funny..stockpatrol.com did a story on F2 a ways back in 2000
stockpatrol.com
stockpatrol.com
F2 BROADCAST NETWORK, INC. (OTCBB: FTWB) — SPAMMING THE WORLD
Investigative Reports
January 1 2000
It seems that someone has been working overtime to promote a company called F2 Broadcast Network, Inc. F2, which is pursuing Internet video production ventures these days, has a history that’s been checkered with regulatory investigations, tax liens and financial problems. Those details, however, didn’t deter one energetic spammer (or perhaps it was a group of spammers echoing a common theme – virtually verbatim) from extolling the prospects for F2 by posting hundreds of messages on various Yahoo Finance! Message Boards during the first week in July.
The glowing notices for F2 appeared on more than 400 Yahoo! Finance Message Boards, including those for such recognizable names as GE, Halliburton, Ebay, Oracle, Boeing, Pfizer, Lucent, IBM and Cisco, to name but a few. Virtually no sector was spared - from communications equipment and aerospace to biotechnology and truck manufacturers. These companies, and their industries, had no discernible connection to F2, but that apparently did not deter the message poster(s).
Who was posting these notices? They bore a series of similar names – like OTCBB104; OTCBB108; OTCBB109; ftwbstock6; ftwbstock7, and others of that ilk. Most of those accounts had been opened within a week before the messages began to appear and, as might have been expected, their membership profiles provided few details.
The promotional campaign apparently had quite an impact. The fireworks began on July 3rd, before investors left for their July 4th holidays, and continued to explode after they returned. On July 2nd, F2 closed at just 23 cents a share. The following day, as the messages began to appear, the share price shot up to 33 cents. Volume on July 3rd was almost 575,000 shares. Then, on July 5th, after those messages had saturated Yahoo! Finance, prices hit 42 cents per share, before closing at 37 cents – on volume of over 1.16 million shares.
Were investors buying the hype, or did they see some substance? Those messages ignored F2’s troubled history. But did they also distort and exaggerate more current events? The messages themselves tell that tale.
To The Moon
Most of the F2 messages bore the same headline; “FTWB UNDERVALUED EXPLODING.” How’s that for hyperbole? But it didn’t stop there. Each posting began with the following teaser (virtually identical in each case, typos and all):
F2 Broadcast Network, Inc. (FTWB) announcements last week and Thursday’s sudden suprise (sic) buyout speculation has exploded FTWB up over 200% since last week and 50% rise today! EXPECT a 200%+ rise from FTWB on Thursday ALONE! As it hits $1! (From source).…
Most investors who read these messages were probably unfamiliar with F2 – and they certainly knew nothing about any “sudden suprise (sic) buyout speculation.” Were they enticed by the prospect of a 23-cent stock exploding to $1? If they were, that enthusiasm should have been tempered by the reality of the Company’s history.
The facts are considerably more sobering than the hype. F2 incurred cumulative losses of approximately $26.4 million from January 1985 (when it was first formed) through March 31st, 2001. That’s a 16-year track record of losses. In fact, according to the Company’s Form 10-Q for the first quarter of this year, “as of March 31, 2001, the Company had an excess of current liabilities over current assets of approximately $2,166,000 and is in default on certain notes payable.”
The details of those debts are even more troublesome. Since October 2000, the Internal Revenue Service has filed liens against the Company for past due taxes, penalties and interest. As of March 31st, F2 owed the IRS almost $369,000. At the time, the Company had just $25,366 in cash. F2 says it plans to sell assets to satisfy these obligations – but more about that later.
Does this sound like a Company that is “UNDERVALUED EXPLODING,” or more like a business that is teetering on the brink of financial crisis? The Form 10-Q conceded that “[t]hese conditions raise substantial doubt about the Company’s ability to continue as a going concern.” F2 needs more money now, but it concedes that no arrangements are “in place for such equity or debt financing and no assurance can be given that such financing will be available at all or on terms acceptable to the Company.”
None of which deterred the spammer from his or her appointed rounds.
Teammates
Next, to support the enthusiastic endorsement of F2, the serial message poster invoked several recent announcements by the Company, beginning with the following:
On May 30th, FTWB entered into an Advertising/Marketing Pact with Convision (sic) Inc!
The message offered no details of the relationship. Convizion, Inc. (not “Convision”), is a private company involved in the distribution, aggregation and distribution of digital, broadcast quality media.
Maybe the messenger was simply relying upon the Company’s May 30th press release, which provided few details of the relationship. According to that press release, F2 and Convizon had entered into “a strategic alliance combining the resources of both companies in marketing and selling available multi-media advertising and sponsorships.” What were the terms of that agreement? What skills and resources would each company bring to the enterprise? Most importantly, how would they generate and divide revenues? The press release was silent on these matters.
Undeterred by such minor details, the Yahoo! Finance messages continued:
On June 7th, FTWB signed an investment banking agreement with Morgan Jeffrey and Co!
Again, no details were given, but the statement itself appeared to be accurate. On June 7th F2 had announced that Morgan, Jeffrey and Co., Inc. of Atlanta would provide it “with Investment Banking and Consulting services in the areas of shareholder relations; mergers and acquisitions; capital placements; a stockbroker and investor awareness campaign, corporate finance policy and investment research coverage.”
The June 7th press release went on to say that the Morgan, Jeffrey “professionals are familiar with the needs of bulletin board companies and the challenges they face as they strive to reach the NASDAQ Small Cap and National Market systems.”
Had the Company retained an experienced securities firm? Apparently not. As best we can determine, Morgan Jeffrey is not a registered member of the National Association of Securities Dealers, and its Chairman, Warrick Morgan, holds no securities industry licenses. In fact, Morgan Jeffrey does not appear to be in the securities industry at all.
We were, however, able to locate an Atlanta, Georgia-based business broker called Morgan Jeffrey & Co. That firm’s web site bears the title “Atlanta M&A Advisors, LLC. Business Brokers and Advisors” (“M&A,” we suppose, refers to “mergers and acquisitions”), and boasts
“WHEN PERFORMANCE COUNTS IN CARS OR MAKING A DEAL! CALL US TO GET THE BEST PERFORMANCE POSSIBLE…AND IF YOU NEED A BREAK SHOP FOR A NEW TOY!”
That “pledge” is followed by a link to a “Buyer’s Site” for Ferrari automobiles. Although it is unclear whether Morgan Jeffrey actually sells cars, when we last checked the website it featured several “Companies For Sale,” including a leather furnishing manufacturer and retailer, a decorative accessory company, a tire and rubber concern, and several radio stations.
Does Morgan Jeffrey possess any investment banking expertise that would qualify it to provide the extensive services recited in F2’s June 7th press release? The biography of Warrick Morgan reveals no securities industry licenses or background, although it does note his “eighteen years of experience with varied operational facets of business, investment analysis and management, international travel, and participation in numerous strategic business transactions.” It offers no specific examples of these accomplishments. It does, however, state that Mr. Morgan, who studied finance as an undergraduate at the University of Florida, is working to gain designation as a Chartered Financial Analyst.
Funny, the Yahoo Finance messages mentioned none of these details.
Fore! And More
The Yahoo! Finance messages continued by declaring:
On June 27th FTWB impressed so many that it sent FTWB on a rampage: rising over 80% to $0.165!! And that news was…
F2 Broadcast Network Launches the “F2 Digital Content Manager Software” – Golf website pgatour.com which averages over 40,000,000 page views monthly, has been testing and now launching FTWB software to run events and highlights through broadcasts at www.pgatour.com!!!
This news garnered three exclamation points. But what is the exact nature of F2’s relationship with PGATOUR.com? On January 26th F2 announced that ORUS Information Services, Inc. would provide web development and consulting services in support of the Company’s efforts to create audio and video sports telecasts. A June 27th press release stated that the joint effort between those companies had resulted in the development of the “F2 Digital Content Manager Software Version 1.0,” a software package that is now being used in connection with certain videocasts on the PGATOUR.com site.
What are the respective roles of F2 and ORUS with respect to those videocasts? What compensation is each company receiving? F2’s most recent Form 10-Q (for the First Quarter of 2001) reveals that:
[The Company] “entered into an agreement with PGA Tour.com to host, produce and serve a feature for them known as ‘Inside the Pressroom’…The revenue to be generated from this source comes through shared advertising and sponsorships. The sale of advertising and sponsorships is a joint effort between PGATOUR CBS Sportsline and F2 Broadcast. Under the terms of the agreement F2 Broadcast recovers all costs first and then shares all revenue generated on a 50/50 basis.”
This may bode well for future revenues, although the potential level of that income remains unclear. So far, however, F2’s Internet operations have operated at a loss. The Company reports that Internet revenues totaled $144,000 during the first quarter of this year (all generated by the work for PGATOUR.com), while costs and expenses were approximately $961,000. Are these expenses - which included contract labor costs, professional fees and salaries of more than $750,000 - likely to recur? How will those costs impact the potential for profits? Investors are likely to want answers to these questions before subscribing to the unbridled enthusiasm of the Yahoo! Finance poster.
Free At Last
What about F2’s substantial outstanding debt? They are no longer a problem according to the Message Poster, who continued to promote F2 by stating:
AND NOW on Monday, July 2nd, announces “F2 Broadcast Network Improves Balance Sheet”. In that announcement, and we quote, “leaves the company virtually debt free, and allows F2 to pursue its core competence in Internet Video Productions, web-casting, and software development.” The CEO/President went on to say Float is gone. New buyers see a very positive 2nd quarter report to come out from us soon. New contracts and software development will take us much higher.”
Just how has the Company improved its balance sheet? Principally, by selling all of its “brick and mortar” assets – a radio station in Gillette, Wyoming and a comedy club in Denver, Colorado. On May 29th it announced the sale of that radio station to Legend Communications of Wyoming LLC for $1.9 million – which would include a $570,000 note receivable and $500,000 used to pay debts associated with the radio station.
That same May 29th press release said the Company expected to sell its interest in the Denver comedy club in exchange for $300,000 in cash and the assumption of debt totaling $250,000. The July 2nd press release cited by the Yahoo! Finance spammer stated that the sale of “The Comedy Works” comedy club had been finalized and “leaves the company virtually debt free, and allows F2 to pursue its core competence in Internet Video Production, web-casting, and software development.”
The July 2nd press release did not enumerate the terms for sale of The Comedy Works, nor is it clear how F2 could be “virtually debt free” at the conclusion of these transactions. According to the Company:
The sale of “The Comedy Works” reduced our outstanding long-term obligations by approximately $350,000 and increased cash by $125,000. With the final sale of the radio assets, we will have extinguished virtually all long-term obligations and increased cash by another $400,000 net…The sale of these assets will result in a substantial gain of between $1.1 to $1.4 million dollars. This will have a positive effect on earnings per share in the subsequent reporting period…
Are these figures consistent with the numbers in the May 29th press release? It appears, that the Company will be receiving a total of $475,000 from its sale of the comedy club, rather than the $550,000 number mentioned previously. And how will these sales render F2 “ virtually debt free?” As of March 31st, the Company’s current liabilities totaled $2.465 million and its long-term debt was an additional $148,000. The money received from the asset sales certainly could extinguish that long-term debt, but are the gross proceeds (excluding the $570,000 note) sufficient to eradicate virtually all outstanding debt? Are those $500,000 of radio station debts included among the current liabilities listed in the Form 10-Q? What are the terms of that $570,000 note, and when will it be paid? The answers to those questions will have a direct bearing upon the status of F2’s continuing obligations.
Psst. Pass It On
The message poster left the best for last. After noting that FTWB has gone up “over 200% ($0.10 to $0.30+) on their June 27 and July 2 news!,” he (or she) offered the following thoughts:
As stated above, these floods of positive acquisitions and announcements in the past month alone are strong signals that FTWB is about to takeoff to uncharted territory – they are ready to make the big announcement – segwaying (sic) into this:
Positive acquisitions? F2 hadn’t announced any acquisitions “in the past month.” Undeterred by such facts, the poster continued with the following “blockbuster” information:
In a paid report dated 7/3, multiexinvestor released a report on FTWB and their current ventures. It stated Yahoo, which currently owns broadcast.com, is interested in the F2 Digital software and talks with FTWB are intense and they close out a deal. Whether it will be a purchase of software, merger, or buyout of FTWB will only send FTWB skyrocketing to new heights in the coming days. That seems to be part of the recent news is leaking out and investors are jumping on for the ride. The report also states that the outlook for FTWB is incredible. Many reputable brokerages forecast this stock as a STRONG BUY. Even if deals with Yahoo fall through, many of the major sports websites are interested in the F2 software for broadcasting. ESPN is very interested in their software and could make use of it on their own website! All of this will bring revenues that will put this stock on the map and it would become $50-$100 a share long term!!
Is there any substance to these claims? We tried, without success, to find the “multiexinvestor” report, but “multiexinvestor” was nowhere to be found. We even checked out “Multex Investor,” an established source for investment information, but found no July 3rd report on the Company.
Is Yahoo! “interested in F2’s software?” If so, neither Yahoo! nor the Company have indicated that any discussions are ongoing, much less “intense.” Who are those “reputable brokerages” who forecast this stock as a “STRONG BUY?” As best we can determine, no “reputable” brokerage firm has issued such a recommendation. And what of those “many” major sport sites, including ESPN, that have expressed interest in the Company’s software? What is meant by “interest” – a vague term at best. The message does not identify those “major” sports sites and neither the Company, ESPN nor any other “major” sports site has indicated impending developments.
And, of course, there is nothing about F2 that suggests its stock will be worth “$50- $100” (quite a broad range in itself) either long term or short. So is the messenger merely blowing smoke? Here’s one clue. On some of the messages he added the following disclaimer. Referring to the portion of the message that preceded the “breaking” “multiexinvestor” news, the poster stated:
PLEASE LET ME MAKE IT CLEAR THAT I AM JUST AN INDIVIDUAL BRINGING YOU THE ABOVE ACCURATE INFORMATION.
Then, before revealing the important news “leaking out” from “multiexinvestor” he cautioned:
BELOW IS WHAT WAS ALSO IN A POST I READ THAT I NOW LET YOU JUDGE FOR YOUR DUE DILIGENCE.
We searched, again without success, for that mysterious “post.”
Could it be possible that the serial messenger was merely relying on that elusive “post?” Consider the remainder of the message:
This report states that FTWB is to release the details of finalized talks or progress with Yahoo! this Thursday 7/5 in a press release announcement! FTWB is on the OTC Exchange so only limit orders are allowed! With a float of only 800,000 shares, this stock can see $1 at Thursday’s open. They are being bought up quickly so get your limit order in!
So now with FTWQB being DEBT-Free they can finalize a deal with Yahoo and/or seek more acquisitions of big name websites for their patented broadcasting software! Thursday’s trading is going to be HUGE for FTWB.
These final paragraphs of the message contained a wealth of incomplete information. Start with this. On May 31st F2 announced a reverse split of its common stock. The Company didn’t specify the ratio of that reverse split, but it stated that there would be just 1.25 million shares outstanding afterwards. The Company’s public filings indicate that there were 138 million shares outstanding on March 31st, and 186.4 million by May 11th. That suggests a reverse split ratio of about 1 for 150.
Did that include 50 million shares that F2 registered on a Form S-8 on May 14th? Those shares were to be issued under the Company’s “Compensation Plan.” Have they been issued, and if so, to whom? Are they now included in the public float?
And did it include another 1.5 million shares registered on another Form S-8 on June 8th? Those shares apparently related to yet another Company “Compensation Plan.” That S-8 indicated that there were 1,232,285 common shares issued and outstanding as of June 1st. Have these new S-8 shares been issued, and are they now included in a growing public float?
The tenor of the message was certainly clear. Buy now, before there are no more shares available. But even the most unsophisticated investor knows that shares will always become available as people accumulate, and then liquidate, positions. Here, there seems to be a somewhat different message – buy now while someone has shares to dump.
Those who bought soon learned that there was no Thursday July 5th press release announcing a deal between F2 and Yahoo!, ESPN, or anyone else. But the Yahoo! Finance scammer was right about one thing. Volume was HUGE on July 5th. Just, it seems, like the messenger planned.
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