Paychest Inc (PYCT)

[mortalmyth]

PYCT Completes DTC Share Audits

Since this almost 3 year old subject is evidently being brought to light again, the following is presented below.

Any new twist of pointing to the formal DTC Audits as verification of a mythical massive naked short in PYCT is nothing but grasping at straws, while providing new concerns that securities violations could be occurring. Please let me explain.

The two DTC Audits in PYCT stock proved nothing about any alleged massive naked shorts in PYCT. Per Paychest financial statements, the audits were successfully completed with NO shorts (legal or illegal) being reported or disclosed to the public. Likewise, the DTC didn't report or make a public statement that any naked short issues were identified. However, results of both audits did uncover a deficiency, or if you prefer "clerical" errors, in Paychest record keeping (hard for them to dot all the i's and cross all the t's in almost anything they try to do). The 2006 audit resulted in having Paychest subsequently adjust the reported common share count lower by 4,105,213,000 shares and the 2011 audit resulted in increasing the reported common shares by 124,014,285.

Reference page 22 of 2011 Annual Report - "On 15th October 2006, Genfin acquired a controlling interest in PayChest with a 100 million non-trading non-convertible preferential voting share block in the company. PayChest has received $200,000 in equipment for the preferential stock. During 2007, management undertook an extensive stock audit resulting in reduction of the total outstanding shares [decreased by 4,105,213,000 shares]. Additionally the company also reduced it’s authorized share count to 25,000,000,000."

Reference page 26 of 2011 Annual Report - "In June 2011 the Company completed a stock certificate audit with the Depository Trust Company. The audit identified an increase in the number of shares to be reported and an adjustment increase was made of 124,014,285 common shares, although no new shares were issued."

Interestingly enough, just a month after the completion of the second audit PayChest appointed Transfer Online as its Transfer Agent on July 13, 2011 (per the issued PR). It looks as though the DTC saw in the audits one too many "clerical" errors occurring with Paychest acting as their own TA and most likely then pushed them into paying for a SEC approved TA. I'm sure the DTC wasn't too pleased to find in the second audit that PYCT under-reported their publicly disclosed share count, which is a serious no-no. As such, I think it's most likely that it wasn't Paychest's idea, out of the kindness in their hearts, to fork over some of their very limited borrowed funds and pay for the TA service, and that instead it was a direct result of firm insistence by the DTC for Paychest to spend some money and clean up their act (enter strike one, with strike two being the small highly publicized share buyback and simultaneous massive share issuance through the side door surprise per the 2011 Annual Report, and strike three being the insider preferred share conversions increasing the O/S all leading up to the imposed DTC "Chill" summarized in the 2Q2012 report).

Now, for the interesting part of this assessment. Which scenario below would be the most likely situation to explain why anyone might want to push a DTC Audit twist as verifying some mythical massive naked short? You make the call.

Scenario 1 - The DTC audit results identified NO massive PYCT naked shorts so none were reported by Paychest or the DTC in a public disclosure, and instead a fabricated story was created (either by the company IR, who could be then telling a select few individuals of the fabricated short, or by some unscrupulous desperate shareholders on their own) to try and entice people to buy PYCT shares on some false impending massive short covering. If this scenario were true, then whoever could have made up such a story and might elect to propagate it on this board could be viewed as "market manipulation" which is a violation as defined by the SEC.

Scenario 2 - The DTC audits did uncover a massive PYCT naked short and the DTC, TA and Paychest got together and decided to hide it and not disclose anything to the public. However, this sensitive information was then given by the company to a select few individuals who elected to discuss it in this forum and try to use that information for their own personal gain by buying more PYCT shares to increase their position (for example, from 500 million to now approaching say 600 million shares). If this scenario were true, then whomever performed these actions could be viewed as falsifying or making improper disclosure, collusion, market manipulation and insider trading which are all violations as defined by the SEC.

So you see, it would be one thing for someone to fabricate a massive naked short story and post it on the PYCT board, but it would be quite another if someone were to specify the naked short premise as linked to the official DTC Audits. To do so would insinuate something underhanded is going on either within Paychest, between Paychest and a few individuals, or by individuals of their own accord, and as such would need to be looked into further by the appropriate authorities. Some people may have a hard time understanding when it's time to STOP digging the hole any deeper.

Good day to all.