LIGATT: Liabilities and Lamers

Wed May 26 16:55:13 CDT 2010

attrition.org

Contents 0. Introduction 1. Current Valuation 2. Penny Stocks and Press Releases 3. Incorporation Ping Pong 4. Conclusion 5. Further Reading

0. Introduction

Investing in penny stocks is not for the faint of heart. As such, accredited investors and bulletin board traders are typically aware of the risk of making bets on less established companies. If the company "makes it," the rewards can be immense, and chasing this dream drives the market. Investment in firms like LIGATT Security International (LGTT.PK) comes with a heavy dose of caveat emptor, and the lack of transparency into company operations often leaves the investor to perform their own research and make decisions without a complete representation of the company's true worth. The following information has been culled from publicly available sources such as filings with the SEC, OTCMarkets and state regulatory bodies, as well as web activity, forum posts and LIGATT's own press releases. While this article is based on a considerable amount of research, many items have not been fully addressed in an effort to avoid undue speculation. If you have insights or comments, please send your thoughts via email to errata[at]attrition.org.

Synthesis of this information reveals a profile of LIGATT's history, operating procedures and future financial viability which has not been previously chronicled - while at the same time raising additional questions that remain as yet unanswered. Though many startups generate buzz with media campaigns and aggressive optimism, sifting through the hard data behind LIGATT's business practices and historical stock movement paints a picture of a firm that has acquired outlandish debt with no viable revenue stream and an equity that faces intense dilutive pressure, resulting in lethargic performance. It is our opinion that investment in LIGATT offers little potential benefit, and furthermore, one faces a considerable opportunity cost by leaving money in such an equity while better situated investments exist (penny stocks or otherwise). Traders looking for breakout stocks may consider abandoning LGTT as liquidity presents itself and move on to greener pastures.

Disclaimer

1. Current Valuation

As of Tuesday's market close (5/25/10), LIGATT Security International (LGTT.PK) had 240,243,009 common shares outstanding and a share price of $0.0003 (one thirty-third of one cent).[1] Thus, its current market capitalization is $72,072. No, there are not any zeros missing from that figure. To put the size of "one of the nation's premier hi-tech security companies" in context, Symantec (NASDAQ:SYMC) currently has a market cap of USD$11.8 billion. Symantec's smallest ever acquisition, Intec Systems, was valued at 22.3 times as much as LIGATT Security's current market value.

While it's market value is pitiful enough, the 2009 end of year balance sheet paints an even sadder picture:

************************************************************************************
                               LIGATT BALANCE SHEET
                              As of February 12, 2010
						   
ASSETS                              LIABILITIES & EQUITY
  Current Assets                      Current Liabilities
    Checking/Savings    -151,039        Credit Cards                          18,268
    Cash on Hand         131,004        Other Current Liabilities            -13,517
    ----------------------------        --------------------------------------------
  Total Current Assets	 -20,035      Total Current Liabilities                4,751
    
  Fixed Assets                        Long Term Liabilities
    Computers & Software  27,592        Loan From Shareholders               -79,244
    Equipment              8,226        Loan Payable - Automobile            -12,100
    Furniture             12,993        Tripod- Cyber Defense System          15,000
    ----------------------------        Tripod- Moore Law Group               68,500
  Total Fixed Assets      48,811        Venture Capital                      675,550
                                        --------------------------------------------
                                      Total Long Term Liabilities            667,706
									  
================================    ================================================
TOTAL ASSETS              28,776    TOTAL LIABILITIES                        672,457
================================    ================================================

                                    Equity
                                      Retained Losses                        643,681
                                      ----------------------------------------------
                                    Total Shareholder's Equity              -643,681
									
                                    ================================================
                                    TOTAL LIABILITIES & SHAREHOLDER'S EQUITY  28,776
                                    ================================================
************************************************************************************

According to their 2009 4th Quarter Report, the expense of LIGATT's $32,528 annual Shareholder's Meeting exceeded the entirety of the company's $28,775 in assets.

Luckily, a $32,528 Shareholder's Meeting likely comes with an open bar, which might help dull the sting of seeing the company's cash deficit, massive debt and overall insolvency. The near complete lack of tangible assets is startling, especially when compared with the more than half a million dollars of liabilities. The largest chunk of debt is listed as "Venture Capital," which is typically directly invested into developing products and building infrastructure (assets). While LIGATT management would no doubt argue that the iPhone/Android applications and government contracts it has "in the pipeline" constitute significant intangible assets, informed review of available materials reveals these assertions to be laughable and are therefore disregarded throughout this analysis. The net result is an EPS of -$0.0026 and a -0.15 (undefined) P/E ratio:

A stockholders' deficit ... means that the value of the assets of the company must rise above its liabilities before the stockholders hold positive equity value in the company. Liabilities that exceed assets is the classic definition of bankruptcy.

Firms that meet the criteria for bankruptcy - negative earnings, negative cash flow and negative book value - cannot pay dividends. Yet in May of 2009, Gregory Evans announced an ambitious plan:

LIGATT Security International CEO Gregory Evans announced today that the company will be one of the first Over-The-Counter (OTC) companies to offer dividends to shareholders. In order to maximize shareholder value and focus on its core business strategy, LIGATT Security International will begin offering dividends to shareholders planned for 4th quarter 2009. ... With this tactic, LIGATT shareholders will not only get paid for each share that they own, but they will also get to retain their stock, therefore receiving a portion of the company's earnings.

Needless to say, the dividend was not paid out in Q4 2009.

But startups are often in the red; profitability may not occur for years, if ever. Securing venture capital (VC) via institutional venture capital firms and angel investors is the dream of any startup, but this type of funding requires a solid business plan... or at least a zeitgeisty wunderkind of a CEO with a dazzling proof of concept. In absence of these, firms often take on other types of debt to pay for their ongoing operating costs. One popular way to raise money is to issue privately placed convertible bonds.

• Convertible bonds (or debentures, for longer yields to maturity) function as hybrid securities. They are sold as bonds - with an established face value and coupon rate - but when a trigger event occurs such as an IPO, predetermined price target or a specific corporate action, convertible bonds may be exchanged for shares of stock (often at a discounted price). For firms with solid growth, bond holders may benefit from trading their fixed returns for gains in stock price. Less optimistically, this debt sits on the books and creates a liability as the firm must pay interest to the bondholders until maturity.
• Privately placed securities are sold directly to investors rather than being available to the general public. These securities generally fall under SEC Regulation D and are therefore exempt from registration requirements. A company may offer up to $1 million in securities for sale under Reg D Rule 504 per year.

In March of 2010, both LIGATT and LIGATT's wholly owned subsidiary SPOOFEM.COM each filed a Form D (Ligatt, Spoofem) with the SEC indicating that $1 million in convertible bonds were being offered by each for private placement, of which $147,000 of each were already sold to two investors in January, likely Gregory Evans himself or the handful of LLCs he has formed since 2005. The features of the bonds - their interest rates, maturities and conversion to equity terms - are not available.

As to the high level purpose for this twin debt issuance, one can only speculate. The more default risk a company poses, the more interest it must offer to be interesting to buyers. With LIGATT's pre-existing negative book value and large pool of existing liabilities, it's likely that the interest rate on its bonds is quite high. For comparison, when Cyber Defense Systems (a company later acquired by LIGATT, discussed below) issued convertible bonds in 2008, the interest rate on these was 15%. High interest convertible bonds offer a subtly incestuous way to suck regular payments out of the company as interest to be paid to the insiders with whom the bonds have been placed. At 15%, the interest paid out on $147,000 over the life of the bond would be $22,050; not too shabby for loaning yourself money. Finally, should all these market machinations finally pan out and the stock rises to something as high as a whole penny, it may become profitable to convert the bonds to stock: mostly likely preferred stock. Preferred stock, another debt/equity hybrid instrument, comes with additional benefits such as an increased likelihood to be repaid in the event of company default. Furthermore, depending on the terms of the initial bond, the price at which the shares are converted may be significantly below the market price at the time of conversion, offering an immediate profit. Unfortunately, by the nature of conversions placing additional shares in the marketplace, their exercise tends to have a dilutive effect on the stock and reduces the price for the general pool of shareholders. Although it is difficult to prove LIGATT/Evans' motivations beyond a shadow of a doubt, such practices are neither creative nor uncommon.

Because of the limited information available and less frequent data updates for Pink Sheets companies, it is possible that there is a larger number of shares outstanding than indicated by available sources. This is the best number available. LIGATT has registered 5 billion shares split between common and preferred stock. Unfortuantely, even if there are many times more shares on the open float than indicated by our sources, this only means that there is a larger discrepancy between the perceived market value and the tangible book value - a problem you might remember as being a contributing factor to the 2000 tech bubble.

2. Penny Stocks and Press Releases

LIGATT, with it's ultra-nano market cap, trades as a Penny Stock on the OTC Pink Sheets Limited under the ticker LGTT. Widely recognized to be inherently risky and ripe for manipulation, Penny Stocks are commonly used in "pump and dump" schemes wherein an orchestrated media blitz is used to lure investors who drive up the stock price with their optimistic purchases before the initial holders (usually insiders) dump their shares on the open market, depressing the illiquid security and walking away with the cash.

"Limited" designation indicates:

companies with financial reporting problems, economic distress, or in bankruptcy, to ensure the limited information they do have is publicly available. The Limited Information category also includes companies that may not be troubled, but are unwilling to meet Pink Sheets' Guidelines for Providing Adequate Current Information. Companies in this category have limited financial information not older than six months available on the Pink Sheets News Service or have made a filing on the SEC's EDGAR system in the previous six months.

The lack of transparency and objective news coverage about lesser known firms is a huge detriment to potential investors looking for reliable information about the business underlying a stock. Because there is little awareness of such companies in the larger marketplace, the most frequent source of new "information" about LIGATT's business comes from materials released by LIGATT itself. Despite their shaky premises, certain stories have caught the eye of a small but dedicated group of traders in LGTT. On days associated PR updates are released, volume is several times the average daily shares traded. As of yet, these flurries of activity have not created a long-term gain in the share price. This indicates that every time LIGATT hypes its "news," money flows into the stock and is then quickly removed by countervailing selling pressure. Indeed, after a constant press push since January 2010, the stock is priced exactly the same as New Year's Day:

Data and chart via BigCharts.com

***********************************************************
Average Daily Volume:     61,513,124    Symbol LGTT
Closing Price 12/31/2009:    $0.0003    CUSIP  50187W109
Closing Price 05/25/2010:    $0.0003    ISIN   US50187W1099
YTD Gain Per Share:          $0.0000    SEDOL  B1YXZ40
***********************************************************

*********************************************************************************************************************
   Date         Volume      Open    High    Close                     Press Release Title / Notes
---------------------------------------------------------------------------------------------------------------------
1 01/04/2010  594,471,808  0.0003  0.0010  0.0010  "Apple Inc. Officially Approved LIGATT to Develop iPhone Applications"
  01/05/2010  595,561,088  0.0012  0.0017  0.0012  <- High volume, no price change.
  01/07/2010  104,444,797  0.0008  0.0009  0.0007  <- Most gains of prior days reversed.
2 01/13/2010  299,671,616  0.0008  0.0013  0.0009  "Google Approves SPOOFEM.COM Android Application"
3 01/27/2010  374,111,904  0.0006  0.0011  0.0011  "Hacker For Hire Application Submitted To Apple For Approval"
  01/28/2010   92,220,576  0.0012  0.0012  0.0008   <- Intense selling pressure removes most previous day gains
4 02/02/2010  714,041,984  0.0011  0.0017  0.0014  "Google Approves LIGATT Android Application"
5 03/01/2010  244,042,048  0.0010  0.0012  0.0010  "Apple Accepts LIGATT's New Cyber P.I. Application"
6 03/17/2010  661,644,288  0.0006  0.0009  0.0008  "LIGATT Security Approved to Receive Government Contracts"
7 05/10/2010  404,518,176  0.0004  0.0006  0.0006  "LIGATT Announces Plan to Buy Back Stock"
*********************************************************************************************************************

Clearly, LGTT is a PR driven stock. Without regularly released, juicy sounding press releases, it would have nearly no volume and be even closer to worthless than the few hundredths of a penny it is already. Furthermore, LIGATT's press releases are full of seemingly ridiculous claims and few real details. To those in the security industry, they read as a comedy of errors. So egregious are the claims that attrition.org has dedicated a separate article to debunking LIGATT's press releases.

While our initial interest in LIGATT had more to do with it's charlatan CEO Gregory Evans than it's potential as a breakout stock, others are also watching the company's every move. A small number of traders active in LGTT post regularly on the InvestorHub.com forums throughout the day. Here are some of their thoughts on LIGATT, its management and it's stock movement [2]:

eckert081499: How can Greg so blatantly lie over and over again about there being no dillution here! It's not just coincidence that we've seen at least 40-50 blocks of 500,000 shares sold today after the pump!!! There was a series of 11 blocks of 500,000 sold at .0012.

fink: Let me tell you whats going on with L2 Many buys today 2:1 buys to sells and there seems to be an endless amount of shares being dumped @ .0012 String after string of 500,000 sells @.0012. Someone is dumping shares into this news run. By law they have to stop 30min within the [end of day] and where I'm bailing out. When a company kills its own run on great news, thats spells bad news for an individual investor. I took a stab at this play today, but the company is a [piece of shit]. Very shareholder unfriendly! GLTA

socali4life: Regarding the news... Look, I am in no way bashing here as I like the stock and have owned and sold it in the past. However, regarding the CCR registration, you all do realize anyone can get this right? You just need a DUNS number then you can register on the link above. All it does is make you able to "compete" for government contracts. Just throwing it out there for those of you that may not be familiar with it. Matt

pro-trader: Listen with this company i have seen so many promises and lies if i turn my computer one morning and i see the pps at $1 and see millions of dollars in my portefolio i would still think [it] is GREG THAT IS DOING SOME KIND OF SCAM LOL

Globalstockadvice: Seriously what is this guy trying to tell us after re reading this pr it is by far the worst one yet today's that is. Is he trying to tell us he is going to do the Buy Back instead of the [reverse split] that they voted on? That would have made more sense than this mombo jombo. The only reason I bought this stock in the first place was because I told myself that I would buy the next buy back. Hopefuly if what Im thinking he was trying to say in this pr is true then it will run today or the next day if it doesnt catch momentum today or tomorrow then its done. IMHO.

LGTTBagholder1: NOTHING MOVES PPS!!! REVERSE SPLIT NEXT!!! Over the last 1 1/2 years CEO EVANS has tried and successfully HYPED all kinds of LIES and MISTRUTHS:

1. "I'm buying up to .10"
2. "We'll buy profitable companies"
3. "Shareholders will get Spoofem dividends"
4. "Shareholders will get CYDM dividens."
5. "There are big deals I can't talk about."
6. "We have tons of iphone apps underway."

And on and on and on. And during ALL the LIES and HYPE, CEO EVANS gagged the TA so he could HIDE the MASSIVE multi-BILLION share DILUTION!!! He then sold shares into each piece of HYPED news. Now 1 1/2 years later, the CEO EVANS can't produce one LIE or HYPE that will move this POS up more than .0002!!! WHY??? Because noboady is being fooled any more. Only the FLIPPERS are buying and even they now appear nervous and afraid of the REVERSE SPLIT!!

StockSnoop1: Evans is a sneaky piece of crap. Let's just hope he actually goes thru with his buyback plans this time. If not, he will truly open himself up to huge shareholder lawsuits and fraud charges.

Doubledown22: Trading tip for you. If that Reverse split happens, I will buy on the dips afterwards because if you have spent more than 3 days trading then you know RS are usually followed by big news campaigns in order to sell diluted shares at a higher price. Oh but wait, that would be unethical I guess. I should just weakly cry on the sidelines with my thumb up my azzz with all the ethical traders...hilarious. So I better just buy JP Morgan shares or some other respectable honest banking company or maybe GM shares when they get listed again.

LGTTBagholder1: As you know DD22, when a REVERSE SPLIT is announced, it will be followed by massive DILUTION and SELLING which will drive the pps down, no matter what the news is. Plus, we don't know who is buying the 504 from LGTT. If it is a Cornell like company, they will short the crap out of us after a REVERSE SPLIT and drive the price back to its current level where they will cover with converted shares. Seen it happen a million times and so have you which is why I suspect you are getting so nervous and frantic in your posts. Like you said, its gambling and WE WILL ALL LOSE, some WAY MORE than others, huh? LOL : )

clevertrade: Just a thought... could Greg be the only buyer the last week? That would be a very cheap way to get almost your company back for a few bucks... and after that he still can say: "I told you in my last PR"

These are not the musings of long-term investors looking to back Evans' products to the end. They are active traders, many are more concerned with playing the rumors surrounding LIGATT rather than caring about their ethics of their business practices. This article makes no morality judgment on the practices of these traders. Their actions are neither surprising nor unique to LIGATT stock. As the group paying the most constant attention to LGTT and it's high profile CEO, however, their discourse is telling. For the most part, they believe that:

• LIGATT's press releases are the key to predicting LGTT's movement.
• If products were sold, contracts secured and corporate actions to unfold in a way that Gregory Evans has set forth, LGTT has the potential to appreciate in value significantly.
• Gregory Evans does not release accurate information to shareholders in a timely fashion and makes grandiose promises that fail to materialize.
• Evans seems more interested in influencing LGTT's price than developing long-term revenue streams.
• Price gains on high volume days are offset by large block selling, indicating float dilution, likely by insider sales.
• The convertible bonds and preferred shares that company insiders own are one likely reason that LGTT has difficulty holding on to price gains.
• LIGATT's cash flow is suboptimal and not in line with the amount of debt that the company has accumulated in the form of convertible bonds and "Venture Capital".

One can only speculate as to how their sentiments would evolve if they understood that LIGATT Security makes (or claims to make, or claims to be thinking about making) products that industry peers find useless to the point of incredulity.

1. These are original forum posts. Opinions, personalities, and motivations vary wildly. Attempts have been made to take a sample of sentiments which will make sense within the context of this article. Where indicated, acronyms and typos have been replaced for clarity.

3. Incorporation Ping Pong

Taking a private company public - even as a Penny Stock - is costly and involves regulator scrutiny and time. A much easier way to bring shares to market is to recycle them from an already defunct firm. And that's exactly what Gregory Evans did. In 2001, he formed LIGATT Security International, Inc. as a privately held corporation in California. That same year, Thomas Hobson incorporated Intelligent Sports, Inc.. In 2003, Hobson took Intelligent Sports public on the OTC Bulletin Board market under the ticker IGTS, despite the firm's propensity to hemorrhage cash... a fact that the SEC Form SB2/A Registration of Securities filing makes quite clear:

WE MAY CONTINUE TO LOSE MONEY, AND IF WE DO NOT ACHIEVE PROFITABILITY, WE MAY NOT BE ABLE TO CONTINUE OUR BUSINESS.
Through June 30, 2003, we have generated limited revenues from operations, have incurred substantial expenses and have sustained losses in the amount of $504,635. In addition, we expect to continue to incur significant operating expenses. As a result, we will need to generate significant revenues to achieve profitability, which may not occur. We expect our operating expenses to increase significantly as a result of our planned expansion. Since we have limited operating history of marketing our services to the public, our business may never generate sufficient revenues to meet our expenses or achieve profitability. Even if we do achieve profitability, we may be unable to sustain or increase profitability on a quarterly or annual basis in the future. If the Company fails to generate significant revenues to meet our expenses or achieve profitability and if the Company cannot arrange financing of our planned expansion, it will be very difficult to operate.

After failing to become profitable by 2009 (surprise!), the Board of Directors for Intelligent Sports stepped down and elected Gregory Evans as its new President. Did Evans want to get into the youth sports market? No. He wanted to execute a reverse merger, wherein a private company (LIGATT Security) buys a public shell company (Intelligent Sports) and thus acquires all its shares, bypassing the costs and regulational hurdles normally required for an IPO. In March of 2009, International Sports, Inc. changes its name to LIGATT Security International and its shares became traded under the ticker LGTT.

Cyber Defense Systems (CYDM.PK), started by William Robinson in Florida, was another Pink Sheets traded company that struggled to stay afloat over the past decade. Despite acquiring On Alert and E City Software in its quest to do [something with airships and gunshot detection], the company was in debt at the end of 2008. Although there was not a public tie between Gregory Evans and William Robinson at the time, these filings indicate that the coming year's dizzying cycle of mergers, acquisitions and corporate re-naming was already planned:

• 11/25/2008 - Georgia - LIGATT Security, LLC
• 11/25/2008 - Georgia - SPOOFEM.COM, LLC
• 01/15/2009 - Oklahoma - SPOOFEM.COM, Inc.
• 01/15/2009 - Oklahoma - Cyber Defense Merger Sub., Inc. / SPOOFEM.COM, Inc.
• 01/15/2009 - Oklahoma - Cyber Defense Systems, Inc. / SPOOFEM.COM

Because Limited Liability Companies (LLCs) are not subject to the same reporting regulations as corporations, there is no transparency into the current nature of LIGATT Security, LLC and SPOOFEM.COM, LLC. LLCs are a hybrid of sorts, taking some desirable features of a corporation and blending them with the simplicity of a Limited Partnership's setup and maintenance. The most valuable "L" in "LLC," however, is "Liability." Like corporations, claims made against the company (e.g., lawsuits, seizure of assets against outstanding debt, etc.) may only seek restitution against the assets of the company, not against its members' personal assets. Also like companies, LLCs are treated as legal entities for the purpose of investment and may hold assets under the company's name. Thus, while it's unclear what roles LIGATT Security LLC and SPOOFEM.COM LLC serve in the large picture, it's likely that they act as middlemen - and an additional layer of operational and legal obfuscation - for money movement and securities transactions (possibly even buying and selling significant amounts of LGTT and SPFM stock) by Evans and crew.

As mentioned in Section 1: Current Valuation, in March of 2009 both SPOOFEM.COM and LIGATT submit identical SEC FORM Ds (Notices of Exempt Offerings of Securities). The only difference between the two documents is that Evans' home address is listed as SPOOFEM.COM's business address (6050 Peachtree Pkwy), but LIGATT's principal address is listed at 6991 Peachtree Industrial Blvd. Each indicates the availability of $1 million in convertible bonds, of which $147,000 has already been privately placed.

Seven months later, LIGATT CEO Gregory Evans issues a press release:

JUNE 2009 - LIGATT Security International announced today the intent to purchase Cyber Defense Systems, Inc. (PINKSHEETS: CYDM), a company whose focal point is international homeland defense.

The various corporations set up in Oklahoma - SPOOFEM.COM, Inc, Cyber Defense Merger Sub., Inc. / SPOOFEM.COM, Inc., and Cyber Defense Systems, Inc. / SPOOFEM.COM - all serve as stepping stones in moving the originally Florida bound Cyber Defense System, Inc. to the new state and allowing the name change to SPOOFEM.COM. Cyber Defense Systems maintains its own identity and trading symbol (CYDM.PK). It's unclear why Oklahoma was chosen as a new base of operations since LIGATT's current are still listed in Georgia, but this likely has to do with either an undetermined physical presence in the state or advantageous corporate treatment. A month later:

AUGUST 2009 - Cyber Defense Systems (Pink Sheets:CYDM) recently filed documentation with the state of Oklahoma and NASDAQ to request a name change to SPOOFEM.COM and to secure a new stock symbol. Previously an operating subsidiary of LIGATT Security International, SPOOFEM.COM will operate as its own publicly traded company. The Board of Directors has appointed Lakesha Wilson as President and CEO of SPOOFEM.COM.

This is the birth of a publicly traded SPOOFEM.COM (SPOF.PK), existing beneath its parent company LIGATT Security International, Inc. (LGTT.PK). Both stocks trade lethargically throughout the rest of 2009. Then more corporations are formed in Oklahoma:

• 09/17/2009 - Oklahoma - Ligatt Security International, Inc. (Domestic)
• 09/17/2009 - Oklahoma - Ligatt Security International, Inc. (Foreign)
• 11/10/2009 - Oklahoma - SPOOFEM.COM USA, Inc.
• 11/10/2009 - Oklahoma - Cyber Defense USA, Inc.

Six months later, In April of 2010, Evans releases what might be the most confusing press release of all time:

ATLANTA, GA--(Marketwire - April 5, 2010) - SPOOFEM.COM, formally known as Cyber Defense Systems, today announced that SPOOFEM.COM, Inc. has been renamed back to its original name, Cyber Defense Systems Inc. The new company, SPOOFEM.COM USA, Inc., starting Tuesday, April 6, 2010; ticker symbol SPOF (PINKSHEETS: SPOF) will stop trading and the new ticker symbol, SPFM will begin. All shareholders of the old SPOOFEM.COM, Inc. will now become shareholders in the new and clean company, SPOOFEM.COM USA (PINKSHEETS: SPFM).

Cyber Defense Systems was sold for its debt to LIGATT Security International. The sold debt will remain with Cyber Defense Systems, leaving the new company SPOOFEM.COM USA, Inc., a debt free company. William Robinson, the former CEO, will become the CEO of Cyber Defense Systems once again. Cyber Defense Systems is no longer a publicly traded company.

The former owner of Cyber Defense Systems, William Robinson, had misled the company regarding the documents he and his former attorney claimed they filed with the SEC. As a result, this issue had led to the corporate restructure of SPOOFEM.COM. In addition, the former President of SPOOFEM.COM, Inc., Lakesha Wilson, has been sued by LIGATT Security International for embezzlement.

Cyber Defense Systems is no longer a part of LIGATT Security International, or the new company, SPOOFEM.COM USA. This is the major reason why LSI did not try to deliver any stock dividends after the merger. [...]

Ok, bear with us on this one:

In other words (and I'd like those moments of my life back which I spent translating this to English), LIGATT spun Cyber Defense Systems back off on its own, giving the company's name and debt back to its former CEO, William Robinson. SPOOFEM.COM persists as a publicly traded company, but has been rolled into the new SPOOFEM.COM USA entity which also trades under a new ticker and remains a subsidiary of LIGATT Security International.

It's unclear just how much debt was transferred from SPOOFEM.COM to Cyber Defense Systems, but the $650k+ in debt discussed under section 1. Current Valuation of this article was most likely not affected as that debt is carried on LIGATT's books and not SPOOFEM.COM's.

To further add to the confusion, LIGATT's most recent press release regarding its stock adds additional uncertainty:

ATLANTA, GA-May 10, 2010 LIGATT Security International, (OTC: LGTT) a cyber security company, today announced that the company will be buying back shares on the open market and through private individuals in order to increase LSI's share price.

In January 2010 it was voted on and passed that LSI would conduct a roll back of the stock, however the company has not done so at this point in time. Although LSI's shareholders voted on a reverse split, before implementing a roll back, the company will try to increase the share price by performing a buy back of the stock.

As of yet, neither a reverse split nor a buyback have occurred. Time will tell whether these claims are indicative of an attempt to help the ailing stock or whether this is simply more bluff and bluster aimed at generating volume and allowing what may be a slow siphoning of money away from the shareholders.

4. Conclusion

Gregory Evans is fascinated with the idea of owning public companies. In addition to the prestige it affords his excessive ego, selling shares allows one (as long as there are buyers) to legally take money from the marketplace with no real accountability to pay it back. Despite LGTT and SPFM performing terribly since their inception, any market value at all is still dollars in Evans' pocket because the underlying companies (Ligatt Security International, Inc. and SPOOFEM USA, Inc.) are insolvent. Insolvency would not be a terrible thing for a small business, if that business was using its debt and equity to finance real business expansion based off a suite of products and services that have a real purpose in the marketplace, eventually allowing the debt to be paid pack and real shareholder value to accumulate. Unfortunately, it appears that neither LIGATT nor SPOOFEM.COM offer a single product that offers a compelling reason for its use. Furthermore, the clear lack of demonstrable information security skills shown by Evans and LIGATT means landing big-time government contracts will likely remain a fantasy.

The press release driven cycle of news -> price increase -> selling pressure -> price reduction can only persist as long as there are buyers willing to shovel money behind LIGATT/SPOOFEM.COM's manufactured news. Perfect market pricing is only possible in an environment of perfect information dissemination. Although a prior lack of transparency into the firms' histories and lack of qualified analysis of their products/services created a large schism between what we consider to be the true value of the firm and investor perception, it is hoped that this article will help level the playing field.

5. Further Reading

The following table outlines the history of Evans' various company incorporations and relevant filings. This history alone calls into question why so much time and effort are spent on what appears to be a corporate version of Three-card Monte:

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