Is IMGG's CEO Pulling the Plug on His Company?
by Melissa Davis - 3/11/2010 10:15:38 AM
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To some, Imaging3 (OTC: IMGG.OB) CEO Dean Janes appears to be giving up on his own company.
On Feb. 11, exactly one month after IMGG announced the latest in a series of regulatory setbacks, Janes reportedly began pitching a new investment opportunity to his 1,000-plus “friends” on Facebook. In his biggest insider transaction on record, Janes then sold 2.6 million shares of IMGG stock the very next day.
Since then, Janes has followed up with specific details about his new business venture. In a recent email to potential investors, Janes announced that he is partnering with Brian Altounian – a driving force behind some troubling penny stocks -- to form a publicly traded “business development corporation” that will raise capital for other microcap companies and invest in those stocks itself. Janes and Altounian will serve as co-chairmen of the new venture, known as Alliance Acquisitions, while filling top executive posts at the startup company as well.
Meanwhile, after years of trying, IMGG has still yet to secure permission from the U.S. Food and Drug Administration to sell its Dominion 3-D imaging device. Although IMGG boldly predicted FDA clearance for the scanner months ago, driving its stock to a record high of $1.95 a share, the company has since fielded multiple questions from the regulatory agency. Janes pledged to address the FDA’s concerns by the end of last month but wound up announcing his new venture with Altounian instead.
“Both of us have been approached by hundreds of microcap companies wishing to utilize our knowledge and experience towards assisting them in raising money, becoming public, organizing business plans and mostly wishing to follow our successful business strategies,” Janes stated when courting investors for the new operation. “This is by far the greatest potential company I’ve ever considered being a part of.
“We are raising $5 million,” he added, “and from my initial responses, this looks to fill up very fast.”
Janes has already supplied potential investors with applications to purchase stock in the new company. They must spend at least $5,000, enough to cover 20,000 shares of Alliance Acquisitions, in order to participate in the private offering.
With 20 million shares for sale, Alliance could attract up to 1,000 investors – including many loyal IMGG followers -- before the company even goes public. After that, Alliance will then purchase shares of other penny stocks that could rise on that buying power.
“Our track record has yielded an experienced and enthusiastic investor base that we will bring to every investment opportunity,” Alliance boasts in its official business summary. “Our investors know how we operate, in business and personally, and they provide faith and support for our endeavors.”
That “support” could boost shares of Alliance and the penny stocks that it holds. If history serves as any guide, however, those gains could benefit only early investors while leaving latecomers – who purchase the stocks at or near their peaks – holding the bag.
Both Janes and Altounian failed to return phone calls from The Street Sweeper on Tuesday seeking comments for this story.
By now, The Street Sweeper has examined IMGG and its founding CEO in detail. (Those interested may click here for access to past stories.) With Janes now branching out, The Street Sweeper has decided to take a close look at his new business partner as well.
In his email to potential investors, Janes describes Altounian as “a longtime friend” whose business strategies resemble his own. Indeed, Altounian has direct ties to IMGG itself.
Notably, Altounian appears on a list of “majority” IMGG shareholders who voted to increase the company’s authorized share count by 50% -- from 500 million to 750 million – 18 months ago. (Although IMGG initially assumed that it could expand its share count without the blessing of ordinary investors, the U.S. Securities and Exchange Commission has since stepped in to delay that move.) Four other shareholders carrying the Altounian name show up on that same list.
All told, Altounian has played a role – as an executive, a director, a consultant or major shareholder – at nine different penny-stock companies. He scored a personal homerun with XsunX (OTC: XSNX.OB), a solar company where he served as chairman, when that stock rocketed ahead of a looming crash.
In early 2006, with XSNX topping the $1 mark for the first time in years, Altounian promptly cashed out 300,000 shares of company stock for a tidy six-figure gain. XSNX continued to rise in the months that followed, allowing Altounian to pocket even bigger profits on down the road.
XSNX also raised some eyebrows during that surge, however. In March of 2006, Hans Deuel – a former Ph.D. scientist who operates a financial blog called Clearfish Research – suggested that XSNX was nothing more than an overhyped penny stock.
“They are nowhere near having a product, have never generated any revenue and don’t know when they will,” Deuel wrote at the time. “They are only story, since they have no products or revenue. And stories are not businesses.”
Although XSNX actually peaked near $3 a share the day after Deuel’s report, that rally proved to be short-lived. With the stock falling into the $2 range by the following month, Altounian began dumping more of his shares.
He executed three big stock sales in April of 2006 alone. He cashed in 500,000 shares of XSNX the first time, becoming an instant millionaire in the process. He sold another 474,000 shares, with the stock slipping below $2, a mere 10 days later. He then finished up by transferring 400,000 shares – selling them for a penny apiece when the stock had just closed at $1.87 a share – to an account set up for two apparent relatives who share his same last name.
Less than three months after those well-timed transactions, XSNX tumbled back below $1 and has remained there ever since. With XSNX now fetching just 13 cents a share – and Altounian long gone with his winnings – Deuel’s warning clearly proved valuable to those who chose to follow his lead.
“It looks to me like the stock is being manipulated,” he stated four years ago. And “playing in manipulated penny shares with no products is just not our game.”
‘Won’t Get Fooled Again’
Altounian has filled important roles at seven other penny-stock companies as well. When listing his past accomplishments for potential investors in his new venture, Altounian identifies those companies by name: Platinum Studios (OTC: PDOS.OB), Cereplast (OTC: CERP.OB), Machine Talker (MACH.OB), OriginOil (OTC: OOIL.OB), BioSolar (OTC: BSRC.OB), Warp9 (OTC: WNYN.OB) and Carbon Sciences (OTC: CABN.OB).
All of those stocks currently trade well below the $1 mark, with the highest-priced (OOIL.OB) fetching 33 cents and the lowest-priced (WNYN.OB) selling for a fraction of a penny a share. The five stocks with historic trading charts – PDOS, CERP, OOIL, BSRC and CABN – have all plummeted from past highs.
Nevertheless, in its pitch for new investors, Alliance Acquisitions brags that Altounian has already helped those companies achieve their “respective exit strategy goals” of simply going public on the OTC Bulletin Board.
Altounian continues to serve as acting president of PDOS, a small entertainment company that licenses comic book characters out for use by various media outlets. (The stock has fared poorly despite Altounion’s ongoing leadership, falling from an original price of 20 cents to just 6 cents a share.) He also fills the top posts at Wowio, another comic book company that PDOS purchased with shares of its own stock a couple of years ago.
That transaction immediately stirred up fears within the comic book world. D.J. Coffman, a former PDOS writer and creator of the Hero by Night comic series, expressed grave concerns even before PDOS officially took over Wowio back in mid-2008. Other industry followers have gone on to voice similar despair.
“Platinum appears to be doomed,” one reader lamented on the ComicMix website after hearing about the deal. “And if so, Wowio is going down with them.”
Since then, PDOS has sold Wowio to a holding company controlled by Altounian himself. Critics felt worried about that transaction as well.
On a seperate industry-related website, comic book enthusiast Ray Cornwall wondered how much Altounian had actually paid for Wowio and whether the sum had been properly disclosed to PDOS shareholders. Another comic book fan, Ed Sizemore, suggested that – despite Wowio’s apparent change in ownership – nothing had really changed.
“I believe quoting The Who’s ‘We Won’t Get Fooled Again’ seems appropriate on many levels,” Sizemore wrote on ComicsWorthReading.com. “‘Meet the new boss,’” he recited, “‘same as the old boss …’”
The ‘New Gig’
Meanwhile, Janes has served as the only boss of IMGG since its inception 17 years ago.
When a 2002 fire destroyed the company’s headquarters – leased to IMGG by Janes himself – the company simply changed its name and its business strategy. (It also pocketed more than $2 million in insurance payments.) After almost a decade of repairing medical equipment manufactured by others, IMGG decided to invent its own medical device instead.
In mid-2007 – some five years later -- IMGG finally submitted a 510(k) application seeking FDA clearance to sell its Dominion 3-D imaging device. Although the 510(k) process normally takes only months to complete, IMGG is still waiting for approval of its scanner to this day.
In fact, this January, IMGG announced significant regulatory setbacks that made some investors wonder if the company would ever secure approval of its imaging device at all. Just two months earlier, with IMGG touting its FDA prospects on MoneyTV, investors seemed certain that regulators were poised to bless the company’s device instead. (Interestingly, both Janes and Altounian have appeared on MoneyTV – a show hosted by a past target of securities regulators – on multiple occasions, sometimes paying for time on the very same episodes.)
IMGG’s stock, now trading for just 65 cents a share, peaked near $2 in mid-November on FDA-related hopes. But the company’s latest quarterly report, filed on the same day the shares reached that high, revealed possible reasons for alarm.
For starters, IMGG posted deteriorating financial results and barely mentioned its FDA prospects – the driver of its future performance – at all. Moreover, the company disclosed a troubling related-party transaction as well.
Specifically, the filing shows, IMGG gave Janes $1.77 million to cover an outstanding loan he made to the company. IMGG wound up paying Janes too much, however, so it recorded $1.09 million of that sum as a related-party receivable on its balance sheet.
Based on IMGG’s regulatory filings, Janes generated at least some of the cash for those loans by selling company stock. His loans to IMGG, payable upon demand, have since been fully satisfied. It remains unclear, however, whether Janes returned the favor and refunded his seven-figure overpayment from the company.
Either way, thanks to his recent stock sale, Janes generated enough money to pay off that loan if necessary. Although he originally reported proceeds of just $100,000 from that transaction, he has since raised the figure to $1.86 million instead. He then indicated that he used the cash to cover an outstanding debt.
As previously noted, Janes sold that IMGG stock around the same time that he began pitching his new business venture. Meanwhile, when courting potential investors for his new company, he mentioned his ongoing commitment to IMGG almost as an afterthought.
“I will still carry on my duties and responsibilities at Imaging3,” Janes stated at the end of the email announcing his new deal, “and will continue until I see that company through FDA and on to market/acquisition.”
Even with Janes dedicating all of his energy to IMGG, however, the company has failed to achieve those goals. With Janes now focused on his new venture, some feel, IMGG could soon fade away.
Nevertheless, IMGG’s loyal followers remain committed to the company and – hungry for the next big winner – receptive to any new Janes-led operation that comes their way. A string of chat-room messages, posted by excited investors last month, showcases that remarkable faith.
“Dean really is starting a new company,” the first message states. “I wonder if this means a buyout (of IMGG) and a new adventure.”
“Now that’s what I’m talking about!” others chime in. “I’d love to get in on a million shares of his new gig.”
* To contact Melissa Davis, the author of this story, please send an email to [email protected]