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An article from Forbes worth reading or rereading if you already have:
KissyKat And The Magic Diesel
Daniel Fisher 02.26.07
"Just How Green Are You?"
"When the cry goes up, "Renewable Energy!" an army of penny-stock operators swings into action.
An aerial photo on the web site of U.S. Sustainable Energy Corp. shows a plant in Natchez, Miss. where the company says it will soon begin producing 1.5 million gallons a day of biodiesel-like fuel from soybeans. To put that in perspective, that's double the current biodiesel output in the entire country.
John Rivera, U.S. Sustainable's chairman, admits he gets some skeptical looks when he describes his "secret" process for turning soybeans into liquid gold at a rate (five gallons per bushel) that experts say defies the laws of chemistry and physics. "Everybody comes out here and says, 'Hey, you're full of it,' and then they see me do it," says Rivera, who in the 1990s promoted a similar process for turning used tires into fuel oil. "That's when I turn to them and say, 'Welcome to the Liars Club. Because now nobody's gonna believe you, either.'"
Somebody's buying Rivera's story. His company, which has not yet reported any revenue (it intends to start filing financials with the Securities & Exchange Commission "soon"), carries a market value of $227 million. Hey, that's nothing. A December news release from U.S. Sustainable says that the company could have "an immediate market value" of $12 billion.
Things only get more confusing if you follow the trail to EarthFirst, a Tampa outfit that told the SEC it loaned $3.3 million to U.S. Sustainable Energy last year. EarthFirst Chairman John Stanton put out a news release in April trumpeting U.S. Sustainable's revolutionary biofuel process. In the days before the release EarthFirst's trading volume spiked to 5 million shares from several hundred thousand and the stock price bounced to 17 cents, briefly arresting a long slide to a nickel a share.
No, no, says Stanton. That's a different U.S. Sustainable Energy. Rivera wanted to use the same name for his company, explains Stanton, who admits doing business with Rivera in the past.
Details, details. The big picture: Everyone is in love with renewable energy--George Bush, any congressman you could name, the eminent venture capitalist Vinod Khosla, Goldman Sachs (NYSE: GS - news - people ). At the upper end of the investment spectrum the field has attracted $53 billion in private capital over the last three years for windmills, solar panels and low-carbon energy sources. At the lower end there are the penny stocks.
Watch your wallet. Des Moines lawyer Steven Wandro is trying to recover $3.8 million stolen a few years ago from a group of grain farmers who thought they were investing in an ethanol plant. The money passed instead to a film studio and a Florida scamster named Jerry Drizin, allegedly at the behest of a Nigerian in Germany, as detailed in a federal judge's ruling in the case. "People are just running to this thing in a way that I think is scary," sighs Wandro, who recalls how legitimate ethanol projects in Iowa collapsed after oil prices fell in the mid-1980s. "It's a prescription for dashed expectations."
Capitalizing on the popular mania for sustainable energy, the penny-stock operators are converting failed Canadian mining outfits and Internet firms into green machines with names like Western Wind Energy and Hydrogen Power International. Western Wind, run by Vancouver mining-stock executive Jeffrey Ciachurski, paid Khandaker Partners, a New York research firm, $22,000 for a November report touting a "price target" of $11.59 a share. Ambitious, given that the price is now hovering around a buck. Western Wind is trading lawsuits with former employees who accuse the wife of the chief executive of posting unflattering comments on a stock bulletin board, including one suggesting that one of those employees was "caught shagging some Red Head" near the proposed wind-farm site. (Ciachurski denies his wife ever made such comments.) Hydrogen Power of Englewood, Colo. says it has a revolutionary method for making hydrogen fuel out of aluminum. One problem: The fuel source weighs more than the high-pressure hydrogen tank it is supposed to replace. That problem is being worked on.
Cornell Capital of Jersey City, N.J. has pumped at least $100 million into green-themed companies in the past couple of years. "Solar, wind, clean technology plays--we love the space," says Troy Rillo, a Cornell managing director. "We think the trends are great."
Great for Cornell, which gets shares at a discount that it can then sell in the open market. Great for investors paying full price?
Check out some Cornell clients. NewGen Technologies, which says it plans to build several hundred million dollars' worth of ethanol refineries, was formed out of a shell company. XsunX, formerly known as Sun River Mining, is now a solar-cell company with no revenue and no orders. Market cap: $86 million. Earth Biofuels, whose mascot is country music star Willie Nelson, raised $52.5 million from Cornell and other convertible-debt buyers but sank more than half the dough into a Louisiana ethanol refinery project that has stalled amid charges of excess costs and failed financial commitments. Power Technology (otcbb: PWTC.OB - news - people ) is on the verge of producing what it claims is a revolutionary lightweight lead-acid battery but has yet to find any potential customers. Still, it's aiming to raise capital in a public share offering; proceeds will repay a $1.4 million loan from Cornell.
Don't like the Cornell portfolio? Maybe there's something in the cozy family of GreenShift Corp., a holding company for six publicly traded entities--combined shares outstanding: 3 billion--with names like gs CleanTech and GS AgriFuels. GreenShift is working on technology to feed carbon dioxide to algae and then harvest the algae as if they were corn stalks. If you find this impractical you are presumably not among the investors whose enthusiasm has given GreenShift a market cap of $114 million.
In 2005 a predecessor of a GreenShift unit, called Incode, was flogging KissyKat, an online dating service for pet lovers. That operation didn't work out. Reincarnated as resource firm, GreenShift lost $9 million on sales of $17 million over the first nine months of 2006. Most of that revenue came from a waste-disposal business and a machine shop in Ohio. But GreenShift's chairman and controlling shareholder, Kevin Kreisler, has dreams, and the algae venture is just one of them. Another is to convert the waste material from corn ethanol plants into oil that can be used to make biodiesel. GreenShift says it has sold several of the $1.6 million units so far, but there's a reason it has the business largely to itself: Michael Ladisch, a Purdue University engineering professor, says that few ethanol plants produce enough waste oil to justify trucking it to a biodiesel plant.
No problem, says Thomas Scozzafava, president of GreenShift's gs AgriFuels unit and a former Lehman Brothers (nyse: LEH - news - people ) merchant banker. All you do is cluster the corn-oil units around biodiesel plants that use another money-saving GreenShift innovation: a "continuous base catalyst reaction" system that relies on a "proprietary process intensification and advanced separation technologies"--whatever those are. There are plans to use them in a new Mean Green Biofuels plant, in Memphis. Mean Green is meantime applying for emissions permits.
EarthFirst, John Stanton's firm, claims to be at "the forefront of alternative energy sources," according to its Web site, but still gets most of its revenue from moneylosing waste-disposal and biodiesel-import businesses, and recently filed to allow Laurus Capital to sell 76 million shares, whose proceeds would be used to retire convertible debt held by Laurus. A self-described turnaround expert, Chairman Stanton doesn't disclose in EarthFirst's sec filings anything about the $157 million collapse of Keller Financial, a used-car finance firm in Florida he briefly ran. A plaintiff attorney reportedly claimed that Keller preyed on unsophisticated, elderly investors. Stanton later paid $181,000 to settle a bankruptcy trustee's claim.
Stanton owns stakes in U.S. Energy Initiatives, which lost $4.5 million on sales of $426,000 in the first half of 2006 trying to sell kits to reconfigure diesel engines so they run on natural gas; and U.S. Sustainable Energy, which claims a catalytic vacuum distillation process that sounds remarkably similar to the one John Rivera is cranking up over in Natchez. Both involve heating organic materials in a vacuum until they break down into carbon and vapors that can be condensed into a low-grade fuel oil. "Why you'd put soybeans in there, I don't know," says Thomas Adams, a biofuels expert at the University of Georgia. "Sewage works just as well."
Adams questions how Rivera can produce biodiesel without methanol--or transform 60 pounds of soybeans into 37 pounds of biodiesel, versus the 27 pounds generally considered the limit. Rivera says his process is a secret and now claims he means "biofuel." He's not the only one pushing the limits of science: In its sec filings EarthFirst claims it can create more than 20 pounds of carbon, fuel oil, combustible gas and scrap steel from a 20-pound tire.
While scrambling for green-energy investments they can trumpet in news releases, penny-stock operators invariably collide. That's what happened in Plaquemines Parish, south of New Orleans, where Earth Biofuels of Dallas last year announced plans to restart an alcohol refinery, closed since the first ethanol boom went bust in the early 1990s. Months later South-ridge Enterprises, a onetime mining operation now in the ethanol business, said it was buying $6 million worth of equipment from the same plant to build its own 60-million-gallon-a-year ethanol refinery. Its shares jumped 20 cents to $1.84 on the news.
Earth cried foul, saying it owned the equipment. Southridge has sued Earth's partner in the deal, blaming it for the loss of $60 million in market value. A lawyer for the Louisiana partners says he expects the case to be dismissed, but the point seems moot: Earth has since imperiled its own $27 million investment by failing to come up with $80 million to finish the refurbishment by a Dec. 4 deadline. Earth says the project is "still viable."
So, apparently, is AFV Solutions of Irvine, which plans to import hybrid natural-gas/electric buses from China. Up until early 2005 AFV was known as Dogs International and planned a chain of "bed and biscuit" upscale kennels. (It still owned one in Flagler Beach, Fla. as of its most recent sec filing in November.) Dogs International turned green after Jeffrey Groscost, former speaker of the Arizona House of Representatives, took over as chief executive. Groscost was famous in Arizona for pushing through a subsidy program for alternative-fuel vehicles in 1999 that cost the state more than $200 million before it was shut down; buyers could get up to half the cost of a $50,000 suv back from the state.
AFV shares surged from $1.60 in 2005 to $11.30 in May 2006. That's when it announced $4.8 million in financing and plans to import Chinese buses. AFV has yet to sell a bus, and its share price has since deflated to $4.50. Groscost died suddenly in November.
Some schemes are outright fraud. LeeRoy Allen was ordered to pay $270,000 and barred from involvement with public companies last October after the sec accused him of converting a penny stock called J-Bird Music Group (former home of faded stars like Billy Squier and The Guess Who) into a purported biodiesel company with "no assets, funding or viable product." Allen consented to the charges without admitting or denying guilt.
In New Jersey the state attorney general last fall filed civil fraud charges against Brian Smith and his wife for promoting Digital Gas (other-otc: DIGG.PK - news - people ). The company lacked even a bank account yet had shares trading on the pink sheets that briefly soared to 90 cents a share last spring, giving it a theoretical value of $22 million. As he pumped the stock with press releases like the one claiming Digital Gas had a "high temperature fuel cell" that would unlock as much as 1.1 billion gallons of oil from a neglected oil shale deposit, New Jersey officials say, Smith was using stock to renovate his home and pay his attorney.
Smith insists, in an e-mail, that he's innocent and his company "is actively seeking to commercialize its energy savings, alternative energy and farming opportunities." For assets, his Web site offers a grainy image of the deed to a 178-acre granite quarry in Nova Scotia, Canada. Despite Digital's legal problems, "We're still in the pipeline," says Theo van Bakkum of iccu Holding bv, a Smith partner who is working on a new method for storing electricity.
"We are here to help farmers, lessen the heavy yoke of imported fuel, help to create food and jobs for Americans and offer the greatest solution to the world's need for energy since humans harnessed the power of fire itself," says Taylor Moffit, chief executive of Originally New York, an o-t-c bulletin board and would-be ethanol producer with a grand total $331 in revenue since it launched in 2001. Dream on--you'll get a lot of investors to dream with you."
The historic and disruptive technological breakthrough that USSE/SSTP has allegedly made in creating clean biofuel and fuel additives that can wean the U.S. off of foreign oil is about the biggest news one can think of if it is true. Is there anyone who doesn't believe the oil rich countries would be shaking in their boots, and the U.S. government would have announced these breakthroughs to the world by now, if these claims are true? I don't know if AmSpec is reputable or not, although I believe it is, and I don't know if the state senator is credible or not, although he probably is, or the two Alcorn professors, who probably are also. What I do know is many more people would have heard of this "disruptive technology" by now if it really was a technological breakthrough.
It is easy to see where the pps is headed if you have no position in this stock. Without substantial and verifiable profitable revenue to report, billions of shares to trade, and little outside credible and reputable endorsement of its products, the price should continue its slide until that set of circumstances changes. How low it will go is anyone's guess. Below .02 looks likely to me.
If it appears that I was promoting another company over USSE I apologize. I think ADM is also overvalued, although it has been taking a tumble. It was simply an illustration of the fact that many biofuel companies are in the market, including those making biodiesel and additives, many are financed much better than USSE, and the sector as a whole is overrun by scammers and con artists. I don't know if that characterization applies to USSE, but it's obvious to me they need, absent fast-growing profitable revenue, some reputable outside endorsements and confirmations that the RP is revolutionary if the stock price is going to appreciate much, since they have billions of outstanding shares. You may believe it's a "disruptive" technology. You may believe it's "revolutionary" and will wean the U.S. off foreign oil. Don't you find it strange that you know this while the EPA and Texas and Mississippi Congressmen don't appear to have heard about it yet?
That makes absolutely no sense, but you're welcome.
With due respect to Senator Dearing, he is a local state senator. He and a couple of local agricultural college professors appear to be the only ones outside the company to endorse USSE. My state's U.S. Congressmen often endorse and support start-up companies in their state, as well as obtain funding for them and others they endorse. Why hasn't even ONE of Mississippi's Congressmen done the same for USSE?
One of many companies that have a big head start on USSE:
7/27/2006
"Archer Daniels Midland Company (NYSE: ADM) today announced plans to build a biodiesel production facility in Rondonopolis, Mato Grosso, Brazil with an annual capacity of 180,000 metric tons. The plant will use soybean oil as its feedstock and is competitively positioned to meet the large anticipated demand from soybean producing farmers as well as from the Brazilian road and rail transport industries. Additionally, it will be strategically located adjacent to ADM’s existing soybean crushing plant in Rondonopolis to maximize synergies between ADM’s Brazilian origination, transportation and processing capabilities.
“ADM is a leader in the production of biodiesel in Europe, and we are pleased to use that extensive experience to help meet the demand for this biofuel in Brazil,” stated Matthew Jansen, President-South American Operations. “As a world leader in soy processing and biofuel production, our participation in the Brazilian biodiesel market is a complementary fit for our business.”
This biodiesel plant will be operational in the first half of 2007, ahead of the anticipated increase in demand due to the mandate that all diesel fuel sold in Brazil include 2% biodiesel beginning in 2008, and 5% biodiesel beginning in 2013.
“The Government of the State of Mato Grosso recognizes the importance of renewable fuels, and we are pleased that ADM, a world leader in bio-based fuels, has chosen our state to build its first Brazilian biodiesel plant,” stated Blairo Maggi, Governor-Mato Grosso. “This plant will contribute significantly towards reducing agricultural production costs, as well as having a very positive economic and environmental impact on the citizens of Mato Grosso and all of Brazil.”
Biodiesel is a vegetable oil-based fuel made from renewable crops that burns cleaner than traditional petroleum-based diesel fuel. Biodiesel works in diesel engines, improves air quality by reducing greenhouse gas emissions and is a growing fuel source for the world.
Construction on the plant is dependent on final engineering and permit approval.
Archer Daniels Midland Company (ADM) is a world leader in agricultural processing and fermentation technology. ADM is one of the world’s largest processors of soybeans, corn, wheat and cocoa. ADM is also a leader in the production of soybean oil and meal, ethanol, corn sweeteners and flour. In addition, ADM produces value-added food and feed ingredients. Headquartered in Decatur, Illinois, ADM has over 25,000 employees, more than 250 processing plants and net sales for the fiscal year ended June 30, 2005 of $35.9 billion."
From:
Brian Peterson, SVP Corporate Affairs
Archer Daniels Midland Company
217-424-5413
_______________________________________________________________
(Currently, ADM has around 650 million o/s to USSE's billions)
Suggestion for longs on this board: Try to get someone from the EPA or another federal agency to endorse USSE's products. Try to get a Congressman to say a few positive words about the company. Try to get ANY outside, reputable independent agency or company to go on record and claim that USSE has "disruptive" and/or "revolutionary" technology. Until then, or until the hundreds of millions of profitable dollars come rolling in, the pps has no positive catalyst. Press releases are not enough for the market to rely on, especially for penny stock companies.
There are billions of o/s with around a million traded daily, and yet some of you believe what is written on this board affects the share price. My guess is over 90% of the shares are in hands of people who do not even read this board, let alone post on it. Think what you will. It's just obvious to me the share price will not recover before or unless USSE can get outside, credible, reputable and independent confirmation that its revolutionary fuel and additive is truly revolutionary. Other biofuel companies have been getting awards from the EPA and other agencies. Put on your objectivity hat and you can also guess why USSE has never received any outside awards for its "disruptive" technology.
The pps is drifting down for good reasons. There is little revenue now, and there is next to no proof that revenue within a year or two will be anywhere near where dreamers on this board are projecting. Without independent and reputable outside confirmation that the RP is disruptive technology, those with any objectivity aren't going to buy in. The companies that USSE is doing business with, including USSE itself, no one had ever heard of a year ago, so to take whatever they say at face value is naive. Take a look at their prior claims and projections in press releases and how many have turned out to be accurate. That should give you a clue where this is headed.
The EPA has given awards and positive recognition to many alternative energy companies this year for their innovations and progress in developing alternative energy, including biodiesel. Anyone have a guess why USSE has never received any outside awards from ANYONE? In my state, several of our Congressmen have given public high praise of a new alternative energy company (solar power) in our state. Why do you think none of Mississippi's Congressmen has done the same about USSE? USSE's products may be the best out there, but until they gain independent endorsements and widespread acceptance anyone who believes all they say is taking a lot on faith. �
Wechoose uses logic as well as facts to support his contentions. He welcomes debate and differences of opinion. To believe everything any company claims to be true without having a healthy degree of skepticism is what is (w)reckless. Misleading "documentation" is easy to come by, especially by companies in "pennyland" that have little revenue and scrutiny.
How does anyone account for the fact that no outside independent company or federal agency has endorsed the product? Meanwhile, Forbes, which is highly respected, as well as others, strongly imply that USSE is a scam. With all its many red flags, those who don't acknowledge any of them and simply pump away are doing a disservice to shareholders. No one has yet explained why NOT ONE of the Mississippi Congressmen has taken the time to endorse USSE or its products. Not one outside award has gone to JR or the company. I wonder why. No, I guess I don't.
Those who are holding or buying at this point look like they are relying on what the company has said is going on rather than on outside, independent and credible observers. Does anyone have a realistic opinion why a local state senator and a couple of local agricultural professors appear to be the only ones who have verified the Rivera Process outside of the company? Why hasn't any of the Mississippi Congressmen endorsed it? Why hasn't ANYONE from a national independent or federal agency endorsed it? Why haven't they gotten any national or international recognition? Some say give it time because that will come. That looks like wishful thinking to me, unless one has inside information that can be trusted.
speckulater
Do you think USSE is as undervalued as you thought TTCM was? USSE and SSTP have billions of shares, as you know. How long do you think it will take before they get billions in profitable revenue?
Billions of shares and no revenue is not a good combination. Even trading @ 3 cents the market cap is around $50 million. I don't see how USSE deserves such a high valuation until it gets some national recognition, but it can't even seem to get any of the 4 Mississippi Congressmen to endorse it first. That's not a good sign imo.
Even @ 4 cents, USSE and SSTP have a market cap over $100 million, with billions and billions of shares to trade. Although a couple of professors at a nearby agricultural college and a local state senator think the Rivera Process works, doesn't everyone realize that the Big Boys are also in this market, and NO federal recognition or awards have come USSE's way, while they have been given to other biofuel creators. With no revenue and only debt, USSE would be climbing a pretty high mountain even if they had no litigation or SEC inquiries to wade through, so I wonder if those of you who think this is a bargain know what odds you're facing. Ask yourself, if this fuel is so revolutionary, why have no independent studies corroborated it, and why haven't at least the four Mississippi Congressmen jumped on the USSE bandwagon by now?�
Do I have this right? There are BILLIONS of USSE/SSTP shares and the company has had several previous alliances and has made a number of previous predictions that have not turned out to be accurate. They have virtually NO revenue. The only ones outside of the company who have vouched for the RP is a local politician and a couple of professors at Alcorn State. The RP has been publicized for over a year, and NO federal agency has seen it or endorsed it. No U.S. Congressmen (from Miss. or anywhere else) appear to have seen the process or endorsed the product. Other "green energy" companies have been receiving national awards for their advancements in formulating biofuels. USSE/SSTP appears to have never even been nominated for an award, let alone funding. What's not to love?
speckulater
It's amusing to see your very positive messages tail off right before selling, but that's par for the course for many others as well. With billions of shares outstanding, questionable alliances, murky specifics about the "biofuel", and almost no sales, it's easy to understand why people would be getting cold feet.
Anyone who wants more information on this company might want to check out Raging Bull. There are a number of shareholders on that board who have been holding since last year. All of the ones who posted on this site couldn't take the heat when the share price began falling, because it looks like all of them sold even though a couple appear to have bought back in after the good news came out today. Nothing wrong with being a trader, but it looks like more of the people who post about this company on RB have been investors, and most of the ones who posted on IHUB about TTCM China since late last year have been traders. It's common for some posters to want you to think they're investors, and encourage others to be also, when they are really traders. The opposite is almost never true.