By: Ihatecrybabies $
Reply To: None Tuesday, 6 Mar 2001 at 7:54 AM EST
Post # of 14403
IVES HEALTH COMPANY, INC. (OTCBB:IVEH) – IVES WIDE SHUT
March 6, 2001
March came in like a lion for Ives Health Company, Inc. Now, it seems, the Company might be going out like the proverbial lamb.
Today, March 5, 2001, the SEC announced that it had suspended trading in Ives through March 16th because of “questions regarding the accuracy of public statements by Ives Health to investors concerning, among other things, a product being marketed by Ives Health for treatment of human immunodeficiency virus.''
The SEC action may represent a body blow to Ives. The Company recently claimed that one of its products, called “T-Factor,” is “an all-natural remedy that has been proven to increase T-Cell counts in HIV patients.” On February 15th, the Company announced that “T-Factor® has been successful in increasing T-Cell (CD-4) cell counts in HIV patients by an average of 18 cells per milliliter of blood per month, with some patients averaging as much as 65 cells per milliliter of blood per month.”
According to the Company, the product evolved from something called the “Java Project,” “a landmark AIDS study carried out on 186 patients of Asian descent by Dr. Slayton-Bedeen, …in Jakarta and Bangkok.” The Company claimed that over 80% of those patients experienced documented decreases in HIV RNA and enhanced CD-4 counts after 24 weeks. The project, Ives said, found that “hormonal inhibitors…like T-Factor®, might initiate profound and sustained suppression of HIV replication.”
What did this mean? A fair amount of hyperbole for one thing. Just listen to the Company’s President and Founder, Keith Ives:
“This is incredible news. There has been a revelation occurring in HIV healthcare that has linked T-Cell loss to immune system deficiency. The Java Project was the first study to be conducted on this type of natural remedy. Anyone who is skeptical of the ability of natural drugs to succeed where man-made chemicals can't, will surely be forced to take another look. If we can gain the support of the media, our investors, and HIV patients worldwide, Ives Health Company could help millions of people.''
Mr. Ives may not have gained the immediate support of the media and HIV patients as he hoped, but investors certainly responded to the notion of an “all-natural” tool for combating HIV and AIDS. On February 12, 2001, 12,000 shares of Ives common stock were traded on the OTC Bulletin Board, closing at a price of 6 cents. Then, on February 15th, the day the Company announced its “ground-breaking” study, investors traded 4.152 million shares of Ives, and prices reached 55 cents before closing at 41 cents. The next day, February 16th, almost 4.5 million shares changed hands, with prices reaching 73 cents per share.
In the wake of this investor interest, the Company had more to say. On February 19th Ives issued another press release reiterating its view that “the product has almost no side effects” and promising efforts to have “the product tested and notarized by a celebrity who is battling HIV.” Ives also announced that “in order to facilitate the public's unbelievable response to T-Factor® and the Java Project,” the Company would be making “a brief summary of the Project, that will include patient profiles” available on its website.
And, of course, the Company was gratified by the overwhelming interest in its shares as evidenced by this statement: “HIV is a terrible virus and the enthusiasm that the investment community is showing over T-Factor will help us get the word out to millions of people who desperately need our help.”
That message was not lost on investors, who continued to flock to Ives. On February 20th, another 3.2 million shares were traded, followed by volume of 2.6 million shares and 1.5 million shares on February 21st and February 22nd, respectively.
Investors were buying the Ives story – and the Company’s shares. But what was the genesis of that story and who was selling all those shares? These were some of the answers we were seeking – even before we learned of today’s SEC action.
THE MARCH OF IVES
In its public filings, Ives says it is in the business of selling “innovative, safe, high quality, natural non-prescription medicines and nutritional supplements,” including “natural medicines, herbal formulas, vitamins, minerals and homeopathic medicines.” In fact, it began talking about “T-Factor®” and a supposedly related product called “Immune 2000” long before it issued the February 2001 press releases.
On May 8, 2000, Ives filed a Form 10-K Annual Report for the year ended December 31, 1999. In that report, Ives said that it was developing and marketing “Immune 2000,” a product which purportedly “boosts immune system function while reducing secondary infections.” The Company maintained that “Immune 2000,” had “been tested on AIDS patients and significantly increased their immune system function while reducing secondary infections.” Ives said it acquired the rights to Immune 2000, and T-Factor, from Dr. Robert Slayton Bedeen in July of 1999.
The Company continued to discuss both Immune 2000 and T-Factor in an SB-2 Registration Statement filed on November 6, 2000. There, it maintained that the Company’s feature products included “T Factor, (an AIDS and Auto-Immune Illness treatment that significantly raises T- Cell, CD-4, CD-24 and CD-26 blood levels, thus greatly enhancing the immune system)” and “Immune 2000 (a scaled down version of T Factor for daily immune system enhancement).”
Investors, as well as physicians, scientists and HIV/AIDS sufferers, may want to know the basis for the claims made by Ives. They may also want to review the study to determine what procedures were utilized and what standards were maintained. This could pose a problem. Ives maintains that the actual patient files cannot be transported out of the country where the tests were performed. Why would any country object to the export of such files? And what would prevent the scientist from removing them? Ives doesn’t say. So curious investors and others will have to rely upon the limited data offered by the Company.
Ives says that Dr. Robert Slayton Bedeen conducted his study in Bangkok, Thailand and Jakarta, Indonesia between February 1991 and January 1993. As evidence of the results, the Company offers a “study report” which it says is based upon Dr. Slayton Bedeen’s “laboratory journal” and a chart of “test results” for 186 “patients.” These “test results,” which list a series of numbers and percentages, do not even contain column headings that would explain what those numbers represent. In any event, the “study report” maintains that subjects in the study demonstrated “improved health in addition to slowing the progression to AIDS” and that “asymptomatic patients given ‘2C-75’ (T-Factor) were more than three times less likely to progress AIDS.”
How was the study conducted? What standards were maintained? The Company does not say. Has there been further testing since 1993? Have any major pharmaceutical companies, universities or medical institutions pursued the findings? Ives gives no indication that they have.
If that is the case, investors can only wonder why such a landmark study has remained undiscovered these past eight years, particularly in view of the amount of funding and attention dedicated to HIV/AIDS research during that time.
The Java project completed in 1993 and Ives apparently obtained the necessary licenses from Dr. Slayton Bedeen in July 1999. So why then did the press releases suddenly appear in February 2001?
THE IVES HAVE IT
On November 6, 2000, the Company filed to register 4,571,429 shares on behalf of three “selling stockholders”: Gata Investments Ltd. (a British Virgin Island company); Altea Investments, Ltd. (a British Virgin Island Company); and TVP Capital, Inc. (A New York Corporation). Ives said that it had entered into a Stock Purchase Agreement with the three entities on July 29, 2000 for the future issuance of registered shares of Ives common stock.
Under that Stock Purchase Agreement, the three purchasers had agreed to provide Ives with up to $2.4 million over an eleven month period, in exchange for shares of Ives common stock. Ives was entitled to request periodic draws during that period based upon a complicated formula that considered both the price and volume of Ives shares during 20 day periods preceding each draw. In substance, the purchasers would receive shares of Ives at a discount of 30% to the average daily trading price for the common stock during the 20 days preceding each draw.
In addition, the law firm of Bondy & Schloss was to receive 4% of each draw as a “finders fee” for having introduced Ives to the three purchasers. Bondy & Schloss had a dual role here – they were also lawyers for the Company. Ives noted that Bondy & Schloss had received 200,000 shares of Ives stock and warrants to buy another 544,000 shares at 50 cents per share.
Readers of StockPatrol may recognize the names of at least two of the participants in this transaction – Altea and Bondy & Schloss. In our recent series featuring a company called Infotopia, Inc., we noted that Infotopia issued 16.8 million shares to Altea Investments, Ltd. on January 4, 2001. (See Infotopia, Inc. Part III – Bye Bye Shares). Just one week later, on January 11, 2001, Infotopia filed a Form SB-2 registering 20,780,000 shares of stock on behalf of Altea. That same SB-2 registered 1 million shares on behalf of Infotopia’s lawyers – Bondy & Schloss.
Infotopia and Ives have had at least one other thing in common. On January 25, 2001 Ives announced that it had retained the services of Strategic Communications, which it described as a “leading investor and media relations firm.” Press releases announcing the efficacy of “T-Factor®” followed soon thereafter. Strategic Communications represented Infotopia for a period during the year 2000.
Has Ives requested any of the “draw down” funds, and if so, how many shares have been issued to Altea, Gata and TVP? According to a Form 10-Q filed with the SEC for the quarter ended September 30, 2000, Ives received the initial “loan,” totaling $498,000, on July 29th. That loan may be converted into Ives common stock at the rate of 50 cents per share – or about 1 million shares. The Form 10-Q indicated that another $250,000 in funding would be forthcoming as soon as the Company filed an SB-2 Registration Statement, with yet another $250,000 to come when the Company received its first set of comments on that Registration Statement from the SEC. This, of course, is in addition to the periodic funding to be received by Ives based upon the market price and volume of Ives shares.
Has Ives issued any more shares to Altea, Gata and/or TVP? As noted above, that SB-2 Registration Statement was filed on November 6, 2000. And, in the ordinary course, it is likely that the SEC issued its initial comments by sometime in January. If that is the case it appears that the Company has received at least $500,000 in additional funding which could then be converted into Ives stock. But at what rate? During the twenty days preceding November 6th, for example, Ives shares closed at prices ranging from 9 cents to 18 cents – or an average of about 13 cents per share. Had any shares been issued at a 30% discount to that price (about 4 cents per share)? Even if shares continued to be issued at a rate of 50 cents per share, lenders would have received another 1 million shares for their additional funding.
Ives does not say whether those additional loans were made, or, if they were, whether they have been converted into stock and at what rate. It also has not indicated whether the Company exercised its option under the Stock Purchase Agreement to draw down additional $200,000 portions of the $2.4 million financing at 20 day intervals. By the end of January 2001 more than 180 days had passed since the Stock Purchase Agreement went into effect. That meant that, theoretically at least, the Company might have had the opportunity to draw down as much as $1.6 million dollars more by the end of January 2001. At the same time those three lenders – Altea, Gata and TVP - could have received still more shares of Ives stock. Without more details from the Company, however, it is difficult to determine just how much money was received and how many shares were issued. Perhaps one clue can be found in that Registration Statement. Ives registered 4,571,429 shares for the three “lenders.”
Investors would be hard pressed to get that information directly from Altea, Gata or TVP. Ives does not indicate who controls the three entities or where they maintain any offices.
IVES ON THE PRIZE
The trio of lenders were not the only ones who were fortunate enough to receive shares of Ives stock shortly before the Company made its blockbuster announcements concerning “T-Factor®. On January 18 the Company filed a Form S-8 to register 3 million shares that had been issued to a consultant identified as Robert Pierce of Reno, Nevada. Ives did not describe the consulting services that Mr. Pierce had rendered or attach a copy of any consulting agreement. As best we can determine, Mr. Pierce is not an officer, director or employee of the Company, and we have been unable to find any other reference to him, or to his consulting services, in the Company’s recent public filings.
Indeed, the Form S-8 suggests that those shares were not simply issued to Mr. Pierce in consideration for his consulting services. The Company states that the shares were “issued at the fair market value on the date of issuance as determined by the Board of Directors in lieu of bona fide services rendered and to be rendered.” The S-8 goes on to say that Mr. Pierce gave the Company a promissory note for $145,000, representing “the balance of the purchase price for the 3,000,000 shares of common stock.”
More details were provided in an Exhibit to the opinion letter submitted by the Company’s attorneys at the time of the S-8 filing. The attorneys, Slicker & Alberty, PC, explain that Pierce paid Ives .001 cent per share – representing the par value of the stock – and delivered a promissory note representing another 49 cents per share. That would make for a total purchase price of 50 cents per share – exactly the same as the price paid by Altea, Gata and TVP in connection with the first “draw-down” by Ives. Is this a mere coincidence?
The Company does not indicate the exact date shares were issued to Mr. Pierce. How then did the Company arrive at a price of 50 cents per share? Ives shares had not closed at prices as high as 50 cents since July 31, 2000, almost six months earlier. On the other hand, if Mr. Pierce was paying for the shares, exactly what did he receive for his unidentified consulting services? And why was an S-8 Registration Statement filed on his behalf, at a cost to the Company of $5,000? An S-8 Registration Statement is unique because shares become registered as soon as the form is filed with the SEC. But it is also limited in utility since it can only be used in connection with shares issued to certain categories of employees or consultants. So if Pierce is a consultant, what has he been doing – and why is he paying more than market value for the shares?
There is at least one more strange twist to the Pierce consulting shares. On March 2, 2001 the Company filed another S-8 – again registering 3 million shares for Pierce. Except for the new filing date the March 2nd S-8 was identical to the one that had been filed on January 18th. Had the Company simply refiled the Form S-8, and if so why? No further explanation accompanied the second filing.
In any event, it appears that Mr. Pierce may have been quite fortunate, even if he was required to pay that 50 cents a share and render the unspecified consulting services. After all, just one month after the initial S-8 was filed Ives issued its “T-Factor®” press releases and the value of those 3 million shares soared as high as $2.1 million. Of course, if he has not yet sold the shares he may not feel so fortunate now that the SEC has halted trading.
So who is Mr. Pierce ? Without more information, it is difficult to determine. But consider this. On September 21, 2000 Infotopia (remember them?) issued 6,200,000 shares to a consultant identified only as Robert Pierce , “for consulting services for the World Wide Web and Internet projects.” Those shares were registered on a Form S-8 filed by Infotopia’s attorneys – Bondy & Schloss. Infotopia did not provide an address for Robert Pierce , or any other information from which he might be further identified. Could it possibly be the same Robert Pierce who wound up receiving S-8 shares as a “consultant” to Ives less than four months later? Without more information, there is no way to be sure.
One thing seems clear however. Pierce, Altea, Gata and TVP all received shares before the Company’s stock price soared in the wake of the publicity that attended the “T-Factor®” press releases. Were they among those sellers who accounted for the dramatic jump in share volume after February 12th?
Little wonder the SEC has some questions it wants answered.
©2001 Stock Patrol.com. All rights reserved.
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