Water treatment firm Cardinal Resources faces financial woes.
Post-Gazette.com October 10, 2016 7:29 PM
By Len Boselovic / Pittsburgh Post-Gazette
When last we heard from Cardinal Resources, stock promoters were using a photo of Matt Damon with a toilet seat around his neck to tout the shares of the beleaguered Wilkins water treatment company.
That was January 2015, when Cardinal’s shares reached the lofty height of 69 cents per share.
Based on the current stock price of a penny, things have gone downhill since then.
Cardinal, which makes solar-powered systems that provide clean drinking water to Third World communities, hasn’t filed financial statements since it told the U.S. Securities and Exchange Commission in January that it lost $2.6 million in the first nine months of last year.
The IRS has slapped a lien on the company for $172,000 in unpaid payroll taxes.
The Pennsylvania Department of Community and Economic Development is after the company for $15,000 because it reneged on a promise to pay back a portion of the $25,000 in incentives the state gave the company in 2008. Cardinal failed to live up to the terms of the incentive agreement, which included creating 25 full-time jobs and investing $840,000 in the business.
Cardinal’s other unpaid bills include $337,000 to a Florida company that provided financing for business development and marketing efforts, and $11,000 to Scarano, Trump & Adelsperger, a Murrysville firm that provided tax and accounting services.
An angry, frustrated Allan Roberts of B2G Alliance figures his Pittsburgh firm is out about $20,000 after helping Cardinal seek U.S. Army contracts in Africa in connection with the Ebola virus outbreak.
“They never made good on their debts,” Mr. Roberts said.
He said Cardinal CEO Kevin Jones made commitments he couldn’t keep.
“He certainly has mismanaged things over there,” Mr. Roberts said. “I’m so tired of this guy.”
Mr. Jones did not return three calls seeking information and comment on the company’s troubled finances and prospects.
Here’s the story that public documents tell.
Cardinal disclosed in December that Hangzhou Sky Valley Water Technology Co. of China would buy 51 percent of the company by investing $7.5 million. According to Cardinal’s press release, the proceeds would be used to repay all of its trade debt, establish a Chinese joint venture, repurchase shares, and for other initiatives.
The announcement indicated Hangzhou Sky Valley was expected to provide $3.7 million of its investment “early in the first quarter of 2016.”
The first check came in May. Cardinal disclosed in a May 5 SEC filing that the check was only for $1.1 million, cautioning that “there is no assurance” the Chinese company would provide the rest of the $7.5 million.
According to a company press release five days later, Hangzhou Sky Valley’s check entitled the Chinese company to a little more than 11 million shares priced at 10 cents per share. At the time, Cardinal’s shares were trading at about 2 cents.
Since then, Cardinal has disclosed in SEC filings that it intended to pay off nearly $419,000 in promissory notes by Aug. 8 and that it had hired Adam Kassab, a Scott tax attorney, to be its chief financial officer. Mr. Kassab’s firm, Padgett Business Services, will receive $25,780 annually while he will be paid at the rate of $150 per hour.
In a telephone interview, Mr. Kassab said he could not talk about how the $1.1 million from China was or will be used. He also declined to comment on why the Chinese investors bought in at 10 cents per share, five times the market price at the time.
He said the federal tax lien, which dealt with 2013 payroll taxes, has been resolved and that he is working with federal and state tax officials to resolve similar issues for subsequent years.
“We still need to deal with the income tax filings,” Mr. Kassab said. “We’ve been working to clean things up. We’re trying to clear the hurdles to allow the rest of the [Chinese] funding to come in.”
He could not comment on when Cardinal will file its financial statements.
“I can’t release that information yet. I’m too new to the process to comment,” he said.
In a January 2015 interview, Mr. Jones said: “Our financials are improving, but they’re not where we want them to be.”
Investors know where the financials should have been months ago: on the desk of the SEC. The record shows Cardinal keeps many people, including the IRS, waiting. Why should the SEC be any different?
Len Boselovic: lboselovic@post-gazette.com or 412-263-1941.
