PCES - UPDATE on Current Information Available (along with some of my own personal "Discussion & Opinion).
- It's a clean, virtually debt-free, fully reporting shell corporation with cash.
- They are current on their SEC filings.
- Outstanding shares are only 5.3 million (about 11.8 million fully diluted)
- Float is about 1.8 million.
- The REAL story seems to be the people behind the scenes at PCES.
You'll see more of the story below.
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Ticker: PCES (OTC:BB)
Pace Health Management Systems
2501 N. Loop Drive
Ames, IA 50010
(515) 296-3102
COMPANY HANDLING PCES SHELL NEGOTIATIONS:
Equity Dynamics, Joe Dunham 515-244-5746
RECENT PRICE RANGE: .10 to .29
- - - - - - - - - - BASIC STORY - - - - - - - - - -
PCES built a software program and sold it to 3M. And that's fine!
But the main story is NOT what PCES has already done.
The main story is the quality of the people behind what is happening at PCES, the current share structure, and how common shares outstanding might be affected by these factors.
Here is some historical background just for reference...
- PCES sold their business to 3M (NYSE:MMM) last fall for $5.9 million. 3M assumed substantially all the liabilities, so PCES has no ongoing operations and no revenues, minimal operating expenses (one part-time employee) and very minimal debt ($11,271 total liabilities shown in latest 10Q filing). So...
- PCES is a “clean,” fully reporting shell corporation with some VERY interesting people behind it.
- For Assets, PCES has about $2 million cash (including the escrow balance) and it has a loss carry-forward ($16.7 million) that could make it very attractive to the right potential business partners.
- The share situation is also VERY interesting. There are 5.3 million shares outstanding and there are Preferred Shares that could be converted to about 6.5 million common shares, so the Fully Diluted Total Shares Outstanding would be about 11.8 million.
According to the SEC 10K filing of Mar 31, 1999, John Pappajohn (a Preferred Shareholder) also holds about 34.5% of the common stock.
- This is where PCES really gets interesting. You can learn more about the Preferred Shareholders in this SEC filing...
sec.gov
The primary player in PCES is John Pappajohn of Des Moines, IA.
WHO IS JOHN PAPPAJOHN?
John Pappajohn is a very successful Iowa businessman who was written up in Forbes magazine a couple of years ago and has quite an interesting biography. He has served as director in over 40 public companies and also serves as a director for many private companies. He has made substantial donations to The University of Iowa, Drake University, North Iowa Area Community College, University of Northern Iowa, and Iowa State University, and the University of Iowa Hospitals and Clinics (UIHC) . His role appears pivotal in what happens at PCES. Here is more information on Mr. Pappajohn:
pappajohn.com
pappajohn.com
pappajohn.com
- - - - - - - - - - SHARES INFO - - - - - - - - - -
FLOAT: 1.8 million
OUTSTANDING SHARES: 5.3 million
(NOTE! Preferred Shares, if converted to common, would add about 6.5 million, so Fully Diluted Total Shares Outstanding would be about 11.8 million. And ONE Preferred Shareholder also hold 34.5% of the common stock.)
WARRANTS:
According to the last 10K filed with the SEC on 3-31-99, “At December 31, 1998, warrants to purchase 256,464 shares were outstanding and exercisable. The warrants provide for reductions in the exercise price under certain terms and conditions and are
exercisable at prices ranging from $.37 to $4.58 per share with an average price per share of approximately $1.45.”
sec.gov
- - - - - - - - - - SEC FILINGS - - - - - - - - - -
sec.gov
- - - - - - - - - - IMPORTANT POINTS - - - - - - - - - -
FACT 1)
According to the SEC filings, the Company says they are looking for another business opportunity to bring into this shell corporation. The Company believes that the combination of cash on hand (about $2 million including the escrow balance) and net operating loss carry-forwards ($16.7 million) make it attractive to potential partners.
sec.gov
Discussion & Opinion:
They are not obligated to bring in another business. They might or they might not. We can only speculate on their intentions. But we do know that the Major Common Shareholder (Pappajohn) is ALSO a Preferred Shareholder, so he would appear to have an interest in how common shareholders come out on the whole deal.
For the sake of discussion, let's first assume they don't bring in another business. If they liquidate, the $2 million cash asset would be distributed to the Preferred Shareholders, but that would still leave a “clean,” fully reporting shell corporation. And I believe the
remaining shell corporation could still be of substantial value to a private company that wants to go public.
If they DO bring in another business, the value to common shareholders would be affected by the substance of the merging business and the structure of the deal. In this case, it is good to know that Pappajohn is also the Major Common Shareholder.
According to SEC filings, in addition to being a Preferred Shareholder, Pappajohn also holds about 34.5% of the common stock and he appears to be the key voice in all of this. Pappajohn is said to have quite a successful reputation as a businessman and as a
philanthropist. A new building at the University of Iowa is called the John Pappajohn Business Administration Building.
His contributions to the University of Iowa Hospitals and Clinics (UIHC) led to construction of the John Pappajohn Pavilion. The Pappajohns contributed another $1 million to begin funding the endowment for the John and Mary Pappajohn Clinical Cancer Center at UIHC. Pappajohn was also written up in Forbes in September
1997. Here are some links to articles on these and other donations.
pappajohn.com
So WHY WOULD PCES BE A MORE ATTRACTIVE SHELL THAN MOST
OTHERS?
1) Is it likely that “clean” public shell corporations that are already FULLY REPORTING might be in greater demand as more and more of the Non-Reporting companies get pushed off the OTC-BB and back to “pink sheets?” It would seem so to me.
2) There is no way of knowing at this time if the $16.7 million loss carry-forward could still be utilized by a merging company (subject to IRS rules), so whether or not that would be an asset at the time of a potential merger cannot yet be determined.
3) The “Wild Card” factor here is what business, if any, the company might roll into this “shell,” and of course, the structure of such a deal would be a significant factor in determining how beneficial, if at all, it might be to common shareholders (keep in mind, the main Preferred Shareholder also holds 34.5% of the common shares).
Looking at what other “fully reporting” OTC-BB companies (such as DDEQ, which went from .03 up to $6.00 or more) have done recently makes this situation very interesting to me. PCES, like DDEQ, does not have the “overhang” (i.e. bankruptcy, debt, huge outstanding shares, etc.) of many other OTC-BB companies in this price range. And with only 5.3 million shares outstanding (about 11.8 million if fully diluted), the situation is interesting.
FACT 2)
The Company believes that it serves the best interests of its shareholders to seek a business combination with another entity.
From Page 5 of the 10Q filed 5-10-99...
sec.gov
“The Company believes that with the cash on hand and net operating loss carry-forwards, subject to the limitation of such carry-forwards under the Internal Revenue Code, such a combination may be attractive to potential partners and would better serve the interests of the Company's shareholders.”
Discussion & Opinion:
The Company has talked with several potential merger candidates and is continuing to talk with candidates. But nobody at the company would comment on the status of those talks other than to confirm that they are actively talking with several companies that have good business plans. We may not know whether any deal might be or has been struck
until it is formally announced. At that point, the stock price would likely adjust quickly to the new market value.
FACT 3)
PCES is a fully reporting company and they are current. Check their SEC filings.
sec.gov
Discussion & Opinion:
Good, clean shell corporations that are fully reporting seem to be getting fewer and fewer. With the new NASD regulations requiring fully reporting status, more and more companies will be removed from the OTC-BB this year and pushed down to “pink sheets.” It seems to me that private companies wanting to go public will be paying a higher premium for good, clean, fully reporting shells. If that made the PCES shell (even without cash) worth only $1 million to $2 million with only 5.3 million shares outstanding, well you can do the math. And there is also the $16.7 million loss carry-forward that could make the PCES shell valuable to the right private company (depending on IRS qualifications).
Filing reports with the SEC costs money. PCES has kept their filing status current and I view that as an indication that they might be serious about rolling in a new business venture into this shell.
One other thing regarding reporting status... The SEC filings are out there so that people considering PCES can read them carefully and discuss the matter with their professional investment advisor (who may very possibly “recommend AGAINST buying it”).
FACT 4)
It is difficult to speculate what price this stock might be at any time in the future.
Discussion & Opinion:
This, like most OTC-BB stocks, is very risky. If PCES “hits,” the return could be enormous. But regardless of how high the potential return might be, there is always risk of losing part or even all your money. I am not a professional advisor. So if anybody buys this stock and loses, remember, there are never any guarantees. By the same token if anybody buys this stock and makes lots of money, it doesn't necessarily mean the next stock I like or post information on will do as well. I can be wrong just like anybody.
Do your homework and make your own evaluation.
YOU have to determine what works best for you.
Good luck!
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