own experience, big board plays lend themselves better to weekly analysis, to understand the trend. If you are day trading and trying to get in and own the same day, you are probably looking at a 5 or 15 minute chart.

For me personally, I tend to use the daily chart, and then 30 minute chart, but I will admit I am still experimenting. A lot depends on how much volume the ticker has. The more volume and greater number of trades the better, that way you can get a better statistical analysis.

Poll 11:

Prop bids happen all the time, you just dont know if they are "prop" or not until they get hit. Whats a prop bid? Its when someone puts up a large lot, say 10M on bid to discourage people from selling. They are trying to get you to slap the ask and buy their shares. You can tell its a prop, or fake bid when it gets hit and that bid suddenly disappears

Loading walls are very very common. A loading wall is a large block put up on the ask to encourage you to sell, and force the price to stay in a specific channel. For example, someone may have a large bid they want filled at 23, so they put up a loading wall at 28 which will scare other retail into selling at 27,26,25, 24 etc.

Bid whacks? Im referring to small lots, maybe only 100 shares, sometimes more into the bid to manipulate the price and make it look like there is more selling than there actually is. Most of the time this is done by someone trying to bring the price down to accumulate, or by a note holder or shorter trying to drive the price down. Note holders make more money when the price goes down before they convert because in their terms there is often a "lookback period" which takes the average price over a 5 or so day period, calculating how many shares they get.

AON orders? IMO, this is not un-ethical at all, just a smart way to load.

Poll 12:

Its hard to argue when people say trading is an addiction. I know that in those first few moments in the morning when the market opens (especially monday) I get a huge rush, watching all the tickers moving up and down. It all seems so amazing and exciting to me those first few minutes, and it really gets me going for the day.

As the trading week winds down around 230pm on Friday, I can already start to feel a slow sadness coming on, knowing that action will be closed for the weekend (not even holiday ones, those are another story!)    Its good to have some separation, and the weekdend is a great time to brush up on your skills, and in my case also work on #chedsblog.

Poll 13:

This is a very interesting question to me:  There is clearly a different class of trader between someone who sits and home with multiple screens vs some guy trading on his phone. Each type of platform both suits the personality of the trader but also the current dynamic they are in. So the biggest question is, does it correlate that desktop users are both better traders and make more money than I-Phone users?

My guess is there is some partial overlap, but perhaps not determinative. The most obvious reason why so many trade from their mobile phones is that they have full time day jobs. Most of them probably make between -$10,000.00 and +$10,000.00 a year, and its a hobby. However, there are some reason and very profitable traders who trade by their phone by choice, and im sure they all have their reasons. I can imagine if you are so profitable that can you afford to play from your phone, you may want to have it handy as you are sipping margaritas at Cancun, bidding and slapping from your Iphone.

In conclusion, I would venture to say most serious and profitable trader do use a desktop and have multiple screens, but that does not mean doing so will make you a profitable trader.  Cheers

PS. I trade from an IPAD :)

Poll 14:

When I put out this poll, I thought that "neither" would get 0%, since its a throw away answer, and obviously wrong. 'Shareholders" is the answer I expect to hear the most from new and inexperienced traders, who believe that the CEO has their best interest in mind and can't wait for news. The dirty OTC secret is that the CEO is only releasing this news for the NOTE HOLDERS. PR's are for note holders because the goal is to build up excitement and retail interest, so the note holder can sell and recoup their loan to the company. Very basic stuff.

I can see an argument being bade for "Both", but the technically correct answer is Note Holders.

Poll 15:

Share buy back is very powerful catalyst, and very very rare. This is often a sign that the company has extra money and is less likely in the near future to take our more toxic debt. Personally for me, I like the "Toxic Note ending", such as we are seeing with $ASCK right now. On these types of plays, when this note ends there is a window with no dilution and all the retail pressure shoots the price right up. Very classic setup

RM annoucement is 50/50, in my experience when you see an RM announcement, the shell being RM'd into has a lot of toxic debt and needs to be chewed through, and this limits the run.

Poll 16:
The field is right on this one -- I usually play around 25% of the tickers on my feed. As trader having liquidity is very important, the ability to have free cash to buy when a good opportunity presents.

I tweet during the day when I see interesting things, tickers moving or big sell offs and possible bottom feeder entries, but un
fortunately I do not have enough funds to play all the tickers I see.

Poll 17:

This is a tough one -- these are all very clear sell signals. Recently CDII had ANOTHER 13g, basically telling everyone that the note holders re loaded with shares and will be dumping them into the market. A 14C is a clear sell signal, but not as strong as the others I think.  Occasionally a 14C for an AS increase will come out and either the AS increase is not that much or traders have already priced it in. However, a 14C RS filing is an immediate sell.

"Prop bids getting smoked' What does this mean? Well, often on these tickers you will see normal bids 100-500k, then there is a 10million bid there and trader see it as a sign of confidence. These bids generally speaking are not ones that the buyer intends to be filled, they intend to put it up there and push the price up rather than have it filled, so when you see it getting hit, that may be a key to sell, albeit a subtle one.

Certain pumpers on the board? This is a very key one for certain people, as it generally is a bad sign when known pumpers or those associated with short groups show up.  Knowing who is who in the game is very important for making a wise decision.

Poll 18:

So, generally speaking pre market form T trades are bearish, as it means there are more shares about to hit the market and there is active dilution going on. However, as is often said by @beardofwallst dilution provides liquidity. So, if there is an active play with excellent retail catalysts and the dilutors are willing to play ball, the pre market form T's can neutral, and in some cases even bullish if it means a note is ending. 

Poll 19:

Correct answer: C. You must know A before you can verify B, achieve C

Once you have learned enough about filings, about L2, about the ebb and flow of price action then you can start to network and make friends -- Find traders you trust and ones you can learn from.

Poll 20:

Its October now and MJ stocks are heating up again -- We have many states with recreational on the ballot and if those pass there will be a nice catalyst for the industry. Right now we are in the middle of a slight pullback after some huge run ups in late September and early October -- As we speak, MJ is king and there is a lot of $flow going into these plays. We are seeing previously dormant companies put on PR's now, often very weak but still good enough to catch that retail interest and get things moving.  I have a feeling as do other I speak with that this MJ momo with NOT stall out, but will continue into and after the November election.

Poll 20:

#chedsblog has been a very fun project. The real secret behind this is I wanted/want to prove to myself I can become a strong and consistent trader, and part of that is being able to teach. With any new task the real measure of knowledge is the ability to teach it to someone else. #chedsblog is my record of that journey.

I am going to do this poll again soon

Poll 21:

I have never been a fan of alerts, weather they be text, email or twitter. The best plays I find are the ones that take a while to set up, and you have plenty of time to DD it and decide if you like it before you jump in. Too often traders fall in the trap or wanting to be fed a ticker, and just buy it without doing any research. Thats not what my whisper list is for. I try to send out a message once or twice a month, once I find a play I like enough that I can stand behind and recommend to my fellow traders with some confidence. I am looking for low float, low debt, tickers near 52W low with good chart setup and future catalysts. Clean setups.

I was very pleased to learn that of those who were on my whisper list, they have made money overall.

PS. Anyone who is not on my whisper list and wants to be, find me on twitter @bigcheds

As I do more polls I will add to the post. If you guys have an good ideas for polls I should do, just let me know!


Monday, March 28, 2016

Conversation with Jason Spatafora aka Wolf of Weed Street aka JohnnyLax - Former CEO of $FBEC

Chedsblog - Our latest article is a conversation with Wolf

Click here to go to the main page and view all articles

*Editors note - At the time this interview was published, $FBEC had not released this PRESS RELEASE announcing he was stepping down as CEO - Turns out we broke the news here on #chedsblog 

First, I would like to say that I have been an admirer of Wolf for a long time and he has always been good to me, from the time I was starting out my twitter account until now. Thanks again bud. 

Disclaimer: I am not now, nor have I ever been a shareholder. I like to be objective for a conversation of this nature.

Cheds – Jason, thanks for talking with us today! Lets start out with an easy question. How did you come about the nickname “Wolf of Weed Street”, and are there any other nicknames that people know you by?

Wolf  - So one night I was home alone and decided that is was a good opportunity to relax so I smoked a joint and watched TV. It was December 2013 and I saw a trailer for Wolf of Wall Street and I thought to myself.. “Hmm, Wolf of Weed Street is a clever name I wonder if anyone has it on Twitter?”. When I saw that no one did I grabbed it. My intention was only to be a parody account, talking about the marijuana sector and being as no holds barred as possible with my opinion on the Marijuana Stocks space. The rest as they say is history...

As for other nicknames, in college an announcer called me “JohnnyLax” after scoring a pretty acrobatic goal during our lacrosse playoff and somehow the name stuck. This was kind of annoying because people just started calling me John or Johnny after that.

Cheds –  Interesting.. So, you were a big lacrosse player in college? Did you play any other sports in college, and whats your favorite one to play these days?

Wolf  - Just lacrosse in College, but after graduating I took a 9 month surfing trip to Australia and Fiji. These days, i'm happy if I can just get a chance to go paddle boarding through my neighborhood.

Cheds -  Oh man, that seems like a lot of fun.   So Jason,  as the CEO of $FBEC can you tell me more about your company and how you got involved with them, and where you see $FBEC in a few years?

Wolf - My partners at and I had been discussing doing a private labeled product in this space in an effort to leverage our massive subscriber base and social audience into a product. 

We were introduced to FBEC because they had a scientist named Linda Strauss that developed the formulation for a Hemp Juice energy shot. We did our DD on her and were very impressed with her credentials so we decided to move forward based on that. As time went on we weren't agreeing with the then management of FBEC and felt that if we didn't act quickly we could hurt our brand and private businesses in the process. An opportunity presented itself to buy the control block of the company and do things on our own with complete autonomy which is what we did. 

While it wasn't an easy decision I'm pretty happy we did as we have brought new products and established brands to the company.  I see FBEC expanding its revenue verticals into technology and information to service the rapidly growing Cannabis & Hemp Space. We are making headway to improve our capital structure and clean up everything that came before us. 

One thing I am very excited about is “Wolfshot”, and it now has a celebrity athlete in Anthony Rumble Johnson and distribution channels in progress, but most importantly sales.

Cheds -  Very nice.... “Wolfshot” seems very promising. So, why do you think no one else is using Hemp juice, and now that you guys are doing it do you think that other companies will follow your lead?

Wolf - Wolfshot is a first to market Hemp Juice energy shot to put it simply..

Most people don't know it exists or they think its too expensive, both are true I suppose, but for product claiming the benefits of "Hemp" they are really talking about the benefits of Hemp juice, but using Hemp seed powder. Both are good for you, but Hemp seed is to Hemp juice what a slice of wheat bread is to a shot of wheat grass.

Cheds – It sounds like there are a lot of moving pieces here at FBEC... What are two or three things shareholders can look forward to in the next 6 months with your company?

Wolf - I think the biggest thing for shareholders will be the cleaning up of the capital structure. FBEC has to be in a position to flourish under optimal share structure conditions so we have gone to great lengths to make this possible. Once we complete this then we can continue with new products, partnerships and new verticals. 

I don't want FBEC to be just a company that has products for sale, I want a company that provides efficiency technologies that services the industry or create platforms for other companies to use because I think that's the future; I also have the team in place on the private side.

While all of this is promising I have always been realistic about my capabilities and have always looked at myself as a phase 1 CEO. As I stated earlier cleaning up the capital structure was exceptionally important as well as initializing the products, but finding a phase 2 CEO that can take FBEC to the next level that has the credentials and "know how" to do it is also something that needs to be done.

Cheds – Very good Jason, thanks for explaining all that. So,  In your earlier interviews, you have described yourself as an "advocate/investor", Is this still how you see yourself, or have you grown into a new role?

Wolf - Today I consider myself both as they are both aligned and compliment the other, but I always have seen myself as a trend spotter. I invest in companies that I see aren't trying to reinvent the wheel, but rather improve it. I still like to invest in components rather than an end product. Think of it like this; why buy apple for $100 a share when you can buy the company that makes the glass screen for a fraction of the price.

Cheds -  Smart. So, you say you are a “trend spotter”, what are some of the trends you see now that other people are not looking at?

Wolf - Like I said above, people are not focusing enough on efficiency technology in this industry, we need the Ubers, we need the Zeals, we need companies like EASE to service specific niches in the cannabis space. We need companies and tech to be rolled up (no pun intended). 
There are a few a prime example of one is which is a roll up of Airbnb, Tinder, and Weedmaps essentially, off the shelf tech consolidated into one place; that's the future!

Cheds – Thanks Jason, that makes a lot of sense.  So, I have to ask... do you think we will ever see a MJ boom like we did back in January 2014?

Wolf - 100%! But I think it will happen come October/November of 2016 and be very strong in 2017. The cannabis space is cyclical and it needs huge catalysts like the changing of schedule 1 for example, but companies out there better have products and revenue this time around and not theoretical ones that will never make it to market.

Cheds – I sure hope you are right! I think there is a good chance for another big run. So, now that PHOT has been re-instated, how do you see this affecting the MJ industry and the MJ trading industry?

Wolf - I got a lot of questions about PHOT when the news initially broke and while I think it is positive they are back, they are coming at a time when the sector has moved on. PHOT was the most heavily traded stock before it got halted because people saw a sector that was literally growing and needed a supplier of lights and products. They turned to PHOT as it was public, but now I see that vertical as too niche and I also see people doing the same thing well by sticking to a general radius and servicing the people within it. PHOT's resurrection is good for the industry, but not good for the shareholders unless they reinvent themselves.

Cheds  - Thanks again Wolf and best of luck!


Saturday, March 26, 2016

Table of Contents - Chedsblog

Welcome to Chedsblog, a free resource site for new and advanced #OTCBB Traders


--Channel Trading, Beer money and BS Pumper lines-

--Trader psychology - #OTCBB Polls: Results and analysis -

--Conservation with Jason Spatafora aka Wolf of Weed Street aka JohnnyLax - CEO of $FBEC

--What happens when my company stops filing financials?

--How to Evaluate Financials Before Investing (Or Trading)

--What is a good opening position size?

--CEO and CFO responsibilities to shareholders

--Break the bad habit! Do not keep averaging down on that POS (And other bad habits)

--Divergences, Bullish and Bearish

--Review of "OTC View" Promotion and Newsletter Tracking Analytics Platform- @OTCDynamics 

--Market Makers - Who are they and how are they different?

--Why I recommend FPS Premium to anyone interested in dominating subs

--Trip 1s and the concept of "Cellar Boxing"

--Whats a reverse split, and how do I play it?

--Buys and sells, whacks and slaps and other L2 transactions

--Twitter and the OTC. How to spot fake followers, how to get more legit ones

--What is the best way to play an Alert? Should I buy now or wait?

--Grey Market Trading - My ticker just got suspended

--Filings: 10Q, 10K, 8K, 14C, 13g. What are these?

Transfer Agents and why is share structure is important

--T Trades, Cross Trades and Iceburg Orders

--Toxic Debt, What is it and why do I care?

--Resources for new traders:

--Interview with Golden Hound

Thursday, March 24, 2016

What happens when my company stops filing financials?

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.


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!

$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]


Saturday, December 12, 2015

How to Evaluate Financials Before Investing Or Trading

How to Evaluate Financials Before Investing Or Trading

When it comes to trading, investing, or to of placing your own hard earned money into a company’s common stock in any way, it’s incredibly important to be able to read and understand that company’s recent financials. If you trade blindly, without at least glancing at recent financial filings, you’ll likely blow through your portfolio so fast you’d be better off burning it. 

Of course, the parts of the company’s financials to focus on does change based on the type of trading you’re doing, or the market you’re investing in. Below, in explaining what I consider some of the more important financial aspects, I will comment on their importance level based on whether you’re investing or trading, and whether you’re playing big boards, such as NASDAQ or NYSE, or the OTC market. 

Before we start looking at individual components of company finances, I’ll leave here a quick summary of the basic accounting equation, also known as the balance sheet equation.

Assets = Liabilities + Stockholder’s Equity
Assets: What a company owns (Property, Cash, Etc.)
Liabilities: What a company owes to others (Debt)
Stockholder’s Equity: The difference left (Negative is bad)

Essentially, what you want here in evaluating a company, is a large relative value for assets, a liability value that is less than assets, and hopefully a stockholder’s equity value that is positive and similar to, or larger than, the value for liabilities. (This is explained more below.)

Debt to equity ratio:
The debt to equity ratio is a simple formula used to quickly evaluate the financial state of a company. Basically, it is just the company’s total liabilities, (or debt), divided by the total stockholder’s equity. Companies saddled with heavy debt are susceptible to trouble if the economy tanks or their business hits rough waters. A ratio of less than 1 is considered a base number for investing, however, some experts like to see the idea ratio for investing at about 0.3. (What this means in simple terms, is that the stockholder’s equity value is larger than the total liabilities value.) A ratio of 2 or more, (or any negative value), is extremely worrisome because the company ownership is severely diluted. Too low of a ratio could mean the company management is too conservative and missing out on more potential growth. Essentially, the more debt per equity, the riskier the investment. 
The importance of the debt to equity value:
If you are looking to invest long term, this value is extremely important to evaluate before investing in the company. If you are simply looking to trade the stock short term, it is not as important, yet it should still not be ignored. Thirdly, if you are trading in the OTC market, this number is likely very high, or negative. As is such, trade with caution, the OTC market is for starter companies with little to no revenue coming in, so in many cases it is normal to see a negative number here. One way to use this number in the OTC is to see the Debt/Equity ratio over time: if it is trending towards positive, then it may be okay to trade. One more caution, however: the OTC is for trading only, DO NOT invest here, you’ll likely become stuck with valueless stock.

A dividend is a pre determined cash payment made to all shareholder’s of a company’s stock, and is a company’s way of showing their commitment to increase the value of their shareholder’s investments. It is important to look at how often dividends have been distributed, for how much, (best to look at the dividend amount compared to the total share price, and then convert to a percentage), and which class of share receives them (sometimes dividends are distributed only to a preferred class of shares, other times to preferred and common share owners). It is very important to take into account dividend payments to determine the potential growth and periodic return of one’s investment in any company.
The importance of dividends:
Dividends are something to greatly consider when looking for a long term investment in a NASDAQ or other big market stock, and some company’s pay dividends that greatly increase investment value over time. However, if you are looking for a short term investment, or just to trade, it is totally acceptable to ignore dividend history, as you likely won’t be around long enough to receive one. Similarly, when trading OTC stocks, you can pretty much ignore the possibility of a dividend, as they are extremely rare occurrences. 

Management turnover
This is something that most people tend to ignore when looking for an investment, or trade. However, it can actually be extremely insightful into the stability of the company. A very low management turnover shows the stability of the company, and conversely, numerous upper level management changes is not a good sign. All corporations are required to report management changes with an 8-K form, filed with the SEC, so it is very easy to track management turnover, even if you are a beginner investor.
The importance of evaluating management turnover:
Again, this is something that becomes more important as your length of investment increases. It can be helpful to look into the history of each member of the management board, taking into account their history with other companies. When only trading, especially in the OTC, before buying, look into the history of the current management members, to see if they are prone to drive companies into the ground. Also beware of 8-K forms that are filed, as these can affect stock price.

Share structure
Share structure is a factor you must consider before doing any sort of investing in a company. Since an entire article could be written on share structure alone, I will keep it simple. There are three numbers you should immediately look for in the share structure of a company: The Authorized Shares, the Outstanding Shares, and the Float. The authorized shares are the amount of shares the company is authorized to issue: to increase this number, the company management, or board of directors must vote, and a form 8-K must be filed with the SEC. If a company increases its authorized share count too often, it could be a sign of financial trouble, and is typically not a good sign. Note: authorized share count is not used to determine the market capitalization of the company. The outstanding share count is the amount of shares that have been issued and are outstanding. This is how you determine market capitalization, and is the number you should use to determine the value of the company. Thirdly, the float is the amount of shares that exist in free trading, it’s basically all the outstanding shares that aren’t restricted or owned by insiders. 
You also need to look into how many classes of shares the company has and the rights of each share class, or their attributes. Who owns the shares; important individuals, insiders, or other corporations, is also important. Although there are many different classes of shares a company could hypothetically issue, it is normal to see a preferred class of shares (sometimes preferred class A and preferred class B), and a common class of shares. Almost always, in a case such as that, only the preferred class of shares will have voting rights on company matters. Thus, share classes are used for business purposes: if numerous types of shares exist for a company, without a valid business purpose, it should be seen as a red flag.
The importance of share structure:
Share structure is one of the first things you must consider before investing or trading. When investing long term, be sure to look at the history of authorized and outstanding share increases, too often of an increase is not a good sign. When trading in the OTC, the single most important factor is the outstanding share number. Since dilution is so prevalent in the OTC, be sure it’s not occurring at an alarming rate. An outstanding share count that has doubled in a few months is a tale of what is to come, STAY AWAY. Even if you are only planning on holding a stock for a day or two, be careful to watch for 8-K filings indicating an authorized share increase, typically when that happens there well be a sell off, and price will drop drastically. I will say once more, share structure is VITAL.
Stock price fluctuation
Splits: It is important to look into whether the company you’re thinking of investing in has had stock splits, forward or reverse, or other types of stock manipulations, such as dilution or share class conversions. When it comes to stock splits, you need to determine whether the splits were due to growth or if they were manipulation for pump and dump schemes (usually only seen in the OTC market.) To show a couple examples of this: forward splits are usually seen as a good thing, as when a share price becomes too high, a company may decide to do a split to increase trading liquidity, and to attract more traders with a lower share price. They may split on a 1/3 basis, so that for every one share issued, there will now be three. The other side of this, of course, is a reverse split, and in most cases, these are seen as a bad thing. OTC market stocks are most prone to reverse split, as if the share price becomes too low, or their outstanding share count becomes far too bloated, the company may be forced to reverse in some fashion, such as a 100/1 split, where for every 100 shares, there will now only be one. Be careful of too many splits in a company’s history.
Class Conversions: Another factor that can influence share price is one class of shares converting. Sometimes companies will issue preferred shares to insiders, with a holding period. Once the holding period is over, those insiders may decide to liquidate some or all of their shares, and when this happens, it can dilute the value of common shares, causing a drop in share price—this is seen far more often in OTC stocks, so be careful to watch for insiders unloading their shares, it’s usually not a good sign.
Dilution: This is by far the biggest factor that hurts share price in OTC market stocks. Dilution occurs when company’s issue shares in exchange for a financing. Once a holding period is over, the shares will be converted, and the stock price will suffer. Although dilution can occur in big board stocks, it’s far more common in OTC stocks, and it is the single most important factor to look into before trading the the OTC market.
The importance of evaluating price fluctuations:
As noted above, it is important to investigate the history of share splits before investing long term in a company, but price fluctuations such as reverse splits, dilution, and conversions are more important to note when trading in the OTC. When trading OTC stocks, you need to be certain that dilution or conversions are not occurring currently, and be careful with impending reverse splits. All of those will drive share price down, and you will lose most of the value of your investment. The dilution schedule can usually be estimated by looking into when notes become due, (this is usually six months or a year after the note issuance date). Preferred shares also have a holding period, so you can determine when insiders will be allowed to convert their shares. 

Type of debt
Before investing, it is important to look into the types of debt a company has, and the details of those debts: terms, interest rate, when they are due, current vs long term—all are factors on determining liquidity and financial health. Due to the amount of depth this topic can be taken to, I will leave it as basic as possible for the time being. As was noted in the share price fluctuation section, debt through share issuance is one type of debt of particular importance to trading in the OTC, so be sure to watch out for that type of debt, (many times this is called toxic debt, so watch out for that term). It is also vital to look into the amount of debt a company has, too much debt in a small company with low revenues may be too much to overcome, but large amounts of debt in companies with quickly growing revenues may not be such a problem.
The importance of company debt:
As always, before investing long term, you must take into account all the debt a company has before buying. When trading for the short term, it is safe to look at only short term debt. When trading OTC stocks, short term debt is again what is most important, and I will note again, that it is the toxic debt through dilution that is most important to watch out for. Extreme due diligence is required for making sure dilution is not occurring, so don’t pass over this section lightly if you plan to be successful.

Company growth is something that can be evaluated based on financials. What you want to look for is increasing revenues, acquisitions of other companies, increases in assets and equity, and higher or steadily increasing profits. How the company has been growing or devolving steadily over the last 5 years is very indicative of the future, and is a sufficient timeline to evaluate whether it is a good investment or not. Steady growth is a good sign of a healthy company, whereas slowing growth or regressing is a sign of a company struggling, or heading towards stormy waters.
The importance of growth:
Growth is most important to take into account when you’re looking for a long term investment. Investing long term with success requires choosing only companies that have a long history of steady growth, so be sure to choose wisely. When it comes to trading in the OTC, most companies don’t have a long enough history to look very far back, so it is best to look back through the quarterly financial statements, and look to see if the company’s revenues are increasing by quarter. Also, be careful to make sure that the company isn’t experiencing increasing costs of revenues at a higher rate than the increased revenues, as this means they’re adding to their operating deficits, which is not a good sign.

Profitability and revenue
When investing, or trading, you want to make sure the company is profitable and has steady or increasing yearly revenues. You also want to consider if the company has had positive and consistent net income. Typically, you want to look at the past 3 years at a minimum. If a company has a growing profit margin, this is usually a sign of a well managed company. Growing revenues are key, you do not want to see a company who has slowing or decreasing revenues, this may mean other market competitors are taking more control, or the company may be having financial issues. Also be sure that costs of revenues or expenses are not increasing faster than revenues, that’s a sign of trouble. Again, since profitability could consist of an entire article, I’ll keep it to that: look for steady or increasing profits and revenues. It would be a smart idea as a new investor to understand this concept more, and look into the different Profitability Ratios, such as return on equity, discussed earlier.
The importance of profitability and revenue:
When choosing a long term investment, this is one of the most important factors to consider. You want to make sure you investment will succeed long term, and there is no better place to ensure that than with a company with increasing revenue and profit. When looking for a short term trade, or when trading the OTC market, make sure the company has at least some revenue, and make sure that revenue is at least steady. If it is decreasing, stay away, it’s as simple as that. In the OTC, it is common to see companies that are not profiting; since you should only be short term trading in the OTC, just make sure that their operating deficit and lack of profit is not so high that even holding a day or two could be detrimental to your money. Again, this topic requires more research than is explained here, but I’ll keep it to that for now. 

Accounts receivable and payable
This is something that is rarely given too much attention, so I’ll just make a quick comment on the basics. If the accounts receivable is increasing, and some accounts are growing older, it could be concerning for the company, as it may not be collecting its receivables. This trend could not be sustained be for an extended period of time: also look at the percentage of bad debts. 
On the flip side, if the accounts payable is growing and getting older it could be a sign of a lack of liquidity and could have grave consequences, the suppliers of financing or goods may stop delivery, etc, and the related interest expense to the company could start to capitalize.
The importance of AR and AP:
As noted, this is a lesser looked at aspect of company finances. Take a look at this closely if planning on investing in a company long term. If only planning to trade, it would be okay to focus more on other aspects of the financials.

Retained earnings (or accumulated deficit)
Retained earnings are the money a company has saved over the years. It is essentially the portion of net income, or profit, retained every year after dividend payments. You want to look closely at this, because some companies deal with retained earnings differently. Some reinvest the money back into the company with acquisitions or other purchases, some will distribute some of the retained earnings back to the shareholders through increased dividends, and others will simply keep the profit on the books. The best companies tend to do a combination of these things. Look into if the RE has steadily increased over the years: steady growth is a good sign. But also look at it in conjunction with the dividends pay-out, as it could be the board of directors has been distributing profits primarily back to shareholders. This may limit how the money is reinvested, but may not be a bad sign for investments. Also, as noted before, remember to look at what class of shares has been receiving the dividends.
The flip side of retained earnings is an accumulated deficit. This occurs when a company is not making enough money to cover all expenses. If this continues over a long period of time, being able to continue as an operating company will become a going concern, as they will likely need restructuring, or they will eventually go bankrupt. (You will see a going concern section, or disclaimer, in most financial filings of OTC companies, as most have accumulated a deficit.)
The importance of retained earnings:
Retained earnings are of particular importance when finding a company to invest long term in. This is again related to growth, as for your investment to grow, retained earnings for the company will need to grow as well. When it comes to trading in the OTC, it is unlikely the company will have any retained earnings at all. What you need to watch out for is the accumulated deficit. If this number is steadily growing larger at an alarming rate, best to steer clear. If the deficit is shrinking, or staying close to the same, it is likely safer to trade.

Auditors report
One more thing to note about financials before investing in or trading a stock is the auditor’s report. It is basically a formal report, or disclaimer, written by an internal auditor, or an independent external auditor as a result of an internal or external audit of a company’s financials. The auditor’s report is very important in ascertaining if the company's financials are accurate and dependable. These auditor’s reports can usually be found within the financial statements, and there are a few different types of auditor’s reports. A financial statement without an accompanying auditor’s report is not nearly as insightful, as it cannot be stated with certainty that all the information included is correct.
The importance of the auditor’s report:
Auditor’s reports are very useful when looking for long term investments and also for trades, as they confirm that the financials are accurate and won’t be up for dispute. When trading OTC stocks, many times the company financials may be questioned, so look closely to make sure the auditor’s report is positively stated and present within the financial statements.

Factors extraneous to financial statements:
The last thing I will mention here isn’t as closely related to financial statements as everything above, but is vital nonetheless. Factors extraneous to financials, such as the public opinion of a stock, news rumors, or actual mergers, acquisitions, or consolidations, can greatly affect the stock price. It is crucial to look into all rumors and news, as well as taking into account public opinion of a company before investing in it.
The importance of extraneous factors:
This is something that needs to be taken into account for all types of investing and trading alike. However, I will note that this is something that can have an even larger influence on OTC stocks as compared to others. Many times, because OTC stocks have such a small share price, they are more prone to have large price fluctuations that can be greatly influenced by news rumors. Before trading an OTC stock, make sure to carefully look into rumors, and determine whether the stock’s price has taken into account the rumor or not. Not doing so can have dire consequences, so make sure to be VERY careful with this.

So, what should you take from all of this? 

It should be fairly clear by now, that to invest efficiently and profitably, an incredible amount of research is required, and shortcuts should not be taken. Since every investor trades differently, determining which parts of the financials to weigh more heavily in importance will be something that defines you as an investor and trader. The more time you spend researching company financials before investing, the better, and as you gain experience as an investor, it will become easier to make your decisions, and you will be able to do so faster. Yet, the financials will never lose their importance. 

Whether you plan to invest primarily long term, or whether you plan on trading OTC market stocks on a daily basis, the importance of financials will not change. Hopefully, this short summary of some of the most important pieces to company financials will provide a base as to where to start researching. Good luck!

For CHEDSBLOG with assistance from Nate Smith, December 10, 2015