Letter from the President
by Paul S. Moller
Volume 10, Issue 2
TO: Moller International Newsletter Subscribers
MOLLER INTERNATIONAL SKYCAR TO BE FEATURED IN NBC'S THE JENSEN PROJECT
Moller International is thrilled to be featured in NBC’s made-for-TV movie “The Jensen Project”. “We were contacted by Jensen (MUSE) Productions as they wanted to showcase the most technologically advanced autovolantor in their movie, The Jensen Project,” stated Dr. Paul Moller, President of Moller International. “This is a major advancement for the VTOL (Vertical-take-off-and-landing) industry as our Skycar gains continued popularity among the media,” he continued.
The premise of the Jensen Project involves a secret community of geniuses conducting advanced underground research to solve the world’s most difficult problems. Produced by NBC by means of Wal-Mart (NYSE: WMT) and Procter and Gamble (NYSE: PG), The Jensen Project will be premiering on NBC on July 16, 2010 at 8/7c. “We are delighted about this additional exposure in a very exciting time for the Company,” stated Bruce Calkins, Manager of Moller International. “With the public’s increased awareness and desire for technologically advanced transportation, the Skycar becomes more advantageous every day,” he concluded.
Originating as a made-for-TV movie, it is rumored that The Jensen Project is likely be NBC’s newest pilot.
MOLLER INTERNATIONAL’S PRESIDENT ACTS ON HIS POSITIVE OUTLOOK
Dr. Paul Moller, President of Moller International (OTC-BB: MLER) has personally arranged for the company’s release from $2.3 million in debt. “I did this to improve the company’s balance sheet and demonstrate my continued confidence in the Company’s future,” stated Dr. Moller.
That future was recently brightened as a result of companies from Malaysia, Korea, China and the UK entering negotiations to license the Company’s Rotapower® engine for their applications. This follows the signing of an agreement by Moller International’s exclusive engine licensee, Freedom Motors, Inc., to provide two models of the Rotapower engine for use in hybrid vehicles.
An illustrative application for the Rotapower® engine is to power the Switchblade, a three-wheeled roadable aircraft under development by Samson Motorworks, LLC (www.samsonmotorworks.com). “I intend to use the Rotapower® engine because it uniquely meets the low weight and high power requirements of my aircraft while maintaining environmentally friendly emissions,” stated Sam Bousfield, President of Samson Motorworks.
Having the Rotapower® engine produced in high quantities is critical in reducing the tooling and manufacturing cost of Moller International’s Skycar® and Neuera™ volantors (see www.moller.com for more details). The low volume and higher cost of these engines presently exceeds the cost of the Company’s volantor airframes. With the anticipated economies of scale, engine production cost could drop substantially and allow the Company to reduce the projected cost of their volantor aircraft.
MOLLER INTERNATIONAL INVITED TO ATTEND INTERNATIONAL RENEWABLE ENERGY ORGANIZATION MEETING
HYBRID FUEL-ELECTRIC SKYCAR CONCEPT PRESENTED AT SAE CONFERENCE IN SEATTLE
Other items of interest include an invitation to participate in the founding meeting of the International Renewable Energy Organization (IREO) in Kuwait on October 10, 2010. Time permitting, we will attend along with our M200M Skycar mockup. This meeting will be attended by twelve heads of state. The fact that the Skycar uses alcohol and probably hydrogen injection is one of the factors that led to our invitation to attend.
On our homepage (www.Moller.com) is the presentation I gave at the recent SAE Aerotech Conference in Seattle. The technology discussed originated in a presentation I gave at an earlier conference in which much of the fuel-powered rotary engines are replaced with electric motors. This reduces the installed power of the engines 75% and replacing it will be electric motors and batteries. This changes the way the Skycar would operate by reducing hover and transition time to about one minute. In return the benefits are: Battery power for ground travel; much more efficient engine operation in cruise; less overall power required for higher payload; reduced noise and cost of the Skycar in volume production.
FREEDOM MOTORS ENGINE PRODUCTION PLAN - EXECUTIVE SUMMARY
Freedom Motors has acquired the exclusive worldwide manufacturing and marketing rights to the Rotapower® engine, a unique Wankel-based rotary engine that is ready for commercialization. Prior to entering volume production, Freedom Motors will undertake a pilot production run of two models of its engines. This will provide “Beta” engines (engines produced to validate the design and verify production processes) for a number of original equipment manufacturers (OEM) that have supplied Freedom Motors with letters of intent (LOI) or conditional orders totaling over 900,000 engines. To fund this pilot production run Freedom Motors will undertake a “Regulation A” offering of its stock to raise $5 million.
The Freedom Motors Rotapower® engine is:
· Based on Proven, Inexpensive Technology – the core technology was acquired from Outboard Marine Corporation, which produced the only Wankel rotary engine ever manufactured in volume in the United States. OMC developed this technology and produced 15,000 engines in the 1970’s in anticipation of stricter emission standards that only now have become law. These engines, collectively, accumulated millions of hours in operation. Manufacturing cost comparisons performed by OMC proved that the rotary engine was cost competitive with their simplest two-stroke engine.
· Patented Technology – advanced proprietary improvements to the core technology, have enhanced reliability, improved fuel consumption and dramatically lowered emissions.This combination of solid historical development coupled with patented
technical innovation has resulted in an engine that has demonstrated:
· Superior Emissions Performance – Tests verified by CARB that the Rotapower engine operating with gasoline produces less than 1% of the emissions of a comparable two-stroke and 14% of those for the four-stroke piston engine. Emissions tests carried out in cooperation with the Institute of Transportation Studies at the University of California have established that the Rotapower® engine can meet the California Ultra Low Emissions Vehicle (ULEV) required while running on gasoline and without the need for a catalytic converter. Recent test results using alcohol (ethanol) as a fuel produced emissions output levels well below those required of an engine to meet the requirements of the California’s Super Ultra Low Emissions Vehicle (SULEV) category.
· Outstanding Compact Power Delivery – Power to weight ratio for the Rotapower engine is 75% better than most two-stroke engines, 250% better than many four-stroke piston gasoline engines and 600% better than typical diesel engines. With only two moving parts, cost and maintenance are projected at well below four stroke piston engines.
· Operates Well On Various Fuels – The Rotapower® engine has run successfully on gasoline, kerosene, alcohol, natural gas and diesel fuel.
Freedom Motor’s Rotapower® engine is a low cost, ultra low emission replacement for two-stroke engines in the worldwide engine market. It will also replace four-stroke engines where compact power, emissions, vibration, and/or multi-fuel capability are important. Examples include applications where portability is essential or space and low vibration are critical such as hybrid electric vehicles. Freedom Motors has tested and proven its engine extensively in several of the above applications.
Freedom Motors plans to initiate production of two different rotor displacements leading to the following Rotapower engine models:
· 450cc series is a modular design, which allows choices between one module producing 35 to 65 HP, depending on porting, and six joined modules producing up to 390 HP.
· 150cc series produces up to 25 HP in a single rotor version and will be made available in a twin rotor version.
Freedom Motors is preparing to produce engines for the following markets: recreational vehicles, power generation, and hybrid automobiles. Because of the time required to redesign an existing product in order to fit a new engine, initial sales efforts will focus on emerging products and converting letters of intent to firm orders. Freedom Motors had received letters of intent to purchase 900,000 Rotapower engines (approximately $1 billion in potential sales) prior to the recent interest from the hybrid car industry in China and elsewhere.
The world-market for engines is 150.4 million units per year. Users of engines in countries like China and India will not place large engine orders with firms outside their borders. Therefore Freedom Motors intends to pursue both a licensing and production path to bring its Rotapower engine into volume production.
On one path Freedom Motors will joint venture (JV) or license its engine technology for those markets outside North America. With a dozen or so interested JV or licensee candidates, Freedom Motors has committed to working with the following companies.
Global Rotary LLC- Freedom Motors has entered a JV in which it will provide a non-exclusive right to produce two models of its engines in China. In return Freedom Motors will receive a license fee, royalties and a minority ownership in the JV.
Samson Motorworks LLC - requires an engine for its application. Samson Motorworks has reached an agreement with a Chinese company to license engine production.
Firstec Co. Ltd.- a subsidiary of Hyundai Automotive in Korea; this aerospace company requires engines for its unmanned vehicles. It is also reviewing the Rotapower engine for use in Hyundai’s proposed hybrid car.
Proton- the largest automotive company in Malaysia is committed to using a rotary engine in future versions of its EVE hybrid car.
Greentec Motors- a UK company that plans to license one model of its Rotapower engine as a power source for portable generators.
Agreements will include some or all of the following elements:
License fee based on the market size, engine model and application
Royalty based on the OEM or distributor engine and parts price (5% in Global Rotary agreement) Performance clause if license includes exclusivity
Freedom Motors receives a minority equity position in the JV Pilot production begins at Freedom Motors’s facility
Freedom Motors has option to acquire parts at best price JV can acquire stock in Freedom Motors
On the other path Freedom Motors will produce and distribute its engines for sale in North America. Many engine parts and required accessories will be acquired from its JV partners or licensees with Freedom Motors maintaining primary responsibility for the rotor and seals. It is anticipated that Freedom Motors will be the supplier of rotors and seals for some if not all of its licensees and partners.
Market Potential of the Rotapower Engine
Freedom Motors has developed four different rotor displacements with the most promising profit margins in the 5 hp to 400 hp range. This range is well covered by the 150cc and 450cc rotor displacements resulting in six different models. In this power range the world market for engines is 60.8 million units per year not including automotive. This represents approximately $45 billion in annual sales worldwide including parts. In the scheduled initial production of the Rotapower engine, the Company can address the power requirements for a portion of the North America market representing 11.6 million units per year, or 19% of the world market.
Profit Potential From Foreign & Domestic Sales
Market penetration rate is key to revenue and profitability. Freedom Motors is projecting a less than 0.1% penetration during the first production year for both its own sales and that of its joint venture partners and licensees. During the fifth production year penetration rate is projected to be 3.3% for North America and 2.5% for its licensed partners.
This level of market penetration would generate royalties of $56.3 million per year by the end of the fifth year of foreign production. Concurrently, the sale of 385,000 units by Freedom Motors would lead to a net income, before taxes, of $74.5 million. This would result in a net profit from all sales, after taxes, of $78.5 million.
Return On Investment
It is projected that full production will begin one year after limited production start-up both for Freedom Motors and its JV partners and licensees. Assuming a price to earnings ratio of 20, which should be conservative based on the modest projected penetration rate, the market value of Freedom Motors would be $1.57 billion at the end of the fifth production year.
This corresponds to a compound rate of return of 47% per year over six years (five production plus start-up year) based on a projected offering price per share of $2.00 after a 10-to-1 stock split.
Paul S. Moller, Ph.D.President
PATENTS, TRADEMARKS AND COPYWRIGHT
Copyright 2010, all rights reserved. Skycar®, Neuera™ and Rotapower® are trademarks of Moller International in the USA and other countries.
SAFE HARBOR STATEMENT
Except for historic information contained in this release, the statements in this news release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause a company's actual results in the future to differ materially from forecasted results. These risks and uncertainties include, among other things, the company's ability to attract qualified management, raise sufficient capital to execute its business plan, and effectively compete against similar companies.