Vancouver sun report on IPZ Monday should be interesting..
CDNX high flyer a familiar story
David Baines, Sun Business Reporter Vancouver Sun
The Canadian Venture Exchange may be a new forum for speculative stocks, but not all its listings have abandoned their old ways.
Vancouver-based Image Power Inc. emerged as the top volume trader during the latter part of the exchange's inaugural week. It traded 20.3 million shares as its stock price tripled to $1.67, then retreated to $1.13 by Friday's close, second only to Unique Broadband Systems Ltd.
The company, previously listed on the Vancouver Stock Exchange, is one of a new breed of high-technology companies that new CDNX president William Hess is trying to foster.
It is developing compression technology to speed transmission of computer and fax images, and reduce the amount of storage space required.
It also carries some of the vestiges of the old exchange. For example, it earlier sold millions of cheap shares to investors in offshore tax and secrecy havens.
Who these investors are -- and whether they have been taking advantage of the burst of trading activity to dump their shares -- is not known.
Also, two of the company's directors have been dealing with promoters who have been squeezed off the Vancouver or Alberta exchanges, including Thai banking fugitive Rakesh Saxena and West Vancouver promoter Don Rutledge.
Why the stock has been so active is a mystery.
On Thursday, the company issued a release saying there were no material changes to account for the trading activity.
"There have been a number of events. It may be a combination. I really don't know," said president and founder Stephen Swift in an interview Friday.
With 39 million shares outstanding (assuming exercise of all warrants and options), the company's stock-market value now exceeds $40 million.
In contrast, the company reported assets of less than $1 million as of Aug. 31, and net equity of only $522,000.
Since 1997, the company has been describing itself as a "leading provider" of image compression technology.
Swift acknowledged that revenues to date have been almost non-existent, but the company "has business relationships at various stages that will see us generate revenue in the current fiscal period."
Image Power raised development capital by selling several million shares at 25 cents or less to companies domiciled in offshore tax havens.
They include Cayman Island Securities Ltd. of Grand Cayman, Euroswiss Securities Ltd, of the Channel Islands, and Rahn & Bodmer Banquiers Zurich of Switzerland.
Swift said he doesn't know who the beneficial owners of these companies are, and has never asked.
Since none of these offshore investors owns more than 10 per cent of the stock, they are not deemed to be insiders and are not required to disclose when they are selling.
Another early investor was director Douglas E. Smith, president of Pacific Bancorp (VCC) Inc., a private venture-capital firm.
His firm bought 800,000 shares at 25 cents, with warrants to buy another 800,000 at 35 cents each. He was also personally granted options to purchase 340,000 shares at 19 cents each.
Almost immediately, Smith began selling the shares, often in advance of converting the warrants or exercising the options. In one instance, his firm was short by 513,000 shares before exercising enough warrants to cover the shortfall.
By the end of August, he and his firm had sold all 1.6 million shares and warrants, and had exercised all but 40,000 of his options and sold the underlying shares at prices up to 67 cents.
Another director, Tony Field, is closely associated with Saxena, who has been accused by Thai authorities of embezzling $88 million from the Bangkok Bank of Commerce.
He was arrested in Whistler in 1996 is currently under house arrest in Vancouver awaiting the conclusion of extradition proceedings.
In January 1998, Field replaced Les Hammond, Saxena's right-hand man in Vancouver, as a director, president and CEO of Global Explorations.
Global is a VSE-listed company controlled by Saxena. It has mineral interests in Sierra Leone, Angola, Congo and other countries.
Two months after leaving Global's board, Hammond was charged with obstruction of justice for allegedly tampering with a witness against Saxena. He is on bail awaiting trial.
In July, after Global's shares spiked from pennies to over $2, the VSE forced the company off the exchange due to concerns over the trading activity and Saxena's continuing involvement in the company.
Global is now quoted on the OTC pink sheets in the U.S. and the Canadian Dealing Network (which is planning to merge with the Canadian Venture Exchange in the new year).
Field was also president and CEO of Fairmile Gold Corp., a Vancouver-based company listed on the Alberta Stock Exchange, when it surged to nearly $6 in early 1996.
The stock was being heavily promoted by Fleming Financial Corp., owned by West Vancouver promoter Don Rutledge. Fleming was being paid $10,000 a month for his services. His brother, William, also served on Fairmile's board.
The stock was also being boosted by Florida stock tipster George Chelekis, one of North America's first Internet stock touts.
He began spreading rumours that senior gold producers such as Glamis Gold and Newmont Gold were about to make buyout offers. No such offers materialized, however.
In March 1997, Chelekis paid $162,500 US to settle allegations by the the U.S. Securities and Exchange Commission that he had taken $1.1 million in cash and 275,500 shares from more than 150 companies to promote their stocks. It is not known whether Fairmile is one of those companies.
Several months later, Fleming Financial and the Rutledges got into trouble with VSE officials over their promotion and administration of T.K.O. Resources Inc. and were ordered off the exchange. Several weeks later, ASE officials similarly turfed them from Fairmile. By this time, the company had paid Fleming Financial at least $330,000 for its services.
Field quit as president but remained a director. He was still on the board in November 1998 when the company's auditors, PricewaterhouseCoopers, suddenly resigned.
In its resignation letter, the accounting firm said it had "become aware of changes in the composition of the board and senior management and in the conduct of the company's affairs which we were not previously informed. The nature of these changes has led us to conclude that we do not wish to continue as auditors."
VSE officials halted trading in the company's shares until it hired a new auditor and produced audited financial statements.
Field resigned in February this year, by which time the stock had collapsed to three cents.
He continues to deal with Don Rutledge even though he has been banished from both exchanges.
On Friday, Swift was asked whether he knew Rutledge. "I've heard the name," he replied. Pressed further, he said he was introduced to Rutledge by Field about four months ago.
"I've had some discussion with him about taking public some other technology, unrelated to Image Power," he said.
He said those discussions have not resulted in any deals, but it is clear that they are still in progress.
On Swift's neatly-kept desk -- during the busiest week in his company's corporate life -- was a document faxed from Fleming Financial.
It is not known whether it was sent via Image Power's fax compression technology.
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