SHAREHOLDER REBUTTAL TO HINDENBURG REPORT 1.
We showed Predictive’s Chairman and then director (up until recently) had settled earlier SEC fraud charges. Manipulation tactic:
Merle Ferguson, PRED’s previous director and chairman, was sanctioned by the SEC for what they claimed to be a misleading press release. Upon reading the full details of that case, I found that all sanctions were dropped after the press release in question was re-written and re-published. If the SEC had ANY issues with Merle Ferguson then they wouldn’t have approved the recent SEC registration for BFNH, of which he is the CEO. 2.
We showed that Predictive’s 3 key original holders, who represented almost 90% of the original shareholder base, had previously been charged with securities fraud by federal or state regulators, including allegations of pump and dumps, boiler room sales, and false press releases. Manipulation tactic:
Restatement of Argument/Half-truth/Distortion Reality:
Restating the SEC charges against Merle Ferguson from the first claim doesn’t actually add to the tally of issues. This is a manipulation tactic to drive the appearance of some additional perceived wrongdoing. Also, as in the claim against Ferguson, the charges against James Price were dismissed. The Hindenburg article only includes these statements to try persuade the reader that there is some current wrongdoing within PRED. So, they use the appearance of SEC charges against former management and fail to include the fact that the SEC just recently completed their review of PRED. It’s kind of like Hindenburg thinks that these past SEC charges and allegations have somehow mysteriously vanished while the SEC performed their review of PRED’s Form 10-12g registration then, bam, they suddenly reappeared without the SEC including that info in their review and approval of their registration. I’ll rephrase, there is NO FRAUD
and we know that because the SEC has reviewed and approved PRED’s registration. 3.
We showed that the Company receives its donated birthing tissue from new moms who are often completely unaware that their ‘donations’ go to for-profit causes. Manipulation tactic:
Hindenburg claims to have contacted 4 new moms out of, who knows how many, and then state with confidence that new moms are “often completely unaware that their ‘donations’ go to for-profit causes”. This is a lie.
Based on the Hindenburg article itself, the moms were never asked if they knew their birthing tissue would be used for “for-profit” causes. They were only asked if they thought Cellsure was a non-profit. The responses of whether they believed Cellsure to be a non-profit were either, “Yes” or “I think so”. Being a “low-profit” organization, I believe the majority of the population of the United States wouldn’t know how to answer that question unless they studied corporate law, or at the very least, read the wiki article about the requirements of an L3C. It’s a requirement of an L3C to contribute at least 5% of their assets to charitable purposes. The moms aren’t being lied to, the readers of the Hindenburg article are. As a side note, one mom in particular stated that Cellsure was “great to work with!” and she had friends who donated and also “enjoyed their experience with them.” 4.
We showed that Predictive’s distributors use dubious sales tactics and aggressive claims to sell its products to elderly patients suffering from chronic pain, and provided multiple examples. Manipulation tactic:
Blaming PRED for the actions of the distributors is akin to blaming Pfizer for my doctor telling me I will have more sex with my wife if I take Viagra. PRED has no control over what the distributors claim the benefits to be for the products they sell just like Pfizer has no control over my doctor claiming to have any insight into my wife’s libido. Just because I can get it up more often doesn’t mean she’ll want it that much more. On second thought, I think I should sue Pfizer for my dismal sex life. I wonder how far that would fly. 5.
We showed that 4 out of 7 of Predictive’s acquisitions were entities based out of their own address before they were acquired, and that the acquisitions displayed hallmark signs of insider self-dealing. The Company’s response: none. Manipulation tactic:
To state that PRED didn’t respond to this claim is a lie. This is the only claim they did respond to by directing shareholders back to their SEC filings. Again, the same SEC Hindenburg uses against PRED is the same SEC who approved their filings in which all of their acquisitions are disclosed. This is a half-truth distortion tactic that, in essence, tries to establish doubt and also diminish the competency of the SEC’s Division of Corporation Finance. Perhaps Hindenburg would like to call Mindy Hooker 202-551-3732, John Cash 202-551-3768, Kate McHale 202-551-3464, or Jay Ingram 202-551-3397 with the SEC, since they were assigned PRED’s review, and let them know they are performing sub-par in their job. 6.
In one example, we showed that Renovo Biotech was formed less than 2 months earlier at Predictive’s own address before being acquired for $14 over million, largely for “trade secrets”. The Company’s response: none. Manipulation tactic:
Lie/Restatement of Argument Reality:
Again, another restatement of claims that PRED’s acquisitions were not properly reviewed by the SEC and again another lie stating that the company didn’t respond in regards to their acquisitions. 7.
In another example, we showed that Predictive CEO Bradley Robinson was listed as a manager/managing member of LifeCode Genetics just prior to its acquisition by Predictive, yet we found no Predictive filing disclosing any stake held by Robinson in the entity. We questioned whether Robinson had an undisclosed stake in this acquisition. Manipulation tactic:
The absence of evidence doesn’t indicate guilt. In fact, it is the opposite. 8.
We showed that 90% of the purchase price for Predictive’s InceptionDX acquisition went to unnamed individuals in the Caymans and asked whether these individuals were arms-length. Manipulation tactic:
See 9 below. Reality:
See 9 below. 9.
We showed other examples of irregularities relating to the Company’s acquisitions and specifically encouraged the Company to provide the investing public with details of the shareholders of its acquisitions, as such information could easily clarify whether any related party dealings took place in these transactions. Manipulation tactic:
Restatement of Argument/Distortion Reality:
Hindenburg has a knack for restating the same argument in different terms and passing it off as an additional item in a long list of bullet points. Arguments 6, 7, 8, and 9 all boil down to this; the financials don’t state who the beneficial owners of all of Predictive’s subsidiaries are and if there could be any overlap between PRED’s management that hasn’t already been stated. Again, the absence of evidence doesn’t indicate guilt. What’s important to note, Hindenburg is attempting to misdirect the reader down a path of uncertainty as it pertains to the value of Predictive’s acquisitions. Here’s a quote from the Hindenburg article: “In other words, Predictive negotiated a deal with Juneau to have Juneau give Inception DX 400,000 shares of Juneau to use a lab that didn’t exist, and then acquired Inception DX later that day, using the 400,000 shares as a partial rationale for the acquisition. (To pose an obvious question: why wouldn’t Predictive just have negotiated to be paid the Juneau shares directly?)” The obvious answer to their obvious question is the fact that they make an assumption that InceptionDX didn’t have a lab and that assumption is WRONG! Included in the securities purchase agreement document that Hindenburg found the recipients of PRED shares, is listed all of the assets in the deal. One asset in particular is a piece of lab equipment. An “ABI 3730XL DNA Sequencer”, which I found a refurbished model on eBay for $110,000. Does anyone really believe that InceptionDX didn’t have a lab for their $100,000+ piece of lab equipment? Oh and guess who manufactures that piece of equipment? Thermo Fisher! The same Thermo Fisher who recently issued a press release about their Global Infertility Research Collaboration. http://thermofisher.mediaroom.com/2019-06-19-Thermo-Fisher-Scientific-and-Predictive-Laboratories-Announce-Global-Infertility-Research-Collaboration 10.
We showed that the Company had seemingly altered a lab report to include conclusions about the number of viable cells in the product that were never in the original report, then used the altered report to market its products. Manipulation tactic:
Hindenburg uses the word “seemingly” for a reason. They are unsure of the claim they are making since it’s a claim that is based on the information they received from a COMPETITOR of PRED. So, not only is Hindenburg biased, they intentionally use biased info in their report for the purpose of misleading investors. 11.
We expressed doubts about whether the Company’s products had any live stem cells or could legally make claims to have any live stem cells. Manipulation tactic:
As in claim 10 above, this doubt is being expressed by a competitor of PRED and Hindenburg also includes modified quotes from an article written in collaboration between The New Yorker and ProPublica. The article was focused on the Utah Cord Bank and none of PRED’s products were tested. They are trying to draw a correlation between Utah Cord Bank and PRED because one of PRED’s employees was a former employee of UCB. 12.
We showed that Predictive’s CEO had previously been sued and apparently settled lawsuits involving allegations of securities fraud and non-compliant marketing of a medical product. Manipulation tactic:
Restatement of Argument/Distort Reality:
It really comes in handy having a PACER account to do due diligence. The securities complaint that is being used against Robinson was dismissed. Actually, the complete wording from the notice of VOLUNTARY dismissal is as follows: “Pursuant to FED. R. CIV. P. 41(a)(1), Plaintiffs Christopher Maggiore and Robert McLain hereby dismiss this case. Defendants have not filed any answer or motion.” As Hindenburg is aware, the mere presence of lawsuits aren’t an indication of any actual wrongdoing. Unless, of course, Hindenburg would like to hold themselves to the same logic since they are inundated with lawsuits. 13.
We showed that Predictive’s CEO had originally reverse-merged an FDA-rejected medical technology into the entity that ultimately became Predictive. Manipulation tactic:
I searched the entire FDA 510(k) database and didn’t find a single rejection decision associated with the ChaSyr syringe, Infusive Technologies, Sagent, or Bradley Robinson. Based on the lawsuit Hindenburg cites, the FDA rejected a “Pre”-prepared 510k application. If this is the case, then the syringe never even got to the stage to be approved or denied by the FDA. If anyone else would care to take a look, be my guest. https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfPMN/pmn.cfm
But, for Hindenburg to claim that the technology was “FDA-rejected” was not entirely true and is just more FUD. 14.
We showed that top organizations studying endometriosis research expressed serious doubts about the Company’s diagnostics test and the ability to diagnose endometriosis via diagnostics alone. Manipulation tactic:
The statements issued by the “top organizations” include words such as “definitively”, “validated”, and “presently”. Such as, “to date there are no data that definitively support any claims of a validated diagnostic test”. Knowing that Dr. Kenneth Ward just recently presented such data to the European Society of Human Reproduction and Embryology, we can see that these statements are either false or dated before the presentation of this data. Also included in the quote pulled from the March 2018 consensus statement, they claim “there is presently no endometriosis diagnostic or treatment biomarkers that have been demonstrated to have the validity and reliability necessary to be used in routine clinical diagnosis or care”. Dr. Ward’s presentation completely invalidates this quote and, actually, should bring savvy shareholders a great deal of confidence in the importance of the discovery of such genetic markers. Ward’s report details four genes (ZNF586, LUZP4, POP4 and UNC5CL) with significant gene burden in over 2,500 women with endometriosis. “Importantly, it was found that one in four women with endometriosis carry a mutation in one of these genes…” http://predtechgroup.com/2019/06/predictive-technology-group-announces-the-presentation-of-new-data-demonstrating-the-genetic-basis-of-endometriosis-at-eshre/ 15.
We showed that the Company has historically missed its own near-term commercialization timelines for its diagnostic tests and expressed concerns that they may again miss their own timelines. Manipulation tactic:
Tag teaming off the response for claim 14 above, these “top organizations” require a significant level of proof for any claims being made in regards to the efficacy of diagnosing endometriosis based on genetic markers. This is where Thermo Fisher (TMO) comes in. TMO announced that they have entered into a global infertility research collaboration with PRED. What this means for shareholders, in spite of short term delays regarding PRED’s launching of their diagnostic tests
, PRED is building clout by utilizing strategic partnerships with huge players in the bioanalysis markets. To quote from Yan Zhang, general manager of reproductive health at TMO, "We look forward to this exciting and important work with Predictive Laboratories to better understand infertility in women.” “With the combination of our partner's expertise and our advanced solutions for genetic analysis, we are committed to reducing the future financial and emotional burden couples face while undergoing fertility treatment." http://thermofisher.mediaroom.com/2019-06-19-Thermo-Fisher-Scientific-and-Predictive-Laboratories-Announce-Global-Infertility-Research-Collaboration DISCLAIMER:
These are my opinions, duh. Although, they are opinions based on the facts that I researched and are presented here for other shareholders to use at their own discretion.