Stocklemon Reports on Flight Safety Technology (OTCBB: FLST) Part 2..We do our homework!!!

Part 2 of 2

Target Price and Fair Market Value - .22 cents

There has been much discussion about which information is outdated on SOCRATES and which holds true.  The company and its newsletter writers would like you to believe that all negative information about SOCRATES is old and no longer valid…BAD NEWS FLST….IT IS ALL TRUE.  The following quotes were given to Stocklemon on August 19, 2003. (Current enough for you guys?)

“The range to date is far short of that required for any operational use; and Socrates has not demonstrated the ability to define the distance or location of any wake” George Greene, Manager of the FAA Field Office at NASA Langley Research Center.  August 19, 2003.

“There have been no engineering studies, or experimental studies to date that have determined that the Socrates technology will work as envisioned by Flight Safety.” George Greene, August 19, 2003

Mr. Greene managed the Congressional mandated Socrates program for the FAA.

“The Volpe reports still stands and has never been retracted”  Robert Rudis, Volpe Research Retired.  August 19, 2003

Mr. Rudis worked at Volpe for 34 years before retiring in April.  He wrote the Socrates report issued in 2001.

“To my knowledge, the Volpe report of October 2001, stands.”  August 19, 2003 Kathy Barnstorff, Public Affairs, NASA Langley

*The Volpe Report is available in Stocklemon’s part 1 on FLST

The Newsletter Game 

Many people have bought this stock based upon the recommendation of newsletter writer Dennis Slothower.  After reading his work, it is obvious that he has never spoken to NASA or the FAA.  Stocklemon has received correspondence from a newsletter writer named Joseph Shafer, for whom we have the utmost respect.  Mr. Shafer was approached by a third party to write a favorable report but found it to be morally wrong, obviously Slothower did not.  In an email to his subscribers, Joseph Shafer explains the whole “game”.

We have received a number of calls and e-mails from subscribers asking “what’s up?” with Flight Safety Technologies (FLST), the company I recommended for purchase at 80 cents in the Special Report I sent all subscribers just 8 weeks ago.  It hit $2.95 today in a market down 120 points.  I ADVISE YOU TO SELL.  If you won’t sell it all, at least sell 1/3 and take all your money off the table.  Remember, the bulls make money, the bears make money, but the pigs get slaughtered — AND you already have a 300%+ gain.

I can find no substantive reason why the stock is racing ahead — there is no new contract, no new joint venture partner, and no new Congressional action to fund their research (last discussed in Congress on May 15, BEFORE the big run-up.)  But I think I see why it is running.  A couple months after I turned down the offer from a PR firm to write about FLST in exchange for “valuable consideration,” someone else has done so.  I thought then, and now, it was smarmy to accept money to write about a company.  I give you these ideas for the price of a subscription — not money passed to me by the companies I write about.  Not everyone agrees.  So over a million “magalogs” have been mailed out to investor lists to get them to subscribe to an investment letter.  Apparently, as part of their Special Bonus for subscribing, they get a secret look at the next Microsoft or some such marketing drivel.  FLST underwrites most of the expenses.  Why would a company pay massive amounts to get their company known when they could simply buy reprints from reputable magazines and newsletters, attend trade shows, etc. ?

The only answer I can offer is that they don’t care about getting the stock in strong hands.  I fear that, instead, this is an opportunity for the company’s insiders to unload their shares at a higher price, and then buy them back later when all the commotion dies down.  How else to explain that a stock with 15 million shares outstanding traded nearly 4 million shares today alone?  Over the past two weeks, the entire float has changed hands at least once.  This tells me that the company has not reached the maturity level I seek in start-up firms wherein management cares more about the company than about their ability to move the stock.  Sell it — I predict you’ll have ample opportunity to buy it back much cheaper.   We will sell from the Aggressive Portfolio as of today’s close (July 11th.)

Joseph L. Shaefer, Editor
The Investor’s Edge
www.investorsedge.us
800 253-2088

WARNING TO INVESTORS: the last newsletter writer who felt compelled to defend his mailer was Donald Rowe when he wrote about Storage Alliance in the early part of this year.  Stocklemon wrote about Storage Alliance (SGAL) at $1.93 five months ago, it currently trades at .26 cents.  Here is Donald Rowe’s opinion of us…we love you too Donald.  http://www.wallstreetdigest.com/specialstock/specialstocklogin.html

The Denver Tests

For those of you who have not figured it out yet, the tests being conducted in Denver are not being done for Flight Safety, rather FLST is showing up at a previously scheduled NASA test for wake vortices..party crashers.  Although FLST would like you to believe that these tests are being conducted for them, NASA has made it clear that these tests would be conducted with or without Flight Safety.

According to Wayne Bryant from NASA in a news release issued by NASA on August 19, 2003, the purpose of the test is Denver is, “.to establish whether an acoustic-based wake vortex sensor is operationally feasible for the airport environment.”

The purpose of the Denver tests is to use microphones, not lasers, to explore whether there is even a basis to study sound.  While Flight Safety is trying to discover a solution, we do not even know if there is a problem.

“The FAA has not determined any need for such a sensor.”  “There is no operational requirement.”  Robert Rudis

“NASA needs to figure out what to do if anything even if there is a sensor such as Socrates with such a sensor. And determine what would be the widespread use for such a sensor.” George Greene

Flight Safety is trying to make this test, a press event in which they can promote their stock, just like the alleged stock buyback (which they have not bought back a share) in May of this year.  Flight Safety wants to invite the mayor, the press, or whoever else will listen to them.  We do not care if Amelia Earhart shows up with the ghost of Charles Lindberg, if the technology does not work, it does not make a difference what your press releases or your touts preach.

Offshore Investors  (Possible SEC Violations)

It appears to Stocklemon that the real money in this stock is being made by the offshore corps and perhaps nominee accounts that are holding the stock.  Who are these people?  Where are the 13D’s that have to be filed for a 5% shareholder?  When Stocklemon called the lawyers of FLST on this matter, we were answered with a “no comment”.

Isn’t this a public company???????

One investor we do know.  Flight Safety was very proud when a few offshore funds exercised their options last week.  Through deduction we know that one of these is Wakefield Holdings domiciled in Anguilla.  Is this the same Wakefield which is under investigation in India by the securities commission?  This is getting good.

http://www.business-standard.com/today/story.asp?Menu=1&story=3080 

From its inception, Stocklemon has always reported that offshore corporations along with newsletter writers and unproven technology have always been recipes for disaster.. We believe this is no different.

Government Funding

It appears that the promoters of this stock seem to put all of their eggs in the basket of government funding.  One most read closely to understand the real nature of the money coming from the government.  Much of the funds are not directed towards FLST, but rather are earmarked for the study of Wake Vortices.

Is it surprising that they get government funding when the company spends more money on lobbying than they do on research and development?  After all, what is a few million of taxpayer’s money?

Congress has funded this project against the advice of FAA and NASA

“Without Congressional mandate the FAA concluded from their peer review that the risk associated with the Socrates technology was too high to warrant funding.”  George Greene, August 19, 2003

Lets not lose sight, it does not make a difference how much and how long this company get funded by Congress, if the FAA does not approve their product, they will never see $1 in real revenue.  And the FAA has completely dropped SOCRATES from their list of technologies they are testing due to high risks.  Hopefully, Congress reads The Lemon, and will cease all future funding to this stock promotion.

BEST CASE SCENARIO

If an act of god happens and the SOCRATES does eventually pass FAA testing, the company is still over a decade away from seeing any form of revenue.

“Wide-spread application for the Socrates technology is at least 10 to 20 years away, if ever utilized by the FAA.” George Greene

Again, as investors we cannot forget that getting FAA approval requires much more scrutiny than even the FDA.  Even successful technologies take decades to get approved and implemented.

Target Price - .229 Cents Explained

We do not believe this company is worth any more today than it was when they conducted the reverse merger into the shell.  While we will give the valuation an extra $1.7 million because of the money raised from the warrants, we have resisted subtracting the significant losses incurred to date.  We will also add another $50,000 for R&D (which is more than they have spent).

Flight Safety merged into a shell (whose two largest shareholders surrendered all of their holding for no consideration - why they did that is not explained) and gave up 46.23% (40% all free trading) of the Company, not including the investors warrants (another 6+%) for a shell with $1.7 million, less $200,000 fee to Dunhill of Vancouver, Canada, $50,000 in legal fees, a requirement to spend $575,000 for IR/PR at the sole administration of Dunhill, or a REAL net of $875,000 (Unlike the reported $1,500,000 the 10-k states).  Again 46.23% for $875k would put a value of $1,892,710 on the Company.  Plus the $1,700,000 in warrants exercised by the offshore entities, equals a total of $3,642,710, not including the significant losses suffered to date, nor any potential litigation that may arise if the press releases are found to have been misleading.  According to the Company’s 10-K filed on August 19, 2003, there are an estimated 15,901,233 common shares outstanding (not including the many warrants outstanding).  Therefore, we conclude the following true valuation $0.229 per share.

Cautious Investing To All

Flight Safety Technologies (OTC:FLST.OB)…Get Ready for the Crash and Burn.

Part 1 of 2

Flight Safety Technologies has become one of the most actively traded issues on the OTC BB over the past month.  Stocklemon believes that this activity and upward movement in the stock does not correlate to the viability of their products, rather it is a mere bi product of a stock promotion.  Flight Safety has been testing a proprietary product called SOCRATES, which measures wake vortices using a laser beam.  This project has been in development for over 6 years now and does not look like it has any commercial or scientific viability in the near future.

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