*************BLOOMBERG’S BLOOPERS**************
When a scathing article appears in the press, a shrewd person will analyze its credibility. But sadly, the average individual believes even the most egregious lies if they are in print. Tabloids that show fabricated pictures of President Clinton walking hand-in-hand with Martians or stories claiming that Elvis appeared at the Kremlin are examples of absurdities that are often believed by gullible citizens.
In my opinion, the Bloomberg article about Computerized Thermal Imaging by David Evans that appeared on June 29th, is in the same category of journalism. This article was obviously designed to scare investors and drive the price down of COII stock. After all, the timing of its publication would have been perfect for a group that had, as its goal, the destruction of market capitalization of the company. Any reasonable person, I think, would see a link between the thousands of immature posts that have appeared on Raging Bull and Silicon Investor, the complaint filed with NASDAQ, and the publication of this article. I believe this was a well thought out, well rehearsed, diabolical scheme to knowingly scare innocent investors into selling their shares to drive the price down and preserve this groups huge short position against the stock.
I would like to discuss a number of the most egregious half-truths in the article:
The company sold the stock in a private placement that raised a net $39.5 million, increasing its shares outstanding by about 16 percent. It was completed on Feb. 29, when the shares closed at 9 7/8. Computerized Thermal sold 11.1 million shares at $2.81 a piece and 11.1 million warrants, priced at $1, giving investors the right to buy half a share at $5 a piece.
THE ARTICLE FAILED TO MENTION THAT THE STOCK PRICE WAS IN THE $3.00 RANGE WHEN THE PRIVATE PLACEMENT WAS ARRANGED! THE RISE TO THE $9.00-$10.00 LEVEL OCCURRED DURING THE DIZZYING NASDAQ RALLY IN MARCH AND APRIL. CLAIMING THAT COII GAVE THESE INVESTORS SUCH A HUGE DISCOUNT IS A FALSIFICATION OF GRAND DIMENSIONS. I PERSONALLY HAD A FRIEND DURING THAT PERIOD WHO WAS THINKING OF PULLING OUT OF THE PRIVATE PLACEMENT BECAUSE THE PRICE DROPPED BELOW THE $3.00 LEVEL!
Raising capital from investors at such a large discount to the price of shares trading in the secondary market is a red flag, said John Coffee, professor of securities law at Columbia Law School. ``The market price is well above what more informed parties think it should be.''
WHAT DOES MR. COFFEE THINK ABOUT INSIDERS OF INTERNET COMPANIES WHO GET STOCK AT $1.00 PER SHARE, ONLY TO SEE IT I.P.O. A FEW MONTHS LATER AT $15.00 AND THEN RUN TO $75.00 IN TWO WEEKS. IS THAT A RED FLAG? EITHER MR. COFFEE WAS KEPT IN THE DARK ABOUT THE TRUE NATURE OF THE PRIVATE PLACEMENT, OR HE HAD SOME OTHER ERRONEOUS IMPRESSION. HIS COMMENT IS PATENTLY ABSURD.
The developer of technology intended to help doctors determine if a breast lesion is benign or malignant has racked up losses of $31 million since it was founded in 1987. Its outside auditor warned in 1999's annual report of ``substantial doubt about the company's ability to continue as a going concern.''
THIS STATEMENT IS FOUND IN THE PROSPECTUS OF ALL DEVELOPMENT STAGE COMAPANIES AS WELL AS MOST DARLINGS OF THE INTERNET. ANY YOUNG HIGH-TECH OR BIOTECHNOLOGY COMPANY INCLUDES THIS IN THEIR ANNUAL REPORT. AGAIN, THIS TRIES TO PAINT THE PICTURE THAT COII IS ATYPICAL, WHEN THIS IS A COMMONPLACE EVENT WITH DEVELOPMENT STAGE COMPANIES.
In 1990, the Ninth Circuit Court of Appeals upheld a $25 million default judgment against Johnston in a racketeering and fraud lawsuit filed by investors who lost money in a rabbit- breeding tax shelter investment called Promorex that he sold in the mid-1980's.
MR. JOHNSTON WAS NEVER FOUND GUILTY OF FRAUD. YES, HE WAS SUED FOR THAT. HOWEVER, LAWSUITS AGAINST SOMEONE ARE OBVIOUSLY NOT THE SAME AS THE JUDGEMENT. ATTORNEYS THROW EVERYTHING IN THEIR LAWSUITS, INCLUDING THE KITCHEN SINK. THE JUDGEMENT WAS FOR ADMINISTRATIVE SANCTIONS FOR PROBLEMS SUCH AS MISSING DEADLINES FOR DEPOSITIONS AND INTERROGATORIES, NOT FOR ANY MORE SERIOUS WRONGDOING. IN FACT, ONE MIGHT LOOK AT MR. JOHNSTON’S LAWYERS FOR ANSWERS TO THESE QUESTIONS, NOT HIM. AFTER ALL, MOST OF US ARE TAKING THE ADVICE OF OUR COUNSEL WHEN INVOLVED IN ANY LEGAL PROCEEDING. HINTING THAT MR. JOHNSTON WAS FOUND GUILTY OF THESE ACCUSATIONS IS, IN MY OPINION, DISTORTED REPORTING.
Yet his company has struggled to sell its $500,000 breast imaging systems. Until last week, it had sold only one of the scanners, to Orchard Hospital in Thailand in 1996.
COII DECIDED THAT IT WAS MORE IMPORTANT TO GET FDA APPROVAL THAN SPEND ITS RESOURCES TRYING TO SELL THEIR SYSTEMS OVERSEAS. THIS WILL BE PROVEN TO BE A VERY SAVVY BUSINESS DECISION IN THE NOT TOO DISTANT FUTURE.
Yuri Parisky, an associate professor of radiology at the USC/Norris Cancer Center in Los Angeles, is directing a company- sponsored clinical test of the breast cancer scanning system at USC. He's concerned some investors are over-hyping the scanning system. Parisky said he began reading messages about the company on Ragingbull.com after fielding numerous investor calls. ………..`People are touting this as a replacement for mammography, which it's not,'' he said. Parisky
THIS SYSTEM IS DESIGNED TO BE AN ADJUNCT TO MAMMOGRAPHY. ANYONE TOUTING IT AS SOMETHING MORE IS JUMPING THE GUN. ALTHOUGH WE KNOW THAT IT IS POSSIBLE THAT TRIALS COULD PROVE THAT THE MACHINE COULD FUNCTION LIKE SCREENING MAMMOGRAPHY, TRIALS ARE ONGOING FOR ONLY ONE PURPOSE NOW—AS AN ADJUNCT TO MAMMOGRAMS. COII HAS BEEN VERY TRUTHFUL ABOUT THAT FACT.
Preliminary tests show a 96 percent cancer detection rate for its system, according to an article he published in 1998. That's not good enough, according to Edward Sickles, professor of radiology at the University of California at San Francisco. Biopsies are 99 percent accurate, he said. ``It's an experimental technology,'' said Sickles, referring to Computerized Thermal's system. ``It probably doesn't work.''
“PROBABLY DOESN’T WORK.” HOW DOES HE KNOW?
HE IS COMPARING SURGERY TO A SCREENING DEVICE WITHOUT ANY SIDE EFFECTS. IF HE IS RIGHT, WOULD EVERY WOMAN WITH A SMALL LUMP BE ASSIGNED TO SURGICAL BIOPSY? AGAIN, THIS DOCTOR WAS EITHER NOT GIVEN ALL OF THE INFORMATION AVAILABLE OR THE WRITER SOUGHT OUT A BIASED INDIVIDUAL UNAWARE OF THE MACHINES PERFORMANCE. SINCE THE COII MACHINE HAS DISTINCT ADVANTAGES OVER MAMMOGRAMS, WOULD DR. SICKLES THINK THAT WE SHOULD OUTLAW MAMMOGRAPHY AND JUST GIVE EVERY WOMAN A BIOPSY? HOW ABSURD.
Persuading doctors to accept the usefulness of Computerized Thermal's technology will be an uphill battle, said Michael Bernstein, a spokesman for the American College of Radiology, the principal organization of radiologists in the U.S. ``The ACR doesn't believe there's enough scientific evidence to show if the new technology is effective,'' said Bernstein.
OF COURSE THAT WILL CHANGE ONCE THEY HAVE COMPLETED TRIALS, ARE APPROVED BY THE FDA AND ACCEPTED BY RADIOLOGISTS. MOST RADIOLOGISTS STILL THINK OF COMPUTERIZED THERMAL IMAGING AS “THERMOGRAPHY” AND OLD-FASHIONED, INEFFECTIVE TECHNOLOGY. THIS IS ANOTHER EXAMPLE OF THE BIAS INHERENT IN THIS ARTICLE.
In the SEC filing three days later, Computerized Thermal said the buyer was given options as an inducement. For each $500,000 system sold, the buyer got two-year options to buy 50,000 shares at $1.67 a share. On the day the sale was announced, Computer Thermal shares closed at 10 3/4. That meant that for each $500,000 system the buyer was awarded options worth more than $454,000.
THE MEXICO DEAL WAS BEING ARRANGED WHEN THE STOCK PRICE WAS A COUPLE DOLLARS OR LESS. THE ONLY REASON THESE FINANCING DEALS APPEAR SO STRANGE IS BECAUSE OF THE STRONG PERFORMANCE OF THE STOCK PRICE. AGAIN, THIS IS ANOTHER EXAMPLE OF TAKING INFORMATION OUT OF CONTEXT AND TWISTING IT FOR THE WRITER’S QUESTIONABLE PURPOSE—DRIVING DOWN THE STOCK PRICE TO SAVE THE BUTTS OF SOME DESPERATE SHORT SELLERS.
THE ARTICLE BY MR. EVANS AND ITS COINCIDENTAL APPEARANCE WITH THE BASHERS ON THE INTERNET AND THE COMPLAINT TO NASDAQ, IN MY OPINION, PAINTS THE PICTURE OF A DESPERATE, VICIOUS GROUP OF STOCK TRADERS WHO DESIRE TO MANIPULATE THE PRICE OF COII STOCK FOR THEIR OWN GAIN.
I PREDICT THAT, IN THE END, COII WILL BE LISTED ON NASDAQ AND RECEIVE FDA APPROVAL. I ALSO PREDICT THAT SOME OF THE PEOPLE BEHIND THESE MANUEVERS TO MANIPULATE THE STOCK PRICE WILL EVENTUALLY BE SOUGHT BY THE AUTHORITIES, CURIOUS ABOUT THE EVENTS MENTIONED IN MY REBUTTAL. BY THEN, COII WILL BE WELL ON ITS WAY TO BEING AN ACCEPTED MEDICAL IMAGING SYSTEM, AVAILABLE IN MOST LARGE HOSPITALS IN AMERICA AND OVERSEAS. |
