SEC Filing: Elio Motors Millions in Debt With No Way Out?

Over the past few years, Elio Motors has burned through more than one hundred million dollars ($100,000,000) and produced five three-wheeled prototypes. As of September 30th, the company reported a working capital deficit of more than $25 million and expressed doubts about its ability to continue operating as a going concern. In their own words:

We have experienced recurring net losses from operations, which losses have caused an accumulated deficit of $123,212,432 as of September 30, 2016. In addition, we have a working capital deficit of $25,769,911 as of September 30, 2016. We had a net loss of $34,787,800 and $13,873,656 for the nine months ended September 30, 2016 and 2015, respectively. These factors, among others, raise substantial doubt about our ability to continue as a going concern. If we are unable to continue to obtain financing to meet our working capital requirements, we may have to curtail our business sharply or cease operations altogether. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis to retain our current financing, to obtain additional financing, and, ultimately, to attain profitability. Should any of these events not occur, we will be adversely affected and we may have to cease operations.

It should be obvious to anyone that a company with a $25 million annual burn rate and zero revenue can’t last forever. And that’s especially true for a company like Elio Motors, which seems to have huge logistical issues it has yet to overcome– to say nothing of substantial R&D issues, staffing issues, tooling issues, etc.- before it can even begin to sell its
innovativefamiliar three-wheeler. Still, selling Elios isn’t the only potential source of revenue for the company.

As Paul Elio himself told me once a few years ago, the trikes themselves aren’t going to be huge money-makers for the company. They’re intended to be profitable, sure- but the real profits will come from selling CAFE credits to the Big 3. I see two problems here. The first is wholly understood by the company, and is outlined in their September SEC filing:

According to the estimated fuel economy of the Elio, it is expected that we could be well positioned to earn a substantial number of credits, from which we could generate extensive future revenues through the sale and transfer of these credits to other auto industry manufacturers. We have received indications from auto industry manufacturers that they would purchase our credits upon confirmation that we can participate in the CAFE program. Currently, we do not qualify for participation in the CAFE program, since the Elio is not an automobile. We have been working with members of Congress and with the former acting head of the NHTSA to permit participation in the program by autocycles.

The other big problem potentially facing Elio is going to come from a source that (if my take on the political leanings of the Elio subreddit is accurate) might come as a bit of a surprise to many of Elio Motors’ biggest fans: President Donald J. Trump.

Why would Trump’s election pose an existential threat to Elio Motors? Because Trump’s appointment of Scott Pruitt as the head of the EPA will very likely try to do away with many of today’s CAFE requirements. And, with the dismantling of those CAFE requirements will come a resulting drop in the value of credits. As in, they will be worthless.

Without credits to sell, Elio’s projections start to fall apart. So, then, might Elio Motors- but, for real. That’s potentially bad news for the tens of thousands of people who put down hard-earned money for one. Worse yet for the thousands more hoping that the company will bring much-needed jobs to Louisiana.

Source: United States Securities and Exchange Commission; backed up on Gas 2.