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Even better presentation by Chris Nelson:
CYPW Dilution City:
From the Q1 10Q: 332,043,678 shares issued and outstanding at March 31, 2014
From Belgianshareholder yesterday: Shares Outstanding 534,582,390 a/o Jul 31, 2014
An increase of 202,538,712 in four months, or 50m per month. Far greater than the 20m increase per month in Q1.
So what's a 61% increase in issued shares in 4 months between friends?
Some unspun DD...
Cyclone's "partners":
Raytheon ordered 2 Mark 5 engines but got two "Manta 36" engines when the Mark 5s couldn't be made to work. The executive championing the submersible program, Kevin Bowen, retired from Raytheon and there has been no word from them about Cyclone since 2011.
Renovalia ordered a S1 engine for solar collectors, but Cyclone couldn't deliver an engine that worked. Renovalia subsequently settled on Stirling engines for their solar collectors. Everyone in the solar industry knows Renovalia licensed Cyclone technology and it didn't work.
Combilift paid $100k in development fees in 2011 and ordered 2 Mark 5 engines for delivery in Q2 2012. They're still waiting.
Phoenix was the partner for the WHE engine. That's now spun out into WHE Generation. They are no longer a partner of Cyclone.
Tardec paid $1.4m and waited 7 years for a 10kW generator. As people have pointed out, this contract finally was finished, and Cyclone has no follow-up contract.
Ohio State University CAR was hired by Cyclone to do Cyclone's research and development. They've now left with WHE Generation.
Cyclone's R&D is back to Harry Schoell, who hasn't been able to publicly demonstrate a working engine after 10 years and 10s of millions spent on development.
Precision CNC left with WHE Generation. Yesterday's memo said Cyclone has hired a new machine shop, Hypex.
Team Steam USA is the land speed record car sponsored by Cyclone. They had the car built in 2012 but have never put an engine in it. It looks good, though.
New "Partners":
Hypex is a machine shop that makes things for customers. Customers pay for the parts they get. Hypex isn't merging with or funding Cyclone.
Ranotor is a one-man Swedish company that promotes steam engines. There is no record they have ever sold anything, or even built a working engine. (If they sold only stock, they'd be much like Cyclone.)
Dr. Kim is a professor who studies cold fusion (=LENR). Cold fusion is an example of a "pathological science". Will cold fusion help Cyclone? Why not?
Material Improvement in Liabilities:
Read the 8K closer:
SCHEDULE 1.1
USE OF PROCEEDS
Seed Round (assuming full $350,000) :
$100,000 – Operations for WHE GEN 1 to 2 months;
$100,000 – Payment of currant payables from contractors and vendors of WHE GEN;
$20,000 -- Payment to Cyclone for elimination of any intercompany debt;
$75,000 – Payment to TCA for retirement of senior secured debt (if pay-off amount is greater, WHE GEN will be responsible for that additional amount, or may arrange for such additional amount to be otherwise purchased or assumed by a third-party to whom Cyclone will provide an unsecured convertible note in exchange).
$20,000 – Legal fees to Roetzel & Andress (inclusive of $15,000 previous invoices as assumed by WHE GEN)
$20,000 – Legal fees for funder’s counsel
$15,000 – Fairness Opinion to David Brooks & Assoc.
Based on the milestones set forth in our six and 18 month project plan, management is reasonably confident that sales for the limited first generation WHE will be approximately $2 million over the following 12 months – revenue through our subsidiary which will support the next mass manufacturing phase of product development.
Those who fail to learn from history...
Today's announced partnering agreement with Hypex is a copy of the 2011 agreement with Topline: "TopLine Energy signs Letter of Intent to build clean steam engines for Cyclone Power"
Except that Topline actually got conned into putting cash into Cyclone. Hypex is putting up nothing.
Maybe Hypex has learned...
75.8 million NEW shares...
...is what a $50K convertible note puts into the market.
Yep, the notes convert to stock at 45% below the lowest market price in the last 20 days.
Page 11 of the Q1 10Q lists 9 convertible notes held by Cyclone.
As each is converted and sold, the stock gets diluted, price goes down and volume goes up.
Good news is there was only $650K in notes at the end of Q1. That would now translate into 984,848,484 new shares.
Wow, hire a machine shop and people throw money at you.
Just imagine what would happen if Cyclone announced having actual revenue this quarter, or demonstrated an engine that works.
Yup, same story for the last two years about DOD funding real-soon-now.
Just like the last eight years of "engines will be going into production in 6 months to a year."
And the two Mark 5 engines they promised Combilift in Q2 2012, yet have not delivered.
And the land speed record they were going to get in 2011, then 2012, then 2013, then 2014, but they've never put an engine in the $500K car.
Oh, and don't forget the November 5, 2013 PR where they said "The model engine, called the WHE-DR, is currently in testing and is expected to be ready to transition into limited production by the end of this year."
They are currently into month 10 of their projected 2 month transition into production, with no production in sight.
So sure, if Cyclone says DOD funding is imminent, gosh darnit, it must be imminent. When have they ever misled investors before?
The car was for setting a land speed record with a steam engine. One racing magazine who did a story on it said it cost $500k.
Unfortunately, for some reason Cyclone has never put an engine in the car.
They've also got (or had?) a custom built racing boat to set the water speed record, but it's never had an engine, either.
I read somewhere the Wankels power drones and have been adapted to run on JP8. So the Army also benefits from applying them to APUs.
There are a lot of benefits from reducing the number of different technologies used by an organization.
Hang the Honda genset off the back. If someone shoots it off, you're not going to be idling the main turbine to run the hotel loads.
Harry Schoell posted to the steam car club forum in 2007 that
HLS
Re: cyclone engine
April 26, 2007 04:07PM
Hi Bill,
I personaly like the 6cyl only it cost more to produce. We have a small 6cyl design for the millitary. I t is a small compact unit to fit in the Abrams, Bradley, and the Stryker. It is a small common 10kw generator to fit in a 12"x12"x17" space.
HLS
Re: cyclone engine
April 26, 2006 01:24PM
Hi Andy,
thanks,We are a little behind on the 6cyl because we are commited to a production 2cyl 10KW gen set engine in a year.
Don't hold your breath for that news.
Cyclone took 7 years and $1.4m to make a proof-of-concept prototype generator.
At the time they got the contract the Army spread around a lot of R&D money to make small generators that run on JP8, the Army's standard fuel.
While Cyclone struggled to make one prototype pass the acceptance test, and even had their Congressman get involved to keep the contract, lots of others successfully converted standard engines. There are at least two companies now selling standard Honda generators converted to JP8.
Cyclone has been claiming for years to be in discussions with the Army for "Stage 2" funding to make their generator reliable. The Army can now buy Honda generators with factory warranties that fulfill their needs. Those are plenty reliable.
Simply put, the Army has no more need for what Cyclone tried to sell.
What else is funny is that Cyclone doesn't even show this generator on their website, let alone try to market it. The company is going down the toilet and only one order is on the books (Combilift, who was supposed to get two engines in Q2 2012), but Cyclone isn't even trying to sell this "successful" product to anyone else.
What do you suppose they know about it that we don't?
The last 10Q showed $1.9m in notes payable and derivative liabilities. That's now gone down by $75K with yesterday's announcement.
If WHE GEN raises another $2m by the end of September, it will assume $200K of CYPW's accounts payable (which were $1.1m in Q1) and pay $175K in licensing fees.
Keep in mind that CYPW's expenses in Q1 were $1.1m, with $500K being just interest, and revenue was zero. Q2's revenue total was $140K from finishing the Army contract, but expenses continued. They owe more now than the did then.
WHE GEN has a $1m purchase order from Phoenix, but it says maximum of $1m over 24 months, with conditions. It doesn't come into effect until the WHE engine survives 200 hours of testing at OSU, which was predicted to have happened in December, but apparently hasn't yet. If 10 more engines survive 200 hours each, Phoenix will pay WHE GEN $250K.
The predicted cost of a WHE 10kW generator was $40K. It will save the owner between $1 and $2 per hour of electricity while it's running.
It may be a while before big royalties start flowing into CYPW.
CYPW has lots of debt and no revenue.
Separating the WHE GEN division as a separate company has got them $75K in cash (all to the secured creditor) and the loss of any realistic chance of any more revenue this year.
The last customer CYPW booked was Combilift in 2011, who ordered two engines for delivery in Q2 2012. They're still waiting for them.
Without WHE GEN, CYPW's new business model is to sell R&D services and licenses for their engine technology. For the last year they have been outsourcing their R&D from Ohio State University, so who will pay CYPW to hire OSU? After 10 years of development they have never publicly demonstrated a running engine, so who will buy licenses?
CYPW's two biggest physical assets are a land speed record car that has never had an engine and a water speed record boat that has also never had an engine.
CYPW's debt is held as notes that convert to stock at 45% below the lowest market price. So, for instance, a $50K note now converts to 50,000,000 new shares in the market.
In short, yesterday's announcement was that CYPW is now an empty shell holding lots of debt. Anything viable has been moved to WHE GEN.
That could be why CYPW hasn't gone up more on this news.
Hi MTM,
What you describe is exactly the feeling I've got about the whole thing.
What we are seeing now strikes me as Nelson and Mayersohm's plan in action.
When you look at Chris Nelson's record as President of Cyclone, who in their right mind would promote him to CEO of a new company in the same (or any) business? Plus big raise, plus stock, plus three kinds of bonuses.
Nelson is getting a much bigger slice of this pie than Harry, and Harry is sidelined as just an adviser now. Cyclone will fold soon, and so will all of Harry Schoell's duties and authority. After that he'll just be a name to be dropped if it is helpful.
The initial financing round puts WHE-GEN on the hook for paying off Cyclone's secured creditor. Why have critical startup funding diverted to someone else's debt? The secured creditor owns all the patents (ownership was transferred last year), and has secured all of Harry's toys at Cyclone. I'll bet as soon as those liens come off, Schoell Marine will secure it all. Then when Cyclone goes broke, Schoell Marine keeps all the hardware.
It could have been put to Harry that if he wanted his patents back, he had to set up Nelson & Mayersohm at WHE-GEN. Harry will also get an advisor fee and some stock. Plus his name mentioned prominently in the PRs. At least initially.
But, unfortunately, I also agree that even with all this history well documented, the fools will be fighting to be separated from their money.
Hi Tom,
I've got a friend with an engineering consulting company that does work in the power plant industry. He's got a few semi-retired engineers (who retired from his clients), and it works out great, just as you suggest. One guy only does mornings, another only a couple days a week, they only work on interesting projects, but they've got tremendous knowledge, and they all are eager to teach young people.
With the web for data and McMaster-Carr for overnight delivery of any materials you need, Florida would be fine to site a company. Just plan on work slowing down during the summer.
Heck, teach your retired staff to use the internet and people could carry on wherever they are for the summer.
But down to specific cases, I can't see it happening here. Harry hasn't accepted any advice yet from very knowledgeable people. The decision to send the WHE work to OSU was most certainly out of his hands. One SEC report said they had a commitment from an investor for up to $500K for the WHE division if they put proper product development processes in place. That's when the announced hiring that retired quality control engineer from California.
WHE-GEN is set up from the inbred group at Cyclone. If there was ever an opportunity to fix mistakes, this would have been it. The fact that their "technical team" consists entirely of a contractor's employees proves there's no interest in making a real company with a real product.
Hi Tom and MTM,
I came into this and did a bunch of reading, and everything I've seen supports your observations.
Most recently I found the link to Cyclone's technical documents. The Mark V Efficiency Calculations are, technically speaking, bizarre.
There is a 20.3 hp "thermal loss" that comes out of nowhere and has no physical justification. When it's subtracted from the indicated horsepower, however, the net engine power comes out at 98.45, not far from the advertised 100 hp of the Mark V.
As Tom says, Harry Schoell decided in 2002-3 that the engine would be 100 hp, and that's what the calculations would conclude, regardless of how many imaginary factors had to be created.
The calculation also predicts energy efficiency to be similar to that of a diesel engine, but there is absolutely no basis for the assumed fuel burn. He picked a number out of the air that just happened to create an efficiency number that supported the claims he had been making for years.
The document properties of that file show it was created in March 2009. In December 2009 they put out a press release: "Cyclone Power Technologies Runs Flagship Mark V Engine on Steam" (with an external boiler, condenser and no power output measured). Again, as Tom said, the numbers that have been quoted for years had all been made up before any engines were run, let alone been tested and accurate measurements made.
I think this is why no powerboat, land speed record car or even golf cart has ever been shown powered by the Mark V engine. The reality is that the performance won't be anything near Harry's claims over the last decade, and his ego won't allow anyone to see that. Even if it means cratering the company to prevent information from getting out.
What I've seen in the recent corporate maneuvering matches MTM's description to a T. The new CEO and the only independent director of WHE GEN are both securities lawyers. Even though WHE GEN was officially created for investors who didn't want to invest in a publicly held company, their stated goal is to have the SEC registration done by Sept. 1st.
As for building street cred, WHE-GEN is claiming the 33 Cyclone patents, even though none are used by the OSU WHE. They are "partnered" with OSU-CAR. Their technical management consists of 2 PhDs and 2 other engineers at OSU-CAR.
But even though their R&D operation, all their assets, their manufacturing operation are all in Ohio, and their potential customers are machinery makers that want to bolt on WHEs, who will be centered around the Mid-West, the WHE-GEN CEO is staying in Florida and the only outside director is a securities lawyer and not anyone with R&D, engineering, manufacturing or OEM marketing experience. That's not what you do if you believe the company is viable as a business. Tom said before that was the business plan for Cyclone, now proven to be an abject failure. If, however, the goal was to skim off a public offering and move on, it looks just about right.
Technically, I believe the WHE-GEN is going to be a failure. OSU has redesigned it and has been working on it for almost a year now, and it still hasn't met its 200 hour reliability requirement yet. Without a "moon-shot" R&D program to invent new materials, they'll never get to the 10,000 hour life that industrial customers will demand. Meanwhile, a number of big companies are testing Rankine cycle systems for waste heat recovery from exhaust of cars and trucks. Once that hardware is in mass production, WHE-GEN won't be able to compete even if they had a working engine.
So, why move to Ohio for the Winter just to move back once the nice weather hits?
Patent EP2352904 is not new, it's been in effect since 2011.
The only new thing is its status changed from "A4" to "B" last week.
Look it up and look at the drawings. It's the engine that Ohio State redesigned because they couldn't make it work.
It's a patent on an engine that will never be built.
Check page 11 of the last 10Q, especially the footnotes.
Add up the number of shares being held in reserve for the conversion of those notes. The stock closed on March 31st at $0.020. The price is now below 1/5th of that, so 5 times as many shares would be issued.
Sure, some notes were paid off in Q2, but new notes are constantly being sold to pay the interest on the existing ones and to provide the cash to keep the lights on.
Interest in Q1 was $500K, or $167K/month. The Army payment wouldn't have covered CYPW's interest between the invoice date and payment date.
Oh, let's not forget that completion of the Army contract reduced Cyclone's customer base by 33%. Their last new customer was Combilift in 2011, and they still have no delivery date for the engines that were supposed to be delivered in Q2 2012.
They started working on that Army contract in 2007 and even got their congressman involved at one point to keep it.
In 2007 the Army gave out a bunch of R&D contracts to develop small engines that ran on JP8 (the Army's standard fuel) instead of gasoline. There was lots of success converting regular engines. In fact, there are at least two companies now converting off the shelf Honda generators to run on JP8.
In comparison, the Cyclone system took $1.4m and 7 years and still needs untold millions and years to make their system practical. As the release said: "The Company is now in discussions for follow-on funding to advance the technology through manufacturability and life testing."
Or the Army could buy Honda generators with factory warranties under competitive bids now.
But what I find most surprising is that there has been no information provided about the Army prototype: no photos, no specs, no video of it running, nothing. Cyclone isn't exactly publicity-shy. They are recycling old news for their Facebook BFFs. Weird, huh?
You missed part of that. The full line is:
Common stock, $.0001 par value, 900,000,000 shares authorized, 332,043,678 and 272,679,942 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively.
Has the tipping point been reached?
I'm thinking not quite yet, but it can't be that far away now.
If a note holder converted a $50K note a week ago it would get about 15 million shares. They could sell it out a few million shares a day. That appears to be happening now.
If all the note holders converted it would mean 200 million new shares, give or take.
If they all converted their notes, they'd have something of a dilemma. If all sold immediately the stock would crash completely. If they all cooperated to sell slowly, Cyclone could go bankrupt and the stock would stop trading. Or one could cheat and crash the market for the others, leaving them with nothing.
Only one note is secured, and even then the assets are quite iffy, e.g., $500K of engine parts at cost.
Maybe the note holders would get the shell company?
Interesting times.
I have to say I've come to believe #1.
Personally I think small steam power plants are going to have a bright future. The question in my mind has been if Cyclone hasn't made a go of it because steam technology isn't fundamentally viable, or something else is at work.
My conclusion is that Harry Schoell dreamed up the engine in 2002-3 (he was posting to the steam car club forum during this time), fixed the design in stone and has spent the last 10 years trying to make it work. He started the company in 2004, filed for patents on the design, sold stock, sold licenses, and only then tried building one to see if it would work. From the end of 2009:
Cyclone Power Technologies Runs Flagship Mark V Engine on Steam
POMPANO BEACH, Fla. -- December 11, 2009
Cyclone Power Technologies Inc. (Pink Sheets:CYPW) successfully ran for the first time its flagship Mark V engine on steam, a major milestone for the Company’s Schoell Cycle heat regenerative, external combustion engine technology.
(snip...)
In the current steam tests, the Engine was attached to an external heat source and built-in, water-cooled condenser. Next phases of developmental testing will include attaching the Company’s patented all-fuel capable combustion chamber, which it successfully tested last week, and an air-cooled condensing system.
"around $500,000" for LSR car #2:
Clearly irked by the British holding yet another record, the Americans have taken an incredible steam engine, modified a Ron Main chassis, and in five months with around $500,000, have created a car that it hopes will power Nelson Hoyos to 200mph early in 2013. Just to make sure the British don’t think that they can step back into the arena for another 100 years, the team has another engine that will take the car to 400mph.
Seems like a lot of money to leave parked with no engine...
Can't wait for the 400 mph version to not run, either. ;)
Don't worry, there isn't going to be any shortage of shares for you to buy.
The last 10Q listed about $380K in convertible notes. Cyclone converts them to stock at 45% below market.
At the current price that will mean issuing 99,000,000 new shares. Assuming market price doesn't drop any more.
I would guess it's June, a note matured and was converted to stock.
If the note holder gets stock at a 45% discount from market, that would be $0.0055. They could sell at $0.007, get their investment back plus 15% or so and eliminate future risk.
Today could be the beginning of the end. The notes are all unsecured. The note holders have to sell their stock to get their investment back. There is no business going forward, so no reason for them to hang onto stock. The faster they sell, the faster the price will drop.
Only 7 years to deliver the Army 10kW genset.
The first mention of it was in April 2007.
HLS
Re: cyclone engine
April 26, 2007 04:07PM
Hi Bill,
I personaly like the 6cyl only it cost more to produce. We have a small 6cyl design for the millitary. I t is a small compact unit to fit in the Abrams, Bradley, and the Stryker. It is a small common 10kw generator to fit in a 12"x12"x17" space. Of course every thing is a compromise.
Yep, the Mercedes patent says "3. In the construction of the composite internal combustion piston engine the lubrication fluid is water based with additional additives."
This isn't a biggie. You can buy water-based hydraulic fluid. It's typically used in construction machinery that operates in environmentally sensitive areas.
The problem with a steam engine is that when you boil the water the additives are left behind. It doesn't take them long to foul the boiling surfaces.
Water lubrication where for art thou?
In the steam car club forums Harry Schoell had been claiming since 2002 how great water lubrication is, and in fact, it's the only way to go for a modern steam engine.
The OSU-CAR presentation from March bears a close reading.
Slide 19 is titled "EXAMPLE OF CRITICAL PATH ISSUE: BEARING ANALYSIS". Yes, bearings are critical. Unless the bearings can be made to work neither the WHE or the Mark 5 will ever be a marketable product.
Slide 30 is key:
Little or no data exists outside Cyclone's own experience for water lubrication of either ball bearings or roller bearings in our environment and under our loadings.
and
Minimal data exists for the use of polymer journal bearings in our environment and under our loadings.
It's hard to say if he was "consulted" on anything technical. Someone on the Yahoo board posted last week:
Does it sound like a scam when you sign up a bunch of respected engineers with many years background in light steam technology, label them your "Board of Advisors" and then never ask them for advice and discount everything they suggest?
Jim Crank
Re: US Land Steam Record!!
May 06, 2014 02:16PM
Chuk,
[...]
Seems you don't need to concern yourself about the other Bonneville car, their engine doesn't work according to good sources.
Does it sounds like a scam when your "Chief Technology Officer" is adamant that automotive drag is a function of the square and not the cube of speed, as is well known?
Will the Cavalry come riding in at the last minute?
The Steam Car Club forum (http://www.steamautomobile.com/ForuM ) has a lot of interesting reading about Cyclone. HLS is the ID of Harry Schoell.
Here's something the steam expert Jim Crank wrote:
Jim Crank
Re: Cyclone engine topic continued 2
April 10, 2010 01:49PM
Tom,
I have seen this one several times before at the Rocket Works. The military have a cute way of dealing with stupid politicians, they study the subject to death until a new administration comes in. Most often they spend a bundle and then just let it die a natural death, which it does.
"On behalf of our team, we would also like to thank Congressman Allen West (FL-22) for helping us cut through the bureaucratic red tape during this contracting process, and for his strong support of small businesses like us," added Mr. Nelson.
Because of these strategic choices, there are some projects that will not be completed in 2013 as previously discussed. The delivery date of our U.S. Army contract has been bi-laterally extended until April 2014, in part due to government delays outside of our control.
Jim Crank
Re: Cyclone engine topic continued 2
April 11, 2010 11:33AM
Bill,
Interesting that you bring up EEstor ultracapacitor as a potential candidate. I got asked a lot of questions about this one recently and dug into their operation.
1) They have never demonstrated the thing does what they say it does. Always full of excuses. This alone raises a lot of questions.
2) That Perkins et al have invested $3M means nothing, that is the pocket change on Tom Perkin's dresser. Like a lot of vulture capitalists these days, they invest in anything "green" that even looks promising. That is the new hot button investment game for these people. For REAL financing these people demand 51% of the company. Make a success of your dream and then see yourself kicked out later. That I have seen around here many times. Then they sell the assets and patents and pocket the gains.
I hope passionately that Harry never falls for their snake oil presentations. He is too smart for that.
3) There seems to be a lot of data flying around that EEstor is a fraud. Far too many reputable people have investigated them and come to the same conclusion.
T-Minus 10 Weeks and counting:
In a way, I guess you do have to recognize Mr. Schoell for his tenacity. Archive.org has a copy of the Cyclone website from 2005 at https://web.archive.org/web/20051107024121/http://www.cyclonepower.com/
To date, Cyclone Technologies has completed its initial research and design of the engine, and has already successfully bench-tested single and twin cylinder engines in the smaller power range. Four six-cylinder engines are currently being assembled. Bench testing on these medium scale engines will commence within the next few months. We are well beyond the proof of concept stage.
Plotting the trajectory here:
The outstanding shares number hit 355 million on May 15th according to the 10Q, so the blue line kept going straight.
So in the first quarter they were issuing about 20 million shares per month while the average price was about $0.03. That's a nominal $600K per month of stock being issued to pay the loan sharks.
Hmmm. $600K per month x 3 months = $1.8 million x 40% discount from market = $1.08 million to the sharks. Cyclone lost $1.097 million for the quarter. That seems to explain that.
If they keep up that burn rate they'll have to go up to 60 million shares per month of 1 cent stock. If the price doesn't drop any more, they've got 9 months of stock left to sell before it's all gone. (But, the price has been dropping about 18% per month for the last 10 months.)
And here's the market capitalization:
Anybody need a LSR car body?
Here's one from eBay in January.
Actual cost $70,000.
Yep, just reading the 10Q:
"For the three months ended March 31, 2014, cash decreased by $10,304. This is reflective of funds used by the net loss of $1,097,033 and the $99,764 increase in inventory."
Interest and derivative expenses were $500,509 for the quarter, compared to $924K for all of 2013.
"Operating expenses incurred for the quarter ended March 31, 2014 were $569,524 as compared to $678,475 for the same period in the previous year, a reduction of $108,951 or 16%. The majority of the decrease was due to a reduction in research and development expenses of $126,370 or 50%,"
R&D cut yet again, while General & Administrative expenses went up.
"We forecast an additional $150,000 in revenue from this contract [Army genset] when we deliver the S-2 engine, expected to be in May 2014. "
It's May. Has anyone seen the S-2 engine actually running?
"The total losses of the WHE Subsidiary for the three months ended March 31, 2014 and for the year ended December 31, 2013 were $120,391 and $157,266, respectively"
$40K/month. Presumably that's what they are paying OSU to design and test the WHE.
"Should plans to commence manufacturing of the WHE continue on schedule, we expect to generate approximately $1 million in engine sales over the following 12 months, or otherwise generate such amount from our investment in WHE."
The last schedule they gave was for engines in production by the end of 2013.
On the other hand, a month ago in the 10K they expected $2 million in sales for the next year. Some improvement in accuracy, I suppose.
In addition to all that they issued about 50 million shares of stock during the quarter, and over 100 million shares are being held in reserve for the current batch of convertible notes.
Funny, this report doesn't say how many employees they (still) have.
They're still projecting two Mark 5s will be sold to Combilift this year for $300K. Who will make the Mark 5 work? They don't say.
So, Q1-2014 had operating expenses of $600K, interest expenses of $500K and zero revenue.
The very first WHE still hasn't passed its 200 hour durability test. If it does, and the next 10 prototypes each pass their own 200 hour tests, Phoenix will pay Cyclone $250K. If they don't work, zero.
The Army will pay $140K if the S-2 genset is accepted. But,
"In the quarter ended March 31, 2014, the Company had a $27,000 charge to cost of goods sold, which was reflective of estimated additional costs on the US Army contract"
This thing was supposed to be finished last summer. They're still spending big money on it. No info about it running has been released. So maybe Cyclone will get the $140K this year.
The Combilift contract says each of two Mark 5 engines has to pass a 50 hour durability test, then "Combilift will use the Beta delivery engines to test usability of the engine in its forklift equipment (Acceptance Testing)."
Combilift has been strung along since 2011 when they paid Cyclone $100K in development fees. Even if Cyclone can make the Mark 5 survive 50 hours on a dyno (now with even less engineering staff), Combilift just has to say the engines are not usable on forklifts to get out of the contract.
(The contract requires Combilift to buy all engines from Cyclone. How on earth can they sell a forklift to a customer based on Cyclone's delivery promises? Assuming the Mark 5 can be made to work...)
OK, let's be optimistic. Combilift is out. Let's say Cyclone gets $140K from the Army and $250K from Phoenix this year. That's $390K in revenue. If the interest costs don't grow even higher during the year, Cyclone's expenses will be $4.4 million. Another $4 million from the loan sharks in 1 cent stock discounted by 45% means sales of 727 million shares. That's assuming the dilution doesn't lower the price any more.
Oh, and:
"As of May 15, 2014, there were 344,215,227 shares of the registrant’s common stock issued and outstanding."
900 - 344 = 556 million shares left to sell.
They're done.
Hey Tom,
I believe the tubes on the sides of the cylinders are for cooling water. The photo of the assembled engine shows polyurethane tubing attached to these, so there is no steam going through them.
The video of the older WHE with a plexiglass top cover shows lots of water being poured into the center of the crankcase. Thus, the WHE has no oil pump, it just has an auxiliary water lube pump.
The wrist pins are vertical and hollow. I imagine they pass this water inlet on each stroke and this provides the "lubrication" to the wrist pin bearing.
Why not update the photo on the website? Well, according to the 10K, the first item on their business plan is to generate revenue with engine development fees and engineering services. If word gets out that they gave up on their own engineering work and subcontracted everything to OSU, who's going to pay them development fees?
Well, don't keep us all in suspense!
Hey Tom,
Actually the WHE isn't uniflow. It has a ball valve inside each piston crown for exhaust (the original was a flapper valve in the piston crown, but OSU replaced that as well). Here's the parts photo from their Facebook page. The IAASP presentation has images of the ball inside the piston.
You just need a film of water one molecule thick to keep plastic "wet". Once that's gone, it's dry, and the friction characteristics will change dramatically.
I'm wondering if the top of the cylinder is going to be permanently dry. It's going to be the hottest area due to the uniflow of steam. Once the exhaust valve opens, the pressure drops dramatically and any moisture left on the hot metal will immediately flash into steam. Unless you pump water onto the cylinder wall ahead of the rings, they are going to go from a wet surface to a dry surface on every stroke.
This also brings up another question. You said Cyclone has been looking for plastics for inside the engine for years. They've been spending millions on R&D. There are only a handful of companies in the world that make these high performance engineering plastics. Cyclone must have already gone through every type of high performance plastic on the market, with no success.
Can OSU find a plastic that Cyclone hasn't already tried that will survive? The odds don't seem good.
Maybe that's why they are now in month 7 of the two month program to finish the 200 hour durability testing.
Hey Tom,
That's the key right there -- having a database of experience with a particular bearing material, running under a particular load and speed and with a particular lubricant at a particular temperature. They've got none of that.
And metal bearings with oil lubrication behave in known, predictable ways. You can confidently extrapolate results from 800 to 5000 hours. Plastic and hot water? I wouldn't bet the farm on any predictions.
My bet is the rings are the primary problem. Plastic is a very good thermal insulator. If the ring is riding on a film of water it is probably fine. But if the water film is missing from a tiny spot on the cylinder wall, the plastic will be rubbing against the metal. This spot will have a much greater friction coefficient, which will generate frictional heat, which will soften the surface of the plastic ring, which will create more friction, etc., etc.
Once there are some plastic molecules stuck to the cylinder wall, they will grab more plastic every time a ring goes by. Goodnight rings.
I wonder what their ISO9000/Six Sigma consultant is publicly going to say about predicted engine life...