The finance director of Cabtivate, the in-taxi advertising company which went into liquidation last week, resigned in early December, shortly after cab drivers were still being signed up for four-year bind-ing agreements with finance companies.

Iain Mackenzie resigned on December 4, according to the record at Companies House, while businesswoman Sara Maclean resigned on January 7. The remaining directors Mark Greenhalgh, 42, and James Neilson, 68, petitioned for liquidation on January 22.

Graham Nicholl, one of 50 Glasgow taxi owners who signed finance company agreements for the installation of the 15-inch television screens in their cabs, said yesterday he was persuaded to sign up on November 23, but did not have the screen installed until December 20.

"On January 5, the finance company phoned me up asking me if I am happy to go ahead, five days later I heard they (Cabtivate) had gone bust. I am legged for four years."

Inquiries by The Herald show that Cabtivate, whose founder Greenhalgh was savaged in television's "Dragons' Den" two years ago but went on to boast of a rapidly- expanding success story, owes creditors almost £1m, including a £100,000 investment from Scottish Enterprise's Business Growth Fund.

Accounts of the company, which was based in Forth Street, Edinburgh, show that in its last financial year it had an asset deficiency of £375,000 after seeing losses more than double from £466,000 to £957,000. Amounts owing to creditors had risen from £312,000 to £483,000 during the year. Secured creditors were then owed £171,000, but the final debt to principal backer Bank of Scotland is understood to be around £300,000.

Ken Pattullo, of insolvency practice Begbies Traynor in Glasgow, said yesterday: "We are focused on whether any of the company's assets, which are mainly intangible, have any value at all The prospects don't look very good at all."

Greenhalgh, a former cab driver, set up Independent Taxi Services a livery advertising service in 1996 then launched Cabtivate in 2002, but held seven other company directorships between 2001 and 2005, according to the records.

Gary Watson at Ad-cabs, Glasgow's taxi advertising livery specialist, commented: "I know he was finding it hard to compete against us in the market-place, and then he set up this new business.

"The big difference is money for a livery has to be paid to the cabbie immediately."

Known to cabbies as "The Penguin" for his natty black suits, Greenhalgh used taxi trade contacts in Glasgow and Edinburgh, and "Taxi Talk" magazine advertising in Manchester, to sign up over 100 drivers, and had claimed he had 350 in the pipeline in London.

The installation cost was £3500-plus VAT, triggering a £104-a-month payment in a four-year agreement with finance companies such as Haydock Finance. Greenhalgh promised to pay the drivers an income of £192 a month, rising in later years, giving them an £88 a month profit.

Drivers however are now questioning the cost of the installation to Cabtivate. One Manchester driver who received two payments before they stopped in December said: "There is no way there is three grand's worth of equipment in the cabs."

In Glasgow, Nicholl said: "There is talk of it costing £700 to £800. If he has signed me up for finance of over three grand, what happened to the rest?"

He added: "As far as the finance company are concerned it is a separate agreement to pay them. If you don't pay, they can take you to court and it will affect your credit rating."

Nicholl said payments to some Glasgow drivers had been missed as early as October. "In Edinburgh the drivers were paid all the time - they didn't want the Edinburgh boys on their doorstep."

Another cabbie who did not want to be named, said he was stuck with agreements on two taxis: "I saw it in terms of income. But I think the amount of the lease, £4000, is quite excessive, considering it is just really an LCD screen."

The Manchester driver said Cabtivate subsequently sold him a livery "wrap-over" worth £900. "I had to fight for my money, I was still waiting for it after six weeks and that was when alarm bells started to ring I asked him (Greenhalgh) whether he was going bust, and he said he had got backers everywhere waiting to take over."

However, the company that carried out the work, Bedford-based Graffit, said it was owed several thousand pounds by Cabtivate for several jobs carried out in September 2006.

Director John Battezzato said: "We were calling Iain Mackenzie, but not getting any answer."

Haydock Finance and The Finance and Leasing Association were unable to comment yesterday.

On Cabtivate's business model and when the company knew it was in trouble, liquidator Pattullo commented: "It is certainly a legitimate question, but not one on which I have formed an opinion yet."

He said the company had clearly "run out of money" but it was too early to say more.

A spokesperson for Scottish Enterprise said: "SE invested £100,000 in Cabtivate through the Business Growth Fund while the company also received account manage-ment support from Scottish Enterprise Edinburgh and Lothian.

"Our investment was made alongside private sector partners, following extensive due diligence, and we believed the company had growth potential within an emerging industry for Scotland."