25 Jul Bayside Corp: From no revenues, no cash, to billions?
After the bell on 23 July, 2013, Bayside Corp. (BYSD) made an extraordinary announcement. It claimed that “the company has been awarded a purchase order to supply 3,600,000 Metric [sic] tons of heavy fuel oil exports annually. Additionally, the order represents approximately $160,500,000 in gross revenues every month for the next thirty-six months.” Additionally? A little more clarity would have been good.
But never mind. That's $1.92 billion a year.
Naturally the stock ran hard on the morning of the 24th. Just to make sure that run didn't falter, the company followed up with a second PR announcing major financing supplied on very short notice by Nick Kontonicolas's C-Trade Group, “a petroleum logistics trade and finance company.” BYSD closed up 186.96% at $0.0132 on volume of 143 million shares. It trades on OTCMarkets' Pink Current Information tier; it has never been an SEC filer.
All this didn't happen without a little help from promoters. On 27 June, several low-profile touts were paid $5000 (impossible to tell whether they were related or not; that may have been the total amount) for a two-day profile. On 17 July, OTC Magic noted receipt of $8,500 to promote BYSD for a couple of days. On the 23rd, a number of new promoters joined in the fun. Moving Pennies disclosed payment of $4000 by Microcap Innovations, LLC; the others, “up to fifteen thousand dollars cash by a non-controlling third party.”
Bayside is a petroleum exploration, development and production company with oil and gas leases in Texas and Mississippi. Its headquarters are in Dallas. It was originally incorporated in Nevada in 1984, but redomiciled in Wyoming on 14 November 2012. It still hasn't bothered to update that information on its OTCMarkets company info page. The company website hasn't been updated recently either: the latest news offered there is from 23 March 2012. Chairman of the board and president is Gordon H. Johnson, who apparently works for several other gas and oil outfits as well. The CEO is Darren Toomer. As of 31 March, BYSD was controlled by DZ Energy, LLC, of Dallas, which, between common and preferred stock, had an 81% interest in the company. DZ's stock was not issued to DK itself, but to individuals associated with it.
In Wyoming, stock authorized is given as 3.4 billion shares. According to a press release of 18 July, the company has reduced that number to a mere 2 billion. Either it didn't bother to inform Wyoming, or the change hasn't yet been posted. According to Wyoming, the outstanding is 65,642,630 shares; according to the most recent financial report (a quarterly for the period ended 31 March), it's 66,142,631 shares. But by 10 April, when the numbers at OTCMarkets were most recently changed, the o/s had risen dramatically, to 913,142,631. How'd that happen? The company hasn't offered an explanation. On 8 July, BYSD's attorney William Goode filed an opinion in which he explained, among other things, that shares had been issued to a number of individuals and entities during the course of 2011 and 2012. (In the most recent quarterly, the company merely responded “no” to questions about stock issuance on the OTCMarkets form.) Those issuances should have been reported, but the number of shares involved doesn't add up to more than 15 or 20 million.
Stranger still, the company says the float is a mere 5,653,426 shares as of April 10, 2013. Like so much about this story, that doesn't make sense. Obviously, based on the volume and price action since April 10, 2013, the float is many times bigger than that now.
Bayside's financials are dismal. For the quarter ended 31 March, it had no cash and no revenues. It had no revenues in fiscal 2012, and just $110,000 in 2011. Its only assets are oil and gas leases worth $2,299,950. Why do they call themselves a producer, and where's that 3,600,000 metric tons of oil going to come from? Who's the customer? It's normal to mention these things when announcing an important contractual relationship.
C-Trade Group, Inc. is confusingly described at its website as “part of the C. Trade Group of Companies.” Another member of this group is C. Trade-BARD, Inc. The original C. Trade formed a new company called C. Trade-BARD in November 2012; it sells algae-based products and agricultural products. C-Trade Group created a new website for C. Trade-BARD and itself in December 2012. On the “About us” page, the original entity is called both “C. Trade” and “C-Trade.”
C-Trade's relationship with Bayside isn't new. In January 2012, as C. Trade, it struck a deal by the terms of which it would provide funding in an initial amount of $1.5 million for the reworking and completion of 13 oil wells in South Texas. In its recent quarterly, it described the arrangement as a joint venture, but did not offer a copy of the agreement between the parties.
Strangely, BYSD made no reference whatsoever to the joint venture in its annual report for 2012. It appears that no revenues of any kind were generated. That raises an obvious question: why would C-Trade want to become involved with Bayside again? No answer presents itself.
The person behind all of the C-Trade companies is Nick Kontonicolas, who describes himself as an “experienced, well-seasoned professional investor and corporate development Banker.” The reality is that he's a guy who offers financing to penny stock companies. Over the years, he's been involved with a great many, none of which has proved to be a long-term success. One way or another, though, he must make money on his financing, or he wouldn't do it.
Kontonicolas has at least one odd and unsavory associate. On 15 and 16 June, he announced a partnership with Lord Neil B. Gibson and Gibson's company Handels Securities Ltd. The notice from the 15th features a photo of the pair, Gibson at the left, Kontonicolas at the right:
Gibson describes himself as a “businessman, humanitarian, philanthropist” who runs an organization based in Las Vegas called LNBG, LLC. Needless to say, “LNBG” stands for “Lord Neil B. Gibson”; that is the name under which it's registered in Nevada. He claims to be lord of the manor of Wheldrake and Warter Priory, an office that, if really his, would not qualify him as a member of the British aristocracy. An amusing discussion of that issue may be found in an anti-Gibson blog. In the course of a lawsuit brought by Gibson a few years ago in California, an appellate panel noted that he'd purchased the title. Not a great deal of information about Gibson that wasn't written by him is available online, but more than one source strongly suggests that he's a con artist. Unfortunately even the most credible of these sites is fantastic, and reeks of conspiracy theories involving the Federal Reserve and three-letter government agencies.
That said, Gibson's Handels Securities, which first partnered with C-Trade in January 2013, was turfed out of Belize on 30 April by the country's International Financial Services Commission. Its website has been dismantled; only remnants of it may be seen courtesy of the Wayback Machine. Kontonicolas is apparently unperturbed by, or unaware of, these events.
Back in January of this year, when the arrangement with Handels was announced, it was said that Handels would be “joining C. Trade Group of Companies as the financial institution in the funding of all future projects of the joint venture” with BARD. It isn't known whether Handels was or is to put up the money C-Trade has promised to BYSD. According to today's press release, C-Trade will be on the hook for “monthly bank guarantees in the amount of $160,500,000 for heavy fuel oil exports.”
Gordon Johnson, Bayside's chairman, remarked: “We are pleased to be able to partner with the C-Trade Group once more to continue our efforts to expand our revenue base.”
What revenue base? They have no revenues.
And what, exactly, is the purchase order for 3,600,000 metric tons of oil all about? BYSD can't possibly produce it, given that it apparently has no working wells, and probably couldn't produce that much even if all its properties were operational. Will it simply be brokering purchases and seeing to their delivery? If so, presumably C-Trade would provide the money for those purchases up front, Bayside would buy and ship the product, and the two would share in a profit that would not be anywhere near $160 million a month. But we don't know what's planned, because the company hasn't offered any explanation.
Or perhaps something else is going on. At its website, again on the “About us” page, C-Trade says: “C-Trade Worldwide Corp has assigned CTBI [C. Trade-BARD] its 3,600,000 (Three Million Six Hundred [sic]) Metric Tons of Mazut 100-75 Type II (referred as heavy fuel) with a one month trading amount Bank Guarantee (BG) Of US$159 million. The total contracted amount for first month is 300,000 Metric Tons.”
Those numbers sound very familiar, although the statement seems to have been written some time before Bayside made its big announcement. The correct interpretation is anyone's guess. One possibility might be that BSYD will, as a broker, sell C-Trade's oil it to a customer, as outlined above. C-Trade may not actually own the oil, of course. Remember: it describes itself as a “petroleum logistics trade and finance company.”
We're left to assume that the point of Bayside's carefully yet vaguely worded press releases was to send stock price skyward. And that is what happened. A retracement is to be expected, but more news, even if implausible, and a continuing promo campaign could change that.
Promotion Stock Secrets will be on... Baywatch. Perhaps Pamela Anderson will appear for a cameo.