Following an extended Pump & Dump campaign and then an emasculating, give-'em-the-finger 1:1,063 reverse split that became effective on 25 October 2013, the stock had traded listlessly, until announcements of a change of control and business direction hit the wires the second week of January 2014. The news--which wasn't really new--brought increased volume and a modest price spike.
What is now HKTU has a long, though undistinguished, history as an OTC issue. It began trading in 1998 as Golden Chain Marketing (GCMK); became Virtual Lender.com Inc. (VLDC) later the same year; morphed into JTS International, Inc. (JTSX) in 2006; and then, in 2008, into Fuji Construction Company International, Inc. (FJIC). Its most recent incarnation, but surely not its last, is as HKTU; it began trading under that symbol on 6 November 2011.
There were problems from the outset. The reverse merger between Golden Chain and Virtual Lender featured in SEC litigation brought against what a Federal district court later called a "sham incubator for startup companies" named M & A West, Inc. and, among others, Stanley R. Medley. M & A West owned a subsidiary called M & A West Financial, which, once the merger was consummated, became Virtual Lender.com. Several similar transactions were arranged by the same people, and in every case Medley and others received unregistered stock and illegally sold it into the market. In 2001, the SEC sued. The case dragged on for years, and was finally decided in 2005. Medley objected to the disgorgement required of him, and to a number of other things, and so appealed. In 2007, the majority of the appellate panel upheld the lower court's decision. Medley lost.
The case is interesting: if unregistered stock entered the market illegally, even many years ago, questions about settlement and clearance could be raised by DTC today, should it feel that is appropriate and a chill or total lock down could even be imposed.
What the Hokutou?
HKTU is not an SEC reporter; neither were its predecessor companies. Except for a few old press releases floating about the Web, nothing much is known about those companies. For that matter, nothing much is known about the inception of HKTU, including why it bears that name. Though it began trading in November 2011, it made no disclosure to OTCMarkets until December 2012. Since then, nearly half the filings it did submit have been declared "inactive" by the company, and so are hidden from view unless a curious researcher clicks "All" on the "Filings and Disclosures" page. As we shall see, some were removed because they were incomplete or contained mistakes; others, apparently because the company wanted to keep some secrets until it felt the time was right.
Once the filings began, they didn't offer a great deal of information. As of 30 September 2012, the company had total assets of $550.00; 950 million shares authorized; 103 million shares outstanding; and a public float of 11,183. The float was the same as it had been at 30 September 2011.
The company had four beneficial owners: Direct Equity International Inc., at 5.40%, Yoshikatsu Saito, at 10.02%, Tsunenobu Arai, at 33.94%, and Chadwick & Collins, a Grand Cayman company, at 50.43%. The filing explained that in July, Chadwick & Collins had purchased its majority interest in the company, and that CEO and chairman was now Eugene Collins, a Chicago resident. HKTU was said to be an operating nutraceuticals business selling anti-aging products, dietary supplements and more online. According to an attorney opinion letter written by Elisa T. Drew of Hsieh & Associates, P.C. of Chicago, Chadwick & Collins had paid $0.0001 a share for 52 million commons. That comes out to $5,200.
At the end of January, Collins announced that the company's products were marketed under the brand "Live Young Naturals," and furnished a link to the website where they could be purchased.
He added that he was "already in talks with a chain of pharmacies and is taking his company public to fund a run at the national chains." Products can be bought at the Live Young Naturals site. Presumably revenues are generated from those sales. Yet oddly enough, no revenues were ever recorded in HKTU's financial reports. By 31 March 2013, the authorized had been increased to 4 billion shares without explanation; the outstanding was 983 million, and the float 80 million. Someone had acquired a large position in restricted securities. Strangely, in its report for the first quarter, HKTU answered "none" to the question "any increase of 10% or more of the same class of outstanding equity securities?" A $25,000 debt not previously mentioned was converted into 80 million shares, but that scarcely accounts for the dramatic increase in the number of shares outstanding. One thing that is clear is that those 80 million shares were issued as free-trading shares.
Collins is not a high-profile figure. A Linked In page describes a Eugene Collins who works as a manufacturing supervisor for Nature's Bounty, another nutraceutical-dietary supplement company, but that Collins lives in the New York City area, not Chicago. Our Collins leaves no real footprint anywhere, although he can be associated with two companies like HKTU. During at least part of 2013, he was CEO of a company called Geo Vision International, which made dietary supplements aimed at the Baby Boomer market. Like HKTU, Geo Vision was public; it traded on the Pink Sheets as GVIT. It still trades, but its name has been changed to Kasten, Inc., and its ticker to KAST. The only OTCMarkets filings it's ever made are from September and October 2012, so it isn't known whether Collins is still associated with it.
On 24 June 2013, it was announced--discreetly, in a revised attorney opinion letter--that Collins had sold all his stock. The letter explained that "the shares were acquired as investment for cash and in lieu of compensation." It did not disclose who now owned the stock. Historical trading information makes clear that Collins didn't dump it on the open market.
Months passed. Nothing was said about that trivial matter. Who was CEO? Good question. It was not until 29 October that the company was next heard from, and the news was not greeted with cries of joy by shareholders. The press release issued informed the public that the company had effected a 1:1,063 reverse split on the 25th of the month. This was the reward for those who held shares after a 7 week promotion that had ended just 7 months earlier. The shares outstanding had been reduced from a little over 1 billion to a little over 1 million. HKTU mendaciously assured readers that "the Company plans to broaden its product offering in the vitamin and supplement market and is currently seeking partners in those industries."
Not even close. When on 5 December HKTU got around to posting its officer/director disclosure report for the quarter ended 30 September, it noted that "by the end of 2012, the development of new supplements became uneconomical and the Company began to seek other more efficient and effective revenue generating opportunities." For a full year, HKTU had been deceiving shareholders about the nature of its supposed business. And it continued to do so, as it hid that report, and a number of others, by declaring them "inactive."
A new direction for HKTU
Those hidden filings, all posted between 5 and 8 December, contained quite a bit of other information that would have been of interest to shareholders and potential shareholders.
First, and most importantly, it was announced that in November 2013 the company had purchased a corporation known as Platinum Pari-Mutuel Group, "in return for restricted common stock of the Company." It isn't at all clear how much restricted stock was involved in this transaction. It may or may not have included Chadwick & Collins's 852 million shares, which were said to be owned by Cim Collins, who was not further identified. Platinum was now a subsidiary of HKTU.
The document in which that is noted is described as a "144A Offering Announcement." Like so many other filings from that time, it's inactive. Nowhere is it explained what amended Rule 144 offering the company is talking about. Nor was any original filing made in connection with any transaction that would be governed by Rule 144. Presumably, though, it had something to do with the acquisition of Platinum Pari-mutuel.
Platinum was described as a gaming hub that has "designed an application that allows users to follow and share information regarding the fast-paced global financial marketplace and to compete against each other in a traditional racing format known as "stock-racing." HKTU plans to make the game available to both the U.S. and international markets, but because of our laws regarding online gaming, in the foreseeable future U.S. residents will only be able to play "for fun."
The rules are explained in greater detail at a new website dedicated to Platinum's new venture. The site is called "Financial Races." More information is offered on the "Investors" page. Amusingly, readers are told that "the Street lacks a place where people can come to socialize and have fun around Financial Markets…"
They must never have heard of stock message boards, or experienced the drama of Twitter and Facebook.
Change of control
New management arrived with the new business plan. The Rule 144A filing introduced Shana Weiner as HKTU's sole officer and director. Weiner's employment history is offered: she'd been CEO since October 2013; before that she was an Implementation Specialist for First Data, Inc.; earlier still she was office manager for Shangrila Ventures, Inc. Weiner owned no stock.
The company had a new address as well: 245 N. Vine, Suite 904, Salt Lake City, UT 84103.
All this interesting information was unknown to shareholders, unless a few happened to look at the hidden inactive OTCMarkets filings. On 11 December, HKTU did file an active quarterly report for the period ended 30 September in which it mentioned its acquisition of the gaming company, but it attracted no attention. Only once the new year had begun was Platinum introduced to the general public in a pair of press releases.
On 7 January HKTU announced the appointment of new directors and executive officers: James A. Egide as CEO, Michael Bard as CFO, and Bruce Benedict as Chief Technology Officer. Egide and Bard would also serve on the board, along with Keith Cannon. Shana Weiner had resigned from all her positions effective 1 January. In a second press release from the same day, the acquisition of Platinum was revealed, and a link to the new website offered.
The company's new team is not young. Egide is 79; the other three are in their mid-60s. All have been involved in some way with public companies in the past. Cannon worked as a registered representative for most of his adult life; until he resigned his license in 2005, his employer was Wilson-Davis, known to the penny crowd as promo group Awesome Penny Stocks' favorite broker. Three of the four--Bard is the exception--have long had interest in and experience with horses, racing, and betting. Egide has been an owner of thoroughbreds since 1980.
Egide has worked in all kinds of businesses, beginning with commercial real estate, and moving on to co-found a company called CARME, Inc., which developed hair and skin products. CARME prospered: it listed on the Nasdaq, and was eventually bought out. While it, and Egide, encountered some problems along the way, it can be considered a success.
Egide is no stranger to pari-mutuel betting, or to OTC companies dealing in some version of it. In 2005, he turned Orbis Development, Inc., a fully-reporting issuer trading on the OTCBB, into Global Pari-Mutuel Services, Inc. (GPRM). That was easy enough for him to do, as he'd been chairman of the board of Orbis since its inception in 1997. GPRM's plan was to "deploy technology and provide services designed to facilitate pari-mutuel wagering over the Internet and through international call-centers and physical Off-Track-Betting… facilities." The company never became profitable. In 2010, it filed a Form 15-12G with the SEC, voluntarily terminating its registration. As a result, it was delisted to the Pinks. Less than six months later, it filed a new Form 10-12G, hoping to re-register and once again trade on the OTCBB. The SEC requested four amendments, and apparently was still not satisfied. In addition, the company fell behind with its periodic financial reports in 2011. In September 2012, the SEC began an administrative proceeding to revoke GPRM's registration. Egide decided not to contest the action, and registration was duly revoked on 18 October.
|Janet Diller Stone|
GPRM must have been one of the Wakabayashi Fund's last jobs. By 2011 the name had become notorious, and the unrepentant Stones decided to fold it and create a new vehicle, which they named the Hong Kong Alliance Fund Limited.
Stone received 600,000 free-trading shares of GRPM for his trouble. That, at least, is what he disclosed. When his report appeared, the stock had last traded at $1.40. Lucky Stone. Unlucky Egide; he'd wasted money on a con artist.
The Pump & Dump
Within a few days of the Platinum Pari-Mutuel Group's official debut, complete with (unfinished) website, the promo campaigns began. There aren't many yet, but they will likely increase in number. As always, it's hard to make sense of the disclosures offered at StockPromoters.com, but clearly some promoters expect to be paid up to $75,000. The chief third-party payor is called Blue Seas Management LLC. A Google search for Blue Seas, not surprisingly, yields nothing. If an entity by that name exists, it is likely to be domiciled offshore, perhaps in the Caribbean or in Central America.
A different kind of effort was made by Robert Goldman, "Senior Analyst" of the Goldman Small Cap Research website. Goldman says he once worked for Piper Jaffray; he is now self-employed, sending out alerts to subscribers, and charging $5,000 apiece for his company reports. Goldman, who will pump just about any piece of garbage, has the habit of setting ridiculous target prices for clients' stocks. Other promoters pounce on those artificial targets and issue fraudulently intended statements, such as, "Goldman sets $2.00 price target", as HKTU's current pimps have done in an effort to infer that Goldman Sachs is analyzing the stock. Rob's compensation for the HKTU job was contributed by an unidentified third party. Perhaps he, too, was hired by Blue Seas Management.
Goldman's report is largely based on the material presented at the new Platinum website. A good deal of the usual hyperbole is involved. For example, he asserts that the company's late-middle-aged to elderly management has "deep experience in gaming [that will allow Platinum] to quickly penetrate the estimated $33 billion global Internet gaming market." His further suggestion that HKTU could soon trade at a premium to "the high-multiple online gaming group, which includes Zynga" strains credibility. Okay, he didn't quite say HKTU, a lowly Pink with a history of transparency problems, would outpace Nasdaq-listed ZNGA--currently priced at about $3.50--but it seems nonetheless to be what he'd like his readers to believe.
To his credit, Goldman does makes a point of noting that he and his website have nothing to do with Goldman Sachs. Most people would naturally be able to figure that out; the investment bank is not in the habit of promoting illiquid, non-reporting penny stocks. Our Goldman--Rob--is, according to his site, not located in New York City, but at 1498 Reisterstown Road, Suite 286, Baltimore, MD 21208. There's a UPS Store at that address, and probably Goldman uses it. Sharing that address, and "Suite" 286, is a business called My Snazzy Chicken Coop. Go figure.
Whether the nascent HKTU pump job will work out for any investors is anyone's guess. Most will lose. Of course it is working for those insiders that funded the scheme. Someone is clearly willing to fork out some serious cash in the hope Hokutou will rise, and, more importantly, will enjoy some sustained heavy volume. Promotions are typically funded by individuals holding large positions they'd like to liquidate. If buying comes in, selling will accompany it.
As for the company itself, it remains to be seen whether the techies Egide hires, if he ever really does, will be able to develop the kind of unusual game he has in mind, and whether that game, once developed, will appeal to the gambling public. His experience with GPRM suggests that unless he's learned a great deal in a few years, HKTU may suffer the same fate. As always, much depends on whether management can successfully raise money--this project will require a great deal--and at the same time keep dilution under control.
On that front, there are already ominous signs. When the stock effected the dramatic reverse split that reduced the outstanding to a mere million shares, the authorized was cut to 400 million. As of 10 January, the outstanding had already risen to 277 million, which was accomplished in two short months. Much of that stock is restricted: the float is a mere 27 million shares. But restricted stock doesn't stay restricted forever. The fact that a promotion is underway suggests that one way or another, some legends may have been lifted in recent days.