INTERNATIONAL BIOCHEMICAL INDUSTRIES, INC. (OTCBB: IBCL) – WHAT GOVERNMENT AGENCY?
February 7, 2003
Stock Patrol readers should have seen this one coming. On January 31, 2003 Stock Patrol warned readers to be on the lookout for companies that attempted to boost their profile by promoting products or ventures that coincided with the agenda set forth in President Bush’s State of the Union Address. See Beyond the State of the Union.
On February 6, 2003, less than one week after that article appeared, the Securities and Exchange Commission temporarily suspended trading in shares of International BioChemical Industries, Inc. (IBCI) (OTCBB: IBCL), citing questions about the accuracy of claims that the federal government had contacted IBCI to discuss the effectiveness of the Company's products in the war on bioterrorism. See Trade Halts and Suspensions – International BioChemical Industries, Inc.
The SEC’s Order does not detail the Company’s questionable conduct, but the suspension appears to stem from a series of press releases issued by IBCI over the past week.
The State of International BioChemical
In his State of the Union Address on January 28th, the President called for “a major research and production effort to guard our people against bioterrorism, called Project Bioshield.” He proposed that the government spend almost $6 billion “to quickly make available effective vaccines and treatments against agents like anthrax, botulinum toxin, Ebola, and plague.”
The following day IBCI distributed a press release bearing the following headline:
“Federal Government Agency Requested Today an Urgent Meeting With IBCI to Discuss BioShield Products Concerning the War on Bioterrorism.”
The headline was a seductive tease that suggested a potential role for the Company in the fight against terrorism. There was, however, little substance to the press release. IBCI did not identify the federal government agency that purportedly had requested a meeting, or indicate why any of its products might be useful to the government. Instead, the Company claimed that an unidentified federal official had contacted IBCI “after a review by his agency of the technical data publicly available from the EPA.”
Although IBCI did not provide any further details about that “technical data,” it did make one additional, equally vague, claim. The Company announced “discovery of a new proprietary use for the technology discovered during testing at a major University lab.” The Company suggested that this discovery had been made while the unidentified product was being tested in connection with an unspecified disease. IBCI did not provide the name of that “major university,” or explain the potential new use (or the old one for that matter) of the unidentified technology.
The press release may have been uninformative, but it seemed to have a decided effect on IBCI stock. On January 28, 2003, IBCI stock closed at a price of 2 cents a share, on volume of 423,400 shares. On January 29th, the date of the “bioterrorism” announcement, almost 13.5 million shares were traded, and share prices increased by 350%, to 7 cents per share.
The following day, January 30, 2003, IBCI issued another press release. This time the headline roared: “IBCI Announces Meeting With Federal Agency Concerning Bio-terrorism Set For Monday, February 3, 2003,” with a subheading that claimed “Government Sets Parameters Yesterday Afternoon for Discussion of Combating Bio-terrorism.”
IBCI says that it has an EPA approved antimicrobial technology that kills bacteria and can be used as an alternative to disinfectants and sanitizers. In its January 30th press release, the Company claimed that a federal agency was urgently seeking the meeting in order to discuss test data and products “that will be effective in the war on bio-terrorism.”
The Company did not specify how its products might be used in the fight against bioterrorism, or name the federal agency that purportedly had requested a meeting. Once again, however, IBCI stock responded. On January 30th almost 22.6 million IBCI shares changed hands, and the stock price rose to 8 cents before closing at 7 cents a share.
More “News”
IBCI was not finished. On February 3rd the Company sent out three more press releases. The first, which was issued before the stock markets opened for trading, attempted to “clarify” the two earlier releases. The Company now was claiming that a “Weapons of Mass Destruction Coordinator for the FBI, who is also a member of the Atlanta Joint Task Force on Terrorism,” contacted IBCI on January 28th. IBCI said that it spoke with the FBI agent again on January 29th and scheduled a meeting at the Company’s offices on February 3rd in order to discuss IBCI’s operations, products, security and stability.
Adding a note of caution, the press release reminded investors that IBCI had no federal government contract. Nevertheless, the Company may have managed to pique the interest of some potential investors when it mentioned that it was prepared to discuss “everything requested by the agent,” including the “security of internal data files on Anthrax.”
The second press release issued on the morning of February 3rd – also before the markets opened - revealed new additions to the Company’s sales and marketing team, but did not elaborate further on the pending meeting with government representatives.
A third press release, issued at 3:34 pm focused on that subject. It stated that the Company had concluded its business meeting with two unnamed representative of an unidentified “agency of the Federal Government.” IBCI said that it had been advised that the meeting was requested by “Washington, D.C.,” and that information gathered about the Company and its employees was being submitted to “Washington, D.C.” for review. These vaguestatements provided virtually no useful information. ,
Despite that rather cryptic summary of the meeting, IBCI shares continued to respond. On January 31st, while the Company took a brief breather from its series of press release, the Company’s common stock doubled in value, to 14 cents, on volume of 15.3 million shares. Then, on February 3rd, the date of the three press releases, another 42.3 million shares were traded, and prices reached a high of 16 cents per share, before closing down at 11 cents.
The wave of press releases continued on February 4th, with the announcement that IBCI’s “partner,” Nova BioGenetics would be adding new antimicrobials to its product mix. The Company did not elaborate on the nature of its “partnership” with Nova, and the impact of this development on IBCI was unclear. Nevertheless, another 19.5 million shares of IBCI stock traded on February 4th.
Interestingly, this onslaught of “news” comes just weeks after the Company registered 7 million shares of its common stock. On January 7, 2003, IBCI filed a Form-8 registering 7 million shares to be issued to unidentified officers, directors, employees, attorneys and consultants under its 2002 Option Plan. An additional 7 million shares already had been registered under this same 2002 Option Plan in September 2002.
The SEC’s trading suspension of IBCI shares took effect on February 6, 2003 and will continue until 11:59 pm on February 20, 2003. Unless the SEC takes further action at that time, the stock can resume trading – most likely on the Pink Sheets.
That does not mean investors should be rushing out to buy more shares. IBCI has quite a few questions to answer, and many details to provide.
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