Health Systems Solutions, Inc., reeling from the collapse of a planned merger and an international fraud investigation of its principal investor, has announced it will deregister its common stock and stop filing reports with the U.S. Securities and Exchange Commission.
Company officials announced in a brief press release on March 5 that “the obligation of filing SEC reports has become too burdensome and expensive for a company of HSS’ size.” Officials said the money saved by the company in delisting would be used for new technologies and services.
HSS expects to file paperwork with the SEC on or about March 18, and expects that its stock will be deregistered in 90 days.
The announcement caps a long month for the New York-based company, which until recently had been based in Tampa, Fla. In February, the company had a $62 million offer on the table to acquire Emageon, a Birmingham, Ala.-based provider of IT solutions for hospitals, healthcare networks and imaging centers. That deal collapsed when HSS’ principal investor, Stanford International Bank, Ltd., could not provide the money to complete the merger.
When the deal was called off on Feb. 12, Emageon took control of a $9 million escrow account created by HSS in case the merger could not be completed. Emageon has since entered into a merger agreement with Boston-based AMICAS, Inc. for approximately $39 million – a little more than half the value of the proposed HSS-Emageon deal.
Within a week of the failed merger, federal investigators raided the offices of Texas billionaire Robert Allen Stanford and shut down his operations in the U.S. and elsewhere under allegations of fraud to the tune of at least $8 billion. Stanford’s businesses are the Houston-based Stanford Group and Stanford Capital Management as well as Stanford International Bank, based in Antigua. According to SEC documents, that bank owns 83 percent of HSS’ common stock. The rest is owned by CEO Stan Vashovsky, CFO Michael Levine and a few other company insiders.
HSS closed the third quarter of 2008 with $3.02 million in revenues, a 106 percent increase over the third quarter of 2007, and gross profit of $1.33 million, a threefold increase over the same quarter of the year before. At that time, Stanford International Bank, based in Antigua, had agreed to provide an additional $5 million in equity and $85 million in convertible securities to the company for acquisitions and working capital.
“Stanford’s desire to fund HSS’ growth through an equity investment – as opposed to debt – affirms their belief in the upside potential of our vision and our team,” Vashovsky said in a press release at that time. “From HSS’ perspective, we will have additional long-term capital to invest in developing new products and services. With the added flexibility afforded by the structure of this transaction, we expect to continue building on the success of the past year.”
Stanford and associates are accused in civil charges of lying about the safety of investments sold as “certificates of deposit,” which promised unrealistically high rates of return. Investigators also said Stanford faked historical data about other investments, which he used to lure new investors in a $1.2 billion mutual fund scheme, and that he shielded 90 percent of the company from independent review.
A little more than a month ago, HSS signed a contract with US Investigations Services, Inc., the largest supplier of investigative services to the federal government, to develop a Production Master Scheduling/Case Load Management mobility application to ensure compliance with government case closure requirements.