Shareholders Apparently Left Holding the Bag : Zoe Products’ Big Seller Was Its Stock

The slick brochure proclaimed that the Zoes were coming. The 1985 models of the “ultra low-cost” three-wheeled English cars, the flyer said, were “now invading the American marketplace.”

But the only real invasion was that of more than 99 million shares of penny stock issued by Zoe Products Inc., of Irvine.

Now that stock appears to be worthless, and investors--like investors in the many other public companies that fade from sight each year--are stuck.

But all is not lost. People who hold shares in defunct companies at least can claim a tax loss if they know the rules of the game.

Although investors should contact their own accountants and tax attorneys for advice, Peter Dolbee, a tax specialist with the Costa Mesa office of Arthur Young & Co., said a letter from a brokerage house attesting to a stock’s apparent worthlessness should be proof enough for any inquisitive Internal Revenue Service auditor.

Vitamins to Autos

Zoe shares once traded for as much as 75 cents each during 1982, before the company turned its attention to autos and was still promoting itself as a vitamin distributor.

Today, brokers will pay no more than a quarter cent a share for the stuff--if they are buying at all.

And, although press releases containing glowing forecasts once flowed from the company’s headquarters--first from a Century City high-rise and, later, from an Irvine warehouse--about the only thing Zoe appears to have ever sold is stock.

In fact, the Securities and Exchange Commission successfully sued Zoe, alleging that the company’s announcements were false and misleading and that its operations were financed primarily from proceeds of stock offerings.

“It appears to be that your clients are frauds,” U.S. District Judge James M. Ideman told a defense attorney for Zoe in May, 1985, when announcing his judgment in favor of the SEC.

Although an appeal of that judgment is pending, according to an SEC official, at least one shareholder is inclined to agree with Judge Ideman’s opinion of Zoe Products: Neal Carron, a Santa Barbara physicist, who bought 14,000 shares of Zoe in early 1983.

‘Appealing’ Product

Paying about 34 cents a share for the stock, Carron said he bought into Zoe because at the time it was touting a product called “Sober-Aid,” described as an anti-intoxication agent.

“The idea of a Sober-Aid type drug sounded very appealing,” said Carron, who estimated that after paying brokerage fees, his investment in the company totaled about $5,000.

What Carron didn’t know was that the company was going to drop its plans to sell Sober-Aid, shifting its focus instead to the three-wheeled cars with which it promised to flood the U.S. market.

Zoe once talked of assembling the autos locally, but James MacPherson II, Zoe’s vice president and the son of its founder James MacPherson, admitted in January that the company had fewer than 10 autos in stock and had yet to sell any.

At that time, Zoe was advertising in the Wall Street Journal for a merger partner, this time touting a negative net worth and approximately $8 million in tax loss carry forwards as “reasonably available to a profitable private firm looking to go public advantageously.”

On Friday, attempts to reach Zoe were unsuccessful, and it could not be determined if the company has yet located a white knight.

An outside answering service said both MacPhersons were out of the office, and messages left for them were not returned. A Newport Beach attorney who once represented Zoe, and whose address appears on its most recent SEC filing--a report for the third quarter of 1985--said he does not know what became of Zoe Products.

Calls to brokerage houses known to have made markets for Zoe stock turned up three which would sell the shares for a cent each, but only one that was willing to buy. The bid price on Friday, said a trader for New Jersey-based Sherwood Securities, was a mere quarter of a penny per share.

Meanwhile, Zoe shareholders unable to unload their stock may be able to take a capital loss, according to Dolbee.

But then again, an ounce of prevention is worth a pound of cure.

“I’m as angry with myself as with the company,” said unhappy shareholder Carron, who said Friday that he will probably try to write off his $5,000 investment in Zoe Products. “I just blame myself for not looking into it closer.”