IDO Security, Inc. (OTCBB:IDOI) exploded on massive volume on Friday after the Company said in an 8k that on the 2nd of December they signed an Agreement and Plan of Reorganization with Minera Ranala, S.A.C.
IDOI went parabolic off its $0.0003 base and traded well over half the float on Friday alone with 264 million out of a total 399 million shares changing hands. IDOI is a Nevada shell that has been around for years; prior to June, 2007 they operated as the Medical Exchange, Inc.
On December 5 IDOI filed the 8k that said ”On December 4, 2014, IDO Security Inc. entered into an Agreement and Plan of Reorganization with Minera Ranala, S.A.C., a Peruvian company engaged in the mining business in Peru.”
Conrad Huss will serve as the new CFO and Minera will merge with and into Ranala Acquisition Corporation, S.A.C., a Peruvian company and subsidiary of the Company which shall be the surviving company.
The same day IDOI filed the 8k they also filed a PRE 14C which states among other things ” In order to close the Merger Agreement, we will need to issue to the Minera shareholders 7.6 billion shares of our common stock representing approximately 95% of our outstanding common stock. We currently have approximately 400,000,000 common shares outstanding, representing approximately the total amount of authorized common shares and which, following the consummation of the Merger, will represent approximately 5% of our outstanding common shares. Accordingly, we are required to increase our authorized common shares to 10,000,000,000 to be able to issue to the Minera shareholders in the Merger the consideration shares.”
and ”In addition, the common shares that are to be issued to the Minera shareholders will have absolute anti-dilution rights during the 18-month period following the closing of the Merger.”
So IDOI will issue 7.6 billion restricted shares of common stock to the Minera shareholders; the shares will not have the legend removed for another 18 months and will have no bearing whatsoever on the current market for IDOI.
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In the PRE 14C they also say ”B. Outstanding Convertible Debt. As of December 31, 2013, we have an aggregate of approximately $28,193,640 in outstanding convertible debentures and convertible preferred stock that we issued between December 2007 and December 31, 2013 that are convertible into shares of our Common Stock. All of these outstanding convertible debentures and convertible stock have a conversion rate of $0.05 per share and if converted, would require the additional issuance of 563,872,800 common shares. We also have outstanding warrants issued in connection with these convertible debt and Series A Preferred Stock for up to an additional 20,000 shares of our Common Stock. ”
There is not much information on the target Company, Minera Ranala, S.A.C other than they are a Peruvian company engaged in the mining business in Peru. The Company does look real and under operation as numerous geologists and industry professionals list Minera as their place of employment on Linkedin.
There has been significant discussion online concerning the exact date when the AS will increase to 10 billion as the Company has significant convertible debt on the books that can be converted into stock; 7.6 billion of the 10 billion are to satisfy the merger and are restricted for the next 18 months. Debt holders will convert their debt but this takes time and it’s unlikely that any of these are in the market yet or will be in the next few weeks for that matter.
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They do say that the AS increase will become effective 20 calendar days following the mailing of the Information Statement however we don’t know the exact date that mailing took place.
Conclusion: IDOI has gone from illiquid at $0.0003 on Friday to one of the top traded stocks on the entire bb’s. There seems to be a significant short position in the stock as evidenced by the growing number of aggressive bashers that have showed up over the weekend.
In the meantime IDOI is trading spectacular volume and is under heavy accumulation by a fast growing shareholder base that swears this one goes way higher. IDOI is a stock to watch.
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Disclosure: we hold no position in IDOI either long or short and we have not been compensated for this article.