Stocklemon Reports on Macreport.net
Say Goodbye to the Mac..Hello to the SEC.
We at Stocklemon have been following the Macreport.net for some time now and this report could have gone many ways. We could have discussed how the CEO is a former stockbroker with customer complaints, or we could have discussed how the company has a $60 million market cap with a little more than $24,000 in the bank. We could discussed the payments to the CEO’s consulting company. But those are just bad business. This report would rather focus on the illegal.
Illegal Stock Promotion
Macreport receives compensation from its clients to put out company profiles. Yet, in their disclosure they fail to mention how much cash or stock they receive and from who they receive it from. This is a major violation, and one that the SEC has been enforcing with a mighty arm. The Statute is listed in the Securities Act of 1933.
Section 17b, Securities Act of 1933
“It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.” (15 U.S.C. § 77q(b).)
In 1998, the SEC’s Internet Enforcement Unit wielded a heavy hand in doing a broad sweep containing 23 actions against 44 companies and individuals committing fraud over the internet. It was then that former head Director Of Enforcement Richard Walker said clearly that it is illegal to publicize a security if you are being paid unless you disclose three things. “The first thing that is required to be disclosed is nature of the compensation you are receiving, whether it is cash, or whether it is stock. The second is the amount of compensation you are receiving. And the third is the source of the compensation.”
http://www.techlawjournal.com/seclaw/81029.htm
This is the Macreport’s blanket discussion of compensation in an inadequate blanket disclosure for the site.
“These companies (or some of these companies) have retained us to perform investor relation services including promotional services that consist of the placement of the profiled companies on our website. Such compensation has been or will be made in cash and or issuance of securities of the profiled company. We may liquidate any securities that we receive as compensation when deemed appropriate to do so, however, we generally liquidate such securities upon receipt thereof prior to performing any services for such company. Such liquidation may have a negative impact on the securities being liquidated.”
Compare this with proper disclosure. Here is the OTC Journal’s disclosure on this month’s profile stock.
“Click Here to view our compensation on every company we have ever covered, or visit the following web address: http://www.otcjournal.com/disclaimer.html for our full profiles and http://www.otcjournal.com/trading-alerts/disclaimer.html for Trading Alerts. MarketByte LLC has been paid of fee of $75,000 directly by Shep Technologies, Inc. for coverage for a period of six months. An additional fee of 100,000 free trading shares has been paid by a third party.
http://www.otcjournal.com/archive/listserv/20030221-1.html
Catch 22
The Macreport faces an interesting dilemma. If they put out how much they really receive from each client, they would lose their ability to generate higher fees from prospective customers and they would have to show the world how little their true revenues are before the mandatory filings. But if they do not put out the compensation than they can still dream of the high paying client.
Conclusion
Stocklemon believes that Macreport will get halted by the SEC and investigated for their practices. A stock promotion site should never be a public company and we scold the management of this company for the lack of imagination and intellectual prowess that they would actually bring this website public.
PS. The Macreport.net did not pay Stocklemon any cash or stock for the dissemination of this report.
Stocklemon Reports on Inernetstudios. (OTCBB: ISTO)
| stock ticker: ISTO | ||
 |
      |
|
Shares Outstanding- 10.029 million
Cash in Bank- $6,487
Nine Month Revenues- 0
http://www.10kwizard.com/filing.php?param=repo%3
Dtenk-sym%3Disto-sdate%3D20020213-edate%3
D20030213-st%3D2&repo=tenk&ipage=1918126&
g=&type=&trad=&print=&attach=on&doc=1&co_item=1
Internetstudio’s stock (OTCBB: ISTO) has risen this year from a low of .20 to its current price of $1.50. Yet Stocklemon believes that this is nothing more than a stock promotion and the company should not even be trading. We expect eventual bankruptcy for this company considering the amount of debt, judgments against them, and lack of any form of revenue.
Cheap Stock for Debt.Everyone Owns the Stock at a Nickel
During February and March 2002 the Company issued a total of 3,487,873 shares of common stock on conversion of the outstanding convertible loans of $199,159. $.0571 per share.
During January 2002 the Directors approved a resolution to issue a maximum of 5,720,000 shares of common stock to certain directors, officers and employees in settlement of outstanding obligations that totaled $393,684. $.0571 per share.
http://www.10kwizard.com/filing.php?param=repo=tenk-sym=isto-sdate=20020213-edate=20030213-st=2&repo=tenk&ipage=1918126&g=&type=&trad=&print=&attach=on&doc=1&co_item=1
CEO and Offshore Accounts.
The CEO of Internet Studios, Richard Mclean, is employed with the company through a consulting contract between the company and his corporation Spray Point Consulting. Spray Point is a corporation in the tax haven in the Isle on Man. Therefore, the millions of shares given to Mclean are in an offshore account.
For those of you who are frequent readers of Stocklemon, you know how skeptical we are of any offshore accounts. Even though there is nothing illegal about it, we have found this to be the one true tell tale sign of a lemon. Normally, we find offshore accounts with investors. The fact that the CEO gets paid in stock that is offshore is both unheard off from the perspective of this reporter.
No Business
InternetStudios.com describes themselves as an online database that allows rights holders and buyers of filmed entertainment to trade in a timeless marketplace. As a matter of fact, on May 28 2002, they made an announcement about their new website.
http://quote.bloomberg.com/fgcgi.cgi?T=marketsquote99_news.ht&s=APPOjyhhJSW50ZXJu
As of the writing of this article, no sites that the company owns are even operational..except of course the investor relations site..try for yourself.
www.onlinefilmsales.com
www.oftvs.com
www.reportertv.com
www.studiobuzz.com
Legal Problems..Judgments Galore
The following comes directly from the company filings:
August Entertainment, Inc. brought an action against our company on September 7, 2000, in Los Angeles County Superior Court for breach of contract arising from an alleged contract for distribution of films. This matter was settled in December 2001. Pursuant to the terms of the settlement, we agreed to pay August Entertainment $70,000, of which $46,000 has been paid as of November 14, 2002.
Two former employees of OnlineFilmSales.com, LLC filed claims with the Labor Commissioner in the State of California. The first made a claim against InternetStudios with the Labor Commissioner’s office on April 25, 2001 even though she was never directly employed by InternetStudios. The former employee alleged non-payment of wages plus interest and penalties. On July 10, 2001, she received an “Order, Decision or Award” (sic) from the Labor Commissioner against InternetStudios in the amount of $11,328.09. As of November 14, 2002, no payments have been made to this employee. The second former employee filed his initial claim with the Labor Commissioner’s office against InternetStudios and OnlineFilmSales.com, LLC on August 24, 2001 alleging non-payment of wages plus expenses, interest and penalties. On May 29, 2002, the former employee received an “Order, Decision or Award” (sic) from the Labor Commissioner against InternetStudios and OnlineFilmSales.com, LLC in the amount of $26,578.24. As of November 14, 2002, no payments have been made to this employee.
On or about September 5, 2001, Total Creative, Inc. filed a complaint in the Superior Court of Los Angeles against OnlineFilmandTVSales.com, Inc. for money allegedly due for work and services allegedly supplied by the claimant. On November 27, 2001, the claimant received a Default Money Judgment in the amount of $34,531.49. As of November 14, 2002, no payment has been made to Total Creative.
Certain former employees have indicated an intention to pursue alleged claims against the Company by taking legal action. To date no actions have been filed against InternetStudios.
Global Media Management
On January 23, 2003, InternetStudios announced a strategic relationship with Global Media Management out of Memphis, Tennessee.
http://quote.bloomberg.com/fgcgi.cgi?T=marketsquote99_news.ht&s=APjASNBeeSW50ZXJu
A phone call made to the investor relations department told us that Global Media is a “multi billion dollar” fund. Maybe these guys should do their homework on their prospective partners. Global Media Management is a company that is run by a gentleman named Sam Cooper. In the link below we see that Mr. Cooper has a history of making empty promises. But then again, does Internetstudios really care or was it nothing more than an announcement.
http://www.tsc.state.tn.us/opinions/tca/PDF/004/lindseybradleymaloy.pdf
The Icing on the Cake
Stocklemon sent a reporter by the Santa Monica Headquarters of InternetStudios to see if people were hard at work. Our reporter went to the address of 1351 4th Street, Suite 227 Santa Monica, California. This address has been listed for the company in their SEC filings as recently as the S-8 Registration of theirs back on December 11, 2002. What we found out was amazing. InternetStudios has not been there in over a year. A phone call to the building manager found out that the company was evicted in December of 2001, and is in arrears for over $80,000 to their landlord.
Conclusion
Maybe the concepts behind InternetStudios was solid back in 1998, when nothing had to make sense as long as it ended in .com. In 2003, this company is nothing more than a lemon as they have no cash, no business. Bankruptcy should be around the corner for this piece of citrus.
Stocklemon Reports on RTIN HOLDINGS (OTBB:RTNH)
RTIN HOLDINGS (OTBB:RTNH)…
… FROM PIZZA TO PRESCRIPTIONS
Numbers
Shares Outstanding - 8 Million Shares
Cash in Bank - $6,000
CEO & President’s Salary - $440,000
Corporate Background
Until last year, RTIN Holdings (the “Company”) was in the restaurant business. They operated full service restaurants, principally in the Dallas, Texas metropolitan area. The Company has since liquidated all of its restaurant related assets and is currently focusing exclusively on the pharmaceutical sector through the operation of its two wholly owned subsidiaries, Safe Med Systems, Inc. and Safescript Pharmacies, Inc.
Management
The president of RTIN Holdings is a gentleman named Curtis Swanson. Mr. Swanson’s experience consists primarily in the management of his family’s pizza restaurant and video store. Curtis Swanson has attempted the franchise model of business back in 1998 when he licensed a pizza franchise from RTNH for $50,000 and 5% of gross revenues. Does this sound like someone who is capable of being the President/COO of a medical software company?
Possible Accounting Irregularity
On January 6, 2003, RTIN put out a press release that stated that they will exceed the previously anticipated $.50 a share earnings.
http://biz.yahoo.com/prnews/030106/dam029_1.html
The bulk of the revenue received by RTIN for the past year was a $3.4 million note receivable from RX Systems. Stocklemon believes that this note is fraudulent for the reason which follows henceforth. To this end we refer to SEC Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements.
http://www.sec.gov/interps/account/sab101.htm#FOOTNOTE_6
From this document, we learn that in order for revenue to be genuine, “collectability must be reasonably assured”. The entity issuing the note must be able to deliver on the note in a reasonable period of time with reasonable assurance.
RX Systems is a company created by one of RTIN’s former stock promoters named David Parker. David Parker’s company does not have $3 million. Furthermore, RX Systems does not even have an open pharmacy to date. Mr. Parker has plans of taking his subsidiary of RTIN Holdings and bring that public himself, as he has already purchased close to 60% of the outstanding shares of a “shell company” with the trading symbols “SRFO”.
http://www.10kwizard.com/filing.php?param=repo%3Dtenk-exp%3Ddavid%2Bparker-sdate%3D20020210-edate%3D20030210-st%3D2&ipage=1886510&repo=tenk&doc=1&exp=david%2Bparker&g=
The former auditors of RTIN have already made them restate earnings for 3 quarters of last year. It will be interesting to see if the new auditors allow this note receivable to stay on the books or if they will make them restate the 2002 earnings as well.
Stock Buyback
On December 17 2002, RTIN Holdings announced that they were going to repurchase 500,000 shares of corporate stock.
http://biz.yahoo.com/prnews/021217/datu023_1.html
On that day, the stock closed at $1.91. Therefore, the price to the Company would be close to $1 million. Stocklemon believes that this is quite ambitious for a company that had just $6,000 in cash in the bank just two months before that announcement. In addition, Stocklemon believes that the Company put out the (above referenced) release with the sole intention of hyping its own stock. We suggest that RTIN lacks the capital to buy $1 million worth of stock.
The Business
RTIN Holdings operates Safescript Pharmacies and is licensing the rights to its Safemed Systems. Stocklemon believes that electronic prescriptions are the way of the future and do not discount the future to this market segment. Unfortunately, RTIN Holdings is neither a pioneer nor a market leader in this segment. The Cleveland Clinic has put out a list of the players in this area and RTIN Holdings is not mentioned amongst this group.
http://www.clevelandclinicmeded.com/eprescribe/prescribe_solution.htm
Whereas all of the other companies who have designed e-prescriptions allow patients to bring their prescription to any pharmacy, Safescript in its current form only allows customers to bring prescriptions to their own pharmacies. Stocklemon does not believe this is a good business model because whenever you restrict the choices of the consumer, you limit your market potential (unless of course you are Microsoft). If you speak to RTIN, they make it sound as if they have pioneered this segment of the market. This could not be farther from the truth. Walgreen’s developed a system of electronic prescriptions more than 10 years ago and has since sold its unit to IBM.
http://www.walgreens.com/about/press/facts/fact6.jhtml
Stocklemon believes that RTIN is late to this party with an inferior product that limits the choice of the consumer.
Another Example of Management Greed
On May 6, 2002 the Company issued a right to Stanley L. Swanson to convert his accrued salary through March 31, 2002 in the amount of $177,177 into 1,107,356 shares of the Company’s common stock at any time prior to April 30, 2003. Additionally, the Company issued a right to Curtis A. Swanson to convert his accrued salary through March 31, 2002 in the amount of $134,000 into 892,644 shares of the Company’s common stock at any time prior to April 30, 2003. If converted, the $311,177 in accrued salary, which is reflected as a current liability on the Company’s balance sheet at March 31, 2002, would be eliminated and the number of outstanding shares of common stock would be increased by 2,000,000. This transaction has been entered into in lieu of the issuance of Series B preferred stock, which had been issued to Stanley L. Swanson and Curtis A. Swanson but then rescinded on May 3, 2002.
Questions For Management
1. How many of the franchise’s have been sold to related parties?
2. What are the qualifications of the franchise owners?
3. Why are executive salaries so high?
4. What is the situation with the corporate repurchase program?
5. Does RX Systems have the capability to pay $3.5 million?
Conclusion
Stocklemon believes that RTIN Holdings is a lemon. This finding is based upon the following:
1. Management is overpaid and under qualified;
2. The company can not separate a stock promotion from a potential business; and
3. The company is undercapitalized to compete.
If RTIN holdings wants to make a serious effort to compete in the future of electronic prescriptions, they should forget about stock promotion and focus on their business. Until then, and only then, we believe that they will have as much success in the pharmacy business as they have had in the restaurant business.