Citadel EFT is a small micro cap company that trades on the over the counter quality board and has been making waves for all the right reasons. We are not here to talk about their stock price, which by all appearances, seems to have completely caught even the newsletter schleps by surprise. What we have found interesting about this issuer, however is not the stock price. We all know that the paid for promo ambulance chasers typically alert the unsuspecting micro cap penny investors with the dead or companies that should be terminated. There is a laundry list of companies, whose sole claim to fame, outside of the pump and dump, that put them on the radar, is their DEBT, DILUTION, and miserable CAPITAL STRUCTURE. But I think we may have found the needle in the haystack. I had the opportunity to interview Citadel EFT’s CEO, Gary DeRoos and here is the Scoop from our interview.
Mr DeRoos, it is pleasure to sit down and talk with you. I guess you know we are not in the habit of interviewing micro cap companies, in most cases we think most of them are paper plays that will never amount to anything, other than personal piggy banks for the insiders or the nominees representing them. We took a shining to your company, for a couple of reasons. We looked at your balance sheet, which is where all due diligence should start, and we were surprised to see a company that had no debt, not even affiliate debt…..As you know that’s where the dilution typically starts and where the paid promo ends. I don’t want to be cliche and ask you what you do, because our audience are primarily the short sellers in the market, who see the fraud and mismanagement in so many of these issuers, and they know your business well. So I won’t ask you to describe what you do, but I do want to know, how Citadel lasted this long, being a novelty item on the Quality Board?
Hi Iman, thanks for even finding us, we are not very well known outside of our core group of savvy investors that follow us every day. I guess, it’s because we are a 20 year old company, that has been concentrating on making money, and we have been pretty good at it, and never needed debt to finance any of our operations. However up until September of 2012, we were spending more money to remain public than it was worth, because we were not raising money either. But we soldiered on, because we knew somebody eventually would take notice. As far as your audience is concerned, I have a healthy respect for short traders in the market. I understand they serve an important function in our market, but we just want the opportunity to prove we are different.
Gary, you mentioned, September 2012? What was the company doing and why was that a watershed moment for you?
Well, Iman, Citadel EFT, prior to September last year was still a thriving business, with a albatross around it’s neck, called CDFT! The public company experience was not enjoyable, my personal expectations of what we could be were not being met, and everything seemed to be an unnecessary cash grab on the business. We did the dog and pony shows, we went to the micro cap conferences, sat down with traditional IR firms, and the more we felt we could be making progress, the more we realized that nothing was performance based, you had to pay to play ! I made some poor judgement decisions that cost the public company a significant amount of equity and I really did not understand how structuring a public company for success was as important as the success we wanted to achieve! My business was profitable, small, but growing and I did not fully understand how we could use the public company to its full advantage, for the benefit of all stockholders.
Gary you mentioned that the big change took place in September? Why the glowing smiles now, and when I look at your balance sheet……..wow, I mean, wow…what a remarkable change in the numbers, the direction of the company, and the tone of your press releases!!! I mean the first thing that got my attention was the balance sheet, the filings, the amount of material event changes reported by the company in it’s news and the tone and language being used in the press releases! Can u shed some light on what happened here, I have got to presume, there is a lot of power and wisdom here, you have behind the throne.
Iman, I do not even know where to start…..September last year was certainly like being reborn. We were approached by an Investor Group, who were themselves active Big Board Short Traders, and their business model was solely built on corporate restructuring, asset management and wealth management. They had a completely contrarian view of paid for promotion. It’s kind of weird that I am sitting down with you, and discussing it this way, because even today, I can’t believe the remarkable difference in the public company, CDFT, and now how it works for Citadel EFT and it’s shareholders. I mean as I look back at the improvements, it’s absolutely amazing!
Gary, let me get this straight, did u just say that you met a group that were, or are Big Board Short Traders that showed you the way??
Yes, they were very clear in telling me that micro cap short traders were a different breed, but were most often justified in betting against these companies. They said that companies with debt, dilution and a lack of cohesive investor confidence, would be the undoing of all these paid for promo efforts, and most of the companies deserved their fate.
I will name the group, I don’t think they would mind. They called themselves THE SYNDICATE TRUST, and often referred to themselves as the Coalition of the Willing or the League of Extraordinary Men & Women.
What was their first order of business, and how did they change the company?
Iman, they structured our Convertible Preferred Designations, wrote the rights and privileges of those instruments, and created the documents we need to attract equity. It was incredible easy actually, and what stunned me, was what happened next. The TRUST, as they like to refer to themselves, went out and located assets that the public company purchased, through an asset purchase agreement, those were the sports and entertainment memorabilia collection we bought from Art to Go. The due diligence process in purchasing those assets was rigorous. We had an independent third party appraisal, we had the proper agreements to buy the asset and we used the right designation of preferred to secure completion of the equity. It was all so fast, but yet so well done that I was still left shaking my head, that we had scored the coup of CDFT’s lifetime. They told me that the public company, should never be defined, exclusively, by the company’s business interests. They said that the real value of the public company, was in it’s ability to create it’s own commercial paper, and use that paper to secure value on the balance sheet. They were only interested in enhancing Net StockHolders Equity and less interested in the revenues I was generating. They were all about the balance sheet, they did not care about the stock at that point. The dialogue we had with our auditors and the extra care we took with our due diligence review, in hiring DOTY SCOTT ENTERPRISES, to evaluate the assets to SEC standard was something quite foreign to me, but they reminded me that erring on the side of caution and having that review done, was an important and necessary firewall against overestimating what we had. Nonetheless, the process was an eye opener.
Gary, this sounds like the DREAM TEAM here, but it appears it’s paid dividends…….excuse the pun!! The company has already paid dividends to you and now it’s getting ready to offer cash dividends to the Preferred Stockholders, how did you get to that mindset?
Well Iman, these people brought a lot of professional and educational expertise, that I dear say 99% of the so called Equity professionals that call companies up every day, simply don’t have. They trained me to think of the stockholder in the micro cap markets as a dividend shareholder, the common stockholder perhaps lacked the long term vision because micro cap companies are typically paper plays for short term gain. but having said that, what was striking about Citadel EFT’s transformation to now, was the INVESTOR CONFIDENCE and TRANSPARENCY that they preached with respect to specially the investors, for example on IHUB. Contrary to the industry professionals who often encouraged the marginalization of those shareholders, the TRUST encouraged open transparent dialogue, with a particular emphasis on retiring securities that were issued previously in the Company. We learned very quickly that any issuance that did not come with with a subscriber or a subscription was gratuitous.and so what this has actually done is to galvanize the common stockholders to support us in ways we never expected.
Gary, it was reported in your latest set of press releases, that you almost ready to make that leap up to the Exchange! Obviously the are some roadblocks there as it relates to your Market Capitalization and Price. The million dollar question, we have for you, how do you see this playing out?
Well Iman, you know that question is a bit of a forward leaning question, and I can’t really answer that, they way you probably would like me to, but what I can say is, we believe that the 2 biggest impediments to uplisting on the Exchange was not Market Cap or price. I now know that if you are balance sheet driven person, then your Net Stockholder Equity and your Going Concern will be the most important priority. I really believe, beyond that, the Company needs to eliminate any dilution or the perception of dilution in its securities. We believe that our common shareholders need that opportunity to galvanize their efforts, and be free to do so without the overhang that many public companies simply create. I think we need to let the market play out, continue to build more value on the balance sheet and win over many of the short sellers in the market. We can’t completely ignore the fact that short sellers play an important role in our capital markets, and we, Citadel, need to reach out to those people, and let our actions speak louder than our words. There is much more we need to do and much more we need to prove, and I believe we will do accomplish our objectives but we definitely have to build bridges with people. And that can only be done by eliminating waste wherever it rears it’s ugly head and enhancing the current balance sheet every Quarter.
Gary, tell you what, this has been a great interview, and we are going to bring you back here in another 6 months, and I hope you are where you want to be! Clearly we are impressed that you took the interview, knowing that we typically look at micro cap issuers suspiciously. I am, cautiously optimistic about Citadel, because your balance sheet, and the changes you have made to your capital structure are second to none. I will make a bold prediction, right now……..I think Citadel EFT will do very well, and I think this interview will help to build bridges. I wish you success, Mr DeRoos, you are on your way!!! Thank you.
Thank you Iman, this was great and I look forward to being back soon.
Well, there it is everyone, that’s the Scoop on Citadel EFT! I for one, like the guy and I think he is doing things that are not being done on the micro cap markets and it’s working. And he is doing it without, schleps in the business that we all know to well. We will be watching Citadel EFT, the micros need a winner, and they just might have found one. Can’t wait till the next edition, when we get back to pounding promoters. This was too nice!!!!
