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Broke Out Inc (OTCMKTS:BRKO) Gets Halted

Broke Out Inc (OTCMKTS:BRKO) Gets Halted
Written by
Alex Carlson
Published on
March 18, 2016
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InsidrFinancial

We've been warning investors about the dangers of investing in Broke Out Inc (OTCMKTS:BRKO) ever since we identified the company as Elite's new pick. We said "Fresh off the disaster that was Cloudweb Inc (OTCMKTS:CLOW), Elite Penny Stock Group is back looking for more victims with Broke Out Inc (OTCMKTS:BRKO). We wrote about the end of the Cloudweb promotion last month and how Elite was looking for bagholders. With shares around $.07, it’s easy to see how the deal turned out for investors." This time, the SEC decided to act. On March 17, the SEC said:

The U.S. Securities and Exchange Commission (“Commission”) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading of the securities of Broke Out, Inc. (“BRKO”), of Frankfurt, Germany at 9:30 a.m. EDT on March 17, 2016, and terminating at 11:59 p.m. EDT on March 31, 2016. The Commission temporarily suspended trading in the securities of BRKO because of concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in BRKO’s common stock. The Commission cautions brokers, dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company.

For a few days, it looked like Elite was going to be able to pull off its short squeeze. We said "shorts are trying to position themselves for when the dump happens. While the money will be made on the short side, this is a risky gamble. We watch the volume on BRKO and it seems to us that goal is to trap the shorts. Many times when a stock goes up, it’s because shorts are forced to cover and buy back they stock they borrowed." This is why the stock surged to over $14. It was a short squeeze of mammoth proportions. It was this short squeeze that caught the SEC's attention.What will happen next is that the halt should be lifted on March 31. From there, BRKO will trade on the Grey Sheets. When they re-open, the chart and price action will be similar to KaloBios Pharmaceuticals Inc (OTCMKTS:KBIOQ). We expect BRKO to open under $1 and eventually trade at zero. Shares will not trade their immediately because the shorts will be covering and will be bidding for shares.The problem with BRKO is that Elite got too greedy. BRKO at one point had a $500 million market cap. This is entirely ridiculous when valuing BRKO. In looking at the financials, it’s not a pretty picture. Total revenue reported for the year ended December 31, 2015 was $131,515. Most of the company’s revenues are attributable to third-party e-commerce sites and some at small retail shops in the UK. As of December 31, 2015, BRKO had total current assets of $3,762, consisting of cash and current liabilities of $12,458.We feel bad for everyone on the wrong side of BRKO. We told our subscribers on Wednesday, "For investors that were lucky enough to go long off the promo emails, we recommending selling shares immediately. Book profits and move to the sidelines."Besides its horrendous financials, there's also cheap stock in the system. The filing stated, "As of June 30, 2015, the Company sold an aggregate of 12,200,000 shares of its common stock in its registered offering at a price of $0.004 per share resulting in proceeds to the Company of $48,800." It is these shares that were most likely used to finance the promotion and that were being sold into the Elite pump.Another red flag on BRKO is that the company is based in Germany and that its officers are foreigners. CEO Chan Set Kuan lives in Malaysia. The filings stated that ""it may be difficult for an investor to enforce any right based on U.S. federal securities laws ... or to enforce a judgment rendered by a United States court against us..."The reality is that it was only a matter of time before the SEC halted one of Elite's picks. Elite has burned a ton of investors with AREN, EURI and CLOW before BRKO. The shorts were planning on cleaning up on BRKO. The Street Sweeper said that they had "sent a detailed email to securities regulators late last week about the actions surrounding Broke Out. We explained that the stock appears to have characteristics associated with pump-and-dump maneuvers." Obviously, the SEC read what The Street Sweeper sent. We will be updating Insider Financial as soon as we know more. For continuing coverage on BRKO, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in BRKO and have not been compensated for this article.

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