05 Jun TCPS: Breakthrough technology or smoke and mirrors?
TechnoConcepts (TCPS) has been attracting attention of late, mostly thanks to message board buzz created by an aggressive unofficial promotion. On Tuesday the 4th, it closed at its intraday high, up 25.71%, at $0.044.
The fun began on 16 May, when “$treet Trader”—beating “Estrella” to the punch by a few minutes—announced that a “statement curing delinquency” had been filed to rectify the company's long-standing failure to keep its incorporation current in the state of Colorado. The document was filed by Anthony Pignatello of Manhattan Beach, California. The stock closed that day at $0.0008, on volume of 3.7 million shares. On the 17th, as word spread, it rose sharply to $0.0015 on 20.6 million shares.
A brief history of TechnoConcepts
TCPS was formed in Colorado on 18 September 2001 as Technology Consulting Partners, Inc. It had a president, Frederick R. Clark, Jr, and two directors, Clark and James H. Watson, Jr. Their plan was to do consulting work in the IT industy. In early 2002, Clark and Watson decided to go public, and conducted a Regulation D private placement to create the necessary shareholder base. On 18 June they filed an SB-2, a now-obsolete SEC form equivalent to an S-1. The SB-2 was amended several times; the final version appeared on Edgar in January 2003. The outstanding at that time was 5,207,500 shares. The people who'd bought the Reg D placement were the selling stockholders; they owned 1,207,500 shares. Clark owned the other 4 million. The 1.2 million shares were priced at $0.20 each.
Meanwhile, a private company called TechnoConcepts Inc was incorporated in Nevada on 22 April 2003; its sole officer and director was Antonio Turgeon. The Nevada company's mission was to design, develop, and market wireless communications solutions. A little more than a month later, it purchased intellectual property it called “the True Software Radio technology” from TechnoConcepts Inc., a California company. TCI California, as it was called, was privately funded, and had developed the technology in the mid-1990s. TechnoConcepts Nevada bought it for 8000 shares of its Series A Convertible preferred and 3,933,320 shares of common.
All this could have been explained more clearly than it was. Who was in charge at TCI California? We have no specifics, though a later SEC filing explains that “the original technical team that developed the Technology continues to work for the Company.” Why was a second California corporation formed in January 2004? The original California company, which later changed its name to Fiber Optic Techno Inc, was incorporated in 1991:
In December 2003, TCPS, the public company, which was still called Technology Consulting Partners, entered into an agreement to merge with TechnoConcepts, the Nevada company. TCPS announced the agreement in a press release on 21 December. The reverse merger was completed on 17 February 2004. Clark and Watson resigned as directors, and were replaced by Antonio Turgeon, Ronald Hickling, and V. John Mansfield. Turgeon would also serve as chairman, CEO, CFO, and president; the secretary was to be George Lange. Hickling had founded, or been one of the founders, of the California TechnoConcepts formed in 1991.
Clark, who owned 32 million shares of TCPS, turned over 4 million of them to the company for $4000, and pledged to return the remaining 28 million at an unspecified date. No additional consideration is mentioned. Presumably Watson still owned no stock.
Clark was robbed. The stock appears to have traded for the first time on 31 March 2004, when it closed at $6.50. (High and low bid prices for the quarter ended 30 December 2003 are given as $1.12 and $1.01 in the company's 10-K for fiscal 2004, but that doesn't mean the stock saw any action.)
During 2004 and early 2005, TCPS—the public company had officially changed its name to TechnoConcepts on 15 April 2004—entered into a number of technology development and application agreements with companies in and outside the U.S., and won its first commercial license agreement. That was with a Taiwanese electronics company, and was expected to generate some revenue in 2005, and significant revenue in 2006. It also began issuing convertible debentures, preferred stock, and warrants to institutional investors, but was confident that its technology and its patents would justify the risk.
As early as the spring of 2005, TechnoConcepts began to encounter problems. They were made aware—thanks to comments from the SEC—that they'd failed to account properly for the issuance of those convertible debentures, and as a consequence were forced to restate their 10-K for the year ended 30 September 2004 and the quarter ended 31 December 2004.
Worse yet, in December 2006, the company was sued by E-Cap Venture Fund and six other plaintiffs who alleged that “the defendants orchestrated a series of fraudulent transfers of the technology of TechnoConcepts, Inc. (CA) in breach of express contractual covenants and in violation of California law, all in an effort to fraudulently deprive the plaintiffs of the fruits of their investments. The complaint alleges that the defendants' scheme to strip TechnoConcepts, Inc. (CA) of its technology was accomplished first through a fraudulent transfer of the TechnoConcepts, Inc. (CA) technology to TechnoConcepts, Inc. (NV), followed some months later by a further fraudulent transfer of the same technology to the Colorado public company, TechnoConcepts, Inc.”
It was the plaintiffs who had for years contributed the private financing that kept the California TechnoConcepts afloat, and they were, they maintained, left out in the cold when the reverse merger with the Colorado company was arranged. They charged that TCPS had “hijacked the assets of the California company” at their expense.
TCPS didn't bother to file an 8-K about the lawsuit, claiming later that it would have “no material adverse impact on operations, assets or financial conditions.” In its 10-K for the year ended 30 September 2006, TechnoConcepts explained that the “primary defendant” in the action was Fiber Optic Techno Inc (the California company's new name), and that they, TCPS, had bought only “some” of its assets. They further pointed out that a related dispute over a patent claimed by Fiber Optic Techno had been awarded by the U.S. Patent and Trademark Office to the plaintiffs. That hadn't done them much good; they weren't out of the suit. E-Cap attempted to throw Fiber Optic into involuntary bankruptcy. But TCPS was still involved at the time it filed its K, engaging in discovery.
TechnoConcepts reported another lawsuit, brought in December 2006, in its 10-K as a subsequent event. It had to do with nonpayment of legal fees incurred by Asanté Technologies, Inc, one of TCPS's acquisitions, prior to and in connection with the acquisition. TCPS vowed to defend vigorously.
The SEC piles on
As if the lawsuits weren't enough, by 2006 the company had attracted the SEC's attention. On 6 October, TCPS filed an 8-K informing the public that it had received “a number” of comment letters from the agency over the past months, asking questions about its quarterly reports and the new SB-2—registering an offering in the amount of $12.6 million—it had filed on 4 May 2005. It pointed out glumly that if it couldn't come to an understanding with the SEC soon, it might have to restate yet more financials.
And restate it did. It was also forced to withdraw its SB-2. As they noted, by then almost all the convertible debentures whose underlying was meant to be sold in the offering had been converted and sold anyway.
By May 2007 the company was in technical default on its Series A secured subordinated promissory notes, but “in discussions” with the note holder. It won an extension, but as the loans mounted up, debt was obviously becoming a problem, though not yet a problem that was completely out of control.
Changing the company's name to “Terocelo Inc.” did not help. Some officers and directors resigned. The “significant revenues” promised for 2006 had never materialized. The company did have revenues, but was losing money. Public interest, never strong, had nearly evaporated by the end of 2007, and stock price, once above $5, dropped to $0.07 on the last day of the year.
Management must have seen the writing on the wall. The company's final SEC filing, an application for a five-day extension on an overdue 10-Q, was submitted on 31 December 2007. As Terocelo, it put out one last press release in early January 2008, and then fell silent. It failed to file its annual report in Colorado, due on February 23, 2008.
TecnoConcepts—or Terocelo—was not heard from thereafter until about three weeks ago.
Reinstatement and resurrection
As noted above, TCPS's reinstatement in Colorado created quite a stir. A surprising stir, considering the company had been dead as a doornail for many years, and was never a stock market sensation to begin with. Somehow or other, a few people learned of the reinstatement pretty much as soon as it happened, and jumped on the bandwagon.
The Colorado document was filed by Anthony Pignatello. Anthony Jay Pignatello, or Jay, as he's evidently known to his friends, is kind to the message board posters who now write to him on a regular basis, excitedly asking about his plans for their new favorite company.
Pignatello is the “Director of Corporate Restructuring” at Rhodes Holdings LLC. In his biography there, he points out that he's “been involved with over fifteen (15) reverse mergers, acquisitions, and reorganizations since July 2006.” He was indeed involved with Hop-On, Inc. (HPNN) a few years back, and more recently with Acceleritas (ALZH). In both cases, his contribution appears to have been “consulting” and “restructuring.” Running the company is left to someone else. For his work, a consulting agreement he signed with American Diversified Holdings Corp (ADHC) suggests he's paid in cash, with bonuses consisting of unspecified amounts of stock. A look at stock price and a couple of charts suggests that whatever Pignatello did for HPNN and ADHC didn't produce long-term positive results. Both are now basically worthless with huge share counts having been abused since taken over by Pignatello. HPNN is currently revoked.
Pignatello has worked as a transfer agent, but his profile suggests a sustained interest in telecommunications: he once managed Global Phoneworks, a mobile virtual network operator in Virginia, and is currently a partner in DIBARA, Inc., a full service MVNO (mobile virtual netork operator) offering customized telecommunications service. That probably explains to some extent his interest in HPNN and now TCPS.
It seems possible that Pignatello became aware of, and interested in, TCPS through his work with DIBARA. One of the TCPS patents addresses a technology that will allow cellphone users to switch networks or carriers without having to purchase a new phone. Perhaps he located the remaining Terocelo people in California, where they live and work, or perhaps they somehow contacted DIBARA. This is, of course, pure speculation, based on what Pignatello has evidently told message board friendlies. He says he's been working with the old Terocelo team, and will have important news very soon. Press releases in the near future, possibly even this week!
In recent days, the discovery of a new patent granted to Ronald Hickling, once Terocelo's Chief Technology Officer, has sparked speculation that he's the person Pignatello's been dealing with, and that he's about to return to TCPS. In the minds of some, Hickling already “owns 25% of the company.” Not so. As of the last 10-K filed, Hickling owned no stock at all; he was, in fact, the only officer and director who had none.
As for the new patent, it was assigned by Hickling to Softwaveradio, Inc., of Newbury Park, California. Softwaveradio is run by Walter Ernest Brooks, who never had anything to do with TCPS. The address, when googled, shows as being in Ventura, not Newbury Park; other maps show the same. It's obviously a private home:
There are many problems with TCPS. They fall into two categories: scientific on the one hand, and informational and regulatory on the other.
What about this very special technology? Some of the patents are six or seven years old. Are they relevant any longer? For that matter, were they ever relevant? Anyone can patent nearly anything; getting the assignment means only that you... have a patent, not that what you invented actually works, or is useful even if it does. TechnoConcepts/Terocelo was not a success in the past. It was in fact so unsuccessful that it went out of business. Softwaveradio, whatever it may do, is clearly not a large operation. A business combination of the two might make for a good pump-and-dump, but it's unlikely to make for the next tech giant.
Easier for the non-scientist to grasp is the fact that there is no recent information available about TCPS. None at all. Even the last known report on share structure is from 2007. The company vanished from the stock market scene like the Marie Celeste. That is a serious problem. Pignatello has evidently been telling his new buddies that he intends to fix all that quickly. His intention, he says, is to file a Form 15 to relieve TCPS of its SEC filing requirements, then make some OTCMarkets filings, and take it to the AMEX within, he promises, six months.
That will not happen. A massive reverse split would be needed merely to get the stock price up to AMEX standards, and even were that to prove successful, the asset level test could not be met. Forget the AMEX. But there's a more critical difficulty. As a stock that went public by filing a Securities Act of 1933 registration statement—that SB-2—if it wants to qualify to file a Form 15-12G, it needs to be current in its financial reports. Are there even any books for Terocelo from early 2008 through 2012? Sometimes missing financials can be reconstructed, but it's time-consuming and expensive. Whipping up five years' worth of financial reports in a few months' time would appear to be a non-starter.
And how, exactly, was the company reinstated in Colorado? Perhaps Pignatello bought the shell. Or perhaps he represented a group of shareholders who had a controlling interest in it. But who would they be at this point? Perhaps David L. Kagel, the attorney who acted as registered agent for TechnoConcepts in Colorado years ago, could have been of help. In fact, he was: he also serves as RA for the reinstated company. He lives and works in California most of the time, and was also resident agent for the TechnoConcepts formed there in 2004. (As an aside, Pignatello was lucky to get him: he was suspended from the California bar for moral turpitude in 2012; but managed to get himself reinstated ahead of schedule. He was also permanently banned from practicing before the SEC in 1994.)
If any filings are ever made, all that needs to be explained.
For the moment, TCPS has an enthusiastic following. Probably there'll be news of some kind, there may even be OTCMarkets filings. Just keep an eye on the abundant red flags.