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What is it about Vancouver that spawns a disproportionate amount of OTCBB listed companies engaged in promotional campaigns? Year after year our friends up north lead the way in exporting blatant scams upon the US retail investor using the means and instrumentalities of the US communications networks as well as our postal service. Even more disturbing is that the securities regulator in British Columbia (BCSC) has become more pro-active than our own regulators in identifying and halting these scams before they are perpetuated. They do so by using their limited powers in Canada to “halt” the trading in these securities by market participants that fall under their regulation. And while sometimes the BCSC goes at it alone leading the shares to remain available for trading in the US, a BCSC halt has generally been a leading indicator for a subsequent rapid decline in the price of the halted security as eventually US investors and sometimes even the regulators catch on. Such is the case with the newest export from up north: Quest Water Global, Inc. (OTCBB: QWTR). The BCSC (British Columbia Securities Commission), the equivalent of the SEC in Canada, has already done its job and halted the shares of QWTR meaning it is currently illegal to transact in the securities of QWTR up north. Unfortunately for US investors, QWTR shares are still allowed to trade in the US (for the time being) providing the unscrupulous promoters with a window of opportunity to sell their shares to the unsophisticated investor at artificial prices. In this report we will provide convincing evidence that the inherent value of QWTR is zero, compared to its current market valuation of $122,400,000.
QWTR Capital Structure & Fundamentals
Shares Outstanding Cash as of March 30,2012 Debts & Liabilities as of March 30, 2012 Shareholder Equity as of March 30, 2012 Revenues as of March 30, 2012 Undisclosed Shares in Float (Believed to be Promoter Shares) 84,577,860 $346,456 (likely much lower now) $-933,411 (likely higher now) $-293,811 (QWTR is essentially insolvent) $0.00 30,500,000
2030 Marine Drive Suite 302, Vancouver, Canada V7P 1V7
This $120 million dollar company is conveniently located in the parking lot of a “Dennys”
The story being sold to us is that somehow Quest Water, with its $364,000 in cash, is going to build “AQUAtap” machines in Africa that will produce up to 20,000 gallons a day of water from air. To continue delving into the story would be an insult to the readers of this report, as such we prefer to focus on the actual reason shares of QWTR are rising and that is due to the electronic and offline promotional campaign being initiated by the promoters who appear to own 30,500,000 shares of the company. Dreams of turning air into water will most likely end in zero revenue, profits, or anything accretive to the shareholders of QWTR several months from now. In supporting this statement we point readers to the following fact: The promoters behind QWTR have spent over $900,000 distributing glossy promotional mailers and over $100,000 paying online email spammers. It does not take a genius to realize that a company which has had 3x the amount of cash on its books spent on promoting its shares is more interested in selling shares to investors than building its business.
What the promoters paid for their 30,500,000 shares:
On the S-1 filed on 8/17/2010 RPM Dental (The shell company that later merged with QWTR) registered 1,525,000 shares @ $ .02 cents per share. But $.02 cents was not a cheap enough price for the promoters so they engaged in an exercise to lower their cost average even further:
On February 20, 2012, the Company completed a 20 for 1 forward split of its common stock. All share amounts have been retroactively adjusted for all periods presented.
And just like magic, the promoters now own 30,500,000 shares of QWTR at a split adjusted average cost of $.001 per share. Given the current share price of $1.43, the promoters are up 140,000% on their investment of $30,500. In other words, their $30,500 investment is now worth $43,615,000. There is a caveat… they have to sell those shares to you!
The Players Involved
John Balanko - President & CEO/Director – Touts on his resume “extensive experience” in corporate finance. Our extensive research discovered a track record of failure that included bankrupt and delisted companies. Most disturbing, is that every single publicly traded company John Balanko has been associated with has delivered significant losses to investors with an average loss of between 90-100%. Mr. Balanko’s name first appears in the public domain on December 7 , 1994 when he was appointed as Director of Fountain House Holding Corp. “FOUNTAIN HOUSE HOLDING CORP. ("FHH-V") - Appointment of Director Luke van der Horst, President of Fountain House Holding Corp., announces that John D. Balanko has been appointed a Director of the Company effective December 7, 1994.” Fountain House was a company that purported to sell “DrinkCentres” in the late 1990’s. In 2002, it changed its name to Abbastar Holdings (TSXV: ABA) and after implementing a few reverse splits, changed its name again to Abbastar Uranium in 2009. On the date Mr. Balanko’s name is first mentioned (December 1994) shares of ABA traded at a split adjusted price of $38 dollars per share. Today you can buy those same shares for $.04. Next, Mr. Balanko’s name appears on a press release issued by a pink sheet listed company: ShowStar Entertainment (SHST). What might you think did SHST do for its investors? Well for one, it officially added the name “Online” to its name right before the internet bubble changing its name to “ShowStar Online.com” in 1999. Then in 2002, it presciently diversified into energy naming itself “Sonoran Energy” which was heavily touted until April of 2010, at which point Sonoran filed for bankruptcy and became SNRNQ. During this period, the various reincarnations of this company traded down from a split adjusted high of $80 to $.0015 at the time it filed for Bankruptcy.
Next in 2007, we have the most relevant of companies in Mr. Balanko’s track record with alarming similarities to QWTR. The company, named S2CGlobal (OTCBB: STWG) currently trades at $.007 per share. Such was not the case when Mr. Balanko’s name first appeared in the filings of the Company. “John Balanko, on April 1, 2006, entered into an agreement to act as Head of Corporate Finance for the 2006 calendar year for 350,000 common shares to be issued at a deemed value of $0.07 per share with 175,000 shares issued on June 30, 2006, 87,500 to be issued on September 30, 2006, and 87,500 on December 30, 2006.”
Here is a snippet from a Press Release issued in January 2007 by S2C Global: “S2C Initiates First USA Installation of Aquaduct LAS VEGAS, NEVADA -- (MARKET WIRE) -- 01/11/07 -- In keeping with S2C Global Systems, Inc.'s (OTCBB: STWG) business strategy to disseminate Aquaduct automated water distribution systems in major retail water markets throughout North America, S2C is placing its first USA Aquaduct just north of Houston, Texas, in The Woodlands.” And here we have Mr. Balanko’s signature at the bottom: “Contacts: S2C Global Systems, Inc. John Balanko Corp. Services 1-866-264-7670 Website: www.s2cglobal.com”
Besides misspelling Aqueduct, this venture achieved another remarkable feat, delivering it’s investors an 80% loss in 2007, one of the best periods for the US stock markets. From here, the next time we hear of Mr. Balanko is on March 7, 2012 when QWTR issued him 2.5 million shares. As if to add insult to injury, Mr. Balanko couldn’t even go out of his way to think of an innovative new name for his new stock promotion electing to simply change “duct” with “tap”: “VANCOUVER, British Columbia, July 26, 2012 (GLOBE NEWSWIRE) -- Quest Water Global, Inc. (OTCBB:QWTR) ("Quest" and or "Quest Water" and or "Company"), an innovative water technology company, and developer of the AQUAtap(TM) Community Drinking Water Station and WEPS(TM) Water Extraction and Purification System, provides the following corporate update to its shareholders:” Peter Miele – VP Corporate Development/Director – With Peter we were able to find even more questionable activity starting with his association with S2C Global as well as several other companies including: Transact Energy (OTCBB: TEGY), which delivered it’s investors an 97% loss and currently trades for $.07 a share, and a Canadian company formerly named Cineimage. That company was worth as much as $4 per share before dropping to $.015 and being suspended indefinitely for trading by the Toronto Stock Exchange. Moving on, we see Mr. Miele’s name appear interestingly enough in an SEC filing for an OTCBB company named Quest Oil (OTCBB:QOIL), in February 2005: “16.
On January 5, 2005, the Company appointed Peter Miele as Vice-President of Marketing.
As you might have predicted by now, QOIL trades at $.0001 making Peter the winner in terms of delivering the largest nominal shareholder losses, having been associated with a company that traded at the lowest mathematically possible price per share. Let us recap the track records of the two executives running Quest Water:
Name Company Association Date of First Mention Price on Date Current Share Price Total Return
John Balanko Peter Miele John Balanko
S2C Global (OTCBB: STWG) Fountain House AKA Abbastar Companies (TSXV: ABA) ShowStar Entertainment AKA Sonoran Energy (OTCBB:SNRNQ) Transact Energy (OTCBB: TEGY) Quest Oil (OTCBB: QOIL) Cinemage (Halted – Canada)
-95% -99% -100% -97% -99% -100%
Peter Miele Peter Miele Peter Miele
12/29/2006 1/1/2005 4/3/2008
$2.25 ** $.80 $.10
$.07 $.0001 Suspended Indefinitely
* The share prices for SNRNQ and ABA are split adjusted. ** TEGY – Did not trade until 1/11/2010 (The date of its first trade) @ $2.25 per share. As the table demonstrates, every one of the companies Peter Miele or John Balanko had involvement with delivered a nearly total loss to investors. To us the most troubling discovery of all is the association of both Mr. Balanko and Mr. Miele with S2C Global which also touted a similar water related product named “Aquaduct”. It is also troubling to see the word “Quest” used in “Quest Oil” indicating a severe lack of creativity on the part of the promoters and their cavalier approach when manufacturing these companies.
Thus far we have established that QWTR and its management team are repeat offenders in the OTCBB promotional space. We will now explore the mechanisms being employed by the promoters to drive the share price of QWTR to these unimaginable levels. We have identified two methods being employed by the promoters of QWTR. The first was an online email spam campaign initiated by the websites: OTCJournal.com, StockHunter.us and Wall Street Whispers. Website/Newsletter Stock Hunter OTC Journal Whisper From Wall Street Date Initiated 7/30/2012 8/1/2012 8/1/2012 Link Newsletter Newsletter Newsletter Compensation $10,000 $10,000 $10,000
These electronic spam campaigns worked well causing a significant increase in the volume of QWTR. Between 7/30/2012 to 8/2/2012 QWTR share volume rose from 89,774 to 370,300, an over 300% increase in 3 days. But this was only the first course th of the promotion. Around July 26 , investors from around the country began to report receiving a 16 page glossy magazine entitled: “The Global Water Crisis & HOW YOU CAN PROFIT FROM IT”. This newsletter was distributed by a company named “MicroCap MarketPlace” with its editor being Mike Casson. A simple search for Mike Casson produced several negative results such as this CBS news article documenting another promotion Mike Casson was involved in FEWP. Staying focused on QWTR we obtained images of the glossy mailer and have attached them to this report:
Disclaimer disclosing a company named “Resource Project Partners” paid $900,000 for the marketing and dissemination of the report.
Who would pay so much money for such a promotional campaign? To us the most logical conclusion would be the owners of those 30,500,000 shares we discussed previously. Using Google we searched for the name “Resource Project Partners” that paid for the glossy mailer as well as the electronic spam campaigns. The first relevant result was an exhibit from a prospectus filed with the BCSC on a Canadian listed copper company: On Page 3 we found a company named “Resource Project Partners I Inc.” based in Panama. At first we were unsure whether the name of the company matched the name disclosed in the mailer, but after further digging we have little doubt that the two are the same entity. Next, we initiated a Panama Corporate Search as well as another search using Dan O’huiggin’s archived, search results on Panamanian Companies.
Official most recent results from Panama Corporate Registry showing the names: Erwin Speckert, Dimitri Fortin, and Livia Floria.
Archived results showing an additional Director: William John Voaden.
THE SMOKING GUN The results indicate that a total of 4 people may be possibly associated with the undisclosed 30,500,000 share float in QWTR: 1) 2) 3) 4) Erwin Speckert Dimitri A. Fortin Livia Floria William John Voaden
Naturally, we decided to dig up whatever we could find on these individuals. To our complete shock only last week Erwin Speckert was charged by the BCSC for financing over $8.2 million in promotional mailer campaigns for OTCBB Companies. Mr. Eckert who lives in Switzerland and Minden, Ontario refused to cooperate with the authorities. Even more relevant are two articles written by David Baines of the Vancouver Sun here and here, documenting the intricacies of this operation as well as a connection to Abbotsford, BC and an individual named Colin McCabe. Erwin Speckert purports to be a Switzerland based asset manager heading a company named Everest Asset Management. This however appears to be a front as Mr. Speckerts name is connected to too many OTCBB companies and questionable individuals.
Culminating in what we view as the strongest evidence connecting Erwin Speckert (and possibly Dimitri Fortin and/or William th Voaden) to the QWTR float we found the following buried in an 8K filed by Quest Water on January 6 , 2012.
As part of the merger with RPM Dental (the QWTR shell) QWTR added an exhibit which disclosed the names of QWTR shareholders who owned shares of QWTR at the time. Mr. Erwin Speckert, through a company named SIHL Investments International shows up as owning 1,000,000 shares of QWTR. From this we can only deduce that Mr. Speckert, and possibly Mr. Fortin and Mr. Voaden are the puppet masters who have paid for the dissemination of the MicroCap MarketPlace mailer making it very likely that they are the owners of the 30,500,000 shares being sold to unsuspecting investors. We are being very careful to connect Mr. William Voaden to all of this as he appears to have a squeaky clean image having served as the director of Pan Pacific Aggregates, PLC now named “Astar Minerals, PLC” which trades on the London Stock Exchange under the symbol: ASTA as well as VSA Capital, an FSA regulated financial firm. With that said this was not the first time Mr. Voaden’s name was associated with Mr. Speckert’s. In a filing with the UK Financial Regulator in 2005 we found that Mr. Speckert held shares in Pan Pacific Aggregates (nearly 20% of the company). Another interesting and highly coincidental fact is that Astar Minerals owns rock quarries in Abbotsford BC, the same town where Colin Mccabe the writer of the newsletters is based. As for Dimitri Fortin, the only information we were able to find on him was from a disclosure by a company named Datrontech PLC in November of 1995. Apparently, Mr. Fortin was the owner of a Switzerland based company named C Connect Limited that was sold for $4.91 million to Datrontech. “In the year ended 31 December 1994, C Connect reported a profit before taxation, as adjusted for UK GAAP, of SFr 0.80 million ( 0.44 million, based on an exchange rate of SFr 1.81: 1) on turnover of SFr 25.2 million ( 13.9 million). As at 31 December 1994, C Connect had audited net assets of SFr 2.4 million ( 1.3 million). Following the acquisition, Dimitri Fortin and Markus Werth, Managing Director and Marketing Manager of C Connect respectively, will work together with Datrontech to take advantage of the many opportunities that are anticipated.” As one can see it is nearly impossible for us with our limited range of tools to identify exactly who is profiting from the sale of the 30,500,000 shares. We have done the best job we can to highlight the names of the individuals which have shown up through our research and who we suspect are involved in some way, shape, or form, but it will be up to the regulators to confirm these connections.
The BCSC Steps In
As we mentioned at the beginning of this report, the BCSC stepped in on August 1 , 2012 and halted the shares of QWTR, essentially restricting any Canadian bank, broker, or institution from transacting in the shares. While we can only guess, we assume that the BCSC was putting the various pieces of the puzzle together and attempting to block Erwin Speckert and his cronies from yet another promotional campaign that would result in investor losses.
For those investors that would even consider being long shares of QWTR after this report, we should warn that the last BCSC Halt FMNL dropped over 70% in one day as investors and regulators received word that the company was engaging in a promotional campaign. Tread carefully!
Conclusion We urge investors to stay away from QWTR as we have documented dozens of red flags which point towards this being nothing more than an elaborate scheme to sell worthless shares by offshore residents to US Investors. In full disclosure, we are short shares of QWTR but stress that the amount is insignificant as a percentage of our total assets. Our goal in writing such an exhaustive report is to prevent unsophisticated investors from buying into the hype and losing their investment capital to unscrupulous promoters. “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one. - Charles Mackay, 1841” Infitialis – August 7 , 2012
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