Successful executives can turn around even bad companies. Consider Jack Byrne, who has turned around numerous insurance companies such as Fireman’s Fund, Travelers, and GEICO; he recently served as chairman of White Mountains Insurance [[WTM]]. On the other hand, bad executives tend to be consistently bad. So it should not surprise us that our friends at Remote MDx Inc. (RMDX.ob), James Dalton and David Derrick, both had high level positions at former biotech flame-out Biomune. Biomune delisted from the Nasdaq in 2000. Biomune was sued by shareholders back in 1998, and while the lawsuit was dismissed because the statute of limitations had passed, the allegations of the plaintiffs make for interesting reading. As for myself, I won’t accuse our friends James and David of being anything more than inept. I anticipate Remote MDX will end up like Biomune: a forgotten, worthless shell of a company.
Relating to Remote MDX’s future, I found some more fun information in the company’s financial statements. See pages 5 & 26 in the company’s 2006 10k. The company’s main subsidiary, SecureAlert, has a bunch of convertible preferred stock outstanding. Some of that stock is controlled by insiders. The conversion privilege of those preferred stockholders means that Remote MDX beneficially owns only 80% of SecureAlert:
"As a group, all Series A Preferred Stock may be converted at the holder's option at any time into an aggregate of 20% ownership of the common shares of the SecureAlert, Inc. During the quarter ended December 31, 2005, the Company sold 600,000 of these shares for $600,000. As of December 31, 2005, there were 3,590,000 shares of SecureAlert Series A Preferred Stock."
Even better, the owners of that preferred stock get paid dividends at a rate of 10% and an extra $1.50 per day for each parolee that is using the company’s product (see page Q-11 of this filing with the SEC). That total dividend is divided among all preferred stock holders (it is not per share), but it is still outrageously high.
Disclosure: I am short RMDX.ob. I do not recommend short selling due to its high risk. See my disclosure policy.