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Technology Stocks : Escala Group, Inc -- Ignore unavailable to you. Want to Upgrade?

To: Glenn Petersen who wrote (146)	5/10/2006 12:04:01 PM
From: Robert T. Quasius	Read Replies (1) \| Respond to of 160

I got out of ESCL a while back after they renamed the company and some Spanish executives from AFINSA took over. AFINSA's business model has always made me nervous, but I previously saw nothing wrong with Greg Manning's operations. However, with the name change, top leadership change, and relocation of the corporate HQ to a pricy area of Manhattan, I took a nice profit and exited. I haven't seen any indication that the scandal extends into the U.S. operations. It seems that Escala in the U.S. was used for buying and selling activities, not the ponzi scheme. If AFINSA unloads the shares it could depress the price and create a buying opportunity, but it is way too early for me to re-enter now. Also, AFINSA served as an outlet for Greg Manning, so any you cut it the news is negative for ESCL.

To: Glenn Petersen who wrote (146)	5/11/2006 8:37:03 AM
From: Robert T. Quasius	Respond to of 160

From yesterday's 10Q filing: Current Development On May 9, 2006, Spanish judicial authorities collected documents from Afinsa Bienes Tangibles, S.A. (Afinsa) of Madrid, Escala's 67% shareholder and major customer, comprising 62% of the collectibles revenue for the period ended March 31, 2006. On the same day, Spanish authorities also collected documents at Escala offices in Madrid. As part of these searches, normal operations at these offices were suspended. The Company understands that the collection of documents was part of an investigation of Afinsa relating to possible tax evasion, money laundering, criminal insolvency and falsification of documents. The Company has also been advised that certain members of the board of directors of Afinsa, including Carlos de Figueiredo, an Afinsa representative on Escala's board, have been questioned by Spanish authorities. The Company has not been advised that it is the target of any investigation by Spanish authorities. The Company is undertaking to acquire all available information relating to these issues and intend to take all appropriate steps in response to them. The effect of these developments on the business and financial condition of Escala cannot be determined at this time. A significant portion of the Company's collectibles revenue and gross profit are attributable to sales to Afinsa. Unless offset by increases in other areas of the Company's business, a significant decrease in the level of sales to Afinsa, or the termination of the supply arrangements with Afinsa, would have a material adverse effect on the Company's financial condition and results of operations. The Company is unable at this time to predict whether these developments will result in any kind of formal proceeding against the Company and is unable to assess the likelihood of a favorable or unfavorable outcome of any such action, or to estimate the amount of liability in the event of an unfavorable outcome. As such, no amounts have been recorded in the accompanying financial statements. Results of Operations (Amounts in thousands except as noted or per share information)