Stocklemon Reports on Raser Technologies (RSTG)
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“Wall Street people learn nothing and forget everything” Benjamin Graham
It is the opinion of Stocklemon that Raser Technology is the most overvalued security we have ever covered.
How many times have we seen a company on the OTCBB claim they have a breakthrough technology and the stock races higher? How often are these companies run by individuals who have histories of failed public companies? Every week? Every day? How often does one of these “dream stories” turn into a viable business? . Stocklemon can not think of one. Amazing how investors never learn their lesson and forget all the bulletin board market has taught us over the years.
Introducing Raser Technologies
In the past 6 months the share price of Raser Technologies (RSTG) has risen an astounding 400% to give it a current market cap north of $1.3 billion. Stocklemon believes this is a lofty price due to the company’s lack of: revenues, technology, and cash. In this report Stocklemon will outline the players in Raser Technolgies and will attempt to fill in the many holes that are left by the company in their SEC filings.
The players behind Raser Technologies are: Kraig Higginson, Ned Warner, R Thomas Bailey, Jack Kerlin and David West. These 5 gentlemen did not just get together to form Raser. At one time in the past, they have all worked together on public or private companies. This blog will attempt to trace the history of these men and their histories.
Kraig Higginson, Raser Chariman and largest shareholder
For the top banana of a billion-dollar company, the bio of Raser Technologies’ Chariman Kraig Higginson is a bit mushy on details. In the 10-K biography section, we read:
“Mr. Higginson founded American Telemedia Network and served as its CEO from 1984-1988. From 1988 through 2002, Mr. Higgginson worked as a business consultant through Lighthouse Associates, an entity he controls.”
Stocklemon looked under the skin, and found that Mr. Higginson has been a bit busier than his company states.
His venture American Telemedia Network eventually became Euro Telecom which now trades on the pink sheets under the symbol EUTC at a price of .001 http://finance.yahoo.com/q?s=EUTC.PK
In 1996, Higginson sold whatever assets were left of Massai Inc. with his partner Ned Warner to MAII Holdings.
MAII holding now trades on the pink sheets at a price of .0001
http://finance.yahoo.com/q?s=MAII.PK
Mr. Higginson also appears on the registration of Holmes Microsystmes Inc. Holmes later changed its name to Gosun Communications which now trades on the pink sheets at .001 http://finance.yahoo.com/q?s=GOSN.PK
Raser fililngs disclose yet another company associated with “the boys”, In November, 2001, Profile Media, Inc., was placed into an involuntary bankruptcy. In January, 2002, Profile Media filed a Chapter 11 bankruptcy case, which later was converted into a Chapter 7 liquidation case. From September, 1997, to January, 2002, Kraig T. Higginson served as Secretary and a director of Profile Media, and R. Thomas Bailey served as a director.”
Ironically enough, Raser’s offices are the same as the now bankrupt Profile Media. Both companies are located at 5152 Edgewood Dr. Suite 75 Provo, Utah 84604.
So what exactly is Raser Technologies business? Raser claims to have invented technology that makes electric motors more efficient. This technology was invented by a man named Jack Kerlin.
What do we know about Jack Kerlin?
Raser claims that Kerlin is a physicist and the inventor of Raser’s technology. Yet, there are few details about Mr. Kerlin’s background which tend to verify his credentials. Raser Technologies does not disclose his biography, so Stocklemon has done its best to piece together who Jack Kerlin is.
Prior to today’s patent issuance, there are very few traces of Mr. Kerlin life work visible on the internet -no mention of advanced degrees, academic publications, professional society associations, or prior work in the industry. Mr. Kerlin registered one patent in 1992, that appears to incorporate much of the same technology that is discussed by Raser Technologies new patent today.
Jack Kerlin has also received patents for 10 or more inventions related to machine shop tooling innovations, stretching back over more than 20 years. None seem to have surfaced into a product of significant commercial impact.
Other than that, there doesn’t seem to be a shred of information about Jack Kerlin anywhere except this registration, where he offers himself as agent for William Dudley Pelley: http://www.imdb.com/name/nm0671163/agent
Pelley, a notorious Nazi sympathizer, was the founder of the Silver Legion, and considered by many to be the father of anti-Semitism in America. http://en.wikipedia.org/wiki/William_Dudley_Pelley
The only photo of Mr. Kerlin we could find is with his wife - who is a medium who claims to contact the spirits of Jesus’s Grandmother. http://www.shastaspirit.com/heartsong/
That is all we can find -we welcome additional information that would shed light on this “breakthrough” technology and its inventor. It appears to Stocklemon that Mr. Kerlin must be like MacGyver and can revolutionize the motor out of the bare necessities, unfortuantly MacGyver was a TV show and Raser is a publicly traded company.
TOXIC FINANCING
The company’s PR says they raised $20 million at $24 a share. That’s 833,333 shares. Nice and clean. But the filing says this:
In the event that the Company is required to issue more than an aggregate of 833,333 shares of Common Stock (the “Company Limit”) to effect the conversion of the shares of the Series C Preferred Stock into shares of Common Stock, Mr. Kraig Higginson, Chairman of the Board of Directors of the Company, has agreed to transfer to the Company up to an aggregate of 2 million shares of Common Stock in excess of the Company Limit. In the event that the conversion of the shares of Series C Preferred Stock results in the issuance by the Company of more than an aggregate of 2,833,333 shares of Common Stock (the “Aggregate Limit”), the Company is required to redeem out of legally available funds such shares of Common Stock issued by the Company in excess of the Aggregate Limit at the then-applicable conversion price.
So if the investors can’t convert at a minimum of $24 per share, Kraig has magnanimously offered to individually pony up 2 million of his own personal shares (don’t worry he owns or beneficially controls over 15 million shares, so he won’t miss ‘em) Of course the company also recently issued a fresh S-8 with another 3.2m shares related to an employee “Long Term Incentives Plan” not part of the filing, so maybe Kraig can award himself a few of those shares too, in case he’s feeling pinched.
So Kraig’s contribution boosts the pool of stock available to protect the converts down to a price of $7.0588, but that’s not all. If there’s still not enough stock to cover the conversion, the company is legally required to use its funds to essentially make up the difference.
So this deal is essentially floorless, shored up only by the ability of the company to generate revenues (we’re still waiting) or sell still more stock to others. How do you spell “toxic” ?
RASER TECHNOLOGIES…IT’S A FAMILY AFFAIR WHAT A JOKE
These are all direct quotes from SEC filings
“Del Higginson, the brother of the Company’s chairman of the Board of Directors, Kraig T. Higginson, is currently an employee of the Company. Del Higginson serves as a Mechanical Technician and has an annual salary of $43,200. In addition, in connection with his employment, the Company granted Del Higginson an option to purchase 10,000 shares of the Company’s common stock at an exercise price of $3.65 per share, which reflects the fair market value per share of our common stock at the time of the grant as determined by our Board of Directors. ”
Well now that the chariman’s brother is a millionaire, how about sharing his qualifications to be the Mechanical Technician of this company????????
“Kort Sandberg, the brother-in-law of Ned Warner, a beneficial holder of more than 5% of the outstanding shares of common stock of the Company, is currently an employee of the Company. Kort Sandberg serves as an Electrical Engineer and has an annual salary of $60,000. In addition, in connection with his employment, the Company granted Kort Sandberg an option to purchase 100,000 shares of the Company’s common stock at an exercise price of $3.65 per share, which reflects the fair market value per share of our common stock at the time of the grant as determined by our Board of Directors.”
“Kevin Kerlin, the son of Jack Kerlin, a beneficial holder of more than 5% of the outstanding shares of common stock of the Company, is currently an employee of the Company. Kevin Kerlin serves as a Mechanical Engineer and has an annual salary of $48,000. In addition, in connection with his employment, the Company granted Kevin Kerlin an option to purchase 50,000 shares of the Company’s common stock at an exercise price of $3.65 per share, which reflects the fair market value per share of our common stock at the time of the grant as determined by our Board of Directors.”
No resumes or qualifications on any of them
Empty Promises, circa 2004
In a January 2004 letter to shareholders, Mr. Higginson expresses that, “”Since becoming a public Company in November of 2003, and subsequently introducing our Symetron(TM) advanced motor technology, our Company continues to pursue a whirlwind of opportunities. In conjunction with the tremendous response we have received during the past several months from our potential customers.” It is now well over one year later and this whirlwind does not seem to have created a single tangible revenue-producing agreement.
http://www.rasertech.com/news/scripts/full-news.php?1080677760
Does it pass “the smell test” ?
How much would it cost to revolutionize the electric motor? How much money has this $1.2 billion company put into research and development of this technology? According to the SEC filings on Raser:
“In 2003, Raser spent $406,148 on research and development activities. From the inception of Raser Technologies, LLC on October 28, 2002, to December 31, 2002, they that entity spent $232,563 on research and development”
Who would have thought one company could revolutionize the motor with an R&D investment of a little over $600,000 ! Stocklemon believes that more research and development goes into developing a salad dressing than this company has put into this “mysterious” gizmo.
Conclusion
Stocklemon finds it amazing how consistently we see companies that claim breakthrough technology and deliver on little or none of it. More often than not these companies are run by individuals who have had previous public companies that are defunct. Stocklemon believes that Raser Technologies is just another one of these stocks. If management is to prove us wrong, they would have to do a lot more than just issue press releases. Raser has yet to prove the value of their technology and has yet to generate the revenues and profits that are necessary to generate even 1/10th of the current market cap.
Right now the stock appears to be tightly held and the borrows are close to none for all those who short sell stocks. Stocklemon believes that when this plays itself out the stock will find a home below $5 a share.
Investors: learn from the past and do not forget the graveyards of stock certificates of the many OTCBB companies that have claimed “Breakthrough Technology”.
Cautious Investing To All.