Re: 4/18/02,9/12/02,9/13/02,10/28/02 - [PAXM/CSOU] Stock Patrol: 25 Million Reasons; Only the Name has Changed; Split Happens; A Shrinking Core
PREMIER AXIUM ASP, INC. (OTCBB:PAXM) – 25 MILLION REASONS
April 18, 2002
A company called Premier Axium ASP, Inc. (OTCB: PAXM) is being heavily promoted these days. E-mails have been arriving from a variety of sources – we have seen at least a half dozen, each from a different, anonymous sender. While the senders use such nondescript names as ure@home.com, adamsd@maktoob.com and mail2@centrum.cz., they all appear to be related to something called “Emerging Equity Alert.” At least that’s the name that appears on the “disclaimer” appended to the end of the e-mails.
Why are the e-mails so enthusiastic about the prospects of this little-known business? Emerging Equity Alert has its reasons, 25 million reasons, in fact. It seems that Emerging Equity Alert received 25 million unrestricted shares of Premier Axium stock from “a third party” for publishing these reports.
Curious investors may be wondering who is behind Emerging Equity Alert, who has been sending those e-mails, and the identity of that generous “third party.” So are we. Our attempts to contact the e-mail senders have been unsuccessful. Our replies to the e-mails have all been returned as “undeliverable.” Not surprisingly, we also have been unable to locate Emerging Equity Alert.
All of this leaves us somewhat skeptical; after all, if this promoter stands behind its recommendation, exactly where is it standing, or sitting – or in this case, apparently hiding?
A Cupboard That’s Bare
Investors may want to contrast the public picture of Premier Axium with the unbridled optimism expressed by the Emerging Equity Alert group. The Company, which became public in February 2001 through a reverse-merger, provides human resources services, including automated payroll information and the administration of employee benefit plans. So far, however, it has enjoyed only limited success in a competitive field.
Premier Axium has not yet filed its Form 10-K Annual Report for the year ended December 31, 2001; the Company advised the Securities and Exchange Commission on April 1st that the 10-K would be filed no later than 15 days after it was due. More than 15 days have now passed and the Form 10-K has yet to appear on the SEC’s Edgar system. Until it does, investors must rely on the information contained in the Company’s last quarterly report, a Form 10-Q for the period ended September 30, 2001. That filing reveals that revenues for that quarter were just $39,800, while operating expenses exceeded $63,000. It also indicates that, for the first nine months of 2001, revenues were only $160,141, while operating expenses were $552,573. Those revenue figures offered no perceptible sign that this Company is “positioned to be an industry leader,” as the e-mails now proclaim.
Nor were investors likely to find any comfort in the state of the Company’s assets. As of September 30, 2001, Premier Axium had no cash. In fact, it was overdrawn at the bank. The Company disclosed a $30 balance in its account at Wells Fargo Bank, and that was the good news. The Premier Axium account at Union Bank of California was overdrawn by $151. Current assets, to the extent they did exist, consisted principally of approximately $128,000 in commission receivables.
Those numbers hardly suggest a business that is described by the Emerging Equity Alert group of newsletters as “positioned for enormous growth in 2002 through [an] aggressive acquisition plan.” The Company’s financial resources were limited, at best. How then does Premier Axium plan to finance its existing operations, much less any acquisitions?
On July 10, 2001, the Company issued a press release claiming that it had obtained a firm commitment for a $10 million credit facility from San Francisco based Allied Boston Group to be used for acquisitions and operations. There is no further indication, however, that this deal was finalized. It is not even mentioned in the Company’s September 30, 2001 Form 10-Q.
Premier Axium has stated that it plans to expand its market presence through aggressive acquisitions, echoing the theme of those promotional e-mails. So far, however, there is no indication that this strategy has succeeded in establishing Premier Axium as a formidable player in its field. On April 18, 2001, the Company announced that it would acquire a payroll and accounting services business called Axium ASP, Inc. through a stock swap. This seemed to be a major step for the Company since, according to an April 18, 2001 press release, Axium ASP “and related companies have realized tremendous growth of revenues, from $40 million to approaching $1 billion in the last 13 years.”
How much of that business actually was serviced by Axium ASP? The press release did not say, but Curtiz J. Gangi, Premier Axium’s President at the time, called the acquisition “the final step for our company to be a full-service…Application Service Provider.” Mr. Gangi went on to say that “we now have the infrastructure and technology to become a leader in the very fast growing payroll, [human resources], employee benefits and insurance outsourcing industry.”
As it turned out, Premier Axium would be looking elsewhere for that “final step” and “infrastructure.” It would also be seeking a new President. The Company’s Form 10-Q for the quarter ended June 30, 2001 disclosed that plans to acquire Axium ASP had been abandoned.
That June 30, 2001 Form 10-Q (like the Form 10-K for 2001) was not filed on time. The Company later claimed that the Form 10-Q filing was delayed because “the officer responsible for accounting matters for such period failed to adequately discharge his duties, as the steps required to prepare the financial statements necessary to file the Form 10-QSB in a timely fashion were not taken.”
Premier Axium did not identify the officer who had “failed to adequately discharge his duties,” but when the June 30, 2001 Form 10-Q was filed, Curtiz Gangi was no longer signing as Premier Axium’s President. The new President was identified as Christine McKiernan.
Despite the failure of the Axium ASP transaction, the Company had not stopped looking for acquisitions. On July 17, 2001 it announced an agreement to acquire two more companies, a payroll system and software business called Savvy Employer, Inc., and a professional employment organization called Active Employment Solutions, Inc.
Although the Company says that the acquisitions closed on August 8, 2001, Premier Axium does not appear to have filed a Form 8-K containing audited financial statements for the acquired businesses. Consequently, investors may have some difficulty assessing their value.
New and Improved?
Premier Axium was not done. It still had acquisitions on its mind. On March 1, 2002 the Company said it planned “to achieve its 5 year strategic plan for an industry-wide rollup of the staffing and PEO industry.” That announcement came from Premier Axium’s “newly appointed President Anthony Burnham” - at least the third person to occupy that office in the past year. In a March 1st press release, Burnham outlined “an intense acquisition strategy,” proclaiming that
It is projected that [Premier Axium] will achieve approximately $250 million in assets within the next year as it moves forward toward its goal of becoming the leader in providing complete infrastructure services.
Premier Axium’s Chief Executive Officer Christine Favara echoed these sentiments, stating:
These acquisitions will allow [Premier Axium] to execute its strategic plan, and will position the company for rapid entry and growth into the HRO market. We are thrilled to have Anthony aboard and his more than 22 years of experience will play a crucial role in the future success of our company.
Less than two weeks later, on March 13, 2002, the Company was announcing plans to expand its services beyond payroll and human resources, and enter the Business Process Outsourcing industry, by providing “critical administrative and operation functions intrinsic to every company.”
These ambitious plans may have to wait. Meanwhile, it doesn’t look as if Anthony Burnham will be playing any “crucial role in the future success” of the Company. On April 2, 2002, Premier Axium announced that Ms. Favara had withdrawn the offer of employment to Burnham “after evaluating further the companies (sic) cash on hand and slow growth into the BPO market.” Ms. Favara is now President (the fourth in the last year) and CEO.
Conceding that the Company had “undergone many evolutions,” the April 2nd press release said that Premier Axium was cutting overhead by 50%, from $100,000 to $50,000 a month – a number that still seems to well-exceed its monthly revenues based upon the last available figures.
Saying that she was committed to enhancing shareholder value over “the next three years,” Ms. Favara revealed yet another new strategy. The Company now plans to expand its customer base through an aggressive sales and marketing campaign. The press release does not say which services they will be marketing so aggressively, or to whom they will be marketed.
There is no doubt, however, that Premier Axium is being marketed aggressively - by Emerging Equity Alert and its entourage. But is it being presented accurately? Hardly.
Old News
The e-mail campaign has been determined and persistent, but it seems remarkably out of touch with the current state of Premier Axium. The e-mails project that the Company “will achieve approximately $250 million in assets within the next year” based upon the “intense acquisition strategy” outlined by Premier Axium President Anthony Burnham. Those numbers are astronomical. Remember, the Company’s assets totaled less than $164,000 on September 30, 2001. There is nothing to suggest they have multiplied dramatically since that time – or that they are likely to grow at that pace in the near future.
Nor is there any evidence that an “intense acquisition strategy” will lead to those results in the near term. To the contrary, Ms. Favara’s decision to tighten the corporate belt seems likely to put a crimp in those expansion plans. And, as we now know, the architect of those plans, Anthony Burnham, will not be joining the Company after all. The e-mailers must have missed that announcement while they were collecting their 25 million shares.
Then there is this claim by the promoters:
[Premier Axium] has “invested millions of dollars in creating its unparalleled proprietary Integrated Service Branch to provide ultimate human capital management, strategic planning, and information technology services to sustained growth companies.”
That sounds intriguing, but there is one problem. There is no information in any public filing by the Company suggesting that “millions of dollars” were invested in creating any system. In fact, there is no indication that Premier Axium ever has had millions of dollars to spend – certainly not since it has been a public company.
The e-mails go on to mention the Company’s “extensive list of alliance partners,” including Aon Corporation, Acordia, Inc., Sungard Data Systems, Inc., Best Software Inc., Unisys Corporation and Virtual CEO, Inc. But promoters like to through out recognizable and semi-recognizable names when they are touting a little-known company. Here, there are no details of the services provided by Premier Axium to these businesses, no indication that there is any ongoing relationship with these firms, and no explanation of the revenues received.
There can be little doubt that the e-mail campaign was designed to boost interest in Premier Axium shares, but who is behind that effort and who is most likely to benefit? Not public shareholders, who were substantially diluted in January 2002 when the Company filed a Form S-8 registering 175 million shares – there were only 62.9 million shares outstanding on September 30, 2001. On the other hand, Emerging Equity Alert did have those 25 million shares to sell, so the promoters certainly stood to benefit from increased interest in the stock.
As we have seen, however, they were not alone. On January 30, 2002, the Company filed a Form S-8 registering 175 million shares of common stock under its “2001 Restricted Share Plan.” Premier Axium did not say who was receiving the shares, but the Restricted Share Plan provided that stock could be issued to officers, directors or independent contractors. And while the Restricted Share Plan may be called “Restricted,” once the Form S-8 was filed those shares became freely tradable, and could be sold immediately.
The aggressive campaign by promoters appears to have served at least one purpose. Volume for the Company’s shares, which was around 8 million shares for the entire month of February 2002, rose to over 700 million shares in March 2002. It continues to skyrocket, with 32 million shares changing hands on April 12th, 46 million traded on April 15th, 61 million shares traded on April 16th, and another 48 million on April 17th.
It appears that the 175 million shares may have changed hands – several times. It’s easy to see why the S-8 shareholders would want to sell. Any price per share – even if it’s a fraction of a cent – would be pure profit. But that leaves us with a question we have asked time and again. Who is buying this stock?
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UPDATE: CORE SOLUTIONS, INC (OTCBB: CSOU) (F/K/A PREMIER AXIUM ASP, INC.) – ONLY THE NAME HAS CHANGED.
September 12, 2002
Core Solutions, Inc. (OTCBB: CSOU) is back at it again. The Company, which used to be called Premier Axium ASP, Inc., has been busy issuing press releases to announce potential acquisitions and other corporate initiatives.
When we first profiled the Company on April 18, 2002, a group of promoters had been paid well to tout its prospects – with few facts to back up their recommendation. (See Premier Axium ASP, Inc. – 25 Million Reasons) As we pointed out at the time, the Company had no cash, was operating at a loss, and had gone through four presidents within the past year.
Considering its shaky financial state and doubtful prospects, there seemed to be little legitimate justification for the promoters’ enthusiasm.
So why was Core Solutions the second most actively traded stock on the OTC Bulletin Board on September 10, 2002, with more than 145 million shares changing hands? And why were another 112 million shares traded on September 11th? After all, only 121 million shares changed hands in all of August, and a mere 13 million shares were traded in July.
What is going on here?
Making News
We wondered whether the answer could be found in a series of press releases issued by Core Solutions since the beginning of August 2002. But did they really offer any vital information that would generate realistic enthusiasm for Core Solutions stock?
An August 13th press release said that the Company was “currently executing due diligence activities on 10 separate acquisition targets representing $42 million of annual revenue.” Core Solutions called those potential acquisitions “a critical milestone in the development of its revenue.” It went on to claim that the Company still was on track to achieve its “three-year annual revenue goal of $250 million though the development of their corporate infrastructure, sales and the market activities, and a staunch dedication to M&A.”
What businesses was Core Solutions proposing to buy, and how would it pay for these acquisitions? The press release did not identify a single one of the “10 separate acquisitions,” provide any terms of the proposed acquisitions, or offer any details of the $42 million in revenues.
Such details were also absent from an August 15th press release claiming that the Company was considering two more acquisition candidates “representing an additional $11 million in revenues. Was the Company likely to conclude any of these acquisitions? As we noted in our April 18th article, the Company has not fared well in previous acquisition attempts. A plan to acquire Axium ASP in April 2001 was subsequently aborted. According to the Company’s Form 10-Q for the period ended June 30, 2002, planned acquisitions of Saavy Employer, Inc. and Active Employment Solutions, Inc. also failed, forcing the Company to write off acquisition costs of $2 million.
Core Solutions reiterated its “goal of $250 million in annual revenue within 36 months” in an August 20th press release announcing plans to expand the Company’s client bases beyond Southern California and Hawaii. The Company claimed that this initiative followed “a comprehensive demographic, market and competitive study.” No details of that study were provided, and the Company did not indicate by whom it had been prepared.
Next up was an August 22nd press release claiming that the Company’s restructuring plan was “moving in a very positive direction” and predicting “substantially increased earnings by year end.” Although the Company said it had removed costs and eliminated consultant agreements, this announcement, like the earlier press releases, was short on details. And, of course, President Christine Favara, reiterated her confidence in that annual revenue goal of $250 million.
They better get moving. Just four days later, on August 26th, Core Solutions filed its Form 10-Q Quarterly Report for the period ended June 30, 2002. It showed revenues of $329,719 for the first six months of 2002, but only $12,145 for the period from April 1st through June 30th. It was a precipitous drop, and hardly suggests a business headed toward a quarter of a billion dollars in revenues.
Dwindling revenues didn’t tell the entire story. Net losses for the first six months of this year were over $6 million, including approximately $4.8 million in consulting fees and $1.5 million in salaries.
And the Company had no cash – as in zero dollars. In fact, as of June 30th its current assets consisted of a meager $1244 in accounts receivable. Its only other assets were property and equipment worth $14,184.
Still, there apparently was enough money in the bank to keep cranking out press releases. On August 28th the Company announced the launch of its new website, as “the first milestone in [its] 5-stage Technology Plan to be completed over the next month.” Core Solutions did not say how it planned to pay for the development of that “Technology Development Plan,” or what it might be expected to include. When we last looked, the website include a brief summary of the human resources services that Core Solutions proposes to offer to its clients, as well as copies of the Company’s recent press releases and SEC filings.
Did any of these announcements explain the increased trading volume for the Company’s shares? And if not – what did?
Selling and Buying
Core Solutions doesn’t appear to be treating its lack of money as an impediment. On September 10, 2002 the Company announced plans to buy back “up to 100 million common shares over the next four months in the open market in block transactions and in privately negotiated arrangements.”
That should be a neat trick, unless the Company comes into a boatload of cash. Even at its current depressed price - three hundredths of a cent a share - it would cost $30,000 – which was exactly $30,000 more than the Company had in the bank account as of June 30th.
The decision to buy back shares is particularly striking in light of the Company’s recent inclination to hand out stock – lots of it. On July 14, 2002, the Company filed a Form S-8 Registration Statement registering 5 billion shares for its 2002 Benefit Plan. The Company said it planned to issue those shares to employees, consultants and advisors. It did not specify who would be receiving those shares, or when.
The Form S-8 threatened massive dilution to the Company’s existing shareholders, who held an aggregate of just over 1.5 billion shares. That apparently included over 1 billion shares that the Company issued to various consultants during the first quarter of 2002.
Of course, with up to 6.5 billion shares outstanding, a one million share buyback sounds like a drop in the bucket.
Or just another reason to issue a press release.
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UPDATE: CORE SOLUTIONS, INC (OTCBB: CSOU) (F/K/A PREMIER AXIUM ASP, INC.) – SPLIT HAPPENS
September 13, 2002
A further word about Core Solutions, Inc. (OTCBB: CSOU). As we noted yesterday, Core Solutions recently has emerged as one of the most active stocks on the OTC Bulletin Board. There should be quite a few shares to sell since the Company registered 5 billion shares for employees and consultants on July 14, 2002. See Update: Core Solutions, Inc. – Only The Name Has Changed.
Making all of this even most astonishing is the fact that nine days earlier, on July 5th, the Company declared a 1 for 10,000 reverse-split of its common stock. That means that investors received one share of Core Solutions stock for every 10,000 shares they owned on July 5th. In other words, the approximately 1.5 billion shares that were outstanding on June 30, 2002, became a mere 150,000 shares. How likely is it that the Company didn’t anticipate that it would issue all of those new shares when it decided on the reverse-split?
That means existing shareholders weren’t just diluted by the 5 billion shares included in the Form S-8 filing - they were dwarfed. To those unfortunate investors, the 5 billion shares seemed like 50 trillion shares – the number of shares that would have been registered on that Form S-8 on a pre-split basis.
Again, we ask - who received those 5 billion shares? And who has been selling them relentlessly?
We would certainly like to know. And we suspect the regulators will also.
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UPDATE: CORE SOLUTIONS, INC (OTCBB: CSOU) (F/K/A PREMIER AXIUM ASP, INC.) – A SHRINKING CORE
October 28, 2002
It’s happened again. Core Solutions Inc. (OTCBB: CSOU), which declared a 1 for 10,000 reverse split of its common shares on July 5, 2002, has called for another reverse-split. This time, the Company enacted a 1 for 25,000 share reverse split, effective October 23, 2002.
This means that someone who owned one billion shares of Core Solutions stock on July 4, 2002 now has 4 shares. Talk about shrinking values!
Theoretically, this might have caused Core Solutions share prices to rise by a factor of 25,000 – from one hundredth of a cent (the closing price on October 22nd) to $2.50. They did not. On October 25th, Core Solutions shares hit a high of $1.15, before dropping to 51 cents. Two days later, Core Solutions stock closed at 15 cents a share. The Company’s stock price was on its way down, and with good reason. Core Solutions has no cash and suffered net losses of almost $716,000 for the quarter ended June 30, 2002.
As best we can calculate from the public filings, Core Solutions had about 5,000,150,000 (5 billion 150 thousand) shares outstanding before the latest reverse-split. Now there are just over 200,000 shares outstanding.
This new development comes one month after the Company announced a stock buyback program. See Update: Core Solutions, Inc (F/K/A Premier Axium Asp, Inc.) – Split Happens. On September 10th the Company said it planned to buy back up to 100 million shares of its common stock over the next four months. After the latest reverse-split that would amount to 4,000 shares. Even that could be ambitious for this Company. As of June 30, 2002, Core Solutions had no money.
Now its investors have no shares – almost.
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