Dr. AcTVnet and Mister Shopss
Efi Landau
30.11.1999 17:58
Another store was opened last month in the shopss.com virtual shopping mall on the Internet. US company OSCM, listed on the US over-the-counter stock exchange as OSCAR, a company which owns Shopss.Com, announced last week it was transferring the activity of its virtual mall in the US and Israel to US company AMCI. AMCI, which will henceforth be called Shopss, is also listed on the over-the-counter exchange.
It also turns out that a group of businessmen from Arab countries is a partner in both OSCM and Shopss. At the beginning of October, OSCM announced Q3 sales of $80 million, as well as expected sales of $500 million in the near future. "Globes" reveals that the source of revenue is a giant deal with the same group of Arab businessmen, who are to develop shopss.com virtual shopping malls in their countries. In order to fulfill the deal, OSCM is currently inaugurating a computer manufacturing plant in Israel, to be marketed to the malls in Arab countries.
The company's management team is Israeli and works in Israel, and the company is connected commercially and through ownership with another Israeli company, CMR, which developed technology for transmitting faxes over the Internet.
Behind the scenes is the company's confidential advisor Israel Rosenfeld, who founded and managed it. Rosenfeld is well known in the Israeli Internet market as the man who initiated and founded and AcTVnet, the Internet virtual shopping mall company, which went bankrupt over a year ago, leaving debts (NIS 5 million to Bezeq alone), unpaid employees, and customers without their goods.
Has AcTVnet been reborn as OSCM in Rosenfeld's image, whose name has been mentioned in connection with not a few projects later exposed as overblown balloons? Will this balloon also pop with an even bigger noise, or is it the beginning of a phenomenal Israeli success in both the Internet and communications market?
It is difficult to answer these questions, so the question will be examined from all possible angles, while allowing the reader to reach his own conclusions. Have a safe flight.
One Stop Communications (OSCM) engages in two main fields: virtual shopping malls and telecommunications services over Internet. The company's name was originally One Stop Car of Florida (OSCAR). It was acquired by former Kardan Communications general manager Israel Letzter, an ultra-orthodox businessman, at the beginning of 1997. Letzter was also the largest shareholder in the Israeli Internet companies AcTVnet and Shani Information Technologies, which, as mentioned, went bankrupt.
OSCAR was mentioned in connection with the fall of the two companies. Two months before the end, in June 1998, OSCAR announced that AcTVnet had acquired a large proportion of its shares; on the basis of this announcement, the shares began to be traded and doubled their value. OSCAR later announced that AcTVnet had received a $60 million order from WorldCom. The similarity in name between this company and the US communications company MCI WorldCom was apparently no accident, and the shares got another upward push. AcTVnet and Shani later collapsed and OSCAR disappeared, as did Israel Rosenfeld.
He didn't vanish completely, however. Rosenfeld, who was AcTVnet's marketing manager, where he conceived the idea of an electronic shopping mall (which failed), was appointed general manager of OSCAR by Letzter. In November 1998, he announced the launching of a new project, Studio 2000, with a giant investment of $600 million. According to the announcement, the project was to enable Internet users to receive a fast hook up to the Internet, and even supply them with various types of content, such as video on demand and interactive television.
The money was to come from different investors over the world. Rosenfeld promised that the British company Motion Picture Bond (MPB) would provide guarantees of the investors' money, receiving for that purpose backing from its parent company, London Insurance Group. According to the announcement, the project was to have been carried out by a company called Israfilm '98. The project never took place, due to a dispute between Rosenfeld and London Insurance Group. The publishing of the disagreement in the newspaper "Haaretz" led to the filing of a libel suit by Rosenfeld against the newspaper. For obvious reasons, we refrain here from publishing details.
The Studio 2000 adventure brings to mind another of Rosenfeld's projects two and a half years ago, before AcTVnet, when he called on investors to manage their portfolios through a company named Wall Street Investments, which had a special model, supposedly preventing any losses. There was an advertising campaign, but the project ended there.
That was the last bow of OSCAR. OSCM appeared in its place in February, still managed by Rosenfeld, and gained headlines with its offer of 25,000 iMac computers, Apple's new colorful computer, in exchange for a commitment to spend $100 a month for three years in the Internet virtual mall developed by shopss.com. The iMac distribution was very reminiscent of the free computers in the AcTVnet virtual shopping mall, which in many cases were never available.
At the same time, OSCM signed an agreement to market communications products and services of the Israeli company CMR and openeda virtual shopping mall in Israel, called shopss.co.il and a store in Herzliya Pituah, with computer stands and shop clerks helping customers to buy products in the virtual mall. The marketing idea, also Rosenfeld's, was very original and interesting, constituting a riveting combination of e-commerce and actual commerce. A fleet of four trucks operated to transport the goods to the customers' homes.
At the beginning of October, as mentioned, OSCM published a bombastic announcement of expected income, which was to transform it into the success story of the year. Meanwhile, it turned out that Rosenfeld is no longer general manager, but "only" a consultant. The general manager is now Rami Adler. The company is no longer just a name, but operates worldwide communications and e-commerce business.
"Globes": Rami Adler, which company are you?
Adler:"We are a communications company operating voice and fax over the Internet, and we are an electronic shopping mall".
What are you doing in the field of voice over the Internet (VOIP)?
"We are laying networks and switches in the US and all over the world. We want to be a communications company".
That's the final goal?
"We want to be a very large company. 20% of the US market in international and regional calls is in the hands of small companies. In the first stage, we will be one of the 20% companies, and afterwards, perhaps one of the large ones. We are speaking only of Internet conversations".
Let's talk about the virtual shopping mall.
"We set up a members' club and a buyers' club. The original offer was a free computer, which we were the first to make.
"In Israel, which is a test case for the US, where we want to do the same thing, we have warehouses in Moshav Zeitan, we have a fleet of four trucks, which is about to grow to 26 trucks, transporting all over Israel, and receiving online supply orders from customers. On Long Island, we have a company, named Shopss, doing the same thing"
Is that the deal you announced a week ago?
"Yes. We sold the virtual shopping mall business to a US public company named AMCI for $5 million and 60% of its shares. We are transferring all Shopss.com activity to it, as well as the activity of our computer company, CCM".
Is this deal connected to your announcement at the beginning of October of expected sales of $500 million?
"The deal seems simple, but there is much more. We have signed contracts with Arab capitalists that ensure high sales".
Additional pressure solicits the information that the capitalists are from Egypt, Jordan, Syria, UAE, and almost all the Arab countries. What Adler didn't say, and what became clear four days later, was the fact that the Arab businessmen hold the remaining 40% of Shopss and 23% of OSCM - a surprise.
I want to understand. Is there a local site of shopss.com in every Arab country that you mentioned, like the Israeli site, which operates in the same fashion?
"Yes".
So where are the sales you announced - $80 million in Q3 and $500 million without a defined time period?
"We have 20,000 subscribers in Israel, each of whom pays $20 a month and get 20,000 computers. The contract speaks of another 200,000 subscribers. That's $20 million revenue. In addition, $60 million is telecommunications equipment. That comes to $80 million. We get to $500 million with revenues from services".
What services?
"We are going to lay a worldwide communications network. We are selling equipment of two companies: CMR and a second, unknown company, which sells voice equipment. The Arab group buys the equipment and supplies the service. We get 50% profit".
Where will you get 20,000 computers, and later another 200,000?
"I'm setting up a plant in Israel on Moshav Zeitan. We're recruiting manpower".
You're playing down the involvement of Israel Rosenfeld in OSCM and in shopss.com.
"Rosenfeld has a very bad past. He has a criminal case against him with the Israel Investments Center, he was involved in a failed investment in AcTVnet, he is being sued by that company's general manager, and he is conducting a libel suit against 'Haaretz'".
Is he a shareholder in OSCM?
"There is a shareholder in the company named Aharon Rosenfeld, who is connected to Israel Rosenfeld".
During the interview with Adler, in response to a question about OSCM's shareholders, he provided a temporary list from memory, promising an official update. According to his memory, Aharon Rosenfeld holds 15% of the shares, he himself holds 16%, Israel Letzter 7%, IDT 11%, AcTVnet 11%, an Israeli subsidiary named TSC 17%, and the public and small shareholders 20%.
Who is IDT?
"They bought the shares a while ago, and I don't know who they are".
It became evident later that he absolutely did know that IDT was Israel Letzter's compay.
Three days later, the company's public relations person gave me the official list of shareholders and some results. They were unrecognizable.
According to the new list, Israel Letzer and IDT as a group held 23% of the shares, Rami Adler 13%, Aharon Rosenfeld 11%, IDTI 23%, various managers 2%, the subsidiary 14%, and the public 14%.
I asked Adler who IDTI was. "It's an Arab group", he answered. This revealed for the first time that the investors from Arab countries with whom OSCM signed an agreement to set up local shopss.com sites and communications networks in their countries were a party at interest in the company. Their interest was not so small, either: 23%. Furthermore, the same investors, IDTI, are involved in the transaction for transferring assets and business of shopss.com to ACMI, now called Shopss. OSCM received $5 million and 60% of the company.
Israel Letzter, an ultra-orthodox businessman from Netanya, is the mystery man of the story. To answer our questions, he sent his brother-in-law, who didn't give his name. The brother-in-law said that IDTI had communications business in the US, Canada, Turkey, Nigeria, Ghana, South Africa, Laos, Cambodia, and Vietnam. No, he doesn't operate in Israel, and he has no current business relations with OSCM besides the shares that he holds. No, you can't talk to him. He studies Torah in yeshiva and is very busy.
One of OSCM's agreements is with CMR, controlled by Moshe Brown, which developed technology for providing fax services over the Internet.
Adler: "CMR was a company with a product that was 99% developed. That's where we came in and gave them some technological ideas. Rosenfeld, with all his disadvantages, is a genius. He's very wise. With the help of his vision, they received the same share, which places them technologically in the first row in Internet fax".
Did you invest in CMR?
"Yes. We have two contracts with CMR. One is purely for marketing. Without ti, CMR would not continue to exist. When the cotract is totally fulfilled, we have an option to acquire 40% of the company. We invested money, either in advance of purchasing products, or on account of investment in the company. The amount is $500,000".
Moshe Brown: "He is our biggest customer. They bring us a lot of money. I have heard all the stories about Rosenfeld, and we were very nervous about it. At first, we were afraid that it was all a facade, but it wasn't. They work; there's activity. My relationship with them is supplier-customer. We would love to have some more customers like them. They pulled us forward, and more is ahead".
Published by Israel's Business Arena on November 29, 1999 |
