=DJ IN THE MONEY:Promoter Under SEC Probe Touts Beverage Creations
Wednesday, February 20, 2008 2:49 PM
By Carol S. Remond
A Dow Jones Newswires Column
In many ways, Beverage Creations Inc. is typical of the many budding companies hoping to make it big.
Full of dreams and short on cash, this St. Paul, Minn., company trades under the ticker symbol BVRG on the unregulated Pink Sheets market. Beverage Creations is hoping to make a splash with a new sport beverage called bio2TONIC, "the only water product that comes with an inhalable shot of oxygen attached to its core."
While Beverage Creations' claimed benefits of combining water and oxygen might sound intriguing - relief from fatigue, stress, jet lag, altitude and alcohol sickness and increased mental acuity - there are a few reasons investors should take a major time out before purchasing the company's stock.
Earlier this month, the shares of Beverage Creations were touted in a mass mailer financed by Wynn Industries.
Wynn Industries' principal Jason Wynn is no stranger to readers of "In The Money." In two columns last year, Dow Jones Newswires highlighted Wynn's role in the promotions of ConnectAJet.com Inc. (CAJT) and Alchemy Creative Inc. (ALMY), two companies whose stock prices have since taken a dive.
In the case of ConnectAJet, the Securities and Exchange Commission in October temporarily halted trading in the company's stock, warning the investing public about "manipulative forces or deceptive practices."
A court document filed in federal court in Texas shows the SEC in investigating Wynn and others for unregistered sales of securities, among other things. Wynn's lawyer, David Clouston, said his client believes that his activities in ConnectAJet "were entirely proper." Clouston said Wynn denies selling unregistered stock or distributing stock to third parties.
Anthony Christmas, a spokesman for Beverage Creations, said Wynn was one of two investors who bought into Beverage Creations' convertible debt offering last July. Beverage Creations declined to provide the name of the other investor or give details of the offering.
Whatever the terms of that debt deal were, one can bet that Wynn bought stock on the cheap - in the case of ConnectAJet he bought 10 million shares for $100,000, or 1 cent a share - and is attempting to profit by raising investors "awareness" in the company and its product.
"Fuel your portfolio with BVRG! Cash In On The $19.2 Billion Sports Drink Market," screamed the brochure mailed from Dallas.
Unabashed like most touting sheets, the promotional mailer forecasts extraordinary gains for those investing into Beverage Solutions' stock with a "profit potential of 275% to 350%" in the next 30 to 60 days.
According to a disclaimer, Wynn Industries received 3.3 million shares of Beverage Creations, which may be sold at any time. The disclaimer contains the usual warnings about investors performing their own due diligence before buying the stock and notes that Wynn Industries paid $370,000 to produce and distribute the mailer.
Spokesman Christmas said Beverage Creations has nothing to do with the stock promotion and that Wynn isn't providing any services to the company. Christmas said the company plans on drafting a letter asking Wynn to cease his activities.
Wynn's promotional activities aside, there is another reason investors might want to exercise caution.
While Beverage Creations claims to have "entered into discussions" with Coca Cola Enterprises Inc. (CCE), Coca Cola Co.'s (KO) bottling partner, in a press release on Feb. 11, neither company appears to have been talking with the company.
A spokesman for Coca Cola Co. said the company has no knowledge of any relationship with Beverage Creations.
Beverage Creations became a publicly traded company through a reverse merger with a corporate shell called Granite Golf Group Inc. in September. The company said in a disclosure statement filed with Pink Sheets that as of the end of December it had $12,506 on its bank accounts and inventories worth about $96,000. The company listed accounts payable of $43,000, credit cards bills of about $14,500. It also listed as long term liabilities some $545,250 in notes payable.
The company had 56.8 million shares outstanding at the end of 2007 with Chief Executive Robert Wieden and Chief Operations Officer Patrick Dado each holding 21.6 million shares.
It's unclear how Beverage Creations plans to finance its recently announced acquisition of bottling and production facility Encore Labs Inc. Company spokesman Christmas was unable to immediately provide details of the planned purchase. While Christmas said Encore Labs is located in Minneapolis or St. Paul, no company bearing that name appears to be incorporated in the state of Minnesota.
Wynn declined to comment about his involvement with Beverage Creations and referred all questions to his attorney.
In late December Wynn unsuccessfully attempted to block an SEC subpoena seeking access to his banking records.
The Commission provided details of its otherwise non-public investigation into ConnectAJet and people associated with the company in its reply to Wynn's court challenge.
The SEC said in a court filing in the U.S. district Court for the Northern District of Texas, Dallas, that it's investigating whether the "registration and/or antifraud provisions of the federal securities laws have been or are being violated by ConnectAJet.com Inc. or any of its officers, directors, partners, subsidiaries and/or affiliates" in connection with the offer, sale or purchase of securities issued by ConnectAJet."
The Commission said that it has "information tending to show that Wynn and others have sold, or participated in the sale of securities issued by ConnectAJet as to which no registration statement was or is in effect or on file with the commission."
The securities regulator also said it has "information indicating that Wynn and others misrepresented and failed to disclose to investors and potential investors in ConnectAJet material facts regarding" the company.
"Obtaining Wynn's bank accounts is a key step for the Commission staff to unravel, and if necessary and appropriate, halt illegal and fraudulent activities surrounding ConnectAJet," the SEC said.
"Records may help demonstrate the amount of money Wynn has received from the potentially illegal sales of ConnecAJet stock and/or promotional activities in connection with the offer, purchase and/or sale of ConnecAJet stock," the SEC added.
A federal judge sided with the SEC in late January, finding that the records requested are for a legitimate law enforcement inquiry and denying Wynn's motion to challenge the subpoenas.
A spokesman for the SEC declined to comment.
(Carol S. Remond is an award-winning columnist who won a Gerald Loeb Award in 2005 for best news service content with "Exposing Small-Cap fraud," a series of articles that described how three small companies unscrupulously pumped up their stocks.)
-By Carol S. Remond, Dow Jones Newswires; 303-997-5783; carol.remond@dowjones.com
