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Microcap & Penny Stocks : HITSGALORE.COM (HITT) -- Ignore unavailable to you. Want to Upgrade?

To: Bill Ulrich who wrote (1579)	5/27/1999 1:58:00 PM
From: Sir Auric Goldfinger	Read Replies (2) \| Respond to of 7056

Hitsgalore.com Falls on Word of Founder's Past Crime. HITT shares slid as much as 26 percent after the Internet advertising company said its founder and majority shareholder spent 10 months in a federal prison after being convicted of wire fraud in 1992. It's the second disclosure of a brush with the law by Dorian Reed this month. On May 11, it was reported that a federal judge ordered Reed and his wife, Audrey, to pay $613,110 to 100 customers they defrauded at another Internet company two years ago. The Reeds were sued by the Federal Trade Commission. Reed quit as director and chief technology officer of Hitsgalore.com on May 13 after the revelation of the FTC suit. He remains ''a key person who provides services to the company,'' according to a 10-K filing with the Securities and Exchange Commission yesterday that disclosed his criminal conviction. Hitsgalore.com shares have slumped more than 70 percent since the FTC action against Reed was reported. They fell 1 1/16 to 5 1/16 in midday trading. Earlier they touched 4 9/16. The stock traded as high as 20 11/16 on May 10, giving the company a market value of about $1 billion. It's worth $250 million now, with Reed's 28.15 million shares worth $140 million. The filing disclosed for the first time that the company's $10 million private sale of two million shares announced on April 21 doesn't require the buyer to give the company any cash for 12 months. When it announced the investment, Hitsgalore.com said it would use the proceeds to fund a national radio advertising campaign beginning this week. Security in Stamps The investor, Life Foundation Trust of Scottsdale, Arizona, secured its investment with a stamp collection it valued at $50 million, according to the filing. The 10-K filing said Life Foundation Trust also agreed to spend another $10 million to buy web sites from Hitsgalore.com that contain local content, called Local City Editions, over the next 12 months. The second $10 million, not previously announced, was also secured by the stamp collection, the 10-K said. On May 10, Hitsgalore.com's shares soared 30 percent after the Life Foundation Trust said it would invest $100 million in Hitsgalore.com stock. Three days later, the trust said it would pay for the shares with interests in Texas oil and gas wells. Neither the company nor the trust would provide details about the stamps or oil wells. Life Foundation claims to have charitable goals, including feeding the hungry, providing clothing and shelter to the needy, education to the uneducated and ministering to spiritual needs. Its trustee, Jeanette Wilcher, has declined requests for interviews. Hitsgalore.com's web site claims customers of its services can earn 400 percent returns. It says by paying it $99 to sponsor banner ads on the Internet, investors can earn $495 if they get 20 more investors to also pay $99 each to Hitsgalore.com. Share Disclosure Until its 10-K annual report for 1998 was filed with the SEC after the close of trading yesterday, the company had refused to say how many shares Reed owned. Steve Bradford, chief executive, owns 6.1 million shares, according to the document. Hitsgalore.com, founded by Reed in July, had revenue of $17,800 in 1998. In March, Reed and minority shareholders merged it with Systems Communications Inc., a Florida-based shell company, in exchange for 37.7 million Systems Communications shares. The surviving company is called Hitsgalore.com. The merger was described as ''de facto'' because neither of two shareholder meetings called to approve the merger gave proper notice to shareholders. The company described them as a ''non- binding straw poll'' of shareholders. It said it plans to call a special shareholder meeting to properly approve the merger. The 10-K said Reed was unaware of the FTC's judgment against him until he learned about it through news reports. Reed maintains he filed an answer to the FTC's complaint in April 1998 and assumed the matter was over. The report said Hitsgalore.com had a negative net worth of $4.8 million on Dec. 31, prompting its outside auditor to warn of ''substantial doubt about the company's ability to continue as a going concern.'' --David Evans in Los Angeles (310) 827-2348 through the New York newsroom (212) 318-2300 jh