Has Atlantic Wind and Solar Been Fueled by Hot Air?

by Melissa Davis - 3/31/2010 7:59:17 AM

Atlantic Wind and Solar (OTC: AWSL.PK) is suspected of blowing a lot of hot air in an effort to inflate the company’s stock price.

A year ago, AWSL supposedly acquired a 47.5% stake in Hybridyne Power Systems – later touting Hybridyne’s “best-in-class” technology and its access to an expansive research team – for $2 million worth of its own stock. After publicizing a string of stock-boosting projects secured by Hybridyne, however, AWSL suddenly announced this month that it had canceled its acquisition of the company due to an “unfortunate default by the vendor” that rendered the transaction “null and void.”  

Notably, Hybridyne itself now claims that the acquisition never took place at all.

To be fair, Hybridyne says, AWSL did offer to purchase the Hybridyne stock owned by some of the company’s original investors. However, Hybridine says, AWSL never actually paid for that Hybridyne stake and wound up defaulting on the entire deal.

“There was an offer to purchase, which was never completed,” says Richard Leverton, chief of media relations for Hybridyne. “They were just pretending to buy the company.”

For its part, AWSL offers a far different version of that story. The company insists that it did in fact purchase Hybridyne – delivering stock and cash to the company as promised – but that Hybridyne failed to uphold its end of the deal.

Yet Hybridyne maintains that it never received any legitimate AWSL shares.

“Every time a date came up when they were supposed to forward some money or shares, they defaulted on everything,” Leverton says. “When they did send some stock certificates, the broker looked at them and said, ‘Are you kidding?’

“The shares were from another company with a sticky label on them … The broker wanted to confirm that they were legitimate shares. We finally asked them to send one share (as opposed to all of them), and they refused to even do that.”

Meanwhile, AWSL’s stock had already taken off. Before AWSL announced its acquisition of Hybridyne – and its appointment of Hybridyne CEO Thomas Cleland as its own chief technology officer – the company’s stock fetched less than 25 cents a share. After AWSL began touting a series of Hybridyne solar projects, however, the company’s stock began to rocket and ultimately peaked last fall near $5 a share.

AWSL’s stock has since lost more than half of its value amidst mounting scrutiny of its business practices. It slipped another nickel, falling to just $2 a share, on Tuesday. But it would have never rallied in the first place, Leverton suspects, without help from the misleading Hybridyne deal.

“Everything they claim on their website is stuff we actually did,” Leverton declares. “If it weren’t for us, their stock would still be 22 cents.”

The Blame Game

AWSL flatly blames Hybridyne for the failed acquisition, however.

When announcing the aborted deal earlier this month, AWSL indicated that it had originally sought to acquire Hybridyne so that it could gain access to valuable technology manufactured by another company with close ties to Hybridyne itself. When Hybridyne allegedly failed to fulfill its obligations, however, AWSL said that it decided to purchase a 60% stake in the actual maker of that technology – identified as Aim Global Energy – instead.

Brent O’Connor, a spokesman for AWSL, reiterated that stand when a respected Toronto-based energy reporter raised concerns about the developments last week.

“When we originally proceeded to acquire Hybridyne, Mr. Thomas Cleland of Hybridyne indicated that they had the ‘exclusive rights’ to this product,” O’Connor stated in response to a recent blog written by Tyler Hamilton, a veteran energy reporter for The Toronto Star. “After realizing that these exclusive rights claims were in jeopardy, in the best interest of its shareholders, and to secure its corporate objectives, AWSL elected to take advantage of Hybridyne’s breach and aborted the acquisition … AWSL made good on its prior (promises) – and actually exceeded its original obligation to shareholders – by acquiring a majority interest in the owner of the technology.”

But Leverton has raised questions about the company that AWSL actually acquired. He portrays Aim Energy (as opposed to Aim Global Energy) as a “solid, real, reliable actual technology company” that’s owned by the co-inventor of its technology – and that’s also “not for sale.” He says that AWSL instead purchased Aim Global Energy, a company “formed within the last month” in an effort to secure control of technology that’s jointly owned by Aim Energy and Hybridyne itself. 

“Aside from that,” Leverton says, “Aim Global is a shell company composed of two guys who know nothing about the technology beyond the fact that they can hope to cash in on it by colluding with AWSL.”

Hybridyne has already indicated that it will fight back – in the courtroom if necessary – to retain the rights to technology that the company helped create. But AWSL has suggested that, through its purchase of Aim Global, it has secured control over that technology already. 

Moreover, AWSL insists that it negotiated most of the Hybridyne deals itself and will now move forward with those projects on its own.

“All of those projects (except for one) were initiated by AWSL,” the company said on Tuesday. “We were hiring Hybridyne to do the design and integration.

“We’re now working with AIM, the engineering people behind Hybridyne,” the company added. “We don’t need Hybridyne” any more.

Magnet for Controversy

Gilles Trahan, the chairman of AWSL, runs another penny-stock company that has sparked some controversy as well. He doubles as chairman and CEO of MSE Enviro-Tech (OTC: MEVT.PK), which – like AWSL – has come under attack from its former allies.

“I met Gilles in July of 2006,” recalls Megola (OTC: MGON.BB) CEO Joel Gardner. “He had emailed me and said that he was a shareholder in my company and that he could help raise awareness” with investors.

“He had a big place and a Jaguar with $26,000 rims,” Gardner continued. “He seemed like he could help. It worked very well, except that Gilles kept saying we needed more press releases – and I didn’t know what we could say.”

Over time, Gardner says, MGON grew increasingly concerned about MEVT’s business practices as well. As a supplier to MEVT, he says, MGON worried about the company’s lack of insurance – or even a real office -- in particular.

As it turns out, Gardner says, MEVT was sharing a post office box with AWSL and calling that its headquarters.

“We started pressing them to be compliant,” Gardner says. “We said, ‘You have to get business insurance and a real address – like our other clients – or we can’t even do business with you.’”

After that, Gardner says, Gilles retaliated by threatening to hurt MGON. Meanwhile, Gardner says, Gilles somehow arranged for MEVT to sell property rights – which it allegedly didn’t own – to yet another penny-stock company. 

In many respects, Gardner’s story sounds eerily similar to Hybridyne’s own.

“All of the sudden, I get a couple of faxes from Gilles in November saying that everything was in default (so) everything was null and void,” Gardner says. “Then a month later, he sells rights that he doesn’t even have.”

Gardner has since contacted the U.S. Securities and Exchange Commission to share his mounting concerns. With the controversies escalating, Gardner hopes that the agency will finally step forward and take some action. 

In his recent blog, Hamilton suggested the need for government scrutiny as well.

“The bottom line is that AWSL said it owned a large share of Hybridyne – and continued to say so for several months – and then suddenly said the deal fell through,” Hamilton wrote last week. “I’ve been covering the industry and publicly traded companies for 12 years, and no company makes such claims unless the deal is truly done …

“Gotta say, this stinks,” he declared. “And regulators should be all over it.”  

Peter Cohan, a Massachusetts-based investment strategist and frequent stock commentator on CNBC, tends to agree. In fact, he questions why AWSL shares even trade at all.

“I don’t know if this company has anything going for it besides its press releases,” says Cohan, who has no position in AWSL or any other penny stocks. “It has a negative net worth of $1.2 million. It doesn’t seem to have any filings with the SEC.

“So why is this thing even allowed to trade on a U.S. stock exchange?”

 

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