Case Study, Test, and Prize on SPNK–A Fantasy, Scam, or Fraud? Cheer Up and Look on the Bright Side of Life!

If everything seems to be going well, you have obviously overlooked something.–Steven Wright

SPNK: Can you Find the ticking bomb?

Anyone who specifically points out in the documents (see link below) where there is guaranteed devastation for the common shareholders will receive an A+ and an email prize.

If someone has posted a reply in the comments section, try not to read it, and think through the case on your own. Why are we in the world of Penny stocks, pump and dump stock schemes and Mafia-controlled companies–far, far away from our cherished franchises like IBM. Colgate, and Stryker?  Sometimes if you invert, you can learn more about financial statements and human nature.

Skim through the 115 pages and focus on the critical areas. Tomorrow evening I will post my analysis of this document.  The goal is to get you to pick out the danger areas. Obviously, this company has little financial value based on its assets and operations, but what is particularly lethal to any shareholder?

Good luck!

SNPK’s Financials:http://www.scribd.com/doc/85185922/SNPK-Financials

Guess how stocks like SNPK are sold:

http://www.youtube.com/watch?v=4zakyg3thfY

http://www.pennystockresearch.com/nsrs-csoc-pump-and-dump-alerts-february-1-2012/

I just received an email alert:

Dear valued subscribers,

SNPK closed at 70 cents today. Getting one step closer to multi dollar territories. We are absolutely confident of the massive potential this pick holds.

If it can just reproduce a fraction of the gains our last pick experienced it would still hit multi dollar levels.

Tomorrow may be one of the last opportunities our members will have to buy SNPK under a dollar.

The company announced this morning that its product, Clotamin, will be sold in about 70 different Discount Drug Mart locations around Ohio. This is on top of the product being available in 9 different states already, and being just picked up by Dakota Drug Inc. for distribution.

Those of you who did buy SNPK a few days ago and are holding are already up a lot.

Those of you who didn’t buy it yet are definitely considering to place an order first thing in the morning.

Do you remember how much our last pick soared? If you had just put $1,000 at our initial alert and and liquidated into near multi dollar levels you could’ve pulled more than $20,000 within 2 months. Not a bad ROI when the S&P returns around 8% a year on avg.

If you invest in anything with 8% return such as the S&P that same $1,000 will take you 40 years to turn into $20,000. As we just mentioned our last pick could have potentially created 40 years’ value in just weeks. Then you could possibly do it all over again with our next pick after it (which in this case is SNPK).

It is already up almost double since our initial alert 4 short days ago. That same gain would take 9 years to produce with the S&P.

The company is in negotiations with a major NBA star to support their products. Let’s stay tuned as this is important information!

SNPK has been steadily climbing every day! Our members couldn’t be happier!

http://www.zdnetasia.com/stock-pump-and-dump-spam-makes-comeback-62301948.htm

Stock pump-and-dump spam makes comeback

                By , ZDNet Asia on September 6, 2011News of the global debt crisis is driving pump-and-dump stock scams in volatile markets, enabling spammers to make profits by artificially “pumping” up stock prices so as to sell cheaply purchased stocks, note a new report by Symantec.Released Monday, the Symantec August 2011 Intelligence Reportrevealed that spammers are seeking to reap from fluctuations in the turbulent financial markets, by sending large amounts of spam related to certain “pink sheets” stocks, in an attempt to “pump” the value of these stocks before “dumping” them at a profit.”Pink sheets” are typically over-the-counter stocks of companies that are not required to submit financial statements to the U.S. Securities and Exchange Commission.”With the world still reeling from the recession, the stock markets are now in turmoil from the increasingly global credit crisis and the specter of a ‘double dip recession’, whereby the [world] economy is expected to again tank after a brief rally,” said Samir Patil, a security researcher at Symantec, in a blog post.According to Paul Wood, senior intelligence analyst at Symantec’s cloud business, scammers can make “substantial profits in a matter of days” with well-executed pump-and-dump spam campaigns. “In the current turbulent environment, many people may be convinced to invest in stocks that scammers claim will benefit from the market turbulence,” he pointed out in a statement.

In a typical pump-and-dump stock scam, spammers promote certain stocks to inflate the price as much as possible so they may then be sold before their valuation crashes back to reality, said Symantec. The spam for these scams tries to convince the prospective investor that the cheap or penny stock is actually worth more than its valuation, or that it will soon skyrocket.

However, most of these claims are misleading or false, the vendor warned in its report.

In a successful campaign, the influx of spam will artificially drive the stock’s price to a point where scammers decide to sell their shares. This usually coincides with them ending the spam campaign, which could reduce interest in the stock, helping to drive the valuation back to its original low price, which could also be exploited in the market.

Most of the pump-and-dump spam originate from the United States and China, while a percentage is being generated from other countries in Asia. The majority of the attacks target North American users, Symantec revealed.

The report also noted a deluge of penny stock spam promoting Resource Exchange of America Corp (RXAC.PK) stocks whereby messages were full of irrelevant line breaks and spaces between words.

The e-mail headers contained broken words such as “Stocks” and “money” with poorly translated non sequiturs throughout the message such as “United States still an AAA country, Obama says?!”.

Other examples of e-mail subjects include “Stocks Ready to Bounce?”, “There is a MASSIVE PROMOTION underway NOW!” and “Been right on the money”.

In order to avoid falling prey to e-mail scams such as pump-and-dump scams, users should create a spam filter, never respond to spam and get multiple e-mail addresses for multiple purposes, Stephanie Boo, regional director for Symantec’s cloud business, advised.

“The Internet world is a borderless one. Today’s volume and sophistication of threat activities have increased substantially and cybercriminals continue to be motivated by financial gains,” she said in an e-mail. “Pump-and-dump scams are just one of the many tactics that cybercriminals leverage to attack consumers and enterprises alike.”

Cheer up and look at the bright side of life

http://www.youtube.com/watch?v=L2Wx230gYJw&feature=related

21 responses to “Case Study, Test, and Prize on SPNK–A Fantasy, Scam, or Fraud? Cheer Up and Look on the Bright Side of Life!

  1. Hi,

    After looking through briefly, I think that biggest concern (there are certainly many) is the ~70% voting rights that the CEO (and only director/officer )has via the common & preferred ownership stakes. Not only would shareholders get no say in the operations of this company–assuming it’s intended purpose is to be a going concern–but I think the majority rights also would limit potential for shareholders to bring suit should this turn out to be a fraud.

    • Yes, you found one HUGE RED FLAG. Outside (minority) shareholder would have no say in the running of the firm. B

      But where is the radioactive bomb hidden? When you notice this, then you know the shareholder will have no chance of a long-term profit. Lethal.

      • In the Articles of incorporation, they detail the cancellation of shares of the former SNPK member & then the newly issued restricted shares for the new CEO in the same amount. Is that normal in the course of this share exchange? Also, I’m not sure if I’m misinterpreting this, but given all of the transfers between the original individuals involved in the company and their being done so on exempt from registration basis, are these sharesbeing sold by them unregistered?

  2. ANOTHER email promising riches if I invest in SPNK.

    http://www2.smallcapfortunes.com/snpk/index.html

    They have broken through my spam filters…………

    • You are seeing an operating company (drug distribution) being acquired–transfer of shares–to a shell company, SNPK.

      Nothing wrong with that. A reverse merger.

      I thought the SEC had outlawed what the company is doing, but they might be do busy chasing insider trading (I think insider trading should be legal–what is you have inside information that SNPK has just found a cure for cancer an you do NOT sell?)

  3. There is so much that is bad here, but certainly the auditors opinion, and specifically the finally paragraph that states: “These matters raise substantial doubt about the Company’s ability to continue as a going concern.” I like a huge neon sign saying “Stay Away!”.

  4. Dear Pete:

    You can’t win a date with Lindsay Lohan (no longer a reward prize since she stopped returning my phone calls) or the email prize unless you pick out a specific aspect in their financial statements or notes to financials or 8-K that would alert you to a bad outcome for shareholders.

    There are assets and liabilities–look where there is danger lurking.

  5. This stock is not a short-sellers dream because the shares are difficult to borrow (read manipulated; tightly controlled).

    So, this is more of a read the financials lesson. The horror.

  6. Ok. then it must be the $160,000 in debt owed to the President and controlling shareholder that overwhelms any equity raised. Send my regrets to Lindsay.

    • Certainly you are looking in the right areas–debt and obligation. What in the structure of a particular obligation is particularly harmful for shareholders.

      Take a step back–how would YOU lend this company money if you had to do it. If you could design a structure today to almost guaranteed profits–your money back–what would or could you do.

      Another HINT.

  7. Sorry, that’s what I get for multi-tasking. Its in Note 7 of the financials on page 123 of the pdf.

  8. Funding the business operations with future equity sales can’t bode well for current equity holders.

    • Well, certainly shareholders run the risk of huge dilution. If the new equity can earn more than its cost of capital then raising money would be beneficial. But in this case I doubt dilution will bring in good returns. But you are getting close. In a company like this that needs to fund its operation with outside capital—look at the terms of their debt. ….and what do you see..hint, hint, hint.

  9. Very nasty. If I’m reading this correctly, the CEO can call the debt on demand at any time and throw the company into bankruptcy/force the company to allow the debt to take over the company. (I also don’t like that all of the sales seem to be to a company owned by the CEO). In effect, the claims on this company are:
    Trade claims (owned by Mr. Barch)
    Debt (Barch)
    Equity (mostly Barch, partly sheep…)

    After a quick scan, that seems to be the major problem to which you are referring, though there are others that would warn me to stay clear.

    It reminds me of Crown Media Holdings (Nasdaq:CRWN), where H C Crown owns most of the equity- they force CRWN to borrow from H C Crown and then use the debt to abuse the other CRWN equity holders. In fact, I wouldn’t be surprised if this is serving is Mr. Barch’s blueprint…

    No thanks on the date with Ms. Lohan. Not my type.

  10. Basically if the company cures cancer, the CEO can kick you out using the line of credit for which the company owes him, and if it continues to do as bad as it does you’re still screwed sooner or later.

  11. Reasons why I will not buy this company.

    !- Debt due on demand
    Related Party Transactions
    (a)
    As at September 30, 2011, the Company owed $284,501 (December 31, 2010 – $50,621) to a company controlled by the
    President and Director of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand.
    (b)
    As at September 30, 2011, the Company owed $150,100 (December 31, 2010 – $nil) to the President and Director of the
    Company. The amounts owing are unsecured, non-interest bearing, and due on demand.

    !- Mackie Barch has Majority of voting rights.

    !-Operating Expenses has increased, there is also not enough assets as at 31 December 2011 $9,916 to cover future operating costs if they do not decrease it next year. The auditors stated that they have substantial doubt that they will be able to continue as a going concern without further financing.

  12. John – I noticed that the CEO has controlling share of the stock and as the shares are non-cumulative can choose and elect the directors of his choosing. The balance sheets show that the current liabilities exceed the assets, and a large part of those liabilities are owned by a firm controlled by the CEO and are due on demand. The CEO can basically do what he wants with the company and as a minority shareholder you couldn’t really do much.

  13. I’ve just sent you my pdf analyzing the SPNK.

    Haha… it’s interesting to analyze SPNK but are you pulling my leg? It feels so surreal, I feel like I’m in a scene out of Boiler Room 😀

  14. Not sure if this is still open but here is my two sense:

    1. Not sustainable (profitability real question)
    2. Not enough cash to cover future opex
    3. This is not really a public company so much as a subsidized way for the CEO to invest other people’s money.
    4. Debt is due on demand

  15. Sunpeaks Ventures Draws SEC Interest
    By Bill Meagher
    April 19, 2012 6:03 AM ET
    Sunpeaks Ventures (SNPK), a Silver Spring, Md.-based vitamin distributor that has been the subject of an extraordinary stock promotion, is on the radar of the Securities and Exchange Commission, according to an SEC official.
    “We’re aware of the situation and we’re concerned about it,” the official told The DealFlow Report.
    Sunpeaks’ corporate counsel, Brian Lebrecht of the South Jordan, Utah-based law firm The Lebrecht Group, declined to comment.
    Sunpeaks said last month that the Financial Industry Regulatory Authority had opened an inquiry into trading activity in the company’s stock.
    Trading volume in Sunpeaks has averaged 20.9 million shares a day over the past three months. Its share price had more than tripled from the company’s reverse merger in February through April 17.
    On April 18, Sunpeaks shares fell $1.31, or 59%, to 93 cents. Even after the decline, however, Sunpeaks still has a market cap of $389 million.
    Sunpeaks has been the subject of 482 different online stock promotions during the last five trading days alone, according to Stockpromoters.com, a website that tracks paid promotions.
    Sunpeaks was a shell company before its reverse merger with Kensington, Md.-based Healthcare Distribution Specialists, a distributor of specialty drugs and over-the-counter vitamins. One of those vitamins is Clotamin, a multi-vitamin that doesn’t contain vitamin K. People who take blood-thinning medications are advised to avoid vitamin K because it can make blood thinners less effective.
    A person familiar with the situation said that FINRA planned to turn the results of its investigation over to the SEC.
    FINRA representatives have declined to comment.
    Sunpeaks said in a statement last month that it was aware that Internet newsletters had been making “unsupportable claims, inappropriate comparisons and unjustifiable common stock performance projections” about its shares. Sunpeaks said that it had not and would not communicate with publishers of Internet newsletters about stocks that are quoted on the OTC Bulletin Board, and that neither the company nor anyone associated with it had paid anyone to promote its securities.

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