Re: 6/26/01 - [SLPH] Insidetruth.com: Pacific Equity Investigations Initiates SULPHCO, Inc. (NASDAQ: SLPH ) with an Immediate Sell Long/ Sell Short Recommendation! (Part 1 of 2)
June 26, 2001
Attention All Business Editors: Pacific Equity Investigations Initiates SULPHCO, Inc. (NASDAQ: SLPH ) with an Immediate Sell Long/ Sell Short Recommendation!
NOTE TO EDITORS: The following is an investment opinion issued by InsideTruth.com and IT IS PROTECTED BY OUR CONSTITUTIONAL RIGHT TO FREE SPEECH. We place a 12 month price target of less than 5 cents.
COMPANY DESCRIPTION:
SulphCo, Inc. provides a self-contained petroleum desulfurization unit that claims to remove sulfur from crude oils, lighter distillates, and fuel oils. The Company claims its closed-loop sulfur polishing units can be scaled to treat large or small volumes of petroleum product. SulphCo claims it is marketing its product and technology to petroleum refiners, crude oil producers, and fuel distributors.
SULPHCO Inc, used to be called Filmworld Inc., until April, 27, 2001 and prior to that It was known as American Pacific Financial Services Inc. prior to July 30, 1999
FINANCIAL DATA and STATS:
Shares Outstanding: 22,700,000
52-Week High/Low: 11.95 / 0.25
Closing price today: 3.15
Market Cap: 74 million
Gross Revenue Last FY: $ 0.00000000001 dollars
Total Net Income (Loss) Last QTR (460k)
Cash per share $0.04
Book Value $ 0.10
TRADING History and Brief Financial Summary
On November-6-2000 SLPH traded at 25 cents
Corporate Filings show the following:
Total cash and equivalents are a measly $ 1,000,000
Total Equity in the company is not sufficient to meet Listing requirements on AMEX based on the most recently filed SEC filings, showing a asset base of $2.4 million
The Company claims to have machinery and Equipment worth $ 558,949.00. ( try not to bust a gut when you see what we found )
Analyst Price projections
OOPS,...... there are not any analysts covering Sulphco Inc., next.
WHO ARE THESE GUYS???
THE COB, its founder and mastermind, Rudy Gunnerman.
Lets take a stroll down memory lane.
The first record we found of Rudolf Gunnerman’s business activity was the incorporation of Bio-Solar in 1976. The public got a glimpse of the fabulous potential of Bio-Solar in an April 12, 1978 issue of Chemical Week. It reported that the company planned to build 70 plants over the next two years to produce and sell a waste-derived industrial fuel called Woodex, a pelletized material made from logging and sawmill wastes or straw. Furthermore, Gunnerman claimed the pellets were interchangeable with coal yet produced virtually no ash or sulfur. TO make sure that everyone believed that they could bring this to market Gunnerman announced they had received a $100 million line of credit from investment firm F. Eberstadt.
So What happened ??
On February 24, 1983 UPI reported that Bio-Solar and Gunnerman were scrambling to avoid bankruptcy. The Small Business Administration was threatening to sell off his fuel-pellet manufacturing equipment if he didn’t pay off a $23,000 debt. Gunnerman did pay off the debt. And he followed it with an announcement that said he had a 25 year contract to sell electricity produced by his fuel pellets to Pacific Power and Light Co. He modestly estimated the contract to be worth $1 billion and said he was negotiating a similar contract with Portland General Electric Co. It looked like Gunnerman was really ready for the big time this go around.
Then What happened ??
Amazingly, Glausi Oil Company filed suit against them in 1984 for non-payment of bills (Case #16-83-09694, Circuit Court of the State of Oregon for Lane County). Paul Meeks was awarded an $85,000 judgment against Gunnerman and Bio-Solar in 1986 (Case #CV 85-5692, Circuit Court for the Tenth Judicial Circuit of Alabama). And then finally we see its corporate status was suspended on 9/30/1991.
WOW ! what happened to the 1 billion dollar contract and the 100 million dollar credit line??
In a face to face interview with Rudy Gunnerman on June 5th , 2001, he states to us
"He doesn't remember".
insidetruth.com
Hi Rudy ! Remember me ??
OK so what happened next you ask??
As Bio-Solar was going up in a desulfurized litigious brawl, Gunnerman was quickly at it again. In 1986 he founded Vintner’s Light Wine Co., a maker of non-alcoholic wine. On November, 9 1987, The Business Journal–Sacramento wrote a story about Gunnerman’s new enterprise. Vintner’s announced an exclusive agreement with Southern Wine and Spirits of Northern California, a "big distributor with more than 17,000 accounts throughout the state." Even more impressive was a description of the manufacturing process. Gunnerman claimed to have developed and patented a nitrogen gas process such that he could purchase wine from local wineries and remove the alcohol. A professor at California State said such a process was likely to remove molecules essential to the smell and flavor of the wine, but Gunnerman countered with a claim that he had a second step to return those flavors. And not only would he sell wine, he could sell the removed alcohol as a gasoline additive. He was so confident of his success, he announced he was expanding his plant capacity from 250 cases a day, to 1,000.
WOW wine and gas !!! Incredible.
But, once again things didn’t quite work out. In 1989, Latchford Glass company sued Gunnerman and Vintner Light Wine for non-payment of bills for wine bottles. Bankruptcy beckoned again. Ouch that has gotta hurt.
What did he do then ??
Gunnerman the perpetual obstacle vaulting dude that he is jumps back on his feet and forms EECO energy.
What is EECO??
Well, we are glad you asked, From a 1993 fraud lawsuit (Gutierrez, #380364, Superior Court of the State of California, County of San Mateo) we can read the tale of EECO Energy. In August of 1989 Gunnerman was raising money for a new venture, called EECO energy. Building on his experience with fuel pellets and alcohol, he claimed to be developing an ethanol fermentation laboratory that would extract ethanol from sorghum plants using a process developed and patented by Gunnerman. The ethanol would then be sold to an energy power plant.
Wow that is truly amazing, what else can he do?
Well to add to the excitement, Gunnerman claimed to hold a patent on a miracle sorghum plant that would grow 14 feet tall and achieve a sugar content of 16%, all with minimal water and fertilization.
Are you kidding me? 14 feet ???
It turns out these claims also turned out to be a bit of an exaggeration, at least with their economic significance since we don’t see any other information on EECO until its corporate charter was suspended in 1993.
OK so what does Rudy do next?
But alcohol kept Gunnerman’s attention. In 1990 he founded Gunnerman Motor Company (GMC). And once again he appears in the press. On January 17, 1990 Gannett News Service wrote about his newest invention, a car that runs on a fuel of grain alcohol and water, producing energy through the combustion of hydrogen, which was separated from the mixture by a technique developed by Gunnerman. Sen. Rose Ann Vuich even arranged for a demonstration of the car at the California state capital, and proclaimed that the technology could cut air pollution, improve the nation’s balance of trade and provide a market for federally subsidized crops and called the fuel the "cleanest of the clean-fuel combinations." A tailpipe emissions test seemed to show that the car produced fewer pollutants.
And ?
Unfortunately, Charles Imbrecht of the California Energy Commission wasn’t quite as impressed. He noted it was obvious if you stood downwind of the car, it was producing aldehydes, a suspected carcinogen and contributor to ozone formation. He offered to run the car through the state’s own battery of tests whenever Gunnerman was ready. Vuich wasn’t dissuaded by this naysayer and said she hoped to get state money to help Gunnerman develop the engine. But the inventor said he didn’t need the help as car makers would be coming to him soon. I guess he wasn’t patient enough, as GMC’s corporate charter was suspended in 1992.
OK so lets forget alcohol, surely there is more.
Gunnerman possibly felt the pot of gold lay with water and continued to pursue the idea that the water might still be a saleable concept. His next company was A-55, which created a water and petroleum mixture. Gunnerman appeared with his new concept on CNN, on October 19, 1992 with reporter Don Knapp. He mixed water, gasoline and a surfactant together and demonstrated the mixture in a Porsche 944. He claimed it was just as powerful and efficient as gasoline and also fire safe. He even went so far to say he could essentially double a car’s gasoline mileage while cutting pollution 90 percent. He also claimed to be getting calls from oil companies all over the world about his invention. Gunnerman said he wasn’t really sure what’s going on in the engine chemically, but "it’s not hocus-pocus or fraud, snake oil or whatever you call it." Funny he should mention fraud, as that is the exact term that one of those oil companies used to describe his dealing with them.
Reviewing HSM Holdings vs. Rudolf Gunnerman (US District Court, Eastern District of MO, St. Louis, 1993) and from a related story in the August 7, 1993 edition of the St. Louis Post-Dispatch we find the story of Clark Oil. According to the complaint, Barry Frazier, VP of Clark Oil read about Gunnerman and his invention. After a few meetings, Clark Oil agreed to invest $10 million in a series of payments depending upon verification of Gunnerman’s claims. The company paid $1.7 million upfront and engaged Gerry Andeen of SRI International to evaluate the performance of the technology. Gunnerman permitted Andeen to observe vehicles in operation and make some limited measurements. But when he wanted to conduct controlled scientific tests, Gunnerman fired him and ordered him off the premises immediately without the consent or knowledge of Clark Oil. Clark Oil then retained another independent laboratory, Southwest Research Institute to test Gunnerman’s claims. But once again they were refused access to the technology or the modified vehicles. Clark Oil then suspended further payments and sued for the return of their $1.7 million initial payment, alleging Fraud, Negligent Misrepresentation and Breach of Fiduciary Duty. Ultimately the suit was settled and Clark Oil and Gunnerman parted company.
Don't tell me that Gunnerman stopped there, he doesn't seem the type to let a little fraud allegation stop him !
Showing his resiliency and salesmanship, Gunnerman found another partner in Caterpillar Inc., the world’s largest maker of heavy construction equipment. According to an August 14, 1994 report in the Chicago Tribune, Caterpillar and Gunnerman formed a joint venture to commercialize the A-55 technology. Prior to the agreement Gunnerman was still claiming as much as a 50% increase in fuel economy from using the mixture, as well as a reduction in pollution. Caterpillar was more cautious and held back on making performance claims until further in-depth testing. And it is a good thing they did.
Two years later Caterpillar started releasing their results as reported by The Oil Daily on August 6, 1996. They did find a mixture composed of 65% Naphtha, 30% water and 5% additives that worked in some engines (spark ignition). And it did reduce pollution, versus diesel fuel. But contrary to Gunnerman’s claims of increased fuel efficiency, it actually consumed 40-50% more liquid, requiring larger fuel tanks or more frequent refueling stops. The actual hydrocarbon consumption seemed to be about the same. But, because Naphtha (a feedstock for gasoline) was used instead of diesel, the potential competition for refinery supplies prevented Caterpillar from making any claims about the cost of the fuel. And as the ultimate indication of their confidence in the technology, on October 24th, 1996, Caterpillar and Gunnerman ended their joint venture, with A-55 retaining all patents and technology after the usual litigation.
These results shouldn’t have been a surprise. It has long been known that you can mix water and fuel together with a surfactant and an engine can operate on it. The problem has always been the cost, fuel consumption, power and the corrosion of the water on metal parts. Some of these issues were discussed in an Aug. 6, 1996 Seattle Times article about A-55. David Kittelson, University of Minnesota director of the Center for Diesel Research called Gunnerman’s claims "absolute nonsense". They’re violating the second law of thermodynamics." He went on to explain that water does not burn. Dissociating it into its hydrogen and oxygen parts to attain a burn takes as much – or more –energy than you would receive. This point was reiterated by Michael Seal, director of the Vehicle Research Institute at Bellingham’s Western Washington University. He said that adding 10 gallons of water to 10 gallons of fuel might give only nine gallons of power. And he continued, "It’s pretty well-known that water doesn’t burn and there’s no way of getting energy from it. Basically, you lose in some way. The best you could hope to do is break even." Which we believe is more than Gunnerman’s current and prior investors could hope for.
But Gunnerman still hadn’t given up on making his fortune with A-55. On March 1, 1999, A-55 filed an S-1/A with the SEC and prepared for an IPO (http://www.sec.gov/Archives/edgar/data/1068603/0000950149-99-000340.txt) with Donaldson, Lufkin and Jenrette as their investment banker. This was the big time with an opportunity to cash in on the stock market mania of 1999 with a multi-million dollar offering from one of the world’s premier investment banks. And we also see that A-55 was now focused on the "domestic electricity generation industry." They also have lined up a big contract for their product: "A-55 has entered into an agreement with Northeast Utilities for an initial order of up to 30,000 barrels (approximately 1.3 million gallons) of A-55 Clean Fuels to be delivered in May 1999, and the right to supply up to 330,000 barrels (approximately 13.9 million gallons) per month of A-55 Clean Fuels for consumption at its Montville and Middletown electricity generating plants in Connecticut." Sounds impressive, but that was nothing compared to what Gunnerman was saying in private.
Once again we go to the legal record with the Shoham Investments suit (99 CIV 8799, US District Court, Southern District of New York). According to the complaint in the fall of 1998, Gunnerman needed a bridge loan for A-55 until their IPO. He told investors that A-55 would soon go public with a $1 Billion valuation and that they had firm purchase agreements with Commonwealth Edison, Central Illinois Power, Florida Power and Light and the Tennessee Valley Authority. He also projected net income for 1999 of over $500 million from just Central Illinois Power and Commonwealth Edison alone. And further, if A-55 received just one more contract, its gross income would exceed $750 million for 1999. It was a great story that enabled him to raise $3 million to tide A-55 over until the IPO.
Unfortunately, not everyone was as willing to believe Gunnerman’s stories without a little more proof. In a letter dated April 22, 1999, a DLJ banker specified exactly what A-55 must produce to enable them to complete an IPO. DLJ demanded two contracts that would aggregate sales of 40,000 bbl/day of A-55 fuel and demonstrate gross profit of $30 million for the year. Until those agreements were produced the IPO could not be completed. According to a source in DLJ, Gunnerman promised the contracts had been signed, and they were "in the mail." This game went on for a while before DLJ finally wised up and realized the kind of person they were dealing with. One banker even referred to Gunnerman as a "pathological liar," which seems to be the story of his career based on the above sources.
How can you say these things about a Doctor who knows about alcohol , wood pellets and wine??
Throughout his history of investment schemes, Gunnerman has often presented himself as a respected inventor and scientist. At one time he even claimed to have taught at Yale. He currently refers to himself as "Dr. Gunnerman" and cites an extensive resume filled with honors. (http://www.cleanfuelstech.com/resume.htm) The interesting thing is that "Dr." Gunnerman never seemed to have graduated from college. Perhaps he took some classes. And his doctorates all seem to be honorary and from universities located many miles and timezones away from his professional activities. Efforts to confirm his honorary degree from Dubna have not been successful. And given his professional background and the ease of purchasing PhDs (http://distancelearn.about.com/education/distancelearn/gi/dynamic/offsite.htm?site=http://www.universitybusiness.com/0003/diploma.html) it is very suspicious. We did confirm that he had not won the Lemelson-MIT award, but was listed as an "inventor of the week." (http://web.mit.edu/invent/www/gunnerman.html) We were able to obtain no information on how "inventors of the week" were selected. Interestingly, while Gunnerman mentions all the great things said about him by the Lemelson program, if you notice on the bottom of the website, they say that all information listed was provided by A-55 and they cannot guarantee its accuracy. So basically Gunnerman's Company patted Gunnerman on the back.
The reality is Gunnerman seems to have had no formal training in fuels technology and all actual work experience involves deals that have blown up into such successful ventures that no trace of them exist any longer.
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