July 10, 2003 Stocklemon Reports On Spear Jackson. Part 1 (OTCBB: SJCK.OB)
In the early part of the twentieth century, cult figure Aleister Crowley reintroduced the world to black magik and devil worship. Aleister relished in his self proclaim title, “Wickedest Man Alive”. In the early part of the twenty first century, we have a new Crowley upon us, Dennis Crowley. This Crowley also does magic, he has an uncanny ability to make shareholder equity disappear. Dennis Crowley is the notorious stock promoter who is currently the CEO of Spear Jackson Industries. Stocklemon believes that Spear Jackson is an over hyped stock that is setting itself up to disappoint both its investors and its employees.
Spear and JacksonSpear and Jackson is an old-line tool company that has a history but has faced recent troubles due to the competition in the tool market for less expensive imports and declining margins on exports. The former owners of Spear and Jackson, US Industries, has been trying to sell this business for over a year before Crowley came in, but no one wanted to buy it. Then, on September 6, 2002, Spear and Jackson was basically given away to Dennis Crowley for 3,543,281 shares of a shell with no trading history and assumption of a note for 150,000 pounds. If we assess the price of the stock at the same price that Crowley bought stock on the same day, the purchase price of Spear Jackson was just north of $1 million.
On the same day the deal was closed, Crowley financed the company with $2 million dollars in exchange for 6,005,561 shares (35 cents a share).
Let’s be Realistic Here
Being generous, Stocklemon will say this company was sold $1.2 million (we are not discounting for the illiquidity of the shell). This sale number was determined by an Independent Valuation done for a US Industries, a NYSE company. Therefore, we can assume that the $1.2 million figure is fair and reasonable if not generous because the stock was basically worthless.
It is 9 months later and now the company has a market value of $183 million.
If Dennis Crowley were the CEO of the Year and should be placed in the CEO Hall of Fame then maybe he would increase the value of the company by 100% in 9 months. If he did 200% he would be a business god. But to have the value of the company increase to $180 million in 9 months, it is the opinion of Stocklemon that he is just a damn good stock promoter. After all, why could he not spin this magic with Mega Pro, another tool company, before the Spear Jackson acquisition? Has he been saving all of his “business savvy” for this deal, and was afraid to make anything good happen in the plethora of “dog” stocks he was involved in the past?
C’mon Folks, we all know that Crowley is not a “tool” guy. He is a stock promoter who likes to race Ferraris.
The $50 million Question…hold on to your hats.
On January 13, 2003, Spear and Jackson filed a 10k that was signed off by their former accountants BDO Dunwoody, a respected firm out of Canada. In this filing, the company shows a pension fund liability of $30.771 million. Five months later the company amends the 10k but this time uses the accountants of Sherb and Co. (who we will go into later). This time the same 10k show the pension fund as an asset of $14.962 million. How Can This Be?
Why would US Industries sell a company with $15 million in assets for shares in an OTC shell? They wouldn’t. But they would sell a company with a huge pension liability
Stocklemon believes that the answer to this is simple….FUZZY ACCOUNTING. The best part of the whole filing is that change was made without even a footnote as to how a liability becomes an asset. I guess Crowley is a magician and poof can turn a 30 mil dollar liability into a $15 mil dollar asset.
Stocklemon is concerned about the people who work for Spear Jackson who might have their pension fund at risk, as the company is not paying down as much as they should because they recorded the pension as a net actuarial loss. Many employees have worked for Spear Jackson for years, and to have their company being run by a stock promoter is not giving dignity to their job or more importantly stability to their pension.
It gets better……..Crowley has no one to answer to because as written in their filings, the company does not have any committees.
NO AUDIT COMMITTEE
NO PENSION COMMITTEE
Accountants
In order to judge the validity of the numbers that are currently being presented by Spear and Jackson, we must rely on the credibility of their accountants Sherb and Co, which classifies themselves as, “Among Top Auditing Firms in the US” www.sherbcocpa.com/pages/1/index.htm
We don’t see them here. toptenlinks.com
Funny, we did not know they were that big. Actually, the CFO of the former parent of Spear and Jackson had never even heard of Sherb and Co. Maybe that is because the majority of Sherb’s clients are OTC companies that trade below .25 cents. Stocklemon’s favorite client of Sherb is WYRE, the boiler room stock of Adnan Kashoggi and Regis Possinno.
It Gets Better………
Among other complaints, Sherb is currently a co-defendant in a class action lawsuit filed against pink sheet companyVoiceFalsh Networks. In the complaint, Sherb is charged with misrepresenting and inflating the numbers for VoiceFlash.
rabinlaw.com
Crowley’s Old Deals
All of the companies listed below are companies (and their current price) that we believe to have involvement from Crowley. Let’s see if it is a record of building companies or destroying companies.
1. GSFT- .18
2. CPCY- .07
3. ISOB- .10
4. ERAW- can not find anywhere
5. SHAR- .25
6. BMAL- delisted
We have saved our favorite for last…Beverly Hills Limited.
(BTLD .0008) Crowley was the largest shareholder of BLTD and the CEO was his good friend Mark Barhonovich. The Investor Relations Contact was a woman named Yolanda Valaquez.
Barhonovich has since been charged by the SEC for Fraud. sec.gov
And Yolanda….well read below
International Media Solutions
During the past two months, Stocklemon has been reporting on the relationship with Telkonet and the Orlando Boiler room International Media Solutions (IMS). IMS has been busy working the phone for Spear Jackson, calling any stockbroker that will hear their story.
International Media Solutions is owned by Yolanda Valaquez….Yes the same Yolanda Valaquez who “worked” his Beverly Hills Limited (BLTD) stock which went from a $12 to its current price of .0008 sportsbyline.com
Stocklemon believes that the relationship between Crowley and Valaquez is now extended beyond a simple stock promotion and has turned into an enterprise. A pattern is forming with the way they sell stocks to the public.
The boiler room business is not for long and Stocklemon believes that the walls will be closing in around International Media Solutions in the near future. Just last month, the SEC cracked down hard on an Orlando based boiler-room Corporate Relations Group. According to SEC documents,
The Court further held that CRG violated Section 15(a) of the Exchange Act by acting as an unregistered broker. CRG directed its sales force to contact registered representatives and encourage them to pitch the securities of CRG's clients to their customers. Then, once the customer bought the security, CRG's sales personnel would submit proof of the purchase to CRG and collect compensation based upon the transaction. Similarly, the Court found that CRG and Stratcomm violated Section 15(a) by acting as an unregistered dealer. The Court determined that CRG acted as a dealer by buying and selling securities for its own account through its Costa Rican nominees, Fondo and Oportunidad, and that Stratcomm acted as a dealer by selling approximately one million shares of its common stock to the public and buying stock from other investors to make delivery to the new investors. sec.gov
Stay Tuned for Part Two
Part two of this report will focus on the business of Spear Jackson and how it has not grown in comparison to stock price. Furthermore, the report will focus on the how earning are being created by SJ by accounting tricks.
Conclusion
A chain is only as strong as its weakest link. In this case there are many weak links that might crack soon. Stocklemon would like the government to look into the accounting of this company and force them to explain to their shareholders and their employees the status of the under funded pension. Do the people involved with this company live in a cave? Do they not watch the news? Do they not see the importance of corporate governance? Yes, the hands of the law do work slowly, but Stocklemon believes when the game is all played out, we might have a new Wickedest Man Alive.
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