Shell Summary for July 17, 2017
THE TSX Venture Exchange gained 4.80 points to 762.32 Monday. Nathan Smith’s capital pool shell, Value Capital Trust (VLU), began trading today. It reached an intraday high of 17 cents before closing at 15.5 cents on 90,000 shares. Value Capital sold a $500,000 initial public offering of trust units at 10 cents, through Echelon Wealth Partners Inc.
The shell is a mutual fund trust, rather than a corporation, because the trust structure offers benefits for the type of qualifying transaction which the shell has in mind: Value Capital plans to seek a real estate deal.
Mr. Smith is an accountant in the Cayman Islands and a first-time shell-maker. He is a director and the chief financial officer of 60 Degrees Group SEZC Ltd., an investment advisory firm. Between September, 2010, and July, 2013, he was a manager at Pricewaterhouse Coopers on Grand Cayman Island.
Mr. Smith’s fe llow shell trustees are Jordan Calonego, David Beckow and Anthony Dutton. Mr. Calonego is a chartered financial analyst in Thun der Bay, Ont. Mr. Beckow is a director of Pareto Capital Partners Ltd., a real estate investment and advisory firm in Vancouver. Mr. Dutton is the principal of Delu Corp., a financial advisory firm in Vancouver. He is also a director of Trakopolis IoT Corp. (TRAK: $1.05), a logistics software company.
Robert Farrell’s shell graduate and pharmaceutical marijuana promotion, Kalytera Therapeutics Inc. (KALY), rose 0.5 cent to 14.5 cents on 393,723 shares. It continues to conduct clinical studies on a potential marijuana-based drug treatment — marijuana in a pill — for graft-versus-host disease. This disease typically affects patients who have undergone a bone marrow transplant. The company has changed its goal to a much more impressive medical accomplishment than before, when it originally planned to go public. Initially, it was hoping to develop marijuana-based drugs for treating bone fractures and osteoporosis.
Kalytera went public in January, 2017, through Andrew DeFrancesco’s NEX shell, Santa Maria Petroleum Inc. In connection with the launch of Kalytera, the shell sold two private placements at 40
cents, raising a combined $8.33-million. There were 54 subscribers to one of the private placements and seven to the other. None of the subscribers was an insider, so all their names are hidden. Whoever they might be, they are down on their investment. Mr. DeFrancesco, a former broker and occasional shell-packager, did not join the board of Kalytera. He is no longer a director of any public company. He keeps busy as the chairman and chief executive officer of the Delavaco Group, a private equity firm in Fort Lauderdale, Fla.
Kalytera’s Mr. Farrell is a lawyer in San Francisco. From 1996 to 2008, he was the CFO of Nasdaq-listed Titan Pharmaceuticals Inc. (TTNP: $4.30 (U.S.)). Then from 2008 to 2009, he was its president. Titan manufactures a skin im plant t hat treats opioid addiction. Under Mr. Farrell’s leadership (before the company received U.S. Food and Drug Administration approval for the implant), Titan peaked at $2.49 (U.S.).
The shareholders of Ellipsiz Communications Ltd. (ECT: $0.02), a shell graduate and Taiwanese telco, have rejected Michael Koh’s proposal to remove three directors: Grant Sawiak, Elliott Jacobson and Mark Korol. Mr. Koh, an electrical engineer, is the company’s chairman and largest shareholder. He took Ellipsiz public in November, 2015, through another NEX shell of Mr. DeFrancesco: NXA Inc. The shell did not sell a private placement in connection with the launch of Ellipsiz, but the target did. In October, 2015, the then-private Ellipsiz sold a $1.24-million (U.S.) private placement of 112,900 subscription receipts at a costly $11 (U.S.). Each receipt was convertible into one share. Mr. Koh bought 500 subscription receipts. His proposal to remove the three directors comes from his disappointment over Ellipsiz’s share price performance.
Mr. Koh’s loss from the private placement (about $7,000) is much less than that of another subscriber, Hong Kong resident Chiang-sen Chang, a former director of the private Ellipsiz. Mr. Chang bought 54,686 subscription receipts. Based on today’s closing price, he is down by about $762,870. Only one more subscriber is known: Vancouver resident Nelson Lin, who bought 500 subscription receipts. Mr. Lin is the president of a software company called Robocoder Corp. He also owns a website called Dentrader that predicts the movement of major indexes and offers trading strategies.
The board of Ellipsiz remains intact. Mr. Koh is still on it. He also continues to hold 42 per cent of the company’s shares. According to Ellipsiz’s news release following the shareholders meeting, there are “transgressions of securities laws and regulations, allegedly committed by Koh while serving as a director of public companies in Asia.” The news release does not provide details, but it adds, “In December of last year, the alleged misconduct engaged in by Koh was brought to the attention of both the [Ontario Securities Commission] and TSX-V, but to date the company is unaware of any action being taken by either regulator.”
Mr. Sawiak is a securities lawyer with Fogler, Rubinoff LLP in Toronto. Mr. Jacobson is an accountant who provides his services through Elliott M. Jacobson & Associates Ltd., also in Toronto. Mr. Korol is a chartered financial analyst in Toronto.