Imagine for a moment that Bach-Hauser, Inc. had one dollar for each of the consultants it retained in the last three months. By our count that would give the Company $39 – which would also represent its entire bank account. That’s right. Bach-Hauser has no money, no revenues and rather uncertain prospects. But that has not deterred the Company from issuing 36.69 million shares of stock to at least thirty-nine consultants since mid-August. Or from registering all of those shares for immediate sale on seven separate Forms S-8 filed with by the Company with the SEC since September 1st.
What have all of those consultants been up to? Bach-Hauser offers few clues.
Wasting Away
Bach-Hauser has a rather unremarkable past. Despite apparent efforts over the past year to enter the waste recycling field, the Company has had no significant operations. Its public filings indicate that Bach-Hauser has had no revenues and that its assets consist of $4,500 in “intangible assets” (which represent costs incurred in organizing the Company). These numbers do not reflect either a successful operating history, or a strong financial position. Certainly, they offer no basis for concluding that the Company has sufficient resources to be any more successful in the future.In striking contrast, however, is the Bach-Hauser website. There, the Company claims that it “aims to capitalize upon the New Economy by developing companies that are in various industries and in different stages of thier (sic) business cycles.” How does it plan to accomplish this goal? Bach-Hauser states that it “provides the capital, resources and expertise required to guide companies through each step of the business lifecycle.”
Now we don’t want to put a damper on that enthusiasm, but, as far as we can determine, Bach-Hauser has no capital or resources to offer those “developing companies.” In fact, its principal attempt to acquire an operating business fell flat. In September 1999, Bach-Hauser announced that it had been granted an exclusive license to distribute, use and sell, waste disposal and recycling products and systems developed by TCR Environmental Corp., a Canadian company. The license entitled the Company to market those products and services all over the world, except in Canada where TCR maintained its own operations. In consideration for the license, TCR received 4.5 million shares of the Company’s common stock.
On November 11, 1999, the Company announced that it had retained Solutek Trade Development Corporation, a “technology and sales based organization,” to market the TCR recycling products in the Philippines, the Caribbean and Latin America. The Company’s press release provided no details of that arrangement.
Two weeks later, on November 23, 1999, Bach-Hauser issued another press release, this time stating that it had entered into a letter of intent to construct recycling plants in three Philippine cities. How would the Company finance the construction of those facilities? After all, it had no money, no employees (other than its officers and directors) and no apparent source of funding. The press release did not address those issues, or discuss the terms of the proposed agreements. How significant are such questions? Without money, the Company’s plan had little chance for success.
That is precisely what Bach-Hauser was to discover. In its most recent Form 10-Q report, the Company conceded that it was forced to abandon plans for the recycling project because it had been unable to raise sufficient funds.
Leaving Garbage Behind
Now, Bach-Hauser says it is changing direction. This time it is going the hi-tech route, but details of its new ventures remain vague. On July 7, 2000 the Company announced that it had signed a letter of intent to acquire Flashtek.com, of Toronto, Canada. According to the press release, Flashtek is “a high end, user-friendly search directory tool.” What had Bach-Hauser agreed to pay for Flashtek.com? How would the Company finance that acquisition, or marketing for the product? Was Flashtek.com actually up and running? How did the Company expect to compete with other, well-established and far better financed search engines? None of these issues were addressed and there has been no further announcement concerning the proposed venture.Instead, the Company disclosed yet another letter of intent. On October 17th the Company issued a press release stating that it had signed a letter of intent to “acquire an exclusive global license to a software package called FREQUENTSEE™ from Aegiss International of San Francisco, California.” According to the Company, the software “allows carriers, portals and application service providers to format existing applications for use by hand-held devices.”
Like the earlier press releases, this announcement provided no details of the anticipated relationship. What had Bach-Hauser paid to acquire the license? If that included a cash payment, where did the Company get the money? How will the Company finance this operation? After all, it was unable to raise funds for the recycling operation. Is there other, competing software in the marketplace? Without this information, it is impossible for investors to determine whether the Company’s new venture has any value.
And what is Aegiss International? Has it successfully marketed FREQUENTSEE™, or any other software? The Company did not say, and we have been unable to find any telephone number or address for Aegiss in San Francisco, or any web site for that company.
On November 2nd the Company issued a second press release disclosing that it had signed the licensing agreement with Aegiss. Again, the Company failed to address these lingering questions. Instead, it simply stated that FREQUENTSEE™ “allows software developers of applications written for desktop computers and the wired Internet to extend their software for use on the wireless web.” Unfortunately, that description alone offers no basis for determining the potential of the product or the prospects for Bach-Hauser.
Lots of Bach-tivity
Considering the lack of meaningful information in these recent press releases, it is difficult to believe that they have had much impact on investors. Why then has volume for Bach-Hauser shares been so high? More than 1 million shares of Bach-Hauser stock were traded on each of 46 separate days since August 11th. On some of those days volume was significantly higher. For example, 5.18 million shares, 4.8 million shares and 4.2 million shares were traded on September 8th, September 14th, and September 15th, respectively. On September 15th, prices reached 59 cents a share. On October 31st, over 6.8 million shares were traded, at prices ranging from 29.5 cents to 39 cents. The next day, November 1st, another 2.17 million shares changed hands.So if a series of sketchy press releases aren’t responsible for this booming volume, what is? How about all those consultants?
Giving Away The Hauser
Since September 1st of this year, Bach-Hauser has filed seven separate S-8 Registration Statements with the SEC. A Form S-8 is used to register shares of stock that have been issued either to employees under an option plan or to consultants. In this case, all of the S-8’s related to shares awarded to consultants. Who were these consultants – 38 in all – and what services were they performing for the Company? How valuable could they have been to a Company with no business, no tangible assets and no income?An S-8 differs from most other Registration Statements because it becomes effective as soon as it is filed – which means the shares can be sold immediately. Those consultants received a total of 36.9 million shares, or about 48% of the outstanding shares (there had been 39.4 million shares outstanding previously). What had compelled the Company to give away so much of the Hauser? As we see below, the S-8’s provide little guidance.
The September 1st S-8 – 1,050,000 shares registered
The September 1st Form S-8 registered 1,050,000 shares of Bach-Hauser stock that had been issued to three lawyers - Daniel Chapman, Sean Flanagan and Herbert Jacobi. Messrs. Chapman and Flanagan are the name partners in the law firm of Chapman & Flanagan, Ltd., with offices in Las Vegas, Nevada. That law firm has acted as SEC counsel to Bach-Hauser, as indicated on various public filings, including the Forms S-8. They also provided the legal opinions that accompanied each of those Forms S-8. Those Registration Statements do not indicate what “legal consulting services” Mr. Jacobi rendered to Bach-Hauser.This was not the first time the Company had registered shares for these three attorneys. In May of this year, Bach-Hauser filed two Forms S-8 in order to register 100,000 shares for Mr. Chapman, 100,000 shares for Mr. Flanagan and 200,000 shares for Mr. Jacobi. And there were still more to come.
The September 12th S-8 – 800,000 shares registered
On September 12th the Company registered another 250,000 shares for Mr. Chapman, 250,000 shares for Mr. Flanagan and 300,000 shares for Mr. Jacobi.The September 15th S-8 – 16 million shares registered
Chapman, Flanagan and Jacobi were back again, together with two “Internet consultants.” This time the three lawyers received a total of 1.5 million shares (250,000 each for Chapman and Flanagan and 1 million for Jacobi) while those Internet consultants received 1.3 million shares.The October 18th S-8 – 13.24 million shares
This time the Company registered 13.24 million shares for 25 different consultants. 6,090,000 of those shares had been issued to ten lawyers including, as you may have guessed, attorneys Chapman (300,000 shares), Flanagan (300,000 shares) and Jacobi (300,000 shares). According to the S-8, two other lawyers, identified as Richard Borrow and Louis Sopov, received 3.75 million and 1 million shares of Bach-Hauser common stock, respectively.The Company said that each of these attorneys provided “legal services,” but once again, none of those services were enumerated. Considering the absence of operations at Bach-Hauser, what legal work needed to be performed – with the exception of the efforts required to turn out these Forms S-8 and the “letters of intent?” And how does the Company, with no tangible assets and no revenues, justify the issuance of stock worth $2.34 million for those unspecified “legal services?”
The remaining shares had been issued to 15 consultants, each of whom had entered into a two paragraph “consulting agreement” dated October 1st. Again, those “consulting agreements” were identical, except for the names of the consultants and the services to be provided. Once more, as we see, those “services” were a curious mix, and those agreements leave critical questions unanswered. For example,
1.25 million shares for market research and consulting in connection with “existing products and services.” But what products or services “existed” on October 1st? Or now for that matter.
500,000 shares to a “Supervisor of refuse operations.” This would appear to be a cushy job since the Company had abandoned plans to market the recycling system. Indeed, there is nothing in the Company’s public disclosures to suggest that Bach-Hauser ever had, or presently contemplates, any “refuse operations.”
1.7 million shares to a pair of merger consultants. Are these the individuals responsible for the flashtek.com and Aegiss International deals? The Company does not say. What is the status of those transactions anyway?
500,000 shares for Internet consulting services. Does this relate to the flashtek.com business? Has that project ever moved beyond a letter of intent? The Company has not provided that information.
250,000 shares to a consultant for sales marketing and project development. Exactly what is the Company selling, to whom and for how much?
1.5 million shares to consultants on “wireless medical technology.” Is the Company engaged in this field? If so, what is the nature of that business?
100,000 shares for media and public relations. This was a relatively modest grant, but then again it appears that the Company has issued only three press releases since the S-8s were filed.
250,000 shares for “nuclear waste reduction patent research.” Huh?
And finally, 600,000 shares to an “Industry Analyst.” The Company doesn’t say what industry is being analyzed, but maybe that’s appropriate since Bach-Hauser doesn’t seem to have decided on one yet.
The November 6th S-8 – 2.2 million shares
They’re baack! Or should we say baach. Another 2.2 million shares issued to the Bach-Hauser lawyers – Daniel Chapman (200,000 shares; Sean Flanagan (200,000 shares); Herbert Jacobi (200,000 shares); Richard Borrow (1.4 million shares); and Deanne Ofsink (200,000 shares).Nice Work If You Can Get It
When the smoke cleared Bach-Hauser had issued, and registered, 36.9 million shares, worth more than $17 million, to its lawyers and consultants. In fact, there were so many shares dispensed that the Company was forced to amend its Certificate of Incorporation on September 14th to increase its authorized shares from 50 million to 100 million. So far, about 76 million shares have been issued. Does that mean S-8s for another 20 million or so shares are on the horizon?Bach-Hauser filed a Form 8-K on October 2nd reflecting that amendment – but it had one interesting typo. The signature line on the Form did not refer to Bach-Hauser. Instead, it contained the name of another public company, Playandwin, Ltd., whose lawyers also include the law firm of Chapman & Flanagan. As it turns out, Playandwin filed its own Form S-8 on October 5th, registering 2.87 million shares on behalf of 19 consultants. Each of those consultants signed a two page consulting agreement that mirrored the ones utilized by Bach-Hauser. We also discovered that 11 of those consultants, including attorneys Chapman, Flanagan, Jacobi and Borrow, had received some of the Bach-Hauser shares.
Consulting seems like a pretty good business, doesn’t it?
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