12.15.08

No Surprises from Maxlife Fund Corp 10K

Posted in All Categories at 11:49 am by Michael Goode

Maxlife Fund Corp (OTC BB: MXFD) filed its 10K today. There were no surprises. Maxlife has not had any revenue for the last year (the only revenue reported in its 10k is from the quarter ended November 30, 2007). Maxlife has sold $480,000 more in preferred shares in the most recent quarter. However, while the funds from the preferred shares are supposed to go to fund Maxlife’s joint venture with GGP, the funds are needed by Maxlife simply to fund its operating losses (net loss of over $300,000 in the most recent quarter).

I am surprised that Maxlife Fund Corp was able to sell as many preferred shares as it has, considering that for just about the same yield an investor could acquire the listed, unsubordinated debt of Comcast (CCW: $25.43 -0.16%, market cap: $69.293B), which is a far larger and more stable company (or one of a number of other preferred stocks or bonds). Perhaps Maxlife’s salesmen are good or perhaps their investors are just idiots. But there are many far safer bonds and preferred stocks yielding 10% or more; there is no need for an investor to buy unlisted preferred stock in an OTC BB company. I doubt Maxlife will be able to sell enough preferred shares to give it enough capital to actually function as a real business.

As to Maxlife’s much-hyped joint venture with GGP, that was supposed to buy/sell $1 billion face value of life insurance policies this year, it appears that it has made no money and Maxlife has not invested more than $1250 in it (see the 10K for details). Maxlife accounts for the JV with the equity method, which means that the profits or losses of the JV show up in Maxlife’s balance sheet as increases or decreases in the book value of its investment in the JV. (From the 10K: “The Company accounts for its non-controlling interests in joint ventures where the Company has influence over financial and operational matters, generally 50% or less ownership interest, under the equity method of accounting. In such cases, the Company’s original investments are recorded at cost and adjusted for its share of earnings, losses and distributions.”) Because in this most recent 10k the book value of the investment remained at $1250, I infer that the JV has not had material losses or profits.

Returning to the preferred stock sales, I should add that with every six shares of preferred stock come three free warrants. Considering these warrants are out of the money and I believe Maxlife to have a fair value of zero, I do not think a prudent investor should consider these in deciding to invest in Maxlife’s preferred stock. From the 10k:

The preferred stock of the Company are currently offered in units (the “Unit”).  Each Unit consists of 1,200 shares of preferred stock plus warrants to purchase 600 shares of common stock. The warrants may be exercised at any time beginning six months from the date of issuance and ending on the fifth anniversary of the final closing of the offering of the preferred stock. The warrants are exercisable, in whole or in part, at exercise prices equal to the following:

One third (1/3) or 200 warrants per Unit shall be exercisable into common stock at $25.00 per share;

One third (1/3) or 200 warrants per Unit shall be exercisable into common stock at $30.00 per share;

One third (1/3) or 200 warrants per Unit shall be exercisable into common stock at $35.00 per share.

Disclosure: No position in MXFD. I am long CCW. I have a disclosure policy.

Permalink