The chief executive of ASX-listed internet of things company IoT Group has been accused of inappropriately acquiring the operations of another start-up company he co-founded for the group, without getting the permission of his co-founder or paying him out.
Proceedings against IoT Group chief Simon Kantor have been lodged in the NSW Supreme Court by a major shareholder of ROAM Systems, a company that is now part of IoT Group.
Mr Kantor is accused by property developer Felix Milgrom of selling ROAM Systems to IoT Group without his approval, or that of other major shareholders, despite permission being a stipulation of their shareholder agreement.
At the time of the sale, Mr Kantor owned 51 per cent of the shares in ROAM and Mr Milgrom and two other shareholders, Michael Teplitsky and Darren Williamson, owned the remaining 49 per cent through their mutually-owned corporate investment vehicle Talk to Geoffrey.
Mr Milgrom also alleges that Mr Kantor signed a share sale and purchase agreement when it underwent a back-door listing through Ardent Resources earlier this year, wherein ROAM's 300,000 options in IoT Group, which were part of the sale, were ignored and that ROAM was not listed as a shareholder of IoT Group.
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Since the listing, ROAM has not received any consideration.
According to the court documents, the three investors had put in almost $300,000 to Mr Kantor's business over little more than a year for the development of a range of devices – predominantly a universal language translator and a home automation system that was similar to an electronic butler.
Mr Milgrom stated in the court documents that Mr Kantor used the bulk of the funds to pay staff costs, rather than invest in the products, and the universal translator was never good enough to be commercialised.
Ignored messages
But the breakdown of the relationship did not occur until March 2015 when Mr Kantor is said to have stopped responding to phone calls and emails.
"I attempted a number of times during the months of March, April and May 2015 to speak with Mr Kantor to check how he was progressing with the work on the universal translator. He did not respond to any of my telephone messages or SMS messages," Mr Milgrom states in the documents.
By September of 2015 the three investors had still received no correspondence from Mr Kantor and the first time they heard of his new venture, IoT Group (previously named OK IoT Group), was in an article by The Australian Financial Review that month announcing the company's listing plans.
IoT Group's prospectus said that in May 2015 it had entered a memorandum of understanding to purchase ROAM and in July that year the business was sold to IoT Group. In consideration ROAM was to be given 300,000 options in the company.
"There has been no unanimous decisions made to consent to the sale of any assets of ROAM to any third party or any entity to be listed on the ASX," Mr Milgrom said in the documents.
Mr Kantor was contacted, but refused to comment on the allegations.
IoT Group is creating a range of wearable and connected devices and has a range of smartwatches in the market. It has also attracted media attention for its selfie-drone known as ROAM-e which is yet to hit shelves, but is claimed to have attracted hundreds of thousands of pre-orders.
Last week the business released its full year results. The business recorded $277,356 in revenue for the year to June 30, on a loss of $3.6 million.
At this stage Mr Milgrom is seeking the court's permission to be considered a director of ROAM Systems, which was allegedly a condition of his investment in ROAM, in order to file proceedings against against IoT Group and Mr Kantor.
Then Mr Milgrom and ROAM will seek a declaration of Mr Kantor's alleged wrongdoing and monetary compensation for the loss.
