a 2004 report on Bach-Hauser, that seems to blow away your hope for the 2003 figures.
Investigative Reports
November 16 2004
Observers should not be surprised to learn that Bach-Hauser, Inc. (Pink Sheets: BHSR) has moved on, and apparently away from its futile bid to enter the motion picture and television business and acquire a company that specializes in producing films using computer generated images – like Pixar, perhaps. That might have been an impossible mission, even for The Incredibles.
As with the Company's previously announced business plans – a waste disposal operation, software development, and the sale of pre-fabricated homes – there is nothing to suggest that the movie venture ever evolved past the wishing and hoping stage, to a point where it was likely to produce meaningful revenues.
But, as StockPatrol.com readers have seen, Bach-Hauser has never been about revenues. From all appearances, this Company is all about issuing, and registering, stock. The Company's principal activity over the past several years has been issuing shares, filing S-8 Registration Statements, and compensating employees and consultants with generous share allocations. See Update: Bach-Hauser, Inc. – Another Day, Another S-8; Update: Bach-Hauser, Inc. - Still Doing Their Thing; Update: Bach-Hauser, Inc. - Plan C: Keep Issuing Stock; Update: Bach-Hauser, Inc. - Faceless And Nameless; Update: Bach-Hauser, Inc. - Double For Nothing; Bach Hauser - A Haus Full Of Consultants; Bach-Hauser, Inc. - The First Thing We Do, Let's Give Stock To All The Lawyers; Update: Bach-Hauser, Inc. - Everyone Makes Misteaks; and Update: Bach-Hauser, Inc. - They're Bach!; Update: Bach-Hauser, Inc. - No Stopping This Thriller.
The Company's financial condition has been a model of consistency – with no revenues and barely any assets. According to its Form 10-Q financial statement for the second quarter of 2004, as of June 30, 2004, Bach-Hauser had $4,500 in "intangible assets," $124,613 in "film assets" and nothing else. Despite its evident failure to establish meaningful operations, the Company insisted that it was determined to enter the film industry by securing an interest in a computer generated imaging business. Determination, unfortunately, will only take you so far.
In this case, it seems that the determination waned quickly. On October 20, 2004, Bach-Hauser signaled another change of direction, announcing that it had signed a letter of intent to acquire DM2 Technology, a private company specializing in the sale of Point of Sale (POS) equipment and software to handle bank card and credit card payments. Bach-Hauser said that DM2 has approximately 150 sales agents and 1,000 terminals in Canada.
On November 11th, Bach-Hauser issued a press release saying it had concluded the deal, acquiring DM2 in exchange for "stock and equity." Bach-Hauser also revealed that it would be changing its name, seeking to regain its OTC Bulletin Board listing, and ultimately "taking the necessary steps to qualify for small cap NASDAQ listing."
The Company will have to take quite a few steps before it qualifies for NASDAQ – giant steps – since its financial statements fall woefully short of the listing requirements. Before it can qualify for NASDAQ listing, the Company would have to satisfy quantitative standards, including stockholders equity and net asset thresholds that currently appear far out of reach since the Company has no cash and no revenues. It also would have to meet qualitative requirements that include independent directors and a proper audit committee.
The November 11th press release provided few details about the acquisition. A Form 8-K filed by Bach-Hauser with the SEC on November 12th, provided considerably more information, including the substantial price Bach-Hauser had agreed to pay. It revealed that Bach-Hauser would acquire 100% of DM2's outstanding shares from an individual named Martin Grenier, and to assume up to $120,000 of DM2's liabilities, in exchange for 10 million shares of Bach-Hauser stock and a promissory note for $1 million.
The deal is scheduled to close in early December 2004. While the acquisition agreement asserts that Bach-Hauser has received DM2's recent financial statements, and the Form 8-K implies that DM2's financial reports are "Exhibits," no financial information for DM2 was included with the Form 8-K filing. Consequently, there is no way for investors to determine what value Bach-Hauser has received in exchange for 10 million shares and $1 million, or what the DM2 balance sheets show, other than those $120,000 in liabilities.
Bach-Hauser offered further information on November 15, 2004, when it announced that DM2 had entered into an agreement to provide point of sale equipment to handle credit card payments for an entity called Taxi Diamond located in Quebec, Canada. The press release did not disclose the terms of that arrangement or any financial details – although it claims that DM2 is on a pace to have over 5,700 terminals placed by the end of 2004.
Does this mean Bach-Hauser is finally poised to acquire an operating business? Based upon the Company's earlier announcements, the road from agreement to closing can be rocky. And questions remain concerning the value of DM2 and its financial condition. Those concerns are not likely to be resolved until the Company produces audited financial information for the acquisition.
No story about Bach-Hauser would seem complete without news of a Form S-8 stock offering. The timing of the DM2 comes closely on the heels of the Company's latest Form S-8 filing. On October 5th, Bach-Hauser filed a Form S-8 registering 19 million shares of stock for the Bach Hauser, Inc. Stock Plan. The Company did not say who would be receiving those shares – although Bach-Hauser reserved the right to hand them out to directors, officers, employees, consultants and advisors.
The announcement also came just days after Bach-Hauser filed an Information Statement with the SEC declaring plans to increase the Company's authorized common stock from 41,666,667 shares to 300,000,000 shares and to create 50 million shares of preferred stock.
Although Bach-Hauser did not define the rights of the new preferred shares, the Company reserved the right to establish virtually any terms, including those governing conversion of preferred stock and voting rights. Consequently, it is conceivable that each share of preferred stock will be convertible into many shares of common stock, and will be granted extraordinary voting rights – effectively giving preferred shareholders the ability to control all corporate decisions. (nosaint's note - thats EXACTLY what I've been saying about the preferred shares in ABVG)
In a further move that consolidates power in the hands of the controlling stockholders – and consequently removes it from the hands of public investors, - the Company also declared that it was amending its Articles of Incorporation to elect not to be governed by (i) sections 78.411 through 78.444, and sections 78.2055 and 78.207of the Nevada Revised Statutes.
This amendment has considerable consequences for the Company's public shareholders. Sections 78.411 through 78.444 of the Nevada Revised Statutes are designed to protect small shareholders. They limit, and in some instances prohibit the Company from entering into transactions with its controlling stockholders. Mergers, consolidations, reclassifications of shares, and the issuance of substantial blocks of stock all would fall under the restrictions imposed by these sections – except where, as here, the Company opts out of these obligations.
That's right. Nevada has adopted provisions to protect the public from a handful of individuals who may run roughshod over a company – and then given those individuals the ability to duck the statute.
Sections 78.2055 and 78.207 of the Nevada Revised Statutes also are designed to protect investors – severely curtailing the Company's ability to reduce the holdings of small shareholders, and proceed to reissue the same shares, again and again. The Nevada statute requires a company to receive approval from a majority of shareholders if it wishes to increase or reduce the number of outstanding shares (as it would in the case of a stock split or a reverse stock split) without a corresponding increase or reduction to the number of authorized shares.
Here again, the protection of the Statute is largely illusory since the company, acting through the individuals in control, can opt out of this obligation.
Is it any wonder that television networks recently had so much trouble deciding which way Nevada voters swung?
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AI
