When we last wrote about HIV-VAC, Inc. in July 2000, the Company was talking about plans for human trials of its HIV/AIDS vaccine in Russia and Africa. Not much seems to have changed since then. HIV-VAC still says that it intends to conduct human trials in Russia - once it gets regulatory approval. But the Company hasn’t indicated whether that approval is pending (or has even been applied for) or how long the approval process might take. Testing is also planned for Zambia, but apparently is not yet underway.
The Company says it will need at least $5 million over the next twelve months to commence those human trials. Where will it get the money? HIV-VAC has no revenues and, as of June 30th, the Company had about $58,000. The Company says it is looking for joint-venture partners, but currently no negotiations are underway.
So how does HIV-VAC plan to fund those human trials? On August 13th, HIV-VAC sold one million shares of Convertible Preferred Stock to a company identified as Bromley Holdings, Inc., of Hewlett, New York for $10,000. Each of those Preferred Shares can be converted into 20 shares of HIV-VAC common stock at the lesser of (a) a 40% discount from the closing bid price on the date the Preferred Shares were issued, or (ii) a 40% discount from the average of the lowest three closing bid prices during the twenty (20) trading days immediately prior to the conversion. In no event can the conversion price exceed $3 per share. Bromley also received warrants to buy an additional 5 million common shares.
From reviewing the documents, it is not clear exactly when the Series B Convertible Preferred Shares were issued. On August 22nd, however, HIV-VAC common stock was trading at around 55 cents per share. Then again, only 200 shares traded that day. If that 55 cent price were applied, the conversion would come at 22 cents, meaning the Company could receive more than $4 million – unless the conversion price is lowered based on the value of HIV-VAC shares when they are converted.
Those additional shares could be hitting the market at any time. On August 22nd, the Company filed a Form SB-2 Registration Statement for the 25 million common shares that can be issued to Bromley if it converts the preferred stock and exercises the warrants.
Who controls Bromley? The Registration Statement doesn’t say, but the Subscription Agreement forms for that convertible preferred stock indicate that an individual named “Joe Blumenthal” is Bromley’s President.
Who then is Joe Blumenthal? Stock Patrol has come across that name before. In an article on a company called Far East Ventures, Inc. (which subsequently changed its name to Nico Telecom, Inc.), we noted that someone named Joseph Blumenthal was the President of J.B. Marc & Associates. J.B. Marc received shares of Far East Ventures common stock in return for certain consulting services. Those shares were registered for sale on a Form S-8. So, as we saw, were additional shares of “consulting stock” given to one Alan Berkun. Was there a connection between Blumenthal and Berkun? It appeared that the two men shared offices in New York City and operated a “funding company” called Turus Trading Corporation. (See Far East Ventures, Inc. – Consultants To Spare).
That was not the only time we encountered J.B. Marc or Alan Berkun. While researching a subsequent article, we discovered that J.B. Marc had purchased 2.5 million shares of a company called Infotopia for $967,000. Those shares were registered for sale on a Form SB-2. Berkun also received Infotopia shares, as a consultant. His shares were registered on a Form S-8. (See, Update: Infotopia, Inc. - Bye Bye Shares).
As it turned out, Infotopia’s consulting agreements were strikingly similar to those used by two other companies - Far East Ventures and HIV-VAC. As we have seen, HIV-VAC entered into consulting agreements with a pair of New York entertainment lawyers, Jeffrey Jacobson and Bruce Colfin in the summer of 2000. (See HIV-VAC – Out of Africa). Jacobson and Colfin were each issued 3 million shares of HIV-VAC stock – all of which was registered for sale on Forms S-8.
Jacobson and Colfin have something else in common with Bromley. They have also maintained offices in Hewlett, New York.
Oh, and Jacobson and Colfin also received S-8 shares for consulting services rendered to Infotopia. It’s a small world, isn’t it?
But that’s not all. As we noted in an article about Infotopia (Infotopia, Inc. – Bye, Bye Shares), individuals named Alan Berkun and Joseph Blumenthal were named in a 1998 order issued by the National Association of Securities Dealers. That NASD proceeding charged, among other things, that a New York brokerage firm called Lexington Capital Corporation and Berkun collaborated to defraud investors and impede regulatory scrutiny.
What had Lexington done wrong? The NASD said that Lexington Capital, acting through Berkun and others, engaged in improper business with a person who had been disqualified from working for a broker-dealer; violated penny stock rules; sold unregistered securities; charged customers excessive markups; and failed to disclose the amount of remuneration received by the firm. Who was that individual who had been disqualified? The NASD also concluded that the firm, acting through Berkun and others, had falsified records in order to conceal the fact that Blumenthal solicited and effected over 300 customer transactions when he was not properly registered with the NASD and several states. According to the NASD, transactions were improperly processed for Blumenthal under Berkun’s registered representative number. The record indicates that the complaint was settled and that Berkun was fined $150,000, ordered to pay more than $200,000 in restitution, and barred from association with any NASD member, either as a principal or registered representative. Berkun agreed to resign from the firm and surrender all ownership interest in Lexington Capital. Blumenthal, who was fined $100,000, was also barred from associating with any NASD member in any capacity.
Leading us to wonder, is this the same Joe Blumenthal now signing on behalf of Bromley?
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