UPDATE: As we suspected, Demonet is undercapitalized and is now being forced to come back to investors looking for an additional 3 million. Some of the firms originally raising money for this are still raising money even though no longer authorized to do so. Raising more money represents dilution to the original investors, and increases the debt load of a company that has yet to produce any significant revenue. Now everyone, new and old investors are at a significantly increased risk of business failure due to the debt load alone.

FURTHER UPDATE: One of the IDE members is on the steering committee trying to straighten out the problems regarding DEMONET. To date the revenue produced by the company is negligible. And we are hearing rumors that the company president, Robert Jones, may have raised as much as 12 million dollars, each group being unknown to the other. This is starting to smell.

FURTHER UPDATE: We received from one of our new members in March, 1997, new DEMONET material. The company is still raising money. And worse, implying in their material that this is all brand new, and not a company already heavily in debt to investors.

FURTHER UPDATE: Robert Jones, the President of Demonet called us, starting the conversation by objecting to our calling him a ‘crook’. Well we hadn’t. But we took advantage of the call to confirm a few things. Mr. Jones 1. admitted that he had given up 50-60% front loads to the firms raising money for Demonet.  And that the total raised so far was in excess of $10 million, with the company only getting $4.5 million. 2. Admitted that many of these firms raised money in violation of securities regulations, raising the possibility that regulatory authorities could shut down Demonet. Mr. Jones claims this was the fault of those raising the money, not his. 3. Admitted that he was still raising money (legally now), and IS NOT DICLOSING that the company is already the $10 million in debt. We told him that we did not know if anyone from the IDE membership had called him a crook. We apologized if someone had. And since we couldn’t meet everyone looking for money, we had to judge people by their actions. And the actions of violating securities regulations, a 50% front load, and non-disclosure of relevant terms were not actions that are designed to inspire confidence.

We then talked to managers of the LLC invested in the company, and they report that it is going through an extreme shrinkage, cutting costs, consolidating quarters, and apparently scrambling to keep everything going. We wish them well, but also wish companies would not put themselves in jeopardy by paying out extreme front loads for their funding.

UPDATE: According to one of the investor partnership heads, this has become an investment ‘of the living dead’. There is no office, only a mail and phone drop, and the principal is supporting himself by repairing computers. Still he hasn’t given up, so investors can’t even write the investment off their taxes.