Florida companies face SEC probe

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“This scheme has proven extraordinarily lucrative for the stock distributor defendants. In approximately two years, they have generated more than $7 million in illegal profits,” the agency said in the court filing outlining its charges.

Revenge gets loan from Ohio county to make its next supercar

DOUG LeDUC - [e-mail]
Friday, 29 January 2010 01:00
http://www.fwbusiness.com/index.php?option=com_content&task=view&id=6149&Itemid=6

A Decatur-based specialty car designer whose stock transactions were cited in a Securities and Exchange Commission complaint filed last fall received a $300,000 loan in December from an Ohio county that hopes to see the company locate a factory there soon.

Much of the money that went into developing the supercar Revenge Designs took to the 2010 North American Auto Show in January came from the Henry County revolving loan fund. The loan also was to secure a building for Revenge’s installation and training center in Henry County and for management and marketing.

The loan agreement required Revenge to come up with $450,000 from lenders or investors, the company said in an Aug. 14 statement.

The Verde supercar, according to Revenge Designs’ Web site, has a top speed exceeding 200 miles per hour, 0-60 mph acceleration estimated at 3.5 seconds and a suggested retail price of $190,000. It will have three powertrain options: performance engines produced by Ford Motor Co. and General Motors Co., and a 400-horsepower, E85-fueled engine that gets 110 mpg and would be supplied by a Henry County company, Napoleon-based HP2g LLC.

HP2g also received funds from Henry County’s revolving loan fund: $50,000 to help it cover the cost of obtaining patents to protect its technology, Henry County Commissioner Rich Myers said. A lease was scheduled to begin in January for a building Revenge found in Napoleon for the marketing and management of its Verde supercar business, Myers said. In addition to establishing an installation center for HP2g engines, he said, Revenge could eventually begin producing the Verde supercar in Napoleon.

In its August statement, Revenge said a Henry County facility “would be the first of the Revenge Designs Certified Installation centers where this site would also house development and training for said centers along with a management and marketing department with an estimated 38 staff member(s) at this facility.”

“Once he gets completely ramped up, there might be 130 people,” Myers said. “That’s getting the production plant together and the cars put together here. The question is, how fast does it get up to that number?”

Peter Collorafi, president and CEO of Revenge, was less definite about the company’s plans in a recent interview with Business Weekly. He said the reception to the Verde supercar at the Detroit auto show was good and he would like to see it go into production this year.

“But as far as having a production facility, I’m still in nego tiations there.”

“It’s all about jobs,” he said. “Maybe by mid-February we’ll have signed a new lease. The location for our headquarters and plant is only a small one; we’ll make it a big one when this is fully developed.”

Collorafi also said the company plans to maintain its location in Decatur.

This is the third car Revenge Designs has proposed to build. It canceled earlier plans for its GTM-R supercar, saying it was not feasible to produce a vehicle that was not entirely designed in-house and required such a considerable amount of reconstruction and design.

Revenge also said on its Web site last year it would develop a four-door sedan version of the Verde before the supercar, because “the world, needs a car that gives the public what it really wants; a high performance, ultra-high efficiency, sleek, seductive multi-passenger car.”

The engine for the sedan was also to be supplied by HP2g.

On its Web site, HP2g said it has married an electric motor operating on a pulse basis to a V8 engine, which “can transition from running on all eight cylinders down to firing on just one.”

The engine was invented by Douglas Pelmear, the company’s president and chief executive officer. The company’s arrangement to supply Revenge was announced last April. HP2g would not respond to questions about the company or the engine.

“HP2g LLC and Revenge will execute a Master Installation Agreement making Revenge the sole and exclusive Certified Installation Centers in the United States for the installation of HP2g engines for aftermarket purchasers,” Revenge said in a statement issued last April.

Four months later, Revenge announced a memorandum of understanding between the company and the Henry County revolving loan fund review committee. The committee hoped to create jobs in Napoleon both through the growth of HP2g and by attracting Revenge operations there.

“There is going to be a level of training for people who would be franchisees to install those (HP2g) motors. If they ran into any kind of snags, Doug (Pelmear) would be close by. It was an advantage,” Myers said in a phone interview.

Pelmear, who has a drag-racing background, has a working prototype of the HP2g, Myers said. “He’s got it in his ’87 Mustang and has driven it to Las Vegas. It averaged 137 miles per gallon. He filled it up once in Oklahoma City.”

Myers said the HP2g engine has passed U.S. Environmental Protection Agency testing. But Collorafi said the engine also must pass some durability tests and other validations before it can be used in production, and that could take until the end of this year or early next year.

Myers said he has been working on the economic development project in his capacity as a county commissioner with the Community Improvement Association of Henry County and with Collorafi.

“Now that we’ve got the concept car together, a lot of it is marketing,” he said.

Revenge’s stock is traded on the pink sheets. It is not a defendant in the case the SEC filed Sept. 24 in the U.S. District Court for the Middle District of Florida, but some of the payments it made in stock to reduce or eliminate debt came under scrutiny in the case.

A lot of its shares were sold by the purchasers “to the investing public without adhering to the registration requirements,” the SEC said. “Because no registration statements were filed … prospective investors never received important information to which they were legally entitled.”

That information included “the company’s audited financial statements, information about the management’s business history, the dilution impact a distribution would have on existing shareholders and the description of principal risks that could arise and affect the value of the company’s shares.”

The SEC said defendants in the case who distributed the stock received it as payment for debt. It said the defendants also sold stock without registration statements in three other companies with shares traded on the over-the-counter bulletin board, including Fort Wayne-based Enzyme Environmental Solutions. That company and its CEO, Jared Hochstedler, were among the named defendants.

“This scheme has proven extraordinarily lucrative for the stock distributor defendants. In approximately two years, they have generated more than $7 million in illegal profits,” the agency said in the court filing outlining its charges.

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