Peter Tassiopoulos and Nova Growth

In 1996, Nova Growth Corp. (NGCO) was a shell company trading on the lowly Canadian Dealer Network, a defunct OTC market for unlisted securities. NGCO was taken over by Brian Hamm, and within weeks began issuing press releases announcing the acquisition of various gaming/casino projects owned by Andrzej Kepinski.   The stock soared from pennies to the $6 area in a matter of months, but the company never actually closed any acquisitions despite a series of upbeat PR’s, and returned to pennies within two years. Hamm and Kepinski suffered a major falling out, eventually ending up in a court case that spanned two decades. Here’s where it gets interesting: recent court documents reveal the central role that Sphere 3D CEO, Peter Tassiopoulos, played in this financial quagmire.

In summary, a judgement released last month covering hearings this spring show that Marco Durante (also involved with Koda Resources and Playandwin) and Tassiopoulos were promoters of Nova Growth and central figures in the dispute. Tassiopoulos “acted as market maker” (Paragraph 99), was issued options at $.15 and warrants at $.75 (101), and personally profited to the tune of at least $500,000 (102). He acted as the investor relations contact, traveled and conducted business on the company’s behalf (262, 266), and simultaneously sold shares into the whisper campaign of alleged casino developments (101, 276-281).

Court documents bring into question the testimony of Tassioupoulos.  Justice Newbould felt that his testimony was “…in large part reconstruction” (99), “suffered from overstatement” (103) and needed to be considered “with caution” (106).   Furthermore, in a classic Catch 22, the judge states that “If Mr. Tassiopoulos and Mr. Durante are to be believed, these trades were based on inside information which Mr. Tassiopoulos and Mr. Durante had to know was illegal.” (102)

Tassiopoulos’ role took a turn for the sinister as the Nova Growth dispute reached a crescendo: “Mr. Kepinski testified that on the day after his resignation letter, Mr. Tassiopoulos, Mr. Hamm and a burly man came to his office…(where they) went to the filing cabinet and took files and some boxes, including his personal documents such as tax returns and documents of A. Kepinski & Associates that he has not recovered. They also took privileged documents.” (301)

Justice Newbould’s entire ruling can be studied here.  It includes a full chronology of the case for more interested readers (including a brief appearance by Sphere 3D director, Jason Meretsky). Those concerned only with Tassiopoulos’ role will find 73 references to the Sphere 3D CEO.

 

How much stock do Sphere 3D founders own?

In our last post we discussed the undisclosed sale of 300,000 shares by Sphere 3D’s co-founder, Giovanni Morelli.  In a recent tweet Peter Bookman, the co-founder of V3 Systems and current Head of Global Strategy and Chief Marketing Officer at Sphere 3D, said that even after the Morelli stock sale Sphere 3D is still  “40% still owned by founders ;)”.

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We find that comment quite interesting, given the fact that the two acknowledged founders, namely Mario Biasini and Giovanni Morelli, are on record as owning only about four million shares between them:

Mario Biasini                      2,746,429

Giovanni Morelli                 1,228,571

Total                                     3,975,000

You will recall that Peter Tassiopoulos is not a founder, according to filings, but has referred to himself as such, discussed here.

So let’s consider him a founder with 100,000 shares bringing the total to 4,075,000.  There were 23,268,935 Sphere 3D shares outstanding according to the most recent AGM filing.   By our calculation and based on disclosed positions, founders control 17.5% of the shares.  If Mr. Bookman’s comment was accurate, founders would need to be in control of a further 5 million shares to reach the 40% level.

Did Mr. Bookman make a simple mistake in his tweet?

Are there other undisclosed founders?  Recall that anyone owning more than 10% of Sphere 3D stock would have been required to disclose this ownership.  At the time of listing that would have amounted to about 1.5M shares.

Would the 5 million undeclared founders shares just happen to be the $.005 shares that were sold to undisclosed subscribers on the same day that Sphere 3D acquired its Glassware 2.0 technology from Promotion Depot?

Shouldn’t the full 40% founder share position (taking the Bookman tweet at face value) be filed with the regulators?

One might want to recall that the OSC requires insiders to report ownership and transactions not just in shares they own directly, but, “any … control or direction over, securities of the reporting issuer,” as outlined here.

For the record, we take no further issue with Mr. Bookman, and acknowledge that he is an established and successful technology player in the VDI space. In fact, we think that Biasini, Morelli, and Tassiopoulos made a smart move to bring him and his company into the Sphere 3D fold, thereby giving their story credibility.

Co-Founder of Sphere 3D sells 300,000 shares

Following the standard stock promotion script we have observed countless times in the past, we can now add insider sales as an important reason for investors to be concerned about their die-hard commitment to Sphere 3d.  Based on filings, John Morelli, the co-founder, former CTO and director (he resigned on March 6) of Sphere 3D, has sold 300,000 shares.  More importantly, it is quite clear that there has been a violation of securities rules in the process.  Let’s start with the sales:

1) Sphere 3D’s listing document, from December 2012 gave Morelli’s stake in Sphere 3D at 1,528,571 shares.

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2) Morelli’s only insider filing since then was a September 16, 2013 statement that he had received 50,000 options as director compensation. (screenshot from sedi.ca)

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3) On Friday, May 30th, Sphere 3D filed irrevocable proxies (giving Sphere 3D the right to vote their shares in favor of the Overland Storage merger) for each member of its board of directors and Giovanni Morelli. It states that he owned 1,228,571, or 300,000 shares less.

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One wonders why the founder and technology “guru”, as he has been referred to by a certain stock tout letter, would be selling stock in this alleged transformational company.  In any event, his selling is a likely answer to a question we have had for some time: why have there been reported marker sellers in Sphere stock (a total of 162,300 starting on January 2, 2014 according to INK Research) with no follow-up insider sales reports?  There are no satisfactory answers to this question.  If indeed it was Morelli, then he broke securities laws by not reporting sales while he was still a director.  And if it wasn’t him, then exactly who was it, and why are those sales not being reported?  As the OSC website states:

What are the deadlines for filing an insider report?

A reporting insider is generally required to file an initial insider report within 10 calendar days of becoming a reporting insider. Any subsequent insider reports reflecting changes in their holdings must be filed within five calendar days. See here.

We think Sphere shareholders should be asking:

1)  Why did Morelli sell 300,000 shares?

2)  When did he sell those shares?

3)  He can now sell without reporting.  Was this the primary reason that the founding visionary left the board?

4)  If it wasn’t him selling, who was it, and why have there been no insider reports filed?

Questions (2) and (4) should be of interest to the regulators.