Actually he is pretty ugly
1/15/99) Correction: On January 20, 1998, Judge Ann Conway of the Federal District Court for the Middle District of Florida granted the SEC's request for a permanent injunction against defendants Steve Samblis and New Stock, Inc., mandating their compliance with Section 17b of the Securities Act, which requires paid stock promoters to disclose the amounts and terms of payments received for their efforts. Stock Detective had incorrectly reported that the injunction ordered the closure of New Stock Inc.'s web site. The next hearing is scheduled for February 17.
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December 30, 1998
Millionaire.com (OTC BB: MLRE)
12/30/98 close $21.63
Sponsored by WallStreet Guru
Million Dollar Mistake?
By Lynn N. Duke, staff writer
The latest piece of evidence that investors have lost all sense of reason when it comes to Internet stocks is Millionaire.com; a company sprung to life just in time for Christmas and the frenzy of reckless spending that can go with it.
Billing itself as an Internet crossroads for the wealthy - promising auctions, chat rooms and more - Millionaire.com (OTC BB: MLRE) began trading over the counter Dec. 16 at $4.00 per share, and has since streaked past the $25 mark. On what basis, aside from its .com assignation, is anyone's guess.
The Stock Detective caught a whiff of Millionaire.com when its outrageous hype came our way. Not only are the company's press releases rife with ambiguity and sometimes misleading statements, its paid promoter was targeted earlier this year by the SEC.
Steve Samblis, president of Fortune Marketing and Capital Consultants, Inc. previously ran a tout sheet called New Stock, Inc., which the SEC shut down in January. Fortune Marketing is Millionaire.com's investor and media relations consultant, and publishes the Small Cap Journal. According to the SEC's complaint against Samblis, he was "passing himself off as an independent and impartial stock picker when, in fact, he is nothing more than a paid pitch man for the companies he hypes."
Samblis refused to talk to the Stock Detective without a guarantee that anything written about Millionaire.com would be positive. Rob White, CEO of Millionaire.com, did not return several phone calls in the past week.
Perhaps the most egregious of Millionaire.com's press releases to date was one dated Dec. 21, declaring "Millionaire.com Receives $8 Million Advertising Contract." Eight mill in the bank? Look closer. No money has changed hands, nor is there any indication that a single ad has been sold. Specifics of the three-year contract with SGD International were not available.
At one point Samblis told The Street.com that Millionaire.com planned to book the entire $8 million as a receivable now. He's since backed off from that statement, which may save his client a lot of headaches. The SEC sometimes looks askance at such tactics.
"If the SEC sees something like that, they'd consider it a red flag. They'd want to check the circumstances," said John Heine, an SEC spokesman. "It's definitely something that makes them perk up their ears."
An accounting expert agreed that recording revenue as a receivable in that manner could be a problem. Unless a company is certain of a buyer's ability to pay, it could get caught short when the cash never comes through, said Howard Schilit, associate professor of accounting at American University. That risk increases in proportion to the time that elapses from the date of sale, or if there is no guaranteed demand for the product (in this case, $8 million worth of advertising on an as yet non-existent website and/or a magazine). Schilit also is the author of "Financial Shenanigans, How to Detect Accounting Gimmicks & Fraud in Financial Reports."
But $8 million is a lot of advertising for a still-to-be-launched website and even for a magazine with circulation of 55,000; even if its readers do claim a combined annual income of US$50 billion. On the other hand, SGD International specializes in "asset recovery management", an accounting maneuver that Schilit said, "at least on the surface, looks like a very unorthodox structure." Could the $8 million advertising contract simply be a form of "asset recovery management"? Jerry Galuten, president of SGD International, could not be reached for comment.
Unanswered questions
Since Millionaire.com is non-reporting to the SEC, and Samblis and White declined to field questions, it's impossible to get an accurate picture of the company's finances, or even the makeup of its stockholders.
Millioinaire.com went public after a reverse merger into the inactive shell of Charter Investor Relations of North America, and a 3-for-1 forward split of its stock. There are now about 6.7 million shares outstanding, only 1.5 million of which are in the float. The breakdown of the remaining shares - what's restricted, who the controlling shareholders are - is a mystery that only Samblis, White and a handful of others can solve.
It is not clear whether the 6.7 million shares outstanding includes 1 million shares issued in a private placement Dec. 15, for $1 per share. Millionaire announced Dec. 29 that another 1.8 million restricted shares would be issued to back a $4.5 million private placement. But again, ambiguity: While the headline suggests the money's in the bank ("Millionaire.com gets $4.5 mln in Funding"), the last line tells investors "the company believes it will have received the majority of this funding by Dec. 31."
This second private placement was necessary, according to the press release, so that Millionaire.com can complete acquisitions, at least one of which has already been announced: "Millionaire.com Agrees to Purchase New Orleans Auction Galleries for $7.2 Million." But terms of the deal were not disclosed, and it is not clear when the deal will close. Jean Vidos, president of the New Orleans Auction Galleries, did not return a phone call.
On Dec. 22, Millionaire.com announced a "Joint Venture With America's Largest Classic Car Auction Company", Kruse International (which only bills itself as "The World's Leading Collector Car Organization"). The press release said Millionaire.com and Kruse had "agreed to hold a three day classic car auction." The office of Mitchell Kruse, president and CEO, said he was not familiar with Millionaire.com, but said it was possible someone had booked the auction and not mentioned it to the boss.
The company has made other statements that make it easy for investors to throw money at its shares. But when considered more closely, these statements add up to little more than a plan, and perhaps wishful thinking.
For example, after comparing itself to eBay (the online auction company whose share price has increased 11-fold in less than four months), Millionaire.com proclaims that it will "become the premier destination website for those seeking 'THE VERY BEST THE WORLD HAS TO OFFER.' And while intimating that the site will be for those with addresses on the Upper East Side, Malibu and Palm Beach, the site is accessible to anyone, as is an email account, which will give you instant access to Millionaire.com's chat rooms.
So, what's to keep out the "riff raff"? Surely these business tycoons (who Millionaire.com is certain will swarm its website to bid on its trinkets) won't want to huddle with the masses.
The message boards, not surprisingly, also are playing a role in Millionaire.com's frenzied climb. Many seem to think that shares they've bought will eventually give them a key to the real millionaire's club, but perhaps without regard to the risk that they may one day simply make nice wallpaper.
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