One Step Ahead

[Euthydemus]

Bo - Sorry to be so long getting back to you.

I agree that the most recent "formula" for computing the CMKX float has one (at least) serious flaw: The computed float would change every time the PPS changed. Does anyone really believe that if the PPS changed from .0002 to .0001 that the float would double? Any formula that purports to compute the float must work for any values of O/S, PPS and revenue.

As for your point about how long ago the issues that caught the attention of SEC go back, I agree they likely go back at least as far as 2003. I contend that regardless of the Form 15(A) filed by the company on 2/17/05, the regs under which they claimed the filing exemption (15g-4(a); less than 300 "holders of record") on the Form 15 filed on 7/22/03 became invalid in the year those conditions were no longer true.

It would seem in light of recent revelations that those conditions were no longer valid in 2003. That would mean that CMKX was required to file a 10KSB for 2003, three quarters of 10QSB forms in 2004 and a 10KSB for 2004 would be due shortly. In addition, any events that triggered 8-K and 4 forms filing requirements for 2004 are also due (overdue, actually). Here is the regulation that I think applies...

SEC Rule 12h-3 Suspension of Duty to File Reports under Section 15(d)

e. If the suspension provided by this rule is discontinued because a class of securities does not meet the eligibility criteria of paragraph (b) on the first day of an issuer's fiscal year, then the issuer shall resume periodic reporting pursuant to Section 15(d) by filing an annual report on Form 10-K and Form 10-KSB for its preceding fiscal year, not later than 120 days after the end of such fiscal year.

http://www.law.uc.edu/CCL/34ActRls/rule12h-3.html

The SEC AR of 3/16/05 only mentions "ADMINISTRATIVE PROCEEDING INSTITUTED AGAINST CMKM DIAMONDS, INC. FOR FAILING TO MAKE REQUIRED PERIODIC FILINGS". I am sympathetic to the situation in which CMKX shareholders find themselves. I also agree with you that there will hopefully be a way for the judge to "punish the wrongdoers and not the 50,000 shareholders".

I am not hopeful, however. In the present case, the AR has only specified two options: a 12 month trading suspension or revocation of all classes of CMKX securities. That would mean the "CMKX" symbol would be deleted from the central database and CMKX shares could no longer be legally traded anywhere.

I suppose there is the possibility that neither of those sanctions would be invoked but the precedents for that are very few in number. I think there was a case last year of a company that appeared with up to date filings and a commitment to get everything caught up and remain so. In the end, that company prevailed and the judge ruled in their favor over the objections of the SEC.

I have enjoyed your posts and hope we can continue our dialog. I think issues about which men of good will can honestly disagree are always worth discussing. Investing and the laws and regulations that govern the investing world are very complex and not well understood by nearly enough investors. These discussions can help everyone gain additional perspective. That is especially true when there is disagreement. The new moderator seems committed to keeping those "discussions" civil.

And again, thanks for your kind words.