Did AuGRID Corporation (OTCBB: AGRD) bet on the wrong horse? AuGRID, a Nevada corporation with offices in Cleveland, Ohio, has been trying for several years to launch an operating business. Recently, the Company established relationships with a number of consultants, including several who are supposed to be helping AuGRID assess potential mergers and acquisitions.
Ranking first among those consultants – at least in terms of compensation paid by AuGRID – is one Daniel Rubin, a high profile investment banker who has cultivated an image as a playboy and “most eligible bachelor,” while accumulating large positions in troubled public companies. The Company recently solidified its relationship with Rubin, who now owns approximately 36% of its outstanding common shares.
But Rubin’s days as an investment banker may be numbered. On October 2, 2003, Rubin was arrested, and charged with orchestrating a “pump and dump” scheme involving shares of two small, struggling companies - Marx Toys & Entertainment Group and The Classica Group. See Feds Say Rubin’s Been Robbin’. Authorities say that Rubin, CEO of Rubin Investment Group (RIG), received 1.2 million shares of Classica stock, and 6.8 million shares of Marx Toys’ stock, in consideration for consulting services that he never actually rendered.
Rubin has been associated with a series of under-performing, over-promoted public companies, including Infotopia, Inc. (Pink Sheets: IFTA), the failed infomercial company that was long on promises and short on performance. Infotopia boasted a series of strange bedfellows who became targets of regulatory or criminal actions, or both, including Rubin; a pair of Las Vegas lawyers, Daniel Chapman and Sean Flanagan; New York attorney/consultant, Alan Berkun; Canadian investment banker Mark Valentine and his firm Thomson Kernhagen & Co. Ltd; and Canadian promoter and offshore investor, Teodisio Pangia. See Infotopia, Inc. – The Professionals - A Familiar Ring; Not Exactly Valentine’s Day; Zero Degrees Of Separation, Part I – North Of The Border; Diamond Discoveries International, Inc. – Are These Diamonds Forever Or Never?
From a public relations standpoint, AuGRID’s timing could not have been worse – even assuming that Rubin did not engage in similar antics with AuGRID shares. On September 30, 2003, AuGRID announced, with unconcealed glee, that Rubin and RIG had paid the Company $1.5 million to exercise common stock purchase options that they had been awarded under two consulting agreements. A Form 13D filed on October 1st revealed that Rubin now owned 200 million shares of the Company – or 36% of the outstanding shares.
We suspect that the joy was short lived. Rubin was arrested the next day.
VISION QUEST
AuGRID may have been hoping that Rubin would help bail it out of its financial malaise. As of December 31, 2002, AuGRID had less than $2,000 in cash, zero operating income, and its auditors were expressing doubt about its ability to continue as a going concern.By June 30, 2003, (shortly after it entered into its first agreement with Rubin) the bank account had increased to slightly more than $21,000 and AuGRID was claiming receivables of more than $500,000. On the other hand, the Company still had no operating revenues and seemed to receive the bulk of its income from selling its shares.
This has continued to prove true. The Company now says it has raised an additional $1.5 million as a result of Rubin’s option exercise. But the money came at a considerable price – about 36% of AuGRID is now owned by an individual who faces criminal and civil securities fraud charges.
Before it can generate operating revenues, however, the Company will have to establish a viable operating business. How does the Company plan to accomplish that task? AuGRID aspires to enter the growing market for “flat panel display” screens. It claims that the worldwide market for flat panel displays is approximately $9.5 billion, and is estimated to increase to $35 billion by 2005. At last report, however, none of those sales were being generated by AuGRID.
AuGRID’s plans appear to hinge, to a significant degree, on its relationship with CeraVision Limited, a company registered in England and Wales, which agreed to license certain flat panel technologies to AuGRID. Unfortunately, that association appears to be tenuous at best, and non-existent at worst.
In July 2000, AuGRID entered into two licensing agreements for flat panel technology with CeraVision (and its Ireland-based subsidiary). But, there’s a problem. The Company has failed to make required royalty payments to CeraVision, placing the status of the relationship in doubt.
Under one of those agreements, AuGRID was obligated to make quarterly royalty payments of $500,000, beginning with the quarter ended September 30, 2001. The first payment was due on October 7, 2001, two years ago, but remains unpaid. That means that, as of the end of September 2003, AuGRID owed a total of $4.5 million in overdue payments – plus interest at 6% above the prime lending rate.
The Company says that CeraVision agreed to defer those payments because of an ongoing dispute under the second agreement. That second agreement called for the Company to pay CeraVision $3 million to develop “certain flat panel display prototypes and building manufacturing lines for the purpose of producing such displays.” The Company says that it paid the first $1 million, but has made no further payments because of disagreements over the prototypes. According to AuGRID, those payments have been deferred while it explores its options.
CeraVision may not share that view. Stock Patrol contacted CeraVision’s U.S. affiliate and spoke with an individual who identified himself as a company representative. He insisted that CeraVision’s agreements with AuGRID had terminated because of AuGRID’s failure to pay the license fees.
The bottom line seems to be this. AuGRID has not paid CeraVision since 2001 and there is no indication in the Company’s public filings that it has moved forward to resolve the dispute, accept the prototypes, or sustain the relationship and licenses.
Investors can take little comfort from the Company’s evident lack of progress, or its inability to resolve this dispute. AuGRID claims that it intends to begin making the licensed product before the end of 2004, but that, of course, would depend upon the continued viability of the license.
And then, there’s this ongoing problem; as of June 30, 2003, AuGRID had no manufacturing or sales operations in place which would enable it to develop the product.
Although progress may be stalled on the flat screen development front, AuGRID has remained busy – retaining consultants and rewarding them with stock. Who are these consultants, what services have they provided, and how have they been compensated?
We will explore those questions in Part II of this series.
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