some DD for (potential) investors 1/12/2012 12:37:34 PM | Peter Kennedy
3620 Reads | 1 Comments
Harry Lappa has emerged as a paper millionaire after snapping up hundreds of millions of shares of NSRS, a company with only $16 in the bank. That was before the stock price took off.
A former Canadian government official has investor chat rooms buzzing after he recently wound up with an eye-popping 500 million shares of North Springs Resources Corp. (OBB: NSRS, Stock Forum), a heavily promoted U.S. bulletin board stock.
While 80 million of those shares were cancelled in December 2011, Harry Lappa remains a wealthy man (on paper anyway) thanks to a paid promotion campaign that sent the junior’s stock price soaring above 55 cents this week from less than 1 cent in September.
At current levels, North Springs has a market cap of $378.6 million, based on 696 million shares outstanding. The yearly range is 57.5 cents and
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A Google search of Lappa’s track record indicates that the 45-year-old financier is a graduate of the University of Regina in Saskatchewan, and he worked as a financial officer for Immigration Canada from 1989 to 2003. That was before he moved into the penny stock world.
U.S. regulatory filings say Lappa was a director of Iciena Ventures Inc., a Vancouver company headed by Canadian diamond explorer Chuck Fipke from 2004 to 2008.
However, Iciena was unable to repeat the success achieved by Fipke’s previous company Dia Met Mineral Ltd., which discovered Canada’s first diamond mine in 1991. Iciena was suspended from trading on the TSX Venture Exchange in March 2011.
After a spell as a director with Pennsylvania electronics recycler Endeavor Power Corp. (OTCQB: EDVP, Stock Forum) in 2009, and more recently as CEO of U.S. Pink Sheets quoted-Global Resource Energy Inc. (OTO: GBEN, Stock Forum), Lappa was named President and CEO of North Springs in August, 2011.
Under a contract that pays $10,000 per month, he is also the company’s sole director, chief financial officer, secretary and treasurer. In other words, he, and he alone is calling the shots.
We couldn’t reach Lappa for comment on this article. But as first noted by PumpsAndDumps.com, Lappa didn’t have much to do to achieve his new found status as paper multi-millionaire
In March 2011, he simply acquired 2.5 million shares or 72.05% of a former shell called Aurum Resources Corp. Three months later, Aurum changed its name to North Springs Resources and proceeded with a forward stock split in which one old share was exchanged for 100 new ones.
On October 31, the stock was split yet again, this time on a two for one basis, a move that not only raised the number of shares outstanding to 696 million from 348 million, but also the eyebrows of penny stock observers, including some Stockhouse Bullboard posters.
Back in October, the stock was trading at less than 5 cents. But it has since risen sharply after being featured on 22 newsletters in the last five trading days, according to a list compiled by Stock Promoters, a U.S. website that aims to connect publicly traded companies with suitable promoters. They include the likes of Awesome Penny Stocks, which was paid to $10,000 by a third party, according to the footnotes in a January 9th, alert.
While Awesome Penny Stocks is not registered as an investment advisor in any jurisdiction, it describes NSRS as an extremely hot and promising company, with “amazing potential.’’
Penny Stock Alley went even further, saying “we wouldn’t be surprised if we see it gain 1,000% or more from this point on.”
Others aren’t so sure about North Springs’ future prospects.
“With 700 million shares outstanding, I DO NOT BELIEVE the share price has much room to GO UP,’’ wrote Stockhouse Bullboard poster Goldenfitness in the North Springs post. “A 10 for 1 roll back would be more appropriate,” he suggested.
What the stock alerts fail to mention is that North Springs has generated zero revenue since its inception in May 2009 and had only $16 in the bank on October 31, 2011, according to financial statements filed with the U.S. Securities & Exchange Commission.
For the three months ended October 31, 2011, the company posted a net loss of $56,841 or
.00 per share compared to a year earlier loss of $6,085. On its website, North Springs bills itself as a mineral exploration company focused on discovering and advancing precious metal properties in Nevada.
Aside from the lack of cash, it is hard to see what’s in the portfolio to support the current stock price.
In early August, the company said it had reached “a mining lease and option to purchase agreement” with Mountain Gold Claims, LLC. Series 15, (Mountain Gold) and Lane Griffin. Under the agreement, Mountain Gold and Griffin have leased to North Springs the right to conduct mineral exploration activities for up to 10 years on 16 unpatented mining claims in Esmeralda County in south central Nevada, near Tonopah (between Las Vegas and Reno).
The fact that North Springs can buy the property for only $400,000 would indicate that exploration is at a very early stage, and may not lead to anything of significance in the future. That view is supported by a December, 2011 press release in which the company announced that “a team of independent geologists had been collecting chip samples from the leased claims and the surrounding areas.”
This week, the company said it has signed a mineral lease agreement with privately-owned Nevada company MinQuest Inc. The lease agreement gives it the right to “conduct mineral exploration activities over a term of 20 years on Esmeralda County mining claims known as the Imperial property.
Under the agreement, North Springs says it has agreed to pay $140,000 to MinQuest. It has also pledged to spending US$3 million on “work commitments.’’
A commitment of US$3 million over a 20 years means that the company could potentially go for years without spending a dime on exploration work, leaving investors in a lengthy state of limbo.
Meanwhile, North Springs said it has reached an agreement in principle to acquire a 100% in two prospecting licenses in the Kabouri gold mining area of Guyana. The company said it is currently completing its final project due diligence and negotiating the definitive terms of the “potential acquisition.’’ A definitive agreement is expected to be reached and executed within 48 hours, North Springs said.
However, the property vendor in Guyana remains a mystery and North Springs says there can be no assurance that the transaction will be completed as proposed or at all.