This is all just my opinion but hope it gets some people looking harder at this company, much like some of the China reverse mergers that are now being put under the microscope-

OK so I glanced over a company (MLKNA.PK) that was being talked about by several regular good posters on IHub VMC (Value MicroCap) board. I think many had mentioned being invested in it including people like cleverrox, 10bagger, Bobwins, SSKILLZ, MikeDDKing, etc so I thought it was worth looking at.
Then I glanced at the balance sheet. Within minutes I thought “something aint right with this one”. My next thought was how could all those people miss what seemed like a potential major issue to me? I thought maybe I was missing something so I started looking closer. It was the ARs outgrowing revs sequentially that first drew my negative attention and also the margins considering they're a tiny company in the competitive space that ahs large players. That made me look a bit more.
What I found tended to back up the initial impression that something probably isn’t right.

Let’s start with this old report from 2003 era-

Citron report:

http://www.citronresea...

Just reading thru that seems kind of scary if I am long the stock and looking at it right. After all, Western Media Group (the former name of Medlink) is mentioned as being pushed by a Boiler Room operation and the current CEO and CFO were listed as consultants with the company going all the way back to 2001 in their annual.

But let’s keep looking around. What about MLKNA’s auditor that signed off on the 2009 annual? Are they good?
Last auditor to sign off on MLKNA’s 2009 annual I believe was Jewett, Schwartz, Wolfe, and Associates (see page 90 of their 2009 annual).

http://www.sec.gov/Arc...

PCAOB made public 8 “deficiencies” when conducting inspection of Jewett, Schwartz, Wolfe, and Associates in July 2006 with the “deficiencies” found during that inspection and not made public until November 21 2008 (apparently because the issues were not adequately addressed). This is cut and pasted from PCAOB report:

Those deficiencies were –
(1) the failure, in two audits, to perform audit procedures to determine
whether revenue was recorded properly;
(2) the failure to perform adequate audit procedures to determine whether a
debt restructuring transaction was accounted for properly;
(3) the failure to perform audit procedures to determine whether a related
party transaction was accounted for properly;
(4) the failure to perform an adequate evaluation to determine whether there
was substantial doubt regarding the issuer's ability to continue as a going
concern;
(5) the failure to perform adequate audit procedures to test the valuation of
goodwill;
(6) the failure to perform audit procedures related to the Firm's use of the
work of a specialist in auditing the fair value of certain assets acquired;
(7) the failure to perform adequate audit procedures related to the
completeness and accuracy of debt and accrued interest payable; and
(8) the failure to perform adequate audit procedures to determine the
reasonableness of the reserve for inventory obsolescence.

http://pcaobus.org/Ins...

So what are we looking at with these PCAOB findings? Let’s look at a Wikipedia explanation of the PCAOB:

http://en.wikipedia.or...

The specific interesting part that might be applicable here is this (below), paying attention to point 1 & 2 and that the PCAOB inspection from 2008 actually made public the 8 “deficiencies” (already noted above):
Inspection Reports
PCAOB periodically issue Inspection Reports of registered public accounting firms. While a large part of such reports are made public, portions of an inspection report that deal with criticisms of, or potential defects in, the firm's quality control systems are not made public if the firm addresses those matters to the Board's satisfaction within 12 months after the report date. Those portions are made public, however, if (1) the Board determines that a firm's efforts to address the criticisms or potential defects were not satisfactory, or (2) the firm makes no submission evidencing any such efforts.

OK so a PCAOB inspection was done in July 2006 on JSW. A letter was sent back to the PCAOB from the auditors (JSW) dated Sept 16 2008 (see bottom page of PCAOB report linked below). The PCAOB then in November 2008 went public with their “deficiency” findings- looks like over 2 years after the initial inspection so lots of time for JSW to correct the deficiencies it would seem yet the PCAOB went public with the findings.

Would you want that auditing firm doing your audits if you were totally legit/free of fraud?
MLKNA has JSW doing their audits. At least as of 2009 and I’m guessing 2010 as well.

Speaking of 2010, here’s another PCAOB inspection finding of JSW report dated October 2010 (more current) and they found even more deficiencies this time so looks like the auditing firm is going the wrong way in clearing up “deficiencies” with the PCAOB (14 “deficiencies” noted this time):

http://pcaobus.org/Ins...

It is worth reading the auditor’s (JSW) response in there too. Very lengthy but IMO seems to show some ugly companies they audit. For example “Issuer B” said to be insolvent.

If you want to learn more for yourself on this situation, going to Edgar online and typing in Interpharm or Atec or Medlink or Western Media Group will help enhance the Citron report info IMO.
It was interesting to see apparently the CEO of MLKNA (Vuono) filed a multimillion dollar lawsuit against Interpharm in 2006 in part for “finder’s fees” owed him (see note 17 of Interpharm’s last annual).
Hmm, finders fees? I thought he was doing consulting? Wasn’t he a consultant to Western Media group too in 2001 along with Rose? Wonder what he was doing to earn finders fees at Interpharm? I don’t know.
Maybe reread the Citron report and guess for yourselves. I am not sure what he was doing consulting for the company and did not look for the legal suit specifics regarding Interpharm. Also, I believe all these company addresses are/were within 20 miles of each other. A close-knit group I guess.

On a sad note, this company (Medlink) I believe is heavily owned by a good group of public message board posters on VMC “IHub” board that IMO should definitely know better than to see this company as a good investment. The risks in my mind are way way too high as a potential fraud to put any money at risk unless they are thinking of a quick flip or something but each person has their own decisions to make of course. I think it is even included in the VMC index. Seems very few there do initial heavy skeptical digging any more (unless it is a reverse merger China micro). People need to be more skeptical first IMO before putting their hard-earned money into a small company.

Last quarter the company reported sequential revenue growth that was about $1 mill LESS than accounts receivables growth sequentially (one of the first red flags that had me look a bit closer).

There’s more as always but this should be enough of a push to shed light on the potential of this being a fraud or at least make people reconsider being long this company at present. I do not know that it is a scam or even committing any fraud but given the circumstantial evidence and the balance sheet I would say the risk is too high for any of my investment money and I would short it if I could.
This unfortunately is another example of a company that basically can not be shorted meaningfully by regular retail investors like me.
That’s OK, truffling around on some of these companies helps me potentially learn more about how to avoid losing money.

To me it looks like it would be hard to trust the company AND the auditors. All is just my personal opinion, look for yourselves and draw your own conclusions.

Hope the links work.

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