LAS VEGAS -- June 29, Pluvia Securities Research Reitterates Coverage of Computerized Thermal Imaging, Inc., (OTC Bulletin Board: COII), with a STRONG SELL Recommendation at the current price, with a 12 month price target of under $0.25 cents.
Our Strong Sell Recommendation and price target are based on:
1. Computerized Thermal Imagingïs lack of a commercially viable product and our belief that the technology in the companyïs proposed product is insignificant and will never be commercially successful;
2. A series of press releases issued by Computerized Thermal Imaging that appear to be false and misleading, and, misrepresent the companyïs business prospects and relationships;
3. Computerized Thermal Imagingïs failure to disclose managementïs past involvement in fraudulent investment schemes. Specifically, a lawsuit filed by investors against Computerized Thermal Imagingïs CEO, under the auspices of the"Racketeering Influenced and Corrupt Organizations Act", (RICO), alleging "Fraud and Deceit", in which the defrauded investors won the suit and subsequent appeal, and were awarded a $25 million judgment;
4. 23 million shares of COII stock recently registered, which if sold could cause a very negative impact on COIIïs stock price.
THE "STORY" FROM THE COMPANY
Computerized Thermal Imaging, (herein as CTI or COII), claims to be developing a computerized thermal imaging, diagnostic and patient management system. Their main product is supposed to be a non-invasive, non-contact, non-radiation procedure for the detection of breast cancer. Many investors have come to believe that COII has a product that will replace traditional mammography with a fast, painless and accurate procedure.
OUR RESEARCH
1. A radiologist with a major teaching hospital who reviewed the companyïs product said the product was, in his opinion, "a complete scam".
2. One of the physicians actively testing the companyïs product claimed to be "very skeptical", stating the product produced "just a temperature map and canït localize anything". The physician went on to say Computerized Thermal Imaging "would get laughed off the podium if you tried to present this (research) at an industry meeting", (the company did attempt to present their research at the Radiological Society of North America conference ? but they were rejected).
3. The Clinical Practice Guideline put out by the US Department of Health and Human Services specifically addresses thermography by issuing the following Strong Recommendation: "Thermography should not be used as a screening or diagnostic tool for breast cancer detection or evaluation of breast disease".
4. Joan Schellenbach, senior director of media relations for the American Cancer Society, said in an interview with The Salt Lake Tribune regarding the company and similar products; "There is a lot of heavy marketing of products out there, and not all are worth the money or the improvement". She added that mammograms followed by biopsies, if needed, remain the standard method for breast cancer detection. Also stating; "Many [doctors] wouldnït count on an alternative for fear of serious consequences if it gave the wrong result".
5. Of the 20 board certified radiologists we talked to, many who specialize in mammography, not one indicated a favorable impression of Computerized Thermal Imagingïs product and none thought the product had a future in radiology.
6. The company has been around since 1987 and reports spending a mere $10.2 million on research and development compared to $18.2 million spent on general and administrative expenses during the same time period.
7. The companyïs only granted patent is for an examination table design, not thermal imaging.
8. The companyïs market valuation is just over a billion dollars and as of March 31, 2000, the company had only managed to generate $180,000 in product revenue during itïs entire thirteen year history.
FALSE & MISLEADING PRESS RELEASES & STATEMENTS
1. An August 29, 1990 misleading press release, the company stated; "By 1992 CTI believes that substantially all hospitals and clinics, as well as 2 percent of all hospital-related physicians, will be users of CTI units" and, that they had an;"agreement with Asian American Capital, a diversified merchant banking firm, headquartered in Tampa, Fla., to finance $40 million in CTI hospital-placed systems. " Message 13957995
We found no evidence this financing ever occurred.
2. A December 3, 1990 COII misleading press release that said; "Computerized Thermal Imaging (CTI) is under an agreement to deliver a thermal imaging unit to the Milwaukee County General Hospital CTI, moreover, has verbal agreements from the following medical facilities: Highland Park Imaging Center (2 units) University of Chicago (2 units) Rush Presbyterian Saint Lukes (3 units) University of Wisconsin (1 unit)." Message 13958049
These units were never delivered or placed in these facilities. Upon calling these facilities, a doctor from Highland Park Imaging Center stated; "we never agreed to have a unit placed in our facility. We only got one phone call from this company, (COII), and asked them to provide us with scientific data on their product. I don't recall that they ever contacted us again"
Total revenue projected in this release was over $9 million by 1997. We found no evidence the company sold any of the thermal imaging units noted in this press release. Furthermore, as of March 31, 2000, the company had only managed to generate $180,000 in product revenue during itïs entire thirteen year history
3. An April 7, 1992 press release the company stated they had signed a letter of intent to acquire a profitable hospital and arranged for financing which would net them $2.5 million in capital. David Johnston, CEO, proclaimed; "The completion of this acquisition and financing will constitute a major breakthrough for CTI, allowing the company to finance the installation of the first 10 systems ordered by hospitals around the country. In addition, having the first installation at a medical facility owned by the company will provide an installed and operating site system for other hospitals to visit and examine results of performance activities, while providing the company with the asset base and operating revenues and profits to expand".
Message 13958108
We found no evidence the company acquire this or any hospital, or sold any of the thermal imaging units noted in this press release.
PRESS RELEASES ANNOUNCING INTERNATIONAL BUSINESS
1. An October 6, 1994 misleading press release the company announced a joint venture with Trisun Medical America to bring computerized thermal imaging technology to China. The press releases stated; "Over the next five years it is the intent of the venture to install 6000 CTI Systems in the PRC [Peopleïs Republic of China]. The top 500 medical facilities will receive systems within the first two years providing the hub for the additional 5500 installations."
Message 13958198
This never happened, we found no evidence of any such sales to China.
2. A November 29, 1994 misleading press release stated; "The first units are scheduled to be shipped to China in the first quarter of 1995. It was announced to the shareholders that this endeavor results in $3 billion in sales for the Company".
Message 13958299
We found no evidence of these sales to China.
3. A June 20, 1995, misleading press release that stated; "Under agreement with the Peoples Republic of China, Computerized Thermal Imaging? will provide thermal imaging and telemedicine capabilities in 6,000 selected hospitals and in an additional 200,000 remote clinics. Message 13958448
We found no evidence of these sales to China.
4. An April 25, 1996, press release, the company stated; "The first CTI System has now been sold to Thailand. The first of two payments has been received by CTI and the unit will be shipped on or about April 25, 1996..., After a few months of operation in Thailand we expect to place a large number of units throughout the country".
We found no evidence of thse sales to Thailand.
5. On September 16, 1996 the company stated; "After several months of operation in Thailand, CTI expects to place an additional 1,000 systems by 1999".
Contrary to these press releases, we found no evidence the company has ever sold these thermal imaging units to anyone in Thailand.
6. On May 20, 1999, CTI claimed to have accompanied Utah Governor Michael Leavitt on a tour of South America and reported; "We had very productive meetings with medical community leaders, private and public hospitals and high ranking government officials in Argentina, Brazil and Chile, all of whom expressed genuine interest in our technology".
On November 22, 1999 the company announced they had expanded this initiative by signing an engagement letter with a consortium of Latin American investors and service providers. They stated the consortium; "has made a firm commitment to the purchase of 100 CTI diagnostic systems valued at approximately $50,000,000 over a two-year period. It is expected that about 40 of these units can be deployed in Mexico beginning in the second quarter of 2000".
A June 19, 2000 press release states the company sold 10 units to the consortium for $5 million, and had received $1.75 million as a down payment.
We do not consider the sales to CTI International as actual sales but an attempt to make transactions appear as sales. We believe COII management intentionally misled the public suggesting the transactions with CTI International are actually sales.
COURT RECORDS SUGGEST COIIïS CEO AND LARGEST SHAREHOLDER IS A CON MAN.
Recent SEC filings describing the background of COIIïs CEO David B. Johnston fail to include the period of time he was involved running a fraudulent scheme via a company named Agricultural Services Associates. According to an August 20, 1989 UPI article;
1. 21 partnerships representing about 650 investors paid $3.5 million to Agricultural Services and pledged $18 million more in notes.
2. The partnerships were paying for an interest in white doe rabbits implanted with embryos of Rex rabbits, a superior breed whose pelts are favored by furriers. Each doe rabbit was expected to produce eight to 10 Rex rabbits, which would then be bred to create a sustaining herd. The rabbits later would be slaughtered and their pelts sold to a Canadian trading company.
3. The partnerships bought the rabbits for $9,000 to $10,000 each in lots of 100.
4. The rabbits were raised and bred on a farm managed by Promorex Corp. Promorex, charged the investors management fees and were to sell the pelts to Scotia Trading Co. Unknown to the investors, Johnston was also secretly behind the activities of Scotia Trading Co.
5. Johnson secretly loaned money to Scotia to buy the rabbit pelts from Promorex at artificially high prices, thus creating the illusion of a highly profitable market for these pelts. Johnston used the deception of an easy profit to lure more investors into the rabbit partnerships.
6. Johnston reported to investors he bought the rabbit herd for $20 million. In reality he paid less than $100,000.
7. Investors caught on to the ponzi scheme and sued Johnston under the auspices of the Securities Act, the Racketeer Influenced and Corrupt Organizations Act, (RICO), and pendent claim for fraud and deceit. The case was heard in United States District Court, the Northern District of California; Stanley A. Weigel, District Judge, Presiding; Ted Wanderer vs David B. Johnston; et al.
8. The investors lawyer, Jon Vaught, reported that during the lawsuits Johnston would often show up in overalls and claim he cut grass for a living and thus couldnït afford to repay the defrauded investors. All the while he lived in a spacious mansion.
9. The investors won and were awarded a $25 million judgment. David Johnston appealed the judgment but lost the appeal.
10. Agricultural Services Associates and its controlling company, DBJ, Inc. filed bankruptcy. Johnstonïs victims in the fraud never got a penny of their money back. According to their attorney, Johnston managed to transfer all of his ill-gotten gains offshore.
SHARES THAT CAN BE DUMPED ON THE PUBLIC MARKET
1. Salah Al-Hasawi vs. Computerized Thermal Imaging Inc., and David B. Johnston, Case No. 2:00-CV-0317K, US District Court, District of Utah.
2. According to the lawsuit: On a trip to Kuwait, Salah Al-Hasawi met Johnston and COII affiliates. At this meeting Johnston complained his attempts to raise $30,000,000 in a private placement had failed and they hadnït reached the minimum amount needed to conduct a closing. As a result they had to extend the closing date for an additional two months.
3. Al-Hasawi reviewed the failed private placement memorandum and agreed to help raise the money in exchange for a 17% commission. He was directly able to raise $10,700,000 from the sale of COII securities in Kuwait and the Persian Gulf.
4. COII decided they didnït want to pay Al-Hasawi the commission he was promised. In response he filed a fraud suit against Johnston and COII and requests damages of $15,516,000.
What does this have to do with stock being dumped on the open market?
The problem for COII shareholders is that the company agreed to commence the application for registration of the private placement shares by July 1, 2000. A lot of posters on chat board claim these investors will hold their shares. We find that hard to believe, given the main placement agent who sold them these securities is now accusing the company of fraud. It would seem much more likely that they dump this stock as fast as possible.
In the last several weeks the company has filed to register over 23 million shares of stock. We think given the circumstances noted herein there is significant potential for this newly registered stock to be sold causing the stock price to fall.
Computerized Thermal Imaging's misleading promotion and recent registration of shares give this investment all the elements of a "Pump and Dump".
Furthermore, we believe the company has no technology that will be commercially successful and management with a strong history of promotion and fraud. For these reasons we strongly warn investors to AVOID investment in COII and reiterate our STRONG SELL/AVOID rating with a price target of less than $.25 within 12 months.
Our investigation continues, we have more research to report... Stay tuned.
Pluvia Securities Research, their agents, associates, and or employees have investment positions consistent with the above-stated investment opinion.
CONTACT:
Pluvia Securities Research
Steve Pluvia
e-mail pluvia2@aol.com |
