Since publishing our first report on August 8, 2012, our public track record of exposing alleged fraud or folly has recorded 5 out of 5 wins with the most recent OTC:CLSR declining by as much as 56% yesterday less than 24 hours after our expose was published. And while readers will not be able to verify this independently we had prepared our second NASDAQ report on PPHM which was due to be published this week only, shares of the company dropped by 76% yesterday making our report obsolete.
The purpose of this opening rant is to communicate to our readers that when we publish a report on a company, we have generally spent hours upon hours poring through the regulatory filings as well as conducting background checks on nearly everyone involved with the enterprise. We view our track record as merely a testament to the fact that the information we uncover is so material to the investment making process that it causes an imminent revaluation of the share price.
Today's report may provide some of our readers with a surreal case of Déjà vu in what is yet another unique OTCBB experience. We have uncovered a company trading at a $242 million valuation that not only has zero revenues, just $59,892 in cash, and $3.6 million in negative shareholder equity (liabilities that exceed assets) but was sued in 2001 by the SEC for engaging in exactly the same type of promotion that we believe has led naïve investors to purchase the shares en masse contributing to a 300% gain in the share price in less than 10 days. Investors and their short memories have apparently forgotten how to use the handy SEC website as anybody could find the well documented case of management hyping shares with dreams of a new technology that would revolutionize a multi-billion dollar industry. We believe the case to be so identical that we have decided to write the report in a format that places the SEC case on the left and the current promotion on the right highlighting the similarities in the most efficient manner. This is the story of Save The World Technologies, Inc. (OTCQX:ZERO)
Shares Outstanding (6/30/2012)
Most Recent Share Price (9/24/2012)
Market Value (9/24/2012)
Cash as of June 30,2012
Debts & Liabilities as of June 30,2012
Shareholder Equity as of June 30,2012
$-3,422,000 (ZERO is essentially insolvent)
Revenues as of June 30,2012
Undisclosed Shares in Float
Value of Undisclosed Shares in Float
ZERO Corporate Offices
735 State Street, Suite 500, Santa Barbara, California 93101
ZERO Research & Development Center (Taken Directly from ITEM 2. Of the 10Q)
235 Tennant Avenue Morgan Hill, CA 95037
Readers can decide whether this is an R&D Facility for a quarter billion dollar company or an AAMCO Tune Up Shop.
Side by Side Comparison of 2001 SEC Case against ZERO and the Current Efforts to Manipulate the Share Price
From the December 2001 SEC Litigation Against ZERO and it's then CEO Jeffrey Muller
The 2012 ZERO Stock Promotion
10. STWA is a Nevada corporation. At all relevant times, its principal offices in the United States were located at 1285 Avenue of the Americas in New York, New York. STWA's common stock is registered with the Commission under Section 12(g) of the Exchange Act. Until July 20, 2000, STWA stock was quoted on the over-the-counter bulletin board ("OTCBB") under the ticker symbol ZERO. On July 20, 2000, the Commission temporarily suspended trading of STWA securities. STWA's stock currently is quoted on the "pink sheets."
Nearly everything has remained the same:
Nearly everything is the same in the company's current description of its business on its most recently filed 10Q, note the company provides ZERO disclosure of its well documented SEC case from 2001.
1. From at least February 23, 1999 through at least April 17, 2001, Defendants STWA and Muller, STWA's former chief executive officer and president, engaged in a fraudulent scheme to manipulate the market for stock in STWA, a public company. STWA and Muller used press releases, Internet postings, an elaborate Internet website, and televised media events to disseminate false and materially misleading information about STWA's product and commercial prospects. STWA's and Muller's actions artificially inflated the price and trading volume of STWA stock, causing its market capitalization to be as much as $218,728,062.
Since January of 2012 ZERO has distributed no less than 27 press releases, while building an elaborate website filled with media events, product presentations, and even an investor newsletter which have led shares of ZERO to increase by over 300%. This while an invisible hand has been buying and selling shares of ZERO using a relatively unknown broker dealer in Texas named Tejas Securities. In both July and August of 2012 Tejas had the highest reported volume (non retail) in shares of ZERO. Together these actions have manipulated investors into buying shares of ZERO at artificially inflated prices causing the market capitalization to rise to $242,791,135 even though the company has just $59,892 in cash, less than $200,000 in assets, and over $3.6 million in liabilities.
2. STWA's business purportedly involves the manufacture, licensing, and distribution of a device for motor vehicles called the "Zero Emission Fuel Saver" ("ZEFS"). Arranged by Muller, STWA engaged in a promotional media campaign to generate interest in STWA and the ZEFS. The promotional information distributed by STWA falls generally into two categories: (A) announcements of significant licensing agreements and other important business developments; and (B) announcements concerning public automotive demonstrations that purportedly proved or would prove that the ZEFS materially reduces emissions and improves fuel economy in motor vehicles. The foregoing representations by STWA were false and misleading and were made without reasonable basis in fact. The purported licensing agreements and other purported business events simply did not exist, and the ZEFS demonstrations did not prove that the ZEFS actually worked as represented.
Directly from the June 30th, 2012 10Q: STWA's business now purportedly involves the design, licensing and development of products that reduce operational costs for oil pipelines. Specifically the AOT technology which reduces the viscosity of crude oil, thereby making it less restrictive to pipeline transport. The promotional information distributed by STWA falls generally into two categories: announcements of significant licensing agreements and other important business developments; and announcements concerning public demonstrations that purportedly proved or would prove that the AOT technology materially reduces the viscosity of oil allowing with its beer budget balance sheet to challenge the laws of physics and innovate in the $100 Billion+ R&D Energy industry.
3. Blackwelder prepared and arranged to have issued at least one false press release announcing a major licensing deal. That transaction did not exist. Blackwelder also posted positive messages about STWA on an Internet stock message board without disclosing, as required, that he received shares of STWA as payment for the promotion. Blackwelder's postings were materially misleading because they created the impression that Blackwelder was expressing unbiased views about STWA and its stock, when he was actually a paid promoter.
Only the SEC can figure this out by using their subpoena power. In the mean time we uncovered a press release from March 2012 that we believe to be exaggerated at best and possibly a complete fabrication. In the way ZERO issues the press release they make LG Partners sound as though they are a large enterprise developing a $2.5 Billion pipeline. We searched vigorously and found no proof of LG Partners other than as a DBA for an individual named Michael Leader in Atlanta Georgia. The address used on the purported contract that warranted such a promotional press release is none other than Michael Leader's 1,355 square foot home in Atlanta valued by Zillow at $212,000. There is no way this company is developing any billion dollar pipelines anytime soon.
4. On February 23, 1999, STWA issued a press release announcing the sale of the ZEFS device to Pancorp Australia Pty. Ltd. ("Pancorp"). STWA reported that it had "received a 5% cash deposit for the $2.5 million (Australian dollars) sale." The announcement further quoted Muller as stating, "[w]e believe that our estimated revenue projections of 20 cents per share for the first quarter can now be achieved
If in 1999 the cornerstone of the promotion was a heavily promoted contract with an Australian company in 2012 ZERO has changed the script a little bit by hyping a purported relationship with a Chinese company. Here is our problem with this whole purported relationship:
25. STWA's representations concerning the success of its ZEFS demonstrations were false and misleading, were made without reasonable basis in fact, and omitted material facts necessary to make the statements made not misleading. In fact, STWA's demonstrations of the ZEFS device did not prove that the ZEFS device would actually perform as represented and the press releases omitted material facts concerning the demonstrations. For example, the demonstrations were performed on old cars equipped with carburetors, not on late model cars, virtually all of which are equipped with fuel injection. The demonstrations were also "static" tests, performed on cars in neutral gear without their wheels moving, not on cars in actual operation on the road. During the Los Angeles demonstration, discussed in the June 15, 2000 press release, the carbon monoxide reading decreased only after a mechanic adjusted the car's carburetor. STWA did not demonstrate that the purported results were the result of the ZEFS device and not the result of the carburetor adjustment. During the Los Angeles demonstration, after connecting the ZEFS device, the emission of harmful nitric oxide actually increased.
Here the SEC will need to use its subpoena power to confirm if in fact the tests were fraudulent. We believe the tests are clearly misleading for the following reasons:
27. Early in 2000, Muller directed Blackwelder and others to post numerous messages touting STWA stock on the Raging Bull Internet message board dedicated to STWA stock. Muller told Blackwelder and others to use different aliases and different computers when they posted messages touting the stock. Muller did this in order to create the false impression that many people were talking positively about STWA and its stock.
Once again the SEC will have to use its subpoena power here to verify whether the ZERO clan is once again at it on the message boards. From what we have observed on the investors hub board there is definitely some highly promotional activity orchestrated by a few posters such as this one that have post histories comprised only of bullish ZERO comments.
29. In these posts, Blackwelder did not disclose that STWA gave him 14,000 shares of STWA stock in compensation for his promotional services. In some instances, Blackwelder affirmatively concealed his identity as the author of the posts.
Looks like ZERO didn't learn from its past experiences with paying stock touts shares as compensation. The website pumpsanddumps.com has disclosed that ZERO paid a pennystock promoter nearly 60,000 shares to send out promotional emails on the company. The company hired is called: stockguru.com
30. From September 1999 through December 2000, Muller sold nearly all of his five million restricted shares in private, unreported transactions. Some of Muller's sales were to United States citizens. If sold at the then-prevailing market price, Muller would have realized nearly $9 million from the sales.
Only 4 days ago! Cecil Kyte, the CEO of ZERO purchased 500,000 shares of ZERO currently worth $1.89 a share for $.25 a share. While retail investors are paying nearly two bucks, Cecil can sell into them for a handsome profit!
This exercise has merely confirmed that there are too many similarities between the current ZERO promotion and the one the SEC sued the company for in 2001. We are always surprised to see just how dishonest some of these OTCBB scammers are. With ZERO, we have not been let down as the patterns appear to be nearly identical with the objective being to liquidate cheap stock at artificial prices.
Different Decade Different Story
Note two screenshots from the ZERO website with one from today and one from 2007. We remind investors that in 2007 ZERO had the SAME Chairman, Mr. Cecil Bond Kyte:
Screenshot from ZERO's own website in 2007 which can be viewed here.
Screenshot from ZERO's website today. From badmouthing fossil fuels and promoting the prevention of global warming in 2007, to badmouthing alternative energies while promoting oil in 2012.
ZERO's "Technology" Is Hardly Proprietary With Past Examples Consisting of Bankrupt OTCBB Companies
Investors may remember Sulphco Inc. a Texas based OTCBB Company that is currently bankrupt and trading under the symbol (OTC:SLPHQ). Before it filed for bankruptcy in 2011, Sulphco was a higher flier reaching a valuation of as much as $400 million in 2007. The demise of the company came when promises to change the physical characteristics of crude oil by electrifying the crude using a process they called "Sonocracking" eventually turned out to be a sham. Today shares of Sulphco trade at $.0006 per share.
The bottom line is that investors need to realize that a company with nearly no cash and assets that total only $200,000 has a ZERO chance of innovating in an energy industry that sees over $100B expended by the best and brightest scientists and engineers the world has to offer. The true purpose of this entire production is to sell worthless shares at artificially inflated prices to unsuspecting investors.
Even the most naïve of retail investors should find it a little unnerving that nearly 10 years ago this same exact company was sued by the SEC for engaging in nearly an identical fraud that left investors with nearly $200 million in losses.
We urge investors to stay away from ZERO as we predict that the shares will follow the path of all five of our recently profiled companies which experienced an average decline of nearly 60% from the time our report was published. And for those investors that are still skeptical we urge you to please read the SEC case vs. ZERO in its entirety as we are certain it will change your minds.
Disclosure: I am short OTCQX:ZERO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.