I am on the call, guess he missed this-->SCII: “You’ll Have to Talk to my Wife about that”
Other working titles:
“What does SCII, WPEC, WKID, USCM, RRRR, FUSN, all have in common.” or
“All they care about is if we filed it, so put it down, remember nobody reads the filings anyways”
As many of you may know, TheTruthseeker has been profiling a new wave of stocks that build their valuation on the pillars of the Internet Bubble without regards to traditional valuations. It’s the “premise of the potential”, and not the “prospects of profits” that is spun to investors, and commentators. To this regard TheTruthseeker has been profiling SCII, and stated that it was a good example of this new class of stocks. But today SCII breaks out of that model and shines all by itself. (You can locate the 3 prior reports on the Silicon Investor SCII thread)
I would like to organize this in the easiest way to read, the issues and connections are complex. I will attempt to lay it out as best I can, however this may in fact be a working document. There is no easy way to explain this nuts and bolts stuff.
1. SCII is a NASDAQ Shell with only cash assets. Through a complex set of negotiations with ITES/Net2Wireless, the two companies are attempting to Merger with N2W becoming the controlling company.
2. Net2Wireless was created in December of 1999, with technology it purchased from ITES. ITES had a deal already with SCII, for some reason that deal was displaced.
3. Currently at around 20 dollars, SCII/N2W have no sales, or contracts involving Sales, with the 6.5 Million shares the market Cap is around 130 Million dollars. After the Merger there will be some 40 Million shares the majority freely tradable, and a Market Cap of 800 Million. Again NO SALES.
4. N2W has been selling shares to Insider investors for as little an effective 16 cents per share.
5. N2W burn rate is increasing dramatically, with uncontrolled hiring, and paying contractors 700,000 per year.
6. The Merger has been on the books since October of last year, the terms have changed many times and the SEC is requiring Amended S-4 to be filed. The latest version came out 9/14.
7. Also on 9/14 SCII files a S-3/A a prospectus for the sale of some 10+ Million shares. At current levels they will be extracting about 200 million worth of equity in the Shell Merger into a NASDAQ company affair.
a. The founder is selling 3.2 Million Shares
b. A current insider who ML Partners is selling all 5 Million of its recently acquired warrants to N2W.
c. The current management of SCII which hold only 1.4 percent of the current SCII shares is granted huge chunks of shares with the completion of the Merger. They will be sell as a group about 2 Million of these newly minted shares. So the current holders of SCII are retail it would seem.
8. Over 800K of institutional ownership was reduced, with FMR selling all 500K shares out, etc etc.
9. Naomi Bodner is a holder of 16 % of N2W
10. Laura Huberfield is a holder of 16% of N2W
11. ML Partners sold (or transferred) warrants to both Huberfield and Bodner.
12. Nechemia Davidson owns 44 % of Net2Wireless
13. Partner Communications was given 14% of the N2W when they agreed to test and support N2W’s products.
14. For the six months ended June 30, 2000, and the period from commencement of operations (April 1, 1999) through December 31, 1999, Net2Wireless had net losses of approximately $129,006,000 and $493,000, respectively. The net loss at June 30,2000, includes approximately $124,664,000 of non-cash expenses relating to stock based compensation.
15. Davidson is also the founder of ECI Commutations, which is attempting another Merger with WPEC. Currently NASDAQ is investigating in regards to listing the stock. In that regard NASDAQ is asking about some of the insiders and major holders of ECI. Here is the list that the NASDAQ officials need info on
a. David Rubner;
b. Zahava Rubner;
c. Murray Huberfeld;
d. Laura Huberfeld;
e. Alexander/Rachel LLC;
f. David Bodner;
g. Naomi Bodner;
h. NBDB, LLC;
i. Broad Capital;
j. Necbemia Davidson;
k. Cedar Investments Services. Ltd.
16. In December, Jenkon completed its reverse acquisition with Multimedia KID, which develops interactive learning software for children and adults, and its shares rose to 4 9/16. They continued to climb to a high of 7 7/8 in February, for a $269 million market cap. The CEO of MKID is David Rubner.
17. On June 19, 2000 insiders register to sell 13,283,239 SHARES of MKID the stock proceeds to tank, and today is sub 1 dollar and in jeopardy of being delisted from NASDAQ
18. The Wives Club are the majority of sellers in MKID’s S3
a. Zehava Rubner to sell 2,650,000 shares (David Rubner is Chairman of the Board)
b. Naomi Bodner to sell 1,325,000 shares
c. Laura Huberfeld to sell 1,325,000 shares
19. Bodner and Huberfeld filed to sell 2.2 Million shares of USCM at 5 dollars on 5/8/1998; by the end of that year the stock was selling for 6 cents. Its now a OTC:BB
20. FUSN Fusion Networks was created out of a similar merger to that proposed by SCII. Much like the jump in SCII, the stock went form 5 dollars to 15-20 dollars after the merger was announced.
a. Bodner, Huberfeld and ML Partner are all listed on the S-4 as holders of approximately 4 million shares each of FUSN.
21. ML Partners list to sell all of its 5 Million Warrants. The owner listed is Susan Meyers, with an address in Greenwich, Connecticut. The only listing for a Susan Meyers in Connecticut comes up with a “Glenn and Susan Meyers listing. The address given is 1 mile away from the address of given for ML Partners? A search for Glenn Meyers shows the CEO of Rare Media (RRRR) as also living in Greenwich Connecticut. So it would appear that the wife of the CEO of RRRR is the entity behind ML Partners which recently came into 5 Million warrants of SCII and is now filed to sell them to the public via a SCII S-3/A. Its amazing!
22. A search of RRRR does not show any ownership by ML Partners, however it does show HUBERFELD LAURA & BODNER NAOMI PARTNERSHIP as an insider with the following sales. The last one if from the HUBERFELD BODNER FAMILY FOUNDATION
a. 21-Dec-99 370,000 RRRR Proposed Sale (Form 144) of Restricted Shares. Estimated proceeds of $12,580,000.
b. 3-Dec-99 100,000 RRRR Proposed Sale (Form 144) of Restricted Shares.Estimated proceeds of $310,000.
c. 3-Dec-99 100,000 RRRR Proposed Sale (Form 144) of Restricted Shares.Estimated proceeds of $320,000.
d. 28-Oct-99 349,500 RRRR Proposed Sale (Form 144) of Restricted Shares.Estimated proceeds of $4,849,313.
e. 4-Oct-99 75,000 RRRR Proposed Sale (Form 144) of Restricted Shares.Estimated proceeds of $825,000.
f. 23-Nov-99 200,000 RRRR Proposed Sale (Form 144) of Restricted Shares. Estimated proceeds of $6,075,000.
Now some comments on the technology
23. Davidson created both N2W and ECI companies, however in his remarks submitted to the SEC he claims that the two companies have technologies that will help each other work. Thus leaving investors without the knowledge of what N2W owns and what ECI owns. Since there are no actual specifications, N2W could in theory pay ECI money to acquire technology.
24. N2W claims to have a revolutionary means of compressing data to make video stream available over narrowband cellular networks. In the Media interviews this has been claimed as patented technology, however in the SEC filings they say they have two patent applications in. It would be remarkable for such a small company to claim such a huge enhancement without the major players having noticed it. Upon an Internet search TheTruthseeker found a report IBM. This sound remarkably similar to the claims by N2W, and the simplicity of 100 lines of code seems like a textbook application of known optimizations. IBM is not claiming patents but will profit from the inclusion of it with the chips and hardware products.
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IBM chip to move Internet data more quickly By News September 11, 2000, 12:20 p.m. PT
IBM said today it has developed programming built into a chip to prioritize Internet data so that more important information can move faster.
The enhancement involves a relatively few 100 lines of code, though IBM said it will make video free of jitters and Web transactions uninterrupted by synchronizing pieces of data that fit together. Internet traffic typically moves in separated bits that are reassembled at their destination.
The PowerNP network-processor chip containing the ''bandwidth allocation technology'' software is expected to be available later this year, for switches and routers used in computer networks that form the Internet, IBM said. Networking hardware makers such as Cisco Systems and Alcatel are potential customers.
Companies using the technology to help run their Web sites can assign priorities to different types of data passing through these switches to and from customers. Digital video, which can be choppy on Web sites, would be one area that would be smoother, IBM said.
news.cnet.com.
The N2W partnerships:
25. SCII first signed a deal to Merger with ITES within Israel back in October of 1999. Later N2W acquired ITES on top of that deal, without the approval of the SCII stockholders (though this was not a requirement, it does seem their interests were not represented here). The new deal with N2W cost significantly more and also establishes about double the ultimate shares of the combined companies.
26. On March 16th N2W announced the agreement for testing with Partner Communications PNTR. Partner was given 10% of N2W along with this. Its now half a year since then, and to date nothing has been signed for purchase or commercial use by Partner from N2W. The S4 says they continue to talk.
27. On March 30,2000 N2W announced an agreement for Testing with Pelephone the other large Israeli Cell phone provider. Its now half a year since then, and to date nothing has been signed for purchase or commercial use by Pelephone from N2W.
28. On July 27th a memorandum of understanding was put established for testing between Nextel and N2W. There have been no updates since. An Israeli based Internet site foreshadowed this event, with remarkable insight on June 26th. In loud opposition to the Barron’s article a reporter (who may or may not own these securities, as disclaimered by the site) reported the following
“. The major development is probably a very large contract (Maariv claims up to $100m - that is going to be signed upon completion of the merger) with Nextel Communications Inc. (NXTL), which provides digital and analog wireless communications services throughout the United States.
As far as I know, one of the top NXTL directors attended the large party that ECIL held a few weeks ago for Mr. Rubner on his departure after 30 years.
29. The simple explanation of N2W technology methods is that it adds servers into the cell phone providers’ location, when Internet addresses are requested these servers compact the data and send the compacted data across the cell line, and it is un-compacted on the other side. While it is true this does not require new cellular equipment, the server farms required (and there maintenance) are cost prohibitive, as mentioned in the SCII filings. So the short cut to 3G is possible, but it could become costly.
30. N2W says this in the SEC filings
“Wireless communication devices are mass-market consumer items with imbedded software that is difficult to modify in the field. To address this issue, the Net2Wireless' translation programs are designed to translate content in real-time. Net2Wireless intends to distribute its software to cellular carriers who can make it available to their customers either for a fee or free of charge. Software translators that transparently translate content to make it compatible with older versions of digital wireless devices may be developed by Net2Wireless in the future, depending on the demand for such software.”
This is addressing that Cellphones are not programmable and have their software hard coded onto ROMs or ASICs. It almost seems by the language that the code will self-extract itself will it is in air and be ready for the users “real-time”, it makes no sense to me.
Bottomline is that from all the information TheTruthseeker can see, any N2W solution will require new cellular handsets to work, or programmable solutions with CPU power, such as a laptop or certain PDAs.
So there you have it, I find this a strange set of circumstances and stocks. Look at the results of these stocks after the insiders file to sell, they just tank into oblivion. USCM, RRRR, MKID. Looking at FUSN it tanked as well but it seems not related to the Insider selling. Many of the folks involved in the stocks are also in SCII. Right now NASDAQ is appraising the Merger, they are on the 4th update of the S-4 now.
You also have a series of aggressive Press Releases, which moved the stock, but so far have not had the necessary bottomline follow-through. Said another way, its been 1 year since the Merger has been announced, after that year, there are no commercial users, and there are no Sales, and there are no design wins into industry standards.
I could talk more about the unregulated press recommendations and rumors, much of which is not US based, or the “Members only Message boards” which often ban posters with critical views, but these are not unique only to SCII and will have to wait for another day.
TheTruthseeker is of the belief that stocks mergers and insiders’ sales--- such as these ---are of serious concerns to the integrity of the NASDAQ Market. These are the type of stocks when they fall; destroy the faith in investors who may not understand the dynamics and risks.
TheTruthseeker has no regulatory powers.
So TheTruthseeker can only hope that those agencies and organizations that hold the check and balances to Publicly traded securities will take a hard look.
These issues are complex and it takes a real wolff to see through the maze of press releases and SEC filings.
In an Internet where TheTruthSeeker’s individual rights of freedom of speech are limited by our court system, I can only hope that the obligations and requirements of Public companies are held to the rules.
After all it’s these rules that give consumers the trust and faith that our Securities within the NASDAQ and other markets are in fact SECURE.
Its not always easy to find, its not always fun, but when you see it, you know it.
The Truth.
The TruthSeeker....................... |
