To OTC Journal Members:

Before I cover today's breaking news on Bad Toys, here's a reminder of a pending event:

Attention penny stock lovers. What would a new year be without a new idea? I found a really good one, and I am very excited about this idea. The company currently enjoys $2 million in annual sales, but by the end of 2007 that number could easily be $20 million plus. They have some great product introductions coming in 2007. It has all the money it needs in the bank, and is trading at a three year low of about $.18. This one could easily be a $1 stock in a favorable market. 

It looks like I will introduce the company on Wednesday after the close. Another NIHK in the making.
 

Bad Toys (OTC BB: BYTH) Completes Giant Step #1

If you've acted on my suggestion to get into Bad Toys before the stock goes x-dividend almost exactly one year after the company said it would, you should be looking good today.

For a comprehensive explanation of this special situation, simply read last week's BLOG entitled "Bad Toys Finding A Bid". Click Here for a short cut to the BLOG.

CEO Larry Lunan is attempting a to execute a strategy I have never seen in 20 years of microcap trading. His floudering custom motorcycle manufacturer acquired distressed and mismanaged Southland Heath Care. After two years of fine tuning, Lunan has Southland delivering about $45 million in annual revenues. Roughly 10% flows to profits. There is still some baggage left from the old management, but this ambulance company serving 200 communities in the Southeast is now running very smoothly and meeting all its obligations.

Bad Toys, as it stands today, only sports a $12.6 million market valuation- relatively absurd for a profitable company delivering over $40 million in annual sales and profitable. 

Lunan plans to spin out Southland into a separate publicly traded company. It is an attempt to unlock a hidden value that resides within the stock. If it works, owners of Bad Toys at current levels should make a substantial return.

Here's how it is supposed to work. Shareholders on the record date in Bad Toys will receive just under 1 share of Southland. The dividend shares are free trading. Here's the unknown- it is unknown when Southland will open for trading- on what exchange and at what price. Bad Toys will retain 30% of the issued and outstanding shares of Southland.

Southland will then be a separate public company doing its own financial filings, and without the proverbial manhole cover of money losing Bad Toys hanging around its neck. Mr. Lunan has stated he believes Southland will qualify for either a NASDAQ or AMEX listing. Here's what makes it interesting- the minimum price to open for trading on NASDAQ SC is $4, and $3 on the AMEX. If the stock does open for trading at either of those prices, the return for current $.60 shareholders of Bad Toys will be substantial.

Here's what I can say for sure. This morning, prior to the open, Bad Toys announced the registration statement for Southland was declared effective by the SEC. In English, this means Southland has gone through a rigorous process of being approved by the SEC to trade on its own. It can now trade on its own when it is ready.

I also know that Bad Toys stated it will announce the real x-dividend date soon, and it will give investors at least 10 days notice. This means that after that date shareholders of Bad Toys will no longer be entitled to the Southland dividend. The stock will probably drop dramatically when it trades x-dividend, and you will have to wait for Southland to open for trading to make any money.

I don't know when Southland will open for trading, at what price, or on what exchange. You should assume it could be a couple of months. I do know the company should be able to qualify for a NASDAQ SC or AMEX listing on the merits of its financial condition.

I know this special situation is a little complex and unusual, but it is definately an interesting speculation, and the value is there. 

As you can see from the chart, Bad Toys has been finding a bid of late. I suggested accumulating the stock right up to $1. You can play it one of two ways- buy it immediately and sell it just before it goes x-dividend- you're likely to enjoy a trading profit over the next week or two. Or, you can buy the stock, hold it past the x-dividend date, and get your shares of Southland. The negative- your shares of Bad Toys will undoubtedly open considerably lower the first day it trades x-dividend. You will have to take your chances on the making your profits through your ownership in Southland.

Giant Step #1 on this journey which has been delayed a year now complete. It will be fun to see what happens next. Accumulate up to $1 and play it anyway you want.
Here is the complete text of today's news release for your review:
 

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