March 28, 2014: Through the wee hours of the morning of 27 March 2014, Cal-Bay International (CBYI) offered night owls some quality entertainment. Earlier in the day, shareholders were delighted to discover that the company's new website, reflecting its recent move to the pot business, had gone live.
But as interested readers took a closer look, embarrassing problems became evident. The strange-looking new president, Walter Nicholas, had the "Management" page all to himself, with a biography outlining years of business success.
|Walter Nicholas's biography <clilck to enlarge>|
Sounds pretty good, doesn't it? A guy named Brad Shupe thought so too, when he prepared his own biography as managing partner of Purity Health Systems of Newport Beach, California. That's right: Nicholas's résumé was shamelessly plagiarized from Shupe's at the Purity site.
|Brad Shupe's biography <click to enlarge>|
And it didn't end there. On the homepage of the new site, CBYI prominently displayed a picture of its supposed Pharmacy-Vend Dispensing System, described as a high tech vending machine for medical marijuana.
|CBYI "vending machine" <click to enlarge>|
|BMAC video kiosks <click to enlarge>|
The message board night owls mentioned above took note and made comments. And screenshots. By dawn, the "Management" page of the CBYI site had been wiped clean, and the Nicholas biography was replaced by an "Under Construction" message. A few hours later, that was in turn replaced by an absurd "explanatory" note saying: "Due to the overwhelming call volume to Mr. Nicholas's previous employers and employees, we are currently updating the resume [sic] to reflect a more generic employment history."
Seriously? The notion that anyone was calling, say, Nike at 5 a.m. to enquire about Nicholas's past employment as a consultant is laughable. There is, however, something interesting, and perhaps significant, about the brief message: the possessive of the purported president's name was spelled "Nicholas's." Most Americans would use "Nicholas'," which is an equally accepted usage. The former--Nicholas's--is British, as is Roger Pawson, the schemer in control of CBYI.
While messing with the Management page, whoever was dealing with the website took the trouble to erase the BMAC logo from the images of the "vending machines."
And so in a few short hours, CBYI was caught out engaging in plagiarism and expropriation of another company's technology, even though that technology has no application to what Cal-Bay claims to do. The day was not off to a good start, and when the opening bell rang, the stock sold off dramatically.
Cal-Bay has been around for a long time, by penny stock standards. It went public in 2001 as a distributor of high-quality engineered products for the process, environmental, safety and laboratory markets. Its founders didn't have much luck, and sold the shell to Roger Pawson in 2005. Pawson immediately effected a reverse split and began to grant himself preferred stock and options. In April 2007, delinquent with the company's SEC financial reports, he filed a Form 15 to deregister the stock.
Originally, CBYI was in the real estate business. It failed to prosper, and not surprisingly was hit hard in by the economic crisis of 2008. Since then, it's moved from one business plan to another, improbably claiming all kinds of lucrative contracts and pretending to be involved in projects that never existed. (For a fuller account of Cal-Bay's sorry history, see here.)
Since 2005, Pawson, an apparently camera-shy Brit, has run the CBYI show, sometimes serving as an officer or director, and always retaining a control block of stock. He's been involved in a rather large number of other nasty companies as well. Many of them were created by him as shells to be sold quickly; he milked a few for his own profit for years. One of the latter was Biocentric Energy Holdings (BEHL). His role there was similar to the one he's played at CBYI: he stayed mostly behind the scenes, helping to manage the pump and dump scheme that enjoyed brief but extravagant success.
Pawson's penny stock dealings have served him well. In 2010, he bought a $2.9 million home in Arizona, paying cash, and followed it up with the purchase of a second property worth $895,000.
|House Pawson bought in 2010|
The Cambertire fiasco
Only a little more than six months ago, CBYI was supposed to be on the verge of consummating a merger agreement with, or an acquisition of--it was never entirely clear what the precise nature of the transaction was to be--a company called Cambertire. As we prognosticated, the deal was never completed.
Cambertire is a legitimate small business located near Milwaukee, Wisconsin, that has developed tires with built-in camber. The product is for sale, and has been received with great enthusiasm in some circles. Pawson had become aware of the company through his longtime friend and business associate Bo Linton, a Porsche buff. Linton had met Cambertire's founder, John Scott, at a Porsche event. The two became friends, and Linton made the introduction, suggesting Scott might profit by taking his company public. As a side note, Linton is an actor-cum-penny stock fraud artist himself, as we've already illustrated through this advisory.
Negotiations dragged on for nearly a year. CBYI's stock price was stuck at $0.0001 and $0.0002. In August 2013, the company began to issue press releases about the impending deal, and the stock responded, touching an intraday high of $0.0049 on 9 September. It was quite an accomplishment for an issue whose float was a whopping 2.6 billion shares. Early buyers were thrilled, but the fun didn't last long. John Scott, unhappy about what he saw as Pawson's failure to keep promises, terminated the deal after the market close on Friday, 4 October, in a dramatic message posted at Investor's Hub. The following Monday, Cal-Bay tersely acknowledged the termination, releasing at the same time a nonsensical update on a proposed transaction involving a "state of the art fiber material for use in the automotive and vehicular industry."
The stock crashed and burned, returning to its $0.0001 by $0.0002 base in no time. There it stayed until quite recently.
Going to pot
Cal-Bay has still not officially announced that it's joined more than 150 other small companies in the marijuana sector. First came rumors. Then, at the beginning of March, players watching the stock--there were still many bagholders left from last year's debacle--noticed that the company had quietly put a Colorado address on its OTCMarkets Company Info page. It had also added someone named "Walter Nicholas" as President.
The stock once again garnered interest, moving from the bottom of the triple zips to an intraday high of $0.0020 on 24 March. Not quite a replication of the Cambertire-fueled run, but excited believers expected it to get there soon.
|CBYI Chart to March 27, 2014|
Along the way, buyers waited impatiently for news. None came. Tantalizingly, the company put the URL for its new website on the Company Info page, with a notice that it would go live on the 26th. Anticipation mounted.
Some shareholders called the new Denver phone number and spoke to new IR representative, "Joe Smith." Joe didn't let much slip, but he did assure them that Pawson was "out," although he's still listed as Chairman of the Board. New management and new directors would be appointed shortly, Joe confided. Many of Pawson's critics' spirits were buoyed by these reassurances, apparently having forgotten just how many times that's been promised in the past.
In April 2007, only two years after taking control of the company, Pawson resigned all of his offices except for a directorship, citing "health issues." On 11 September, one Syed Hasan Rizvi, a director who'd never been announced, filed an 8-K informing shareholders that Pawson had been terminated as President and CEO on 6 September and replaced by Rizvi himself. Yes, Pawson had resigned those offices months earlier, but with Cal-Bay there's often been confusion about who was officially in charge. Rizvi pretended to buy the shell, and in fact took possession of 89.7 percent ownership. He then sold it to his purported Georgia company, Lenox Corp LTD. He filed numerous Forms 4 declaring the purchase of very large amounts of stock.
And then in the blink of an eye, Rizvi was gone, and Pawson was back. The explanation offered made very little sense. Certainly Lenox Corp never existed; probably Rizvi didn't either. In Pawson companies, there tend to be rather a lot of nonexistent officers and directors. With BEHL, Pawson made considerable use of a character named "Michael Burton." Though it's never been proved, many who followed the story believed Burton was a figment of Pawson's lively imagination.
After the departure of the phantom Rizvi, Shaun Bailey supposedly took charge as CEO, with Melinda Rice as president. Rice didn't last long. In January 2009, the company IR guy Dale Baeten (recently sued by the SEC for his role in the Zenergy pump and dump) told a correspondent that Rice and Pawson had resigned "as of today." Bailey slogged on, accomplishing nothing. In a press release issued on 11 May 2010, he informed concerned shareholders that Pawson had no position with the company, and had sold all of his stock except for a small amount of non-convertible preferred.
That, as subsequent events show, was an outright lie. In March 2010, Bailey was replaced by Kevin Denniston. Denniston exited the revolving door in early 2012, succeeded by "Larson Coleman." It should by now be obvious to readers that Bailey, Rice, and Denniston were merely front men carrying out Pawson's wishes. Coleman, however, seems to have no meaningful existence. Variously referred to as "CEO," "interim CEO," and "spokesperson" in company documents from 2012 and 2013, he was finally fleshed out in Cal-Bay's only OTCMarkets filing from that period, a report for the quarter ended 30 June 2013. In it, Coleman is said to be acting CEO, president, secretary, and treasurer.
More amusingly, it's revealed that Coleman is British, has a background in real estate, and as an adult chose to reside in the U.S. It seems reasonable to conclude that Coleman was simply Pawson's alter ego. It's also noted Pawson holds a control position by virtue of his 3 million shares of preferred stock, and is the company's only greater than 5 percent owner. Although Bailey had assured shareholders that Pawson's stock was not convertible, that was untrue. Pawson's Class C preferred is convertible at a ratio of 1000:1.
Coleman disappeared without a trace between the time of that filing and the present.
Is Pawson gone?
Jittery shareholders have been telling each other that Pawson is no long around. "Joe Smith" says the same thing. Unfortunately, like so many other things said over the years by CBYI officers and spokesmen, it's not the truth. After the bell on 27 March the company filed a "basic disclosure document" and its annual report with OTCMarkets. Both are extremely sketchy. However, the disclosure document states clearly that Pawson is still Chairman of the Board, and CBYI's only beneficial owner. Walter Nicholas is named as President and CEO.
Of particular interest is the change in Pawson's holdings. As of 30 June 2013, he owned 3 million shares of Class C preferred stock. He now owns only 2 million. So 1 million of those shares, equivalent to 1 billion shares of common stock, have… gone elsewhere. Did he create this new pot venture so he could convert and sell into the resulting pop? That would make a great deal of sense considering Pawson's nefarious past. As a control person, he's not supposed to sell more than 1 percent of the outstanding each quarter, but who's counting? Insider reports aren't required of the officers and directors of Pinks, and Forms 144 don't appear on Edgar.
Much remains unexplained. There's also a Class A preferred, with 55 million shares authorized and 46.8 million outstanding. Who owns them? We're not told, but it doesn't really matter, since the Class A confers voting rights of 1000:1, and conversion rights with a 1:1 ratio.
Even more puzzlingly, the disclosure document states unequivocally that there have been no stock issuances, and that there are no outstanding aged promissory notes. How, then, did the outstanding number of shares grow from 3.1 billion shares as of 30 June 2013 to 3.6 billion as of 24 March 2014, and how did the float increase from 2.6 billion to 3.4 billion in the same period?
Shareholders are still focused on what "Joe Smith" has told them: that shares will be retired. But if Pawson's 1 million Class C preferred had been retired or cancelled, that would have been reported in today's disclosure document. They represent enough stock to make the person who owns them a greater than 5 percent shareholder, yet Pawson is the only person reported to qualify as a beneficial owner.
Shareholders also have high hopes for "new management" that hasn't yet been named, apart from "Walter Nicholas." Who, exactly, is Nicholas? Anyone who googles the name will quickly learn that the best-known Walter Nicholas stars in hardcore gay porn films. Could that be Pawson's little joke? None of the people by that name who have Linked In accounts qualifies to be the new CBYI CEO. Nicholas appears not to be a real person. All that can be said is that he briefly figured on the new website as an identity thief. Surely a genuine Walter Nicholas would be capable of writing a two-paragraph biography that reflects what he--and not Brad Shupe--has spent the last 12 years doing. Why is that a problem?
Traders want to believe Cal-Bay is a budding medical marijuana company. That is what the website says it is. The site also claims two subsidiaries for CBYI: Legal Hemp and Marijuana Meds Pharmacy. Legal Hemp is not a Colorado nor a Nevada registered corporation; neither is Marijuana Meds. Are they companies at all, or are they simply names? Both have domain registrations in the name of Walter Nicholas. Legal Hemp's domain was created on 17 March; Marijuana Meds Pharmacy's on 27 March.
What will they and their parent company do? Certainly they won't be making use of those "vending machines" we saw earlier, because they're video kiosks sold by BMAM.
|A retinal scan|
This story is just not ready for prime time. Fake biographies and purloined kiosks do not lend credibility, nor do incomplete and largely incomprehensible OTCMarkets disclosures. Prospective players should bear in mind that Pawson companies are not in the business of doing business. Don't let the smoke get in your eyes.