The real reason Elio Motors wanted Shreveport's GM Facility: Valuable Collateral
New insight on the valuable collateral Shreveport's former General Motors plant provided to controversial automaker Elio Motors.
Sure, the company promised the facility would be used to provide 15-hundred jobs and build fuel efficient cars capable of 84 miles per gallon, but as KTBS-3 Investigates found out, the facility was used to secure funds to bankroll the car makers pockets.
President and founder, Paul Elio spoke exclusively with KTBS-3. Elio was very open, addressing his critics, saying his company "is not a fraud" and he still insists, despite the company's 123 million accumulated deficit - and ZERO profit - Elio Motors will still build cars in Shreveport. Paul Elio says, "he just needs to raise more money."
In a KTBS-3 investigative report, our team took a critical look at the company's most recent Securities and Exchange filings and followed a money trail that revealed the role the Shreveport facility played in generating millions of cash for the troubled company.
We uncover, how loans, secured by the equipment inside the facility, was used to foot Elio Motor's bills, but not necessarily to build cars.
Instead, the paper trail shows money going back and forth between Elio directors and shareholders and according to experts, its perfectly legal.
Paul Elio, President and founder of the company, says because of a non-disclosure agreement, he cannot disclose who purchased the equipment inside the Shreveport facility, but financial records reveal Elio Motors made a 4 million dollar profit selling it.
KTBS-3 News asked Paul Elio, who were the buyers and did he have a relationship with potential buyers before leasing the Shreveport facility?
Elio responded, "Elio Motors owns all the equipment inside. The equipment is Elio Motors. The building is Shreveport Business Park and we lease it back. Equipment sales they have been sold to a variety of folks," said Elio. "I really don't know the details on it." Elio Motors could also not reveal how much they paid for the equipment inside the Shreveport facility.
But SEC documents show on February 8th, 2013, a 9.8 million dollar loan was secured based the acquisition of machinery and equipment inside the former GM facility. It was then sold to Stuart Lichter, one of Elio Motors directors and majority shareholder, to decrease its interest from 12 to 10 percent. By the way, Lichter also has an affiliation with Shreveport Business Park, which leased Elio the former GM facility.
On March 3rd, 2013, another 23 million dollar "promissory note" was entered with Racer Trust, secured by a lien on the manufacturing machinery and equipment held in Shreveport.
Both loans are now in default with interest rates soaring to 18 percent.
To pay the debt, Elio secured "convertible notes" and awarded them to, quote, "multiple individuals and trusts".
In return, Elio Motors received an advance of almost 2.5 million from an undisclosed director and stockholder in the company. But instead of a cash transaction, Elio received a convertible unsecured note, with an agreement Elio's director and shareholder could sell up to 2,500 shares, PER WEEK, as long as the price per share was above $19.50.
By the year 2014, more promissory notes were made, secured by equipment inside the former GM plant, issued to an undisclosed director and stockholder of the company. Those transactions included:
June 19, 2014 for 600-thousand dollars.
March 6, 2014 for another 1 million dollars.
May 30, 2014 another promissory note for 300-thousand dollars.
And by September 30th, 2016, SEC filings show Elio Motors received additional advances for 3 million dollars.
To date Elio reports it has spent $59 million developing 5 prototype cars, but has accrued over 44 million in loans - all backed and secured by the equipment inside the Shreveport facility - where as of September 2016, 4 million dollars of the equipment was sold. Another 1 million plus is expected to be sold prior to production.
So the big question now, what has Shreveport received in turn? According to SEC documents, another deal that defers rent payment.
Back in November 2016, Elio entered into a lease amendment that converted 5.5 million dollars of accrued rent, taxes, insurance into shares of preferred stock that delays payment until Elio begins building the three-wheel vehicles, which has been pushed back until 2018.
KTBS-3 news asked Paul Elio about his critics, that claim his company is a fraud. Paul Elio did not mince words.
"I have patience for folks who are skeptical because what we are doing is hard and everyone has a different level of skepticism. But people that say, 'fraud', I have no patience for. If you look at what we've done ( laughs) we've developed our own engines," said Elio.
He then added, "we have achieved milestone after milestone and clearly we are gonna bulld this vehicle. You cannot deny that this is an honest sincere attempt to create something very special."
KTBS-3 News spoke to financial experts who say how Elio has used loans and financing to pay off debt to Elio directors and shareholders is completely legal. But Elio Motors could have other legal issues, particularly with the Louisiana Motor Vehicle Commission.
Last month, Elio did not attend a meeting with Louisiana officials about possible state law violations regarding the sale of reservations for its cars. The LMVC will meet again in early March. It is unknown if Elio will be asked to show up for the full public commission hearing.
As for those with refundable reservations. Elio says to receive a refund of refundable reservations, the customer simply has to email Elio Motor's directly to request a refund. The refundable reservations are 100% refundable, no fee, and is held in a separate account. The refundable reservations come in four levels: $100, $250, $500, $1000.
According to Elio Motors, those with non-refundable reservations, must abide by terms and conditions made during the reservations process, or contact Elio Motors directly. All nonrefundable reservations come in four levels: $100, $250, $500 and $1000.
Elio Motors reported to the SEC, if substantial funding is not acquired, the company may cease operations altogether or scale back.
A representative for Elio Motors says the company is relying on a Department of Energy Loan and Federal credits for its cars fuel efficiency. The company also stated:
"The DOE loan (ATVM) and CAFÉ are part of our overall funding strategy but not the sole path to our success. We have several paths that we are working concurrently as we move toward production. There is no deadline per se, as funding is a daily focus for the team.
As for the DOE, we have reached out to the new administration, as we did with the prior administration, to share the Elio story about bringing manufacturing back to the US and reducing the deficit and reliance on foreign oil... and most importantly, creating jobs, 1500, for the people of Caddo Parish."
Paul Elio also states Elio's plan to build cars in Shreveport has not wavered and Elio Motors is aware of of buyers suing to get their reservation money back, as well as a petition to file a class action against the company.
"The consumer has a choice and either picks an All In non-refundable or Want In refundable reservation, depending on what benefits they want to receive as each is clear on the benefits and risk," replied representatives for Elio Motors.