There's an interesting discussion in the Wall Street Journal about USA Talk. In a way, this relates to Frank picking up 2M shares at 10 cents on January 5th. I don't blame the WSJ for defending value investing. They would be guilty of hype if they weren't the referee.
As of September 30, the company had liabilities of $782,318. Its assets were $86,088. It had an accumulated deficit of more than $5 million. It had no revenues. As of Sept. 30, cash and cash equivalents had melted to $29,900. At the same time a year before that, it had cash of about $189,950.
And the quarterly report that contained these numbers was not audited.
It would make sense that a company with little money on its books and no revenue winging in the front door pays consultants through the issuance of common stock or warrants.
But a couple of these consultants received what appears to be a pretty
good deal.
One consultant, Allen Gelbard, was hired before Alfine merged with the
shell corporation that allowed for Portnoy to take his company public. In addition to a retainer and other assorted fees, Gelbard received warrants to purchase 941,000 USA Talks.com shares at six cents a share. Those shares were registered with the SEC earlier this month, which indicates Gelbard exercised that option and bought the stock for $56,460.
As of the closing price Thursday, if Gelbard still held the stock, it was worth $49.1 million. Gelbard couldn't be reached for comment.
Another consultant who didn't do badly was Robert Beaton. The Golden,
Co., consultant said he was hired by USA Talks.com to help develop a
business strategy. Beaton's job also is to develop relationships with
securities analysts and brokerage firms.
Beaton received warrants to buy 750,000 common shares at six cents
each for a total of $45,000, which is exactly what he said he has done. Beaton said he has sold "a little" of the stock but holds most of it.
"I'm very concerned with all of this. As far as I know, the company was in compliance with all of its SEC filings," Beaton said.
His concern can be measured in real dollars. If he owned all of the shares he bought, they would be worth $39.1 million.
Now don't get me wrong: I think investors should have fun investing. When a stock goes from $.40 to $4 in three months, the investors should consider that fun. I did a three bagger in ten minutes and I'm glad I was home with the flu that day. Maybe you aren't sick enough to have fun.
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