HARVEY WESTBURY CORP (PINK:HVYW) Shine in the Sun

HVYW.pngYesterday was a good day for HARVEY WESTBURY CORP (PINK:HVYW). The stock recorded a volume that is way above the average and, at the same time, their price soared by about 40%. The managers must have been quite happy. Will investors be happy in a few days’ time, though? We set ourselves the task of finding out.

HVYW apparently produce car and boat waxes for people who spend more time cleaning their cars than having fun with their families. Like every other company that we’ve covered, HVYW are very enthusiastic about their product and they tell us how it can get rid of all the grit and dirt on your pride and joy. Our question is: “Can it get rid of all the dirt in their financial statement?”. Because there is quite a lot of it.

Over the last months dilution and the random share issuance apparently has been the only thing on HVYW‘s agenda. Recently they increased the number of authorized shares from 240 million to a whopping 975 million. They also allowed the issuance of series A and B preferred shares. Both types are convertible into common stock at the rate of one preferred share for five common shares. Perhaps because of the great performance of the company the executive officers were given a total of 8 million preferred stock. They also awarded themselves a further 158 million common shares and they decided that from now on, they don’t need to notify shareholders before they exercise a stock split.

All the awards and the new privileges seems rather silly. Why? Because HVYW have been working at a loss since Day One, and things are getting worse by the minute. They have defaulted on several debt obligations, one of which ended in court and the company CEO, Mr. Eugene Chiaramonte III, was convicted of breach of contract. They are up to their ears in debt and they can’t stop issuing convertible notes for all sorts of services, which would most likely result in even more defaults and even more court cases.

They have kindly provided us with a financial statement at the end of their report and we were hardly surprised when we found that it looks appalling. Still, to give you a better idea of what we mean, we have summarized the figures:

  • cash: $1,458
  • current assets: $24 thousand
  • current liabilities: $1.8 million
  • revenue (Q3 of 2012): $14 thousand
  • net loss (Q3 of 2012): $69 thousand

A couple of paragraphs ago we mentioned that HVYW‘s CEO has been in court and was convicted for breach of contract. A few minutes’ worth of research shows that this is not the only time that he has misbehaved. We managed to link Mr. Chiaramonte to a company called Kentucky Energy Inc (PINK:QMIN). He was investigated by SEC for misinterpretation of information while there and according to this article, he also spent some time in prison during the 1980’s when he was convicted of securities fraud. QMIN themselves stopped reporting back in 2011 and it’s fair to say there’s little hope for them.

Whether the same thing will happen to HVYW, only time will tell, but we would advise you to be extremely cautious when making your decision.

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