ELECTRIC CARS:

Struggling X Prize winner to buy maker of gas-powered 3 wheelers

The electric carmaker that won the $2.5 million automotive X Prize last year has announced plans to buy a company that makes three-wheeled cars that run on compressed natural gas.

Li-Ion Motors Corp., a struggling, nine-year-old company traded in the penny-stock arena, said Monday that it plans to acquire Red Roadster Corp.

"We are very excited about this first acquisition by LMCO in the area of green, energy-efficient transportation technology," said Li-Ion Motors President Stacey Fling in a statement from the companies, datelined Bend, Ore. "We plan to continue effecting acquisitions in the transportation industry that are complementary to, and synergistic with, the manufacturing of alternative energy vehicles."

Red Roadster has no website, but a company release states that it is a privately held Nevada corporation that created and sells a three-wheel, natural gas-powered roadster.

Red Roadster was incorporated in Nevada in May, according to Nevada secretary of state records. It is closely related to a company called Eco-Fueler Corp.

"Eco-Fueler Corporation ... will be transferring all of its assets to a newly formed Nevada Corporation, Red Roadster Corporation," Red Roadster CEO Jerry Hendricks wrote in an email response today to questions about the deal. "Once the asset transfer has been complete, Red Roadster will merge with Li-Ion Corporation."

Using three wheels rather than four allowed the roadster's creator, John Green, to get the vehicle classified as a motorcycle. That allowed him to sidestep the billions of dollars in testing required for the research and development of new automobiles, according to a short item accompanying a photograph in the March 2007 edition of Vanity Fair.

Green told the Pittsburgh Business Times earlier this year that Eco-Fueler has made a handful of cars in a small shop in Oregon. The paper reported Green was negotiating with local development officials to find a site for a commercial manufacturing facility. But he was struggling to line up the the $30 million to $55 million needed to open a plant.

Before that, Eco-Fueler tried to secure a facility in Tennessee, but the effort faded. In 2005 the company sought $20 million in private financing, according to a filing with the Securities and Exchange Commission.

Li-Ion Motors was rejected for a $288 million loan guarantee from the Advanced Technology Vehicle Manufacturing Incentive Program (ATVMIP) last year but has continued to tout plans for a manufacturing facility in North Carolina that is dependent on federal assistance (Greenwire, Sept. 20).

Red Roadster had an agreement in August to be acquired by Augrid Global Holdings Corp., according to a statement from the two companies. Nothing in this week's release explains what happened to the August deal.

Li-Ion Motors is headquartered in Las Vegas, but its main facility is in Mooresville, N.C. -- nicknamed "Race City, USA" -- in the heart of NASCAR country.

The company has not mass-produced cars but has been in the business of converting gasoline-burning cars into electric vehicles powered by lithium-ion batteries. The company has said in regulatory filings that it has derived "minimal revenues" from sales.

Before winning the X Prize, Li-ion was dogged by allegations of fraud, investigations by securities regulators and complaints from customers (Greenwire, Oct. 27, 2010). The company's financial losses and substantial debt raised questions about whether the company met a key X Prize requirement -- the ability to mass-produce its winning car.

Days before the Sept. 16, 2010, X Prize awards ceremony, Li-Ion's trading was halted by Canadian securities regulators who alleged it broke a rule targeted at flagging companies that engage in "abusive practices" in the penny-stock market. The company appealed. But the case is on hold, according to a spokesman for the British Columbia Securities Commission, awaiting action by Li-Ion.

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