Firm to Sell Rare Stamps to Recoup Loss

Hitsgalore.com Inc. said its largest customer, Life Foundation Trust, never paid for the services it received nor for its 4% stake in the Internet marketing company.

The trust provided 85% of the revenue Hitsgalore reported for the first nine months of 1999.

Now, Hitsgalore said it’s preparing to liquidate the Aden stamp collection put up by Life Foundation Trust as collateral for the $20 million in missed payments--$10 million for 2 million shares of Hitsgalore and $10 million for advertising on its Web site.

The Rancho Cucamonga-based Hitsgalore expects to take a year or more to sell the stamps, which it said have a catalog value of $50 million and a wholesale value of $20 million. First, it will allow the trust a 20-day grace period.

“You can’t just drop one of the world’s rarest stamp collections on the market all at once,” said Dorian Reed, chairman of Hitsgalore, in a prepared statement.

In January, the company warned that “cash-flow difficulties could arise” unless the Scottsdale, Ariz.-based trust made its first payment soon. Hitsgalore gave the trust liberal terms--no money down, and a year before its money was due Saturday.

Hitsgalore didn’t file its annual report with the Securities and Exchange Commission at the end of March, as required, saying its year-end audit wasn’t complete. This week, it said the report will be filed by the end of April.

The company had $90,771 in cash on hand Sept. 31.

Its stock fell 8 cents to 70 cents, giving its 50 million shares a market value of $35 million. The stock has declined 92% over the last year.

Jeanette Wilcher, trustee of the trust, wasn’t available for comment.

Life Foundation Trust, which is not a charity, says it has charitable goals that include “the provision of food to the hungry, clothes and shelter to the needy, education to the unlearned and to minister to the spiritual needs of all people.”

Its stamp collection is stored in a Manhattan warehouse, according to Hitsgalore’s SEC filings.