- The company went public through a self-directed IPO, where the CEO received 25 million shares at a cost basis of $0.001 ($150,000).
- The company is touting its product as a lead generation tool to match buyers and sellers. As an example, here is an excerpt from its 2013 10-K.
"We are working with a leading auto classified site to provide a means for their dealers to deliver Branded Pings to our users, once we have users of our app. Our users will have given us the information for the types of vehicles they are currently seeking. With this information, we will provide a targeted lead generation system to the dealers. The user only gets Pings for vehicles they are looking for and the dealer only pays for Pings sent to users that are requesting them."
- Like many past successful pumps, the company's SEC filings go into great detail about business strategies and market opportunities. There is no press release flow yet but a major third party promotional campaign by an "unaffiliated 3rd party" Laluna Services Inc. had commenced for $6.5 million.
- 50.1% of the stock is owned by the company's President and CEO. The only other employee of the company is the CFO who owns no stock and does not receive any compensation. We find it hard to believe that the CFO is not being "compensated" in some manner.
- The company uses all the right social media buzz words in its filings by stating that its app will be able to work on cell phones and is available on iTunes. The company also claims it is developing a Facebook app and throws in the hot Software as a Service ("SAAS") reference.
- We learned that the iTunes application was available for download on March 8, 2012 and that a relationship with Beyond.com to receive $0.05 per click is over a year old. Apparently, these ventures are not going that well. According to the company's last 10-Q it didn't earn any revenues.
PGFY reached an intra-day high of $1.72 on May 5, 2014. Since our note on May 6, 2014, the stock has been on a wild ride. In yesterday's trading session, shares touched $0.20 and closed at $0.35, down 56%. Shares fell in a response to a press release issued after the close on May 6, 2014 that the company's CFO, Vlad Milutin, submitted a letter of resignation:
"San Jose, CA / ACCESSWIRE / May 6, 2014 / Pingify International, Inc. (PGFY) Chief Financial Officer and Director Vlad Milutin, submitted his resignation to company President Jason Gray today, in objection to a promotion campaign to artificially raise the price and trading volume of Pingify. According to Mr. Milutin, the promotion campaign, otherwise known as a pump and dump scheme, has significantly overinflated the value of Pingify shares, especially in the light of the company's current business position."
Here is the entire letter written by the CFO to the CEO, Jason Gray, which includes a plea to the SEC and FNRA to investigate the trading activity in shares of PGFY:
I am greatly depressed by the recently commenced promotion campaign on Pingify stock. That the public could be conned into giving this company with no assets and limited prospects, upwards of a $75 million market cap is quite distressing to me. I am not aware of any contracts or other sources of revenue at this time and no assets on the books. That emails from Mike Statler of StockTips could paint such a rosy picture as to suggest these shares are worth $5.00 each, thereby giving the company a $250 million market cap, is ludicrous.
Obviously, one or more of the purchasers of S-1 shares @$.005 is behind this effort to defraud the public, as they held all of the shares of the company not owned by you. As I did not recruit any of the shareholders, I am sorry that more effort was not done on your part to determine the honorable intentions of these seed shareholders. I call on the SEC and FINRA to investigate the trading of the shares of Pingify, International, Inc. and determine the people who are responsible for this pump and dump effort. As a consequence of my concerns, I am hereby submitting my resignation as CFO and Director of Pingify International, Inc., effective immediately.
In response to share volatility, on May 7, 2014, the company issued two relevant press releases. The first press release at 12:54 ET stated that the company signed a letter of intent (LOI) to acquire 80 Elements Entertainment,
"Pingify signs letter of intent with 80 Elements Entertainment. This acquisition will provide Pingify with a solid development team and a new source of revenue. 80ELEMENTS specializes in creating dynamic driven web site platforms and applications that harness the power of today's media delivery technologies."
What the company fails to tell investors in the release is that this "LOI" appears to just be the regurgitation of old news and has been on and off the table since August 2013:
On August 17, 2013, the Company entered into letter of intent to acquire 80 Elements Entertainment Inc. ("80 Elements") for approximately 940,000 in restricted common shares, issued from treasury.
"As of October 31, 2013, the Company has not entered into a definitive agreement to acquire 80 Elements Entertainment Inc. ("80 Elements") and the original letter of intent has expired." "80 Elements Entertainment Acquisition (1-2 months) Though the LOI has expired, Pingify is still in acquisition discussions with 80 Elements"
Given the recent developments we hold the opinion that management is not being totally transparent with investors by ignoring the progression, or lack thereof, of the 80 Elements LOI. Less sophisticated investors likely don't read SEC filings closely and will solely rely on press releases to perform due diligence. We also find it deceitful that PGFY did not disclose the revenue of 80 Elements, only including a comment from the president of 80 Elements:
"We have the most efficient team we have ever had this year. So overhead is slightly lower," says Boris Chow, President of 80 Elements. "We are definitely on track to hit our revenue target by the end of 2014."
A second press release issued at 2:30 PM ET discussed the CFO resignation, basically telling investors to focus on the positive aspects of PGFY's "growth" story, not even addressing the CFO's opinion that investors who received stock per the original S-1 filing are part of a pump and dump scheme to artificially pump PGFY shares. Why didn't the CEO at least acknowledge that he is on the case and does not endorse the "parties" behind the promotional campaign? Instead, the CEO insinuates that the company is succeeding in the implementation of its business plan:
"As per the S-1A filing with the SEC submitted in March 16, 2012 an agreement with Beyond.com was entered into on March 13, 2012. As well, Pingify became an eBay partner and filed the completion of integration in the 10K for 2013. Currently, users are downloading our application that is available on the iTunes store and actively find results with eBay and Beyond.com."
Well, the CEO should have disclosed this statement from its 2013 10-K:
"We own our domain name PINGIFY.COM. We currently have less than $10 in revenues from the sale of our app and no lead-generation payments from our partners ("Agents"). As of March 8, 2012, the application became available and we anticipate lead-generation revenues to begin after sufficient capital has been raised."
It is also worth noting that PGFY's app has been available on iTunes since March 2014:
"As of March 8, 2012 the PINGIFY application became available in the iTunes store in both Canada and the US. This version focuses solely on Craigslist, the world's largest free bulletin board website."
Again, this is all old news. The CEO should address why, after having these relationships in place for over two years, the company still has not generated meaningful revenue.
According to the company's most recent 10-K, PGFY's annual revenue for fiscal year 2013 is $0. And with only $2,209 on its balance sheet, we find it hard to imagine how PGFY can execute its business plan. Without raising a significant capital, the company would have tremendous difficulties to compete with the established competitors such as Nearbynow, Admob, and Jumptap, as listed in its own 10-K.
We think investors would appreciate it if the CEO would comment on:
- A newsletter that was paid 6.5 million dollars to promote PGFY.
- Why has it not been able to monetize its business plan - at all.
- How much capital does PGFY need to generate meaningful revenue?
- What were the revenues of 80 Elements for 2013?
We also urge the regulatory bodies to take a close look at who is behind the alleged pump and dump scheme that is sure to cause significant losses to long investors - a campaign that is being funded by a staggering $6.5 million - one of the biggest we have ever come across in the Pump and Dump space! We applaud the CFO's candid reaction to the aggressive pump campaign that transpired.
Disclosure: I am short PGFY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.