FORTIS ENTERPRISES, INC. (OCTBB: FRTE) - CALIFORNIA DREAMIN'
November 6, 2003
Wildfires have raged through Southern California, leaving a trail of tragedy. Lives have been lost, homes destroyed; the losses have been devastating.
And now the bottom feeders have emerged. They always appear in the wake of tragedy, be it 9/11, the anthrax attacks, the AIDS crisis, or the more mundane energy crunch. They claim to have solutions, wonder drugs and magic bullets that will heal wounds, cure illness and repair devastating damage. Mostly, they’re just carnival barkers, snake oil salesmen seeking to entice curious passersby to come see their show. But the price of admission can be costly, as many impressionable investors have learned.
Earlier this week an e-mail was disseminated by an Internet promoter using the moniker “Emerging Stock Report.” Bearing the headline, BULLETIN: Fires causing huge damage in California, the “Emerging Stock Report” noted that President Bush now has declared a major disaster in California, opening the way for the use of federal disaster funds to assist people who have suffered losses as a result of the ravaging wildfires.
The e-mail went on to describe the monumental costs of natural disasters, going to great lengths to point out that disaster relief is a multi billion dollar business that results in massive insurance settlements.
Then “Emerging Stock Report” got to the point. It claimed that an obscure over the counter company called Fortis Enterprises, Inc. (OTCBB: FRTE) “is in the business of Property Damage Restoration.” The e-mail claimed that, during the past twelve years, insurers have paid out more than $100 billion in catastrophe-related losses – suggesting that casualty claims make for boffo business. And it went on to say that “ased upon our vast experience in this business [Fortis] right now is a huge bargain.”
“Emerging Stock Report’s” mission was clear. It was implying that Fortis was poised to profit from the coming onslaught of disaster relief claims. To drive that point home, the e-mail newsletter emphasized the prospect of multi-billion dollar settlements, culminating its pitch with this declaration: “And WHAT a business!”
Unfortunately, to be more accurate, the promoter should have dropped the word “a” from its rallying cry, and substituted a question mark for the exclamation point. “And WHAT business?” would more accurately describe Fortis. As best we can determine, the Company has not yet earned a dime in revenues from damage restoration, or any other business.
That hardly seems like the sort of relief that victims of the California fires will be seeking.
Hold That Fortis
In reality, there is no sign that Fortis has captured any portion of that multi-billion dollar disaster relief market. As of June 30, 2003, the Company had less than $22,000 in cash, no other assets, no business operations, and no revenues. In fact, it has not generated any revenues since it was formed in October 2000.
Until July 14, 2003, the Company was called First Impressions – and it had not made a lasting impression in any business. First Impressions had intended to operate as an online retailer and distributor of perfume fragrances and bath products. There is no evidence that this enterprise ever got off the ground.
Maybe it was the name – and not the absence of assets, financing and capable management – that had impeded the Company’s efforts to establish operations. At least that was the view of the Board of Directors, who decided that the name First Impressions was impeding its “ability to pursue the expansion of its business into other marketing areas.” The name Fortis Enterprises was selected because, according to the Company it was “more generic and allows for more flexibility in the future expansion of business opportunities.”
There were other changes as well. Tammy Kraft, had served as the Company’s sole officer and director since it was formed in October 2000. In describing her background and professional experience, the Company stated simply that Ms. Kraft had held positions as a technician in the cosmetic and hair salon industry since 1995, and was studying computers and the Internet in her spare time (which may have been considerable in view of the Company’s lack of operations).
On July 14th, Ms. Kraft was replaced as sole officer and director by Stephen Carnes, who assumed those same dual roles. Readers of Stock Patrol already are familiar with Mr. Carnes, who also serves as President and CEO of Valde Connections, Inc., another obscure over the counter company with lofty ambitions and no discernible operations. Apparently, Mr. Carnes has ample time to fulfill his responsibilities as the sole officer and director of two publicly traded companies that have aggregate operating revenues of zero. See Valde Connections, Inc., Part I - Just Styling; Part II - The Time Machine; and Part III - In Search of Spa-ing Partners.
Before he took control of Valde (and later, Fortis) Mr. Carnes was the founder and co-owner of a public relations firm. So it may come as no surprise that Valde, like Fortis, has attempted to improve its image. Valde recently changed its name to Signature Leisure, with Mr. Carnes expressing his view that the new name “will allow the company to better capitalize on name and branding opportunities as the company grows forward.” As was the case with First Impressions/Fortis Enterprises, the driving notion appeared to be a belief that a fresh identity would light the path to success. Sometimes, however, it takes more than a coat of paint – or a change of name.
The rise of Mr. Carnes at Fortis was not limited to his appointment as an officer and director. On July 2003 he also became the Company’s largest shareholder. Prior to Mr. Carnes’ ascendancy, the Company had 20 million shares outstanding, including 15 million shares that were held by its three largest shareholders. On July 15th, Fortis cancelled the 15 million shares held by its former principal shareholders and issued 11,250,000 shares to Carnes – leaving him with approximately 69% of the outstanding stock.
That same day, the Company authorized a four for one forward stock split.
Mr. Carnes was firmly in control.
Preparing for Disaster
By mid-July 2003, the Company had changed its name, its sole officer and director, and its controlling shareholder. What was left? A change of direction, perhaps?
In a July 22nd press release Fortis declared that it intended “to capitalize upon the niche market opportunities within the commercial and residential restoration service markets” by acquiring small, individually owned restoration companies, and consolidating their overhead under the Fortis “umbrella.”
Fortis did not say how it planned to accomplish this goal. The Company had little cash – approximately $22,000 as of June 30th, and no discernible experience in the disaster recovery field.
Still, despite such obvious limitations, Fortis soon claimed that its search for potential acquisition candidates had generated an unanticipated, positive response. On August 18th the Company issued a press release saying that it had been contacting “cleaning and restoration companies in Florida, Texas and Georgia,” and had scheduled additional meetings with selected companies. CEO Carnes indicated that Fortis planned to bring in outside consultants to evaluate the potential candidates.
Carnes went on to articulate the Fortis game plan. Small and mid-sized companies, in the industry, he said, are often unable to bid on larger jobs because they do not receive payment for sixty to ninety days. According to Carnes, with “a couple of key acquisitions” Fortis would be able to gain access to the capital necessary to bid on larger contracts.
The Company – and Carnes – did not name any of the potential acquisition candidates, indicate the terms of any proposed acquisition, or identify the sources of future funding. Nor did they specify the consultants who might assist with this process, or say how they might be compensated.
Perhaps Carnes intends to seek financing from the same offshore sources that provided private placement funds to Valde earlier this year. On May 12, 2003, Valde completed a private placement, selling 1,472,320 common shares for $250,000 to a Liechtenstein-based company called Alpha Capital AG. Valde agreed to issue Alpha Capital approximately 1,472,320 additional shares, for another $250,000, once a Registration Statement became effective covering all of the shares.
How much were those shares worth to Alpha Capital? On June 23, 2003, the Company filed a Form SB-2 Registration Statement with the Securities and Exchange Commission covering all of the shares that might be issued to Alpha Capital. That Registration Statement was amended on July 2, 2003. Between June 23rd and July 11th - Valde shares were trading in a range of approximately 18 cents to 24 cents. Assuming the Registration Statement had become effective in that time frame, and Alpha had received its full compliment of Valde stock in return for $500,000 in financing, the shares would have had a market value ranging from approximately $530,000 to $700,000. Not a bad return for such a short term investment.
Alpha Capital could conceivably have earned even more on its investment if it had sold Valde shares short soon after entering into the private placement agreement, when Valde’s common stock price ranged as high as 27 cents a share.
Considering the potential rate of return on that private placement, perhaps the Liechtenstein-based financer is prepared to make a similar arrangement with Fortis. Unfortunately, if that were to happen, the marketplace could be flooded with hundreds of thousands of shares of another company that has yet to demonstrate its ability to operate a business.
A Place on the Web
Despite its evident lack of experience or operations, Fortis has not shied away from the implication that it is in the disaster relief business. On the Company’s website the name Fortis Enterprises” is followed immediately by the phrase “Leaders in Catastrophe Relief” – a bold proclamation that ignores a complete absence of products and services.
If the Company is weak on performance, it is strong on slogans. The website goes on to say “When Disaster Strikes, Strike Back With Fortis Enterprises!,” although it is unclear what resources Fortis has that would allow it to “strike back.” In fact, while the website highlights the need to respond promptly to disasters, it concedes that Fortis is only now attempting to acquire companies that can assist with that response. In other words, if you need help right now – as do the folks in California – don’t look to Fortis. The Company is still in the development stage.
And what is the status of those possible acquisitions in Florida, Texas and Georgia? On September 22, 2003, Fortis announced that it had signed a consulting agreement with Florida Cat astrophe Corp, an Orlando-based company that specializes in the insurance restoration industry. According to the press release, Fla-Cat, as the consultant is known, will help Fortis evaluate potential acquisition candidates.
Although the press release did not reveal the terms of the consulting relationship, a Form 8-K filed by Fortis on September 30th included a copy of the Consulting Agreement. Under that arrangement, Fla-Cat is to receive 320,000 non-registered shares of the Company’s common stock over the next year.
Unless those shares are registered, Fla-Cat will have to wait at least one year after it receives the stock before it can be sold. Some other lucky Fortis shareholders may not be similarly constrained.
On August 26, 2003 the Company filed a Form S-8 Registration Statement for three million shares of common stock that it planned to issue under a “Consultant and Employee Stock Compensation Plan.” The Plan provides that those shares can be awarded to “any person or entity that renders bona fide services to the Company” including officers, directors, consultants, lawyers and accountants – a group which could presumably, but not necessarily, include Fla-Cat.
The Company has not said whether the S-8 shares have been issued, or to whom, or whether Fla-Cat is likely to be one of the recipients.
But whoever gets the shares will not have to hold onto the stock for a year or more. Because they have been registered on a Form S-8 they may be sold right away – before Fortis acquires or develops any disaster relief operations.
Fortis may not be in a position to repair damage, but it does want to improve someone’s home. On September 2nd the Company announced that it was holding an online contest called “The Fortis Enterprises Home Improvement Sweepstakes.” The Company was offering a grand prize of $2,500, toward a home improvement project of the winner’s choice.
In other words, Fortis may not be in a position to rebuild anyone’s home just yet, but it’s prepared to hand over $2,500 to someone who is willing to do it for themselves.
The Guru, That’s Who
Stock promoters have been sniffing around the Fortis story – and not just the unnamed person (or people) behind “Emerging Stock Report.” An Internet stock-picker called “TheStockGuru” presented a special “sponsored” corporate profile on the Company, lauding its prospects and predicting that Fortis would be on hand “to step in when fire, flood, tornadoes, hurricanes, and all sorts of disaster take place.”
The StockGuru enumerated “disasters that Fortis could be called upon to serve,” listing fires in California, floods and tornadoes in the Midwest, and hurricanes that strike the Atlantic coast. Yet, while this promoter proclaimed that Fortis “is in acquisition mode” it failed to point out that the Company has no operating business at present, and therefore is not positioned to respond to any of these natural disasters.
Instead, TheStockGuru claimed that a “breakout is possible” for Fortis stock, and predicted “conservatively,” that Fortis stock would hit $1 within six months. Why was TheStockGuru so enthusiastic about a business that does not yet exist? The promoter said that it did not own any shares of the Company’s stock, but conceded that it had been paid $10,000 by a “third party shareholder” to issue its profile.
TheStockGuru profile also included a short telephone interview with Fortis’s CEO Stephen Carnes, who spoke briefly of the Company’s plan. Fortis apparently was not pleased. On October 7th the Company filed a Form 8-K stating that Mr. Carnes had given an “unsolicited” interview to TheStockGuru’s John Pentony. The Company insisted that it had not compensated TheStockGuru and “is not agreeing or disagreeing with the contents of the profile.”
So, while the Company did not adopt the contents of the profile, it also did not take the opportunity to distance itself from the puffed up portrait painted by TheStockGuru.
And so far there has been no Form 8-K disclaiming any connection between Fortis and the “Emerging Stock Report.”
One thing seems certain. Victims of the California wildfires should be looking elsewhere for relief.
©2003 Stock Patrol.com. All rights reserved.
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