By STAFF REPORTERS
A Mt Maunganui company that has attracted worldwide attention for its energy-saving technology is being investigated by the Securities Commission for selling shares without a prospectus.
Inertialess Drive Corporation has been selling its own shares as well as shares in an American subsidiary it claims to have established and part-own, and a previous incarnation, Inertialess Drive Technologies, which the Companies Office has delisted.
Commission chief executive John Farrell said he had evidence to suggest that shares in all three companies had been sold in the Bay of Plenty recently.
Inertialess was founded by Ken Pedlar, whose kinetic storage battery featured in Jim Hopkins' book on local inventors, Inventions from the Shed, published last year. He has also gained widespread publicity for his technologies and was a guest of the Energy Business Network linked to the Apec summit last year.
Investors the Business Herald spoke to say the shares have been selling fast, as many Mt Maunganui people are buying in the belief that they are getting an early slice of a technology high-flyer.
Mr Pedlar and his technology companies have a six-year history in Mt Maunganui. His first company, Inertialess Drive Technologies, was incorporated in 1994 and was struck off for failing to provide an annual return in 1996.
In 1995, a second company, Inertialess Drive Technologies (1995), was formed, with three million shares issued to Mr Pedlar for $3000. Mr Pedlar sold shares in that company to members of the public before he was pulled up by authorities for not supplying a prospectus.
The company explained its actions in a prospectus issued in April 1998 by saying it had "erroneously" used a share subscription.
"Ken Pedlar thought he was selling shares owned in the company when in fact he was selling shares in the company which were owned by himself."
Mr Pedlar amassed around $1.5 million from the invalid share sales, then lent the money to the company. The company is therefore indebted to Mr Pedlar, and was technically insolvent when the prospectus appeared. Interest of 12 per cent a year accrued on Mr Pedlar's debenture continues to be written into company accounts.
The company was also the subject of a complaint to the police over its initial public fundraising methods, but an inquiry was not pursued. The firm subsequently offered to buy back the invalid shares with 10 per cent interest, with a proviso in the prospectus that the invalid shares could not be bought back "unless sufficient shares are prescribed for in this issue."
In addition, the company licenses the rotor patent from the Pedlar Family Trust, which is owed 12 per cent of each year's net sales.
Share sales in the now-renamed firm - Inertialess Drive Corporation - are understood to have picked up since it announced on its website in May that it would seek a listing on a Swiss-based internet stock exchange and had registered Inertialess Drive Incorporation in Nevada.
The website says 980,000 shares priced at $US1000 ($2200) would be offered for public subscription and traded on the exchange. That information was then amended to say that the shares are being sold by private placement.
Business Herald attempts to establish that the Nevada company existed failed. Nevada state officials responsible for incorporations were unable to find any trace of an Inertialess Drive entity.
Company chairman and inertialess rotor inventor Ken Pedlar is in Switzerland. He said from Zurich that he was in the "banking capital of the world" to set up a research and development centre for his technology and establish a headquarters.
"It's common sense," he said, adding that he had enlisted private money to further fund the company's development.
Inertialess Drive staff in Mt Maunganui say Mr Pedlar will probably be back within the month. Mr Pedlar confirmed that he would be returning, saying the firm would buy back shareholdings after December in accordance with its constitution.
Foundation shareholders had that option, he said. "That's if they want to sell their shares back - but why would they? My shareholders will be millionaires. We're talking about a multitrillion-dollar corporation here."
Share sales under scrutiny
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