Comprehensive Report on TSIG -- Part V(b):
Concerns And Risks that Have Been Expressed By Jeff A. Berry On the Thread - Fact or Fiction? ; Truth or Distortion?
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Cornerstone #2: Gordon's sale of 6,480,000 shares
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JAB CLAIMS that TSIG's crash-and-burn future can be foretold in the selling activities of Gordon.
Let's take a look at this.
=== [ fact # 3 ] ===
In S-8 (6/25/98), it is documented " On December 8, 1997, Mr. Gordon was granted a total of 7,000,000 options to purchase common stock under the Plan, exercisable at $0.15 per share, expiring on December 31, 2002. The shares underlying these options were registered for reoffer and resale pursuant to a reoffer prospectus filed in conjunction with a Form S-8 Registration Statement (Registration No. 333-52271) filed on May 8, 1998, which registered 12,000,000 shares issuable under the Plan. All such options have been exercised and 6,480,000 underlying shares have been sold pursuant to the earlier reoffer prospectus by Mr. Gordon. The remaining 520,000 shares are included in this reoffer prospectus for possible reoffer and resale."
=== [ fact # 4 ] ===
It is also documented in the S-8: "On April 20, 1998, Mr. Gordon was granted an additional 7,000,000 options to purchase common stock under the Plan, exercisable at $0.15 per share, expiring on April 30, 2003. The shares underlying these additional options are being registered hereunder for possible reoffer and resale, which may be made on a continuing or delayed basis in the future. At the date of this Prospectus, Mr. Gordon has not exercised any of these additional options."
So far, here are the facts: Gordon sold $6,480,000 pursuant to the reoffer prospectus by Gordon ; and he's registered to be able to exercise 7,000,000 options. So far he hasn't exercise the 7,000,000 shares yet.
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Some Background on the Form S-8:
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Let me at this point give you some background regarding the SEC documents referred to hereafter.
All this information is documented in Exhibit 5C : Security Act of 1933 -- Employ Benefit Plan Release # 6188.
S-8: This form is used for the registration of securities to be offered to an issuer's employees pursuant to certain plans.
Gordon's options, granted by the Employee Option Plan of TSIG, need to be registered through S-8 before he can exercise them. Along with the S-8, Gordon can register a reoffer prospectus which would grant him the ability to sell the exercised shares registered in the S-8.
Gordon is defined by the SEC as an "affiliate" of the TSIG because he has a "control" relationship with the company. (Meaning he is an insider)
All his shares then are defined as "controlled" shares
=== [ JAB's Distortion # 2 ] ===
Mr. Gordon sold the 6,480,000 share into the open market in small oddlot numbers.
He is going to sell the rest 7,520,000 shares the same way, because he knows TSIG is going to bankrupt.
The above statement is reinforced by Gordon's past with Phoenix Informations Systems. He's done the exact same thing before.
Ok. Once again this is another arrogant, invective, inpudent lie.
Let's look at it in more details
In more than one messages, JAB has claimed the first 7,000,000 shares exercised by Gordon pursuant to the reoffer prospectus filed along with Form S-8 can be sold in the open market. That's the foundation of most of his other accusations. (Reply #1538, Paragraph 2 ; Reply # 1533, Paragraph 1)
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Here is the fact JAB distorted:
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Under the Security Act of 1933, an "affiliate's" exercised "controlled" shares can be sold in two ways: 1) to the public pursuant to Rule 144 or 2) to private "market savvy" private parties pursuant to the reoffer prospectus filed in conjunction with the S-8.
=== Here is an excerp of section VI of Exhibit 5C ====
"VI. RESALES BY PLAN PARTICIPANTS
A matter of major concern to participants in a pension or profit-sharing plan is the tradeability of securities received by them under the plan. That is, can the securities be freely resold without restrictions or not? The next two sections will attempt to resolve the uncertainty that may exist regarding this issue. c
A. Registered Plans
Many plans register the securities offered and sold by them on Form S-8 or some other appropriate registration form under the 1933 Act. Generally, such securities are freely tradeable upon distribution to participants, unless the person acquiring the securities is an affiliate of the issuer. Thus, participants in a registered plan who do not have a control relationship with the issuer may resell the shares or other securities acquired by them under the plan without any restrictions.
Affiliates are in a somewhat different position because their control relationship with the issuer subjects them to the same disabilities regarding registration that [*103] would attach to the issuer if it tried to sell the securities. Such persons may resell their shares publicly either pursuant to an effective registration statement or pursuant to Rule 144 n177 under the 1933 Act. Affiliates also may resell the securities in a private transaction, provided it is understood that the purchaser is acquiring restricted securities which are subject to the same limitations on resale that applied to the seller. "
=== Here is an exerp of the May 8th S-8 ===
"In addition, management and others have acquired and may acquire in the future shares of Common Stockregistered on Form S-8, which shares may be sold, subject to compliance with state securities laws, by NON-AFFILIATES without restriction, and by AFFILIATES (including management) either (i) pursuant to Rule 144 but without regard to theholding period or (ii) pursuant to an effective reoffer prospectus filed for theForm S-8."
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poisontaster's assessment of JAB's Cornerstone #2
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I can't believe JAB had the audacity to distort this obviously undistortable fact.
Gordons options were registered with the form S-8 along with its reoffer prospectus. They were exercised and sold.....but not to the public.
FACT
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GORDON COULD NOT SELL THE SHARES INTO THE
OPEN MARKET WITHOUT FILING A FORM 144.
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A look at TSIG's 144 filings will show no Robert P. Gordon as a registrant.
biz.yahoo.com
If what JAB claims is true then, all the employees of corporations across the country don't need to register Forms 144 and can all, through reoffer prospectus, dump their newly exercised stock into the open market in small odd lots so no one can notice. You tried to sell that, JAB?
If that is not the most imperious and blatant misrepresentation and manipulation, I don't know what is.
I don't know if I should continue anymore. I feel I may be wasting everyone's time. But for those of you who care to read on, I'll touch upon more misrepresentations by JAB in the long period of time he's been onboard. Toward the end, I will also give my assessment on the issue of cashflow and some other valid concerns.
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Examples of JAB's
Bashes based on Distortion #2
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=== Reply # 1528 ===
"On May 8th The day you could first begin selling your first 7 million shares the price of TSIG stock was on a rapid uptrend, fast on its way to reaching Gamblers prediction of a dollar a share.
On that May 8th Friday the stock began the day gapping up from the previous days close rising to a high of over .70 a share when suddenly for no explainable reason a major sell off began to occur. The stock price plummeted. The TSIG bulls responded by buying more and more of these "cheap" shares (or so they seemed at the time). every time the bulls began to reverse the downward spiral BAM! another major sell of....."
"Mr. Gordon, a) Why should TSIG shareholders lock away their shares while sitting back watching the stock price tumble as you profit at their expense?
b)Now that your unloading of TSIG has become a matter of public record what kind of signal do you think that sends to other insiders who have already filed 144's to sell shares of TSIG stock? Ready,Set,Go!?"
=== Reply # 1533 ===
"Topfuel, I beg to differ with you. Stock that is registered for sale on an S-8 as was the case with Mr Gordon's may be sold without restriction pursuant to an effective reoffer prospectus filed for the form S-8, which Mr Gordon has complied with on 5/8/98."
=== Reply # 2650 ===
(This entire long message is an elaborate bash based on Distortion #2. I won't post it. Please look it up)
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Additional Misinformation from JAB
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At this point, I would like everyone to open up Exhibit 5D:
Addendum to the Asset Acquisition of CCI
One piece of evidence that JAB claims to support his assumption about TSIG's cashflow "crisis" and Gordon's "untrustworthiness" is the $2,250,000 that TSIG needs to supply CCI for the new venture. Gordon stated, as reported by gambler, that the fund has been distributed to CCI for in anticipation of the ad campaign and other expenses. JAB CLAIMS that Gordon is either lying or are making "unwise" decision because: (Reply 1380)
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The $2,250,000 Obligation to CCI
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As one of JAB's arguement for the cashflow crisis is the fact that TSIG needs to provide CCI with up to $2,250,000 of working capital for this new cd venture to work. Before we get into my evaluation of how TSIG is going to get its money. Let's take a look at some of JAB's attempts to cast doubts and fear through the use of this particular information. Here are some of his statements.
===(Reply #1990, Paragraph 13)===
"In the midst of this cash crisis environment TSIG entered into an agreement to provide $2,250,000 in cash to CCI. Based on the interview with Darrell Piercy CEO of CCI with Vista Quest it is apparent that CCI will need this cash since the advertising budget for 98 has been established at $2,000,000." ....."Why would such a payment be made when CCI had yet to fulfill its obligation to provide audited financials for TSIG's approval?"
Even in June 19, 1998, JAB is still claiming that TSIG needs to pay CCI and Darrel Piercy $2,250,000. When the 8-K published in May 14, 1998 irrefutably disprove his claim.
I would like everyone to open up Exhibit 5D: Addendum to CCI's Asset Acquisition.
If you like you can also look at Exhibit 5E: Asset Acquistion of CCI (in its totality).
===[ fact #5 ]===
It is in plain English that the TSIG agrees to fund the BUYER (CCI of Delaware, a subsidiary of TSIG) not the SELLER (CCI of Nevada, now called DP Enterprises).
===[ distortion #3]===
It is obvious JAB mispresented ,again, documented facts.
TSIG does not have to pay CCI of Nevada $2,250,000. It does not create doubt on the wisdom of
Gordon if he paid CCI of Delaware, a TSIG's subsidiary, that $2,250,000 in order to prepare for opening of the cd business.
JAB once again distorted the facts.
Even so, what about the cashflow issue? Where does the money come from?
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So, where does the money come from?
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Gordon has stated in his Conference Call interview with gambler (Reply #1594) that there are two sources to increase the needed working capital.
1) His 5 million loan to TSIG.
2) A private placement which will raise $7.5 million
Let's take a look at this situation in more details.
Now we know the beta website is built but not yet completed.
We know that TSIG signed an agreement with Valley Media Inc, ENZO Audio Imaging, and MUZE Inc.
We know that TSIG did not give CCI of Nevada any cash but a pending 6 million shares of TSIG pending the audited financials.
We know that TSIG, as of 3/31/98, has current asset of $485,506 and current liabilities of $6,733,191.
We know that TSIG's CCI's going to need about $2,000,000 for the marketing campaign.
We know that so far the Private Placement for $7.5 million has not happened yet. <<POISONTASTER'S ASSESSMENT>>
So by my rough estimations, TSIG needs about $8.5 million between now and the marketing of the website. (According to the financials in the 1st 10-Q)
There are definitely ongoing expenses: the building of the website, payroll, monthly overhead etc.How much is the building of the site? Is it paid yet? We don't know. Let's assume that it is partially paid.
Where is the money coming from?
Gordon has made some inconsistent statements that will leave many issues to our own judgement call.
1) Gordon stated in the June 4 CC (Reply 1015) with gambler and Beeblebrox that "the $5 million shouldn't be needed because the private placement is near completion.
But we know that the private placement has not happen yet or has not been announced yet as of 8/3/98.
Where is the money coming from?
My assessment is that the private placement was delayed. Gordon anticipated that his loan was not needed when he made that statement in the CC. But since, without the pp, his loan remains the only logical answer. It is very logical, that right now it is his $ 5 million that is fueling the company. The fact that Gordon did not sell his shares to the publc; though it doesn't prove, but it makes more likely that Gordon is telling the truth when he said the shares were sold to private investor(s) in order to raise the cash for his loan to TSIG.
There is one inconsistency JAB brought up about that possibility: the 13D.
Schedule 13D needs to be filed with SEC when any one entity or individual acquires more than 5% of the company in any class of stock. As of June 25, no 13D has been filed by Gordon.
There is one possibility that could explain this contradiction: that the 6,480,000 shares, which in June 24 constituted 14.7%, were sold to serveral individuals or entities which leaves any one of them holding less than 5%.
That is a speculation. You will have to make up your mind whether this possibility is more likely ; or the scenario painted by JAB: that the $5 million loan is a front; Gordon somehow sold it (we know it can't be public); delayed the 13D; and is selling the 7,520,000 shares as we speak.
2) Gordon has said that the private placement was near completion more than 2 months ago. We know that a private placement is definitely needed. We need ~$8.5 million. Even if Gordon's $5 million is indeed there, we are still short $ 3.5 milion. We do have a cashflow problem; and the private placement or some other financial solution needs to happen. If we have more info -- for instance, the latest 10-Q -- we would have a better chance of evaluating if it is possible to get by without the Private Place -- that is assuming Gordon's $5 million is there.
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Additional Concerns to be Addressed
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The IRS Crisis (?)
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Throughout JAB's posts (#905, #380, #1423), his claim that TSIG is facing a cash crisis is founded on, among others, the IRS debt.
The IRS debt is a matter of public record. Gordon has acknowledge the debt in his CC (Reply 1015). But one indication of the status of the debt, assuming the interview in Reply 1015 is accurate, is Gordon's response to the IRS question.
In his CC interview with gambler and Beeblebrox, Gordon confirmed a debt owed to IRS. He also states that the debt will be paid off as soon as the Private Placement is completed. He said "The IRS will be paid off as soon as the PP is completed." So we have an idea that it is not paid off yet.
JAB has made claims that this debt to the IRS "totaled a staggering 7 number figures" (Reply 1380, Paragraph 1) I have yet find any information on the amount owed.
However, we do have a way of sounding whether this is a big problem.
When you IRS Employor Account becomes delinquent, the first step IRS does is to put a lien on the company -- so call Federal Tax Lien. The full name of TSIG is Teleservice International Group. The Federal Employor Identification Number of TSIS is 59-2773602.
I pulled a lien search on Lexis-Nexis (Exhibit F). I did a search on TSIG's FEIN: 59-2773602 and an exact name search (Teleservices International Group) Both came up with 0 documents. To be sure, I pulled another search on keyword "teleservices" -- there are 166 companies with the word "Teleservices" as part of their name that are liened by the municipal, state, or federal government. TSIG is not one of them. TSIG does not have a lien as of July 15th 1998. If IRS was not paid off or if an satisfactory arrangement has not been made between the IRS and TSIG, there would have been a lien.
For the fun of it I pulled a lien search of Robert Gordon. There are 13 liens with the name Robert Gordon in it. Gordon of TSIG is not one of them.
<<POISONTASTER'S ASSESSMENT>>
I believe Gordon when he says that the TSIG is in good terms with the IRS. I believe that the amount owed is not "7 number" figures. I believe the above two assumption because if either case is not true, there logically should be a lien. IRS will not mess around. Look through Exhibit F, see for yourself how much you have to owe to get on the lien-list. So does it threaten TSIG's ongoing concern, as JAB claimed, I don't believe so.
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Past and Ongoing Lawsuits Against TSIG
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This issue has been touched upon many times in the past.
Exhibit 5G lists all the lawsuits and judgements past and on-going.
The lawsuits do document two facts that concerns the cashflow issue in question : 1) Loss of clients 2) cash liability.
In Reply #1015, Gordon claimed:
" that the statements 10K and 10Q do not reflect completely accurate #'s for their liabilities. For example, there was a phone bill for $400k that they were overcharged on and that they actually only owe $70k. They were incorrectly billed. As another example, there was a piece of software listed on the liabilities for $600k that has never worked. Those are just a few examples, but Gordon says that the liabilities listed can be reduced to a figure of about $1.4-1.5 million which brings it to a very manageable #. Gordon assured us that the liabilities are not overwhelming at all. The situation looks much worse on paper than it actually is. "
You'll have to evaluate that statement along with all the proceeding make your own conclusion.
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Gordon's Past History
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I will address this issue in full with another chapter to this report.
JAB has made quite a few claims about Gordon's past.
:his involvement with Phoenix Information Systems, Harvest International, and Teleservices International (a separate company).
Here are some facts though:
1) Phoenix Information System went bankrupt.
2) There was a "cease and desist" order placed against Gordon.
Again, I will address this issue in the Part VI of this report.
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postlude
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If it please all, (I wouldn't imagine that you'd be pleased, Jerry), I'd like to post another quote by JAB:
"I do not seek to embarrass anyone, especially if their motives are sound. I would prefer not to post a contrarian rebuttle and addendum to the fine work that you have performed. It would be far more beneficial if the factually based risks and concerns were addressed head on by yourself. Thus providing a true picture of balance." (PM to me)
Jerry, thank you for the suggestion and the opportunity to allow me to do a thorough research on your past messages. As you can see, I took your brilliant suggestion for the title of Part IV: Concerns and Risks that have been Expressed on the Thread. I took the liberty of entitle you of the title, since I find that it is mostly expressed by you.
Thank you for you kind attempts to "guide" me along towards a fair and objective research. I'm sure all the old and new investors will appreciate it. I must admit, since I'm new to the thread(s), I still couldn't master the fine eye of subtle omission and brave misdirection. I took your encouragement to do the research on my own but I will promulgate to all that Jerry had no hand in it. I did it on my own.
I hope you would like the report -- since you're it's progenitor-- as I don't intent to embarass anyone. I hope I have provided a true picture of balance.
Thank you, with all sincerety, old timer.
Respectfull, as always,
poisontaster. |
