UNISYS BIG MISTAKE!Careful! Unisys got into bed with a murky company that is being followed by Stockwatch. Acsys is partly owned by Nexus Group and read up what they are all about. I can't believe Unisys would ruin their great name by affiliating themselves with these people.
Nexus Group International Inc - Street Wire
Nexus posts $1.77-million loss and touts continuing success
Nexus Group International Inc NXS
Shares issued 338,550,109 Mar 4 2002 close $.110
Monday Mar 4 2002 Street Wire
FACING SUCCESS
by Lee M. Webb
Nexus Group International Inc., a perennial penny stock listed on the Toronto Stock Exchange, released its dismal second-quarter results on March 1. For the three months ending Dec. 31, 2001, Nexus reported a loss of $1.77-million on revenue of $154,549. Through the first six months of the current fiscal year, Nexus has tallied a loss of more than $4-million on meagre revenue of $277,365.
Based in Burlington, Ont., Nexus is the latest attempted make-over of Grandma Lee's Inc., a down-at-the-heels restaurant franchise operation with a checkered history. Jerry Janik joined the company as chief executive officer and chairman in 1997, after dealing off a bundle of real estate assets that promptly declined in value to Grandma Lee's in a share transaction that gave him approximately 39 per cent of the company's shares. Committed to strengthening the balance sheet and increasing shareholder value, Mr. Janik first tried to paint a new face on Grandma Lee's by introducing a number of new franchise concepts and changing the company's name to Heritage Concepts International Inc., but the promotional lacquer quickly began to peel away. The ballyhooed new franchise concepts turned out to be duds and Heritage's stock price followed the languishing tradition of Grandma Lee's.
In late 1999, Mr. Janik began preparations for another make-over. A self-proclaimed trend-picker, he steered the company toward the hot technology market, joining the stampede already in full progress by scores of beaten-up mining companies, inactive shells and penniless startups. The company's first acquisition on Jan. 11, 2000, Platinum Intermedia Inc., turned out to be another dud, but the technology twist whetted the appetite of some investors. Before the year was out, the company served up two more technology entrees, a 50-per-cent stake in AcSys Biometrics Corp. and a 50.1-per-cent stake in CompuBlox Inc., and then changed its name to Nexus. AcSys, which lays claim to being a player in the biometric security market, quickly became Nexus's promotional gem.
AcSys has been the source of dozens of fluffy news releases and considerable media puffery, some of it paid for by Nexus. Among other things, the company's news releases have linked Nexus to major players such as Litton PRC, Chubb PLC, MAXIMUS Inc. and Unisys Corp. The figures bandied about by Nexus in the media have been impressive. For example, in a Sept. 4, 2000, Canadian Business article, Mr. Janik reportedly predicted sales of $500-million (U.S.) within nine months and even suggested that figure might be higher. In a Sept. 14, 2000, puff piece published by Canada-iNvest.com, David Lobb, then the company's chief financial officer, offered some thoughts on the association with Litton, one of five prime vendors awarded a $1.5-billion (U.S.) General Services Administration contract for providing smart cards to all U.S. federal agencies. "This deal is very financially significant to the company," Mr. Lobb claimed. "It is too early to tell just how much money comes with this deal. But we are effectively going to be a sub-contractor to Litton."
The much-hyped associations with major companies and tantalizing figures excited the imagination of many investors, not least Nexus's cultish following on an Internet chat site operated by StockHouse Media Corp. However, Nexus's financial performance has been anything but exciting. Last year the company reported only a paltry $19,000 in revenue from its ballyhooed technology ventures, disappointing even some of its StockHouse stalwarts. Rallied by some of the more devoted and committed followers, as well as by Mr. Janik's upbeat "interview" on CEOcast.com, another tout service favoured by Nexus, many investors set their sights and hopes on the company's first-quarter results for a breakthrough in technology revenue. Those first-quarter results were a grim disappointment; Nexus did not report a penny of technology revenue for the first three months of the year.
Nexus's stoic supporters put on a brave face at the disappointing first-quarter results and settled in to await the financial statements for the second quarter ending Dec. 31, 2001. Released on March 1, those results did include some technology revenue; a modest $30,456. While an improvement, to be sure, that paltry revenue has shaken at least some of the company's devoted followers. Others, however, have ferreted out of the most recent financial statements what they believe may be grounds for optimism.
James Ryan, a veteran StockHouse poster and ardent supporter of Nexus, takes some comfort in the company's accounts receivable, which stood at $1.3-million at the end of the second quarter. A self-proclaimed clear and analytical thinker, Mr. Ryan suggests that the $1.3-million in receivables will show up as revenue, primarily from technology, along with sales from January and February, in the third-quarter results. A review of Nexus's previous financial statements, however, might give the clear-thinking Mr. Ryan and other like-minded StockHouse Nexus acolytes pause to reconsider that expectation.
At the midpoint of last year, Nexus reported revenue of $332,113 and its accounts receivable stood at $2.1-million. At the end of the third quarter, the company reported revenue of $519,069 through nine months and the accounts receivable had climbed to approximately $2.8-million. According to the audited financial statements for the year ending June 30, 2001, accounts receivable had dwindled to $560,686. That reduction of approximately $2.3-million in accounts receivable from the third-quarter report, however, did not end up in the revenue column. Indeed, Nexus only reported $719,000 in revenue last year, with $700,000 of that coming from its restaurant operations.
Notwithstanding the latest dismal financial results and the perhaps misguided expectations of some of the company's shareholders, Mr. Lobb, now Nexus's president and chief executive officer, remains upbeat about the company's prospects. "I am personally committed to strengthening our balance sheet and creating a growth path for this company that will enhance our shareholder value and the overall health of the organization," Mr. Lobb said in his second-quarter report to shareholders.
Mr. Lobb has had his finger on the pulse of the ailing promotion for some time, being appointed chief financial officer on Feb. 1, 2000. "Mr. Lobb is a senior management professional with over 20 years experience in operations, finance, accounting and insolvency in various industries including the restaurant business," the announcement of Mr. Lobb's appointment reported. "He also co-owns and operates La Costa in Mississauga, an upscale Mediterranean restaurant." Among other things, Mr. Lobb was involved "in establishing the growth path for Platinum Intermedia," which culminated in a dead end. Mr. Janik had some fine comments about the strategic appointment of Mr. Lobb in his moving 2000 year-end message to shareholders, remarking that it had "positively impacted the profits of The Great Canadian Soup Company and our newly launched pub franchise concept, The Whistling Walrus." A year later, The Great Canadian Soup Company was still losing money and shareholders are left whistling in the dark about the wonderful pub franchise concept.
Mr. Lobb's fine credentials evidently stood him in good stead; he was passed the Nexus leadership baton last year as Mr. Janik stepped aside to concentrate on his weighty responsibilities as the company's chairman. Both men have been handsomely compensated for their efforts, each receiving $480,000 for six-month service contracts ending Dec. 31, 2001. Inasmuch as Nexus did not have the cash to pay the pricey tab, Mr. Janik and Mr. Lobb were compensated in shares. The pair entered into more modest contracts for this year, accepting slimmed-down base salary packages of $380,000 each. Mr. Janik resigned as Nexus's chairman on Feb. 8, reportedly to focus on his duties as president of AcSys.
Many investors look to insider trading reports as an indication of the commitment and confidence of officers and directors of a public company. Securities regulators also attach significance to insider trading reports, claiming that they are a cornerstone of public confidence in the markets. Investors who set stock in such things may well take some comfort from the apparent commitment and confidence of Mr. Janik, who reportedly held more than 49 million shares as of Nov. 12, 2001, and Mr. Lobb, who controlled 5.2 million shares as of the same date. According to Mr. Janik's insider trading reports, the company's visionary has not sold a single share since June 30, 1999; Mr. Lobb has not sold a share since Feb. 25, 2000, as far as can be determined from his insider trading reports. Given the tax implications of their compensation packages, that might well be taken as commitment and confidence, at least by those who use insider trading reports as a gauge of such matters.
Notwithstanding that apparent commitment and confidence, some shareholders are becoming increasingly concerned over the number of outstanding shares. Since June 30, 2001, Nexus has issued another 50 million shares, bringing the total outstanding to more than 338 million shares as of Dec. 31, 2001. Considerably more dilution is expected as the cash-strapped company continues to finance its two money-gobbling technology ventures, AcSys and CompuBlox.
In spite of the latest grim financial results, Nexus continues to paint a rosy picture of the company's prospects. "All in all we are well positioned to address the challenges of the biometric security industry and expect continuing success in this marketplace," Mr. Lobb claims, echoing a sentiment shared by many of the company's devoted StockHouse supporters.
Meanwhile, there is little to suggest that the market shares the optimism of Mr. Lobb or Nexus's StockHouse devotees; and some of the more sceptical followers of the Nexus saga are wondering just how much more of this continuing success the company can withstand. With just over 1.9 million shares changing hands, Nexus shed a penny to close at 10.5 cents on March 4.
Comments regarding this article may be sent to lwebb@stockwatch.com.
(More information regarding Nexus is available in Canada Stockwatch articles published on Oct. 16, 19 and 24; Nov. 16, 22 and 30; Dec. 6, and 10, 2001; Jan. 10; Feb. 18 and 25; and March 1, 2002.)
(c) Copyright 2002 Canjex Publishing Ltd. https://www.canada-stockwatch.com