Ashton Technology Group (fka ASTN)

[MMMARY]

How Valentine operates

relevance: valentine is director in uttc, a division of astn. He is also doing hte same financing with ashton.

Re: 8/15/01 - [JNOT/Mark Valentine] Red Herring: JagNotes.com has a serrated edge
The Contrarian: JagNotes.com has a serrated edge
By Christopher Byron

Red Herring
August 22, 2001

This article is from the August 15, 2001, issue of Red Herring magazine.

Have no doubt, there's no free lunch on Wall Street. At the faintest aroma of edible chow, you can be sure that insiders will be the first to feast -- especially when the meal is a penny stock whose principal financier is operating through an offshore tax haven.

Consider the little-known New York-based Web outfit JagNotes.com (OTC: JNOT). Investors in this company now find themselves sitting on a collapsed stock whose only valuable remaining asset -- a Web-based streaming-video service -- has lately become the plaything of a Canadian hedge fund operator with interests in Bermuda.

JagNotes.com got some buzz in the early '90s by publishing a tip sheet of the Buy-and-Sell recommendations that investment firms gave institutional clients before the markets opened. A network of spies at various firms alerted JagNotes.com after the so-called morning calls, and the company then faxed the information out to its small but cultlike subscriber list.

Then in 1999, JagNotes.com launched a $9.95-per-month subscription Web site for the tip sheet and gussied up the operation with some Hamburger Helper commentary from the likes of former New York representative Susan Molinari and analyst Elaine Garzarelli. For added sex appeal, the site offered a streaming-video service.

At its zenith, in spring 1999, JagNotes.com was valued at more than $300 million, though the business was operating in the red with rising costs and revenue of less than $1 million a year. Just two years later, operating costs have exploded and the top line has barely budged -- revenue even fell 34 percent in the three-month period ended April 30. The company's stock price tumbled from its high of $21.50 in 1999 to a low of 4 cents this April.

But some stocks just don't know when to quit. Recent weeks have seen JagNotes.com arise, Lazaruslike, from the embalming table as a result of an astonishing refinancing that, at least temporarily, has brought the company back to life.

VALENTINE'S DAY

The saga began in summer 2000, when the cash-strapped company, down to its last $800,000, turned to a Canadian hedge fund operator named Mark Valentine. He agreed to pump in as much as $12.5 million in debt and equity over three years at discounts ranging from 15 percent to 25 percent of the prevailing market price.

Then in February 2001, Mr. Valentine wrangled a deal to have JagNotes.com sell him 85 percent of the streaming-video service -- to be known as JAGfn -- that he'd effectively been bankrolling. The purchase price: a touch over $1 million in cash, a $500,000 IOU, and the forgiveness of a bit over $1.5 million owed to Mr. Valentine's hedge fund, a Bermuda-based outfit called CALP II.

This basically left JagNotes with almost nothing of value, and certainly helps explain why the stock crashed from 25 cents to 12.5 cents the day the deal was announced.

But in May, Mr. Valentine reappeared with a deal that amounted to an about-face: an agreement to sell JagNotes.com back its 85 percent interest in JAGfn -- not for the $3 million or so he had paid for it in February, but for nearly eight times that amount, or $23 million in JagNotes.com convertible debentures. The deal has since been restructured with more favorable terms for JagNotes.com. On August 9, JagNotes.com agreed to buy back 79.7 percent of JagFN for $4.5 million in stock and convertible debentures.

The kicker: fine print in the transaction gives Mr. Valentine enough stock warrants, exercisable at 1 cent per share, to take majority control of JagNotes.com any time he wants. He can flood the market with stock that will crush the price for outsiders but certainly won't drive it below his exercise price.

In short, Mr. Valentine intends to get his money back one way or another, and whether they realize it or not, the people helping him do so will be JagNotes.com's outside shareholders. So, what else is there to say to any of them but, to paraphrase Warren Buffett: if you're in the game for 15 minutes and haven't yet figured out who the patsy is, then the patsy is you.

Christopher Byron is a syndicated radio commentator and writer, living in Connecticut. He also writes a weekly column for the New York Observer and a weekly column for MSNBC.com. Write to [e-mail].

1997-2001 Red Herring Communications. All Rights Reserved.

http://www.redherring.com/index.asp?layout=story&channel=200...


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