Good reading: The ABC's Of MYEC Apr 19, 2014
Post# of 537
Posted On: 11/14/2015 3:53:09 PM
Good reading:
The ABC's Of MYEC
Apr 19, 2014 1:05 AM
By Marketman 123
"for every action there is an equal and opposite reaction"
- Isaac Newton
I felt compelled to write this short blog in response to recent post "My ECheck - Don't Bank On It." and a number of phone calls I've received on the subject. To be clear, I'm not opposed to a difference of opinion (I will not delete comments opposed to my view, I would evaluate the claim and agree or provide a rebuttal) as long as the one who brings forth the information can backup statements with facts and it's clear that despite all of the information available publicly that many don't clearly understand the industry and what unique features MyECheck brings to the table. Hopefully what I write hear clarifies a few of these points.
So what is the deal with Check21?
The best way of describing MyECheck (Check 21) is to offer a comparison to computer processors. Intel (NASDAQ:INTC) had a monopoly on the CPU industry for many years until Advanced Micro Devices, Inc. (NASDAQ:AMD) made an appearance to the market offering a cheaper alternative (the dwindling market share of AMD is beyond the scope of this article). The difference in comparison to ACH vs. Check21 is that the service is significantly less expensive by more than half the cost, transactions take between 1 and 3 seconds as opposed to ACH (which typically take between 1 and 3 business days) and because of the speed of the transactions, fraud related to chargebacks cannot occur.
Furthermore when we look at the processor industry, the CPU is in essence much the same as the backend service (as is ACH or Check21) in which regardless of who is providing the frontend system, be it Hewlett-Packard Development Company (NYSE:HPQ), International Business Machines Corporation (NYSE:IBM), DELL or Apple (OTC:APPL), they all have the option of choosing Intel or AMD regardless of all the bells and whistles each offer to try and capture market share. The same applies for the checking industry, it doesn't matter if it's a bank, fund processor, retail chain or any variant of special service company that move money from one account to another, they ALL need to use either ACH or Check21 processing.
I believe some of the confusion comes to those who look at MyECheck as industry specific (like Marijuana) or because of the upcoming release of iPhone/Android apps. These apps are not the core of this business, the company could easily function and prosper without ever having developed these apps. Any existing app on the market which processes, scans or offers any variation which moves money via the checking system currently runs on ACH as the backend processing services and pays the appropriate fees in order to do so.
MYEC is essentially expanding their income source by offering these apps, but could have easily waited for 3rd party developers to create their own proprietary apps to process through MyECheck's proprietary and patented system. MYEC has already sold licensing branded versions of their upcoming apps to numerous 3rd party customers. Other companies can create (or modify existing apps to access MyEChecks system as well)
With the recent release of MyECheck 3.0 MYEC IS now processing payments in accounts in numerous different banking institutions such as (but not limited to) Bank of America and Chase among others. We have mitigated the risks once associated and realized with the company going forward.
Check 21 Act and reference to the Patent held by Ed Starrs
Firstly, a few points about check 21 act. This act is not just made up of 1 element, there are a few elements to the act (I will not cover all aspects of it here). One such aspect is the digital return of a check to the issuer as opposed to returning the actual physical check. Up to this point this has been the most widely accepted aspect from financial institutions and has the same legal status as previously given to the return of physical checks (this is a scan of the physical check issued). There is no monetary value to be gained from this part other than the money saved by banks which no longer need to physically return the check to clients and has nothing to do with MYEC. One such example can be seen here by RBC. Most banks have adopted the practice even if they don't particularly publish information on it.
A new U.S. federal law, called the "Check Clearing for the 21st Century Act,'" or Check 21 Act, gives U.S. financial institutions the option of processing substitute cheques instead of original cheques. This new Act gives a substitute check/IRD that meets the requirements of the Act the same legal status as an original paper cheque and requires financial institutions to accept substitute checks/IRDs.
While this is a new U.S. law, it affects financial institutions and their clients across North America. Once this new law takes effect, RBC Financial Group will begin receiving substitute checks/IRDs from U.S. financial institutions.
MyECheck is the "ONLY" company with a patent which can legally issue a digital check for processing (most other companies make, capture or scan a digital copy of an actual physical check). Obviously, the Check 21 act itself cannot be patented, but the process of creating electronic checks and how it's handled, can be. The Patent covers all aspects to the issuing of electronic checks, real-time verifications and processing of those electronic checks. It also covers all type of transactions
"to acquire physical product, a service, digital media, or digital content; and the financial institution is one of a bank, savings and loan (S&L), credit union, or Federal Reserve."
As well as covering the information from the user being received through a graphical user interface (and since this is all done virtually, it would be difficult to work around these parameters).
Federal Reserve interpretation
In regards to statements about the Federal Reserve Bank of Atlanta which is covered here (which was quoted out of context), it is there job to fully evaluate any technology (the good and the bad) and point out any type of security holes that may exist.
The topic discussed about RCC (remotely Created Checks) is NOT inherent to MYEC or Check21 processing, it's equally problematic to ACH. On the Assessment by the Federal Reserve Bank of Atlanta they also give examples of Remotely Created Check Fraud which clearly had nothing to do with MyECheck or the Check21 act seen below (there are more examples on the link provided here):
(click to enlarge)
"In recent years, the use of these "electronic remotely created checks" has increased. The primary reason is to avoid the costs of printing and to leverage off the imaged-based processing permitted under the Check Clearing for the 21st Century Act(Check 21). Yet, no matter their form (paper or electronic), it is possible for these payment orders to wind up converted and processed as an ACH debit item and cleared through the ACH network.
Whether processed through the check collection system or ACH network, remotely created checks' most common uses include: pre-authorized drafts, where for example, a consumer approves a payment of its insurance policy and the company issues an unsigned draft"
"In its simplest form, the issue or creation of a remotely created check is a matter between the account holder (drawer) and payee. The drawer grants the payee (merchant) authorization to produce a remotely created check drawn on the drawer's account. The payee obtains the information that appears in the MICR line of the drawer's physical checks, and based on this information, the payee enters the check information and creates either an electronic template of a check or sometimes a paper check document that looks like a check. The check does not bear the drawer's signature; instead the signature line displays the drawer's name or some other verbiage referencing the drawer's authorization to create the check"
I also covered this in my previous articles, but we also know that the federal reserve is in the process of revising current check processing related to the Check 21 act which was enacted on October 28, 2003 and then became effective in October 2004. On February 4, 2014, the Board of Governors of the Federal Reserve System took the final step before creating a new law that will define a new payment official instrument called the "electronic check". They are now indirectly pushing the banking industry towards implementing the Check 21 act across all institutions (in other words pushing banks towards adopting MyECheck) see here.
One of the primary reasons for slow integrations by the banking industry is due to liability. Those words "Liable" strike fear in the hearts of even the largest of organizations and is why the results of the new proposed law is so significant to the mass adoption of the technology. For those companies willing to listen today should feel at ease knowing that MYEC actually has partnered with industry leading check guarantee providers to offer clients a cost effective Check Guarantee Service. The check guarantee provider warranties all approved checks and reimburses the Payee (Merchant) for financial losses incurred as a result of returned checks. The Check Guarantee Provider buys the returned checks that have been warranted from merchants for the full face value of the returned checks. MyECheck merchants utilize Check Guarantee Service (see here) so that they can ship products or provide services immediately without having to wait to determine if the check will be returned unpaid. The Check Guarantee Service also eliminates the need for Merchants to collect on returned checks from their customers.
there are a few things that must be considered as well. First, are there any secure payment systems at all? Has anyone here heard of credit card fraud? Fraud and hacking are a part of life, that's a fact. The harder we work to secure our systems, the harder frauders work to circumvent the measures we put in place.
"Ignorance is bliss"
- Thomas Gray
There are two parts to our technology that should put us ahead of the curb are that currently via ACH, when fraud occurs for clients, the crooks have up to a 3 day heads start for the transactions to ever occur in ones account in order to react. Ironically, this has been one of the leading opposition to electronic checks using Check 21 Act. Ignorance is bliss, but that's not so when it comes to money… The sooner one knows, the sooner they can react to the fraud. I also like that we are the backend processor that does not lend itself or enable for fraud (discussed later).
The competition???
A list of companies have been mentioned by the author of the slanderous, false and misleading article here: PaySimple, Green Payment Processing, PacNet Services, CyberSource, Vchecks, Payment Processing Alliance, Focal Payments, RCC Billing Solutions, Burroughs, Panini, Bluepoint Solutions, Digital Check. These companies are no different than numerous others such as InterPay, VX Gateway and iCard1. All are good companies, but are much better suited as our clients than competitors. They are no more our competition than Amazon or PayPal.
The company
There is no denying the company has been in business for many years, they have had a string of bad luck when the 2 banks partnered with MYEC closed their doors during 2010 and 2011. There is no getting around the fact that Ed Starrs has eaten his share of humble pie. I will not recover all details covered in my previous 2 articles here, but it amazes me that in light of the company having over $1 million in debt, Ed has always stayed the course, and has took hold of his responsibilities and has done an amazing job over the past 2 quarters at dwindling that debt to a fraction of what it once was. Not to mention the company has generated OVER $1 million in revenue since restarting operations over the course of 2 quarters with little overhead.
As an extra note, I would like to comment in regards to the 6 million shares in exchange for $53,252 ( or 0.0088 cents per share) which was not even mentioned by the blogger. Many feel/felt like this was an unreasonable exchange as it may seem very cheap when looking at the PPS today, but if you look at the previous trading days to the transaction (on Feb 26th 0.0088 was about the middle between the high & low) it was not as cheap as some may think.
Final Rebuttal
Finally I will offer insight to the comments of the author quoted below (most anyone who has followed recent press releases will already know the answer to some of it)
"You see, in October 2012, Mr. Starr, acting on behalf of My eCheck voluntarily terminated the company's registration with the SEC. Hence the company became an alternate reporting entity on the OTC. That means that the company doesn't need to explain what Mr. Starrs did to earn those 3,000,000,000 shares of common stock.
With the last annual report filed, we find out that Mr Starrs only owns just over 2 Billion shares of stock. No where in the filings available on OTC do we find an explanation of what happened to the other 1 Billion shares of common stock.
Provided those shares were subject to rule 144 restriction, and given the time they were issued (2012), they would be eligible to trade freely in the market now. Were some unrelated third party to decide to liquidate 1,000,000,000 shares in the market where the average daily volume has been less than 25 million shares, they would undoubtedly move the market. And that market movement would NOT be in the direction desired by long shareholders."
What can I say, it's true… Ed did voluntarily stopped filing with the SEC…
After our business partners went belly up and we were no longer able to generate revenue the company went "dark" by filing SEC Form 15. Though not required, Mr. Starrs continued filing OTC disclosures in order to updates his shareholders with pertinent information.
Here's a great presentation provided by Ellenoff Grossman & Schole LLP.
The "Going Dark" presentation lists these benefits for filing a Form 15:
1. Significantly lower operating costs
2. No SOX 404 compliance
3. Management can focus more on the business
4. Reduces potential liability for officers and directors
5. D & O insurance costs will likely decrease
6. Shares can still trade on the Pink Sheets
7. Less public scrutiny and disclosure
8. More confidentiality regarding business activities
9. Simplified corporate governance
10. Greater freedom to explore extraordinary corporate transactions
As per the 1billion "Missing" shares it was filed with the OTC markets and PRed here
Conclusion:
There are risks, there always are when investing in stocks, I'm not opposed to knowing the good and bad of any investment that I own. Originally when the blog had been discovered I had hoped that the author simply did not understand the industry, the company or our patent well and had intended to simply be factual in my rebuttal, but his intentions to discredit and harm the company seemed clear when he removed any comment from his blog that presented factual information opposing his views in order to deceive shareholders. He clearly sees value here and is willing to take inconceivable steps to profit off of the fear of others. I welcome ALL feedback (good or bad)
It is my hope that Seeking Alpha in light of Investor RockieK's deceitfully and misguiding opinions in order to profit from his privilege as a poster here, will re-evaluate the manner in which people can post unregulated and unverified information in the future for instablogs (even at my own expense) I have, and will continue to be truthful and as factual as possible to uphold the integrity of myself and the site.
All investors should do their own due diligence whenever making any sort of investment regardless of popular belief or source.
Disclosure: I am long MYEC.
Stocks: MYEC, INTC, AMD, HPQ, IBM, AAPL
The ABC's Of MYEC
Apr 19, 2014 1:05 AM
By Marketman 123
"for every action there is an equal and opposite reaction"
- Isaac Newton
I felt compelled to write this short blog in response to recent post "My ECheck - Don't Bank On It." and a number of phone calls I've received on the subject. To be clear, I'm not opposed to a difference of opinion (I will not delete comments opposed to my view, I would evaluate the claim and agree or provide a rebuttal) as long as the one who brings forth the information can backup statements with facts and it's clear that despite all of the information available publicly that many don't clearly understand the industry and what unique features MyECheck brings to the table. Hopefully what I write hear clarifies a few of these points.
So what is the deal with Check21?
The best way of describing MyECheck (Check 21) is to offer a comparison to computer processors. Intel (NASDAQ:INTC) had a monopoly on the CPU industry for many years until Advanced Micro Devices, Inc. (NASDAQ:AMD) made an appearance to the market offering a cheaper alternative (the dwindling market share of AMD is beyond the scope of this article). The difference in comparison to ACH vs. Check21 is that the service is significantly less expensive by more than half the cost, transactions take between 1 and 3 seconds as opposed to ACH (which typically take between 1 and 3 business days) and because of the speed of the transactions, fraud related to chargebacks cannot occur.
Furthermore when we look at the processor industry, the CPU is in essence much the same as the backend service (as is ACH or Check21) in which regardless of who is providing the frontend system, be it Hewlett-Packard Development Company (NYSE:HPQ), International Business Machines Corporation (NYSE:IBM), DELL or Apple (OTC:APPL), they all have the option of choosing Intel or AMD regardless of all the bells and whistles each offer to try and capture market share. The same applies for the checking industry, it doesn't matter if it's a bank, fund processor, retail chain or any variant of special service company that move money from one account to another, they ALL need to use either ACH or Check21 processing.
I believe some of the confusion comes to those who look at MyECheck as industry specific (like Marijuana) or because of the upcoming release of iPhone/Android apps. These apps are not the core of this business, the company could easily function and prosper without ever having developed these apps. Any existing app on the market which processes, scans or offers any variation which moves money via the checking system currently runs on ACH as the backend processing services and pays the appropriate fees in order to do so.
MYEC is essentially expanding their income source by offering these apps, but could have easily waited for 3rd party developers to create their own proprietary apps to process through MyECheck's proprietary and patented system. MYEC has already sold licensing branded versions of their upcoming apps to numerous 3rd party customers. Other companies can create (or modify existing apps to access MyEChecks system as well)
With the recent release of MyECheck 3.0 MYEC IS now processing payments in accounts in numerous different banking institutions such as (but not limited to) Bank of America and Chase among others. We have mitigated the risks once associated and realized with the company going forward.
Check 21 Act and reference to the Patent held by Ed Starrs
Firstly, a few points about check 21 act. This act is not just made up of 1 element, there are a few elements to the act (I will not cover all aspects of it here). One such aspect is the digital return of a check to the issuer as opposed to returning the actual physical check. Up to this point this has been the most widely accepted aspect from financial institutions and has the same legal status as previously given to the return of physical checks (this is a scan of the physical check issued). There is no monetary value to be gained from this part other than the money saved by banks which no longer need to physically return the check to clients and has nothing to do with MYEC. One such example can be seen here by RBC. Most banks have adopted the practice even if they don't particularly publish information on it.
A new U.S. federal law, called the "Check Clearing for the 21st Century Act,'" or Check 21 Act, gives U.S. financial institutions the option of processing substitute cheques instead of original cheques. This new Act gives a substitute check/IRD that meets the requirements of the Act the same legal status as an original paper cheque and requires financial institutions to accept substitute checks/IRDs.
While this is a new U.S. law, it affects financial institutions and their clients across North America. Once this new law takes effect, RBC Financial Group will begin receiving substitute checks/IRDs from U.S. financial institutions.
MyECheck is the "ONLY" company with a patent which can legally issue a digital check for processing (most other companies make, capture or scan a digital copy of an actual physical check). Obviously, the Check 21 act itself cannot be patented, but the process of creating electronic checks and how it's handled, can be. The Patent covers all aspects to the issuing of electronic checks, real-time verifications and processing of those electronic checks. It also covers all type of transactions
"to acquire physical product, a service, digital media, or digital content; and the financial institution is one of a bank, savings and loan (S&L), credit union, or Federal Reserve."
As well as covering the information from the user being received through a graphical user interface (and since this is all done virtually, it would be difficult to work around these parameters).
Federal Reserve interpretation
In regards to statements about the Federal Reserve Bank of Atlanta which is covered here (which was quoted out of context), it is there job to fully evaluate any technology (the good and the bad) and point out any type of security holes that may exist.
The topic discussed about RCC (remotely Created Checks) is NOT inherent to MYEC or Check21 processing, it's equally problematic to ACH. On the Assessment by the Federal Reserve Bank of Atlanta they also give examples of Remotely Created Check Fraud which clearly had nothing to do with MyECheck or the Check21 act seen below (there are more examples on the link provided here):
(click to enlarge)
"In recent years, the use of these "electronic remotely created checks" has increased. The primary reason is to avoid the costs of printing and to leverage off the imaged-based processing permitted under the Check Clearing for the 21st Century Act(Check 21). Yet, no matter their form (paper or electronic), it is possible for these payment orders to wind up converted and processed as an ACH debit item and cleared through the ACH network.
Whether processed through the check collection system or ACH network, remotely created checks' most common uses include: pre-authorized drafts, where for example, a consumer approves a payment of its insurance policy and the company issues an unsigned draft"
"In its simplest form, the issue or creation of a remotely created check is a matter between the account holder (drawer) and payee. The drawer grants the payee (merchant) authorization to produce a remotely created check drawn on the drawer's account. The payee obtains the information that appears in the MICR line of the drawer's physical checks, and based on this information, the payee enters the check information and creates either an electronic template of a check or sometimes a paper check document that looks like a check. The check does not bear the drawer's signature; instead the signature line displays the drawer's name or some other verbiage referencing the drawer's authorization to create the check"
I also covered this in my previous articles, but we also know that the federal reserve is in the process of revising current check processing related to the Check 21 act which was enacted on October 28, 2003 and then became effective in October 2004. On February 4, 2014, the Board of Governors of the Federal Reserve System took the final step before creating a new law that will define a new payment official instrument called the "electronic check". They are now indirectly pushing the banking industry towards implementing the Check 21 act across all institutions (in other words pushing banks towards adopting MyECheck) see here.
One of the primary reasons for slow integrations by the banking industry is due to liability. Those words "Liable" strike fear in the hearts of even the largest of organizations and is why the results of the new proposed law is so significant to the mass adoption of the technology. For those companies willing to listen today should feel at ease knowing that MYEC actually has partnered with industry leading check guarantee providers to offer clients a cost effective Check Guarantee Service. The check guarantee provider warranties all approved checks and reimburses the Payee (Merchant) for financial losses incurred as a result of returned checks. The Check Guarantee Provider buys the returned checks that have been warranted from merchants for the full face value of the returned checks. MyECheck merchants utilize Check Guarantee Service (see here) so that they can ship products or provide services immediately without having to wait to determine if the check will be returned unpaid. The Check Guarantee Service also eliminates the need for Merchants to collect on returned checks from their customers.
there are a few things that must be considered as well. First, are there any secure payment systems at all? Has anyone here heard of credit card fraud? Fraud and hacking are a part of life, that's a fact. The harder we work to secure our systems, the harder frauders work to circumvent the measures we put in place.
"Ignorance is bliss"
- Thomas Gray
There are two parts to our technology that should put us ahead of the curb are that currently via ACH, when fraud occurs for clients, the crooks have up to a 3 day heads start for the transactions to ever occur in ones account in order to react. Ironically, this has been one of the leading opposition to electronic checks using Check 21 Act. Ignorance is bliss, but that's not so when it comes to money… The sooner one knows, the sooner they can react to the fraud. I also like that we are the backend processor that does not lend itself or enable for fraud (discussed later).
The competition???
A list of companies have been mentioned by the author of the slanderous, false and misleading article here: PaySimple, Green Payment Processing, PacNet Services, CyberSource, Vchecks, Payment Processing Alliance, Focal Payments, RCC Billing Solutions, Burroughs, Panini, Bluepoint Solutions, Digital Check. These companies are no different than numerous others such as InterPay, VX Gateway and iCard1. All are good companies, but are much better suited as our clients than competitors. They are no more our competition than Amazon or PayPal.
The company
There is no denying the company has been in business for many years, they have had a string of bad luck when the 2 banks partnered with MYEC closed their doors during 2010 and 2011. There is no getting around the fact that Ed Starrs has eaten his share of humble pie. I will not recover all details covered in my previous 2 articles here, but it amazes me that in light of the company having over $1 million in debt, Ed has always stayed the course, and has took hold of his responsibilities and has done an amazing job over the past 2 quarters at dwindling that debt to a fraction of what it once was. Not to mention the company has generated OVER $1 million in revenue since restarting operations over the course of 2 quarters with little overhead.
As an extra note, I would like to comment in regards to the 6 million shares in exchange for $53,252 ( or 0.0088 cents per share) which was not even mentioned by the blogger. Many feel/felt like this was an unreasonable exchange as it may seem very cheap when looking at the PPS today, but if you look at the previous trading days to the transaction (on Feb 26th 0.0088 was about the middle between the high & low) it was not as cheap as some may think.
Final Rebuttal
Finally I will offer insight to the comments of the author quoted below (most anyone who has followed recent press releases will already know the answer to some of it)
"You see, in October 2012, Mr. Starr, acting on behalf of My eCheck voluntarily terminated the company's registration with the SEC. Hence the company became an alternate reporting entity on the OTC. That means that the company doesn't need to explain what Mr. Starrs did to earn those 3,000,000,000 shares of common stock.
With the last annual report filed, we find out that Mr Starrs only owns just over 2 Billion shares of stock. No where in the filings available on OTC do we find an explanation of what happened to the other 1 Billion shares of common stock.
Provided those shares were subject to rule 144 restriction, and given the time they were issued (2012), they would be eligible to trade freely in the market now. Were some unrelated third party to decide to liquidate 1,000,000,000 shares in the market where the average daily volume has been less than 25 million shares, they would undoubtedly move the market. And that market movement would NOT be in the direction desired by long shareholders."
What can I say, it's true… Ed did voluntarily stopped filing with the SEC…
After our business partners went belly up and we were no longer able to generate revenue the company went "dark" by filing SEC Form 15. Though not required, Mr. Starrs continued filing OTC disclosures in order to updates his shareholders with pertinent information.
Here's a great presentation provided by Ellenoff Grossman & Schole LLP.
The "Going Dark" presentation lists these benefits for filing a Form 15:
1. Significantly lower operating costs
2. No SOX 404 compliance
3. Management can focus more on the business
4. Reduces potential liability for officers and directors
5. D & O insurance costs will likely decrease
6. Shares can still trade on the Pink Sheets
7. Less public scrutiny and disclosure
8. More confidentiality regarding business activities
9. Simplified corporate governance
10. Greater freedom to explore extraordinary corporate transactions
As per the 1billion "Missing" shares it was filed with the OTC markets and PRed here
Conclusion:
There are risks, there always are when investing in stocks, I'm not opposed to knowing the good and bad of any investment that I own. Originally when the blog had been discovered I had hoped that the author simply did not understand the industry, the company or our patent well and had intended to simply be factual in my rebuttal, but his intentions to discredit and harm the company seemed clear when he removed any comment from his blog that presented factual information opposing his views in order to deceive shareholders. He clearly sees value here and is willing to take inconceivable steps to profit off of the fear of others. I welcome ALL feedback (good or bad)
It is my hope that Seeking Alpha in light of Investor RockieK's deceitfully and misguiding opinions in order to profit from his privilege as a poster here, will re-evaluate the manner in which people can post unregulated and unverified information in the future for instablogs (even at my own expense) I have, and will continue to be truthful and as factual as possible to uphold the integrity of myself and the site.
All investors should do their own due diligence whenever making any sort of investment regardless of popular belief or source.
Disclosure: I am long MYEC.
Stocks: MYEC, INTC, AMD, HPQ, IBM, AAPL
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