RBC Capital Markets Corp., Equity Station Inc., Fagenson & Co. Inc., Olympic Securities LLC, and Alpine Securities Corp. have consented to pay $385,000 to settle Financial Industry Regulatory Authority that they sold collectively over 7.5 billion in “unregistered” penny stock in Universal Express Inc. shares and made about $8.4 million as a result.

• Fagenson & Co. has agreed to a $165,000 fine and made $44,000 in commissions

Full background report:

http://www.finra.org/web/groups/industry/@ip/@enf/@ad/documents/industry/p121326.pdf

SEC Obtains Judgment Against Florida Stockbroker Stephen Fayette

The Securities and Exchange Commission announced today that on Dec. 30, 2010, the United States District Court for the Northern District of Texas entered a Final Judgment against Stephen Fayette (Fayette), of Sarasota, Florida. The Commission's complaint alleged that Fayette was part of a scheme to pump and dump the stock of ConnectAJet.com, Inc. According to the complaint, ConnectAJet.com, Inc., of Austin, Texas, issued 30 million shares of stock in an illegal, unregistered offering to certain penny stock promoters. To pump up demand for the stock, ConnectAJet.com, Inc. and its chief executive, attorney Martin T. Cantu, launched a nationwide advertising campaign including false press releases. The complaint alleged that Fayette, a registered representative at Fagenson & Co., Inc. facilitated the scheme by liquidating ConnectAJet.com, Inc. shares  shares on behalf of multiple customers, including the penny stock promoters.

Martin Veigh:

10-K analysis:

"We have material weaknesses in our internal control over financial reporting structure, which, until remedied, may cause errors in our financial statements that could require restatements of our financial statements and investors may lose confidence in our reported financial information, which could lead to a decline in our stock price.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal control over financial reporting as of the end of each year, and to include a management report assessing the effectiveness of our internal control over financial reporting in each Annual Report on Form 10-K.

We have identified two material weaknesses in our internal control over financial reporting in our annual assessment of internal controls over financial reporting that management performed for the year ended December 31, 2011. Management has concluded that (i) we did not maintain a sufficient complement of qualified accounting personnel and controls associated with segregation of duties; and (ii) we lack sufficient resources within the accounting department to have effective controls associated with identifying and accounting for complex and non-routine transactions in accordance with U.S. generally accepted accounting principles, and that the foregoing represented material weaknesses in our internal control over financial reporting. We are uncertain at this time of the costs to remediate all of the above listed material weaknesses, however, we anticipate the cost to be in the range of $200,000 to $400,000 (including the cost of hiring additional qualified accounting personnel to eliminate segregation of duties issues and using the services of accounting consultants for complex and non-routine transactions if and when they arise). We cannot guarantee that the actual costs to remediate these deficiencies will not exceed this amount. If our internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors in our financial statements and in our disclosure that could require restatements. Investors may lose confidence in our reported financial information and in our disclosure, which could lead to a decline in our stock price.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected."

Convertible Note to a "Mayer Laufer" in recent 10-K:

"On December 30, 2011, we issued a convertible promissory note to Mayer Laufer (the “Lender”), in the principal amount of $575,000. The proceeds of the note were used to pay off a note previously entered into between one of our subsidiaries, Secuprint, and the Lender. Under the December 30, 2011 note, Lender may, at any time during the one year term of the note, convert up to $575,000 of the principal amount into shares of the Company’s common stock at a conversion price of $2.21 per share."

Google search on Mayer Laufer:

sec.gov/news/digest/1974/dig022174.pdf

"MAYER LAUFER SANCTIONED.  An order has been issued revoking the broker-dealer regis-tration of Mayer Laufer, doing business as Mayer..."

Low R&D spend for an IP Company:

On both an absolute basis and relative to other fees the company incurs

Operating Expenses

Sales, general and administrative compensation costs were 10% higher during 2011 as compared to 2010 which reflect additions in sales and marketing personnel made during 2011 along with the addition of seven people from the Company’s digital division.

Professional fees increased 26% during 2011 primarily due to increases in consulting fees, investor relations costs and legal fees.

...Or relative to a sampling of private placement/PR fees:

"On February 13, 2012, we completed the sale of $3,000,000 of units to investors in a private placement (the “Offering”). Net proceeds to the Company from the Offering were approximately $2,800,000. The Offering consisted of the sale of common stock and warrants. A total of 967,740 shares of common stock were sold, and warrants to purchase up to an aggregate of 483,870 shares of common stock at a price of $3.10 per share were issued to the investors in the Offering. The net proceeds of the Offering will be used for working capital purposes, payment of debt, and for further development of the Company’s intellectual property portfolio." (implied $200K cost)

"Also, on February 20, 2012, the Company entered into consulting arrangement with Century Media Group for the provision of investor relations services. As compensation Century Media will receive a fee of $10,000 per month for the one year term, plus the Company issued Century Media a 14-month warrant (the “Century Media Warrant”) to purchase up to 250,000 shares of the Company’s common stock at exercise prices of $4.50, $4.75, $5.00, $5.25 and $6.00 for each 50,000 shares subject to the Century Media Warrant. The Century Media Warrant vested in full on the date of issuance. The Company calculated the fair value of the warrant at approximately $241,000, using the Black Scholes-Merton option pricing model, in the first quarter of 2012. Expense for consulting services will be recorded over the 14-month service term."

"Financing Cash Flows - The Company used a net of approximately $711,000 of cash for financing activities including payments under debt of $359,000 and capitalized lease obligations of $88,000. In addition, the Company paid $240,000 in accrued placement agent fees in January 2011 for the sale of equity which had occurred in December 2010. As noted above, the Company borrowed $1,200,000 under at 10-Year note for purchase of the Company’s Packaging division’s 40,000 square foot facility."

ECB Ligitation:

Now they are suing former client coupons.com: