It would appear from what I have been able to divine so far that a real estate investor may end up owning the Shreveport plant - one of GM's latest high-tech facilities that used to make Hummers, along with 600 acres of land. According to some, the screwy deal set up by the RACER trust and the local Parish hands over the ownership of the property, once the developer has paid about $7.5 million in lease payments. Was this transaction the intent of the whole scheme from the get-go? We will have to wait and see.
But what about Paul Elio and others on the board or employed by Elio Motors? Did they make out in this deal as well? Again, you can dig, but it gets so complicated and difficult to follow, that you lose track of the cash really fast. Companies that are related to companies, various agreements and contracts we don't have access to. SEC filings that - like most SEC filings - can be pretty opaque to the amateur investor. It would appear, based on my limited research, that most of the people who are principals in this deal will walk away with more money than they started with. Those who bought stock, loaned money, or put down deposits, will likely walk away with nothing.
Unless of course, Elio comes up with the tens or hundreds of millions it says it needs to build the first production model, and that Elio motors can sell nearly as many of these as Honda does Accords, for a number of years. That could happen, I suppose. But I would bet on lighting strikes and lottery tickets first. And it seems many people are coming to the same conclusion. The Facebook site for "future Elio owners" is throwing in the towel. The Reddit subreddit once full of cheerleaders is now dominated by skeptics. The few die-hards left admit they will never see car or deposit, in their lifetimes.
Sadly, few people are willing to admit that the entire scheme was cockamamie. There are indeed, three wheel cars for sale right now, worldwide. They cost more than $8000 and do not get 84 miles per gallon. The basic premise is flawed by both physics and economics.
But getting back to the money, where did it all go? I still have no concrete idea, but there are clues.
Much of the vehicle engineering has been completed, and we are finalizing our engineering simulations, which suggest that the important vehicle performance milestones can be achieved. To date, $41 million has been invested in vehicle engineering and development, of which $26.3 million was in the form of shares of common stock granted and the assumption of liabilities of Elio Engineering, Inc. dba ESG Engineering. At the close of our Regulation A offering, we obtained approximately $16.0 million in net proceeds to build prototypes. Upon completion of this phase, the vehicle production costs, as well as the performance and safety profiles, will be understood to a level that will allow for the kick-off of hard tooling. With the development risks addressed, we will then be in a position to raise larger amounts of capital - up to an additional estimated $312 million to fund production activities.
Paul Elio, Chief Executive Officer and Elio Motors Board Chairman. Mr. Elio founded Elio Motors and has been its CEO and Chairman since the Company’s inception. He has over 18 years of experience in business management and engineering, most recently as founder and CEO, from 1998 to 2011, of Elio Engineering, dba ESG Engineering. ESG was a Tempe, Arizona company which designed, engineered and prototyped products using state-of-the-art design tools and techniques, evaluated them for engineering feasibility and designed them for high volume manufacturing and assembly. Mr. Elio held various positions at Johnson Controls from 1992 to 1997. He holds numerous patents related to various mechanisms. He graduated from the General Motors Institute of Engineering & Management (now Kettering University) with a Bachelor of Science in Mechanical Engineering in 1995.
Elio Engineering was started by an individual name Paul Elio who had an idea that of the ABTS(All-Belt-To-Seat) called “No Compromise seat” or NC seat.
From this slide presentation:
1996, Pual[sic] Elio designed a revolutional [sic] bike which got a patent.
1998, Pual[sic] met Hari Sankara who was his mentor in Structural design and Analysis department of Johnson Controls,Inc.
July 1998 , Pual[sic] invited Hari to join his idea about the NC seat and they founded Elio Engineering
Nov 1998,They went to present the NC seat to Bostrom Seating, the seat supplier for heavy truck and bus industry, that was looking to develop the ABTS.
(1) Includes 12,750,000 shares owned of record by Elio Engineering, Inc. of which Mr. Elio is the President, a director and majority shareholder.
The Company received engineering and prototype development services from Elio Engineering, Inc. dba ESG Engineering, valued at $25,000,000. In exchange for these services, the Company transferred 25,000,000 shares of common stock to Elio Engineering, Inc. in October 2011.
Paul Elio and ESG Engineering
The original design for the Elio was conceived by Paul Elio and Elio Engineering, Inc., dba ESG Engineering, a company partially owned and controlled by Paul Elio. ESG Engineering transferred all rights to the design to the Company, valued at $5,000,000, as consideration for 25,000,000 shares of common stock in the Company. In addition, we assumed approximately $1,277,187 of payables that ESG Engineering had incurred on behalf of Elio Motors. At December 31, 2015 and 2014, these outstanding payables were $-0- and $164,827, respectively. ESG Engineering transferred 12,250,000 shares of common stock in the Company to Paul Elio in November 2012 in consideration for his services in forming and organizing Elio.
Transfer of Consumer Financing Rights
In 2012, we transferred the right to provide consumer financing for the purchase of the Elio to Carr Finance Company, LLC in consideration of Paul Elio’s efforts to devote his time and attention to developing the business of the Company with only limited compensation. Mr. Elio is a member of Carr Finance Company, LLC.
Guaranty of Loan Repayment Provided by Stuart Lichter; Loan from CH Capital Lending
On February 28, 2013, in connection with the acquisition of certain machinery and equipment at the Shreveport facility, we entered into a promissory note with GemCap Lending I, LLC for $9,850,000, the payment of which is secured by a first lien on our equipment at the Shreveport facility. Stuart Lichter personally guaranteed the payment of this note. CH Capital Lending, LLC purchased the loan from GemCap on August 1, 2014. CH Capital Lending is an affiliate of Stuart Lichter. On July 31, 2015, we entered into a forbearance agreement with CH Capital Lending in which CH Capital Lending has agreed to forbear on enforcing the payment of this note until July 31, 2016.
Lease with Shreveport Business Park, LLC
Our equipment is located in a plant in Shreveport, Louisiana, which is leased by Shreveport Business Park, LLC, an entity owned and controlled by Stuart Lichter, one of Elio’s directors and significant stockholders. We entered into an agreement with Shreveport Business Park in December 2013 to sublease 997,375 square feet of manufacturing and warehouse space for a 25-year term, which provides for a rent-free period until the earlier of four months after the start of production or August 1, 2015, after which the base rent will be $249,344 per month. Since December 2013, the Company has been obligated to pay taxes, insurance expenses and common expenses with respect to this space and is past due in paying these amounts. On July 31, 2015, we entered into an amendment to the lease which extended the base rent commencement date to February 1, 2016 and deferred payment of the base rent for the period February 1, 2016 through July 31, 2016 until August 1, 2016.
Advances to Paul Elio
During 2015 and 2014, we advanced a total of $328,014 and $74,966, respectively, to Paul Elio, our Chief Executive Officer. The advance accrued interest at the Federal Funds rate per annum, is due on demand and is reflected on the balance sheets as other current assets.
Not only that, but even at $6 a share, Mr. Elio is sitting on $150 million in stock (25 million shares) in his Elio Engineering company alone. If he has been selling any of this stock, he has cashed out millions of dollars. But I cannot find any record of whether he has sold any stock, either the shares he holds directly, or through Elio Engineering.
Raging true believers I have written about before - whether it is gold bugs or bitcoin fiends. They are all convinced, based not on numbers or hard data, but raw belief that whatever it is they are investing in (or crowdfunding) is going to be "the next big thing!" Belief is a fine thing if you want answers to questions like "What happens when we die?" and "Is there a God?" but a horrific thing rely on in financial matters. Having your beliefs shattered can lead to depression and self-doubt. And sadly, the sorts of folks who engage in this behavior never learn from their failures but instead, jump right back on the belief bandwagon again and again. How sad.
The fantasy of a "revolutionary car" that will change the world and put the "big 3" out of business has been going on for a long time - a fantasy that only people without Engineering degrees believe in. Many people even today want to make a folk hero out of Preston Tucker, who appears to at best have been snookered into having his dream car used as a front for stock fraud - or at worst was in on the con himself. Make no mistake about it, the Tucker car was hardly revolutionary and was in fact, a piece of crap. Sure a turning center headlight might seem "radical" but the rest of the car was nothing out of the ordinary, other than it was staggeringly expensive to build. And as it turns out, he never would have been able to build it or compete with the major automakers. There was no "conspiracy" against him, just a poor design and a poor business plan. "But Bob, they made a movie about him!" They also made a movie about the windshield-wiper guy and he was crazy as a loon, too.
But maybe that will be the next shoe to drop - that the reason why Elio was forced out of business was a "conspiracy of the big-three automakers" who just couldn't stand the competition! And I am sure right now, someone somewhere already believes this.
There are idiots. Look around you. Some readers ask me how to make a ton of money in a short period of time. My suggestion: Find raging true believers and relieve them of their money. Myself, I don't have the stomach for it.
UPDATE: The more I think about this Elio thing, the more questions I have. Making cars is a cut-throat marginal business. Even Mary Barra, my former classmate at GMI made "only" about $7M back in 2015, and is up to $28M in 2016. And she's running the largest car company on the planet.
For someone running a company that has yet to make or sell a single production car to make anything is all is puzzling. Even if Elio Motors was "successful" and made money, one wonders if the CEO and other principals would have made less money than they are making today running a company that doesn't make cars. A scam from the get-go, or just poor visionary planning? Like with the show The Producers sometimes a flop makes more money than a hit!
UPDATE: Someone linked this posting to a Reddit site. One of the Redditors did more research and found a lot more information - some startling. It seems one of the founders of Elio had a previous life in another start-up car company.
There are MANY LAYERS to the onion here to peel back. I suspect sometime next year, there will be an investigation of this and we'll find out what happened. Or maybe not - it is not clear anyone did anything illegal, as in crowdfunding and Regulation A, you don't have to disclose a lot of things that would be illegal to withhold in a traditional investment offering. In other words, the Elio people might walk away with tens of millions of dollars, all perfectly legal.
What I find funny is that all it took was a few hours and searching the internet to figure out what was going on. The case seems to be is that in many startups that do crowdfunding, people literally do zero research yet hand over money because they look at it as a small investment for a bright and shiny object and they obviously have money to burn. As opposed to the Dale (which had to find a few investors to hand over millions), Elio has done it with getting tens of thousands to hand over up to $1K.
With that, I suggest that you look up the Elio COO (Hari Sankara Iyer). He has been with ESG since 2001 (as per ESG corporate filings with the state of AZ). When you look up this guy you find something interesting. He was the VP of Next Autoworks Company that used to be V-Vehicle (please Google both of those companies).
So, many of you never heard of V-Vehicle until today but just read this and you might wonder, "Have I seen this situation before?"
And look at where this car was going to be built:
Since V-Vehicle never got that $320M ATVM loan, the company became Next Autoworks Company.
Looks like they withdrew their ATVM loan toward the end of 2011 because they figured they were not going to get it.
Then it looks like that Next Autoworks had their assets bought by LCV Capital. What's interesting, is that Steve Jobs was impressed with this:
Then comes Elio. Hari became an officer of Elio motors in July 2014 but already was an officer of ESG since 2001.
Here's some info on the Elio COO (in case you are wondering): http://www.bloomberg.com/research/stocks/private/person.asp?personId=228755276&privcapId=141045816&previousCapId=36768697&previousTitle=Industrial%20Realty%20Group,%20LLC
As you can see, just a bit of research, you find that Hari has been quite involved with getting that ATVM loan. He's been teamed up with Paul since 2001. I just wonder if ESG did the engineering work on the Next Autoworks car too?
Info on Next Autoworks:
Some interesting artwork for Next Autoworks. Showing the Next Autoworks dealers and the Next Autoworks "My Way" (sound familiar?):
What really hurt V-Vehicle and Next Autoworks is that crowdfunding didn't exist back then and they pretty much never went anywhere. Add into that, most people never heard of or cared about that car because they didn't have a "reservation" of bought stock in it. That project needed a Steve Jobs and T Boone Pickens to fund it, not the unaccredited investor like Elio has.
The way I see it, same story, just the business plan was changed from getting an angel investor to just using the uninformed average Joe to get it running by sheer volume of Joes giving small amounts of money. Plus, with the failures in Solyandra and Fisker, that just ruined it for companies like Next Autoworks and Elio because the DoE figured out they need to be a bit more diligent.
BTW, here's something else: http://www.prnewswire.com/news-releases/former-coo-of-elio-motors-launches-car-subscription-service-yoyo-300280891.html
So, the COO of Elio left at the end of May 2016 (still on the Board though) to start YoYo.