Tradeshow Marketing Knows How to Sell Its Stock

by Melissa Davis - 2/24/2010 8:02:51 AM

Give Tradeshow Marketing (OTC: TSHO.PK) some credit. For a company riddled with so many ugly conflicts, TSHO sure knows how to put on a pretty face for investors.

TSHO can thank SkyMark Research – a promotional firm operated by the apparent son of TSHO’s own founder – for reshaping its public image. For years, TSHO looked like a failed business with limited appeal to even speculative investors willing to place bets on high-risk penny stocks. After SkyMark launched favorable coverage of TSHO late last year, however, the company saw interest in its long-overlooked stock suddenly skyrocket.

Boosted by that tout, TSHO soared to a record high of $1.62 on massive volume earlier this month. Although TSHO has since fallen to $1.16 a share, the same stock fetched mere pennies – and, on some days, failed to trade at all – before SkyMark kicked off its aggressive publicity campaign.

TSHO is banking on infomercial sales of the “Ultimate Squeegee,” a window-cleaning tool that retails for $19.95, to reverse its poor track record. Although TSHO just began airing its first commercials this week, the company has already achieved a remarkable market value of $26 million – or 3,500 times last year’s sales – on paid forecasts of its future success.

Even before TSHO officially scheduled its TV infomercials, SkyMark had already predicted that the company’s stock could hit $30 a share based on future sales. Incredibly, the Microcap Speculator noted, SkyMark compared TSHO to SpongeTech (OTC: SPNG.PK) – a stock halted last year over questionable promotions – when making its bullish claims.

“Remember what happened when SPNG launched its national infomercial campaign,” SkyMark stated in one of its TSHO reports. “Its market capitalization saw an increase from under $19 million to over $200 million within a period of three months.

“The exposure brought mass revenues and never-before-seen volume into its stock,” SkyMark marveled, “moving SPNG from 2 cents to a 28-cent high with volume in excess of 500 million shares per day!”

A previous SkyMark tout, SPNG has since fallen back to 4 cents a share on a fraction of that volume. As SkyMark’s current favorite, critics say, TSHO now looks poised to follow that same dangerous pattern.

TheStreetSweeper left a voicemail message for TSHO on Tuesday afternoon, but the company did not return that call.

All in the Family

TSHO founder Bruce Kirk actually began relying on his son, John Kirk, for promotional services five years ago. In May of 2005, regulatory filings show, TSHO hired Excel Relations – where John Kirk served as president – to generate investor interest in the company. TSHO agreed to pay Excel $5,000 a month, the same amount it now pays SkyMark, for its publicity campaigns.

When announcing that deal, TSHO CFO Peggie-Ann Kirk – the sister of TSHO’s founder – offered no clues about Excel’s ties to her own company.

“We were seeking to partner with a highly experienced and respected I.R. (investor relations) firm to introduce our story to the investment community and help us improve our visibility,” the CFO stated at the time. “Excel is a firm with great experience, a solid reputation and an aggressive, results-oriented approach that should benefit our investors through increased shareholder value.”

In that same press release, TSHO went on to credit Excel’s “principals” with executing successful I.R. campaigns for several other (unidentified) publicly traded companies. According to Factiva’s news database, however, Excel appeared in press releases for just five companies – including four Pink Sheet stocks that no longer trade at all -- before suddenly disappearing a month after TSHO hired the firm.

With TSHO languishing well below the $1 mark for the next four years, SkyMark surfaced this summer as a new alternative for penny-stock promotions. In early July, Skymark hired an outside party to register its website – keeping the identity of its leaders concealed – and began touting its first microcap company the very next week.

Notably, Factiva records show, SkyMark chose to kick off its promotions with “complimentary” research coverage of SPNG during the trading frenzy that led up to the stock’s looming halt. Two months later, SkyMark followed up with bullish touts of yet another overhyped penny stock – Genova Biotherapeutics (OTC: GVBP.PK) – that soon wound up halted by regulators as well.

All told, Factiva shows, SkyMark has issued hundreds of press releases – many of them on speculative penny stocks – since the firm first registered its website roughly eight months ago. That number excludes any companies, such as TSHO, that SkyMark chose to tout through paid mailers instead.

Sizzle and Burn

Both John Kirk and Ben Kirk – identified by industry sources as brothers – have clear ties to SkyMark.

Indeed, John Kirk actually represented SkyMark at a special investor conference late last month. During his presentation, a conference program shows, he specifically highlighted “sizzle” – with its power to drive investors to act based on “pure emotion” – as a key ingredient in any successful penny stock campaign.

John Kirk failed to return a phone call from TheStreetSweeper on Tuesday afternoon.

Meanwhile, Ben Kirk promoted SkyMark’s presentation ahead of that investor conference. Listing himself as a writer for SkyMark, he personally touted TSHO itself as well.

SkyMark’s apparent ties to TSHO extend beyond the founding family, however. Wade Huettel, a partner at Carrillo Huettel in San Diego, has provided legal services for SkyMark and TSHO alike. He registered the trademark for SkyMark last October, Internet records show, and filed a legal opinion on behalf of TSHO – seeking to lift trade restrictions on the company’s stock – the very next month.

Since then, Carrillo Huettel has apparently expanded its reach in the penny stock arena. Although the law firm told TheStreetSweeper that it has never funded any stock promotions, website disclaimers specifically name Carrillo Huettel as the financer behind recent publicity campaigns for two different microcap companies.

Either way, those campaigns failed. The first stock, KMA Global Solutions (OTC: KMAG.PK), never even broke the one-penny mark. The second, Pengram (OTC: PNGM.OB), also fizzled despite signs of a possible rally.

“PNGM traded more last week than it has in its whole history as a public company,” marveled WhisperfromWallStreet, which identified Carrillo Huettel as the funder of its report. “To me, this means that investors are just now starting to find out about PNGM … I think, as PNGM comes out with more news and more investors hear about PNGM, this stock could be in a great position to break out from here.”

But PNGM began a steady dive instead. At 15 cents, the stock now fetches about one-third of the price it did before its short-lived trading boom first began.

‘Band of Thieves’

Huettel is no stranger to failure despite his relatively brief legal career.

In 2006, three years after graduating from a second-tier law school, Huettel surfaced as a top executive at the ill-fated Tax Relief Network (TRN). He publicly touted the strength of TRN – a firm that promised to reduce outstanding tax debts for is customers -- even as the company skated toward the brink of disaster.

“Tax Relief Network is a veteran company that has saved clients millions of dollars over the years,” Huettel proclaimed in a 2006 press release issued at the height of the tax-preparation season. “We’ve worked hard to build a good reputation by serving people’s needs.”

Seven months later, TRN suddenly filed for bankruptcy protection and ceased all operations. Within days, critics began complaining about the company in general – and Huettel in particular – on the “Ripoff Report” website.

One of those devastated customers, who paid TRN off the day before it closed its doors, claimed that Huettel personally informed him that the company had begun planning for bankruptcy a full month earlier. Nevertheless, the customer complained, TRN continued to accept customer payments – including his own – with no intention of providing the services it had promised in return.

Although some TRN insiders rushed to Huettel’s defense, claiming that he worked for just $300 a week (the equivalent of today’s minimum wage) in an effort to save the company, they failed to silence his critics. Indeed, the customer who first complained about Huettel on the “Ripoff Report” continued to single out the attorney by name.

“Wade Huettel and his band of thieves continued to allow their salespeople to promote the business (TRN) and take monies from people who were trying to resolve their tax issues,” the customer stated in one of his follow-up complaints. “That is pure fraud … I hope that someone is able to give these thieves what they are due.”

Meanwhile, TSHO has selected a transfer agent with a tainted background as well. In 1998, the U.S. Securities and Exchange Commission sanctioned Holladay Stock Transfer for allegedly removing restrictive legends from a company stock certificate and then illegally allowing the distribution of those shares. In a special series on penny-stock fraud six years later – and a follow-up article two years after that – The New York Post was still spotlighting Holladay’s past transgressions when scrutinizing some of the firm’s shadier clients.

“One such outfit, which bears the name CDC Systems Inc. and operates out of a postal mail drop in New Mexico, ginned up an astonishing billion-dollar market value for itself last month by issuing a series of wildly overhyped and misleading press releases about its future in the natural gas business,” the Post reported in the fall of 2004. And “the company handling CDC’s back-office operations for Wall Street – Holladay Stock Transfer – has had at least one penny stock run-in with the law already.”

By the time the Post revisited CDC two years later, the SEC had effectively shut the company down.

Since then, Holladay has continued to attract negative attention. Just last year, in fact, one industry expert pointed to Holladay as an SEC-cited example for “not following the rules.”  

History of Failure

Like TSHO’s attorney and its transfer agent, the company’s current CEO comes with a spotty track record.

Lunier de Beer first surfaced at TSHO in late 2005 as the company’s chief technology officer. He went on to serve as a senior development manager for Idearc in 2007, however, before assuming the top post at TSHO – replacing the company’s founder – later on that year.

Customers began criticizing Idearc, a publisher of Yellow Pages advertisements, on the “Ripoff Report” website when de Beer still worked for the company. Those complaints accelerated last year, when Idearc filed for bankruptcy, and continued to appear as recently as this month.

Meanwhile, TSHO has struggled under the leadership of both its CEOs. In early 2007, when Bruce Kirk still ran the company, TSHO launched a new division – known as Sandstrom – charged with expanding its retail presence through franchise-operated stores. After failing to sell a single franchise, however, TSHO abandoned its Sandstrom division the following year.

TSHO fared no better with its two company-owned stores. The same year that TSHO formed its new Sandstrom division, the company began reporting double-digit sales gains for its own retail outlets. When its franchise business failed in 2008, TSHO decided to hire a director of retail development to establish more corporate stores instead.

Two months later, however, TSHO suddenly announced plans to close both of its retail outlets. Those long-established stores – which had operated since 1997 and 1999, respectively -- lasted just three years under the TSHO umbrella.

Despite those major setbacks, TSHO cheerfully predicted “substantial growth” in 2009. By May of that year, however, TSHO listed just one asset -- $100 in cash – on its balance sheet. Nevertheless, the company somehow found the resources to launch yet another business strategy before the year came to a close.

The Impossible Dream?

Last October, TSHO hired Cesari Direct to produce its first infomercial with plans to launch its new ad campaign the following month. That long-anticipated infomercial finally hit the airwaves on Monday, triggering a significant – if temporary – rebound in the company’s stock.

Going forward, TSHO must sell more than 1 million “Ultimate Squeegees” in order to trade at just a modest one times company sales. Moreover, TSHO must compete against long-established Ettore – which sells its own “Ultimate Window-Cleaner Squeegee” for about one-third less – in order to succeed.

Another Cesari client, showcased as a past winner for the advertising firm, enjoyed only a fleeting victory. Three years ago, AeroGrow (OTC: AERO.OB) saw its stock soar to $9 a share – and secure a listing on the Nasdaq exchange – due to infomercial-generated sales of its indoor gardening systems. Now saddled with falling revenue and ongoing losses, however, AERO currently trades on the Bulletin Board for just 14 cents a share.

Today AERO sports a total market value of just $1.74 million, even though the company has been posting infomercial-related sales for years. Meanwhile, TSHO boasts a market capitalization that’s 15 times higher based on the mere hope for future sales.

Nevertheless, SkyMark expects even better. In its rosiest projections, SkyMark has suggested that TSHO could achieve a market value of roughly $700 million – eclipsing the market cap of more established retailers – somewhere down the road.

That forecast raised some eyebrows. This month, the “Microcap Speculator” -- already suspicious of TSHO and its paid promotions -- insisted that SkyMark had finally crossed the line with its “absurd projections.” Moreover, he questioned why anyone else would condone the firm’s behavior.

But SkyMark supporters, including one with suspected ties to the research firm, have continued to do just that throughout the aggressive TSHO publicity campaign.

“In this case, we have a real company working on a real project with a potential revenue source that makes sense (for) its stock price,” one fierce SkyMark defender stated. “Promotion equals exposure.

“And that’s a good thing,” he added, “just so long as promotion isn’t the only thing supporting a company’s stock price.”

* To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.

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