Let us return to the days of the December 9, 2011 Shareholder Open House. The shareholders were told: All the key "technological hurdles" were "overcome". Not "being worked on" or "improved", but "overcome". Number 1 "overcome" hurdle was Bearings, Number 2 "overcome" hurdle was Valves and Number 3 "overcome" hurdle was Condensing. That was December 2011.
On January 2, 2013, i.e., 13 months later, James Landon, CEO of Cyclone issues a Letter to Shareholders and says:
But wait a minute, didn't Harry and Frankie already tell shareholders hurdles like condensing were already "overcome"?
On March 8, 2013, i.e., less than two months later, James Landon resigned as Cyclone's CEO and from the Board of Directors for "personal reasons". There was never again any mention of contractors fixing problems on the Mark 5 engine.
Maybe Harry and Frankie vetoed the plan to bring in outside expertise to fix the Mark 5, or maybe James Landon did bring in that expertise and they told him the Mark 5 would never work, but one thing is known for sure: James Landon believed Cyclone did not possess the expertise to fix the Mark 5.
Now we move up to June 12, 2013 when Cyclone hires Ohio State University to work on some of the problems with their engines. A presentation by the OSU people on March 8, 2014 described bearing design as a critical issue and stated they were designing and building a special bearing testing machine and starting a research program on bearings because no bearing they had knowledge of would survive in the low-pressure, low-temperature WHE engine. The high-pressure, high-temperature Mark 5 engine needs even better bearings than the WHE.
But wait another minute, didn't Harry and Frankie tell shareholders in 2011 the bearing hurdle was "overcome"? Yet in 2014 they were paying OSU to research and develop bearings that would work.
Moving up to February of 2015, we see in the update video that the whole cam-operated valve system (who's hurdles had been "overcome" in 2011) has been replaced with a rotary valve.
A rotary valve is going to have huge problems sealing 3200 psi 1200F steam while turning at 3600 rpm with no lubrication. Is it even possible to make such a valve? Very, very unlikely.
The video also shows a big condenser hung off the side of the engine, yes, even though the condensing hurdle had been "overcome" in 2011. As big as it is, though, it will need to be much bigger if the engine is to produce its rated 100 hp, i.e., as big as a semi-truck radiator.
And the Mark 5 engine has still not been able to run for the 50 hours necessary for the customer to accept it.
So, where's this leave Cyclone?
Harry and Frankie have known for years there are serious, unsolved technical problems preventing the engine from being marketable, yet they have never met their legal obligation to divulge this material information, as the SEC requires.
James Landon had concluded Cyclone did not possess the internal expertise to fix the problems. That was when Cyclone had a staff of engineers. They are gone now.
Cyclone has accumulated operating losses since inception of more than $21 million, yet has made no apparent progress getting the Mark 5 engine to work.
Even so, Cyclone has still never explained why the Mark 5 was originally promised to be delivered to a customer five and a half years ago and hasn't been yet.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.