The top company in UTEK Corp.’s securities portfolio has encountered a series of setbacks in its attempt to commercialize a powder-coating technology for kitchen cabinets, bathroom vanities and other wood products.
Trio Industries Group Inc. (Pink Sheets: TRIG) has been evicted from its offices in Dallas. Its phone and fax numbers have been disconnected and it no longer has control of the 650,000-square-foot building that it hoped to convert to a wood products plant.
UTEK (AMEX: UTK) is a Florida-based company that licenses technology from government and university labs and transfers it to other companies, usually in exchange for stock in the recipients.
UTEK has done five such deals with Trio and has received 7.79 million shares of Trio stock. UTEK valued that stake at $11.6 million on Sept. 30, making the shares the biggest single holding in a stock portfolio it valued at $55.7 million.
Sharesleuth.com published an investigative report on UTEK in October that raised questions about UTEK’s business model, the true worth of its securities portfolio, and some of the companies whose shares make up that portfolio.
As UTEK prepares to announce its 2006 earnings, one of the biggest wild cards will be the value it assigned to its Trio shares on Dec. 30. The eviction notice was posted at Trio’s headquarters in mid-November, and the company was gone by the end of the year.
In addition, officials in Greenville, Miss., say the previous owner of the building that Trio bought last year has taken back the property and is again offering it for sale.
“We have been contacted, and informed that we can show the property,’’ said Tommy Hart, director of economic development for Washington County, Miss., where Greenville is located.
The building, a former carpet plant, is listed as an available property on the county’s industrial development Website.
Trio did not publicly announce any of the recent developments.
Trio said last February that it bought the building for $1.85 million and would spend $3.5 million to convert it to a coating center. Trio had been hoping to finance the project through a government-sponsored bond issue, but no money materialized.
Trio also has dropped its suit in federal court against a New York financier who was seeking to claim 30 million of the company’s shares as collateral for a $100,000 loan that he claimed had gone unpaid.
Trio said it filed for a dismissal without prejudice after conferring with the lawyer for the defendants in the case.
Trio’s attorney’s had filed a motion in December to withdraw from the case, saying their legal bills had gone unpaid and that the company had no way to pay them in the future.
Trio’s financier, Beryl Zyskind, 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.
Trio’s stock, which trades infrequently and in low volumes, fell by more than 50 percent in the last three months of 2006. It has continued to decline, with the most recent transaction at $1.40 a share.
Sharesleuth also has noted that UTEK’s stock portfolio on Sept. 30 included shares of three companies that were never announced as strategic alliance partners or technology transfer partners.
One of those companies was Pride Business Development Holdings (OTCBB: PDVG), a California company that makes bulletproof vests and other protective clothing. Pride is headed by Michael Markow, who is currently a defendant in a civil fraud case brought by the Securities and Exchange Commission.
The SEC said in its civil suit that Markow participated in a scheme to manipulate the shares of another penny-stock company, BluePoint Linux Software Corp. Markow has denied the charges.
The SEC alleged that Markow transferred shares of BluePoint into the names of other people to conceal his ownership, recruited brokers to act as market makers for the stock, helped coordinate planned purchases and sales of the stock, and arranged for other individuals to tout the stock on Internet message board. The SEC said Markow collected $1.23 million in profits on Bluepoint shares he sold as part of the scheme.
The SEC said in its complaint that Markow, a former stock broker, had previously been disciplined by Alabama securities regulators in 2000 and California securities regulators in 1998. Both cases involved charges of operating as an unlicensed broker-dealer.
UTEK’s 10-Q for the third quarter listed 160,000 Pride shares, with a value of $78,400.
UTEK’s portfolio included 269,230 shares of Protocall Technologies Inc., a New York company that is marketing a system that allows retailers to burn brand-name CDs and DVDs in stores and distribution centers.
Protocall’s early investors included at least 16 individuals or entities whose names also appeared in SEC filings for Xethanol Corp., an ethanol company that was the subject of an earlier Sharesleuth investigation.
The list of Protocall investors included Lawrence S. Bellone, Xethanol’s executive vice president for corporate development; Richard L. Ritchie, a former Xethanol director; Jed Schutz., a member of Xethanol’s advisory board, and Kelly Langberg, the wife of Jeffrey S. Langberg, a former Xethanol director and consultant.
UTEK’s portfolio on Sept. 30 included 2.25 million shares of a third company, Magnitude Information Systems Inc., of Chester, N.J. UTEK valued its stake in the company at $67,625.
Magnitude Information announced last week that it would acquire Kiwibox Media Inc., operator of a social networking site aimed at teens.
(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 99,000 shares of UTEK’s stock. Christopher Carey, editor of Sharesleuth.com, does not invest in individual stocks and has no position in the shares of Xethanol or UTEK.)