care to comment on this post:
Mat, seems like a lot of folks here are holding a lot of shares; so many that they have become emotionally attached to this equity (using the term loosely).
Re-post from Spy
A look at what appears to be Sherman's history before QSGI.
Was doing some research on Mr. Sherman and was pretty stunned what I found. This whole QSGI tries to grow a company through acquisitions and totally fails, start KruseCom and try again is just a rinse and repeat for Sherman. He did virtually the same thing over 10 years ago and the attempted start of that was unimpressive as well, considering what the prior entity had been before its ruin and liquidation.
You need to research his past, primarily through a detailed review of filings at SEC.gov for Applied Digital Solutions and Intellesale Com. You can supplement that with other search results for theses entities and Universal Commodities Corp. Do your own research on all of this, my comments below and other information one might consider relevant to understanding the past information.
It’s a little hard to follow but here is how I think it basically went. Sherman worked at a family business named Universal Commodities Corp. This was largely a scrap metal company, including taking in used computer equipment. He took over the company around 1994 and then sold 80% of it to Applied Digital Solutions in late 1996 for $1.5 million. Applied Digital was beginning to get into to computer equipment resale and leasing business at that time thru acquisitions.
From 1995 through 1998 Applied digital acquired 80% interests in around 12 companies of various sizes, including 4 that they paid more for than they did for Universal Commodities Corp. In 1999 they made a very large acquisition of 2 related companies.
These various companies were grouped as an operating segment within Applied Digital and apparently had the initial management teams playing various roles in operating their business. Sherman remained as President of Universal Commodities Corp. In April 1998, he was named a VP of Applied Digital and in August 1999 he was named a Senior VP of Applied Digital. Applied Digital had made their two large 1999 acquisitions in June 1999.
In July 1999 all 14 of these business were combined into and/or under one legal entity named Intellesale Com. Sherman was named CEO and director of Intellesale in July 1999 and he resigned his management positions at Applied Digital in August 1999. Sherman’s sister in law was also named a director of Intellesale in 1999.
In September 1999, Intellesale filed a registration statement starting a process to execute an IPO where they sought to raise money and to have Applied Digital Solutions spin off a portion of the shares they owned.
Per the S-1 registrations statements, the 12 companies acquired by the end of 1998 had 1998 revenues of $61 million and a Net Income of a mere $1.45 million or a net margin of 2.4%. Adding in 1998 results for the 2 companies acquired in 1999, the 1998 numbers would have been revenue of $128 million and a Net Loss of $2.8 million. Pro Forma numbers for the 1st 9 months of 1999 were disclosed as revenue of $121 million and a Net Loss of $0.8 million.
Interesting here is that the proposed IPO price was to be right at 1 to 1.2 TIMES trailing PRO FORMA REVENUE. This was in the middle of tech mania and yet it still was targeted at a valuation consistent with what has been historical for this type of business throughout the last 12 years – 1 to 2 TIMES REVENUE.
But now for THE REST OF THE STORY! The IPO was pulled and in February 2001 Applied Digital stated they were going to try and sale Intellesale.
Intellesale under Sherman and his cronies were seeded with $137 million in revenue and a 2.2% net margin in 1999. The year 2000 saw a reduction to $96 million in revenue and a Pre-tax Loss of $71 million, including $43 million in normal losses, before impairment charges and other special items.
The year 2001 saw a reduction to $8 million in revenue and a Pre-tax Loss of $0.35 million, before special items.
I believe Sherman and his cronies left Intellesale in July 2001. In November 2001, Applied Digital just shut down Intellesale.
Sherman appeared to make out like a bandit. The disclosures I read were not clear with his take in the end but it appears he would have been paid for up to 5 years severance at a $400,000 salary and maybe potential bonuses as well. There were other things tied to original contract provisions of the various companies Applied Digital acquired that may have paid even more.
Now the rest of the rest of the story! With all this knowledge, experience, contacts, etc., Sherman and cronies went off and started Windsor Tech in July 2001. In January 2002, they did a reverse merger with a public shell company and this is what QSGI is today, after failed acquisitions, ineffective operating of the company and bankruptcy.
What is somewhat interesting is that all this going for them; Windsor Tech only generated $8 million in revenue in their 1st 18 months and lost over $600,000. This time around with KruseCom, they only had $3.5 million in revenue for the 1st 15 months ending December 2010.
Now we appear to be seeing a repeat again with Sherman starting a new business to try and mimic one he failed in and caused to be liquidated. The goal again appears to be to try and use the old business relationships and to try and roll up companies where they can.
NOTE THE KEY to the last part. YOU STILL VALUE a company like this on PRICE TO SALES at market multiples and those still seem to call for a multiple of no more than 2 times revenue.
Also note that stock acquisitions are going to have to be at multiples around what QSGI trades at and this doesn’t do anything for the stock price. Also it will generate people seeking to sell shares to monetize their holdings. Even that QSGI statement posted here makes that clear. They hope to find acquisitions where they can provide the current owners with liquidity. THAT MEANS providing them with an opportunity to sell their acquired stock. This will create a constant selling overhang, especially when you add it to the 190 million shares KruseCom shareholders will get and the 10 million shares creditors will get, starting next week.
One more thing! Just like with Riconda and his current suit against Sherman and just like the allegations QSGI outlined on the DS related to their lenders in 2008, the persons involved in the 1999 acquisitions sued Sherman as well.
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WHEREAS, Intellesale, Bostek, and Micro commenced a civil action in the Plymouth Superior Court in Massachusetts entitled IntelleSale.com, Inc., Bostek, Inc. and Micro Components International Incorporated v. David Romano and Eric Limont, Civil Action No. 00-0571-B, and in connection therewith asserted various claims against the Plaintiffs (the "Massachusetts State Action").
WHEREAS, the Plaintiffs commenced a civil action in the Plymouth Superior Court in Massachusetts, which was subsequently removed to the United States District Court for the District of Massachusetts and there entitled David Romano and Eric Limont v. Marc Sherman, Edward L. Cummings, Michael Krawitz, and Charles D. Newman, Civil Action No. 11805-RWZ, and in connection therewith asserted various claims against Sherman, Cummings, Krawitz and Newman (the "Massachusetts Federal Action") (collectively, with the Delaware Action and Massachusetts State Action, the "Civil Actions").
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