Opinions about Scuderi Group's misuse of funds

[Nick]

Andersen.

[Phil Robichaud]

Guest has a good point.

The only one with any information about the investors is the company, or, if someone is in a club, the club managers. The only way those bottom feeder attorneys could get access to that information is if it was STOLEN! Any information found out at discovery (which of course hasn't started yet) cannot be used by the attorneys to solicit business.

And speaking of discovery, private companies in this sort of action have had their attorneys subpoena all personal records of any and all parties who are in the class action lawsuit or have signed on to be a member of the class, including, for example, 10 years of tax returns, verification of all income and assets (private and business)of each investor and their spouses, all private emails for the years they have had the investment, real estate and other stock holdings, etc. All of this information could eventually become public.

That should be fun! But for me, no thanks!

[Sallie Nicoletta Kron]

Francz & Goldie, CPAs, LLP
Offices in New Jersey and Germany

[Paul]

Nick-You still haven't told us what your motives are?? Your running scared, I can sense it, one last attempt before disappearing into oblivion. Maybe the class action law suit has weaken considerable and now your trying to recruit more investors?? Is your plan failing, you only recently showed up with your slanderous comments? Unfortunately your credibility sucks, your a non investor, trying to reek havoc with real investors for your own deviant gains. It's as simple as that!

[Nick]

@ Phil

Who are the auditors?

[Nick]

@ Sallie

Nice try. I have been saying "Auditor" not accountant! Like to get them through an IPO?

[Guest]

Ummmm.......wow. An auditor IS an accountant. The knowledge level on this board is very low!

[Nick]

Yes auditors are actually accountants and hopefully CPA's. but not just any CPA or Accounting firm is qualified to perform in audit AND be able to issue an Unqualified Opinion! Duh! Yes many people on this board ARE clueless.

[jay]

I understand that many on this forum find the arguments put forth here to be very entertaining, and that defending one's point of view can be very personal.  But it would do all on here well to review the laws pertaining to divulging sensitive corporate materials on a public web forum.  That being said, I will be making this my second and final entry in the hopes that it may shed a bit of light on some dark areas... Research and Perspective.
I know that venture capital/angel investing can be quite daunting, and for many of you this is your first time in this realm.  Institutional investors not only will have multiple investments maturing simultaneously, but they'll also be using capital from large corporate reserves.  As a result, the money invested will usually not affect their everyday lives, thus making it much easier to maintain an emotional disconnect from their investments.  Whereas the small investor will most likely be using personal funds, where any possible loss will be much more difficult to bear.  This makes maintaining an emotional disconnect much more difficult.  Unfortunately, the risks are the same for either scenario, and just as in a casino, any funds invested should be put forth with an understanding that a total loss is quite a real possibility.  Start-ups have a very low rate of success (failure rate between 99.6% and 90% according to Y Combinator), thus making it important to diversify, rather than pin all your hopes of recouping some ROI on one investment.
I mentioned Research earlier because it seems that most of the complaints and concerns are centered around mistakes that are actually quite common in the corporate world.  As the SEC investigation points out, there were no claims of illicit business practices or questions about the validity of the technology.  There were errors made regarding reporting status and proper documentation of financial expenditures.  The reasons for those expenditures was not their wrong doing, but rather the lack of full documentation of them, as is required by an SEC reporting company. A bit of research into some business reference volumes might help to clear most of that up and ease your concerns.  And I don't mean a quick Google search and reading the first hit on the list.  Thorough research will also help to clarify the standard methods used in bringing a new engine from inception to market.  The direction chosen by SG is the same path followed by their competitors, as well as the big OEMs like GM and Ford.  All rely mostly on computer simulations and dynometer data, and many actually use the very same research lab; SwRI. And aside from Mazada's limited adoption of the Wankel engine, there is no precedent with which to gauge SG's rate of progress in terms of OEM licensing.  Which leads me to the other keyword; Perspective...
Many of you are concerned about a lack of perceived progress in relation to the amount of funding SG has acquired.  At face value $80 million seems like quite a large sum to have at their disposal and still have no OEM licenses.  But in actuality, this puts SG right on par with their biggest competitors... Ecomotors, funded by Bill Gates and Vinod Khosla, has pulled in $66 Million.  Achates Power has pulled in over $90 Million. Each have a joint development deal that could lead to a full license if their respective tech's performance comes to fruition. This is not that dissimilar to SG's joint development with HINO. And neither company has made as much progress as SG in the direction of distributed generation. This is no knock against SG's competition, but rather just a clear delineation that bringing a new tech into a highly risk-averse industry is quite time consuming and a major uphill battle.  Smaller budget designers like Lonny Doyle also face the same difficulties in trying to break into market.  Funding may make the R & D go a bit easier, but it doesn't make OEMs any more eager to fork over great sums of money and change their incumbent powerplants after decades of success and profits with them.
Perspective can also be gained by looking at the tumultuous rise and fall of biofuel producer KiOR. Amassing large sums of cash funding is no guarantee that the business will make the transition from concept to commercial success. No one knows this better than Vinod Khosla and Bill Gates, who have invested nearly $300 Million in the company. Since its start in 2007, KiOR has accrued a debt of over $250 Million (and that's after a gracious $39 Million write-off) and has spent over $629 Million, and not once have they ever come close to the production rate or efficiency that was achieved at their demonstration plant. This wasn't due to illicit business practices or lack of proper leadership. This is a prime example of how the best intentions and loads of funding still cannot predict, or sometimes, overcome the hurdles that will pop up in the path of a start-up. Are shareholders calling for CEO Fred Cannon's head? No. Are Khosla or Gates demanding their capital back or trash talking the company because things didn't pan out as predicted? No. Truth be told, even the largest investors usually have no say in the operations of the company, they can merely decide whether or not to continue providing funds. Management competency is assessed PRIOR to investing. After investing you play the cards you bought into, good or bad. Khosla and Gates know the only hope they have to recoup some ROI is to stay the course and support the business until all available options are exhausted. They receive the same types of Updates that every other investor receives and they all contain the same positive attitude and forward-looking statements. They understand that these are not promises, but rather best-effort predictions based on the current data available. Sometimes they're accurate, most times they're not.
Speaking of Fred Cannon, last year he made $341,250 in salary. That's about the mean salary for CEOs, which a great deal more than Sal or any other Scuderi is making. It's that big difference in salary that prohibits the quick-fix many of you have called for, which is to replace management. Doing so would require SG to pay the new team what they're positions would garner at any other company. That would place an enormous financial burden on an already cash-strapped company.
But at the end of the day, I'm still a realist. I understand fully the frustration and angst that the waiting game can cause an investor. In fact, a few early Facebook investors were so tired of waiting for Mark Zuckerberg to take them public, that they helped usher in the age of a new second market for the buying and selling of private shares so that they could finally realize some ROI. Secondmarket.com and Sharespost.com utilized the exchange of shares of private companies like Facebook to great success, and they are viable exits for any SG investor tired of waiting for a public launch, as well as newcomer Angel.co. Remember, company management doesn't owe it's investors a speedy IPO. The health of the company is owed a properly timed IPO. Truth be told, if Zuckerberg wasn't legally obligated to take Facebook public, his company would still be private. That same attitude is shared by many CEOs. But SG has made it clear from day one that their intention is to take the company public as soon as it's fiscally reasonable. To do so on any other terms would be to risk a failed IPO or jeopardise the company's stability. So if you put all this together you're left with a few basic options... 1.) Support the company 2.) Ask for a buyout from the SG 3.) Utilize Secondmarket.com, Sharespost.com, or Angel.co to find a buyer for your units. And if your intention is to hold your units, then obviously publicly harming the company you own shares in is tantamount to shooting yourself in the foot. No one says you have to be pleased with the the timeframe or progress, but if realizing a return on your investment is truly what you want, then support or neutrality are the only way you can help your own cause.

[Paul]

Excellent post Jay!

[Nick]

4. Join the Class action lawsuit and force the SG to produce the audited financials required by law.

[GUEST]

"INVESTORS BEWARE" Do not listen to a word Nick has to say, he is not an investor, he can care less about you or your investment.

[Guest]

The SG is under no requirement at this time to produce audited financials, nor would it be if the class action somehow prevailed. The only remedy IF the class action were to prevail ( and that's a BIG if, as the case has been consistently whittled down even before discovery and a trial) is that a relatively small group of investors could get their initial investment back. I also believe, per the law, that club members especially will not end up being in this group. Of course, another event would happen IF this case were to prevail - the law firm handling the case would receive approximately 35-45% of the funds of that initial investment from each individual who signed on. This fact makes it easy to understand if this law firm is aggressive in attempting people to sign on. This fact may also explain why only one investor has signed on. Perhaps the previous poster is indeed that individual who is unfortunately and obviously ignorant of the law.

The class action only serves to distract and incur costs for the company and its investors ( which perhaps was the sole purpose behind what one must assume was nefarious reasons to attempt to destroy the company).

[gman]

Thank you Jay for your post.

Thanks also to Guest regarding the audited financials.

[Admin]

There is a new section of the forum that explains some changes I've made to this board and some suggestions for future posts.

Thanks,
Lonny