Pluvia Securities Research Initiates Coverage of eConnect, (OTC BB: ECNC), at the current price of $14.50. We are issuing a STRONG SELL Recommendation and a target price of under $1.00.
A.) On March 8, 2000 The company released an amended 10-Q reporting a total share count of 77,852,101 shares for the period ending 9/30/99,According to an agent identified as" Wendy ", of Corporate Stock Transfer, Inc. this figure ballooned to 158,206,459 issued and outstanding shares as of March 8, 2000.
B.) On December 13, 1999, the Company announced that as of Friday the
company had purchased a total of 1.5 million shares in a buy back program. None of the SEC filings reveal that any such buy back was ever undertaken by the company.
C.) On Feb. 29, 2000 The company announced the following in their SEC 424A filing, "For users of major credit cards, the Company's eSecure "SafeTpay" system allows people to make purchases and payments on-line. By simply swiping a major credit card through any of the Company's eSecure hardware products, the encryption processing systems provide the ultimate in current anti-piracy technology." However, On January 12, 2000 all contracts and agreements between Safe T Pay and Econnect were dissolved. In a letter dated January 12th, 2000, counsel for SafeTpay nullified and voided any and all agreements with Econnect, Inc., this dissolution occurred prior to the SEC filing.
D.) eConnect Inc. failed to file the appropriate 8-K filings disclosing material developments and the abandonment of the contract between SafeTpay and eConnect, Inc.
E.) ECNC currently has assets of $44,664 and liabilities of $1,062,446.00 according to the most recently filed 10-Q amendment dated March 8, 2000.
F.) ECNC claims two revenue sources, the powerclick.com website and its gaming division. In a Press release dated, March 6, 2000, the powerclick.com site generates in excess of $10,000.00 /day in revenue for Econnect Inc. According to John Wade, Freeshop.com's CFO of Freeshops.com, "anyone can join the Freeshop affiliate program. By linking to the Freeshop website, anyone may then earn $0.05 per "click-thru". Freeshop's affiliate program currently consists of over 50,000 affiliates all of which operate websites similar to ECNC's Powerclick website. He further stated "none of our affiliates have ever generated over $1,000 per day" and "the top ten affiliates each generate about $100 per day."
THE SECOND SOURCE OF REVENUE:
G.) eCONNECT GAMBLING OPERATIONS, eConnect reported on November 16, 1999 purchasing the online gambling site "777WINS.com" for 7 million shares of ECNC stock. ECNC reported this gambling site produced revenue of $100,000/month and 9 month income of $338,000 during 1999, making it ECNC's largest income and revenue producing operation. In a conversation with eConnect's information officer yesterday, Manny Vavolizzo, he indicated the 777WINS.com operations had been shut down several months earlier. He also stated that eConnect has never received any revenue 777wins.com. He also confirmed that ECNC had not disclosed the shutdown of this unit in a press release or in an 8K filing as required by the SEC.
H.) On November 23rd, 1999 eConnect announced in a press release it had "signed a letter of Intent to acquire 50 percent of the Dominican Republic business of Top Sports SA, which currently owns and operates 12 Dominican land based licensed sports books which are generating $1,700,000 in yearly revenue." In a conversation with eConnect's Information Officer yesterday, Manny Vavolizza, indicated eConnect did not own any part of Top Sports SA. Instead, ECNC had an "alliance" with Top Sports SA in exchange for an unknown number of ECNC shares and that the discrepancy between the press release and the actual transaction was not addressed.
RECENT PRESS:
I.) On February 28, 2000 eConnect issued a press release touting that its subsidiary eConnect2Trade.com Inc. had "entered into a strategic alliance with Empire Financial Group Inc. (http://www.empirenow.com), to offer Internet stock brokerage firms and their clients the Instant Cash Trading. In an interview, Donald Wojnowski, Vice President of New Business Development at Empire Financial Group, stated the following "We have no comment regarding eConnect other than we have not entered into any strategic alliance with connect. The only agreement we have is a confidentiality agreement to explore business possibilities. We did not approve the press release issued by eConnect."
J.) eConnect Inc. glossed over the Less than arms length transaction between eConnect Inc. and ET &T Inc. which was disclosed in a delinquently filed SEC filing as actually a deal between Tom Hughes and himself, being the 70% controlling shareholder of ET&T Inc.
COMPETITION & VALUATION:
K.) eConnect's current market valuation is a staggering $2.billion, dwarfing that of well-financed, leading Internet payment processors such as Cybersource (NASDAQ: CYBS), valued at $1.3 billion and Cybercash (NASDAQ:CYCH), valued at only $272 million .Cybersource customers include Amazon.com, Beyond.com, BUY.COM, Casio, Compaq Computer, Mercata.com, MotherNature.com, Nike.com, Priceline Rx.com, Remedy and Shopping.com. Cybercash (NASDAQ: CYCH) with a market capitalization of $272 mm processed more than eight million transactions in February and has over 20,000 merchant customers. Cybercash customers include FatBrain.com, PalmPilot.com Reel.com, SmarterKids.com, Toysrus.com, and Vitamins.com.
L.) The Chief Information Officer, Manny Vavolizza confirmed that he has sold approximately 50% of his stock holdings but was unauthorized to disclose how many shares were sold by other officers.
Pluvia Securities Research continues it's investigation and initiates preliminary coverage based on the above gathered facts with a strong sell recommendation with a 3 to 6 month target of less than $ 1.00.
Pluvia Securities Research holds a position consistent with the above recommendation, any of the agents, associates or employees of Pluvia Securities Research, may have similar positions or may contrary positions. These positions may and can do change without notice. This report is not to be construed as a solicitation to buy or sell any security. While we believe the above information to be accurate, no warranties or guarantees are implied. |
