When Pure Play Music Ltd. (Pink Sheets; PPML.PK) went public through a reverse merger last summer, one of its financial backers managed to turn a $291,000 loan into Pure Play stock with a current market value of $14.5 million.
Though Pure Play’s Securities and Exchange Commission filings don’t disclose the identity of the party or parties that got those shares, documents do provide some clues.
In 2007, Pure Play’s predecessor company — Latin Television Inc. — was on the verge of collapse. It had no revenue, almost no cash and more than $4 million in accumulated losses.
It turned to Cohiba Partners Inc., securing what it called “essential” funds to cover operating expenses.
Cohiba Partners is a Santa Monica, Calif., company with close ties to Regis M. Possino, a two-time felon and disbarred attorney who has provided financing to numerous penny stock companies.
LOAN REPAID WITH SHARES
In return for the cash advances, Latin Television issued Cohiba a note that the company, or its assignees, could convert into stock at a penny a share. When Latin Television morphed into Pure Play last July, Cohiba Partners converted the roughly $291,000 in principal and interest on the note into 29.1 million shares of Pure Play stock.
Not long afterward, Pure Play’s stock was trading at around $2.50, giving the converted shares a market value of more than $70 million, and giving the entire business a value of nearly $150 million.
Pure Play’s stock has since fallen to 50 cents, with total trading volume exceeding 2 million shares. Neither the company, Cohiba Partners or any assignees have filed documents disclosing who holds the 29.1 million shares from the debt conversion, which amount to 49 percent of the company’s outstanding common stock.
Pure Play says it provides a unique global platform that unknown bands and singers can use promote and sell their music. Its site includes streaming audio of featured acts, six genre-based Internet radio stations and a download purchase area. Pure Play also created a social networking area designed to allow fans to communicate with the musicians and with each other.
As of late, there’s been little activity on Pure Play’s Web site. Although they say more than 6,000 people registered for the site, those members trigger just a handful of publicly posted “actions” every few days. Pure Play’s radio stations, the main way that Web visitors listen to its unsigned artists, appear in most cases to have just a few dozen songs. Artists have posted comments to the site, complaining that their profiles and music have disappeared, inaccessible for months. The last message board posting was from January.
Pure Play said late last year it had signed a deal to provide pre-loaded MP3 players to DSG International, a large electronics retailer in Europe. It said in press releases that those shipments would generate $18 million in revenue this year. But Pure Play is two quarters behind in its financial filings with the SEC, making it impossible to tell anything about its sales or profits. DSG didn’t respond to questions from Sharesleuth about the deal.
THE PAPER TRAIL
No public records link Cohiba Partners or Pure Play directly to Possino. But corporation filings show that Cohiba Partners and three other companies headed by its president, Colin Nix, have the same address as three companies controlled by Possino or his wife.
Those filings show that Nix and Possino both were officers of one of those businesses, Geneva Equities Ltd. Cohiba Partners and Geneva Equities also have the same phone number.
Corporation records list Nix as president of European American Investments Ltd., another company that shares the Santa Monica address with Cohiba Partners and Geneva Equities.
SEC filings show that all three of those entities were large shareholders in Who’s Your Daddy Inc. (OTCBB: WYDI.OB), a San Diego energy-drink company whose founder and former chief executive, Edon Moyal, was recently arrested and charged in connection with a drug-trafficking ring.
(read about Moyal’s arrest)
A CHANGE OF ADDRESS
Until recently, Pure Play’s SEC filings listed the Santa Monica office suite as its address. The company said in a press release in late April that it had moved its headquarters to Poway, Calif., a suburb of San Diego. The new location is a house owned Alex J. Grange, its chief executive officer.
Pure Play also announced that it terminated all of its agreements with Cohiba Partners, which had been providing general consulting and investment banking services.
Jeffrey P. Berg, a lawyer who represents Pure Play, said last week he wouldn’t allow his clients to be interviewed by Sharesleuth but asked for a list of written questions. He didn’t respond to them.
Sharesleuth noted that Cohiba Partners and European American Investments both paid stock-promotion sites to feature specific companies, including Latin Television.
European American Investments gave 225,000 shares of Latin Television’s stock to a firm called Beacon Equity Research in 2007 as compensation for a research report and a public relations campaign, according to a disclosure in a Beacon press release.
Cohiba Partners and European American Investments each gave shares of Vsurance Inc. to a site called OTCPicks.com as compensation for its coverage of that company, now known as Ensurapet Inc. (Pink Sheets: EPTI.PK).
SEC filings show that Cohiba Partners was a large shareholder in Vsurance at the time. So were October Fund Ltd. — another company headed by Nix — and Rancho Malibu Inc., which had been headed by Possino but now lists his wife as president.
October Fund and Rancho Malibu also list their address as the Santa Monica office suite. Records show that Geneva Equities originally leased that 1,056-square foot space in 2002.
Possino was convicted in 1995 of one court of wire fraud in connection with a scheme to use inflated stock to help prop up an insurance company’s finances. According to court documents, he was sentenced to two years probation and ordered to pay a $500 fine.
Possino more recently has served as a consultant and financier for a number of obscure public companies. According to news reports and regulatory documents (pdf), shares of some of them were peddled to foreign investors by boiler-room style brokerages operating from Europe and Asia. This archived web page of one boiler room brokerage, General Commerce Bank AG of Austria, shows that it was promoting two companies, Thaon Inc., and Junum Inc., with ties to Possino.
Possino also figured into an investigation by the Nasdaq exchange of Global Capital Securities Corp. Nasdaq officials concluded in 2001 (pdf) that Possino and another convicted felon, Sherman Mazur, had acquired a substantial, undisclosed interest in Global Capital, a publicly traded brokerage firm. Nasdaq said that Global Capital also bought millions of dollars worth of stock in companies that listed Possino or members of Mazur’s family among their largest shareholders.
Nasdaq delisted Global Capital’s shares in December 2001 over concerns about its ties to Possino, Mazur and others with criminal or regulatory pasts. The company ceased operations a few months later.