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Vaso Active's Odd Pedigree

The rocketing foot-powder maker has some strange bedfellows.

A familiar stench wafts from

Vaso Active


, the small Massachusetts company that claims to have developed a new treatment for athlete's foot.

The smell spawns memories of the late 1990s IPO market, when any company with a whiff of a business plan, vague stories and an investment bank could sell shares to the public and see them soar.

Skyrocket is the more apt verb for Vaso, which, since going public in mid-December, has seen its shares jump 440% to just below $27. This is for a company with no profits, less than $100,000 in annual sales and seven employees.

Trading in the 1.6 million Vaso shares sold to the public has been frenzied. Over the past two weeks, an average of 1 million shares have changed hands each day. The trading has been so frenetic that even the investment bankers at

Kashner Davidson

, the small Florida brokerage firm that led the IPO, are expressing dismay.

Perhaps investors also should worry.

For starters, there's the debate about just how

amazing its foot-fungus-fighting treatment Termin8, really is.

The company contends the product, with its "revolutionary transdermal drug delivery technology," is a "highly advanced and remarkably effective cure for Athlete's Foot." The company has such high hopes for Termin8, which retails for $19.99, it recently told investors that it foresees a $365 million market for the product. Furthermore, Vaso Active boasts on its Web site that Termin8 has won the endorsement of

The American Association of Medical Foot Specialists


In a recent interview, David Z. Ascher, a New York podiatrist and the foot association's president, seemed more impressed with Termin8's packaging.

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"There is no such thing as a miracle cure," Ascher said. "It is as good as any of the other products."

The doctor continued: "The packaging is fantastic. The box is so beautiful."

Vaso Active might be ruing ever getting involved with Ascher, who won't say how many members are in his medical association.

Last week, Ascher told


he didn't recall endorsing the company's product. He has since amended that. Ascher told the

this week that he was confused when he talked to


because Termin8 used to be called something else, deFEET. Ascher said his association stands behind its endorsement, but now he wants Vaso Active to make a donation to an association scholarship.

Whatever the connection, Ascher's group wants no part of a controversy. "We do not want to be involved with any hanky-panky," he commented.

A Vaso Active spokesman declined to comment.

If that doesn't give investors pause, consider the cast of Wall Street characters surrounding the tiny company.

previously reported that Ray Dirks, a legendary analyst whom regulators have charged with pumping up a handful of penny stocks,

initially had a hand in Vaso Active's IPO. Dirks' firm,

Sky Capital

, was going to be the lead underwriter on the deal, until Kashner Davidson replaced it at the last minute.

Still, sources familiar with the deal said, Sky Capital got an allocation of shares to sell to its customers. Also, one of Vaso Active's directors, Gary Fromm, also is a director of Sky Capital Ventures, a subsidiary of Sky Capital.

Kashner Davidson, the firm that ultimately took Vaso Active public, has also known controversy. The 27-year-old firm, which specializes in so-called microcap IPOs, has been fined or censured by securities regulators 19 times. The most serious infraction occurred in 1996 when state and federal regulators fined and sanctioned Kashner Davidson for having an improper relationship with a stock promoter.

Some of the investment firm's recent IPOs haven't fared too well.

EsafetyWorld, a Bohemia, N.Y., company that Kashner took public in 2000, is out of business. It imploded after regulators raised concerns about some of its financial filings and a post-Sept. 11 claim that it had developed a safe system for opening mail suspected of containing anthrax.

Two other companies,

Able Energy



BioDelivery Sciences

(BDSI) - Get BioDelivery Sciences International, Inc. Report

, are both selling well below their IPO prices. Shares of Able, which went public at $7 a share, were most recently trading around $2.58, while BioDelivery, priced at $5.25, is trading around $3.75.

Matt Meister, Kashner Davidson's president and chief executive, defended his firm's reputation and underwriting track record. He said the regulatory issues at Kashner Davidson are in the past and there's always a risk in taking companies, especially small ones, public. Vaso Active's success, he said, doesn't depend on the sales of a single product, but the company's ability to develop its transdermal technology.

"This is a company we think that may have a technology platform for transdermal delivery," said Meister. "It's more the technology than the product itself. It looks like it could be pretty good, with some sound science behind it."