DJ IN THE MONEY: Get Some Insurance Before Investing In Maxlife
By Carol S. Remond
A Dow Jones Newswires Column
A few things should have told investors that Maxlife Fund Inc.'s
(MXFD) stratospheric price rise wouldn't last.
After climbing to an extraordinary $18 a share, the shares of this
tiny Canadian life insurance company lost almost one-third of their
value last week. And there wasn't even any news to cause this.
To be fair, Maxlife's stock price never had any relationship to its
underlying business, which so far can be summed by the purchase of a
life insurance policies portfolio with a $4 million face value. In
fact, Ontario-based Maxlife hardly has any business. So far it appears
to have bought a few life insurance policies for about $400,000.
Maxlife's sole executive doesn't seem to have any experience in the
industry the company claims to be active in.
Maxlife, which was incorporated in Wyoming, is about to lose its
corporate registration because nobody at the company bothered filing
annual reports due in January 2007 and 2008.
Also, Maxwell Network Group Inc., the Canadian investors relations
firm representing the company, was recently associated with two other
bulletin board companies, Royal Spring Water Inc. (RSPG) and Red Rock
Pictures Holding (RRPH), whose stocks suffered brusque price drops.
Neither Maxwell's president, Itamar Cohen, nor Maxlife's chief
executive officer and chairman, Bennett Kurtz, were available to
comment.
According to its latest filing with the Securities and Exchange
Commission, Maxlife had just $101,845 in cash on its balance sheet as
of Nov. 30. The company had a working capital of about $144,000 at the
end of November with total assets of $587,068, including $412,411
listed as investments in life insurance policies and note receivable.
Despite its obvious state of infancy, the company's stock rose to a
high of $18.69 on Jan. 23, given it an amazing $566 million market
capitalization. Then, just as inexplicably as it had risen, Maxlife's
stock price plunged to a low of about $11.46 the next day without any
explanation. The company stock was recently trading over the counter
at about $13.48 a share in thin volume.
Maxlife was incorporated in Wyoming in January 2006. The company
bought all issued stock of 125445 Ontario Ltd. in August 2006 for
about $26,700.
According to SEC filings, 125445 is an Ontario corporation whose
business was to buy life insurance policies of viatical persons. At
the time it was purchased by Maxlife, the entity owned the policy of
one viatical patient.
A viatical settlement allows an entity to invest in another person's
life insurance policy. The entity purchases the policy, or part of it,
at a price that is less than the death benefit of the policy. When the
seller dies, the entity collects the death benefit.
The return on this investment depends upon the seller's life
expectancy and the actual date he or she dies. If the seller dies
before the estimated life expectancy, the entity may receive a higher
return. But if the seller lives longer than expected, the return will
be lower. If the person lives long enough so that additional premiums
need to be paid to maintain the policy, the entity which purchased the
policy might even lose part of its investment.
SEC filings show that 125445 Ontario Ltd. was controlled by Daniel
Kahan, a man who was later named as a director of Maxlife.
Information posted on the Web site for the Secretary of State for
Wyoming shows that Maxlife is delinquent in its corporate
registration.
A person answering the phone in the corporations division said the
company failed to file two annual reports, one due in January 2007 and
another which was due early last month. The person said the company's
resident agent has been informed of the delinquency and that Maxlife
risk being dissolved by May or June 2008 if the filings aren't
submitted.
Maxlife's registered agent, Guillermo Jalil, told Dow Jones
Newswires that the owner of the company, not its resident agent, is
responsible for filing annual reports. Jalil said that if he received
notices for annual report delinquencies from the state of Wyoming, he
would have forwarded them to the company. The resident agent declined
to say whom at Maxlife would have received the notices. "We were hired
to form a company. We sold the company to this person and I don't know
they did," Jalil said.
According to filings with the SEC, Maxwell's Cohen controls 12.9
million shares of Maxlife, or about 42%. Meanwhile, CEO Kurtz owns 4.6
million shares, or about 15%. Some of Kurtz's relatives also hold or
held stock in Maxlife, including his brother Moshe whose company Adir
Accessories Ltd. in Toronto hosts Maxlife's "corporate headquarters"
for free.
Cohen is identified principal and owner of the Maxwell group in a
Form 144 filed with the SEC in June 2007. The form indicates that
Cohen was looking to sell 203,504 shares at the time through Park
Financial Group, a Florida brokerage firm which has since gotten on
the bad side of the SEC for aiding and abetting fraudulent trading in
the shares of Spear & Jackson Inc. (SJCK).
According to that form, Cohen acquired one million shares of Maxlife
in January 2006. The shares were issued for "founders services".
The SEC in December 2007 issued a cease and desist order and
sanctions against Park Financial and its principal Gordon Cantley. The
SEC said that Park Financial and Cantley in 2002 and 2003 helped a
fraudulent pump-and-dump scheme involving the shares of Spear &
Jackson. Dow Jones was first to raise questions about Spear & Jackson
in a July 2003 column.
If Maxlife's recent stock price movement isn't enough of a warning
sign, investors might want to consider the fact that the company's
auditors have expressed a "substantial doubt about (Maxlife's) ability
to continue as a going concern because (the company has) no viable
operations or significant assets..."
While they are at it, investors may also want to exercise caution
when it comes to Henya Food Corp., a brand new distributor of kosher
food whose stock looks poised to start trading soon. This
Connecticut-based company shares some of the same shareholders as
Maxlife, including Maxwell and members of the Kurtz family.
(Carol S. Remond is an award-winning columnist who won a Gerald Loeb
Award in 2005 for best news service content with "Exposing Small-Cap
fraud," a series of articles that described how three small companies
unscrupulously pumped up their stocks.)
-By Carol S. Remond; Dow Jones Newswires; 303 997 5783;
carol.remond@dowjones.com
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(END) Dow Jones Newswires
02-01-08 1225ET
Copyright (c) 2008 Dow Jones & Company, Inc.
- - 12 25 PM EST 02-01-08
