From Web design to topless bars: The fascinating tale of Internet Advisory Corp.

MSNBC ^ | March 13, 2002 | Christopher Byron

[Bubba_Leroy]

Here’s a story to remind you about how Wall Street is such an exciting place to put your money. Do you recall a stock known as Internet Advisory Corp. from back in the salad days of the dot-com boom? Wonder what’s happened to it since then? Well, read on for the heartwarming tale of a Web-design outfit that crashed in the tech wreck, and is now trying to resurrect itself as a topless bar.

IN CASE YOU’VE FORGOTTEN, Internet Advisory Corp. enjoyed an Elvis moment of sorts in the late 1990s when its terrifically descriptive stock symbol of ‘PUNK’ generated a certain amount of attention (and snickering) from the folks who followed its fortunes in the Over The Counter pink sheets.

For a time, those fortunes were worth following, too, as PUNK cranked out an endless supply of press releases promoting itself to the world as a Web management and design outfit. There were said to be deals with China, and even a press release that managed to work in the name of Paul McCartney.

Such enthusiastic outpourings managed to lift PUNK’s stock price from one cent to — for a brief and glorious moment in the spring of 1999 — nearly $14, giving the company a momentary market value on Wall Street of roughly $100 million.

But when the dot-com bubble popped, the dreams of Internet Advisory Corp. fizzled as well — though from a strictly business point of view, they were never based on very much to begin with. That is particularly so when you consider that the company has taken in total revenues since 1999 of a mere $1.4 million while racking up losses of more than $3.7 million. Finally, last June, the company threw in the towel and filed for bankruptcy, showing $22,240 in cash, and a balance sheet deficit of close to half a million.

That’s where the topless bar comes in, as it now turns out that Internet Advisory Corp. is busily engaged in morphing itself into a topless nightclub in Manhattan’s “adult entertainment zone” not far from Ground Zero.

The gimmick the company is using is the acquisition of an outfit called Go West Entertainment, Inc., which holds a 20-year “exclusive license” to open up three New York City topless bars under the name “Scores.” That name, in turn, is on the marquee of a New York City emporium of adult entertainment that has, to say the least, a colorful history.

Numerous published reports over the years have linked the Scores establishment to factions within New York City’s organized criminal underworld. In 1999, the New York Times reported that the East Side strip club was controlled by the Gambino crime family. Two Albanian mobsters are now serving prison sentences for the 1996 murders of a club bouncer and waiter.

Our story picks up the history of Scores last August when, according to a source privy to the inner workings of the club, a deal was put together whereby the East Side club would merge itself into Internet Advisory Corp. A private placement memorandum was circulated to that end, inviting investors in the gold Rolex crowd to get in on the ground floor at $2 per share, for a deal that the memo said was going to balloon into a chain of strip clubs in New York, Miami and Las Vegas.

The memorandum put a $100 million market value on the business, and offered some interesting insights into the kind of money an East Side strip joint was generating in the summer of 2001. For instance, the average bill at Scores was $120, with alcohol comprising $45 of the tab. Some 83 percent of all bills were paid by credit card. Tips to the washroom attendants totaled roughly $20,000 per year. A massage operation generated $160,000 annually.

Yet for some reason that is even now not entirely clear, the deal subsequently fell apart, only to resurface this week in an oddly modified form. In the new deal, Internet Advisory Corp. has agreed to acquire the rights to open up three new “Scores” strip-joints elsewhere in town, as well as take over the lease on a building on West 28th Street on Manhattan’s Lower West Side.

What is IACP paying for the rights to the Scores name and some empty commercial space in a run-down section of town? Answer: 10 million shares of stock, worth $25 million at current prices.

Nice for whoever got the stock, of course: $25 million for something that may turn out to be worth a whole lot of nothing.

As for everyone else, well, here’s a question? When you consider that the company’s latest published financial statement shows balance sheet cash of exactly $64,811 as of Sept. 30, and the aforementioned private placement memo from last summer estimated that the cost of opening the new facility on West 28th Street could approach $5 million, where is the company going to get the money to finish the job?

Actually, when you consider the history of Scores up till now, maybe that’s a question you don’t want to ask? Meantime, anyone for a lap-dance?

[Bubba_Leroy]

At least now they have a business I can understand.

[eno_]

Apart from some element of irony, what they are describing is a "reverse merger," the object of which is to take a somewhat gamey business public. It happens to a lot of third-tier NASDAQ stocks on their way down: merge with a business that might not be able to go public otherwise, and provide liquidity to the owners of that business.