I’ve just been alerted by Mr T Winnifrith re’ a pump & dump operation. Of course Toms’ much too refined to call it a “Scam” His words are “Pump & Dump” However I’m a tad more abrasive. This is a slam dunk SCAM. Stay well away from it and take TW’s advice if you were suckered in get the hell out of here asap Monday morning.
I’ve managed to twist TW’s arm & he’s graciously allowed me at no cost to our site to re-publish his article here for the greater good of all. Thanks Tom.
Make sure you read this
An email was sent out by a leading financial websites group to its readers on Friday with the headline : “The one stock to own before the New Year.” I do not know where to begin with this shocking tale but if you bought that stock (and it is clear some folks did) you need to sell first thing Monday. This is just horrible. The stock in question is Harmonic Energy Inc (ASUV) which is traded on the US Bulletin Boards (think Plus markets but less regulated and less liquid if you are a seller). The whole episode is just appalling.
The financial promotion (it appears from an FSA authorised site thus that is what it is termed) talks of a “gold mine” that could “generate $100 million per year in revenue” and concludes “PS I urge you to climb on board now and buy what you can without delay. America’s used tire reserves have become a superfund of untapped reserves that could fuel ASUV Growth of 3200% over the next two to three years.”
Golly gosh. That mailing went out at 10.17 AM Friday and was persuasive enough (heck you have to trust an FSA regulated website) that by late Friday ASUV stock was 15% higher and it closed 7% higher at 78 cents. Brits were clearly buying. But someone was selling.
Oh dear. Folks should have read the (very) small print on the mailing:
“This paid advertisement by John Myers’ The Myers Newsletter does not purport to provide an analysis of any company’s, financial position, operations or prospects and this is not to be construed as an offer to sell or solicitation to buy or sell any security. Harmonic Energy ( hereafter ASUV or The Company) , the company featured in this issue appears as paid advertising. Wilkerson Marketing has been paid six hundred thirty thousand dollars to enhance public awareness for ASUV. A total sum of ten thousand dollars has been paid to Mondo marketing Inc from a shareholder(s) of ASUV who may or will sell shares of the feature company at or about the time of this mailing. This payment is to cover costs associated with creating, printing or distributing this report and Mondo marketing will retain any excess funds as profit.”
Do you understand what that means?
a) ASUV paid Wilkerson marketing $630,000 to get paid adverts for its shares in US tipsheets like the Myers report.
b) A shareholder in ASUV paid Mondo Marketing $10,000 to rent lists to distribute that paid advert ( making it look like semi-credible analysis) to folks who might buy the stock so that he can sell. And a respected, FSA authorised media group took payment to play its part.
Maybe I am just thick, but to me that looks like a pump and dump operation. But I am afraid it gets worse. Much worse.
Because we then turn to Harmonic itself. What is the underlying stock worth? At 78 cents the company is capitalised at $49 million but remember this is an illiquid stock. Just a few sellers and the share price can crater. What is the company really worth?
Your first clue is the website which you can see HERE
Notice the vast shining offices depicted. Er they are not Harmonic’s and nor are they anything to do with its purported business so that should alarm you. Why put them up there if not to give a false impression? In fact the office is 3rd Floor 207 Regent Street, London. Do a Google search. It is a serviced office for dozens of companies. This global enterprise is in fact run from some bloke’s bedroom.
Why is a British based firm (albeit incorporated in Nevada) listed in the US? Odd that. You would have thought with such potential it would have listed closer to home allowing investors to “kick the tyres.”
There is not a lot of financial information on the site – well to be precise, there is none. For that one needs to go to the SEC website.
And so it is off to the SEC where the results for the three months to October 31st 2012 were posted on 14th December. You can read them HERE
Where do I start?
At the period end cash was $31,633. Current liabilities ( accrued expenses) were $37,180. There is also the little matter of $175,000 due on June 30th and another $175,000 due next September to a Japanese firm Kouei Industries from whom a license to use Harmonic’s tyre recycling technology in the US and Europe was licensed last March.
So there is a bit of a cash issue there. Forget the money owed to the Japs, Harmonic is already technically in a negative working capital position.
Not surprisingly the auditors note:
The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. However, the Company has an accumulated deficit of $409,035 as of October 31, 2012. The Company currently has a working capital deficit, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
Oh dear. Revenue nil. Negative working capital, $350,000 owed to the Japs within a year. That looks pretty bad to me.
This company was established in Nevada in 2007. It was originally called Fairytale Ventures. No comment. It then became Aviation Surveillance Systems. Now it is Harmonic. Good luck to all who sale in this good ship but it strikes me that it is – shall we say – high risk.
I note also that having raised $500,000 earlier this year the company’s biggest area of expenditure seems to be Wilkerson Marketing rather than product development. Odd that.
Not only do we have a shareholder who wants to offload but this company needs to raise cash at once otherwise it will go bust within weeks.
None of that is made explicitly clear in a promotion sent out to thousands of unsuspecting British investors on Friday morning. Instead they are told that they must buy now before it is too late in case they miss out on 3,200% gains.
This is a total disgrace. I alert you so that you are not suckered into this or if you have been suckered so that you can cut your losses and exit first thing Monday before it is too late.
I am sure that the firm that sent this promotion out will wish to issue a retraction as soon as possible as part of its care and duty to its readers. And it may wish to look at its own vetting procedures going forward. On the basis that it will act in a responsible manner to redress this issue I shall not name and shame it.
I am sure this is all legal. But it smells to high heaven.
For more forthright views from Tom Winnifrith follow him on twitter @tomwinnifrith
All of Tom Winnifrith’s writings can be found at www.TomWinnifrith.com