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It looks to me like a Ponzi scheme that falls just inside the law.
Nelson proved the Cyclone WHE engine is an irredeemable failure. He's now winding down that business? All the workers were laid off last May. What's left to wind down?
He's been trying to raise money to buy a composting operation in Georgia since then or before. Since Q2Power is just a shell with a lot of debt and no assets, it's not a surprise that no one has given him more millions so he can skim off another big share for himself.
Notice a couple things in the announcement:
1) They closed $1,000,000 note offering.
2) $1,000,000 in liabilities has been restructured.
They don't detail how much of the "new" million is really old debt in another form.
So the existing note holders who weren't getting paid can have new notes. This PR goes out predicting great things. If they find new suckers to put up cash money, Nelson takes his cut and the existing investors can get their money out.
If Q2Power ends up in the composting business it will be coincidental. The name of the game here is to get money from new investors to pay out to the old investors. Just like Mr. Ponzi did.
After all, if Chris Nelson wanted to get into the composting business he could simply rent a little land, collect tipping fees for truck loads of sewage sludge and wait. Barriers to entry are minimal. Capital requirement is minimal. The technology isn't complicated. But he hasn't. The composting business story is just bait.
"What do they know that this message board does not?"
Well, for one thing Harry and Frankie know why Cyclone has never met the many, many promises of engine production starting.
They also know why they spent $2 on general and administrative expenses for every dollar they spent on R&D.
They know how much shareholder money was spent on building boats and cars to set speed records; boats and cars that have never moved one foot under their own power.
They know just how badly the engines perform. All we know for sure is that they can't get an engine to run for 50 hours at part load without failure. We can estimate they can't get the Mark 5 engine to run at full load for 5 minutes, which is all the time required for a land speed record run.
Only Harry and Frankie know why they've never publicly demonstrated a Cyclone engine powering anything.
Only Harry and Frankie know why they told investors at the shareholder open house in 2011 all the technological problems with the engines had been solved when we now know those problems are still critical problems with the engines.
Only Harry and Frankie know how their genset for FSDS of Denmark performed in testing. Prankie put on Facebook at the beginning of December that testing would take 6 weeks and all the results would be released. They still haven't reported how well the genset worked.
All of these things that we don't know are material facts, as defined by the SEC and as required by law to be communicated to the market.
One wonders why Harry and Frankie would risk jail time for securities fraud by not releasing all these material facts...
Summary: Hey, look over there!
The bad grammar suggests this was written by Harry.
Oh, yes, the only problem is bringing product to market. The fact there is no product and never has been anything close to a product isn't management's concern.
After all, Harry told everyone at the shareholder's open house in 2011 that all the technological problems had been overcome and plans were in place to start engine production.
And now all the production is to be done by others, the current batch of strategic partners, with all sales flowing through Cyclone. Yet the holdup is that Cyclone is undercapitalized. Under the claimed business model of Cyclone selling licenses and collecting revenues while sales flow through Cyclone, just what capital is needed? Do they need a fleet of forklift trucks to unload new engines from their strategic partners' delivery trucks to load onto their customers' trucks? Just what's the problem with capital?
WHE GEN (wonder why Harry isn't calling it Q2Power?), we now hear, didn't sell Cyclone stock so therefore held up Cyclone engine production. Then WHE GEN didn't "close the final agreements in a timely matter" causing Cyclone to "use the funds for developing and getting product to market." So WHE GEN caused Cyclone engine development to both stop and advance simultaneously. Very convenient, having a multi-purpose excuse like that.
The military genset for FSDS of Denmark now, we just learn, uses the Mark 1 engine rather than the S-2 engine from the Army genset we were told, for instance, in the 2016 annual report. The Mark 1 engine is rated at 5 hp (also in the annual report) while the genset for FSDS is supposed to produce 20kW of electricity. That's equivalent to 28 hp. Wow, talk about efficiency. A 5 hp engine powers a generator that provides 28 hp of electricity. Harry must have been extra ingenious that day.
Oh look, it turns out California is 2700 miles away from Florida. Who knew? How could management have foreseen that?
So they've decided to switch to local auditors because of that distance. The fact they left a bill for $85,000 from their previous auditors unpaid has nothing to do with it.
Frankie "feels" there has been "great progress with our engines". No actual reportable, objective progress, of course, but she feels like there has been progress. That's good, isn't it?
Maybe that's the real Cyclone strategy. Maybe if we could all just agree to feel there was great progress, all the good cosmic vibes would make Cyclone engines work. Why not? It's just as likely to make the engines work as having Harry spend another decade tinkering.
While we're all feeling sorry for poor undercapitalized Harry doing his heroic work to save the planet and all that, it's worth looking at the original sale of the Mark 5 engines. Two were sold to Phoenix Power in July 2009 with promised delivery in January 2010. Harry signed a legal contract to deliver working engines. He represented to Phoenix the Cyclone engine worked. He even agreed to a $25,000 per month late delivery penalty, up to a maximum of $400,000. Cyclone paid out that $400,000 in penalties, and still didn't deliver any engines. But even though there was no foreseeable prospect of making the Mark 5 engine work, Harry then signed another legal contract in September 2011 to deliver two working engines to Combilift in July 2012. Combilift is still waiting and there is no reasonable prospect they will ever get a working Mark 5 engine. The Mark 5 is now more than 7 years past its promised delivery date and Cyclone has never provided any explanation for why that is.
The land speed record car that shareholders paid hundreds of thousands to build, plus the custom GG MOM speedboat that cost the best part of another hundred grand came out of Cyclone's capital. Was Cyclone undercapitalized? Only in the sense that Schoell Marine drained off many millions from Cyclone and management spent $2 on General & Administrative expenses for every dollar they put into R&D.
But if investors just gave Harry many more millions to do with as he pleases, without making him provide any objective information on the true state of the engines, everything will be wonderful.
They've also been financing through credit.
There are those two judgements (we know about) from defaults on notes. From the filings it looks like they are still raising money by selling notes.
The accounts payable has been increasing, which is credit extended by suppliers. The new auditor said Cyclone owes them $85,000 for instance.
There's also the related parties payables which are Harry and Frankie's salaries that they are not drawing.
Cyclone has also been collecting cash from their new customers, the Danish defense outfit, the Mexican solar people and that outfit in Dubai.
Why anyone would give money or extend credit to Cyclone is a mystery to me, but there seem to be people doing it. Mind you, Harry and Frankie aren't exactly forthcoming with the truth of how badly Cyclone engines perform. They've always been very skilled at telling people things that will separate the people from their money.
It's also hard to understand the screwed-up priorities inside Cyclone. Harry designed the new Mark 1 and Mark 3 engines with water lubrication and spider bearings after Ohio State University proved those couldn't be made to work. So he has tied Cyclone to engines that can't be successful for technical reasons. He also designed these little engines with six cylinders so Cyclone is tied to engines that can't be successful for economic reasons. Then we see that Cyclone has kept a CFO on payroll even though revenue in 2015 and 2016 were zero and President Frankie claims to have been an auditor.
Back when they were trying to crowdsource funding for the land speed record car it came out they had an IT manager on staff. This for a company that had no engineers at the time or any computer facilities more elaborate than some PCs.
Things like that would be why General&Administrative expense always greatly exceeded R&D expense for a company that claims to do nothing but R&D.
Other than being all to glorify Harry Schoell's self proclaimed genius, I don't see any other realistic explanation for Cyclone's behavior.
NOTE 18 – SUBSEQUENT EVENTS
In the last quarter of 2016, the Company engaged in the following transactions:
a. Placed purchase orders for the pre production manufacturing of 10 Mark 1 engines to test application and integration with customers’ systems
Remember this PR:
Cyclone Power Technologies Authorizes Pre-Production of Mark 1 Engines
POMPANO BEACH, FL--(Marketwired - Nov 7, 2014) - Cyclone Power Technologies (PINKSHEETS: CYPW), developer of the all-fuel, clean-tech Cyclone Engine, announced today that HyPex Inc. is manufacturing a pre-production of 10 Mark I engines to test performance and quality control before going into engine production on a larger scale.
In mid 2017, the company anticipates $300,000 in revenue from the completion of the Combilift Mark 5 contract. The FSDS contract is projected to be complete in first half of 2017 with additional payment due of $75,000. IBES is negotiating to purchase 5 more beta site projects with an anticipated additional revenue from R&D of $80,000. We project delivering manufactured products thru our integrators and manufacturers by the fourth quarter of 2017. The Company has signed three contracts for deliverables and anticipates purchase orders for manufactured engines by summer of 2017.
Additionally, we have potential contracts in various stages of negotiation that could generate another $2 million in revenue over the following 12 to 24 months. We cannot guarantee that we will be successful in closing these new contracts, but we are cautiously optimistic that these or other opportunities will materialize in the coming quarters.
Hey Creston, the quarterly reports for 2016 were unaudited and the auditors wanted to make sure everyone understood they had nothing to do with the numbers.
I don't see unaudited quarterlies as a biggie. Cyclone stiffed their auditors for $85K on the annual reports so they obviously don't have any money to pay for audits on the quarterlies. I also believe Cyclone should have been filing reports, unaudited if necessary, all along. Especially since they brag about their President being a former auditor.
The letter from the auditors in the annual report is unusually long with very convoluted disclaimers. For instance: "Our audits include examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements." "On a test basis" means they didn't verify everything so if it turns out the inventory asset is actually worthless junk the auditors have an out.
Something interesting for the first 9 months of 2016 is their spending:
OPERATING EXPENSES
Advertising and promotion ........ 7,986
General and administrative ....... 655,308
Research and development ......... 131,827
For every dollar of R&D they spent $4.97 in General & Administrative. Interest expense was in addition to this. As always, there is no explanation of where all this money went.
Here's a puzzler. The new annual report lists an advertising expense "Retirement of demonstration equipment - $85,583" for 2014. Then under R&D expenses is "Retirement of equipment - $93,053"
They never mentioned having "demonstration equipment" before. In fact, other than several thousand in trade show display material there was never any equipment listed under advertising costs.
They've also had so little R&D equipment it's hard to see where that $93K would have come from. All the WHE assets went to Q2Power and were accounted for then. The Mark 5 is still on its rickety test stand (as far as we know). Just what R&D equipment was there?
The report also says "In 2015 Silest filed a small claim for rent due on storage facility against Cyclone (included in accounts payable). Silest and Cyclone reached a settlement and paid in full in 2016." This was the extra space they had rented to hide all the non-functional mockups like the lawn mower, truck chassis, Frankie's boat and various collections of painted tupperware.
Now, just what "demonstration equipment" worth $85,000 did they get rid of in 2014? And what $93,000 in R&D equipment?
Harry, believe it or not, made production quality molds for the fiberglass body on the new land speed record car. He claimed on the steam car board he was going to make copies of the car's body to give to his engine dealers as a promotional item, so therefore needed high quality molds to mass produce these car bodies. That was all going to be after setting multiple speed records, of course.
Harry, after taking back the car body he had given to Chuk Williams, sold it on eBay for $3150 while claiming it cost $70,000 to make: http://www.ebay.com/itm/Land-Speed-Record-LSR-Streamliner-Fiberglass-Car-Body-/251430846090 So it could be either the $85K or $93K were the body molds for the new car.
The other write-off, I'll bet, was Frankie's boat. Cyclone never admitted what it cost, but the value of equipment jumped $70 or 80,000 the year the boat showed up.
After all, it was probably quite a public embarrassment to Harry knowing the boat could never fulfill its purpose of setting a steam boat speed record. On the steam car board years ago Harry made the excuse that the boat couldn't even be put in the water until after the car set a record. He never did explain why the boat couldn't be launched and run right now. Getting rid of the boat would save him from ever having to admit it was a failure.
Funny, though. Even with $180K of equipment taken off the books for 2014, not a dollar of revenue was listed by Cyclone. Do you suppose stuff got sold out the back door for cash?
Cyclone just stiffed their new auditor.
SEC filing here: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=11951696
Notice the letter from the auditor at the bottom
As described in the 8-K, the Registrant filed its quarterly reviews without our approval, knowledge, communication and our firm was not engaged to complete the Registrant’s March 31, 2016, June 30 and September 30, 2016 quarterly reviews. The Registrant owes our firm $85,000 in fees.
Yeah, I noticed that too. The Mark 5 has been demoted from "pre-production", which it had been for many years, to "beta".
All those Mark 1 and Mark 3 engines might actually exist and be in testing, all evidence to the contrary. There are lots of boats anchored out in Biscayne Bay. There's got to be something on the bottom end of the anchor ropes. Why not Cyclone engines undergoing testing?
Can't wait for all that production to start in the next six months.
Here's a reason why the auditors wouldn't sign off:
NOTE 3 – INVENTORY, NET
Inventory principally consists of raw material engine parts, work in process engines, labor and overhead, net of realization, valuation and obsolescence reserves. In the aggregate it is stated at the lower of cost or market.
June 30, 2016 December 31, 2015
Raw material $ 323,224 $ 323,508
Work in process 26,289 0
Total $ 349,513 $ 323,508
We provide estimated provisions for the realization, valuation and obsolescence of our inventories, including adjustments to market, based on various factors, including the age of such inventory and our management’s assessment of the need for such provisions. We look at historical inventory aging and usage reports and margin analyses in determining our provision
Bobby, you caught something we've all missed so far. The boat market had been going crazy with all the free money up to 2008. Schoell Marine would have been doing well.
After 2008 one of the biggest businesses going was boat repossession. Business at Schoell Marine would have dried right up. When boats are are selling for pennies on the dollar, who would pay Harry to fix their old boat? Who would commission a new boat from him?
That's probably why all the photos up until a few years ago showed a big boat under construction in the shop. The owner didn't have money to finish it.
But fortunately for Schoell Marine, Cyclone shareholders were able to rent the whole building and pay premium rates for all the workers. Many millions went into General and Administrative that could only have gone ended up in the pockets of Schoell Marine.
The boat market meltdown in 2008 is likely the point where Cyclone went from being a sincere but ignorant and incompetent inventor to being a stock market fraud.
Good Grief. Just what "R&D job" is Harry claiming to have done?
Other than proving there are many, many ways to build a steam engine that doesn't work, that is.
He continues to be immune to the fact that GE actually built a working power plant which runs 24/7 generating electricity at a profit and will do so for decades to come. Meanwhile, Cyclone has never public demonstrated an engine even running, let alone powering anything.
In the last year there have been announcements of 1 megawatt systems, wood fired boiler systems, solar power systems including heat storage and military APU systems, and zero has come of any of them.
And this is after years of claims to investors of market-ready products and engine production starting soon. And of telling investors and the SEC that all the technological problems had been solved more than 5 years ago.
Yep, Harry and Frankie have done quite a "R&D job" on other peoples' money.
Let's do a year in review for Cyclone.
Cyclone Power Technologies Signs Agreement With Nextra Technologies of The Netherlands for 125 - 1 Megawatt Solar Plants Published: Mar 8, 2016 11:00 a.m. ET
Results: nothing.
Cyclone Power Technologies Inc. Announces the Delivery and Acceptance of the Mark 3 Engine to 3R for Production Published: May 25, 2016 9:01 a.m. ET
Results: nothing. No news or even photo of this engine. 3R soon folded and passed their "assets" to IBES of Dubai (see below).
Cyclone Power Technologies Inc. Kicks Off 24/7 Solar Project With License and Development Agreement With G2E Published: June 2, 2016 9:00 a.m. ET
Results: nothing. Harry was supposed to go to Mexico last August to deliver a working Mark 1 engine, but, you know...
Cyclone Power Technologies Will File Reports and Releases Progress Letter to Shareholders Published: June 8, 2016 9:01 a.m. ET
Results: nothing.
Cyclone Power Technologies Inc. Signs License and Engineering Agreement With Falck Schmidt Defense Systems Published: June 23, 2016 9:01 a.m. ET
Results: nothing. In early December Frankie said on Facebook testing would be finished in six weeks and all results released. She was mostly telling the truth here. Testing is no doubt finished and there are no results because the engine didn't work long enough to measure anything.
Cyclone Power Technologies to File Audited Financials With SEC and Project and Contract Update Published: Aug 1, 2016 6:00 a.m. ET
Results: nothing. Predictions: Financials in six weeks. 3R to release video of running Mark 3 engine. Mark 1 engine delivered to Mexico in August. Two S2 engines to be delivered to FSDS in September.
Cyclone Power Technologies Receives Purchase Order From I.B.E.S. a UAE Corporation & Update on Cyclone Published: Sept 29, 2016 1:00 p.m. ET
Results: nothing.
A couple grainy videos of engines spinning for a minute were put out (you can almost make out Bigfoot in the background). There was a photo of a burner made by their Alabama partner put on Facebook. It's almost as good as a $250 off the shelf Beckett oil burner.
Still no demonstration of a Cyclone engine powering anything or any explanation of the true status of engine performance. Talk about management's failure to communicate material facts. The only surprising thing about Cyclone is that the SEC hasn't issued a stop trading order.
Most likely is a R/S and sale of the shell.
Their waste-to-power technology failed to work. Chris Nelson knew for years before at Cyclone Power these steam engines were not even at proof-of-concept stage, yet that didn't deter him from telling investors the technology was ready to deploy.
Most of the last year was spent in talk about acquiring a composting business, but apparently no investors will give him the money to do so.
Q2P has no assets or revenue but big liabilities. They have no business, other than looking for a business to enter.
At this point there's no reason to spend money on bringing filings up to date. Revenue was zero, assets are zero and there is a tangled web of liabilities.
Oh, that salary was just the tip of the iceberg.
They raised millions in cash from investors. A small part actually went to R&D. The rest disappeared through the various financial contortions that fill up the majority of the filings.
Chris Nelson had been in charge of the WHE engine at Cyclone for years, constantly making predictions of production in six months. Remember that PR he put out announcing their "factory" in Ohio? Look at all the photos taken inside the Q2P building and look for factory machinery. There isn't any.
The last report listed their primary asset as shop equipment with an acquisition cost of $9500. That's all that's left to show for the $6 million they burned through. (Yes, I am ignoring the listed value of the Cyclone IP license.)
The lion's share of that money didn't end up in steam engines.
Of course, Chris Nelson had known for years the WHE engine couldn't be made to work at Cyclone. He also dealt with the Ohio State University engineers who couldn't make the engine work there. The last word from Ohio State was they couldn't make the water lubricated bearings work and they had designed a bearing test machine for more research in hopes of making a bearing that could work.
There is no bearing test machine in the Q2P photos. Bearings were the key critical hurdle, and Nelson put no visible effort into solving this problem. There's not a word in any of the financial filings saying the bearings were being worked on.
Q2P has that contract with Phoenix Power that makes a $150K progress payment when an engine runs under part load continuously for 200 hours. This payment was never made, so we know for certain Q2P never made an engine last that long.
Nelson knew his product did not work, and had no reasonable prospect of being made to work. Years of experimentation at Cyclone plus the conclusions of the Ohio State research proved that. Yet he told investors the technology worked and was ready to deploy. He even sold a system to that company in Florida.
Bottom line is a lot more than Nelson's salary disappeared with nothing to show for it. The little bit spent on R&D had no hope of making Q2P's only product work. Only the guy who spent all that money knows where it went.
Uh-oh, the SEC is watching...
From that 8K just filed: "These amendments have been filed in response to a December 21, 2016 limited review letter from the Securities Exchange Commission."
The amendments say their internal control of financial reporting is unacceptable. Some of their internal weaknesses that may lead to "material misstatements" of the finances are:
· Management has a lack of knowledge and experience with accounting for derivative liabilities, reverse mergers and redeemable preferred stock.
· Management is understaffed to perform the necessary accounting, including preparation of the required financial disclosures, in a timely manner.
· Management has not yet formed an audit committee.
The Company is in the process of addressing and correcting these material weaknesses. Management will be diligent in its efforts to continue to improve the reporting processes of the Company, including the continued development of proper accounting policies and procedures.
You're being awfully generous, Tom.
I agree there is a market for small, modern steam engines, and not the universal market Cyclone pretends there is. But, even if Cyclone got the world's best marketing plan it would make no difference. The Cyclone engine just does not work. It never has and it never will.
Harry Schoell has no intention of making a working steam engine that could be marketed successfully. He's only about proving to the world that he is a genius inventor. No lie is too big to reach that goal.
Someone on Facebook again compared Harry to Edison. What the believers miss is that as soon as Edison figured out an idea (a) could not work well enough for people to want it, or, (b) would not make a profitable business for him, he dropped it and went on to other ideas. Harry's fans seem to think Edison took one idea and spent all his resources and more than a decade with zero progress and continued with it indefinitely. (The fans also don't realize that Edison made his inventions WORK first, then patented them, then sold them to investors. Just the opposite of Cyclone.)
Ohio State engineers looked at the WHE and redesigned it right away to eliminate the spider bearing. Cyclone put out a press release quoting Harry saying how much the noise and vibration were reduced, and eliminating half the cylinders reduced the parts count and manufacturing costs.
Ohio State then found the bearings could not be made to survive for any time. Chris Nelson hired some of those engineers who spent two more years trying to make the WHE survive before running out of money and shutting down development.
Meanwhile, the Mark 5 engine had been making progress only in that Harry kept stripping off his inventions, except the spider bearing and water lubrication. They stayed.
So Cyclone had burned through $25 million in investors' cash and couldn't sell any more stock. Harry and Frankie needed to get serious about making a working product. So Harry designs the 5 hp Mark 1 and 20 hp Mark 3 as the company's saviors.
Except he designs them as six cylinder radials with spider bearings and water lubrication. I.e., the ingenious Harry Schoell engine design.
Guaranteed failure.
I've always been surprised by the lack of instrumentation in photos. The test stands are like something you'd pull out of a dumpster. Old, mismatched gauges from boat instrument panels and cheap multimeters duct taped to the stand.
Of course, there's no reason to collect objective data if you have no intention of using it, is there? For instance, when water lubricated bearings constantly failed with a textbook lack of lubrication failure, Harry didn't call in support engineers from bearing companies and trust their opinions. Instead, he came up with his own theory that bearings are really tiny generators and then he spent who knows how many years trying to electrically insulate the bearings. With no success.
As you mention, basically no gas engines under 20 hp have more than one cylinder because of the economics. Harry Schoell's insistence on using six cylinders shows he isn't interested in designing marketable engines.
The fact that he straight up lied to investors about all the technical problems having been solved at the 2011 shareholder's open house also shows he has no interest in making a working steam engine.
He's only about squeezing the last penny out of investors to glorify himself.
I have no idea why the price is still so high.
There were a number of investors that put money in and got stock, either through outright purchases or through notes converting. Other than a successful pump and dump, there is no chance of the stock price going up. Liquidating might get the early sellers dimes on the dollar but that's still better than what they'll get from hanging on.
When the shell sells, or maybe before, there is going to be a big reverse split to wipe out the existing shareholders. Q2P has no other reason to exist than the sale of the shell.
Actually, I suspect just the opposite: Frankie picked auditors that were too honest for Cyclone.
Her excuse a while ago was the auditors had issues with derivative accounting and inventory aging. She later complained about Chris Nelson loading Cyclone up with toxic debt that was driving the derivative accounting problems.
Notice on the Cyclone website that Frankie has not updated the number of outstanding shares or the number of authorized shares in two years, while she does update the site to include news of all those great deals Cyclone makes. She and Harry have no intention of telling the world what the true state of CYPW stock is.
While Nelson did sign off on many convertible notes, Harry and Frankie obviously approved at the time, being the controlling shareholders and directors, and spent the money raised. In one message to shareholders Frankie did say the authorized shares were increased from the 2 billion level to cover contractual requirements in convertible notes (although she didn't say what the authorized was increased to) so she and Harry have continued to use toxic debt.
I think a big sticking point is the inventory aging issue. Most of Cyclone's assets were in inventory and IP, priced at the acquisition cost. The auditors, rightly, are asking about aging. They have to sign off that the numbers they put down represent the real value of the inventory. The real value is as scrap metal for the inventory and the price of the picture frames holding the patent certificates for the IP. But with Harry completely delusional about Cyclone engines actually working, there is no chance he will allow an honest value of the inventory to be used.
The land speed car and water speed boat costs were never properly disclosed, but their appearance jumped the equipment asset by about $400K. These toys would only have realizable value as some of the parts. For instance, the trailer is worth more than the boat.
The auditors would be crazy to sign off on Harry and Frankie's valuations of the Cyclone junk. They could lose their licenses and be sued personally if they did.
The holdup on the financials is all about Harry and Frankie trying hard to continue deceiving investors.
Any minute now we should be getting test results...
From Facebook in early December:
Cyclone Power Technologies the test are for two generator systems with base testing then militarization testing total results will be released at end. FSDS engineers are here doing the test. There are what is called TRL levels that is being tested for militarization.
December 7, 2016 at 6:44am
Cyclone Power Technologies should not take more than 6 weeks but hard to predict based on FSDS engineers breaks going back for Holidays. Remember these are militarization TRL level testing.
December 7, 2016 at 12:17pm
Tom, you're being way too generous in your assessment. Not wrong by any means, but giving Cyclone the benefit of the doubt that they don't deserve.
You said "Of course, every single element of the argument assumes world-class efficiency (or better) and I have seen no indisputable proof that real world testing backs up their claims. For that matter, I have problems believing they even performed calculations beyond the most theoretical in nature."
First, not only is there no indisputable proof anywhere, but there is no anecdotal evidence that any real world testing was done. There have been some really short videos of engines spinning, sometimes even with a dynamometer connected, but none showing an actual load being applied and power measured.
Even then, this was all bench testing (if you can call it testing). As for real world, there have been two boats built, two land speed record cars, a truck chassis, lawn mower, weed eater, generators, etc., and none shown running in public. Not even at the shareholders' open house in 2011. We are told the Army genset passed its acceptance test, but not a hint as been give out of what that test was.
Harry had once promised to publish dyno test results for the Mark 5 land speed version on the steam car board, but then weaseled out under a variety of excuses. The last was the SEC wouldn't let him. Considering the engine has to last less than 5 minutes in a land speed run, Harry's inability to do a dyno test is strong evidence the Mark 5 can't survive for more than seconds while producing any power.
The performance predicted from calculations is not just based on the most optimistic assumptions, but on ignoring thermodynamic theory altogether. Harry's calculation was removed from the Cyclone website after links to it started appearing on this board, but it's still available at the Internet Archive:
http://web.archive.org/web/20150923144017/http://www.cyclonepower.com/PDF/Mark%20V%20Efficency%20Calculations.pdf
It's techno-gibberish. It's like something done by a school kid on a math test where they know the kind of answer they want but have no idea how to calculate it. Numeric values are just pulled out of air with no justification. No knowledge of thermodynamic theory is evident.
For example, on the first page it says "Indicator Diagram hp = 131". An indicator diagram shows the pressure acting on a piston top as a function of piston stroke. Between the top of the piston and the end of the crankshaft there is friction in the various parts, plus loads from other engine components (pumps, fans, etc.). The brake horsepower of the engine is the indicated horsepower minus the friction and auxiliary loads, i.e., what Harry called the "Mechanical losses". These total 12.25 hp, based on numbers pulled out of the air.
So now Harry has a problem. He has advertised his engine as 100 hp, but his calculation shows it should produce 131- 12 = 119 hp, which is 20 hp too high. What's he do? Makes up "Thermal losses" that come to the 20 hp he is trying to get rid of.
Theoretically the trouble with this is there are no thermal losses between the top of the piston and the crankshaft output. The calculation is dead wrong, but Harry's prediction came out to the number he wanted, which was his goal.
Even so, the engine efficiency only comes out to 23.2% on the second page. Much too low for Harry's needs, so out of nowhere comes a 4.05% air side and 4.32% water side efficiency gain from the heat exchangers, which magically push engine efficiency up to the 31% he wants.
The last Mark 5 engine video from February of 2015 showed all the heat exchangers removed, so they obviously didn't work anywhere near as anticipated. Yet, this 31% efficiency number is still being trotted out by Harry and Frankie on Facebook.
If you right click on that calculation document and select Document Properties, it shows the author was Frankie and the creation date as 3/18/2009. Cyclone has had 8 years of accumulated failures and let's say $20 million of spending since then and they know fully well their 31% efficiency claim is pure fantasy. Yet, it still gets used.
By the way, here is an annotated screenshot of the last update on the Mark 5 from almost two years ago now. Other than pulling off most of Harry's inventions there was no progress on the engine since the previous video of 2010. Want to bet there has been no progress since 2015?
Nailed it!
Although some grammar quibble: "Production ready in 6 months..." should be "In production in 6 months..."
After all, a family of Cyclone engines has been "market ready" since 2007 and they've been building "pre-production" prototypes for almost as long.
There's more Cyclone BS shaping up on Facebook as I type this. They posted a fuzzy photo of a round burner made by their partner in Alabama, the former algae oil guy who now apparently is a waste plastic oil guy.
Gawd, I almost feel sorry enough for him wasting so much time and money on developing oil burner technology to send him a gift of a $250 Beckett oil burner. Almost, but not really.
Meanwhile the Cyclone responses to comments are more outright fraud. Frankie will send individuals "proof" by email the Cyclone engine is more thermally efficient than gasoline engines. This must be the dyno results Harry had promised to the people on the steam car board but then created a stream of excuses for not doing so. Ironically, the last excuse was the SEC wouldn't let Cyclone publish dyno results so here Cyclone is only giving out this material information to individuals which breaks the SEC's insider trading law.
There is also the claim of 320 hp and 2600 ft-lbs of torque on the dyno at 1 rpm. That was the lie told about the Mark 6, which they never even attempted to make a prototype of. Cyclone's little cheap water brake dyno can't absorb that much power, and will provide a load of about zero ft-lbs at 1 rpm.
I'd love to see a Cyclone engine developing maxium torque at 1 rpm. I'll bet it wouldn't make a full revolution before either the bearings seized or connecting rods broke.
A low-speed high-torque dyno is easy to make. Surplus Center of Nebraska has a hydraulic wheel motor for $219 rated at 20500 in-lbs (1700 ft-lbs) of torque. That's double the rating of the Mark 5 (which is in final testing before shipment to Combilift...) A 5 gallon bucket of oil, couple of hoses, high pressure globe valve to throttle the output, pressure gauge to indicate torque and a stopwatch to measure rpm is all that's necessary.
Pity Harry is allergic to proper test equipment, isn't it?
Here's a couple more dots connected.
In March 2011 Christopher Nelson was made President of Cyclone.
In December 2011 Cyclone held the open house for shareholders. The slides from the presentation are filed with the SEC.
Obviously Harry Schoell had to give a presentation, but Harry mysteriously left without taking any questions, claiming he had to catch a plane. Here was the schedule for the day:
Funny, that. Why couldn't they have started Harry's talk at 9:30, giving him a full hour to answer questions and done the tour at the end?
Why would President Chris Nelson have scheduled the open house this way?
Also funny is that they had a professional video company there recording the talks, two of which were posted, the talk by Kevin Bowen of Raytheon and the talk by Chris Nelson. You can go through the list of all videos posted by video company, and none are of Harry's talk: https://vimeo.com/askmediaproductions/videos/page:16/sort:date
Do you suppose Harry Schoell is so modest and shy that he didn't want a video of him posted?
Or do you suppose that Chris Nelson had by that time figured out that Harry just makes things up? Nelson was well aware of the years of failed predictions. Being a lawyer he would know that excuse they couldn't show running engines that day because of "the insurance" was pure nonsense.
Being the President and a lawyer he would know that he could be sued personally, or even put in jail, for securities fraud, and there would be a lot of witnesses there that day. Letting Harry ad lib would guaranty a lot of falsehoods would be told to shareholders. What's a lawyer to do to protect his own hide?
How about put Harry on a pre-approved presentation then get him out of there before he could start making things up? Like maybe if he had to catch a plane or something...
Harry did slip one key piece of fraud past Nelson though:
We now know the bearings, valves and condensing did not work then (and still don't work). We don't know whether the combustion and pumps work right because a Cyclone engine has never run long enough to find out.
Pure intentional misrepresentation of material facts.
Nelson, although being President of a steam engine company, was so utterly clueless about the technology and what Harry was actually up to that he let this by.
Harry and Frankie knew then they were swindling investors with claims of working technology and promises of production that had no basis in reality. That was more than 5 years ago, and they haven't gotten the slightest bit more honest since then.
Christopher Nelson keeps proving PT Barnum right.
UAS Drone Corp. has all their manufacturing and sales done by another company, who is going to do all the work and hand over the profits to UAS... UAS' role is to count the money and divert it to the insiders.
Just like Nelson's business plan for Q2Power in the composting business.
The same "strategic partnership" scam used for so many years at Cyclone, again.
And UAS Drone's financials show them swamped in convertible note liabilities. Toxic debt again.
But the market may be getting wise to Nelson's MO. Q2Power raised far less than Cyclone, and UAS has raised far less than Q2Power.
Absolutely. Creston, can you pin Chuck's post too?
Here's some timeline to illustrate.
* Sep 13, 2005 Harry Schoell starts filing patents for the Mark 5. The applications have fully detailed assembly drawings.
* November 17, 2008 WHE system sold to Bent Glass Design. It was finally reported running on December 14, 2010, but years later Cyclone admitted removing it after a couple weeks.
* July 30, 2009 First two Mark 5 engines are sold to Phoenix Power with a quoted delivery time of six months. In the intervening four years Cyclone had not been able to make the much simpler WHE engine work.
* September 12, 2011 Cyclone enters a contract to sell two Mark 5s to Combilift, this time with a quoted delivery of 9 months. Cyclone had already been paying $25,000 per month late delivery penalties to Phoenix.
* December 2011 Shareholder Open House where Harry tells investors the technical problems had all been solved. No engines were demonstrated running because of "the insurance".
* April 2012 Phoenix had collected the contract maximum of $400,000 in late delivery penalties from Cyclone.
* February 2013 Cyclone hires Ohio State University to "assist in commercialization" of the WHE engine. OSU's real goal is to make the WHE run for 200 hours under part load to get a progress payment from Phoenix.
* September 30, 2013 Phoenix cancels order for Mark 5s.
* February 23, 2015 Cyclone posts a "progress" video of the Mark 5. It shows about of minute of the engine turning but not powering anything and the speed going up and down uncontrollably, just like in the March 2010 video.
* May 2016 Q2Power ends work on the WHE engine without having gotten the 200 running hour progress payment from Phoenix.
So, what have we got?
Engines were not run at the 2011 Open House because of "the insurance", but all the videos Cyclone has posted show people with no more safety equipment than a cheap plastic face shield, and many without that. Obviously a face shield is all "the insurance" really requires. Harry wouldn't let the engines be run because it would quickly demonstrate he was lying about technical problems being fixed.
Contracts were signed (and continue to be signed) to deliver working engines knowing they had no working engines and no idea how to make the engines work.
Cyclone didn't start to build a Mark 5 until four years after the patents had been filed. All the performance claims and awards came literally before any real hardware was built, let alone tested. Videos of Harry from the period show him pointing to the engine mockups and claiming performance as if the mockups were real engines. He never let on they were just mockups.
We're now seven years past the initial promised delivery of the Mark 5 and Cyclone has not provided a word of explanation as to why.
The work Ohio State did was solely to make a prototype engine run for 200 hours. They didn't succeed, nor did Q2Power with a couple more years of work (using real engineers). Cyclone has been claiming for year having engines completing Alpha, Beta and Pre-production stages, but the truth is they do not yet have a proof-of-concept prototype of anything.
Yet they continue to sign contracts to deliver working engines.
Their "One Engine" delusion had for years focused on building auto engines. If you figure car engines will last for 200,000 miles and average 40 mph, that means a typical car engine lasts for 5,000 hours. Industrial engines, for instance in generator sets, quote design lives of 60,000 hours and more.
Has any Cyclone engine survived running for one hour? Considering they spent hundreds of thousands on that land speed record car, did huge bragging on it, and have never run it even though the engine only needs to run for less than five minutes, Harry and Frankie know fully well they are nowhere near proof-of-concept, and never have been. The whole stream of claims of being market-ready and production starting has been fraudulent.
You can sure tell when people have been drinking the Cyclone Kool-aid. They start chanting talking points like "R&D takes time" and engaging in magical thinking such as a long string of failures logically must lead to success.
Tom used an example before: it's like trying to teach a horse to sing. No matter how patient and dedicated you are, your string of failures is never going to end in success.
Harry Schoell is guarantying continued failure by sticking to his design that neither he nor Ohio State University could make any progress with. Ohio State designed out the spider bearing to eliminate the failures it caused, and they proposed a research program to invent new bearing materials to have some chance of water lubrication ever working. Harry's response was to put the spider bearing back in and pretend he can make water lubrication work.
Harry, after 12 years of continuous failure, has made zero progress. Has a Cyclone engine ever survived for one hour at full load? They've never said.
Part of what the fans never get is that "research" and "development" both involve methodical, thoughtful processes. Harry Schoell is proudly ignorant of all relevant branches of engineering and does nothing but trial and error. Being ignorant of the underlying science means he has about the same chances of fixing problems as a monkey at a CAD terminal.
No, strike that. A monkey wouldn't be emotionally attached to a bad design concept and could move on to designs with a chance of working.
And the Cyclone BS continues...
Looking at their Facebook postings in December. On the 6th, a new photo with the statement "FSDS load bank test for 10 kW Cyclone powered unit in process."
FSDS is the Danish military contractor who ordered a copy of the 10kW test genset Cyclone delivered to the Army a couple years ago. That was the one that Cyclone refused to give out any actual performance data on. They never even posted a video of it running.
A load bank is a cabinet with big electrical resistors in it. All it does is turn electricity to heat to provide a load for a generator. The tag on this one says "Ready to Rent", so it's a rental unit. $25 million spent, and Harry never bothered to buy a load bank to do real tests on all those WHE, solar and military gensets he kept claiming were running.
In the comments Frankie put
Cyclone Power Technologies the test are for two generator systems with base testing then militarization testing total results will be released at end. FSDS engineers are here doing the test. There are what is called TRL levels that is being tested for militarization.
Cyclone Power Technologies should not take more than 6 weeks but hard to predict based on FSDS engineers breaks going back for Holidays. Remember these are militarization TRL level testing.
Hi Creston, the auditor only signs off that the numbers are accurate. All the rest of the explanation in the financial reports is the responsibility of management, and lawyers are used to make sure management doesn't say things that get them sued.
In practical terms, Cyclone won't get sued except maybe by a shareholder-lawyer with spare time just for kicks. Cyclone has nothing and has no prospect of every having anything of value. A judgement against Cyclone would be easy but collecting would be impossible. The millions that went through Cyclone is very well hidden by now.
There is a "safe harbor" provision in the law that protects management from being sued over predictions they make that don't come true. Note that every single financial report and PR ever issued by Cyclone highlights this. Trouble for them is the safe harbor law specifically excludes penny stock companies. Frankie is well aware all those bogus predictions of engine deliveries and production starts she has ever made are not predicted by safe harbor, but she keeps making them anyway.
But, the lawyers would only come into the picture to check the reports after they are written. Harry and Frankie are determined to keep misleading shareholders about Cyclone's financial position and the auditors will never sign off on that. For example, on their website the Shares Outstanding number is now two full years out of date. The "Leadership" is also mostly people who have been gone for two years.
And it's now five full years since that Shareholder Open House where Harry told everyone all the technological problems with the engine had been solved.
Harry and Frankie are going to prevent honest disclosure if it's the last thing they do.
Eventually the SEC will issue a stop trade order for failing to file financial reports. SEC, though, is understaffed and don't care much about tiny fish like Cyclone. That leaves Harry and Frankie to continue to swindle investors and customers.
Hi Tom. The licensees not only had to litigate any possible infringements on behalf of Cyclone, but they also had to develop the technology itself to create working engines. And if you have that capability already, why on earth pay money to Cyclone when it is so easy to get around Cyclone's patent?
The outfits that fell for that like Revgine with lawnmower engines, that first green energy outfit, the solar power company, Great Wall of China and so on were all startups by people with no relevant technical skills. They bought into Harry's bs about market-ready products. All they got were the generic blueprints of the envisioned Cyclone engine and it was up to them to make it work.
Cyclone exhibited at a Society of Automotive Engineers (SAE) engine trade show in 2006 and 2008 and got those awards for innovation, but got zero interest from real engine companies. I imagine the first question from every engineer who stopped by was "where is the test data?". And Harry would have to admit everything on display was painted kitchenware stuck together.
Remember Topline, the "global" autoparts maker that was going to mass produce WHE engines? I once looked them up. They had a place in Michigan with about 20 employees making aftermarket valvetrain parts, a place in Argentina with about 20 people rebuilding alternators, and were getting into the warehouse and distribution business. They were also going to engineer Cyclone engines for mass production. The last word was Topline supplied parts for four engines that Cyclone never produced pictures of and that are not known to have been run.
In addition to selling licenses for unproven technology, Cyclone's business plan was to sell engine development services to companies. No, really. Remember the picture of the Mark 5 test stand with all the cheap Harbor Freight multimeters duct-taped on as the data acquisition system? Cyclone builds looked like stuff done on Junkyard Wars.
Yep, big companies were going to throw money at Cyclone to bask in the glow of Harry Schoell's brilliance.
Raytheon had a very specific requirement of a small steam engine for the pet project of that one engineering manager. I believe Raytheon's objective was to learn everything Cyclone knew about steam engines to help them design their own. The two engines they bought were incidental. Raytheon had embedded engineers at Cyclone and someone anticipating just buying engines would never do that.
Agreed, any rational evaluation of the market for engines would show some niches where a good steam engine could sell, but nothing like the "one world one engine" delusion.
Of course, the whole trajectory of Cyclone has been nothing but an ego trip for Harry. What company would set a goal of building a marketable steam engine then spend the next twelve years and every penny they could raise on a water-lubricated six-cylinder radial configuration that has never been able to survive for more than minutes? How many unsuccessful tweaks to the same engine can you do and still not investigate alternate configurations that are known to work?
No, creating a viable business and creating value for customers and shareholders was never a priority for Cyclone. Pumping up the image of Harry Schoell, genius, is all it has ever been about.
Hey Tom, as always, spot on.
The trading activity is just MMs pushing shares back and forth to give the appearance of an active market. For most investors the commission to close out their positions exceeds the stock value so they just sit on what they have.
Cyclone engines run off the power of Harry Schoell's ego, no more, no less. He's a guy with no education who has always been looked down upon by people who know what they're doing. But he keeps going, playing the role of the "ingenious inventor" to prove them all wrong.
His only successful product that I could find was the 8-outboard drug runner boat. http://www.snopes.com/photos/boats/drugrunner.asp Crompton Marine of the UK commissioned the designs from Schoell Marine, who was only too happy to design bigger and bigger drug runner boats: http://www.schoellmarine.com/new.htm
Imagine getting a design commission requiring:
- Capable of carrying three tons of cargo
- Speed to outrun any Coast Guard or DEA vessel
- No quarters or facilities for crew or passengers
- Able to run at full speed in open ocean between Africa and England
- Minimal radar profile
and probably being paid with duffle bags of cash. A job a little too dodgy for Harry Schoell? Of course not.
This gig ended when the client ended up in prison.
Of all the other Harry Schoell inventions, well,
- Pulse-Drive Systems International eventually failed after "Many years of trial and error"
- The patented "Delta-Conic" hull turned out to offer a little more speed in calm water but gave boats poor handling in waves. Trojan boats dropped the design after a short production run.
- His biggest "innovations" (http://www.schoellmarine.com/innovations.htm) all went nowhere.
- His previous attempt at engine design, the "Schoell Rolling Radial" engine was never reported to have been seen running.
- His "revolutionary" SR-84 design for setting a speed record (sound familiar?) is now a lawn ornament at Disney. http://www.schoellmarine.com/sr84_files/sr84.htm
- And this one has to be the stupidest of all: http://www.schoellmarine.com/bio_files/bio.htm Putting a sail on the front of a power boat. You can see from the boat's wake that it is hardly moving under sail power. There is zero rudder effectiveness as it drifts down wind. The sail on the bow will keep the stern pointed into the wind like a weathervane so the driver's visibility will be 100% obscured of what he is going to run into. Why would anyone have spent a penny to build something just so plain dumb? I guess the answer is that Harry Schoell got a magazine article written about his "genius"...
Cyclone seems to be Harry's final attempt to prove his critics wrong. That's what's keeping it going.
Over on the steam car board Harry once described the bearing failure he was seeing. It was a textbook lack of lubrication failure but instead of letting the data show him the water lubrication wasn't working, Harry came up with his own theory that bearings are really tiny generators and the electricity they generate was destroying the bearings.
The Ohio State University engineers put in no uncertain terms that there is no known way to make water lubrication work in the Cyclone engine. Harry, having stripped the Mark 5 of all his other inventions beyond the spider bearing, kept water lubrication. The latest Mark 1 and Mark 3 designs also rely on water lubrication working.
He's quite determined to prove the rest of the world wrong, no matter how much investor and customer money he has to waste.
Cyclone's business plan has nothing to do with building working steam engines.
In this mission he and Frankie have no problem deceiving investors and customers about engine performance and function. All those engines that completed alpha and beta testing have never had their actual performance released. Beta testing at Cyclone must mean the engine turns under its own power for a few minutes once the mechanic gives it a push.
Even if some benefactor dropped in millions and a full staff of skilled people equipped with top notch facilities Cyclone would still make no progress. Harry Schoell would see to that by demanding his theories be vindicated above all else.
Cyclone spent about $7 million total in R&D and $14 million in General and Administrative. The only place the bulk of the latter could have ended up is Schoell Marine. I expect Harry and Frankie are quite comfortable and can easily afford to indulge Harry's hobby for as long as he wants.
The thousands of hours you mention would be to provide a real deliverable: a working prototype engine that has a chance to be developed into a commercial product. I agree that's a huge effort and would require genuine hard work. That's not what Harry is into, though. He's just tinkering like he has for the last 12 years. The goal is just to portray him as that "ingenious inventor".
He's never made any successful commercial products so there is no reason to expect him to do so now.
Oh, there are lots of reasons Harry and Frankie wouldn't want an honest assessment of their finances released.
For instance, here are the biggest assets listed in the Q3 2014 filing:
- Patents, trademarks and copyrights........$590,643
Many (most?) of the patents have lapsed due to nonpayment of renewal fees. The market value of what's left is questionable since nothing in the patents has ever been shown to work.
- Other assets.............................$559,518
This was stock in Q2Power, almost all of which was sold off according to Q2P's last filing, and the share price of the rest has tanked. It's worth peanuts now, but Harry and Frankie can't really object to reporting this fairly.
- Property and Equipment:
* Display equipment for trade shows................$9,648
* Leasehold improvements and furniture and fixtures...$93,922
* Equipment and computers..........................$427,478
Harry sold his building so the leasehold improvements are gone now. The lion's share of equipment and computers are the speed record car and boat, which are worth close to nothing since they were designed only for Cyclone engines, which don't work. Computers were on a 3 year depreciation schedule, so they would be gone as assets.
- Inventory, net.........................$439,941
This is engine parts and labor and overhead to make engine parts. Trouble is, they are parts for engines that never worked so the market value is as scrap metal.
- Cash.............................$306,320
is long gone.
- Accounts receivable..............$150,000
- Other receviables...............$150,000
It was never clear what these were, but after the Q2Power split Cyclone was owed a final payment of $150K. Chris Nelson claimed Cyclone violated the agreement and a Q2Power statement said that debt was cancelled.
So if you list the fair current value of all these things, Cyclone has almost zero in assets.
But, do you suppose Harry Schoell's ego would let all those engine parts be listed for scrap value? Or that his world record wannabe boat and car would be listed for what they would bring as restaurant decorations? That's the holdup, not the auditors.
Blaming toxic debt, Chris Nelson and derivatives is just a red herring. You can go back for years and see convertible notes, warrants, options and other stock hocus-pocus listed. Why can't those numbers just be updated? Sure, the depth of liabilities will be breathtaking, but that's no reason not to publish it.
There are thousands of public companies in the United States that get their financials audited and filed every quarter. Why is it that only Cyclone can't get their audit done?
Another question worth asking is why Cyclone switched from their past auditor to one in California even when they pay cash up front? Why wouldn't the previous auditor accept new work from Cyclone?
And, another oldie but goodie from Q3, 2014:
"Our R&D team is moving towards completion of the Mark 5 project in Quarter 1 of 2015."
"Cyclone also anticipates to receive initial royalty income from Whe Gen in early 2015 from the Mark 2 engine. This license is from sale of engines that produces power from static waste heat."
Hope they at least remember to change the dates when they cut and paste these predictions into the new reports.
That's awfully optimistic Chuck.
The Q2Power ship has taken on so much water already that you need a depth sounder and glass-bottom boat to see it.
The last report had about $2 million in liabilities, two senior debt defaults, no assets and no business other than that letter of intent last summer to consider buying a composting business.
OK, that's a little harsh. There were *lots* of assets. $91K was the value of the Cyclone license (wonder how that's working out?), $9K in prepaid expenses to Nelson's other company, $8K in software and equipment for Cyclone engine development and $3,342 in cash.
If Nelson had leased some land somewhere and charged tipping fees for dumping sewage sludge he would have been in the compost business by now. Apparently putting manure in piles and letting it rot is beyond his managerial acumen.
I'm waiting for the announcement of the reverse split and sale of the shell.
Plus, the stock didn't tank because of Chris Nelson, it tanked because of Harry Schoell's blatant incompetence.
Cyclone had squandered more than $25 million in investors' cash and had not been able to make a working STEAM ENGINE. You know, the kind of thing James Watt was getting rich on more than 230 YEARS ago.
And Watt did that back before the Internet, computers, calculators, electricity, machine tools, engineering schools and indoor plumbing.
Tom Swift once said Cyclone would have done better by going to country auctions, buying old steam engines and rebuilding them. He's right. At least some customers would have gotten something that worked.
But even after Ohio State University proved the Schoell spider bearing and water lubrication can't be made to work, Harry Schoell is still trying to make engines with his spider bearing and water lubrication work. They never have, don't now and never will work. Guaranteed continued failure.
Even so, the toxic debt isn't stopping filings.
Look through the last couple years of filings from Cyclone and you'll see lots of toxic debt and derivative costs reported.
All the auditors have to do is tally it up and report it on the balance sheets. The only things that would stop them from doing so would be if there are no records (unlikely), or a company desperate to keep shareholders from knowing just how bad the situation is.
For instance, a company that selectively doesn't update webpages so potential shareholders can't find out how badly the stock is diluted or how the management team consists of just two people, would be the kind that avoids honest reporting of financials.
I'm too lazy to look it up right now, but Cyclone had reported upping the number of authorized shares from 900 million to 2 billion. Then Frankie said in a notice to shareholders it had been upped again, but never said what the new number is. The reason given was to cover guarantees on convertible notes (i.e., toxic debt).
Probably billions of shares have been pledged to the creditors and derivative accounting would require a value be placed on that huge amount of stock, and that value be listed as a liability on the balance sheet. Harry and Frankie were probably shocked at just how badly underwater they are and are refusing to accept the auditor's reporting.
Yes, Chris Nelson presided over Cyclone's financial crash and burn, but it was Harry and Frankie squandering the money raised by the toxic debt while not delivering on any of their promises of working products that led to this cratering.
Oh Man, is that ever funny! "Further, they are developing an engine and give it a chance to see if it works"
After a decade of claiming having working engines, selling licenses for other companies to produce these working engines, claiming in filings that the engines were "production ready" and even telling shareholders in 2011 that all the technological problems have been "overcome", shareholders, whose wealth has decreased by more than $55 million in total, are now told they need to give Cyclone a chance to see if the engine even works!
And still not even a single honest word about what the real problems with the engines are. Although, to be fair, Harry Schoell has no clue about why the engines don't work so couldn't give a sensible answer even if he was forced to.
I'm curious about how well the Mark 5 actually worked in 2012. That's the year Cyclone spent hundreds of thousands to have that yellow car built while Harry was on the steam car board bragging about the Mark 5 being "a beast" and producing so much power on the dyno. And those predictions of the speed records they were going to set... Let's look again: https://archive.org/stream/Racecar_Engineering_2013_02#page/n19/mode/2up
Team Steam driver Nelson Hoyos hopes that he will be the man to take the steam driven land speed record from the British, who claimed it in 2009, back to the USA with a 200 mph run, and intends to extend that to 400 mph by the end of 2013.
The engine creates 200 bhp, which is not a great deal, but it generates 1100 ft/lbs of torque.
The team has another engine in the workshop, an increase in capacity to to 3-litres, produces 2650 ft/lbs of torque and can take the car beyond 400mph.
"The powerplant has tremendous efficiencies because multi-fuel capabilities, and the reason they have high efficiency is that they can operate at high temperatures" says its inventor, Harry Schoell
"The LSR is to prove that we have a viable product. People have to see it. We have generators running, but to see something like this has excitement to it. We also have a boat we are going to run to show the viability of the product."
Still trying to peddle the red herring about deferred salaries.
Let's look at the 2011 annual report, back when the WHE was listed as being in the Production Model stage and the Mark 5 was a "“Pre-production Beta” refers to a second generation prototype engine, which has undergone significant durability and performance testing at Cyclone’s facility. " http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=8545321
OPERATING EXPENSES
Advertising and promotion..............66,001
General and administrative.........2,628,835
Research and development...........983,276
and
NOTE 7 - RELATED PARTY TRANSACTIONS
A. LEASE ON FACILITIES
The Company leases a 6,000 square foot warehouse and office facility located at 601 NE 26 th Court in Pompano Beach, Florida. The lease, which is part of the Company’s Operations Agreement with Schoell Marine, provides for the Company to pay rent equal to the monthly mortgage payment on the building plus property taxes, rent, utilities and sales tax due on rent. Occupancy costs for the years ended December 31, 2011 and 2010 were $62,964 and $62,964, respectively.
Patent law?
Well, to qualify for a patent an idea only needs to show novelty and utility. Novelty means it hasn't been described before and is not obvious to those skilled in the art.
Utility nominally means it is useful, that is, the invention works. But the courts have interpreted this to mean that if it worked as described someone somewhere would find it useful.
See the issue there? The Patent Office doesn't make any determination on whether or not an invention might work (except for perpetual motion machines and cold fusion). They just ask if it works as the inventor describes, even if it only works 1% as well as described, would anyone anywhere find it useful?
This is a really key idea most people don't know. A patent says nothing at all about whether the invention actually works.
As a result all kinds of stupid ideas get patented then the unscrupulous tell potential investors the device works because it is patented.
The other factor at play here is the U.S. Patent Office is notoriously underfunded with inexperienced and overworked patent inspectors. The Europeans do a much better job. For instance, here's the report where they rejected the spider bearing patent: https://register.epo.org/documentView?number=US.2007016226.W&documentId=id00000007658137
Here's where they rejected the clearance volume valve application: https://register.epo.org/documentView?number=US.2007016224.W&documentId=id00000007658132
Here they rejected the valve controlled throttle mechanism: https://register.epo.org/documentView?number=US.2007016223.W&documentId=id00000022744090
Here they rejected the engine shroud heat exchanger: https://register.epo.org/documentView?number=US.2007016222.W&documentId=id00000007657761
Here they rejected the splitter valve: https://register.epo.org/documentView?number=US.2007016149.W&documentId=id00000022197150
Here they reject the preheater coil: https://register.epo.org/documentView?number=US.2007016083.W&documentId=id00000007657793
Here they reject the steam generator: https://register.epo.org/documentView?number=US.2007010586.W&documentId=id00000007335129
Here they reject the centrifugal condenser: https://register.epo.org/documentView?number=US.2007010586.W&documentId=id00000007335129
Here they reject the mini turbine generator: https://register.epo.org/documentView?number=US.2007018891.W&documentId=id00000022612205
All things the U.S. Patent Office let through. Cyclone didn't appeal any of these rejections, so must not have believed the European Patent Office was wrong to reject any of them.
And, as it has turned out, none of those ideas has been shown to work after 10 years and $25 million squandered on them.
That worse-than-useless spider bearing Harry insists on using even after Ohio State University showed it will never work, not only was rejected by the Europeans, but Cyclone let the U.S. Patent lapse in March 2015. Harry can't even rationalize clinging to that failed invention by claiming it is protected IP.
A total dead loss if there ever was one.
When Cyclone's financial statements listed the patents as an asset at the cost to obtain them, I wonder if they included the legal fees for all these rejected European patents, too? That's something the new auditors should check.
Oh, the auditors aren't the holdup.
In fact, I'm sure they would be happier than anyone to be done with Cyclone.
The problem is Harry and Frankie's lack of transparency. From the September update: http://www.marketwired.com/press-release/cyclone-power-technologies-receives-purchase-order-from-ibes-uae-corporation-update-otc-pink-cypw-2162700.htm
Cyclone is still working diligently on getting the financials brought up to date, audited and filed; there have been some unforeseen delays due to reporting requirements associated with derivatives accounting and inventory aging.
Oh dear. Poor, poor Fankie. President of a public company and forced to evade and dissemble by mere common shareholders...
Those spending figures (e.g., http://investorshub.advfn.com/boards/read_msg.aspx?message_id=126673388) were taken from the annual reports filed by Cyclone. It's easy to verify that. Those were also the cash amounts, not derivative losses.
The numbers for 2014 were incomplete, but the General and Administrative averaged close to $2 million per year. Frankie is trying ot spin those expenses as just the pay for her and Harry and the rent paid to Schoell Marine that they forgave.
Sorry Frankie, but that pay and rent can only account for 15% at the most of the G&A expenses. Where did the other 85% go? That 85% was still far more than spent on R&D.
Cyclone had rented the entire Schoell Marine building, even though Cyclone only used a small part of it and Schoell Marine continued in business using Cyclone's space. That's why all the photos of the place show boats, boat parts and equipment for working on boats. Cyclone was also paying about double market rent for the area. It's only in the more recent years that rent was forgiven. Schoell was paid shareholder cash for rent in most years.
Yes, Harry and Frankie forgave deferred salary, but look through all the statements and tally up all the stock options, warrants and grants issued to them over the years. Allow some time for this as there is an awful lot of ink in the reports devoted to it.
While the stock is worthless now, it wasn't always so and who knows how much those two got out of that.
But by far the biggest wealth transfer was through the "services agreement" between Cyclone and Schoell Marine. That's the only place the lion's share of that G&A could have ended up. And why the Schoell Marine guys working on boats all wore Cyclone shirts.
If Schoell Marine paid a guy $12/hr, how much did he charge Cyclone? $40? $50? $60? That could run up G&A pretty quickly.
Considering Cyclone was paying dear for the entire building and funneling most of its money to Schoell Marine, Schoell Marine must have had some extremely profitable years.
Cyclone didn't just put that cash in a pile and burn it. It must have gone somewhere and Schoell Marine is the only place it could have gone. Frankie could prove me wrong by going back and breaking down the one-line G&A category into components, but she won't. Just like she won't update Cyclone's website to say how many outstanding shares there are now or to delete all the people who no longer work there.
Frankie should ask Harry where her $2 million is.
Does Florida have a palimony law? She must know where the assets went.
Derivatives accounting in the reports is due to all the stock hocus-pocus. Options and warrants represent a future liability so the SEC makes companies estimate what those costs will be. Cyclone has also been using convertible notes - toxic debt - to raise money and then convert to new shares at up to 50% below market price. That dilutes the shares and erases shareholder wealth, so it's in the derivative expenses. Cyclone also eliminated the Class A Preferred shares some years ago and wiped out all those investors, creating more derivative losses.
The derivative losses wasn't cash being paid out, but the wealth shareholders lost due to management's manipulation of stock. Harry and Frankie could simplify the derivative accounting by calling a board meeting and cancelling all the outstanding warrants and options and giving back any stock they've taken in the last few years.
They could also simplify the inventory accounting by writing down the value of the inventory to something justifiable. For instance, a scrap yard in Pompano Beach is currently paying:
Stainless Steel (clean) $0.30 per pound
Cast Aluminum $0.40 per pound
Aluminum Rads Clean (Auto or AC coils) $0.32 per pound
They just have to separate the inventory by material and weigh it. It's all just pieces of engines Harry could never make work, so it's good for nothing but scrap. I'll bet, though, the holdup is that Harry refuses to value this junk realistically and the auditors refuse to write down his delusional valuation.
I wonder if Frankie is just as cranky with Harry. The guy has been making unkeepable promises for years and telling investors outright falsehoods about the state of their technology. After Ohio State University proved the spider bearing and water lubrication were technically unworkable, Harry has gone right back to those in the new Mark 1 and 3 engines. His decision guarantees Cyclone engines will never be marketable. The best they can hope for is to get some money by scamming new investors.
In the final analysis, though, that's all they've ever been good at so it's not surprising they would stay that course.