UTEK Corp.’s latest quarterly report lists the value of its stake in Fuel FX International Inc. at $7.05 million. Some may question that number, given that there is no public market for Fuel FX’s shares, that its Web site lists no sales outlets or pricing information, and that its corporate headquarters is its chief executive’s house.
The Florida-based technology transfer company (AMEX: UTK) valued its stock in Advanced Refractive Technologies Inc. at $4.8 million. That company has no revenue, reported just $286 in cash at the end of its most recent quarter and was in default on its debt, which is secured by the company’s assets.
A Sharesleuth.com investigation suggests that the stated values of the stock that UTEK received through its technology deals with numerous small companies should be examined closely. If so, the company’s financial results also should be scrutinized, because the shares are its chief source of revenue, and the value assigned to them is a major determinant of its earnings.
UTEK’s own share price has risen as the pace of its deal-making has accelerated. Its stock closed at $19.01 on Wednesday, up 38 percent for the year.
UTEK reported $21.6 million in revenue from the sale of technology rights in the three months that ended June 30, versus $1.5 million in the same quarter last year. It said net income from operations was $9.77 million, up from $28,713 a year earlier. Much of the additional revenue comes from companies whose stock is listed on the Pink Sheets or Over-the-Counter market. The shares of some of those companies trade in small amounts, when they trade at all.
Sharesleuth’s findings also raise questions about the level of due diligence that UTEK performed when approving technology transfers and alliances. Our analysis of the roughly 45 companies that have licensed technology through UTEK turned up no fewer than seven whose executives or large shareholders had previously been charged with violations by the Securities and Exchange Commission, the National Association of Securities Dealers, state regulators or other entities
The SEC recently brought fraud cases against two more of UTEK’s technology partners, HydroFlo Inc. (Pink Sheets: HYRF) and WebSky Inc. (Pink Sheets: WKYN). The SEC said HydroFlo and WebSky were involved in “pump and dump’’ schemes fueled by false announcements about lucrative deals.
An executive behind four other companies that did technology transfers with UTEK in its early years also wound up facing an SEC fraud suit. The case involved a fifth company that had retained UTEK to identify potential license acquisitions.
Still another person who has been chief executive of two more UTEK technology partners was targeted last year in an SEC investigation. A court filing said the SEC was probing whether a group of attorneys, accountants, securities transfer agents, consultants and others were working together to manipulate the share prices of small public companies through misleading fax blasts and spam e-mails( )
UTEK declined to comment on Sharesleuth’s findings. The company never responded to messages left by telephone and e-mail.
UTEK specializes in identifying potentially useful technologies developed by university and government labs, licensing those technologies, and then placing them with potential users – typically in exchange for stock in the companies. UTEK recognizes that exchange as revenue.
UTEK covers the initial licensing cost, while the research organizations retain rights to the royalties. UTEK’s technology recipients pay the royalties and also pick up annual licensing fees, which usually are less than $10,000 and sometimes don’t kick in for several years. Some of the agreements include an allotment of shares for entities headed by Jeffrey O. Friedland, of Friedland Global Capital Markets, which offers publicity, promotional services and networking opportunities, primarily to small public companies.
UTEK has collected $13.6 million since 2000 by selling shares in its partner companies. More than $10 million came from shares of two companies, Xethanol Corp. and Z Trim Holdings Inc., formerly Circle Group Holdings Inc.
UTEK’s proceeds from stock sales are slightly below the amount that UTEK spent to acquire all of the technology it transferred to all of its partners. The company values the portfolio of stock that remains on its books at nearly $60 million.
Sharesleuth’s check of SEC filings by UTEK’s partners found that none has reported more than $300,000 in revenue from a product developed through a technology acquisition. The most successful partner in that department, Z Trim Holdings, says interest is building among food companies in its zero-calorie fat substitute, made from the hulls of corn, oats, soybeans, rice and barley.
UTEK’s license deals with Xethanol (AMEX: XNL) were the subject of a previous Sharesleuth investigation.
Xethanol said the technology was a central part of its plan to make ethanol from wood chips, corn stalks and other cellulosic material, starting next year. Since Sharesleuth published its story questioning Xethanol’s capabilities and projections, the New York-based company has replaced its chief executive and has written off the full amount it paid for four of the five licenses it acquired through UTEK.
(Disclosure: Mark Cuban, the majority member of Sharesleuth.com LLC, sold short 10,000 shares of Xethanol’s stock at a time when the price was around $12.65 a share. Cuban also has sold short 75,000 shares of UTEK’s stock at an average price of around $20 a share. Christopher Carey, editor of Sharesleuth.com, does not invest in individual stocks and has no position in the shares of Xethanol or UTEK.)
AN INVENTOR’S INVENTION
UTEK was founded by Clifford M. Gross, former research professor and director of the Center for Product Ergonomics at the University of South Florida. Gross has written two books on technology transfer and also was founder of The Biomechanics Corp. of America, a publicly traded ergonomics consulting firm. He ran that company from 1984 until 1995. According to UTEK’s SEC filings, Gross is the holder of 18 patents.
UTEK’s home until this summer was a space on the second floor of a bank building in Plant City, Fla., about 20 miles northeast of Tampa. Last year, the company bought a building in Tampa’s Ybor City neighborhood for its new headquarters. UTEK also has branched out internationally, acquiring other technology transfer businesses in Great Britain and Israel. The company has roughly 50 employees, with branch offices in Pennsylvania, Massachusetts, North Carolina, California, Texas, and its foreign outposts.
UTEK says it has worked with 53 colleges, universities and government research facilities around the world to license technology, fund research or forge strategic alliances. The company operates several online services that allow users to search for technology at some 250 facilities, and to monitor licensing activity.
The company has no connection to Ultratech Inc., which makes equipment used in semiconductor manufacturing. Its stock trades on the NASDAQ market under the stock symbol “UTEK.”
UTEK has raised more than $40 million through public offerings and private placements over the past seven years. The company sold 816,330 shares in February in a deal that raised about $10 million before expenses. It said it would use the proceeds to speed the growth of its technology transfer business. UTEK’s balance sheet for the quarter ended June 30 listed $5.7 million in cash and $14.7 million in Treasury securities and certificates of deposit. The company listed no long-term debt.
UTEK bills itself on its Web site as a specialty finance company that helps companies of all sizes acquire innovative technologies. Gross said in an interview with the New York Times this summer that the company is market driven rather then technology driven, and has an exit strategy in mind before it enters any deal.
UTEK said in a press release announcing its second-quarter earnings that it completed 10 technology transfers in the period, with average revenue per transaction of $2.2 million and an average cost of $452,000.
UTEK’s latest 10-Q lists a portfolio of shares in 60 affiliated and non-affiliated companies, with a combined valuation of $57.7 million. The figures exclude two real estate units that own the company’s headquarters and other Tampa-area property.
THE TOP FIVE
UTEK’s report for the three months that ended June 30 show that the top five outside companies in its portfolio had a stated value of $38.8 million. That translates to more than two-thirds of UTEK’s total stock holdings and more than half of its net assets.
But our investigation turned up information that raised questions about all five companies’ finances, management or ability to execute on their plans.
The top company in UTEK’s portfolio is Trio Industries Inc. (Pink Sheets: TRIG). The Dallas-based company says it has a revolutionary system for powder coating finishes onto kitchen cabinets, bathroom vanities and other wood products. UTEK has done five technology transfer deals with Trio in the past year, and has received 7.76 million shares of stock as payment. UTEK valued those shares at $12.2 million at the end of June.
Trio went public in 2004 through a reverse merger with a shell company. Its stock trades infrequently, and in low volumes. The most recent trade was Oct. 13, at a price of $3.50 a share, according to Pinksheets.com.
Trio acquired an idled carpet plant in Greenville, Miss., earlier this year, according to news outlets in that region, and said it would spend $3.5 million to convert the factory to a coating center.
Sharesleuth’s investigation turned up several questions about Trio and its prospective value. Lawsuits filed in city, state and federal court in Dallas over the past few years show that Trio has been sued repeatedly for nonpayment of debts. The suits include efforts to collect delinquent payments for office furniture and temporary staffing. The latter case was filed in February.
In its biggest pending case, Trio is fighting a creditor who is claiming the rights to 30 million shares of stock that were pledged as collateral for a loan and represent a majority stake in the business.
Sharesleuth also found that two of Trio’s top execu
tives have previously run afoul of securities regulators. And the company’s former president said in an affidavit in March in one court case that he went to the SEC with concerns that Trio was deceiving investors.
Trio did not respond to questions submitted by Sharesleuth.
Trio’s chairman, Robert E. Gyemant, previously was charged by the SEC with insider trading. The agency alleged in 1982 that Gyemant and two other directors of a San Francisco-clothing chain sold stock ahead of that company’s bankruptcy filing. Gyemant settled the charges without admitting or denying guilt, and agreed to a permanent injunction barring future violations.
Trio’s vice president and secretary, Brian N. Johanson, was disciplined by securities regulators in California and Virginia in the late 1990s in connection with the unregistered sale of stock in two other small companies.
California regulators issued a cease-and-desist order against him.Virginia regulators assessed a $79,000 penalty against Johanson and a $224,000 penalty against his company, BLB Financial Inc. of Solana Beach, Calif. They agreed to waive the penalties if all of the investors in the state who bought shares from Johanson’s firm got their money back.
At the same time that Trio is trying to get its Mississippi plant up and running, it is working to block a New York financier who says he is entitled to 30 million shares of stock it pledged as collateral for a loan it did not repay on time.
The suit claims that Trio, in August 2005, was willing to pay $8,000 in interest, plus 200,000 shares of stock, for a one-month loan of $100,000. Trio also agreed to put up the 30 million shares in the company as a guarantee. Trio said in court filings that it was unaware its financier was a convicted felon. The company added that the lender, Beryl Zyskind, blocked its attempts to repay the loan so that he could claim the collateral.
In an unusual legal maneuver, Gyemant sought a temporary restraining order in January against his own company, asking a judge to block any transfer of shares to Zyskind or his company, Charter Capital Resources Inc. Gyemant argued that he would be harmed financially and his majority stake “eviscerated’’ if Zyskind gained full control of the stock, which the filing described as nearly 65 percent of Trio’s outstanding shares. The judge granted the request and ordered Trio to cancel the stock certificate. The case has since been transferred to federal court, where Trio and Charter Resources continue to trade accusations.
Since the dispute hit the courts in January, Trio has completed three technology deals with UTEK. In March, it acquired the license to a powder-coating technology developed at the University of Western Ontario. In April, it bought technology that it hopes to use to develop a natural, formaldehyde-free wood adhesive. In June, it added another powder-coating process developed by E.I. du Pont de Nemours and Co.
Given the illiquid market for Trio’s shares and the uncertainty associated with the company, even the significantly below-market valuation that UTEK has placed on its stock in the company should be scrutinized closely.
Zyskind, the man who sought to take control of the Trio shares, was convicted on federal fraud and theft charges in 1996. He was found to have diverted millions of dollars from a New York nursing home he ran, and to have stolen $120,000 in Veterans’ Administration benefits from a resident. He was sentenced to 30 months in prison.
Documents filed in Trio’s suit against Zyskind show that the intermediary who put the two parties together was a Connecticut-based consultant named Gary Robinson.
Johanson and Robinson have known each other for at least a decade. Both men were named as defendants in a 1996 fraud suit brought by the majority owner of SCI Holdings Inc., a publicly traded company in San Diego.
According to court documents at a federal archives center in California, Johanson and Robinson were part of an alleged scheme to divert and sell 2 million shares of SCI Holdings stock that it had pledged as collateral for a loan it never received.
SCI Holdings signed a deal with Park Financial Group Inc., of Battle Creek, Mich., for a $2.2 million loan and agreed to put up stock to secure the funding. SCI Holdings claimed that the head of Park Financial, a convicted white-collar criminal named Edwin F. Wood, conspired with Johanson, Robinson and others to misappropriate the shares.
Court documents say that Park Financial enlisted Johanson’s company, BLB Financial, to help raise the money. Neither came through. When SCI Holdings demanded the return of its shares – worth roughly $5 million — it learned that they had been transferred into the names of multiple outside parties, and that 215,000 had been sold into the public market.
Robinson said in court filings that he loaned $125,000 to Park Financial as part of the financing effort, and foreclosed on the shares when Park Financial missed the deadline for repayment. He claimed the deal gave him the right to 1.1 million of the SCI shares. According to the filings, Robinson agreed to sell 1 million of them to another of the eventual defendants at a price equal to 40 percent of their market value. SCI won a court order freezing the sale or transfer of most of those shares.
Johanson and Robinson reached a settlement with SCI Holdings in 1997, agreeing to return all the stock still within their reach. However, SCI Holdings had no recourse on the 215,000 shares that were sold to others determined to be good-faith buyers.
Wood was indicted in 1999 on 22 counts of wire fraud, mail fraud and money laundering in connection with other stock schemes and was sentenced to 14 years in prison.
Johanson’s personal financial history is also worth examining. The Internal Revenue Service filed a lien against him in June, seeking to recover $781,433 in back taxes. And a credit union in California won a $3,914 judgment against him in 2004 for nonpayment of a credit-card bill. The charges covered a period during which Johanson was working in Dallas on Trio’s behalf.
Evan R. Daniels, Trio’s former president and one of the creators of its original powder-coating technology, said in his affidavit in one of the lawsuits that he asked Gyemant to resign after witnessing him “lie and deceive investors.’’ Instead, Daniels said, Gyemant changed company bank accounts, held meetings without him, stopped paying him and told others that Daniels was responsible for all of the problems at the company.
Daniels said in the affidavit that he reported the situation to the SEC’s district office in Fort Worth. He said its representatives advised him to resign from all positions with Trio and related entities, and to turn in his 7.2 million shares of Trio’s common stock so he would not be “considered a co-conspirator in the actions of Mr. Gyemant.’’
“I was, at that time, the single largest investor and shareholder within the entire Trio Industries group of companies,’’ Daniels said in his filing. “Every available dollar that I inherited or earned was in the companies as capital or loans.’’
INDUSTRIAL BIOTECHNOLOGY CORP.
UTEK’s latest quarterly filing lists the company’s second most-valuable holding as its stake in Industrial Biotechnology Corp. (Pink Sheets: IBTY), of Sarasota, Fla. It put the worth of its 17.3 million shares in that company at $8.15 million.
UTEK completed another technology transfer with IBC in September. It turned over the license for technology that could form the basis for a natural aphid repellant, in return for an additional 4.64 million shares of stock.
IBC says it aims to commercialize new scientific developments and production methods in the emerging field of biologically produced chemicals. It went public in August 2005 through a reverse merger with a shell company.
IBC is little more than a year old. But its chief executive, Andrew M. Badolato, has a long history of legal disputes and unpaid debts.
Sharesleuth ran a routine check of the online court records in Sarasota County, IBC’s home base, and found at least 15 financial-related suits listing Badolato as a defendant. Those cases include a foreclosure action brought this year on his $2.4 million house, a $1.85 million suit brought in 2001 by an investor in another Badolato venture and judgments won by 2003 American Express Corp. and a Bahamian resort and casino for unpaid bills.
Badolato has worked as an investment banker specializing in helping small companies raise money or go public. Other suits in Florida show that Badolato had a pattern of privately reselling stock he has received in connection with his activities, without registering the shares or disclosing the transactions.
IBC attributed much of the litigation against Badolato to stock market decline that marked the end of the dot-com era.
“As the technology market declined or dot-com bubble burst in 2000-2002, Mr. Badolato was the subject of litigation with multiple co-defendants (other officers and directors of same companies), and mounting attorneys’ fees resulted in his filing of personal bankruptcy in 2005,’’ the company said in a e-mailed response to questions posed by Sharesleuth. “All previous debts and litigation have been discharged.’’
UTEK has been doing business with Badolato since 2004, when it completed a technology transfer deal with another of his companies, privately held BioFlavorance Technology and Research Inc. of Sarasota.
As compensation, UTEK received 500,000 shares of BioFlavorance, 20 million shares of Uniphyd Corp. (Pink Sheets: UPHD) and 175,000 shares of SinoFresh HealthCare Inc. (OTCBB: SFSH). Badolato also was involved with Uniphyd and SinoFresh. UTEK got an additional 48,000 shares of BioFlavorance through a separate strategic alliance deal.
IBC acquired BioFlavorance early this year, and UTEK’s shares were converted to 2 million shares in the new company.
Badolato’s activities at SinoFresh figured prominently in a lawsuit that pitted two of his associates who served on the company’s board of directors against SinoFresh’s founder and chief executive, Charles A. Fust, and others. The two directors claimed they were improperly ousted.
Court documents filed by Fust alleged that Badolato improperly sought to control the company after helping it go public through a reverse merger. Among other things, Fust said that Badolato tried to install allies as executives and directors, and tried to divert 1 million shares of SinoFresh stock to an entity in Belize that he secretly controlled.
The court file also included a copy of a memo written by Fust that detailed Badolato’s alleged improprieties. It said that Badolato sold more than $3 million of personal stock in SinoFresh and related entities in undisclosed transactions – some of it at the same time he was supposed to be helping the company raise capital by placing new shares with investors.
The memo also said that the state of Florida began a securities investigation into SinoFresh because of Badolato’s activities. Fust wrote that he learned from an investigator that Badolato was “known” to have been involved in two federal securities investigations and one other state investigation in the three years prior to his involvement with SinoFresh. Badolato has never been charged with a violation.
A University of Florida law professor appointed by the court to review the competing claims in the case generally sided with Fust’s version of the events at the company. SinoFresh and the plaintiffs settled the case late last year. The two ousted directors were reinstated and Fust was deemed to own the disputed 1 million shares.
IBC’s executive team includes Badolato associates from previous stops, including SinoFresh and Uniphyd.
IBC is not generating revenue at the moment, Badolato told Sharesleuth. The company hopes to finance the development of its technology through joint ventures or strategic investments from established chemical companies.
“Currently the company is in discussions with large chemical companies regarding the identification, financing, development and implementation of biologically produced chemicals,’’ he said in an e-mail. “Because of this financing business model, the company’s low burn rate, actual costs to develop biological compounds and outsourced manufacturing alliance partnerships in Asia, management feels it can acquire the capital necessary to commercialize the technologies it has acquired.’’
IBC’s stock closed Wednesday at $1.02 a share, giving the company a market capitalization of $75.4 million. As noted, UTEK valued the shares it held on June 30 at $8.15 million. The additional stock it received in the technology transfer last month would have an implied market value of $4.73 million, absent any liquidity discount.
FUEL FX INTERNATIONAL
UTEK lists its stake in Fuel FX International as its third most valuable stock holding, at just over $7 million. The companies have done three technology transfer deals, and UTEK holds 9.9 million shares of Fuel FX’s common stock and 100,000 shares of its preferred stock.
UTEK lists the value of the common shares at $4.95 million, a figure that is $2.97 million higher than the stated value on March 31. Sharesleuth could find no internal or external development to explain the increased valuation. UTEK listed the value of the preferred shares at $2.1 million at the end of June, unchanged from the prior quarter.
Fuel FX International is a privately held company based in Del Mar, Calif. It sells a device that attaches to the fuel lines of heavy trucks, buses and other vehicles and is purported to increase mileage, boost engine efficiency and reduce emissions. The company has said in press releases that it is developing other products to improve fuel economy and engine performance.
Sharesleuth was unable to find any big trucking supply or maintenance businesses that offer the Fuel FX Reactor. Nor could we find any ads placed by the company, or any articles or product reviews in industry publications. Virtually all of the mentions on the Internet and in archived news databases are from press releases put out by Fuel FX International or UTEK. The company’s Web site contains no information on pricing or availability for the devices, and the area marked “sales” is password protected.
Erik Ulsteen, Fuel FX International’s chief executive, said the company has been marketing its devices through a network of distributors who attend trade shows, send out promotional material and call on potential custom
ers. Ulsteen added that people who call the company or inquire through its Web site are directed to those distributors.
Ulsteen told Sharesleuth that Fuel FX is in the process of changing its business model. He provided a copy of a memo that the company sent to its distributors, announcing the appointment of a master distributor for North America that will coordinate customer support, demonstrations, technical questions, financing and other functions.
“We believe that this strategy will increase sales and profitability to help us grow and provide the structure that both the distributors and investors are looking for,’’ Ulsteen wrote. “It will probably take up to 45 days for us to complete the transition to the new master distributor. We are currently reviewing numerous details and options of the new marketing and distribution strategy which will be announced when we introduce the master distributor during our next distributor meeting.’’
The memo identified the new master distributor as Summit CMG and said the company had “vast experience’’ as a distributor and a successful track record with Fuel FX.
Fuel FX’s corporation filing with California secretary of state lists its address as an office suite in a business park that is home to many other emerging companies. However, when we visited the address, we found the suite vacant. Fuel FX’s Web site and a recently filed California tax registration put the corporate offices at a house occupied by Ulsteen.
Fuel FX is looking for a new, smaller office, Ulsteen said.
“We don’t need to have a huge overhead as our business plan is to outsource to third parties. We have outsourced both manufacturing and distribution, thus keeping overhead as low as possible. We believe in spending money on R&D and support for our distributors,” he said in an e-mail response to questions posed by Sharesleuth.
Ulsteen declined to say how much it would cost Fuel FX to commercialize the technology it acquired through UTEK, nor would he say where the company expected to raise the money.
Court filings in San Diego show that Fuel FX’s former president, David Fernandes, won a $129,000 judgment against the company last year. Fernandes said in his suit that Fuel FX fired him in May 2005 and failed to pay him salary it still owed him from parts of 2004 and 2005.
The court filings indicate that Fuel FX was having cash flow problems, and include a memo warning that the company might not be able to pay employees their full salaries. Other documents in the file show that the company expected an infusion of capital from a merger or a public stock offering — neither of which came to pass.
Fernandes settled his suit with the company, but went back to court last fall after the company missed the deadline for paying him. Ulsteen told Sharesleuth that the company has paid Fernandes some of the money, and that a divorce court has awarded a portion of the judgment to Fernandes’ ex-wife. Fuel FX is awaiting word on where to send that money, he said.
Another suit, in federal court in San Diego, alleged that an earlier incarnation of Fuel FX was part of an elaborate fraud scheme that took in more than $12 million from investors. According to the complaint, people who bought interests in unsuccessful oil ventures from a man with a history of selling unregistered investments were offered a chance to recoup their money by buying shares in Fuel FX and a related company, Soil Savers Inc.
Those companies were based in Dallas. The original Fuel FX began promoting the Fuel FX Reactor in 2002, claiming that it could boost mileage by as much as 50 percent while also reducing emissions.
Fuel FX International was set up to sell the devices overseas. But a press release in February 2004 announced that Fuel FX and Fuel FX International would merge under Ulsteen’s leadership, restoring the organization to a single entity. Sharesholders in Fuel FX received one share of Fuel FX International for every two shares of Fuel FX they owned, according to documents filed in the fraud suit. The court filings note that Ulsteen is not alleged to be a participant in the original scheme.
Over the past few years, different versions of Fuel FX’s Web site have featured wildly divergent claims about the fuel savings that are possible with its device. The current version of the site claims that the Fuel FX Reactor has been proven to reduce fuel consumption by 5 percent to 15 percent.
An archived version from February 8, 2005, said the device could boost mileage by 15 percent to 30 percent. Another version, from January 28, 2005, used a range of 5 percent to 50 percent. Yet another version, from September 26, 2004, said a 100 percent improvement was possible. Ulsteen told Sharesleuth that Fuel FX stands by its claim that average fuel savings for a fleet of vehicles is 5 percent to 15 percent.
“However, individual results vary more, and those might be the ones you are referring to when talking about 30 to 50 or even 100 percent,’’ he said.
The Federal Trade Commission has warned consumers about claims made by the makers of such devices. The Environmental Protection Agency says it has tested more than purported 100 fuel-saving additives and devices and found that none produced significant improvements in mileage per gallon. Government reports say that driving speeds, tire condition and engine maintenance have a more significant effect on fuel consumption.
The suggested retail price for the Fuel FX Reactor is $850, Ulsteen said.
Sharesleuth tracked down two people who previously promoted the Fuel FX Reactor. Both said that users who tested the devices reported uneven results, and that no one wanted to make the investment required to outfit a fleet of vehicles with them
This gives us reason to question the $7.05 million valuation on UTEK’s books, and the increased valuation from the previous quarter.
UTEK listed its stake in Xethanol as its fourth most valuable stock holding. It listed the value of its 932,889 remaining shares in that New York-based ethanol company at $6.51 million on June 30. UTEK filed forms with the SEC in July disclosing the planned sale of 786,123 of those shares.
Sharesleuth published an investigative report on Xethanol in August that questioned the company’s claims that it was poised to produce ethanol from wood chips, corn stalks and other cellulosic material, rather than conventional sources such as grain. The story also raised questions about the background of Christopher d’Arnaud-Taylor, Xethanol’s then-chairman and chief executive, and other people involved in the company.
Xethanol replaced d’Arnaud-Taylor with Louis B. Bernstein, a Xethanol director and former assistant general counsel at Pfizer Inc. It has also brought in a new senior vice president of operations, and this month overhauled its board. Xethanol added three outsiders, one from the alternative-energy industry and two from the financial-services industry. Three previous members of the board have resigned.
A Xethanol executive said in a press release last month that the former drug plant in Augusta, Ga., that the company is conve
rting for ethanol production would initially use corn as a feedstock, not wood chips, as d’Arnaud-Taylor had announced.
UTEK also agreed to seek out technology for two other companies linked to Xethanol insiders. It entered into a strategic alliance in 2004 with Xeminex Ltd., a privately held minerals company, and would up writing off the $120,000 it originally said the Xeminex stock was worth. UTEK also has an alliance with Metamorphix Global Inc., a privately held maker of countertops. It still values it shares in that company at $120,000.
ADVANCED REFRACTIVE TECHNOLOGIES
UTEK listed its investment in Advanced Refractive Technologies Inc. as its fifth most valuable stock holding at the end of June. UTEK pegged the value of its 5.3 million shares of common stock and 294,000 shares of preferred stock at $4.83 million.
Advance Refractive (OTCBB: ARFR) is based in San Clemente, Calif., and calls itself “a cutting edge ophthalmic company.’’ When we checked out its headquarters last month, we found an office in the back of a business park, with no identifying signage on the building or door, and only spartan furnishings in the reception area. The company said in its annual filing with the SEC that it had six full-time employees — three in management and legal affairs and one each in research, product development and customer relations and accounting.
Norman Schwartz, Advanced Refractive’s general counsel, said in an e-mail to Sharesleuth this week that the company has a commitment for $9 million in financing from investors in Luxembourg and Spain, although the money has not yet been received.
When asked about the company’s current financial condition, he replied: “We are in the process of required SEC filings which will facilitate obtaining funding.’’
Advanced Refractive Technologies turned to UTEK for technology after a deal with another partner fell through. It signed an agreement with a German company in 2004 that gave it the exclusive worldwide distribution, sales and marketing rights for ophthalmic surgical products used in LASIK eye surgery. Its SEC filings say it ended that relationship in November 2005 after a dispute with its partner, leaving it with no product to sell and no source of revenue.
Advance Refractive Technologies’ deals with UTEK brought it licenses for new approaches to the detection or treatment of cataracts, glaucoma and age-related macular degeneration. But Schwartz said the company’s most promising product is the Accupulse Cataract Emulsifier, which was not built around technology from UTEK. Advanced Refractive said in a press release in May that it hopes to conduct clinical testing on the devices later this year and gain Food and Drug Administration approval early next year.
“As soon as we receive anticipated funding, we will proceed with clinicals,’’ Schwartz said.
Advanced Refractive, formerly known as VisiJet Inc., signed a strategic alliance deal with UTEK in May 2005. At the time, one of the investors holding more than 5 percent of the ophthalmic company’s shares was Norton Cooper, a stock promoter who went to prison in Canada in the 1980s for a scheme in which two small public companies defrauded that nation’s government. Cooper was banned by the Vancouver Stock Exchange in 1989 in connection with trouble at another public company.
Cooper acquired his stake when Advanced Refractive did a reverse merger in 2003 with a public shell company he controlled. Advanced Refractive said in an SEC filing last September that Cooper’s company, Financial Entrepreneurs Inc., of Las Vegas, held 2.13 million shares of its stock, or nearly 7 percent of the total then outstanding.
Cooper also is one of Advanced Refractive’s creditors. The company said in an SEC filing earlier this year that it owed $342,249 in principal and interest on a note held by Financial Entrepreneurs.
“Mr. Cooper’s prior activities in Canada, of which we were aware, have no bearing on his initial involvement with the company,’’ Schwartz said in an e-mailed reponse to questions posed by Sharesleuth. “In addition, he received a full pardon from Canada. Since we are a public company we obviously have no control over who are our shareholders and we believe his position, if any, is extremely small at this time.’’
Advanced Refractive has issued more than 200 million additional shares of common stock and several series of preferred stock, diluting Cooper’s interest in the company.
Advanced Refractive Technologies disclosed in its annual report that it might have violated SEC registration requirements in connection with the sale of certain securities, and that the purchasers may have a right to rescind the transactions and demand the return of their money.
The company entered into a “workout consulting services agreement’’ earlier this year with a woman in Europe named Florencia Mate Garabito. The company said it hired her to assist in restructuring its senior debt, which amounted to just over $7 million in convertible notes. Mate Garabito’s compensation was listed as 178.6 million shares of common stock – half to be paid within five days of signing and half when the restructuring was completed. At the company’s current stock price of 2 cents a share, the fee would equate to $3.57 million. It also would leave Mate Garabito as the biggest single holder of the company’s common stock, with a 78 percent stake.
Advanced Refractive noted in an earlier announcement that Mate Garabito also is helping to develop investor and customer awareness in Europe, and assisted in getting its shares listed this year on the Frankfurt Stock Exchange.
Advanced Refractive said in July it had nominated two outsiders to its board of directors. They are Jenaro Garcia Martin, founder and chief executive of IBER Band Exchange SA in Madrid, Spain, and Timothy F. Laney, identified as managing director of La Terraza Trading and Asset Management Ltd., also in Madrid. Advanced Refractive said La Terraza manages the assets of high net-worth individuals and institutions.
A business filing in Luxembourg lists Garcia Martin and Mate Garabito as directors of an entity called Blue Emerald I.B. SA. Advanced Refractive said in its July press release that Blue Emerald concentrates on restructuring and investing in companies in the $10 million to $50 million value range.
UTEK says in its SEC filings that it pays Bolten Financial Consulting Inc., a firm headed by a University of South Florida finance professor, to conduct independent valuations of the securities in its portfolio. That expense was $112,502 for 2003, the last year for which its SEC filings list an annual figure.
UTEK says its board of directors uses that information to establish the fair value of the securities in its portfolio.
“We determine fair value to be the amount for which an investment could be exchanged in an orderly disposition over a reasonable period of time between willing parties other than in a forced or liquidation sale,’’ the company said in an SEC filing last fall. “Our valuation policy considers the fact that no ready market exists for substantially all of the securities in wh
ich we invest.’’
UTEK said in an SEC filing that it updates the valuations quarterly, and marks each shareholding up or down to reflect changes at the companies or in the market for their shares.
THE EARLY YEARS
Almost from the start, UTEK has been doing deals with questionable partners.
The company’s second technology transfer, in 1999, was with NuElectric Corp. of Tarpon Springs, Fla. NuElectric was previously known as Escalator Inc., and was the parent company of Escalator Securities.
Both NuElectric and Escalator were controlled by the husband-and-wife team of Howard A. Scala and Laurie C. Scala. Between 1991 and 1998, the National Association of Securities Dealers repeatedly fined, censured or suspended Howard Scala for violations at Escalator. Finally, it revoked the brokerage firm’s membership and barred Scala for association with any member firm.
NuElectric’s deal with UTEK took it into an entirely new field. It acquired technology for removing arsensic from drinking water. The company changed its name to Clean Water Technologies Inc. in 2002, but never managed to commercialize its product.
The Scalas sold their majority interest in the company this year. Clean Water Technologies changed its name to SheerVision Inc. and now sells surgical loupes and light sources. UTEK valued its stock in the company at $102,570 on June 30.
GIFFORD MABIE COMPANIES
UTEK completed a technology transfer deal in May 1998 with Lexon Inc., a Tulsa, Okla., company headed by Gifford M. Mabie Jr. It got 1 million shares of stock in Lexon (formerly OTCBB: LXXN) in return for the license to the blood-screening kit used for cancer detection.
Six months later, UTEK entered into a strategic alliance with Maxxon Inc., (Pink Sheets: MXON), another Mabie company that was developing a retractable safety syringe. Maxxon agreed to pay 500,000 shares for help in finding additional new technology.
In 1999, UTEK transferred technology to three other Mabie companies in Tulsa. It provided Centrex Inc. (OTCBB: CNEXE) with technology for confirming the presence of E. coli bacteria and the cryptosporidium parasite in water. UTEK provided Image Analysis Inc. with technology for adding color to Magnetic Resonance Imaging scans. It also provided Nucor Enterprises Inc., later renamed Nubar Enterprises, with the license for a new carbon-fiber rebar that could be used in bridges, buildings and roads.
In the third quarter of 2002, three of the Mabie companies — Lexon, Inc., Image Analysis, Inc., and Centrex, Inc. – received notices that certain licenses they held were being terminated for failure to develop the technology or failure to pay the specified royalties.
At the time, UTEK valued its stake in Image Analysis, Inc. at roughly $1.3 million and noted that the company’s failure to preserve the license would have a material negative impact on UTEK’s financial condition and operating results. UTEK has since listed the shares as having no value.
In December 2002 the SEC filed a fraud complaint against Maxxon, Mabie and two other company insiders, alleging that they made false and misleading statements about the company’s “safety syringe’’ and collected more than $1.5 million from stock sold at inflated prices. The SEC said the misleading statements were issued during two periods, from 1997 through 1999 and from February 2002 to July 2002.
A federal jury found in 2004 that Maxxon and Mabie had engaged in securities fraud. A judge last year ordered Mabie to pay more than $1 million in disgorgement and penalties, barred him from serving as an officer or director of any public company for five years and barred him from participating in any penny stock offerings. Maxxon and Mabie challenged the verdict, but a federal appeals court upheld it earlier this month.
UTEK signed a strategic alliance deal in February 2004 with ZKid Network Co. (formerly OTCBB: ZKID), a Chicago-area company that said it was developing software and systems to provide a safe online environment for children.
Eight months earlier, the SEC brought fraud charges against that company’s chief executive, Jon A. Darmstadter, in connection with his activities at another small public company, The Children’s Beverage Group Inc.The SEC said that Darmstadter used the brokerage account of one of his employees to transfer and sell shares in Children’s Beverage Group to business associates and others, without registering the transactions. The SEC said Darmstadter pulled off the scheme by moving shares from a Canadian account he controlled into the employee’s account, telling the employee’s broker that the employee was physically incapacitated and unable to communicate by phone, and then forging the employee’s name on authorization letters.
The Illinois Secretary of State had previously taken action against Darmstadter, alleging in 2003 that he and others sold shares in a private company called eKid Network.com Inc. and failed to deliver the shares to investors. Darmstadter settled the case in May 2004. Without admitting or denying guilt, he consented for an order of prohibition.
That same month, UTEK transferred to ZKid Network the license to a software package developed by the U.S. Department of Energy’s Pacific Northwest National Laboratory that the companies said could be used to evaluate and flag sensitive content. UTEK got 9.55 million shares of ZKid Network’s stock, which it initially valued at $1.35 million.
Darmstadter settled the SEC charges without admitting or denying guilt, and in September 2004 a court ordered him to pay more than $70,000 in disgorgement, penalties and interest. He also was barred from serving as an officer or director of any public company for five years. ZKid shut down its operations in January. UTEK has written off the value of its shares.
UTEK saw the value of one of its other big shareholdings plunge after the company, HydroFlo Inc. of Apex, N.C., issued a series of corrections to press releases it had issued in September 2005.
In July, the SEC brought fraud charges against HydroFlo and Dennis L. Mast, its chief executive. Regulators said the company and Mast defrauded investors by “making false and materially misleading statement’s about HydroFlo’s water treatment business, contracts and prospects in a series of press releases in 2005.’’
HydroFlo and Mast settled the charges without admitting or denying guilt. Both agreed to injunctions against further violation of federal securities laws. Mast agreed to pay a $100,000 civil penalty and was barred form serving as an officer or director of any public company or participating in any penny stock offering.
Some of HydroFlo’s announcements involved technology that it had licensed from UTEK. A timeline comparison of the press releases and UTEK’s sales of HydroFlo stock show that UTEK was selling shares at the same time that Hydroflo was misleading investors.
UTEK first teamed up with HydroFlo Inc. in May 2004, when it agreed to help the Raleigh, N.C., company acquire new technology and find licensing partners for its existing technology. In August of that year, HydroFlo bought the license for a novel method of removing water-soluble forms of arsenic from water. Four months later, it bought the rights to a system for using high-frequency sound waves to identify potentially harmful compounds in water.
UTEK received 6.71 million shares of HydroFlo stock in the deals, or 18.4 percent of HydroFlo’s stock. At the end of 2004, UTEK valued that stake at just over $1
million. HydroFlo’s stock rose from 19 cents a share in early 2005 to more than $1 in the fall, after the company issued the press releases about new contracts that the SEC concluded were either false or overstated.
The SEC said in its fraud case that HydroFlo mischaracterized agreement with a consignment customer as guaranteed contract worth $210 million to HydroFlo. The SEC said HydroFlo repeatedly published false statements claiming that its subsidiaries were providing water filtration equipment and water purification consulting services to government agencies engaged in Hurricane Katrina relief efforts.
The complaint said the company had not shipped any products nor provided any relief services. It also said that HydroFlo had touted a positive report by a stock analyst as being independent and unbiased without disclosing that it paid $19,500 for the coverage. The SEC said the false releases increased the trading volume and price of HydroFlo’s stock.
UTEK’s SEC filings show that the company sold 364,956 shares of HydroFlo’s stock between Sept. 13 and Sept. 22, 2005, generating about $226,000 in proceeds. UTEK reported holding 6.34 million shares of HydroFlo on Sept. 30, 2005. At the time, UTEK valued the stock at $3.68 million, which made it the company’s second most valuable holding.
Hydroflo’s shares fell sharply in October 2005 after the company issued a long press release clarifying its earlier announcements. The stock has continued to decline through 2006. It closed Tuesday at 2 cents a share.
UTEK gave away or abandoned its right to the remainder of its HydroFlo stock in the second quarter of this year. The company said in an SEC filing that it donated 5.1 million shares of HydroFlo’s stock worth $663,000 to four nonprofit institutions. UTEK said it discovered that HydroFlo had been structured as a closed-end management investment company — like UTEK — and that its holdings in HydroFlo conflicted with regulatory limits for those types of entities. UTEK said it also abandoned its rights to another 400,000 HydroFlo shares.
UTEK did not disclose in its own SEC filings the regulatory actions against HydroFlo and Mast. Nor has it disclosed any of the SEC cases against other partners, even though those actions invariably led to declines in the share prices of those companies and the value of UTEK’s portfolio.
George Moore, who took over as HydroFlo’s chief executive in July, told Sharesleuth that the public statements that drew the SEC’s attention were the result of Mast’s overexuberance about the company’s prospects and were not an attempt to manipulate the market for the company’s shares.
“He’s an entrepreneur,’’ Moore said. “His whole mindset looks to the future, and his cup is always full. That’s a dangerous thing in today’s corporate world.’’
HydroFlo has been selling water pitchers and other products that incorporate the arsenic-removal technology it licensed from UTEK, Moore said. It has announced plans to spin off that subsidiary to its shareholders, creating a new company.
“It’s a very good technology, to be honest, and has a very good future,’’ Moore said.
Moore declined to say how much revenue it was generating from the technology it licensed through UTEK. The company’s most recent annual filing with the SEC listed no sales.
Another of UTEK’s technology-transfer partners, WebSky Inc. of San Francisco, was hit with fraud charges by the SEC in August. However, regulators say the activities covered in the complaint occurred before the company’s involvement with UTEK.
The SEC alleged that Jeffery Steven Stone, a recidivist securities-law violator, and his wife, Janette Diller Stone, acquired more than 288 million shares of WebSky’s stock under false pretenses in late 2004. The agency said the Stones hired stock promoters to hype the stock through false spam emails, which contributed to a tripling of the company’s share price. They then dumped the shares into the market, collecting more than $1 million in proceeds.
The SEC also brought charges against WebSky and its chief executive, Douglas P. Haffer, for allegedly selling shares to an entity controlled by Stone and Diller without registering the shares or obtaining an exemption. WebSky and Haffer settled the charges without admitting or denying guilt. WebSky agreed to disgorge the $35,000 it received from the share sale, and Haffer agreed to pay a $25,000 civil penalty.
UTEK completed a technology transfer with WebSky in February. UTEK valued its 33.7 million shares of WebSky at $809,520 at the end of the June quarter, down slightly from the original cost basis of $897,750.
WebSky’s shares have moved from the Over-the-Counter market to the Pink Sheets, where they have little trading volume. The stock closed Wednesday at 6 cents a share.
Sharesleuth also turned up questions about UTEK’s real estate transactions.
Last September, the company agreed to pay $3.15 million for the real estate assets held by Ybor City Group Inc. The deal consisted of a three-story office building that now serves as UTEK’s headquarters, a separate office and warehouse building and two adjacent parking lots. UTEK financed the purchase with 119,134 shares of stock and a $1.5 million mortgage. It is rare for sellers of commercial real estate to accept stock for their property, because of the possibility that the shares could abruptly decline in value. But with the rise in UTEK’s stock since the deal for Ybor City Group, the current value of the consideration the owners received has climbed to $3.76 million.
On March 30, UTEK agreed to pay $2 million for 22nd Street of Ybor City Inc., which it described as a real-estate holding company that owned a commercial property in Tampa. UTEK finance the deal with $1 million in cash and 82,919 shares of stock it valued at $1 million. Those shares would have been worth $1.58 million Wednesday.
The person who signed as the seller in both deals was Jacob M. Buchman, a Tampa area investor whose family once ran a department store in the Ybor City neighborhood.
Florida corporation records show that 22nd Street of Ybor City was incorporated on March 13 – a little more than two weeks before the deal — with Buchman as president, secretary and sole director. The document lists Sam I. Reiber, UTEK’s vice president and general counsel, as registered agent. Similarly, Florida corporations show that Ybor City Group Inc. was incorporated just days before UTEK signed the purchase agreement for that company. Buchman was listed as president and Reiber as registered agent.
In addition to his duties at UTEK, Reiber maintains a separate law practice whose specialties include real estate matters. He also is co-owner of a real-estate title company. Corporation and legal filings in Florida show that Reiber has acted as registered agent for some of Buchman’s businesses for more than 20 years, and has been an officer or director in at least two of them. UTEK did not disclose the prior relationship between Reiber and Buchman in connection with the real estate deals, or say whether it considered the deals to be arms-length transactions. Nor did it say whether it sought an independent appraisal of the value of the properties.
p>According to the Hillsborough County Property Appraiser, the four parcels that comprise Ybor City Group have an assessed value of $2.17 million, up from $1.53 million in 2005. Overall property values in Tampa rose 21 percent past year.
Property records show that 22nd Street of Ybor City owns three pieces of undeveloped land a few blocks from UTEK’s headquarters. All three currently are parking lots. UTEK has said in SEC filings that the properties produce no revenue. UTEK paid $2 million for the properties. The Hillsborough County Property Appraiser puts their assessed value at $311,082, up from $253,016 in 2005.
UTEK also has an interest in another real estate entity, Rosbon LLC. Florida corporation filings show that Reiber and Buchman were directors of a predecessor company, Rosbon Inc., which merged into Rosbon LLC in 2001.
UTEK owns another piece of property under the name ABM of Tampa Bay Inc. The company says in its SEC filings that it bought the vacant land in December 2004 as a future site for its corporate offices. UTEK paid with 20,534 shares of its stock. Because the company wound up moving elsewhere, it says it now intends to sell the land.
Florida records show that ABM of Tampa Bay was created in May 2004, with Dimitri Artzibushev as president and Sam Reiber as incorporator. Other business filings show that Artzibushev and Reiber also had a long history of business dealings, including mutual participation as officers in several companies.
Sharesleuth found it unusual that all of UTEK’s real estate acquisitions involved sellers whose principals already were associated with company insiders.
A spate of new strategic alliance deals led Sharesleuth to ask more questions about UTEK’s due diligence and choice of partners.
UTEK announced a strategic alliance in July with Inverted Paradigms Corp. (OTCBB: IVPC) of Sarasota. Sharesleuth’s investigation shows that a limited liability company that ranks as one of Inverted Paradigm’s top shareholders is headed by investment banker John G. Wright Jr., who was the subject of two previous SEC fraud cases.
Florida corporation filings list Wright as manager of San Rafael Consulting Group LLC, which owned nearly 1.39 million shares on Inverted Paradigm’s stock, or 5.7 percent. They also list Wright as the manager and principal officer of Delta Insights LLC. Inverted Paradigm bought its anti-virus, anti-spyware product from that company.
The SEC brought charges against Wright in January 2000 in connection with an alleged penny stock fraud directed by the owner of a San Francisco brokerage, Global Strategies Group. The SEC alleged that the brokerage boss, Jon F. Williams and others sold $2.1 million in supposed “stock repurchase agreements.’’ The complaint said that, from 1995 through 1997, investors were sold shares in three start-up companies for $1 a share on the promise that the shares would be repurchased within six months at a profit of 20 percent or more. The SEC said Wright and others working with him offered and sold securities as part of the scheme. It said they made misrepresentations to investors and omitted material facts concerning such matters as use of investor funds and the market value of underlying securities. Wright, who was not a registered securities representative, settled the charges without admitting or denying guilt. He agreed to pay a $50,000 penalty.
The SEC filed another action against Wright in February 2000, alleging that he and Williams bought and sold shares of a penny stock company in matched trades designed to create the appearance of active trading and boost the market price of the shares. The SEC said the company, Orlando Super Card Inc., never had more than $20,000 in assets. But by August 1997, when the trading scheme ended, it had a market capitalization of $9.7 million. Wright settled the charges without admitting or denying guilt. He agreed to pay a $25,000 penalty and was barred from participating in any offering of a penny stock, including acting as a promoter, finder or consultant or inducing or attempting to induce the purchase of shares.
UTEK announced a strategic alliance in August with PracticeXpert Inc., a California medical-management company. Michael S. Manahan, PracticeXpert’s chief executive, previously ran a stock promotion firm called Magnum Financial LLC.
The SEC brought charges against Manahan and Magnum in 2002, alleging that they were involved in a pump-and-dump scheme to manipulate the shares of a startup company called New Energy Corp. The complaint said that Manahan and his firm posted on the Internet a supposedly independent analyst report on New Energy. The SEC said the report was actually supplied by a participant in the scheme and contained at least five false and misleading statements, including claims about a relationship with the Los Angeles Department of Water and Power and negotiations with Coca-Cola bottlers.
Manahan settled the charges without admitting or denying guilt. He agreed to pay a $50,000 penalty. The person who supplied the false analyst report was convicted on criminal fraud charges and sentenced to prison, along with two other participants in the scheme.
In September 2005, UTEK entered into a strategic alliance with Quest Minerals and Mining Corp., which listed its headquarters as Belfry, Ky. Quest (OTCBB: QMMG) said it was looking for technology that could help it boost efficiency and safety. The deal called for UTEK to receive 800,000 shares of the coal company’s stock over the next year.
Quest went public through a reverse merger in early 2004. Its current president is Eugene J. Chiaramonte Jr., a former stockbroker who went to prison in the 1980s for his part in an insider trading scheme. Chiaramonte was part of a group that used insider information on takeovers from a law firm working on the deals. Chairamonte pleaded guilty to tax evasion and acknowledged making $200,000 in profits on trades through a Swiss brokerage, according to United Press International account of the case. He was sentenced to 18 months in prison.
Chairamonte was Quest’s vice president and treasurer at the time of the UTEK deal, and was one of the company’s two directors. Quest said in its latest quarterly report that it has not mined any coal from its properties in eastern Kentucky because it has been unable to obtain the required permits, insurance and other approvals.
In May, a federal grand jury in Lexington, Ky., returned indictments against Quest’s then-president and chief executive, William R. Wheeler and its former chief financial officer, Fred Runyon Jr., in connection with a check-kiting scheme that cost a bank in Pikeville, Ky. more than $1 million. Runyon’s sister was a branch manager for the bank. She also was indicted, along with another person who had business ties to Quest. The Federal Deposit Insurance Corp. has notified Quest that it will seek recovery from the company. Quest in turn has sued the bank, alleging negligence in allowing the kiting.
UTEK valued the 680,000 Quest shares it held on June 30 at $14,280.
Quest’s stock closed Wednesday at 1.24 cents a share.
UTEK completed a technology transfer in April with UBA Technology Inc. (Pink Sheets: UBTG), a company in Vancouver, British Columbia that develops betting-exchange software for online and bri
UBA Technology said it would use the technology developed at the University of Wisconsin to develop new features for its gambling kiosks and make them more user friendly for people with special needs or disabilities. UBA issued 48.6 million shares of common stock and 95,000 shares of convertible preferred stock in the transaction. It later reduced the number of common shares outstanding through a 1-for-20 reverse split.
UTEK’s quarterly SEC filing for the three months that ended June 30 listed the value of its 2.55 million shares of UBA’s common stock at $1.38 million. Recent business and political developments have raised questions about the true worth of that stake.
Since July, executives from two offshore companies that operate online gaming sites have been indicted on racketeering charges in the United States. Congress passed legislation in September that seeks to ban online gambling in America by making it illegal for banks and credit card companies to process payments. Some online gambling companies responded by pulling out of the market, one of the most lucrative in the world.
UBA’s current status is unclear. Its Internet sites are no longer active. The e-mail messages that Sharesleuth sent to the company were returned undelivered, and several phone messages left in a voicemail system went unanswered.
The most recent trade in UBA’s stock was Oct. 20, at 3.98 cents a share.
Other UTEK partners with executives or major shareholders who have previously run afoul of regulators include:
–DME Interactive Holdings Inc. (Pink Sheets: DMHD), which licensed technology through UTEK for software to help prevent the duplication and redistribution of multimedia content. The entertainment company’s president, Thomas D. O’Rourke, previously ran a brokerage called Thornwater Co. O’Rourke settled disciplinary charges with the NASD in 2002, agreeing to a censure and a $25,000 fine. Without admitting or denying the allegations, O’Rourke consented to the entry of findings that his firm failed to report customer settlements and certain information on customer complaints. The findings also said O’Rourke agreed that the firm would participate in a firm commitment underwriting when it lacked sufficient net capital. In a related action, Thornwater also accepted a censure and a $40,000 fine. The NASD found that the firm also failed to develop written training plans, failed to ensure that each representative participated at least annually in a meeting at which compliance issues were discussed. UTEK’s financial report for the quarter that ended June 30 listed 40,000 shares of DME stock with a stated value of $13,600
–Broadcast International Corp. (OTCBB: BCST), which acquired technology through UTEK for delivering smoother video images to mobile devices. Spanish securities regulators in 2004 identified Reed L. Benson, the company’s vice president, secretary and general counsel, as one of the directors of Carlton Birtal Financial Advisory of Barcelona. They said that firm, which offered shares in Broadcast International and at least one other obscure U.S. company to European investors, was not authorized to conduct an investment business in Spain. Regulators in February imposed fines of just over 300,000 Euros (approximately $375,000) against Benson, Carlton Birtal and another person. UTEK’s latest quarterly filing listed 984,360 Broadcast International shares with a stated value of $994,204.
–VitaCube Systems Holdings Inc (AMEX: PRH), which signed a strategic alliance deal with UTEK in May 2005. The company’s founder and former chief executive, Sanford D. Greenberg, was the head of a brokerage called Chatfield Dean & Co. In 1994, the NASD ordered fines and restitution totaling $2.47 million against the firm, Greenberg and other current and former officers. Greenberg and the others consented to a finding that the firm used “manipulative, deceptive and other fraudulent devices or contrivances’’ in securities transactions, charged excessive markups on six stocks and engaged in other improper behavior. Greenberg also was suspended for four months from association with any member firm. VitaCube operates a nutritional supplements business under the name XELR8 Holdings Inc. UTEK’s latest quarterly filing listed 54,857 shares of the company’s stock, with a stated value of $24,686.
–Magic Media Networks Inc. (OTCBB: MGCN), which signed a strategic alliance deal with UTEK in December 2003. Magic Media’s president, Gordon Scott Venters, is a former stockbroker whose record with the NASD includes fines, suspensions and ultimately, a revocation of his license. UTEK’s latest quarterly filing listed 67,904 shares of the Magic Media’s stock with a stated value of $5,297.
–Group Management Corp., which signed a strategic alliance deal with UTEK in January 2002. A company director, who also was its third-largest shareholder, was under indictment at the time in connection with a fraudulent offshore banking scheme. Thomas L. McCrimmon, who had an 8.6 percent stake in Group Management, was convicted in the case. He was sentenced to 60 months in prison and ordered to pay $23 million .UTEK said in an SEC filing that the alliance was canceled in June 2002. UTEK sold its 47,615 shares in the company, now called Silver Screen Studios Inc. (OTCBB: SSSU), last year for a loss it reported at $29,137.
UTEK announced last week that it completed a technology transfer to World Energy Solutions Inc. (OTCBB: WEGY) of St. Petersburg, Fla. The license covers a method developed by researchers at the University of Florida to use ozone to help eliminate hazardous organic chemicals and micro-organisms from indoor air.
The deal called for UTEK to receive 100,000 shares of convertible preferred stock that can be exchanged one year after issuance into common stock with a value of $4.05 million. UTEK did not report what it paid to acquire the license.
World Energy has pursued four different businesses in the past eight years. It started life as a car wash and oil-change company, then sold its sole location and became an Internet search portal, Yseek.com. After the tech bubble burst, it decided to pursue the 3-D ultrasound market. When that business failed to develop, it acquired its new business through a reverse merger. World Energy makes surge suppressors and markets energy-saving equipment and applications to residential and commercial customers. It reported revenue of $267,331 for the first half of the year, and a net loss of $5.07 million. The company’s stock on Wednesday was 45 cents a share.
UTEK announced this week that it had signed a strategic alliance deal with GammaCan International Inc., an Israeli company that is trying to commercialize an immunotherapy-based treatment for melanoma, other cancers and other diseases. GammaCan (OTCBB: GCAN) said it hopes to gain access to technology and ideas that can aid its existing research and development or help it expand to new areas. Its stock closed Wednesday at 60 cents a share.
SaarResearch.com provided fact-checking services for this story.