Re: 8/25/00 [BIFS] Suspicious: Biofiltration Systems
SUSPICIOUS STOCKS
Suspicious: Biofiltration Systems
By Bob Davis
Fri Aug25, 2000 10:33AM EDST
The run-up in the shares of Biofiltration Systems (OTCBB: BIFS) began about two weeks ago, on August 7. The company issued two press releases that day which probably helped to feed this fire, as the stock jumped about 10 percent, closing at $0.51 for the day.
A well-timed story about BIFS in a South Carolina newspaper on August 8 fanned these flames. More press releases followed and the price continued to climb. Another press release on August 9 pushed the stock to $1.00 by the 11th, while the next week saw a flurry of four new releases that pushed the stock to $2.26 a share at the open on Wednesday, August 16.
But from there, things went downhill. As the result of a 100-to-1 forward stock split on April 15, the company had a total of 512,890,716 shares outstanding on June 30. On August 16, a total of 44 million shares changed hands, and BIFS price dropped precipitously to $0.52 -all before lunch on the East Coast! But then it promptly rebound to close at $1.22. Subsequently, the stock has drifted downward to a close of $0.59 on August 24.
But lately, the BIFS story has become even more complicated. On Wednesday, August 23, Bloomberg published an article that mentioned the company, but largely focused on the "varied activities" of one Orville Baldridge, a stock promoter with a singularly checkered history who reportedly had worked with BIFS in the past.
But later that same day, BIFS issued a press release of its own, stating that its relationship with Baldridge had started "over two years ago" and had been terminated by BIFS "upon experiencing Mr. Baldridge's unsatisfactory performance over an eight month period of time." In summary, it states "BioFiltration Systems, Inc. (OTCBB: BIFS) announced today that it has absolutely no involvement with Orville Baldridge, 55, of Casselberry, FL. This matter was resolved in early 1999."
And then, in the late morning of August 24, a post appeared on several different I-net forums dedicated to BIFS. Although it was not sent out by any of the various press release distributors, it looked a lot like a real press release, and it stated: "LAS VEGAS -AUGUST 24, Pluvia Securities Research Initiates Coverage of Biofiltration Systems Inc., (OTC Bulletin Board: BIFS), at the current price of $0.67 with a STRONG SELL Recommendation and a target price of under .02 CENTS."
What is the "Story"?
It does not appear that any of the I-net investment newsletters have been "promoting" BIFS recently. However, a mosaic of its "story" can be constructed from an article in a Myrtle Beach, South Carolina newspaper, supported by the eight press releases that the company has issued in August, as well as the nine releases it sent out in July.
According to the August 8 issue of Myrtle Beach Sun News, "Myrtle Beach-based Beach Access (a BIFS subsidiary) has developed technology that turns any laptop computer into a high-speed, wireless, mobile unit. The company with 18 employees is negotiating to launch the technology across the country." This article goes on to state, "Beach Access overcame the hurdle other companies couldn't jump, creating a system that runs at 1,780 kilobytes, more than 100 times faster than other wireless services, said Jay Knabb, Beach Access' chief executive officer."
BIFS previously had been a largely unsuccessful participant in the pollution treatment industry. However, this "summer flood" of press releases laid out a picture of new relationships and recent acquisitions that were rapidly converting it into an Internet Service Provider. Reportedly, BIFS is putting into place in Myrtle Beach a "roaming broadband high speed wireless internet with measured speeds of 2 mega bits per second or 256 kbps."
What's Wrong with the "Story"?
Probably the most conspicuous problem with this "Story" is how incredibly overvalued BIFS has become, and still is as of its August 24 close at $0.59. Given the 512,890,716 shares that were outstanding as of June 30, 2000, the market is valuing this company at $303 million, even though it has never been profitable and only has $2.3 million in assets. At its high, the market valued this company at almost $1.2 billion!
If BIFS or its new subsidiaries actually had developed a "breakthrough wireless Internet technology," such a market valuation might be justified. However, the actual source of BIFS wireless Internet technology is not clear.
In its various SEC filings, BIFS refers to only one patent, for an aircraft de-icer remediation process, while it does not mention any patent protection for any wireless Internet technologies. Therefore, it is unlikely that BIFS actually controls this technology.
BIFS acquisition of Revcon Technologies on June 14 may have provided the company with access to these technologies, as Revcon apparently has been using them for several years. According to the Metro Nashville Police website, "Currently we are working with Revcon Technologies Corp who provide wireless 3.2Mbit/sec links to five of our precinct stations and a 10MBit/sec link to the Metro Nashville Police Training Academy (5.6 miles remote)." Reportedly, they have been using this system "since early 1998."
However, it appears that BIFS "strategic alliance with OTC Telecom, a wireless hardware manufacturer," announced two days later on June 16, is a more likely source for the technology itself, as it already manufactures and markets this type of equipment. In fact, the OTC Telecom website shows a picture of the "AirEZY Wireless LAN," which appears to be the same unit used by BIFS.
In fact, it appears that Revcon may not have been actively in business prior to its acquisition by BIFS. BIFS most recent 10-Q Report states that:
"In May 2000, Beach Access.Net, Inc. acquired all of the common stock of Revcon Technologies, Inc. and the business assets of Alliance Computer Systems, LLC."
"Neither of these operations had significant operations during the six months ended June 30, 2000."
Net-net, it is unlikely that BIFS actually controls this proprietary technology, but instead is merely a distributor for OTC Telecom. In addition, a search of the Internet indicates that there are a number of competing sources for similar technology, offered by substantially stronger companies.
In addition, there are a couple of other discrepancies in recent BIFS press releases:
There are serious discrepancies in the BIFS press release of Wednesday, August 23 concerning its relationship with Orville Baldridge. In this release, BIFS stated that its relationship with Baldridge had started "over two years ago" and had been terminated by BIFS "upon experiencing Mr. Baldridge's unsatisfactory performance over an eight month period of time."
However, BIFS issued a press release on April 22, 1999 that stated "Al Keyser, President and CEO of Biofiltration Systems, Inc. (OTC Bulletin Board: BIFS) announced today that they signed a contract with Worldvision Financial Group for Investor Relations." A second press release issued by BIFS on May 17, 1999 lists "Orville Baldridge" of Worldvision Financial Group as its IR contact.
Clearly, BIFS relationship with Orville Baldridge did not end "in early 1999."
At this point, I would probably be guilty of nit-picking if I pointed out that the "DuPont trade show" for which BIFS announced a contract to provide "wireless internet services" is actually on the Myrtle Beach Convention Center calendar of events as an amateur golf tournament.
The moral of this story: If you can't find out what it is, don't invest in it!
--------------------------------------------------------------------------------
Bob Davis is the editor and founder of The Napeague Letter, has 15 years' experience as Chief Financial Officer of two different Nasdaq companies and a Harvard MBA. He does not own stock in, has not been compensated by and has no affiliation with any of the companies he analyzes or their agents or affiliates.
financialweb.com |
