PART II – GREENVOLT POWER CORP. – (OTCBB: GVLT) - GREENVOLTING DEVELOPMENTS
Investors have begun their search for companies that could profit from the growing energy crisis. Mostly, they are looking for businesses that have devised products or developed technologies which might address today’s power needs. In theory, at least, those companies would thrive – and, as a natural consequence, their shares would soar. That seems like a plausible scenario, but how can investors distinguish those potential winners from the rest of the pack? The energy bandwagon is getting more crowded all the time. It seems that new companies have been surfacing, almost daily, to lay claim to a piece of the energy action. Do any of them have a realistic chance to succeed? Are their products likely to have any tangible impact on current or future energy needs? How much do investors know about some of these new entrants in the energy sweepstakes?
In this Special Report on the Energy Crisis, Stock Patrol examines some of these companies and looks at what they have been saying – and what is being said about them. Are they likely to be part of the solution, or could investors just be asking for more problems?
Name Games
There’s one sure way to capture attention – drop a few prominent names. And if you’re going to try that approach, why not start at the top. On May 22nd a company called Greenvolt Power Corp did just that, declaring that the Company’s “unique” technology “[f]its in with the Bush-Cheney Energy Plan.” As in President George W. Bush and Vice-President Richard Cheney. Guess what happened next. Greenvolt shares, which closed at 29 cents on May 21st, traded as high as 78 cents per share on May 22nd before closing that day at 60 cents.That means share prices doubled – and so did the market cap for Greenvolt stock. The value of the Company increased from about $5.4 million to $11.2 million in one day (after flirting with $14.5 million during intra-day trading). Volume increased from 175,000 on May 21st to 1.66 million on May 22nd.
Could the sudden interest in Greenvolt shares have been triggered solely by the reference to Messrs. Bush and Cheney? It seems so. Certainly, investors were not responding to the Company’s past performance or its financial condition. Greenvolt had just $377 in the bank on March 31st. It had no revenues for the nine months ending March 31, 2001. Were investors ignoring those cold hard facts or (as seems more likely) were they simply unaware of them? They certainly didn’t get this information if they read an “investment opinion” issued by an online newsletter called “The Subway.com” on May 23rd. “The Subway.com” opined that Greenvolt’s plan for the “Refcell™ is “serendipitous in light of President Bush’s recent energy plan, which, though controversial, points to a near-future for a ‘hydrogen economy.’” “The Subway.com,” however, did not mention either Greenvolt’s lack of revenues or its precarious financial position.
From Jewels to Fuels
Greenvolt, a Nevada corporation that maintains its offices in Ontario, Canada, became public by virtue of a reverse-merger with an online jewelry retailer called Beck & Company in July 2000. The Company’s public filings indicate that it is working to develop Alkaline Fuel Cells, an alternative power source that generates electrical current using hydrogen and oxygen. Since the merger, it says, operations have been pretty much limited to research, development and testing. Not all of that testing has fared so well. Efforts to develop alkaline fuel cell technology with an unnamed “contractor” proved unfruitful, and led to the termination of that contract. Greenvolt states that it has had discussions toward obtaining new alkaline fuel cell technology, but concedes that “[n]ew investment funds will be required for further commercialization of this Alkaline Fuel Cell.”Where will that money come from? As of March 31st, the Canadian-based Company had raised about $260,000 in U.S. dollars, but Greenvolt admits that it will need another $2.5 million over the next two years to complete research and development of these fuel cell technologies. The Company says it is talking to “private individuals” about providing those funds, but it has not identified those potential financiers, and there is no assurance those negotiations will be successful. All of this leaves the Company in a rather precarious position – not withstanding its recent invocation of the names Bush and Cheney. Indeed, Greenvolt’s recent financial statements warn that it may not survive as a going concern. More specifically, they state:
As noted in these Financial Statements, the presence of significant losses, negative working capital together with the uncertainties associated with the company's ability to obtain additional capital, raises doubts as to its ability to continue as a going concern. The company's ability to continue as a going concern will be in doubt until such time as it obtains sufficient new capital to sustain the remaining development expenditures, the ongoing costs associated with the manufacturing facility and the ongoing administrative and fund raising activities. Until that time the company will have to rely on its ability to receive funds under private financing agreements and the sales of its Magnesium, Air, Salt Water Fuel Cells.
Can it sell enough of those units to make ends meet? Greenvolt says it has a license to sell a “12 volt 2 amp Magnesium, Air, Salt Water Fuel Cell” that it is testing. But while the Company says orders are being received daily, it has not given details of those orders, the terms of the license, or anticipated revenues from sale of the devices.
The Company warns that it may have to downsize operations if it can’t raise enough money. Downsize? From what? How do you scale back from zero revenues and $377 in the bank?
Whither Refcell™?
When investors rushed to buy Greenvolt shares after the “Bush-Cheney “release were they responding to Greenvolt’s claims of a “unique” technology?. If so, what is that technology and how is it likely to impact future energy needs? On May 25th the Company issued a press release that said that Greenvolt’s new “Refcell”™ is a reverse fuel cell that “can be energized by wind or photovoltaic power sources and is capable of splitting water” into hydrogen and oxygen. According to the Company, “the Refcell™, which can supply the hydrogen necessary to fuel other fuel cells, has cross-industry implications and answers the fuel needs of any company that needs hydrogen and oxygen.”How unique is the Refcell™? Indeed, how fundamental is it to Greenvolt? Greenvolt’s most recent Form10Q quarterly report, filed on May 15th, makes no reference to the Refcell™. Neither does the Company’s Form 10-K for the year ended June 30, 2000. Instead, both public filings emphasize Greenvolt’s “fuel cell” business.
In its Form 10-K, the Company points out that
Hydrogen can also be made from water (H20) at the Fuel Cell location by various means, thus eliminating the need to compress it and to store it in pressure vessels. These advantages provide economic and environmental incentives for the commercial development of fuel cells.
So, if “various means” exist for making hydrogen from water, how “unique” is Refcell™? We found that other products exist, including some marketed on the Internet, that can be used to derive hydrogen from water. Does Refcell™ employ any proprietary or patented technology that cannot be duplicated by larger, better capitalized companies? Does Greenvolt hold any patents on this technology, or any exclusive licenses that would preclude instant competition? Did Greenvolt invent the device or does it hold a license to market the product – and if so, from whom and on what terms? The May 25th press release does not say and the records of the United States Patent and Trademark Office do not reflect any patents held by Greenvolt.
Greenvolt’s Form 10-K goes on to address the possible future use of hydrogen in connection with its “fuel cell” business, stating
The Company's technology contemplates production of hydrogen from water to supply the fuel for the fuel cell on an "on demand" basis, without any requirement for pressurized fuel storage facilities for the fuel cell unit. Management is arranging strategic alliances in order to develop the "on site" Hydrogen Fuel Supply Systems with a target date at the end of 2002 or the beginning of 2003.
Which brings us back to Refcell™. Has the Company entered into one of those “strategic alliances,” and, if so, with whom. What are the terms of that arrangement – assuming it does exist. We checked the Company’s website and found that Greenvolt was selling three different “reverse polymer fuel cell electrolysers,” with the smallest selling at $3000 a unit. The Company says that each of these units can produce hydrogen and oxygen from distilled water – but none are referred to as the Refcell™, and the product descriptions suggest that each is powered by direct electrical current rather than “wind or photovoltaic power sources.”
Shifting Gears
Despite these financial concerns, Greenvolt recently announced two other projects. On May 25th, the Company said that it planned to begin production of a fuel cell powered emergency highway blinker. That May 25th press release did not mention Refcell ™Then, on May 31st, Greenvolt issued a press release stating that it had formed an alliance with AOL Technology (no not that AOL) to utilize the Company’s “Magnesium Air Saltwater Fuel Cell” to power the “Balanced Oil Recovery System Lift,” a process for rejuvenating certain shallow oil wells. The press release refers to a $200 million market” but does not specify whether that is the market for rejuvenated oil wells or for the Greenvolt fuel cell product. In any event, Greenvolt does not provide any details of the AOL Technology agreement , the license fees it must pay in connection with the “Magnesium Air Saltwater Fuel Cell,” or the potential allocation of revenues with AOL Technology.
And, again, the May 31st press release contains no reference to Refcell™.
The Competitive Edge
Money troubles are not Greenvolt’s only concern. The Company admits that it has plenty of competition – at least 370 fuel cell research operations, “the bulk of which are likely far better capitalized than is the Company.” Its principal competitor is the National Aeronautics and Space Administration (NASA) which, despite regular fights to secure congressional funding, is certainly better capitalized than Greenvolt.And they have a direct line to Bush and Cheney.
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