AAC / Phalanx VTOL Projects

[Grey Havoc]

http://www.sec.gov/litigation/opinions/34-43235.htm

I'd hate to be tossed in the slammer with a name like Ponce.

From the linked document (an SEC appeal brief [Admin. Proc. File No. 3-8944] regarding the dismissal of proceedings against Ponce by an administrative law judge):

B. Ponce Improperly Certified Financial Statements that Falsely Capitalized Tooling and Prototype Costs.

Ponce also improperly treated tooling and prototype costs as assets. As research and development costs, they should have been expensed under FAS 2, which states: "All research and development costs encompassed by this Statement shall be charged to expense when incurred." AAC's in-house accountant, Batista, initially recorded AAC's tooling costs as expenditures in his trial balance sheets for AAC's quarterly reports on Form 10-Q. Batista provided the trial balances to Ponce. For every quarter for four years, Ponce changed Batista's entries to capitalize tooling costs. Batista then included Ponce's changes in the Forms 10-Q filed with the Commission. Ponce testified that AAC's Board of Directors had resolved to treat tooling costs as assets because the tooling would be used for the manufacture of the aircraft.

Ponce himself initially treated prototype costs for the Penetrator as expenses but subsequently included the Penetrator in inventory when Moody pressured him to do so. In its 1991 annual report on Form 10-K, AAC reported that it had produced a single "proof of concept" version of the Penetrator that would be disassembled and analyzed at the completion of flight testing,expected to be in August 1992. 32 Moody testified that flight tests on the Penetrator did not begin until December 1991. The prototype was never sold.

These tooling and prototype costs fell within the types of matters considered to be research and development. FAS 2 defines research and development as follows:

Research is planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service . . . or a new process or technique . . . or in bringing about a significant improvement to an existing product or process.

Development is that translation of research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process. . . . It includes the conceptual formulation, design, and testing of product alternatives, construction of prototypes, and operation of pilot plants. It does not include routine or periodic alterations to existing products, production lines, manufacturing processes, and other on-going operations even though those alterations may represent improvements . . . .

FAS 2, Paragraph 9 also provides examples of activities that typically would be included in research and development. Among these examples are:

d. Testing in search for or evaluation of product or process alternatives.

e. Modification of the formulation or design of a product or process.

f. Design, construction, and testing of preproduction prototypes and models.

g. Design of tools, jigs, molds and dies involving new technology.

* * *

i. Engineering activity required to advance the design of a product to the point that it meets specific functional and economic requirements and is ready for manufacture.

The tools and molds for the aircraft exteriors should have been treated as research and development costs under FAS 2 Paragraph 9.g. None of AAC's aircraft included in the License, for which tooling was developed, advanced beyond the research and development stage.

The prototype of the Penetrator, an aircraft not included in the License, involved a unique new exterior that was replacing that of an old aircraft. The Penetrator would have had to undergo flight testing before it could be commercially manufactured. Moody's assertion that no "new" technology was involved because he was simply making cosmetic changes to an existing aircraft is not persuasive. 33 The work on the prototype did not constitute "routine or on-going efforts to improve an existing product" under FAS Paragraph 10.d. A prototype that must be changed because it does not meet commercial marketability expectations is considered research and development. 34 Here, the prototype was originally designed to meet the needs of the United States Army and configured to resemble a Soviet aircraft. AAC had to reconfigure the prototype to resemble a United States aircraft design for potential export to Taiwan and to complete flight testing.

Our conclusion is confirmed by AAC's 1991 annual report on Form 10-K, which states that after "engineering modifications

. . . the Company will be in a position to manufacture . . . upon receipt of a firm contract. There can be no assurance of the ability of the Company to successfully complete the engineering process or to commence production of the prototype." Clearly, the aircraft was still in development. The prototype was not, as Ponce suggests, properly classified as inventory. It was not "held for sale in the ordinary course of business or . . . in process of production for such sale." 35

Ponce also argues that the tools and prototype had "alternative future uses," and were therefore not research and development. 36 These potential uses are not documented in the work papers. 37 Moreover, it is not enough to argue that the tools might have been usable in the future, if the aircraft designs ever were developed sufficiently to be commercially produced. 38 While all research and development arguably would have such an alternative future use in production if the product were commercially developed, this potential does not satisfy

FAS 2. 39 In any event, the prototype clearly did not have an "alternative future use" because AAC planned to disassemble it after flight testing. Preproduction prototype costs for the Penetrator fall squarely into FAS 2, Paragraph 9.f.

 

[Dsadow]

Hi Folks,
While going trough my collection of aviation files, I came across these images. I don't remember where or how I got them, but I also have a 3-view drawing showing weights and CG placement. Now, if I only can scan it...it's BIG... enjoy

 

[Orionblamblam]

if I only can scan it...it's BIG... enjoy

If you can scan it in chunks, several of us will race to stitch it together.

 

[Stargazer]

Topics merged.

Do we know what movie it was, or is it still a mystery?

 

[hesham]

Hi,


the Phalanx Dragon mock-up.


http://www.flightglobal.com/pdfarchive/view/1986/1986%20-%203290.html

 

[Dsadow]

I promised to post these a long time ago, but I misplaced them and just refound them on Sunday cleaning the garage. So, Here they are !! I hope they are worth the wait. One question though,Does anyone think that these craft would have actually flown ??

 

[martinbayer]

I always wondered whether there was some connection to the IML Addax-S http://www.secretprojects.co.uk/forum/index.php/topic,235.0.html (or whether the designers merely coincidentally drank from the same batch of Kool-Aid).

Martin

 

[madgepetto]

Hello Folks..
I had the dubious honor of building the first 3D models in '84 for Phalanx to take to the Paris Airshow in 1985, still have some of their PR stuff and photos of the build-up, as well as a later version of the aircraft.I will scan and post if you like, there can be no doubt by now that the whole thing was a scam of epic proportions.All I know is that they paid my fee for making the models, and when I learned that Gucci family money was involved I declined any further work.


I will say that there were some very capable people involved in making the full scale mock-up and tool, and the guy in charge, Bill Moody, was a very nice fellow..charming, but undoubtedly full of steam.


Bluesman

 

[Orionblamblam]

I will scan and post if you like,

Yes, indeed!

 

[Dsadow]

Yes,by all means scan them !! I would like to see more of this design.

 

[Stargazer]

I will scan and post if you like, there can be no doubt by now that the whole thing was a scam of epic proportions.

Please do! And welcome to SPF, madgepetto.

 

[madgepetto]

Well...came into the shop early today and dug around, found the old photo album, my God it's a shock to see this stuff after all this time, I will scan today and post some pics.These are all old-school photos, so the resolution is not what we've come to expect, but I think you will ind them interesting.More soon!


Paul

 

[jsport]

wow, thanks for posting in advance madgepetto.

 

[madgepetto]

Here we are, these are pics of the first model I did for Phalanx, it was constructed of jelutong wood , syntactic foam and a fair amount of grp and bondo...this was the MP-18 Dragon for the Paris show, had to come apart at the wing joins for transport.Once in primer it was painted a high gloss pearlescent white , then red and blue trim was applied as well as the canopy.

 

[madgepetto]

More pictures of the MP-18 model...after the Paris Air Show it was returned to me to have a mold made of of it, and a second model was made up in USMC markings, then another in Israeli paint. As you can imagine, making grp tools off of the model was a pretty sporty deal..I had a friend from my Northrop model shop days do the final molds, he went on to work at Scaled Composites as I recall.

 

[madgepetto]

Still more!The full scale mock up was actually quite beautifully made, I recall the plan was to pull master tools from it for composite molding of skins, but I moved from the Los Angeles area at that time so never went back to the Phalanx shop in Long Beach.This is the only picture I could dig up of the mock up...having been at Northrop doing this kind of thing and then in the wind tunnel shop you can imagine my amusement at some of the claims made for the Dragon project.


Some time later I was contacted to do another model of a smaller Phalanx project, the MP-14, these 3 pictures are all I have, what a young puppy I was !My hair is all silver these days....


Made this one in my shop up in Washington State, and that was it for my association with Phalanx. Nowadays I do all sorts of model making, and produce resin kits of aircraft and race cars .

You can see my work at www.fishermodels.com if you're curious.
35 years of this stuff...


I hope this is of interest, I'm sure there are a few others lurking about who were invlolved.


Best,
Paul Fisher a.k.a. Mad Gepetto

 

[Stargazer]

Wonderful set of photos, Paul! Thank you so much for sharing.

When you allude to the fact that Phalanx's claims were ludicrous, do you imply that the Phalanx company was a smokescreen set up by con men trying to grab a lot of money for a project that they knew would never take off? Or simply that they were an enthusiastic bunch of guys convinced about what they were doing but who were ill-advised or failed to have a realistic approach to it?

 

[hesham]

Thank you Madgepetto,


and from 1980s,I know only the MP-15 and MP-18,it is the first time to
see MP-14.

 

[madgepetto]

Stargazer...my take on the situation is that it was a combination of both...I think a couple of very enthusiastic dreamers and some very motivated , skilled crafts people got caught up with a few folks in very expensive suits that saw an opportunity to solicit a lot of money for something that had no hope of coming to fruition. Not the first time that's happened in aviation.


This is why I have been reticent about posting about my experience with Phalanx, it's very hard to separate the two. As I have said, it was obvious to me from the get-go that the thing would not fly but my business was and is making models for people and I was paid in full for everything I did for them, no foul there, I just heard about many of the crew there being let go without pay through the grapevine later on.


They appeared to be taking money for the company from the kind of people that could get you killed if things went sour, or maybe I just watched too much Miami Vice back then. At any rate, I enjoyed making the models.


Paul

 

[GTX]

Great posts Paul,


What scale were the models?

what a young puppy I was !My hair is all silver these days....

Oh that "Mo" is a great one. ;D

 

[madgepetto]

I think they were 1/5th scale.I have a very bubbly press release from after the Paris Air Show in which they make a point of how many times "The Russians" came back to film and photograph the model...


I can still remember Mr. Moody telling me to just blank off the aft end as they had no idea what was going to go there...it's just possible that the whole thing was a deliberate hoax just to keep people guessing. Back then there was a lot of money sloshing around looking for a place to park. Some of the stuff we did at Northrop in those days was just as hard to swallow at least visually.

 

[Bgray]

The thing I keep wondering is why anyone took this seriously? It's one thing to have a design concept-- heck, some of my 7th graders had "design concepts" but it's another thing to getting published in magazines, and published in an utterly uncritical manner, IE, articles saying "The Dragon will" Instead of "The Dragon's designers CLAIM the Dragon will." Were they really that naive, or were there other factors at play.

 

[Orionblamblam]

This is why I have been reticent about posting about my experience ...

I know how you feel. I once worked for a company that was run in a way that In My Opinion was a combination of incompetance and fraud. However, it's vitally important to keep in mind the distinctions between "I think that..." and "I know that..." and "I can prove in a court of law that..."

If there was outright fraud, you know to a moral certainty that certain people were there to rip other people off but you don't have the hard evidence to back it up... unless you like getting sued there's sadly not much you can say publicly without a *lot* of weasel words. "In my opinion," "It seemed to me," "I think," "I believe," and suchforth *should* help to keep the lawyers away, but don't push your luck.

All that said: did anything you ever saw give any indication as to *how* this thing was supposed to generate vertical lift? I've never seen any nozzles under the nose...

 

[Jemiba]

... I've never seen any nozzles under the nose...

Exactly what I was looking for, too ! I took the 3-view posted by Dsadow as a possible
first indication, where the forward nozzles could be positioned, although in the upper view
it doesn't make much sense. And in the same drawing, used to show the show the weight
distribution, for the point 11 "nozzles and plenum" there's unfortunately only a position in
the mid after part of the aircraft is given ..

 

[madgepetto]

Orionblamblam....
You've hit the nail squarely on the head, one must be sooo very careful in what they say, especially on the 'net.


Never in the time I was involved did I see drawings that offered anything more than a hint of possible powerplants, locations, exhausts and on an on...if you look at the picture of the MP-18 model from below in front, you will see intakes I fudged up from the top caps of some spray cans with center-bodies that are the bow sections of some small scale 688 class submarine models I was producing for Hughes Fullerton at the time. Hi tech indeed!


These intakes were based on some vague comments from Mr.Moody when he came to inspect the model in its early stages.I asked what they wanted for intakes and was told to wing it, so there we are.never did find out what was supposed to come out the back end...just as well.

 

[Stargazer]

The Phalanx Dragon may have been the biggest swindle this side of the Dupont DP-2... but the company sure knew how to catch the aeronautical media's attention!

Here is an article from Flight International, 19 June 1986, a much better scan than the ones provided on their site.

 

[Triton]

Photo of Phalanx MP-18 Dragon artist's impression found on eBay.

URL:
http://www.ebay.com/itm/Photograph-of-Artist-Impression-of-Phalanx-MP-18-Dragon-LHX-VSTOL-Jet-Fighter-/141124414026?pt=UK_Collectables_Aeronautica_MJ&hash=item20dbabaa4a

 

[Triton]

Three-view drawing of Phalanx MP-18 Dragon found on eBay.

URL:

http://www.ebay.com/itm/Photograph-of-Artist-Impression-of-Phalanx-MP-18-Dragon-VSTOL-Jet-Fighter-/141124411759?pt=UK_Collectables_Aeronautica_MJ&hash=item20dbaba16f

 

[overscan (PaulMM)]

Pretty...

 

[hesham]

Hi,


the American Aircraft Corp. designed a high-wing VTOL aircraft with tilting props mounted
midwing as alternative to V-22.

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[cluttonfred]

Seems like a poor design, even for a concept. The wings block most of the prop wash.

 

[Stargazer]

http://www.secretprojects.co.uk/forum/index.php/topic,234.msg10517.html#msg10517

http://www.secretprojects.co.uk/forum/index.php/topic,2140.msg96783.html#msg96783

http://www.secretprojects.co.uk/forum/index.php/topic,2009.msg89098.html#msg89098

 

[Mark Nankivil]

Hi All -

On EPay is this art piece for the Phalanx proposal:

http://www.ebay.com/itm/Rare-IML-Addax-New-Zealand-Jet-Military-Aircraft-Fighter-Oil-Painting-Concept-/331659622326?hash=item4d387437b6

Enjoy the Day! Mark

 

[yasotay]

?? Looks more like Phalanx to me.

 

[Stargazer]

?? Looks more like Phalanx to me.

A Phalanx it is, of course.

Also, the Addax was never portrayed in U.S. markings to my knowledge, nor is there any reason why it would!

 

[TomS]

There was at least one drawing of Addax-1 in US Navy markings.

http://www.secretprojects.co.uk/forum/index.php/topic,235.msg1383.html#msg1383 B)

 

[Stargazer]

There was at least one drawing of Addax-1 in US Navy markings.

Oh, okay! Thanks for pointing me to it.
Still, the one above is a Phalanx, without a shadow of a doubt.

 

[TomS]

Oh. definitely. Has anyone contacted the seller to correct them, or is this buyer beware?

 

[hesham]

by the way the Sa.7 was preceded with a six experimental designs to
this company.

Still mystery to this moment,the Sadleir Sa.1 to Sa.6.

 

[martinbayer]

These days the AAC Penetrator (a.k.a. the Aerocraft Stealth Star 204 SS, according to Wikipedia) sits at the perimeter of Long Beach Airport right next to the 405 freeway: https://www.google.com/maps/@33.812...FgQPnzmVf_1gKPs6Nozw!2e0!7i13312!8i6656?hl=en

Martin