On December 10, 2005, about 1000 eastern standard time, a experimental Velocity LWFG-E, N535BM, registered to and operated by a private individual, experienced an in-flight loss of engine power during takeoff from Charlotte County Airport, Punta Gorda, Florida. Visual meteorological conditions prevailed at the time, and no flight plan was filed for the Title 14 CFR Part 91 personal flight. The airplane was destroyed and the private-rated pilot and one passenger were not injured. The flight was originating at the time of the accident. The pilot stated that the takeoff and initial climb were normal until the airplane reached about 200-300 feet, when the engine began "loosing compression." He further stated that the airspeed began to bleed off, so he lowered the nose to maintain 80 knots and turned the airplane back toward the runway. He said the was unable to reach runway, so he decided to land in the grass on the airport property. According to the pilot the landing flare and touchdown were normal, but during the rollout the airplane struck a taxiway sign, became airborne, impacted the ground again on the main landing gear, and then came to a sudden stop in a ditch. The airplane then caught fire and was mostly consumed in the flames. The pilot/builder of the accident airplane stated that he built the airplane with an General Motors automobile conversion V-6 engine, and the accident flight was the first flight after the airplane had been built. He stated that prior to the flight only ground taxi operations had been performed with the airplane as a test. He said that during takeoff, he noticed the engine temperature gauge needle displayed the that the engine was operating hotter than usual. According the pilot/builder, postcrash examination of the engine could not be accomplished because the engine had been constructed largely of aluminum and the intense heat of the postcrash fire mostly consumed the engine and the aluminum had melted.