August 17, 2014: With another 125 million shares of Solar Wind Energy Tower (SWET) recently registered in an S-1 filing, it seems likely that yet another Pump & Dump campaign on this ticker will soon be upon us. We've already seen at least seven such attempts to divest insiders of stock since January 2012, somewhat cloaked by an otherwise purposeless ticker (from CWET) and name (formerly Clean Wind Energy Tower) change in March of 2013. In that time, the number of shares outstanding has doubled. Needless to say, minus a few astute flippers, those who have been suckered in to date are not too happy with their investment decision.
The Carrot On the End of the Stick
The most recent funding announcement came on July 14, in which a SWET subsidiary purportedly received a commitment of up to $100 million from something called "Arizona Alternative Energy Center, LLC" (AAEC) for its previously announced first tower development in San Luis, Arizona. What those caught up in the euphoria of the announcement may miss is that AAEC does not happen to have the cash on them. They have to raise it.
Under the terms of the Benefits and Services Agreement, AAEC will raise up to $100 Million Dollars of development capital for the San Luis, AZ Tower Project through the Federal EB-5 Visa Direct Investment Program which fuels hiring and economic growth in U.S. cities and in other counties. Greenpower will acquire the funding from AAEC in the form of a five year loan.Apparently, AAEC will seek foreign investors for the San Luis project under the government's EB-5 program and then lend the money to SWET. It is kind of curious--although not really--why SWET doesn't just seek these investors on their own and eliminate the middle man. Logically, AAEC shouldn't have to act as anything more than an agent for SWET, perhaps for a finders fee. The fact that AAEC is subsequently lending the money to SWET is disconcerting. Even if AAEC is able to raise the cash, and we predict that they won't, who knows what they will do with it, or what they will charge SWET for it. We are left in the dark about the terms and conditions of the agreement because no Form 8-K regarding it was filed, certainly an egregious and suspicious omission. It's not like the filing of 8-Ks regarding agreements are a foreign concept to SWET.
The United States Customs and Immigration Service (USCIS) administrates the Immigrant Investor Program, also known as "EB-5," which was created by Congress to stimulate the U.S. economy through job creation and capital investment by foreign investors. Almost all EB-5 investments have been in massive Regional Center Projects that involve hundreds of foreign investors and scores of millions of dollars. AAEC is a USCIS approved Regional Center (within the meaning of the EB-5 program) in Maricopa County, Arizona.
An investment made by the foreign investor must create at least 10 new American jobs over a period of two years. If successful, the investor receives their permanent green card. The U.S. Citizenship and Immigration Service sets aside up to 10,000 visas for immigrants investing $500,000 or more in Targeted Employment Areas (TEA) to create new jobs in American businesses and enhance the economy in and around cities such as San Luis, Arizona.
An 8-K was filed hand in hand with SWET's announcement that it had selected the San Luis site for its first tower development, perhaps because there were no terms that are potentially toxic to the shareholders. Even so, all that has been executed is an option agreement to purchase the 640 acre site at a hefty $46,500 per acre, requiring SWET to come up with almost $3 million by the end of the year. 6 month extensions on the option can be had for $250K per. As far as the property goes, SWET currently owns nothing but air. With only 335 grand last reported to be on the books, where is the money going to come from? And it will be a lot more than $3 million that is required since a grand total of $370 worth of equipment is listed among the assets. Obviously, the 100 million bucks from AAEC is supposed to fill the requirements, but that is far from a fait acommpli.
Arizona Alternative Energy Center
|AAEC Domain Registration|
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The AAEC website barely exists and does not provide much information at all; the Projects, Escrow and Articles pages are all blank. Even more disconcerting is that the domain registration has been privatized, rather odd for an entity that purportedly relies on government programs. Furthermore, a Google search fails to reference any projects backed by the AAEC other than the latest SWET venture.
It is anybody's guess who is really behind AAEC or if it truly exists other than in name only.
The over 109 million share registration is in consideration for a $885,000 convertible note assigned to JDF. The conversion works out to about $.0081 per share. According to the company, $555,000 was already received on June 9, 2014 with the remaining $330,000 is to be received after the S-1 is deemed effective by the SEC. Sometime after that, be it the next day or six months later, another Pump & Dump campaign will be launched.
The remaining 15,750,000 shares registered under the S-1 are intended to accommodate warrants issued to JDF at 4 and 5 cents a share. With at least 173 million shares--and probably more than 200 million shares--already out on the street, it will take an intensive promotion to get these shares to a price where redemption of the warrants becomes profitable for JDF. We suspect that the relatively small amount of out-of-range warrants may merely be window dressing designed to provide an optimistic outlook of the share price to potential dupes. With better than 109 million shares newly available to them, currently at a 68% discount to the market, we doubt that Fierro will be doing much crying if he doesn't get to exercise the warrants.
Where does the money go?
Previously, several rounds of financing were completed and we think there were questionable use of funds. The company routinely fritters away approximately half a million dollars each quarter on "Selling, general and administrative" expenses. By way of example, of the $555,000 received from JDF on June 9, 2014, only $335,261 remained by June 30th, according to the company's recent Form 10-Q filing for the period ending June 30, 2014. The company made no cash interest payments that we can see on the financials, and since it sells nothing, it appears that about $220K was spent on those elusive "general" and "administrative" costs in just three weeks.
What's the Real Story?
(1) An obscure, perhaps non-existent entity (AAEC) promises to raise a huge amount of money to fund a project.This sounds like a scam to us. It better sound like one to you too.
(2) That project is on land that is optioned but not owned by SWET, who is the frequent subject of Pump & Dump promotions.
(3) Millions of shares are registered on behalf of a financier (Fierro) for a fraction of their trading value.
(4) Fierro is known to have a dubious penny stock history.
(5) SWET obfuscates the money received for those shares.