More from Yahoo thread. Analysis of Financials Good Read
What the press release does not tell you and should.
Even though revenues increased by 31% or a measely $780,449, operating expenses also increased 31% or $2,840,404. Of these expenses a fair amount of these costs were associated with prior non-arms length transactions between the Company and officers and directors of the Company. Of this increase was a write off of $836,097 of goodwill acquired in 1996 when the Company purchased all of the outstanding shares of Thermo Waste Exchange Inc, a current licensor of technology. The acquisition was a payment of $250,000 cash and $627,098 of shares in the Company. In return for its cash and money the company in essence acquired $51,903 of debt and $929,001 of goodwill, thus management deemed this company to add above normal earnings power and placed the value of this addition at $877,098. In 1997 $92,904 of this goodwill was amortized. In 1998 the management of the Company deemed that in fact the addition of this company held no future value and therefore wrote off the remaining amount of $836,097 yet it is still reflected as an active subsidiary and licensor but has no future value. This was done for the benefit of all shareholders as management evidently selected a company of no real worth but paid close to $1,000,000 for it!
It gets better or at least more interesting!!
As in the past operating expenses have far exceeded any amount of revenue generated. In 1998, commencement of construction on new plants has been a major feature with the completion of the Hamilton Mark II conversion, Richmond Bio Conversion Inc. and the addition of a second 400 ton per day facility to the Hamilton Bio Conversion complex. This increased level of activity caused selling, general and administrative expenses to increase. With the major amount of increased activity aimed at future business and revenue generation, these selling, general and administrative costs increased 19% in the past fiscal year to $6,985,767 from $5,881,059 in the fiscal year ended April 30, 1997. A significant amount of the increase took place in the fourth quarter. Of this $1,104,708 total increase, $535,183 or a whopping 48.5% of the total increase was attributed to accrued or paid to companies controlled by common officers and directors. Of course these transactions were recorded at exchange value representing amounts agreed upon by the related parties. Though a good portion of the management has been hired from the same company, BDO Dunwoody, which performs the auditing function these types of transactions are deemed ethical by the management team because they were transacted.
Further analysis of the Company's performance has shown that professional fees increased by a total amount of $885,028 or 132%. The Company press release accounts for $350,000 due to significant use of legal firms. This leaves an unexplained amount of $535,032. Of course with all of the interrelated transactions between all of the 26 listed subsidiaries, which seem to be wholly owned or partially owned or controlled by the officers and directors. Not to mention the other external organizations such as The Baha Company, Global Technologies, Pacific Ocean etc., which also seem to point to ownership or control by officers and directors of the Company. One can only assume that this cost was similar to the $535,183 accrued or paid to companies controlled by common officers and directors from the selling, general and administrative expense.
Oooh! Don't forget that also included in accounts payable is $227,781 of money due to companies controlled by common officers and directors!!! Are we starting to see a pattern and reason for all of these subsidiaries? What great EARNINGS POTENTIAL for management!!! And we get the GOODWILL portion!!! These guys are masters at improving THEIR PERSONAL BOTTOM LINES!
The Company also entered into an agreement with the Company President to supply 260,.000 common shares of the Company with an exchange value of $1,037,400. THAT EQUATES TO $3.99/PER SHARE!! WOULDN'T YOU LIKE TO SEE THAT IN THE STOCK PRICE?
Back to the prior year 1997. Last year the Company entered into another highly rewarding transaction with a company, you guessed it, controlled by a common director to purchase the licence right to utilize the thermophillic digestion technology in the marine culture and aquaculture industry. Though I personally have not seen the company posture themselves in this industry. I can only assume this would be somehow connected with setting up so that a subsidiary, controlled by a common director, will receive some money. God I love subsidiaries and the earnings that get paid to the controllers of those little companies.
We wouldn't want to be able to reflect additional earnings for the Company. That would be stupid huh? Well in connection with this transaction the Company advanced a $2,000,000 refundable deposit to the related company which was recovered in 1998. How responsible, yet suspicion abounds here! As one gets referred to note 13 of the 1998 annual report. Thirsty yet?
Well remember that prior matter with regard to a write off of goodwill for $836,097? The one which the "action based" management team decided would add above normal earnings power back in 1996? Well they did an even bigger whopper this fiscal year!!! This year the "action based position" of the highly ethical management team decided that they needed to really boost their earnings potential. I mean they really wanted to increase it to where the sky is the limit. So what did they do for us, the shareholder? Well it looks as though the highly ethical management team possibly met with Harvey Ambrose. Combined they devised a scheme, or business plan as they call it in venture capitalism, that the Company should form a partnership with old Harvey and get him in on all of this above normal earnings potential. The result was that they would create a company called Ontario Thermo Tech and that Ontario Thermo Tech would oversee the highly acclaimed Oshawa and Niagara Bio Conversion projects. Now remember these two projects are going to be constructed using debt financing which it has been rumored that Harvey Ambrose is in someway a principal player. Further the debt financing is a done deal but can't be announced because of a confidentiality agreement. Anyway Ontario Thermo Tech is set up as an entity prior to the Company (Thermo Tech) acquiring a 50% interest. Now we have Harvey Ambrose in a company as an owner or controller (can't wait for next years notes to the financials). Ontario Thermo Tech becomes the parent of Power Grow Systems Inc. and the infamous Northwood Recycling Inc. Once Ontario Thermo Tech is set up, the Company enters into an agreement with a Bahamian Company to supply the shares to purchase Ontario Thermo Tech. The Bahamian Company acquired all the shares required to settle the OTT acquisition from an officer of the Company or companies related to him and persons related to him! Gotta love the director and those subsidiaries and other companies related to "him". (I wonder who him is and who the owner or controller of the Bahamian company is, mmm let me think). Basically the highly ethical management team offers to buy 4,123,380 shares of Thermo Tech Technologies stock from the Bahamian company at a price of $2.80/share or $11,545,464. The highly ethical, and action based management team then took those shares and acquired OTT for $6,952,188 or $1.69/share!! Included in the $6,952,188 was $5,978,105 of goodwill, or the value associated with the above normal earnings potential the company has acquired! Now, the remaining $4,593,276 (the difference between what we paid Baha for the 4,123,380 shares and what we sold them to OTT for) was lumped into the negative $20,485,710 of Shareholder Equity Deficit. We got the worthless goodwill asset of $5,907,678 and $974,083 of true value assets and a note payable on demand to Baha Co. in the amount of $6,705308!!! I think we paid out $11,545,464 less $6,705,308 or $4,840,156. The note is without interest and security how nice of him!
Subsequent to this transaction, Baha Co. assumed responsibility for the settlement of the $2,000,000 refundable deposit mentioned earlier (looks like Global Corp. is now in the Bahamas).
What could be next?
Well the Company also purchased from a director for cash the remaining 30% of thie issued and outstanding shares of Hamilton Bio Conversion Inc and land occupied by that company's facility. The cost? $!,479,152 of our Company's cash! Where does the money come from? Hi. At least we didn't get goodwill. Again we are paying our director money for subsidiaries we already own.
And before I conclude there is this one last item. The highly ethical directors and us the shareholders approved a reduction in the stated capital of the outstanding common shares and deficit of the Company by $39,262,299. Yep we agreed to this didn't we? Anyone want to expand on this one?
Maybe I will dig some more. In summary all of the assets seem to be collateralized most likely to the highly ethical ones.
A lot of energy in this organization involves creating non-valuable subsidiaries placing the management, or officers and directors at the helm so that future shareholder wealth can be siphoned to them.
That the level of energy utilized in creating all of these interrelated transactions are proof that this management team is not functioning ethically or making sound decisions which would enhance and efficiently develop organizational and shareholder earnings and return on investment.
That when it comes down to ethical management these guys outright fail. Further, not one person on the management team could count their nuts twice and come up with the same number since it is evident they can't give you the number of shares outstanding.
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