Imagine our surprise when we received an email earlier this month from a promoter using the name “Stock Patrol” – recommending a company called Diamond Bay Holdings, Inc. (Pink Sheets: DBHD). We knew we had not sent out the report since we do not issue recommendations. We also were certain that we had not authorized anyone to use the name “Stock Patrol.” We never have.
As it turned out, the bogus "Stock Patrol" was not the only tout pushing Diamond Bay Holdings. As promoter called Stock Alerts LLC has been issuing press releases naming Diamond Bay Holdings on each "watch list" for traders and investors. Not surprisingly, Stock Market Alerts had been paid $5,000 by Consolidated Diversified Investments LLC, which it described as a non-affiliated third party, to spreas the good word on the obscure Company.
Understandably, we wanted to be certain that readers did not mistakenly believe that we had generated the “report.” We were not even faintly familiar with Diamond Bay Holdings when we received the email – not surprising since few people tend to be aware of start-up over-the-counter companies with no track record. Learning about such companies is even more difficult when they do not file regular reports with the Securities and Exchange Commission. Diamond Bay Holdings, which trades on the Pink Sheets, does not file regular public reports.
With that in mind we set out to learn what we could about Diamond Bay Holdings. As it turned out, there was not a great deal to discover.
Poised By the Bay
Our initial point of reference was the promoter’s “report,” which suggested that Diamond Bay Holdings was “poised for sustained growth in dynamic or high demand industries.” But does “poised” translate into “operating?” The promoter described Diamond Bay Holdings as a “global holding company with operations in diverse yet complementary industries that include real estate vacation clubs, telecommunications, career services and Internet marketing.” Any one of those ventures would present considerable challenges and require substantial funding.
And, according to the promoter, there are more ambitious projects on the horizon. The “report” claimed that
[Diamond Bay Holdings] currently has interests in obtaining exclusive real estate properties, natural resources (gold, diamonds and minerals), career services, telecommunications services, leading edge technologies, Internet portals, and other unique products and services that can quickly be brought to market with significant appreciation.
Having “interest” in a business is one thing. Having the capacity to develop and exploit that interest is quite a different matter. Is Diamond Bay Holdings up to the task? The report offered no meaningful insight into the Company’s financial condition, operating history, or management.
Is that information available elsewhere? As we noted earlier, Diamond Bay Holdings does not file periodic public reports, so shareholders and potential investors must rely upon information disseminated by promoters or the Company, and on the few public records that may be available. In this case, information available from the Office of the Nevada Secretary of State indicates that Diamond Bay Holdings is just getting started.
The Company was incorporated on March 12, 2004 as Beautiful Life Foods, Inc. According to a website called “505 Bank,” which lists “pre-IPO investment opportunities,” Beautiful Life Foods, was a Tennessee-based “chocolatier of heart healthy fine chocolates,” trading on the Pink Sheets. As of June 2004, the Company was seeking to raise $1 million at 20 cents a share. We found nothing to indicate whether or not those efforts proved successful.
The appetite for Beautiful Life Foods must not have been as beautiful or lively as its founders had hoped. Less than a year after the Company was formed, it morphed into Diamond Bay Holdings and the business plan underwent a dramatic change. Healthy chocolates were out; diversity was in. On January 7, 2005 Beautiful Life implemented a 2 for 1 stock split and two weeks later, on January 21st, the Company announced that it would begin trading on the Pink Sheets as Diamond Bay Holdings and outlined its new operations. Diamond Bay Holdings explained that it now would act as a “holding company,” with subsidiaries in the telecommunications, real estate, internet marketing and career services fields” – language that would later be echoed by the promoter seeking to boost interest in the Company.
The Company said that it had recently completed four acquisitions, leading to the formation of four “operating” subsidiaries - Diamond Equity Estates, Inc. (described as an “exclusive real estate vacation property club”); CareerNets, Inc. (focusing on “career services:); NetNetMarketing.com, Inc. ( an “E-commerce Internet marketing” venture) and; DBH Telecom, Inc. (offering telecommunications services). It did not specify from whom it had acquired the subsidiaries, or the specific details of those transactions.
Are any of those subsidiaries actually “operating,” and to what extent? How did the Company acquire each of the new businesses, from whom, and on what terms? Does Diamond Bay Holdings have any cash or revenues? Who controls the Company, and who are its officers and directors?
The last of those questions may be the easiest to answer, at least in part. According to the Office of the Nevada Secretary of State Jeffrey J. Guzy is Diamond Bay Holding’s President and Robin Gordon is its Secretary. The Pink Sheets identify three additional officers and directors of the Company: Gus Mechalas, (director); John H. Page, (Executive Vice-President and director); and Liz Sara, (Executive Vice-President and director).
Who are these individuals and what experience do they bring to their positions at Diamond Bay Holdings? The Company offers little insight. The Diamond Bay Holdings Internet site does not identify a single member of the management team or board of directors, offering instead a broad view of the type of individuals who staff the Company. The Company says simply that it “Executive Management Team” is comprised of “seasoned professionals with broad business expertise in operating and building businesses in world wide markets,” and that its “Subsidiary Management Teams” are operated by “professionals that have direct industry experience in the markets served by their particular operation.”
What little we learned about Diamond Bay’s management – or from people who share the same names - was culled from other public sources. For instance, the records of the Nevada Secretary of State identify an individual named Jeffrey J. Guzy as a Member of a Limited Liability Company called Facilicom International LLC. Facilicom, a Washington D.C.-based firm, provided international wholesale telecommunications services to other carriers worldwide. In December 1977, Facilicom was converted from a limited liability company into a stock based corporation. At the time, Guzy was identified as Executive Vice President of Marketing, Sales & Product Development, with over thirteen years of experience with telecommunications and technology companies, including Interferometrics, Sprint Communications, Inc., Bell Atlantic Corp., and Overseas Telecommunications Inc. According to a Form 4 filed by Facilicom with the SEC in June 1998, Guzy owned less than 1% of Facilicom at that time. In December 1999, Facilicom was acquired by World Access, Inc. a NASDAQ-listed company.
In 2000, Guzy joined CyberStar as Executive Vice-President and General Manager for Broadband Deployment. A press release issued by CyberStar indicated that Guzy received an MBA and a masters in systems engineering from the Wharton School at the University of Pennsylvania.
We also found biographical information for individuals named Gus Mechalas and Liz Sara – two other names mentioned as officers or directors of Diamond Bay Holdings. An individual named Gus Mechalas served as Executive Vice-President, Chief Technology Officer and director of a publicly traded company called Infocall Commmunications. Public filings for Infocall indicate that Mr. Mechalas had a background in management and technical recruiting experience in the computer industry - one of the services that Diamond Bay Holding now says it is offering. Prior to joining Infocall, he was employed by Unisys Corporation, where he was responsible for developing an HMO system for the health care industry. Mr. Mechalas received a BA in education from Eastern Illinois University.
According to documents we located over the Internet, Liz Sara is a technology marketing veteran and founder of Best Marketing LLC, based in the Washington D.C. area. This Liz Sara also has been an adjunct professor of Marketing at the R H Smith School of Business at the University of Maryland.
Are these the same Jeffrey Guzy, Gus Mechalas and Liz Sara identified as officers or directors of Diamond Bay Holdings? If so, why has the Company declined to provide this information on its website, or in public filings?
The State of the Subs
Perhaps for now the Company is preoccupied with the state of its “operating subsidiaries.” As best we can determine from available public records, Guzy has a background in telecommunications, Mechlas in recruiting, and Sara in marketing. Has the apparent experience of Diamond Bay’s management signified success for its varied ventures? As best we could determine, the operations of those subsidiaries presently range from limited to non-existent.
• Pieces of Dreams
On February 8, 2005, the Company announced the launch of its real estate subsidiary, Diamond Equity Estates, specializing in “the sale of fractional ownership of luxurious real estate properties” – in other words, time-sharing arrangements where buyers acquire a share in property and pay a management company to operate, maintain, and schedule occupancy of the unit. The business model for Diamond Equity Estates sounded ambitious; “Elite Destiny” members would pay initiation fees of $200,000 for the rights to use “the club’s full property portfolio,” while “Elite Equity” members each would pay $500,000 for a share of ownership of the club properties.
But did the Company actually own or operate any properties, and, if so, are they luxurious enough to command such hefty sums? According to Diamond Bay Holding’s President, Jeffrey Guzy, the Company was “planning on acquiring properties such as private wineries, castles, ocean and ski resorts and other, similar properties that will enable our members to experience the very finest in vacation luxury.” The Company claimed that it was bidding on two properties, a wine estate and a castle, although it declined to disclose their locations – or even the countries where they were located.
How will Diamond Bay Holdings pay for those properties? The Company, which did not disclose its financial condition or the terms of the two pending bids, stated that it planned to acquire properties through the sale of memberships. It remains to be seen, however, whether that cart will pull this horse; in other words, will prospective members invest $200,000 to $500,000 before the luxury portfolio is established.
Has Diamond Equity Estates concluded its initial acquisitions? A second press release, issued on February 14th, said that the Company was in the “final stages” of contract negotiations and hoped to conclude the transactions before March 31. According to the February 14 press release, the two properties were located outside of the United States and would cost approximately $15 million. Diamond Bay Holdings did not say how the purchases would be funded.
It appeared that the Company already had adjusted some of its expectations. Now it said that Diamond Destiny members would pay a minimum initiation fee of $150,000 – a 25% reduction of the number floated less than one week earlier. The Company stated that it planned to sell 250 Diamond Destiny memberships, raising $37.5 million and 50 Diamond Equity memberships for a total of $25 million. The press release did not indicate that a single membership had been sold so far – in either category.
• Take This Job
The Company says that a second subsidiary, CareerNets, Inc., “operates as a worldwide job portal and network for recruiting firms, companies and jobseekers.” While that may be the plan, there is little evidence that CareerNets is more than modestly operational. A website for the venture, www.careernets.com, describes the subsidiary as “a worldwide network of professional recruiting firms assisting job seekers locate positions.” It claims that “member recruiting firms list open positions on industry specific career websites” and job seekers receive “professional recruiter assistance.”
Once again, the Company has undertaken a bold project – but has it advanced beyond a formative stage? CareerNets claims to operate “a vast network of member recruiting firms listing hiring companies open positions” and to employ a “vertical search approach,” using individual search engines to list job opportunities by industry and specialty.
Based upon information available on the website, however, most of those individual search engines are not yet running and the “network of recruiting firms” is hardly vast. In fact, the website offers only one search engine – for those seeking Information Technology careers. Other recruiting sites, for individuals seeking medical, accounting and finance, or engineering and science careers, are supposed to be “Coming Soon!”
When we visited the one operating site, which posted opportunities for those pursuing IT work, we found only a small handful of jobs – 26 to be exact – including 17 that had been posted between June and August 2004 and are likely to have been filled by now. Eight of the remaining nine listings were for positions in Boca Raton, Florida (including one three month “contract” position that expired at the end of February 2005), hardly suggesting a “vast network” of recruiting firms.
Careernets.com, offers one additional product – “Career Rewards” – through an unaffiliated website called www.netnetrewards.com. Netnetrewards is a member of the BSP Rewards Network, which provides the same benefits through a number of other members, including 1NetStore Rewards, Advaliant Rewards, Americlean Rewards, Christian Benefits Rewards, Diamond Club Rewards, Doodyville Rewards and Leather Genie Rewards.
That's right. Rewards are also available at Doodyville. Careernets.com’s participation is this program does not seem to be unique.
• To Market, To Market
On February 18, 2005, Diamond Bay Holdings announced its acquisition of NetNetMarketing Inc. “in a 100% stock exchange.” The Company did not identify the previous owners of NetNet Marketing or say how many shares it had issued in exchange for the new subsidiary. According to the February 18th press release, NetNet Marketing “specializes in providing state-of-the-art Internet marketing and e-commerce services to clients to support the sale of business-to-business and business-to-consumer products across a variety of industries.” NetNet also allows users to participate in “a number of web-based products and services,” including a consumer rewards program, low-cost insurance, long distance telephone services, and prepaid bank debits cards.
Once again, however, there is little indication that the Company’s services are either available or unique. The NetNetMarketing website consists of a single page offering potential clients an opportunity to sign up if they wish to market products or services. It invites customers to “create cash flow from your business” by employing marketing programs that increase website traffic. What does this program entail? The Company provides no details of its strategy – and no list of its current clients. The Internet already is filled with sites that serve as a marketplace for third-party products and services. Is NetNet Marketing designing portals that permit users to access the multitude of bonus reward programs that already exist, and can be accessed elsewhere on the Internet?
In other words, is the Company unique, or is this program, like that offered by CareerNets.com, redundant?
• Dialing the Dark Continent
Diamond Bay Holdings recent press releases have focused on its telecommunications subsidiary, DBH Telecom, Inc. On February 23, 2005, the Company announced that it had acquired DBH in exchange for Diamond Bay Holdings shares – although it did not say how many shares had been issued, from whom it had purchased DBH, or whether the acquired company had any operations, assets or revenues. Since Diamond Bay Holdings does not file public reports, those details remain a mystery.
Who were the former owners of DBH and where was it incorporated? The Company did not say, although it disclosed that the entity had been formed in 2004 in order to acquire certain assets from an entity identified as Secure Telecom, Inc., a Delaware telecommunications company. Diamond Bay Holdings did not indicate whether DBH actually had acquired those assets, or at what price.
The relationship between DBH and Diamond Bay Holdings hardly seems coincidental since they share the same initials. In any event, the Company explained that DBH would provide international telecommunications solutions to global clients. According to the February 23rd press release, DBH has developed telecommunications products (including calling cards, unified messaging to wireless, and broadband VOIP) and owns a “proprietary telecom service portal platform that enables clients to turn existing infrastructure investment and market access into recurring revenues.” The Company stated at the time that it already held contracts in Asia and Africa aimed at generating revenues through calling card, VoIP and international bank debit card services. No details of those contracts were provided.
Two days later, on February 25th, the Company announced that DBH had signed its “first major distribution agreement.” The other party to the agreement was identified only as a U.S.-based company with operating subsidiaries in Africa. No terms of the arrangement were revealed, although DBH said that the unnamed distributor would release a suite of services called “Call Virtuosity™" to 54 African countries under the “Talk Africa” label. The press release did not indicate how revenues would be generated or allocated by the companies.
The Company described "Call Virtuosity ™ as a rechargeable calling card program with multiple voice services, including caller identification and SMS messaging. The Company claimed that its “proprietary customer portal enables distributors to develop their own customized web sites, complete with outsourcing of related ecommerce transactions to deliver turnkey services.” DBH said that it planned to enhance the product line in the future to serve the growing “money remittance services segment – allowing workers to send funds to persons in their native countries. Diamond Bay Holdings did not say whether it had applied for or obtained patents or copyrights for any of those products.
Diamond Bay Holding’s African Adventure continued on March 2, 2005, when the Company disclosed a joint venture with an entity called ISO Pty, subsidiary of an established South African call center provider. Diamond Bay Holdings did not provide any additional identifying information about ISO Pty or its unidentified parent.
The Company said that the joint venture, operating as SMSCall, would offer international voice service using mobile phone Short Message Service (SMS). According to the March 2nd press release, ISO “provides an established SMS gateway and access to a marketing database of more than 2 million mobile phone users.” In addition, Diamond Bay stated that SMSCall intended to apply for a license as a “pre-selected carrier,” allowing it to compete for long distance phone business in the future – a process that could prove difficult since, as the Company concedes, South African telecom users cannot select their service provider..
The Company did not release any details of the agreement, indicate the relative equity positions of the joint venture partners, enumerate the costs expected to be incurred, or specify the potential revenue stream. And while the Company predicted that initial margins from the SMSCall service could “exceed 100 percent,” it did not quantify those margins.
The Company’s most recent press release, issued on March 8, 2005, revealed that DBH had “won a contract to support a global telecommunications provider with outsourced management and technology solutions.” According to the press release, DBH would be assisting the unidentified “global telecommunications provider” in deployment and maintenance of an Internet service portal. The press release did not provide any meaningful details of the contract, insisting that such information, including the identity of the service provider, would be protected by a confidentiality agreement until the launch date for the service. And while Diamond Bay Holdings claimed that the contract would provide “immediate revenue” for DBH, it did not indicate the amount of revenues anticipated, either in the short or long term.
The absence of details in these press releases is mirrored by the lack of specific information we discovered on the DBH website, which offers the following sparse description of the subsidiary’s services:
Our goal is to operationalize leading edge solutions in order to provide scalable, low cost services without significant technical risk. We have relationships with the world’s major telecom equipment producers and our product offerings consist of international long distance, VOIP, electronic funds transfer, wireless applications and other new technologies that reduce both capital costs and the cost of operations.
And while DBH refers to its “expert management team,” not a single employee is identified by name. Instead, the website offers the following:
The Company has a combined senior management expertise of over 200 years expertise in telecommunications, technology and financial solutions. Management has an array of methodologies and approaches to offer and DBH Telecom is willing to consider sharing project risk and reward on a results basis.
Our staff of consultants are ready to serve you and creating solutions for all of your telecommunications needs.
Exactly how many individuals comprise that “team” and how many consultants are part of the Company’s “staff?” DBH does not say.
Premature Promotion?
Diamond Bay Holdings and its various subsidiaries may yet prove to be successful and profitable, but did that justify the promoter that triggered our interest in the Company to describe it as a “Whirl Wind of opportunity?” Aside from the series of press releases issued by the Company since January 2005, investors have no material information about the Company, its management team, its financial condition or its anticipated revenues. Its subsidiaries are, at best, getting started, and at worst, barely starting.
So why would the promoter encourage investors to buy shares of the Company at this time, before there is evidence that any one of its business ventures will succeed? Likely, it was because the promoter had plenty of stock to sell – one million shares that it received from an unidentified “non-affiliate third party” to distribute its “report.”
And like the “non-affiliate third party,” the promoter has declined to provide its name, address, or relationship to the Company. We do not know who this tout is, but readers should be assured that it is not StockPatrol.com.
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