Collexis continues to dilute stock


Columbia, SC, technology company Collexis Holdings Inc. continues to dilute its stock in an effort to generate enough money to stay afloat.

Collexis announced Wednesday that it had issued 26,142,857 shares of common stock at 7 cents a share in a private offering, representing an investment of a little more than $1.8 million in the company.

Earlier this month, Collexis announced it had issued nearly 13 million shares of stockand raised a little more than $900,000. That offering also priced Collexis’s stock at 7 cents a share.

That means the company has issued more than 39 million shares of stock in the past few weeks, substantially diluting the investment of existing shareholders.

Prior to the most recent sale, Collexis had 136.1 million shares of common stock outstanding.

According to information filed with The Securities and Exchange Commission, Collexis will use the proceeds from the most recent sale “to make installment payments required under the terms of our recent acquisition agreements and for working capital.”

Collexis appears to be in dire straits financially. It lost more than $4 million for the last six months of 2008 and the company’s independent accounting firm included an explanatory paragraph in Collexis’s annual report last October that expressed substantial doubt about its ability to continue as a going concern.


Why is this so hard to understand?


The resolution isn’t great but, yeah, I’d say this pretty well sums up why a lot of folks are angry with the federal government right now.

The above is a plot of the federal deficit by year. Up to 2008 is historical data, the remaining years are projected numbers, both the CBO estimate and the (less conservative) White House estimate.

(Hat tip: Coyote Blog)

What the ‘buy local’ crowd doesn’t grasp


“Buying local” sounds great until one examines what the concept actually entails. 

George Mason University economics professor Don Boudreaux explains the downside of the “Buy Local” propaganda here, in a letter to The Florida Times-Union:

Dear Editor:

In “Florida’s economy: Support local business” (April 9) you report that some Floridians are trying to boost Florida’s economy by “buying local.” The idea, of course, is that if Floridians buy as much as possible from other Floridians, rather than non-Floridians, then economic activity in Florida will be stronger.


Suppose that to promote, say, Florida peach growers, consumers in Florida reject good deals on peaches from South Carolina. Florida peach growers benefit, but other Floridians suffer. Florida consumers not only directly make themselves poorer, but they also have less money to spend elsewhere, such as at the local car-repair shop and at local restaurants. In addition, to the extent that the misguided ethic of “buying local” takes hold, local firms have weaker incentives to improve efficiencies and product offerings. The state’s economy suffers, both today and especially tomorrow.

Florida’s buy-local effort boasts the charming name “Backyard Economics.” A more appropriate name would be “Backward Economics.”


Donald J. Boudreaux 

There are benefits to buying locally produced food, including that it may be fresher and easier on the environment, and doing so may give one a sense of loyalty at the idea of supporting home-grown goods.

But it’s foolish to let a poor grasp of economics delude oneself into thinking that buying local represents the key to prosperity for regional economies.

Signalife offers lesson on penny stocks


The term “penny stock,” while commonly used in reference to any publicly traded company whose shares sell for less than $5, more accurately applies to small-cap companies which are considered to be speculative investments. Legitimate information on penny stock companies can be difficult to find and, as such, shares can theoretically be easily manipulated, increasing risks for investors.

Signalife, a one-time darling of the South Carolina media, would be categorized by most investment analysts as a penny stock, and the difficulty in tracking down information about the company points to some of the problems inherent in following a penny stock company.

Singalife was a Greenville, SC-based medical device company until the middle of last year, when it apparently relocated to Studio City, Calif. It’s not certain when the move took place because Signalife doesn’t appear to have issued a formal statement regarding the move. Once known as Recom Managed Systems, it had moved to downtown Greenville in 2005.

The only way one can tell there was a change in headquarters is the fact that in May of last year the company listed its base of operations on an SEC filing as being Greenville, while two months later it was using Studio City, outside Los Angeles, as its headquarters on information sent to the Securities and Exchange Commission.

The move may have coincided with Lowell Harmison, president and chief executive officer, leaving the company in either late May or early June 2008, but again it’s difficult to tell because the company filed no information with the Securities and Exchange Commission. Typically, public companies file documents with the SEC when there’s a significant change in management.

Signalife was delisted from the American Stock Exchange last September. On Sept. 19, 2008, it effected a 1-for-4,500 reverse stock split and began trading on the OTC Bulletin Board. That means if you had 90,000 shares of the old Signalife stock, you wound up with 20 shares of new stock.

According to Yahoo! Finance, in the past 52 weeks, Signalife stock has fluctuated from a high of more than $6,600 a share to a low of $1 a share. It current trades at $4.50.

In November, it announced it would change its name to HeartTronics, Inc., and named former National Football League standout Willie Gault co-chief executive officer. It doesn’t appear any formal filing was made with the SEC regarding the name change, although the company did issue a press release.

In February, Heartronics ended its relationship with SC-based auditing firm Elliott Davis. At the same time, interim chief financial officer Kevin Pickard left the company. In addition, other directors have departed over the past year.

For the nine months ended Sept. 30, 2008, the company lost $11.7 million and, according to an SEC filing “incurred losses since inception resulting in an accumulated deficit of $60,423,275.”

The company added that its financial difficulties “raise substantial doubts about the company’s ability to continue.”

Just last week, the company told the SEC that it would not be able to file its 2008 10-K annual report by the March 31, 2009, deadline.

Unfortunately, little of this would have been gleaned from reading The Greenville News or other SC newspapers. These days, the media’s idea of business coverage appears to involve little more than rewriting company press releases when good news is put out. 

More importantly, trying to keep tabs on Signalife/HeartTronics over the past year illustrates perfectly the importance of Rule No. 1 when dabbling in penny stocks: Caveat emptor.

UCI Medical names Boyle CFO


UCI Medical Affiliates recently appointed longtime Columbia executive Joe Boyle executive vice president and chief financial officer.

Boyle, 55, had served as interim CFO of the publicly traded company since last December, according to Securities and Exchange documents.

Columbia-based UCI provides non-medical management and administrative services for a network of approximately five dozen freestanding medical centers.

Services UCI provides include treasury and capital planning, financial reporting and accounting, pricing decisions, patient acceptance policies, setting office hours, contracting with third party payers and various administrative services.

Boyle has served as chief executive officer of Columbia-based Affinity Technology Group since 2000 and as its chairman since 2001. Affinity filed for bankruptcy last year.

Boyle, a certified public accountant, served as Affinity’s chief financial officer from 1996-2000 and as chairman and CEO of Affinity subsidiary Surety Mortgage from 1997-2001.

Boyle also served as chief operating officer of Community Resource Mortgage from January 2005 to June 2006. He has also worked for Elliott Davis and Price Waterhouse.

Upstate bank needs to capital to survive


First National Bancshares, the holding company for Spartanburg-based First National Bank of the South, could go out of business if it is unable to raise capital this year, a banking industry expert told The Spartanburg Herald-Journal Friday.

First National expects to report a loss of $37.3 million for 2008 — much of it from an accounting charge from writing off portions of the purchase of Columbia-based Carolina National Bank.

The bank is in violation of three loan covenants and is awaiting approval of an extension of a waiver of defaults on that credit line, which would carry through to the end of the year., according to The Herald-Journal.

“It’s a very difficult situation, but it’s certainly not unique. We have sick banks all over the Carolinas,” said Tony Plath, associate professor of finance at the University of North Carolina-Charlotte. “We’re going to have to see how (First National) does, but they need capital to survive.”

First National has delayed filing its year-end financial reports because it is negotiating with Nexity Bank of Birmingham, Ala., to avoid defaulting on a loan it used to purchase Carolina National in February 2008.

First National has grown rapidly since it was founded in 1999. Its stock has traded as high as $10.45 a share over the past year and as low as 91 cents. It closed Friday at $1.25 a share.

Why the Obama-FDR comparison is troubling


As much of the US population rushes headlong to embrace President Obama’s New Deal, it’s might be prudent to remember that Franklin Roosevelt’s policies not only did little to improve life for the average American during the Great Depression, it actually made things worse for many. 

According to economist Thomas J. DiLorenzo, “FDR and his advisors mistakenly believed that the Depression was caused by low prices, therefore, high prices—enforced by threats of violence, coercion and intimidation by the state—would be the “solution.” 

In fact, FDR, in the midst of one of the bleakest periods of US economic history, actually signed laws that forced businesses to charge above-market prices for everything.

Jim Powell, a senior fellow at the Cato Institute, details here how Roosevelt, seen by many as the savior of the common man, worsened the lot of the average American by making discounting prices a crime.

Powell identifies some of the vehicles Roosevelt used in his misguided efforts to jump-start the economy through government fiat.

  • The National Industrial Recovery Act authorized the president to establish cartels via executive orders. FDR established some 500 cartels, and one of the things they did was fix prices above market levels.
  • The Agricultural Adjustment Act aimed to raise prices of agricultural commodities above market levels, in an effort to raise farm incomes.
  • The Robinson-Patman Act aimed to protect small grocery stores from price competition offered by A&P and other chain stores.
  • The Miller-Tydings Retail Price Maintenance Act was a related effort to protect small businesses from competition with larger, more efficient firms.
  • The Civil Aeronautics Act, which established the Civil Aeronautics Authority. It enforced a cartel, protecting existing airlines from new competition.

In addition to outlawing discounting, Powell writes, FDR indirectly forced prices above market levels by signing the National Labor Relations Act. When it was upheld by the Supreme Court in 1937, labor union monopolies developed in mass production industries.

That year, in the midst of the Depression, average labor costs surged 11 percent, Powell says. This put strong upward pressure on the prices of things made with union labor, until the labor cost surge helped trigger a recession that undermined demand. Powell adds that:

“FDR did what private businesses cannot do by themselves, namely use the law to enforce above-market prices. As long as businesses are free to enter any market, somebody who charges above-market prices is likely to attract competitors who will drive prices down. Competitors could be start-up businesses or established businesses entering a new market, and such competitors could come from within the country or overseas. The most famous private ‘monopoly,’ John D. Rockefeller’s Standard Oil, lost market share despite having cut the price of its principal product 90 percent, because it wasn’t backed by the force of government. Perhaps the most intriguing question is why “progressives” continue to view FDR as savior, giving him a free pass as a price-gouger.”

And how did Roosevelt’s policy’s work? Not so well, Powell says. Consider:

  • U.S. Census Bureau statistics show that the official unemployment rate was still 17.2 percent in 1939 despite seven years of interference from the Roosevelt administration (the normal, pre-Depression unemployment rate was about 3 percent);
  • Per capita GDP was lower in 1939 than in 1929 ($847 vs. $857), as were personal consumption expenditures ($67.6 billion vs. $78.9 billion), according to Census Bureau data;
  • Net private investment was minus $3.1 billion from 1930–40.