Datascension

Capital Raised: $ 14.49 million
Capital Burned: $ 10.65 million
Previous Executive Compensation: $150,000 for the CEO and the COO

When you first open Datascension's SEC filings, the first thing that strikes you is a balance sheet that appears to show a company with a net worth greater than zero. In fact, the balance sheet shows a net worth of $4.07 million which is remarkable for a candidate in this group of cellar dwellers.

Unfortunately, Datascension's balance sheet does not hold up to close scrutiny. The first thing that you notice is the size of their intangibles. Datascension hasn't amortized their goodwill over the past year and it stood at $1.69 million as of December 31. There is an additional $2.08 million in intangibles they book as "Discount on debt issuance", which is an entry they use to reconcile the exchange of their convertible securities for common stock.

Finally, there is the issue of a $1.02 million "Asset held for sale". Dig through their notes and you find that this amount is for a loan that had been made to Nutek Oil where "it was determined there is the potential the entire amount of the receivable will not be received."

So much for Datascension's net worth.

Provectus Pharmaceuticals

Capital Raised: $ 23.73 million
Capital Burned: $ 14.57 million
Previous Executive Compensation: Not Available, disclosed on their proxy statement

At first glance, Provectus appears to be a company that hasn't completely burned through all of their capital. Upon closer examination, we find an intangible $10 million item on their balance sheet carried as "patents". Whether or not Provectus really has patents worth $10 million is subject to debate, but their income statement shows 2004 total revenues of just under $32,000 while they took a $671,000 amortization charge against those patents.

Frequently, you will hear the "naked short seller" scammers talk about all the wonderful research and development that isn't getting done because "naked short selling" suffocates these small, innovative companies. Over the past three years, Provectus has spent nearly five times more money on general and administrative expenses than they spent on actual research and development.

How long do you think that kind of behavior would be tolerated at a real research and development oriented company?

CyberAds, Inc.

Capital Raised: $ 16.63 million
Capital Burned: $ 19.23 million
Previous Executive Compensation: $250,000 for the President

Just another Berlin Beauty. Moving right along...

CalbaTech, Inc.

Capital Raised: $ 3.75 million
Capital Burned: $ 4.41 million
Previous Executive Compensation: $ 142,083 for each of three executives in 2003

CalbaTech is another one of the Berlin Beauties. Otherwise, there's not much that is remarkable about them.

In defense of the three top executives, their filings state that none of them were able to draw 100% of the salaries that was due to them in cash. It's not immediately clear whether or not they drew some other form of renumeration in lieu of the salary that was owed them. Sometimes running a company into the ground doesn't pay such a handsome salary afterall.

Bentley Commerce Corp

Capital Raised: $ 17.65 million
Capital Burned: $ 18.34 million
Previous Executive Compensation: One salary as high as $402,093 (2004)

Bentley Commerce Corp is one of several score of companies that complained about naked short selling abuses on the Berlin Stock Exchange. Bentley made a huge fuss over the "unauthorized" listing and immeidately issued a press release when they got word that the Berlin-Bremen had delisted them.

In that May 14, 2004 press release, the company's chairman stated, "Bentley Commerce is making every effort to protect and increase shareholder value." After reading their SEC filings, you can at least respect their sense of humor.

Zann Corp

Capital Raised: $ 25.57 million
Capital Burned: $ 27.13 million
Previous Executive Compensation: $312,500 EACH for the Chairman and Vice Chairman in 2001

Zann Corp is another not so exceptional company that draws our attention only because of its President and CEO, Robert C. Simpson. Mr. Simpson, you may recall, is the gentleman who bought all of the Global Links shares after their reverse split.

You may also recall that Mr. Simpson expressed concern about the existence of an issue of preferred stock that Global Links might have that would block him from taking control of Global Links. It happens that Mr. Simpson had good cause to be concerned, for he is the owner of Zann Corp's Series C Preferred Stock. Not to be outdone by the piddling voting rights of Global Links' Series B issue, these "C" shares are entitled to one hundred votes per share for any matter brought to the common stockholders.

Mr. Simpson put those voting rights to good use on 2005 April 4. That was the day that it was announced that Zann Corp's articles of incorporation were being amended to increase the number of authorized shares of common stock from 11.4 million to 4 billion and to give permission to the board of directors to implement a reverse split of up to 1:350 over the next year.

The best part of this announcement can be found near the end.

"Dr. Simpson will have the power to approve the proposed corporate actions without the concurrence of any of our other stockholders.

WE ARE NOT ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. [The all caps is their emphasis, not mine.]

We appreciate your continued interest in Zann Corp."

Who could possibly continue to be interested in a company that so brazenly runs roughshod over their shareholders?

Global Links Corp

Capital Raised: $ 4.67million
Capital Burned: $ 4.45 million
Previous Executive Compensation: $143,627 annually (2004) for the current CEO

As broken down companies go, there's nothing exceptional about Global Links' balance sheet. It's the same old thing we see in a lot of these candidates for stock hospice. Millions raised, millions gone, and a nice salary for the man at the top.

What has made Global Links entertaining to watch has been their creative approach to common stockholder dilution and how they've managed this share dilution while effortlessly keeping control out of the hands of the shareholders being diluted.

Global Links made headlines when, after their February 1, 2005 reverse stock split, a Form 3 was filed by Robert C Simpson claiming to have acquired nearly 1.2 million shares of Global Links. This was supposed to have constituted 100 percent of Global Links' outstanding shares. Despite this acquisition by Mr. Simpson, millions of shares of Global Links common continued to trade, thereby fueling accusations that "naked short sellers" were somehow involved and actively seeking to harm Global Links. The story made more headlines when Senator Bennett of Utah referenced Global Links and Mr. Simpson in a Senate banking committee.

Unfortunately, Senator Bennett did not do any research on Global Links before he made his ill-timed remarks to SEC Chairman William Donaldson.

Had Senator Bennett done his research on Global Links, he would have immediately recognized their M.O. For the fourteen months prior to the February 1 reverse split, Global Links had diluted their previous common stockholders by some 90 percent. The company is a perpetual share issuing machine. In the sixty days that followed their reverse split, Global Links diluted their stock by over 70 percent.

Had Senator Bennett done his research on Global Links, he would have found that there was an amendment to a previous share offering filed with the SEC for 600 million shares that stipulated that the offering would not be affected by any future splits of the company's common stock.

So much for Mr. Simpson's 100 percent stake in Global Links.

However, this sundae has a very special cherry on top of it. Dig further through Global Links' SEC filings and you will find one of the most offensive notes ever seen in a company's annual report.

Global Links has an issue of Series B Preferred Stock outstanding. Some of the issue was given away to management in lieu of compensation in 2003, more was handed out in the time that followed. For bookkeeping purposes, the company has assigned a value of $15,000 for the entire 15 million share issue of Series B Preferred.

Here's the fun part.

Each share of Series B Preferred has the right to TWENTY votes for any vote involving the company's common shareholders. According to a Financialwire article in March, Mr. Simpson expressed concern that there might be a form of preferred shares that could prevent him from taking control of the company. Mr. Simpson had good reason to express concern as we shall see when we review Zann Corp tomorrow.

Eagletech Communications

Capital Raised: $16.76 million
Capital Burned: $18.26 million
Previous Executive Compensation: $90,200 annual salary plus $2.3 million in stock awards in 1999

Like every other company that you will see that complains about "naked short selling", Eagletech is another one of those companies that has run their shareholders' equity into the ground while executive suite personnel lined their pockets. Eagletech isn't really a distinctive company in this series. They haven't bothered to prepare and submit an SEC filing in over three years. Their last released balance sheet was for the period ending December 31, 2001 and had all of $1,322 worth of cash on it.

What makes Eagletech especially interesting is an open letter that hit the newswires in early April. This letter, penned by company president and CEO Rodney Young, made quite the production of enumerating the same list of halftruths that all of these companies and their promoters use to divert attention away from their finances. However, what REALLY stood out in Mr. Young's letter was the statement "The law makes no distinction between the counterfeiting of a development stage startup public company and for example, Microsoft Corporation. By the way, while listed in the 'Pink Sheets' in 1975 Microsoft reported three employees and income of $16,000 for the period."

By the way, Mr. Young, Microsoft Corporation was NEVER listed on the Pink Sheets. Microsoft's IPO was done in 1986 and they went directly to the Nasdaq.

One frequent accusation hurled by these parties seeking out the "naked short seller" witch is that these derelict companies are the source of tomorrow's economic growth. They will tell you that the next Microsoft or Dell or Genentech is buried somewhere in the Pink Sheets just waiting to hit the big time if they could only ward off those evil "naked short sellers". What they don't want you to know is that neither Bill Gates nor Michael Dell drew a six figure salary and awarded themselves millions of dollars worth of free stock before they sold their first copy of MS-DOS or their first PC.

Jag Media Holdings

Capital Raised: $43.66 million
Capital Burned: $44.02 million
Previous Executive Compensation: $150,000 per year to each of three senior executives

Jag Media is, in so many ways, the perfect example of a company that has run its shareholders' equity into the ground and then sought to blame outsiders for its problems. As if running through $44 million worth of capital was not insult enough to Jag Media shareholders, they also have in place a toxic funding package with Cornell Capital.

Jag Media has aggressively pursued lawsuits against hundreds of financial institutions and harassed DTCC over an alleged naked short position that, according to some of the chronically financial illiterates who follow this stock, runs between 100 and 300 million shares.

Unfortunately for Jag Media and her shareholders, the naked short position has no role in Jag Media's negative net worth. "Naked short sellers" don't make executive decisions regarding a corporation's finances. The $44 million that was exhausted by Jag Media was done at the behest of her own management.

Despite Jag Media's grave financial condition, the company still sports a market cap of nearly $15 million. Some shareholders figure there's no point in selling at the current market price, that it's easier to just ride the thing to zero.

And so they shall.

Welcome.

By now, you may have heard about a mysterious "problem" in our financial markets that is hurting investors and stifling small companies. That problem is "naked short selling".

Unfortunately, the "naked short selling" problem is not a problem at all. It is a diversion. It is a tactic used by managements and promoters to keep their investors' attention away from the true cause of their portfolio losses.

Where do you look to see who's truly responsible for the condition that so many of these companies find themselves in? You look at the SEC filings. I have investigated scores of companies that have complained about "naked short selling". Supposedly, "naked short selling" keeps companies from raising capital and artificially depresses their share prices. In EACH and EVERY company I have ever examined, I have found that all of these companies have been able to raise capital, some of them have raised tens of millions of dollars in capital in fact, and all of them have share prices that are far above what any reasonable investor would pay for these companies based upon a sound, analytical approach to their financial statements.

Accompany me through the SEC filings of these companies that blame "naked short sellers" for their problems and you will see the same old pattern over and over again:

Companies raise capital.
Companies burn through their capital.
Managements get a handsome compensation package until the money is all gone.
Managements blame outsiders for the depleted condition of the company.

Unfortunately, there are plenty of investors who fall prey to this scandal. They put their money into these derelict companies and then believe the very people who have run their companies into the ground when they seek to cast the blame elsewhere. The very first lesson you should take away from this blog is to never, ever invest your money in a company that would try to blame its problems on "naked short sellers". It is a long time proven formula for identifying a company that is not generating value for its investors.